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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-10272
SECURITY CAPITAL PACIFIC TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 74-6056896
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7777 MARKET CENTER AVENUE
EL PASO, TEXAS 79912
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(915) 877-3900
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Shares of Beneficial Interest, par value New York Stock Exchange
$1.00 per share
Cumulative Convertible Series A Preferred Shares New York Stock Exchange
of Beneficial Interest, par value $1.00 per
share
Series B Cumulative Redeemable Preferred Shares New York Stock Exchange
of Beneficial Interest, par value $1.00 per
share
Preferred Share Purchase Rights New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Based on the closing price of the registrant's common shares on March 10,
1997, the aggregate market value of the voting shares held by non-affiliates
of the registrant was approximately $1,168,752,392.
At March 10, 1997, there were outstanding approximately 76,042,168 of the
registrant's common shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the 1997 annual
meeting of its shareholders are incorporated by reference in Part III of this
report.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
---- ------------------------------------------------------------------- ----
PART I
<C> <S> <C>
1. Business........................................................... 1
Security Capital Pacific Trust..................................... 1
PTR's Operating System and Business Strategy....................... 4
The REIT Manager................................................... 10
Trustees and Officers of PTR and Directors and Officers of the REIT
Manager and Relevant Affiliates................................. 13
Employees.......................................................... 20
Insurance.......................................................... 21
Competition........................................................ 21
Americans with Disabilities Act.................................... 21
Environmental Matters.............................................. 21
2. Properties......................................................... 22
Geographic Distribution............................................ 22
Real Estate Portfolio.............................................. 23
3. Legal Proceedings.................................................. 30
4. Submission of Matters to a Vote of Security Holders................ 30
PART II
5. Market for the Registrant's Common Equity and Related Stockholder
Matters........................................................... 31
6. Selected Financial Data............................................ 34
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 35
Overview........................................................... 35
Results of Operations.............................................. 40
Environmental Matters.............................................. 45
Liquidity and Capital Resources.................................... 45
REIT Management Agreement.......................................... 52
8. Financial Statements and Supplementary Data........................ 53
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure Matters...................................... 53
PART III
10. Directors and Executive Officers of the Registrant................. 53
11. Executive Compensation............................................. 53
12. Security Ownership of Certain Beneficial Owners and Management..... 53
13. Certain Relationships and Related Transactions..................... 53
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 54
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
SECURITY CAPITAL PACIFIC TRUST
Security Capital Pacific Trust (New York Stock Exchange Symbol: "PTR") is an
equity real estate investment trust ("REIT") which was formed in 1963. PTR's
objective is to be the preeminent real estate operating company focusing on
multifamily communities in its western United States target market. Through
its REIT Management Agreement with Security Capital Pacific Incorporated (the
"REIT Manager" or "REIT Management"), PTR has access to the extensive services
provided by the REIT Manager and its specialized service affiliates, which
provides PTR with access to the same resources as a fully integrated operating
company. The REIT Manager and its specialized service affiliates have 129
professionals dedicated to implementing PTR's highly focused operating and
investment strategy.
PTR believes its investment discipline is unique because it is based on
state-of-the-art research capabilities provided by Security Capital Investment
Research Incorporated ("Security Capital Investment Research"), an affiliate
of the REIT Manager. Security Capital Investment Research employs six full-
time professionals focused on producing the best available research on the 289
submarkets in PTR's target market. Using its resources to identify superior
growth opportunities, PTR focuses on the strategic development, acquisition
and operation of multifamily communities. At January 31, 1997, PTR owned and
operated or was developing 51,287 multifamily units with a total expected
investment of $2.5 billion. In addition, as of the same date, PTR had land in
planning and under control (as defined below) for the development of 3,507
units with a total budgeted development cost of $264.5 million. PTR's recent
investment activity has been focused primarily on key metropolitan areas in
California, the Pacific Northwest and Salt Lake City, which PTR feels will
produce strong cash flow growth over the long term. As of January 31, 1997,
PTR's properties were located in 23 metropolitan areas in 12 states. See "Item
2. Properties."
The term "multifamily" as used herein refers to garden-style communities and
excludes Homestead Village(R) extended-stay lodging assets, which were
contributed to a new publicly traded company, Homestead Village Incorporated
("Homestead"), on October 17, 1996, in exchange for Homestead common stock.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources--Homestead
Transaction."
PTR seeks to achieve long-term sustainable growth in cash flow by maximizing
the operating performance of its core portfolio through value-added operating
systems and concentrating its highly experienced team of professionals on
developing and acquiring industry-leading product in targeted submarkets
identified by proprietary research as exhibiting strong job growth and
favorable demographic trends. PTR believes that population and employment
growth are the primary demand generators for multifamily product. Based on
forecasts published by Woods & Poole Economics, Inc., the projected population
growth in PTR's primary target market cities is 28.8% for the years 1997
through 2016, whereas the projected population growth of the United States as
a whole for the same period is 16.8%. For the same period, job growth is
projected to be 28.4% in PTR's primary target market cities, compared to 20.8%
for the United States as a whole.
PTR's investment strategy is focused on three principal components: (1) the
development of state-of-the-art new communities targeted primarily at one of
the largest segments of the renter market, moderate income households; (2) the
acquisition of multifamily communities exhibiting high cash flow growth
potential or attractive redevelopment opportunities; and (3) the execution of
its asset optimization strategy, which involves the disposition of properties
which no longer meet PTR's investment objectives and the redeployment of the
proceeds, typically on a tax-deferred basis, into assets that in PTR's view
offer better long-term cash flow growth prospects.
<PAGE>
The table below illustrates the growth in PTR's multifamily portfolio, based
on total expected investment, resulting from the execution of this investment
strategy since 1991 (the REIT Manager was retained in March 1991):
<TABLE>
<CAPTION>
TOTAL EXPECTED INVESTMENT(1)
----------------------------------------------------------------
DECEMBER 31,
JANUARY 31, ------------------------------------------------
1997 1995 1994 1993 1992 1991
----------- ---------- ---------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Communities:
Acquired(2)............ $1,557,164 $1,270,419 $ 937,683 $666,497 $205,600 $ 31,487
Developed(2)........... 394,289 244,848 171,505 66,893 54,852 24,416
---------- ---------- ---------- -------- -------- --------
Total operating
communities......... 1,951,453 1,515,267 1,109,188 733,390 260,452 55,903
Communities under
construction........... 348,259 297,549 170,017 140,563 73,898 16,207
Communities in planning
and owned(3)........... 209,156 118,347 194,001 73,578 -- --
---------- ---------- ---------- -------- -------- --------
Total owned
communities......... $2,508,868 $1,931,163 $1,473,206 $947,531 $334,350 $ 72,110
========== ========== ========== ======== ======== ========
Communities in planning
and under control(3)... $ 264,531 $ 100,714 $ 152,313 $136,687 $ -- $ --
========== ========== ========== ======== ======== ========
</TABLE>
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(1) For operating communities, represents cost, including budgeted renovations.
For communities under construction and in planning, represents total
budgeted development cost, which includes the cost of land, fees, permits,
payments to contractors, materials, architectural and engineering fees and
interest and property taxes to be capitalized during the construction
period. Does not include land held for future development, which is less
than 2% of assets, based on cost.
(2) Net of any dispositions.
(3) The term "in planning" means that construction is anticipated to commence
within 12 months. The term "under control" means that PTR has an exclusive
right (through contingent contract or letter of intent) during a
contractually agreed-upon time period to acquire land for future
development of multifamily communities, subject to approval of
contingencies during the due diligence process, but does not currently own
the land.
Highlights of PTR's strategic accomplishments since the beginning of 1996
include:
. PTR's strong growth in 1996 was driven primarily by the successful
implementation of its investment strategy, with development activity
generating 47% of the growth in pro forma funds from operations and
acquisition activity generating 42%. The remaining 11% of growth in pro
forma funds from operations was produced by an increase in net operating
income for PTR's same-store multifamily portfolio, which achieved net
operating income growth of 3.31% compared with 1995. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operation--Liquidity and Capital Resources--Funds from Operations."
. On October 17, 1996, PTR contributed its Homestead Village(R) properties
to a newly formed company, Homestead, in exchange for Homestead common
stock and entered into a funding commitment agreement to fund the
development of certain of such properties in exchange for warrants to
purchase Homestead common stock. The Homestead common stock and warrants
were subsequently distributed to PTR's common shareholders. On a fully
funded and converted basis, PTR will own 34.7% of Homestead's common
stock (assuming no further equity offerings by Homestead, conversion of
all Homestead convertible mortgage notes by PTR and Security Capital
Atlantic Incorporated ("ATLANTIC") and exercise of all outstanding
warrants) as a result of its obligation to fund up to $198.8 million to
Homestead in exchange for up to $221.3 million of Homestead convertible
mortgage notes (the "Homestead Notes"). The Homestead Notes are expected
to contribute significantly to PTR's future growth. The Homestead common
stock and warrants trade on the American Stock Exchange (the "ASE") under
the symbols "HSD" and "HSD.W," respectively. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Homestead Transaction."
2
<PAGE>
. During 1996, the price of PTR's common shares of beneficial interest, par
value $1.00 per share ("Common Shares"), increased from $19.750 to
$22.875 (based on the closing prices on the New York Stock Exchange (the
"NYSE") on December 31, 1995 and 1996, respectively). In addition,
shareholders received total cash distributions of $1.24 per Common Share
in 1996 and a special distribution of 0.125694 shares of Homestead common
stock and warrants to purchase 0.084326 shares of Homestead common stock
per PTR Common Share (the "Homestead Distribution"). The securities
distributed in the Homestead Distribution had a market value of $3.032
per PTR Common Share, based on the closing prices of such securities on
the ASE on November 11, 1996, the day prior to the distribution date. See
"Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters."
. The development of moderate income multifamily communities is an
important component of PTR's long-term growth strategy. In 1996, PTR
commenced construction on 3,875 multifamily units, representing a total
expected investment of approximately $262.5 million. Of that total, 2,763
units, or 71.3%, were moderate income. At January 31, 1997, PTR had 5,479
units under construction, representing a total expected investment of
$348.3 million. During 1996, 12 communities representing a total expected
investment of $186.4 million achieved stabilization (defined below),
adding 3,456 units to PTR's stabilized portfolio.
. PTR continues to take advantage of attractive investment opportunities
throughout its target market with a current focus on California, the
Pacific Northwest and Salt Lake City. PTR has targeted certain submarkets
in these areas because it believes that the market fundamentals together
with the high barriers to entry for new supply will provide for
significant growth in rental income and cash flow. During 1996, PTR
completed the acquisition of 5,265 operating units in California,
representing a total expected investment of $365.3 million. As of January
31, 1997, PTR had a total expected investment of $503.0 million in
operating communities in California, of which 50.7% is in Northern
California and 49.3% is in Southern California.
. During 1996, PTR demonstrated its ability to dispose of existing assets
and efficiently redeploy the proceeds into multifamily investments with
more attractive long-term growth prospects. The success of this asset
optimization strategy was evidenced by the disposition of 6,303
multifamily units and one industrial building, realizing an aggregate
gain of $37.5 million on aggregate net proceeds of $291.1 million, which
were redeployed, primarily through tax-deferred exchanges, into strategic
acquisitions in targeted western submarkets.
. PTR continues to focus on maintaining a strong balance sheet. This
objective is accomplished in part by PTR's issuance of unsecured long-
term debt that, in the aggregate, has a relatively level amortization
schedule which PTR believes is unusual among multifamily REITs. As of
December 31, 1996, PTR's $580 million in long-term unsecured debt had an
effective average fixed interest rate of 7.62% and an original weighted-
average life to maturity of 12.0 years. PTR's long-term debt as a
percentage of total long-term undepreciated book capitalization (the sum
of long-term debt and shareholders' equity after adding back accumulated
depreciation) was 36.9% at December 31, 1996.
In addition to the 1996 highlights summarized above, through its relationship
with the REIT Manager, PTR has accomplished the following from the end of 1990
(the REIT Manager was retained in March 1991), through December 31, 1996.
. As a result of PTR's strategic investment program, PTR's total
multifamily assets increased from $23.1 million as of December 31, 1990
to $2.5 billion as of December 31, 1996, based on total expected
investment.
. PTR's total equity market capitalization increased from $35.5 million as
of December 31, 1990 to $2.0 billion as of December 31, 1996. See "--
PTR's Operating System and Business Strategy--Capital Markets/Finance and
Conservative Balance Sheet Strategy" for a summary of PTR's capital
raising activities.
3
<PAGE>
. Net earnings attributable to Common Shares have increased from $2.1
million for 1990 to $106.5 million for 1996 and the per share amount of
net earnings attributable to Common Shares has increased from $0.41 to
$1.46, an average annual increase of 42.7%, for the same period.
. In order to achieve a higher level of customer service and superior
property operating performance, SCG Realty Services Incorporated ("SCG
Realty Services"), the REIT Manager's property management affiliate, was
retained to replace third-party fee management firms as the property
manager for most of PTR's multifamily communities. As of January 31,
1997, SCG Realty Services managed 91.3% of PTR's operating communities
based on total expected investment.
. PTR consummated a merger with Security Capital Pacific Incorporated
("PACIFIC") on March 23, 1995. PACIFIC was a private real estate
investment trust controlled by Security Capital Group Incorporated
("Security Capital Group"), PTR's principal shareholder. The merger
expanded PTR's target market to include a six-state region of the western
United States that the REIT Manager believes has attractive growth
prospects. Concurrent with the merger, PTR changed its name from Property
Trust of America to Security Capital Pacific Trust to more accurately
reflect its target market.
PTR has elected to be taxed as a REIT for federal income tax purposes and was
organized in 1963 as a real estate investment trust under the laws of Maryland.
Its principal executive offices are located at 7777 Market Center Avenue, El
Paso, Texas 79912, and its telephone number is (915) 877-3900. Security Capital
Group, the sole owner of the REIT Manager, owned 36.0% of PTR's Common Shares
as of March 10, 1997.
PTR recently announced that it received a proposal from Security Capital
Group to exchange the REIT Manager and SCG Realty Services for Common Shares.
As a result of the proposed transaction, PTR would become an internally managed
REIT and Security Capital Group would remain PTR's largest shareholder. PTR's
Board of Trustees (the "Board") has formed a special committee comprised of
independent Trustees to review the proposed transaction. The proposed
transaction is subject to approval by the special committee and the full Board.
If the Board approves the transaction, a proxy statement, subject to review by
the Securities and Exchange Commission, will be mailed to PTR's common
shareholders prior to a shareholder vote on the proposed transaction.
PTR'S OPERATING SYSTEM AND BUSINESS STRATEGY
The REIT Manager and its specialized service affiliates have 129
professionals dedicated to implementing PTR's highly focused, fully integrated
business strategy using PTR's "Operating System." PTR's Operating System
consists of seven functional areas: fundamental real estate research,
opportunistic acquisitions, multifamily developments, comprehensive due
diligence and investment analysis, asset optimization, customer-focused
property management and an efficient capital markets/finance function. By
focusing on a single discipline, professionals within each of these areas
develop substantial expertise commensurate with their respective skills and
responsibilities. All of these functional areas are integrated by senior
management but the REIT Manager believes that the focus on separate disciplines
by key personnel improves PTR's overall results. PTR utilizes the extensive
capabilities of its Operating System to execute its business strategy in order
to achieve PTR's primary objective of generating long-term, sustainable growth
in per share cash flow.
Commitment to Fundamental Real Estate Research
PTR is dedicated to a continuing investment in leading edge research and
development for markets, products and new business opportunities. PTR utilizes
Security Capital Investment Research, an affiliate of the REIT Manager, to
conduct comprehensive evaluations of its target market on a submarket-by-
submarket basis to identify those submarkets that offer strong prospects for
long-term cash flow growth. These evaluations, combined with PTR's extensive
market experience throughout its target market, enable PTR to identify
submarkets that will offer attractive growth opportunities.
4
<PAGE>
For each submarket, PTR's research evaluates 24 key variables that PTR has
identified as having the greatest impact on multifamily operating performance.
This research provides PTR with the information needed to target specific
resident profiles and identify the unit mix, density and amenities for each
community which will provide the greatest opportunity for consistent rental
increases and high occupancies. The REIT Manager and its affiliates also
evaluate and continually refine PTR's multifamily product to incorporate
technologies and designs that will enhance long-term resident satisfaction.
In addition to dedicated market research and continuous refinement of the
traditional multifamily product, considerable resources are devoted to
researching new products and businesses. The Homestead Village(R) extended-stay
lodging product is an example of PTR's research and development efforts which
resulted in the creation of an exciting new growth company, Homestead, and
resulted in the Homestead Distribution which occurred in November 1996.
Another innovative product concept developed by the REIT Manager is PTR's
master-planned apartment neighborhood, or "village," concept. These "village"
communities offer residents an extraordinary level of amenities, including
greenbelt areas, soccer and baseball fields, sports courts and large clubhouses
with features such as theaters, business centers and community resource
centers. PTR believes the "village" concept will generate consistent, long-term
growth by providing a large segment of the renter population with amenities far
beyond those which are available in traditional multifamily developments. PTR
currently has two "village" communities in operation and two additional
communities in planning.
Opportunistic Acquisitions
PTR opportunistically acquires multifamily communities where demographic and
market trends indicate a high likelihood of achieving attractive, sustainable
operating results. This strategy has resulted in multifamily community
acquisitions which have produced attractive returns. Since inception and
through January 31, 1997, PTR had acquired 42,038 operating units representing
a total expected investment of $1.8 billion. During 1996, PTR specifically
focused its acquisition efforts on California, because its research identified
the opportunity for very strong growth in operating performance there. PTR
acquired a total of 5,265 operating multifamily units, representing a total
expected investment of $365.3 million, in targeted California submarkets during
1996. Additionally, at January 31, 1997, PTR had letters of intent or
contingent contracts, subject to PTR's final due diligence, for the acquisition
of 964 units in California, representing a total expected investment of $77.2
million. This significant acquisition activity in California is expected to be
an important source of PTR's future growth.
PTR categorizes operating multifamily communities (which include all
communities not in development) as either "stabilized" or "pre-stabilized." The
term "stabilized" means that renovation, repositioning, new management and new
marketing programs (or development and marketing in the case of newly developed
communities) have been completed and in effect for a sufficient period of time
(but in no event longer than 12 months, except for major rehabilitations) to
achieve 93% occupancy at market rents. Prior to being "stabilized," a community
is considered "pre-stabilized." Due to its active investment program, 24% of
PTR's multifamily operating portfolio, based on total expected investment, was
classified by PTR as pre-stabilized as of January 31, 1997.
At January 31, 1997, PTR's operating multifamily communities (excluding
communities in lease-up) were 94.0% leased. For operating communities which PTR
has acquired, stabilized operations generally have been achieved six to 12
months after acquisition. For communities which it is developing, PTR expects
stabilized operations generally to be achieved 18 to 24 months after
construction commences.
Multifamily Developments
PTR selectively develops multifamily communities where land costs,
demographics and market trends indicate a high likelihood of achieving
sustainable operating results and consistent cash flow growth. This
5
<PAGE>
disciplined approach to development has produced multifamily property
developments with desired characteristics including state-of-the-art product,
protected locations and attractive returns. Through January 31, 1997, completed
development communities, communities under construction and communities in
planning and owned represented 37.9% of PTR's multifamily portfolio, based on
total expected investment. As of January 31, 1997, PTR's multifamily
development portfolio consisted of the following:
<TABLE>
<CAPTION>
NUMBER OF TOTAL EXPECTED
UNITS INVESTMENT (1)
--------- --------------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Communities completed (since inception).......... 7,868 $394,289
Communities under construction................... 5,479 348,259
Communities in planning and owned................ 3,351 209,156
------ --------
Total owned development communities.......... 16,698 $951,704
====== ========
Communities in planning and under control........ 3,507 $264,531
====== ========
</TABLE>
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(1) Represents total budgeted development cost, which includes the cost of
land, fees, permits, payments to contractors, materials, architectural and
engineering fees and interest and property taxes to be capitalized during
the construction period. Does not include land held for future development,
which is less than 2% of assets, based on cost.
PTR focuses its development efforts primarily on moderate income communities,
which target households with incomes that range from 65-90% of the median
household income in the submarket. These households represent one of the
largest segments of the multifamily renter market. Residents in this category
are value-driven and focus on unit livability and practical amenities such as
washer/dryer hookups, storage space and lower density communities with
attractive landscaping. PTR's moderate income product comprised 71.3% of PTR's
development starts during 1996, based on number of units. Few other REITs
currently focus on the moderate income segment within PTR's primary target
market. Moreover, PTR believes that less than 15% of the 1995 and 1996
multifamily development starts in PTR's primary target market cities were
moderate income product. Consequently, PTR believes that the moderate income
segment is a significantly underserved market with limited competition. PTR
believes that focusing on this segment will allow PTR to achieve more
consistent rental increases and higher occupancies over the long-term and,
thereby, realize above average, sustainable cash flow growth and appreciation
in value.
Moderate income residents are typically longer-term residents because they
often lack the financial resources required to purchase single-family homes. As
a result, resident turnover is often significantly lower in moderate income
communities than in upper middle income communities (which target households
with incomes that range from 115-140% of the median household income in the
submarket) or middle income communities (which target households with incomes
that range from 90-115% of the median household income in the submarket). PTR
estimates that the total cost of refurbishing and re-leasing a unit ranges from
$700 to $1,500; therefore, reducing resident turnover can have a material
impact on a community's cash flow. Due to market fundamentals and the operating
characteristics of moderate income communities, PTR believes that this product
category offers greater sustainable cash flow growth.
PTR's research-driven development strategy is to focus on developing state-
of-the-art communities in attractive submarkets to meet renter preferences and
demographic trends. Development opportunities also permit PTR to incorporate
into its multifamily communities proprietary technologies and designs aimed at
enhancing long-term rental growth while reducing ongoing maintenance costs. PTR
has had the opportunity to evaluate and refine its multifamily product through
its long history of development (PTR has developed multifamily communities
since 1970). PTR, unlike a typical merchant builder, intends to be a long-term
owner of the communities that it develops. Hence, PTR emphasizes durability by
using materials and designs with an added view toward minimizing ongoing
operating and maintenance costs.
6
<PAGE>
PTR carefully manages development risks by obtaining zoning and discretionary
municipal approvals prior to purchasing land. PTR does not assume construction
risk, but instead uses qualified third-party general contractors to build its
communities, using guaranteed maximum price contracts. PTR cannot eliminate all
development risk, but believes that the opportunities to better control product
and realize higher returns from development communities compensate for the
limited risk.
PTR traditionally has commenced development immediately after acquiring a
tract of land. However, in certain cases where land prices are favorable and
zoned land is very limited, PTR has acquired and will acquire, on an
unleveraged basis, prudent amounts of land zoned for multifamily use. In
addition, to allow for entitlements to be finalized prior to purchasing the
land, PTR often utilizes options and rights of first refusal in order to
control land for future developments with minimal cash investments. The land
that PTR owns or controls provides a foundation for future growth by providing
a pipeline of future developments at attractive prices.
To enhance its flexibility in developing and acquiring communities, PTR may
also from time to time enter into presale agreements with third-party
owner/developers to acquire development communities which meet PTR's investment
criteria. PTR has and will fund such developments through development loans to
these owner/developers. In addition, to provide greater flexibility for the use
of land acquired for development and to facilitate disposition of excess
parcels, PTR has and will make mortgage loans to PTR Development Services
Incorporated ("PTR Development Services") to purchase land for development. PTR
may also fund developments of multifamily communities by PTR Development
Services where the particular community or submarket does not meet PTR's
objectives for long-term ownership but presents an attractive investment
opportunity. PTR owns all of the preferred stock of PTR Development Services,
which entitles PTR to substantially all of the net operating cash flow (95%) of
PTR Development Services. All of the common stock of PTR Development Services
is owned by an unaffiliated trust. The common stock is entitled to receive the
remaining 5% of net operating cash flow. As of December 31, 1996, the
outstanding balance of development and mortgage loans made by PTR to third-
party owner/developers and PTR Development Services aggregated $127.3 million
and $18.8 million, respectively. The activities of PTR Development Services and
third-party owner/developers are consolidated with PTR's activities and all
intercompany transactions have been eliminated in consolidation.
Comprehensive Due Diligence and Investment Analysis
PTR believes that comprehensive due diligence is essential prior to investing
in acquisitions or developments. The REIT Manager employs six full-time
professionals who perform due diligence for PTR. This due diligence team is an
important resource which allows PTR to effectively and efficiently close a
large volume of investment transactions, while thoroughly evaluating all
potential aspects of risk in each transaction. This capability provides PTR
with a competitive advantage in acquiring both operating communities and land.
Prior to purchasing an asset, the due diligence team works in tandem with the
REIT Manager's development and operations professionals to thoroughly
investigate the following factors: market conditions; competitive communities
and developments; comparable sales and rents; existing and projected income and
expenses; current and targeted resident profiles; present and projected capital
requirements for community acquisitions; development costs for land purchases;
and potential liability issues such as environmental and title conditions, tax
increases, special assessments and code compliance. In addition, for land
acquisitions, all discretionary development approvals are obtained prior to
closing, thus ensuring that projected development costs are quantified with a
high degree of accuracy and the risk of construction delay is minimized.
With the comprehensive data available from research, development and
operating professionals, standard financial underwriting is completed on an
unleveraged basis in order to evaluate each investment's yield and its
prospects for long-term growth in cash flow. The REIT Manager's investment
committee, which consists of five members having a combined 77 years of
experience in the real estate industry, evaluates all prospective investments
prior to submission of investment recommendations to the Board.
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Asset Optimization Strategy
The ability to dispose of existing assets and efficiently redeploy the
proceeds into communities and submarkets having more attractive long-term
growth prospects is an important component of PTR's investment strategy. Each
year, REIT Management formulates operating and capital plans based on an
ongoing active review of PTR's portfolio. Based in part upon the market
research provided by Security Capital Investment Research and in an effort to
optimize its portfolio composition, PTR may from time to time seek to dispose
of assets that in management's view no longer meet PTR's long-term investment
objectives. The proceeds from these selected dispositions will be redeployed,
typically through tax-deferred exchanges, into assets that in PTR's view offer
better long-term cash flow growth prospects. This allows PTR to continually
reposition its portfolio by redeploying capital into communities and markets
with superior growth characteristics.
PTR's asset optimization strategy is based on the premise that it has a
finite amount of investment capital and that this capital should be deployed
where it can produce the highest levels of cash flow growth. PTR has
demonstrated the ability to enter and exit submarkets based on future growth
expectations and the supply/demand fundamentals of the submarkets in which it
operates. Since PTR's asset optimization program commenced in December 1995
and through January 31, 1997, PTR had completed the disposition of 7,403
multifamily units, realizing aggregate gains of $48.9 million on aggregate net
proceeds of $322.5 million. The proceeds were redeployed into targeted
submarkets in California, the Pacific Northwest and Salt Lake City to allow
PTR to take advantage of the strong economic recovery which is underway in
these markets. PTR's expected investment in these markets grew from 16.8% of
PTR's total portfolio as of December 31, 1995, to 41.5% of PTR's total
portfolio as of January 31, 1997, based on total expected investment.
Customer-Focused Property Management
PTR believes that its communities must be actively managed in order to
maximize cash flow and enhance long-term economic performance. Therefore, PTR
has retained SCG Realty Services, its affiliated multifamily property
management and customer service firm wholly owned by Security Capital Group,
to manage most of PTR's communities. As of January 31, 1997, approximately
91.3% of PTR's operating multifamily communities were managed by SCG Realty
Services, based on total expected investment, with the balance of the
communities in various stages of transition to SCG Realty Services'
management.
SCG Realty Services has over 1,100 employees and emphasizes locally-based
management of PTR's multifamily communities. SCG Realty Services has 15 local
offices to serve PTR's target market. This network improves SCG Realty
Services' ability to anticipate and respond to changes in local market
conditions and resident needs. PTR believes that SCG Realty Services has
developed superior operating procedures, financial controls, information
systems and training programs, which it expects will positively affect growth
in rental and occupancy rates. The REIT Manager and SCG Realty Services
develop systems and procedures which facilitate effective management of PTR's
communities.
PTR recognizes that a highly focused customer service approach to day-to-day
management is essential to maximize short and long-term cash flow growth from
each of its multifamily communities. As a result, SCG Realty Services is
dedicated to maximizing the performance of PTR's communities by providing
consistent, high quality residential services to its customers. SCG Realty
Services and the REIT Manager work closely together to develop innovative
ideas to enhance customer service and resident satisfaction while maximizing
cash flow growth. See "--Security Capital Pacific Trust" for a description of
a proposal that PTR has received from Security Capital Group to exchange the
REIT Manager and SCG Realty Services for Common Shares, which would result in
PTR becoming internally managed.
A few of the programs which have been developed recently and are currently
in the process of being implemented are summarized below:
. During 1996, SCG Realty Services established 5 Regional Information
Management ("RIM") Centers and expects to establish several additional
centers during 1997. The RIM Center concept is designed to enable
property-level management personnel to focus on PTR's customers, the
residents, while moving
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certain accounting and administrative functions to the regionally located
RIM Center. Each RIM Center is designed to carry out these functions for
several area communities and thus benefit from economies of scale, better
accounting control and enhanced cash management capabilities.
. SCG Realty Services and the REIT Manager had also initiated resident
utility billing programs at approximately 70% of PTR's multifamily
operating communities as of December 31, 1996 and expect to increase this
to approximately 85% of PTR's multifamily operating communities by
December 31, 1997. Under this arrangement, water and sewer usage are
metered and billed to individual residents, thereby enabling PTR to
better control operating expenses, while providing residents with the
incentive to minimize usage.
. In late 1996, PTR entered into revenue sharing agreements with certain
cable television and telephone service providers. The arrangements
require the telecommunication providers to continually upgrade service to
ensure state-of-the-art offerings in this rapidly changing industry. The
agreements also allow PTR to receive a percentage of the service
providers' revenues generated from subscribing residents while increasing
the quality and accessibility of these services to residents.
These creative initiatives coupled with highly focused day-to-day management
are expected to contribute to the growth in net operating income generated by
PTR's multifamily operating communities.
Capital Markets/Finance and Conservative Balance Sheet Strategy
PTR believes that a successful REIT must maintain a strong balance sheet and
have the ability to access the equity and debt markets efficiently,
expeditiously and cost effectively. PTR's ability to efficiently access the
capital markets permits it to capitalize on development and acquisition
opportunities that PTR identifies in its target market. In order to maximize
the effectiveness of this activity and enhance relationships with major
institutional investors, Security Capital Group formed Security Capital Markets
Group Incorporated ("Capital Markets Group"), a registered broker-dealer
affiliate. Capital Markets Group's services are included in the REIT Manager's
fee and do not result in a separate charge to PTR. Capital Markets Group and
the REIT Manager have arranged securities offerings and credit facilities for
PTR including:
. From June 1991 through March 1995, PTR raised $822.4 million of net
proceeds from various Common Share offerings. PTR's underwriting
commissions on these offerings (all of which were paid to unaffiliated
underwriters) aggregated $8.8 million, representing 1.05% of the $835.1
million in gross proceeds.
. In November 1993, PTR raised $219.7 million of net proceeds from an
underwritten public offering of Cumulative Convertible Series A Preferred
Shares, par value $1.00 per share ("Series A Preferred Shares"). PTR
raised $101.3 million of net proceeds from an underwritten public
offering of Series B Cumulative Redeemable Preferred Shares, par value
$1.00 per share ("Series B Preferred Shares"), in May 1995.
. From February 1994 through December 1996, PTR has raised $572.6 million
in net proceeds from underwritten public offerings of unsecured, long-
term, fixed rate, debt securities which in the aggregate, have a
relatively level amortization schedule.
. Since the beginning of 1991, the REIT Manager has arranged for increases
in PTR's borrowing capacity under its variable rate line of credit from
$14.3 million to $350 million. The REIT Manager was also successful in
converting the line of credit to an unsecured facility in August 1994. As
of March 10, 1997, there were approximately $151.5 million of borrowings
outstanding on this line of credit, which currently bears interest at an
interest rate of LIBOR plus 1.125%.
. On September 9, 1996, PTR entered into a short-term borrowing agreement
with Texas Commerce Bank, National Association ("TCB"). The loan matures
on September 9, 1997 and bears interest at an overnight rate, which has
ranged from 5.80% to 7.50%. At March 10, 1997, there were approximately
$6.6 million of borrowings outstanding under this agreement.
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PTR continues to focus on maintaining its strong balance sheet which has
resulted from a conservative balance sheet strategy. PTR has a significant
equity base with a total equity market capitalization of $2.03 billion at
December 31, 1996. A key component of PTR's conservative balance sheet strategy
is the issuance of fixed rate, unsecured, long-term debt. In order to minimize
refinancing risk, PTR's long-term debt offerings are carefully structured to
create a relatively level principal maturity schedule, without large repayment
obligations in any future year. As of December 31, 1996, PTR's $580 million in
unsecured long-term debt had an effective average fixed interest rate of 7.62%
and an original weighted-average life to maturity of 12.0 years. PTR's long-
term debt as a percentage of total long-term undepreciated book capitalization
(the sum of long-term debt and shareholders' equity after adding back
accumulated depreciation) was 36.9% at December 31, 1996.
PTR's credit facilities provide PTR with the financial flexibility to take
advantage of attractive investment opportunities prior to raising capital
through securities offerings. Additionally, such facilities minimize the amount
of cash which must be invested in short-term investments at low yields prior to
the deployment of the capital.
PTR's conservative balance sheet strategy is expected to provide significant
incremental debt capacity and allow PTR to take advantage of future investment
opportunities which will contribute to PTR's objective of long-term growth in
cash flow per share.
Non-Multifamily Properties
In addition to multifamily investment activity, PTR had developed and
operated extended-stay lodging facilities under the Homestead Village(R) name
since 1992. On October 17, 1996, PTR contributed its Homestead Village(R)
properties to Homestead, a newly formed company, in exchange for Homestead
common stock. As of such date, the Homestead Village(R) properties constituted
approximately 7.1% of PTR's total assets, at cost. Additionally, the Homestead
Village(R) properties generated approximately 8.2% of PTR's net operating
income from January 1, 1996 to October 17, 1996 and approximately 5.9% and 3.5%
of PTR's 1995 and 1994 net operating income, respectively. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations" and "--Liquidity and Capital Resources--
Homestead Transaction" for further information.
PTR will continue to aggressively manage its non-multifamily properties in
order to maximize cash flow, and may sell its remaining non-multifamily
properties as opportunities arise. As of January 31, 1997, PTR owned two non-
multifamily properties, including a 338-room, five-story hotel located in the
Fisherman's Wharf area of San Francisco, California, which is leased to Holiday
Inns of America, Inc. Excluding the Homestead Village(R) properties,
approximately 1% of PTR's total 1996 rental income and less than 2% of 1995 and
1994 rental income was generated by non-multifamily properties.
THE REIT MANAGER
General
The REIT Manager and its specialized service affiliates provide PTR with
strategic and day-to-day management, research, investment analysis,
acquisition, development, marketing, disposition of assets, asset management,
due diligence, capital markets, legal and accounting services and a number of
administrative services, all of which are included in the REIT Management fee.
Hence, PTR depends upon the quality of the management provided by the REIT
Manager. PTR believes that its relationship with the REIT Manager provides PTR
with access to high quality and depth of management, savings from a dedicated
capital markets group, and access to centralized research, accounting, legal
and administrative support. The REIT Manager and its specialized service
affiliates have 129 professionals dedicated to implementing PTR's highly
focused operating and investment strategy. The REIT Manager also provides
office and other facilities for PTR's needs.
The REIT Manager is wholly owned by Security Capital Group and Security
Capital Group maintains a significant ownership position in PTR, thereby
creating an important alignment of interest with PTR's
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shareholders. As of March 10, 1997, Security Capital Group owned 36.0% of PTR's
total outstanding Common Shares. Furthermore, the REIT Manager provides all its
services for one fee, and does not receive additional fees for investment
banking, financing, asset sales or similar services. SCG Realty Services, which
is also owned by Security Capital Group, provides property management services
at market rates in a competitive environment and management believes they are
consistent with rates prevailing in the markets in which PTR operates. See
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--REIT Management Agreement."
The REIT Manager has organized itself such that each operating professional
specializes in a particular discipline (such as research, marketing,
development, acquisition, due diligence, dispositions, property management,
capital markets or financial operations) rather than being responsible for all
functions on a project-by project basis. All investments are approved by the
REIT Manager's investment committee, using uniform criteria, prior to being
submitted to the Board. Additionally, regional operating professionals focus on
specific target markets to ensure high levels of attention to resident
services. PTR believes that the quality of management should be assessed in
light of the factors discussed below.
PTR recently announced that it received a proposal from Security Capital
Group to exchange the REIT Manager and SCG Realty Services for Common Shares.
As a result of the proposed transaction, PTR would become an internally managed
REIT and Security Capital Group would remain PTR's largest shareholder. The
Board has formed a special committee comprised of independent Trustees to
review the proposed transaction. The proposed transaction is subject to
approval by both the special committee and the full Board. If the Board
approves the transaction, a proxy statement, subject to review by the
Securities and Exchange Commission, will be mailed to PTR's common shareholders
prior to a shareholder vote on the proposed transaction.
Management Depth/Succession
PTR believes that management should have several senior executives with the
leadership, operational, investment and financial skills and experience to
oversee the entire operations of the REIT. PTR believes that several of its
senior officers could serve as the principal executive officer and continue
PTR's performance. See "--Trustees and Officers of PTR and Directors and
Officers of the REIT Manager and Relevant Affiliates."
Strategic Vision and Research Capability
PTR believes that management should have the strategic vision to determine an
investment focus which provides favorable initial yields and long-term growth
prospects. To identify favorable investment opportunities, PTR relies heavily
on the strong research capabilities of Security Capital Investment Research.
The REIT Manager and its affiliates have several persons, who work closely with
the senior officers of the REIT Manager, devoting substantial time to research
on a submarket-by-submarket basis. This research is dedicated to new
multifamily investment opportunities as well as new products such as the
Homestead Village(R) extended-stay lodging product, which resulted in the
Homestead Distribution in November 1996.
Investment Committee Process
PTR believes that an investment committee should provide discipline and
guidance to the investment activities of the REIT in order to achieve its
investment goals. The five members of the REIT Manager's investment committee
have a combined 77 years experience in the real estate industry. The investment
committee receives detailed written analyses and research, in a standardized
format, from the REIT Manager's personnel and evaluates all prospective
investments pursuant to uniform underwriting criteria prior to submission of
investment recommendations to the Board. The quality of the REIT Manager's
investment committee process is demonstrated by PTR's ability to achieve its
investment goals and generally exceed its projected initial returns and cash
flow growth from PTR's multifamily investments.
Development/Redevelopment and Acquisition Capability
PTR believes that by internally developing projects and redeveloping well
located existing communities, management can create value for the REIT that
normally escapes through sales premiums paid to successful
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developers. The REIT Manager's personnel have substantial development and
redevelopment experience, as described in "--Trustees and Officers of PTR and
Directors and Officers of the REIT Manager and Relevant Affiliates." The REIT
Manager has 35 full-time professionals committed to development and acquisition
activities and has arranged for over $1.8 billion of successful acquisitions
for PTR since March 1991, based on total expected investment. As of January 31,
1997, the REIT Manager had 8,830 multifamily units under construction or in
planning and owned for PTR, with a total budgeted development cost of $557.4
million. In addition, as of the same date, PTR had land in planning and under
control for the development of 3,507 units with a total expected investment of
$264.5 million. See "--PTR's Multifamily Operating System and Business
Strategy."
Disposition Capability
The ability to identify and effectively complete the cost-effective
disposition of targeted communities is essential to the successful execution of
PTR's investment strategy. Since PTR's asset optimization program began in
December 1995 and through January 31, 1997, PTR had completed the disposition
of 7,403 multifamily units, realizing aggregate gains of $48.9 million on
aggregate net proceeds of $322.5 million, which were redeployed, typically on a
tax-deferred basis, into strategic acquisitions.
Due Diligence Process
PTR believes that management should have experienced senior personnel
dedicated to performing comprehensive due diligence. The REIT Manager has six
full-time due diligence professionals and has developed uniform systems and
procedures for due diligence. The REIT Manager's due diligence personnel have
analyzed and screened over $3.1 billion of investments for PTR. See "--PTR's
Multifamily Operating System and Business Strategy--Comprehensive Due Diligence
and Investment Analysis" for a description of the due diligence process.
Operating Capability
PTR believes that management can substantially improve funds from operations
by actively and effectively managing its multifamily communities. As described
under "--PTR's Multifamily Operating System and Business Strategy--Customer-
Focused Property Management," the REIT Manager and its affiliates have devoted
substantial personnel and financial resources to develop value-added operating
systems, which control and effectively administer the management of PTR's
multifamily portfolio.
Capital Markets Capability
PTR believes that management must be able to effectively raise capital for
the REIT in order for the REIT to achieve growth through investment. As set
forth under "--PTR's Multifamily Operating System and Business Strategy--
Capital Markets/Finance and Conservative Balance Sheet Strategy," REIT
Management has successfully arranged funding for PTR's investment activities.
Communications/Shareholder Relations Capability
PTR believes that a REIT's success in capital markets and investment
activities can be enhanced by management's ability to effectively communicate
the REIT's strategy and performance to investors, sellers of property and the
financial media. The REIT Manager provides at its expense full-time personnel
who prepare informational materials for and conduct periodic meetings with the
investment community and analysts.
PTR believes that successfully combining the foregoing attributes
significantly enhances a REIT's ability to increase cash flow and the market
valuation of the REIT's portfolio.
REIT Manager Compensation
The REIT Management Agreement requires PTR to pay a base annual fee of
$855,000 plus 16% of cash flow, as defined in the REIT Management Agreement, in
excess of $4,837,000, payable monthly (see "Item 7.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations--REIT Management Agreement"). PTR is also obligated to reimburse
the REIT Manager for certain expenses incurred by the REIT Manager on behalf
of PTR relating to PTR's operations, consisting primarily of external
professional fees, third-party offering costs and travel expenses. Since the
REIT Management fee fluctuates with the level of PTR's pre-REIT Management fee
cash flow, the fee has increased for each of the years ended December 31,
1996, 1995 and 1994, because cash flow increased substantially throughout the
same periods. As PTR arranges additional amortizing long-term debt and
nonconvertible preferred share financing and as additional funding of
Homestead convertible mortgage notes occurs, the REIT Management fee will
effectively decline in proportion to PTR's earnings from operations. This
decline will result from the fact that actual or assumed regularly scheduled
principal payments associated with long-term debt and distributions actually
paid with respect to nonconvertible preferred shares are deducted from the
cash flow amount on which the REIT Management fee is based. Similarly,
interest income from the Homestead Notes is not included in the cash flow
amount in determining the REIT Management fee. The REIT Management fee
aggregated $22,191,000, $20,354,000 and $13,182,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. See "--Security Capital
Pacific Trust" for a description of a proposal PTR has received from Security
Capital Group to exchange the REIT Manager and SCG Realty Services for Common
Shares.
TRUSTEES AND OFFICERS OF PTR AND DIRECTORS AND OFFICERS OF THE REIT MANAGER
AND RELEVANT AFFILIATES
Trustees of PTR
C. RONALD BLANKENSHIP--47--Chairman and Trustee of PTR; Chairman of the REIT
Manager and Managing Director of Security Capital Group since March 1991; from
June 1988 to March 1991, Regional Partner, Trammell Crow Residential, Chicago,
Illinois (multifamily real estate development and property management); prior
thereto, Executive Vice President and Chief Financial Officer, The Mischer
Corporation, Houston, Texas (multi-business holding company with investments
primarily in real estate). While with Trammell Crow Residential, Mr.
Blankenship was on the Management Board for Trammell Crow Residential
Services, a property management company that managed approximately 90,000
multifamily units nationwide, and was chief executive officer of Trammell Crow
Residential Services-North, which managed 10,000 multifamily units in the
Midwest and Northeast. In his various positions prior to his affiliation with
the REIT Manager, Mr. Blankenship supervised the development of approximately
9,300 multifamily units. Mr. Blankenship supervises the overall operations of
PTR and the REIT Manager.
JAMES A. CARDWELL--65--Trustee of PTR; Chairman and Chief Executive Officer,
Petro Shopping Centers, L.P., El Paso, Texas (operation of full-service truck
stopping centers) since 1974; Director, El Paso Electric Company.
JOHN T. KELLEY, III--56--Trustee of PTR; advisory Trustee of Security
Capital Industrial Trust, Aurora, Colorado (ownership and development of
industrial parks in the United States), an affiliate of the REIT Manager; from
1987 to 1991, Chairman of the Board, Kelley-Harris Company, Inc., El Paso,
Texas (real estate investment company); from 1968 to 1987, Managing Director,
LaSalle Partners Limited, Chicago, Illinois (corporate real estate services).
Mr. Kelley is also a Director of Security Capital Group and Tri State Media
and a Trustee of Pacific Retail Trust (ownership and development of infill
retail properties in the southwestern United States).
CALVIN K. KESSLER--65--Trustee of PTR; President and principal shareholder,
Kessler Industries, Inc., El Paso, Texas (manufacturer of furniture and
aluminum castings) since 1960.
WILLIAM G. MYERS--69--Trustee of PTR; Trustee of Security Capital Industrial
Trust; Chief Executive Officer of Ojai Ranch and Investment Company, Inc.,
Santa Barbara, California, which he founded in 1963 (agri-business and other
investments); Director, Chalone Wine Group, Napa, California.
JAMES H. POLK, III--54--Trustee of PTR; Managing Director of Capital Markets
Group since August 1992. Mr. Polk has been affiliated with the REIT Manager
since March 1991; prior thereto, he was President and Chief Executive Officer
of PTR for sixteen years. Mr. Polk is registered with the National Association
of Securities Dealers, Inc. and is past President and Trustee of the National
Association of Real Estate Investment Trusts, Inc.
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JOHN C. SCHWEITZER--52--Trustee of PTR; Managing Partner, Continental
Properties Company, Austin, Texas (real estate and investments) since 1976;
General Partner, G.P. Campbell Capital Ltd. (real estate and investments)
since 1976; Trustee, Texas Christian University; Director, Austin Smiles.
Senior Officers
All executive functions of PTR are performed by the REIT Manager. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--REIT Management Agreement." The executive officers of the REIT
Manager are:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
C. Ronald Blankenship............. 47 Chairman
R. Scot Sellers................... 40 Managing Director
Patrick R. Whelan................. 40 Managing Director
Jeffrey B. Allen.................. 48 Senior Vice President
Bryan J. Flanagan................. 44 Senior Vice President
John H. Gardner, Jr............... 43 Senior Vice President
Jay S. Jacobson................... 44 Senior Vice President
Jeffrey A. Klopf.................. 48 Senior Vice President and Secretary
Mark N. Tennison.................. 36 Senior Vice President
</TABLE>
Directors and Senior Officers of the REIT Manager
C. RONALD BLANKENSHIP--47--See "--Trustees of PTR" above.
R. SCOT SELLERS--40--Managing Director of PTR and Director and Managing
Director of the REIT Manager since September 1994, where he has overall
responsibility for PTR's investment program, and from May 1994 to September
1994, Senior Vice President of PTR; from April 1993 to May 1994, Senior Vice
President of Security Capital Group, where he was responsible for national
multifamily acquisitions; from September 1981 to April 1993, an operating
partner and Vice President of Lincoln Property Company (development,
acquisition and management of multifamily communities), where he was
responsible, among other things, for the development of more than 6,500
multifamily units in a number of different markets.
PATRICK R. WHELAN--40--Managing Director of PTR and the REIT Manager since
December 1995 and Director of the REIT Manager since February 1995, where he
has responsibility for PTR's operations; since October 1994, President of SCG
Realty Services, where he has overall responsibility for property management;
from February 1994 to October 1994, Senior Vice President and Co-Manager of
Multifamily Acquisitions of Security Capital Group; from July 1986 to January
1994, Senior Vice President of Trammell Crow Company (development, acquisition
and management of commercial properties).
JEFFREY B. ALLEN--48--Senior Vice President of PTR since September 1995 and
the REIT Manager since July 1995, where he has overall responsibility for
investments and operations in the Western Region; from October 1981 to July
1995, Managing Director of Paragon Group, where he was responsible for
commercial and residential development and management operations in the
western region; prior thereto, Vice President of Cabot, Cabot and Forbes Co.,
where he was responsible for commercial development in the Los Angeles area.
BRYAN J. FLANAGAN--44--Senior Vice President of PTR and the REIT Manager
since November 1996, where he has responsibility for financial operations;
from June 1995 to November 1996, Senior Vice President of Security Capital
Group, where he was responsible for financial operations; from September 1987
to June 1995, Vice President-Financial Analysis for Marriott Hotels, Resorts &
Suites.
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JOHN H. GARDNER, JR.--43--Director of the REIT Manager since February 1995
and Senior Vice President of PTR and the REIT Manager since September 1994,
where he has overall responsibility for multifamily dispositions; Senior Vice
President of ATLANTIC and its REIT manager since September 1994, where he has
overall responsibility for multifamily dispositions; from December 1984 to
January 1993, Vice President of Asset Management and through September 1994,
Managing Director and Principal of Copley Real Estate Advisors in Boston,
where he had overall responsibility for the portfolio management function for
eight accounts valued at $7.5 billion; prior thereto, Real Estate Manager of
Equity Real Estate at John Hancock Companies.
JAY S. JACOBSON--44--Senior Vice President of PTR and the REIT Manager since
June 1996, and from July 1993 to June 1996, Vice President of PTR, where he
has overall responsibility for investments and operations in the Central
Region; from 1988 to June 1993, Vice President-Residential Development for
Michael Swerdlow Companies, Inc. and Hollywood Inc., South Florida real estate
development/management companies under common control, where he was
responsible for the planning and development of over 2,200 multifamily units
as well as other development projects.
JEFFREY A. KLOPF--48--Senior Vice President and Secretary of PTR, the REIT
Manager and Security Capital Group since January 1996, where he provides
securities offerings and corporate acquisition services and oversees the
provision of legal services for affiliates of Security Capital Group; from
January 1988 to December 1995, partner of Mayer, Brown & Platt where he
practiced corporate and securities law.
MARK N. TENNISON--36--Senior Vice President of PTR and the REIT Manager
since November 1996, and from July 1992 to November 1996, Vice President of
PTR, where he has overall responsibility for investment and operations in the
Northwest Region; from May 1991 to July 1992, Executive Vice President/Chief
Operating Officer of Metro Concap, Inc., an operator of over 7,100 multifamily
units; from January 1991 to May 1991, attorney for the Federal Deposit
Insurance Corporation.
PAMELA D. PORTER--36--Vice President of PTR and the REIT Manager since
September 1996 and Director of the REIT Manager since January 1997, where she
has overall responsibility for the six-person due diligence group and is
responsible for contract negotiations for acquisitions, due diligence,
approval and oversight of land entitlements and management and implementation
of tax-free exchanges; from November 1994 to September 1996, Vice President of
Security Capital Industrial Trust and Security Capital Industrial
Incorporated, where she had overall responsibility for due diligence and was a
member of the due diligence team since November 1993; from May 1992 to
November 1993, Partner with Lantana Properties, Inc., a commercial real estate
brokerage company in San Antonio, Texas; from July 1991 to April 1992, Broker
and Analyst with Wilsonschanzer, Inc. in San Antonio, Texas, where she sold
investment properties, performed financial analyses and coordinated market
reports.
DARCY B. BORIS--34--Vice President of Security Capital Investment Research
since June 1995, where she conducts strategic market analysis for PTR and
affiliated companies; Director of the REIT Manager since January 1997; from
August 1993 to November 1994, Ms. Boris worked for Capital Markets Group; from
January 1987 to September 1991, she was with Marcus & Millichap Incorporated
as Project Manager for Summerhill Development Company, the multifamily
development subsidiary of Marcus & Millichap Incorporated, where she managed
the development of multifamily housing, and prior thereto, she was an analyst
for its property investment subsidiary.
Other Officers
FRANK R. ANDERSON--38--Vice President of PTR and the REIT Manager since June
1995, where he is a Project Manager in the Northwest Region; prior thereto
Vice President, Acquisitions and Land Development of Shea Homes, a single
family and multifamily developer in San Diego, California.
ARIEL AMIR--37--Vice President of Security Capital Group since June 1994;
from September 1985 to April 1994, an attorney with the law firm of Weil,
Gotshal & Manges, New York, New York where he practiced securities and
corporate law. Mr. Amir provides securities offerings and corporate
acquisition services to PTR.
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ASH K. ATWOOD--33--Vice President of PTR and the REIT Manager since November
1996, where he is responsible for PTR's corporate accounting and external
financial reporting; prior thereto, Senior Manager in the assurance practice
of KPMG Peat Marwick LLP, where he had extensive involvement in PTR's annual
audit and securities offerings since joining the firm in June 1986.
MICHAEL P. BISSELL--46--Vice President of PTR and the REIT Manager since
February 1997; Vice President of SCG Realty Services since August 1996, where
he is responsible for community operations in the Northwest Region; from
September 1991 to August 1996, President of Michael P. Bissell & Associates,
where he was involved in a variety of consulting assignments with clients in
the multifamily industry.
MICHAEL A. BRITTI--37--Vice President of PTR and the REIT Manager since
September 1996 and with the REIT Manager since September 1995, where he is
responsible for new product development and revenue enhancement through
portfolio-wide initiatives; from November 1993 to September 1995, Vice
President-Asset Management with the National Corporation for Housing
Partnerships in Washington, D.C., where he led acquisitions and restructuring
of large apartment portfolios; from July 1987 to November 1993, Vice
President-Investment Management with Oxford Realty Services Corporation in
Bethesda, Maryland.
JAMES C. BORMANN--44--Vice President of PTR since December 1995 and the REIT
Manager since June 1995, where he is responsible for production and
construction activities in the Central Region; from August 1992 to May 1995,
Vice President of construction with Roseland Property Company (formerly
Lincoln Property Company Northeast); prior thereto, Construction
Superintendent with Toll Brothers, Inc.
MARK J. CHAPMAN--39--Vice President of Security Capital Investment Research
since November 1995, where he is the director of the group and conducts
strategic market analysis for PTR and affiliated companies; from March 1995 to
November 1995, Vice President of PTR, with asset management responsibilities
in five major markets; from November 1994 to March 1995, Vice President of
PACIFIC; from July 1989 to November 1994, Vice President of Copley Real Estate
Advisors, Inc., where he directed asset management for Copley assets located
from Connecticut to Virginia, valued in excess of $1.5 billion; prior thereto,
Director of Asset Management for Liberty Real Estate, with responsibility for
assets east of the Mississippi River, including multifamily, office and retail
properties.
RICHARD W. DICKASON--40--Vice President of PTR and the REIT Manager since
March 1995, where he has overall responsibility for PTR's investment activity
in the Northwest Region; from December 1993 to March 1995, Vice President of
PACIFIC; from July 1992 to September 1993, President of J.M. Peters
Company/Capital Pacific Homes, where he acquired property for the development
of single family homes and apartments; from May 1980 to January 1992, Partner
and Vice President of Lincoln Property Company N.C. Inc., where he was
responsible for the acquisition, development, construction and management of a
4,000 unit multifamily residential portfolio in the California marketplace;
prior thereto, Mr. Dickason represented private investors in the development
of condominiums, townhouses, shopping centers and single family homes
throughout California.
JOSEPH G. DI CRISTINA--37--Vice President of PTR and the REIT Manager since
March 1995, where he has overall responsibility for PTR's investment activity
in the Central Region; from August 1994 to March 1995, Vice President of
PACIFIC; prior thereto, Vice President of Forward Planning at Robertson Homes,
where he was responsible for the development of eight multifamily projects
totalling 2,845 units throughout California.
KERRY E. ENDSLEY--48--Vice President of PTR and the REIT Manager since
December 1996, where he is Project Manager in the Central Region; from January
1994 to July 1995, President of Construction for MTI Construction, Inc. in
Houston, Texas, where he managed construction of over 1,100 multifamily units
in Texas and Colorado; from October 1988 to December 1993, Vice President of
General Contracting for Bradley Construction Co., Inc., where he was
responsible for over 2,000 multifamily units, schools, dormitories and
warehouses and where he recruited personnel.
16
<PAGE>
KATHY B. FARR--42--Vice President of PTR and the REIT Manager since June
1995, where she is responsible for multifamily dispositions; Vice President of
ATLANTIC and its REIT manager since June 1995, where she is responsible for
multifamily dispositions; from January 1994 to April 1995, Vice President of
Corporate Finance with Irvine Apartment Communities, where she was responsible
for all aspects of financing, including that company's working capital line of
credit and construction financings for all new development activity; prior
thereto, Senior Director Project Finance with The Irvine Company, where she
was responsible for negotiating and closing construction and permanent
financings on residential and commercial properties.
SUE P. FREEDMAN--49--Vice President of PTR and the REIT Manager since
February 1997 where she has overall responsibility for SCG Realty Services'
Education and Organizational Development activities; from August 1995 to
October 1996, Creator and Manager of Knowledge Work Associates, where she
worked with clients on organizational improvement; from January 1994 to July
1995, Manager of Organization Effectiveness for Texas Instruments, where she
advised and assisted senior executives in the implementation of change from a
traditional to an entrepreneurial culture; from January 1984 to December 1993,
with Texas Instruments Systems Group, where her most recent position was
manager of organizational effectiveness and where she selected and managed
delivery of management and organizational effectiveness programs.
PETER M. GRIMM--54--Vice President of PTR since 1975 and the REIT Manager
since March 1991, where he is a Project Manager in the Central Region.
DANA K. HAMILTON--28--Vice President of PTR and the REIT Manager since
December 1996, where she is responsible for new product development and
revenue enhancement through portfolio-wide initiatives; from April 1996 to
December 1996, Vice President of Operations for SCG Realty Services, where she
focused on national operations; from August 1994 to April 1995, in the
Management Development Program of Security Capital Group; from June 1993 to
October 1993, Consultant to Rouse and Associates in San Francisco, where she
was responsible for evaluating the quality of property management at five
properties, and Consultant to Construction Specialties International in
Jakarta, Indonesia.
KEVIN M. HAMPTON--33--Vice President of PTR and the REIT Manager since
December 1996, where he is responsible for land acquisition and product
development throughout Southern California; from August 1995 to December 1996,
Vice President of Land Acquisitions for The Akins Companies in Irvine,
California, where he was responsible for coordination of land acquisition
activities and purchase and sale negotiations; from June 1993 to August 1995,
Vice President of New Business Development for J. M. Peters Company in Newport
Beach, California, where he managed land acquisitions throughout Southern
California; from October 1989 to March 1993, Director of Business Development
for Lincoln Property Company in Irvine, California.
CHRISTOPHER C. HARNESS--44--Vice President of PTR and the REIT Manager since
December 1995, where he is responsible for community operations in Houston,
Dallas and El Paso, Texas; from August 1993 to June 1994, Senior Analyst for
Due Diligence at SCG Realty Services; prior thereto, Mr. Harness was
responsible for development of commercial properties in eight Texas markets
for Affiliated Builders.
NELSON L. HENRY--61--Vice President of PTR since December 1994 and the REIT
Manager since January 1995, where he is responsible for production and
construction activities in the Western Region; from January 1983 to September
1993, Construction Vice President for Lincoln Property Company N.C. Inc.,
where he was responsible for the construction of over 8,000 units in Colorado
and California; prior thereto, President of Royal Investment Corporation, a
regional multifamily and single family developer.
RICHARD A. JUAREZ--49--Vice President of PTR and the REIT Manager since
December 1996, where he is Project Manager for the Western Region; from
February 1978 to December 1996, Partner and Vice President with Lincoln
Property Company in Northern California and Las Vegas, Nevada, where he was
responsible for the development of more than 6,000 multifamily units.
17
<PAGE>
JOHN JORDANO III--40--Vice President of PTR and the REIT Manager since March
1995, where he has overall responsibility for PTR's investment activity in the
Western Region; from August 1994 to March 1995, Vice President of PACIFIC;
from January 1992 to July 1994, Senior Vice President of Prospect Partners,
where he was responsible for identifying and advising individual and corporate
clients on financial institution and Resolution Trust Corporation REO
apartment acquisition and investment opportunities in the western United
States; prior thereto, Partner with Trammell Crow Residential Company, where
he established the Sacramento office and was responsible for the development
of multifamily projects.
LAWRENCE S. LEVITT--40--Vice President of PTR since September 1995 and the
REIT Manager since December 1995, where he is responsible for all acquisition
activity in Southern California; from May 1992 to August 1995, Vice President-
Director of Residential Acquisitions of Sares-Regis Group, where he managed
the residential acquisitions division; from August 1991 to May 1992, Principal
of Integrated Mortgage Resources, a commercial and residential mortgage
banking firm; prior thereto, Vice President of Con Am Management Corporation,
where he directed acquisition transactions.
TONI L. LOPEZ--39--Vice President of PTR and the REIT Manager since February
1997; Vice President of SCG Realty Services since August 1996, where she has
overall responsibility for community operations in Denver, Austin and San
Antonio; since July 1993, Ms. Lopez was responsible for community operations
in San Antonio and Austin; from December 1985 to January 1993, Vice President
of Beacon Hill Investments, Inc., where she was responsible for new account
generation and property and asset management.
SCOTT V. MONROE--36--Vice President of PTR and REIT Manager since February
1997; since August 1996, Vice President of SCG Realty Services, where he has
overall responsibility for community operations in California; from March 1987
to July 1996, Vice President, Maxim Property Management, where he had direct
management responsibility for a residential portfolio consisting of over
11,000 units located throughout California and Arizona.
CHARLES E. MUELLER, JR.--33--Vice President of PTR and the REIT Manager
since September 1996, where he is responsible for corporate finance and
capital markets activities; prior thereto, he was with Capital Markets Group,
where he provided financial services to Security Capital Group and its
affiliates; from April 1994 through April 1995, in the Management Development
Program of Security Capital Group.
DANIEL W. OGDEN--36--Vice President of PTR and the REIT Manager since
December 1995 and SCG Realty Services since March 1995, where he is
responsible for community operations in Phoenix and Tucson, Arizona,
Albuquerque, New Mexico and Reno and Las Vegas, Nevada; from June 1994 to
February 1995, Executive Vice President of Mutual Real Estate Corporation in
Dallas, where he was responsible for the management of a portfolio located in
seven states; prior thereto, Regional Vice President of Lincoln Property
Company where he was responsible for the management of over 16,000 multifamily
units located in twelve mid-Atlantic/Midwest states.
MARK P. PEPPERCORN--34--Vice President of PTR and the REIT Manager since
February 1995, where he is responsible for the acquisition of land and
existing communities in Northern California; from September 1994 to February
1995, a member of the acquisitions group for ATLANTIC and previously, for PTR;
from March 1991 to June 1993, Mr. Peppercorn was responsible for the
multifamily brokerage division of Transwestern Property Company in Houston;
and prior thereto, an Associate Vice President of Eastdil Realty Incorporated.
THOMAS L. POE--39--Vice President of PTR since June 1994 and the REIT
Manager since April 1992, where he is responsible for the accounting and
financial reporting for each of PTR's three geographic regions; from 1988 to
1992, Vice President of Finance and from 1981 to 1992, Real Estate Controller
for the Mischer Corporation, Houston, Texas, prior thereto, staff accountant
with Arthur Andersen & Company.
HAROLD D. RILEY--60--Vice President of PTR since 1974 and the REIT Manager
since March 1991, where he provides accounting and financial reporting
services.
18
<PAGE>
DAVID K. ROBBINS--44--Vice President of PTR and the REIT Manager since March
1995, where he is a Project Manager in the Western Region; from June 1994 to
January 1995, Vice President of ATLANTIC, where he was a member of the
development group; from December 1992 to May 1994, Vice President of PTR, where
he had overall responsibility for the due diligence group; from January 1988 to
December 1992, partner in the law firm of Hill, Farrer & Burrill in Los
Angeles, where his practice focused on real estate acquisitions and
development. He also served as general counsel to Hollywood Park Racetrack,
where he was involved in forming Hollywood Park's public REIT.
W. ROBERT SMITH--37--Vice President of PTR and the REIT Manager since
November 1996, where he is a Project Manager in the Central Region; from July
1989 to November 1996, Senior Vice President of IBG Development in Washington,
D.C., where he was responsible for the development of high-rise commercial,
mixed-use, and residential projects in the central business district.
SHYAM R. TAGGARSI--41--Vice President of PTR and the REIT Manager since
September 1996, where he is responsible for development activity in Northern
California; from January 1993 to September 1996, Real Estate Consultant in
Foster City, California; from December 1987 to January 1993, Development
Partner with Lincoln Property Company; from December 1987 to January 1993,
Development Partner of Trammell Crow Residential in Foster City, California,
where he was responsible for all aspects of multifamily residential project
management and development in the South Bay area.
GARY L. TRUITT--46--Vice President of PTR and the REIT Manager since December
1995, where he has overall responsibility for production and construction
activities in the Northwest Region; from July 1994 to January 1995, Project
Manager with C.F. Jordan Inc.; prior thereto, Superintendent of Benchmark
Contractors, where he had supervision and code and specifications compliance
responsibilities.
TIMOTHY R. WELSH--41--Vice President of PTR and the REIT Manager since
September 1996, where he is a Project Manager of Development in the Central
Region; from February 1993 to September 1996, Regional Vice President and
Project Manager for C.F. Jordan Residential, a multifamily general contracting
company in Dallas and El Paso, Texas; from 1986 to February 1993, Project
Manager and Senior Project Engineer with the Weitz Company, a commercial real
estate development company in Des Moines, Iowa.
DAVID B. WOODWARD--30--Vice President of PTR and the REIT Manager since
November 1993 and SCG Realty Services since January 1995, where he is
responsible for community operations in Northern California; from June 1993 to
October 1993, Mr. Woodward was with PTR, where he was responsible for property
management; prior thereto, asset manager with USF&G's Real Estate Division.
K. DOUGLAS WRIGHT--50--Vice President of PTR and the REIT Manager since July
1995, where he is a Project Manager in the Western Region; from December 1991
to June 1995, Mr. Wright was a real estate consultant, developer and asset
manager; prior thereto, President of Summit Development Company.
In addition, an affiliate of the REIT Manager employs a number of accounting
professionals who provide centralized accounting services for PTR.
Shareholder Relations and Capital Markets. The following persons provide
shareholder relations and capital markets services to PTR:
K. SCOTT CANON--35--President of Capital Markets Group since January 1996,
Vice President of Capital Markets Group since August 1993 and a member of
Capital Markets Group since March 1992, where he participates in capital
markets and institutional investor relations; from September 1991 to March
1992, a personal account director for Chase Manhattan Investment Services; from
August 1987 to September 1991, a member of private client services for Goldman,
Sachs & Co. Mr. Canon is registered with the National Association of Securities
Dealers, Inc.
19
<PAGE>
ROBERT H. FIPPINGER--53--Vice President of Capital Markets Group since June
1995 and with Security Capital Group since October 1994, where he directs
corporate communications services for affiliates of Security Capital Group;
from November 1991 to October 1994, he was with Grubb & Ellis, where he
represented corporate clients and provided tenant advisory services; prior
thereto, Executive Director of Techmart, where he was responsible for
management, marketing, operations, leasing and program development of
commercial properties.
GERARD DE GUNZBURG--49--Senior Vice President of Capital Markets Group in its
New York office since January 1997, where he provides capital markets services
for affiliates of Security Capital Group; prior thereto, Vice President with
Capital Markets Group since 1993; from June 1988 to December 1992, a consultant
to American and European companies; prior thereto, Director and Partner of
Lincoln Property Company, Europe, where he arranged real estate financing from
1976 to 1988. Mr. de Gunzburg is registered with the National Association of
Securities Dealers, Inc.
ALISON C. HEFELE--37--Vice President of Capital Markets Group since February
1994, where she provides capital markets services for affiliates of Security
Capital Group; from January 1990 to February 1994, Vice President with
Prudential Real Estate Investors (strategic planning and business development
for institutional real estate investment management services); from September
1985 to January 1990, a management consultant with McKinsey & Company; prior
thereto, a financial analyst with Morgan Stanley Realty Inc. Ms. Hefele is
registered with the National Association of Securities Dealers, Inc.
GARRETT C. HOUSE--32--Vice President of Capital Markets group since September
1996, where he provides capital markets services for affiliates of Security
Capital Group; from May 1994 to August 1996, he assisted with financing
activities for affiliates of Security Capital Group, and prior thereto, he was
a member of the Management Development Program from May 1993 to May 1994; in
May 1993, he obtained his M.B.A. from Harvard Graduate School of Business
Administration; from July 1989 to July 1991, Project Manager for Nansay
Corporation in Los Angeles, California; from July 1987 to July 1989, Analyst
with Merrill Lynch Capital Markets in New York. Mr. House is registered with
the National Association of Securities Dealers, Inc.
BRADFORD W. HOWE--32--Vice President of Capital Markets Group since January
1996, where he provides capital markets services for affiliates of Security
Capital Group and where he has been an associate since December 1994; from
March 1993 to December 1994, Assistant Vice President in the real estate
investment banking group of Kidder Peabody & Co., Incorporated; prior thereto,
real estate consultant at Coopers & Lybrand. Mr. Howe is registered with the
National Association of Securities Dealers, Inc.
JAMES H. POLK III--54--See "--Trustees of PTR" above.
DONALD E. SUTER--40--Senior Vice President of Capital Markets Group since May
1996; from October 1995 to April 1996, President and Chief Operating Officer
for Cullinan Properties Limited in Peoria, Illinois; from July 1984 to October
1995, Mr. Suter was with LaSalle Partners in Chicago, Illinois, where his last
position held was Senior Vice President, Corporate Finance Group.
EMPLOYEES
PTR currently has no employees. The REIT Manager, whose sole activity is
advising PTR, manages the day-to-day operations of PTR. The REIT Manager and
its specialized service affiliates have assembled a team of 129 operating
professionals in the REIT Manager and its affiliates, collectively possessing
extensive experience in multifamily real estate. The majority of these persons
are employed directly by the REIT Manager and are focused entirely on the
services provided by the REIT Manager. The balance of the professionals provide
centralized research, capital markets, legal, accounting and other
administrative services.
20
<PAGE>
INSURANCE
PTR carries comprehensive general liability coverage on its owned
communities, with limits of liability customary within the industry, to insure
against liability claims and related defense costs. Similarly, PTR is insured
against the risk of direct physical damage in amounts necessary to reimburse
PTR on a replacement cost basis for costs incurred to repair or rebuild each
property, including loss of rental income during the reconstruction period (up
to a six-month period). PTR's blanket property policy for all operating and
development communities includes coverage for loss due to earthquake.
COMPETITION
There are numerous commercial developers, real estate companies and other
owners of real estate that compete with PTR in seeking land for development,
communities for acquisition and disposition and residents for communities. All
of PTR's multifamily communities are located in developed areas that include
other multifamily communities. The number of competitive multifamily
communities in a particular area could have a material adverse effect on PTR's
ability to lease units and on the rents charged. In addition, other forms of
single family and multifamily residential communities provide housing
alternatives to residents and potential residents of PTR's multifamily
communities.
AMERICANS WITH DISABILITIES ACT
PTR's communities must comply with Title III of the Americans with
Disabilities Act (the "ADA") to the extent that such communities are "public
accommodations" and/or "commercial facilities" as defined by the ADA. The ADA
does not consider multifamily communities to be public accommodations or
commercial facilities, except portions of such facilities open to the public,
such as the leasing office. Noncompliance could result in imposition of fines
or an award of damages to private litigants. PTR believes that the mandated
portions of its communities comply with all present requirements under the ADA
and applicable state laws.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of certain hazardous or toxic
substances at, on, under or in its property. The costs of removal or
remediation of such substances could be substantial. Such laws often impose
such liability without regard to whether the owner or operator knew of, or was
responsible for, the release or presence of such hazardous or toxic substances.
The presence of such substances may adversely affect the owner's ability to
sell or rent such real estate or to borrow using such real estate as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances also may be liable for the costs of removal or remediation of
such substances at the disposal or treatment facility, whether or not such
facility is owned or operated by such person. Certain environmental laws impose
liability for the release of asbestos-containing materials into the air,
pursuant to which third parties may seek recovery from owners or operators of
real properties for personal injuries associated with such materials, and
prescribe specific methods for the removal and disposal of such materials,
which may result in increased costs in connection with renovations at PTR's
properties.
PTR has not been notified by any governmental authority of any non-
compliance, liability or other claim in connection with any of its properties
owned or being acquired at January 31, 1997, and PTR is not aware of any
environmental condition with respect to any of its properties that is likely to
be material. PTR has subjected each of its properties to a Phase I
environmental assessment (which does not involve invasive procedures such as
soil sampling or ground water analysis) by independent consultants. While some
of these assessments have led to further investigation and sampling, none of
the environmental assessments has revealed, nor is PTR aware of, any
environmental liability (including asbestos-related liability) that the REIT
Manager believes would have a material adverse effect on PTR's business,
financial condition or results of operations. No assurance can be given,
however, that these assessments and investigations reveal all potential
environmental liabilities, that no prior owner or operator created any material
environmental condition not known to PTR or the independent consultants or that
future uses and conditions (including, without limitation, resident actions or
changes in applicable environmental laws and regulations) will not result in
unreimbursed costs relating to environmental liabilities.
21
<PAGE>
ITEM 2. PROPERTIES
GEOGRAPHIC DISTRIBUTION
To effectively manage its multifamily communities, PTR has organized its
operations into three regions (Central, Northwest and West). Within these
regions, PTR's multifamily communities are located in 23 metropolitan areas in
12 states. The table below summarizes the geographic distribution of PTR's
multifamily communities which are operating or under construction, based on
total expected investment.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996(1) 1995(1) 1994(1)
------- ------- -------
<S> <C> <C> <C>
CENTRAL REGION:
Austin, Texas.................................. 4.65% 7.26% 9.92%
Dallas, Texas.................................. 3.86 5.22 7.36
Denver, Colorado............................... 4.61 5.62 7.91
El Paso, Texas................................. 4.45 5.68 7.84
Houston, Texas................................. 7.29 8.65 10.74
San Antonio, Texas............................. 6.37 9.16 13.06
------ ------ ------
Central Region Total......................... 31.23% 41.59% 56.83%
------ ------ ------
NORTHWEST REGION:
Portland, Oregon............................... 6.71% 4.95% -- %
Salt Lake City, Utah........................... 4.94 2.86 --
Seattle, Washington............................ 5.82 4.41 --
------ ------ ------
Northwest Region Total....................... 17.47% 12.22% -- %
------ ------ ------
WEST REGION:
Albuquerque, New Mexico........................ 5.80% 6.60% 7.45%
Las Vegas, Nevada.............................. 5.34 6.52 --
Northern California............................ 8.99 2.15 --
Phoenix, Arizona............................... 12.95 17.70 21.15
Southern California............................ 12.82 2.47 2.24
Tucson, Arizona................................ 2.73 6.46 7.12
------ ------ ------
West Region Total............................ 48.63% 41.90% 37.96%
------ ------ ------
Other Markets................................ 2.67% 4.29% 5.21%
------ ------ ------
Total All Markets.......................... 100.00% 100.00% 100.00%
====== ====== ======
</TABLE>
- --------
(1) For operating communities, represents cost, including budgeted renovations.
For communities under construction, represents total budgeted development
cost, which includes the cost of land, fees, permits, payments to
contractors, materials, architectural and engineering fees and interest and
property taxes to be capitalized during the construction period.
22
<PAGE>
REAL ESTATE PORTFOLIO
The information in the following table is as of December 31, 1996, except as
noted below (dollar amounts in thousands). Additional information on PTR's
real estate portfolio is contained in Schedule III, Real Estate and
Depreciation, in PTR's financial statements incorporated by reference in "Item
8. Financial Statements and Supplementary Data".
<TABLE>
<CAPTION>
YEAR TOTAL
ACQUIRED OR PERCENTAGE NUMBER OF PTR EXPECTED
COMPLETED(1) LEASED UNITS INVESTMENT INVESTMENT(2)
------------ ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING
COMMUNITIES(3):
CENTRAL REGION:
Austin, Texas:
Stabilized:
Anderson Mill Oaks... 1993 95.7% 350 $ 12,558 $ 12,614
Cannon Place......... 1993 99.5 184 6,846 6,904
Hunter's Run*........ 1995 97.1 240 11,480 11,481
Hunter's Run II*..... 1996 95.6 160 8,276 8,276
Monterrey Ranch
Village II ......... 1996 99.1 456 24,040 24,044
The Ridge............ 1993 94.5 326 10,640 10,837
Rock Creek........... 1993 97.1 314 10,246 10,347
Saddlebrook*......... 1994 95.1 308 13,321 13,378
Shadowood............ 1993 97.0 236 6,622 6,704
----- ----- ---------- ----------
Subtotal/Average.... 96.8 2,574 104,029 104,585
----- ----- ---------- ----------
Dallas, Texas:
Stabilized:
Apple Ridge.......... 1993 96.4 304 11,151 11,292
Custer Crossing...... 1993 93.4 244 10,555 11,114
Post Oak Ridge....... 1993 98.2 486 15,272 16,533
Quail Run............ 1993 94.6 278 11,212 11,630
Summerstone.......... 1993 97.4 192 7,102 7,275
Timber Ridge......... 1994 95.0 160 7,118 7,289
Woodland Park........ 1993 96.3 216 7,364 7,454
----- ----- ---------- ----------
Subtotal/Average.... 96.2 1,880 69,774 72,587
----- ----- ---------- ----------
Denver, Colorado:
Stabilized:
Cambrian............. 1993 97.4 383 12,159 12,374
The Cedars........... 1993 99.8 408 17,425 17,668
Fox Creek I.......... 1993 94.9 175 6,451 6,515
Hickory Ridge........ 1992 97.2 688 23,587 23,982
Reflections I........ 1993 100.0 208 8,892 9,094
Reflections II*...... 1996 98.1 208 12,335 12,348
Silvercliff#......... 1994 94.6 312 16,398 16,486
Sunwood.............. 1992 100.0 156 6,232 6,443
----- ----- ---------- ----------
Subtotal/Average.... 98.0 2,538 103,479 104,910
----- ----- ---------- ----------
El Paso, Texas:
Stabilized:
Acacia Park*......... 1995 93.2 336 14,281 14,341
Cielo Vista.......... 1993 88.6 378 8,924 9,091
The Crest at Shadow
Mountain*........... 1992 91.0 232 8,017 (4)
Double Tree.......... 1993 97.9 284 6,236 6,365
Las Flores*#......... 1980-83 97.4 468 8,502 8,705
</TABLE>
(see notes following table)
23
<PAGE>
<TABLE>
<CAPTION>
YEAR TOTAL
ACQUIRED OR PERCENTAGE NUMBER OF PTR EXPECTED
COMPLETED(1) LEASED UNITS INVESTMENT INVESTMENT(2)
------------ ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Mountain Village..... 1992 92.0% 288 $ 7,437 $ 7,521
Park Place*.......... 1989-91 91.8 292 8,817 8,927
The Patriot*......... 1996 97.8 320 12,231 12,365
The Phoenix*......... 1993 98.2 336 10,688 10,813
Shadow Ridge*........ 1991-94 94.6 352 12,381 12,470
Tigua Village*#...... 1970 & 78 96.7 184 2,416 2,533
---- ----- ---------- ----------
Subtotal/Average.... 94.5 3,470 99,930 93,131
---- ----- ---------- ----------
Houston, Texas:
Stabilized:
Beverly Palms........ 1994 97.2 362 10,205 10,362
Braeswood Park#...... 1993 97.1 240 12,604 12,731
Brompton Court#...... 1994 98.5 794 31,444 31,920
Cranbrook Forest..... 1993 87.4 261 6,957 7,183
Memorial Heights I*.. 1996 99.2 360 18,442 18,595
Oaks at Medical
Center I*........... 1996 99.2 360 18,411 18,592
Pineloch............. 1993 96.6 440 13,759 13,925
Plaza Del Oro........ 1994 98.9 348 12,077 12,209
Seahawk#............. 1994 99.1 224 8,745 8,846
Weslayan Oaks........ 1993 94.1 84 3,998 3,999
---- ----- ---------- ----------
Subtotal/Average.... 97.3 3,473 136,642 138,362
---- ----- ---------- ----------
Omaha, Nebraska:
Stabilized:
Apple Creek#......... 1994 94.5 384 13,795 13,919
Oakbrook............. 1995 92.6 162 7,536 7,597
---- ----- ---------- ----------
Subtotal/Average.... 94.0 546 21,331 21,516
---- ----- ---------- ----------
San Antonio, Texas:
Stabilized:
Applegate............ 1993 93.6 344 10,225 10,349
Austin Point......... 1993 94.5 328 12,068 12,229
Camino Real.......... 1993 94.3 176 6,281 6,483
Cobblestone Village.. 1992 94.0 184 4,597 4,634
Contour Place........ 1992 92.1 126 2,624 2,763
The Crescent*........ 1994 92.8 306 15,690 15,764
Dymaxion............. 1994 97.4 190 4,654 4,797
The Gables........... 1993 95.3 192 7,388 7,429
Marbach Park......... 1993 86.2 304 8,134 8,243
Palisades Park....... 1993 89.9 328 8,261 8,313
Panther Springs...... 1993 95.5 88 4,047 4,066
Rancho Mirage........ 1993 96.1 254 5,131 5,224
St. Tropez I......... 1992 96.0 273 11,038 11,284
Stanford Heights*.... 1996 93.1 276 13,334 13,366
Sterling Heights*.... 1995 96.4 224 12,104 12,116
Towne East Village... 1993 92.0 100 2,571 2,588
Villas of Castle
Hills............... 1993 87.1 163 5,931 6,071
Waters of Northern
Hills............... 1994 94.1 305 9,141 9,278
---- ----- ---------- ----------
Subtotal/Average.... 93.2 4,161 143,219 144,997
---- ----- ---------- ----------
</TABLE>
(see notes following table)
24
<PAGE>
<TABLE>
<CAPTION>
YEAR TOTAL
ACQUIRED OR PERCENTAGE NUMBER OF PTR EXPECTED
COMPLETED(1) LEASED UNITS INVESTMENT INVESTMENT(2)
------------ ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Tulsa, Oklahoma:
Stabilized:
Southern Slope....... 1993 95.1% 142 $ 5,363 $ 5,423
----- ------ ---------- ----------
Central Region
Subtotal/Average. 95.6 18,784 683,767 685,511
----- ------ ---------- ----------
NORTHWEST REGION:
Portland, Oregon:
Stabilized:
Club at the Green.... 1995 97.6 254 11,151 11,200
Double Tree I........ 1995 96.3 245 10,515 10,528
Double Tree II#...... 1995 96.0 124 6,681 6,681
Knight's Castle...... 1995 94.9 296 13,182 13,335
Meridian at
Murrayhill.......... 1995 96.8 312 17,256 17,305
Preston's Crossing*.. 1996 94.3 228 12,866 12,877
Riverwood Heights.... 1995 95.0 240 10,163 10,187
Squire's Court....... 1995 94.0 235 10,980 11,134
Pre-Stabilized:
Brighton............. 1996 93.6 233 11,476 12,117
Timberline........... 1996 98.5 130 7,335 7,411
----- ------ ---------- ----------
Subtotal/Average.... 95.6 2,297 111,605 112,775
----- ------ ---------- ----------
Salt Lake City, Utah:
Stabilized:
Brighton Place....... 1995 94.6 336 15,282 15,473
Cherry Creek#........ 1995 92.4 225 8,982 9,053
Greenpointe#......... 1995 97.9 192 6,008 6,097
Mountain Shadow#..... 1995 95.4 174 5,687 5,746
Pre-Stabilized:
Fox Creek#........... 1996 95.7 186 7,936 8,303
Summertree#.......... 1996 95.8 240 10,183 10,535
----- ------ ---------- ----------
Subtotal/Average.... 95.2 1,353 54,078 55,207
----- ------ ---------- ----------
Seattle, Washington:
Stabilized:
Logan's Ridge........ 1995 96.9 258 13,345 13,417
Matanza Creek........ 1995 99.3 152 7,097 7,129
Millwood Estates..... 1995 100.0 300 11,401 11,566
Pebble Cove*......... 1995 100.0 288 16,979 16,991
Remington Park....... 1995 97.3 332 19,120 19,234
Walden Pond.......... 1995 100.0 316 13,904 13,935
Pre-Stabilized:
Clubhouse#........... 1996 97.4 194 8,171 8,725
----- ------ ---------- ----------
Subtotal/Average.... 98.7 1,840 90,017 90,997
----- ------ ---------- ----------
Northwest Region
Subtotal/Average. 96.6 5,490 255,700 258,979
----- ------ ---------- ----------
</TABLE>
(see notes following table)
25
<PAGE>
<TABLE>
<CAPTION>
TOTAL
YEAR ACQUIRED PERCENTAGE NUMBER OF PTR EXPECTED
OR COMPLETED(1) LEASED UNITS INVESTMENT INVESTMENT(2)
--------------- ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
WEST REGION:
Albuquerque, New
Mexico:
Stabilized:
Commanche Wells...... 1994 84.9% 179 $ 5,164 $ 5,273
Corrales Pointe...... 1993 95.2 208 6,811 7,143
Entrada Pointe....... 1994 96.2 209 7,676 7,821
La Paloma*........... 1996 93.4 424 23,174 24,810
La Ventana*.......... 1996 95.3 232 15,327 15,506
Pavilions*........... 1991 97.5 240 15,438 15,771
Sandia Ridge......... 1992 90.4 272 7,656 7,769
Vista Del Sol........ 1993 94.6 168 6,068 6,236
Wellington Place..... 1993 93.2 280 10,456 10,721
Pre-Stabilized:
Vistas at Seven Bar
Ranch*.............. 1996 92.6 364 21,874 22,139
Telegraph Hill....... 1996 95.5 200 8,245 8,607
---- ----- ---------- ----------
Subtotal/Average.... 93.5 2,776 127,889 131,796
---- ----- ---------- ----------
Inland Empire,
California(5):
Pre-Stabilized:
The Crossing......... 1996 94.9 296 15,409 15,545
Miramonte............ 1995 96.6 290 16,335 16,582
Mission Springs &
Villas.............. 1996 93.8 736 39,295 39,925
Westcourt Village.... 1996 89.5 515 15,333 15,794
Woodsong Village..... 1996 93.1 262 12,492 12,841
---- ----- ---------- ----------
Subtotal/Average.... 93.9 2,099 98,864 100,687
---- ----- ---------- ----------
Las Vegas, Nevada:
Stabilized:
The Hamptons......... 1995 98.2 492 21,130 21,309
Horizons at Peccole
Ranch............... 1995 98.8 408 21,730 21,826
King's Crossing...... 1995 96.8 440 19,401 19,609
Sunterra#............ 1995 99.6 444 14,254 14,713
Pre-Stabilized:
La Tierra at the
Lakes#.............. 1995 96.7 896 42,257 43,509
---- ----- ---------- ----------
Subtotal/Average.... 97.8 2,680 118,772 120,966
---- ----- ---------- ----------
Orange County,
California:
Pre-Stabilized:
Newpointe............ 1996 97.5 160 9,484 9,808
Villa Marseilles..... 1996 99.0 192 13,387 13,860
---- ----- ---------- ----------
Subtotal/Average.... 98.3 352 22,871 23,668
---- ----- ---------- ----------
Phoenix, Arizona:
Stabilized:
Bay Club............. 1993 94.1 472 15,107 15,575
Foxfire.............. 1994 96.3 188 7,357 7,410
Moorings at Mesa
Cove................ 1992 95.8 406 17,372 17,576
</TABLE>
(see notes following table)
26
<PAGE>
<TABLE>
<CAPTION>
TOTAL
YEAR ACQUIRED PERCENTAGE NUMBER OF PTR EXPECTED
OR COMPLETED(1) LEASED UNITS INVESTMENT INVESTMENT(2)
--------------- ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
North Mountain Village..... 1994 96.7% 568 $ 18,459 $ 18,554
Peaks at Papago Park II*... 1996 99.3 144 7,188 7,207
Peaks at Papago Park I..... 1994 97.6 624 29,271 29,756
The Ridge-Phoenix.......... 1993 96.6 380 12,755 13,197
San Antigua*............... 1994 100.0 320 23,789 23,837
San Marina................. 1992 98.3 400 6,950 (4)
San Marquis North*......... 1995 98.6 208 10,750 10,878
San Marquis South*......... 1994 99.6 264 13,479 13,624
Scottsdale Greens.......... 1994 96.1 644 28,298 29,179
Superstition Park.......... 1992 97.3 376 12,693 12,915
----- ------ ---------- ----------
Subtotal/Average.......... 97.1 4,994 203,468 199,708
----- ------ ---------- ----------
San Diego, California:
Stabilized:
Scripps Landing............ 1994 96.3 160 9,200 9,455
Tierrasanta Ridge.......... 1994 90.9 340 19,684 19,888
Pre-Stabilized:
Club Pacifica.............. 1996 96.2 264 14,615 14,749
El Dorado Hills#........... 1996 90.6 448 30,215 31,188
Ocean Crest................ 1996 89.7 300 16,243 16,450
The Palisades.............. 1996 98.0 296 31,638 32,160
----- ------ ---------- ----------
Subtotal/Average.......... 93.0 1,808 121,595 123,890
----- ------ ---------- ----------
San Francisco (Bay Area),
California:
Stabilized:
Treat Commons#............. 1995 90.6 510 38,906 38,991
Pre-Stabilized:
Ashton Place#.............. 1996 94.5 948 65,898 84,200
Harborside................. 1996 100.0 148 21,423 21,691
Quail Ridge................ 1996 86.4 396 18,141 19,327
Redwood Shores#............ 1996 95.1 304 37,654 37,754
----- ------ ---------- ----------
Subtotal/Average.......... 92.7 2,306 182,022 201,963
----- ------ ---------- ----------
Santa Fe, New Mexico:
Stabilized:
Meadows of Santa Fe*....... 1994 86.8 296 12,432 12,535
----- ------ ---------- ----------
Tucson, Arizona:
Stabilized:
Cobble Creek............... 1992 96.4 301 7,899 (4)
Craycroft Gardens.......... 1992 94.1 101 1,974 2,010
Tierra Antigua............. 1992 98.0 147 5,486 5,544
Villa Caprice.............. 1993 92.9 268 8,846 9,015
Windsail#.................. 1993 96.3 300 9,976 10,076
----- ------ ---------- ----------
Subtotal/Average.......... 95.5 1,117 34,181 26,645
----- ------ ---------- ----------
West Region
Subtotal/Average....... 95.0 18,428 922,094 941,858
----- ------ ---------- ----------
Multifamily
Operating Communities
Total/Average........ 95.5% 42,702 $1,861,561 $1,886,348
----- ------ ---------- ----------
</TABLE>
(see notes following table)
27
<PAGE>
<TABLE>
<CAPTION>
YEAR TOTAL
ACQUIRED OR PERCENTAGE NUMBER OF PTR EXPECTED
COMPLETED(1) LEASED UNITS INVESTMENT INVESTMENT(2)
------------ ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
COMMUNITIES UNDER
CONSTRUCTION:
CENTRAL REGION:
Dallas, Texas:
Park Meadows......... 1997 N/A 368 $ 5,997 $ 17,136
----- ---------- ----------
Houston, Texas:
Memorial Heights II.. 1997 N/A 256 9,639 15,763
----- ---------- ----------
Central Region
Subtotal........ 624 15,636 32,899
----- ---------- ----------
NORTHWEST REGION:
Portland, Oregon:
Arbor Heights........ 1998 N/A 348 8,804 22,818
Cambridge Crossing... 1997 N/A 250 5,834 15,567
----- ---------- ----------
Subtotal........... 598 14,638 38,385
----- ---------- ----------
Salt Lake City, Utah:
Greenpointe
Expansion........... 1997 N/A 32 156 2,332
Mountain Shadow
Expansion........... 1997 N/A 88 334 4,726
Remington............ 1997 N/A 288 16,089 17,095
Riverview............ 1998 N/A 492 10,965 32,558
----- ---------- ----------
Subtotal........... 900 27,544 56,711
----- ---------- ----------
Seattle, Washington:
Canyon Creek......... 1997 N/A 336 14,643 25,217
Harbour Pointe....... 1997 N/A 229 4,892 15,004
----- ---------- ----------
Subtotal........... 565 19,535 40,221
----- ---------- ----------
Northwest Region
Subtotal........ 2,063 61,717 135,317
----- ---------- ----------
WEST REGION:
Orange County,
California:
Las Flores Apartment
Homes............... 1998 N/A 504 8,234 43,894
----- ---------- ----------
Phoenix, Arizona:
Arrowhead I.......... 1998 N/A 272 2,389 17,070
Miralago I........... 1997 N/A 496 19,440 24,631
San Palmera.......... 1997 N/A 412 21,049 24,337
San Valiente I....... 1997 N/A 376 16,913 22,010
----- ---------- ----------
Subtotal........... 1,556 59,791 88,048
----- ---------- ----------
Reno, Nevada:
Vista Ridge.......... 1997 N/A 324 17,595 20,852
Tucson, Arizona:
San Ventana I........ 1997 N/A 408 23,737 27,249
----- ---------- ----------
West Region
Subtotal........ 2,792 109,357 180,043
----- ---------- ----------
Total
Communities
Under
Construction.. 5,479 $ 186,710 $ 348,259
----- ---------- ----------
</TABLE>
(see notes following table)
28
<PAGE>
<TABLE>
<CAPTION>
TOTAL
YEAR ACQUIRED PERCENTAGE NUMBER OF PTR EXPECTED
OR COMPLETED(1) LEASED UNITS INVESTMENT INVESTMENT(2)
--------------- ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
COMMUNITIES IN PLANNING
AND OWNED:
Central Region...... 1,982 $ 29,440 $ 113,595
------ ---------- ----------
Northwest Region.... 472 6,594 34,506
------ ---------- ----------
West Region......... 897 12,470 61,055
------ ---------- ----------
Total Communities
In Planning and
Owned............ 3,351 $ 48,504 $ 209,156
------ ---------- ----------
LAND HELD FOR FUTURE
DEVELOPMENT.............. -- $ 30,043 $ --
------ ---------- ----------
Total Multifamily
Communities
Owned at
December 31, 1996. 51,532 $2,126,818 $2,443,763
------ ---------- ----------
NON-MULTIFAMILY:
San Francisco,
California:
Wharf Holiday Inn
(Hotel)................ 1971 100.0% N/A $ 22,870 $ 22,870
Dallas, Texas:
Irving Blvd. (Industrial
Building).............. 1989 100.0 N/A 540 (4)
El Paso, Texas:
Vista Industrial
(Industrial Building).. 1987 100.0 N/A 3,135 3,135
----- ------ ---------- ----------
Total/Average Non-
Multifamily at
December 31, 1996.. 100.0% N/A $ 26,545 $ 26,005
----- ------ ---------- ----------
Total Real Estate
Owned at
December 31, 1996. 51,532 $2,153,363 $2,469,768
====== ========== ==========
JANUARY 1997 OPERATING
COMMUNITY ACQUISITIONS:
NORTHWEST REGION:
Seattle, Washington:
Newport Crossing........ 1997 N/A 192 N/A $ 12,279
------ ---------- ----------
WEST REGION:
San Francisco (Bay Area),
California:
Reflections............ 1997 N/A 496 N/A 52,826
------ ---------- ----------
Total January 1997
Activity............. 688 N/A $ 65,105
====== ========== ==========
</TABLE>
- --------
See footnotes following the table below.
29
<PAGE>
The following table sets forth certain information with respect to PTR's
communities in planning and under control at January 31, 1997 (dollar amounts
in thousands). The term "in planning" means that construction is anticipated
to commence within 12 months. The term "under control" means that PTR has an
exclusive right (through contingent contract or letter of intent) during a
contractually agreed-upon time period to acquire land for future development
of multifamily communities, subject to removal of contingencies during the due
diligence process, but does not currently own the land. There can be no
assurance that such land will be acquired. The unit and total expected
investment information shown for communities in planning is based on
management's best estimates.
<TABLE>
<CAPTION>
EXPECTED
NUMBER TOTAL EXPECTED
OF UNITS INVESTMENT(2)(6)
-------- ----------------
<S> <C> <C>
COMMUNITIES IN PLANNING AND UNDER CONTROL:
Central Region...................................... 864 $ 49,196
Northwest Region.................................... 1,508 143,895
West Region......................................... 1,135 71,440
----- --------
Total............................................. 3,507 $264,531
===== ========
</TABLE>
- --------
*Community developed by PTR.
#Community is encumbered by a mortgage. See PTR's financial statements
incorporated by reference in "Item 8. Financial Statements and
Supplementary Data" for additional information on PTR's mortgages payable.
(1) With respect to communities under construction, represents expected
completion date.
(2) For operating communities, represents cost, including budgeted
renovations, as of January 31, 1997. For communities under construction
and in planning, represents total budgeted development cost as of January
31, 1997, which includes the cost of land, fees, permits, payments to
contractors, materials, architectural and engineering fees and interest
and property taxes to be capitalized during the construction period. The
term "in planning" means that construction is anticipated to commence
within 12 months.
(3) The term "stabilized" means that renovation, repositioning, new management
and new marketing programs (or development and marketing in the case of
newly developed communities) have been completed and in effect for a
sufficient period of time (but in no event longer than 12 months, except
for major rehabilitations) to achieve 93% occupancy at market rents. Prior
to being "stabilized," a community is considered "pre-stabilized." See
"Item 1. Business--PTR's Operating System and Business Strategy--
Opportunistic Acquisitions."
(4) Property was disposed of during January 1997.
(5) The Inland Empire is a part of the Los Angeles basin. It includes San
Bernardino and Riverside counties, which have a total population of
approximately three million people.
(6) As of December 31, 1996, PTR's actual investment in these developments was
$1.6 million. This amount is reflected in the "Other assets" caption of
PTR's balance sheet at December 31, 1996.
ITEM 3. LEGAL PROCEEDINGS
PTR is a party to various claims and routine litigation arising in the
ordinary course of business. PTR does not believe that the results of any of
such claims and litigation, individually or in the aggregate, will have a
material adverse effect on its business, financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
30
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
The Common Shares are listed on the NYSE under the symbol "PTR." The
following table sets forth the high and low sales prices of the Common Shares
as reported in the NYSE Composite Tape and cash distributions per Common
Share, for the periods indicated.
<TABLE>
<CAPTION>
CASH
HIGH LOW DISTRIBUTIONS
------- ------- -------------
<S> <C> <C> <C>
1995:
First Quarter............................. $18 3/8 $16 3/8 $0.2875
Second Quarter............................ 18 1/8 16 5/8 0.2875
Third Quarter............................. 19 1/4 17 0.2875
Fourth Quarter............................ 20 1/2 17 1/4 0.2875
1996:
First Quarter............................. 22 1/4 19 1/4 0.31
Second Quarter............................ 22 3/8 20 1/2 0.31
Third Quarter............................. 22 5/8 20 1/4 0.31
Fourth Quarter............................ 23 5/8 19 0.31
1997:
First Quarter (through March 12).......... 25 1/8 21 0.325
</TABLE>
In addition to the quarterly cash distributions shown above, PTR made the
Homestead Distribution on November 12, 1996. The securities distributed in the
Homestead Distribution had a market value of $3.032 per Common Share based on
the closing prices of such securities on the ASE on November 11, 1996, the day
prior to the distribution date. The Homestead Distribution resulted in an
adjustment of $3.125 per PTR Common Share ($21.875 before and $18.750 after)
on the NYSE on November 12, 1996.
As of March 10, 1997, PTR had approximately 76,042,168 Common Shares
outstanding, approximately 3,050 record holders of Common Shares and
approximately 23,500 beneficial holders of Common Shares.
Distributions
PTR, in order to qualify as a REIT, is required to make distributions (other
than capital gain distributions) to its shareholders in amounts at least equal
to (i) the sum of (A) 95% of its "REIT taxable income" (computed without
regard to the dividends-paid deduction and its net capital gain) and (B) 95%
of the net income (after tax), if any, from foreclosure property, minus (ii)
the sum of certain items of non-cash income. PTR's distribution strategy is to
distribute what it believes is a conservative percentage of its cash flow,
permitting PTR to retain funds for capital improvements and other investments
while funding its distributions. PTR has paid 84 consecutive quarterly cash
distributions on the Common Shares.
PTR announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 10, 1996 Board meeting, the Board announced an increase in the annual
distribution level from $1.24 to $1.30 per Common Share and declared the first
quarter 1997 distribution of $0.325 per Common Share. The first quarter
distribution was paid on February 20, 1997 to shareholders of record on
February 7, 1997. The payment of distributions is subject to the discretion of
the Board and is dependent upon the financial condition and operating results
of PTR.
31
<PAGE>
Pursuant to the terms of the Preferred Shares, PTR is restricted from
declaring or paying any distribution with respect to its Common Shares unless
all cumulative distributions with respect to the Preferred Shares have been
paid and sufficient funds have been set aside for Preferred Share distributions
that have been declared.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed PTR's current and accumulated earnings and profits
(calculated for tax purposes) constitute a return of capital rather than a
dividend and reduce the shareholder's basis in the Common Shares. To the extent
that a distribution exceeds both current and accumulated earnings and profits
and the shareholder's basis in the Common Shares, it will generally be treated
as gain from the sale or exchange of that shareholder's Common Shares. PTR
annually notifies shareholders of the taxability of distributions paid during
the preceding year. For federal income tax purposes, the following summarizes
the taxability of cash distributions paid on the Common Shares in 1995 and 1994
and the estimated taxability for 1996:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Per Common Share:
Ordinary income....................................... $0.61 $0.92 $0.68
Capital gains......................................... 0.11 -- --
Return of capital..................................... 0.52 0.23 0.32
----- ----- -----
Total............................................... $1.24 $1.15 $1.00
===== ===== =====
</TABLE>
The Homestead securities distributed by PTR to each holder of Common Shares
in the Homestead Distribution were valued at $2.16 per PTR Common Share for
federal income tax purposes, of which $1.06 was taxable as ordinary income,
$0.19 was taxable as a capital gain and $0.91 was treated as a return of
capital.
On July 21, 1994, in addition to the normal Common Share distributions paid,
PTR redeemed the shareholder purchase rights issued pursuant to the Rights
Agreement dated as of February 23, 1990, as amended. Pursuant to the
redemption, each holder of record at the close of business on July 21, 1994 was
entitled to receive $0.01 per shareholder purchase right. The redemption price
was paid on August 12, 1994 and was taxable as ordinary income for federal
income tax purposes.
Under federal income tax rules, PTR's earnings and profits are first
allocated to its Series A Preferred Shares and Series B Preferred Shares, which
increases the portion of the Common Shares distribution classified as return of
capital. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations."
For federal income tax purposes, the following summaries reflect the
estimated taxability of dividends paid on the Series A Preferred Shares and
Series B Preferred Shares, respectively.
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Per Series A Preferred Share:
Ordinary income....................................... $1.47 $1.75 $1.75
Capital gains......................................... 0.28 -- --
Return of capital..................................... -- -- --
----- ----- -----
Total............................................... $1.75 $1.75 $1.75
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
DATE OF
ISSUANCE TO
1996 12/31/95
----- -----------
<S> <C> <C> <C>
Per Series
B
Preferred
Share:
Ordinary
income.. $1.89 $1.3625
Capital
gains... 0.36 --
----- -------
Total.. $2.25 $1.3625
===== =======
</TABLE>
32
<PAGE>
Due to the increase in the conversion ratio resulting from the Homestead
Distribution to holders of Common Shares, holders of Series A Preferred Shares
were deemed to have received a distribution of $2.43 on November 12, 1996 for
federal income tax purposes. Of this amount, $1.19 was taxable as ordinary
income, $0.22 was taxable as a capital gain and $1.02 was treated as a return
of capital.
PTR's tax return for the year ended December 31, 1996 has not been filed, and
the taxability information for 1996 is based upon the best available data.
PTR's tax returns for prior years have not been examined by the Internal
Revenue Service and, therefore, the taxability of the dividends is subject to
change.
33
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data relating to the
historical financial condition and results of operations of PTR for 1996,
1995, 1994, 1993 and 1992. Such selected financial data is qualified in its
entirety by, and should be read in conjunction with, "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation" and
the financial statements and notes thereto incorporated by reference herein
(amounts in thousands, except per share data).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATIONS SUMMARY:
Rental income.......... $ 322,046 $ 262,473 $ 183,472 $ 76,129 $ 30,970
Interest income on
Homestead Notes....... 2,035 -- -- -- --
Total revenues......... 326,246 264,873 186,105 78,418 32,779
Property management
fees paid to
affiliates............ 11,610 8,912 7,148 3,862 1,424
REIT management fee
paid to affiliate..... 22,191 20,354 13,182 7,073 2,711
General and
administrative
expense............... 1,077 952 784 660 436
Earnings from
operations(1)......... 94,089 81,696 46,719 23,191 9,037
Gain (loss) on sale of
investments........... 37,492 2,623 -- 2,302 (51)
Preferred Share cash
dividends paid........ 24,167 21,823 16,100 1,341 --
Net earnings
attributable to Common
Shares................ 106,544 62,496 30,619 24,152 8,986
Common Share cash
distributions paid.... 90,728 76,804 46,121 29,162 13,059
PER SHARE DATA:
Net earnings
attributable to Common
Shares................ $ 1.46 $ 0.93 $ 0.66 $ 0.66 $ 0.46
Common Share cash
distributions paid.... 1.24 1.15 1.00 0.82 0.70
Series A Preferred
Share cash dividends
paid.................. 1.75 1.75 1.75 0.1458 --
Series B Preferred
Share cash dividends
paid.................. $ 2.25 $ 1.363 -- -- --
Weighted-average Common
Shares outstanding.... 73,057 67,052 46,734 36,549 19,435
<CAPTION>
DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Real estate owned, at
cost.................. $2,153,363 $1,855,866 $1,296,288 $872,610 $337,274
Homestead Notes........ 176,304 -- -- -- --
Total assets........... 2,282,432 1,840,999 1,295,778 890,301 342,235
Line of credit......... 110,200 129,000 102,000 51,500 54,802
Long-term debt......... 580,000 200,000 200,000 -- --
Mortgages payable...... 217,188 158,054 93,624 48,872 30,824
Total liabilities...... 1,014,924 565,331 455,136 135,284 94,186
Shareholders' equity... $1,267,508 $1,275,668 $ 840,642 $755,017 $248,049
Number of Common Shares
outstanding........... 75,511 72,211 50,456 44,645 27,034
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Net earnings
attributable to Common
Shares................ $ 106,544 $ 62,496 $ 30,619 $ 24,152 $ 8,986
Add (Deduct):
Depreciation........... 44,887 36,685 24,614 10,509 5,311
Provision for possible
loss on investments... -- 420 1,600 2,270 400
Gain or loss on sale of
investments........... (37,492) (2,623) -- (2,302) 51
Extraordinary item--
loss on early
extinguishment of
debt, net............. 739 -- -- -- --
Homestead Notes--
related amortization.. (141) -- -- -- --
Other (primarily
provision for loss on
receivables).......... -- -- -- 87 174
---------- ---------- ---------- -------- --------
Funds from operations
attributable to Common
Shares(2)(3).......... $ 114,537 $ 96,978 $ 56,833 $ 34,716 $ 14,922
========== ========== ========== ======== ========
Net cash provided by
operating activities.. $ 143,939 $ 121,795 $ 94,625 $ 49,247 $ 20,252
Net cash used by
investing activities.. (360,935) (294,488) (368,515) (529,065) (229,489)
Net cash provided by
financing activities.. 195,720 191,520 276,457 478,345 185,130
</TABLE>
34
<PAGE>
- --------
(1) Earnings from operations for the years ended December 31, 1995, 1994 and
1993 reflect a $420,000, $1.6 million and a $2.3 million provision,
respectively, for possible losses relating to investments in non-
multifamily properties.
(2) Funds from operations is defined as net earnings computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains
(or losses) plus depreciation and provision for possible loss on
investments and excluding extraordinary items. Management believes that an
understanding of funds from operations will enhance the reader's
comprehension of PTR's results of operations and cash flows presented in
the financial statements and other data in this document. In July 1994,
PTR changed to a more conservative policy of expensing the amortization of
loan costs in determining funds from operations. For comparability, funds
from operations has been restated to give effect to this policy as if it
had been in effect since January 1, 1992. Funds from operations should not
be construed as a substitute for "net earnings" in evaluating operating
results or as a substitute for "cash flow" in evaluating liquidity and the
funds from operations measure presented by PTR may not be comparable to
similarly titled measures of other REITs.
(3) See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources--Funds From
Operations" for pro forma funds from operations information giving effect
to the Homestead transaction as if it had occurred as of January 1, 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with PTR's financial
statements and notes thereto included in Item 14 of this report.
The statements contained in this discussion and elsewhere in this report
that are not historical facts are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements are based on
current expectations, estimates and projections about the industry and markets
in which PTR operates, management's beliefs and assumptions made by
management. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and 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 certain 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. PTR undertakes no obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. PTR's operating results depend
primarily on income from multifamily communities, which is substantially
influenced by (i) the demand for and supply of multifamily units in PTR's
primary target market and submarkets, (ii) operating expense levels, (iii) the
effectiveness of property-level operations and (iv) the pace and price at
which PTR can acquire and develop additional multifamily communities. Capital
and credit market conditions which affect PTR's cost of capital also influence
operating results.
OVERVIEW
General
PTR's results of operations, financial position and liquidity as of and for
each of the years in the three-year period ended December 31, 1996 have been
influenced primarily by the operations of and investments made in PTR's
multifamily communities. PTR's investment activity has been financed through
proceeds from debt and equity offerings, proceeds from asset dispositions and
internally generated funds. During the three-year period ended December 31,
1996, PTR raised approximately $101.4 million in net proceeds from the
issuance of Series B Preferred Shares, $318.1 million in net proceeds from
subscription offerings of Common Shares, $572.6 million in net proceeds from
the issuance of unsecured, long-term, fixed rate debt and $314.2 million in
net proceeds from property dispositions (excluding the Homestead transaction).
PTR's target market and submarkets have benefited substantially in recent
periods from demographic trends (including job and population growth) that
increase the demand for multifamily units. Consequently, rental rates
35
<PAGE>
for multifamily units have increased more than the inflation rate for the last
three years and are expected to continue experiencing such increases for 1997.
Expense levels also influence operating results. During 1996, PTR's rental
expenses increased but at a lower rate than rental rate increases, producing
overall growth in net operating income. During 1995 and 1994, rental expenses
as a percentage of rental income decreased slightly. Rental expenses during
1997 are expected to increase at approximately the rate of inflation, which is
less than expected rental rate growth.
Multifamily Investments
The following table provides an overview of PTR's multifamily portfolio and
related investment activity for 1996, 1995 and 1994 (dollar amounts in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING COMMUNITIES:
Communities............................... 142 131 103
Units..................................... 42,702 38,737 30,182
Total expected investment(1).............. $1,891,828 $1,515,267 $1,109,188
COMMUNITIES UNDER CONSTRUCTION:
Starts During Year:
Communities............................... 13 11 13
Units .................................... 3,875 3,196 3,468
Total expected investment(1).............. $262,547 $179,402 $176,139
Completions During Year:
Communities .............................. 13 5 7
Units .................................... 3,820 1,088 1,986
Total expected investment(1).............. $208,332 $52,560 $102,910
Stabilizations During Year:
Communities .............................. 12 6 7
Units .................................... 3,456 1,690 2,178
Total expected investment(1).............. $186,426 $73,472 $102,150
Under Construction at Year-End:
Communities .............................. 17 17 11
Units .................................... 5,479 5,424 3,316
Total expected investment(1).............. $354,852 $297,549 $170,017
ACQUISITIONS(2):
Communities .............................. 20 24 20
Units .................................... 6,448 7,633 6,625
Total expected investment(1).............. $417,729 $361,027 $266,066
MULTIFAMILY DISPOSITIONS:
Communities .............................. 22 1 2
Units .................................... 6,303 166 538
Net sales proceeds........................ $285,500 $8,765 $11,807
Gains..................................... $37,124 $3,244 --
</TABLE>
- --------
(1) For operating communities and acquisitions, represents cost, including
budgeted renovations, as of each year-end. For communities under
construction, represents total budgeted development cost as of each year-
end, which includes the cost of land, fees, permits, payments to
contractors, materials, architectural and engineering fees and interest
and property taxes to be capitalized during the construction period.
(2) 1995 acquisitions include 17 communities containing 5,579 units with an
aggregate purchase price including budgeted renovations of $242.5 million
acquired in connection with the March 1995 merger with PACIFIC. See "--
Liquidity and Capital Resources--Merger and Concurrent Subscription
Offering."
36
<PAGE>
Current Development Activity
PTR believes that development of multifamily communities from the ground up,
which are built for long-term ownership and designed to meet broad resident
preferences and demographic trends, will continue to provide an important
source of long-term cash flow growth. PTR believes its ability to compete is
significantly enhanced relative to other companies because of the REIT
Manager's depth of development and acquisition personnel and presence in local
markets combined with PTR's access to investment capital.
The following information on development communities under construction is
as of December 31, 1996, except as noted below (dollar amounts in thousands).
<TABLE>
<CAPTION>
START ACTUAL OR EXPECTED
NUMBER TOTAL DATE EXPECTED DATE FOR STABILIZATION
OF PTR EXPECTED (QUARTER/ FIRST UNITS DATE %
UNITS INVESTMENT INVESTMENT(1) YEAR) (QUARTER/YEAR)(2) (QUARTER/YEAR) LEASED(3)
------ ---------- ------------- --------- ----------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMUNITIES UNDER
CONSTRUCTION AND IN
LEASE-UP(4):
NORTHWEST REGION:
Salt Lake City, Utah:
Remington.............. 288 $16,089 $ 17,095 Q3/95 Q3/96 Q3/97 100.0%
----- ------- --------
WEST REGION:
Phoenix, Arizona:
Miralago I............. 496 19,440 24,631 Q4/95 Q4/96 Q2/98 100.0
San Palmera............ 412 21,049 24,337 Q4/95 Q4/96 Q1/98 82.0
----- ------- --------
Total Phoenix......... 908 40,489 48,968
----- ------- --------
Reno, Nevada:
Vista Ridge............ 324 17,595 20,852 Q1/96 Q4/96 Q4/97 90.3
----- ------- --------
Tucson, Arizona:
San Ventana............ 408 23,737 27,249 Q2/95 Q2/96 Q4/97 100.0
----- ------- --------
Total West Region... 1,640 81,821 97,069
----- ------- --------
Total in Lease-up.. 1,928 $97,910 $114,164
----- ------- --------
OTHER COMMUNITIES UNDER
CONSTRUCTION(5):
CENTRAL REGION:
Dallas, Texas:
Park Meadows........... 368 $ 5,997 $ 17,136 Q3/96 Q2/97 Q2/98 n/a
----- ------- --------
Houston, Texas:
Memorial Heights II.... 256 9,639 15,763 Q4/96 Q4/97 Q3/98 n/a
----- ------- --------
Total Central
Region............. 624 15,636 32,899
----- ------- --------
NORTHWEST REGION:
Portland, Oregon:
Arbor Heights.......... 348 8,804 22,818 Q2/96 Q2/97 Q2/98 n/a
Cambridge Crossing..... 250 5,834 15,567 Q3/96 Q3/97 Q3/98 n/a
----- ------- --------
Total Portland........ 598 14,638 38,385
----- ------- --------
Salt Lake City, Utah:
Greenpointe Expansion.. 32 156 2,332 Q4/96 Q3/97 Q4/97 n/a
Mountain Shadow
Expansion............. 88 334 4,726 Q4/96 Q3/97 Q1/98 n/a
Riverview ............. 492 10,965 32,558 Q2/96 Q3/97 Q3/98 n/a
----- ------- --------
Total Salt Lake City.. 612 11,455 39,616
----- ------- --------
Seattle, Washington:
Canyon Creek........... 336 14,643 25,217 Q2/96 Q1/97 Q2/98 n/a
Harbour Pointe......... 229 4,892 15,004 Q3/96 Q3/97 Q2/98 n/a
----- ------- --------
Total Seattle......... 565 19,535 40,221
----- ------- --------
Total Northwest
Region............. 1,775 45,628 118,222
----- ------- --------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
ACTUAL OR
EXPECTED EXPECTED
START DATE FOR STABILIZATION
NUMBER INVESTMENT TOTAL DATE FIRST UNITS DATE
OF COST TO EXPECTED (QUARTER/ (QUARTER/ (QUARTER/ %
UNITS DATE INVESTMENT(1) YEAR) YEAR)(2) YEAR) LEASED(3)
------ ---------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
WEST REGION:
Orange County,
California:
Las Flores Apartment
Homes................. 504 $ 8,234 $ 43,894 Q4/96 Q4/97 Q4/98 n/a
----- -------- --------
Phoenix, Arizona:
Arrowhead I............ 272 2,389 17,070 Q3/96 Q3/97 Q3/98 n/a
San Valiente........... 376 16,913 22,010 Q2/96 Q1/97 Q4/97 n/a
----- -------- --------
Total Phoenix......... 648 19,302 39,080
----- -------- --------
Total West Region... 1,152 27,536 82,974
----- -------- --------
Total Other........ 3,551 $ 88,800 $234,095
----- -------- --------
Total Communities
Under
Construction.... 5,479 $186,710 $348,259
===== ======== ========
</TABLE>
- --------
(1) Represents total budgeted development cost as of January 31, 1997, which
includes the cost of land, fees, permits, payments to contractors,
materials, architectural and engineering fees and interest and property
taxes to be capitalized during the construction period.
(2) Represents the date that the first completed units were made available for
leasing (or are expected to be made available for leasing). PTR begins
leasing completed units prior to completion of the entire community.
(3) The percentage leased is based on total units completed and is as of
January 31, 1997.
(4) A development community is considered in "lease-up" once the first units
are delivered.
(5) Lease-up has not yet commenced.
There are risks associated with PTR's development and construction
activities which include: development and acquisition opportunities explored
may be abandoned; construction costs of a community may exceed original
estimates due to increased material, labor or other expenses, which could make
completion of the community uneconomical; occupancy rates and rents at a newly
completed community are dependent on a number of factors, including market and
general economic conditions, and may not be sufficient to make the community
profitable; financing may not be available on favorable terms for the
development of a community; and construction and lease-up may not be completed
on schedule, resulting in increased debt service expense and construction
costs. Development activities are also subject to risks relating to the
inability to obtain, or delays in obtaining, all necessary land-use, building,
occupancy and other required governmental permits and authorizations. The
occurrence of any of the events described above could adversely affect PTR's
ability to achieve its projected yields on communities under development or
redevelopment.
To mitigate these risks, PTR obtains zoning and municipal approvals prior to
purchasing land. Furthermore, PTR does not take construction risk, but instead
uses qualified third-party general contractors to build its communities, using
guaranteed maximum price contracts. PTR cannot eliminate all development risk,
but believes that the opportunities to better control product and realize
higher returns from development communities compensate for the limited risk.
38
<PAGE>
Recent Acquisitions
In addition to its development activity, PTR completed the acquisition of
$486.1 million of operating multifamily communities, representing a total of
7,136 units, in 1996 and through January 31, 1997. The communities PTR
acquired are listed in the table below (dollar amounts in thousands):
<TABLE>
<CAPTION>
TOTAL
EXPECTED ACQUISITION
UNITS INVESTMENT(1) DATE
----- ------------- -----------
<S> <C> <C> <C>
NORTHWEST REGION:
Portland, Oregon:
Brighton................................... 233 $ 12,117 08/16/96
Timberline................................. 130 7,411 04/17/96
Salt Lake City, Utah:
Fox Creek.................................. 186 8,303 12/17/96
Summertree................................. 240 10,555 10/29/96
Seattle, Washington:
Clubhouse.................................. 194 8,725 12/19/96
Newport Crossing........................... 192 12,279 01/10/97
----- --------
Total Northwest Region................... 1,175 $ 59,390
----- --------
WEST REGION:
Albuquerque, New Mexico:
Telegraph Hill............................. 200 $ 8,607 10/15/96
Inland Empire, California:
The Crossing............................... 296 15,545 05/21/96
Mission Springs & Villas................... 736 39,925 05/31/96
Westcourt Village.......................... 515 15,794 03/27/96
Woodsong Village........................... 262 12,841 08/28/96
Orange County, California:
Newpointe.................................. 160 9,808 07/10/96
Villa Marseille............................ 192 13,860 11/13/96
San Diego, California:
Club Pacifica.............................. 264 14,749 04/23/96
El Dorado Hills............................ 448 31,188 08/30/96
Ocean Crest................................ 300 16,450 03/29/96
The Palisades.............................. 296 32,160 11/27/96
San Francisco (Bay Area), California:
Ashton Place............................... 948 84,200 09/16/96
Harborside................................. 148 21,691 12/31/96
Quail Ridge................................ 396 19,327 06/13/96
Redwood Shores............................. 304 37,754 09/20/96
Reflections................................ 496 52,826 01/27/97
----- --------
Total West Region........................ 5,961 $426,725
----- --------
Total.................................. 7,136 $486,115
===== ========
</TABLE>
- --------
(1) Represents cost, including budgeted renovations, as of January 31, 1997.
Acquisitions entail risks that investments will fail to perform in
accordance with expectations and that judgments with respect to the cost of
improvements to bring an acquired community up to standards established for
the market position intended for that community will prove inaccurate, as well
as general investment risks associated with any new real estate investment.
Although PTR undertakes an evaluation of the physical condition of each new
community before it is acquired, certain defects or necessary repairs may not
be detected until after the community is acquired, which could significantly
increase PTR's total acquisition costs.
These risks are partially mitigated and managed by the extensive market
research and rigorous due diligence process performed in connection with every
community considered. These factors combined with PTR's
39
<PAGE>
extensive market experience throughout its target market and methodical
approval process have proven PTR's ability to select investments that have a
high probability of meeting or exceeding underwritten expectations.
Non-Multifamily Properties
In addition to multifamily investment activity, PTR had developed and
operated extended-stay lodging facilities under the Homestead Village(R) name
since 1992. On October 17, 1996, PTR contributed its Homestead Village(R)
properties to Homestead, a newly formed company, in exchange for Homestead
common stock. As of the contribution date, the Homestead Village(R) properties
constituted approximately 7.1% of PTR's total assets, at cost. Additionally,
the Homestead Village(R) properties generated approximately 8.2% of PTR's net
operating income from January 1, 1996 to October 17, 1996 and approximately
5.9% and 3.5% of PTR's 1995 and 1994 net operating income, respectively. See
"--Liquidity and Capital Resources--Homestead Transaction" for further
information.
PTR will continue to aggressively manage its non-multifamily properties in
order to maximize cash flow, and may sell its remaining non-multifamily
properties as opportunities arise. As of January 31, 1997, PTR owned two non-
multifamily properties, including a 338-room, five-story hotel located in the
Fisherman's Wharf area of San Francisco, California, which is leased to
Holiday Inns of America, Inc. Excluding the Homestead Village(R) properties,
approximately 1% of PTR's total 1996 rental income and less than 2% of 1995
and 1994 rental income was generated by non-multifamily properties.
RESULTS OF OPERATIONS
Net earnings for 1996, 1995 and 1994 were $130.7 million, $84.3 million and
$46.7 million, respectively. Net earnings increased $46.4 million (55%) in
1996 over 1995 and $37.6 million (81%) in 1995 over 1994. These increases
related primarily to net increases in the number of multifamily operating
communities from new acquisitions and developments and, in 1996, substantial
gains from dispositions. A discussion of the major components of the increases
in net earnings follows.
Property Operations
The following table summarizes the net operating income generated from
multifamily and non-multifamily property operations (in thousands).
<TABLE>
<CAPTION>
1996 CHANGE 1995 CHANGE 1994
-------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Rental income..................... $322,046 $59,573 $262,473 $79,001 $183,472
-------- ------- -------- ------- --------
Rental expenses................... 89,550 15,742 73,808 18,036 55,772
Real estate taxes................. 26,962 5,636 21,326 5,233 16,093
Property management
fees paid to affiliates.......... 11,610 2,698 8,912 1,764 7,148
-------- ------- -------- ------- --------
Operating expenses................ 128,122 24,076 104,046 25,033 79,013
-------- ------- -------- ------- --------
Net operating income ("NOI")...... $193,924 $35,497 $158,427 $53,968 $104,459
======== ======= ======== ======= ========
NOI/Rental income................. 60.2% (0.2)% 60.4% 3.5% 56.9%
======== ======= ======== ======= ========
</TABLE>
The increases in rental income resulted primarily from net increases in the
number of multifamily operating communities during each respective period and
collections growth. The percentage of PTR's total rental income generated by
multifamily communities was 91.1%, 93.7% and 94.3% for 1996, 1995 and 1994,
respectively. This percentage is expected to increase in future periods due to
ongoing multifamily investment activities, the periodic sale of non-
multifamily properties and the October 17, 1996 contribution of PTR's
Homestead Village(R) properties to Homestead, a newly formed company. At
December 31, 1996, multifamily investments comprised 98.9% of PTR's total real
estate portfolio, based on total expected investment. Rental income increases
were partially offset by the additional operating expenses associated with the
increase in operating communities. Overall, NOI as a percentage of rental
income improved from 1994 to 1995 and remained relatively level from 1995 to
1996 as a greater percentage of PTR's portfolio became stabilized.
PTR categorizes operating multifamily communities (which include all
communities not under development) as either "stabilized" or "pre-stabilized."
The term "stabilized" means that renovation,
40
<PAGE>
repositioning, new management and new marketing programs (or development and
marketing in the case of newly developed communities) have been completed for
a sufficient period of time (but in no event longer than 12 months, except for
major rehabilitations) to achieve 93% occupancy at market rents. Prior to
being "stabilized," a community is considered "pre-stabilized." Approximately
74.4%, 87.2% and 82.3% of PTR's operating multifamily portfolio was classified
as stabilized as of December 31, 1996, 1995 and 1994, respectively, based on
total expected investment. The December 31, 1996 stabilized percentage was
lower than the stabilized percentage throughout most of 1996 due to above
average acquisition activity in the fourth quarter of 1996. Using a weighted-
average percentage based on total expected investment at the end of each
quarter, approximately 81.1%, 82.8% and 64.4% of PTR's operating multifamily
portfolio was classified as stabilized during 1996, 1995 and 1994,
respectively.
The full impact of additional net operating income from PTR's multifamily
development activities, and to a lesser extent, PTR's acquisition activities,
is not reflected until after the communities are stabilized. Initially these
investment activities are dilutive when compared to the results of operations
that would occur if these investments were yielding a stabilized return;
however, they are an important source of PTR's long-term growth.
During the construction period for communities developed by PTR, there is no
operating income; therefore, the only contribution to net earnings and funds
from operations from units under construction results from the capitalization
of interest. The capitalization of interest ceases for all units in a building
once the building is completed and units are placed in service. Operating
expenses, including pre-opening marketing costs, are expensed and typically
exceed rental revenues during the early stages of lease-up. As the lease-up
process continues, net operating income becomes positive and the return on
investment approaches a stabilized yield. However, the net operating income
generated during the lease-up period is less than the income that is expected
to be earned when the community is stabilized. Therefore, development
communities are dilutive during the construction period and until the property
reaches stabilization, which generally is achieved 18 to 24 months after
construction commences. Despite this short-term dilutive impact, PTR has
demonstrated that its development activities contribute significantly to long-
term performance as the communities achieve stabilization.
Multifamily Communities Fully Operational Throughout Consecutive Periods
For the 93 multifamily communities which were fully operational throughout
both 1996 and 1995, property-level net operating income increased 3.31% in
1996 over 1995. The increase in net operating income resulted from a 2.81%
rental revenue increase and a 2.08% increase in rental expenses for such
communities. For the 79 multifamily communities fully operating throughout
both 1995 and 1994, property-level net operating income increased 7.8% in 1995
over 1994. The increase in net operating income resulted from a 3.7% rental
revenue increase and a 1.5% decrease in rental expenses for such communities.
The following tables illustrate the performance of PTR's communities which
were fully operational for consecutive years ("same store communities") and
the same store community information by region and market (dollar amounts in
thousands):
<TABLE>
<CAPTION>
FULLY OPERATIONAL FULLY OPERATIONAL
COMMUNITIES AS OF COMMUNITIES AS OF
JANUARY 1, 1995 JANUARY 1, 1994
----------------- -----------------
<S> <C> <C>
PORTFOLIO:
Communities........................... 93 79
Units................................. 27,765 21,605
Total expected investment(1).......... $1,039,774 $758,749
% of total PTR portfolio(2)........... 46.28% 41.85%
OPERATING PERFORMANCE: 1996 VS. 1995 1995 VS. 1994
------------- -------------
Collections growth(3)................. 2.81% 3.70%
Property operating expense growth
(decrease)(4)......................... 2.08% (1.51)%
Net operating income growth(5) ....... 3.31% 7.75%
SUMMARY INFORMATION: 1996 1995
------------- -------------
Average physical occupancy............ 94.72% 94.36%
Property operating expense ratio(6)... 40.10% 40.39%
Average rental rate per unit(7)....... $605 $589
Recurring capital expenditures per
unit................................. $239 $142
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
COLLECTIONS 1/1/95 SAME STORE TOTAL PTR PORTFOLIO
AVERAGE PHYSICAL AVERAGE PHYSICAL GROWTH 1996 COMMUNITIES INVESTMENT INVESTMENT %
OCCUPANCY 1996 OCCUPANCY 1995 VS. 1995(3) % BY MARKET(2) BY MARKET(2)
---------------- ---------------- ----------- ---------------------- -------------------
<S> <C> <C> <C> <C> <C>
CENTRAL REGION:
Austin, Texas......... 95.39% 95.75% 3.34% 5.79% 4.65%
Dallas, Texas......... 95.92 96.10 5.53 6.71 3.86
Denver, Colorado...... 96.43 96.29 2.83 8.77 4.61
El Paso, Texas........ 93.43 91.83 0.95 6.20 4.45
Houston, Texas........ 96.02 92.53 6.17 9.60 7.29
San Antonio, Texas.... 92.58 93.64 (1.32) 11.33 6.37
----- ----- ----- ------ ------
Total Central
Region............. 94.73% 94.11% 2.63% 48.40% 31.23%
----- ----- ----- ------ ------
NORTHWEST REGION:
Portland, Oregon...... 93.72% 96.04% (1.45)% 7.04% 6.71%
Salt Lake City, Utah.. 94.79 94.43 5.30 1.12 4.94
Seattle, Washington... 94.81 93.53 5.77 2.62 5.82
----- ----- ----- ------ ------
Total Northwest
Region............. 94.12% 95.25% 0.97% 10.78% 17.47%
----- ----- ----- ------ ------
WEST REGION:
Albuquerque, New
Mexico............... 94.71% 95.25% (0.95)% 5.05% 5.80%
Las Vegas, Nevada..... 94.99 92.54 4.89 11.54 5.34
Northern
California(8)........ -- -- -- -- 8.99
Phoenix, Arizona...... 95.23 95.53 5.78 15.12 12.95
Southern California... 95.33 94.29 5.60 2.78 12.82
Tucson, Arizona....... 93.61 94.30 (2.18) 3.29 2.73
----- ----- ----- ------ ------
Total West Region... 94.91% 94.45% 3.74% 37.78% 48.63%
----- ----- ----- ------ ------
Other Markets....... 94.35% 95.06% 0.61% 3.04% 2.67%
----- ----- ----- ------ ------
Total............. 94.72% 94.36% 2.81% 100.00% 100.00%
===== ===== ===== ====== ======
</TABLE>
- --------
(1) Represents cost, including budgeted renovations.
(2) Based on total expected investment.
(3) Represents percentage growth in actual rental income, net of vacancies,
bad debts and concessions.
(4) Includes rental expenses, management fees, real estate taxes and property
management fees.
(5) Represents growth in total rental income less property operating expenses
(excluding depreciation and interest expense).
(6) Represents property operating expenses as a percentage of rental income.
(7) Represents weighted-average "asking rents" during each period.
(8) PTR entered this market subsequent to January 1, 1995; therefore, there
are no communities for the same store comparison.
Homestead Operations and Interest Income
Prior to the Homestead transaction described below in "--Liquidity and
Capital Resources--Homestead Transaction," which closed on October 17, 1996,
PTR developed and operated Homestead Village(R) properties. Following is a
summary of the operations related to these properties:
<TABLE>
<CAPTION>
DECEMBER 31,
OCTOBER 17, -------------
1996 1995 1994
----------- ------ ------
<S> <C> <C> <C>
Number of operating properties.................. 29 20 12
Net operating income for period beginning
January 1, (in thousands)...................... $13,294 $9,314 $3,652
</TABLE>
42
<PAGE>
The increase in net operating income in each period is primarily attributable
to the increase in the number of operating properties from period to period as
a result of significant development activity.
During 1996, PTR recorded $2.0 million in interest income ($1.9 million for
purposes of calculating funds from operations) from the Homestead Notes
received on October 17, 1996 in connection with the Homestead transaction and
Homestead Notes received thereafter in connection with additional fundings of
Homestead development activity. Homestead interest income will increase in
future periods as PTR continues to fund Homestead's development activity up to
its $198.8 million funding commitment and since the Homestead Notes were
outstanding for less than one quarter during 1996. Following is a summary of
Homestead fundings during 1996 (in thousands).
<TABLE>
<S> <C>
Funded balance as of October 17, 1996........................... $ 75,946
Additional amount funded through December 31, 1996.............. 25,242
--------
Funded balance as of December 31, 1996.......................... $101,188
========
</TABLE>
PTR deducts from net earnings the interest income related to the amortization
of discounts and warrant-related deferred revenue in calculating funds from
operations. Therefore, the effective interest rate on the Homestead Notes as a
percentage of the "funded" balance for purposes of calculating funds from
operations is approximately 10.7% per annum as compared to approximately 12.4%
per annum for purposes of calculating net earnings.
PTR expects to complete the funding of the remaining $97.6 million under its
funding commitment in 1997 and the first half of 1998.
Depreciation Expense
The increases in depreciation expense reflected in each year of the three-
year period resulted primarily from the increase in the number of operating
communities partially offset by dispositions and, in 1996, the contribution of
PTR's Homestead Village(R) properties to Homestead.
Interest Expense
The following table summarizes PTR's interest expense (in thousands).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Line of credit............................... $ 9,813 $ 5,749 $ 6,097
Unsecured long-term debt..................... 29,308 14,480 12,941
Mortgage..................................... 13,108 11,096 6,433
Capitalized interest......................... (16,941) (11,741) (6,029)
-------- -------- -------
Total interest expense................... $ 35,288 $ 19,584 $19,442
======== ======== =======
</TABLE>
Line of credit interest expense increased $4.1 million in 1996 as compared
with 1995 and decreased $0.3 million in 1995 as compared with 1994. The
increase in 1996 as compared to 1995 resulted from higher outstanding balances
and an increase in amortization of additional loan costs (administrative fees,
renewal fees and legal fees) relating to PTR's revolving credit facility, which
were offset in part by lower interest rates.
Interest expense on senior, unsecured, long-term, fixed rate debt ("Notes")
increased for 1996 as compared with 1995, resulting from the issuance of $150
million of Notes in February 1996, the issuance of $100 million of Notes in
August 1996 and the issuance of $130 million of Notes in October 1996. Interest
expense increased for 1995 as compared with 1994, as a result of the issuance
of $200 million of Notes in February 1994.
43
<PAGE>
Mortgage interest expense increased $2.0 million in 1996 as compared with
1995, and $4.7 million in 1995 as compared with 1994. These increases are the
result of additional weighted-average debt outstanding due to mortgage
assumptions related to acquisitions which were partially offset by
prepayments.
The increases in interest expense were offset by increases in capitalized
interest of $5.2 million in 1996 over 1995 and $5.7 million in 1995 over 1994.
The increase in capitalized interest is primarily attributable to increased
levels of multifamily development activity in each year.
REIT Management Fee Paid to Affiliate
The REIT Management fee paid by PTR increased by $1.8 million in 1996 over
1995 and $7.2 million in 1995 over 1994. These increases are attributable to
the fact that the REIT Management fee paid by PTR generally fluctuates with
the level of PTR's pre-REIT Management fee cash flow, which increased
substantially throughout the same period (see "--REIT Management Agreement"
below). In the future, as PTR arranges additional unsecured long-term debt and
nonconvertible preferred share financing and as additional fundings of the
Homestead Notes occur, the REIT Management fee will effectively decline in
proportion to PTR's earnings from operations. This decline will result from
the fact that actual or assumed regularly scheduled principal payments
associated with the unsecured long-term debt and distributions actually paid
with respect to any nonconvertible preferred shares are deducted from the cash
flow amount on which the REIT Management fee is based. Similarly, interest
income from the Homestead convertible mortgage notes is not included in the
cash flow amount in determining the REIT Management fee. See "Item 1.
Business--Security Capital Pacific Trust" for a description of a proposal that
PTR has received from Security Capital Group to exchange the REIT Manager and
SCG Realty Services for Common Shares.
Gains and Provision for Loss on Real Estate and Investments
Each year, REIT Management formulates operating and capital plans based on
an ongoing active review of PTR's portfolio. Based in part upon the market
research provided by Security Capital Investment Research and in an effort to
optimize its portfolio composition, PTR may from time to time seek to dispose
of assets that in management's view no longer meet PTR's long-term investment
objectives. The proceeds from these selected dispositions will be redeployed,
typically through tax-deferred exchanges, into assets that in PTR's view offer
better long-term cash flow growth prospects. As a result of this asset
optimization strategy, PTR disposed of 22 multifamily communities and one
industrial building during 1996, representing aggregate net proceeds of $291.1
million, and disposed of one multifamily property in the fourth quarter of
1995, representing net proceeds of $8.8 million. For federal income tax
purposes, the majority of the dispositions were structured as tax-deferred
exchanges which deferred gain recognition. For financial reporting purposes,
however, the transactions qualified for profit recognition and aggregate gains
of $37.5 million and $2.6 million were recorded for 1996 and 1995,
respectively.
Statement of Financial Accounting Standards No. 121, Accounting For The
Impairment Of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of
("SFAS No. 121"), adopted by PTR effective January 1, 1996, establishes
accounting standards for the review of long-lived assets to be held and used
for impairment whenever the carrying amount of an asset may not be
recoverable. SFAS No. 121 also requires that certain long-lived assets to be
disposed of be reported at the lower of carrying amount or fair value less
cost to sell, PTR did not recognize any losses on the date it adopted SFAS No.
121.
As part of PTR's asset optimization strategy, 19 multifamily communities and
two non-multifamily properties were held for disposition as of December 31,
1996. The aggregate carrying value of properties held for disposition was
$178.9 million at December 31, 1996. Each property's carrying value is less
than or equal to its estimated fair market value, net of estimated costs to
sell. Such properties are not depreciated during the period for which they are
determined to be held for disposition. Subject to normal closing risks, PTR
expects to complete the disposition of all properties during 1997 and redeploy
the net proceeds from such dispositions primarily through tax-deferred
exchanges into the acquisition of multifamily communities. The earnings from
operations for properties held for disposition which are included in PTR's
earnings from operations for 1996, 1995 and 1994 were $15.8 million, $15.3
million and $10.5 million, respectively.
44
<PAGE>
PTR's other real estate investments are periodically evaluated for
impairment and provisions for possible losses are made if required. As a
result of such evaluation, PTR recorded a provision for possible loss of
$220,000 and $1,600,000 during 1995 and 1994, respectively, relating to a non-
multifamily investment which was subsequently sold in October 1995. Also,
during 1995 it was determined that PTR could potentially be liable for certain
maintenance items under the terms of a 1993 master lease agreement on a non-
multifamily property which resulted in the recording of an estimated provision
for loss of $200,000. The recording of a provision for loss has no impact on
cash flow from operating activities. As of December 31, 1996, PTR's real
estate investments were carried at depreciated cost, which is not in excess of
fair market value.
Extraordinary Item--Loss on Early Extinguishment of Debt
During 1996, PTR prepaid $25.8 million in mortgage notes payable. Such early
extinguishment of debt resulted in prepayment penalties and a write-off of
unamortized loan costs in the aggregate of $870,000 which was recorded as an
extraordinary item for 1996.
ENVIRONMENTAL MATTERS
PTR is subject to environmental regulations related to the ownership,
operation, development and acquisition of real estate. As part of its due
diligence procedures, PTR has conducted Phase I environmental assessments on
each community prior to acquisition. The cost of complying with environmental
regulations was not material to PTR's results of operations. PTR is not aware
of any environmental condition on any of its communities that is likely to
have a material adverse effect on PTR's financial position or results of
operations.
LIQUIDITY AND CAPITAL RESOURCES
PTR considers its liquidity and ability to generate cash from operations and
financings to be adequate and expects it to continue to be adequate to meet
PTR's development, acquisition, operating, debt service, Homestead funding
obligation and shareholder distribution requirements.
Operating Activities
Net cash flow provided by operating activities increased by $22.1 million
(18.2%) for 1996 as compared to 1995 and $27.2 million (28.7%) for 1995 as
compared to 1994. These increases are due primarily to multifamily property
acquisitions and developments as described under "--Overview" and "--Results
of Operations" above and, to a lesser extent, cash flow growth in communities
fully operating in both comparative years.
Investing and Financing Activities
During 1996, 1995 and 1994, PTR invested cash of $628.6 million, $311.6
million and $380.7 million, respectively, in real estate investments relating
primarily to the significant acquisition and development activity summarized
in "--Overview" above. The $628.6 million invested in 1996 was financed
primarily from $291.1 million of net proceeds received from property
dispositions and proceeds from the issuance of $380 million of unsecured long-
term debt. The $311.6 million invested in 1995 was financed primarily from
$216.3 million of net proceeds from the sale of Common Shares and $101.3
million of net proceeds from the sale of Series B Preferred Shares. The $380.7
million invested in 1994 was financed primarily from $101.1 million of net
proceeds from the sale of Common Shares and proceeds from the issuance of $200
million of unsecured long-term debt.
Other significant financing activity included the payment of $114.9 million,
$98.6 million and $62.2 million in Common and Preferred Share distributions
and dividends for 1996, 1995 and 1994, respectively. The increases in these
distributions and dividends from year to year reflect the sale of additional
Common Shares issued in 1995 and 1994 and the impact of the Series B Preferred
Shares issued in 1995.
In addition to the cash financing and investing activities described above,
in March 1995, PTR issued 8,468,460 Common Shares valued at $138.7 million,
assumed $51.9 million in outstanding line of credit debt and assumed $54.4
million in mortgage debt in exchange for all of PACIFIC's common stock.
Mortgage debt assumed in connection with other multifamily property
acquisitions aggregated $104.2 million, $12.1 million and $56.6 million for
1996, 1995 and 1994, respectively.
45
<PAGE>
Credit Facilities
PTR has a $350 million unsecured revolving line of credit with TCB, as agent
for a group of financial institutions (collectively, the "Lenders"). At March
10, 1997, there were approximately $151.5 million of borrowings outstanding on
this line of credit. The line of credit matures August 1998 and may be
extended annually for an additional year with the approval of the Lenders. The
line of credit bears interest at the greater of prime (8.25% at March 10,
1997) or the federal funds rate plus 0.50% or at PTR's option, LIBOR (5.4375%
at March 10, 1997) plus 1.125% (6.5625% at March 10, 1997). The spread over
LIBOR can vary from LIBOR plus 0.75% to LIBOR plus 1.50% based upon the rating
of PTR's senior unsecured debt. Additionally, there is a commitment fee on the
average unfunded line of credit balance. The commitment fee was $396,000,
$502,000 and $224,000 for 1996, 1995 and 1994, respectively.
A summary of PTR's line of credit borrowings is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Borrowings outstanding at December 31......... $ 99,750 $129,000 $102,000
Weighted-average daily borrowings............. $112,248 $ 51,858 $ 59,890
Weighted-average daily nominal interest rate.. 7.3% 8.0% 7.0%
Weighted-average daily effective interest
rate......................................... 8.8% 11.1% 10.6%
</TABLE>
On September 9, 1996, PTR entered into a short-term, unsecured, borrowing
agreement with TCB. The loan matures September 9, 1997 and bears interest at
an overnight rate, which has ranged from 5.80% to 7.50%. At March 10, 1997,
there were $6.6 million of borrowings outstanding under this agreement.
On March 10, 1997, PTR borrowed $60 million under a short-term borrowing
agreement with a financial institution. The loan matures on September 10,
1997, but provides for early repayment at PTR's option on the 10th day of each
month during the term. Interest is payable monthly at an annual rate of LIBOR
plus 0.60% (6.0375% at March 10, 1997). These proceeds were used to repay
borrowings under PTR's line of credit.
The aggregate amount of borrowings outstanding under all of PTR's credit
facilities on March 10, 1997 was $218.1 million.
Long-Term Debt
As of December 31, 1996, PTR has issued a total of $580 million of Notes,
which bear interest at a specified rate per annum, payable semi-annually.
Funds from such issuances were used primarily for acquisition, development and
renovation of multifamily communities and to repay revolving credit balances
incurred for such purposes. The following table summarizes the Notes:
<TABLE>
<CAPTION>
ISSUANCE AVERAGE EFFECTIVE
AND INTEREST RATE, AVERAGE
OUTSTANDING AVERAGE INCLUDING OFFERING ORIGINAL
PRINCIPAL COUPON DISCOUNTS AND LIFE
DATE OF ISSUANCE AMOUNT RATE ISSUANCE COSTS (YEARS)
---------------- ----------- ------- ------------------ --------
<S> <C> <C> <C> <C>
October 21, 1996......... $130 million 7.350% 7.500% 6.85
August 6, 1996........... 100 million 7.840 7.950 15.60
February 23, 1996........ 150 million 7.710 7.840 15.50
February 8, 1994......... 200 million 7.240 7.370 14.25
------------ ------ ------ -----
Total/Average $580 million 7.500% 7.620% 12.03
============ ====== ====== =====
</TABLE>
The Notes, other than a $15 million tranche of 6.500% Notes issued October
21, 1996 and due 2026 (the "6.500% Notes"), are redeemable any time at the
option of PTR, in whole or in part, at a redemption price equal to the sum of
the principal amount of the Notes being redeemed plus accrued interest thereon
to the redemption date plus an adjustment, if any, based on the yield to
maturity relating to market yields available at
46
<PAGE>
redemption. The 6.500% Notes may be repaid on October 15, 1999 at the option
of the holders at their full principal amount together with accrued interest.
If the holders do not exercise their right to require PTR to repay the 6.500%
Notes on October 15, 1999, they may be repaid at the option of PTR, in whole
or in part, at a redemption price equal to the sum of the principal amount of
the Notes being redeemed plus accrued interest thereon to the redemption date
plus an adjustment, if any, based on the yield to maturity relating to market
yields available at redemption. The Notes are governed by the terms and
provisions of an indenture agreement.
Mortgages Payable
The changes in mortgages payable during the past three years consisted of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Balances at January 1........................ $158,054 $ 93,624 $48,872
Notes originated or assumed................. 104,176 66,481 56,624
Principal payments and prepayments.......... (45,042) (2,051) (11,872)
-------- -------- -------
Balances at December 31...................... $217,188 $158,054 $93,624
======== ======== =======
</TABLE>
The overall effective interest rate of PTR's mortgages as of December 31,
1996 was 7.60%.
Scheduled Debt Maturities
As of December 31, 1996, approximate principal payments due during each of
the years in the 20-year period ending December 31, 2016 are as follows (in
thousands):
<TABLE>
<CAPTION>
SHORT TERM
UNSECURED UNSECURED BORROWING
MORTGAGES LONG-TERM DEBT LINE OF CREDIT AGREEMENT TOTAL
--------- -------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C>
1997......... $ 15,266 $ -- $ -- $10,450 $ 25,716
1998......... 40,012 -- 99,750 -- 139,762
1999......... 12,790 30,000 -- -- 42,790
2000......... 29,799 -- -- -- 29,799
2001......... 11,280 12,500 -- -- 23,780
2002......... 17,348 32,500 -- -- 49,848
2003......... 1,752 38,750 -- -- 40,502
2004......... 1,903 38,750 -- -- 40,653
2005......... 2,066 38,750 -- -- 40,816
2006......... 2,241 38,750 -- -- 40,991
2007......... 13,528 18,750 -- -- 32,278
2008......... 18,863 38,750 -- -- 57,613
2009......... 1,603 36,250 -- -- 37,853
2010......... 1,732 38,750 -- -- 40,482
2011......... 1,871 25,000 -- -- 26,871
2012......... 2,022 30,000 -- -- 32,022
2013......... 2,185 35,000 -- -- 37,185
2014......... 2,361 42,500 -- -- 44,861
2015......... 2,551 40,000 -- -- 42,551
2016......... 2,756 45,000 -- -- 47,756
Thereafter... 33,259 -- -- -- 33,259
-------- -------- ------- ------- --------
Total........ $217,188 $580,000 $99,750 $10,450 $907,388
======== ======== ======= ======= ========
</TABLE>
47
<PAGE>
Covenants
PTR's debt instruments generally contain certain covenants common to the
type of facility or borrowing, including financial covenants establishing
minimum debt service coverage ratios and maximum loan to value ratios. PTR was
in compliance with all covenants pertaining to its debt instruments at
December 31, 1996.
Commitments and Contingencies
At January 31, 1997, PTR had contingent contracts or letters of intent,
subject to PTR's final due diligence and approval of all entitlements, to
acquire land for new development communities with an estimated 3,507
multifamily units at a total budgeted development cost of $264.5 million. At
the same date, PTR also had contingent contracts or letters of intent, subject
to final due diligence, for the acquisition of 964 additional operating
multifamily units with a total expected investment of $77.2 million, including
budgeted renovations. At January 31, 1997, PTR had unfunded development
commitments for developments under construction of $158.8 million. For a
description of unfunded commitments in connection with the Homestead
transaction, see "--Homestead Transaction" below.
PTR expects to finance these activities and other future investment and
operating needs with cash on hand, borrowings under its credit facilities and
disposition proceeds from its asset optimization strategy, prior to arranging
long-term capital. The credit facilities will facilitate an efficient response
to market opportunities while minimizing the amount of cash invested in short-
term investments at lower yields. As of March 10, 1997, there were
approximately $218.1 million of borrowings outstanding under all of PTR's
credit facilities. Other sources of future liquidity and financial flexibility
include $170 million in shelf-registered securities which can be issued in the
form of unsecured long-term debt or preferred shares on an as-needed basis,
subject to PTR's ability to effect an offering on satisfactory terms. PTR
believes that its current conservative ratio of long-term debt to total long-
term undepreciated book capitalization (the sum of long-term debt and
shareholders' equity after adding back accumulated depreciation) of 36.9% at
December 31, 1996, provides considerable flexibility to prudently increase its
capital base by utilizing long-term debt as a financing tool in the future.
From time to time, PTR utilizes derivative financial instruments as hedges
in anticipation of future debt offerings in order to manage well-defined
interest rate risk. In anticipation of a 1997 debt offering, PTR entered into
interest rate contracts in 1996 with notional amounts aggregating $50 million
which PTR plans to terminate when the anticipated offering is completed. As of
March 10, 1997, the fair market value of these contracts was an unrealized
loss of approximately $69,250. The gain or loss ultimately realized upon
termination of the hedge will be deferred and amortized into interest expense
over the term of the related debt.
Homestead Transaction
On October 17, 1996, PTR, ATLANTIC, Security Capital Group and Homestead
consummated a merger agreement pursuant to which each of PTR, ATLANTIC and
Security Capital Group contributed, through a series of merger transactions,
all of their respective assets related to their Homestead Village(R) extended-
stay lodging assets to Homestead, a newly formed company. In connection with
the transaction, PTR and ATLANTIC entered into funding commitment agreements
to finance the development of certain Homestead properties.
PTR contributed 54 Homestead Village(R) properties (or the rights to acquire
such properties) ("Homestead Assets") to Homestead in exchange for 9,485,727
shares of Homestead common stock. Simultaneously, PTR received 6,363,789
warrants to acquire additional shares of Homestead common stock at a price of
$10.00 per share in exchange for entering into a funding commitment agreement.
In this agreement, PTR agreed to provide up to $198.8 million in secured
financing for developments to Homestead in exchange for up to $221.3 million
in Homestead Notes, including those existing on the properties at the
transaction date.
48
<PAGE>
The Homestead Notes were created under a master facility providing for
aggregate fundings of up to $198.8 million in exchange for notes with a face
amount of up to $221.3 million. Under the terms of the funding commitment
agreement, PTR receives approximately $1.00 in principal amount of Homestead
Notes for every $.90 funded (i.e., the Homestead Notes are issued at a
discount). The discount is amortized into interest income over the term of the
Homestead Notes using a method which approximates the effective interest
method. Maximum fundings are established for each individual development
project and specific liens are recorded to secure payment. The Homestead Notes
are cross-collateralized, which enables PTR to foreclose or take possession of
any one or more of the underlying properties upon the occurrence of an event of
default. The Homestead Notes require semi-annual interest-only payments at 9%
per annum of the face amount of the Homestead Notes outstanding, are callable
at the option of Homestead after 5 years and mature on October 31, 2006.
The Homestead Notes are convertible into Homestead common stock after March
31, 1997 on the basis of one share of Homestead common stock for every $11.50
of principal amount outstanding, subject to adjustment. The initial value
attributed to the conversion feature has been recorded as an additional
component of the Homestead Notes' balance and the corresponding discount is
being amortized into interest income over the term of the Homestead Notes using
a method which approximates the effective interest method. The difference
between the fair value of the Homestead Notes (assuming conversion), based upon
the closing price of $18.00 of Homestead's common stock on the ASE at December
31, 1996, and the amortized cost of the Homestead Notes is reflected as an
additional component of the Homestead Notes' balance and as an unrealized
holding gain.
PTR also received warrants to purchase Homestead common stock in exchange for
entering into the funding commitment agreement. The warrants were distributed
to PTR shareholders with the Homestead common stock in the Homestead
Distribution. The benefit associated with the receipt of the Homestead warrants
has been recorded as deferred revenue which is included in accrued expenses and
other liabilities and is being amortized into interest income using a method
which approximates the effective interest method over the term of the Homestead
Notes.
PTR deducts from net earnings the interest income related to the amortization
of discounts and warrant-related deferred revenue in calculating funds from
operations. Therefore, the effective interest rate on the Homestead Notes as a
percentage of the "funded" balance for purposes of calculating funds from
operations is approximately 10.7% per annum as compared to approximately 12.4%
per annum for purposes of calculating net earnings.
Through February 28, 1997, PTR had funded $111.4 million of its funding
commitment. This leaves a remaining commitment under the funding commitment
agreement of approximately $87.4 million, which will be provided to Homestead
to fund developments as needed on development properties contributed by PTR.
During 1997 and the first half of 1998, PTR expects to complete the funding
of the Homestead Notes which are convertible into Homestead common stock at a
price of $11.50 per share. PTR's ownership of the Homestead Notes, assuming
full funding and conversion, would result in the following incremental value
per PTR Common Share as of December 31, 1996 (in thousands, except per share
amounts):
<TABLE>
<S> <C>
Homestead common stock price (at 12/31/96)...................... $ 18.00
Conversion price................................................ $ 11.50
--------
Incremental value per share of Homestead common stock......... $ 6.50
Shares of Homestead common stock upon conversion (at full
funding)....................................................... 19,246
--------
Total incremental value from conversion....................... $125,099
PTR Common Shares outstanding (at 12/31/96)..................... 75,511
--------
Assumed incremental value per PTR Common Share at December 31,
1996......................................................... $ 1.66
========
</TABLE>
49
<PAGE>
Upon full funding of the Homestead Notes and after giving effect to the
Homestead Distribution described below, PTR's conversion rights would
represent a 34.7% ownership interest in Homestead. This ownership interest
assumes no further equity offerings by Homestead, conversion of all Homestead
Notes by PTR and ATLANTIC and exercise of all outstanding warrants.
PTR's Homestead common stock and warrants to acquire additional common stock
were distributed on November 12, 1996 to holders of record of Common Shares on
October 29, 1996. Each PTR shareholder received 0.125694 shares of Homestead
common stock and 0.084326 warrants per PTR Common Share plus cash for
fractional shares and warrants in the Homestead Distribution.
Merger and Concurrent Subscription Offering
On March 23, 1995, PTR consummated a merger (the "Merger") of PACIFIC with
and into PTR. PACIFIC was a private multifamily REIT controlled by Security
Capital Group. In the Merger, each outstanding share of PACIFIC common stock
was converted into the right to receive 0.611 Common Shares. As a result,
8,468,460 Common Shares were issued in the Merger in exchange for all
outstanding shares of PACIFIC common stock. The Merger expanded PTR's target
market to include a six-state region of the western United States that the
REIT Manager believes will provide attractive multifamily growth
opportunities. Additionally, PTR changed its name from Property Trust of
America to Security Capital Pacific Trust to more accurately reflect its
target market.
Concurrently with the consummation of the Merger, PTR completed a
subscription offering pursuant to which PTR received net proceeds of $216.3
million (13.2 million Common Shares). The subscription offering was designed
to allow shareholders of PTR to purchase Common Shares at the same price at
which PACIFIC shareholders acquired Common Shares in the Merger ($16.375 per
Common Share). Security Capital Group purchased $50 million (3.1 million
Common Shares at $16.375 per Common Share) in the subscription offering
pursuant to the oversubscription privilege.
Distributions
PTR announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 10, 1996 Board meeting, the Board announced a projected increase in
the annual distribution level from $1.24 to $1.30 per Common Share and
declared the first quarter 1997 distribution of $0.325 per Common Share. The
first quarter distribution was paid on February 20, 1997, to shareholders of
record on February 7, 1997. The payment of distributions is subject to the
discretion of the Board and is dependent upon the financial condition and
operating results of PTR.
Preferred Shares
In November 1993, PTR issued $230 million of Series A Preferred Shares that
are entitled to receive an annual dividend equal to the greater of $1.75 per
share and the dividend which would be received if the Series A Preferred
Shares were converted to Common Shares. This amounted to $14.7 million, $16.1
million and $16.1 million for 1996, 1995 and 1994, respectively. The decrease
in the dividend during 1996 is attributable to approximately 2,705,000 Series
A Preferred Shares being converted into approximately 3,294,000 Common Shares
during 1996. In connection with the Homestead transaction described above, the
conversion ratio was adjusted from 1.2162 to 1.3469 Common Shares for each
Series A Preferred Share. Based on this conversion ratio and the 1997
projected distribution of $1.30 per Common Share, the dividend per Series A
Preferred Share is expected to be approximately $1.751 in 1997.
In May 1995, PTR issued $105 million of Series B Preferred Shares that are
entitled to receive an annual dividend of $2.25 per share (9.0% annual
dividend rate), which amounted to $9.5 million for 1996 and $5.7 million for
1995.
The Preferred Share dividends do not reduce the amount PTR has budgeted for
Common Share distributions but do increase the percentage of the Common Share
distribution that constitutes a non-taxable return of capital.
50
<PAGE>
Funds From Operations
Funds from operations is defined as net earnings computed in accordance with
GAAP, excluding gains (or losses) plus depreciation and provision for possible
loss on investments and excluding extraordinary items. Management believes
that an understanding of funds from operations will enhance the reader's
comprehension of PTR's results of operations and cash flows presented in the
financial statements and other sections within this document. In July 1994,
PTR changed to the more conservative policy of expensing the amortization of
loan costs in determining funds from operations. For comparability, funds from
operations has been restated to give effect to this policy as if it had been
in effect since January 1, 1992. Funds from operations should not be construed
as a substitute for "net earnings" in evaluating operating results nor as a
substitute for "cash flow" in evaluating liquidity and the funds from
operations measure presented by PTR may not be comparable to similarly titled
measures of other REITs.
In 1996, PTR contributed its Homestead Assets to Homestead, as more fully
described above under "--Homestead Transaction". Management believes that
funds from operations for 1996 and 1995 should be adjusted to reflect the
effects of the Homestead transaction on funds from operations in order to be
comparable. Accordingly, the table below also presents pro forma funds from
operations, which have been calculated as if the Homestead transaction had
occurred on January 1, 1995. Management believes that the pro forma funds from
operations information presented below provides a more meaningful comparison
of 1996 and 1995; however, the pro forma funds from operations information is
unaudited and is not necessarily indicative of what actual funds from
operations would have been if the Homestead transaction had occurred on
January 1, 1995.
Funds from operations and pro forma funds from operations were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1995
-------- -------
<S> <C> <C>
Net earnings attributable to Common Shares............ $106,544 $62,496
Add (Deduct):
Depreciation........................................ 44,887 36,685
Provision for possible loss on investments.......... -- 420
Gain or loss on sale of investments................. (37,492) (2,623)
Extraordinary item--loss on early extinguishment of
debt, net.......................................... 739 --
Interest income on Homestead Notes (non-cash
portion)........................................... (141) --
-------- -------
Historical funds from operations attributable to
Common Shares........................................ 114,537 96,978
-------- -------
Add (deduct) pro forma adjustments relating to the
contribution
of Homestead Assets:
Reduction in revenues and operating expenses(1)..... (13,294) (9,314)
Increase in interest income(2)...................... 4,093 446
Increase in interest expense(3)..................... (460) (778)
Reduction in capitalized interest(4)................ (2,246) (2,149)
REIT Management fee effect(5)....................... 2,757 1,988
Other............................................... 35 62
-------- -------
Total pro forma adjustments....................... (9,115) (9,745)
-------- -------
Pro forma funds from operations attributable to Common
Shares............................................... $105,422 $87,233
======== =======
Weighted-average Common Shares outstanding............ 73,057 67,052
======== =======
</TABLE>
- --------
(1) Represents the elimination of Homestead's historical revenues and
operating expenses.
(2) Represents the interest income which would have been recognized on the
Homestead Notes, assuming that PTR received Homestead common stock in
exchange for its contribution first, and then Homestead Notes in exchange
for the balance of its contribution over the respective time periods.
51
<PAGE>
(3) Represents the assumed amount of incremental interest expense which would
have been incurred as a result of higher line of credit balances.
(4) Represents the reclassification of historical interest costs capitalized
on Homestead developments to interest expense.
(5) Represents the decrease in REIT Management fee that would have resulted
from the pro forma adjustments.
REIT MANAGEMENT AGREEMENT
Effective March 1, 1991, PTR entered into a REIT management agreement (the
"REIT Management Agreement") with the REIT Manager pursuant to which the REIT
Manager assumed day-to-day management of PTR. All officers of PTR are
employees of the REIT Manager and PTR currently has no employees. The REIT
Manager provides both strategic and day-to-day management of PTR, including
research, investment analysis, acquisition, development, dispositions,
property management, capital markets, legal, accounting and other
administrative services. The REIT Manager is a wholly owned subsidiary of
Security Capital Group, which owned 36.0% of the Common Shares as of February
28, 1997.
The REIT Management Agreement requires PTR to pay a base annual fee of
$855,000 plus 16% of cash flow as defined in the REIT Management Agreement in
excess of $4,837,000, payable monthly. In the REIT Management Agreement, cash
flow is calculated by reference to PTR's cash flow from operations plus (i)
fees paid to the REIT Manager, (ii) extraordinary expenses incurred at the
request of the independent Trustees of PTR and (iii) 33% of any interest paid
by PTR on convertible subordinated debentures (of which there has been none
since inception of the REIT Management Agreement); and after deducting (i)
regularly scheduled principal payments (excluding prepayments or balloon
payments) for debt with commercially reasonable amortization schedules, (ii)
actual or assumed principal and interest payments on long-term debt, (iii)
interest income received in connection with the Homestead Notes and (iv)
distributions actually paid with respect to any nonconvertible preferred
shares of beneficial interest of PTR. The REIT Management Agreement provides
that long-term unsecured debt is treated as if it had regularly scheduled
principal and interest payments similar to a 20-year, level monthly payment,
fully amortizing mortgage, and the assumed principal and interest payments are
deducted from cash flow in determining the fee. Cash flow does not include
dividend and interest income from PTR Development Services, realized gains or
losses from dispositions of investments or income from cash equivalent
investments. The REIT Manager also receives a fee of 0.25% per year on the
average daily balance of cash equivalent investments.
Since the REIT Management fee fluctuates with the level of PTR's pre-REIT
Management fee cash flow, the fee has increased for each of the years ended
December 31, 1996, 1995 and 1994, because cash flow increased substantially
throughout the same periods. As PTR arranges additional amortizing long-term
debt and nonconvertible preferred share financing and as additional funding of
Homestead Notes occurs, the REIT Management fee will effectively decline in
proportion to PTR's earnings from operations. This decline will result from
the fact that actual or assumed regularly scheduled principal payments
associated with long-term debt and distributions actually paid with respect to
nonconvertible preferred shares are deducted from the cash flow amount on
which the REIT Management fee is based. Similarly, interest income from the
Homestead Notes is not included in the cash flow amount in determining the
REIT Management fee.
PTR is obligated to reimburse the REIT Manager for certain expenses incurred
by the REIT Manager on behalf of PTR relating to PTR's operations, consisting
primarily of external professional fees, offering costs and travel expenses.
The REIT Management Agreement is renewable by PTR annually, subject to a
determination by the independent Trustees (who receive performance benchmark
information verified by an independent third party) that the REIT Manager's
performance has been satisfactory and that the compensation payable to the
REIT Manager is fair. Each of PTR and the REIT Manager may terminate the REIT
Management Agreement on 60 days' notice.
52
<PAGE>
PTR recently announced that it received a proposal from Security Capital
Group to exchange the REIT Manager and SCG Realty Services for Common Shares.
As a result of the proposed transaction, PTR would become an internally managed
REIT and Security Capital Group would remain PTR's largest shareholder. The
Board has formed a special committee comprised of independent Trustees to
review the proposed transaction. The proposed transaction is subject to
approval by both the special committee and the full Board. If the Board
approves the transaction, a proxy statement, subject to review by the
Securities and Exchange Commission, will be mailed to PTR's common shareholders
prior to a shareholder vote on the proposed transaction.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PTR's Balance Sheets as of December 31, 1996 and 1995, its Statements of
Earnings, Shareholders' Equity and Cash Flows for each of the years in the
three-year period ended December 31, 1996 and Schedule III--Real Estate and
Accumulated Depreciation, together with the report of KPMG Peat Marwick LLP,
independent auditors, are included under Item 14 of this report and are
incorporated herein by reference. Selected quarterly financial data is
presented in Note 10 of Notes to Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information regarding PTR's executive officers, see "Item 1. Business--
Trustees and Officers of PTR and Directors and Officers of the REIT Manager and
Relevant Affiliates." The other information required by this Item 10 is
incorporated herein by reference to the description under the caption "Section
16(a) Beneficial Ownership Reporting Compliance" in PTR's definitive proxy
statement for its 1997 annual meeting of shareholders (the "1997 Proxy
Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the description under the captions
"Trustee Compensation" and "PTR Officers" in the 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the description under the captions
"Principal Shareholders" and "Election of Trustees" in the 1997 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the description under the caption
"Certain Relationships and Transactions" in the 1997 Proxy Statement.
53
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a) Financial Statements and Schedules:
1. Financial Statements:
See Index to Financial Statements and Schedule on page 55 of this
report, which is incorporated herein by reference.
2. Financial Statement Schedules:
Schedule III.
All other schedules have been omitted since the required information is
presented in the financial statements and the related notes or is not
applicable.
3. Exhibits
See Index to Exhibits on pages 88-90 of this report, which is
incorporated herein by reference.
(b) Reports on Form 8-K: The following reports on Form 8-K were filed during
the last quarter of the period covered by this report.
<TABLE>
<CAPTION>
ITEMS FINANCIAL
DATE REPORTED STATEMENTS
---- -------- ----------
<S> <C> <C>
October 14, 1996...................................... 5,7 yes
October 17, 1996...................................... 5,7 no
</TABLE>
(c) Exhibits:
The Exhibits required by Item 601 of Regulation S-K are listed in the Index
to Exhibits on pages 88-90 of this report, which is incorporated herein by
reference.
54
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECURITY CAPITAL PACIFIC TRUST:
Independent Auditors' Report............................................ 56
Balance Sheets as of December 31, 1996 and 1995......................... 57
Statements of Earnings for the years ended December 31, 1996, 1995 and
1994................................................................... 58
Statements of Shareholders' Equity for the years ended December 31,
1996, 1995 and 1994.................................................... 59
Statements of Cash Flows for the years ended December 31, 1996, 1995 and
1994................................................................... 60
Notes to Financial Statements........................................... 61
Schedule III--Real Estate and Accumulated Depreciation as of December
31, 1996............................................................... 80
</TABLE>
55
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
SECURITY CAPITAL PACIFIC TRUST:
We have audited the financial statements of SECURITY CAPITAL PACIFIC TRUST as
listed in the accompanying index. In connection with our audits of the
financial statements, we also have audited the financial statement schedule
listed in the accompanying index. These financial statements and financial
statement schedule are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SECURITY CAPITAL PACIFIC TRUST
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
January 29, 1997, except as to Note
13which is as of March 10, 1997
56
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS DECEMBER 31,
------ ----------------------
1996 1995
---------- ----------
<S> <C> <C>
Real estate............................................ $2,153,363 $1,855,866
Less accumulated depreciation.......................... 97,574 81,979
---------- ----------
2,055,789 1,773,887
Homestead Notes........................................ 176,304 --
Other mortgage notes receivable........................ 13,525 15,844
---------- ----------
Net investments.................................... 2,245,618 1,789,731
Cash and cash equivalents.............................. 5,643 26,919
Accounts receivable and accrued interest............... 4,157 3,318
Other assets........................................... 27,014 21,031
---------- ----------
Total assets....................................... $2,282,432 $1,840,999
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Lines of credit...................................... $ 110,200 $ 129,000
Long-term debt....................................... 580,000 200,000
Mortgages payable.................................... 217,188 158,054
Distributions payable................................ 24,537 22,437
Accounts payable..................................... 22,782 21,040
Accrued expenses and other liabilities............... 60,217 34,800
---------- ----------
Total liabilities.................................. 1,014,924 565,331
---------- ----------
Shareholders' equity:
Series A Preferred Shares (6,494,967 convertible
shares in 1996 and 9,200,000 in 1995; stated
liquidation preference of $25 per share)............ 162,374 230,000
Series B Preferred Shares (4,200,000 shares issued;
stated liquidation preference of $25 per share)..... 105,000 105,000
Common Shares (shares issued--75,510,986 in 1996 and
72,375,819 in 1995)................................. 75,511 72,376
Additional paid-in capital........................... 918,434 952,679
Unrealized holding gain on Homestead Notes........... 74,923 --
Distributions in excess of net earnings.............. (68,734) (82,450)
Treasury shares (164,901 in 1995).................... -- (1,937)
---------- ----------
Total shareholders' equity......................... 1,267,508 1,275,668
---------- ----------
Total liabilities and shareholders' equity......... $2,282,432 $1,840,999
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Rental income..................................... $322,046 $262,473 $183,472
Interest income on Homestead Notes................ 2,035 -- --
Other interest income............................. 2,165 2,400 2,633
-------- -------- --------
326,246 264,873 186,105
-------- -------- --------
Expenses:
Rental expenses................................... 89,550 73,808 55,772
Real estate taxes................................. 26,962 21,326 16,093
Property management fees paid to affiliates....... 11,610 8,912 7,148
Depreciation...................................... 44,887 36,685 24,614
Interest.......................................... 35,288 19,584 19,442
REIT management fee paid to affiliate............. 22,191 20,354 13,182
General and administrative........................ 1,077 952 784
Provision for possible loss on investments........ -- 420 1,600
Other............................................. 592 1,136 751
-------- -------- --------
232,157 183,177 139,386
-------- -------- --------
Earnings from operations............................ 94,089 81,696 46,719
Gain on sale of investments, net.................... 37,492 2,623 --
-------- -------- --------
Net earnings before extraordinary item.............. 131,581 84,319 46,719
Less extraordinary item-loss on early extinguishment
of debt............................................ 870 -- --
-------- -------- --------
Net earnings........................................ 130,711 84,319 46,719
Less Preferred Share dividends...................... 24,167 21,823 16,100
-------- -------- --------
Net earnings attributable to Common Shares........ $106,544 $ 62,496 $ 30,619
======== ======== ========
Weighted-average Common Shares outstanding.......... 73,057 67,052 46,734
======== ======== ========
Per Common Share amounts............................
Net earnings before extraordinary item............ $ 1.47 $ 0.93 $ 0.66
======== ======== ========
Net earnings...................................... $ 1.46 $ 0.93 $ 0.66
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SHARES OF BENEFICIAL
INTEREST, $1.00 PAR VALUE
-------------------------------
SERIES A SERIES B
PREFERRED PREFERRED
SHARES AT SHARES AT COMMON
AGGREGATE AGGREGATE SHARES ADDITIONAL UNREALIZED DISTRIBUTIONS
LIQUIDATION LIQUIDATION AT PAR PAID-IN HOLDING IN EXCESS OF TREASURY
PREFERENCE PREFERENCE VALUE CAPITAL GAINS NET EARNINGS SHARES TOTAL
----------- ----------- ------- ---------- ---------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1993................... $230,000 $ -- $44,809 $523,053 $ -- $ (40,916) $(1,929) $ 755,017
Net earnings........... -- -- -- -- -- 46,719 -- 46,719
Common Share
distributions paid.... -- -- -- -- -- (46,121) -- (46,121)
Redemption of
shareholder purchase
rights................ -- -- -- -- -- (448) -- (448)
Net increase in Common
Share distributions
accrued............... -- -- -- -- -- (3,345) -- (3,345)
Preferred Share
dividends paid........ -- -- -- -- -- (16,100) -- (16,100)
Sale of shares, net of
expenses.............. -- -- 5,594 95,482 -- -- -- 101,076
Dividend Reinvestment
and Share Purchase
Plan, net............. -- -- 216 3,607 -- -- -- 3,823
Exercise of stock
options, net.......... -- -- 2 19 -- -- -- 21
-------- -------- ------- -------- ------- --------- ------- ----------
Balances at December 31,
1994................... 230,000 -- 50,621 622,161 -- (60,211) (1,929) 840,642
Net earnings........... -- -- -- -- -- 84,319 -- 84,319
Common Share
distributions paid.... -- -- -- -- -- (76,804) -- (76,804)
Net increase in Common
Share distributions
accrued............... -- -- -- -- -- (7,931) -- (7,931)
Preferred Share
dividends paid........ -- -- -- -- -- (21,823) -- (21,823)
Issuance of shares, net
of expenses........... -- 105,000 21,694 329,591 -- -- -- 456,285
Dividend Reinvestment
and Share Purchase
Plan, net............. -- -- 61 927 -- -- -- 988
Cost of treasury shares
purchased............. -- -- -- -- -- -- (8) (8)
-------- -------- ------- -------- ------- --------- ------- ----------
Balances at December 31,
1995................... 230,000 105,000 72,376 952,679 -- (82,450) (1,937) 1,275,668
Net earnings........... -- -- -- -- -- 130,711 -- 130,711
Common Share
distributions paid.... -- -- -- -- -- (90,728) -- (90,728)
Net increase in Common
Share distributions
accrued............... -- -- -- -- -- (2,100) -- (2,100)
Preferred Share
dividends paid........ -- -- -- -- -- (24,167) -- (24,167)
Conversion of Series A
Preferred shares into
Common Shares......... (67,626) -- 3,294 64,332 -- -- -- --
Distribution of
Homestead common stock
and warrants at book
value, net of
transaction expenses.. -- -- -- (96,914) -- -- -- (96,914)
Unrealized holding gain
on Homestead Notes.... -- -- -- -- 74,923 -- -- 74,923
Cost of treasury shares
purchased............. -- -- -- -- -- -- (1) (1)
Retirement of 164,957
treasury shares....... -- -- (165) (1,773) -- -- 1,938 --
Exercise of stock
options, net.......... -- -- 6 110 -- -- -- 116
-------- -------- ------- -------- ------- --------- ------- ----------
Balances at December 31,
1996................... $162,374 $105,000 $75,511 $918,434 $74,923 $ (68,734) $ -- $1,267,508
======== ======== ======= ======== ======= ========= ======= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities
Net earnings................................. $ 130,711 $ 84,319 $ 46,719
Adjustments to reconcile net earnings to net
cash flow provided by operating activities:
Depreciation and amortization.............. 46,911 38,228 26,517
Provision for possible loss on investments. -- 420 1,600
Gain on sale of investments, net........... (37,492) (2,623) --
Increase in accounts payable............... 565 2,719 3,463
(Decrease) increase in accrued real estate
taxes..................................... (2,168) 2,167 7,874
Increase in accrued interest on long-term
debt...................................... 9,214 -- 5,391
Increase in accrued expenses and other
liabilities............................... 4,240 4,857 4,264
Increase in other operating assets......... (8,042) (8,292) (1,203)
--------- --------- ---------
Net cash flow provided by operating
activities.................................. 143,939 121,795 94,625
--------- --------- ---------
Investing activities:
Real estate investments...................... (628,640) (311,619) (380,688)
Advances on Homestead Notes.................. (25,242) -- --
Mortgage notes receivable.................... -- (1,538) (162)
Principal repayments on other mortgage notes
receivable.................................. 2,319 7,701 189
Proceeds from dispositions, net of closing
costs....................................... 291,056 10,968 12,146
Operating cash contributed in Homestead
transaction................................. (428) -- --
--------- --------- ---------
Net cash flow used in investing activities. (360,935) (294,488) (368,515)
--------- --------- ---------
Financing activities:
Proceeds from sale of shares, net of
expenses.................................... -- 317,614 101,076
Proceeds from lines of credit................ 510,985 278,000 266,250
Principal payments on lines of credit........ (529,785) (302,900) (215,750)
Proceeds from Dividend Reinvestment and
Share Purchase Plan, net.................... -- 988 3,823
Proceeds from long-term debt................. 380,000 -- 200,000
Debt issuance costs incurred................. (5,659) (1,496) (4,422)
Cash distributions paid on Common Shares..... (90,728) (76,804) (46,121)
Cash dividends paid on Preferred Shares...... (24,167) (21,823) (16,100)
Redemption of shareholder purchase rights.... -- -- (448)
Regularly scheduled principal payments on
mortgages payable........................... (2,037) (1,748) (1,398)
Principal prepayment of mortgages payable.... (43,005) (303) (10,474)
Proceeds from exercise of stock options...... 116 (8) 21
--------- --------- ---------
Net cash flow provided by financing
activities................................ 195,720 191,520 276,457
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (21,276) 18,827 2,567
Cash and cash equivalents at beginning of
year......................................... 26,919 8,092 5,525
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 5,643 $ 26,919 $ 8,092
========= ========= =========
Non-cash investing and financing activities:
Assumption of mortgages payable upon
purchase of multifamily communities......... $ 104,176 $ 12,078 $ 56,624
Series A Preferred Shares converted to
Common Shares............................... $ 67,626 $ -- $ --
Accrual of Common Share distributions........ $ 24,537 $ 22,437 $ 14,506
Fair market value adjustment related to
Homestead Notes............................. $ 74,923 $ -- $ --
Other:
Homestead transaction--See description in
Note 2
Merger with Security Capital Pacific
Incorporated--See description in Note 3
</TABLE>
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Security Capital Pacific Trust (New York Stock Exchange Symbol: "PTR") is an
equity real estate investment trust ("REIT") organized in 1963 under the laws
of the state of Maryland, which primarily owns, develops, acquires and operates
income-producing multifamily communities in the western United States.
Principles of Financial Presentation
The accounts of PTR and its majority-owned subsidiaries are consolidated in
the accompanying financial statements. All significant intercompany accounts
and transactions have been eliminated in consolidation.
The preparation of these financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affected the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the dates of the financial statements
and the reported amounts of revenues and expenses during the reporting periods.
Actual amounts realized or paid could differ from those estimates.
Cash and Cash Equivalents
PTR considers all cash on hand, demand deposits with financial institutions
and short-term, highly liquid investments with original maturities of three
months or less to be cash equivalents.
Real Estate and Depreciation
Real estate is carried at depreciated cost, which is not in excess of
estimated fair market value.
Costs directly related to the acquisition (including costs related to certain
planned renovations identified during PTR's pre-acquisition due diligence),
development or improvement of real estate, and certain indirect costs related
to developments are capitalized. Costs incurred in connection with the pursuit
of unsuccessful acquisitions or developments are expensed at the time the
pursuit is abandoned.
Depreciation is computed over the expected useful lives of depreciable
property on a straight-line basis. Real estate assets are depreciated
principally over the following useful lives:
<TABLE>
<S> <C>
Buildings and improvements... 20-40 years
Furnishings and other........ 2-10 years
</TABLE>
Make-Ready and Repairs and Maintenance
Make-ready (expenditures incurred in preparing a vacant multifamily unit for
the next tenant) and repairs and maintenance expenditures, other than
acquisition-related renovation costs identified during PTR's pre-acquisition
due diligence, are expensed as incurred. PTR generally expenses carpet and
appliance repairs and replacements after any planned acquisition-related
renovation expenditures for such items have been incurred.
Interest
During 1996, 1995 and 1994, the total interest paid in cash on all
outstanding debt, net of interest capitalized, was $23,631,000, $17,674,000 and
$11,949,000, respectively.
PTR capitalizes interest incurred during the construction period as part of
the cost of multifamily communities under development. Interest capitalized
during 1996, 1995 and 1994 aggregated $16,941,000, $11,741,000 and $6,029,000,
respectively.
61
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cost of Raising Capital
Costs incurred in connection with the issuance of equity securities are
deducted from shareholders' equity. Costs incurred in connection with the
issuance or renewal of debt are capitalized as other assets and amortized over
the term of the related loan or the renewal period. Amortization of loan costs
included in interest expense for 1996, 1995 and 1994 was $2,233,000, $1,543,000
and $1,903,000, respectively.
Interest Rate Contracts
From time to time, PTR utilizes derivative financial instruments as hedges in
anticipation of future debt offerings to manage well-defined interest rate
risk. Unrealized changes in the market value of interest rate contracts are
deferred until the hedged transaction is consummated and realized gains and
losses resulting from changes in the market value of these contracts are
deferred and amortized into interest expense over the life of the related debt
issuance.
Revenue and Gain Recognition
PTR leases its multifamily units under operating leases with terms of
generally less than one year. Rental income is recognized according to the
terms of the underlying leases which approximates the revenue which would be
recognized if spread evenly over the lease term.
Gains on sales of real estate are recorded when the recognition criteria set
forth by generally accepted accounting principles have been met.
Rental Expenses
Rental expenses shown on the accompanying Statement of Earnings include costs
of on-site personnel, utilities, repairs and maintenance, make-ready, property
insurance, marketing, landscaping, property management fees paid to
unaffiliated companies, and other on-site administrative costs.
Federal Income Taxes
PTR has made an election to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended. PTR believes it qualifies as a REIT and, accordingly,
no provisions have been made for federal income taxes in the accompanying
financial statements.
Per Share Data
Primary earnings per share is computed based on the weighted average number
of common shares of beneficial interest, par value $1.00 per share ("Common
Shares"), outstanding. Fully diluted earnings per Common Share is calculated
from the weighted average Common Shares outstanding plus the Common Shares that
would be outstanding assuming conversion of all outstanding cumulative
convertible Series A Preferred Shares of Beneficial Interest, par value $1.00
per share ("Series A Preferred Shares"), outstanding Trustee options and
certain warrants exercisable by third parties (Note 8). For purposes of the
fully diluted earnings per share calculation, dividends on the Series A
Preferred Shares are added back to net earnings attributable to Common Shares.
Primary earnings per share and fully diluted earnings per share were
approximately the same for each of the three years presented, although there
was reportable dilution for the third quarter of 1996. See Note 10.
Reclassifications
Certain of the 1995 and 1994 amounts have been reclassified to conform to the
1996 presentation.
62
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) HOMESTEAD TRANSACTION
On October 17, 1996, PTR, Security Capital Atlantic Incorporated
("ATLANTIC"), Security Capital Group Incorporated ("Security Capital Group")
and Homestead Village Incorporated ("Homestead") consummated a merger
agreement pursuant to which each of PTR, ATLANTIC and Security Capital Group
contributed, through a series of merger transactions, all of their respective
assets related to their Homestead Village(R) extended-stay lodging assets to
Homestead, a newly formed company. In connection with the transaction, PTR and
ATLANTIC entered into funding commitment agreements to finance the development
of certain Homestead properties.
PTR contributed 54 Homestead Village(R) properties (or the rights to acquire
such properties) ("Homestead Assets") to Homestead in exchange for 9,485,727
shares of Homestead common stock. Simultaneously, PTR received 6,363,789
warrants to acquire additional shares of Homestead common stock at a price of
$10.00 per share in exchange for entering into a funding commitment agreement.
In this agreement PTR agreed to provide up to $198.8 million in secured
financing for developments to Homestead in exchange for up to $221.3 million
in convertible mortgage notes ("Homestead Notes"), including those existing on
the properties at the transaction date. See Note 5 for information on the
Homestead Notes.
Upon full funding of the Homestead Notes and after giving effect to the
Homestead Distribution described below, PTR's conversion rights would
represent a 34.7% ownership interest in Homestead. This ownership interest
assumes no further equity offerings by Homestead, conversion of all Homestead
Notes by PTR and ATLANTIC and exercise of all outstanding warrants.
PTR's Homestead common stock and warrants to acquire additional common stock
were distributed on November 12, 1996 to holders of record of Common Shares on
October 29, 1996 (the "Homestead Distribution"). Each PTR shareholder received
0.125694 shares of Homestead common stock and 0.084326 warrants per PTR Common
Share plus cash for fractional shares and warrants.
As of October 17, 1996, the Homestead Assets owned by PTR constituted 7.1%
of PTR's total assets, and PTR's investment in its wholly owned Homestead
Village subsidiaries, including intercompany advances, constituted less than
1% of PTR's total assets. PTR's Homestead Village(R) operations accounted for
approximately 8.2% of PTR's total earnings from operations from January 1,
1996 to October 17, 1996.
The Homestead transaction had the following impact on PTR's balance sheet as
of October 17, 1996, after giving effect to the Homestead Distribution (in
thousands):
<TABLE>
<S> <C>
Real estate contributed, net.................................... $154,731
Other non-cash operating assets and liabilities contributed,
net............................................................ 3,001
Operating cash contributed...................................... 428
Deferred revenue (included in accrued expenses) relating to
PTR's funding commitment....................................... 14,700
--------
$172,860
========
Homestead Notes received (funded amount)........................ $ 75,946
Homestead common stock and warrants distributed to PTR common
shareholders (recorded as a reduction of additional paid-in
capital)....................................................... 96,914
--------
$172,860
========
</TABLE>
63
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) 1995 MERGER OF SECURITY CAPITAL PACIFIC INCORPORATED AND CONCURRENT
SUBSCRIPTION OFFERING
On March 23, 1995, PTR consummated a merger (the "Merger") of Security
Capital Pacific Incorporated ("PACIFIC"), a Maryland corporation, with and
into PTR. PACIFIC was a private multifamily REIT controlled by Security
Capital Group, PTR's principal shareholder. PACIFIC's portfolio consisted
primarily of 17 operating multifamily communities aggregating 5,579 units. In
the Merger, each outstanding share of PACIFIC common stock was converted into
the right to receive 0.611 Common Shares. As a result, 8,468,460 of PTR's
Common Shares valued at $138.7 million ($16.375 per share) were issued in the
Merger in exchange for all of the outstanding shares of PACIFIC common stock.
In addition, PTR assumed $51.9 million on PACIFIC's line of credit and $54.4
million of mortgage debt. The Merger has been accounted for as a purchase and,
accordingly, the results of operations of PACIFIC have been included in PTR's
financial statements from March 23, 1995.
The following summarized pro forma (unaudited) information assumes the
Merger occurred on January 1, 1994, and represents the combined historical
operating results of PTR and PACIFIC for the respective pro forma periods. No
material pro forma adjustments to revenue and expenses were required. The
weighted-average Common Shares outstanding have been adjusted to reflect the
Merger conversion rate (0.611 Common Shares for each share of PACIFIC common
stock). The pro forma financial information does not necessarily reflect the
results of operations that would have occurred had PACIFIC and PTR constituted
a single entity during such periods (in thousands, except per share amounts).
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Rental Income........................................... $271,091 $204,337
======== ========
Net earnings attributable to Common Shares.............. $ 64,152 $ 36,512
======== ========
Weighted-average Common Shares outstanding.............. 68,955 52,846
======== ========
Per Common Share amounts:
Net earnings attributable to Common Shares............ $ 0.93 $ 0.69
======== ========
</TABLE>
Concurrently with the consummation of the Merger, PTR completed a
subscription offering of 13.2 million Common Shares pursuant to which PTR
received net proceeds of $216.3 million. The subscription offering was
designed to allow shareholders of PTR to purchase Common Shares at the same
price at which PACIFIC shareholders acquired Common Shares in the Merger
($16.375 per Common Share). Security Capital Group purchased $50 million (3.1
million Common Shares at $16.375 per Common Share) in the subscription
offering pursuant to the oversubscription privilege.
64
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4) REAL ESTATE
Investments
Equity investments in real estate, at cost, were as follows (dollar amounts
in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995
----------------- -----------------
INVESTMENT UNITS INVESTMENT UNITS
---------- ------ ---------- ------
<S> <C> <C> <C> <C>
Multifamily:
Operating communities........... $1,861,561 42,702 $1,507,458 38,737
Communities under construction.. 186,710 5,479(1) 160,487 5,424(1)
Development communities in
planning:
Development communities owned.. 48,504 3,351(1) 19,921 2,047(1)
Development communities under
control....................... (2) 3,737(1) (2) 2,408(1)
---------- ------ ---------- ------
Total development
communities................. 48,504 7,088 19,921 4,455
---------- ------ ---------- ------
Land held for future
development.................... 30,043 -- 28,796 --
---------- ------ ---------- ------
Total multifamily............ 2,126,818 55,269 1,716,662 48,616
---------- ------ ---------- ------
Homestead Assets.................. -- 108,460
Other non-multifamily............. 26,545 30,744
---------- ----------
Total real estate............ $2,153,363 $1,855,866
========== ==========
</TABLE>
- --------
(1) Unit information is based on management's estimates and is unaudited.
(2) PTR's investment as of December 31, 1996 and 1995 for developments in
planning and under control was $1.6 million and $2.2 million,
respectively, and is reflected in the "other assets" caption of PTR's
balance sheets.
The change in investments in real estate, at cost, consisted of the
following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1................. $1,855,866 $1,296,288 $ 872,610
---------- ---------- ----------
Multifamily:
Acquisitions and renovations
expenditures........................ 463,935 385,356 270,024
Development expenditures, excluding
land
acquisitions........................ 187,377 117,980 111,184
Acquisition and improvement of land
held for current or future
development......................... 20,880 11,255 16,789
Recurring capital expenditures....... 7,992 5,119 3,746
Dispositions......................... (269,693) (6,166) (11,902)
---------- ---------- ----------
Net multifamily activity subtotal.... 410,491 513,544 389,841
---------- ---------- ----------
Non-multifamily:
Homestead development expenditures,
including land acquisitions......... 54,883 48,247 35,943
Contribution of Homestead Assets
(Note 2)............................ (161,370) -- --
Non-multifamily dispositions......... (6,527) (2,235) (331)
Provisions for possible losses....... -- (220) (1,600)
Other................................ 20 242 (175)
---------- ---------- ----------
Balance at December 31............... $2,153,363 $1,855,866 $1,296,288
========== ========== ==========
</TABLE>
65
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At January 29, 1997, PTR had contingent contracts or letters of intent,
subject to PTR's final due diligence, to acquire land for the near term
development of an estimated 3,507 multifamily units with an aggregate
estimated development cost of $264.5 million. At the same date, PTR also had
contingent contracts or letters of intent, subject to final due diligence, for
the acquisition of 964 additional operating multifamily units with a total
expected investment of $77.2 million, including planned renovations.
At January 29, 1997, PTR had unfunded development commitments for
developments under construction of $158.8 million.
Pre-Sale Agreements and Development Subsidiary
To enhance its flexibility in developing and acquiring multifamily
communities which meet PTR's investment criteria, PTR has and will enter into
presale agreements with third-party owner/developers to acquire communities
developed by such owner/developers. PTR has and will fund such developments
through mortgage loans on the communities. For financial reporting purposes,
these transactions are recorded as real estate developments rather than
mortgage loans due to PTR's commitment to acquire these properties upon
completion.
In addition, to provide greater flexibility for the use of land acquired for
development and to facilitate disposition of excess parcels, PTR has and will
make mortgage loans to PTR Development Services Incorporated ("PTR Development
Services") to purchase land for development. PTR may also fund developments of
multifamily communities by PTR Development Services where the particular
community or submarket does not meet PTR's objectives for long-term ownership
but presents an attractive investment opportunity. PTR owns all of the
preferred stock of PTR Development Services, which entitles PTR to
substantially all of the net operating cash flow (95%) of PTR Development
Services. An unaffiliated trust owns all of the common stock of PTR
Development Services. The common stock is entitled to receive the remaining 5%
of net operating cash flow.
As of December 31, 1996, the outstanding balance of development and mortgage
loans made by PTR to third-party owner/developers and PTR Development Services
aggregated $127.3 million and $18.8 million, respectively. The activities of
third-party owner/developers and PTR Development Services are consolidated
with PTR's activities and all intercompany transactions have been eliminated
in consolidation.
Gains and Provision for Loss on Real Estate and Investments
Each year, REIT Management formulates operating and capital plans based on
an ongoing active review of PTR's portfolio. Based in part upon the market
research provided by Security Capital Investment Research Incorporated and in
an effort to optimize its portfolio composition, PTR may from time to time
seek to dispose of assets that in management's view no longer meet PTR's long-
term investment objectives. The proceeds from these selected dispositions will
be redeployed, typically through tax-deferred exchanges, into assets that in
PTR's view offer better long-term cash flow growth prospects. As a result of
this asset optimization strategy, PTR disposed of 22 multifamily communities
and one industrial building during 1996, representing aggregate net proceeds
of $291.1 million, and disposed of one multifamily property in the fourth
quarter of 1995, representing net proceeds of $8.8 million. For federal income
tax purposes, the majority of the dispositions were structured as tax-deferred
exchanges which deferred gain recognition. For financial reporting purposes,
however, the transactions qualified for profit recognition and aggregate gains
of $37.5 million and $2.6 million were recorded for 1996 and 1995,
respectively.
Statement of Financial Accounting Standards No. 121, Accounting For The
Impairment Of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of
("SFAS No. 121"), adopted by PTR effective January 1, 1996, establishes
accounting standards for the review of long-lived assets to be held and used
for impairment
66
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
whenever the carrying amount of an asset may not be recoverable. SFAS No. 121
also requires that certain long-lived assets to be disposed of be reported at
the lower of carrying amount or fair value less cost to sell, PTR did not
recognize any losses on the date it adopted SFAS No. 121.
As part of PTR's asset optimization strategy, 19 communities and two non-
multifamily properties were held for disposition as of December 31, 1996. The
aggregate carrying value of properties held for disposition was $178.9 million
at December 31, 1996. Each property's carrying value is less than or equal to
its estimated fair market value, net of estimated costs to sell. Such
properties are not depreciated during the period for which they are determined
to be held for disposition. Subject to normal closing risks, PTR expects to
complete the disposition of all properties during 1997 and redeploy the net
proceeds from such dispositions through tax-deferred exchanges into the
acquisition of multifamily communities. The earnings from operations for
properties held for dispositions which are included in PTR's earnings from
operations for 1996, 1995 and 1994 were $15.8 million, $15.3 million and $10.5
million, respectively.
PTR's other real estate investments are periodically evaluated for
impairment and provisions for possible losses are made if required. As a
result of such evaluation, PTR recorded a provision for possible loss of
$220,000 and $1,600,000 during 1995 and 1994, respectively, relating to a non-
multifamily investment which was subsequently sold in October 1995. Also,
during 1995 it was determined that PTR could potentially be liable for certain
maintenance items under the terms of a 1993 master lease agreement on a non-
multifamily property which resulted in the recording of an estimated provision
for loss of $200,000. The recording of a provision for loss has no impact on
cash flow from operating activities. As of December 31, 1996, PTR's real
estate investments were carried at depreciated cost, which is not in excess of
estimated fair market value.
(5) MORTGAGE NOTES RECEIVABLE
Homestead Convertible Mortgage Notes
In connection with the Homestead transaction described in Note 2 and
pursuant to fundings which have occurred under the funding commitment
agreement, PTR holds Homestead Notes. The Homestead Notes were created under a
master facility providing for aggregate fundings of up to $198.8 million in
exchange for Homestead Notes with a face amount of up to $221.3 million. Under
the terms of the funding commitment agreement, PTR receives approximately
$1.00 in principal amount of Homestead Notes for every $.90 funded (i.e., the
Homestead Notes are issued at a discount). The discount is amortized into
interest income over the term of the Homestead Notes using a method which
approximates the effective interest method. Maximum fundings are established
for each individual development project and specific liens are recorded to
secure payment. The Homestead Notes are cross-collateralized, which enables
PTR to foreclose or take possession of any one or more of the underlying
properties upon the occurrence of an event of default. The Homestead Notes
require semi-annual interest-only payments at 9% per annum of the face amount
of the Homestead Notes outstanding, are callable at the option of Homestead
after 5 years and mature on October 31, 2006.
The Homestead Notes are convertible into Homestead common stock after March
31, 1997 on the basis of one share of Homestead common stock for every $11.50
of principal amount outstanding, subject to adjustment. The initial value
attributed to the conversion feature has been recorded as an additional
component of the Homestead Notes' balance and the corresponding discount is
being amortized into interest income over the term of the Homestead Notes
using a method which approximates the effective interest method. The
difference between the fair value of the Homestead Notes (assuming
conversion), based upon the trading price of Homestead's common stock on the
American Stock Exchange at December 31, 1996, ($18.00) and the amortized cost
of the Homestead Notes is reflected as an additional component of the
Homestead Notes' balance and as an unrealized holding gain in Shareholders'
Equity.
67
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As described in Note 2, PTR also received Homestead warrants in exchange for
entering into the funding commitment agreement. The warrants were distributed
to PTR shareholders with the Homestead common stock. The value associated with
the receipt of the Homestead warrants has been recorded as deferred revenue
which is included in accrued expenses and other liabilities in the accompanying
1996 Balance Sheet and is being amortized into interest income using a method
which approximates the effective interest method over the term of the Homestead
Notes.
The effective interest rate on the Homestead Notes as a percentage of the
"funded" balance, including amortization of discount and deferred revenue, is
approximately 12.4% per annum (10.7% excluding conversion feature and warrant-
related amortization).
Following is a reconciliation of the Homestead Notes' components described
above to the amount reflected in the accompanying 1996 Balance Sheet (in
thousands).
<TABLE>
<S> <C>
Face amount of Homestead Notes.................................. $112,639
Original issue discount......................................... (11,451)
--------
Amount funded................................................... 101,188
Amortization of original issue discount......................... 121
Conversion feature--initial value............................... 7,933
Unamortized discount on conversion feature...................... (7,861)
Fair value adjustment........................................... 74,923
--------
Carrying value at December 31, 1996............................. $176,304
========
</TABLE>
As of December 31, 1996, PTR had funded $101.2 million of its funding
commitment. This leaves a remaining commitment under the funding commitment
agreement of approximately $97.6 million, which will be provided to Homestead
to fund developments as needed on development properties contributed by PTR.
Other Mortgage Notes Receivable
The change in investments in other mortgage notes receivable which primarily
originated in connection with PTR's sale of non-multifamily communities
consisted of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Balances at January 1......................... $ 15,844 $22,597 $22,624
Notes originated.............................. -- 1,538 162
Reduction of principal........................ (2,319) (8,291) (189)
-------- ------- -------
Balances at December 31....................... $ 13,525 $15,844 $22,597
======== ======= =======
</TABLE>
Interest rates on mortgage notes receivable range from 7.00% to 10.00% with a
weighted-average rate of 8.4%. Maturity dates on mortgage notes receivable
range from 1998 to 2008.
68
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) BORROWINGS
Credit Facilities
PTR has a $350 million unsecured revolving line of credit with Texas
Commerce Bank, National Association ("TCB"), as agent for a group of financial
institutions (collectively, the "Lenders"). The line matures August 1998 and
may be extended annually for an additional year with the approval of the
Lenders. The line of credit bears interest at the greater of prime (8.25% at
December 31, 1996) or the federal funds rate plus 0.50% or at PTR's option,
LIBOR (5.50% at December 31, 1996) plus 1.125% (6.625% at December 31, 1996).
The spread over LIBOR can vary from LIBOR plus 0.75% to LIBOR plus 1.50% based
upon the rating of PTR's senior unsecured debt. Additionally, there is a
commitment fee on the average unfunded line of credit balance. The commitment
fee was $396,000, $502,000 and $224,000 for 1996, 1995 and 1994, respectively.
A summary of PTR's line of credit borrowings is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Total line of credit.......................... $350,000 $350,000 $275,000
Borrowings outstanding at December 31......... 99,750 129,000 102,000
Weighted-average daily borrowings............. 112,248 51,858 59,890
Maximum borrowings outstanding at any month
end.......................................... 188,750 138,000 124,000
Weighted-average daily nominal interest rate.. 7.3% 8.0% 7.0%
Weighted-average daily effective interest
rate......................................... 8.8% 11.1% 10.6%
Weighted-average nominal interest rate at
December 31.................................. 6.6% 7.3% 7.8%
</TABLE>
On September 9, 1996, PTR entered into a short-term, unsecured, borrowing
agreement with TCB. The loan matures September 9, 1997 and bears interest at
an overnight rate, which has ranged from 5.80% to 7.50%. At December 31, 1996
there was $10.5 million of borrowings outstanding under this agreement.
69
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Long-Term Debt
As of December 31, 1996, PTR has issued a total of $580 million of long-term
unsecured senior notes ("Notes"), which bear interest at specified rates per
annum, payable semi-annually. Funds from such issuances were used primarily
for acquisition, development and renovation of multifamily communities and to
repay revolving credit balances incurred for such purposes. The following
table summarizes the Notes:
<TABLE>
<CAPTION>
ISSUANCE AVERAGE EFFECTIVE
AND INTEREST RATE,
OUTSTANDING INCLUDING OFFERING ORIGINAL PRINCIPAL
PRINCIPAL COUPON DISCOUNTS AND MATURITY LIFE PAYMENT
DATE OF ISSUANCE AMOUNT RATE ISSUANCE COSTS DATE (YEARS) REQUIREMENT
- ---------------- ----------- ------ ------------------ -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
10/21/96 $ 15 million 6.600% 7.030% 10/15/99 3.00 (1)
10/21/96 20 million 6.950 7.400 10/15/02 6.00 (1)
10/21/96 20 million 7.150 7.500 10/15/03 7.00 (1)
10/21/96 20 million 7.250 7.630 10/15/04 8.00 (1)
10/21/96 20 million 7.300 7.640 10/15/05 9.00 (1)
10/21/96 20 million 7.375 7.685 10/15/06 10.00 (1)
10/21/96 15 million 6.500 6.750 10/15/26 30.00 (1)
------------ ------ ------ -----
Subtotal/Average $130 million 7.350% 7.500% 6.85
------------ ------ ------ -----
8/6/96 $ 20 million 7.550% 7.680% 8/1/08 12.00 (1)
8/6/96 20 million 7.625 7.730 8/1/09 13.00 (1)
8/6/96 20 million 7.650 7.770 8/1/10 14.00 (1)
8/6/96 20 million 8.100 8.210 8/1/15 19.00 (1)
8/6/96 20 million 8.150 8.250 8/1/16 20.00 (1)
------------ ------ ------ -----
Subtotal/Average $100 million 7.840% 7.950% 15.60
------------ ------ ------ -----
2/23/96 $ 50 million 7.150% 7.300% 2/15/10 10.50 (2)
2/23/96 100 million 7.900 8.030 2/15/16 18.00 (3)
------------ ------ ------ -----
Subtotal/Average $150 million 7.710% 7.840% 15.50
------------ ------ ------ -----
2/8/94 $100 million 6.875% 6.978% 2/15/08 10.50 (4)
2/8/94 100 million 7.500 7.653 2/15/14 18.00 (5)
------------ ------ ------ -----
Total/Average $200 million 7.240% 7.370% 14.25
------------ ------ ------ -----
Grand
Total/Average $580 million 7.500% 7.620% 12.03
============ ====== ====== =====
</TABLE>
- --------
(1) Entire principal amount due at maturity.
(2) These Notes require aggregate annual principal payments of $6.25 million
commencing in 2003.
(3) These Notes require aggregate annual principal payments of $10 million in
2011, $12.5 million in 2012, $15 million in 2013, $17.5 million in 2014,
$20 million in 2015 and $25 million in 2016.
(4) These Notes require annual principal payments of $12.5 million commencing
in 2001.
(5) These Notes require aggregate annual principal payments of $10 million in
2009, $12.5 million in 2010, $15 million in 2011, $17.5 million in 2012,
$20 million in 2013, and $25 million in 2014.
The Notes, other than the $15 million of 6.500% Notes issued October 21,
1996 and due 2026 (the "6.500% Notes"), are redeemable any time at the option
of PTR, in whole or in part, at a redemption price equal to the sum of the
principal amount of the Notes being redeemed plus accrued interest thereon to
the redemption date plus an adjustment, if any, based on the yield to maturity
relating to market yields available at redemption. The 6.500% Notes may be
repaid on October 15, 1999 at the option of the holders at their full
principal amount together with accrued interest. If the holders do not
exercise their right to require PTR to repay the 6.500% Notes on October 15,
1999, they may be repaid at the option of PTR, in whole or in part, at a
redemption price equal to the sum of the principal amount of the Notes being
redeemed plus accrued interest thereon to the redemption date plus an
adjustment, if any, based on the yield to maturity relating to market yields
available at redemption. The Notes are governed by the terms and provisions of
an indenture agreement.
70
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Mortgages Payable
Mortgages payable at December 31, 1996 consisted of the following (dollar
amounts in thousands):
<TABLE>
<CAPTION>
BALLOON PRINCIPAL PRINCIPAL
EFFECTIVE SCHEDULED PERIODIC PAYMENT BALANCE AT BALANCE AT
INTEREST MATURITY PAYMENT DUE AT DECEMBER 31, DECEMBER 31,
COMMUNITY RATE(1) DATE TERMS MATURITY 1996 1995
--------- --------- --------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CONVENTIONAL FIXED RATE:
Knight's Castle....... N/A 10/01/96 (7) N/A $ -- $ 7,609
Tigua Village......... 9.90% 05/01/97 (2) 677 683 694
Chasewood............. N/A 06/01/97 (7) N/A -- 9,485
Presidio at South
Mountain............. N/A 10/01/97 (7) N/A -- 14,593
Silvercliff........... 7.66 11/10/97 (2) 7,304 7,382 7,469
Braeswood Park........ 7.51 01/01/98 (2) 6,635 6,761 6,889
Seahawk............... 8.05 01/10/98 (2) 5,350 5,427 5,505
La Tierra at the
Lakes................ 7.89 12/01/98 (2) 25,105 26,019 26,444
Windsail.............. 8.88 02/01/99 (2) 4,675 4,798 4,843
Clubhouse............. 8.75 12/01/99 (2) 5,501 5,831 --
Greenpointe........... 8.50 03/01/00 (3) 3,410 3,638 3,696
Mountain Shadow....... 8.50 03/01/00 (3) 3,130 3,340 3,394
Sunterra.............. 8.25 03/01/00 (3) 7,612 8,138 8,274
Brompton Court........ 8.39 09/01/00 (2) 13,340 14,318 14,543
Spring Park........... N/A 09/27/00 (7) N/A -- 4,293
Park Place I.......... N/A 11/01/00 (7) N/A -- 3,515
Park Place II......... N/A 11/01/00 (7) N/A -- 3,517
Treat Commons......... 7.50 09/14/01 (2) 6,578 7,192 7,296
El Dorado............. 7.59 10/01/02 (2) 15,527 16,718 --
Ashton Place.......... 7.75 10/01/23 (3) N/A 47,342 --
Double Tree II........ 8.25 05/01/33 (3) N/A 4,750 4,770
-------- --------
162,337 136,829
TAX-EXEMPT FIXED
RATE(4):
Cherry Creek.......... 8.11 11/01/01 (2) 2,630 4,000 4,210
Fox Creek............. 8.71 05/01/97 (2) 4,246 4,236 --
Summertree............ 6.65 12/15/18 (2) 4,435 4,435 --
Redwood Shores........ 5.53 10/01/08 (2) 16,820 25,220 --
-------- --------
37,891 4,210
TAX-EXEMPT FLOATING
RATE(4):
Apple Creek........... 6.48 09/01/07 (5) 11,100 11,100 11,100
COMBINED(6):
Las Flores............ 8.42 06/01/24 (3) N/A 5,860 5,915
---- -------- --------
Total/Average
Mortgage Debt...... 7.60% $217,188 $158,054
==== ======== ========
</TABLE>
- --------
(1) Represents the effective interest rate, including loan cost amortization
and other ongoing fees and expenses, as of December 31, 1996.
(2) Amortizing monthly with a balloon payment due at maturity.
(3) Fully amortizing.
(4) Tax-exempt rates include credit enhancement and other bond-related costs,
where applicable.
(5) Monthly payments are interest only until maturity and the interest rate is
adjusted weekly by the remarketing agent. Weighted-average daily interest
rate was 5.97% for 1996. Mortgage is secured by a letter of credit of
$11.4 million. The fee for this letter of credit is 5.05% per annum of the
outstanding mortgage payable balance.
(6) In 1990, the Las Flores apartments were refinanced pursuant to multifamily
bonds aggregating $6.2 million. The bonds consist of $4.5 million Series A
tax exempt fixed rate bonds and $1.7 million Series B taxable fixed rate
bonds. The bonds are guaranteed by the GNMA mortgage-backed securities
program.
(7) Mortgage was prepaid during 1996.
71
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The changes in mortgages payable during the past three years consisted of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Balances at January 1........................ $158,054 $ 93,624 $48,872
Notes originated or assumed................. 104,176 66,481 56,624
Principal payments and prepayments.......... (45,042) (2,051) (11,872)
-------- -------- -------
Balances at December 31...................... $217,188 $158,054 $93,624
======== ======== =======
</TABLE>
Scheduled Debt Maturities
Approximate principal payments due during each of the years in the 20-year
period ending December 31, 2016 are as follows (in thousands):
<TABLE>
<CAPTION>
SHORT TERM
UNSECURED UNSECURED BORROWING
MORTGAGES LONG-TERM DEBT LINE OF CREDIT AGREEMENT TOTAL
--------- -------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C>
1997......... $ 15,266 $ -- $ -- $10,450 $ 25,716
1998......... 40,012 -- 99,750 -- 139,762
1999......... 12,790 30,000 -- -- 42,790
2000......... 29,799 -- -- -- 29,799
2001......... 11,280 12,500 -- -- 23,780
2002......... 17,348 32,500 -- -- 49,848
2003......... 1,752 38,750 -- -- 40,502
2004......... 1,903 38,750 -- -- 40,653
2005......... 2,066 38,750 -- -- 40,816
2006......... 2,241 38,750 -- -- 40,991
2007......... 13,528 18,750 -- -- 32,278
2008......... 18,863 38,750 -- -- 57,613
2009......... 1,603 36,250 -- -- 37,853
2010......... 1,732 38,750 -- -- 40,482
2011......... 1,871 25,000 -- -- 26,871
2012......... 2,022 30,000 -- -- 32,022
2013......... 2,185 35,000 -- -- 37,185
2014......... 2,361 42,500 -- -- 44,861
2015......... 2,551 40,000 -- -- 42,551
2016......... 2,756 45,000 -- -- 47,756
Thereafter... 33,259 -- -- -- 33,259
-------- -------- ------- ------- --------
Total:....... $217,188 $580,000 $99,750 $10,450 $907,388
======== ======== ======= ======= ========
</TABLE>
Covenants
PTR's debt instruments generally contain certain covenants common to the
type of facility or borrowing, including financial covenants establishing
minimum debt service coverage ratios and maximum loan to value ratios. PTR was
in compliance with all covenants pertaining to its debt instruments at
December 31, 1996.
(7) DISTRIBUTIONS
PTR's distribution strategy is to distribute what it believes is a
conservative percentage of cash flow while maintaining its status as a REIT
which generally requires annual distributions of at least 95% of PTR's taxable
income.
72
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PTR announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 10, 1996 Board meeting, the Board announced an increase in the annual
distribution level from $1.24 to $1.30 per Common Share and declared the first
quarter 1997 distribution of $0.325 per Common Share. The first quarter
distribution was paid on February 20, 1997 to shareholders of record on
February 7, 1997. The payment of distributions is subject to the discretion of
the Board and is dependent upon the financial condition and operating results
of PTR.
Pursuant to the terms of the Preferred Shares, PTR is restricted from
declaring or paying any distribution with respect to its Common Shares unless
all cumulative distributions with respect to the Preferred Shares have been
paid and sufficient funds have been set aside for Preferred Share distributions
that have been declared.
PTR made total cash distributions of $1.24 per Common Share in 1996, $1.15
per Common Share in 1995 and $1.00 per Common Share in 1994. In addition, on
November 12, 1996, PTR distributed 0.125694 shares of Homestead common stock
and warrants to purchase 0.084326 shares of Homestead common stock per Common
Share in the Homestead Distribution to each holder of record of Common Shares
on October 29, 1996.
For federal income tax purposes, the following summarizes the taxability of
cash distributions paid on the Common Shares in 1995 and 1994 and the estimated
taxability for 1996:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Per Common Share
Ordinary income....................................... $0.61 $0.92 $0.68
Capital gains......................................... 0.11 -- --
Return of capital..................................... 0.52 0.23 0.32
----- ----- -----
Total............................................... $1.24 $1.15 $1.00
===== ===== =====
</TABLE>
The Homestead securities distributed by PTR to each holder of Common Shares
in the Homestead Distribution were valued at $2.16 per PTR Common Share for
federal income tax purposes, of which $1.06 was taxable as ordinary income,
$0.19 was taxable as a capital gain and $0.91 was treated as a return of
capital.
On July 21, 1994, in addition to the normal Common Share distributions paid,
PTR redeemed the shareholder purchase rights issued pursuant to the Rights
Agreement dated as of February 23, 1990, as amended. Pursuant to the
redemption, each holder of record at the close of business on July 21, 1994 was
entitled to receive $0.01 per shareholder purchase right. The redemption price
was paid on August 12, 1994 and was taxable as ordinary income for federal
income tax purposes.
73
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
For federal income tax purposes, the following summaries reflect the
taxability of dividends paid on Series A Preferred Shares and Series B
Cumulative Redeemable Preferred Shares ("Series B Preferred Shares"),
respectively, for periods prior to 1996 and the estimated taxability for 1996.
The Series A and Series B Preferred Shares are discussed in Note 8.
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Per Series A Preferred Share:
Ordinary income...................................... $1.47 $1.75 $1.75
Capital gains........................................ 0.28 -- --
Return of capital.................................... -- -- --
----- ----- -----
Total.............................................. $1.75 $1.75 $1.75
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
DATE OF ISSUANCE
1996 TO 12/31/95
----- ----------------
<S> <C> <C>
Per Series B Preferred Share:
Ordinary income.................................. $1.89 $1.3625
Capital gains.................................... 0.36 --
----- -------
Total.......................................... $2.25 $1.3625
===== =======
</TABLE>
Due to the increase in the conversion ratio (Note 8) resulting from the
Homestead Distribution to holders of Common Shares, holders of Series A
Preferred Shares were deemed to have received a distribution of $2.43 on
November 12, 1996 for federal income tax purposes. Of this amount, $1.19 was
taxable as ordinary income, $0.22 was taxable as a capital gain and $1.02 was
treated as a return of capital.
PTR's tax return for the year ended December 31, 1996 has not been filed, and
the taxability information for 1996 is based upon the best available data.
PTR's tax returns for prior years have not been examined by the Internal
Revenue Service and, therefore, the taxability of the dividends is subject to
change.
(8) SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
At December 31, 1996, 150,000,000 shares of beneficial interest, par value
$1.00 per share, were authorized. The Board is authorized to issue, from the
authorized but unissued shares of PTR, preferred shares in series and to
establish from time to time the number of preferred shares to be included in
such series and to fix the designation and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms and conditions of redemption of the shares of each
series.
Series A Preferred Shares
The Series A Preferred Shares issued in November 1993 have a liquidation
preference of $25.00 per share for an aggregate liquidation preference at
December 31, 1996 of $162.4 million plus any accrued but unpaid distributions.
Holders of the Series A Preferred Shares are entitled only to limited voting
rights under certain conditions. During 1996, 2,705,000 of PTR's Series A
Preferred Shares were converted, at the option of the holders, into 3,294,000
Common Shares (an implied conversion ratio of 1.2178 Common Shares for each
Series A Preferred Share, which is a combination of the original conversion
ratio of 1.2162 and the adjusted ratio discussed below).
74
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As a result of the Homestead Distribution, PTR adjusted the conversion price
of its Series A Preferred Shares, effective as of the opening of business on
October 30, 1996, from $20.556 to $18.561 per Common Share (a conversion ratio
of 1.3469 Common Shares for each Series A Preferred Share), as required by the
Articles Supplementary governing the Series A Preferred Shares. Distributions
on the Series A Preferred Shares are cumulative in an amount per share equal to
the greater of $1.75 per annum or the annualized quarterly PTR distribution
rate on the Common Shares into which the Series A Preferred Shares are
convertible. The Series A Preferred Share dividends are payable quarterly in
arrears on the last day of March, June, September and December of each year.
Based on the projected 1997 distribution level of $1.30 per Common Share, the
projected 1997 dividend on the Series A Preferred Shares is $1.751 per share.
The Series A Preferred Shares are redeemable at the option of PTR after
November 30, 2003.
Series B Preferred Shares
The Series B Preferred Shares issued in May 1995 have a liquidation
preference of $25.00 per share for an aggregate liquidation preference of
$105.0 million plus any accrued but unpaid distributions. The net proceeds
(after underwriting commissions and other offering costs) to PTR from the sale
of the Series B Preferred Shares were $101.4 million. On and after May 24,
2000, the Series B Preferred Shares may be redeemed for cash at the option of
PTR, in whole or in part, at a redemption price of $25.00 per share plus
accrued and unpaid distributions, if any, to the redemption date. The
redemption price (other than the portion thereof consisting of accrued and
unpaid distributions) is payable solely out of the sale proceeds of other
capital shares of PTR, which may include shares of other series of preferred
shares. The holders of the Series B Preferred Shares have no preemptive rights
with respect to any shares of the capital securities of PTR or any other
securities of PTR convertible into or carrying rights or options to purchase
any such shares. The Series B Preferred Shares have no stated maturity and are
not subject to any sinking fund or other obligation of PTR to redeem or retire
the Series B Preferred Shares and are not convertible into any other securities
of PTR. In addition, holders of the Series B Preferred Shares are entitled to
receive, when and as declared by the Board, out of funds legally available for
the payment of distributions, cumulative preferential cash distributions at the
rate of 9% of the liquidation preference per annum (equivalent to $2.25 per
share). Such distributions are cumulative from the date of original issue and
are payable quarterly in arrears on the last day of each March, June, September
and December.
Series A Preferred Shares and Series B Preferred Shares are collectively
referred to as "Preferred Shares." The net proceeds from the sale of Preferred
Shares were used primarily for the acquisition, development and renovation of
multifamily communities, and to repay revolving credit balances incurred for
such purposes.
Both series of Preferred Shares rank on a parity as to distributions and
liquidation proceeds.
All dividends due and payable on Preferred Shares have been accrued and paid
as of the end of each fiscal year and, accordingly, are reflected in the
accompanying financial statements.
Option Plan
In January 1987, PTR adopted its Share Option Plan for Outside Trustees (the
"1987 Plan"). There are 200,000 Common Shares reserved for issuance upon
exercise of options which could have been granted to independent Trustees under
the 1987 Plan. All options granted are for a term of five years and are
exercisable in whole or in part. The exercise price of the options granted may
not be less than the fair market value on the date of grant. At December 31,
1996, there were 32,000 options for Common Shares outstanding and exercisable
under the 1987 Plan at exercise prices ranging from $10.625 to $21.50 per
Common Share. No further options may be granted under the 1987 Plan.
75
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Outstanding Warrants
As a result of the Merger discussed in Note 3, warrants to acquire 140,530
Common Shares at an exercise price of $14.21 per share were outstanding as of
December 31, 1996. These warrants are subject to adjustment to prevent
dilution and expire on November 8, 1999.
Ownership Restrictions and Significant Shareholder
PTR's Restated Declaration of Trust and the Articles Supplementary governing
the Preferred Shares restrict beneficial ownership (or ownership generally
attributed to a person under the REIT tax rules) of PTR's outstanding shares
by a single person, or persons acting as a group, to 9.8% of the Common Shares
and 25% of each series of Preferred Shares. The purpose of these provisions
are to assist in protecting and preserving PTR's REIT status and to protect
the interests of shareholders in takeover transactions by preventing the
acquisition of a substantial block of shares unless the acquiror makes a cash
tender offer for all outstanding shares. For PTR to qualify as a REIT under
the Internal Revenue Code of 1986, as amended, not more than 50% in value of
its outstanding capital shares may be owned by five or fewer individuals at
any time during the last half of PTR's taxable year. The provision permits
five persons to acquire up to a maximum of 9.8% each of the Common Shares, or
an aggregate of 49% of the outstanding Common Shares, and thus assists the
Trustees in protecting and preserving PTR's REIT status for tax purposes.
Common Shares owned by a person or group of persons in excess of the 9.8%
limit are subject to redemption by PTR. The provision does not apply where a
majority of the Board, in its sole and absolute discretion, waives such limit
after determining that the eligibility of PTR to qualify as a REIT for federal
income tax purposes will not be jeopardized or the disqualification of PTR as
a REIT is advantageous to the shareholders.
The Board has permitted Security Capital Group, the owner of the REIT
Manager (see Note 9), to acquire up to 49% of PTR's fully converted Common
Shares. Security Capital Group's ownership of Common Shares is attributed for
tax purposes to its shareholders. Security Capital Group owned 36.3% of PTR's
total outstanding Common Shares at December 31, 1996. Pursuant to an agreement
between Security Capital Group and PTR, Security Capital Group has agreed to
acquire no more than 49% of the fully converted Common Shares except pursuant
to an all-cash tender offer for all Common Shares held open for 90 days.
Security Capital Group would have no limitation on making a tender offer if an
unrelated third party commences such a tender offer.
Purchase Rights
In 1994, the Board authorized the distribution of one preferred share
purchase right (a "Purchase Right") for each Common Share outstanding at the
close of business on July 21, 1994. Holders of additional Common Shares issued
after July 21, 1994 and prior to the expiration of the Purchase Rights on July
21, 2004 will be entitled to one Purchase Right for each additional Common
Share.
Each Purchase Right entitles the holder under certain circumstances to
purchase from PTR one one-hundredth of a share of a series of Junior
Participating Preferred Shares, par value $1.00 per share (the "Participating
Preferred Shares"), at a price of $60.00 per one-hundredth of a Participating
Preferred Share, subject to adjustment. Purchase Rights are exercisable when a
person or group of persons acquires beneficial ownership of 20% or more of the
fully converted Common Shares (49% in the case of Security Capital Group and
certain defined affiliates), commences or announces a tender offer or exchange
offer which would result in the beneficial ownership by a person or group of
persons of 25% or more of the outstanding Common Shares (49% in the case of
Security Capital Group and certain defined affiliates) or files or announces
their intention to file with any regulatory authority an application seeking
approval of any transaction which would result in the beneficial ownership by
a person of 25% or more of the outstanding Common Shares (49% in the case of
76
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Security Capital Group and certain defined affiliates). Under certain
circumstances, each Purchase Right entitles the holder to purchase, at the
Purchase Right's then current exercise price, a number of Common Shares having
a market value of twice the Purchase Right's exercise price. The acquisition
of PTR pursuant to certain mergers or other business transactions would
entitle each holder to purchase, at the Purchase Right's then current exercise
price, a number of the acquiring company's common shares having a market value
at that time equal to twice the Purchase Right's exercise price. The Purchase
Rights will expire in July 2004 and are subject to redemption in whole, but
not in part, at a price of $0.01 per Purchase Right payable in cash, shares of
PTR or any other form of consideration determined by the Board.
Shelf Registration
On September 27, 1996, PTR filed a $300 million shelf registration statement
with the Securities and Exchange Commission. These securities can be issued in
the form of unsecured debt and preferred shares of beneficial interest on an
as-needed basis, subject to PTR's ability to effect an offering on
satisfactory terms. As of December 31, 1996, $170 million in securities were
available to be issued under this shelf registration.
(9) REIT MANAGEMENT AND PROPERTY MANAGEMENT AGREEMENTS
Effective March 1, 1991, PTR entered into a REIT management agreement (the
"REIT Management Agreement") with Security Capital Pacific Incorporated (the
"REIT Manager"), pursuant to which the REIT Manager assumed day-to-day
management of PTR. All officers of PTR are employees of the REIT Manager and
PTR currently has no employees. The REIT Manager provides both strategic and
day-to-day management of PTR, including research, investment analysis,
acquisition, development, dispositions, property management, capital markets,
legal, accounting and other administrative services. The REIT Manager is a
wholly owned subsidiary of Security Capital Group (see Note 8).
The REIT Management Agreement requires PTR to pay a base annual fee of
$855,000 plus 16% of cash flow as defined in the REIT Management Agreement in
excess of $4,837,000, payable monthly. In the REIT Management Agreement, cash
flow is calculated by reference to PTR's cash flow from operations plus (i)
fees paid to the REIT Manager, (ii) extraordinary expenses incurred at the
request of the independent Trustees of PTR and (iii) 33% of any interest paid
by PTR on convertible subordinated debentures (of which there has been none
since inception of the REIT Management Agreement); and after deducting (i)
regularly scheduled principal payments (excluding prepayments or balloon
payments) for debt with commercially reasonable amortization schedules, (ii)
actual or assumed principal and interest payments on long-term debt, (iii)
interest income received in connection with the Homestead Notes resulting from
the Homestead transaction discussed in Notes 2 and 5 and (iv) distributions
actually paid with respect to any nonconvertible preferred shares of
beneficial interest of PTR. The REIT Management Agreement provides that the
long-term unsecured debt described in Note 6 is treated as if it had regularly
scheduled principal and interest payments similar to a 20-year, level monthly
payment, fully amortizing mortgage, and the assumed principal and interest
payments are deducted from cash flow in determining the fee. Cash flow does
not include dividend and interest income from PTR Development Services,
realized gains or losses from dispositions of investments or income from cash
equivalent investments. The REIT Manager also receives a fee of 0.25% per year
on the average daily balance of cash equivalent investments.
PTR is obligated to reimburse the REIT Manager for certain expenses incurred
by the REIT Manager on behalf of PTR relating to PTR's operations, consisting
primarily of external professional fees, offering costs and travel expenses.
The REIT Management Agreement is renewable by PTR annually, subject to a
determination by the independent Trustees (who receive performance benchmark
information verified by an independent third party)
77
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
that the REIT Manager's performance has been satisfactory and that the
compensation payable to the REIT Manager is fair. Each of PTR and the REIT
Manager may terminate the REIT Management Agreement on 60 days' notice.
SCG Realty Services Incorporated ("SCG Realty Services"), a subsidiary of
Security Capital Group, has managed and currently manages a substantial
majority of PTR's operating multifamily communities (91.3% as of January 29,
1997, based on total expected investment). Homestead Realty Services
Incorporated ("Homestead Realty Services"), a subsidiary of Security Capital
Group, managed all of PTR's operating Homestead Village(R) extended-stay
lodging assets through October 17, 1996 (See Note 2).
PTR recently announced that it received a proposal from Security Capital
Group to exchange the REIT Manager and SCG Realty Services for Common Shares.
As a result of the proposed transaction, PTR would become an internally
managed REIT and Security Capital Group would remain PTR's largest
shareholder. The Board has formed a special committee comprised of independent
Trustees to review the proposed transaction. The proposed transaction is
subject to approval by both the special committee and the full Board. If the
Board approves the transaction, a proxy statement, subject to review by the
Securities and Exchange Commission, will be mailed to PTR's common
shareholders prior to a shareholder vote on the proposed transaction.
(10) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data (in thousands except per share amounts)
for 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR
------------------------------- ENDED
3-31 6-30 9-30 12-31 12-31
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1996:
Rental income....................... $75,809 $79,491 $84,802 $81,944 $322,046
======= ======= ======= ======= ========
Earnings from operations............ $22,920 $24,462 $24,718 $21,989 $ 94,089
Gain on sale of investments, net.... 2,923 5,160 25,257 4,152 37,492
Less extraordinary item--loss on
early extinguishment of debt....... -- 870 -- -- 870
Less preferred share dividends...... 6,388 6,386 6,182 5,211 24,167
------- ------- ------- ------- --------
Net earnings attributable to Common
Shares............................. $19,455 $22,366 $43,793 $20,930 $106,544
======= ======= ======= ======= ========
Net earnings per Common Share:
Primary........................... $ 0.27 $ 0.31 $ 0.60 $ 0.28 $ 1.46
======= ======= ======= ======= ========
Fully-diluted..................... $ -- $ -- $ .57 $ -- $ --
======= ======= ======= ======= ========
Weighted-average Common Shares:
Primary........................... 72,211 72,223 72,628 75,147 73,057
======= ======= ======= ======= ========
Fully-diluted..................... -- -- 83,217 -- --
======= ======= ======= ======= ========
1995:
Rental income....................... $53,518 $65,719 $70,176 $73,060 $262,473
======= ======= ======= ======= ========
Earnings from operations............ $14,540 $20,806 $23,203 $23,147 $ 81,696
Gain on sale of investments, net.... -- -- -- 2,623 2,623
Less preferred share dividends...... 4,025 5,023 6,387 6,388 21,823
------- ------- ------- ------- --------
Net earnings attributable to Common
Shares............................. $10,515 $15,783 $16,816 $19,382 $ 62,496
======= ======= ======= ======= ========
Primary and fully-diluted net
earnings per
Common Shares...................... $ 0.20 $ 0.22 $ 0.23 $ 0.27 $ 0.93
======= ======= ======= ======= ========
Weighted-average Common Shares
outstanding........................ 51,485 72,027 72,211 72,211 67,052
======= ======= ======= ======= ========
</TABLE>
78
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
(11) COMMITMENTS AND CONTINGENCIES
PTR is a party to various claims and routine litigation arising in the
ordinary course of business. PTR does not believe that the results of any of
such claims and litigation, individually or in the aggregate, will have a
material adverse effect on its business, financial position or results of
operations.
PTR is subject to environmental regulations related to the ownership,
operation, development and acquisition of real estate. As part of its due
diligence investigation procedures, PTR has conducted Phase I environmental
assessments on each property prior to acquisition since 1984. The cost of
complying with environmental regulations was not material to PTR's results of
operations for any of the years in the three-year period ended December 31,
1996. PTR is not aware of any environmental condition on any of its
communities which is likely to have a material adverse effect on PTR's
financial condition or results of operations.
See Notes 4 and 5 for development and acquisition commitments.
(12) FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value of financial instruments
was determined by PTR based on available market information and valuation
methodologies believed to be appropriate for these purposes. Considerable
judgment and a high degree of subjectivity are involved in developing these
estimates and accordingly they are not necessarily indicative of amounts that
PTR could realize upon disposition.
As of December 31, 1996 and 1995, the carrying amount of certain financial
instruments employed by PTR, including cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses were representative of their
fair values because of the short-term maturity of these instruments.
Similarly, the carrying value of lines of credit balances approximates fair
value as of those dates since the interest rate fluctuates based on published
market rates. As discussed in Note 5, the Homestead Notes outstanding at
December 31, 1996 are reflected at fair value in the accompanying balance
sheet. PTR believes the carrying value of the other mortgage notes receivable
approximates fair value. As of December 31, 1996 and 1995, based on the
borrowings available to PTR, the carrying value of the long-term debt and
mortgages was a reasonable estimation of their fair values.
Derivative Financial Instruments
PTR has only limited involvement with derivative financial instruments and
does not use them for trading purposes. PTR occasionally utilizes derivative
financial instruments as hedges in anticipation of future transactions to
manage well-defined interest rate risk.
In anticipation of a 1997 debt offering, PTR entered into interest rate
contracts in 1996 with notional amounts aggregating $50 million which PTR
plans to terminate when the anticipated offering is completed. As of December
31, 1996, the fair value of these interest rate contracts was an unrealized
loss of approximately $831,000 (approximately $69,250 as of March 10, 1997)
based on quoted market prices or estimates obtained from brokers. There were
no derivative financial instruments outstanding as of December 31, 1995.
(13) SUBSEQUENT EVENT
On March 10, 1997, PTR borrowed $60 million under a short-term borrowing
agreement with a financial institution. The loan matures on September 10,
1997, but provides for early repayment at PTR's option on the 10th day of each
month during the term. Interest is payable monthly at an annual rate of LIBOR
plus 0.60% (6.0375% at March 10, 1997). These proceeds were used to pay down
PTR's $350 million line of credit which had an outstanding balance of $151.5
million after the paydown on March 10, 1997.
79
<PAGE>
SCHEDULE III
SECURITY CAPITAL PACIFIC TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
CARRIED AT DECEMBER 31,
INITIAL COST TO PTR COSTS 1996
------------------- CAPITALIZED ---------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED
---------- ------- ------ ------------ ----------- ------ ------------ ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY:
Albuquerque, New
Mexico:
Commanche Wells..... $ -- $ 719 $ 4,072 $ 374 $ 719 $ 4,445 $ 5,164 $ 331 1985 1994
Corrales Pointe..... -- 944 5,351 516 944 5,867 6,811 507 1986 1993
Entrada Pointe...... -- 1,014 5,744 918 1,014 6,662 7,676 518 1986 1994
La Paloma........... -- 4,135 -- 19,039 4,135 19,039 23,174 1,073 1996 1993
La Ventana.......... -- 2,210 -- 13,117 2,657 12,670 15,327 387 1996 1994
Pavilions........... -- 2,182 7,624 5,632 2,182 13,256 15,438 1,864 (a) (a)
Sandia Ridge........ -- 1,339 5,358 959 1,339 6,317 7,656 898 1986 1992
Vistas at Seven Bar
Ranch (g).......... -- 2,597 -- 19,277 2,597 19,277 21,874 243 1996 1994
Vista Del Sol....... -- 1,105 4,419 544 1,105 4,963 6,068 165 1987 1993
Wellington Place.... -- 1,881 7,523 1,052 1,881 8,575 10,456 701 1981 1993
Telegraph Hill...... -- 1,216 6,889 140 1,216 7,029 8,245 48 1986 1996
Austin, Texas:
Anderson Mill Oaks.. -- 1,794 10,165 600 1,794 10,764 12,558 912 1984 1993
Cannon Place........ -- 1,220 4,879 747 1,220 5,626 6,846 459 1984 1993
Estates of Gracy
Farms (g).......... -- 788 -- 453 788 453 1,241 (b) (b) 1993
Hunters' Run........ -- 1,400 -- 10,080 1,400 10,080 11,480 516 1995 1993
Hunters' Run II..... -- 797 -- 7,479 797 7,479 8,276 115 1996 1995
Monterey Ranch
Village II......... -- 1,151 -- 22,889 1,151 22,889 24,040 291 1996 1993
The Ridge........... -- 1,669 6,675 2,296 1,669 8,971 10,640 826 1978 1993
Rock Creek.......... -- 1,311 7,431 1,504 1,311 8,935 10,246 741 1979 1993
Saddlebrook......... -- 800 -- 12,521 800 12,521 13,321 1,184 1994 1992
Shadowood........... -- 1,197 4,787 638 1,197 5,425 6,622 476 1985 1993
Dallas, Texas:
Apple Ridge......... -- 1,986 7,942 1,223 1,986 9,165 11,151 736 1984 1993
Custer Crossing..... -- 1,532 8,683 340 1,532 9,023 10,555 758 1985 1993
Park Meadows (g).... -- 1,373 -- 4,625 1,373 4,624 5,997 (b) (b) 1996
Post Oak Ridge...... -- 2,137 12,111 1,024 2,137 13,135 15,272 1,096 1983 1993
Quail Run........... -- 1,613 9,140 459 1,613 9,599 11,212 801 1983 1993
Summerstone......... -- 1,028 5,823 251 1,028 6,074 7,102 516 1983 1993
Timber Ridge........ -- 997 5,651 470 997 6,121 7,118 363 1984 1994
Timber Ridge II (g). -- 675 -- 567 675 567 1,242 (b) (b) 1996
Woodland Park....... -- 1,386 5,543 435 1,386 5,978 7,364 482 1986 1993
Denver, Colorado:
Cambrian............ -- 2,256 9,026 877 2,256 9,903 12,159 909 1983 1993
The Cedars.......... -- 3,128 12,512 1,785 3,128 14,297 17,425 1,330 1984 1993
Fox Creek I......... -- 1,167 4,669 615 1,167 5,284 6,451 423 1984 1993
Fox Creek II........ -- -- -- 217 -- 217 217 (b) (b) 1995
Hickory Ridge....... -- 4,402 17,607 1,578 4,402 19,185 23,587 2,112 1984 1992
Reflections I....... -- 1,591 6,362 940 1,591 7,301 8,892 675 1980 1993
Reflections II...... -- 805 -- 11,530 805 11,530 12,335 335 1996 1993
Silvercliff......... 7,382 2,410 13,656 332 2,410 13,988 16,398 1,031 1991 1994
Sunwood............. -- 1,030 4,596 606 1,030 5,202 6,232 570 1981 1992
El Paso, Texas:
Acacia Park......... -- 1,130 -- 13,151 1,130 13,151 14,281 760 1995 1993
Cielo Vista......... -- 1,111 4,445 3,368 1,111 7,813 8,924 519 1962 1993
The Crest at Shadow
Mountain........... -- 865 -- 7,152 865 7,152 8,017 1,106 1991 1992
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
CARRIED AT DECEMBER 31,
INITIAL COST TO PTR COSTS 1996
------------------- CAPITALIZED ---------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED
---------- ------- ------ ------------ ----------- ------ ------------ ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Double Tree......... $ -- $1,106 $ 4,423 $ 708 $1,106 $ 5,130 $ 6,236 $ 488 1980 1993
Las Flores.......... 5,860 625 6,624 1,253 625 7,877 8,502 3,368 (c) (c)
Mountain Village.... -- 1,203 4,824 1,410 1,203 6,234 7,437 991 1982 1992
The Patriot......... -- 1,027 -- 11,204 1,027 11,204 12,231 485 1996 1993
Park Place.......... -- 992 7,409 416 992 7,825 8,817 1,708 (d) (d)
The Phoenix......... -- 454 -- 10,234 454 10,234 10,688 1,136 1993 1993
Shadow Ridge........ -- 1,524 3,993 6,864 1,524 10,857 12,381 1,190 (e) (e)
Tigua Village....... 683 161 146 2,109 161 2,255 2,416 1,228 (f) (f)
Houston, Texas:
American Rice....... -- 13,162 -- 254 13,162 254 13,416 (b) (b) 1996
Beverly Palms....... -- 1,393 7,893 919 1,393 8,812 10,205 647 1970 1994
Braeswood Park...... 6,761 1,861 10,548 195 1,861 10,743 12,604 912 1984 1993
Brompton Court...... 14,318 4,058 22,993 4,393 4,058 27,386 31,444 1,830 1972 1994
Cranbrook Forest.... -- 1,326 5,302 329 1,326 5,631 6,957 463 1984 1993
Memorial Heights I.. -- 3,169 -- 15,273 3,169 15,273 18,442 290 1996 1996
Memorial Heights II. -- 9,164 -- 475 9,164 475 9,639 (b) (b) 1996
Oaks at Medical
Center I........... -- 4,210 -- 14,201 4,210 14,201 18,411 347 (b) 1994
Oaks at Medical
Center II.......... -- 3,368 -- 2,044 3,368 2,044 5,412 (b) (b) 1994
Pineloch............ -- 1,980 11,221 558 1,980 11,779 13,759 988 1984 1993
Plaza Del Oro....... -- 1,713 9,706 658 1,713 10,364 12,077 710 1984 1994
Seahawk............. 5,427 1,258 7,125 362 1,258 7,487 8,745 542 1984 1994
Sacks............... -- 2,812 -- -- 2,812 -- 2,812 (b) (b) 1996
Weslayan Oaks....... -- 581 3,293 124 581 3,417 3,998 294 1984 1993
Inland Empire,
California:
The Crossing........ -- 2,227 12,622 560 2,227 13,182 15,409 232 1989 1996
Miramonte........... -- 2,357 13,364 614 2,357 13,978 16,335 374 1989 1995
Mission Springs &
Villas............. -- 5,780 32,757 758 5,780 33,515 39,295 506 1988 1996
Westcourt Village... -- 1,909 10,817 2,607 1,909 13,424 15,333 273 1986 1996
Woodsong Village.... -- 1,846 10,469 177 1,846 10,646 12,492 97 1985 1996
Kansas City, Kansas:
SWC 119th & Quivira. -- 1,565 -- 368 1,565 367 1,932 (b) (b) 1996
NEC 119th & Quivira. -- 1,540 -- 470 1,540 470 2,010 (b) (b) 1996
Las Vegas, Nevada:
The Hamptons........ -- 2,959 16,790 1,381 2,959 18,171 21,130 799 1989 1995
Horizons at Peccole
Ranch.............. -- 3,173 18,048 509 3,173 18,557 21,730 851 1990 1995
King's Crossing..... -- 2,860 16,272 269 2,860 16,541 19,401 764 1991 1995
La Tierra at the
Lakes.............. 26,019 5,904 33,561 2,792 5,904 36,353 42,257 1,676 1986 1995
Sunterra............ 8,138 2,086 11,867 301 2,086 12,168 14,254 561 1986 1995
Omaha, Nebraska:
Apple Creek......... 11,100 1,953 11,069 773 1,953 11,842 13,795 787 1987 1994
Oakbrook............ -- 1,108 6,307 121 1,108 6,428 7,536 296 1994 1995
Orange County,
California:
Aliso Viejo......... -- 4,872 -- 883 4,872 883 5,755 (b) (b) 1996
Las Flores Apartment
Homes.............. -- 4,190 -- 4,044 4,190 4,044 8,234 (b) (b) 1996
Newpointe........... -- 1,403 7,981 100 1,403 8,081 9,484 109 1987 1996
Villa Marseilles.... -- 1,970 11,162 255 1,970 11,417 13,387 26 1991 1996
Phoenix, Arizona:
Arrowhead I (g)..... -- 2,019 -- 370 2,019 370 2,389 (b) (b) 1995
Bay Club............ -- 2,797 11,188 1,122 2,797 12,310 15,107 1,037 1985 1993
Foxfire............. -- 1,055 5,976 326 1,055 6,302 7,357 465 1985 1994
Miralago I (g)...... -- 2,743 -- 16,697 2,743 16,697 19,440 6 1996 1995
Moorings at Mesa
Cove............... -- 3,261 13,045 1,066 3,261 14,111 17,372 1,464 1985 1992
North Mountain
Village............ -- 2,704 15,323 432 2,704 15,755 18,459 1,199 1986 1994
Peaks at Papago Park
I.................. -- 4,131 23,408 1,732 4,131 25,140 29,271 1,843 1988 1994
Peaks at Papago Park
II................. -- 1,000 -- 6,188 1,000 6,188 7,188 101 1996 1994
The Ridge--Phoenix.. -- 1,852 10,492 411 1,852 10,903 12,755 918 1987 1993
San Antigua......... -- 4,200 -- 19,589 4,200 19,589 23,789 1,732 1994 1991
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
CARRIED AT DECEMBER 31,
INITIAL COST TO PTR COSTS 1996
------------------- CAPITALIZED --------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED
---------- ------- ------ ------------ ----------- ------ ------------ ------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
San Marina........... $ -- $1,208 $4,831 $ 911 $1,208 $5,742 $6,950 $1,044 11986 1992
San Marquis North.... -- 1,215 -- 9,535 1,215 9,535 10,750 608 1994 1993
San Marquis South.... -- 2,312 -- 11,167 2,312 11,167 13,479 968 1994 1993
San Palmera (g)...... -- 3,515 -- 17,534 3,515 17,534 21,049 7 1996 1995
San Valiente I (g)... -- 3,062 -- 13,851 3,062 13,851 16,913 (b) (b) 1995
Scottsdale Greens.... -- 3,489 19,774 5,035 3,489 24,809 28,298 1,629 1980 1994
Superstition Park.... -- 2,340 9,362 991 2,340 10,353 12,693 1,069 1985 1992
Portland, Oregon:
Arbor Heights........ -- 2,669 -- 6,135 2,669 6,135 8,804 (b) (b) 1996
Brighton............. -- 1,675 9,532 270 1,675 9,801 11,476 90 1,685 1996
Cambridge Crossing... -- 2,260 -- 3,574 2,260 3,574 5,834 (b) (b) 1996
Club at the Green.... -- 1,640 9,327 184 1,640 9,511 11,151 453 1991 1995
Double Tree I........ -- 1,548 8,810 157 1,548 8,967 10,515 416 1990 1995
Double Tree II....... 4,750 991 5,611 79 991 5,690 6,681 252 1994 1995
Knight's Castle...... -- 1,963 11,164 55 1,963 11,219 13,182 524 1989 1995
Meridian at
Murrayhill.......... -- 2,517 14,320 420 2,517 14,739 17,256 680 1990 1995
Preston's Crossing
(g)................. -- 851 -- 12,015 851 12,015 12,866 125 1996 1995
Riverwood Heights.... -- 1,479 8,410 274 1,479 8,684 10,163 399 1990 1995
Squire's Court....... -- 1,630 9,249 101 1,630 9,350 10,980 435 1989 1995
Timberline........... -- 1,058 5,995 282 1,058 6,277 7,335 114 1990 1996
Reno, Nevada:
Meadowview I & II.... -- 3,485 -- 735 3,485 735 4,220 (b) (b) 1996
Vista Ridge.......... -- 2,002 -- 15,593 2,002 15,593 17,595 (b) (b) 1995
Salt Lake City, Utah:
Brighton Place....... -- 2,091 11,892 1,300 2,091 13,191 15,282 582 1979 1995
Cherry Creek......... 4,000 1,290 7,330 362 1,290 7,692 8,982 344 1986 1995
Fox Creek............ 4,236 1,172 6,641 123 1,172 6,764 7,936 -- 1985 1996
Greenpointe.......... 3,638 891 5,050 67 891 5,117 6,008 238 1985 1995
Greenpointe Expan-
sion................ -- 32 -- 124 32 124 156 (b) (b) 1996
Mountain Shadow...... 3,340 832 4,730 125 832 4,855 5,687 222 1985 1995
Mountain Shadow
Expansion........... -- 95 -- 239 95 239 334 (b) (b) 1996
Remington............ -- 2,324 -- 13,765 2,324 13,765 16,089 76 1996 1995
Riverview............ -- 4,636 -- 6,329 4,636 6,329 10,965 (b) (b) 1996
Summertree........... 4,435 1,521 8,619 43 1,521 8,662 10,183 39 1986 1996
San Antonio, Texas:
Applegate............ -- 1,455 8,248 522 1,455 8,770 10,225 737 1983 1993
Austin Point......... -- 1,728 9,725 615 1,728 10,340 12,068 870 1982 1993
Camino Real.......... -- 1,084 4,338 859 1,084 5,197 6,281 529 1979 1993
Cobblestone Village.. -- 786 3,120 691 786 3,811 4,597 658 1984 1992
Contour Place........ -- 456 1,829 339 456 2,168 2,624 427 1984 1992
The Crescent......... -- 1,145 -- 14,545 1,145 14,545 15,690 1,384 1994 1992
Dymaxion I........... -- 683 3,740 231 683 3,971 4,654 228 1984 1994
The Gables........... -- 1,025 5,809 554 1,025 6,363 7,388 521 1983 1993
Marbach Park......... -- 1,122 6,361 651 1,122 7,012 8,134 605 1985 1993
Palisades Park....... -- 1,167 6,613 481 1,167 7,094 8,261 598 1983 1993
Panther Springs...... -- 585 3,317 145 585 3,462 4,047 294 1985 1993
Rancho Mirage........ -- 724 2,971 1,437 724 4,407 5,131 368 1974 1993
Stanford Heights..... -- 1,631 -- 11,703 1,631 11,703 13,334 399 1996 1993
Sterling Heights..... -- 1,644 -- 10,460 1,644 10,460 12,104 558 1995 1993
St. Tropez I......... -- 2,013 8,054 971 2,013 9,025 11,038 983 1982 1992
St. Tropez II........ -- 605 -- 554 605 554 1,159 (b) (b) 1994
Towne East Village... -- 350 1,985 236 350 2,221 2,571 182 1983 1993
Villas of Castle
Hills............... -- 1,037 4,148 746 1,037 4,894 5,931 424 1971 1993
Waters of Northern
Hills............... -- 1,251 7,105 785 1,251 7,890 9,141 604 1982 1994
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
INITIAL COST TO PTR COSTS DECEMBER 31, 1996
--------------------- CAPITALIZED --------------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED
---------- -------- -------- ------------ ----------- -------- ------------ ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
San Diego, Cali-
fornia:
Club Pacifica... $ -- $ 2,141 $ 12,132 $ 343 $ 2,141 $ 12,474 $ 14,615 $ 227 1987 1996
El Dorado Hills. 16,718 4,418 25,084 713 4,418 25,797 30,215 237 1983 1996
Ocean Crest..... -- 2,369 13,427 447 2,369 13,874 16,243 280 1993 1996
Scripps Landing. -- 1,332 7,550 318 1,332 7,868 9,200 646 1985 1994
The Palisades... -- 4,741 26,866 31 4,741 26,897 31,638 59 1991 1996
Tierrasanta
Ridge.......... -- 2,859 16,130 695 2,859 16,825 19,684 1,340 1994 1994
San Francisco
(Bay Area), Cal-
ifornia:
Harborside...... -- 3,213 18,210 -- 3,213 18,210 21,423 (b) (b) 1996
Ashton Place.... 47,342 9,782 55,429 687 9,782 56,116 65,898 385 1970 1996
Quail Ridge..... -- 2,633 14,923 587 2,633 15,508 18,141 246 1986 1996
Redwood Shores.. 25,220 5,608 31,778 263 5,608 32,046 37,654 215 1986 1996
Treat Commons... 7,192 5,788 32,802 316 5,788 33,118 38,906 884 1988 1995
Santa Fe, New
Mexico:
Foothills of
Santa Fe Phase
I.............. -- 1,396 -- 1,098 1,396 1,098 2,494 (b) (b) 1995
The Meadows of
Santa Fe....... -- 760 -- 11,672 760 11,672 12,432 1,220 1994 1993
Seattle, Washing-
ton:
Canyon Creek.... -- 5,250 -- 9,393 5,250 9,393 14,643 (b) (b)
Canyon Crown.... -- 4,370 -- 231 4,370 231 4,601 (b) (b)
Clubhouse....... 5,831 1,223 6,928 20 1,223 6,948 8,171 -- 1982 1996
Forrest Creste.. -- 1,681 -- 312 1,681 312 1,993 (b) (b) 1996
Harbour Pointe.. -- 2,027 -- 2,865 2,027 2,865 4,892 (b) (b) 1996
Logan's Ridge... -- 1,950 11,118 278 1,950 11,395 13,345 524 1987 1995
Matanza Creek... -- 1,016 5,814 267 1,016 6,081 7,097 276 1991 1995
Millwood Es-
tates.......... -- 1,593 9,200 608 1,593 9,808 11,401 440 1987 1995
Pebble Cove..... -- 1,895 -- 15,084 1,895 15,084 16,979 148 1996 1995
Remington Park.. -- 2,795 15,593 732 2,795 16,325 19,120 684 1990 1995
Walden Pond..... -- 2,033 11,535 336 2,033 11,871 13,904 545 1990 1995
Tucson, Arizona:
Cobble Creek.... -- 1,422 5,690 777 1,422 6,477 7,899 1,041 1980 1992
Craycroft Gar-
dens........... -- 348 1,392 234 348 1,626 1,974 235 1963 1992
San Ventana (g). -- 3,177 -- 20,561 3,177 20,560 23,737 89 1996 1993
Tierra Antigua.. -- 992 3,967 527 992 4,494 5,486 669 1979 1992
Villa Caprice... -- 1,279 7,248 319 1,279 7,567 8,846 641 1972 1993
Windsail........ 4,798 1,852 7,407 718 1,852 8,124 9,976 770 1986 1993
Tulsa, Oklahoma:
Southern Slope.. -- 779 4,413 170 779 4,584 5,363 392 1982 1993
-------- -------- ---------- -------- -------- ---------- ---------- ------ ---- ----
Total Multifami-
ly............. 217,188 357,708 1,189,347 549,720 358,155 1,738,620 2,096,775 93,386
-------- -------- ---------- -------- -------- ---------- ---------- ------ ---- ----
LAND HELD FOR FU-
TURE MULTIFAMILY
DEVELOPMENT:
Austin, Texas:
Monterey Ranch
Village I (h).. -- 424 -- 1,887 424 1,887 2,311 (b) (b) 1993
Monterey Ranch
Village III
(i)............ -- 1,131 -- 6,036 1,131 6,036 7,167 (b) (b) 1993
Monterey Ranch
IV (j)......... -- 920 -- -- 920 -- 920 -- N/A 1993
El Paso, Texas:
West Ten (k).... -- 1,523 -- 83 1,523 83 1,606 -- N/A 1994
Houston, Texas:
SPCA Tract (l).. -- 563 -- -- 563 -- 563 (b) (b) 1996
North Arlington,
Texas:
Cracker Barrel.. -- 245 -- -- 245 -- 245 --
</TABLE>
83
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
INITIAL COST TO PTR COSTS DECEMBER 31, 1996
--------------------- CAPITALIZED --------------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED
---------- -------- -------- ------------ ----------- -------- ------------ ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix, Arizona:
San Valiente (m)
............... $ -- $ 1,647 $ -- $ 540 $ 1,647 $ 540 $ 2,187 $ -- N/A 1995
Arrowhead II
(n)............ -- 1,601 -- 128 1,601 128 1,729 -- N/A 1995
Miralago II..... -- 1,801 33 33 1,801 66 1,867 --
San Antonio, Tex-
as:
Dymaxion II (o). -- 545 -- 18 545 18 563 -- N/A 1994
Indian Trails II
(p)............ -- 864 -- 43 864 43 907 -- N/A 1994
Walker Ranch I
(q)............ -- 2,230 -- 1,282 2,230 1,282 3,512 (b) (b) 1994
Walker Ranch II
(r)............ -- 1,481 -- 579 1,481 579 2,060 (b) (b) 1994
Walker Ranch III
(s)............ -- 555 -- 258 555 258 813 (b) (b) 1994
Santa Fe, New
Mexico:
Foothills of
Santa Fe II
(t)............ -- 1,114 -- 147 1,115 146 1,261 (b) (b) 1995
St. Francis (u). -- 1,941 -- 391 941 391 2,332 -- N/A 1994
-------- ---------- -------- -------- ---------- ---------- -------
Total Develop-
ment Land...... 18,585 33 11,425 18,586 11,457 30,043
-------- ---------- -------- -------- ---------- ---------- -------
HOTEL:
San Francisco,
California:
Wharf Holiday
Inn (v)........ -- 12,861 1,935 8,075 12,861 10,009 22,870 3,440 1972 1971
-------- ---------- -------- -------- ---------- ---------- -------
OFFICE/INDUSTRIAL:
Dallas, Texas:
Irving Blvd..... -- 109 303 128 109 431 540 249 1968 1977
El Paso, Texas:
Vista Industri-
al............. -- 567 2,504 63 567 2,568 3,135 499 1987 1987
-------- -------- ---------- -------- -------- ---------- ---------- -------
TOTAL
OFFICE/INDUSTRIAL. -- 676 2,807 191 676 2,999 3,675 748
-------- -------- ---------- -------- -------- ---------- ---------- -------
TOTAL........... $217,188 $389,830 $1,194,122 $569,411 $390,278 $1,763,085 $2,153,363 $97,574
======== ======== ========== ======== ======== ========== ========== =======
</TABLE>
- -------
(a)Phase I (118 units) was acquired in 1991 and Phase II (122 units) was
developed in 1992.
(b)As of December 31, 1996, property was undergoing development.
(c)Phase I (120 units) was developed in 1980, Phase II (60 units) was developed
in 1981 and Phase III (288 units) was developed in 1983.
(d)Phase I (160 units) was developed in 1989 and Phase II (132 units) was
developed in 1991.
(e)Phase I (208 units) was acquired in 1991 and Phase II (144 units) was
developed in 1994.
(f)Phase I (84 units) was developed in 1970 and Phase II (100 units) was
developed in 1978.
(g)Represents properties owned by third party developers that are subject to
presale agreements to PTR to acquire such properties.
PTR's investment as of December 31, 1996 represents development loans made
by PTR to such developers.
(h)19.9 acres of undeveloped land.
(i)53.1 acres of undeveloped land.
(j)11.01 acres of undeveloped land.
(k)25.30 acres of undeveloped land.
(l).05 acres of undeveloped land.
(m)7.6 acres of undeveloped land.
(n)11.60 acres of undeveloped land.
(o)18.0 acres of undeveloped land.
(p)25.6 acres of undeveloped land.
(q)38.7 acres of undeveloped land.
(r)30.5 acres of undeveloped land.
(s)10.3 acres of undeveloped land.
(t)19.2 acres of undeveloped land.
(u)10.4 acres of undeveloped land.
(v)PTR owns the building and land leased to hold Holiday Inns of America, Inc.
at Fisherman's Wharf in San Francisco.
The lease with Holiday Inns expires in 2018.
84
<PAGE>
The following is a reconciliation of the carrying amount and related
accumulated depreciation of PTR's investment in real estate, at cost (in
thousands):
<TABLE>
<CAPTION>
CARRYING AMOUNTS DECEMBER 31,
---------------- ----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1....................... $1,855,866 $1,296,288 $872,610
Multifamily:
Acquisitions and renovations
expenditures............................ 463,935 385,356 270,024
Development expenditures, excluding land
acquisition............................. 187,377 117,980 111,184
Acquisition and improvements of land held
for current and future development...... 20,880 11,255 16,789
Recurring capital expenditures........... 7,992 5,119 3,746
Dispositions............................. (269,693) (6,166) (11,902)
---------- ---------- ----------
Net multifamily activity subtotal...... $ 410,491 $ 513,544 $ 389,841
---------- ---------- ----------
Non-multifamily:
Homestead development expenditure,
including land acquisitions............. $ 54,883 $ 48,247 $ 35,943
Contribution of Homestead Assets......... (161,370) -- --
Nonmultifamily dispositions.............. (6,527) (2,235) (331)
Provision for possible loss.............. -- (220) (1,600)
Other.................................... 20 242 (175)
---------- ---------- ----------
Balance at December 31..................... $2,153,363 $1,855,866 $1,296,288
========== ========== ==========
<CAPTION>
ACCUMULATED DEPRECIATION DECEMBER 31,
------------------------ ----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1....................... $ 81,979 $ 46,199 $ 22,022
Depreciation for the year.................. 44,887 36,685 24,614
Accumulated depreciation of real estate
sold...................................... (22,653) (646) (151)
Contribution of Homestead Assets........... (6,639) -- --
Other...................................... -- (259) (286)
---------- ---------- ----------
Balance at December 31..................... $ 97,574 $ 81,979 $ 46,199
========== ========== ==========
</TABLE>
85
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Security Capital Pacific Trust,
a Maryland real estate investment trust, and the undersigned Trustees and
officers of Security Capital Pacific Trust, hereby constitutes and appoints C.
Ronald Blankenship, Bryan J. Flanagan, Jeffrey A. Klopf, Ariel Amir, Edward J.
Schneidman and Michael T. Blair its or his true and lawful attorneys-in-fact
and agents, for it or him and in its or his name, place and stead, in any and
all capacities, with full power to act alone, to sign any and all amendments to
this report, and to file each such amendment to this report, with all exhibits
thereto, and any and all documents in connection therewith, with the Securities
and Exchange Commission, hereby granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform any and
all acts and things requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as it or he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them may lawfully do or cause to be done by virtue hereof.
86
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
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.
Security Capital Pacific Trust
/s/ C. Ronald Blankenship
By: _________________________________
C. Ronald Blankenship
Chairman (Principal Executive
Officer)
Date: March 13, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ C. Ronald Blankenship Chairman (Principal March 13, 1997
____________________________________ Executive Officer) and
C. Ronald Blankenship Trustee
/s/ Bryan J. Flanagan Senior Vice President March 13, 1997
____________________________________ (Principal Financial
Bryan J. Flanagan Officer)
/s/ Thomas L. Poe Vice President and March 13, 1997
____________________________________ Controller (Principal
Thomas L. Poe Accounting Officer)
/s/ James A. Cardwell Trustee March 13, 1997
____________________________________
James A. Cardwell
/s/ John T. Kelley III Trustee March 13, 1997
____________________________________
John T. Kelley III
/s/ Calvin K. Kessler Trustee March 13, 1997
____________________________________
Calvin K. Kessler
/s/ William G. Myers Trustee March 13, 1997
____________________________________
William G. Myers
/s/ James H. Polk III Trustee March 13, 1997
____________________________________
James H. Polk III
/s/ John C. Schweitzer Trustee March 13, 1997
____________________________________
John C. Schweitzer
</TABLE>
87
<PAGE>
INDEX TO EXHIBITS
Certain of the following documents are filed herewith. Certain other of the
following documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S> <C>
2.1 Merger and Distribution Agreement, dated as of May 21, 1996,
among PTR, Security Capital Atlantic Incorporated ("ATLAN-
TIC"), Security Capital Group Incorporated ("Security Capital
Group") and Homestead Village Properties Incorporated ("Home-
stead") (incorporated by reference to Exhibit 2 to Homestead's
Form S-4 Registration Statement (File No. 333-4455; the "Home-
stead S-4"))
2.2 Form of Articles of Merger with Homestead (incorporated by
reference to Exhibit 2.1 to the Homestead S-4)
2.3 Agreement and Plan of Merger dated as of December 6, 1994
among PTR, Security Capital Pacific Incorporated ("PACIFIC")
and Security Capital Group (incorporated by reference to Ex-
hibit 2.1 to Registration Statement No. 33-87184)
2.4 Articles of Merger of PACIFIC with and into PTR (incorporated
by reference to Exhibit 4.6 to PTR's Form 10-K for the year
ended December 31, 1994)
4.1 Restated Declaration of Trust of PTR (incorporated by refer-
ence to Exhibit 4 to PTR's Form 10-Q for the quarter ended
June 30, 1991)
4.2 First Certificate of Amendment of Restated Declaration of
Trust of PTR (incorporated by reference to Exhibit 4 to PTR's
Form 10-Q for the quarter ended June 30, 1992)
4.3 Second Certificate of Amendment of Restated Declaration of
Trust of PTR (incorporated by reference to Exhibit 3.1 to
PTR's Form 8-K dated May 3, 1994)
4.4 Third Articles of Amendment of Restated Declaration of Trust
of PTR (incorporated by reference to Exhibit 4.4 to PTR's Reg-
istration Statement No. 33-86444)
4.5 Fifth Articles of Amendment of Restated Declaration of Trust
of PTR
4.6 Articles Supplementary relating to PTR's Cumulative Convert-
ible Series A Preferred Shares of Beneficial Interest (incor-
porated by reference to Exhibit 3.1 to PTR's Form 8-K dated
November 22, 1993)
4.7 Articles Supplementary relating to PTR's Series B Cumulative
Redeemable Series B Preferred Shares of Beneficial Interest
(incorporated by reference to Exhibit 99.3 to PTR's Form 8-K
dated May 18, 1995)
4.8 First Articles of Amendment to Articles Supplementary relating
to PTR's Series B Cu- mulative Redeemable Preferred Shares of
Beneficial Interest (incorporated by reference to Exhibit 3.1
to PTR's Form 10-Q for the quarter ended September 30, 1995)
4.9 Bylaws of PTR (incorporated by reference to Exhibit 4.1 to
PTR's Form 8-K dated November 22, 1993)
4.10 Indenture, dated as of February 1, 1994, between PTR and Mor-
gan Guaranty Trust Company of New York, as Trustee, relating
to PTR's unsecured senior debt securities (incorporated by
reference to Exhibit 4.2 to PTR's Form 10-K for the year ended
December 31, 1993)
4.11 First Supplemental Indenture, dated as of February 2, 1994,
among PTR, Morgan Guaranty Trust Company of New York and State
Street Bank and Trust Company, as successor Trustee (incorpo-
rated by reference to Exhibit 4.3 to PTR's Form 10-K for the
year ended December 31, 1993)
4.12 6.60% Note due October 15, 1999
4.13 6.95% Note due October 15, 2002
4.14 7.15% Note due October 15, 2003
</TABLE>
88
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S> <C>
4.15 7.25% Note due October 15, 2004
4.16 7.30% Note due October 15, 2005
4.17 7.375% Note due October 15, 2006
4.18 6.875% Note due February 15, 2008 (incorporated by reference
to Exhibit 4.4 to PTR's Form 10-K for the year ended December
31, 1994)
4.19 7.55% Note due August 1, 2008
4.20 7.625% Note due August 1, 2009
4.21 7.15% Note due February 23, 2010 (incorporated by reference to
Exhibit 4.14 to PTR's Form 10-K for the year ended December
31, 1995)
4.22 7.65% Note due August 1, 2010
4.23 7.5% Note due February 15, 2014 (incorporated by reference to
Exhibit 4.5 to PTR's Form 10-K for the year ended December 31,
1994)
4.24 8.10% Note due August 1, 2015
4.25 7.90% Note due February 23, 2016 (incorporated by reference to
Exhibit 4.15 to PTR's Form 10-K for the year ended December
31, 1995)
4.26 8.15% Note due October 15, 2016
4.27 6.50% Note due October 15, 2026
4.28 Rights Agreement dated as of July 21, 1994 between PTR and
Chemical Bank, including form of Rights Certificate (incorpo-
rated by reference to Exhibit 4.2 to PTR's Form 8-K dated July
19, 1994)
4.29 First Amendment dated as of February 8, 1995 to the Rights
Agreement (incorporated by reference to Exhibit 4.13 to PTR's
Form 10-K for the year ended December 31, 1994)
10.1 1987 Share Option Plan for Outside Trustees, as amended (in-
corporated by reference to Exhibit 10.1 to PTR's Form 10-K for
the year ended December 31, 1995)
10.2 Form of Indemnification Agreement entered into between PTR and
all of its officers and Trustees (incorporated by reference to
Exhibit 10.50 to Registration Statement No. 33- 43201)
10.3 Second Amended and Restated Investor Agreement dated as of
July 11, 1994 between PTR and Security Capital Group (incorpo-
rated by reference to Exhibit 10.1 to PTR's Form 8-K dated
July 19, 1994)
10.4 Supplemental Investment Agreement dated as of October 1, 1991,
by and between PTR and Security Capital Group (incorporated by
reference to Exhibit 10.70 to Registration Statement No. 33-
43201)
10.5 Second Supplemental Investment Agreement dated as of December
7, 1993 between PTR and Security Capital Group (incorporated
by reference to Exhibit 10.2 to PTR's Form 8-K dated May 3,
1994)
10.6 Third Supplemental Investment Agreement dated as of December
6, 1994 between PTR and Security Capital Group (incorporated
by reference to Exhibit 10.6 to PTR's Form 10-K for the year
ended December 31, 1994)
10.7 Management Agreement dated as of October 1, 1996 between PTR
and SCG Realty Services Incorporated
10.8 Amended and Restated Credit Agreement dated as of August 16,
1996 among PTR, Texas Commerce Bank National Association and
Wells Fargo Realty Advisors Funding, Incorporated, as co-
agents, and the banks named therein
</TABLE>
89
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S> <C>
10.9 Fifth Amended and Restated REIT Management Agreement dated as
of May 21, 1996 between PTR and the REIT Manager
10.10 Amended and Restated Promissory Note dated as of May 28, 1996
by PTR Homestead Village Incorporated in favor of PTR (incor-
porated by reference to Exhibit 4.3 to the Homestead S-4)
10.11 Amended and Restated Promissory Note dated as of May 28, 1996
by PTR Homestead Village Limited Partnership in favor of PTR
(incorporated by reference to Exhibit 4.4 to the Homestead S-
4)
10.12 Protection of Business Agreement dated as of October 17, 1996
among ATLANTIC, PTR, Security Capital Group and Homestead
10.13 Investor and Registration Rights Agreement dated as of October
17, 1996 between Homestead and PTR
10.14 Funding Commitment Agreement dated as of October 17, 1996 be-
tween Homestead and PTR
12.1 Computation of Ratio of Earnings to Fixed Charges
12.2 Computation of Ratio of Earnings to Fixed Charges and Pre-
ferred Share Dividends
21 Subsidiaries of PTR
23 Consent of KPMG Peat Marwick LLP
24 Power of Attorney (included at page 86)
27 Financial Data Schedule
</TABLE>
90
<PAGE>
EXHIBIT 4.5
FIFTH ARTICLES OF AMENDMENT
OF
RESTATED DECLARATION OF TRUST
OF
SECURITY CAPITAL PACIFIC TRUST
The undersigned, being all the Trustees of Security Capital Pacific Trust,
a Maryland real estate investment trust (the "Trust"), do hereby certify
-----
pursuant to the provisions of Article 6, Section 2 of the Trust's Restated
Declaration of Trust, dated as of June 18, 1991, as amended and supplemented
(the "Declaration of Trust"), and Section 8-501 of the Corporations and
--------------------
Associations Article of the Annotated Code of Maryland, that the Board of
Trustees of the Trust has adopted a resolution declaring this amendment to the
Declaration of Trust as hereinafter set forth to be advisable and that the
shareholders of the Trust have approved such amendment by the affirmative vote
of at least two-thirds of all the votes entitled to be cast on the matter.
Therefore, the Declaration of Trust is hereby amended by adding the
following new Article 9:
ARTICLE 9. HOMESTEAD TRANSACTION
Notwithstanding anything to the contrary contained herein,
including, without limitation, the provisions of Article 1 and Article
4 of this Declaration of Trust, the Trust shall be authorized to
perform all of its obligations and exercise all of its rights under
the terms of that certain Merger and Distribution Agreement, dated as
of May 21, 1996 (as such agreement may be amended or supplemented from
time to time, the "Merger Agreement"), among the Trust, Security
Capital Atlantic Incorporated, Security Capital Group Incorporated and
Homestead Village Properties Incorporated and each of the other
agreements and transactions contemplated thereby, including, without
limitation, the following agreements (as each of such agreements are
defined in the Merger Agreement) and the transactions contemplated by
such agreements: (i) Articles of Merger; (ii) Warrant Purchase
Agreement; (iii) one or more Funding Commitment Agreements (including,
without limitation, any notes and mortgages or deeds of trust in
connection therewith); (iv) Investor and Registration Rights
Agreement; (v) Protection of Business Agreement; and (vi) Distribution
Agency Agreement.
Each undersigned Trustee acknowledges these Fifth Articles of Amendment to
be the act of the Trust and, as to all other matters or facts required to be
verified under oath, that, to the best of his knowledge, information and belief,
these matters and facts are true in all material respects, and that this
statement is made under the penalties for perjury.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed these Fifth Articles of
Amendment as of this 16th day of October, 1996.
/s/ C. Ronald Blankenship
---------------------------------------
C. Ronald Blankenship
/s/ James A. Cardwell
---------------------------------------
James A. Cardwell
/s/ John T. Kelley, III
---------------------------------------
John T. Kelley, III
/s/ Calvin K. Kessler
---------------------------------------
Calvin K. Kessler
/s/ William G. Myers
---------------------------------------
William G. Myers
/s/ James H. Polk, III
---------------------------------------
James H. Polk, III
/s/ John C. Schweitzer
---------------------------------------
John C. Schweitzer
S-1
<PAGE>
EXHIBIT 4.12
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $15,000,000
CUSIP No.: 81414E AF 6
SECURITY CAPITAL PACIFIC TRUST
6.600% NOTE DUE 1999
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of FIFTEEN
MILLION DOLLARS on October 15, 1999 and to pay interest on the outstanding
principal amount thereon from October 21, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on April 15 and October 15 in each year, commencing on April 15,
1997, at the rate of 6.600% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the April 1 or October 1 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed,
<PAGE>
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payment of the principal of, Make-Whole Amount, if
any, on, and interest on this Security will be made at the office or agency of
the Company maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
-------- -------
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $15,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: October 21, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
========================================
========================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with
full power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.13
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AG 4
SECURITY CAPITAL PACIFIC TRUST
6.950% NOTE DUE 2002
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on October 15, 2002 and to pay interest on the outstanding
principal amount thereon from October 21, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on April 15 and October 15 in each year, commencing on April 15,
1997, at the rate of 6.950% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the April 1 or October 1 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such
<PAGE>
notice as may be required by such exchange, all as more fully provided in the
Indenture. Payment of the principal of, Make-Whole Amount, if any, on, and
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
-------- -------
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: October 21, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
========================================
========================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with
full power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.14
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AH 2
SECURITY CAPITAL PACIFIC TRUST
7.150% NOTE DUE 2003
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust
organized and existing under the laws of the State of Maryland (hereinafter
called the "Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on October 15, 2003 and to pay interest on the outstanding
principal amount thereon from October 21, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on April 15 and October 15 in each year, commencing on April 15,
1997, at the rate of 7.150% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the April 1 or October 1 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such
<PAGE>
notice as may be required by such exchange, all as more fully provided in the
Indenture. Payment of the principal of, Make-Whole Amount, if any, on, and
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
-------- -------
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
-------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: October 21, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=========================================
=========================================
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
........................................................................Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.15
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AJ 8
SECURITY CAPITAL PACIFIC TRUST
7.250% NOTE DUE 2004
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on October 15, 2004 and to pay interest on the outstanding
principal amount thereon from October 21, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on April 15 and October 15 in each year, commencing on April 15,
1997, at the rate of 7.250% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the April 1 or October 1 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such
<PAGE>
notice as may be required by such exchange, all as more fully provided in the
Indenture. Payment of the principal of, Make-Whole Amount, if any, on, and
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
-------- -------
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: October 21, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=========================================
=========================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.16
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AK 5
SECURITY CAPITAL PACIFIC TRUST
7.300% NOTE DUE 2005
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust
organized and existing under the laws of the State of Maryland (hereinafter
called the "Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on October 15, 2005 and to pay interest on the outstanding
principal amount thereon from October 21, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on April 15 and October 15 in each year, commencing on April 15,
1997, at the rate of 7.300% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the April 1 or October 1 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such
<PAGE>
notice as may be required by such exchange, all as more fully provided in the
Indenture. Payment of the principal of, Make-Whole Amount, if any, on, and
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
-------- -------
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: October 21, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
========================================
========================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.17
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AL 3
SECURITY CAPITAL PACIFIC TRUST
7.375% NOTE DUE 2006
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on October 15, 2006 and to pay interest on the outstanding
principal amount thereon from October 21, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on April 15 and October 15 in each year, commencing on April 15,
1997, at the rate of 7.375% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the April 1 or October 1 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such
<PAGE>
notice as may be required by such exchange, all as more fully provided in the
Indenture. Payment of the principal of, Make-Whole Amount, if any, on, and
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
-------- -------
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: October 21, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
===================================
===================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.19
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AA 7
SECURITY CAPITAL PACIFIC TRUST
7.550% NOTE DUE 2008
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on August 1, 2008 and to pay interest on the outstanding
principal amount thereon from August 8, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on February 1 and August 1 in each year, commencing on February 1,
1997, at the rate of 7.550% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the January 15 or July 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required
<PAGE>
by such exchange, all as more fully provided in the Indenture. Payment of the
principal of, Make-Whole Amount, if any, on, and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the City of Boston, Commonwealth of Massachusetts, or elsewhere as provided in
the Indenture, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
- -------- -------
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: August 8, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=======================================
=======================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.20
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AB 5
SECURITY CAPITAL PACIFIC TRUST
7.625% NOTE DUE 2009
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on August 1, 2009 and to pay interest on the outstanding
principal amount thereon from August 8, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on February 1 and August 1 in each year, commencing on February 1,
1997, at the rate of 7.625% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the January 15 or July 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required
<PAGE>
by such exchange, all as more fully provided in the Indenture. Payment of the
principal of, Make-Whole Amount, if any, on, and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the City of Boston, Commonwealth of Massachusetts, or elsewhere as provided in
the Indenture, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
- -------- -------
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: August 8, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=========================================
=========================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.22
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AC 3
SECURITY CAPITAL PACIFIC TRUST
7.650% NOTE DUE 2010
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust
organized and existing under the laws of the State of Maryland (hereinafter
called the "Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on August 1, 2010 and to pay interest on the outstanding
principal amount thereon from August 8, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on February 1 and August 1 in each year, commencing on February 1,
1997, at the rate of 7.650% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the January 15 or July 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required
<PAGE>
by such exchange, all as more fully provided in the Indenture. Payment of the
principal of, Make-Whole Amount, if any, on, and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the City of Boston, Commonwealth of Massachusetts, or elsewhere as provided in
the Indenture, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
- -------- -------
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of
the Company, in whole or in part, upon notice of not more than 60 nor less than
30 days prior to the Redemption Date, at a redemption price equal to the sum of
(i) the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: August 8, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=======================================
=======================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.24
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AD 1
SECURITY CAPITAL PACIFIC TRUST
8.100% NOTE DUE 2015
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust
organized and existing under the laws of the State of Maryland (hereinafter
called the "Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on August 1, 2015 and to pay interest on the outstanding
principal amount thereon from August 8, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on February 1 and August 1 in each year, commencing on February 1,
1997, at the rate of 8.100% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the January 15 or July 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required
<PAGE>
by such exchange, all as more fully provided in the Indenture. Payment of the
principal of, Make-Whole Amount, if any, on, and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the City of Boston, Commonwealth of Massachusetts, or elsewhere as provided in
the Indenture, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
- -------- -------
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: August 8, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=========================================
=========================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.26
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $20,000,000
CUSIP No.: 81414E AE 9
SECURITY CAPITAL PACIFIC TRUST
8.150% NOTE DUE 2016
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of TWENTY
MILLION DOLLARS on August 1, 2016 and to pay interest on the outstanding
principal amount thereon from August 8, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on February 1 and August 1 in each year, commencing on February 1,
1997, at the rate of 8.150% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the January 15 or July 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required
<PAGE>
by such exchange, all as more fully provided in the Indenture. Payment of the
principal of, Make-Whole Amount, if any, on, and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the City of Boston, Commonwealth of Massachusetts, or elsewhere as provided in
the Indenture, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
- -------- -------
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $20,000,000.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
-2-
<PAGE>
(exclusive of interest accrued to the date of redemption or accelerated payment)
that would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
-3-
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this
-4-
<PAGE>
Security for registration of transfer at the office or agency of the Company in
any Place of Payment where the principal of, Make-Whole Amount, if any, on, and
interest on this Security are payable duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-5-
<PAGE>
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
Dated: August 8, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
==========================================
==========================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.27
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $15,000,000
CUSIP No.: 81414E AM 1
SECURITY CAPITAL PACIFIC TRUST
6.500% NOTE DUE 2026
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of FIFTEEN
MILLION DOLLARS on October 15, 2026 and to pay interest on the outstanding
principal amount thereon from October 21, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on April 15 and October 15 in each year, commencing on April 15,
1997, at the rate of 6.500% per annum, until the entire principal hereof is paid
or made available for payment. The interest so payable, and punctually paid or
duly provided for on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest which shall be the April 1 or October 1 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed,
<PAGE>
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payment of the principal of, Make-Whole Amount, if
any, on, and interest on this Security will be made at the office or agency of
the Company maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
-------- -------
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $15,000,000.
Securities of this series may be repaid on October 15, 1999 (the "Option
Payment Date"), at the option of the Holder, at a repurchase price equal to 100%
of the principal amount of the Securities being redeemed plus accrued interest
thereon to the Option Payment Date. In order for a Holder to exercise this
option, the Company must receive at its offices during the period beginning on
August 15, 1999 and ending at 5:00 p.m. (Eastern Standard time) on September 15,
1999 this Security with the section "Option to Elect Repayment on October 15,
1999" properly completed. Any such notice received by the Company during the
period beginning on August 15, 1999 and ending at 5:00 p.m. (Eastern Standard
time) on September 15, 1999 shall be irrevocable. The repayment option may be
exercised for less than the entire principal amount of the Securities, so long
as the principal amount that is to be repaid is equal to $1,000 or an integral
multiple of $1,000. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of
-2-
<PAGE>
any Security for repayment will be determined by the Company whose determination
will be final and binding.
Failure by the Company to repay any Security of this series when required
as described in the preceding paragraph and Article Thirteen of the Indenture
will result in an Event of Default under the Indenture.
Securities of this series may be redeemed at any time after October 15,
1999 at the option of the Company, in whole or in part, upon notice of not more
than 60 nor less than 30 days prior to the Redemption Date, at a redemption
price equal to the sum of (i) the principal amount of the Securities being
redeemed plus accrued interest thereon to the Redemption Date and (ii) the Make-
Whole Amount, if any, with respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such redemption or accelerated
payment had not been made, determined by discounting, on a semiannual basis,
such principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of redemption is given or
declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the
Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent
-3-
<PAGE>
Statistical Release published prior to the date of determination of the Make-
Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
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<PAGE>
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any Place of Payment where the principal of, Make-Whole
Amount, if any, on, and interest on this Security are payable duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the
-5-
<PAGE>
Company or the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
* * * *
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Senior Vice President
Attest:
By: /s/ Lucinda G. Marker
----------------------
Lucinda G. Marker
Assistant Secretary
Dated: October 21, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Authorized Officer
-----------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=========================================
=========================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
OPTION TO ELECT REPAYMENT ON OCTOBER 15, 1999
If you elect to have the entire principal amount of this Security repaid by
the Company pursuant to the terms of this Security and Article Thirteen of the
Indenture, check the following box [_]
If you elect to have only a portion of the principal amount of this
Security repaid by the Company pursuant to the terms of this Security and
Article Thirteen of the Indenture, state the amount to be repaid (multiples of
$1,000 only):
$____________________
Date:________________ Your Signature:___________________________________
(Signature(s) must correspond with the
name(s) as written upon the face of this
certificate in every particular, without
alteration or enlargement, or any change
whatever.)
Your social security number or
taxpayer identification number:_______________________________________________
Signature Guarantee:____________________________________________________________
NOTICE: Signature(s) must be guaranteed by an "eligible guarantor institution"
that is a member or participant in a "signature guarantee program" (i.e., the
Securities Transfer Agents Medallion Program, the Stock Exchange Medallion
Program or the New York Stock Exchange, Inc. Medallion Signature Program).
-9-
<PAGE>
EXHIBIT 10.7
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement"), made and entered into as of
---------
the 1st day of October, 1996, by and between SECURITY CAPITAL PACIFIC TRUST, a
Maryland real estate investment trust (the "Owner"), and SCG REALTY SERVICES
-----
INCORPORATED, a Texas corporation ("Manager").
-------
W I T N E S S E T H:
This Agreement covers the apartment projects listed on Exhibit A (each is
---------
individually referred to herein as a "Project"). This Agreement constitutes a
-------
separate and independent contract between the Owner and the Manager for each
Project.
Owner desires to employ Manager in the management and operation of the
Project by turning over to Manager the operation, direction, management and
supervision of the Project, as outlined below, and Manager desires to assume
such duties upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants herein contained, Owner and Manager agree as follows:
ARTICLE 1
Definitions
-----------
The following terms shall have the following meanings when used in this
Agreement:
1.1 Term. The term of this Agreement shall commence on the date hereof
----
and shall, subject to the provisions hereof, terminate on September 30, 1997;
provided, however, that unless either Owner or Manager delivers written notice
to the other party on or before thirty (30) days prior to the expiration of the
initial, or any renewal term, the term of this Agreement shall automatically be
extended for successive one year terms.
1.2 Fee. The management fee payable each month by Owner to Manager
---
hereunder shall be an amount equal to 3% of the Gross Receipts of the Project
for such month if the Project is located in California, 3.5% of the Gross
Receipts of the Project for such month if the Project is located in Washington,
Oregon or Nevada, and 3.75% of the Gross Receipts of the Project for such month
if the Project is located in any other state. Notwithstanding the foregoing,
the management fee payable for any Project identified on Exhibit A as a
---------
"construction project" shall commence on the date 30 days prior to the opening
of the leasing office or, if earlier, the first delivery of units, and the
management fee shall be equal to 90% of the Gross Receipts shown on a rent
schedule approved by Owner until the first to occur of (the "Conversion Date")
---------------
(a) the date 12 months after the commencement of payment of management fees, and
(b) the month in which the management fee payable under this sentence first
equals or exceeds the management fee that would be due if calculated under the
first sentence of this
<PAGE>
Section. On and after the Conversion Date, the management fee shall be
calculated in accordance with the first sentence of this Section.
1.3 Depository. An FDIC insured national or state bank designated by
----------
Owner.
1.4 Working Capital Reserve. A reasonable working capital reserve for
-----------------------
each Project, as determined by Owner in its sole discretion, shall be delivered
by Owner to Manager concurrently with Owner's execution and delivery hereof, to
be maintained by Manager during the term hereof, used in connection with the
operation of the Project in accordance with the terms hereof, and restored per
the terms of Sections 4.4 and 4.5 hereof.
1.5 Fiscal Year. The year beginning January 1 and ending December 31,
-----------
which is the fiscal year established by Owner for the Project.
1.6 Budget. A composite of (i) an Operations Budget, which shall be an
------
estimate of receipts and expenditures for the operation of the Project during a
Fiscal Year, including a schedule of expected apartment rentals (excluding
security deposits) for the period in question and a schedule of expected special
repairs and maintenance projects, and (ii) a Capital Budget, which shall be an
estimate of capital replacements, substitutions of and additions to the Project
for a Fiscal Year.
1.7 Gross Receipts. The entire amount of all receipts, determined on a
--------------
cash basis, from (a) tenant rentals collected pursuant to tenant leases for each
month during the term hereof; provided, however, that there shall be excluded
from tenant rentals any tenant security deposits (except as provided below) and
any electric utility payments on behalf of tenants on all "BILLS PAID"
properties; (b) cleaning, security and damage deposits forfeited by tenants in
such period; (c) laundry and vending machine income; (d) any and all receipts
from the operation of the Project received and relating to the period in
question; (e) proceeds from rental interruption insurance, unless the entire
property is destroyed; in which event this agreement will terminate as to such
property and Owner will have no further obligation to Manager with respect to
such Project; and (f) any other sums and charges collected in connection with
termination of the tenant leases. Gross Receipts do not include the proceeds of
(i) any sale, exchange, refinancing, condemnation, or other disposition of all
or any part of the Project, (ii) any loans to the Owner whether or not secured
by all or any part of the Project, (iii) any capital contributions by the Owner,
or (iv) any insurance (other than rental interruption insurance) maintained with
regard to the Project.
1.8 Project Employees. Those persons employed by Manager as a
-----------------
management staff (i.e., manager, assistant manager, leasing agents, maintenance
personnel, and other personnel necessary to be employed in order to maintain and
operate the Project).
2
<PAGE>
ARTICLE 2
Duties and Rights of Manager
----------------------------
2.1 Appointment of Manager. During the Term of this Agreement, the
----------------------
Manager agrees, for and in consideration of the compensation hereinafter
provided, and the Owner hereby grants to Manager the right, to supervise and
direct the leasing, management and operation of the Project. Everything
performed by Manager under this Agreement shall be done as an independent
contractor of Owner. All obligations or expenses incurred hereunder, including
the pro rata portion used in connection with or for the benefit of the Project
of all purchases of or contracts for sales or services in bulk or volume which
Manager may obtain for discount or convenience in connection with its operation
of other apartment projects, shall be for the account of, on behalf of, and at
the expense of Owner, expect as otherwise specifically provided; provided,
however, Owner shall not be obligated to reimburse Manager for expenses for
office equipment or office supplies of Manager (unless incurred for the
Project), for any overhead expenses of Manager incurred with respect to its
general offices, costs relating to accounting services performed hereunder, or
for any salaries of employees of Manager paid with respect to duties performed
on a supervisory level (except when Manager's supervisory employees are
performing tasks otherwise performed by a resident manager or (to the extent of
the savings achieved) where specialists are employed whose involvement creates
savings in performance of required duties). Owner shall also have no obligation
to reimburse Manager for that portion of the salary of a resident manager which
represents payment for services rendered in respect to apartment projects other
than the Project.
2.2 General Operation. Subject to the limitations imposed by the
-----------------
Budget from time to time, Manager shall operate the Project in the same manner
as is customary and usual in operation of comparable facilities, and shall
provide such services as are customarily provided by operators of apartment
projects of comparable class and standing consistent with the Project's
facilities. In addition to the other obligations of Manager set forth herein,
Manager shall render the following services and perform the following duties for
Owner in a faithful, diligent and efficient manner: (a) maintain businesslike
relations with tenants whose service requests shall be received, considered and
recorded in systematic fashion in order to show the action taken with respect to
each; (b) collect all monthly rentals due from tenants and rent from users or
lessees of other non-dwelling facilities in the Project, if any; request,
demand, collect, receive and receipt for any and all charges or rents which
become due to Owner, and at Owner's expense take such legal action as may be
necessary or desirable to evict tenants delinquent in payment of monthly rental
or other charges (security deposits, late charges, etc.); (c) prepare or cause
to be prepared for execution by the Owner all forms, reports and returns, if
any, required to be filed by the Owner under applicable federal, state or local
laws and any other requirements relating to the employment of personnel
(anything contained herein to the contrary notwithstanding, however, Manager
shall not be obligated to prepare any of Owner's state or federal income tax
returns); (d) use all reasonable efforts at all times during the term of this
Agreement to operate and maintain the Project according to the highest standards
achievable consistent with the operation of comparable quality units; (e)
maintain the Project as a safe and secure environment and notify Owner of any
security risks or issues related to the Project that
3
<PAGE>
become known to Manager; (f) advertise when necessary, at Owner's expense, the
availability for rental of the Project units and display "for rent" or other
similar signs upon the Project, it being understood that Manager may install one
or more signs on or about the Project stating that same is under management of
Manager and may use, in a tasteful manner, Manager's name and logo in any
display advertising which may be done on behalf of the Project; and (g) sign,
renew and cancel tenant leases for the Project, in compliance with standards
established by Owner under the provisions of written apartment leases to bona
fide individuals, for monthly rentals and otherwise on terms established by
criteria approved from time to time by Owner, based upon Manager's
recommendations; provided, however, that Project Employees may occupy apartment
units on a month-to-month basis with or without an executed tenant lease.
2.3 Budget.
------
(a) Manager shall submit for Owner's approval no later than one hundred
twenty (120) days prior to the beginning of each successive Fiscal Year the
Budget for the ensuing Fiscal Year. The Budget shall be approved or rejected by
Owner within thirty (30) days after receipt. If Owner fails to approve or
disapprove the Budget within such period, the Budget shall be deemed to be
approved. In the event Owner rejects the Budget, Owner and Manager shall jointly
prepare the Budget as soon as may be reasonably possible. Until a new Budget is
approved, Manager shall operate on the Budget approved for the prior Fiscal
Year, with the exception of expenses for personnel, which must be increased
based upon existing competitive conditions, and expenses relating to taxes,
insurance and utilities. The Budget shall reflect the schedule of monthly rents
proposed for the new fiscal year and shall also constitute a major control under
which Manager shall operate the Project, and there shall be no substantial
deviations therefrom except as permitted by Section 2.6(a). Consequently,
without the prior consent of Owner, no expenses may be incurred or commitments
made by Manager in connection with the maintenance and operation of the Project
which exceed the total expenses allocated for the period in question in the
approved Budget by more than ten percent (10%). The limitation in the preceding
sentence, with respect to incurring any expense not covered by the Budget, shall
not apply to expenses relating to taxes, insurance or utilities or expenditures
required due to emergencies which threaten life or property or could result in
civil or criminal liability for Owner and/or Manager. Manager makes no guaranty,
warranty or representation whatsoever in connection with the accuracy of any
Budget, and Owner agrees that they are intended as good faith estimates only.
(b) In the event there shall be a substantial discrepancy between the
results of operations for any month and the estimated results of operations for
such month as set forth in the Budget, Manager shall upon request furnish to
Owner within twenty (20) days after the expiration of such month a written
explanation as to why the discrepancy occurred. If substantial variations have
occurred or are anticipated by Manager during the course of any Fiscal Year,
Manager, upon Owner's reasonable request, shall prepare and submit to Owner a
revised forecast of annual income and expenses for the remainder of the Fiscal
Year based on actual year-to-date income and expenses and Manager's forecast of
income and expenses for the remainder of the Fiscal Year.
4
<PAGE>
2.4 Manager and Other Personnel.
---------------------------
(a) Manager shall investigate, hire, train, instruct, pay, promote,
discharge and supervise the work of the Project Employees and shall supervise,
through the Project Employees, the hiring, promotion, discharge and work of all
other operating and service employees of Manager performing services in or about
the Project, all in the name of Manager. Since some of the Project Employees
may need to reside at the Project and be available full time in order to perform
properly the duties of his/her employment, it is further understood and agreed
that the Project Employees (including his/her spouse and dependent children), in
addition to their salary and fringe benefits, may receive the normal maintenance
customarily provided managers, assistant managers, leasing agents, and
maintenance personnel of an apartment project, including employee housing, use
of all Project facilities and reimbursement for any and all expenses which such
persons may reasonably incur in the performance of their duties. Any such
housing allowance that is provided will be considered as a payroll cost under
the Budget, and the amount of housing allowance will be credited as apartment
rental income.
(b) The Project Employees shall be employees of Manager. Owner shall
reimburse Manager monthly, in advance, for the total aggregate compensation,
including salary and fringe benefits, payable with respect to the Project
Employees, any temporary employees residing at the Project and, on an agreed
basis, the Project's proportionate share of such costs relating to roving
maintenance, off-site operating staff and similar personnel. The term "fringe
benefits" as used herein shall mean and include the employer's contribution of
F.I.C.A., unemployment compensation and other employment taxes, workmen's
compensation, group life and accident and health insurance premiums, performance
bonuses, and disability and other similar benefits paid or payable by the
employer with respect to employees in other apartment projects operated by
Manager.
2.5 Contracts and Supplies. Manager shall, except as provided herein,
----------------------
in the name of and on behalf of Owner and at Owner's expense, and without
compensation directly or indirectly to Manager, except as expressly set forth
herein or agreed to by Owner or Manager, consummate arrangements with
concessionaires, licensees, tenants or other intended users of the facilities of
the Project, shall, except as provided herein, on Owner's behalf, enter into
contracts for the furnishing to the Project of electricity, gas, water, steam,
telephone, cleaning, vermin extermination, furnace and air conditioning
maintenance, security protection, pest control and any other utilities, services
and concessions which are provided in connection with the maintenance and
operation of an apartment project in accordance with standards comparable to
those prevailing in other similar apartment projects, and shall place purchase
orders for such equipment, tools, appliances, materials and supplies as are
necessary to properly maintain the Project.
2.6 Alterations, Repairs and Maintenance.
------------------------------------
(a) Manager shall make or install, or cause to be made and installed,
or do or cause to be done at Owner's expense and in the name of Owner, all
necessary or desirable repairs,
5
<PAGE>
interior and exterior cleaning, painting and decorating, plumbing, alterations,
replacements, improvements and other normal maintenance and repair work on and
to the Project as are customarily made by Manager in the operation of apartment
projects; provided, however, that no unbudgeted expenditure in excess of
$5,000.00 per item or a total of $20,000.00 annually may be made for such
purposes without the prior approval of Owner, unless emergency repairs involving
manifest danger to life or property are immediately necessary for the
preservation of the safety of the Project, or to avoid criminal or civil
liability or for the safety of the tenants, or are required to avoid the
suspension of any necessary service to the Project, in which event such
expenditures may be made by the Manager without prior approval and irrespective
of the cost limitations imposed by this Section 2.6, provided that Owner is
immediately thereafter given notice of such situation and all costs so incurred.
(b) In accordance with the terms of the Budget or after consultation
with, and written approval by, Owner (except in the case of emergency, in which
case such consultation shall be by telephone), Manager shall, at Owner's
expense, from time to time during the term hereof, make all required capital
replacements or repairs to the Project. Subject to obtaining Owner's prior
written approval in regard to sums necessary to cover costs of such capital
replacements or repairs, Manager shall first use any excess funds held pursuant
to Section 4.5 and then funds furnished by Owner.
2.7 Licenses and Permits. Manager shall apply for, obtain, and
--------------------
maintain, in the name and at the expense of Owner, all licenses and permits
(including deposits and bonds) required of Owner or Manager in connection with
the management and operation of the Project. Owner agrees to execute and deliver
any and all applications and other documents and to otherwise cooperate to the
fullest extent with Manager in applying for, obtaining and maintaining such
licenses and permits.
2.8 Compliance with Laws. Manager, at Owner's expense, shall use all
--------------------
reasonable efforts to cause all such acts and things to be done in and about the
Project as Owner and/or Manager shall deem necessary, and Owner covenants
throughout the term of this Agreement at its expense to comply with all laws,
regulations and requirements of any federal, state or municipal government
having jurisdiction respecting the use or manner of use of the Project or the
maintenance or operation thereof.
2.9 Legal Proceedings. Manager shall institute, in its own name or
-----------------
in the name of Owner, but in any event at the expense of Owner, any and all
legal actions or proceedings which Manager deems reasonable to collect charges,
rent or other income from the Project or to dispossess tenants or other persons
in possession, or to cancel, terminate, or enforce any lease, license or
concession agreement for the breach thereof or default thereunder by the tenant,
licensee or concessionaire.
2.10 Debts of Owner. In the performance of its duties as Manager,
--------------
Manager shall act solely on behalf of Owner in Manager's capacity as an
independent contractor. Except as provided in Section 2.1, all debts and
liabilities to third persons incurred by Manager (which are
6
<PAGE>
consistent with the terms and conditions of this Agreement), in the course of
its operation and management of the Project shall be the debts and liabilities
of the Owner only, and Manager shall not be liable for (and is hereby
indemnified in respect of) any such debts or liabilities, except to the extent
Manager has exceeded its authority hereunder.
ARTICLE 3
Management Fees
---------------
3.1 Management Fee and Other Reimbursable Expenses. Owner shall pay
----------------------------------------------
to Manager, during the term hereof, the Fee for the month on or before the 10th
day of each month. At such time as the Fee is paid, Owner shall also reimburse
Manager for the expenses identified on Exhibit B actually incurred by Manager
---------
during the prior month.
3.2 Place of Payment. All sums payable by Owner to Manager hereunder
----------------
shall be payable to Manager at the address set forth below Manager's signature,
unless the Manager shall from time to time specify a different address in
writing.
ARTICLE 4
Procedure for Handling Receipts and Operating Capital
-----------------------------------------------------
4.1 Bank Deposits. All monies received by Manager for or on behalf
-------------
of Owner shall be deposited by Manager with the Depository. Manager shall
maintain separate accounts for such funds consistent with the system of
accounting of the Project. All funds on deposit shall be and remain under the
sole and exclusive control of Manager, subject to the provisions hereof.
Concurrently, with its execution and delivery hereof, Owner has deposited with
Manager the Working Capital Reserve. All monies of Owner held by Manager
pursuant to the terms hereof shall be held by Manager in trust for the benefit
of Owner to be held and disbursed as herein provided, and shall not, unless
Owner otherwise has agreed or directed, be commingled with the funds of any
other person, including Manager or any affiliate of Manager. However, Owner has
specifically approved the use of Manager's Central Disbursement account and the
movement of Owner's funds into that account when payments are made. Except as
otherwise provided herein, the Manager shall be strictly liable for the proper
application of all funds of Owner held by Manager in accordance with the terms
of this Agreement.
4.2 Security Deposits. Subject to Owner's direction, a portion of
-----------------
security deposits collected in connection with the leasing of apartment units
shall be delivered to Owner who shall make same available to Manager for return
to tenants in accordance with their respective tenant leases to the extent Gross
Receipts are insufficient to repay same. Manager shall comply with all
applicable laws with respect to such security deposits. All funds held by
Manager representing security deposits shall at all times be the property of
Owner, subject to all applicable laws with respect thereto.
7
<PAGE>
4.3 Disbursement of Deposits. Manager shall disburse and pay all
------------------------
funds on behalf of and in the name of Owner in such amounts and at such times as
the same are required in connection with the ownership, maintenance and
operation of the Project on account of all taxes, assessments and charges of
every kind imposed by any governmental authority having jurisdiction over the
Project, and all costs and expenses of maintaining, operating and supervising
the operation of the Project, including, but not limited to, salaries, fringe
benefits and expenses of the Project Employees, insurance premiums, legal and
external accounting fees and the cost and expense of utilities, services and
concessions. If Owner requests Manager to place or create any services for the
Project which are not generally provided at other comparable apartment complexes
managed by Manager, Owner shall reimburse Manager for any costs of Manager's
staff allocable to the placement and/or creation of such services.
4.4 Working Capital. In addition to the funds derived from the
---------------
operation of the Project and the Working Capital Reserve, Owner shall furnish
and maintain in the operating accounts in the Depository such other funds as may
be necessary to discharge financial commitments required to efficiently operate
the Project, meet all payrolls and satisfy, before delinquency, all accounts
payable. Manager shall have no responsibility or obligation with respect to the
furnishing of such funds.
4.5 Excess Funds. Any operating funds in excess of the Working
------------
Capital Reserve shall be utilized at Owner's option, to pay debt service or
shall be transferred to a bank account opened and maintained solely by Owner;
provided, however, that Manager shall not be required to make any such transfer
if the transfer would reduce the balance of operating funds below an amount
equal to the Working Capital Reserve. Owner shall designate the bank in which
the operating funds are maintained, and Manager shall have no liability for loss
of operating funds due to insolvency of such institution, even though the amount
of funds maintained exceeds the available federal or other deposit insurance.
4.6 Authorized Signatories. In addition to any signatory designated
----------------------
by Owner, any persons from time to time designated by Manager shall be
authorized signatories on all bank accounts established by Manager hereunder and
shall have authority to make disbursements from such accounts. Funds may be
withdrawn from all bank accounts established by Manager, in accordance with this
Article IV, only upon the signature of an individual who has been granted that
authority by Manager or Owner. All persons who are authorized signatories or
who in any way handle funds for the Project shall be bonded in the minimum
amount of $500,000.00. Any expense relating to such bonds for on-site employees
shall be borne by Owner and for off-site employees by Manager.
8
<PAGE>
ARTICLE 5
Accounting
----------
5.1 Books and Records. On behalf of Owner, Manager shall keep, or shall
-----------------
supervise and direct the keeping, on an accrual basis, of a comprehensive system
of office records, books and accounts pertaining to the Project. Manager shall
use the computer accounting program designated by Owner or otherwise approved by
Owner. Such records shall be subject to examination by Owner or its authorized
agents, attorneys and accountants at all reasonable hours at the office where
such records are maintained.
5.2 Periodic Statements; Audits.
---------------------------
(a) On or before ten (10) days following the end of each calendar
month, Manager shall deliver or cause to be delivered to Owner (i) an unaudited
income and expense statement showing the results of operation of the Project for
the preceding calendar month and the Fiscal Year to-date; (ii) a comparison of
actual income and expenses with the income and expenses projected in the Budget;
and (iii) cash balances for reserves and operating accounts as of the last day
of such month. Manager shall at its option (i) preserve all invoices for a
period for four (4) years, or (ii) at the expiration of each Fiscal Year deliver
all invoices to Owner. Such statements and computations shall be prepared from
the books of account of the Project.
(b) Within twenty (20) days after the end of such Fiscal Year, Manager
will deliver or cause to be delivered to the Owner an income and expense
statement as at the end of such Fiscal Year, and the results of operation of the
Project during the preceding Fiscal Year.
(c) In the event that Owner or Owner's Mortgagee(s) requires an audit,
the Manager shall cooperate with the auditors. Owner shall pay all costs and
fees of the external auditors.
(d) Owner may request and Manager shall provide without further cost to
Owner, when available, such monthly, quarterly and/or annual leasing and
management reports that relate to the operations of the property as Manager
customarily provides the owners of properties it manages. If additional reports
are required, Manager shall quote Owner an additional fee for providing such
additional reports and, if Owner thereafter requests such reports, Owner shall
pay Manager such additional fee.
5.3 Expenses. All costs and expenses incurred in connection with the
--------
preparation of any statements, budgets, schedules, computations and other
reports expressly required under this Article 5 or under any other provisions of
this Agreement shall be borne by Manager. Any costs and expenses incurred in
connections with the preparation of any statement or reports not expressly
provided for under this Article V or any other provisions of this Agreement
shall be borne by Owner.
9
<PAGE>
ARTICLE 6
General Covenants of Owner and Manager
--------------------------------------
6.1 Operating Expenses. Except as otherwise provided herein, Owner
------------------
shall be solely liable for the costs and expenses of maintaining and operating
the Project incurred by Owner or by Manager in accordance with the provisions of
this Agreement, and shall pay, or Manager shall pay on Owner's behalf, all such
costs and expenses, including, without limitation, the salaries of all Project
Employees.
6.2 Owner's Right of Inspection and Review. Owner and its accountants,
--------------------------------------
attorneys and agents shall have the right to enter upon any part of the Project
at all reasonable times during the term of this Agreement for any reason,
including, without limitation, examining or inspecting the Project or examining
or making extracts of books and records of the Project, but any inspection shall
be done with as little disruption to the business of the Project as possible.
Books and records of the Project shall be kept, beginning the date hereof, at
the Project or at the location where any central accounting and bookkeeping
services are performed by Manager, but at all times shall be the property of
Owner.
6.3 Indemnity. Owner, at its sole cost and expense, shall defend,
---------
indemnify and hold harmless Manager, its partners, employees, agents,
contractors and affiliates against and from any and all claims, losses, damages,
liabilities and expenses, including, but not limited to, attorneys' fees,
arising out of injuries or damages to persons or property, by reason of any
cause whatsoever, occurring on or around the Project. If the Owner's general
liability policy does not automatically include the manager as an additional
insured, Owner agrees to list the Manager as an additional insured on any and
all liability insurance policies maintained by Owner with insurance to that
effect. The indemnity set forth herein shall not apply if the claim results from
either (i) Manager's gross negligence; (ii) Manager's willful misconduct; or
(iii) Manager's failure to comply with the provisions of this Agreement;
provided that these exceptions shall not apply with respect to any action taken
or policy implemented upon the Owner's written request after consultation with
the Manager.
6.4 Covenants Concerning Payment of Operating Expenses. Except as
--------------------------------------------------
otherwise provided herein, Owner covenants to pay all sums for operating
expenses in excess of Gross Receipts required to operate the Project upon
written notice and demand from Manager within ten (10) days after receipt of
written notice. Owner further recognizes that the Project may be operated in
conjunction with other phases and that costs may be allocated or shared between
such phases on a more efficient and less expensive method of operation. In such
regard, Owner consents to the allocation of costs and/or the sharing of any
expenses in an effort to save costs and operate the Project in a more efficient
manner.
10
<PAGE>
ARTICLE 7
Defaults: Termination Rights
-----------------------------
7.1 Default by Manager. Manager shall be deemed to be in default
------------------
hereunder in the event Manager shall fail to keep, observe or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed or performed by Manager, and such default shall (i) result from
Manager's grossly negligent acts or omissions or willful misconduct; (ii)
involve Manager's misappropriation or intentional misapplication of funds
received or held by Manager hereunder; or (iii) continue for a period of ten
(10) days after written notice thereof by Owner to Manager as to any default in
payment of money or thirty (30) days after notice thereof by Owner to Manager as
to any non-monetary default, or, if such non-monetary default cannot be cured
within thirty (30) days, then such additional period as shall be reasonable
provided that Manager is capable of curing same and has continuously attempted
to cure such default.
7.2 Remedies of Owner. Upon the occurrences of an event of default
-----------------
by Manager as specified in Section 7.1 hereof, Owner shall be entitled to
terminate this Agreement and Owner shall have the right to pursue any other
remedy it may have at law or in equity, it being expressly understood that
following such a termination, Owner shall have no further obligation to pay any
Fee due hereunder, however, notwithstanding such termination, Manager shall not
be relieved of any liability arising as a result of Manager's default and the
resulting termination of this Agreement. Upon such termination, Manager shall
deliver to Owner such funds, books and records of Owner then in the possession
or control of Manager.
7.3 Defaults by Owner. Owner shall be deemed to be in default hereunder
-----------------
in the event Owner shall fail to keep, observe or perform any material covenant,
agreement, term or provision of this Agreement to be kept, observed or performed
by Owner, and such default shall continue for a period of ten (10) days after
written notice thereof by Manager to Owner as to any default in payment of money
or thirty (30) days after notice thereof by Manager to Owner as to any non-
monetary default, or, if such non-monetary default cannot be cured within thirty
(30) days, then such additional period as shall be reasonable provided that
Owner is capable of curing same and has continuously attempted to cure such
default.
7.4 Remedies of Manager. Upon the occurrence of an event of default by
-------------------
Owner as specified in Section 7.3 hereof, Manager shall be entitled to terminate
this Agreement and upon any such termination by Manager pursuant to this Section
7.4, Manager shall have the right to pursue any other remedy it may have at law
or in equity, except that Owner shall continue to be obligated to pay and
perform all of its obligations which have accrued as of the date of termination
and provided further that Owner shall pay Manager a termination fee for the
month in which this Agreement is terminated equal to the Fee paid for the last
full calendar month preceding the month in which the Agreement was terminated.
7.5 Expiration of Term. Upon the expiration of the Term hereof pursuant
------------------
to Section 1.10 hereof, or the earlier termination hereof pursuant to any of
Sections 7.2, 7.3 and 9.10,
11
<PAGE>
Manager shall deliver to Owner all funds, including tenant security deposits,
books and records of Owner then in the possession or control of Manager, save
and except such sums as are then due and owing to Manager hereunder. Within
sixty (60) days following expiration or termination, Manager shall deliver to
Owner a final accounting, in writing, with respect to the operations of the
Project.
ARTICLE 8
Insurance
---------
8.1 Owner's Insurance Coverage. Owner, at its expense, will obtain and
--------------------------
keep in force commercially reasonable commercial general liability insurance and
insurance against physical damage (e.g., fire and extended coverage endorsement,
boiler, and machinery, etc.) and insurance against liability for loss, damage,
or injury to property or persons which might arise out of the occupancy,
management, operation or maintenance of the Project, all as set forth on Exhibit
-------
C attached hereto. Manager will be covered as an additional insured in all
liability insurance maintained with respect to the Project.
The Manager shall furnish whatever information is requested by Owner for
the purpose of establishing the placement of insurance coverages and shall aid
and cooperate in every reasonable way with respect to such insurance and any
loss thereunder. Owner shall include in its hazard policy covering the Project,
the personal property, fixtures, and equipment located thereon (owned by either
Manager or Owner), appropriate clauses pursuant to which the insurance carriers
shall waive the rights of subrogation with respect to losses payable under such
policies.
8.2 Manager's Insurance Coverage. Pursuant to the provisions of Section
----------------------------
4.3, Manager shall provide and maintain, so long as this Agreement is in force,
workmen's compensation insurance in full compliance with all applicable state
and federal laws and regulations covering all employees of Manager performing
work in respect of the Project operations and liability insurance complying with
the terms of Exhibit D.
---------
8.3 Subrogation and Indemnity or Deductible Provisions.
--------------------------------------------------
(a) Any insurance which is procured and maintained which in any way is
related to the Project or the authorized activities connected therewith is for
the sole benefit of the party securing such insurance and others named as
insureds, and Manager and Owner hereby release each other from all rights of
recovery under or through subrogation or otherwise for any loss or damage
insured under policies required by this Agreement, and agree that no insurer
shall have a right to recover any amounts paid in respect of a claim from Owner
or Manager, as the case may be, by way of subrogation to Manager's or Owner's
claim, assignment or otherwise, as the case may be. Any insurance which is
procured and maintained by Manager insuring the interest and property of Owner
may contain indemnity or deductible provisions and the cost of such provisions
shall be borne by the Owner.
12
<PAGE>
(b) Each of Owner and Manager hereby waives any and all claims and
demands of whatsoever nature against the other for damages, loss or injury to
the other's property in, upon or about the Project, except for claims and
demands arising out of the gross negligence or willful misconduct of Owner,
Manager, or either of their respective agents, employees, officers or
contractors.
8.4 Environmental Indemnification. Owner agrees to indemnify, defend
-----------------------------
and hold Manager and its partners, officers, employees and agents harmless from
any claims, judgments, damages (including consequential damages), penalties,
fines, costs, liabilities (including sums paid in settlement of claims) or
losses, direct or indirect, known or unknown, including without limit,
attorney's fees, consultant fees and expert fees, which Manager may incur as a
result of its being named as a "responsible party" or a "potential responsible
party" under any federal, state or local law governing or regulating the
environment for acts arising solely from its duties as manager under this
Agreement.
ARTICLE 9
Miscellaneous Provisions
------------------------
9.1 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State wherein jurisdiction of
the specific property is applicable.
9.2 Notices. Owner shall designate one person as Owner's representative
-------
in all dealings with Manager, who shall, until further notice, be the person
whose name is indicated beneath Owner's address set forth on the signature page
hereof. Any notice or communication hereunder must be in writing, and may be
given by registered or certified mail, and if given by registered or certified
mail, same shall be deemed to have been given and received when a registered or
certified letter containing such notice, properly addressed, with postage
prepaid, is deposited in the United States mail; and if given otherwise than by
registered mail, it shall be deemed to have been given when delivered to and
received by the party to whom it is addressed. Such notices or communications
shall be given to the parties hereto at the addresses set forth opposite the
names of the respective parties on the signature page hereof. Any party hereto
may at any time by giving ten (10) days' written notice to the other party
hereto designate any other address in substitution of the foregoing address to
which such notice or communication shall be given.
9.3 Severability. If any term, covenant or condition of this Agreement
------------
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement or such other
documents, or the application of such term, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, covenant or condition of this
Agreement or such other documents shall be valid and shall be enforced to the
fullest extent permitted by law.
13
<PAGE>
9.4 No Joint Venture or Partnership. Owner and Manager hereby agree
-------------------------------
that nothing contained herein or in any document executed in connection herewith
shall be construed as making Manager and Owner joint venturers or partners. In
no event shall Manager have any obligation or liability whatsoever with respect
to any debts, obligations or liabilities of Owner.
9.5 Modification; Termination. This Agreement terminates any and all
-------------------------
prior management agreements between Owner and Manager, relating to the Project,
and any amendment, modification, termination or release hereof may be effected
only by a written instrument executed by Manager and Owner.
9.6 Attorneys' Fees. Should either party employ an attorney or
---------------
attorneys to enforce any of the provisions hereof or to protect its interest in
any manner arising under this Agreement, or to recover damages for the breach of
this Agreement, the non-prevailing party in any action (the finality of which is
not legally contested) agrees to pay to the prevailing party all reasonable
costs, damages and expenses, including attorneys' fees, expended or incurred in
connection therewith.
9.7 Total Agreement. This Agreement (including any understanding
---------------
referred to in Section 9.14 hereof) is a total and complete integration of any
and all undertakings existing between Manager and Owner and supersedes any prior
oral or written agreements, promises or representations between them.
9.8 Competitive Projects. Manager agrees that in its management of
--------------------
ventures or projects which are competitive with the Project, Manager will
exercise good faith towards and deal fairly with Owner and the Project. Manager
agrees to notify Owner of any competitive projects.
9.9 Successors and Assigns. Owner has entered into this Agreement with
----------------------
Manager based on Manager's abilities and, accordingly, Manager may not assign
this Agreement without the prior written consent of Owner. Notwithstanding the
foregoing limitation on assignment, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
and assigns.
9.10 Sale of the Project. In the event the Project is sold, conveyed
-------------------
or transferred during the term hereof, Owner may assign this Agreement to the
purchaser of the Project, subject to obtaining Manager's prior written consent,
or Owner may terminate this Agreement, and Owner shall pay to Manager a
termination fee equal to the Fee payable hereunder for the month prior to the
month of termination. Manager, unless otherwise agreed, shall have no duties in
connection with any such sale except reasonable cooperation with brokers and
purchasers.
9.11 Termination. The term of this Agreement shall be for a period of
-----------
one year, and shall be automatically renewed for successive periods of one year
each unless either party provides thirty (30) days' notification of its intent
not to renew. Subject to the provisions of the
14
<PAGE>
sentences next following, either party may terminate this Agreement at any time
with or without cause by giving the other party at least thirty (30) days prior
notice in writing. Owner recognizes that Manager will sustain significant
start-up and mobilization costs, therefore, in the event that Owner terminates
this Agreement without cause within one (1) year from the date hereof, Manager
shall be entitled to receive a termination fee as a condition precedent to the
effectiveness of such termination, in an amount equal to three (3) times the
management fee which accrued during the thirty (30) days immediately prior to
the effective date of termination.
9.12 Prior Agreement. This Agreement supersedes and replaces all prior
---------------
agreements.
9.13 Limitation of Liability. Owner is a Maryland real estate investment
-----------------------
trust, and, in accordance with the declaration of trust of Owner, notice is
hereby given that neither the trustees, officers, employees nor shareholders of
Owner assume any personal liability for obligations entered into by or on behalf
of Owner.
ARTICLE 10
Subordination to Mortgages
--------------------------
10.1 Subordination. This Agreement and Manager's interest and rights
-------------
hereunder, are and shall be subject and subordinate at all times to the lien of
any first or second mortgage, whether now existing or hereafter created on or
against the Project, and all amendments, restatements, renewals, modifications,
consolidations, refinancings, assignments and extensions thereof ("Security
--------
Documents") without the necessity of any further instrument or act on the part
- ---------
of the Manager. Manager agrees, at the election of the holder of any such
Security Documents (the "Secured Party"), to attorn to the Secured Party. The
-------------
term "mortgage" as used herein shall be deemed to include deeds of trust,
security assignments and any other encumbrances, and any reference to the
"holder" of a Security Document shall be deemed to include the beneficiary under
a deed of trust. Notwithstanding the foregoing, nothing herein shall obligate
the Manager to continue its performance under this Agreement unless it continues
to be paid in accordance with the terms of this Agreement.
10.2 Rights after Events of Default. Upon an Event of Default (as such
------------------------------
term is defined in any Security Document), the Manager shall continue to perform
its obligation under this Agreement until the earlier to occur of (a) the
termination of this Agreement with respect to the Project or the termination of
this Agreement in its entirety by the Secured Party, either of which may occur
in the Secured Party's sole discretion, or (b) the Secured Party's (or its
assignee's or nominee's) acquisition of title to the Project through the
foreclosure, a deed-in-lieu thereof, or otherwise. On and after an Event of
Default, there shall be no material changes in the terms and conditions of this
Agreement without the prior written consent of the Secured Party having been
obtained, which consent may be arbitrarily withheld.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Management
Agreement as of the day and year first above written.
OWNER:
ADDRESS: SECURITY CAPITAL PACIFIC TRUST
125 Lincoln Avenue, 3rd Floor
Santa Fe, NM 87501
By: /s/ Patrick R. Whelan
-------------------------------
Name: Patrick R. Whelan
Its: Managing Director
MANAGER:
ADDRESS: SCG REALTY SERVICES
INCORPORATED
125 Lincoln Avenue, 3rd Floor
Santa Fe, NM 87501
By: /s/ Jeffrey A. Klopf
-------------------------------
Name: Jeffrey A. Klopf
Its: Senior Vice President
16
<PAGE>
EXHIBIT 10.8
AMENDED AND RESTATED CREDIT AGREEMENT
Dated
August 16, 1996
among
SECURITY CAPITAL PACIFIC TRUST
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Administrative Agent
WELLS FARGO REALTY ADVISORS FUNDING, INCORPORATED,
as Co-Agent
and
the Lenders
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions.................................................................... 1
-----------
2. The Loans...................................................................... 15
---------
2.1 Advances................................................................ 15
--------
2.2 Term Loan Conversion.................................................... 17
--------------------
2.3 Payments................................................................ 18
--------
2.4 Pro Rata Treatment...................................................... 20
------------------
2.5 Non-Receipt of Funds by the Agent....................................... 20
---------------------------------
2.6 Sharing of Payments, Etc................................................ 20
-------------------------
2.7 Fees.................................................................... 21
----
3. Conditions..................................................................... 22
----------
3.1 All Loans............................................................... 22
---------
3.2 First Loan.............................................................. 22
----------
3.3 Options Available....................................................... 23
-----------------
3.4 Designation and Conversion.............................................. 23
--------------------------
3.5 Special Provisions Applicable to Eurodollar Re Borrowings............... 24
---------------------------------------------------------
3.6 Funding Offices; Adjustments Automatic.................................. 27
--------------------------------------
3.7 Funding Sources, Payment Obligations.................................... 27
------------------------------------
3.8 Mitigation, Non-Discrimination.......................................... 27
------------------------------
4. Representations and Warranties................................................. 28
------------------------------
4.1. Organization............................................................ 28
------------
4.2 Financial Statements.................................................... 28
--------------------
4.3 Enforceable Obligations; Authorization.................................. 29
--------------------------------------
4.4 Other Debt.............................................................. 29
----------
4.5 Litigation.............................................................. 29
----------
4.6 Taxes................................................................... 29
-----
4.7 Regulation U............................................................ 29
------------
4.8 Subsidiaries............................................................ 30
------------
4.9 Securities Act of 1933.................................................. 30
----------------------
4.10 No Contractual or Corporate Restrictions................................ 30
----------------------------------------
4.11 Investment Company Act Not Applicable................................... 30
-------------------------------------
4.12 Public Utility Holding Company Act Not Applicable....................... 30
-----------------------------------------------
4.13 ERISA Not Applicable.................................................... 30
--------------------
5. Affirmative Covenants.......................................................... 30
---------------------
5.1 Taxes, Insurance, Existence, Regulations, Property, etc................. 30
------------------------------------------------------
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C>
5.2 Financial Statements and Information.................................... 31
------------------------------------
5.3 Financial Tests......................................................... 31
---------------
5.4 Inspection.............................................................. 32
----------
5.5 Further Assurances...................................................... 32
------------------
5.7 Insurance............................................................... 32
---------
5.8 Notice of Certain Matters............................................... 32
-------------------------
5.9 Use of Proceeds......................................................... 32
---------------
5.10 Expenses of and Claims Against the Agent and he Lenders................. 33
------------------------------------------------------
5.11 Legal Compliance; Indemnification....................................... 33
---------------------------------
5.12 Borrower's Performance.................................................. 34
----------------------
5.13 Professional Services................................................... 34
---------------------
5.14 Capital Adequacy........................................................ 34
----------------
5.15 Property Pool........................................................... 35
-------------
6. Negative Covenants............................................................. 36
------------------
6.1 Indebtedness............................................................ 36
------------
6.2 Mergers, Consolidations and Acquisitions of Assets...................... 36
------------------------------------------------
6.3 Redemption.............................................................. 37
----------
6.4 Nature of Business; Management.......................................... 37
------------------------------
6.5 Transactions with Related Parties....................................... 37
---------------------------------
6.6 Loans and Investments................................................... 37
---------------------
6.7 Limiting Agreements..................................................... 39
-------------------
6.8 Nature of Assets........................................................ 40
----------------
7. Events of Default and Remedies................................................. 40
------------------------------
7.1. Events of Default....................................................... 40
-----------------
7.2 Remedies Cumulative..................................................... 42
-------------------
8. The Agent...................................................................... 42
---------
8.1 Appointment, Powers and Immunities...................................... 42
----------------------------------
8.2 Reliance................................................................ 44
--------
8.3 Defaults................................................................ 44
--------
8.4 Rights as a Lender...................................................... 45
------------------
8.5 Indemnification......................................................... 45
---------------
8.6 Non-Reliance on Agent and Other Lenders................................. 45
---------------------------------------
8.7 Failure to Act.......................................................... 46
--------------
8.8 Resignation of Agent.................................................... 46
--------------------
8.9 No Partnership.......................................................... 47
--------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C> <C>
9. Renewal and Extension.......................................................... 47
---------------------
9.1 Procedure for Consideration of Renewal and Extension Requests........... 47
-------------------------------------------------------------
9.2 Conditions to Renewal and Extension..................................... 48
-----------------------------------
9.3 No Obligation to Renew and Extend....................................... 48
---------------------------------
10. Miscellaneous.................................................................. 49
-------------
10.1 No Waiver, Amendments................................................... 49
---------------------
10.2 Notices................................................................. 49
-------
10.3 Venue................................................................... 49
-----
10.4 Choice of Law........................................................... 50
-------------
10.5 Survival; Parties Bound; Successors and Assigns......................... 50
-----------------------------------------------
10.6 Counterparts............................................................ 52
------------
10.7 Usury Not Intended; Refund of Any Excess Payments....................... 52
-------------------------------------------------
10.8 Captions................................................................ 52
--------
10.9 Severability............................................................ 52
------------
10.10 Disclosures............................................................. 52
-----------
10.11 NO NOVATION............................................................. 53
-----------
10.12 LIMITATION OF LIABILITY................................................. 53
-----------------------
10.13 ENTIRE AGREEMENT........................................................ 53
----------------
</TABLE>
EXHIBITS
- --------
A - Officer's Certificate
B - Request for Loan
C - Note
C-1 - Swing Loan Note
D - Legal Opinion
(iii)
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement") is made and
---------
entered into as of August 16, 1996, by and among SECURITY CAPITAL PACIFIC TRUST,
a Maryland real estate investment trust (the "Borrower"), the financial
--------
institutions (including TCB and Wells Fargo Realty Advisors Funding,
Incorporated, the "Lenders") which are now or may hereafter become signatories
-------
hereto, TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association
("TCB"), as administrative agent for Lenders (in such capacity, "Agent"), and
--- -----
WELLS FARGO REALTY ADVISORS FUNDING, INCORPORATED, as co-agent for Lenders (in
such capacity, "Co-Agent").
--------
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Borrower, the Agent, the Co-Agent and certain Lenders (the
"Existing Lenders") entered into an Amended and Restated Credit Agreement dated
- -----------------
as of August 11, 1995 (the "Original Credit Agreement"); and
-------------------------
WHEREAS, the Borrower, the Agent, the Co-Agent, and the Lenders desire to
amend and restate the Original Credit Agreement upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE in consideration of the mutual covenants, agreements and
undertakings herein contained, the parties hereto agree as follows:
1. Definitions.
-----------
Unless a particular word or phrase is otherwise defined or the context
otherwise requires, capitalized words and phrases used in Credit Documents have
the meanings provided below.
Accounts, Equipment and Inventory shall have the respective meanings
-------- --------- ---------
assigned to them in the Texas Business and Commerce Code in force on the date
the document using such term was executed.
Adjusted Eurodollar Interbank Rate shall mean, with respect to each
----------------------------------
Interest Period applicable to a Eurodollar Rate Borrowing, a rate per annum
equal to the quotient, expressed as a percentage, of (a) the Eurodollar
Interbank Rate with respect to such Interest Period divided by (b) 1.0000 minus
the Eurodollar Reserve Requirement in effect on each day during such Interest
Period.
Affiliate shall mean any Person controlling, controlled by or under common
---------
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under
<PAGE>
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or otherwise.
Annual Audited Financial Statements shall mean the annual financial
-----------------------------------
statements of a Person, including all notes thereto, which statements shall
include a balance sheet as of the end of such fiscal year and an income
statement and a statement of cash flows, all setting forth in comparative form
the corresponding figures from the previous fiscal year, all prepared in
conformity with Generally Accepted Accounting Principles and accompanied by a
report and opinion of independent certified public accountants satisfactory to
the Agent, which shall state that such financial statements, in the opinion of
such accountants, present fairly the financial position of such Person as of the
date thereof and the results of its operations for the period covered thereby in
conformity with Generally Accepted Accounting Principles. Such statements shall
be accompanied by a certificate of such accountants that in making the
appropriate audit and/or investigation in connection with such report and
opinion, such accountants did not become aware of any Default or, if in the
opinion of such accountant any such Default exists, a description of the nature
and status thereof. The Annual Audited Financial Statements shall be prepared
on a consolidated basis in accordance with Generally Accepted Accounting
Principles.
Applicable Margin shall mean the following percentage which will be in
-----------------
effect whenever and for so long as the Borrower has received the corresponding
S&P Rating or Moody's Rating, whichever is lower:
<TABLE>
<CAPTION>
S&P RATING/ APPLICABLE MARGIN
----------- -----------------
MOODY'S RATING EURODOLLAR RATE BASE RATE
-------------- ---------------- ---------
BORROWING BORROWING
------------- ---------
<S> <C> <C>
A/A2 or better 0.750% 0
A-/A3 0.875% 0
BBB+/Baa1 1.000% 0
BBB/Baa2 1.125% 0
BBB-/Baa3 1.250% 0
Worse than BBB-/Baa3 1.500% .25%;
</TABLE>
Base Rate shall mean for any day a rate per annum equal to the Applicable
---------
Margin on that day plus the greater on a daily basis of (a) the Prime Rate for
that day, or (b) the Federal Funds Effective Rate for that day plus one-half of
one percent (1/2%).
-2-
<PAGE>
Base Rate Borrowing shall mean that portion of the principal balance of the
-------------------
Loans at any time bearing interest at the Base Rate.
Borrower's REIT Manager shall mean Security Capital Pacific Incorporated,
-----------------------
manager to the Borrower, or any successor manager to the Borrower permitted by
this Agreement.
Business Day shall mean a day other than (a) a day when the main office of
------------
the Agent is not open for business, or (b) a day that is a federal banking
holiday in the United States of America.
Ceiling Rate shall mean, on any day, the maximum nonusurious rate of
------------
interest permitted for that day by whichever of applicable federal or Texas laws
permits the higher interest rate, stated as a rate per annum. On each day, if
any, that Chapter One establishes the Ceiling Rate, the Ceiling Rate shall be
the "indicated rate ceiling" (as defined in Chapter One) for that day. The Agent
may from time to time, as to current and future balances, implement any other
ceiling under Chapter One by notice to the Borrower, if and to the extent
permitted by Chapter One. Without notice to the Borrower or any other person or
entity, the Ceiling Rate shall automatically fluctuate upward and downward as
and in the amount by which such maximum nonusurious rate of interest permitted
by applicable law fluctuates.
Chapter One shall mean Chapter One of Title 79, Texas Revised Civil
-----------
Statutes, 1925, as amended.
Code shall mean the Internal Revenue Code of 1986, as amended, as now or
----
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
Commitment shall mean the commitment of the Lenders to lend funds under
----------
Section 2.1 of this Agreement, other than Swing Loans.
- -----------
Construction Interest shall mean Borrower's interest expense for the
---------------------
construction of projects, which is capitalized in accordance with Generally
Accepted Accounting Principles; provided, however, that notwithstanding
Generally Accepted Accounting Principles, interest applicable to each building
under construction shall be capitalized as to such building only until
substantial completion thereof and such building is ready for its intended use
and thereafter interest attributable thereto shall be expensed.
Conversion Date has the meaning given to it in Section 2.2 hereof.
--------------- -----------
-3-
<PAGE>
Coverage Ratio shall mean the ratio of (a) the Borrower's Funds From
--------------
Operations plus all of the Borrower's Interest Expense for the period used to
calculate Funds From Operations, to (b) dividends of any kind or character or
other proceeds paid or payable with respect to any Disqualified Stock plus all
of the Borrower's Interest Expense, in each case for the period used to
calculate the Funds From Operations.
Credit Documents shall mean this Agreement, the Notes, all instruments,
----------------
certificates and agreements now or hereafter executed or delivered to the Agent
or the Lenders pursuant to any of the foregoing, and all amendments,
modifications, renewals, extensions, increases and rearrangements of, and
substitutions for, any of the foregoing.
Debt to Tangible Net Worth Ratio shall mean the ratio of Indebtedness to
--------------------------------
Tangible Net Worth.
Debt to Total Asset Value Ratio shall mean the ratio (expressed as a
-------------------------------
percentage) of Indebtedness to Total Asset Value.
Determination Date shall mean the date that is one (1) year prior to the
------------------
then existing Revolving Credit Termination Date.
Disqualified Stock shall mean any of the Borrower's capital stock which by
------------------
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable or exercisable) (a) matures or is subject to mandatory
redemption, pursuant to a sinking fund obligation or otherwise, (b) is
convertible into or exchangeable or exercisable for Indebtedness or
Disqualified Stock, (c) is redeemable at the option of the holder of such stock,
or (d) otherwise requires any payments by Borrower, in each case on or before
the Maturity Date.
Eligible Institution shall mean a commercial bank or a finance company,
--------------------
insurance company or other financial institution which is regularly engaged in
making, purchasing or investing in loans, but shall not include any Person which
is an Affiliate of the Borrower or of the Borrower's REIT Manager.
Equity Percentage shall mean the following percentage for each
-----------------
Unconsolidated Affiliate which will be in effect whenever and for so long as the
Unconsolidated Affiliate Ratio for that Unconsolidated Affiliate equals the
corresponding amount:
-4-
<PAGE>
Unconsolidated Affiliate Ratio Equity Percentage
------------------------------ -----------------
1.5:1.0 or less 100%
Greater than 1.5:1.0 but less 50%
than or equal to 1.86:1.0
Greater than 1.86:1.0 0%
Eurodollar Business Day shall mean a Business Day on which transactions in
-----------------------
United States dollar deposits between banks may be carried on in the London
interbank dollar market.
Eurodollar Interbank Rate shall mean, for each Interest Period, the rate of
-------------------------
interest per annum, rounded, if necessary, to the next highest whole multiple of
one-sixteenth per cent (1/16%), quoted by Agent at or before 11:00 a.m., London
time (or as soon thereafter as practicable), on the date two (2) Eurodollar
Business Days before the first day of such Interest Period, to be the arithmetic
average of the prevailing rates per annum at the time of determination and in
accordance with the then existing practice in the London interbank dollar
market, for the offering to Agent by one or more prime banks selected by Agent
in its sole discretion, in the London interbank dollar market, of deposits in
United States dollars for delivery on the first day of such Interest Period and
having a maturity equal to the length of such Interest Period and in an amount
equal (or as nearly equal as may be) to the Eurodollar Rate Borrowing to which
such Interest Period relates. Each determination by Agent of the Eurodollar
Interbank Rate shall be prima facie evidence thereof.
Eurodollar Rate shall mean for any day a rate per annum equal to the sum of
---------------
the Applicable Margin for that day plus the Adjusted Eurodollar Interbank Rate
in effect on the first day of the Interest Period for the applicable Eurodollar
Rate Borrowing. Each Eurodollar Rate is subject to adjustments for reserves,
insurance assessments and other matters as provided for in Section 3.5 hereof.
-----------
Eurodollar Rate Borrowing shall mean that portion of the principal balance
-------------------------
of the Loans at any time bearing interest at a Eurodollar Rate.
Eurodollar Reserve Requirement shall mean, on any day, that percentage
------------------------------
(expressed as a decimal fraction and rounded, if necessary, to the next highest
one ten thousandth) which is in effect on such day for determining all reserve
requirements (including, without limitation, basic, supplemental, marginal and
emergency reserves) applicable to "Eurocurrency liabilities," as
-5-
<PAGE>
currently defined in Regulation D, all as specified by any Governmental
Authority, including but not limited to those imposed under Regulation D. Each
determination of the Eurodollar Reserve Requirement by Agent shall be prima
facie evidence thereof.
Event of Default shall mean any of the events specified as an event of
----------------
default in Section 7 of this Agreement, and Default shall mean any of such
--------- -------
events, whether or not any requirement for notice, grace or cure has been
satisfied.
Federal Funds Effective Rate shall to the extent necessary be determined by
----------------------------
the Agent separately for each day and shall for each such day be a rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for each such day (or if any such day is not a
Business Day, for the next immediately preceding Business Day) by the Federal
Reserve Bank of New York, or if the weighted average of such rates is not so
published for any such day which is a Business Day, the average of the
quotations for any such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent.
Fixed Charge Coverage Ratio shall mean the ratio of (a) the Borrower's
---------------------------
Funds From Operations plus all of the Borrower's Interest Expense for the period
used to calculate Funds From Operations, less Unit Capital Expenditures, to (b)
dividends of any kind or character or other proceeds paid or payable with
respect to any Disqualified Stock, plus all of the principal payable and
principal paid on the Borrower's Indebtedness other than (i) in the case of the
Borrower, any scheduled principal payments on the Term Loans and (ii) any
regularly scheduled principal payments on any Indebtedness which pays such
Indebtedness in full, to the extent the amount of such final scheduled principal
payment is greater than the scheduled principal payment immediately preceding
such final scheduled principal payment, plus all of the Borrower's Interest
Expense, in each case for the period used to calculate the Funds From
Operations.
Funding Loss shall mean, with respect to (a) Borrower's payment or
------------
prepayment of principal of a Eurodollar Rate Borrowing on a day other than the
last day of the applicable Interest Period; (b) Borrower's failure to borrow a
Eurodollar Rate Borrowing on the date specified by Borrower; (c) Borrower's
failure to make any prepayment of the Loans (other than Base Rate Borrowings) on
the date specified by Borrower, or (d) any cessation of a Eurodollar Rate to
apply to the Loans or any part thereof pursuant to Section 3.5, in each case
-----------
whether voluntary or involuntary, any direct loss, expense, penalty, premium or
liability incurred by any Lender (including but not limited to any loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by a Lender to fund or maintain a Loan).
-6-
<PAGE>
Funds From Operations shall mean gross cash revenues (excluding unforfeited
---------------------
security deposits) actually received by the Borrower, less all cash
disbursements characterized as expenses and all proper charges against income,
plus depreciation of Property and deferred taxes, reserves and other non-cash
charges, all determined in accordance with Generally Accepted Accounting
Principles; provided, that there shall not be included in such revenues (i) any
--------
proceeds of any insurance policy other than rental or business interruption
insurance received by the Borrower, (ii) any gain which is classified as
"extraordinary" in accordance with Generally Accepted Accounting Principles, or
(iii) any capital gains. Funds From Operations will be calculated, on an
annualized basis, on the four (4) calendar quarters immediately preceding the
date of the calculation. Funds From Operations shall not be increased or
decreased by gains or losses from sales of Property. Funds From Operations
shall be calculated on a consolidated basis in accordance with Generally
Accepted Accounting Principles.
Generally Accepted Accounting Principles shall mean, as to a particular
----------------------------------------
Person, such accounting practice as, in the opinion of the independent
accountants of recognized national standing regularly retained by such Person
and acceptable to the Agent, conforms at the time to generally accepted
accounting principles, consistently applied. Generally Accepted Accounting
Principles means those principles and practices (a) which are recognized as such
by the Financial Accounting Standards Board, (b) which are applied for all
periods after the date hereof in a manner consistent with the manner in which
such principles and practices were applied to the most recent audited financial
statements of the relevant Person furnished to the Lenders or where a change
therein has been concurred in by such Person's independent auditors, and (c)
which are consistently applied for all periods after the date hereof so as to
reflect properly the financial condition, and results of operations and changes
in financial position, of such Person. If there is a change in such accounting
practice as to the Borrower that could affect the Borrower's ability to comply
with the terms of this Agreement, the parties hereto agree to review and discuss
such changes in accounting practice and the terms of this Agreement for a period
of no more than thirty (30) days with a view to amending this Agreement so that
the financial measures of the Borrower's operating performance and financial
condition are substantially the same after such change as they were immediately
before such change.
Governmental Authority shall mean any foreign governmental authority, the
----------------------
United States of America, any State of the United States and any political
subdivision of any of the foregoing, and any agency, department, commission,
board, bureau, court or other tribunal having jurisdiction over the Agent, any
Lender or the Borrower or their respective Property.
Historical Value shall mean the purchase price of Property (including
----------------
improvements) and ordinary related purchase transaction costs, plus the cost of
subsequent capital improvements made
-7-
<PAGE>
by the Borrower, less any provision for losses, all determined in accordance
with Generally Accepted Accounting Principles. If the Property is purchased as a
part of a group of properties, the Historical Value shall be calculated based
upon a reasonable allocation of the aggregate purchase price by the Borrower for
all purposes, and consistent with Generally Accepted Accounting Principles.
Indebtedness shall mean and include, without duplication (1) all
------------
obligations for borrowed money, (2) all obligations evidenced by bonds,
debentures, notes or other similar agreements, (3) all obligations to pay the
deferred purchase price of Property or services, except trade accounts payable
arising in the ordinary course of business (unless included in (6) below), (4)
---
all guaranties, endorsements and other contingent obligations in respect of, or
any obligations to purchase or otherwise acquire, Indebtedness of others, (5)
all Indebtedness secured by any Lien existing on any interest of the Person with
respect to which Indebtedness is being determined in Property owned subject to
such Lien whether or not the Indebtedness secured thereby shall have been
assumed, and (6) accounts payable, dividends of any kind or character or other
proceeds payable with respect to any stock and accrued expenses which in the
aggregate are in excess of five percent (5%) of the undepreciated value of the
assets of the Borrower, in each case including Non-recourse Debt. Indebtedness
shall be calculated on a consolidated basis in accordance with Generally
Accepted Accounting Principles.
Interest Expense shall mean all of a Person's paid, accrued or capitalized
----------------
interest expense on such Person's Indebtedness (whether direct, indirect or
contingent, and including, without limitation, interest on all convertible
debt), but excluding Construction Interest.
Interest Options shall mean the Base Rate and the Eurodollar Rate, and
----------------
"Interest Option" means either of them.
- ----------------
Interest Payment Dates shall mean the first (1st) day of each calendar
----------------------
month and the Maturity Date, for both Base Rate Borrowings and Eurodollar Rate
Borrowings.
Interest Period shall mean, for each Eurodollar Rate Borrowing, a period
---------------
commencing on the date such Eurodollar Rate Borrowing was made and ending on the
numerically corresponding day which is, subject to availability, (a) one (1),
two (2), three (3) or six (6) months thereafter, or (b) seven (7), fourteen (14)
or twenty-one (21) days thereafter for no more than three (3) time periods each
calendar year in connection with payments of the Loans because of debt and/or
equity sales by the Borrower, changes in the Lender Commitments in connection
with an extension pursuant to Section 9.1 hereof or sales of major assets by the
-----------
Borrower; provided, (v) any Interest Period which would otherwise end on a day
--------
which is not a Eurodollar Business
-8-
<PAGE>
Day shall be extended to the next succeeding Eurodollar Business Day, unless
such Eurodollar Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Eurodollar Business Day; (w) any
Interest Period which begins on the last Eurodollar 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 end on the last
Eurodollar Business Day of the appropriate calendar month; (x) no Interest
Period shall ever extend beyond the Maturity Date; and (y) Interest Periods
shall be selected by Borrower in such a manner that the Interest Period with
respect to any portion of the Loans which shall become due shall not extend
beyond such due date.
Legal Requirement shall mean any law, statute, ordinance, decree,
-----------------
requirement, order, judgment, rule, regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority.
Lender Commitment means, for any Lender, the amount set forth opposite such
-----------------
Lender's name on its signature page of this Agreement, or as may hereafter
become a signatory hereto.
Lien shall mean any mortgage, pledge, charge, encumbrance, security
----
interest, collateral assignment or other lien or restriction of any kind,
whether based on common law, constitutional provision, statute or contract, and
shall include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions.
Loans shall mean the Loans described in Sections 2.1 and 2.2 hereof. Loan
----- ------------ --- ----
shall mean any such Loan.
Majority Lenders shall mean the Lenders with an aggregate amount of at
----------------
least sixty-six and 67/100 percent (66.67%) of the amount of the Commitment then
outstanding.
Material Adverse Change shall mean a change which could reasonably be
-----------------------
expected to have a Material Adverse Effect.
Material Adverse Effect means a material adverse effect on (a) the
-----------------------
financial condition, or results of operations of Borrower and its Subsidiaries
taken as a whole, (b) the ability of Borrower to perform its obligations under
any Credit Document to which it is a party, (c) the validity or enforceability
of any of such Credit Documents, or (d) the rights and remedies of Lenders and
Agent under any of the Credit Documents.
-9-
<PAGE>
Maturity Date shall mean (a) the Revolving Credit Termination Date prior to
-------------
any conversion of the Loans to the Term Loans, and (b) the Termination Date as
to the Term Loans.
Moody's Rating shall mean the senior unsecured debt rating from time to
--------------
time received by the Borrower from Moody's Investor Service.
Net Operating Income shall mean, for any income producing operating
--------------------
properties, the difference between (a) any cash rentals, proceeds and other
income received from such Property (but excluding security or other deposits,
late fees, early lease termination or other penalties, or other income of a non-
recurring nature) during the determination period, less (b) all cash costs and
----
expenses (excluding interest expense and any expenditures that are capitalized
in accordance with Generally Accepted Accounting Principles) incurred as a
result of, or in connection with, or properly allocated to, the operation or
leasing of such Property during the determination period. Net Operating Income
shall be calculated on a consolidated basis in accordance with Generally
Accepted Accounting Principles.
Non-recourse Debt shall mean any Indebtedness the payment of which the
-----------------
Borrower or any of its Subsidiaries is not obligated to make other than to the
extent of any security therefor.
Notes shall mean the promissory notes of the Borrower described in Section
----- -------
2.1 hereof, including the Swing Loan Note, any and all renewals, extensions,
- ---
modifications, rearrangements and replacements thereof and any and all
substitutions therefor, and Note shall mean any one of them.
----
Obligations shall mean, as at any date of determination thereof, the sum of
-----------
(a) the aggregate amount of Loans outstanding hereunder plus (b) all other
liabilities, obligations and Indebtedness of any Parties under any Credit
Document.
Officer's Certificate shall mean a certificate in the form attached hereto
---------------------
as Exhibit A.
---------
Operating Sub-Pool Value means, with respect to properties in the Operating
------------------------
Sub-Pool (as defined in Section 5.15 hereof), for the period being measured, the
------------
lesser of (a) the aggregate Historical Value of such properties; and (b) the sum
of (i) the aggregate Net Operating Income of such properties that during such
measurement period have reached the beginning of the first full calendar quarter
after the Stabilization Date (the "Calculation Date") ((1) beginning with the
----------------
Calculation Date until the end of the third full calendar quarter after the
Stabilization Date, based on the annualized Net Operating Income from the
Calculation Date until the time of measurement, and (2) after the third full
calendar quarter after the Stabilization Date, based on the immediately
-10-
<PAGE>
preceding twelve (12) calendar month period) divided by nine and one-fourth
percent (9.25%), plus (ii) the Historical Value of such properties that have not
reached the Calculation Date during the measurement period.
Organizational Documents shall mean, with respect to a corporation, the
------------------------
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture, and with respect to a trust,
the instrument establishing such trust; in each case including any and all
modifications thereof as of the date of the Credit Document referring to such
Organizational Document and any and all future modifications thereof which are
consented to by the Lenders.
Opinion Letters shall mean the opinion letters of independent counsel for
---------------
the Borrower, each in Proper Form.
Parties shall mean all Persons other than the Agent, the Co-Agent or any
-------
Lender executing any Credit Document.
Past Due Rate shall mean, on any day, a rate per annum equal to the Ceiling
-------------
Rate for that day, or only if applicable law imposes no maximum nonusurious rate
of interest for that day, then the Past Due Rate for that day shall be a rate
per annum equal to the Base Rate plus an additional three percent (3%) per
annum, but in any event not to exceed the Ceiling Rate.
Percentage shall mean the amount, expressed as a percentage, of each Lender
----------
Commitment as compared to the Commitment, set forth opposite the Lender's name
on its signature page of this Agreement, or as may hereafter become signatory
hereto.
Permitted Encumbrances shall mean (a) encumbrances consisting of zoning
----------------------
restrictions, easements, or other restrictions on the use of real property,
provided that such items do not materially impair the use of such property for
the purposes intended and none of which is violated in any material respect by
existing or proposed structures or land use; (b) the following: (i) Liens for
taxes not yet due and payable, or being diligently contested in good faith, or
where no Material Adverse Effect could reasonably be expected to result from
such nonpayment or the imposition of such Lien; or (ii) materialmen's,
mechanic's, warehousemen's and other like Liens arising in the ordinary course
of business, securing payment of Indebtedness whose payment is not yet due, or
that are being contested in good faith by appropriate proceedings diligently
conducted, and for or against which the Borrower has established adequate
reserves in accordance with Generally Accepted Accounting Principles; (c) Liens
for taxes, assessments and
-11-
<PAGE>
governmental charges or assessments that are being contested in good faith by
appropriate proceedings diligently conducted, and for or against which the
Borrower has established adequate reserves in accordance with Generally Accepted
Accounting Principles; (d) Liens on real property which are insured around or
against by title insurance; (e) Liens securing assessments or charges payable to
a property owner association or similar entity which assessments are not yet due
and payable or are being diligently contested in good faith; and (f) Liens
securing this Agreement and Indebtedness hereunder.
Person shall mean any individual, corporation, trust, unincorporated
------
organization, Governmental Authority or any other form of entity.
Prime Rate shall mean, as of a particular date, the prime rate of interest
----------
per annum most recently determined by the Agent and thereafter entered in the
minutes of the Agent's Loan and Discount Committee, automatically fluctuating
upward or downward with and at the time specified in each such determination
without notice to Borrower or any other Person; each change in the Prime Rate
shall be effective on the date such change is determined; which Prime Rate may
not necessarily represent the Agent's lowest or best rate actually charged to a
customer.
Proper Form shall mean in form and substance satisfactory to the Lenders.
-----------
Property shall mean any interest in any kind of property or asset, whether
--------
real, personal or mixed, tangible or intangible.
Quarterly Unaudited Financial Statements shall mean the quarterly financial
----------------------------------------
statements of a Person, including all notes thereto, which statements shall
include a balance sheet as of the end of such quarter and an income statement
for such fiscal quarter, and for the fiscal year to date, a statement of cash
flows for such quarter and for the fiscal year to date, subject to normal year-
end adjustments, and a detailed listing of the Borrower's Property and the
Historical Value thereof, all setting forth in comparative form the
corresponding figures for the corresponding fiscal period of the preceding year
(or, in the case of the balance sheet, the end of the preceding fiscal year),
prepared in accordance with Generally Accepted Accounting Principles except that
the Quarterly Unaudited Financial Statements may contain condensed footnotes as
permitted by regulations of the United States Securities and Exchange
Commission, and certified as true and correct by a managing director or vice
president of Borrower's REIT Manager. The Quarterly Unaudited Financial
Statements shall be prepared on a consolidated basis in accordance with
Generally Accepted Accounting Principles.
-12-
<PAGE>
Rate Designation Date shall mean 12:00 noon, Houston, Texas time, on the
---------------------
date three (3) Eurodollar Business Days preceding the first day of any proposed
Interest Period.
Regulation D shall mean Regulation D of the Board of Governors of the
------------
Federal Reserve System from time to time in effect and shall include any
successor or other regulation relating to reserve requirements applicable to
member lenders of the Federal Reserve System.
Request for Loan shall mean a written request substantially in the form of
----------------
Exhibit B.
- ---------
Revolving Credit Termination Date shall mean the earlier to occur of (a)
---------------------------------
August 13, 1998 as the same may hereafter be accelerated pursuant to the
provisions of any of the Credit Documents, and (b) the Conversion Date.
S&P Rating shall mean the senior unsecured debt rating from time to time
----------
received by the Borrower from Standard & Poor's Corporation.
Stabilization Date shall mean, with respect to a property, the earlier of
------------------
(a) twelve (12) months from the date of acquisition of an income producing
property by the Borrower or twelve (12) months after substantial completion of
construction or development of a new construction or development property, and
(b) the date on which the occupancy level is at least ninety percent (90%).
Stated Rate shall, on any day, mean whichever of the Base Rate or the
-----------
Eurodollar Rate has been designated and provided pursuant to this Agreement;
provided that, if on any day such rate shall exceed the Ceiling Rate for that
- --------
day, the Stated Rate shall be fixed at the Ceiling Rate on that day and on each
day thereafter until the total amount of interest accrued at the Stated Rate on
the unpaid principal balance of the Notes equals the total amount of interest
which would have accrued if there had been no Ceiling Rate. If the Notes mature
(or are prepaid) before such equality is achieved, then, in addition to the
unpaid principal and accrued interest then owing pursuant to the other
provisions of the Credit Documents, Borrower promises to pay on demand to the
order of the holders of the Notes interest in an amount equal to the excess (if
any) of (a) the lesser of (i) the total interest which would have accrued on the
Notes if the Stated Rate had been defined as equal to the Ceiling Rate from time
to time in effect and (ii) the total interest which would have accrued on the
Notes if the Stated Rate were not so prohibited from exceeding the Ceiling Rate,
over (b) the total interest actually accrued on the Notes to such maturity (or
prepayment) date.
-13-
<PAGE>
Subsidiary shall mean, as to a particular parent entity, any entity of
----------
which more than fifty percent (50%) of the indicia of voting equity or ownership
rights (whether outstanding capital stock or otherwise) is at the time directly
or indirectly owned by, such parent entity, or by one or more of its other
Subsidiaries.
Swing Loan shall mean a Loan made pursuant to Section 2.1(c) hereof.
---------- --------------
Swing Loan Note shall mean that certain promissory note dated of even date
---------------
herewith in the original principal amount of $75,000,000.00 executed by the
Borrower payable to the order of TCB.
Tangible Net Worth shall mean total assets (valued at cost without
------------------
deduction for depreciation, and including the book value of equity investments
in each Unconsolidated Affiliate multiplied by the Equity Percentage for that
Unconsolidated Affiliate), less (1) all intangibles and (2) all liabilities
(including contingent and indirect liabilities), all determined in accordance
with Generally Accepted Accounting Principles. The term "intangibles" shall
include, without limitation, (i) deferred charges, (ii) the amount of any write-
up in the book value of any assets contained in any balance sheet resulting from
revaluation thereof or any write-up in excess of the cost of such assets
acquired, and (iii) the aggregate of all amounts appearing on the assets side of
any such balance sheet for franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, goodwill, treasury stock,
experimental or organizational expenses and other like intangibles. The term
"liabilities" shall include, without limitation, (i) Indebtedness secured by
Liens on Property of the Person with respect to which Tangible Net Worth is
being computed whether or not such Person is liable for the payment thereof,
(ii) deferred liabilities, and (iii) obligations under leases which have been
capitalized. Tangible Net Worth shall be calculated on a consolidated basis in
accordance with Generally Accepted Accounting Principles.
Taxes shall mean any tax, levy, impost, duty, charge or fee.
-----
Term Loan has the meaning given it in Section 2.2 hereof.
--------- -----------
Termination Date shall mean the date three (3) years after the Conversion
----------------
Date, as the same may hereafter be accelerated pursuant to the provisions of any
of the Credit Documents.
Total Asset Value shall mean the sum of (a) the Borrower's aggregate Net
-----------------
Operating Income (based on the immediately preceding calendar quarter and
annualized, and adjusted to exclude the Net Operating Income from any properties
not owned for the full quarter and the properties described in (iii) below)
-----
divided by eight and three-fourths percent (8.75%), plus (b)
-14-
<PAGE>
the total book value of (i) properties acquired during the immediately preceding
calendar quarter, (ii) land not yet being developed, and (iii) land (and any
improvements being constructed thereon) on which the construction of new income
producing improvements has been commenced and is continuing and for up to six
(6) months after completion of all improvements thereon, plus (c) the amount of
any cash and cash equivalents, excluding tenant security and other restricted
deposits, plus (d) the total book value of all of the Borrower's other assets
not described in (a), (b) or (c) above, excluding all intangibles and all equity
--- --- ---
investments in Unconsolidated Affiliates, plus (e) the total book value of the
Borrower's equity investments in each Unconsolidated Affiliate multiplied by the
Equity Percentage for that Unconsolidated Affiliate. Total Asset Value shall be
calculated on a consolidated basis in accordance with Generally Accepted
Accounting Principles.
Unconsolidated Affiliate shall mean, in respect of any Person, any other
------------------------
Person in whom such Person holds a voting equity or ownership interest and whose
financial results would not be consolidated under Generally Accepted Accounting
Principles with the financial results of such Person on the consolidated
financial statements of such Person.
Unconsolidated Affiliate Ratio shall mean, for each Unconsolidated
------------------------------
Affiliate, the ratio of the Indebtedness of the Unconsolidated Affiliate to the
Tangible Net Worth of the Unconsolidated Affiliate.
Unit Capital Expenditure shall mean, on an annual basis, an amount equal to
------------------------
the product of (a) the number of apartment units contained in each completed,
operating Property owned by Borrower and any Subsidiary as of the last day of
each of the immediately preceding five (5) calendar quarters, divided by five
(5); and multiplied by (b) $200.00.
The following terms shall have the respective meanings ascribed to them in
the Uniform Commercial Code as enacted and in force in the State of Texas on the
date hereof:
accessions, continuation statement, fixtures, general intangibles,
proceeds, security interest and security agreement.
2. The Loans.
---------
2.1 Advances. (a) Subject to the terms and conditions of this
--------
Agreement, each Lender severally agrees to make Loans (other than Swing Loans)
prior to the Revolving Credit Termination Date to the Borrower not to exceed an
amount (in the aggregate, the "Commitment") at any one time outstanding equal to
----------
the Lender's Lender Commitment. Each such request for a Loan by Borrower shall
be deemed a request for a Loan from each Lender equal to such
-15-
<PAGE>
Lender's Percentage of the aggregate amount so requested, and such aggregate
amount shall be in an amount at least equal to $1,000,000.00 and equal to a
multiple of $250,000.00, or the difference between the Commitment and the
aggregate principal balance of the Notes, whichever is less. Each repayment of
the Loans shall be deemed a repayment of each Lender's Loan equal to such
Lender's Percentage of the amount so repaid. The obligations of the Lenders
hereunder are several and not joint, and the preceding two sentences will give
rise to certain inappropriate results if special provisions are not made to
accommodate the failure of a Lender to fund a Loan as and when required by this
Agreement; therefore, notwithstanding anything herein to the contrary, (A) no
Lender shall be required to make Loans at any one time outstanding in excess of
such Lender's Percentage of the Commitment and (B) if a Lender fails to make a
Loan as and when required hereunder and Borrower subsequently makes a repayment
on the Loans, such repayment shall be split among the non-defaulting Lenders
ratably in accordance with their respective Percentages until each Lender has
its Percentage of all of the outstanding Loans, and the balance of such
repayment shall be divided among all of the Lenders in accordance with their
respective Percentages. Notwithstanding the foregoing, borrowings and payments
---------------
of Swing Loans shall be for TCB's own account. The Loans (other than Swing
Loans) shall be evidenced by the Notes substantially in the form of Exhibit C
---------
attached hereto. The Borrower, the Agent and the Lenders agree that Chapter 15
of the Texas Credit Code shall not apply to this Agreement, the Notes or any
Loan.
(b) The Borrower shall give the Agent notice of each borrowing to be
made hereunder as provided in Section 3.1 hereof, and the Agent shall deliver
-----------
same to each Lender promptly thereafter. Not later than 11:00 a.m., Houston,
Texas time, on the date specified for each such borrowing hereunder other than
Swing Loans, each Lender shall make available the amount of the Loan, if any, to
be made by it on such date to the Agent at the Agent's principal office in
Houston, Texas, in immediately available funds, for the account of the Borrower.
Such amounts received by the Agent will be held in Agent's general ledger
account. The amounts so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower by wiring or
otherwise transferring, in immediately available funds not later than 12:00
noon, Houston, Texas time, such amount to an account designated by the Borrower
and maintained with Texas Commerce Bank National Association in El Paso, Texas
or any other account or accounts which the Borrower may from time to time
designate to the Agent by a written notice as the account or accounts to which
borrowings hereunder are to be wired or otherwise transferred. TCB shall make
available the amount of each Swing Loan by depositing the same in immediately
available funds, in the foregoing account by 2:00 p.m., Houston, Texas time, on
the date of the borrowing.
-16-
<PAGE>
(c) Subject to the terms and conditions hereof, if necessary to meet the
Borrower's funding deadlines, TCB agrees to make Swing Loans to the Borrower at
any time on or prior to the Revolving Credit Termination Date, not to exceed an
amount at any one time outstanding equal to the lesser of (i) $75,000,000.00, or
(ii) the difference between the Commitment and the unpaid principal balance of
all Loans. Swing Loans shall constitute "Loans" for all purposes hereunder.
Notwithstanding the foregoing, the aggregate amount of all Loans (including,
without limitation, all Swing Loans) shall not at any time exceed the
Commitment. Each request for a Swing Loan shall be in an amount at least equal
to $1,000,000.00 and equal to a multiple of $250,000.00. If necessary to meet
the Borrower's funding deadlines, the Agent may treat any Request for Loan as a
request for a Swing Loan from TCB and TCB may fund it as a Swing Loan. Within
two (2) Business Days after each Swing Loan is funded, TCB shall request that
each Lender, and each Lender shall, on the first Business Day after such request
is made, purchase a portion of any one or more Swing Loans in an amount equal to
that Lender's Percentage of such Swing Loans by funding under such Lender's
Note, such purchase to be made in accordance with the terms of Section 2.1(b) of
--------------
this Agreement just as if the Lender were funding directly to the Borrower under
its Note (such that all Lenders other than TCB shall fund only under their
respective Note and not under the Swing Loan Note). Unless the Agent knew or
should have known when TCB funded a Swing Loan that the Borrower had not
satisfied the conditions in this Agreement to obtain a Loan, each Lender's
obligation to purchase an interest in the Swing Loans shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender or any other Person may have against TCB or any other Person
for any reason whatsoever; (ii) the occurrence or continuance of a Default or
Event of Default or the termination of any Lender Commitment; (iii) any adverse
change in the condition (financial or otherwise) of the Borrower or any of its
Subsidiaries; (iv) any breach of this Agreement or any other Credit Documents by
the Borrower, any of its Subsidiaries, the Agent or any other Lender; or (v) any
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing. Any portion of a Swing Loan not so purchased and converted
may be treated by TCB as a Loan which was not funded by the non-purchasing
Lenders as contemplated in Section 2.1(a) of this Agreement, and as a funding by
--------------
TCB under the Commitment in excess of TCB's Percentage. Each Swing Loan, once
so sold, shall cease to be a Swing Loan for the purposes of this Agreement, but
shall be a Loan made under the Commitment and each Lender's Lender Commitment.
The Swing Loans shall be evidenced by the Swing Loan Note substantially in the
form of Exhibit C-1 attached hereto.
-----------
2.2 Term Loan Conversion.
--------------------
-17-
<PAGE>
(a) Subject to the terms and conditions of this Agreement, if
any Extension Request (as defined in Section 9) shall be denied, the Borrower
---------
may elect to convert the aggregate unpaid principal amount of the Loans (other
than the Swing Loans) outstanding on the date (if the conversion election is
chosen, the "Conversion Date") one (1) year prior to the then existing Revolving
---------------
Credit Termination Date into a term loan owing to each of the Lenders (each a
"Term Loan"), so long as (i) the Borrower has given the Agent at least fifteen
---------
(15) days prior written notice of the Borrower's intention to so convert the
Loans, (ii) no amounts remain unpaid under the Swing Loan Note, and (iii) the
conditions to make a Loan set forth in Section 3 are satisfied as of the
---------
Conversion Date. After the Conversion Date, the Borrower shall have no further
right to receive, and no Lender shall have the obligation to make, any advances
of Loans.
(b) The Borrower shall repay the principal balance of each Term
Loan in quarterly installments due on November 13 first following the Conversion
Date, and continuing on the thirteenth (13th) day of each subsequent February,
May, August and November until the Termination Date. The amount of each
quarterly principal installment shall be equal to the following amount during
the corresponding period:
PERIOD PAYMENT AMOUNT
------ --------------
During the first year after Quarterly amount necessary to amortize
the Conversion Date the unpaid principal balance of the
Term Loan on the Conversion Date over a
seven (7) year period
During the second year after Quarterly amount necessary to amortize the
the Conversion Date unpaid principal balance of the Term
Loan on the Conversion Date over seven
(5) year period
During the third year after Quarterly amount necessary to amortize
the Conversion Date the unpaid principal balance of the
Term Loan on the Conversion Date over a
seven (3) year period
Accrued and unpaid interest on the unpaid principal balance of the Term Loans
shall continue to be due and payable on the Interest Payment Dates. The entire
unpaid principal balance, and all accrued and unpaid interest thereon, of the
Term Loans, together with all other amounts due under this Agreement, shall be
due and payable in full on the Termination Date.
2.3 Payments. (a) Except to the extent otherwise provided herein, all
--------
payments of principal, interest and other amounts to be made by the Borrower
hereunder, under the Notes and
-18-
<PAGE>
under the other Credit Documents shall be made in immediately available funds to
the Agent at its principal office in Houston, Texas (or in the case of a
successor Agent, at the principal office of such successor Agent in the United
States), not later than 12:00 noon Houston, Texas time on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day).
(b) The Borrower may, at the time of making each payment hereunder,
under any Note or under any other Credit Document, specify to the Agent the
Loans or other amounts payable by the Borrower hereunder or thereunder to which
such payment is to be applied (and in the event that it fails so to specify,
such payment shall be applied to the Loans (first to the Swing Loans) or, if no
Loans are outstanding, to other amounts then due and payable, provided that if
--------
no Loans or other amounts are then due and payable or an Event of Default has
occurred and is continuing, the Agent may apply such payment to the Obligations
in such order as it may elect in its sole discretion, but subject to the other
terms and conditions of this Agreement, including without limitation Section 2.4
-----------
hereof). Each payment received by the Agent hereunder, under any Note or under
any other Credit Document for the account of a Lender shall be paid promptly to
such Lender, in immediately available funds. If the Agent receives a payment
for the account of a Lender prior to 12:00 noon Houston, Texas time, such
payment must be delivered to the Lender on that same day and if it is not so
delivered due to the fault of the Agent, the Agent shall pay to the Lender
entitled to the payment the interest accrued on the amount of the payment
pursuant to said Lender's Note from the date the Agent receives the payment to
the date the Lender received the payment. The Agent may apply payments received
from the Borrower to pay any unpaid principal and interest on the Swing Loans
before making payment to each Lender of amounts due under the Notes other than
the Swing Loan Note.
(c) If the due date of any payment hereunder or under any Note falls on
a day which is not a Business Day or a Eurodollar Business Day, as the case may
be, the due date for such payments shall be extended to the next succeeding
Business Day or Eurodollar Business Day, respectively, and interest shall be
payable for any principal so extended for the period of such extension;
provided, however, that with respect to Eurodollar Rate Borrowings if such
extension would cause the Eurodollar Business Day of payment to fall in another
calendar month, the payment shall be due on the Eurodollar Business Day next
preceding the due date of the payment.
(d) The Borrower shall give the Agent at least one (1) Business Day's
prior written notice of the Borrower's intent to make any payment of principal
or interest under the Credit Documents not scheduled to be paid under the Credit
Documents. Any such notification of payment shall be irrevocable after it is
made by the Borrower. Upon receipt by the Agent of such notification of payment,
it shall deliver same to the other Lenders.
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<PAGE>
2.4 Pro Rata Treatment. Except to the extent otherwise provided herein:
------------------
(a) each borrowing from the Lenders under Section 2.1(a) hereof shall be made
--------------
ratably from the Lenders on the basis of their respective Percentages, each
payment of the Fee (hereinafter defined) shall be made for the account of the
Lenders, and shall be applied, pro rata, according to the Lenders' respective
--------
Lender Commitment; and (b) each payment by the Borrower of principal or
interest on the Loans other than the Swing Loans, of any other sums advanced by
the Lenders pursuant to the Credit Documents, and of any other amount owed to
the Lenders other than the Fee, payments of Swing Loans, or any other sums
designated by this Agreement as being owed to a particular Lender, shall be made
to the Agent for the account of the Lenders pro rata in accordance with the
respective unpaid principal amounts of the Loans (other than Swing Loans) held
by the Lenders. Payments of Swing Loans shall be for TCB's own account.
2.5 Non-Receipt of Funds by the Agent. Unless the Agent shall have been
---------------------------------
notified by a Lender or the Borrower (the "Payor") prior to the date on which
such Lender is to make payment to the Agent of the proceeds of a Loan (or
purchase of a portion of a Swing Loan) to be made by it hereunder or the
Borrower is to make a payment to the Agent for the account of one or more of the
Lenders, as the case may be (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Agent, the Agent may assume that the
Required Payment has been made and may, in reliance upon such assumption (but
shall not be required to), make the amount thereof available to the intended
recipient on such date and, if the Payor has not in fact made the Required
Payment to the Agent, the recipient of such payment shall, on demand, pay to the
Agent the amount made available by the Agent together with interest thereon in
respect of the period commencing on the date such amount was so made available
by the Agent until the date the Agent recovers such amount at a rate per annum
equal to (a) the Past Due Rate for such period if the recipient returning a
Required Payment is the Borrower, or (b) the Federal Funds Effective Rate for
such period if the recipient returning a Required Payment is the Agent or a
Lender.
2.6 Sharing of Payments, Etc. The Borrower agrees that, in addition to
-------------------------
(and without limitation of) any right of set-off, bankers' lien or counterclaim
a Lender may otherwise have, each Lender shall be entitled, at its option, to
offset balances held by it for the account of the Borrower at any of its
offices, against any principal of or interest on any of such Lender's Loans to
the Borrower hereunder, or other Obligations of the Borrower hereunder, which is
not paid (regardless of whether such balances are then due to the Borrower), in
which case it shall promptly notify the Borrower and the Agent thereof, provided
--------
that such Lender's failure to give such notice shall not affect the validity
thereof. If a Lender shall obtain payment of any principal of or interest on
any Loan made by it under this Agreement (other than Swing Loans made by TCB),
or other Obligation then due to such Lender hereunder, through the exercise of
any right
-20-
<PAGE>
of set-off, banker's lien, counterclaim or similar right, or otherwise, it shall
promptly purchase from the other Lenders portions of the Loans made or other
Obligations held (other than Swing Loans made by TCB), by the other Lenders in
such amounts, and make such other adjustments from time to time as shall be
equitable to the end that all the Lenders shall share the benefit of such
payment (net of any expenses which may be incurred by such Lender in obtaining
or preserving such benefit) pro rata in accordance with the unpaid principal and
interest on the Obligations then due to each of them. To such end all the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower.
2.7 Fees. The Borrower shall pay to the Agent for the account of each
----
Lender fees (collectively, the "Fee") equal to (a) an amount payable as a
---
commitment fee by the Borrower to the Agent for the account of each Lender equal
to the portion of the daily unused amount of the Commitment (Swing Loans shall
be deemed to be a utilization of the Commitment solely for the purposes of this
Section 2.7(a)) listed below multiplied by the corresponding rate per annum
- --------------
applicable to that portion:
Unused Commitment Rate
----------------- ----
Up to but not including $115,000,000 0.1250%
$115,000,000 up to and including
$230,000,000 0.1875%
Over $230,000,000 0.2500%
such commitment fee to be payable in arrears on or before the tenth (10th) day
of each April, July, October and January, (b) if the Revolving Credit
Termination Date is extended pursuant to Section 9 of this Agreement, an amount
---------
payable as an extension fee by the Borrower to the Agent for the account of each
Lender that extends its Loans equal to 0.1500% of each Lender's Lender
Commitment at that time payable on the Determination Date, and (c) if the Loans
are converted to the Term Loans pursuant to Section 2.2 of this Agreement, an
-----------
amount payable as a conversion fee by the Borrower to the Agent for the account
of each Lender that converts its Loans equal to one-fourth of one percent (1/4%)
of the aggregate unpaid principal balance of each Loan on the date one (1) year
after the Conversion Date payable to each Lender on the date one (1) year after
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<PAGE>
the Conversion Date, plus one-fourth of one percent (1/4%) of the aggregate
unpaid principal balance of each Loan on the date (2) years after the Conversion
Date payable to each Lender on the date two (2) years after the Conversion Date
if any portion of the Term Loan is unpaid on that date. The Fee shall not be
refundable (except as required by Section 3.1(c) of this Agreement). Any
--------------
portion of the Fee which is not paid by the Borrower when due shall bear
interest at the Past Due Rate from the date due until the date paid by the
Borrower. The Fee shall be calculated on the actual number of days elapsed in a
year deemed to consist of 360 days.
3. Conditions.
----------
3.1 All Loans. The obligation of any Lender to make any Loan is subject
---------
to the accuracy of all representations and warranties of the Borrower on the
date of such Loan, to the performance by the Borrower of its obligations under
the Credit Documents and to the satisfaction of the following further
conditions: (a) the Agent shall have received the following, all of which shall
be duly executed and in Proper Form: (1) a Request for Loan (i) by 11:00 a.m.,
Houston, Texas time, one (1) Business Day before the date (which shall also be a
Business Day) of the proposed Loan which is to be a Base Rate Borrowing (other
than Swing Loans), (ii) by 11:00 a.m., Houston, Texas time, on the same Business
Day of any proposed Swing Loan, provided that by 11:00 a.m., Houston, Texas time
on the date of the proposed Swing Loan, Borrower shall also have notified TCB by
telephone of its request for a Swing Loan, or (iii) by the Rate Designation Date
of the proposed Loan which is to be a Eurodollar Rate Borrowing; and (2) such
other documents as the Agent may reasonably require to satisfy itself or the
request of any Lender; (b) no Default or Event of Default shall have occurred
and be continuing; (c) the making of the Loan shall not be prohibited by any
Legal Requirement (in which event the applicable portion of the Fee will not be
charged to the Borrower); (d) the Borrower shall have paid all legal fees and
expenses of the type described in Section 5.10 hereof through the date of such
------------
Loan; and (e) in the case of a Loan other than a Swing Loan, all Swing Loans
then outstanding shall have been paid or shall be paid with the proceeds of such
Loan.
3.2 First Loan. In addition to the matters described in Section 3.1
---------- -----------
hereof, the obligation of the Lenders to make the first Loan under this
Agreement is subject to the receipt by the Lenders of each of the following, in
Proper Form: (a) the Notes, executed by the Borrower; (b) a certificate executed
by the Secretary of the Borrower dated as of the date hereof; (c) a certificate
from the Secretary of State or other appropriate public official of Maryland as
to the continued existence and good standing of the Borrower; (d) a certificate
from the appropriate public official of every state where the location of the
Borrower's Property requires it to be qualified to do business as to the due
qualification and good standing of the Borrower; (e) a legal opinion from
independent counsel for the Borrower as to the matters set forth on Exhibit D
---------
-22-
<PAGE>
acceptable to the Lenders; (f) policies of insurance addressed to the Agent
reflecting the insurance required by Section 5.7 hereof; and (g) an Officer's
-----------
Certificate in the form of Exhibit A; and to the further condition that, at the
---------
time of the initial Loan, all legal matters incident to the transactions herein
contemplated shall be satisfactory to Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P., counsel for the Agent.
3.3 Options Available. The outstanding principal balance of the Notes
-----------------
shall bear interest at the Base Rate; provided, that (1) all past due amounts,
--------
both principal and accrued interest, shall bear interest at the Past Due Rate,
and (2) subject to the provisions hereof, Borrower shall have the option of
having all or any portion of the principal balance of the Notes, other than the
Swing Loan Note, from time to time outstanding bear interest at a Eurodollar
Rate. The records of the Lenders with respect to Interest Options, Interest
Periods and the amounts of Loans to which they are applicable shall be prima
facie evidence thereof. Interest on the Loans shall be calculated at the Base
Rate except where it is expressly provided pursuant to this Agreement that a
Eurodollar Rate is to apply.
3.4 Designation and Conversion. Borrower shall have the right to
--------------------------
designate or convert its Interest Options in accordance with the provisions
hereof. Provided no Event of Default has occurred and is continuing and subject
--------
to the provisions of Section 3.5, Borrower may elect to have a Eurodollar Rate
-----------
apply or continue to apply to all or any portion of the principal balance of the
Notes, other than the Swing Loan Note. Each change in Interest Options shall be
a conversion of the rate of interest applicable to the specified portion of the
Loans, but such conversion shall not change the respective outstanding principal
balance of the Notes. The Interest Options shall be designated or converted in
the manner provided below:
(a) Borrower shall give Agent a Request for Loan. Each such written notice
shall specify the amount of Loan which is the subject of the designation, if
any; the amount of borrowings into which such borrowings are to be converted or
for which an Interest Option is designated; the proposed date for the
designation or conversion and the Interest Period, if any, selected by Borrower.
The Request for Loan shall be irrevocable and shall be given to Agent no later
than the applicable Rate Designation Date. The Agent shall promptly deliver the
Request for Loan to the Lenders.
(b) No more than twelve (12) Eurodollar Rate Borrowings with twelve (12)
Interest Periods shall be in effect at any time.
(c) Each designation or conversion of a Eurodollar Rate Borrowing shall
occur on a Eurodollar Business Day.
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<PAGE>
(d) Except as provided in Section 3.5 hereof, no Eurodollar Rate Borrowing
-----------
shall be converted on any day other than the last day of the applicable Interest
Period.
(e) Unless a Request for Loan to the contrary is received as provided in
this Agreement, each Eurodollar Rate Borrowing will convert to a Base Rate
Borrowing after the expiration of the Interest Period.
3.5 Special Provisions Applicable to Eurodollar Rate Borrowings.
-----------------------------------------------------------
(a) Options Unlawful. If the adoption of any applicable Legal Requirement
----------------
or any change in any applicable Legal Requirement or in the interpretation or
administration thereof by any Governmental Authority or compliance by the
Lenders with any request or directive (whether or not having the force of law)
of any central bank or other Governmental Authority shall at any time make it
unlawful or impossible for any Lender to permit the establishment of or to
maintain any Eurodollar Rate Borrowing, the commitment of the Lenders to
establish or maintain such Eurodollar Rate Borrowing shall forthwith be
suspended until such condition shall cease to exist and Borrower shall
forthwith, upon demand by Agent to Borrower, (1) convert the Eurodollar Rate
Borrowing with respect to which such demand was made to a Base Rate Borrowing;
(2) pay all accrued and unpaid interest to date on the amount so converted; and
(3) pay any amounts required to compensate the Lenders for any additional cost
or expense which the Lenders may incur as a result of such adoption of or change
in such Legal Requirement or in the interpretation or administration thereof and
any Funding Loss which the Lenders may incur as a result of such conversion.
If, when Agent so notifies Borrower, Borrower has given a Request for Loan
specifying a Eurodollar Rate Borrowing but the selected Interest Period has not
yet begun, such Request for Loan shall be deemed to be of no force and effect,
as if never made, and the balance of the Loans specified in such Request for
Loan shall bear interest at the Base Rate until a different available Interest
Option shall be designated in accordance herewith.
(b) Increased Cost of Borrowings. If the adoption of any applicable Legal
----------------------------
Requirement or any change in any applicable Legal Requirement or in the
interpretation or administration thereof by any Governmental Authority or
compliance by any Lender with any request or directive of general applicability
(whether or not having the force of law) of any central bank or Governmental
Authority shall at any time as a result of any portion of the principal balance
of the Notes being maintained on the basis of a Eurodollar Rate:
(1) subject any Lender (or make it apparent that any Lender is subject) to
any Taxes, or any deduction or withholding for any Taxes, on or from
any payment due under any Eurodollar Rate Borrowing or other amount
due
-24-
<PAGE>
hereunder, other than income and franchise taxes of the United
States and its political subdivisions; or
(2) change the basis of taxation of payments due from Borrower to
any Lender under any Eurodollar Rate Borrowing (otherwise than
by a change in the rate of taxation of the overall net income
of a Lender); or
(3) impose, modify, increase or deem applicable any reserve
requirement (excluding that portion of any reserve requirement
included in the calculation of the applicable Eurodollar Rate),
special deposit requirement or similar requirement (including,
but not limited to, state law require ments and Regulation D)
imposed, modified, increased or deemed applicable by any
Governmental Authority against assets held by any Lender, or
against deposits or accounts in or for the account of any
Lender, or against loans made by any Lender, or against any
other funds, obligations or other property owned or held by any
Lender; or
(4) impose on any Lender any other condition regarding any
Eurodollar Rate Borrowing;
and the result of any of the foregoing is to increase the cost to
any Lender of agreeing to make or of making, renewing or maintaining
such Eurodollar Rate Borrowing, or reduce the amount of principal or
interest received by any Lender, then, upon demand by Agent,
Borrower shall pay to such Lender, from time to time as specified by
such Lender, additional amounts which shall compensate such Lender
for such increased cost or reduced amount. Agent will promptly
notify Borrower in writing of any event which will entitle any
Lender to additional amounts pursuant to this paragraph. A Lender's
determination of the amount of any such increased cost, increased
reserve requirement or reduced amount shall be prima facie evidence
thereof. Borrower shall have the right, if it receives from Agent
any notice referred to in this paragraph, upon three Business Days'
notice to Agent, either (i) to repay in full (but not in part) any
borrowing with respect to which such notice was given, together with
any accrued interest thereon, or (ii) to convert the Eurodollar Rate
Borrowing which is the subject of the notice to a Base Rate
Borrowing; provided, that any such repayment or conversion shall be
--------
accompanied by payment of (x) the amount required to compensate a
Lender for the increased cost or reduced amount referred to in the
preceding paragraph; (y) all accrued and unpaid interest to date on
the amount so repaid or converted, and
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<PAGE>
(z) any Funding Loss which any Lender may incur as a result of such
repayment or conversion.
(c) Inadequacy of Pricing and Rate Determination. If for any
--------------------------------------------
reason with respect to any Interest Period Agent shall have
determined (which determination shall be prima facie evidence
thereof) that:
(1) Agent is unable through its customary general practices to
determine any applicable Eurodollar Rate, or
(2) by reason of circumstances affecting the applicable market
generally, Agent is not being offered deposits in United States
dollars in such market, for the applicable Interest Period and
in an amount equal to the amount of any applicable Eurodollar
Rate Borrowing requested by Borrower, or
(3) any applicable Eurodollar Rate will not adequately and fairly
reflect the cost to the Lenders of making and maintaining such
Eurodollar Rate Borrowing hereunder for any proposed Interest
Period,
then Agent shall give Borrower notice thereof and thereupon, (A) any
Request for Loan previously given by Borrower designating the
applicable Eurodollar Rate Borrowing which has not commenced as of
the date of such notice from Agent shall be deemed for all purposes
hereof to be of no force and effect, as if never given, and (B)
until Agent shall notify Borrower that the circumstances giving rise
to such notice from Agent no longer exist, each Request for Loan
requesting the applicable Eurodollar Rate shall be deemed a request
for a Base Rate Borrowing, and any applicable Eurodollar Rate
Borrowing then outstanding shall be converted, without any notice to
or from Borrower, upon the termination of the Interest Period then
in effect with respect to it, to a Base Rate Borrowing.
(d) Funding Losses. Borrower shall indemnify the Agent and each Lender
--------------
against and hold the Agent and each Lender harmless from any Funding Loss. This
agreement shall survive the payment of the Notes. A certificate as to any
additional amounts payable pursuant to this subsection and setting forth the
reasons for the Funding Loss submitted by Agent to Borrower shall be prima facie
evidence thereof.
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<PAGE>
3.6 Funding Offices; Adjustments Automatic. Any Lender may, if it so
--------------------------------------
elects, fulfill its obligation as to any Eurodollar Rate Borrowing by causing a
branch or affiliate of such Lender to make such Loan and may transfer and carry
such Loan at, to, or for the account of, any branch office or affiliate of such
Lender; provided, that in such event for the purposes of this Agreement such
--------
Loan shall be deemed to have been made by such Lender and the obligation of
Borrower to repay such Loan shall nevertheless be to such Lender and shall be
deemed held by it for the account of such branch or affiliate. Without notice
to Borrower or any other person or entity, each rate required to be calculated
or determined under this Agreement shall automatically fluctuate upward and
downward in accordance with the provisions of this Agreement.
3.7 Funding Sources, Payment Obligations. Notwithstanding any provision
------------------------------------
of this Agreement to the contrary, each Lender shall be entitled to fund and
maintain its funding of all or any part of the Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Lender had actually funded and
maintained each Eurodollar Rate Borrowing during each Interest Period through
the purchase of deposits having a maturity corresponding to such Interest Period
and bearing an interest rate equal to the Eurodollar Rate for such Interest
Period. Notwithstanding the foregoing, Funding Losses, increased costs and
other obligations relating to Eurodollar Rate Borrowings described in Section
-------
3.5 of this Agreement will only be paid by the Borrower as and when actually
- ---
incurred by the Lenders.
3.8 Mitigation, Non-Discrimination. (a) Each Lender will notify the
------------------------------
Borrower through the Agent of any event occurring after the date of this
Agreement which will require or enable such Lender to take the actions described
in Sections 3.5(a) or (b) of this Agreement as promptly as practicable after it
--------------- ---
obtains knowledge thereof and determines to request such action, and (if so
requested by the Borrower through the Agent) will designate a different lending
office of such Lender for the applicable Eurodollar Rate Borrowing or will take
such other action as the Borrower reasonably requests if such designation or
action is consistent with the internal policy of such Lender and legal and
regulatory restrictions, can be undertaken at no additional cost, will avoid the
need for, or reduce the amount of, such action and will not, in the sole opinion
of such Lender, be disadvantageous to such Lender (provided that such Lender
--------
will have no obligation to designate a different lending office which is located
in the United States of America).
(b) None of the Lenders shall be able to pass through to the Borrower
changes and costs under Section 3.5 of this Agreement on a discriminating basis,
-----------
such that such changes and costs are not also passed through by each Lender to
other customers of such Lender similarly situated where such customer is subject
to documents providing for such pass through.
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<PAGE>
(c) If any Lender elects under Section 3.5 of this Agreement to
-----------
suspend or terminate the availability of Eurodollar Rate Borrowings for any
material period of time, and the event giving rise to such election is not
generally applicable to all of the Lenders, the Borrower may within sixty (60)
days after notification of such Lender's election, and so long as no Event of
Default is then in existence, either (i) demand that such Lender, and upon such
demand, such Lender shall promptly, assign its Lender Commitment to another
financial institution subject to and in accordance with the provisions of
Section 10.5 of this Agreement for a purchase price equal to the unpaid balance
- ------------
of principal, accrued interest, the unpaid balance of the Fee and expenses owing
to such Lender pursuant to this Agreement, or (ii) pay such Lender the unpaid
balance of principal, accrued interest, the unpaid balance of the Fee and
expenses owing to such Lender pursuant to this Agreement, whereupon, such Lender
shall no longer be a party to this Agreement or have any rights or obligations
hereunder or under any other Credit Documents, and the Commitment shall
immediately and permanently be reduced by an amount equal to the Lender
Commitment of such Lender.
4. Representations and Warranties.
------------------------------
To induce the Lenders to enter into this Agreement and to make the Loans,
the Borrower represents and warrants to the Agent and the Lenders as follows:
4.1. Organization. The Borrower is duly organized, validly existing
------------
and in good standing as a real estate investment trust under the laws of the
state of Maryland; has all power and authority to conduct its business as
presently conducted; and is duly qualified to do business and in good standing
in every state where the location of its Property requires it to be qualified to
do business, unless the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect.
4.2 Financial Statements. The financial statements delivered to the
--------------------
Agent fairly present, in accordance with Generally Accepted Accounting
Principles (provided, however, that the Quarterly Unaudited Financial Statements
are subject to normal year-end adjustments and may contain condensed footnotes
as permitted by regulations of the United States Securities and Exchange
Commission), the financial condition and the results of operations of the
Borrower as at the dates and for the periods indicated. No Material Adverse
Change has occurred since the dates of such financial statements. The Borrower
is not subject to any instrument or agreement which would materially prevent it
from conducting its business as it is now conducted or as it is contemplated to
be conducted.
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<PAGE>
4.3 Enforceable Obligations; Authorization. The Credit Documents are
--------------------------------------
legal, valid and binding obligations of the Parties, enforceable in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency
and other laws affecting creditors' rights generally and by general equitable
principles. The execution, delivery and performance of the Credit Documents
have all been duly authorized by all necessary action; are within the power and
authority of the Parties; do not and will not contravene or violate any Legal
Requirement or the Organizational Documents of the Parties; do not and will not
result in the breach of, or constitute a default under, any agreement or
instrument by which the Parties or any of their respective Property may be bound
or affected, except where such breach or default could not reasonably be
expected to have a Material Adverse Effect; and do not and will not result in
the creation of any Lien upon any Property of any of the Parties except as
expressly contemplated therein. All necessary permits, registrations and
consents for such making and performance have been obtained except where the
lack thereof could not reasonably be expected to have a Material Adverse Effect.
4.4 Other Debt. The Borrower is not in default in the payment of any
----------
other Indebtedness or under any agreement, mortgage, deed of trust, security
agreement or lease to which it is a party which default could reasonably be
expected to have a Material Adverse Effect.
4.5 Litigation. There is no litigation or administrative proceeding
----------
pending or, to the knowledge of the Borrower, threatened against, or any
outstanding judgment, order or decree affecting, the Borrower before or by any
Governmental Authority which is not adequately covered by insurance or which, if
determined adversely to the Borrower could reasonably be expected to have a
Material Adverse Effect. The Borrower is not in default with respect to any
judgment, order or decree of any Governmental Authority which default could
reasonably be expected to have a Material Adverse Effect.
4.6 Taxes. The Borrower has filed all tax returns required to have been
-----
filed and paid all taxes shown thereon to be due, except those for which
extensions have been obtained, those which are being contested in good faith and
those for which the Borrower's failure to file a return or pay could not
reasonably be expected to have a Material Adverse Effect.
4.7 Regulation U. None of the proceeds of any Loan will be used for the
------------
purpose of purchasing or carrying directly or indirectly any margin stock or for
any other purpose that would constitute this transaction a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System.
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<PAGE>
4.8 Subsidiaries. The Borrower has no Subsidiaries which individually
------------
or in the aggregate own more than twenty-five percent (25%) in value of the
Borrower's and the Subsidiaries' consolidated assets determined in accordance
with Generally Accepted Accounting Principles. Each of the Borrower's
Subsidiaries is a "qualified REIT subsidiary" under Section 856 of the Code.
4.9 Securities Act of 1933. Other than the Agent's efforts in
----------------------
syndicating the Loans (for which the Agent is responsible) neither the Borrower
nor any agent acting for it has offered the Notes or any similar obligation of
the Borrower for sale to or solicited any offers to buy the Notes or any similar
obligation of the Borrower from any Person other than the Agent or any Lender,
and neither the Borrower nor any agent acting for it will take any action which
would subject the sale of the Note to the provisions of Section 5 of the
Securities Act of 1933, as amended.
4.10 No Contractual or Corporate Restrictions. The Borrower is not a
----------------------------------------
party to, or bound by, any contract, agreement or charter or other corporate
restriction materially and adversely affecting its business, Property, assets,
operations or condition, financial or otherwise.
4.11 Investment Company Act Not Applicable. The 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.
4.12 Public Utility Holding Company Act Not Applicable. The Borrower is
-------------------------------------------------
not a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company", or an affiliate of a "subsidiary company" of
a "holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.
4.13 ERISA Not Applicable. The Borrower is not subject to any
--------------------
requirements of the Employee Retirement Income Security Act of 1974 as amended
from time to time, or any rules, regulations, rulings or interpretations adopted
by the Internal Revenue Service or the Department of Labor thereunder.
5. Affirmative Covenants.
---------------------
The Borrower covenants and agrees with the Agent and the Lenders that prior
to the termination of this Agreement it will do, and if necessary cause to be
done, each and all of the following:
5.1 Taxes, Insurance, Existence, Regulations, Property, etc. At all
-------------------------------------------------------
times (a) pay when due all taxes and governmental charges of every kind upon it
or against its income, profits or
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<PAGE>
Property, unless and only to the extent that the same shall be contested in good
faith and reserves which are adequate under Generally Accepted Accounting
Principles have been established therefor, or unless such failure to pay could
not reasonably be expected to have a Material Adverse Effect; (b) do all things
necessary to preserve its existence, qualifications, rights and franchises in
all States where such qualification is necessary or desirable, except where
failure to obtain the same could not reasonably be expected to have a Material
Adverse Effect; (c) comply with all applicable Legal Requirements in respect of
the conduct of its business and the ownership of its Property except where
failure to so comply could not reasonably be expected to have a Material Adverse
Effect; and (d) cause its Property to be protected, maintained and kept in good
repair (reasonable wear and tear excepted) and make all replacements and
additions to its Property as may be reasonably necessary to conduct its
business.
5.2 Financial Statements and Information. Furnish to the Agent each of
------------------------------------
the following: (a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, Annual Audited Financial Statements
of the Borrower (which shall include an unaudited statement of Funds From
Operations); (b) as soon as available and in any event within 45 days after the
end of each quarter (except the last quarter) of each fiscal year of the
Borrower, Quarterly Unaudited Financial Statements of the Borrower (which shall
include a statement of Funds From Operations); (c) concurrently with the
financial statements provided for in Subsections 5.2(a) and (b) hereof, an
------------------ ---
Officer's Certificate, together with such schedules, computations and other
information (including, without limitation, if provided to Borrower information
as to Unconsolidated Affiliates of the Borrower), in reasonable detail, as may
be required by the Agent to demonstrate compliance with the covenants set forth
herein or reflecting any non-compliance therewith as of the applicable date, all
certified as true, correct and complete by a managing director, vice president
or controller of Borrower's REIT Manager; (d) promptly after the filing thereof,
all reports to or filings made by the Borrower or any of its Subsidiaries with
the Securities and Exchange Commission, including, without limitation,
registration statements and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents); (e) within two (2) Business Days after the receipt thereof, a copy
of the notification to the Borrower of the Borrower's S&P Rating or Moody's
Rating, or change therein, and (f) such other information relating to the
financial condition and affairs of the Borrower as from time to time may be
reasonably requested by any Lender. The Agent will send to each Lender the
information received by the Agent pursuant to this Section 5.2 promptly after
-----------
the receipt thereof by Agent.
5.3 Financial Tests. Have and maintain, on a consolidated basis in
---------------
accordance with Generally Accepted Accounting Principles: (a) a Debt to Tangible
Net Worth Ratio no greater than 1.0:1.0 at all times; (b) a Coverage Ratio of
not less than 2.0:1.0 at all times; (c) a Fixed Charge Coverage Ratio of not
less than 1.4:1.0 at all times; (d) a Tangible Net Worth of at least
-31-
<PAGE>
One Billion Dollars ($1,000,000,000.00) at all times; and (e) a Debt to Total
Asset Value Ratio no greater than (i) fifty-five percent (55%) during the first
year after the Conversion Date, if any, and (ii) fifty percent (50%) thereafter.
5.4 Inspection. In order to permit the Agent to ascertain compliance
----------
with the Credit Documents, during normal business hours permit the Agent to
inspect its Property, to examine its files, books and records and make and take
away copies thereof, and to discuss its affairs with its officers and
accountants, all at such times and intervals and to such extent as a Lender may
reasonably desire.
5.5 Further Assurances. Promptly execute and deliver any and all other
------------------
and further instruments which may be requested by the Agent to cure any defect
in the execution and delivery of any Credit Document or more fully to describe
particular aspects of the Borrower's agreements set forth in the Credit
Documents or so intended to be.
5.6 Books and Records. Maintain books of record and account in
-----------------
accordance with Generally Accepted Accounting Principles.
5.7 Insurance. Maintain insurance with such insurers, on such of its
---------
properties, in such amounts and against such risks as is consistent with
insurance maintained by businesses of comparable type and size in the industry,
and furnish the Agent satisfactory evidence thereof promptly upon request.
5.8 Notice of Certain Matters. Notify the Agent promptly upon acquiring
-------------------------
knowledge of the occurrence of any of the following: the institution or
threatened institution of any lawsuit or administrative proceeding affecting the
Borrower in which the claim exceeds $250,000.00 and if determined adversely
could have a Material Adverse Effect; when the Borrower believes that there has
been a Material Adverse Change; or the occurrence of any Event of Default or any
Default. The Borrower will notify the Agent in writing at least thirty (30)
Business Days prior to the date that the Borrower changes its name or the
location of its chief executive office or principal place of business or the
place where it keeps its books and records.
5.9 Use of Proceeds. The proceeds of the Loans will be used for general
---------------
business purposes including (without limitation) for acquisition of multi-family
real estate properties, for the development and enhancement of multi-family real
estate properties, for investment in convertible mortgages issued by Homestead
Village Properties Incorporated or for the costs of construction of multi-family
real estate projects owned or to be acquired by the Borrower.
-32-
<PAGE>
Notwithstanding the foregoing, none of the proceeds of the Loans will be used to
finance, fund or complete any hostile acquisition of any Person.
5.10 Expenses of and Claims Against the Agent and the Lenders. To the
--------------------------------------------------------
extent not prohibited by applicable law, the Borrower will pay all reasonable
costs and expenses incurred to third parties and reimburse the Agent and each
Lender, as the case may be, for any and all reasonable expenditures of every
character incurred or expended from time to time, in connection with (a)
regardless of whether a Default or Event of Default shall have occurred, the
Agent's preparation, negotiation and completion of the Credit Documents, and (b)
during the continuance of an Event of Default, all costs and expenses relating
to the Agent's and such Lender's exercising any of its rights and remedies under
this or any other Credit Document, including, without limitation, attorneys'
fees, legal expenses, and court costs; provided, that no rights or option
--------
granted by the Borrower to the Agent or any Lender or otherwise arising pursuant
to any provision of this or any other instrument shall be deemed to impose or
admit a duty on the Agent or any Lender to supervise, monitor or control any
aspect of the character or condition of any property or any operations conducted
in connection with it for the benefit of the Borrower or any other person or
entity other than the Agent or such Lender. Notwithstanding the foregoing, the
Borrower shall not be charged with any cost or expense incurred by the Agent or
any Lender relating to disputes or claims among or between the Agent, the
Lenders, or any of them unless during the continuance of an Event of Default and
related to details of enforcement of the Lenders' rights under the Credit
Documents.
5.11 Legal Compliance; Indemnification. The Borrower shall operate its
---------------------------------
Property and businesses in full compliance with all Legal Requirements. It
shall not constitute an Event of Default if there is a failure to comply with
any Legal Requirement which failure could not reasonably be expected to have a
Material Adverse Effect. The Borrower shall indemnify the Agent and each
Lender, their directors, officers, employees and shareholders (the "Indemnified
-----------
Parties") for and defend and hold the Indemnified Parties harmless against any
- -------
and all claims, demands, liabilities, causes of action, penalties, obligations,
damages, judgments, deficiencies, losses, costs or expenses (including, without
limitation, interest, penalties, attorneys' fees, and amounts paid in
settlement) threatened or incurred by reason of, arising out of or in any way
related to any failure of the Borrower to so comply with the provisions of any
Legal Requirement, this Agreement or the other Credit Documents, and any and all
matters arising out of any act, omission, event or circumstance, regardless of
whether the act, omission, event or circumstance constituted a violation of any
such Legal Requirement, this Agreement or the other Credit Documents at the time
of its existence or occurrence. THE BORROWER SHALL INDEMNIFY THE AGENT AND EACH
LENDER PURSUANT TO THIS SECTION REGARDLESS OF WHETHER THE ACT, OMISSION, FACTS,
CIRCUMSTANCES OR
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<PAGE>
CONDITIONS GIVING RISE TO SUCH INDEMNIFICATION WERE CAUSED IN WHOLE OR IN PART
BY THE AGENT'S OR SUCH LENDER'S NEGLIGENCE (SIMPLE, BUT NOT GROSS NEGLIGENCE).
The Borrower will comply with all Legal Requirements to maintain, and will at
all times qualify as and maintain, its status as a real estate investment trust
under Section 856(c)(1) of the Code.
5.12 Borrower's Performance. If the Borrower should fail to comply with
----------------------
any of the agreements, covenants or obligations of the Borrower under this
Agreement or any other Credit Document, then the Agent (in the Borrower's name
or in Agent's name) may perform them or cause them to be performed for the
account of the Borrower and at the Borrower's sole expense, but shall not be
obligated to do so. Any and all expenses thus incurred or paid by the Agent and
by any Lender shall be the Borrower's demand obligations to the Agent or such
Lender and shall bear interest from the date of demand therefor until the date
that the Borrower repays it to the Agent or the applicable Lender at the Past
Due Rate. Upon making any such payment or incurring any such expense, the Agent
or the applicable Lender shall be fully subrogated to all of the rights of the
Person receiving such payment. Any amounts owing by the Borrower to the Agent
or any Lender pursuant to this provision or any other provision of this
Agreement shall automatically and without notice be secured by any collateral
provided by the Credit Documents. The amount and nature of any such expense and
the time when paid shall, absent manifest error, be fully established by the
affidavit of the Agent or the applicable Lender or any of the Agent's or the
applicable Lender's officers or agents.
5.13 Professional Services. Promptly upon the Agent's request to satisfy
---------------------
itself or the request of any Lender, the Borrower, at the Borrower's sole cost
and expense, provided, however, that so long as no Event of Default has occurred
and is continuing, such items will not be at the Borrower's expense, shall: (a)
allow an inspection and/or appraisal of the Borrower's Property to be made by a
Person approved by the Agent in its sole discretion; and (b) if the Agent
believes that an Event of Default has occurred or is about to occur, cause to be
conducted or prepared any other written report, summary, opinion, inspection,
review, survey, audit or other professional service relating to the Borrower's
Property or any operations in connection with it (all as designated in the
Agent's request), including, without limitation, any accounting, auctioneering,
architectural, consulting, engineering, design, legal, management, pest control,
surveying, title abstracting or other technical, managerial or professional
service relating to such property or its operations.
5.14 Capital Adequacy. (a) If after the date of this Agreement, the
----------------
Agent or any Lender shall have determined that the adoption or effectiveness of
any applicable law, rule or regulation regarding capital adequacy of general
applicability, or any change therein, or any change in the
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<PAGE>
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Agent or any Lender with any request or directive
regarding capital adequacy of general applicability (whether or not having the
force of law) of any such Governmental Authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
Agent's or any Lender's capital as a consequence of its obligations hereunder to
a level below that which the Agent or such Lender could have achieved but for
such adoption, change or compliance (taking into consideration the Agent's or
such Lender's policies with respect to capital adequacy) by an amount deemed by
the Agent or such Lender to be material, then from time to time, the Borrower
shall pay to the Agent or such Lender such additional amount or amounts as will
compensate the Agent or such Lender for such reduction.
(b) A certificate of the Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate the Agent or such Lender
as specified in Section 5.14(a) hereof and making reference to the applicable
---------------
law, rule or regulation shall be delivered as soon as practicable to the
Borrower and shall be prima facie evidence thereof. The Borrower shall pay the
Agent or such Lender the amount shown as due on any such certificate within
fourteen (14) Business Days after the Agent or such Lender delivers such
certificate. In preparing such certificate, the Agent or such Lender may employ
such assumptions and allocations of costs and expenses as it shall in good faith
deem reasonable and may use any reasonable averaging and attribution method.
5.15 Property Pool. The Borrower will at all times own fee simple title
-------------
to real estate properties that are not mortgaged, pledged, hypothecated, or
encumbered in any manner other than Permitted Encumbrances (the "Pool") with an
----
aggregate Historical Value (plus all cash balances held by the Borrower if and
whenever the unpaid balance of the Loans is zero) of at least one hundred
seventy-five percent (175%) of the Borrower's unsecured Indebtedness outstanding
from time to time, with the following characteristics: (a) the Pool must
include income producing operating properties (the "Operating Sub-Pool") with an
------------------
aggregate Operating Sub-Pool Value of at least one hundred fifty percent (150%)
of the Borrower's unsecured Indebtedness outstanding from time to time, (b) each
individual property in the Operating Sub-Pool must have an occupancy level of at
least eighty percent (80%), where such occupancy level is the average of the
actual occupancy level for each of the immediately preceding three (3) months,
(c) any properties added to the Operating Sub-Pool after the date of this
Agreement must be multifamily properties, and (d) the Borrower must have
received from third party independent environmental consultants, written
assessments for each property in, or to be added to, the Operating Sub-Pool that
do not disclose any material environmental conditions or risks related to such
properties. If requested by the Agent and\or the Co-Agent, the Borrower will
provide to the Agent and the Co-Agent
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<PAGE>
written assessments from third party independent environmental consultants for
all real estate properties acquired after the date of this Agreement. If the
Agent determines that there are material environmental conditions existing on or
risks to such properties, the properties will be excluded from the Pool.
6. Negative Covenants.
------------------
The Borrower covenants and agrees with the Agent and the Lenders that prior
to the termination of this Agreement it will not do any of the following:
6.1 Indebtedness. Create, incur, suffer or permit to exist, or assume
------------
or guarantee, directly or indirectly, contingently or otherwise, or become or
remain liable with respect to any Indebtedness with a final maturity of five (5)
years or less (not including any renewal or extension options) in excess of
$400,000,000.00 in the aggregate, in all cases whether direct, indirect,
absolute, contingent or otherwise; except (a) Indebtedness incurred by Borrower
which has an S&P Rating of BBB- or better and a Moody's Rating of Baa3 or better
at the time of issuance, (b) Non-recourse Debt, (c) Indebtedness in the final
five (5) years or less of a full payment amortization schedule providing for
periodic payments over the remaining life where no more than fifty percent (50%)
of the original loan amount is amortized in said final five (5) year or less
period, (d) credit enhancement provided by or on behalf of the Borrower for tax
exempt bonds if said credit enhancement has an expiration date or a maturity
date of one (1) year or more, and (e) Indebtedness secured by multifamily real
estate properties and assumed by Borrower in connection with the purchase of
said properties by Borrower (but not incurred or assumed in anticipation of such
purchase) not to exceed $50,000,000.00 in the aggregate. For the purposes of the
foregoing calculation under (c) above, simultaneously issued tranches of
---
Indebtedness under the same indenture shall be combined and treated as a single
debt issuance.
6.2 Mergers, Consolidations and Acquisitions of Assets. In any single
--------------------------------------------------
transaction or series of related transactions, directly or indirectly: (a)
liquidate or dissolve; (b) other than a merger or consolidation in which the
Borrower is the surviving entity and the value of the assets of the other party
to such merger or consolidation is less than twenty percent (20%) of the value
of the assets of the Borrower on a consolidated basis (in accordance with
Generally Accepted Accounting Principles) after such merger or consolidation, be
a party to any merger or consolidation; (c) other than an acquisition in which
the Borrower acquires all or substantially all of the assets of another Person
and the value of the assets acquired is less than twenty percent (20%) of the
value of the assets of the Borrower on a consolidated basis (in accordance with
Generally Accepted Accounting Principles) after such acquisition, acquire all or
substantially all of the assets of any Person; or (d) except for periodic sales
not exceeding twenty-five percent
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<PAGE>
(25%) of the Borrower's total assets on a consolidated basis (in accordance with
Generally Accepted Accounting Principles) in any calendar year, or sales or
leases executed in the ordinary course of business, sell, convey or lease all or
any substantial part of its assets.
6.3 Redemption. At any time redeem, retire or otherwise acquire,
----------
directly or indirectly, any shares of its capital stock if such action would
cause the Borrower to not be in compliance with this Agreement.
6.4 Nature of Business; Management. Change the nature of its business
------------------------------
or enter into any business which is substantially different from the business in
which it is presently engaged; amend the Borrower's agreements with Borrower's
REIT Manager if such amendments would materially increase amounts payable
thereunder to Borrower's REIT Manager or which would violate any provision of
the Credit Documents; or terminate or allow the termination (whether voluntary
or involuntary) of the Borrower's agreements with Borrower's REIT Manager unless
within thirty (30) days thereafter Borrower's REIT Manager is replaced by an
advisor or management team pursuant to an agreement which is in compliance with
the requirements of the North American Security Administrators Association's
Statement of Policy for Real Estate Investment Trusts and which is otherwise
satisfactory to the Agent and the Majority Lenders.
6.5 Transactions with Related Parties. Enter into any transaction or
---------------------------------
agreement with any officer, director, or holder of more than five percent (5%)
(based on voting rights) of the issued and outstanding capital stock of the
Borrower (or any Affiliate of the Borrower), unless the same is upon terms
substantially similar to those obtainable from qualified wholly unrelated
sources, or complies with the requirements of the Statement of Policy for Real
Estate Investment Trusts promulgated by the North American Security
Administrators Association, as amended from time to time. Agent and each Lender
hereby consent to (a) the contribution to Homestead Village Properties
Incorporated of all of the Homestead Village assets owned by the Borrower in
exchange for common stock and warrants to be transferred to the Borrower's
shareholders promptly after receipt by the Borrower, and (b) the retention by
Borrower of mortgages convertible into common stock of Homestead Village
Properties Incorporated securing amounts funded by the Borrower (irrespective of
the face amount of the convertible mortgages) which do not exceed
$230,000,000.00, in each case to the extent not on terms substantially similar
to those obtainable from unrelated sources.
6.6 Loans and Investments. Make any loan, advance, extension of credit
---------------------
or capital contribution to, or make or have any investment in, any Person, or
make any commitment to make any such extension of credit or investment, except
(a) travel advances in the ordinary course of business to officers, employees
and agents; (b) readily marketable securities issued or fully
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<PAGE>
guaranteed by the United States of America (or investments or money market
accounts consisting of the same); (c) commercial paper rated "Prime 1" by
Moody's Investors Service, Inc. or A-1 by Standard and Poor's Corporation (or
investments or money market accounts consisting of the same); (d) certificates
of deposit or repurchase certificates issued by financial institutions
acceptable to the Agent (or investments or money market accounts consisting of
the same), all of the foregoing b, c and d not having a maturity of more than
- - -
one (1) year from the date of issuance thereof; (e) securities received in
settlement of liabilities created in the ordinary course of business, or
securities in Persons engaged primarily in the business of investment in and
operation of commercial real estate properties received in exchange for Property
sold to such Persons so long as the market value of such securities does not
exceed ten percent (10%) of the value of the assets of the Borrower on a
consolidated basis (in accordance with Generally Accepted Accounting Principles)
prior to such investment; (f) investments in Subsidiaries through which the
Borrower invests in real estate assets and acquisition and/or construction loans
encumbered by Property of or to be acquired by the Borrower; (g) the Borrower's
existing forty percent (40%) joint venture interest investment in KP/M PTA Joint
Venture I and investments in Unconsolidated Affiliates that are engaged
primarily in the business of investment in and operation of multifamily real
estate properties, so long as the aggregate amount of such investments described
in this (g) does not exceed fifteen percent (15%) of the value of the assets of
the Borrower on a consolidated basis (in accordance with Generally Accepted
Accounting Principles) after giving effect to such investments; (h) equity
investments or capital contributions in, and loans, advances, and extensions of
credit to, PTR Development Services, so long as (1) the equity investments or
capital contributions do not exceed $10,000,000.00, (2) the loans, advances and
extensions of credit are secured by valid and enforceable first priority liens
on real estate, (3) the Borrower shall at all times beneficially own at least
ninety percent (90%) of the economic interest in PTR Development Services, and
(4) the financial condition and results of operations of PTR Development
Services shall be consolidated with those of the Borrower for purposes of the
Borrower's financial statements; (i) loans, advances, and extensions of credit
to Persons (who are not Affiliates of the Borrower) secured by valid and
enforceable first priority liens on real estate for the purpose of acquiring and
developing multifamily properties for eventual ownership by, or to be acquired
by, the Borrower prior to, or within a reasonable period of time consistent with
a business purpose after, the completion of construction or development of such
multifamily property; (j) investments permitted under Section 6.2 of this
-----------
Agreement, and (k) loans, advances and extensions of credit to Homestead Village
Properties Incorporated secured by mortgages convertible into common stock
ownership of Homestead Village Properties Incorporated, so long as the aggregate
amount which is funded by the Borrower (irrespective of the face amount of the
convertible mortgages) does not exceed the lesser of $230,000,000.00 or 20% of
the value of the assets of the Borrower on a consolidated basis (in accordance
with Generally Accepted Accounting
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<PAGE>
Principles). The Borrower will not mortgage, pledge, hypothecate or encumber in
any manner the loans, advances or extensions of credit made pursuant to
Sections 6.6(h), (i) or (k).
- --------------- --- ---
6.7 Limiting Agreements. Without affecting the provisions of Section
------------------- -------
5.15 of this Agreement, but cumulative of and in addition thereto:
- -----
(a) Except for the Indenture dated February 1, 1994 between the Borrower
and Morgan Guaranty Trust Company of New York, as Trustee, neither Borrower nor
any of its Subsidiaries has entered into, and after the date hereof, neither
Borrower nor any of its Subsidiaries shall enter into, any agreement, instrument
or transaction which has or may have the effect of prohibiting or limiting
Borrower's ability to pledge to Agent as security for the Loans assets now or
hereafter owned by Borrower up to the value described in this Section 6.7.
-----------
Borrower shall take, and shall cause its Subsidiaries to take, such actions as
are necessary (including, without limitation, otherwise limiting the amount of
secured indebtedness of the Borrower and its Subsidiaries) to preserve the right
and ability of Borrower to pledge assets up to the value described in this
Section 6.7 as security for the Loans without any such pledge after the date
- -----------
hereof causing or permitting the acceleration (after the giving of notice or the
passage of time, or otherwise) of any other indebtedness of Borrower or any of
its Subsidiaries. For the purpose of this paragraph, the Historical Value of
the assets to be kept available by Borrower to be pledged as security for the
Loans shall be assets having an aggregate Historical Value of not less than one
hundred thirty-three percent (133%) of the Commitment; provided however that the
-------- -------
foregoing shall not be construed as a maximum amount of collateral which could
be required or accepted by the Lenders under any other agreement or in any
proceeding.
(b) Borrower shall, upon demand, provide to the Lenders such evidence as
the Lenders may reasonably require to evidence Borrower's compliance with this
covenant, which evidence shall include, without limitation (i) copies of any
agreements or instruments which would in any way restrict or limit Borrower's
ability to pledge assets as security for indebtedness, or which provide for the
occurrence of a default (after the giving of notice or the passage of time, or
otherwise) if assets are pledged in the future as security for indebtedness of
the Borrower or any of its Subsidiaries, (ii) a summary of the total debt of
Borrower and its Subsidiaries, and (iii) a summary of any of such debt which is
secured by any mortgage, pledge, lien, charge, encumbrance or other security
interest.
(c) Nothing in this covenant shall be construed as an obligation of
Borrower to, or request by the Lenders that Borrower, grant any mortgage, pledge
or security interest in any of its properties.
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<PAGE>
6.8 Nature of Assets. (a) In its own name or the name of any of its
----------------
Subsidiaries, own or lease, directly or indirectly, land not improved for
multifamily use, other than land that is either under development or planned for
commencement of development within one (1) year from the date it was acquired,
with an aggregate Historical Value in excess of ten percent (10%) of the value
of the assets of the Borrower on a consolidated basis (in accordance with
Generally Accepted Accounting Principles), or (b) allow the Historical Value of
the income producing properties owned or leased, directly or indirectly, by the
Borrower and its Subsidiaries which are not multifamily properties and not
corporate affordable or extended stay lodging properties (such as Homestead
Village or the related convertible mortgages), to exceed five percent (5%) of
the value of the assets of the Borrower on a consolidated basis (in accordance
with Generally Accepted Accounting Principles).
7. Events of Default and Remedies.
------------------------------
7.1. Events of Default. If any of the following events shall occur,
-----------------
then, as to the events described in Sections 7.1(b), (c), and (d), if the event
--------------- --- ---
has not been waived, cured or remedied within twenty (20) days after the Agent
gives the Borrower notice of such event, at any time thereafter, and as to all
of the other events described herein, at any time, the Agent may do any or all
of the following: (1) without notice to the Borrower, declare the Notes to be,
and thereupon the Notes shall forthwith become, immediately due and payable,
together with all accrued interest thereon, without notice of any kind, notice
of acceleration or of intention to accelerate, presentment and demand or
protest, all of which are hereby expressly waived; (2) without notice to the
Borrower, terminate the Commitment; (3) exercise, as may any other Lender, its
rights of offset against each account and all other Property of the Borrower in
the possession of the Agent or any such Lender, which right is hereby granted by
the Borrower to the Agent and each Lender; and (4) exercise any and all other
rights pursuant to the Credit Documents:
(a) The Borrower shall fail to pay or prepay any principal of or
interest on the Notes or any fee or any other obligation hereunder within
five (5) days after it was due; or
(b) The Borrower shall (i) fail to pay when due, or within any
applicable period of grace, any principal of or interest on any other
Indebtedness other than Non-recourse Debt or Disqualified Stock in excess
of $10,000,000.00 in principal amount, or Non-recourse Debt in excess of
$25,000,000.00 in principal amount; or (ii) fail to comply with Section
1004 of the Indenture dated February 1, 1994 between the Borrower and
Morgan
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<PAGE>
Guaranty Trust Company of New York, as Trustee, as said Section 1004 may be
amended with the consent of the Majority Lenders; or
(c) Any written representation or warranty made in any Credit
Document by or on behalf of the Borrower, when taken as a whole shall prove
to have been incorrect, false or misleading in any material respect; or
(d) Default shall occur in the punctual and complete performance of
any covenant of the Borrower or any other Person other than the Agent or
the Lenders contained in any Credit Document not specifically set forth in
this Section; or
(e) A final judgment or judgments in the aggregate for the payment
of money in excess of $5,000,000.00 shall be rendered against the Borrower
and the same shall remain undischarged for a period of thirty (30) days
during which execution shall not be effectively stayed; or
(f) Any court shall finally determine, that the Agent or any Lender
does not have a valid Lien as provided for herein on any security which may
have been provided to the Agent or any Lender by the Borrower under the
Credit Documents, or such other Person; or
(g) Any order shall be entered in any proceeding against the
Borrower decreeing the dissolution, liquidation or split-up thereof, and
such order shall remain in effect for more than thirty (30) days; or
(h) The Borrower shall make a general assignment for the benefit of
creditors or shall petition or apply to any tribunal for the appointment of
a trustee, custodian, receiver or liquidator of all or any substantial part
of its business, estate or assets or shall commence any proceeding under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect; or
(i) Any such petition or application shall be filed or any such
proceeding shall be commenced against the Borrower and the Borrower by any
act or omission shall indicate approval thereof, consent thereto or
acquiescence therein, or an order shall be entered appointing a trustee,
custodian, receiver or liquidator of all or any substantial part of the
assets of the Borrower or granting relief to the Borrower or approving the
petition
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<PAGE>
in any such proceeding, and such order shall remain in effect for more than
ninety (90) days; or
(j) The Borrower shall fail generally to pay its debts as they become
due or suffer any writ of attachment or execution or any similar process to
be issued or levied against it or any substantial part of its Property
which is not released, stayed, bonded or vacated within thirty (30) days
after its issue or levy; or
(k) The Borrower shall have concealed, removed, or permitted to be
concealed or removed, any part of its Property, with intent to hinder,
delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its Property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall have made any
transfer of its Property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid.
7.2 Remedies Cumulative. No remedy, right or power conferred upon the
-------------------
Agent or the Lenders is intended to be exclusive of any other remedy, right or
power given hereunder or now or hereafter existing at law, in equity, or
otherwise, and all such remedies, rights and powers shall be cumulative.
8. The Agent.
---------
8.1 Appointment, Powers and Immunities. (a) Each Lender hereby
----------------------------------
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Credit Documents with such powers as are specifically delegated
to the Agent by the terms hereof and thereof, together with such other powers as
are reasonably incidental thereto. The Agent (i) shall not have any duties or
responsibilities except those expressly set forth in this Agreement and the
other Credit Documents, and shall not by reason of this Agreement or any other
Credit Document be a trustee for any Lender; (ii) shall not be responsible to
any Lender for any recitals, statements, representations or warranties contained
in this Agreement or any other Credit Document, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or any other Credit Document, or for the value, validity,
effectiveness, genuineness, enforceability, execution, filing, registration,
collectibility, recording, perfection, existence or sufficiency of this
Agreement or any other Credit Document or any other document referred to or
provided for herein or therein or any property covered thereby or for any
failure by any Party or any other Person to perform any of its obligations
hereunder or thereunder, and shall not have any duty to inquire into or pass
upon any of the foregoing matters; (iii) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or any other
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<PAGE>
Credit Document except to the extent requested by the Majority Lenders; (iv)
SHALL NOT BE RESPONSIBLE FOR ANY MISTAKE OF LAW OR FACT OR ANY ACTION TAKEN OR
OMITTED TO BE TAKEN BY IT HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT OR ANY
OTHER DOCUMENT OR INSTRUMENT REFERRED TO OR PROVIDED FOR HEREIN OR THEREIN OR IN
CONNECTION HEREWITH OR THEREWITH, INCLUDING, WITHOUT LIMITATION, PURSUANT TO ITS
OWN NEGLIGENCE, BUT NOT INCLUDING AND EXCEPT FOR THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENT; (v) shall not be bound by or obliged to recognize any
agreement among or between the Borrower, the Agent, and any Lender other than
this Agreement and the other Credit Documents, regardless of whether the Agent
has knowledge of the existence of any such agreement or the terms and provisions
thereof; (vi) shall not be charged with notice or knowledge of any fact or
information not herein set out or provided to the Agent in accordance with the
terms of this Agreement or any other Credit Document; (vii) shall not be
responsible for any delay, error, omission or default of any mail, telegraph,
cable or wireless agency or operator, and (viii) shall not be responsible for
the acts or edicts of any Governmental Authority. The Agent may employ agents
and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care.
(b) Without the prior written consent of Agent and all of the Lenders,
Agent shall not (i) modify or amend in any respect whatsoever the interest rate
provisions of the Credit Documents, (ii) increase the Commitment above
$350,000,000.00, (iii) extend the Maturity Date other than in accordance with
the express provisions of the Credit Documents, (iv) extend or reduce the due
date for or the amount of the scheduled payments of principal or interest on the
Loans or the Fee, (v) amend the definition of Majority Lenders or any
requirement that certain actions be taken only with the consent of a certain
number of the Lenders, or (vi) amend Section 5.15 of this Agreement. From time
------------
to time upon Agent's request, each Lender shall execute and deliver such
documents and instruments as may be reasonably necessary to enable Agent to
effectively administer and service the Loan in its capacity as lead lender and
servicer and in the manner contemplated by the provisions of this Agreement.
(c) All information provided to the Agent under or pursuant to the Credit
Documents, and all rights of the Agent to receive or request information, or to
inspect information or Property, shall be by the Agent on behalf of the Lenders.
If any Lender requests that it be able to receive or request such information,
or make such inspections, in its own right rather than through the Agent, the
Borrower will cooperate with the Agent and such Lender in order to obtain such
information or make such inspection as such Lender may reasonably require.
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<PAGE>
(d) The Borrower shall be entitled to rely upon a written notice or a
written response from the Agent as being pursuant to concurrence or consent of
the Majority Lenders unless otherwise expressly stated in the Agent's notice or
response.
8.2 Reliance. The Agent shall be entitled to rely upon any certification,
--------
notice or other communication (including any thereof by telephone, telex,
telecopy, telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel (which may be counsel for the
Borrower), independent accountants and other experts selected by the Agent. The
Agent shall not be required in any way to determine the identity or authority of
any Person delivering or executing the same. As to any matters not expressly
provided for by this Agreement or any other Credit Document, the Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
and thereunder in accordance with instructions of the Majority Lenders, and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders. If any order, writ, judgment or decree shall be made or entered by any
court affecting the rights, duties and obligations of the Agent under this
Agreement or any other Credit Document, then and in any of such events the Agent
is authorized, in its sole discretion, to rely upon and comply with such order,
writ, judgment or decree which it is advised by legal counsel of its own
choosing is binding upon it under the terms of this Agreement, the relevant
Credit Document or otherwise; and if the Agent complies with any such order,
writ, judgment or decree, then it shall not be liable to any Lender or to any
other Person by reason of such compliance even though such order, writ, judgment
or decree may be subsequently reversed, modified, annulled, set aside or
vacated.
8.3 Defaults. The Agent shall not be deemed to have constructive
--------
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans) unless it has received notice from a Lender
or the Borrower specifying such Default and stating that such notice is a
"Notice of Default". In the event that the Agent receives such a notice of the
occurrence of a Default, or whenever the Agent has actual knowledge of the
occurrence of a Default, the Agent shall give prompt written notice thereof to
the Lenders (and shall give each Lender prompt notice of each such non-payment).
The Agent shall (subject to Section 8.7 hereof) take such action with respect to
-----------
such Default as shall be directed by the Majority Lenders and within its rights
under the Credit Documents and at law or in equity, 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,
permitted hereby with respect to such Default as it shall deem advisable in the
best interests of the Lenders and within its rights under the Credit Documents
in order to preserve, protect or enhance the collectibility of the Loans, at law
or in equity. Provided, however, that if there is an occurrence of an Event of
--------
Default, then in no event or under any circumstances shall any of the actions
described in Section 8.1(b)(i) through (vi) of
----------------- ----
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<PAGE>
this Agreement be taken, without in each instance the written consent of Agent
and all of the Lenders.
8.4 Rights as a Lender. With respect to the Commitment and the Loans
------------------
made, Agent, in its capacity as a Lender hereunder shall have the same rights
and powers hereunder as any other Lender and may exercise the same as though it
were not acting in its agency capacity, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may (without having to account therefor to any
other Lender) as a Lender, and to the same extent as any other Lender, accept
deposits from, lend money to and generally engage in any kind of banking, trust,
letter of credit, agency or other business with the Borrower (and any of its
Affiliates) as if it were not acting as the Agent but solely as a Lender. The
Agent may accept fees and other consideration from the Borrower (in addition to
the fees heretofore agreed to between the Borrower and the Agent) for services
in connection with this Agreement or otherwise without having to account for the
same to the Lenders.
8.5 Indemnification. The Lenders agree to indemnify the Agent, its
---------------
officers, directors, agents and Affiliates, ratably in accordance with each
Lender's respective Percentage, for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever (INCLUDING BUT NOT LIMITED TO,
THE CONSEQUENCES OF THE NEGLIGENCE OF THE AGENT) which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or any other Credit Document or any other documents
contemplated by or referred to herein or therein, or the transactions
contemplated hereby or thereby (including, without limitation, interest,
penalties, reasonable attorneys' fees and amounts paid in settlement in
accordance with the terms of this Section 8, but excluding, unless a Default has
---------
occurred and is continuing, normal administrative costs and expenses incident to
the performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents, INCLUDING BUT NOT
LIMITED TO THE NEGLIGENCE OF THE AGENT, provided that no Lender shall be liable
--------
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified, or from the Agent's default
in the express obligations of the Agent to the Lenders provided for in this
Agreement. The obligations of the Lenders under this Section 8.5 shall survive
-----------
the termination of this Agreement and the repayment of the Obligations.
8.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
---------------------------------------
has received current financial information with respect to the Borrower and that
it has, independently and without reliance on the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and decision to enter
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<PAGE>
into this Agreement and 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 analysis and
decisions in taking or not taking action under this Agreement or any of the
other Credit Documents. The Agent shall not be required to keep itself informed
as to the performance or observance by any Party of this Agreement or any of the
other Credit Documents or any other document referred to or provided for herein
or therein or to inspect the properties or books of the Borrower or any Party
except as specifically required by the Credit Documents. Except for notices,
reports and other documents and information expressly required to be furnished
to the Lenders by the Agent hereunder or the other Credit Documents, the Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the affairs, financial condition or business of
the Borrower or any other Party (or any of their affiliates) which may come into
the possession of the Agent. Each Lender assumes all risk of loss in connection
with its Percentage in the Loans to the full extent of its Percentage therein.
The Agent assumes all risk of loss in connection with its Percentage in the
Loans to the full extent of its Percentage therein.
8.7 Failure to Act. Except for action expressly required of the Agent, as
--------------
the case may be, hereunder, or under the other Credit Documents, the Agent shall
in all cases be fully justified in failing or refusing to act hereunder and
thereunder unless it shall receive further assurances to its satisfaction by the
Lenders of their indemnification obligations under Section 8.5 hereof against
-----------
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action.
8.8 Resignation of Agent. Subject to the appointment and acceptance of a
--------------------
successor Agent as provided below, the Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, (i)
the Majority Lenders without the consent of the Borrower shall have the right to
appoint a successor Agent so long as such successor Agent is also a Lender at
the time of such appointment and (ii) the Majority Lenders shall have the right
to appoint a successor Agent that is not a Lender at the time of such
appointment so long as the Borrower consents to such appointment (which consent
shall not be unreasonably withheld). If no successor Agent shall have been so
appointed by the Majority Lenders and accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation, then the retiring
Agent may, on behalf of the Lenders, and with the consent of the Borrower which
shall not be unreasonably withheld, appoint a successor Agent. Any successor
Agent shall be a bank which has an office in the United States and a combined
capital and surplus of at least $250,000,000.00. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be
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<PAGE>
discharged from its duties and obligations as Agent thereafter arising hereunder
and under any other Credit Documents, but shall not be discharged from any
liabilities for its actions as Agent prior to the date of discharge. Such
successor Agent shall promptly specify by notice to the Borrower its principal
office referred to in Section 2.1 and Section 2.3 hereof. After any retiring
----------- -----------
Agent's resignation hereunder as Agent, the provisions of this Section 8 shall
---------
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Agent.
8.9 No Partnership. Neither the execution and delivery of this Agreement
--------------
nor any of the other Credit Documents nor any interest the Lenders, the Agent or
any of them may now or hereafter have in all or any part of the Obligations
shall create or be construed as creating a partnership, joint venture or other
joint enterprise between the Lenders or among the Lenders and the Agent. The
relationship between the Lenders, on the one hand, and the Agent, on the other,
is and shall be that of principals and agent only, and nothing in this Agreement
or any of the other Credit Documents shall be construed to constitute the Agent
as trustee or other fiduciary for any Lender or to impose on the Agent any duty,
responsibility or obligation other than those expressly provided for herein and
therein.
9. Renewal and Extension.
---------------------
Neither the Agent nor any Lenders have any agreement or obligation to
extend or renew the Revolving Credit Termination Date. But in the event such an
extension is requested by the Borrower and any Lender decides to consider such
renewal and extension request, such request and consideration will be governed
by the following terms and conditions:
9.1 Procedure for Consideration of Renewal and Extension Requests.
-------------------------------------------------------------
(a) The Borrower may request the Agent and the Lenders to extend the
current Revolving Credit Termination Date by successive one (1) year intervals
by executing and delivering to the Agent a written request for extension (the
"Extension Request") at least seventy-five (75) days (but not more than ninety
- ------------------
(90) days) prior to the Determination Date. If all of the Lenders shall have
notified the Agent on or prior to the date which is forty-five (45) days prior
to the Determination Date that they accept such Extension Request, the Revolving
Credit Termination Date shall be extended for one (1) year. If any Lender shall
not have notified Agent on or prior to the date which is forty-five (45) days
prior to the Determination Date that it accepts such Extension Request, the
Revolving Credit Termination Date shall not be extended. The Agent shall
promptly notify the Borrower whether the Extension Request has been accepted or
rejected
-47-
<PAGE>
as well as which Lender or Lenders rejected the Borrower's Extension Request
(each such Lender a "Rejecting Lender").
----------------
(b) Notwithstanding the preceding subsection (a), within thirty (30) days
after notification from the Agent that the Extension Request has been rejected
(a "Notice of Rejection"), and provided that the aggregate amount of Lender
-------------------
Commitments of the Rejecting Lenders does not exceed twenty percent (20%) of the
Commitment, the Borrower may either (i) demand that the Rejecting Lender, and
upon such demand the Rejecting Lender shall promptly, assign its Lender
Commitment to another financial institution subject to and in accordance with
the provisions of Section 10.5 of this Agreement for a purchase price equal to
------------
the unpaid balance of principal, accrued interest, the unpaid balance of the Fee
and expenses owing to the Rejecting Lender pursuant to this Agreement, or (ii)
pay to the Rejecting Lender the unpaid balance of principal, accrued interest,
the unpaid balance of the Fee and expenses owing to the Rejecting Lender
pursuant to this Agreement, whereupon the Rejecting Lender shall no longer be a
party to this Agreement or have any rights or obligations hereunder or under any
other Credit Documents, and the Commitment shall immediately and permanently be
reduced by an amount equal to the Lender Commitment of the Rejecting Lender. If
all Rejecting Lenders have either assigned their Lender Commitments to other
financial institutions as contemplated by the preceding clause (i) or have been
paid the amounts specified in the preceding clause (ii), then the Borrower's
Extension Request which was initially rejected shall be deemed to have been
granted and accordingly the Revolving Credit Termination Date shall be extended
by one (1) year, otherwise the Revolving Credit Termination Date shall not be
extended. If the aggregate of Lender Commitments of the Rejecting Lenders
exceeds twenty percent (20%) of the Commitment, the Revolving Credit Termination
Date shall not be extended.
9.2 Conditions to Renewal and Extension. Any agreement of the Lenders to
-----------------------------------
extend the Revolving Credit Termination Date under Section 9.1 of this Agreement
-----------
shall be conditioned upon, among other things, the following terms and
conditions (which shall be in addition to those required by Sections 2.7, 3 and
------------ -
9.1 of this Agreement):
- ---
(a) Execution by the Borrower of a renewal and extension agreement
for each Note in Proper Form.
(b) Such other documents, instruments and items as Agent or any
Lender shall require in its sole discretion.
9.3 No Obligation to Renew and Extend. Notwithstanding the procedures and
---------------------------------
terms and conditions for any renewal and extension of the Revolving Credit
Termination Date, neither
-48-
<PAGE>
the Agent nor any Lender has any obligation, commitment or present intent to
extend the Revolving Credit Termination Date, and the Revolving Credit
Termination Date may not be extended except in accordance with a written
agreement signed by the Agent, the Lenders, the Borrower and any other Person to
be charged with compliance therewith.
10. Miscellaneous.
-------------
10.1 No Waiver, Amendments. No waiver of any Default shall be deemed to
---------------------
be a waiver of any other Default. No failure to exercise or delay in exercising
any right or power under any Credit Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
further or other exercise thereof or the exercise of any other right or power.
Except as may be prohibited by Section 8.1 hereof, no amendment, modification or
-----------
waiver of any Credit Document shall be effective unless the same is in writing
and signed by the Borrower, the Agent and the Majority Lenders. No notice to or
demand on the Borrower or any other Person shall entitle the Borrower or any
other Person to any other or further notice or demand in similar or other
circumstances.
10.2 Notices. All notices under the Credit Documents shall be in writing
-------
and either (i) delivered against receipt therefor, or (ii) mailed by registered
or certified mail, return receipt requested, in each case addressed as set forth
herein, or to such other address as a party may designate. Notices shall be
deemed to have been given (whether actually received or not) when delivered (or,
if mailed, on the next Business Day). Provided, however, that as between the
-------- -------
Agent and the Lenders and among the Lenders, notice may be given by telecopy or
facsimile effective upon the earlier of actual receipt or confirmation of
receipt by telephone.
10.3 Venue. HARRIS COUNTY, TEXAS SHALL BE A PROPER PLACE OF VENUE TO
-----
ENFORCE PAYMENT OR PERFORMANCE OF THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS,
UNLESS THE AGENT SHALL GIVE ITS PRIOR WRITTEN CONSENT TO A DIFFERENT VENUE. THE
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS IN THE STATE OF TEXAS AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY PROCEEDING ARISING OUT OF ANY OF
THE CREDIT DOCUMENTS BY SERVICE OF PROCESS AS PROVIDED BY TEXAS LAW. THE
BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE CREDIT DOCUMENTS
IN THE DISTRICT COURTS OF HARRIS COUNTY, TEXAS,
-49-
<PAGE>
OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS,
HOUSTON DIVISION, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIMS THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. THE BORROWER (A) AGREES TO DESIGNATE AND MAINTAIN AN AGENT
FOR SERVICE OF PROCESS IN THE STATE OF TEXAS IN CONNECTION WITH ANY SUCH SUIT,
ACTION OR PROCEEDING AND TO DELIVER TO THE AGENT EVIDENCE THEREOF AND (B)
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY NOTICE GIVEN AS PROVIDED FOR IN
THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR THE
LENDERS TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER
IN ANY JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE
LAW. THE BORROWER HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING
AGAINST THE AGENT OR ANY LENDER ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR THE OTHER CREDIT DOCUMENTS SHALL BE BROUGHT AND MAINTAINED IN THE
DISTRICT COURTS OF HARRIS COUNTY, TEXAS, OR THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION.
10.4 Choice of Law. THIS AGREEMENT, THE NOTES AND THE OTHER CREDIT
-------------
DOCUMENTS HAVE BEEN NEGOTIATED, EXECUTED AND DELIVERED IN THE STATE OF TEXAS AND
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF TEXAS, INCLUDING ALL APPLICABLE FEDERAL LAW, FROM TIME TO TIME
IN FORCE IN THE STATE OF TEXAS.
10.5 Survival; Parties Bound; Successors and Assigns. (a) All
-----------------------------------------------
representations, warranties, covenants and agreements made by or on behalf of
the Borrower in connection herewith shall survive the execution and delivery of
the Credit Documents, shall not be affected by any investigation made by any
Person, and shall bind the Borrower and its successors, trustees, receivers and
assigns and inure to the benefit of the successors and assigns of the Agent and
the Lenders; provided, however, that the Borrower may not assign or transfer any
of its rights or obligations hereunder without the prior written consent of the
Agent and all of the Lenders, and any such assignment or transfer without such
consent shall be null and void.
-50-
<PAGE>
(b) Subject to Sections 10.5(d) and (e) of this Agreement, a Lender
---------------- ---
may assign part of its Lender Commitment to an Eligible Institution so long as
such assignment shall (1) include the voting rights and all other rights and
obligations attributable thereto, and include a written assumption by the
assignee of the assigning Lender's obligations under the Credit Documents, (2)
require the written consent of the Borrower and the Agent, such consent not to
be unreasonably withheld, (3) be in a minimum amount of $15,000,000.00 if
assigned to a Person not already a Lender, (4) not reduce the Lender's Lender
Commitment to an amount less than $15,000,000.00, and (5) include payment to the
Agent by the Lender of a service fee for each assignment equal to $3,000.00.
(c) Subject to Section 10.5(d) and (e) of this Agreement, a Lender
--------------- ---
may sell participating interests in any of its Loans to an Eligible Institution
so long as such participation shall (1) limit the voting rights of the
participant, if any, to the ability to vote for changes in the amount of the
Commitment, the interest rate on the Loans, and the Maturity Date, (2) if the
participant is not an Affiliate of the participating Lender, require the written
consent of the Borrower and the Agent, such consent not to be unreasonably
withheld and, if the participant is an Affiliate of the participating Lender,
require written notice to the Agent and the Borrower but not any consent of the
Agent, the Borrower or any other Lender, (3) be in a minimum principal amount of
at least $10,000,000.00 if participated to a Person not already a Lender, and
(4) not reduce the Lender's Lender Commitment which has not been participated to
less than $10,000,000.00. In connection with any sale of a participating
interest made in compliance with this Agreement, (i) the participating Lender
shall continue to be liable for its Lender Commitment and its other obligations
under the Credit Documents, (ii) the Agent, the Borrower and the other Lenders
shall continue to deal solely and directly with the participating Lender in
connection with such Lender's rights and obligations under the Credit Documents,
and (iii) the participant may not require the participating Lender to take or
refrain from taking any action under the Credit Documents that is in conflict
with the terms and provisions of the Credit Documents.
(d) A Lender may assign all or any part of its Loans or its Lender
Commitment to an Affiliate of the Lender with written consent of the Agent and
the Borrower, such consent not to be unreasonably withheld.
(e) Notwithstanding any provision hereof to the contrary, (i) any
Lender may assign and pledge all or any portion of its Lender Commitment and
Loans to a Federal Reserve Bank; provided, however, that any such assignment or
pledge shall not relieve such Lender from its obligations under the Credit
Documents; (ii) the Agent may not assign or participate $30,000,000.00 of its
Lender Commitment to any Person other than an Affiliate of the Agent without the
prior written consent of all of the Lenders and the Borrower; and (iii) TCB may
-51-
<PAGE>
assign, sell or participate all or any portion of the Swing Loan without the
consent of the Agent, the Borrower or any other Lender.
(f) The term of this Agreement shall be until the final maturity of
the Notes and the payment of all amounts due under the Credit Documents.
10.6 Counterparts. This Agreement may be executed in several identical
------------
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.
10.7 Usury Not Intended; Refund of Any Excess Payments. It is the intent
-------------------------------------------------
of the parties in the execution and performance of this Agreement to contract in
strict compliance with the usury laws of the State of Texas and the United
States of America from time to time in effect. In furtherance thereof, the
Agent, the Lenders and the Borrower stipulate and agree that none of the terms
and provisions contained in this Agreement or the other Credit Documents shall
ever be construed to create a contract to pay for the use, forbearance or
detention of money with interest at a rate in excess of the Ceiling Rate and
that for purposes hereof "interest" shall include the aggregate of all charges
which constitute interest under such laws that are contracted for, reserved,
taken, charged or received under this Agreement. In determining whether or not
the interest paid or payable, under any specific contingency, exceeds the
Ceiling Rate, the Borrower, the Agent and the Lenders shall, to the maximum
extent permitted under applicable law, (a) characterize any nonprincipal payment
as an expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) "spread" the total amount of
interest throughout the entire contemplated term of the Loans. The provisions
of this paragraph shall control over all other provisions of the Credit
Documents which may be in apparent conflict herewith.
10.8 Captions. The headings and captions appearing in the Credit Documents
--------
have been included solely for convenience and shall not be considered in
construing the Credit Documents.
10.9 Severability. If any provision of any Credit Documents shall be
------------
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired thereby.
10.10 Disclosures. Every reference in the Credit Documents to disclosures
-----------
of the Borrower to the Agent and the Lenders in writing, to the extent that such
references refer to
-52-
<PAGE>
disclosures at or prior to the execution of this Agreement, shall be deemed
strictly to refer only to written disclosures delivered to the Agent and the
Lenders in an orderly manner concurrently with the execution hereof.
10.11 NO NOVATION. THE PARTIES HERETO HAVE ENTERED INTO THIS AGREEMENT AND
-----------
THE OTHER CREDIT DOCUMENTS SOLELY TO AMEND, RESTATE AND RESTRUCTURE THE TERMS
OF, AND THE OBLIGATIONS TO THE EXISTING LENDERS OWING UNDER AND IN CONNECTION
WITH, THE ORIGINAL CREDIT AGREEMENT. THE PARTIES DO NOT INTEND THIS AGREEMENT
NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL NOT BE CONSTRUED TO BE, A NOVATION OF ANY
OF THE OBLIGATIONS OWING BY THE BORROWER UNDER OR IN CONNECTION WITH THE
ORIGINAL CREDIT AGREEMENT.
10.12 LIMITATION OF LIABILITY. NO OBLIGATION OR LIABILITY WHATSOEVER OF
-----------------------
THE BORROWER WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION
OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER CREDIT DOCUMENT
SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF
BE HAD TO THE PRIVATE PROPERTY OF, ANY OF THE BORROWER'S TRUSTEES OR
SHAREHOLDERS REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE
OF CONTRACT, TORT OR OTHERWISE.
10.13 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS
----------------
TOGETHER CONSTITUTE A WRITTEN AGREEMENT AND REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-53-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
SECURITY CAPITAL PACIFIC TRUST
By:/s/ James W. KLUBER
-----------------------------------------
Name: James W. KLUBER
---------------------------------------
Title: VP
Address:
7777 Market Center Avenue
El Paso, Texas 79912
Attention: Secretary
-54-
<PAGE>
Lender Commitment: $55,000,000.00 TEXAS COMMERCE BANK
Percentage: 15.714285714% NATIONAL ASSOCIATION,
as Agent and as a Lender
By:/s/Brian M. Kouns
------------------------------------
Name:Brian M. Kouns
----------------------------------
Title: Vice President
---------------------------------
Address:
712 Main Street
Houston, Texas 77002
Attention: Manager, Real Estate Group
Telecopy No.: 713-216-7713
Telephone No.: Brian Kouns
713-216-5133
-55-
<PAGE>
Lender Commitment: $55,000,000.00 WELLS FARGO REALTY ADVISORS
Percentage: 15.714285714% FUNDING, INCORPORATED, as
Co-Agent and as a Lender
By:/s/ Mary Ann Kelly
------------------------------------
Name: MARY ANN KELLY
----------------------------------
Title: VICE PRESIDENT
---------------------------------
By:/s/ Priscilla A. Forbes
------------------------------------
Name: Priscilla A. Forbes
----------------------------------
Title: Assistant Secretary
---------------------------------
Address:
2859 Paces Ferry Road
Suite 1210
Atlanta, Georgia 30339
Attention: Bob Belson
Telecopy No: 770-435-2262
Telephone No. Bob Belson
770-435-3800
-56-
<PAGE>
Lender Commitment: $30,000,000.00 GUARANTY FEDERAL BANK, F.S.B.
Percentage: 8.571428571%
By: /s/ Phyllis Milstead
------------------------------------
Name: PHYLLIS MILSTEAD
----------------------------------
Title: VICE PRESIDENT
--------------
Address:
301 Congress, Suite 1075
Austin, Texas 78701
Attention: Phyllis Milstead
Telecopy No.: 512-320-1041
Telephone No.: Phyllis Milstead
512-320-1007
-57-
<PAGE>
Lender Commitment: $20,000,000.00 NORWEST BANK NEW MEXICO,
Percentage: 5.714285714% NATIONAL ASSOCIATION
By: /s/ Dan Shannon
------------------------------------
Name: Dan Shannon
----------------------------------
Title: President & Managing Officer
---------------------------------
Address:
1048 Paseo de Peralta
Santa Fe, New Mexico 87501
Attention: Dan Shannon
Telecopy No.: 505-983-6232
Telephone No.: Dan Shannon
505-984-8500
-58-
<PAGE>
Lender Commitment: $25,000,000.00 COMMERZBANK
Percentage: 7.142857143% AKTIENGESELLSCHAFT, LOS ANGELES
BRANCH
By: /s/ Christian Jagenberg
------------------------------------
Name: Christian Jagenberg
----------------------------------
Title: SVP and Manager
---------------------------------
By: /s/ Steven F. Larsen
------------------------------------
Name: Steven F. Larsen
----------------------------------
Title: Vice President
---------------------------------
Address:
660 S. Figueroa, Suite 1450
Los Angeles, California 90017
Attention: Steven F. Larsen
Telecopy No.: 213-623-0039
Telephone No.: Steven F. Larsen
213-623-8223
-59-
<PAGE>
Lender Commitment: $30,000,000.00 BANK OF AMERICA NATIONAL TRUST
Percentage: 8.571428571% AND SAVINGS ASSOCIATION
By: /s/ Kelly M. Allred
------------------------------------
Name: Kelly M. Allred
----------------------------------
Title: Vice President
---------------------------------
Address:
555 South Flower Street
6th Floor
Los Angeles, California 90071
Attention: Kelly M. Allred
Telecopy No.: 213-228-5389
Telephone No.: Kelly M. Allred
213-228-4027
-60-
<PAGE>
Lender Commitment: $30,000,000.00 FLEET NATIONAL BANK
Percentage: 8.571428571%
By: /s/ Mark E. Dalton
---------------------------------
Name: MARK E. DALTON
-------------------------------
Title: VICE PRESIDENT
------------------------------
Address:
111 Westminster, Suite 800
Providence, Rhode Island 02903
Attention: Mark Dalton
Telecopy No: 401-278-5166
Telephone No. Mark Dalton
401-278-5605
-61-
<PAGE>
Lender Commitment: $20,000,000.00 THE NIPPON CREDIT BANK, LTD.
Percentage: 5.714285714%
By: /s/ Neil J. Crawford
---------------------------------
Name: Neil J. Crawford
-------------------------------
Title: VP
------------------------------
Address:
245 Park Avenue
30th Floor
New York, New York 10167
Attention: Neil Crawford
Telecopy No: 212-490-3895
Telephone No. Neil Crawford
212-984-1319
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<PAGE>
Lender Commitment: $22,500,000.00 BANK HAPOALIM, B.M.,
Percentage: 6.428571429% Los Angeles Branch
By: /s/ Kalman Schiff
--------------------------------
Name: KALMAN SCHIFF
------------------------------
Title: FIRST VICE PRESIDENT
-----------------------------
By: /s/ Lori Lake
--------------------------------
Name: LORI LAKE
------------------------------
Title: ASSISTANT VICE PRESIDENT
-----------------------------
Address:
6222 Wilshire Blvd.
Los Angeles, California 90048
Attention: Shohre Afshar or
Lori Lake
Telecopy No: 213-937-1439
Telephone No. Shohre Afshar or
Lori Lake
213-937-2322
-63-
<PAGE>
Lender Commitment: $25,000,000.00 CORESTATES BANK, N.A.
Percentage: 7.142857143%
By: /s/ R. Scott Relick
--------------------------------
Name: R. Scott Relick
------------------------------
Title: Vice President
-----------------------------
Address:
1339 Chestnut Street
Real Estate Department
Philadelphia, Pennsylvania 19107
Attention: R. Scott Relick
Telecopy No: 215-786-6381
Telephone No. R. Scott Relick
215-786-4224
-64-
<PAGE>
Lender Commitment: $20,000,000.00 BANK ONE, ARIZONA, NA
Percentage: 5.714285714%
By: /s/ Deborah L. Bliss
---------------------------------
Name: DEBORAH L. BLISS
-------------------------------
Title: VICE PRESIDENT
------------------------------
Address:
Real Estate Banking Group
241 N. Central, 20th Floor
Phoenix, Arizona 85004
Attention: Deborah L. Bliss
Telecopy No: 602-221-1372
Telephone No. Deborah L. Bliss
602-221-2342
-65-
<PAGE>
Lender Commitment: $17,500,000.00 UNION BANK OF CALIFORNIA
Percentage: 5.000000000%
By: /s/ Annette Billingsley
----------------------------------
Name: ANNETTE BILLINGSLEY
--------------------------------
Title: VICE PRESIDENT
-------------------------------
By: /s/ Gary L. Roberts
----------------------------------
Name: GARY L. ROBERTS
--------------------------------
Title: Vice President
-------------------------------
Address:
Capital Markets Division
350 California, 7th Floor
San Francisco, California 94104
Attention: Annette Billingsley
Telecopy No: 415-705-7367
Telephone No. Annette Billingsley
415-705-5075
-66-
<PAGE>
OFFICER'S CERTIFICATE
---------------------
Security Capital Pacific Trust (the "Borrower"), Texas Commerce Bank
National Association, as Agent (the "Agent") and certain other Lenders (the
"Lenders") entered into that certain Amended and Restated Credit Agreement (as
amended, supplemented and restated from time to time, the "Agreement") dated as
of AUGUST , 1996. Any term used herein and no otherwise defined shall have the
- -----------------
meaning ascribed to it in the Agreement.
The undersigned hereby certifies that.
I. I am a Vice President of the Borrower.
--------------
II. The attached financial statements were prepared in conformity with
generally accepted accounting principles consistently applied (except for the
omission of footnote disclosures and appropriately disclosed consistency
exceptions) and present fairly the financial position of the Borrower as of the
date thereof and the results of its operations for the period covered thereby
subject to normal year-end adjustments.
III. As of the end of the period covered by the attached financial
statements dated _________. 19 :
----
1. Tangible Net Worth Calculation (Section 5.3 (d))
------------------------------
(a) Assets, as defined $ _________
(b) Liabilities $ _________
(c) Tangible Net Worth ((a) - (b)) $ _________
$ 1 Billion
Required:
2. Ratio of Debt to Tangible Net Worth Ratio
-----------------------------------------
Calculation (Section 5.3 (a))
-----------
(a) Indebtedness $ _________
(b) Tangible Net Worth $ _________
(c) Debt to Tangible Net Worth Ratio ___ : 1.0
(Ratio of (a) to (b))
Required: Maximum of 1.0 to 1.0
EXHIBIT A
Page 1 of 5
<PAGE>
3. Coverage Ratio Calculation (Section 5.3 (b))
--------------------------
(a) Borrower's Funds from Operations $ ______
(b) Borrower's Interest Incurred $ ______
(c) Construction Interest $ ______
(d) Interest Expense $ ______
(e) FFO plus Interest Expense $ ______
(f) Payments and Payables on Disqualified Stock $ ______
(g) Interest Expense $ ______
(h) Payments and Payables on Disqualified Stock
plus Interest Expense $ ______
(i) Coverage Ratio (Ratio of (e) to (h)) ___ : 1.0
Required: Minimum of 2.0 to 1.0
4. Fixed Charge Coverage Ratio Calculation
---------------------------------------
(Section 5.3 (c))
(a) Borrower's Funds from Operations $ ______
(b) Borrower's Interest Expense $ ______
(c) Unit Capital Expenditures $ ______
(d) FFO plus Interest Expense minus
Unit Capital Expenditures $ ______
(e) Payments and Payables on Disqualified Stock $ ______
(f) Regularly Scheduled Principal Paid and Payable $ ______
(g) Payments and Payables on Disqualified Stock
Plus Interest Expense plus Regularly Scheduled
Principal Paid and Payable $ ______
(h) Fixed Charge Coverage Ratio
(Ratio of (d) to (g)) ___ : 1.0
Required: Minimum of 1.4 to 1.0
5. Maximum Recourse Indebtedness Calculation
-----------------------------------------
(Section 6.1)
(a) Indebtedness with a Final Maturity of Five
Years or less $ ______
(b) Investment Grade Debt included in 5 (a) $ ______
-----
(c) Non-recourse Debt included in 5 (a)
-----
excluded from 5 (b) $ ______
-----
EXHIBIT A
Page 2 of 5
<PAGE>
(d) Amortizing Debt included in 5 (a),
-----
excluded from 5 (b) or 5 (c) $ ______
----- -----
(e) Credit Enhancement included in 5 (a),
-----
excluded from 5 (b) or 5 (c) or 5 (d) $ ______
----- ----- --------
(f) Acquisition Indebtedness included in 5 (a),
-----
excluded from 5 (b) or 5 (c) or 5 (d) or 5 (e) $ ______
----- ----- ----- -----
(g) Recourse Indebtedness as Calculated using (a)
through (f) (may not exceed $400,000,000) $ ______
6. Asset Maintenance Calculation as of Quarter-End
-----------------------------------------------
(a) Historical Value of Pool
(attached list of each Property)
(must equal at least 6 (c))
--------------------------- $ ______
(b) Outstanding Unsecured Indebtedness $ ______
x1.75
(c) Minimum Historical Value of Pool $ ______
(d) Historical Value of Operating Sub-Pool $ ______
(e) Net Operating Income of Operating Sub-Pool
Properties Owned Through at least one complete
calendar quarter from the Stabilization Date/1/ $ ______
Divided by .0925
(f) Value of (e) $ ______
(g) Historical Value of Operating Sub-Pool
Properties Owned less than at least one complete
calendar quarter from the Stabilization Date $ ______
(h) (f) + (g) $ ______
(i) Operating Sub-Pool Value (lesser of (d) and
(h) must equal at least 6 (k) $ ______
(j) Outstanding Unsecured Indebtedness $ ______
(k) Minimum Operating Sub-Pool Value $ ______
7. Debt to Total Asset Value Ratio Conversion
(only required after the Conversion Date)
(a) Indebtedness $ ______
(b) Net Operating Income for Properties Owned
During the Preceding Quarter divided by 8.75% $ ______
EXHIBIT A
Page 3 of 5
____________________________
/1/NOI may be annualized in this calculation.
<PAGE>
(c) Value of (b) $ ______
(d) Book Value of Properties Acquired During
the Preceding Quarter $ ______
(e) Book Value of Undeveloped Land $ ______
(f) Book Value of Land Under Development for $ ______
up to 6 Months after Completion $ ______
(d) Book Value of Properties Acquired During
the Preceding Quarter $ ______
(e) Book Value of Undeveloped Land $ ______
(f) Book Value of Land Under Development for
up to 6 Months after Completion $ ______
(g) Cash and Cash Equivalents Excluding
Restricted Deposits $ ______
(h) Book Value of All Others Assets Not
Included in (b) through (g) above,
Excluding Intangibles and Equity
Investments in Unconsolidated Affiliates $ ______
(i) Book Value of Equity Investments in
Unconsolidated Affiliates Multiplied by
the Equity Percentage $ ______
(j) Total Asset Value ((c)+(d)+(e)+(f)+(g)+(h)+(i)) $ ______
(k) Debt to Total Asset Value Ratio
(as a percentage, (a) divided by (j)) $ ______
IV. Attached hereto is a statement of Funds from Operations for the
Borrower as of the most recent date required by the Agreement.
V. A review of the activities of the Borrower during the period covered
by the attached financial statements has been made under my supervision and with
a view to determining whether during such period the Borrower has kept,
observed, performed and fulfilled all of its obligations under the Agreement.
VI. (Check either (a) or (b))
[X] (a) The Borrower has kept, observed, performed and fulfilled each and
every one of its obligations under the Agreement during the period covered by
the attached financial statements.
[_] (b) The Borrower has kept, observed, performed and fulfilled each and
every one of its obligations under the Agreement during the period covered by
the attached financial statements except for the following matters: [Describe
all such defaults, specifying the nature, duration and status thereof and what
action the Borrower has taken or proposes to take with respect thereto:]
EXHIBIT A
Page 4 of 5
<PAGE>
VII. With regard to Section 1004 of the Indenture dated as of February 1,
1994 between the Borrower and Morgan Guaranty Trust Company of New York, as
Trustee (and using the terms defined therein), a certificate required thereunder
showing compliance with Section 1004 is attached (only required for the fourth
quarter Officer's Certificate), and as at the end of the period covered by the
attached financial statements:
<TABLE>
<S> <C> <C>
1. (a) Sum of Total Assets, Aggregate Purchase
Price of Real Estate Assets, or Mortgages
Receivable Acquired, and Securities
Offering Proceeds Received to Purchase
said Assets $ ______
x.60
(b) Maximum Amount of Debt $ ______
(c) Debt $ ______
2. (a) Consolidated Income Available for
Debt Service $ ______
(b) Annual Service Charge $ ______
(c) Ratio of Consolidated Income Available
for Debt Service to Annual Service Charge
(must be equal to or greater than 1.5:1.0 ___ : 1.0
3. (a) Total Assets $ ______
x.40
(b) Maximum Secured Debt $ ______
(c) Secured Debt $ ______
</TABLE>
Date:_________________, 1996 ______________________________
Name:_________________________
EXHIBIT A
Page 5 of 5
<PAGE>
POOL PROPERTY LIST
List each property separately showing the Historical Value and the
components, the city, the state, the occupancy level for the past 3 months, the
number of units, the age of the property and net operating income.
<PAGE>
REQUEST FOR LOAN
----------------
Date: _________________, 199__
Texas Commerce Bank
National Association, as Agent
712 Main Street
Houston, Texas 77002
("Lender")
RE: Request for Loan Under Amended and Restated Credit Agreement (as
amended from time to time, the "Credit Agreement") dated as of August
----------------
13, 1996, among Security Capital Pacific Trust (the "Borrower"), the
Agent and the Lenders as signatory to the Credit Agreement
Gentlemen:
Borrower hereby requests [check as applicable] [_] a conversion of an
existing Loan as provided below, and/or [_] an advance under the Credit
Agreement, which is allowed pursuant to Section 5.9 of the Credit Agreement, in
the amount of $___________ [minimum of $1,000,000.00 and in multiples of
$250,000.00].
<TABLE>
<S> <C>
Maximum Principal Amount $350,000,000.00
Less the amount outstanding under the
Credit Agreement (including Swing Loans) ($_________.__)
Available amount $_________.__
Less amount requested ($_________.__)
Amount remaining to be advanced $_________.__
</TABLE>
EXHIBIT B
---------
Page 1 of 3 Pages
<PAGE>
The advance or conversion is to be made as follows:
<TABLE>
<S> <C> <C>
A. Base Rate Borrowing.
-------------------
1. Amount of Base Rate Borrowing: $___________.__
2. Date of Base Rate Borrowing ________, 199_
B. Eurodollar Rate Borrowing:
-------------------------
1. Amount of Eurodollar Rate
Borrowing: $___________.__
2. Amount of conversion of existing
Loan to Eurodollar Rate Borrowing: $___________.__
3. Number of Eurodollar Rate
Borrowing(s) now in effect: ______________
[cannot exceed 12]
4. Date of Eurodollar Rate Borrowing
or conversion: ________, 199_
5. Interest Period: ______________
6. Expiration date of current Interest
Period as to this conversion: ________, 199_
C. Swing Loan.
----------
1. Amount of Swing Loan: $___________.__
[minimum of $1,000,000.00 and in
multiples of $250,000.00]
2. Date of Swing Loan: ________, 199_
</TABLE>
Borrower hereby represents and warrants that the amounts set forth above
are true and correct, that the amount above requested has actually been
incurred, that the representations and warranties contained in the Credit
Agreement are true and correct as if made
EXHIBIT B
---------
Page 2 of 3 Pages
<PAGE>
as of this date, and that Borrower has kept, observed, performed and fulfilled
each and every one of its obligations under the Credit Agreement as of the date
hereof [except as follows:]
Very truly yours,
SECURITY CAPITAL PACIFIC TRUST
By:______________________________
Name:____________________________
Title:___________________________
EXHIBIT B
---------
Page 3 of 3 Pages
<PAGE>
$[___________________] [__________________], 1996
FOR VALUE RECEIVED SECURITY CAPITAL PACIFIC TRUST, a Maryland real estate
investment trust (herein called "Maker") promises to pay to the order of
-----
[_____________________________________________________________________________],
a [___________________________________] ("Payee"), at the offices of Texas
-----
Commerce Bank National Association, a national banking association, as "Agent"
-----
under the Credit Agreement, at 712 Main Street, Houston, Texas 77002, or at such
other place as the holder (the "Holder", whether or not Payee is such holder) of
------
this note may hereafter designate in writing, in immediately available funds and
in lawful money of the United States of America, the principal sum of
[_________________________________] Dollars ($[___________________________] (or
the unpaid balance of all principal advanced against this note, if that amount
is less), together with interest on the unpaid principal balance of this note
from time to time outstanding at the Stated Rate and interest on all past due
amounts, both principal and accrued interest, at the Past Due Rate; provided,
--------
that for the full term of this note the interest rate produced by the aggregate
of all sums paid or agreed to be paid to the Holder of this note for the use,
forbearance or detention of the debt evidenced hereby (including, but not
limited to, all interest on this note at the Stated Rate) shall not exceed the
Ceiling Rate.
1. Definitions. Any terms not defined herein shall have the meaning
-----------
given to them in the Amended and Restated Credit Agreement dated of even date
herewith among the Maker, the Payee, the Agent and certain other Lenders (as the
same may be amended or modified the "Credit Agreement").
----------------
2. Rates Change Automatically and Without Notice. Without notice to
---------------------------------------------
Maker or any other person or entity and to the full extent allowed by applicable
law from time to time in effect, the Prime Rate and the Ceiling Rate shall each
automatically fluctuate upward and downward as and in the amount by which
Agent's said prime rate, and such maximum nonusurious rate of interest permitted
by applicable law, respectively, fluctuate.
3. Calculation of Interest. Interest shall be computed for the actual
-----------------------
number of days elapsed in a year (up to 365, or 366 in a leap year) deemed to
consist of 360 days, unless the Ceiling Rate would thereby be exceeded, in which
event, to the extent necessary to avoid exceeding the Ceiling Rate, interest
INITIALLED FOR
IDENTIFICATION:_______
Page 1 of 6 Pages
EXHIBIT C
---------
<PAGE>
shall be computed on the basis of the actual number of days elapsed in the
applicable calendar year in which it accrued.
4. Excess Interest Will be Refunded or Credited. If, for any reason
--------------------------------------------
whatever, the interest paid or received on this note during its full term
produces a rate which exceeds the Ceiling Rate, the Holder of this note shall
refund to the payor or, at the Holder's option, credit against the principal of
this note such portion of that interest as shall be necessary to cause the
interest paid on this note to produce a rate equal to the Ceiling Rate.
5. Interest Will be Spread. All sums paid or agreed to be paid to the
-----------------------
Holder of this note for the use, forbearance or detention of the indebtedness
evidenced hereby, to the extent permitted by applicable law and to the extent
necessary to avoid violating applicable usury laws, shall be amortized,
prorated, allocated and spread in equal parts throughout the full term of this
note, so that the interest rate is uniform throughout the full term of this
note.
6. Payment Schedule. The principal of this note shall be due and payable
----------------
on the Maturity Date. Accrued and unpaid interest shall be due and payable on
each Interest Payment Date. All payments shall be applied first to accrued
interest, the balance to principal.
7. Prepayment. Maker may prepay this note only as provided in the Credit
----------
Agreement.
8. Revolving Credit. Upon and subject to the terms and conditions of the
----------------
Credit Agreement and the other provisions of this note, Maker may borrow, repay
and reborrow against this note at any time unless and until a default (however
designated) or event (an "Event of Potential Default") which, if not cured after
--------------------------
notice or before the lapse of time (or both) would develop into a default under
this note, the Credit Agreement or any other Credit Documents has occurred which
the Holder has not declared to have been fully cured or waived, and (except as
the Credit Agreement or any of the other Credit Documents may otherwise provide)
there is no limit on the number of advances against this note so long as the
total unpaid principal of this note at any time outstanding does not exceed the
Payee's Lender Commitment. Interest on the amount of each advance against this
note shall be computed on the amount of the unpaid balance of that advance from
the date it is made until the date it is repaid. If Maker's right (if any) to
borrow against this note shall ever lapse because of the occurrence of any
default, it shall not be reinstated (or
INITIALLED FOR
IDENTIFICATION:_____
Page 2 of 6 Pages
EXHIBIT C
---------
<PAGE>
construed from any course of conduct or otherwise to have been reinstated)
unless and until the Holder shall declare in a signed writing that it has been
cured or waived. The unpaid principal balance of this note at any time shall be
the total of all principal lent against this note to Maker or for Maker's
account less the sum of all principal payments and permitted prepayments on this
note received by the Holder. Absent manifest error, the Holder's computer
records shall on any day conclusively evidence the unpaid balance of this note
and its advances and payments history posted up to that day. All loans and
advances and all payments and permitted prepayments made on this note may be
(but are not required to be) endorsed by the Holder on the schedule attached
hereto (which is hereby made a part hereof for all purposes) or otherwise
recorded in the Holder's computer or manual records; provided; that any Holder's
--------
failure to make notation of (a) any principal advance or accrual of interest
shall not cancel, limit or otherwise affect Maker's obligations or any Holder's
rights with respect to that advance or accrual, or (b) any payment or permitted
prepayment of principal or interest shall not cancel, limit or otherwise affect
Maker's entitlement to credit for that payment as of the date of its receipt by
the Holder. Maker and Payee expressly agree, as expressly allowed by Article
15.10(b) of Chapter 15 ("Chapter 15") of the Texas Credit Code, that Chapter 15
----------
(which relates to open-end line of credit revolving loan accounts) shall not
apply to this note or to any loan evidenced by this note and that neither this
note nor any such loan shall be governed by Chapter 15 or subject to its
provisions in any manner whatsoever.
9. Credit Agreement. This note has been issued pursuant to the terms of
----------------
the Credit Agreement, to which reference is made for all purposes. Advances
against this note by Payee or other Holder hereof shall be governed by the
Credit Agreement. Payee is entitled to the benefits of the Credit Agreement. As
additional security for this note, Maker hereby grants to Payee and all other
present and future Holders an express lien against, security interest in and
contractual right of setoff in and to, all property and any and all deposits
(general or special, time or demand, provisional or final) at any time held by
the Payee or other Holder for any Maker's credit or account.
INITIALLED FOR
IDENTIFICATION:______
Page 3 of 6 pages
EXHIBIT C
---------
<PAGE>
10. Defaults and Remedies. Time is of the essence. Maker's failure to pay
---------------------
any principal or accrued interest owing on this note when due and after
expiration of any applicable period for notice and right to cure such a default
which is specifically provided for in the Credit Agreement or any other
provision of this note, or the occurrence of any default under the Credit
Agreement or any other Credit Documents shall constitute default under this
note, whereupon the Holder may elect to exercise any or all rights, powers and
remedies afforded (a) under the Credit Agreement and all other papers related to
this note and (b) by law, including the right to accelerate the maturity of this
entire note.
In addition to and cumulative of such rights, the Holder is hereby
authorized at any time and from time to time after any such default, at Holder's
option, without notice to Maker or any other person or entity (all rights to any
such notice being hereby waived), to set off and apply any and all of any
Maker's deposits at any time held by the Holder, and any other debt at any time
owing by the Holder to or for the credit or account of any Maker, against the
outstanding balance of this note, in such order and manner as Holder may elect
in its sole discretion.
The Holder's right to accelerate this note on account of any late payment
or other default shall not be waived or deemed waived by the Holder by reason of
the Holder's having previously accepted one or more late payments or by reason
of any Holder's otherwise not accelerating this note or exercising other
remedies for any default, and no Holder shall ever be obligated or deemed
obligated to notify Maker or any other person that Holder is requiring strict
compliance with this note or any papers securing or otherwise relating to it
before such Holder may accelerate this note or exercise any other remedy.
Nothing in this Section or elsewhere shall be construed as diminishing
Holder's absolute right to demand payment of all or any part of this note at any
time.
11. Legal Costs. If any Holder of this note retains an attorney in
-----------
connection with any such default or to collect, enforce or defend this note or
any papers intended to secure or guarantee it in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Maker sues any Holder in
connection with this note or any such papers and does not prevail, then Maker
agrees to pay to each such Holder, in addition to principal and interest, all
reasonable costs and expenses incurred by such Holder in trying to collect this
note
INITIALLED FOR
IDENTIFICATION:_____
Page 4 of 6 Pages
EXHIBIT C
---------
<PAGE>
or in any such suit or proceeding, including reasonable attorneys' fees.
12. Waivers. Except only for any notices which are specifically required
-------
by the Credit Agreement, Maker and any and all co-makers, endorsers, guarantors
and sureties severally waive notice (including, but not limited to, notice of
intent to accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
13. Rate of Return Maintenance Covenant. If at any time after the date of
-----------------------------------
this note, any Holder determines that (a) any applicable law, rule or regulation
regarding capital adequacy of general applicability has been adopted or changed,
or (b) its interpretation or administration by any governmental authority,
central bank or comparable agency has changed, and determines that such change
or the Holder's compliance with any request or directive regarding capital
adequacy of general applicability (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Holder's capital as a consequence
of its obligations under this note or any related papers to a level below that
which the Holder could have achieved but for such adoption, change or compliance
(taking into consideration the Holder's own capital adequacy policies) by an
amount the Holder deems to be material, then Maker promises to pay from time to
time to the order of the Holder such additional amount or amounts as will
compensate the Holder for such reduction. A certificate of any Holder setting
forth the amount or amounts necessary to compensate the Holder as specified
above shall be given to Maker as soon as practicable after the Holder has made
such determination and shall be conclusive and binding, absent manifest error.
Maker shall pay the Holder the amount shown as due on any such certificate
within 15 days after the Holder gives it. In preparing such certificate, the
Holder may employ such assumptions and make such allocations of costs and
expenses as
INITIALLED FOR
IDENTIFICATION:_____
Page 5 of 6 Pages
EXHIBIT C
---------
<PAGE>
the Holder in good faith deems reasonable and may use any reasonable averaging
and attribution method.
14. Governing Law, Jurisdiction and Venue. This note shall be governed by
-------------------------------------
and construed in accordance with the laws of the State of Texas and the United
States of America from time to time in effect.
15. General Purpose of Loan. Maker warrants and represents to Payee and
-----------------------
all other Holders that all loans evidenced by this note are and will be for
business, commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter One.
16. Participations and Assignments. Payee and each other Holder reserves
------------------------------
the right, exercisable in such Holder's discretion and without notice to Maker
or any other person, to sell participations, assign interests or both, in all or
any part of this note or the debt evidenced by this note, in accordance with the
Credit Agreement.
17. Limitation of Liability. No obligation or liability whatsoever of
-----------------------
Maker which may arise at any time under this promissory note or any obligation
or liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be personally binding upon,
nor shall resort for the enforcement thereof be had to the private property of,
any of Maker's trustees or shareholders regardless of whether such obligation or
liability is in the nature of contract, tort or otherwise.
SECURITY CAPITAL PACIFIC TRUST
By:___________________________
Name:_________________________
Title:________________________
Page 6 of 6 Pages
EXHIBIT C
---------
<PAGE>
SWING LOAN NOTE
---------------
$75,000,000.00 _______________, 1996
FOR VALUE RECEIVED SECURITY CAPITAL PACIFIC TRUST, a Maryland real estate
investment trust (herein called "Maker") promises to pay to the order of TEXAS
-----
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, at 712 Main
Street, Houston, Texas 77002, or at such other place as the holder (the
"Holder", whether or not Payee is such holder) of this note may hereafter
------
designate in writing, in immediately available funds and in lawful money of the
United States of America, the principal sum of Seventy-Five Million Dollars
($75,000,000.00) (or the unpaid balance of all principal advanced against this
note, if that amount is less), together with interest on the unpaid principal
balance of this note from time to time outstanding at the Stated Rate and
interest on all past due amounts, both principal and accrued interest, at the
Past Due Rate; provided, that for the full term of this note the interest rate
--------
produced by the aggregate of all sums paid or agreed to be paid to the Holder of
this note for the use, forbearance or detention of the debt evidenced hereby
(including, but not limited to, all interest on this note at the Stated Rate)
shall not exceed the Ceiling Rate.
1. Definitions. Any terms not defined herein shall have the meaning
-----------
given to them in the Amended and Restated Credit Agreement dated of even date
herewith among the Maker, the Payee and certain other Lenders (as the same may
be amended or modified the "Credit Agreement").
----------------
2. Rates Change Automatically and Without Notice. Without notice to
---------------------------------------------
Maker or any other person or entity and to the full extent allowed by applicable
law from time to time in effect, the Prime Rate and the Ceiling Rate shall each
automatically fluctuate upward and downward as and in the amount by which
Holder's said prime rate, and such maximum nonusurious rate of interest
permitted by applicable law, respectively, fluctuate.
3. Calculation of Interest. Interest shall be computed for the actual
-----------------------
number of days elapsed in a year (up to 365, or 366 in a leap year) deemed to
consist of 360 days, unless the Ceiling Rate would thereby be exceeded, in which
event, to the extent necessary to avoid exceeding the Ceiling Rate, interest
shall be computed on the basis of the actual number of days elapsed in the
applicable calender year in which it accrued.
INITIALLED FOR
EXHIBIT C-1 IDENTIFICATION:_________
-----------
Page 1 of 6 Pages
<PAGE>
4. Excess Interest Will be Refunded or Credited. If for any reason
--------------------------------------------
whatever, the interest paid or received on this note during its full term
produces a rate which exceeds the Ceiling Rate, the Holder of this note shall
refund to the payor or, at the Holder's option, credit against the principal of
this note such portion of that interest as shall be necessary to cause the
interest paid on this note to produce a rate equal to the Ceiling Rate.
5. Interest Will be Spread. All sums paid or agreed to be paid to the
-----------------------
Holder of this note for the use, forbearance or detention of the indebtedness
evidenced hereby, to the extent permitted by applicable law and to the extent
necessary to avoid violating applicable usury laws, shall be amortized,
prorated, allocated and spread in equal parts throughout the full term of this
note, so that the interest rate is uniform throughout the full term of this
note.
6. Payment Schedule. The principal of this note shall be due and payable
----------------
on the Revolving Credit Termination Date. Accrued and unpaid interest shall be
due and payable on each Interest Payment Date. All payments shall be applied
first to accrued interest, the balance to principal.
7. Prepayment. Maker may prepay this note only as provided in the Credit
----------
Agreement.
8. Revolving Credit. Upon and subject to the terms and conditions of the
----------------
Credit Agreement and the other provisions of this note, Maker may borrow, repay
and reborrow against this note at any time unless and until a default (however
designated) or event (an "Event of Potential Default") which, if not cured after
--------------------------
notice or before the lapse of time (or both) would develop into a default under
this note, the Credit Agreement or any other Credit Documents has occurred which
the Holder has not declared to have been fully cured or waived, and (except as
the Credit Agreement or any of the other Credit Documents may otherwise provide)
there is no limit on the number of advances against this note so long as the
total unpaid principal of this note at any time outstanding does not exceed
$75,000,000.00. Interest on the amount of each advance against this note shall
be computed on the amount of the unpaid balance of that advances from the date
it is made until the date it is repaid. If Maker's right (if any) to borrow
against this note shall ever lapse because of the occurrence of any default, it
shall not be reinstated (or construed from any course of conduct or otherwise to
have been reinstated) unless and until the Holder shall declare in a signed
writing that it has been cured or waived. The unpaid principal balance of this
note at
INITIALLED FOR
EXHIBIT C-1 IDENTIFICATION:________
-----------
Page 2 of 6 Pages
<PAGE>
any time shall be the total of all principal lent against this note to Maker or
for Maker's account less the sum of all principal payments and permitted
prepayments on this note received by the Holder. Absent manifest error, the
Holder's computer records shall on any day conclusively evidence the unpaid
balance of this note and its advances and payments history posted up to that
day. All loans and advances and all payments and permitted prepayments made on
this note may be (but are not required to be) endorsed by the Holder on the
schedule attached hereto (which is hereby made a part hereof for all purposes)
or otherwise recorded in the Holder's computer or manual records; provided,
--------
that any Holder's failure to make notation of (a) any principal advance or
accrual of interest shall not cancel, limit or otherwise affect Maker's
obligations or any Holder's rights with respect to that advance or accrual, or
(b) any payment or permitted prepayment of principal or interest shall not
cancel, limit or otherwise affect Maker's entitlement to credit for that payment
as of the date of its receipt by the Holder. Maker and Payee expressly agree, as
expressly allowed by Article 15.10(b) of Chapter 15 ("Chapter 15") of the Texas
----------
Credit Code, that Chapter 15 (which relates to open-end line of credit revolving
loan accounts) shall not apply to this note or to any loan evidenced by this
note and that neither this note nor any such loan shall be governed by Chapter
15 or subject to its provisions in any manner whatsoever.
9. Credit Agreement. This note has been issued pursuant to the terms of
----------------
the Credit Agreement, to which reference is made for all purposes. Advances
against this note by Payee or other Holder hereof shall be governed by the
Credit Agreement. Payee is entitled to the benefits of the Credit Agreement.
As additional security for this note, Maker hereby grants to Payee and all other
present and future Holders an express lien against, security interest in and
contractual right of setoff in and to, all property and any and all deposits
(general or special, time or demand, provisional or final) at any time held by
the Payee or other Holder for any Maker's credit or account.
INITIALLED FOR
EXHIBIT C-1 IDENTIFICATION:________
-----------
Page 3 of 6 Pages
<PAGE>
10. Defaults and Remedies. Time is of the essence. Maker's failure to pay
---------------------
any principal or accrued interest owing on this note when due and after
expiration of any applicable period for notice and right to cure such a default
which is specifically provided for in the Credit Agreement or any other
provision of this note, or the occurrence of any default under the Credit
Agreement or any other Credit Documents shall constitute default under this
note, whereupon the Holder may elect to exercise any or all rights, powers and
remedies afforded (a) under the Credit Agreement and all other papers related to
this note and (b) by law, including the right to accelerate the maturity of this
entire note.
In addition to and cumulative of such rights, the Holder is hereby
authorized at any time and from time to time after any such default, at Holder's
option, without notice to Maker or any other person or entity (all rights to any
such notice being hereby waived), to set off and apply any and all of any
Maker's deposits at any time held by the Holder, and any other debt at any time
owing by the Holder to or for the credit or account of any Maker, against the
outstanding balance of this note, in such order and manner as Holder may elect
in its sole discretion.
The Holder's right to accelerate this note on account of any late payment
or other default shall not be waived or deemed waived by the Holder by reason of
the Holder's having previously accepted one or more late payments or by reason
of any Holder's otherwise not accelerating this note or exercising other
remedies for any default, and no Holder shall ever be obligated or deemed
obligated to notify Maker or any other person that Holder is requiring strict
compliance with this note or any papers securing or otherwise relating to it
before such Holder may accelerate this note or exercise any other remedy.
Nothing in this Section or elsewhere shall be construed as diminishing
Holder's absolute right to demand payment of all or any part of this note at any
time.
11. Legal Costs. If any Holder of this note retains an attorney in
-----------
connection with any such default or to collect, enforce or defend this note or
any papers intended to secure or guarantee it in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Maker sues any Holder in
connection with this note or any such papers and does not prevail, then Maker
agrees to pay to each such Holder, in addition to principal and interest, all
reasonable costs and expenses incurred by such Holder in trying to collect this
note
INITIALLED FOR
EXHIBIT C-1 IDENTIFICATION_____
-----------
Page 4 of 6 Pages
<PAGE>
or in any such suit or proceeding, including reasonable attorneys' fees.
12. Waivers. Except only for any notices which are specifically required
-------
by the Credit Agreement, Maker and any and all co-makers, endorsers, guarantors
and sureties severally waive notice (including, but not limited to, notice of
intent to accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
13. Rate of Return Maintenance Covenant. If at any time after the date of
-----------------------------------
this note, any Holder determines that (a) any applicable law, rule or regulation
regarding capital adequacy of general applicability has been adopted or changed,
or (b) its interpretation or administration by any governmental authority,
central bank or comparable agency has changed, and determines that such change
or the Holder's compliance with any request or directive regarding capital
adequacy of general applicability (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Holder's capital as a consequence
of its obligations under this note or any related papers to a level below that
which the Holder could have achieved but for such adoption, change or compliance
(taking into consideration the Holder's own capital adequacy policies) by an
amount the Holder deems to be material, then Maker promises to pay from time to
time to the order of the Holder such additional amount or amounts as will
compensate the Holder for such reduction. A certificate of any Holder setting
forth the amount or amounts necessary to compensate the Holder as specified
above shall be given to Maker as soon as practicable after the Holder has made
such determination and shall be conclusive and binding, absent manifest error.
Maker shall pay the Holder the amount shown as due on any such certificate
within 15 days after the Holder gives it. In preparing such certificate, the
Holder may employ such assumptions and make such allocations of costs and
expenses as
INITIALLED FOR
IDENTIFICATION:_______
EXHIBIT C-1
-----------
Page 5 of 6 Pages
<PAGE>
the Holder in good faith deems reasonable and may use any reasonable averaging
and attribution method.
14. Governing Law, Jurisdiction and Venue. This note shall be governed by
-------------------------------------
and construed in accordance with the laws of the State of Texas and the United
States of America from time to time in effect.
15. General Purpose of Loan. Maker warrants and represents to Payee and
-----------------------
all other Holders that all loans evidenced by this note are and will be for
business, commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter One.
16. Participations and Assignments. Payee and each other Holder reserves
------------------------------
the right, exercisable in such Holder's discretion and without notice to Maker
or any other person, to sell participations, assign interests or both, in all or
any part of this note or the debt evidenced by this note.
17. Limitation of Liability. No obligation or liability whatsoever of
-----------------------
Maker which may arise at any time under this promissory note or any obligation
or liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be personally binding upon,
nor shall resort for the enforcement thereof be had to the private property of,
any of Maker's trustees or shareholders regardless of whether such obligation
or liability is in the nature of contract, tort or otherwise.
SECURITY CAPITAL PACIFIC TRUST
By:___________________________
Name:_________________________
Title:________________________
EXHIBIT C-1
-----------
Page 6 of 6 Pages
<PAGE>
OPINION OF COUNSEL
------------------
1. The Borrower (a) is duly organized, validly existing and in good
standing under the laws of the states of Maryland and Texas; (b) has all
requisite power and authority and all material governmental licenses,
authorizations, permits and approvals to own its Property and to carry on its
business as, and in the places where, such Property is owned or such business is
now conducted and (c) is duly qualified to do business and is in good standing
in every jurisdiction in which such qualification is necessary or desirable.
2. The execution, delivery and performance of the Credit Agreement and
the other Credit Documents (a) have all been duly authorized by all necessary
action by the Borrower; (b) are within the power and authority of the Borrower;
(c) will not contravene or violate any Legal Requirement or the Organizational
Documents of the Borrower; (d) to the best of our knowledge, will not result in
the breach of, or constitute a default under, any agreement, instrument,
judgment, license, order or permit to which the Borrower is a party or by which
the Borrower or any of its Property may be bound or affected, and (e) to the
best of our knowledge, do not result in the creation of any Lien upon any
Property of the Borrower except as expressly contemplated by the Credit
Documents.
3. All authorizations, consents, approvals, licenses, permissions and
registrations, if any, of or with any Governmental Authority, or to the best of
our knowledge, any other Person, required in connection with the execution,
delivery and performance of the Credit Agreement, the Note and the Other Credit
Documents have been obtained.
4. The Credit Documents are legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
5. To the best of our knowledge and except as heretofore disclosed to the
Agent, there is no litigation or administrative proceeding pending or threatened
against, or any outstanding judgment, order decree or award affecting, the
Borrower before or by any Governmental Authority or arbitral body which in the
aggregate have, or if adversely determined could have, any material adverse
effect on the condition, business or prospects, financial or otherwise, of the
Borrower.
6. The Borrower is not an "investment company", or a copy "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1940, as amended.
EXHIBIT D
---------
Page 1 of 1 Page
<PAGE>
EXHIBIT 10.9
FIFTH AMENDED AND RESTATED REIT MANAGEMENT AGREEMENT
----------------------------------------------------
THIS FIFTH AMENDED AND RESTATED REIT MANAGEMENT AGREEMENT (this
"Agreement") is made and entered into as of May 21, 1996, by and between
Security Capital Pacific Trust, a Maryland real estate investment trust (the
"Trust"), and Security Capital Pacific Incorporated, a Delaware corporation (the
"REIT Manager").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is organized under the laws of the State of Maryland
pursuant to a Restated Declaration of Trust dated as of June 18, 1991, as
amended and supplemented (the "Declaration of Trust"), and currently qualifies
as a "real estate investment trust" as defined in the Internal Revenue Code of
1986, as amended (the "Code"), to make investments of the type permitted for
qualified real estate investment trusts under the Code and not inconsistent with
the Declaration of Trust and the By-Laws of the Trust (the "By-Laws");
WHEREAS, the Trust, desiring to avail itself of the experience, sources of
information, advice, assistance and certain facilities of, or available to, the
REIT Manager and to have the REIT Manager undertake the duties and
responsibilities hereinafter set forth, on behalf of and subject to the
supervision of the Board of Trustees of the Trust (the "Board"), entered into a
Fourth Amended and Restated REIT Management Agreement dated as of June 30, 1995,
as amended (the "Prior Agreement"), with the REIT Manager; and
WHEREAS, the REIT Manager and the Trust desire to amend and restate the
Prior Agreement to extend the term thereof and to clarify certain ambiguities
and to more fully give effect to the intentions of the parties thereto;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Trust and the REIT Manager agree that the Prior
Agreement is hereby amended and restated in its entirety as follows:
I. DEFINITIONS
-----------
1.1 DEFINITIONS. As used in this Agreement, the following capitalized
-----------
terms shall have the meanings set forth below.
(a) "Affiliate" means as to any person, (i) any other person directly or
indirectly controlling, controlled by or under common control with such person,
(ii) any other person that owns beneficially, directly or indirectly, 10% or
more of the outstanding capital stock, shares or equity interests of such
person, or (iii) any officer, director, employee, general partner or trustee of
such person or of any other person controlling, controlled by or under common
control
<PAGE>
with such person (excluding trustees or directors and persons serving in similar
capacities who are not otherwise an Affiliate of such person).
(b) "Average Invested Assets" for any period shall mean the average of
the aggregate book value of the assets of the Trust invested, directly or
indirectly, in equity interests in and loans secured by real estate, before
reserves for depreciation or bad debts or other similar non-cash reserves,
computed by taking the average of such values at the end of each month during
such period.
(c) "Board" shall have the meaning set forth in the recitals hereto.
(d) "By-Laws" shall have the meaning set forth in the recitals hereto.
(e) "Cash Equivalent Investments" means assets of the Trust that consist
of cash, interest-bearing deposits in banks, repurchase agreements with banks
and readily-marketable securities.
(f) "Cash Flow" for any period means the sum of (i) Funds Available from
Operations for such period (after deducting all income from Cash Equivalent
Investments), plus (ii) the REIT Management Fees payable pursuant to Section 3.1
-----------
hereof, plus (iii) any expenses incurred by the Trust that are unusual in light
of the Trust's historical experience prior to the incurrence thereof and are
incurred at the request of a majority of the Independent Trustees, plus (iv) 33%
of the interest paid during such period on any subordinated debentures that are
(x) issued after the execution of this Agreement and (y) convertible into shares
of beneficial interest of the Trust, provided, however, that this definition
-------- -------
shall be equitably adjusted by mutual agreement in the event of a
recapitalization or other event which results in a reclassification of the
equity securities of the Trust.
(g) "Cause" means (i) an act of fraud, embezzlement or theft
constituting a felony or an act intentionally against the interests of the Trust
which causes it material injury, (ii) a final determination by a court of
competent jurisdiction that the REIT Manager has committed a material breach of
this Agreement, (iii) a petition shall have been filed against the REIT Manager
for an involuntary proceeding under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, and such petition shall not have
been dismissed within 60 days of filing; or a court having jurisdiction shall
have appointed a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the REIT Manager for any substantial portion
of its property, or ordered the winding up or liquidation of its affairs, or
(iv) the REIT Manager shall have commenced a voluntary proceeding under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have made any general assignment for the benefit of creditors,
or shall have failed generally to pay its debts as they become due.
(h) "Code" shall have the meaning set forth in the recitals hereto.
-2-
<PAGE>
(i) "Declaration of Trust" shall have the meaning set forth in the
recitals hereto.
(j) "Exchange Act" shall have the meaning set forth in Section 2.13
------------
hereof.
(k) "Funds Available from Operations" for any period means the dollar
amount equal to the sum of (i) net earnings of the Trust for such period,
determined in accordance with generally accepted accounting principles, but
excluding (A) interest income and/or dividends received from PTR Development
Services Incorporated, and (B) from and after the consummation of the
transactions contemplated by that certain Merger and Distribution Agreement (the
"Merger Agreement") among the Trust, Security Capital Atlantic Incorporated, a
Maryland corporation, Security Capital Group Incorporated, a Maryland
corporation, and Homestead Village Properties Incorporated, a Maryland
corporation, dated as of May 21, 1996, interest income received in connection
with promissory notes now outstanding or hereafter issued pursuant to the
Funding Commitment Agreement entered into by the Trust in connection with the
Merger Agreement from PTR Homestead Village Limited Partnership or PTR Homestead
Village Incorporated to the Trust, plus (ii) interest actually paid on the
Trust's senior unsecured long term debt instruments, plus (iii) non-cash items
deducted in calculating net earnings for such period (including but not limited
to depreciation) which are generally added to net earnings in determining funds
from operations for distribution to shareholders pursuant to prevailing practice
among publicly-held real estate investments trusts, minus (iv) regularly
scheduled principal payments (excluding prepayments or balloon payments) on
mortgage indebtedness which has a commercially reasonable amortization schedule,
minus (v) an assumed amount of payments of principal and interest which would
have been paid by the Trust during such periods under senior unsecured long term
debt instruments of the Trust, if payments were equal to payments on a 20-year
fully amortizing mortgage of equal principal amount and effective interest rate
with a payment schedule requiring equal annual payments of combined principal
and interest (but not costs of issuance), minus (vi) distributions actually paid
with respect to any non-convertible preferred shares of beneficial interest of
the Trust. For calculations under clause (v) of the preceding sentence, all
----------
tranches of long term debt issued simultaneously shall be viewed collectively
and shall be treated as one mortgage financing with an interest rate equal to
the Trust's weighted average effective interest rate for such tranches after
giving effect to any interest rate protection or similar agreements. For
example, the attached Exhibit A shows the assumed effective interest rate and
---------
monthly payment schedules on the $200 million of senior notes issued by the
Trust in February 1994, which will be deducted in calculating Funds Available
from Operations. Funds Available from Operations will not be increased or
decreased by virtue of any of the following: realized gains or losses, capital
expenditures or principal payments, except for principal payments under the
Trust's long term debt instruments as contemplated by clauses (iv) and (v) of
--------------------
the foregoing sentence.
(l) "Indemnified Party" shall have the meaning set forth in Section
----------
6.2(a) hereof.
- ------
-3-
<PAGE>
(m) "Independent Trustee" means a Trustee who (i) is not affiliated,
directly or indirectly, with the REIT Manager, whether by ownership of,
ownership interest in, employment by, any material business or professional
relationship with, or service as an officer or director of, the REIT Manager or
a business entity that is an Affiliate of the REIT Manager, (ii) is not serving
as a trustee or director for more than three real estate investment trusts
organized by a Sponsor of the Trust and (iii) performs no other services for the
Trust, except as Trustee. An indirect relationship shall include circumstances
in which a member of the immediate family of a Trustee has one of the foregoing
relationships with the REIT Manager or the Trust.
(n) "Investment Policies" at any time shall have the meaning given
thereto either in (i) the Declaration of Trust or By-Laws as then in effect or
(ii) a written statement adopted by the Board and delivered to the REIT Manager
by the Trust.
(o) "Net Income" for any period means total revenues (excluding gains or
losses from the sale of Trust assets) applicable to such period, less the
expenses applicable to such period other than additions to reserves for
depreciation or bad debts or other similar non-cash reserves.
(p) "REIT Management Fee" shall have the meaning set forth in Section
-------
3.1 hereof.
- ---
(q) "Renewal Term" shall have the meaning set forth in Section 4.2
-----------
hereof.
(r) "Sponsor" means any person directly or indirectly instrumental in
organizing, wholly or in part, a real estate investment trust, or any person who
will manage or participate in the management of a real estate investment trust,
and any Affiliate of any such person, but excluding (i) any person whose only
relationship with such real estate investment trust is that of an independent
property manager whose only compensation is for property management services and
(ii) independent third parties such as attorneys, accountants and underwriters
whose only compensation is for professional services.
(s) "Total Operating Expenses" for any period means all operating and
general and administrative expenses of the Trust as determined under generally
accepted accounting principles but excluding (i) the expenses of raising capital
and financing, including, without limitation, financing for Trust Properties,
including related investment banking and legal fees, (ii) interest payments on
all debt of the Trust, (iii) taxes, (iv) non-cash expenditures and (v) the costs
related directly to Trust Property acquisition, development, operation and
disposition. The exclusion for costs related directly to Trust Property
acquisition, development, operation and disposition permits exclusion of
expenses incurred with respect to specific individual Trust Properties but does
not permit the exclusion of operating, general and administrative expenses for
the Trust's operations in general.
(t) "Trust Property" means any real property or interest therein and
associated personal property owned by the Trust.
-4-
<PAGE>
(u) "Trustees" means the Trustees holding office under the Declaration
of Trust at any particular time.
1.2 ACCOUNTING PRINCIPLES. Except as otherwise provided herein, all
---------------------
accounting and financial terms used herein shall be determined in accordance
with generally accepted accounting principles.
II. DUTIES OF THE REIT MANAGER
--------------------------
2.1 GENERAL. The REIT Manager shall use its best efforts to perform
-------
each of the duties set forth in this Agreement and shall have the authority to
take all actions and to execute all documents and instruments that it deems
necessary or advisable in connection with the management and operations of the
Trust and the fulfillment of its duties as set forth herein, subject in each
matter to the supervision of the Board and to the Investment Policies of the
Trust, and with respect to the acquisition, development, financing and
disposition of real property, to the prior approval of the Board.
2.2 ANNUAL STRATEGIC PLAN. The REIT Manager will prepare annually a
---------------------
strategic plan that incorporates a specific business strategy, an annual
operating budget, investment and disposition objectives and capitalization and
funding strategies. This plan will be presented in the fourth quarter of the
year prior to the year for which such plan applies to the Board for its review
and approval. Consistent with the annual strategic plan, and subject to
supervision by the Board, the REIT Manager will provide acquisition, development
and disposition services including the following:
(a) Investigation and selection of possible acquisitions and
developments, property analysis, market and economic surveys, on-site
physical inspections, review and projection of income and operating
expenses and, when desired, supervising and negotiating the arrangement of
financing;
(b) Conducting negotiations with real estate brokers, owners of
property and their agents, investment bankers and owners of privately and
publicly held real estate companies;
(c) Engaging and supervising, on behalf of the Trust,
independent contractors which provide real estate brokerage, investment
banking (as to which an Affiliate of the REIT Manager may be used if there
is no charge to the Trust for its services, other than the REIT Management
Fee) and leasing services, mortgage brokerage and other financial services
and such other services as may be required relating to the Trust
Properties, provided, however, that the REIT Manager shall not share in any
------- -------
brokerage, investment banking or similar fees paid to any person engaged by
the REIT Manager to perform such services for the Trust; and
-5-
<PAGE>
(d) Negotiating on behalf of the Trust for the sale, exchange or
other disposition of any Trust Properties.
2.3 ASSET MANAGEMENT. The REIT Manager may retain third-party property
----------------
managers and leasing agents for administration, leasing and management of Trust
Properties. Subject to the approval of a majority of the Board, including a
majority of the Independent Trustees, the REIT Manager may provide property
management and/or leasing services for Trust Properties through an Affiliate of
the REIT Manager on terms and conditions no less favorable to the Trust than
those available from qualified unaffiliated third parties; provided, however,
-------- -------
that such services may not be provided through an Affiliate of the REIT Manager
if doing so would jeopardize the Trust's qualification as a real estate
investment trust under Sections 856 through 860 of the Code. The Trust and the
REIT Manager will negotiate in good faith the terms of any future management
agreements between the Trust and Affiliates of the REIT Manager which are
permitted pursuant to this Section 2.3.
-----------
2.4 GENERAL ADMINISTRATIVE DUTIES. The REIT Manager shall perform, or
-----------------------------
supervise the performance of, the necessary administrative functions in the day-
to-day management of the Trust and its operations, including, without
limitation, internal and external financial reporting, property accounting,
shareholder relations, supervision of stock registrar and transfer services and
other necessary services, all in a manner consistent with the Trust's current
practice, subject to changes approved by a majority of the Board.
2.5 REAL ESTATE INVESTMENT ADVICE. The REIT Manager shall advise the
-----------------------------
Trust with respect to policy decisions to be made by the Board, shall
investigate and evaluate investment opportunities consistent with the real
estate investment policies and the objectives of the Trust and recommend them to
the Board, and shall provide research, economic and statistical data in
connection with the Trust's real estate investments and policies.
2.6 SHORT-TERM INVESTMENTS. The REIT Manager may invest and reinvest
----------------------
any monies and securities of the Trust in short-term investments pending
investment in Trust Properties. Unless a specific new policy is developed by the
REIT Manager and approved by the Board, the REIT Manager may invest and reinvest
any monies and securities of the Trust, pending investment in Trust Properties,
in accordance with current practice and past policies developed by the REIT
Manager and approved by the Board.
2.7 AGENCY. The REIT Manager shall act as agent of the Trust in making,
------
acquiring, financing and disposing of investments, disbursing and collecting the
Trust's funds, paying the debts and fulfilling the obligations of the Trust,
supervising the performance of the managers of the Trust Properties and
handling, prosecuting and settling any claims of or against the Trust, the
Board, holders of the Trust's securities or the Trust's representatives or
properties.
-6-
<PAGE>
2.8 RETENTION OF SERVICES. The REIT Manager shall retain for and on
---------------------
behalf of the Trust such services of accountants, legal counsel, appraisers,
insurers, brokers, transfer agents, registrars, developers, banks and other
lenders and others as the REIT Manager deems necessary or advisable in
connection with the management and operations of the Trust and the fulfillment
of the REIT Manager's duties as set forth herein.
2.9 OFFICE AND PERSONNEL. The REIT Manager shall maintain on behalf of
--------------------
the Trust such office space, equipment and personnel, including officers and
employees of the REIT Manager or its Affiliates, as it deems necessary or
advisable in connection with the management and operations of the Trust and the
fulfillment of the REIT Manager's duties as set forth herein.
2.10 BANK ACCOUNTS. The REIT Manager may establish one or more bank
-------------
accounts in the name of the Trust or in its own name and may deposit into and
disburse from such accounts any monies on behalf of the Trust, provided that no
funds in any such account shall be commingled with funds of the REIT Manager,
and the REIT Manager shall as requested by the Board render appropriate
accountings to the Board of such deposits and disbursements.
2.11 BOOKS AND RECORDS. The REIT Manager shall maintain all accounting
-----------------
and reporting systems, books and records of the Trust, including books of
account and records relating to services performed by the REIT Manager, in form
and quality at least equivalent to the Trust's current practice, and shall make
such books and records accessible for inspection by the Board at any time during
ordinary business hours.
2.12 APPRAISALS AND REPORTING. As frequently as may be required by the
------------------------
Board or as the REIT Manager may deem necessary or advisable, the REIT Manager
shall prepare, or cause to be prepared, with respect to each of the Trust
Properties (i) an appraisal prepared by an independent real estate appraiser,
(ii) reports and information on Trust operations and asset performance at least
equivalent, with respect to quality and clarity of information, to the Trust's
current practice and (iii) other information reasonably requested by the Board.
2.13 REPORTS, ETC. The REIT Manager shall prepare, or cause to be
------------
prepared, all reports of the Trust required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and other communications to the holders
of the Trust's securities, including, without limitation, proxy solicitation
materials, and all tax returns and any other reports or other materials required
to be filed with any governmental body or agency, and shall prepare, or cause to
be prepared, all materials and data necessary to complete such reports and other
materials including, without limitation, an annual audit of the Trust's books of
account by a nationally recognized independent accounting firm.
2.14 FINANCING AND SECURITIES ISSUANCES. The REIT Manager shall provide
----------------------------------
services to the Trust in connection with negotiations by the Trust with
investment banking firms, securities brokers or dealers and other institutions
or investors in connection with the sale of
-7-
<PAGE>
securities of the Trust and the securing of loans for the Trust, provided,
--------
however, that the REIT Manager shall not share in any fees paid by the Trust to
- -------
third parties for such services.
2.15 ADDITIONAL SERVICES. The REIT Manager shall perform such additional
-------------------
services as from time to time may be requested by the Board and agreed to by the
REIT Manager, provided, however, that nothing herein shall require the REIT
-------- -------
Manager to agree to any such request or to perform any additional services to
which it has not previously agreed.
2.16 REIT QUALIFICATION, ETC. In the performance of its duties and
------------------------
responsibilities hereunder, the REIT Manager shall refrain from any action (i)
which, in its judgment or in the judgment of the Board of which the REIT Manager
has written notice, would adversely affect the qualification of the Trust as a
real estate investment trust under the Code, (ii) which would violate any law,
rule or regulation of any governmental body or agency having jurisdiction over
the Trust or its securities, the violation of which could have a material
adverse effect on the Trust or (iii) which would otherwise not be permitted by
the Declaration of Trust.
2.17 MORTGAGES AND INSURANCE. The REIT Manager shall use its best
-----------------------
efforts to (i) ascertain that any mortgage securing any investment of the Trust
shall be a valid lien upon the mortgaged property according to its terms, for
which the REIT Manager may rely on mortgagee's policies of title insurance
issued by reputable title insurance companies, and that any insurance or
guaranty issued by any person upon which the Board relies is valid and in full
force and effect and enforceable according to its terms, (ii) cause each Trust
Property to be duly insured, to the extent coverage is available on commercially
reasonable terms, against loss or damage by fire, with extended coverage, and
against such other insurable hazards and risks as is customary and appropriate
in the circumstances, provided, however, that if the REIT Manager determines
-------- -------
that a type of insurance coverage currently maintained by the Trust is
available, but no longer on commercially reasonable terms, the REIT Manager
shall so advise the Board and act in accordance with the Board's instructions
and (iii) carry out the policies from time to time specified in writing by the
Board with regard to the protection of Trust Properties. The REIT Manager shall
be entitled to reasonably rely on qualified experts in performing its duties
under this Section 2.17.
------------
2.18 FIDELITY BOND. The REIT Manager shall maintain a fidelity bond with
-------------
a responsible surety company in an amount approved by the Board covering all
officers and employees of the REIT Manager handling funds of the Trust and any
investment documents or papers, which bonds shall protect against all losses of
any such property from acts of such officers and employees through theft,
embezzlement, fraud and dishonesty.
2.19 LIABILITY LIMITATION. The REIT Manager shall cause to be included
--------------------
in any document or agreement prepared for the benefit of, or executed by the
REIT Manager on behalf of, the Trust under which substantial obligations are
assumed on behalf of the Trust clear and complete provisions pursuant to Article
4, Section 11 of the Declaration of Trust to the effect that the Trustees and
the shareholders of the Trust shall not be personally liable thereunder and
-8-
<PAGE>
that all parties concerned shall look solely to the property of the Trust for
the satisfaction of any claim against the Trust under any such document or
agreement.
III. COMPENSATION
------------
3.1 REIT MANAGEMENT FEE.
-------------------
(a) The Trust shall pay the REIT Manager an annual REIT Management Fee
equal to the sum of (i) $855,000, plus (or minus, in the case of annual Cash
Flow below $4,837,000) 16% of the difference between annual Cash Flow and
$4,837,000 and (ii) the product of 0.25% per annum multiplied by the average
daily balance of the Trust's Cash Equivalent Investments, measured at the end of
each month. All payments of the REIT Management Fee shall be subject to annual
adjustment at year end as provided in Section 3.5 hereof. The REIT Management
-----------
Fee shall be payable monthly in arrears in such amounts indicated by the annual
operating budget approved by a majority of the Board, as revised no more than
quarterly to reflect known material changes.
(b) Within 50 days following the end of each calendar quarter and within
100 calendar days after the end of each calendar year of the Trust (following
the receipt by the Trust of an auditor's report, prepared by a nationally
recognized independent accounting firm, with respect to the Trust's financial
statements for such year), the REIT Manager shall deliver to the Trust a
statement, certified by an officer of the REIT Manager, setting forth the
following: (i) the amount of the estimated REIT Management Fee actually paid by
the Trust for all months during such quarter or year, as the case may be, (ii)
the amount of the REIT Management Fee that should have been paid for such
quarter or year, as the case may be, and (iii) the amount, if any, of accrued
and unpaid REIT Management Fees. If the annual or quarterly statement, as the
case may be, indicates an overpayment by the Trust of the REIT Management Fee,
such overpayment shall be offset against the next ensuing estimated REIT
Management Fee to become due hereunder, or, if at any time no further REIT
Management Fee can become due, the balance of any overpayment shall be paid
without interest by the REIT Manager within 15 calendar days after demand
therefor by the Trust, such repayment to be due and payable whether or not this
Agreement is still in full force and effect. If the annual or quarterly
statement, as the case may be, indicates an underpayment by the Trust of the
REIT Management Fee with respect to the quarter or year covered thereby, the
Trust, within 15 calendar days after receipt of the statement, shall pay to the
REIT Manager the amount of such underpayment. The REIT Management Fee for any
year shall not be recalculated on the basis of any post-year-end adjustments to
the Trust's taxable income arising, directly or indirectly, from an audit by the
Internal Revenue Service.
3.2 PAYMENT FOR ADDITIONAL SERVICES. If the Board shall request the
-------------------------------
REIT Manager to render services to the Trust other than those required to be
rendered by the REIT Manager hereunder, such additional services, if performed,
shall be compensated separately on terms to be agreed upon from time to time
between the REIT Manager and the Trust, which terms shall
-9-
<PAGE>
not be less favorable to the Trust than either (a) the terms under which the
REIT Manager is then performing similar services for other persons, taking into
account the full range of services and prices therefor provided by the REIT
Manager to such other persons or (b) the terms under which qualified
unaffiliated persons are then performing such services for comparable
organizations, provided that no separate fee shall be charged to the Trust for
any investment banking services provided by any Affiliate of the REIT Manager.
3.3 EXPENSES OF THE REIT MANAGER. Without regard to the amount of
----------------------------
compensation received hereunder by the REIT Manager, the REIT Manager shall bear
the following expenses:
(a) wages, salaries and other compensation of the REIT Manager's
officers and employees, including so-called fringe benefits such as life,
disability, medical and health insurance, pension plans, social security
taxes and workers' compensation insurance;
(b) rent and other overhead expenses of the REIT Manager; and
(c) travel and mailing costs pertaining to the REIT Manager's
performance of its duties hereunder, except for expenses described in
Section 3.4(a) below.
--------------
3.4 REIMBURSABLE EXPENSES. The REIT Manager shall pay, or cause to be
---------------------
paid out of the assets of the Trust, the following operating expenses of the
Trust and, if the REIT Manager advances money for such expenses, it shall be
entitled to reimbursement by the Trust therefor:
(a) travel and other out-of-pocket expenses incurred by
directors, officers and employees of the REIT Manager in connection with
(i) seeking financing (including debt and equity) for the Trust, (ii)
evaluating, investigating, negotiating or closing the acquisition,
financing, refinancing or disposition of a Trust Property after the Board
has approved for investment the market in which such property is located or
(iii) attending Board, Board committee or shareholder meetings of the
Trust;
(b) costs of third-party legal, accounting, tax and similar
services rendered for the Trust;
(c) all other costs and expenses relating to the Trust's
operations, including, without limitation, the costs and expenses of
acquiring, owning, managing, protecting, maintaining and disposing of the
Trust's investments, including travel, appraisal, reporting, audit and
legal fees;
(d) all insurance costs incurred in connection with the
operation of the Trust;
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<PAGE>
(e) expenses connected with payments of interest or
distributions in cash or any other form made or caused to be made by the
Board to or on account of holders of securities of the Trust, including,
without limitation, expenses incurred in connection with any dividend
reinvestment plan;
(f) expenses connected with communications to holders of
securities of the Trust and the investment community in general (including
meetings between Affiliates of the REIT Manager and investors or analysts)
and the other bookkeeping and clerical work necessary in maintaining
relations with holders of securities and in complying with the continuous
reporting and other requirements of governmental bodies or agencies,
including the cost of printing and mailing certificates for securities and
proxy solicitation materials and reports to holders of the Trust's
securities;
(g) transfer agent and registrar's fees and charges; and
(h) expenses relating to any office or office facilities
maintained for the Trust or the Trust Properties separate from the office
or offices of the REIT Manager.
3.5 REFUND. In accordance with the Declaration of Trust, with respect
------
to any fiscal year in which a majority of the Independent Trustees do not find
such excess justified, the Board may require the REIT Manager either (a) to
refund to the Trust, to the extent of any fees received by the REIT Manager
during such fiscal year, the amount, if any, by which the Total Operating
Expenses of the Trust for such fiscal year exceeded the greater of (i) 2% of the
sum for such fiscal year of the Average Invested Assets of the Trust or (ii) 25%
of the Net Income of the Trust for such fiscal year or (b) to reduce its fees by
the amount of such excess during the balance of the fiscal year next following
the fiscal year with respect to which such refund is to be made.
3.6 RESTRICTIONS.
------------
(a) The REIT Manager shall not recommend or consummate any transaction
which would involve the acquisition by the Trust of property in which the REIT
Manager or any Affiliate thereof has an ownership interest, including any
transaction prohibited by Article 1, Section 5(g) of the Declaration of Trust,
and neither the REIT Manager nor any Affiliate thereof shall purchase or
otherwise acquire from the Trust any Trust Property; provided, however, that the
-------- -------
REIT Manager may recommend and consummate transactions which involve the
acquisition or disposition by the Trust of property from or to PTR Development
Services Incorporated ("PTR Development Services") or in which PTR Development
Services has an ownership interest, provided that the Trust owns a substantial
majority of the economic interest in PTR Development Services and that a
majority of the Board (including a majority of the Independent Trustees) not
otherwise interested in such transaction approve the transaction as being fair,
competitive and commercially reasonable and no less favorable to the Trust than
acquisitions or dispositions between unaffiliated parties under similar
circumstances; provided further, that this
----------------
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<PAGE>
Section 3.6(a) shall not apply to the negotiation, execution, delivery and
- --------------
performance under the Merger Agreement and each of the agreements and
transactions contemplated thereby.
(b) Other than advances of expenses pursuant to Section 3.4 hereof, the
-----------
Trust shall not make loans to, or borrow money from, the REIT Manager or any
Affiliate thereof, unless a majority of the Board (including a majority of the
Independent Trustees) not otherwise interested in such transaction approve the
transaction as being fair, competitive and commercially reasonable and no less
favorable to the Trust than loans between unaffiliated lenders and borrowers
under the same circumstances.
(c) The Trust shall not invest in joint ventures with the REIT Manager
or any Affiliate thereof, unless a majority of the Board (including a majority
of the Independent Trustees) not otherwise interested in such transaction
approve the transaction as being fair and reasonable to the Trust and on
substantially the same terms and conditions as those received by the other joint
venturers.
(d) All other material transactions between the Trust and the REIT
Manager, or any Affiliate thereof, shall require approval by a majority of the
Board (including a majority of the Independent Trustees) not otherwise
interested in such transactions as being fair and reasonable to the Trust and on
terms and conditions no less favorable to the Trust than those available from
unaffiliated third parties.
IV. TERMINATION; TERM
-----------------
4.1 TERMINATION. Notwithstanding any other provision to the contrary,
-----------
this Agreement (i) may be terminated without Cause by the Trust upon 60 calendar
days' written notice to the REIT Manager, or by the REIT Manager upon 60
calendar days' written notice to the Trust, and (ii) may be terminated by the
Trust for Cause immediately upon providing written notice to the REIT Manager.
Any determination by the Trust to terminate this Agreement shall be made by the
vote of a majority of the Independent Trustees or the holders of a majority of
outstanding Trust voting shares. The REIT Manager shall immediately notify the
Trust of the occurrence of any event described in Sections 1.1(g)(iii) or (iv).
----------------------------
In the event of termination of this Agreement, the REIT Manager will cooperate
with the Trust and take all reasonable steps requested to assist the Board in
making an orderly transition of the REIT management function.
4.2 RENEWAL TERMS. This Agreement shall continue in force for an
-------------
initial term beginning on the date hereof and ending on June 30, 1997, and shall
be renewable by the Trust annually, subject to a determination by a majority of
the Independent Trustees that the REIT Manager's performance hereunder has been
satisfactory and that the compensation payable to the REIT Manager hereunder is
fair. Absent written notice of non-renewal as provided in this Section 4.2, this
-----------
Agreement shall be automatically renewed for successive one-year terms ("Renewal
Terms") upon the expiration of the initial term and each Renewal Term. Notice of
non-renewal, if given, shall be given in writing by the Trust to the REIT
Manager not less than
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<PAGE>
60 calendar days before the expiration of the initial term of this Agreement or
60 calendar days before the expiration of any Renewal Term thereof.
4.3 COMPENSATION ON TERMINATION OR NON-RENEWAL. Until liquidation of
------------------------------------------
the Trust, in the event the Trust terminates or fails to renew this Agreement on
terms as favorable as those contained in this Agreement or hereafter in a
renewal agreement, in either case other than for Cause, the Trust shall pay the
REIT Manager all fees then accrued and unpaid as of the year or portion thereof
in which the termination occurred.
V. ACTION UPON TERMINATION OR CANCELLATION
---------------------------------------
5.1 ACCOUNTING. The REIT Manager shall immediately upon termination of
----------
this Agreement:
(a) pay over to the Trust all monies collected and held for the
account of the Trust pursuant to this Agreement, after deducting any
accrued compensation and reimbursement for its expenses to which it is then
entitled;
(b) deliver to the Trust a full accounting, including a
statement showing all payments collected by it and a statement of all
monies held by it, covering the period following the date of the last
accounting furnished to the Trust;
(c) refund to the Trust any amounts due pursuant to Section 3.5
-----------
hereof;
(d) deliver to the Trust all property and documents of the Trust
then in the custody of the REIT Manager; and
(e) cooperate with the Trust and take all reasonable steps
requested to assist the Board in making an orderly transition of the REIT
management function.
VI. LIABILITY AND INDEMNIFICATION OF REIT MANAGER
---------------------------------------------
6.1 LIMITATION ON LIABILITY. The REIT Manager shall have no
-----------------------
responsibility other than to render the services and take the actions described
herein in good faith and with the exercise of due care and shall not be
responsible for any action of the Board in following or declining to follow any
advice or recommendation of the REIT Manager. The REIT Manager, except by
reason of its own gross negligence, bad faith or willful misconduct, shall not
be liable for any action taken, omitted or suffered to be taken by it in good
faith and believed by it to be authorized or within its discretion or rights or
powers conferred upon it by this Agreement or in reasonable reliance upon the
written opinion of counsel of recognized expertise.
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<PAGE>
6.2 INDEMNIFICATION.
---------------
(a) The Trust shall reimburse, indemnify and hold harmless the REIT
Manager and its directors, officers, shareholders, agents and employees and each
other person or entity, if any, controlling the REIT Manager (an "Indemnified
Party"), to the full extent lawful, from and against any and all losses, claims,
damages or liabilities of any nature whatsoever with respect to or arising from
any acts or omissions of the REIT Manager (including ordinary negligence) in its
capacity as such, except with respect to losses, claims, damages or liabilities
with respect to or arising out of the REIT Manager's gross negligence, bad faith
or willful misconduct.
(b) Notwithstanding the indemnification provisions in Section 6.2(a)
--------------
above, indemnification will not be allowed for any liability imposed by
judgment, and costs associated therewith, including attorneys' fees, arising
from or out of a violation of state or federal securities laws associated with
the offer and sale of Trust securities. Indemnification will be allowed for
settlement and related expenses of lawsuits alleging securities law violations,
and for expenses incurred in successfully defending such lawsuits, provided that
a court either (i) approves the settlement and finds that indemnification of the
settlement and related costs should be made or (ii) approves indemnification of
litigation costs if a successful defense is made. If indemnification is
unavailable as a result of this Section 6.2(b), the Trust shall contribute to
--------------
the aggregate losses, claims, damages or liabilities to which the REIT Manager
or its officers, directors, agents, employees or controlling persons may be
subject in such amount as is appropriate to reflect the relative benefits
received by the Trust and the party seeking contribution and the relative faults
of the Trust and the party seeking contribution, as well as any other relevant
equitable considerations.
(c) Promptly after receipt by an Indemnified Party of notice of the
commencement of any action, such Indemnified Party shall, if a claim in respect
thereof is to be made against the Trust, notify the Trust in writing of the
commencement thereof; but the omission so to notify the Trust shall not relieve
it from any liability that it may have to any Indemnified Party pursuant to
Section 6.2(a) hereof, unless the failure to so notify would itself constitute
- --------------
gross negligence, bad faith or willful misconduct. In case any such action
shall be brought against an Indemnified Party and it shall notify the Trust of
the commencement thereof, the Trust shall be entitled to participate therein
and, to the extent that it shall wish to assume the defense thereof, with
counsel satisfactory to such Indemnified Party and, after notice from the Trust
to such Indemnified Party of its election so to assume the defense thereof, the
Trust shall not be liable to such Indemnified Party under Section 6.2(a) hereof
--------------
for any legal expenses of other counsel or any of the expenses, in each case
subsequently incurred by such Indemnified Party, unless (i) the Trust and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the Trust and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate in the reasonable opinion of
the Indemnified Party, due to actual or potential differing interests between
them.
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<PAGE>
(d) The obligations of the Trust under this Section 6.2 shall be in
-----------
addition to any liability which the Trust otherwise may have.
6.3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF TRUST.
--------------------------------------------------
(a) The Trust represents and warrants as of the date hereof that:
(i) this Agreement has been duly authorized, executed and
delivered on behalf of the Trust;
(ii) the Trust is fully authorized under the applicable laws
governing the Trust to enter into all of the types of investments and co-
investments described in the Investment Policies;
(iii) the execution and performance of this Agreement by the Trust
will not conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation
of, any agreement or instrument to which the Trust is subject;
(iv) the terms of this Agreement are in conformity with the
applicable laws governing the Trust; and
(v) the assets of the Trust do not constitute "plan assets"
within the meaning of the Department of Labor plan asset regulation
published at 29 C.F.R. (S) 2510.3-101.
(b) The Trust shall promptly advise the REIT Manager in writing of any
agreements or changes in any agreements, instruments, governing law, regulations
or interpretations thereof affecting the investments of the Trust or the duties,
responsibilities, liabilities or obligations of the REIT Manager, and any change
or any contemplated change with respect to any of the foregoing or the operation
or administration of the Trust that could cause the assets of the Trust to
constitute "plan assets" as defined in Section 6.3(a)(v) above.
-----------------
VII. MISCELLANEOUS PROVISIONS
------------------------
7.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter hereof. Any modification
or amendment of this Agreement shall be in writing executed by each of the
parties.
7.2 ASSIGNMENT. This Agreement may not be assigned by either party
----------
except in the event of an assignment to a successor organization that takes over
the property and carries on the affairs of the assignor, provided that following
any such assignment by the REIT Manager, the persons who controlled the
operations of the REIT Manager immediately prior thereto shall control the
operations of the successor organization, including the performance of its
duties
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<PAGE>
under this Agreement. Any such assignment of this Agreement shall bind the
assignee hereunder in the same manner as the assignor is bound hereunder.
Notwithstanding the foregoing, without the Trust's consent, the REIT Manager may
assign all or any part of the compensation due it hereunder and the REIT Manager
may assign or subcontract any or all of its rights and duties hereunder with
respect to the Trust's corporate efficiency properties to an Affiliate of the
REIT Manager, provided that no such assignment or subcontract shall relieve the
REIT Manager of its obligations hereunder.
7.3 NO PARTNERSHIP OR JOINT VENTURE. The Trust and the REIT Manager are
-------------------------------
not, and shall not be deemed to be, partners or joint venturers with each other.
7.4 SEVERABILITY. If any term or provision of this Agreement or the
------------
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
that term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
7.5 POLICY AND FINANCIAL INFORMATION. The Trustees shall keep the REIT
--------------------------------
Manager informed in writing concerning the investment and financing policies of
the Trust and shall promptly notify the REIT Manager of any intention to make
any new investments, to sell or dispose of any existing investments or to enter
into any agreement or understanding with any third party. The Trust shall
furnish the REIT Manager a certified copy of all financial statements, a signed
copy of each report prepared by independent public accountants, a certified copy
of each amendment or supplement to the Declaration of Trust, the By-Laws and the
Investment Policies and such other information with regard to the Trust's
affairs as the REIT Manager from time to time reasonably may request.
7.6 NOTICES. Any notices and other communications to be given by any
-------
party hereunder shall be in writing delivered at the address of the respective
party set forth on the signature page hereof, or at such other address as a
party shall have specified to the other party in writing as the address for
notices hereunder. Any such notice or other communication shall be deemed to
have been given when personally delivered or one business day after being
forwarded by overnight courier or five days after being sent by registered or
certified United States mail, postage prepaid.
7.7 HEADINGS. The section headings used herein have been inserted for
--------
convenience of reference only and shall not be considered in interpreting this
Agreement.
7.8 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Texas, without giving effect to the
principles of conflict of laws thereof.
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<PAGE>
7.9 BOARD ACTION. Whenever action on the part of the Trust or the Board
------------
is contemplated in this Agreement, unless otherwise indicated herein, action by
a majority of the Trustees, including a majority of the Independent Trustees,
shall constitute the action provided for herein.
7.10 OTHER ACTIVITIES.
----------------
(a) Nothing in this Agreement shall prevent the REIT Manager or any
Affiliate thereof from rendering advice to other investors (including other real
estate investment trusts), even if such investors are in competition with the
Trust or any of the Trust's real estate investments or from managing other
investments, including investors and investments advised, sponsored or organized
by the REIT Manager. The REIT Manager also may render such services to joint
ventures and partnerships in which the Trust is a co-venturer or partner and to
the other entities in such joint ventures and partnerships. In addition,
nothing in this Agreement shall limit the right of the REIT Manager or any of
its subsidiaries or Affiliates to engage in any other business or to render
services of any kind (including business activities competitive with those of
the Trust) to any corporation, partnership or other entity. The REIT Manager
will inform the Trustees of any other advisory contracts or investments (other
than purchases of marketable securities or securities which are registered
pursuant to Section 12 of the Exchange Act) by the REIT Manager or its
Affiliates. When informing the Trustees of any advisory contracts, the REIT
Manager need not identify the advised entities by name, but shall provide the
Board with sufficient information to permit the Board to evaluate the services
performed or to be performed by the REIT Manager under such contract. Nothing
in this Agreement shall prevent the Trustees from considering the REIT Manager's
activities for itself and for other entities in evaluating the REIT Manager's
performance for purposes of deciding whether or not to renew this Agreement.
The Trust will maintain the confidentiality of all information provided to the
Trust pursuant to this paragraph, subject to disclosure only if required by
applicable law or compelled by appropriate legal process.
(b) The REIT Manager and its Affiliates, directors, officers, employees,
shareholders and subsidiaries shall be free of any obligation to provide the
Trust with the right of first refusal to acquire or invest in any investment
opportunity that may come to any of them in any capacity, whether or not such
investment opportunities are of a character which is within the investment
policies of the Trust. Directors, officers, employees and agents of the REIT
Manager or any of its Affiliates may serve as Trustees, officers, employees,
agents, nominees or signatories of the Trust. When executing documents or
otherwise acting in such capacities for the Trust, such persons shall use their
respective titles for the Trust. Such persons shall receive from the Trust no
compensation for their services to the Trust in any such capacities.
7.11 INDEPENDENT TRUSTEES' APPROVAL. Notwithstanding anything to the
------------------------------
contrary in this Agreement, a majority of the Independent Trustees must approve
the Trust's annual strategic plan and operating budget; all property
acquisitions, developments, dispositions and unbudgeted (non-emergency) capital
expenditures in excess of $50,000; and all Trust financing, including
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<PAGE>
the issuance of public and private debt or equity securities. In addition, to
the extent that the Declaration of Trust requires approval of the majority of
Independent Trustees with respect to any matter pertaining to this Agreement,
such matter shall be submitted for such approval and shall not be pursued until
such approval is received.
7.12 LIMITATION OF LIABILITY OF TRUST. ANY OBLIGATION OR LIABILITY
--------------------------------
WHATSOEVER OF THE TRUST WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY
OBLIGATION OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER
INSTRUMENT, TRANSACTION OR UNDERTAKING CONTEMPLATED HEREBY SHALL BE SATISFIED,
IF AT ALL, OUT OF THE TRUST'S PROPERTIES ONLY. NO SUCH OBLIGATION OR LIABILITY
SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF
BE HAD TO, THE PRIVATE PROPERTY OF ANY OF ITS TRUSTEES, SHAREHOLDERS, OFFICERS,
EMPLOYEES OR AGENTS, REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN
THE NATURE OF CONTRACT, TORT OR OTHERWISE.
7.13 DECLARATION OF TRUST GOVERNS. To the extent that any provision in
----------------------------
this Agreement is inconsistent with or contradicts a provision in the
Declaration of Trust, as the same may be amended and supplemented from time to
time, the Declaration of Trust shall govern and such provision of this Agreement
shall be deemed to have been reformed to be consistent with the Declaration of
Trust.
7.14 AUTHORITY TO ACT. The Trust shall furnish to the REIT Manager from
----------------
time to time, upon request of the REIT Manager, certified copies of appointments
or designations setting forth the names, titles and authorities of the
individuals who are authorized to act on behalf of the Trust with respect to the
Trust's investments, together with specimen signatures of those individuals who
are authorized to act on its behalf with respect to this Agreement. The REIT
Manager shall furnish to the Trust from time to time, upon request of the Trust,
certificates setting forth the names, titles and authorities of the persons
authorized to act on its behalf and provide specimen signatures of those
individuals who are authorized to act on its behalf with respect to this
Agreement.
7.15 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts and by each of the parties hereto on separate counterparts; all
such counterparts shall together constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the Trust and the REIT Manager have executed this
Agreement as of the day and year first above written.
Address for Notice: SECURITY CAPITAL PACIFIC TRUST
7777 Market Center Avenue
El Paso, Texas 79912
By: /s/ C. Ronald Blankenship
--------------------------
C. Ronald Blankenship
Chairman
Address for Notice: SECURITY CAPITAL PACIFIC INCORPORATED
125 Lincoln Avenue
Santa Fe, New Mexico 87501
By: /s/ Jeffrey A. Klopf
---------------------
Jeffrey A. Klopf
Secretary
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<PAGE>
EXHIBIT 10.12
PROTECTION OF BUSINESS AGREEMENT
--------------------------------
THIS PROTECTION OF BUSINESS AGREEMENT (this "Agreement") is entered into as
of October 17, 1996, by and among Security Capital Atlantic Incorporated, a
Maryland corporation ("Atlantic"), Security Capital Pacific Trust, a Maryland
real estate investment trust ("PTR"), and Security Capital Group Incorporated, a
Maryland corporation ("SCG"), and Homestead Village Incorporated, a Maryland
corporation ("Homestead").
WHEREAS, on the date hereof the parties are entering into a series of
related transactions as described in that certain Merger and Distribution
Agreement, dated as of May 21, 1996, among Atlantic, PTR, SCG and Homestead (the
"Merger Agreement"), pursuant to which, among other things, PTR, Atlantic and
SCG will cause their respective subsidiaries engaged in the conduct of the
extended-stay lodging business to be merged with and into Homestead;
WHEREAS, Atlantic, PTR and SCG and their respective affiliates will
continue to engage in certain businesses after the date hereof;
WHEREAS, as a condition to the consummation of the transactions
contemplated by the Merger Agreement, the parties hereto desire to enter into
certain agreements restricting the activities of Atlantic, PTR and SCG and their
respective affiliates; and
WHEREAS, pursuant to the Merger Agreement, it is contemplated that
securities of Homestead will be distributed by PTR and Atlantic in a public
distribution to their respective shareholders.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein shall have the
-----------
meanings set forth below:
"Affiliate" with regard to any Person, means (a) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(b) any Person owning or controlling 10% or more of the outstanding voting
interests of such Person or (c) any Person of which such Person owns or controls
10% or more of the voting interests. The term "Affiliates" and "Affiliated"
shall have correlative meanings. For purposes of this Agreement, the term
"Affiliate" shall not include Security Capital U.S. Realty, a Luxembourg
corporation, or any Person controlled by Security Capital U.S. Realty and no
party hereto shall be deemed to be an Affiliate of any other party hereto.
<PAGE>
"Extended-Stay Property" means real property that is or is planned to be
used primarily for lodging facilities generally offering studio apartments,
including cooking facilities, which are generally rented for incremental periods
of one week but shall not include any real property that is or is planned to be
used primarily as corporate apartments.
"Interest" means any kind of right, title or interest (whether legal or
beneficial), whether such right, title or interest is held directly or
indirectly through an interest in a Person that either directly or indirectly
owns such interest, but excluding any interests in Homestead.
"Multifamily Property" means real property that is or is planned to be used
primarily for garden style multifamily dwellings which are generally leased for
six-month to twelve-month periods and require security deposits and also
includes real property that is or is planned to be used primarily for master-
planned apartment neighborhoods.
"Person" means an individual or any corporation, partnership, trust,
unincorporated association or any other legal entity; provided, however that,
for purposes of Sections 2, 3 and 4 hereof, the term "Person" shall not include
an individual.
"Restricted Area" means the continental United States.
Section 2. Agreement not to Engage in Certain Activities.
---------------------------------------------
(a) During the term provided in Section 6 hereof, none of Atlantic,
PTR or SCG nor any of their respective Affiliates shall, anywhere within
the Restricted Area, directly or indirectly, engage in the ownership,
operation, development, management or leasing of any Extended-Stay
Property.
(b) During the term provided in Section 6 hereof, neither Homestead
nor any of its Affiliates shall, anywhere within the Restricted Area,
directly or indirectly, engage in the ownership, operation, development,
management or leasing of any Multifamily Property.
Section 3. Atlantic, PTR and SCG Limitations on Protection of Business.
-----------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, each of
Atlantic, PTR and SCG and their respective Affiliates may:
(a) be an owner of securities of any class of Homestead;
(b) be an owner of up to 5% of the outstanding shares of stock of any
class of securities of a Person (public or private) primarily engaged in
owning, operating, developing, managing or leasing Extended-Stay
Properties, so long as Atlantic, PTR and SCG and their Affiliates have no
active participation (except to the extent permitted by clauses (c) and (d)
below) in the business of such Person;
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<PAGE>
(c) be an owner of any amount of the outstanding shares of stock of
any class of securities of a Person (public or private), a majority owned
subsidiary, division, group, franchise or segment of which is engaged in
owning, operating, developing, managing or leasing Extended-Stay
Properties, so long as not more than 5% of such Person's consolidated
revenues are derived from the ownership, operation, development, management
or leasing of Extended-Stay Properties; and
(d) be an owner of the outstanding shares of stock of any class of
securities of a Person (public or private) primarily engaged in a business
other than owning, operating, developing, managing or leasing Extended-Stay
Properties, including a Person primarily engaged in business as an owner,
operator or developer of hotel properties, whether or not such Person owns,
operates, develops, manages or leases any Extended-Stay Properties.
Section 4. Homestead Limitations on Protection of Business.
-----------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, Homestead
and its Affiliates may:
(a) be an owner of securities of any class of any of Atlantic, PTR or
SCG;
(b) be an owner of up to 5% of the outstanding shares of stock of any
class of securities of a Person (public or private) primarily engaged in
owning, operating, developing, managing or leasing Multifamily Properties,
so long as Homestead and its Affiliates have no active participation
(except to the extent permitted by clause (c) below) in the business of
such Person; and
(c) be an owner of any amount of the outstanding shares of stock of
any class of securities of a Person (public or private), a majority owned
subsidiary, division, group, franchise or segment of which is engaged in
owning, operating, developing, managing or leasing Multifamily Properties,
so long as not more than 5% of such Person's consolidated revenues are
derived from the ownership, operation, development, management or leasing
of Multifamily Properties.
Section 5. Reasonable and Necessary Restrictions. Each of the parties
-------------------------------------
hereto acknowledges that the restrictions, prohibitions and other provisions
hereof are reasonable, fair and equitable in scope, terms and duration, are
necessary to protect the legitimate business interests of each of the other
parties hereto, and are a material inducement to such party to enter into the
transactions contemplated by the Merger Agreement.
Section 6. Term.
----
6.1 General. Subject to earlier termination pursuant to Section 6.2, this
-------
Agreement shall be effective from and after the date hereof and shall continue
in effect until the tenth anniversary of the date hereof.
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<PAGE>
6.2 Change in Control. Notwithstanding anything to the contrary contained
-----------------
herein, the provisions of Section 2 of this Agreement shall terminate and be of
no further force or effect upon the occurrence of a Change in Control. As used
herein, "Change in Control" means the acquisition, directly or indirectly (other
than by purchase from PTR, Atlantic or SCG, or any of their respective
Affiliates), by any Person (or group of associated Persons acting in concert),
other than PTR, Atlantic, SCG, or their respective Affiliates, of 25% or more of
the outstanding shares of voting stock of Homestead, without the prior written
consent of the Board of Directors of Homestead.
Section 7. Specific Performance. Each of the parties hereto acknowledges
--------------------
that the obligations undertaken by it pursuant to this Agreement are unique and
that the other parties hereto will not have an adequate remedy at law if it
shall fail to perform any of its obligations hereunder, and each of the parties
hereto therefore confirms that the right of each other party hereto to specific
performance of the terms of this Agreement is essential to protect the rights
and interests of such party. Accordingly, in addition to any other remedies
that any party hereto may have at law or in equity, each such party shall have
the right to have all obligations, covenants, agreements and other provisions of
this Agreement specifically performed by each other party, and each party shall
have the right to obtain preliminary and permanent injunctive relief to secure
specific performance and to prevent a breach or contemplated breach of this
Agreement by each other party hereto.
Section 8. Operations of Affiliated Parties. Each of the parties hereto
--------------------------------
agrees that it will refrain from authorizing or permitting any Affiliated party
to perform any activities that would be prohibited by the terms of this
Agreement if such activities were performed by it.
Section 9. Ancillary Agreements. Nothing contained in this Agreement
--------------------
shall in any way restrict or impair the obligations and rights of any party
under the terms of any agreement entered into in connection with the
transactions contemplated by the Merger Agreement, including, without
limitation, the foreclosure by PTR or Atlantic under any mortgages secured by
the properties of Homestead and the operation of such properties subsequent to
such foreclosure.
Section 10. Miscellaneous Provisions.
------------------------
10.1 Interpretation. The parties hereto acknowledge that the fundamental
--------------
policies of this Agreement are to protect each other party's interest in its
respective business and to eliminate potential conflicts of interest that may
exist as a result of actions taken or proposed to be taken by the other parties
hereto, and this Agreement shall be construed and enforced in a manner
consistent with and in furtherance of these policies.
10.2 Binding Effect. Subject to any provisions hereof restricting
--------------
assignment, all covenants and agreements in this Agreement by or on behalf of
any of the parties hereto shall
-4-
<PAGE>
bind and inure to the benefit of their respective successors, assigns, heirs,
and personal representatives.
10.3 Assignment. None of the parties hereto may assign any of its rights
----------
under this Agreement, or attempt to have any other entity or individual assume
any of its obligations hereunder.
10.4 Severability. If performance of any provision of this Agreement, at
------------
the time such performance shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be performed shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect. The parties shall negotiate in good faith a
replacement clause or provision as consistent with the ineffective clause or
provision as is practicable under law.
10.5 Governing Law. This Agreement, the rights and obligations of the
-------------
parties hereto, and any claims or disputes relating thereto shall be governed by
and construed in accordance with the laws of the State of Maryland, not
including the choice-of-law rules thereof.
10.6 Amendment. Except as otherwise expressly provided in this Agreement,
---------
no amendment, modification or discharge of this Agreement shall be valid or
binding unless set forth in writing and duly executed by each of the parties
hereto.
10.7 Waiver. Any waiver by any party or consent by any party to any
------
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
10.8 Headings. Section and subsection headings contained in this
--------
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
10.9 No Presumption Against Drafter. Each of the parties hereto have
------------------------------
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or a question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by each of the parties hereto
and no presumptions or burdens of proof shall arise favoring any party by virtue
of the authorship of any of the provisions of this Agreement.
10.10 Execution in Counterparts. This Agreement may be executed in one
-------------------------
or more counterparts, none of which need contain the signatures of each of the
parties hereto and each of which shall be deemed an original.
-5-
<PAGE>
10.11 Limitation of Liability. Any obligation or liability whatsoever of
-----------------------
PTR which may arise at any time under this Agreement or any obligation or
liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of PTR's assets only. No such obligation or liability shall be personally
binding upon, nor shall resort for the enforcement thereof be had to, the
property of any of its shareholders, trustees, officers, employees or agents,
regardless of whether such obligation or liability is in the nature of contract,
tort or otherwise.
-6-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
SECURITY CAPITAL ATLANTIC INCORPORATED
By: /s/ James C. Potts
------------------
James C. Potts
Co-Chairman
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
-------------------------
C. Ronald Blankenship
Chairman
SECURITY CAPITAL GROUP INCORPORATED
By: /s/ Jeffrey A. Klopf
--------------------
Jeffrey A. Klopf
Senior Vice President
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
S-1
<PAGE>
EXHIBIT 10.13
INVESTOR AND REGISTRATION RIGHTS AGREEMENT
THIS INVESTOR AND REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is
entered into as of October 17, 1996, between Homestead Village Incorporated, a
Maryland corporation ("Homestead"), and Security Capital Pacific Trust, a
Maryland real estate investment trust ("PTR").
WHEREAS, on the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Security Capital Atlantic Incorporated
("Atlantic"), PTR, Security Capital Group Incorporated ("SCG") and Homestead
(the "Merger Agreement"), pursuant to which, among other things, Homestead will
acquire all of PTR's assets relating to its operation of extended-stay lodging
facilities;
WHEREAS, pursuant to the Merger Agreement, PTR and Homestead are
entering to a Funding Commitment Agreement (the "Funding Commitment Agreement"),
pursuant to which PTR will agree to make certain loans to Homestead, which loans
will be secured by mortgages, and the notes evidencing such loans will be
convertible into shares of Common Stock, $0.01 par value per share ("Common
Stock"), of Homestead on the terms and conditions described therein;
WHEREAS, pursuant to a Warrant Purchase Agreement (the "Warrant
Purchase Agreement"), dated as of May 21, 1996, among Homestead, SCG, Atlantic
and PTR, Homestead has agreed to issue to PTR warrants to acquire Common Stock;
and
WHEREAS, the execution of this Agreement is a condition to the
consummation of the transactions contemplated by the Merger Agreement, the
Funding Commitment Agreement and the Warrant Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
Section 1. Board Representation. Until March 31, 1998 and for so
--------------------
long thereafter as PTR shall continue to have the right to convert in excess of
$20 million in principal amount of loans made pursuant to the Funding Commitment
Agreement, Homestead shall not increase the number of members of its Board of
Directors to more than seven (7) members and PTR shall be entitled to designate
one person for nomination to the Homestead Board of Directors (such person, a
"Nominee") and Homestead will use its best efforts to cause the election of such
Nominee. The Nominee of PTR may, but need not, include the same person or
persons nominated by SCG pursuant to the Investor Agreement of even date
herewith between SCG and Homestead or the person nominated by Atlantic pursuant
to the Investor and Registration Rights Agreement of even date herewith between
Atlantic and Homestead.
<PAGE>
Section 2. Inspection. Until March 31, 1998 and for so long
----------
thereafter as PTR shall continue to have the right to convert any principal
amount of loans made, pursuant to the Funding Commitment Agreement, at any time
during regular business hours and as often as reasonably requested of
Homestead's officers, Homestead shall permit PTR or any authorized employee,
agent or representative of PTR to examine and make copies and abstracts from the
records and books of account of, and to visit the properties of, Homestead and
to discuss the affairs, finances, and accounts of Homestead with any of its
officers or directors; provided, that all costs and expenses of such inspection
--------
shall be borne by PTR.
Section 3. Registration Rights.
-------------------
(a) Demand. At any time prior to the first anniversary of
------
the date on which the Common Stock is registered under Section 12(b)
or 12(g) of the Exchange Act of 1934, as amended (the "Exchange Act"),
PTR may request one registration of all or any part of its Registrable
Securities (as defined in sub-section (h) below) under the Securities
Act of 1933, as amended (the "Securities Act"), by delivering written
notice (which notice shall state that PTR intends to dispose of such
securities through a public distribution thereof) to Homestead
specifying the number of Registrable Securities that PTR desires to
distribute and Homestead shall use its reasonable efforts to effect
the registration of such Registrable Securities under the Securities
Act in accordance with the further provisions of this Section 3.
(b) Shelf Registration. At any time after the first
------------------
anniversary of the date on which the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, PTR may request, on up to
three separate occasions, registration of all or any part of its
Registrable Securities pursuant to Rule 415 under the Securities Act
by delivering written notice (which notice shall state that PTR
intends to dispose of such securities through a public distribution
thereof) to Homestead and Homestead shall use its reasonable efforts
to effect the registration of such Registrable Securities under the
Securities Act in accordance with the further provisions of this
Section 3.
(c) Registration Procedures. If and whenever Homestead is
-----------------------
required by any of tmeans (i)he provisions of this Section 3 to use its
reasonable efforts to effect the registration of any of the Registrable
Securities under the Securities Act, Homestead shall:
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with
respect to such securities and use its reasonable efforts to
cause such registration statement to become effective and
remain effective for as long as shall be necessary to complete
the distribution of the Registrable Securities so registered;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection
-2-
<PAGE>
therewith as may be necessary to keep such registration
statement effective for so long as shall be necessary to
complete the distribution of the Registrable Securities so
registered and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all
securities covered by such registration statement whenever PTR
shall desire to sell or otherwise dispose of the same within
such period;
(iii) furnish to PTR such numbers of copies of such
registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement,
including any preliminary prospectus, and any amendment or
supplement thereto, and such other documents, as PTR may
reasonably request in order to facilitate the sale or other
disposition of the Registrable Securities;
(iv) use its reasonable efforts to register and qualify
the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions
as PTR shall reasonably request, and do any and all other acts
and things reasonably requested by PTR to assist it to
consummate the public sale or other disposition in such
jurisdictions of the securities owned by PTR, except that
Homestead shall not for any such purpose be required to
qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein
any general consent to service of process;
(v) otherwise use its reasonable efforts to comply with
all applicable rules and regulations of the Commission, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve months, beginning with the first fiscal quarter
beginning after the effective date of the registration
statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(vi) use its reasonable efforts to list such securities
on any securities exchange or quotation system on which any
securities of Homestead are then listed, if the listing of
such securities is then permitted under the rules of such
exchange or quotation system; and
(vii) notify PTR, at any time when a prospectus relating
to the Registrable Securities is required to be delivered
under the Securities Act, of the happening of any event of
which it has knowledge as a result of which the prospectus
included in such registration statement, as then in effect,
contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing.
-3-
<PAGE>
(d) Homestead's Ability to Postpone. Homestead shall have the
-------------------------------
right to postpone the filing of a registration statement under this
Section 3 for a reasonable period of time (not exceeding 60 days) if
Homestead furnishes PTR with a certificate signed by the Chairman of
the Board or the President of Homestead stating that, in its good
faith judgment, Homestead's Board of Directors has determined that
effecting the registration at such time would adversely affect a
material financing, acquisition, disposition of assets or stock,
merger or other comparable transaction or would require Homestead to
make public disclosure of information the public disclosure of that
would have a material adverse effect upon Homestead.
(e) Expenses. All expenses incurred in the registration of
--------
Registrable Securities under this Agreement shall be paid by
Homestead. The expenses shall include, without limitation, the
expenses of preparing the registration statement and the prospectus
used in connection therewith and any amendment or supplement thereto,
printing and photocopying expenses, all registration and filing fees
under Federal and state securities laws, and expenses of complying
with the securities or blue sky laws of any jurisdictions, provided,
however, that PTR shall be responsible for the fees and disbursements
of its own counsel.
(f) Indemnification. In the event any Registrable Securities
---------------
are included in a registration statement under this Section 3:
(i) Indemnity by Homestead. Without limitation of any
----------------------
other indemnity provided to PTR, to the extent permitted by
law, Homestead will indemnify and hold harmless PTR and its
officers, trustees and any individual, partnership,
corporation, trust, unincorporated organization or other
entity (a "Person") if any, who controls PTR (within the
meaning of the Securities Act or the Exchange Act), against
any losses, claims, damages, liabilities and expenses (joint
or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, liabilities and
expenses (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact
contained in any registration statement (including any
preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto), (ii) the omission
or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, or (iii) any violation or alleged
violation by Homestead of the Securities Act, the Exchange
Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any
state securities law, and Homestead will reimburse PTR and its
officers, trustees and any controlling person thereof for any
reasonable legal or other expenses incurred by them in
connection with
-4-
<PAGE>
investigating or defending any such loss, claim, damage,
liability, expense or action; provided, however, that
Homestead shall not be liable in any such case for any such
loss, claim, damage, liability, expense or action to the
extent that it arises out of or is based upon a Violation that
occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with
such registration by PTR or any officer, trustee or
controlling person thereof.
(ii) Indemnity by PTR. In connection with any
----------------
registration statement in which PTR is participating, PTR will
furnish to Homestead in writing such information and
affidavits as Homestead reasonably requests for use in
connection with any such registration statement or prospectus
and, to the extent permitted by law, will indemnify Homestead,
its directors and officers and each Person who controls
Homestead (within the meaning of the Securities Act or
Exchange Act) against any losses, claims, damages, liabilities
and expenses resulting from any Violation, but only to the
extent that such Violation is contained in any information or
affidavit so furnished in writing by PTR; provided, that the
obligation to indemnify will be several and not joint and
several with any other Person and will be limited to the net
amount received by PTR from the sale of Registrable Securities
pursuant to such registration statement.
(iii) Notice; Right to Defend. Promptly after receipt
-----------------------
by an indemnified party under this Section 3(f) of notice of
the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under
this Section 3(f), deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, if the
indemnifying party agrees in writing that it will be
responsible for any costs, expenses, judgments, damages and
losses incurred by the indemnified party with respect to such
claim, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the
indemnifying party, if the indemnified party reasonably
believes that representation of such indemnified party by the
counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented
by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall relieve such
indemnifying party of any liability to the indemnified party
under this Section 3(f) only if and to the extent that such
failure is prejudicial to its ability to defend such action,
and the omission so to deliver written notice to the
indemnifying party will not relieve it
-5-
<PAGE>
of any liability that it may have to any indemnified party
other than under this Section 3(f).
(iv) Contribution. If the indemnification provided for
------------
in this Section 3(f) is held by a court of competent
jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and
of the indemnified party on the other hand in connection with
the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other
relevant equitable considerations. The relevant fault of the
indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, the
amount PTR shall be obligated to contribute pursuant to this
Section 3(f)(iv) shall be limited to an amount equal to the
aggregate value of the Registrable Securities distributed by
PTR pursuant to the registration statement which gives rise to
such obligation to contribute (less the aggregate amount of
any damages which PTR has otherwise been required to pay in
respect of such loss, claim, damage, liability or action or
any substantially similar loss, claim, damage, liability or
action arising from the distribution of such Registrable
Securities).
(v) Survival of Indemnity. The indemnification
---------------------
provided by this Section 3(f) shall be a continuing right to
indemnification and shall survive the registration and sale of
any securities by any Person entitled to indemnification
hereunder and the expiration or termination of this Agreement.
(g) Limitations on Registration Rights.
----------------------------------
(i) Homestead shall not, without the prior written
consent of PTR, include in any registration in which PTR has a
right to participate pursuant to this Agreement any securities
of any Person other than Atlantic and PTR.
(ii) PTR shall not, without the prior written consent of
Homestead, effect any public sale or distribution (including
sales pursuant to Rule 144 under the Securities Act) of
securities of Homestead during any period commencing 30 days
prior to and ending 60 days after the effective date any
registration statement filed
-6-
<PAGE>
by Homestead on behalf of any Person (including Homestead),
other than a registration statement on Form S-8 or any
successor form.
(h) Registrable Security. The term Registrable Security
--------------------
means (i) any shares of Common Stock issuable to PTR pursuant to the
conversion of notes issuable pursuant to the terms of the Funding
Commitment Agreement or otherwise held by PTR, (ii) any other shares
of Common Stock owned by PTR and (iii) any shares of Common Stock or
other securities that may subsequently be issued with respect to such
shares of Common Stock as a result of a stock split or dividend or any
sale, transfer, assignment or other transaction by Homestead involving
the shares of Common Stock and any securities into which the shares of
Common Stock may thereafter be changed as a result of merger,
consolidation, recapitalization or otherwise. As to any particular
Registrable Securities, such securities will cease to be Registrable
Securities when they have been distributed to the public pursuant to
an offering registered under the Securities Act. All Registrable
Securities shall cease to be Registrable Securities when all such
securities may be sold in any three-month period pursuant to Rule 144,
or any successor to such rule, under the Securities Act.
Section 4. File Reports. For so long as PTR owns any Registrable
------------
Securities, Homestead shall file on a timely basis all annual, quarterly and
other reports required to be filed by it under Section 13 and 15(d) of the
Exchange Act, and the rules and regulations of the Commission thereunder, as
amended from time to time.
Section 5. Miscellaneous.
-------------
(a) Survival of Covenants. All covenants contained herein shall
---------------------
survive the execution of this Agreement and shall remain in full force and
effect until terminated in accordance with this Agreement.
(b) Successors and Assigns. This Agreement shall be binding upon,
----------------------
and inure to the benefit of, the parties hereto and their respective heirs,
personal representatives, successors, assigns and affiliates.
(c) Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed given if delivered personally, sent via a
recognized overnight courier with delivery confirmed in writing or sent via
facsimile to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
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<PAGE>
If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
If to PTR:
Security Capital Pacific Trust
7777 Market Center Avenue
El Paso, Texas 79912
Attention: C. Ronald Blankenship
Facsimile: (915) 877-3301
(d) Waiver. No party may waive any of the terms or conditions of this
------
Agreement, except by a duly executed writing referring to the specific provision
to be waived.
(e) Amendment. This Agreement may be amended only by a writing duly
---------
executed by both Homestead and PTR.
(f) Severability. Insofar as is possible, each provision of this
------------
Agreement shall be interpreted so as to render it valid and enforceable under
applicable law and severable from the remainder of this Agreement. A finding
that any such provision is invalid or unenforceable in any jurisdiction shall
not affect the validity or enforceability of any other provision or the validity
or enforceability of such provision under the laws of any other jurisdiction.
(g) Entire Agreement. This Agreement constitutes the entire agreement,
----------------
and supersedes all other prior agreements and understandings, both written and
oral, between the parties hereto and their affiliates, with respect to the
subject matter hereof.
(h) Expenses. Except as otherwise expressly contemplated herein to the
--------
contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for
--------
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
-8-
<PAGE>
(j) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(k) Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of Maryland.
(l) Limitation of Liability. Any obligation or liability whatsoever of
-----------------------
PTR which may arise at any time under this Agreement or any obligation or
liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of PTR's assets only. No such obligation or liability shall be personally
binding upon, nor shall resort for the enforcement thereof be had to, the
property of any of its shareholders, trustees, officers, employees or agents,
regardless of whether such obligation or liability is in the nature of contract,
tort or otherwise.
* * * * *
-9-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
-------------------------
C. Ronald Blankenship
Chairman
S-1
<PAGE>
EXHIBIT 10.14
- -------------------------------------------------------------------------------
FUNDING COMMITMENT AGREEMENT
By and Between
SECURITY CAPITAL PACIFIC TRUST
"PTR"
AND
HOMESTEAD VILLAGE INCORPORATED
"Homestead"
PTR HOMESTEAD VILLAGE LIMITED PARTNERSHIP
"Partnership Borrower"
Dated: October 17, 1996
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS.................................................... 3
Section 1.1. Certain Defined Terms................................... 3
Section 1.2. Other Definitional Provisions........................... 10
ARTICLE 2. THE LOANS...................................................... 11
Section 2.1. The Homestead Loan...................................... 11
Section 2.2. The Partnership Loan.................................... 11
Section 2.3. Future Projects......................................... 11
Section 2.4. Subsidiary Loans........................................ 12
Section 2.5. Duration of Funding Commitment.......................... 13
Section 2.6. Project Specific Funding Commitment..................... 13
Section 2.7. Replacement Projects.................................... 14
Section 2.8. Release of Security Documents........................... 15
ARTICLE 3. REPRESENTATIONS AND WARRANTIES................................. 15
Section 3.1. Existence and Power..................................... 15
Section 3.2. Authorization and Binding Obligations................... 15
Section 3.3. No Legal Bar or Resultant Lien.......................... 16
Section 3.4. No Consent.............................................. 16
Section 3.5. Compliance with Laws.................................... 16
Section 3.6. Litigation.............................................. 16
Section 3.7. Defaults................................................ 17
Section 3.8. Status of Property...................................... 17
Section 3.9. Use of Proceeds......................................... 17
Section 3.10. Real Property Environmental Matters..................... 17
Section 3.11. Financial Condition..................................... 17
Section 3.12. No Condemnation......................................... 18
Section 3.13. No Actions.............................................. 18
Section 3.14. No Adverse Conditions................................... 18
ARTICLE 4. COVENANTS...................................................... 18
Section 4.1. Construction of Improvements............................ 18
Section 4.2. Plans; Project Budgets; Project Schedules and Material
Changes................................................. 19
Section 4.3. Inspection and Examination.............................. 19
Section 4.4. Permits and Approvals................................... 19
Section 4.5. Governmental Requirements............................... 19
Section 4.6. Books and Records....................................... 19
Section 4.7. Title to Property and Improvements...................... 20
Section 4.8. Costs and Expenses...................................... 20
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.9. Use of Advances........................................ 20
Section 4.10. Insurance.............................................. 20
Section 4.11. Environmental Matters.................................. 20
Section 4.12. Selection of Architects; Contractors;
Inspecting A/E's........................................21
Section 4.13. Further Assurances..................................... 21
Section 4.14. Quarterly Statements................................... 21
Section 4.15. Continued Existence.................................... 21
Section 4.16. Defaults Under Other Loans............................. 22
ARTICLE 5. ADVANCE CONDITIONS............................................ 22
Section 5.1. Conditions Precedent to First Advance under this
Agreement.............................................. 22
Section 5.2. Conditions Precedent to First Advance for New Project.. 24
Section 5.3. Initial Improvement Advance Conditions................. 25
Section 5.4. Additional Improvement Advance Conditions.............. 26
Section 5.5. Final-Advance Conditions............................... 26
ARTICLE 6. PROCEDURE FOR ADVANCES; RESERVES.............................. 27
Section 6.1. General................................................ 27
Section 6.2. Payments to PTR........................................ 28
Section 6.3. Retainage and Contractor's Fee Holdback................ 28
Section 6.4. Interest Reserve....................................... 29
Section 6.5. Owner's Contingency.................................... 29
Section 6.6. Cost Overruns and Savings; Change Order Reserve........ 29
ARTICLE 7. EVENTS OF DEFAULT............................................. 30
Section 7.1. Failure to Pay......................................... 30
Section 7.2. Other Loan Document Defaults........................... 30
Section 7.3. Judgment or Attachment................................. 31
Section 7.4. Violation of Governmental Requirements................. 31
Section 7.5. Insolvency, etc........................................ 31
Section 7.6. Unapproved Transfer.................................... 32
ARTICLE 8. REMEDIES...................................................... 32
Section 8.1. General................................................ 32
Section 8.2. Remedies Cumulative.................................... 34
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 9. MISCELLANEOUS.................................................. 34
Section 9.1. Survival of Representations, Warranties and
Covenants............................................... 34
Section 9.2. Successors and Assigns.................................. 34
Section 9.3. Notices................................................. 35
Section 9.4. Waiver.................................................. 35
Section 9.5. Amendment............................................... 35
Section 9.6. Severability............................................ 35
Section 9.7. Entire Agreement........................................ 36
Section 9.8. Expenses................................................ 36
Section 9.9. Captions................................................ 36
Section 9.10. Governing Law........................................... 36
Section 9.11. No Joint Venture or Partnership......................... 36
Section 9.12. No Third Party Beneficiary Rights Created............... 36
Section 9.13. Incorporation by Reference.............................. 36
Section 9.14. Counterparts............................................ 37
Section 9.15. Scope of Review of Plans................................ 37
Section 9.16. Governmental Regulation................................. 37
Section 9.17. Subordination........................................... 37
Section 9.18. Indemnity............................................... 37
Section 9.19. Limitation of Liability................................. 37
</TABLE>
-iii-
<PAGE>
FUNDING COMMITMENT AGREEMENT
THIS FUNDING COMMITMENT AGREEMENT (this "Agreement"), is entered into as of
---------
October 17, 1996, among HOMESTEAD VILLAGE INCORPORATED, a Maryland corporation
("Homestead"), PTR HOMESTEAD VILLAGE LIMITED PARTNERSHIP, a Delaware limited
---------
partnership (the "Partnership Borrower") and SECURITY CAPITAL PACIFIC TRUST, a
--------------------
Maryland real estate investment trust ("PTR").
---
RECITALS
A. Prior to the date hereof, PTR agreed to make to PTR Homestead Village
Incorporated (the "Prior Corporate Borrower") a loan (the "Corporate Loan"), of
------------------------ --------------
up to a maximum amount of $127,602,594 (the "Maximum Corporate Loan Amount") to
-----------------------------
fund, among other things, acquisition and construction costs and expenses
incurred in connection with the acquisition and development of Homestead Village
extended stay lodging facilities. In connection with agreeing to make the
Corporate Loan, PTR and the Prior Corporate Borrower agreed that the Prior
Corporate Borrower's repayment obligation for funds advanced in respect of the
Corporate Loan would be adjusted by a premium factor of 1.113164866782 (the
"Premium Factor"). To evidence the Prior Corporate Borrower's obligation to
- ---------------
repay the Corporate Loan, at the adjusted rate, the Prior Corporate Borrower has
delivered to PTR an Amended and Restated Promissory Note (the "Corporate Note"),
--------------
dated May 28, 1996, in the face amount of $142,042,725 (i.e., the Maximum
----
Corporate Loan Amount as adjusted by the Premium Factor) (which note amended and
restated a prior promissory note dated January 24, 1996, and delivered by the
Prior Corporate Borrower to PTR to evidence the Corporate Loan), and to secure
the payment obligations under the Corporate Note and the Partnership Note (as
defined below), the Prior Corporate Borrower has, prior to the date hereof,
delivered to PTR deeds of trust and mortgages (the "Existing Corporate Security
---------------------------
Documents"), creating liens on the existing Homestead Village Projects listed in
- ---------
Exhibit A hereto which are owned by the Prior Corporate Borrower (the "Existing
- --------- --------
Corporate Projects"). (The Corporate Note, the Existing Corporate Security
- ------------------
Documents and all other instruments heretofore delivered by the Prior Corporate
Borrower in connection therewith to secure the payment of the Corporate Note and
the Partnership Note are herein called the "Existing Corporate Loan Documents".)
---------------------------------
B. Prior to the date hereof, PTR agreed to make to the Partnership
Borrower a loan (the "Partnership Loan") of up to a maximum amount of
----------------
$71,230,145 (the "Maximum Partnership Loan Amount") to fund, among other things,
-------------------------------
acquisition and construction costs and expenses incurred in connection with the
acquisition and development of Homestead Village
1
<PAGE>
extended stay lodging facilities. In connection with agreeing to make the
Partnership Loan, PTR and the Partnership agreed that the Partnership Borrower's
repayment obligation for funds advanced in respect of the Partnership Loan would
be adjusted by the Premium Factor. To evidence the Partnership Borrower's
obligation to repay the Partnership Loan, at the adjusted rate, the Partnership
Borrower has delivered to PTR an Amended and Restated Promissory Note (the
"Partnership Note"), dated May 28, 1996, in the face amount of $79,290,895
- -----------------
(i.e., the Maximum Partnership Loan Amount as adjusted by the Premium Factor)
----
(which note amended and restated a prior promissory note dated January 24, 1996,
and delivered by the Partnership Borrower to PTR to evidence the Partnership
Loan), and to secure the payment obligations under the Corporate Note and the
Partnership Note, the Partnership Borrower has, prior to the date hereof,
delivered to PTR those certain deeds of trust and mortgages listed in Part II of
-------
Exhibit A hereto (the "Existing Partnership Security Documents"), creating liens
- --------- ---------------------------------------
on the existing Homestead Village Projects listed in Exhibit A hereto which are
---------
owned by the Partnership Borrower (the "Existing Partnership Projects"). (The
-----------------------------
Partnership Note, the Existing Partnership Security Documents and all other
instruments heretofore delivered by the Partnership Borrower in connection
therewith to secure the payment of the Corporate Note and the Partnership Note
are herein called the "Existing Partnership Loan Documents"; and the Existing
-----------------------------------
Corporate Loan Documents and Existing Partnership Loan Documents are
collectively referred to herein as the "Existing Loan Documents".)
-----------------------
C. On the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Security Capital Atlantic Incorporated
("Atlantic"), PTR, Security Capital Group Incorporated ("SCG") and Homestead
- ---------- ---
(the "Merger Agreement"), pursuant to which, among other things, Homestead is,
----------------
contemporaneously herewith, acquiring all of the stock of PTR's subsidiaries
which own, operate or develop PTR's Homestead Village extended-stay lodging
facilities. As a consequence of the mergers contemplated under the Merger
Agreement, the Prior Corporate Borrower has been merged into Homestead and in
connection therewith Homestead has succeeded to and assumed all of the Prior
Corporate Borrower's obligations and liabilities, including those under the
Corporate Note and the Existing Corporate Loan Documents.
D. Upon and subject to the provisions of this Agreement, Homestead, the
Partnership Borrower and PTR desire to continue the funding provided for under
the Existing Loan Documents, and in consideration of the issuance, pursuant to
that certain Warrant Purchase Agreement, dated as of May 21, 1996 among
Atlantic, PTR, SCG and Homestead, to PTR by Homestead of warrants to purchase
shares of common stock, $0.01 par value per share, of Homestead ("Homestead
---------
Common Stock"), PTR is willing to provide funds to Homestead and the Partnership
- ------------
Borrower for the costs incurred in connection with performing due diligence
investigations, securing required development approvals and otherwise completing
the acquisition
2
<PAGE>
and development of the proposed future Homestead Village projects listed in
Exhibit A (which projects, and any replacement projects approved by PTR pursuant
- ---------
to the provisions of this Agreement, are herein called the "Future Projects").
---------------
E. The execution of this Agreement is a condition to the consummation of
the transactions contemplated by the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"Agreement" shall mean this Funding Commitment Agreement.
---------
"Acquisition Notice" has the meaning set forth in Section 2.3 of this
------------------ -----------
Agreement.
"Architect" means the architect retained by a Borrower to provide
---------
architectural services for a Project.
"Architect's Agreement" means the agreement for architectural services
---------------------
executed by a Borrower and an Architect in connection with the design of a
Project, and all exhibits, attachments, riders and addenda thereto.
"Architect's Certificate" means a Certificate from the Architect for a
-----------------------
Project, in form and substance reasonably acceptable to PTR, wherein the
Architect acknowledges the collateral assignment of the Architect's Agreement
and the Plans prepared by such Architect from Borrower to PTR pursuant to this
Agreement and agrees to perform all of its obligations under the Architect's
Agreement in the event PTR takes possession of the subject Project in connection
with the exercise of its remedies hereunder or under the Security Documents
after an Event of Default.
"Atlantic" has the meaning set forth in the Preamble to this Agreement.
--------
3
<PAGE>
"Borrower" means Homestead, in its capacity as maker under the Corporate
--------
Note, the Partnership Borrower or any Subsidiary, whichever entity is the owner
of the subject Project.
"Business Day" means any day other than Saturday, Sunday, or any other day
------------
on which commercial banks in New Mexico are not required to be open for
business.
"Change Order" means a written order executed by a Borrower authorizing a
------------
Contractor to proceed with a change in the work as provided for in the original
Plans for a Project, which change has been made in accordance with the
applicable provisions of this Agreement.
"Completion and Payment Guaranty" means that certain Guaranty of Completion
-------------------------------
and Payment of even date herewith from Homestead to PTR in the form attached as
Exhibit B.
- ---------
"Construction Contract" means the contract for construction executed by a
---------------------
Borrower and the Contractor in connection with the construction of a Project,
and all exhibits, attachments, riders and addenda thereto.
"Consultant" means any civil engineer or other material consultant, other
----------
than the Architect, retained directly by a Borrower to provide design or
engineering services for a Project.
"Consultant's Agreement" means the agreement for engineering or other
----------------------
consultant services executed by a Borrower and a Consultant in connection with a
Project, and all exhibits, attachments, riders and addenda thereto.
"Consultant's Certificate" means a Certificate from a Consultant for a
------------------------
Project, in form and substance reasonably acceptable to PTR, wherein the
Consultant acknowledges the collateral assignment of the Consultant's Agreement
and the Plans prepared by such Consultant from Borrower to PTR pursuant to this
Agreement and agrees to perform all of its obligations under the Consultant's
Agreement in the event PTR takes possession of the subject Project in connection
with the exercise of its remedies hereunder or under the Security Documents
after an Event of Default.
"Contractor" means the general contractor retained by a Borrower to provide
----------
construction services for a Project.
"Contractor's Certificate" means a Certificate from the Contractor for a
------------------------
Project, in form and substance reasonably acceptable to PTR, wherein the
Contractor acknowledges the collateral assignment of the Construction Contract
from Borrower to PTR pursuant to this Agreement and
4
<PAGE>
agrees to perform all of its obligations under the Construction Contract in the
event PTR takes possession of the subject Project in connection with the
exercise of its remedies hereunder or under the Security Documents after an
Event of Default.
"Corporate Loan" has the meaning set forth in Recital A to this Agreement.
-------------- ---------
"Corporate Note" has the meaning set forth in Recital A to this Agreement.
-------------- ---------
"Default" means any condition or event that constitutes an Event of Default
-------
or that with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"Development Budget" has the meaning set forth in Section 2.3 of this
------------------ -----------
Agreement.
"Development Schedule" has the meaning set forth in Section 2.3 of this
-------------------- -----------
Agreement.
"Environmental Laws" means any and all laws, statutes, ordinances, rules,
------------------
regulations, orders, or determinations of any governmental authority pertaining
to health or the environment applicable to a Borrower, or a Property owned by
such Borrower, in effect in the jurisdiction in which such Property is located,
or where any hazardous substances generated by or disposed of by a Borrower in
connection with such Property are located, including but not limited to the
Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended by the Superfund Amendments
and Reauthorization Act of 1986, as amended ("CERCLA"), the Federal Water
------
Pollution Control Act, as amended, the Resource Conservation and Recovery Act of
1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal
Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984, as
amended ("RCRA"), the Safe Drinking Water Act, as amended, the Toxic Substances
----
Control Act, as amended, the Hazardous Materials Transportation Act, as amended
any analogous state law of the state in which the Property is located and other
environmental conservation or protection laws. The terms "hazardous substance,"
"release," and "threatened release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposal" (or "disposed") shall have the
meanings specified in RCRA; provided, however, that (i) in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and (ii) to the extent the laws of the state in which the
Property is located establish a meaning for "hazardous substance," "release,"
"threatened release," "solid waste," or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply.
5
<PAGE>
"Event of Default" means the occurrence of any of the events specified in
----------------
Article 7 hereof.
- ---------
"Existing Corporate Projects" has the meaning set forth in Recital A to
--------------------------- ---------
this Agreement.
"Existing Corporate Security Documents" has the meaning set forth in
-------------------------------------
Recital A to this Agreement.
- ---------
"Existing Loan Documents" has the meaning set forth in Recital B to this
----------------------- ---------
Agreement.
"Existing Partnership Loan Documents" has the meaning set forth in Recital
----------------------------------- -------
B to this Agreement.
- -
"Existing Partnership Projects" has the meaning set forth in Recital B to
----------------------------- ---------
this Agreement.
"Existing Partnership Security Documents" has the meaning set forth in
---------------------------------------
Recital B to this Agreement.
- ---------
"Existing Projects" means the Existing Corporate Projects and the Existing
-----------------
Partnership Projects.
"Expiration Date" has the meaning set forth in Section 2.5 of this
--------------- -----------
Agreement.
"Final Advance" means the final advance of Loan proceeds to a Borrower for
-------------
construction of a Project in accordance with the applicable provisions of this
Agreement.
"Final Completion" means that the requirements of Section 5.5 have been
---------------- -----------
fully satisfied for a Project.
"Final CO" means a final unconditional certificate of occupancy for a
--------
Project issued by the applicable Governmental Authority.
"Force Majeure" means, with respect to any Project, an event entitling a
-------------
Contractor to an extension of time in constructing the Improvements as
established in the Construction Contract and any act of God, war, riots,
unusually severe weather, shortages of labor or materials (but not a shortage of
funds), strikes, lock-outs, explosions, the order of any court or governmental
authority or unavailability of or delay in issuance of any Permits despite a
Borrower's reasonable diligence in securing same, which results in any delay in
whole or in part
6
<PAGE>
in the design, engineering or construction of a Project, or the duration of any
inspection, testing, or remediation related to any environmental condition or
aspect of a Project.
"Funding Notice" has the meaning set forth in Section 2.3 of this
-------------- -----------
Agreement.
"Future Project" has the meaning set forth in Recital D to this Agreement.
-------------- ---------
"Geographic Area" means the States of Arizona, California, Colorado, Idaho,
---------------
Kansas, Missouri, Nevada, New Mexico, Oklahoma, Oregon, Texas, Utah and
Washington.
"Governmental Authority" means any Federal, state, county, municipal or
----------------------
other governmental or quasi-governmental department, commission, board, court,
agency or other instrumentality having jurisdiction over a Borrower and any
Project.
"Governmental Requirement" means any law, statute, code, ordinance, order,
------------------------
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including, without
limitation, any of the foregoing that relate to environmental standards or
controls, energy regulations and occupational safety and health standards or
controls) of any Governmental Authority.
"Homestead" has the meaning set forth in the Preamble to this Agreement.
---------
"Homestead Common Stock" has the meaning set forth in Recital D to this
---------------------- ---------
Agreement.
"Homestead Affiliate" means (a) an entity that directly or indirectly
-------------------
controls, is controlled by or is under common control with Homestead or (b) an
entity at least a majority of whose economic interest is owned by Homestead; and
the term "control" means the power to direct the management of such entity
through voting rights, ownership or contractual obligations; provided, however,
in no event shall PTR, Atlantic, SCG or any wholly-owned subsidiary of any of
the foregoing be deemed a Homestead affiliate.
"Homestead Security Documents" means the deeds of trust, deeds to secure
----------------------------
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
-------
C hereto, to be delivered to PTR by Homestead in connection with the funding of
- -
any Project acquired by Homestead after the date of this Agreement, as security
for the Corporate Note, the Partnership Note and any Subsidiary Note executed
and delivered after the date hereof, and any other security instruments
delivered by Homestead from time to time as security for the Corporate Note, the
Partnership Note and any such Subsidiary Note.
7
<PAGE>
"Improvements" means the buildings, structures, and other improvements to
------------
be constructed on the Land as described on the Plans for the subject Project.
"Inspecting A/E" means the inspecting architect or engineer retained by a
--------------
Borrower to inspect, monitor and administer the progress of construction of a
Project.
"Land" means the parcel or parcels of land on which a Project is or is to
----
be located, together with all easements, rights of way and other appurtenances
thereto.
"Lien Waivers" means a waiver of all liens relating to a Project executed
------------
by any and all contractors, subcontractors and/or suppliers of a Borrower who
have provided any goods or services relating to Improvements.
"Loan" means the Corporate Loan, the Partnership Loan, or any Subsidiary
----
Loan made after the date hereof, as the context may require; and "Loans" means
-----
the Corporate Loan, the Partnership Loan, and any Subsidiary Loans made after
the date hereof, collectively.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
--------------
the Completion and Payment Guaranty and any and all other agreements or
instruments now or hereafter executed and delivered by a Borrower, Homestead or
any other person in connection with, or as security for, the payment or
performance of the Notes.
"Material Adverse Effect" means any material and adverse effect on the
-----------------------
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Homestead and its Subsidiaries, taken as a
whole.
"Material Change" means any change to the Plans or to a Project which would
---------------
result in a material increase or decrease in the number of lodging units in such
Project from the number contained in a Prototypical Project, a material increase
or decrease in the overall cost of completing a Project above the costs
contemplated in the Prototypical Project Budget, or would otherwise result in
such Project materially deviating from the product and/or investment concept of
a Prototypical Project as set forth in the Prototypical Plans.
"Maximum Corporate Loan Amount" has the meaning set forth in Recital A to
----------------------------- ---------
this Agreement.
"Maximum Loan Amount" means the aggregate of the Maximum Corporate Loan
-------------------
Amount and the Maximum Partnership Loan Amount.
8
<PAGE>
"Maximum Partnership Loan Amount" has the meaning set forth in Recital B to
------------------------------- ---------
this Agreement.
"Note" means the Corporate Note, the Partnership Note, or any Subsidiary
----
Note executed and delivered after the date hereof, as the context may require,
and "Notes" means the Corporate Note, the Partnership Note, and any Subsidiary
-----
Notes executed and delivered after the date hereof, collectively.
"Partnership Borrower" has the meaning set forth in the Preamble to this
--------------------
Agreement.
"Partnership Loan" has the meaning set forth in Recital B to this
---------------- ---------
Agreement.
"Partnership Note" has the meaning set forth in Recital B to this
---------------- ---------
Agreement.
"Partnership Security Documents" means the deeds of trust, deeds to secure
------------------------------
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
-------
D hereto, to be delivered to PTR by the Partnership Borrower in connection with
- -
the funding of any Project acquired by the Partnership after the date of this
Agreement, as security for the Partnership Note, the Corporate Note and any
Subsidiary Note executed and delivered after the date hereof, and any other
security instruments delivered by the Partnership Borrower from time to time as
security for the Corporate Note, the Partnership Note and any such Subsidiary
Note.
"Permits" shall mean all permits, licenses, registrations, certificates,
-------
authorizations and approvals now or hereafter issued or required to be issued by
any governmental or quasi-Governmental Authority for the lawful ownership,
construction, use and operation of a Project.
"Personalty" means all items of tangible or intangible personal property
----------
owned by a Borrower, or in which a Borrower has any interest, to the extent of
such interest, that now are or hereafter may be purchased, prepared, constructed
or placed for, upon or in a Project owned by such Borrower.
"Plans" means the final plans and specifications for the construction of
-----
the Improvements comprising a Project, together with any modifications or
additions to the same subsequently permitted under the terms of this Agreement
or, to the extent required hereunder, approved by PTR in accordance with the
provisions of this Agreement.
"Project" means each Existing Project and each Future Project for which an
-------
Acquisition Notice has been delivered to PTR prior to the Expiration Date.
9
<PAGE>
"Project Budget" means the budget for a Project delivered by a Borrower to
--------------
PTR.
"Project Schedule" means the schedule for the design and construction of
----------------
the Improvements encompassed within a Project delivered by a Borrower to PTR.
"Property" means any property from time to time subject to any of the
--------
Security Documents, including the Land and all Improvements now or hereafter
located thereon and all Personalty associated therewith.
"Proposed Substitute Future Project" has the meaning set forth in Section
---------------------------------- -------
2.7 of this Agreement.
- ---
"Prototypical Project Budget" means the due diligence, development
---------------------------
approval, land acquisition, design and construction budget for a Prototypical
Project heretofore delivered to, and approved by, PTR.
"Prototypical Project Schedule" means the due diligence, development
-----------------------------
approval, design and construction schedule for a Prototypical Project heretofore
delivered to, and approved by, PTR.
"Prototypical Plans" means the standard plans and specifications for a
------------------
Homestead Village extended-stay lodging facility heretofore delivered to, and
approved by, PTR.
"Prototypical Project" means a Homestead Village extended-stay lodging
--------------------
facility designed and constructed in substantial accordance with the
Prototypical Plans.
"PTR" has the meaning set forth in the Preamble to this Agreement.
---
"Pursuit Costs" has the meaning set forth in Section 2.3 of this Agreement.
------------- -----------
"Quarterly Statement" has the meaning set forth in Section 4.14 of this
------------------- ------------
Agreement.
"Rejected Project" has the meaning set forth in Section 2.7 of this
---------------- -----------
Agreement.
"Security Documents" means the Homestead Security Documents, the Existing
------------------
Corporate Security Documents, the Existing Partnership Security Documents, the
Partnership Security Documents, and any Subsidiary Security Documents,
collectively.
10
<PAGE>
"Subcontractor" means all persons performing labor or services, or
-------------
providing materials, equipment or furnishings in connection with the
construction of Improvements, other than Contractor.
"Subsidiary" means any entity now or hereafter in existence including the
----------
Partnership Borrower, all of the outstanding equity securities of which are
owned by Homestead.
"Subsidiary Loan" means any portion of the Corporate Loan or Partnership
---------------
Loan which Homestead may direct PTR to advance to a Subsidiary instead of to
Homestead or the Partnership Borrower in accordance with the provisions of this
Agreement.
"Subsidiary Note" means any promissory note, substantially in the form of
---------------
the Partnership Note, which a Subsidiary executes and delivers to PTR after the
date hereof to evidence a Subsidiary Loan made by PTR to such Subsidiary.
"Subsidiary Security Documents" means the deed of trust or mortgage
-----------------------------
instrument to be delivered to PTR by a Subsidiary, substantially in the form of
the Homestead Security Documents, in connection with the funding of any Future
Project owned by Subsidiary as security for the Corporate Note, the Partnership
Note and any Subsidiary Note executed and delivered after the date hereof, and
any other security instruments delivered by such Subsidiary from time to time as
security for the Corporate Note, the Partnership Note and any such Subsidiary
Note.
"Title Insurer" means Chicago Title Insurance Company or any other
-------------
nationally recognized title insurance company issuing a Title Policy.
"Title Policy" means the lender's policy of title insurance for a Property
------------
issued by the Title Insurer for the benefit of PTR and all endorsements thereto,
which insures the lien priority of the Security Documents applicable to such
Property.
"UCC" means the Uniform Commercial Code as in force in the state in which a
---
Project is located.
Section 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) Except as otherwise specified herein, all references herein (i) to any
person or entity shall be deemed to include such person's or entity's heirs,
legal representatives, successors and assigns, as appropriate, (ii) to any
Governmental Requirement defined or referred to herein shall be deemed
references to such Governmental Requirement as the same may have been or
11
<PAGE>
may be amended or supplemented from time to time and (iii) to any Loan Document
or other agreement defined or referred to herein shall be deemed references to
such Loan Document or agreement (and, in the case of the Notes or other
instruments, any instrument issued in substitution therefor) as the terms
thereof may have been or may be amended, supplemented, waived or otherwise
modified from time to time in writing.
(b) Whenever the context so requires, the neuter gender includes the
masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
ARTICLE 2.
THE LOANS
Section 2.1. THE HOMESTEAD LOAN. Subject to the limitations set forth in
Sections 2.5, 2.6 and 2.7 below, PTR hereby agrees, upon the terms and
- ----------------- ---
conditions set forth herein and in the other applicable Loan Documents, to
advance to Homestead (or, as Homestead may direct, to any Subsidiary) up to the
amount of the Maximum Corporate Loan Amount for the purpose of paying the costs
and expenses incurred by Homestead (or by any such Subsidiary, as the case may
be) in completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of, such of the Future Projects hereafter pursued by Homestead
or any such Subsidiary as may be funded under the provisions of this Agreement.
Principal and accrued interest on the Corporate Note shall be due and payable in
accordance with the terms and conditions set forth therein and herein.
Section 2.2. THE PARTNERSHIP LOAN. Subject to the limitations set forth
in Sections 2.5, 2.6 and 2.7 below, PTR hereby agrees, upon the terms and
----------------- ---
conditions set forth herein and in the other applicable Loan Documents, to
advance to the Partnership Borrower (or, as Homestead may direct, to Homestead
or any Subsidiary) up to the amount of the Maximum Partnership Loan Amount for
the purpose of paying the costs and expenses incurred by the Partnership
Borrower (or by Homestead or any such Subsidiary, as the case may be) in
completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of the Future Projects hereafter pursued by Homestead, the
Partnership Borrower or any other Subsidiary as may be funded under the
provisions of this Agreement. Principal and accrued interest on the Partnership
Note shall be due and payable in accordance with the terms and conditions set
forth therein and herein.
12
<PAGE>
Section 2.3. FUTURE PROJECTS. The parties acknowledge and agree that the
Future Projects identified in Exhibit A hereto are in differing stages of
---------
consideration by Homestead and that, at any point in the process of its due
diligence review, the negotiation of definitive acquisition and related
documents and its efforts to obtain all Permits required for development of any
such Future Project, Homestead may determine, in its sole and absolute
discretion, either to proceed with the acquisition of the land for, and
development of, any such Future Project or to discontinue its efforts in respect
of any such Future Project. Requests for advances of Loan proceeds hereunder
may include amounts required to reimburse Homestead for the costs and expenses
incurred by Homestead in its due diligence review of any such Future Project, as
well as all costs incurred in connection with its efforts to secure the Permits
required for development of any such Future Project. Whenever such pursuit
costs ("Pursuit Costs") are to be funded with Loan proceeds, prior to the first
-------------
advance in respect of a Future Project, Homestead will provided PTR with a
notice (a "Funding Notice") identifying the Future Project, together with a
--------------
development budget (a "Development Budget") indicating the anticipated costs
------------------
that are likely to be incurred prior to the acquisition of such Future Project
by Homestead or a Subsidiary, the amount of such costs to be funded by Loan
proceeds, which amount shall in no event exceed $100,000 per Future Project, and
a schedule setting forth the anticipated time-frames for completing the due
diligence review and obtaining required Permits (a "Development Schedule").
--------------------
If Homestead elects to proceed with a Future Project, then Homestead shall
provide PTR at least 10 Business Days' prior written notice (an "Acquisition
-----------
Notice") of the anticipated closing date for the acquisition of the subject
- ------
Land, the identity of the Borrower for such transaction, and the estimated
amount of Loan proceeds that will need to be advanced at such closing. From and
after delivery of an Acquisition Notice to PTR, the subject project shall, for
all purposes under this Agreement, be deemed a "Project". Notwithstanding
anything to the contrary in the foregoing, funding of the first advance of Loan
proceeds in respect of any such Project shall require the recordation of
Security Documents adding such Project as security for the Loan and the
satisfaction of the other conditions set forth in Section 5.2 as to such
-----------
Project.
In the event, however, that Homestead determines from time to time that any
Future Project is unacceptable to it and that Homestead will not expend further
efforts with respect to such Future Project, Homestead shall provide written
notice to PTR identifying any such Future Project. In such event, any Pursuit
Costs theretofore funded with Loan proceeds, together with accrued and unpaid
interest thereon due under the terms of the Corporate Note, shall be repaid by
Homestead to PTR within 30 days after delivery of such notice to PTR.
Section 2.4. SUBSIDIARY LOANS. With respect to any Future Project for
which an Acquisition Notice is delivered to PTR in accordance with Section 2.3
-----------
above, Homestead shall have the right to determine, in its sole and absolute
discretion, that a Subsidiary acquire the
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subject Project, in which event, the subject Subsidiary shall, at such time as
it acquires the subject Future Project, execute and deliver to PTR Subsidiary
Security Documents in connection therewith together with an agreement in form
and substance satisfactory to PTR pursuant to which such Subsidiary agrees to be
bound by the terms of this Agreement as to such Project. In addition, at the
election of Homestead, the subject Subsidiary shall execute a Subsidiary Note in
the amount of the Loan determined by Homestead to be allocable to such Project
and the Maximum Corporate Loan Amount and/or the Maximum Partnership Loan Amount
(as Homestead may elect) shall be decreased by the amount of any such Subsidiary
Note. Alternatively, Homestead may elect to have funds advanced with respect to
such Project under the Corporate Loan or Partnership Loan and either loan or
contribute, or cause the Partnership Borrower to loan or contribute, the funds
so advanced to the subject Subsidiary. In the event any Subsidiary executes a
Subsidiary Note and/or any Subsidiary Security Documents as contemplated under
this Section 2.4, the parties shall, contemporaneously therewith, execute,
-----------
deliver, and, if appropriate, record, such amendments to the Loan Documents as
may reasonably be necessary or appropriate to properly document any resulting
changes in the Maximum Corporate Loan Amount and/or the Maximum Partnership Loan
Amount.
Section 2.5. DURATION OF FUNDING COMMITMENT. The obligation of PTR to
advance Loan proceeds in respect of Future Projects for which an Acquisition
Notice has not yet been delivered to PTR shall expire on March 31, 1998 (the
"Expiration Date"). Notwithstanding anything to the contrary in the foregoing,
- ----------------
PTR shall continue to be obligated, subject to and upon the terms and conditions
set forth herein and in the other Loan Documents, to continue to make advances
of Loan proceeds after such date for each Project for which an Acquisition
Notice has theretofore been delivered to PTR under the terms of this Agreement,
but shall not have any obligation to make further advances in respect of Pursuit
Costs for any Future Project for which only a Funding Notice has been delivered
to PTR. On or before April 30, 1998, Homestead shall repay, or cause to be
repaid, to PTR any advances of Loan proceeds in respect of Pursuit Costs
(together with accrued and unpaid interest thereon) that have not been repaid
pursuant to Section 2.3 hereof as of the Expiration Date.
-----------
Section 2.6. PROJECT SPECIFIC FUNDING COMMITMENT. PTR's obligation under
this Agreement to make advances of Loan proceeds in respect of a designated
Project shall not exceed the lesser of (i) the actual aggregate hard and soft
costs incurred by the applicable Borrower in connection with the acquisition,
development, design and construction of such Project, or (ii), except as
provided in Section 6.6, the amount allocated to such Project in Exhibit A
----------- ---------
hereto, and all costs in respect of a Project in excess of the Loan amount
allocated to such Project shall, except as provided in such Section 6.6, be
-----------
funded by Homestead as and when needed. In addition, PTR's obligation to make
advances in respect of a designated Project shall expire on the second
anniversary of the date on which the subject Land was acquired by
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<PAGE>
Homestead or the applicable Subsidiary. In the event Final Completion of such
Project has not been achieved by such date, PTR shall have no obligation to make
any further advances of Loan proceeds in connection with such Project and all
costs required to complete such Project shall be funded by Homestead as and when
required in order to assure that such Project is completed and placed in
operation as soon as is reasonably practicable. If, however, Final Completion
of such Project has not been achieved by the date which is 30 months after the
date of acquisition of the subject Land, then, at the election of PTR, exercised
by delivering written notice to Homestead, Homestead shall repay, or cause the
applicable Subsidiary to repay, within 30 days after receipt of such notice the
amount of Loan proceeds advanced in respect of such Project (together with
accrued and unpaid interest on such amount), and upon receipt of such payment,
this Agreement, solely as it relates to such Project, shall terminate and PTR
shall cause to be released the Security Documents recorded or filed against such
Project.
Section 2.7. REPLACEMENT PROJECTS. Homestead agrees that for each Future
Project rejected by Homestead pursuant to Section 2.3 (a "Rejected Project"),
----------- ----------------
Homestead will propose to PTR in writing a proposed substitute future project (a
"Proposed Substitute Future Project") to take the place of such Rejected
----------------------------------
Project. Any such Proposed Substitute Future Project shall be located within
the Geographic Area and, except as specifically noted in writing by Homestead,
shall conform, to Homestead's then current knowledge, to the Prototypical
Project requirements. Homestead may select a Proposed Substitute Future Project
from its then contemplated Homestead Village projects which Homestead is
considering pursuing or, if all such contemplated projects are then already
included within the list of Future Projects under this Agreement, then Homestead
may delay in identifying a Proposed Substitute Future Project until, in the
ordinary course of its business, a new site for a contemplated Homestead Village
project is identified within the Geographic Area. Homestead shall not, however,
be obligated to identify a new potential Homestead Village site solely for the
purposes of presenting to PTR a Proposed Substitute Future Project.
PTR shall have a period of 20 Business Days after receipt of any such
Proposed Substitute Project to approve or reject, in its sole and absolute
discretion, any such proposal, and failure of PTR to provide Homestead with
written notice within such 20-Business Day period shall be deemed a rejection by
PTR of the subject Proposed Substitute Future Project. If PTR timely approves a
Proposed Substitute Future Project, then such project shall be substituted in
the place and stead of the Rejected Project in Exhibit A hereto, and shall for
---------
all purposes under this Agreement thereafter be deemed a Future Project. The
maximum amount of Loan proceeds that will be available to fund such Future
Project (if Homestead thereafter delivers an Acquisition Notice for such
Project) shall be equal to the Loan amount originally allocated to the
applicable Rejected Project in Exhibit A.
---------
15
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In the event that any Proposed Substitute Future Project is rejected or
deemed rejected by PTR, Homestead shall be free to pursue the Proposed
Substitute Future Project on its own. For each Rejected Project, Homestead
shall be required (subject to the limitations set forth above) to propose to PTR
up to a maximum of three (3) Proposed Substitute Future Projects. If PTR
rejects all three (3) Proposed Substitute Future Projects submitted by Homestead
in respect of a particular Rejected Project, then the Maximum Loan Amount, and
PTR's funding commitment hereunder, shall be reduced by the amount allocated to
the Rejected Project in Exhibit A hereto. The obligation of Homestead to
---------
propose to PTR Proposed Substitute Future Projects shall in any event terminate
on the Expiration Date.
Section 2.8. RELEASE OF SECURITY DOCUMENTS. The parties acknowledge and
agree that the Notes are convertible, in whole or in part, into shares of
Homestead Common Stock up to the maximum amount of the unpaid principal amount
of such Notes outstanding from time to time and otherwise pursuant and subject
to the terms and conditions of such Notes. Any such conversion shall reduce the
amount of the debt evidenced by the Notes and secured by the Security Documents
by the amount determined in accordance with the conversion provisions of the
Notes. In connection with any partial conversion of the Notes, Homestead may
request that, in lieu of or in addition to reducing the amount secured by the
Security Documents, PTR release any one or more of the Projects then subject to
the Security Documents and having a value equivalent to or less than the amount
of the debt reduction resulting from such conversion. The release of any
Projects from the lien of the Security Documents shall, however, be subject to
the approval of PTR, which approval shall not to be unreasonably withheld or
delayed.
At such time as all amounts owing to PTR under or in respect of any of the
Loan Documents have been paid in accordance with the provisions of the Loan
Documents or if not paid then, to the extent permitted under the Notes,
converted into Homestead Common Stock, and when PTR has no further obligation to
make any advance, disbursement or payment of any kind or to extend credit under
or with respect to any of the Loan Documents, then this Agreement shall
terminate and upon receipt of demand therefor from Homestead, PTR shall execute
and deliver to Homestead appropriate instruments of release or reconveyance of
any Security Documents then in effect.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
To induce PTR to enter into this Agreement, Homestead and each Borrower
represents and warrants to PTR (each representation and warranty herein being
given as of the date of this
16
<PAGE>
Agreement and deemed repeated and reaffirmed on the date of each advance of
funds by PTR) as follows:
Section 3.1. EXISTENCE AND POWER. Homestead and each Borrower is duly
organized, validly existing and in good standing under the laws of the State of
its organization and to the extent required is qualified to do business in and
is in good standing in each jurisdiction in which it owns property; has full
power and authority to own its assets, to conduct the activities in which it is
engaged, and to own and develop each Project which it owns.
Section 3.2. AUTHORIZATION AND BINDING OBLIGATIONS. The borrowing
evidenced by the Notes and the execution, delivery and performance of this
Agreement and all other Loan Documents by Homestead and each Borrower (i) are
within the power of the subject entity and (ii) have been duly authorized. Each
of the Loan Documents executed by Homestead and/or any Borrower, when executed
and delivered, will constitute the legal, valid and binding obligations of such
entity and are enforceable against such entity in accordance with its respective
terms, subject to bankruptcy and insolvency laws, equitable principles, and laws
affecting creditors rights generally.
Section 3.3. NO LEGAL BAR OR RESULTANT LIEN. None of the (i) execution
and delivery of, (ii) fulfillment of the terms and conditions of, or (iii) the
consummation of the transactions contemplated by the Loan Documents to which
Homestead and/or any Borrower is a party (a) violate any provisions of the
articles or certificate of incorporation, bylaws or partnership agreement of
such entity, (b) violate or constitute a default under any contract, agreement
or instrument, or any law, ordinance, rule or regulation of any Governmental
Authority, to which such entity is subject, (c) to such entity's knowledge,
violate or constitute a default under any Governmental Requirement so as to
create a Material Adverse Effect or (d) to such entity's knowledge, result in
the creation or imposition of any lien upon any property of such entity, other
than those permitted by this Agreement.
Section 3.4. NO CONSENT. The execution, delivery and performance of the
Loan Documents to which Homestead and/or each Borrower is a party does not
require the consent or approval of any other person, including, without
limitation, any financial institution or other creditor of such entity, any
trustee, conservator, receiver or administrator, or any regulatory authority or
governmental body of the United States of America or any state thereof or any
Governmental Authority.
Section 3.5. COMPLIANCE WITH LAWS. All Plans, Projects, Properties,
Improvements and their intended use presently comply, and throughout the term of
this Agreement will continue to comply, in all material respects with all
Governmental Requirements and all public
17
<PAGE>
and private restrictions or other agreements affecting each such Property,
including, without limitation, building codes, special use permits, zoning
codes, Environmental Laws, applicable requirements of fire underwriters,
restrictive covenants, easements and other agreements affecting the Property.
All Permits currently required by Governmental Requirements to be obtained for
the Projects now subject to this Agreement have been obtained, and neither
Homestead nor any Borrower has any reason to believe that any Permits that
subsequently may be required to enable it to construct, occupy, operate, use or
sell any of the Property will not be obtained in due course.
Section 3.6. LITIGATION. Except as disclosed to PTR in writing, at the
date of this Agreement there is no litigation, legal, administrative, or
arbitral proceeding, investigation or other action of any nature pending or, to
the knowledge of Homestead or any Borrower, threatened against or affecting any
Borrower or Homestead that involves the possibility of any judgment or liability
(not fully covered by insurance) that would have a Material Adverse Effect.
Section 3.7. DEFAULTS. To the knowledge of Homestead and each Borrower,
neither Homestead nor any Borrower is in default, and no event or circumstance
has occurred that, but for the passage of time or the giving of notice, or both,
would constitute a default, in any respect under any agreement of instrument
that may have a Material Adverse Effect. No Event Default has occurred
hereunder.
Section 3.8. STATUS OF PROPERTY. The Borrower delivering any Security
Documents to PTR is the fee simple owner of the subject Property free and clear
of all restrictions, covenants, easements, liens and encumbrances, including,
without limitation, mechanics', materialmen's and suppliers' liens (except liens
securing PTR and matters reflected in the Title Policy). To Homestead and each
Borrower's knowledge: each Property is a legal lot under applicable laws,
statutes, ordinances and regulations of the governing jurisdiction; each
Property is carried, or is in the process of being changed so as to be carried,
on the tax rolls of the governing jurisdiction as a separate, subdivided parcel;
each Property has, or will have upon completion of construction, full access to
the public highways and to the services of all utilities, including water, storm
sewer, sanitary sewer, electricity and telephone, required to serve the intended
use of the Property; each Property under construction or completed is zoned
under applicable zoning laws and ordinances so as to permit the construction and
development of the Project planned for such Property and the use and occupancy
of the Property as contemplated under this Agreement; and each Property under
construction or completed currently complies in all material respects with such
laws and ordinances and with all private restrictions applicable thereto and any
special use permit, variance, exception, or other special zoning authorization
applicable thereto; each Property currently complies in all material respects
with all Governmental Requirements
18
<PAGE>
applicable thereto. To Borrower's knowledge, the liens of the Security
Documents executed by it are valid liens covering the subject Properties.
Section 3.9. USE OF PROCEEDS. None of the proceeds of the Loans has been
or shall be used to purchase or carry, or to reduce or retire or refinance any
credit incurred to purchase or carry, any margin stock (within the meaning of
Regulations G and U of the Board of Governors of the Federal Reserve System) or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.
Section 3.10. REAL PROPERTY ENVIRONMENTAL MATTERS. To the actual
knowledge of Homestead and each Borrower, except as disclosed in the
environmental audits prepared for Homestead and/or any such Borrower and
delivered to PTR, no hazardous substances or solid waste are located at or on or
have been disposed of or otherwise released on or to any of the Properties in
violation of any Environmental Laws.
Section 3.11. FINANCIAL CONDITION. All financial statements delivered to
PTR concerning Homestead and each Borrower fairly and accurately present the
financial condition of such entities as of the date of such statements and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, and there are no contingent liabilities not
disclosed thereby which would have a Material Adverse Effect. Since the close
of the period covered by the latest financial statements delivered to PTR with
respect to Homestead's and each Borrower's assets, liabilities, or financial
condition, no event has occurred (including, without limitation, any litigation
or administrative proceedings) and no change in such entities' financial
condition exists or, to the knowledge of Homestead or any Borrower, is
threatened, which (i) materially adversely affects a Borrower's ability to
perform its obligations under the Loan Documents, (ii) constitutes or which
after notice or lapse of time, or both, would constitute a Default hereunder, or
(iii) materially adversely affects the validity or priority of the lien of the
Security Documents on any Borrower's Property or the financial condition of
Homestead or any Borrower.
Section 3.12. NO CONDEMNATION. No taking of any Property or any material
part thereof, through eminent domain, conveyance in lieu thereof, condemnation
or similar proceeding is pending or, to the best of Homestead's and each
Borrower's knowledge, threatened by any governmental agency.
Section 3.13. NO ACTIONS. There is no action, proceeding or investigation
pending or, to the best of Homestead's and each Borrower's knowledge, threatened
(or any basis therefor) which questions, directly or indirectly, the validity of
this Agreement, the Notes, the Security
19
<PAGE>
Documents, or any other Loan Document or any action taken or to be taken
pursuant hereto or thereto.
Section 3.14. NO ADVERSE CONDITIONS. To the best of Homestead's and each
Borrower's knowledge, there are no existing, pending or threatened events which
could materially adversely affect any of the Properties or the operation
thereof.
ARTICLE 4.
COVENANTS
Each Borrower will, at all times, comply with the covenants contained in
this Article 4 from the date hereof and for so long as any part of the Loans is
---------
outstanding.
Section 4.1. CONSTRUCTION OF IMPROVEMENTS. Each Borrower will proceed
with the design, engineering and construction of its Improvements with
reasonable diligence and continuity and will endeavor in good faith to complete
the design, engineering and construction of its Improvements substantially in
accordance with the applicable Project Schedule, subject to Force Majeure, and
substantially in accordance with the Plans for such Improvement and applicable
Governmental Requirements.
Section 4.2. PLANS; PROJECT BUDGETS; PROJECT SCHEDULES AND MATERIAL
CHANGES. Prior to the date hereof, Homestead has delivered to PTR and PTR has
approved Homestead's Prototypical Plans, Prototypical Project Budget and
Prototypical Project Schedule. So long as the Plans and Project Budget
(including the Development Budget which is a part of the overall Project Budget)
for a given Project do not contain any Material Change and the Project Schedule
does not deviate in any material respect from the Prototypical Schedule, no
further approval by PTR of the Plans, Project Schedule or Project Budget for a
Project shall be required. Borrower shall not, however, make any Material
Change in the Plans for any of its Projects or construct any Improvements which
are not substantially in accordance with the Prototypical Plans or make any
change to any Plans or install any material or equipment which would constitute
a Material Change, without Homestead's obtaining in each instance PTR's prior
written consent, which consent shall not be unreasonably withheld or delayed.
Homestead shall promptly notify PTR in writing of any Material Change desired by
a Borrower, which notice shall be accompanied by such plans or other information
as may reasonably be necessary for PTR to evaluate the proposed Material Change.
PTR shall deliver written notice to Homestead within 10 Business Days after
receipt of the requested Material Change stating whether such Material Change
has been approved or disapproved by PTR.
20
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Section 4.3. INSPECTION AND EXAMINATION. Borrower will permit
representatives and agents of PTR to enter each Property owned by such Borrower
at all reasonable times to inspect the progress of the construction of the
subject Improvements and all materials to be used therein and to examine all
detailed plans and shop drawings which are or may be kept at the construction
site, and such Borrower will use reasonable efforts to cause the Contractor and
all Subcontractors to cooperate with PTR or its representatives in such
inspections or examinations. Homestead and each other Borrower shall also
permit representatives and agents of PTR to examine their respective books,
records and accounting data applicable to the Loans and the subject Projects
(and to make extracts therefrom or copies thereof) and, to the extent Homestead
or such Borrower has such right, all Contractor's and Subcontractors' books,
records and accounting data applicable to the subject Project.
Section 4.4. PERMITS AND APPROVALS. Borrower will comply in all material
respects with, and keep in full force and effect, all Permits necessary for
ownership, development and operation of the Projects owned or operated by it.
Section 4.5. GOVERNMENTAL REQUIREMENTS. Borrower will cause all
Governmental Requirements and all restrictive covenants affecting its Projects
to be complied with in all material respects (except matters contested in good
faith by appropriate proceedings).
Section 4.6. BOOKS AND RECORDS. Borrower will implement and maintain
payment and accounting systems which will assure accurate and complete records
of all amounts owed and paid in connection with the completion of each Project.
Borrower shall require each Contractor and each Subcontractor having a
subcontract in excess of $100,000 to deliver lien waivers or releases as a
condition to receiving payments. Contractor lien waivers shall cover the amount
paid to the Contractor under its application for payment for the month or other
payment period just ending; Subcontractor lien waivers shall cover the amount
paid to such Subcontractor pursuant to the Contractor's application for payment
for the immediately preceding month or other payment period.
Section 4.7. TITLE TO PROPERTY AND IMPROVEMENTS. Neither the legal or
beneficial title and ownership of a Borrower in the Property(ies) and
Improvements or any portion thereof owned by it will be conveyed, pledged or
encumbered in any way other than to Homestead or a Homestead Affiliate without
the consent of PTR, which may be granted or denied in PTR's sole and absolute
discretion. Borrower will promptly pay and discharge prior to the date when any
interest or penalties shall accrue thereon, all taxes, levies, charges,
impositions, water and sewer rents, and assessments of every kind or nature,
whether foreseen or unforeseen and whether general or special, which are now or
shall hereafter be charged or assessed against the Property(ies) or the
Improvements owned by it, or any part thereof, or which may become a lien
21
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thereon (except matters contested in good faith by appropriate proceedings and
for which adequate reserves have been provided).
Section 4.8. COSTS AND EXPENSES. Borrower shall pay any out-of-pocket
expenses reasonably incurred by PTR in the enforcement or collection of the
Loans, including without limitation, attorneys' fees and expenses, records
searches, documentary stamps, transfer taxes and recording taxes and court
costs.
Section 4.9. USE OF ADVANCES. Borrower shall not apply any advances of
Loan proceeds to costs other than those incurred in connection with the subject
Future Project or Project for which the advance has been made. Borrower shall
not apply such advances to the cost of acquiring any additional real property
other than a Project. Borrower shall not receive or apply advances of Loan
proceeds except to the purposes for which such proceeds have been advanced by
PTR, and in accordance with the provisions of the Loan Documents generally.
Section 4.10. INSURANCE. Borrower shall keep in full force and effect at
all times the policies of insurance applicable to the Property owned by it and
required by the Security Documents, and Borrower shall provide PTR with evidence
of such insurance upon receipt or request therefor.
Section 4.11. ENVIRONMENTAL MATTERS. Borrower shall not, by any act or
omission, cause or permit any hazardous substances, solid wastes or other
pollutants to exist on or about any Project in violation of Environmental Laws.
In the event of a breach of the foregoing provision, Homestead and the subject
Borrower shall remove the same (or if removal is prohibited by law, take
whatever action is required by law) promptly upon discovery at Homestead's and
such Borrower's sole expense. Homestead will promptly notify PTR in writing of
any existing, pending or threatened action, investigation or inquiry by any
Governmental Authority of which it has knowledge relating to any Property in
connection with any Environmental Laws.
Section 4.12. SELECTION OF ARCHITECTS; CONTRACTORS; INSPECTING A/E'S.
Prior to the date hereof, Homestead has delivered to PTR and PTR has approved, a
list of potential Contractors, Architects, Consultants and Inspecting A/E's that
Homestead, or any of its Subsidiaries, has or may retain in connection with any
Project funded, or to be funded, under this Agreement. Homestead may, from time
to time, subject to the prior written approval of PTR, add Contractor,
Architect, Consultant and Inspecting A/E names to such list. So long as any
Contractor, Architect, Consultant and Inspecting A/E retained by Homestead or a
Subsidiary in connection with a Project is on such pre-approved list, no further
approval of such hiring by PTR shall be required. If Homestead or any
Subsidiary desires to retain a Contractor, Architect,
22
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Consultant or Inspecting A/E not on the current pre-approved list, then prior to
retaining such individual or entity, Homestead shall be required to obtain the
prior written approval of PTR, such approval not to be unreasonably withheld or
delayed, and such approval shall be deemed given if PTR does not deliver written
notice of objection to Homestead within 10 Business Days after receipt by PTR of
a request for approval from Homestead.
Section 4.13. FURTHER ASSURANCES. Homestead and each Borrower shall
execute such further documents, agreements and instruments, and take all other
actions, as may reasonably be necessary to carry out the purposes of the Loan
Documents or to protect and enforce the validity and priority of the Security
Documents.
Section 4.14. QUARTERLY STATEMENTS. Within 20 Business Days after the
expiration of each calendar quarter, Homestead shall deliver to PTR a written
summary (each, a "Quarterly Statement") containing a status report for each
-------------------
Future Project or Project then being funded pursuant to this Agreement,
indicating whether and to what extent each such Future Project or Project is
proceeding substantially on schedule and on budget or, if not, the amount of any
overrun and/or schedule slippage and setting forth in reasonable detail any
efforts being undertaken to remedy any noted material problems. Each Quarterly
Statement shall also include any pertinent information in respect of Future
Projects and the anticipated timing of when any such Future Projects may be
acquired and construction commenced and such other information as Homestead may
deem appropriate, or PTR may reasonably request, to keep PTR reasonably apprised
of the status of the Future Projects.
Section 4.15. CONTINUED EXISTENCE. Homestead and each Borrower shall at
all times preserve and keep in full force and effect its existence and rights
and franchises material to its business and rights and franchises material to
its business and properties.
Section 4.16. DEFAULTS UNDER OTHER LOANS. Borrower shall notify PTR in
writing within fifteen (15) days following Borrower's receipt of notice of a
default under any document or instrument governing, evidencing, securing, or
otherwise relating to any loan (other than the Loan) made to Borrower.
23
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ARTICLE 5.
ADVANCE CONDITIONS
Section 5.1. CONDITIONS PRECEDENT TO FIRST ADVANCE UNDER THIS AGREEMENT.
PTR shall not be obligated to advance funds pursuant to this Agreement until
each of the following conditions is fulfilled:
(a) Receipt by PTR of each of the following:
(i) a fully executed copy of this Agreement;
(ii) duly executed copies of each of the Notes from any Subsidiaries
owning Projects for which a Funding Notice or Acquisition
Notice has been delivered to PTR and Security Documents for any
Land then owned or to be acquired with such initial funding by
Homestead or any Subsidiary for which the subject Project is to
be financed with Loan proceeds, the Completion and Payment
Guaranty and all other Loan Documents PTR may reasonably
require to be executed and delivered in connection with the
first advance hereunder;
(iii) Title Policies for all Properties then subject to Security
Documents or to be made subject to Security Documents
contemporaneously with the first advance of Loan proceeds (or
an irrevocable commitment to issue each such Title Policy),
effective as of the date of the Notes, in form and substance
satisfactory to PTR in its reasonable judgment, confirming the
first priority status and validity of the lien of the Security
Documents on the Property to secure the obligations under the
Notes, the Security Documents and the other Loan Documents;
(iv) for each Project then subject to this Agreement, a survey of
the subject Land, and a geotechnical report and environmental
audit, satisfactory to PTR, in its reasonable judgment;
(v) opinions of counsel reasonably satisfactory to PTR addressing
the following matters:
(A) each Borrower then executing and delivering any Loan
Documents is duly organized and validly existing, and in
good standing and
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authorized to do business in each state in which it owns a
Project, with power and authority to own its Projects and
to perform its obligations under the Loan Documents to
which it is a party and to carry on its business as it is
now being conducted;
(B) the execution, delivery and performance of the Loan
Documents delivered by each such Borrower have been duly
and validly authorized by all necessary action of such
Borrower; and
(C) the Loan Documents executed by each such Borrower
constitute valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their
respective terms, except as such enforcement may be
limited by applicable bankruptcy laws and other customary
exceptions;
(vi) for each Project then under construction or completed,
certificates of insurance confirming the existence of all
insurance required by Section 4.9 hereof;
-----------
(vii) Copies of the Plans, Project Budget and Project Schedule for
each Project then under construction or then being added to
this Agreement; and
(viii) Certification from Homestead that any Property(ies) then being
added to this Agreement either contain no Material Changes or
any Material Changes have previously been approved by PTR.
(b) The Title Insurer shall have been paid all title insurance premiums,
filing fees, recording fees and taxes required for proper recording of the
Security Documents to be recorded at such time and any other Loan Document to be
filed or recorded at such time.
(c) There shall not have occurred and be continuing any Default.
(d) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising any Property then subject to any of the Security
Documents.
(e) Neither Homestead nor any Borrower shall be the subject of any
bankruptcy or similar proceeding.
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(f) There shall not have occurred and be continuing beyond any applicable
cure or grace period any default under any of the Prior Loan Documents.
(g) The representations and warranties set forth in Article 3 hereof shall
---------
be true and correct in all material respects with respect to each Project then
subject to the Security Documents.
Section 5.2. CONDITIONS PRECEDENT TO FIRST ADVANCE FOR NEW PROJECT. PTR
shall not be obligated to advance funds in respect of a new Future Project for
which Pursuit Costs are to be funded or for any Project to be acquired by
Homestead or any Subsidiary until each of the following conditions is fulfilled:
(a) The conditions precedent set forth in Section 5.1 shall remain
-----------
satisfied.
(b) Receipt by PTR of each of the following for each Future Project for
which Pursuit Costs are to be funded:
(i) a Funding Notice for the subject Future Project;
(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Future
Project whereby such Subsidiary agrees to be bound by the terms
of this Agreement with respect to the subject Future Project;
and
(iii) a Development Budget and Development Schedule for the subject
Future Project.
(c) Receipt by PTR of each of the following for each Project:
(i) an Acquisition Notice for the subject Project;
(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Project
whereby such Subsidiary agrees to be bound by the terms of this
Agreement with respect to the subject Project;
(iii) duly executed copies of any Homestead Security Documents,
Partnership Security Documents or Subsidiary Security
Documents, any Subsidiary
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Note, and any other Loan Documents which PTR may reasonably
require to be executed and delivered in connection with such
Project;
(iv) an opinion of counsel addressing, as to the subject Borrower
and the Loan Documents then being executed by such Borrower,
the matters set forth in Section 5.1(a)(viii) above;
--------------------
(v) the Title Policy for the subject Property (or irrevocable
commitment to issue such Title Policy), effective as of the
date of the first advance in respect of such Project, in form
and substance satisfactory to PTR in its reasonable judgment,
confirming the first priority status and validity of the lien
of the Security Documents on the Property to secure the
obligations under the Notes, the Security Documents and the
other Loan Documents;
(vi) a survey of the subject Land, and a soils report, geotechnical
report and environmental audit of the Land, satisfactory to
PTR, in its reasonable judgment; and
(vii) Copies of the Plans, Project Budget and Project Schedule for
the subject Project.
(d) With respect to each Project, the Title Insurer shall have been paid
all title insurance premiums, filing fees, recording fees and taxes required for
proper recording of the Security Documents to be recorded at such time and any
other Loan Document to be filed or recorded at such time.
(e) There shall not have occurred and be continuing any Default.
(f) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising the Property.
(g) The Completion and Payment Guaranty shall be in full force and effect.
Section 5.3. INITIAL IMPROVEMENT ADVANCE CONDITIONS. PTR's initial
obligation to advance any of the Loan proceeds to a Borrower for construction of
Improvements is conditioned upon the conditions precedent set forth in Sections
--------
5.1 and 5.2 remaining satisfied and, if requested by PTR, receipt of the
- --- ---
following:
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(a) Evidence of the issuance of all Permits required by any Governmental
Authority as a condition to the commencement of construction of the subject
Improvements.
(b) A copy of the Construction Contract, Architect's Agreement and any
Consultants' Agreements for the subject Project.
(c) Certificates of insurance and other certificates or information in
form and substance reasonably satisfactory to PTR confirming the existence of
all insurance required by Section 4.9 hereof.
-----------
(d) An executed Contractor's Certificate, Architect's Certificate and
Consultants' Certificates from the Contractor, Architect and Consultants
performing services to the subject Project.
(e) Such further financing statements and security agreements, executed
and acknowledged by the subject Borrower, relating to construction materials for
the subject Project as PTR may reasonably require.
(f) Evidence of the availability of utilities and access to and from the
subject Project sufficient for its intended use.
Section 5.4. ADDITIONAL IMPROVEMENT ADVANCE CONDITIONS. After the initial
advance, additional advances made for the purpose of constructing any subject
Improvements shall be subject to the following conditions:
(a) The conditions precedent set forth in Sections 5.1, 5.2 and 5.3 shall
------------ --- ---
remain satisfied.
(b) All Permits required under Governmental Requirements for construction
of the subject Improvements shall be legally valid and in force and effect.
(c) The subject Property and Improvements shall not have suffered any
damage or deterioration without provision for arrangements satisfactory to PTR
for the restoration and replacement of the damage or deterioration to such
Property or Improvements.
Section 5.5. FINAL-ADVANCE CONDITIONS. PTR's obligation to advance any of
the Loan proceeds to a Borrower for the Final Advance for the Improvements
comprising a Project is conditioned upon the following and, if requested by PTR,
receipt by PTR of evidence reasonably satisfactory to PTR that such conditions
have been satisfied:
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<PAGE>
(a) The completion of all Improvements in substantial accordance with the
Plans.
(b) Receipt by the Borrower of all Final CO's issued by the appropriate
Governmental Authorities for the Improvements and all other Permits necessary
for use of the subject Improvements and Property.
(c) The Inspecting A/E for the Project shall have executed a certificate
of final completion with respect to all of the Improvements required under the
applicable Construction Contract.
(d) The Contractor, all Subcontractors and other parties (including
Architects and Consultants, if applicable) who performed work for the subject
Project have been paid (or with the application of the final advance of Loan
proceeds for such Project, will have been paid) in full, except for amounts
which the Borrower in good faith disputes and/or amounts which Homestead and/or
the subject Borrower intends to pay with its own funds provided any liens filed
against the Project have been released or bonded over.
(e) Receipt by Borrower of an as-built survey showing the location of all
Improvements, including parking areas, streets and the location of all utilities
and other easements, encroachments and building set back lines, if any, together
with delivery to PTR of an endorsement to the Title Policy removing any
exception for matters of survey.
(f) All remaining punchlist items have been completed by the Contractor
and approved by the Borrower.
(g) All conditions precedent to the "Final Payment" required under the
Construction Contract shall have been satisfied.
(h) The Project is otherwise ready for immediate occupancy by guests.
ARTICLE 6.
PROCEDURE FOR ADVANCES; RESERVES
Section 6.1. GENERAL. PTR will disburse the proceeds of the Loans on a
monthly basis for the cost categories set forth in the applicable Development
Budgets and Project Budgets. Homestead shall submit a written request for
advance in a form approved by PTR by the 25th day of each month and, provided
PTR determines that all conditions precedent to the advance
29
<PAGE>
have been satisfied, disbursements will be made by the 1st day of the
immediately following month. Each request for advance shall set forth, on a
Project-by-Project basis, Homestead's reasonable estimate of the hard and soft
costs and expenses incurred during the month just ending and for which
reimbursement is being sought. With each request for advance after the first,
Homestead shall also provide a reconciliation indicating the amount by which the
immediately preceding advance made by PTR exceeded the actual hard and soft
costs for the period covered by such advance and the amount by which the request
for advance for the month just ending has been adjusted on account of any over-
or underpayment by PTR for the preceding month. With respect to the final
advance of Loan proceeds in respect of a Project, if the final reconciliation
submitted in the month following such advance reflects that Loan proceeds in
excess of actual costs were advanced, such overpayment (together with accrued
and unpaid interest thereon) shall be repaid by Borrower to PTR within 15 days
after such reconciliation is delivered to PTR. Any additional Loan proceeds
owing to Borrower on the basis of such final reconciliation shall be advanced by
PTR with the balance of the monthly advance made by PTR under this Section 6.1.
-----------
All disbursements with respect to any request for an advance submitted
other than on the 25th day of a month will be made within ten (10) business days
after the later of (i) receipt by PTR of a written request for an advance from
Homestead in a form approved by PTR and (ii) PTR's determination that all
conditions precedent to the advance have been satisfied.
All disbursements shall be made in accordance with any instructions
contained in the Homestead request for advance.
Section 6.2. PAYMENTS TO PTR. Notwithstanding any other provisions of this
Agreement, PTR may, at it's option and without notice or authorization by
Homestead or any Borrower, use any Loan proceeds to pay, as and when due, any
interest on the Loans. The parties acknowledge that the Loans provide for
interest reserves in amounts sufficient to pay all interest due and payable in
respect of each Project through completion of same, and Homestead and each
Borrower specifically authorizes PTR to advance portions of such interest
reserves to pay interest on the Loans as and when the same comes due.
Section 6.3. RETAINAGE AND CONTRACTOR'S FEE HOLDBACK. The parties
acknowledge that PTR shall retain, and Homestead shall not request disbursement,
of any retainages provided for under any Construction Contract, which amounts
shall be retained by PTR to secure full and complete performance of all
construction obligations hereunder (hereinafter, the "Retainage Holdback").
------------------
Provided no Default exists hereunder, PTR shall disburse the Retainage Holdback
in accordance with the provisions of the applicable Construction Contract as
requested by Homestead in its requests for advances. Upon the occurrence of a
Default hereunder, PTR shall
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<PAGE>
have no obligation to make further disbursements from the Retainage Holdback,
and no Borrower shall be entitled to any such disbursements, until such Default
is cured. Upon the occurrence of an Event of Default hereunder, PTR may apply
the Retainage Holdback against any of the obligations secured by the Security
Documents as PTR sees fit or, in PTR's discretion, to the completion of any
incomplete Improvements. Subject to the foregoing terms and provisions, to the
extent not theretofore disbursed, PTR will disburse the amounts in the Retainage
Holdback in respect of a Project concurrently with the Final Advance for such
Project.
Section 6.4. INTEREST RESERVE. PTR shall, on the date hereof, withhold
from the proceeds of the Loans available for distribution the amount of Seven
Million, Nine Hundred Five Thousand, Four Hundred Sixty-Six Dollars ($7,905,466)
(the "Interest Reserve"). Provided no Default exists hereunder, the Interest
----------------
Reserve shall be disbursed for the payment of interest on the Loans as such
interest becomes due and payable. Upon the occurrence of a Default hereunder,
PTR shall have no obligation to make further disbursements from the Interest
Reserve, and no Borrower shall be entitled to any such disbursements, until such
Default is cured. Should interest payable on the Loans exceed the amount of the
Interest Reserve, the Borrowers shall promptly pay such amounts. Upon the
occurrence of an Event of Default, PTR may apply any undisbursed portion of the
foregoing reserve against any of the obligations secured by the Security
Documents as it sees fit or, at PTR's discretion, to the completion of and
incomplete Improvements.
Section 6.5. OWNER'S CONTINGENCY. The parties acknowledge that each
Project Budget shall contain an owner's contingency (an "Owner's Contingency")
-------------------
equal to no less than 2% of Project hard and soft costs contained within the
Project Budget. Provided no Default exists hereunder, the Owner's Contingency
for a Project shall be disbursed by PTR to the subject Borrower to cover
unanticipated Project costs, costs associated with change orders and hard and
soft cost overruns (before such Borrower or Homestead, as guarantor under the
Completion and Payment Guaranty, shall be required to cover such additional
costs pursuant to the provisions of Section 6.6 hereinbelow or the Completion
-----------
and Payment Guaranty) as and when such payments are due and payable. Requests
for disbursement of portions of the Owner's Contingency shall be made with
Homestead's monthly requests for advance of Loan proceeds. Upon the occurrence
of a Default hereunder, PTR shall have no obligation to advance any portion of
the Owner's Contingency until such Default is cured. Upon the occurrence of an
Event of Default, PTR may apply the Owner's Contingency against any of the
obligations secured by the Security Documents as PTR sees fit, or at PTR's
option, to the completion of any incomplete Improvements.
Section 6.6. COST OVERRUNS AND SAVINGS; CHANGE ORDER RESERVE. In the
event that the costs to acquire and complete any Project in its entirety,
including, without limitation, the
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<PAGE>
furnishing thereof, exceed the amount of Loan proceeds available for the subject
Project (including the applicable Owner's Contingency), then the subject
Borrower shall with its own funds pay all costs and expenses which may be
required to complete the subject Project as and when such costs and expenses
become due and payable. In the event the costs to acquire and complete any
Project are less than the amount of Loan proceeds allocated to the subject
Project, then the unapplied portion of the Loan proceeds (including any
unexpended portion of the applicable Owner's Contingency and amounts required to
be refunded by Borrower under Section 6.1 for any overpayments of Loan proceeds
-----------
made in the final advance for a Project) shall be retained by PTR as a reserve
for Change Orders on other Projects which are made in accordance with the
requirements of this Agreement (the "Change Order Reserve"). Provided no
--------------------
Default exists hereunder, the Change Order Reserve shall be disbursed by PTR to
any Borrower from time to time to cover the costs of Change Orders to the extent
any such Change Order results in Project costs exceeding the Project Budget,
including the Owner's Contingency, for such Project (before such Borrower or
Homestead, as guarantor under the Completion and Payment Guaranty, shall be
required to cover such additional costs pursuant to the provisions of this
Section 6.6 or the Completion and Payment Guaranty). Requests for disbursement
- -----------
of portions of the Change Order Reserve shall be made with Homestead's monthly
requests for advance of Loan proceeds. Upon the occurrence of a Default
hereunder, PTR shall have no obligation to advance any portion of the Change
Order Reserve until such Default is cured. Upon the occurrence of an Event of
Default, PTR may apply the Change Order Reserve against any of the obligations
secured by the Security Documents as PTR sees fit or, at PTR's option, to the
completion of any incomplete Improvements.
ARTICLE 7.
EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
Event of Default under this Agreement:
Section 7.1. FAILURE TO PAY. The failure by a Borrower to pay when due
any sums required to be paid under the Notes, the Security Documents, this
Agreement or any other Loan Documents, and such failure is not cured within 10
days after receipt of written notice from PTR.
Section 7.2. OTHER LOAN DOCUMENT DEFAULTS. To the extent any such
failure, breach or inaccuracy has, or would have, a Material Adverse Effect, the
failure by a Borrower or Homestead to perform or observe, as and when required,
any covenant, agreement, obligation
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<PAGE>
or condition required to be performed or observed under this Agreement or under
any of the other Loan Documents other than as set forth elsewhere in this
Article 7 (for which no additional grace or cure period is given by this Section
- --------- -------
7.2, or the existence of any breach or inaccuracy in any of the representations,
- ---
covenants or warranties set forth in this Agreement or in any of the other Loan
Documents, provided, however, that (i) no Event of Default shall exist hereunder
on account of a breach of any representation, warranty or covenant set forth in
any of the other Loan Documents (other than this Agreement) until Homestead or
such Borrower, as applicable, shall have failed to cure such breach within any
applicable notice and cure period therein provided; and (ii) no Event of Default
shall exist hereunder on account of a breach of any representation, warranty or
covenant contained herein unless and until PTR shall provide written notice of
such breach to Homestead or such Borrower and such entity shall fail to cure the
same within 30 days after receipt of such notice, provided if such breach is of
such a nature that it cannot be cured within such 30 day period, it shall not
constitute an Event of Default hereunder so long as Homestead or such Borrower,
as applicable, commences its cure of such breach within such 30 day period and
thereafter diligently and continuously proceeds with the curing of same within a
reasonable period of time not to exceed 180 days.
Section 7.3. JUDGMENT OR ATTACHMENT. The entry by any court of a final
judgment in excess of $500,000 against Homestead or a Borrower that is not
satisfactorily stayed or discharged within 30 days from the date thereof, or any
attachment of any of the Properties or any of the proceeds of the Loans that
shall not be released, stayed or otherwise provided for to PTR's satisfaction
within 30 days after the occurrence thereof; provided that in the case of a
stay, Homestead or the subject Borrower, as applicable, shall have reserved for
the full amount thereof.
Section 7.4. VIOLATION OF GOVERNMENTAL REQUIREMENTS. The institution of
any judicial or administrative proceeding alleging that any of the Improvements
violate any Governmental Requirements if such violation gives rise to a Material
Adverse Effect and the failure to have such proceeding dismissed or such
violation corrected within 30 days after the institution thereof, except that
Homestead or the applicable Borrower shall have the right to contest any such
proceeding beyond such 30 day period, provided that PTR is satisfied that the
prosecution of such proceeding will neither have any Material Adverse Effect nor
materially impair PTR's security.
Section 7.5. INSOLVENCY, ETC. The occurrence of any of the following:
(a) Homestead or any Borrower shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors;
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<PAGE>
(b) Homestead or any Borrower shall commence any case, proceeding or other
action seeking reorganization, arrangement, adjustment, liquidation, dissolution
or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property;
(c) Homestead or any Borrower shall take any corporate action to authorize
any of the actions set forth above in paragraphs (a) or (b); or
-------------- ---
(d) Any case, proceeding or other action against Homestead or any Borrower
shall be commenced seeking to have an order for relief entered against it as
debtor, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding or
other action (i) results in the entry of an order for relief against it which is
not fully stayed within 15 Business Days after the entry thereof or (ii) remains
undismissed for a period of 60 days.
Section 7.6. UNAPPROVED TRANSFER. Any sale, conveyance, transfer,
disposition, alienation, hypothecation, leasing (except in the ordinary course
of business) or further encumbrancing of a Project, or any portion thereof or
any interest therein, by any Borrower, other than any conveyance of a portion of
the unimproved land associated with such Project which is in excess of what is
needed for such Project (which conveyance is permitted), or a sale, conveyance,
transfer, disposition, alienation, hypothecation or encumbrancing of any legal
or equitable interest in a Borrower or Homestead in violation of the Loan
Documents shall be an Event of Default as of the date of such transfer, without
any right to cure. In the case of a permitted conveyance of excess land, as
hereinbefore provided, Lender shall, upon request of Homestead, execute a
partial release, releasing the lien of any Security Documents applicable to such
excess land.
ARTICLE 8.
REMEDIES
Section 8.1. GENERAL. Upon the occurrence of any Event of Default an
defined in Article 7 of this Agreement, PTR, at its option, shall have the
---------
following rights and remedies:
34
<PAGE>
(a) PTR may declare any one or more of the Notes to be immediately due and
payable, whereupon the Notes shall become forthwith due and payable without
presentment, demand, protest or further notice of any kind.
(b) PTR may bring a foreclosure action with respect to the Security
Documents, take possession of any one or more of the Properties or exercise any
other remedy provided for in the Security Documents.
(c) PTR shall be entitled to proceed simultaneously, or selectively and
successively, to enforce its rights and remedies under the Notes, the Security
Documents, the Completion and Payment Guaranty or this Agreement, and to
exercise any or all other rights and remedies available to PTR at law or in
equity.
(d) In the event PTR shall elect to enforce its rights selectively under
any one or more of the Loan Documents, such action shall not be deemed a waiver
or discharge of any lien or encumbrance securing payment of the Notes until such
time as PTR shall have been paid in full all sums due under the Notes or secured
by the Security Documents, including any sums advanced or disbursed pursuant to
this Agreement. The foreclosure of any lien provided pursuant to this Agreement
or the Security Documents, without the simultaneous foreclosure of all such
liens, shall not merge the liens granted which are not foreclosed with any
interest which PTR might obtain as a result of such selective and successive
foreclosure.
(e) PTR shall have the right, but not the obligation, to take possession
of any one or more of the Properties and proceed to complete the Improvements
thereto according to the applicable Plans. For this purpose, each Borrower
hereby conditionally assigns to PTR as additional security for the repayment of
the Loans all of each such Borrower's rights to the Plans for the Projects owned
by it, any contracts pertaining to the Project owned by such Borrower, whether
for construction, sale or otherwise, and any Permits pertaining to the subject
Property(ies); provided, PTR shall, upon occurrence of an Event of Default, have
the option to exercise this assignment, but shall not be obligated to accept
this assignment or to assume any liability of any Borrower under any such Plans,
contracts or Permits. Furthermore, each Borrower hereby constitutes and appoints
PTR as its true and lawful attorney-in-fact with full power of substitution to
complete, or cause to be completed, the Improvements owned by such Borrower in
the name of such Borrower and hereby empowers said attorney or attorneys as
follows: (i) to use any funds of Borrower, including any balance that may be
held in escrow and any funds which may remain unadvanced hereunder, for the
purpose of completing the Improvements being built by such Borrower; (ii) to
make such additional changes and corrections in the Plans for such Improvements
as may reasonably be necessary or desirable to complete such Improvements in
substantially the manner contemplated by the Plans for such
35
<PAGE>
Improvements and in a good and workmanlike manner; (iii) to employ such
contractors, subcontractors, agents, architects and inspectors as shall be
required for said purposes; (iv) to pay, settle or compromise all existing bills
and claims that are or may become liens against the subject Property(ies) or any
part thereof or may be necessary or desirable for the completion of the subject
Improvements or the clearance of title; (v) to execute all applications and
certificates in the name of Borrower which may be required by law or by any
contract relating to the subject Improvements; and (vi) to do any and every act
with respect to the applicable Property(ies) which such Borrower may do in its
own behalf. It is understood and agreed that this power of attorney shall be
deemed to be a power coupled with an interest which cannot be revoked. PTR, as
attorney-in-fact, shall also have the power to defend, to the extent PTR
reasonably deems necessary, at such Borrower's cost, all actions or proceedings
in connection with the subject Improvements and Property(ies). At the time PTR
takes possession of a Property(ies), or any part thereof, all materials on such
Property owned by Borrower shall become the property of PTR for the purpose of
completing the subject Improvements. In addition, any materials or equipment
paid for with the proceeds of the Notes but stored at a location other than the
subject Property(ies) shall become the property of PTR when it takes possession
of the subject Property(ies). Such Borrower shall pay PTR the cost of
completion. Each Borrower hereby authorizes PTR to add such costs to the
indebtedness of the Borrowers to PTR, which costs shall be secured by the
Security Documents. Any of the foregoing actions by PTR shall not relieve the
Borrowers of their responsibility to repay the Notes. The foregoing provision
shall not be construed as creating any third party beneficiary contract and
nothing in the foregoing shall be construed as giving or conferring any rights
or benefits whatsoever to or upon any other person or entities other than the
parties to this Agreement. Homestead shall indemnify, defend and hold harmless
PTR from and against any and all claims, liabilities, loss, damages, suits,
actions, expenses (including reasonable attorneys' fees) and costs arising from
any actions taken by PTR in accordance with the power of attorney herein granted
except to the extent attributable to the gross negligence or willful misconduct
of PTR.
(f) PTR shall not have any obligation to make any advances under the Notes
pursuant to this Agreement after the occurrence and during the continuance of an
Event of Default and at any time during such period, may unilaterally elect to
terminate any obligation of PTR to make any future advances under the Notes
pursuant to this Agreement.
Section 8.2. REMEDIES CUMULATIVE. No failure or delay by PTR in the
exercise of any rights or remedies available to it under the Loan Documents or
at law or in equity shall operate as a waiver thereof, nor shall any single or
partial exercise by PTR of any such right or remedy preclude any further
exercise thereof or of any other right or remedy. The remedies provided in the
Loan Documents or available at law or in equity are cumulative and not
alternative.
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ARTICLE 9.
MISCELLANEOUS
Section 9.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants contained herein shall survive the
execution of this Agreement, the making of the Loans and the delivery of the
Notes and other Loan Documents and the release of any portion of the liens of
the Security Documents, and shall remain in full force and effect until the
termination of this Agreement in accordance with Section 2.8 hereof.
-----------
Section 9.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, personal representatives, successors, assigns and affiliates, but shall
not be assignable by any party hereto without the prior written consent of the
other party hereto; provided that Homestead and/or the Partnership Borrower may
assign its rights hereunder in whole or in part to a Homestead Affiliate or
Subsidiary. Other than to a Homestead Affiliate or Subsidiary, no Borrower
shall, without the prior written consent of PTR, which consent PTR may withhold
in its sole discretion, directly or indirectly assign, transfer or convey (i)
this Agreement or any of the other Loan Documents, (ii) any of Borrower's rights
or obligations under any of the Loan Documents, (iii) any portion of the
proceeds of the Notes, (iv) any legal or equitable interest in the Property or
(v) any legal or equitable interest in such Borrower.
Section 9.3. NOTICES. Any notice or other communication provided for
herein or given hereunder to a party hereto shall be in writing and shall be
given by delivery, by telex, telecopier or by mail (registered or certified
mail, postage prepaid, return receipt requested) to the respective parties as
follows:
If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
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If to PTR:
Security Capital Pacific Trust
7777 Market Center Avenue
El Paso, Texas 79912
Attention: C. Ronald Blankenship
Facsimile: (915) 877-3301
or to such other address with respect to a party as such party shall notify the
other in writing.
Section 9.4. WAIVER. No party may waive any of the terms or conditions of
this Agreement, except by a duly executed writing referring to the specific
provision to be waived.
Section 9.5. AMENDMENT. This Agreement may be amended only by a writing
duly executed by both Homestead and PTR.
Section 9.6. SEVERABILITY. Insofar as is possible, each provision of this
Agreement shall be interpreted so as to render it valid and enforceable under
applicable law and severable from the remainder of this Agreement. A finding
that any such provision is invalid or unenforceable in any jurisdiction shall
not affect the validity or enforceability of any other provision or the validity
or enforceability of such provision under the laws of any other jurisdiction.
Section 9.7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, among the parties hereto and their affiliates, with respect to
the subject matter hereof. The provisions of this Agreement supersede any
provisions set forth in the Existing Loan Documents relating to the disbursement
of Loan proceeds for the Projects.
Section 9.8. EXPENSES. Except as otherwise expressly contemplated herein
to the contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
Section 9.9. CAPTIONS. The Article, Section and Paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
Section 9.10. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New Mexico.
38
<PAGE>
Section 9.11. NO JOINT VENTURE OR PARTNERSHIP. Nothing contained in this
Agreement or in any of the other Loan Documents and no other aspect of the
relationship between Homestead or any Borrower and PTR shall be construed as
creating a partnership, joint venture, or other relationship of or between
Homestead or any Borrower and PTR other than the lending relationship of lender
and borrower. All rights and obligations granted to or undertaken by either of
the parties hereto shall be construed as incidents of such lending relationship.
Section 9.12. NO THIRD PARTY BENEFICIARY RIGHTS CREATED. The parties
hereto expressly declare that it is their joint and mutual intention that this
Agreement and the transactions contemplated hereby shall not be construed as
creating a third party beneficiary contract, and neither this Agreement nor any
of the other Loan Documents shall be construed as giving or conferring any
rights or benefits whatsoever to or upon any other persons or entities other
than Homestead, any Borrower and PTR.
Section 9.13. INCORPORATION BY REFERENCE. This Agreement, the Notes and
the Security Documents are intended to be construed as part of the same
transaction, and all of the covenants, agreements, conditions, terms and
provisions contained in any one of the Loan Documents shall be deemed to be
included in each of the other Loan Documents with the same force and effect as
though set forth in full therein. In the event any of the provisions of this
Agreement are in conflict with or inconsistent with the provisions of the
Security Documents, this Agreement shall govern and control.
Section 9.14. COUNTERPARTS. This Agreement may be executed in counterpart
copies, each of which shall constitute an original, and all of which together
shall constitute one and the same document.
Section 9.15. SCOPE OF REVIEW OF PLANS. Neither the approval of the Plans
nor any subsequent inspections or approvals of the Improvements during
construction shall constitute a warranty or representation by PTR or any of its
agents, representatives or designees as to the technical or legal sufficiency,
adequacy or safety of the structures or any of their component parts, including
without limitation fixtures, equipment or furnishings, nor shall such approvals
or inspections constitute such a warranty or representation as to the subsoil
conditions involved in the Property or any other physical condition or feature
pertaining to the Property. All acts, including any failure to act, relating to
the Property by any agents, representatives or designees of PTR are performed
solely for the benefit of PTR to assure repayment of the Loans and are not for
the benefit of Borrower or any other person, including without limitation
purchasers, guests or other occupants.
39
<PAGE>
Section 9.16. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, PTR shall not be obligated to extend
credit to Borrower in an amount in violation of any limitation or prohibition
provided by any applicable governmental statute or regulation.
Section 9.17. SUBORDINATION. Each Borrower hereby subordinates all
rights, liens and claims for any of the proceeds and advances under the Notes to
the liens, operation and effect of the Security Documents.
Section 9.18. INDEMNITY. Homestead and each Borrower agree to indemnify,
defend and hold PTR harmless from and against any and all claims, injuries,
damages and liabilities that may be asserted or claimed against PTR by any
person as a result or by reason of, or that may be incurred or suffered by PTR
as a result or by reason of, the construction contemplated herein or the
operation of the ownership or Encumbered Property or any part thereof.
Section 9.19. Limitation of Liability. Any obligation or liability
whatsoever of PTR which may arise at any time under this Funding Commitment
Agreement or any obligation or liability which may be incurred by it pursuant to
any other instrument, transaction or undertaking contemplated hereby shall be
satisfied, if at all, out of PTR's assets only. No such obligation or liability
shall be personally binding upon, nor shall resort for the enforcement thereof
be had to, the property of any of its shareholders, trustees, officers,
employees or agents, regardless of whether such obligation or liability is in
the nature of contract, tort or otherwise.
40
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
-------------------------
C. Ronald Blankenship
Chairman
S-1
<PAGE>
EXHIBIT 12.1
SECURITY CAPITAL PACIFIC TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net earnings from operations.......... $ 94,089 $ 81,696 $46,719 $23,191 $ 9,037
Add:
Interest expense.................... 35,288 19,584 19,442 3,923 3,147
-------- -------- ------- ------- -------
Earnings as adjusted.................. $129,377 $101,280 $66,161 $27,114 $12,184
======== ======== ======= ======= =======
Fixed charges:
Interest expense.................... $ 35,288 $ 19,584 $19,442 $ 3,923 $ 3,147
Capitalized interest................ 16,941 11,741 6,029 2,818 989
-------- -------- ------- ------- -------
Total fixed charges............... $ 52,229 $ 31,325 $25,471 $ 6,741 $ 4,136
======== ======== ======= ======= =======
Ratio of earnings to fixed charges.... 2.5 3.2 2.6 4.0 2.9
======== ======== ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 12.2
SECURITY CAPITAL PACIFIC TRUST
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDENDS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net earnings from operations......... $ 94,089 $ 81,696 $46,719 $23,191 $ 9,037
Add:
Interest expense................... 35,288 19,584 19,442 3,923 3,147
-------- -------- ------- ------- -------
Earnings as adjusted................. $129,377 $101,280 $66,161 $27,114 $12,184
======== ======== ======= ======= =======
Combined fixed charges and preferred
share dividends:
Interest expense................... $ 35,288 $ 19,584 $19,442 $ 3,923 $ 3,147
Capitalized interest............... 16,941 11,741 6,029 2,818 989
-------- -------- ------- ------- -------
Total fixed charges.............. 52,229 31,325 25,471 6,741 4,136
Preferred share dividends (a)...... 24,167 21,823 16,100 1,341 --
-------- -------- ------- ------- -------
Combined fixed charges and preferred
share dividends..................... $ 76,396 $ 53,148 $41,571 $ 8,082 $ 4,136
======== ======== ======= ======= =======
Ratio of earnings to combined fixed
charges and preferred share
dividends........................... 1.7 1.9 1.6 3.4 2.9
======== ======== ======= ======= =======
</TABLE>
- --------
(a) PTR had no preferred shares in any of the historical periods presented
prior to 1993.
<PAGE>
Exhibit 21
The registrant has 14 consolidated wholly owned subsidiaries carrying on
the same line of business and operating in the United States.
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees and Shareholders of Security Capital Pacific Trust:
We consent to incorporation by reference in registration statements No. 33-
25317 (Form S-8), No. 333-4455 (Form S-4), and No. 333-12885 (Form S-3) of
Security Capital Pacific Trust of our report dated January 29, 1997, except as
to Note 13 which is as of March 10, 1997, relating to the balance sheets of
Security Capital Pacific Trust as of December 31, 1996 and 1995, and the
related statements of earnings, shareholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1996, and the related
schedule, which report appears in the December 31, 1996 annual report on Form
10-K of Security Capital Pacific Trust.
KPMG Peat Marwick LLP
Chicago, Illinois
March 13, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Form 10-K for the twelve months ended December 31, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,643
<SECURITIES> 0
<RECEIVABLES> 193,987
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,153,363
<DEPRECIATION> 97,574
<TOTAL-ASSETS> 2,282,432
<CURRENT-LIABILITIES> 0
<BONDS> 797,188
<COMMON> 75,511
0
267,374
<OTHER-SE> 924,623
<TOTAL-LIABILITY-AND-EQUITY> 2,282,432
<SALES> 322,046
<TOTAL-REVENUES> 326,246
<CGS> 0
<TOTAL-COSTS> 128,122
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,288
<INCOME-PRETAX> 106,544
<INCOME-TAX> 0
<INCOME-CONTINUING> 107,414
<DISCONTINUED> 0
<EXTRAORDINARY> (870)
<CHANGES> 0
<NET-INCOME> 106,544
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.46
</TABLE>
