<PAGE>
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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
_______________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[_] 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 01-12846
PROLOGIS TRUST
(Exact name of registrant as specified in its charter)
Maryland 74-2604728
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14100 East 35th Place, Aurora, Colorado 80011
(Address or principal executive offices) (Zip Code)
(303) 375-9292
(Registrant's telephone number, including area code)
Security Capital Industrial Trust
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing for the past 90 days. Yes X No _____
The number of shares outstanding of the Registrant's common stock as of
August 10, 1998 was 123,070,633.
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<PAGE>
PROLOGIS TRUST
INDEX
<TABLE>
<CAPTION>
Page
Number(s)
---------
<S> <C>
PART I. Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets--June 30, 1998 and December 31, 1997... 3
Consolidated Statements of Income and Comprehensive Income--Three
and six months ended June 30, 1998 and 1997...................... 4
Consolidated Statements of Cash Flows--Six months ended June 30,
1998 and 1997.................................................... 5
Notes to Consolidated Financial Statements......................... 6 - 14
Report of Independent Public Accountants........................... 15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 16 - 26
Part II. Other Information
Item 4. Submission of Matters to a Vote of Securities Holders.............. 27
Item 5. Other Information.................................................. 27
Item 6. Exhibits and Reports on Form 8-K................................... 27 - 28
</TABLE>
<PAGE>
PROLOGIS TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
------
June 30, December 31,
1998 1997
(Unaudited) (Audited)
----------- ------------
<S> <C> <C>
Real estate................................................................... $3,259,536 $3,006,236
Less accumulated depreciation............................................... 209,062 171,525
---------- ----------
3,050,474 2,834,711
Investments in and advances to unconsolidated subsidiaries.................... 373,548 86,139
Cash and cash equivalents..................................................... 63,250 25,009
Accounts receivable........................................................... 13,031 12,554
Other assets.................................................................. 81,809 75,540
---------- ----------
Total assets........................................................ $3,582,112 $3,033,953
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Line of credit.............................................................. $ 216,600 $ --
Long-term debt.............................................................. 709,100 724,052
Mortgage notes payable...................................................... 88,777 87,937
Securitized debt............................................................ 32,717 33,197
Assessment bonds payable.................................................... 11,599 11,894
Accounts payable and accrued expenses....................................... 51,257 62,850
Construction payable........................................................ 33,606 27,221
Due to affiliate............................................................ 708 1,138
Distributions payable....................................................... -- 33,449
Other liabilities........................................................... 24,390 22,174
---------- ----------
Total liabilities................................................... 1,168,754 1,003,912
---------- ----------
Commitments and contingencies
Minority interest............................................................. 51,960 53,304
Shareholders' equity:
Series A preferred shares; $0.01 par value; 5,400,000 shares issued
and outstanding at June 30, 1998 and December 31, 1997; stated
liquidation preference of $25 per share.................................. 135,000 135,000
Series B Convertible preferred shares; $0.01 par value; 7,924,700 shares
issued and outstanding at June 30, 1998 and 8,000,300 shares issued and
outstanding at December 31, 1997; stated liquidation preference of $25
per share................................................................ 198,118 200,008
Series C preferred shares; $0.01 par value; 2,000,000 shares issued and
outstanding at June 30, 1998 and December 31, 1997; stated
liquidation preference of $50 per share.................................. 100,000 100,000
Series D preferred shares; $0.01 par value; 10,000,000 shares issued
and outstanding at June 30, 1998; stated liquidation preference of
$25 per share............................................................ 250,000 --
Common shares of beneficial interest; $0.01 par value; 122,931,875
shares issued and outstanding at June 30, 1998 and 117,364,148
shares issued and outstanding at December 31, 1997....................... 1,229 1,174
Additional paid-in capital.................................................. 1,896,613 1,773,465
Employee share purchase notes............................................... (26,161) (27,186)
Accumulated other comprehensive income...................................... (1) (63)
Distributions in excess of net earnings..................................... (193,400) (205,661)
---------- ----------
Total shareholders' equity.......................................... 2,361,398 1,976,737
---------- ----------
Total liabilities and shareholders' equity.......................... $3,582,112 $3,033,953
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
<PAGE>
PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income:
Rental income...................................................... $ 84,353 $ 69,157 $162,918 $136,543
Other real estate income........................................... 1,747 4,569 7,004 5,690
Income (loss) from unconsolidated subsidiaries..................... (1,030) 1,546 3,208 1,546
Foreign exchange gains............................................. 453 -- 2,063 --
Interest income.................................................... 700 393 1,325 1,117
-------- -------- -------- --------
Total income................................................ 86,223 75,665 176,518 144,896
-------- -------- -------- --------
Expenses:
Rental expenses, net of recoveries of $13,842 and $10,663 for the
three month periods in 1998 and 1997, respectively, and
$28,227 and $21,263 for the six month periods in 1998 and
1997, respectively.............................................. 7,362 5,235 13,300 9,513
Property management fees paid to affiliate, net of recoveries of
$1,073 for the three month period in 1997 and $2,115 for the
six month period in 1997........................................ -- 1,762 -- 3,312
General and administrative......................................... 4,293 380 8,892 687
Administrative services fee paid to affiliate...................... 449 -- 1,021 --
REIT management fee paid to affiliate.............................. -- 6,228 -- 12,834
Depreciation and amortization...................................... 23,554 18,976 46,734 37,024
Interest........................................................... 14,362 13,183 34,007 24,558
Other.............................................................. 614 850 1,517 1,461
-------- -------- -------- --------
Total expenses.............................................. 50,634 46,614 105,471 89,389
-------- -------- -------- --------
Net earnings before minority interest and gain on disposition of
real estate........................................................ 35,589 29,051 71,047 55,507
Minority interest share in net earnings.............................. 1,075 940 2,054 1,835
-------- -------- -------- --------
Net earnings before gain on disposition of real estate............... 34,514 28,111 68,993 53,672
Gain on disposition of real estate................................... 2,212 3,773 4,278 3,773
-------- -------- -------- --------
Net earnings......................................................... 36,726 31,884 73,271 57,445
Less preferred share dividends....................................... 13,075 8,830 21,874 17,659
-------- -------- -------- --------
Net earnings attributable to Common Shares........................... 23,651 23,054 51,397 39,786
Other comprehensive income:
Foreign currency translation adjustments........................... 6 -- 62 --
-------- -------- -------- --------
Comprehensive income................................................. $ 23,657 $ 23,054 $ 51,459 $ 39,786
======== ======== ======== ========
Weighted-average Common Shares outstanding - basic................... 122,445 97,758 120,236 96,888
======== ======== ======== ========
Weighted-average Common Shares outstanding - diluted................. 122,857 102,961 125,722 102,091
======== ======== ======== ========
Per share net earnings attributable to Common Shares:
Basic.............................................................. $ 0.19 $ 0.24 $ 0.43 $ 0.41
======== ======== ======== ========
Diluted............................................................ $ 0.19 $ 0.23 $ 0.43 $ 0.41
======== ======== ======== ========
Distributions per Common Share....................................... $ 0.3183 $ 0.2675 $ 0.6033 $ 0.5350
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Operating activities:
Net earnings........................................................ $ 73,271 $ 57,445
Minority interest................................................... 2,054 1,835
Adjustments to reconcile net earnings to net cash flow provided by
operating activities:
Depreciation and amortization..................................... 46,214 37,024
Gain on disposition of real estate................................ (4,278) (3,773)
Rent leveling..................................................... (2,062) (2,278)
Equity in earnings of unconsolidated subsidiaries................. 3,298 --
Foreign exchange gain............................................. (9) --
Amortization of deferred loan costs............................... 846 1,034
Increase in accounts receivable and other assets.................... (9,135) (8,622)
Increase/(decrease) in accounts payable and accrued expenses........ (11,593) 1,875
Increase/(decrease) in other liabilities............................ 2,216 (275)
Decrease in due to affiliate........................................ (430) --
--------- ---------
Net cash flow provided by operating activities................... 100,392 84,265
--------- ---------
Investing activities:
Real estate investments............................................. (284,588) (250,443)
Investments in and advances to unconsolidated subsidiaries.......... (290,707) (75,166)
Tenant improvements and lease commissions........................... (5,608) (5,794)
Recurring capital expenditures...................................... (2,004) (2,046)
Proceeds from dispositions of real estate........................... 51,878 66,029
--------- ---------
Net cash flow used in investing activities....................... (531,029) (267,420)
--------- ---------
Financing activities:
Proceeds from sale of shares, net of expenses....................... 372,090 80,450
Proceeds from dividend reinvestment and share purchase plan......... 186 209
Proceeds from issuance of long-term debt............................ -- 100,000
Payments on long-term debt.......................................... (15,000) --
Debt issuance costs incurred........................................ (93) (1,393)
Proceeds from interest rate contracts............................... -- 1,658
Distributions paid on Common Shares................................. (72,585) (51,308)
Distributions paid to minority interest holders..................... (3,120) (2,846)
Dividends paid on preferred shares.................................. (21,874) (17,659)
Repurchase of Common Shares......................................... (240) --
Proceeds from line of credit and bridge loan........................ 867,000 208,600
Payments on line of credit and bridge loan.......................... (650,400) (117,100)
Regularly scheduled principal payments on mortgage notes payable.... (2,011) (1,854)
Balloon principal payments made upon maturity....................... (5,075) (10,840)
--------- ---------
Net cash flow provided by financing activities................... 468,878 187,917
--------- ---------
Net increase in cash and cash equivalents............................ 38,241 4,762
Cash and cash equivalents, beginning of period....................... 25,009 4,770
--------- ---------
Cash and cash equivalents, end of period............................. $ 63,250 $ 9,532
========= =========
Noncash investing and financing activities:
In conjunction with real estate acquired:
Assumption of existing mortgage notes payable..................... $ 7,151 $ 3,900
Issuance of Common Shares......................................... -- 1,000
Foreign currency translation adjustments............................ 62 --
Conversion of limited partnership units into Common Shares.......... 302 --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
1. General:
The consolidated financial statements of ProLogis Trust ("ProLogis"),
formerly Security Capital Industrial Trust, as of June 30, 1998 and for the
three and six months ended June 30, 1998 and 1997 are unaudited, and pursuant to
the rules of the Securities and Exchange Commission, certain information and
footnote disclosures normally included in financial statements have been
omitted. While management of ProLogis believes that the disclosures presented
are adequate, these interim consolidated financial statements should be read in
conjunction with ProLogis' December 31, 1997 audited consolidated financial
statements contained in ProLogis' 1997 Annual Report on Form 10-K.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of ProLogis' consolidated
financial position and results of operations for the interim periods. The
results of operations for the three and six months ended June 30, 1998 and 1997
are not necessarily indicative of the results to be expected for the entire
year.
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Name Change
On May 19, 1998, the Board of Trustees (the "Board") of ProLogis
announced plans to change the company's name from Security Capital Industrial
Trust to ProLogis Trust. An amendment to the Declaration of Trust, which
changed the name effective July 1, 1998, was approved by ProLogis' shareholders
at the annual meeting on June 30, 1998. The name change is intended to create
stronger name recognition among its customers as ProLogis expands globally.
Comprehensive Income
On January 1, 1998, ProLogis adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income" which establishes
standards for the reporting and display of comprehensive income and its
components. The adoption of this standard did not have a significant impact on
the financial position, results of operations or financial statement disclosures
of ProLogis. Other comprehensive income in the accompanying Statements of
Income and Comprehensive Income represents a net unrealized gain on foreign
currency translation adjustments. This unrealized gain has been recognized as a
component of shareholders' equity with no impact to net earnings.
6
<PAGE>
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Per Common Share Data
ProLogis adopted SFAS No. 128, "Earnings Per Share" in December 1997. SFAS
No. 128 replaces the presentation of primary and fully diluted earnings per
share with a presentation of basic and diluted earnings per share. The adoption
of SFAS No. 128 did not result in a restatement of previously reported earnings
per share data.
The weighted-average number of common shares of beneficial interest, par
value $0.01 per share ("Common Shares"), outstanding during the year is used to
calculate basic earnings per Common Share. Diluted earnings per Common Share
reflects the potential dilution that could occur if securities or other
contracts to issue Common Shares were exercised or converted into Common Shares
or resulted in the issuance of Common Shares that then shared in earnings. See
Note 8.
Accounting for Derivatives
SFAS No. 133, "Accounting for Derivative Instruments and for Hedging
Activities" was issued on June 16, 1998. SFAS No. 133 is effective for fiscal
years beginning after June 15, 1999 and early adoption is allowed. SFAS No. 133
provides comprehensive guidelines for the recognition and measurement of
derivatives and hedging activities and, specifically, requires all derivatives
to be recorded on the balance sheet at fair value. Management is currently
evaluating the effects, if any, this pronouncement will have on its financial
position, results of operations and financial statement disclosures.
Reclassifications
Certain 1997 amounts have been reclassified to conform to the 1998
presentation.
2. Real Estate:
Investments in Real Estate
ProLogis' investments in real estate, at cost, were as follows (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Improved land..................... $ 460,966 $ 420,019
Buildings and improvements........ 2,438,717 2,233,585
Land under development............ 80,041 65,773
Construction in progress.......... 101,487 114,495
Land held for development......... 156,836 159,645
Capitalized preacquisition costs.. 21,489 12,719
---------- ----------
Total real estate 3,259,536 3,006,236
Less accumulated depreciation..... 209,062 171,525
---------- ----------
Net real estate.............. $3,050,474 $2,834,711
========== ==========
</TABLE>
7
<PAGE>
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Capitalized preacquisition costs include $1.6 million and $3.6 million of
funds on deposit with title companies as of June 30, 1998 and December 31, 1997,
respectively, for property acquisitions.
In addition to the June 30, 1998, construction payable accrual of $33.6
million, ProLogis had unfunded commitments on its contracts for developments
under construction totaling $248.2 million.
ProLogis Development Services
ProLogis Development Services Incorporated ("ProLogis Development
Services") develops corporate distribution facilities to meet customer
requirements or contracts on a fee basis to develop distribution facilities for
customers. ProLogis owns 100% of the preferred stock of ProLogis Development
Services and realizes substantially all economic benefits of its activities.
ProLogis advances mortgage loans to ProLogis Development Services to fund its
acquisition, development and construction activities. ProLogis accounts for
these loans as real estate investments, effectively consolidating the activities
of ProLogis Development Services.
As of June 30, 1998, the outstanding balances of development and mortgage
loans made by ProLogis to ProLogis Development Services for the purchase of
distribution facilities and land for distribution facility development
aggregated $209.3 million. The gains recognized on disposition of undepreciated
property by ProLogis Development Services and the fees generated by ProLogis
Development Services are reflected as other real estate income by ProLogis.
3. Unconsolidated Subsidiaries:
At June 30, 1998, investments in and advances to unconsolidated
subsidiaries consisted of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Insight................................................... $ 1,000
ProLogis Logistics:
Investment............................................. 15,171
Note receivable........................................ 140,973
Accrued interest and other receivables................. 7,965
--------
164,109
--------
Frigoscandia S.A.:
Investment............................................. (9,027)
Note receivable from Frigoscandia Holding AB........... 183,082
Mortgage note receivable from Frigoscandia Limited UK.. 30,000
Accrued interest and other receivables................. 4,384
--------
208,439
--------
Total............................................. $373,548
========
</TABLE>
8
<PAGE>
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Insight, Inc.
At June 30, 1998, ProLogis Development Services had a 16.7% ownership
interest in Insight, Inc. ("Insight"), a privately owned logistics optimization
consulting company. On July 1, 1998, ProLogis Development Services increased its
ownership in the common stock in Insight to 23.1% by contributing an additional
$500,000. ProLogis Development Services is committed to investing an additional
$1,000,000 in Insight through July 1, 1999, which would bring its ownership
interest to 33.3%. This investment is accounted for on the cost method.
ProLogis Logistics
ProLogis owns 100% of the preferred stock and recognizes substantially all
economic benefits of the activities of ProLogis Logistics Services Incorporated
("ProLogis Logistics"). At June 30, 1998, ProLogis Logistics owned 100% of a
refrigerated distribution company, CS Integrated LLC ("CSI"). ProLogis Logistics
acquired a 60% interest in CSI on April 24, 1997 and increased its ownership to
77.1% during the remainder of 1997. On June 12, 1998, ProLogis Logistics
increased its ownership in CSI to 100% by purchasing the minority shareholder's
interest.
On June 15, 1998, CSI acquired Rosenberger Cold Storage for $55.4 million.
With this acquisition, CSI owned or operated refrigerated distribution
facilities aggregating 96.0 million cubic feet at June 30, 1998.
At June 30, 1998, ProLogis had a $141.0 million note receivable from
ProLogis Logistics. The note is unsecured, bears interest at 10% per annum and
matures on April 24, 2002. Interest payments on the note are due annually.
ProLogis accounts for its investment in ProLogis Logistics on the equity
method. ProLogis recognized income (including interest income on the notes
receivable and a management fee payable from CSI) from its investment in
ProLogis Logistics of $1.5 million for the three months ended June 30, 1998 and
also for the three months ended June 30, 1997, and $2.5 million and $1.5 million
for the six months ended June 30, 1998 and 1997, respectively.
Frigoscandia S.A.
On January 16, 1998, ProLogis invested in 100% of the preferred stock of
Frigoscandia S.A., a Luxembourg company, which acquired a refrigerated
distribution company headquartered in Sweden for $400.3 million on the same
date. The acquired company, Frigoscandia AB, is 100% owned by Frigoscandia
Holding AB. Frigoscandia Holding AB is 100% owned by a wholly-owned subsidiary
of Frigoscandia S.A. At June 30, 1998, Frigoscandia AB, which operates in eight
European countries, owned 178.5 million cubic feet of refrigerated distribution
facilities and had an additional 4.3 million cubic feet of facilities under
development. The common stock of Frigoscandia S.A. is owned by a subsidiary of
Security Capital Group Incorporated ("Security Capital"), ProLogis' largest
shareholder. ProLogis recognizes substantially all economic benefits of the
activities of Frigoscandia S.A.
At June 30, 1998, ProLogis had a $183.1 million note receivable from
Frigoscandia Holding AB. The unsecured note bears interest at 8% per annum and
is due on demand. Additionally, at June 30, 1998, ProLogis had a $30 million
mortgage note receivable from Frigoscandia Limited UK, a subsidiary of
Frigoscandia AB. The mortgage note receivable, which provides for interest at 7%
per annum and matures on March 20, 2018, is secured by refrigerated distribution
properties.
9
<PAGE>
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
ProLogis accounts for its investment in Frigoscandia S.A. on the equity
method. ProLogis recognized a loss of $2.5 million and income of $0.7 million
for the three and six months periods ended June 30, 1998, respectively,
(including interest income on the mortgage note and note receivable) from its
investment in Frigoscandia S.A.
4. Borrowings:
Line of Credit
At June 30, 1998, ProLogis had a $350 million unsecured revolving line of
credit agreement with NationsBank, N.A., ("NationsBank"), as agent for a bank
group. This agreement provides for interest at ProLogis' option, at either (a)
the greater of the federal funds rate plus 0.5% and the prime rate, or (b) LIBOR
plus 0.95% based upon ProLogis' senior debt ratings in effect at June 30, 1998.
At June 30, 1998, ProLogis was in compliance with all covenants contained in the
credit agreement. ProLogis had $197.0 million of borrowings outstanding on the
line of credit at June 30, 1998.
On August 11, 1998, ProLogis entered into an amended and restated credit
agreement with NationsBank that provides for a $350 million unsecured revolving
line of credit. The new agreement, which replaces the credit agreement in effect
at June 30, 1998, provides for interest, at ProLogis' option, at either (a) the
greater of the federal funds rate plus 0.5% and the prime rate, or (b) LIBOR
plus 0.75% based upon ProLogis' current senior debt ratings. In addition,
ProLogis pays certain annual fees. Under a competitive bid option contained in
the new line of credit agreement, ProLogis may be able to borrow at a lower
interest rate spread over LIBOR, depending on market conditions. This option is
available on up to $100 million of borrowings. The line of credit matures on May
1, 2000 and may be extended annually for an additional year with the approval of
NationsBank and the other participating lenders. All borrowings under the line
of credit are subject to certain covenants, similar to those contained in the
previous line of credit agreement.
In addition, ProLogis has a $25 million short-term unsecured discretionary
line of credit with NationsBank that matures on October 1, 1998. The rate of
interest and the maturity date of each advance on this line of credit are
determined by agreement between ProLogis and NationsBank at the time of each
advance. At June 30, 1998, there were $19.6 million of borrowings outstanding on
this credit facility.
Long-term Debt Offering
On July 20, 1998, ProLogis completed a $250 million offering of 7.05% debt
securities due July 15, 2006 (the "2006 Notes") with a coupon rate of 7.05%. The
securities were issued at a discount, resulting in a yield to maturity of 7.08%.
The 2006 Notes are direct, senior unsecured obligations of ProLogis and rank
equally with all other unsecured and unsubordinated indebtedness of ProLogis
from time to time outstanding. Interest on the 2006 Notes is payable
semiannually in arrears. The 2006 Notes are redeemable at any time at the option
of ProLogis, in whole or in part, at a redemption price equal to the principal
amount of the 2006 Notes being redeemed plus accrued interest thereon to the
redemption date plus a make-whole amount, if any. The 2006 Notes are governed by
the terms and provisions of the same indenture agreement applicable to ProLogis'
other debt securities. Net proceeds from the offering were approximately $247.6
million, net of underwriters' commissions and other costs.
10
<PAGE>
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Interest Expense
For the six months ended June 30, 1998 and 1997, interest expense on all
borrowings was $34.0 million and $24.6 million, respectively, which was net of
capitalized interest of $8.9 million and $8.5 million, respectively. The total
interest paid in cash was $41.7 million and $28.5 million for the six months
ended June 30, 1998 and 1997, respectively.
5. Minority Interest:
Minority interest represents limited partners' interests in five real
estate partnerships controlled by ProLogis (Red Mountain Joint Venture, ProLogis
Limited Partnership-I, ProLogis Limited Partnership-II, ProLogis Limited
Partnership-III, and ProLogis Limited Partnership-IV). At June 30, 1998, a total
of 5,069,258 limited partnership units were held by minority interest limited
partners in the various real estate partnerships. Limited partners are entitled
to exchange each partnership unit for one Common Share and are entitled to
receive preferential cumulative quarterly distributions per unit equal to the
quarterly distribution in respect of Common Shares. For the six months ended
June 30, 1998, distributions of $3.1 million were made to the minority interest
limited partners. For financial reporting purposes, the assets, liabilities,
results of operations and cash flows of these partnerships are included in
ProLogis' consolidated financial statements and the third party investors'
interests in the partnerships are reflected as minority interest.
During the six months ended June 30, 1998, ProLogis increased its ownership
in one partnership, ProLogis Limited Partnership-IV, from 96.36% to 97.57% by
contributing additional funds to the partnership in conjunction with tax
deferred exchanges of real estate. The additional contribution aggregated $2.4
million.
11
<PAGE>
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Distributions and Dividends:
Common Share Distributions
On March 5, 1998, the Board increased ProLogis' annual distribution to
$1.24 per Common Share from $1.14 per Common Share. ProLogis paid quarterly
distributions of $0.285 per Common Share on February 24, 1998 and $0.3183 per
Common Share on May 26, 1998. On July 24, 1998, the Board declared a quarterly
distribution of $0.3183 per Common Share payable on August 25, 1998 to
shareholders of record on August 10, 1998.
Preferred Share Dividends
During 1998, ProLogis paid quarterly dividends of:
. $0.5875 per cumulative redeemable Series A preferred share on March 31,
1998 and June 30, 1998;
. $0.4375 per cumulative convertible Series B preferred share ("Series B
Preferred Share") on March 31, 1998 and June 30, 1998;
. $1.0675 per cumulative redeemable Series C preferred share on March 31,
1998 and June 30, 1998; and,
. $0.43 per cumulative redeemable Series D preferred share on a prorated
basis for the period from April 13, 1998 (date of issuance) to June 30,
1998 on June 30, 1998.
7. Shareholders' Equity:
Authorized Shares
At the annual meeting on June 30, 1998, the shareholders of ProLogis
approved an amendment to the Declaration of Trust to increase the number of
authorized shares of beneficial interest to 230,000,000 shares from 180,000,000
shares.
Completed Equity Offerings
ProLogis sold 4,000,000 Common Shares on March 18, 1998 and 1,493,878
Common Shares on April 29, 1998. The sales were made through underwritten public
offerings and generated proceeds, net of underwriting discounts and offering
costs, of $95.7 million and $34.7 million, respectively.
On April 13, 1998, ProLogis issued 10,000,000 shares of Series D Cumulative
Redeemable Preferred Stock, par value $0.01 per share with a stated liquidation
preference of $25.00 per share (the "Series D Preferred Shares"). Holders of the
Series D Preferred Shares are entitled to receive cumulative preferential cash
distributions at a rate of 7.92% of the liquidation preference per annum (equal
to $1.98 per share). Such distributions are payable quarterly in arrears, when,
and if, declared by the ProLogis Board, out of funds legally available for
payment of distributions. Subject to certain conditions, the holders of Series D
Preferred Shares have limited voting rights. The Series D Preferred Shares are
redeemable on or after April 13, 2003 by ProLogis for cash at the stated
redemption price, plus accrued and unpaid distributions. The redemption price
12
<PAGE>
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(other than the portion thereof consisting of accrued and unpaid distributions)
is payable solely out of the sales proceeds of other capital shares of ProLogis,
which may include shares of other series of preferred shares. The Series D
Preferred Shares rank on parity with the other series of preferred shares of
ProLogis with respect to payment of distributions and amounts upon liquidation.
Net proceeds from the offering were $241.7 million, net of underwriting discount
and offering costs.
Shelf Registration
On May 15, 1998, ProLogis filed an $800 million shelf registration
statement with the Securities and Exchange Commission, which was declared
effective on May 29, 1998. This shelf registration supplemented an existing
shelf registration with a balance of $183 million. As a result of this filing,
ProLogis can issue securities in the form of debt securities, preferred shares,
Common Shares, rights to purchase Common Shares and preferred share purchase
rights on an as-needed basis, subject to ProLogis' ability to effect offerings
on satisfactory terms. After giving effect to the July 1998 issuance of the 2006
Notes discussed in Note 4, ProLogis has $733 million of shelf-registered
securities available for issuance.
8. Earnings Per Common Share:
The following is a reconciliation of the numerator and denominator used to
calculate basic earnings per Common Share to the numerator and denominator used
to calculate diluted earnings per Common Share under SFAS No. 128 for the
periods indicated (in thousands, except per Common Share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net earnings attributable to Common Shares.................. $ 23,651 $ 23,054 $ 51,397 $ 39,786
Add: Minority interest..................................... -- (a) 940 2,054 1,835
-------- -------- -------- --------
Adjusted net earnings attributable to Common Shares......... $ 23,651 $ 23,994 $ 53,451 $ 41,621
======== ======== ======== ========
Weighted-average Common Shares outstanding - basic.......... 122,445 97,758 120,236 96,888
Incremental options and warrants............................ 412 9 416 9
Weighted-average effect of conversion of partnership
units into Common Shares.................................. -- (a) 5,194 5,070 5,194
-------- -------- -------- --------
Adjusted weighted-average Common Shares outstanding -
diluted................................................... 122,857 102,961 125,722 102,091
======== ======== ======== ========
Per share net earnings attributable to Common Shares:
Basic..................................................... $ 0.19 $ 0.24 $ 0.43 $0.41
======== ======== ======== ========
Diluted (b)............................................... $ 0.19 $ 0.23 $ 0.43 $0.41
======== ======== ======== ========
</TABLE>
- ---------------
(a) Net earnings per Common Share on a diluted basis for the three months ended
June 30, 1998 does not assume the conversion of limited partnership units as
the effect is antidilutive.
(b) For the three months ended June 30, 1998 and 1997, there were 10,174 and
10,320 weighted-average Series B Preferred Shares outstanding on an as-
converted basis, respectively. For the six months ended June 30, 1998 and
1997, there were 10,209 and 10,320 weighted-average Series B Preferred
shares outstanding on an as-converted basis, respectively. These Series B
Preferred Shares were not assumed to be converted into Common Shares for
purpose of calculating diluted earnings per Common Share as the effect was
antidilutive. These securities may become dilutive to earnings per Common
Share in subsequent periods.
13
<PAGE>
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
9. Derivative Financial Instruments:
ProLogis has only limited involvement with derivative financial instruments
and does not use them for trading purposes. ProLogis uses derivatives to manage
well-defined risk associated with interest and foreign currency rate
fluctuations on existing obligations or anticipated transactions.
The primary risks associated with derivative instruments are market risk
(price risk) and credit risk. Price risk is defined as the potential for loss
in the value of the derivative due to adverse changes in market prices (interest
or foreign currency rates). Through hedging, ProLogis can effectively manage
the risk of increases in interest rates and fluctuations in foreign currency
exchange rates.
Credit risk is the risk that the counterparty to a derivative contract
fails to perform or meet its financial obligation under the contract. ProLogis
does not obtain collateral to support financial instruments subject to credit
risk but monitors the credit standing of counterparties. ProLogis does not
anticipate non-performance by any of the counterparties to its derivative
contracts. Should a counterparty fail to perform, however, ProLogis would incur
a financial loss to the extent of the positive fair market value of the
derivative instruments, if any.
In October 1997, in anticipation of debt offerings in 1998, ProLogis
entered into two interest rate protection agreements which have been renewed
past the original termination dates. The agreements currently in effect are:
. a forward treasury lock agreement with a notional amount of $75 million
that terminates on August 31, 1998 and effectively locks in the 30-year
treasury rate can be used to price a future long-term debt issue at 6.36%;
and,
. a swap agreement with a notional amount of $75 million that terminates on
August 28, 1998 and carries a fixed rate of 6.754%.
At June 30, 1998, based on quoted market prices, the fair value of the
forward treasury lock agreement was a loss of approximately $7.6 million and the
fair value of the swap agreement was a loss of approximately $6.9 million.
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
ProLogis Trust:
We have reviewed the accompanying consolidated balance sheet of ProLogis
Trust and subsidiaries as of June 30, 1998, and the related consolidated
statements of income and comprehensive income for the three and six months ended
June 30, 1998 and 1997, and the consolidated statements of cash flows for the
six months ended June 30, 1998 and 1997. These financial statements are the
responsibility of the Trust's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of ProLogis Trust and subsidiaries as
of December 31, 1997, and in our report dated March 13, 1998, we expressed an
unqualified opinion on that statement. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 1997, is
fairly stated in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 13, 1998
15
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information should be read in conjunction with ProLogis' 1997
Annual Report on Form 10-K as well as the unaudited consolidated financial
statements and notes included in Item 1 of this report. See ProLogis' 1997
Annual Report on Form 10-K for a discussion of various risk factors associated
with forward-looking statements made in these documents.
Overview
ProLogis' operating results depend primarily on the operating results of
its distribution properties, which are substantially influenced by (i) the
demand for and supply of distribution properties in ProLogis' target market
cities; (ii) the pace and economic returns at which ProLogis can acquire and
develop additional distribution properties; (iii) the extent to which ProLogis
can sustain improved market performance as measured by lease rates and occupancy
levels; and, (iv) the demand for the corporate distribution facilities services
that are provided by ProLogis Development Services. In addition, the operating
performance of ProLogis' two unconsolidated subsidiaries that are engaged in the
refrigerated distribution business effect ProLogis' operating results.
ProLogis' target market cities and submarkets have benefited substantially
in recent periods from demographic trends (including population and job growth)
which influence the demand for distribution properties. ProLogis believes its
ability to compete is significantly enhanced relative to other companies due
to its depth of management and ability to serve customers through the ProLogis
International Operating System(TM), which includes acquisition, development,
property management personnel, and presence in local markets.
At June 30, 1998, ProLogis' real estate investments included 97.3 million
square feet of operating properties with a total expected investment of $3.0
billion. During the six months ended June 30, 1998, ProLogis acquired 3.0
million square feet of operating properties at a total expected investment of
$87.2 million, while disposing of properties from its operating portfolio
aggregating 948,000 square feet. For the six months ended June 30, 1998,
ProLogis recognized $7.0 million of other real estate income related to the
activities of ProLogis Development Services, primarily from the disposition of
undepreciated property.
ProLogis had 11.5 million square feet of properties under development at
June 30, 1998 with a total expected investment at completion of $429.7 million.
Development starts during the six months ended June 30, 1998 aggregated 7.8
million square feet at a total expected investment of $283.3 million.
Development completions during this period aggregated 4.4 million square feet at
a total expected investment of $169.3 million. At June 30, 1998, ProLogis had
1,621 acres of land in inventory for the future development of approximately
28.5 million square feet of distribution facilities.
16
<PAGE>
During the first six months of 1997, ProLogis began expanding its
distribution facilities operations into Europe and Mexico. This expansion was
necessary to meet the needs of its targeted national and international customers
as they expand and reconfigure their distribution facility requirements
globally. With over 20 target market cities identified in Europe and five target
market cities identified in Mexico, ProLogis believes significant growth
opportunities exist internationally to enable ProLogis to meet its objective of
achieving long-term sustainable growth in cash flow. At June 30, 1998, ProLogis
owned 1,288,000 square feet of operating properties with a total expected
investment of $55.2 million in Europe and 887,000 square feet of operating
properties with a total expected investment of $32.1 million in Mexico.
Additionally, at June 30, 1998, ProLogis had 492,000 square feet with a total
expected investment of approximately $28.3 million under development in Europe
and 1,122,000 square feet with a total expected investment of $43.0 million
under development in Mexico.
At June 30,1998, ProLogis' had approximately 274.5 million cubic feet of
refrigerated distribution facilities in operation (178.5 million located in
Europe) through its investment in two unconsolidated subsidiaries.
No assurance can be given that the current cost of funds available to
ProLogis will be available in the future. Additionally, no assurance can be
given that the expected trends in leasing rates and economic returns on acquired
and developed properties will be realized. There are risks associated with
ProLogis' development and acquisition activities which include future factors
such as development and acquisition opportunities explored by ProLogis may be
abandoned; construction costs of a project may exceed original estimates due to
increased materials, labor or other expenses; and construction and lease-up may
not be completed on schedule, resulting in increased debt service expense and
construction costs. Acquisition activities entail risks that investments will
fail to perform in accordance with expectations and that analysis with respect
to the cost of improvement to bring an acquired project up to standards will
prove inaccurate, as well as general investment risks associated with any new
real estate investment. Although ProLogis undertakes a thorough evaluation of
the physical condition of each proposed investment before it is acquired,
certain defects or necessary repairs may not be detected until after it is
acquired, which could increase ProLogis' total acquisition cost. Risks include
the occurrence of any of the events described above that could adversely affect
ProLogis' ability to achieve its projected returns on acquisitions and projects
under development and could hinder ProLogis' ability to make expected
distributions to equity holders.
Results of Operations
Six Months Ended June 30, 1998 and 1997
Net earnings attributable to Common Shares increased by $11.6 million to
$51.4 million for the first six months of 1998 from $39.8 million for the same
period in 1997. The increase in net earnings resulted from:
. an increase in net operating income from property operations (after
deductions for depreciation), primarily the result of the increased number
of distribution properties in operation in 1998 as compared to 1997;
. an increase in other real estate income, primarily gains on dispositions of
undepreciated properties and fees generated by ProLogis Development
Services;
. additional investments in refrigerated distribution businesses since June
30, 1997;
. a net foreign exchange gain recognized during 1998; and,
. a reduction in expenses resulting from the internalization of management
transaction that occurred in September 1997.
17
<PAGE>
Interest expense, preferred share dividends and weighted-average Common
Shares outstanding all increased for the first six months of 1998 as compared to
the first six months of 1997, as additional debt and equity were used by
ProLogis to finance its increased acquisition and development activities.
Net earnings is expected to increase in subsequent periods due to the
acquisition and development of additional operating properties. In addition,
ProLogis anticipates that rental rates and occupancy levels will continue to
increase in subsequent periods and that the activities of ProLogis Development
Services will continue to generate other real estate income. ProLogis'
investments in the refrigerated distribution businesses are also expected to
have a positive effect on its results of operations in the future.
Property Operations
At June 30, 1998 ProLogis had 1,053 operating properties totaling 97.3
million of rentable square feet, an increase of 12.0 million square feet over
June 30, 1997. This increase in operating properties resulted in an increase in
property-level net operating income of $25.9 million as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Rental income.................................. $162,918 $136,543
Property operating expenses:
Rental expenses........................... 13,300 9,513
Property management fees paid to affiliate -- 3,312
-------- --------
Net operating income........................... $149,618 $123,718
======== ========
</TABLE>
Rental income increased by $26.4 million for the first six months of 1998
as compared to the same period in 1997. This increase is comprised from the
following components:
. properties acquired or developed during the first six months of 1998
contributed $1.2 million and $2.7 million of additional rental revenues,
respectively;
. properties acquired or developed during 1997 contributed $8.9 million and
$11.1 million of additional rental revenues, respectively;
. properties owned and operated at January 1, 1997 contributed $8.6 million
of additional rental revenues; and,
. properties that were in operation during the first six months of 1997 but
have subsequently been disposed of reduced rental revenues for the first
six months of 1998 by $6.1 million. Of the properties acquired or developed
in 1997 and 1998, three have been disposed of as of June 30, 1998.
Rental expenses, including property management fees paid to affiliate in
1997, net of recoveries from tenants, increased $475,000 for the first six
months of 1998 over the same period in 1997. Gross expenses, before the
deduction of amounts recovered from tenants, were approximately 25% of rental
income for both of the six-month periods ended June 30, 1998 and 1997.
18
<PAGE>
ProLogis acquired its property management company from Security Capital,
its largest shareholder, on September 9, 1997. The property management company
managed approximately 96% of ProLogis' operating portfolio prior to the
acquisition. As a result, ProLogis no longer pays a property management fee on
the properties managed by this company. However, ProLogis has recognized the
actual personnel and other operating costs associated with the property
management function in rental expenses in 1998.
ProLogis frequently acquires properties that are underleased and develops
properties which are not fully leased at the start of construction, which
reduces ProLogis' overall occupancy rate below its stabilized level but provides
opportunities to increase revenues. The term "stabilized" means that capital
improvements, repositioning, new management and new marketing programs (or
development and marketing, in the case of newly developed properties) have been
completed and in effect for a sufficient period of time (but in no case longer
than 12 months for properties acquired by ProLogis and 12 months after shell
completion for properties developed by ProLogis) to achieve stabilized occupancy
(typically 93%). ProLogis has been successful in increasing occupancies on
acquired and developed properties during their initial months of operation
resulting in an occupancy rate of 94.7% and a leased rate of 96.2% for
stabilized properties owned at June 30, 1998. The average increase in rental
rates for new and renewed leases on previously leased space (17.4 million square
feet) during the first six months of 1998 was 14.5%. As leases are renewed or
new leases are acquired, ProLogis expects most lease rates on renewals or new
leases to increase in the remainder of 1998.
Other Real Estate Income
Other real estate income consists primarily of gains on the disposition of
undepreciated properties and fees and other income received from corporate
distribution facilities customers. Other real estate income is generated to a
large extent by ProLogis Development Services. ProLogis Development Services
develops corporate distribution facilities to meet specific customer
requirements or contracts on a fee basis to develop distribution facilities for
customers. Through its preferred stock ownership of ProLogis Development
Services, ProLogis realizes substantially all economic benefits of these
activities. ProLogis advances mortgage loans to ProLogis Development Services to
fund its acquisition, development and construction activities. ProLogis accounts
for these loans as real estate investments, effectively consolidating the
activities of ProLogis Development Services. Due to the timing of the completion
of these development projects and the related dispositions, other real estate
income recognized by ProLogis will vary on a quarterly basis.
Income (Loss) from Unconsolidated Subsidiaries
Income (loss) from unconsolidated subsidiaries relates to ProLogis'
investments in 100% of the preferred stock of two companies, whose primary
source of income is their respective investments in refrigerated distribution
businesses. These investments, discussed in Note 3 to the Consolidated Financial
Statements in Item 1, generated income as follows (in thousands):
19
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1998 1997
------- ------
<S> <C> <C>
ProLogis Logistics (a):
Equity in earnings (loss).................................... $(2,628) $ 28
Management fee from CSI...................................... 712 171
Interest income on note receivable from ProLogis Logistics... 4,438 1,347
------- ------
2,522 1,546
------- ------
Frigoscandia S.A. (b):
Equity in earnings (loss) (c)................................ (9,990) --
Interest income on mortgage note receivable from
Frigoscandia Limited UK................................. 525 --
Interest income on note receivable from Frigoscandia
Holding AB.............................................. 10,151 --
------- ------
686 --
------- ------
$ 3,208 $1,546
======= ======
</TABLE>
_________________
(a) ProLogis Logistics was acquired on April 24, 1997.
(b) Frigoscandia S.A. was acquired on January 16, 1998.
(c) Frigoscandia S.A.'s loss for the six months ended June 30, 1998 includes
$2.5 million of unrealized losses on the remeasurement of assets and
liabilities based on the foreign exchange rates as of June 30, 1998.
Foreign Exchange Gain
The foreign exchange gain for the six months ended June 30, 1998 consists
of a gain of $2,054,000 associated with forward exchange contracts and a gain of
$9,000 related to remeasurement adjustments.
On December 22, 1997, ProLogis entered into two separate contracts to (i)
exchange $373.8 million for 2.9 billion Swedish krona, and (ii) exchange 310.0
million German marks for $175.0 million in anticipation of the January 1998
acquisition and planned European currency denominated financing of Frigoscandia
AB by Frigoscandia S.A., ProLogis' unconsolidated subsidiary. The contracts were
marked to market at December 31, 1997 and ProLogis recognized a net loss of $6.0
million in 1997. Both contracts were settled during the first quarter of 1998
and ProLogis recognized a net gain of $2.1 million. These foreign exchange
hedges were one-time, non-recurring contracts that fixed the exchange rate
between the U.S. dollar and the Swedish krona and German mark. ProLogis executed
these hedges after the purchase agreement to acquire Frigoscandia AB, which
required payment in Swedish krona was executed. The contracts were executed
exclusively for the acquisition and financing of Frigoscandia AB and were not
entered into to hedge on-going income in foreign currencies.
The remeasurement of intercompany assets and liabilities on the financial
statements of ProLogis' consolidated foreign subsidiaries into their functional
currency, as required by GAAP, resulted in a foreign exchange gain of $9,000 for
the six months ended June 30, 1998. The gain was associated with the
remeasurement of intercompany loans between the wholly-owned foreign subsidiary
of ProLogis and its associated foreign subsidiaries.
20
<PAGE>
Interest Income
Interest income for the first six months of 1998 increased $208,000 from
the same period in 1997. The increase in interest income was primarily a result
of higher average cash balances in the first six months of 1998 compared to the
same period in 1997.
Depreciation and Amortization
The increase in depreciation and amortization expense of $9.7 million for
the six months ended June 30, 1998 as compared to the same period in 1997
results primarily from the increase in operating properties in 1998. See
"--Property Operations".
Interest Expense
Interest expense is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1998 1997
------------------
<S> <C> <C>
Line of credit............ $ 7,593 $ 1,751
Long-term debt............ 30,036 25,753
Mortgage notes payable.... 2,690 2,825
Securitized debt.......... 1,449 1,542
Assessment bonds payable.. 1,167 1,192
Capitalized interest...... (8,928) (8,505)
------- -------
$34,007 $24,558
======= =======
</TABLE>
Interest expense on line of credit borrowings increased $5.8 million for
the first six months of 1998 over the same period in 1997 due primarily to a
higher average outstanding balance ($219.1 million in 1998 compared to $42.2
million in 1997) partially offset by a lower weighted-average daily interest
rate (6.60% in 1998 compared to 6.82% in 1997). Of the interest expense incurred
in 1998, $2.7 million related to the $200 million bridge loan associated with
the Frigoscandia AB acquisition in the first quarter of 1998, which was repaid
on March 31, 1998. See "--Liquidity and Capital Resources--Investing and
Financing Activities".
Long-term debt interest increased by $4.3 million for the six months ended
June 30, 1998 as compared to the six months ended June 30, 1997 due primarily to
the interest incurred in 1998 on a $100 million long-term debt issuance in July
1997.
Interest expense recognized on borrowings is offset by interest capitalized
with respect to ProLogis' development activities. Capitalized interest increased
by $423,000 in the first six months of 1998 over the first six months of 1997.
Capitalized interest levels are reflective of ProLogis' cost of funds and the
level of development activity.
21
<PAGE>
General and Administrative Expense, Administrative Expense Services Fee and REIT
Management Fee
ProLogis acquired its REIT management company from Security Capital on
September 9, 1997 and terminated the REIT Management Agreement. The REIT
management fee previously paid to the REIT management company was replaced with
the actual personnel and other operating costs associated with the REIT
management function. These costs are recorded as general and administrative
expenses in 1998. Direct and incremental costs related to successful development
and leasing activities have been capitalized in accordance with GAAP.
Upon consummation of this acquisition, ProLogis entered into an
administrative services agreement ("ASA") with Security Capital for services
which include, but are not limited to, payroll and human resources, cash
management, accounts payable, MIS support and other computer services, research,
investor relations and insurance, legal and tax administration. These services
are provided in exchange for a fee equal to Security Capital's direct cost of
providing the service plus an overhead factor of 20%, subject to a maximum of
approximately $2.0 million for the period from September 9, 1997 to December 31,
1997 and $5.1 million for 1998.
ASA fees for the six months ended June 30, 1998 aggregated $1.8 million,
including $445,000 that has been recognized as rental expenses. Of the total ASA
fees, $296,000 have been capitalized. The ASA, which expires on December 31,
1998, provides for automatic renewals of consecutive one-year terms, subject to
approval by a majority of the independent members of the Board.
Other Expense
Other expenses, which increased by $56,000 for the six months ended June
30, 1998 over the six months ended June 30, 1997, consist of land holding costs
and the write-off of previously capitalized pursuit costs. Land holding costs
were $1,147,000 for the first six months of 1998 compared to $1,016,000 for the
same period in 1997 and pursuit cost write-offs were $370,000 for the first six
months of 1998 compared to $445,000 for the same period in 1997.
Preferred Share Dividends
The increase in preferred share dividends of $4.2 million for the six
months ended June 30, 1998 over the same period in 1997 is primarily
attributable to the issuance of Series D Preferred Shares in April 1998.
See "--Liquidity and Capital Resources--Investing and Financing Activities".
Three Months Ended June 30, 1998 and 1997
Net earnings attributable to Common Shares and its components for the three
months ended June 30, 1998 compared to three months ended June 30, 1997 reflect
changes similar to those discussed in the preceding paragraphs for comparison of
the six months ended on the same dates. The changes for the three-month periods
are substantially attributable to the same reasons discussed in the preceding
paragraphs.
22
<PAGE>
Liquidity and Capital Resources
Overview
ProLogis considers its liquidity and ability to generate cash from
operations and financing to be adequate and expects it to continue to be
adequate to meet its development, acquisition, operating and debt service needs
as well as its shareholder distribution requirements.
ProLogis expects to finance future activities with cash on hand,
redeployment of proceeds from the disposition of selected properties, borrowings
on its line of credit, issuance of limited partnership units, the assumption of
existing mortgage debt, when applicable, long-term debt issuances and sales of
Common Shares and preferred shares. The line of credit provides ProLogis with
the ability to efficiently respond to market opportunities while minimizing the
amount of cash invested in short-term investments at lower yields. At June 30,
1998 ProLogis had $158.4 million available for borrowing under the line of
credit ($328.9 million available at August 10, 1998). Another source of future
liquidity and financial flexibility is ProLogis' shelf-registered securities
($733.0 million available at August 10, 1998) which can be issued in the form of
debt securities, preferred shares, Common Shares, rights to purchase Common
Shares and preferred share purchase rights on an as-needed basis, subject to
ProLogis' ability to effect an offering on satisfactory terms.
Operating Activities
Cash provided by operating activities increased by $16.1 million during the
first six months of 1998 as compared to the first six months of 1997 ($100.4
million in 1998 and $84.3 million in 1997). This increase is primarily the
result of the increased number of operating properties in 1998 over 1997. See
"--Results of Operations--Property Operations".
Investing and Financing Activities
ProLogis funds its current investment needs primarily with line of credit
borrowings, which are subsequently repaid with proceeds from sales of debt and
equity securities. ProLogis' investment activities used approximately $531.0
million and $267.4 million of cash during the first six months of 1998 and 1997,
respectively. ProLogis' financing activities provided net cash flow of $468.9
million and $187.9 million during the first six months of 1998 and 1997,
respectively. Cash distributions paid on Common Shares were $72.6 million and
$51.3 million for the six months ended June 30, 1998 and 1997, respectively,
which have been substantially funded by cash generated from operating
activities.
Investments in real estate, net of proceeds from dispositions, used cash of
$240.3 million during the first six months of 1998 and $192.3 million during the
first six months of 1997. ProLogis' cash investment in ProLogis Logistics and
related subsidiaries was $76.7 million during the first six months of 1998 and
$75.2 million during the first six months of 1997. During 1998, ProLogis' net
cash investment in Frigoscandia S.A. and related subsidiaries aggregated $214.0
million.
ProLogis' primary financing activities in the first six months of 1998
were: (i) the sale of Series D Preferred Shares generating net proceeds of
$241.7 million; (ii) the sale of Common Shares (including sale of Common Shares
under the share purchase plan) generating net proceeds of $130.6 million; (iii)
net borrowings on ProLogis' lines of credit of $216.6 million; and, (iv)
proceeds from a short-term bridge loan from NationsBank of $200 million (used
primarily to finance the acquisition of Frigoscandia AB), which was repaid on
March 31, 1998 after Frigoscandia Holding AB obtained third-party financing.
23
<PAGE>
ProLogis' primary financing activities during the first six months of 1997
were: (i) the issuance of long-term debt generating net proceeds of $99.1
million; (ii) the sale of Common Shares (including the sale of Common Shares
under the share purchase plan) generating net proceeds of $80.7 million; and,
(iii) net borrowings on ProLogis' lines of credit of $91.5 million.
On July 20, 1998, ProLogis completed a $250 million offering of debt
securities due July 15, 2006 with a coupon rate of 7.05%. The securities were
issued at a discount resulting in a yield to maturity of 7.08%. Net proceeds
from the offering were approximately $247.6 million, net of underwriters'
commissions and other costs. The proceeds were used to repay borrowings on
ProLogis' line of credit.
Line of Credit
On August 11, 1998, ProLogis entered into an amended and restated credit
agreement with NationsBank that provides for a $350 million unsecured revolving
line of credit. The new agreement, which replaces the credit agreement in effect
at June 30, 1998, provides for interest at ProLogis' option, at either (a) the
greater of the federal funds rate plus 0.5% and the prime rate, or (b) LIBOR
plus 0.75% based upon ProLogis' current senior debt ratings. In addition,
ProLogis pays certain annual fees. Under a competitive bid option contained in
the new line of credit agreement, ProLogis may be able to borrow at a lower
interest rate spread over LIBOR, depending on market conditions. This option is
available on up to $100 million of borrowings. The line of credit matures on May
1, 2000 and may be extended annually for an additional year with the approval of
NationsBank and the other participating lenders. All borrowings on the line of
credit are subject to certain covenants similar to those contained in the
previous line of credit agreement.
In addition, ProLogis has a $25 million short-term, unsecured discretionary
line of credit with NationsBank that provides for additional flexibility through
same day borrowings and more efficient cash management.
Derivative Financial Instruments
ProLogis utilizes derivative instruments in anticipation of future
financing transactions in order to manage well defined interest rate risk.
Through hedging, ProLogis can effectively manage the risk of increases in
interest rates on future debt issuances. In October 1997, in anticipation of
debt offerings in 1998, ProLogis entered into two interest rate protection
agreements which have been renewed past the original termination dates. The
agreements currently in effect are:
. a forward treasury lock agreement with a notional amount of $75 million
that terminates on August 31, 1998 and effectively locks in the 30-year
treasury rate that can be used to price a future long-term debt issue at
6.36%; and,
. a swap agreement with a notional amount of $75 million that terminates on
August 28, 1998 and carries a fixed rate of 6.754%.
At June 30, 1998, based on quoted market prices, the fair value of the
forward treasury lock agreement was a loss of approximately $7.6 million and the
fair value of the swap agreement was a loss of approximately $6.9 million.
ProLogis intends to also utilize derivative instruments in order to manage
currency risk exposure associated with foreign currency denominated purchase
contracts and income in excess of interest expense. ProLogis had no open foreign
currency contracts as of June 30, 1998. In future periods, ProLogis will
consider using selective currency hedges through foreign exchange forwards or
options in order to minimize on-going currency gains and losses.
24
<PAGE>
Commitments
At June 30, 1998, ProLogis had letters of intent or contingent contracts,
subject to ProLogis' final due diligence, for the acquisition of 6.5 million
square feet in various target markets with an acquisition cost of $289.1
million. Through July 31, 1998, ProLogis had completed the acquisition of
811,000 square feet at an acquisition cost of $47.5 million of properties
subject to these contingent contracts. In addition, ProLogis had a letter of
intent to acquire an industrial distribution development company located in the
United Kingdom for approximately $160 million. This acquisition would be made
through the formation of a subsidiary, of which ProLogis would own 100% of the
preferred stock and recognize substantially all economic benefits of its
activities. The foregoing transactions are subject to a number of conditions,
and ProLogis cannot predict with certainty that any of them will be consummated.
In addition, at June 30, 1998, ProLogis had $429.7 million of budgeted
development cost for developments in process, of which $248.2 million was
unfunded.
ProLogis' current distribution policy is to pay quarterly distributions to
shareholders based upon what it considers to be a reasonable percentage of cash
flow and at the level that will allow ProLogis to continue to qualify as a REIT
for tax purposes. Because depreciation is a non-cash expense, cash flow
typically will be greater than earnings from operations and net earnings.
Therefore, quarterly distributions are expected to be consistently higher than
quarterly earnings.
Pursuant to the terms of the Series A Preferred Shares, the Series B
Preferred Shares, the Series C Preferred Shares and the Series D Preferred
Shares (the "Preferred Shares"), ProLogis is restricted from declaring or paying
any distribution with respect to the Common Shares unless all cumulative
distributions with respect to the Preferred Shares have been paid and sufficient
funds have been set aside for distributions that have been declared for the then
current distribution period with respect to the Preferred Shares.
Funds from Operations
Funds from operations attributable to Common Shares increased $36.2 million
to $111.1 million for the first six months of 1998 from $74.9 million for the
same period in 1997.
Funds from operations represent ProLogis' net earnings (computed in
accordance with GAAP) before minority interest, before gains or losses on
disposition of depreciated real estate, before gains or losses on the
remeasurement of assets and liabilities on the financial statements of ProLogis'
foreign subsidiary and before deferred tax benefits or deferred tax expenses of
ProLogis' taxable subsidiaries, plus real estate depreciation and amortization
(exclusive of amortization of loan costs). ProLogis believes that funds from
operations is helpful to a reader as a measure of the performance of an equity
REIT because, along with cash flow from operating activities, financing
activities and investing activities, it provides a reader with an indication of
the ability of ProLogis to incur and service debt, to make capital expenditures
and to fund other cash needs. The funds from operations measure presented by
ProLogis, while consistent with the National Association of Real Estate
Investment Trusts' definition, will not be comparable to similarly titled
measure of other REITs which do not compute funds from operations in a manner
consistent with ProLogis. Funds from operations is not intended to represent
cash made available to shareholders. Funds from operations should not be
considered as an alternative to net earnings or any other GAAP measurement of
performance as an indicator of ProLogis' operating performance, or as an
alternative to cash flows from operating, investing or financing activities as a
measure of liquidity. Funds from operations were as follows (in thousands):
25
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended,
June 30,
-------------------
1998 1997
--------- --------
<S> <C> <C>
Net earnings attributable to Common Shares................. $ 51,397 $39,786
Add (Deduct):
Depreciation and amortization, including ProLogis'
share from unconsolidated subsidiaries.............. 63,132 37,024
Minority interest..................................... 2,054 1,835
ProLogis' share of deferred tax benefit of
unconsolidated subsidiaries......................... (1,596) --
Gain on disposition of depreciated real estate........ (4,278) (3,773)
Non-recurring foreign currency exchange gain.......... (2,054) --
Net foreign exchange loss on remeasurement of assets
and liabilities, including ProLogis' share from
unconsolidated subsidiary........................... 2,444 --
-------- -------
Funds from operations attributable to Common Shares........ $111,099 $74,872
======== =======
</TABLE>
26
<PAGE>
PART II--OTHER INFORMATION
Item 4. Submission of Matters to Vote of Securities Holders
At a meeting on June 30, 1998, the shareholders of ProLogis elected the
following Trustees to office (of the total 122,906,567 shares outstanding on the
record date of May 4, 1998, 108,510,994 shares were voted at the meeting):
. 108,395,430 shares were voted for the election of Mr. Stephen L. Feinberg
as a Class II Trustee to serve until the annual meeting of shareholders in
the year 2001, 115,564 shares withheld; and,
. 108,385,269 shares were voted for the election of Mr. Donald P. Jacobs as a
Class II Trustee to serve until the annual meeting of shareholders in the
year 2001, 125,725 shares withheld.
In addition, ProLogis' shareholders approved an amendment to the
Declaration of Trust which changed the company's name from Security Capital
Industrial Trust to ProLogis Trust and increased the number of authorized shares
of beneficial interest from 180,000,000 to 230,000,000 with 102,500,015 shares
in favor, 5,986,823 shares withheld and 24,156 shares abstaining.
Item 5. Other Information
On May 29, 1998, ProLogis' shelf registration statement was declared
effective by the Securities and Exchange Commission regarding the offering from
time to time of $800 million in one or more series of its debt securities,
preferred shares of beneficial interest and common shares of beneficial
interest. As of August 10, 1998, ProLogis has approximately $733 million in
securities available to be issued under its shelf registration statement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Articles of Amendment of Amended and Restated Declaration of Trust of
ProLogis Trust
3.2 Articles Supplementary Rights of Series A Junior Participating Preferred
Shares of ProLogis Trust
3.3 Certificate of Amendment of Amended and Restated Declaration of Trust of
Security Capital Industrial Trust
10.1 Amended and Restated Credit Agreement, dated as of August 12, 1998, between
ProLogis and NationsBank, N.A., as agent bank
12.1 Computation of Ratio of Earnings to Fixed Charges
12.2 Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Share Dividends
15.2 Letter from Arthur Andersen LLP regarding unaudited financial
information dated August 13, 1998
27 Financial Data Schedule
27
<PAGE>
(b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Financial
Date Item Reported Statements
---- ------------- ----------
<S> <C> <C>
April 13, 1998 5,7 No
April 28, 1998 5,7 No
April 30, 1998 5,7 Yes
</TABLE>
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROLOGIS TRUST
/s/ M. GORDON KEISER
--------------------------------------------
M. Gordon Keiser
Senior Vice President
(Principal Financial Officer)
/s/ EDWARD F. LONG
--------------------------------------------
Edward F. Long
Vice President and Controller
(Principal Accounting Officer)
Date: August 13, 1998
29
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
OF
AMENDED AND RESTATED DECLARATION OF TRUST
OF
PROLOGIS TRUST
The undersigned, being an officer duly authorized by a majority of the
Trustees of ProLogis Trust, a Maryland real estate investment trust (the
"Trust"), does hereby certify pursuant to the provisions of Article 7, Section 1
of the Trust's Amended and Restated Declaration of Trust, dated as of December
15, 1993, 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 a majority of all the votes entitled to be
cast on the matter.
Therefore, the Trust's Declaration of Trust is hereby amended as
follows:
1. The first two paragraphs of Article 1, Section 1 are hereby amended
to read in their entirety as follows:
"Section 1 Name. The Trust created by this Declaration of Trust
is herein referred to as the "Trust" and shall be known by the name
"ProLogis Trust." So far as may be practicable, legal and convenient,
the affairs of the Trust shall be conducted and transacted under that
name, which name shall not refer to the Trustees individually or
personally or to the beneficiaries or Shareholders of the Trust, or to
any officers, employees or agents of the Trust.
Under circumstances in which the Trustees determine that the use
of the name "ProLogis Trust" is not practicable, legal or convenient,
they may as appropriate use their names with suitable reference to
their trustee status, or some other suitable designation, or they may
adopt another name under which the Trust may hold property or operate
in any jurisdiction which name shall not, to the knowledge of the
Trustees, refer to beneficiaries or Shareholders of the Trust. Legal
title to all the properties subject from time to time to this
Declaration of Trust shall be transferred to, vested, and held by the
Trust in its own name or by the Trustees as joint tenants with right
of survivorship as Trustees of this Trust, except that the Trustees
shall have the power to cause legal title to any property of this
Trust to be held by and/or in the name of one or more of the Trustees,
or any other person as nominee, on such terms, in such manner, and
with such powers as the Trustees may determine, provided that the
interest of the Trust therein is appropriately protected."
<PAGE>
2. The Trust's Declaration of Trust is hereby amended to change the
words "Security Capital Industrial Trust" to "ProLogis Trust" each time they
appear therein.
3. Article 2, Section 1 is amended by deleting the number
"180,000,000" and inserting the number "230,000,000" in its place.
Immediately before the adoption of this Amendment, the total number of
shares of all classes which the Trust had authority to issue was 180,000,000
consisting of 150,950,000 common Shares of Beneficial Interest, $0.01 par value
per share ("Common Shares"), 5,400,000 Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest, par value $0.01 per share (the "Series A
Preferred Shares"), 8,050,000 Series B Cumulative Convertible Redeemable
Preferred Shares of Beneficial Interest, par value $0.01 per share (the "Series
B Preferred Shares"), 2,300,000 Series C Cumulative Redeemable Preferred Shares
of Beneficial Interest, par value $0.01 per share (the "Series C Preferred
Shares"), 11,500,000 Series D Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $0.01 per share (the "Series D Preferred
Shares"), and 1,800,000 Series A Junior Participating Preferred Shares, par
value $0.01 per share (the "Junior Participating Preferred Shares"),
representing an aggregate par value of $1,800,000. Immediately after the
adoption of this Amendment, the total number of shares of all classes which the
Trust has authority to issue is 230,000,000 consisting of 200,450,000 Common
Shares, 5,400,000 Series A Preferred Shares, 8,050,000 Series B Preferred
Shares, 2,300,000 Series C Preferred Shares, 11,500,000 Series D Preferred
Shares and 2,300,000 Junior Participating Preferred Shares, representing an
aggregate par value of $2,300,000.
The undersigned officer acknowledges these 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 officer, duly authorized by a
majority of the Trustees, has executed these Articles of Amendment as of this
1st day of July, 1998.
/s/ JEFFREY A. KLOPF
---------------------
Jeffrey A. Klopf
Senior Vice President
ATTEST:
/s/ LUCINDA G. MARKER
- ---------------------
Lucinda G. Marker
Assistant Secretary
<PAGE>
EXHIBIT 3.2
ARTICLES SUPPLEMENTARY
RIGHTS OF SERIES A JUNIOR
PARTICIPATING PREFERRED SHARES
of
PROLOGIS TRUST
The undersigned, being an officer duly auhtorized by a majority of the
Trustees of ProLogis Trust, a Maryland real estate investment trust (the
"Trust"), does hereby certify pursuant to the provisions of Article 2, Section 1
of the Trust's Amended and Restated Declaration of Trust, dated as of December
15, 1993, as amended and supplemented (the "Declaration of Trust"), and Section
8-203 of the Corporations and Associations Article of the Annotated Code of
Maryland, that:
FIRST: The Board of Trustees has classified 2,300,000 unissued shares
of the Trust as Series A Junior Participating Preferred Shares of Beneficial
Interest (the "Preferred Shares").
SECOND: The following is a description of the Preferred Shares,
including the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof:
Section 1. Designation and Amount. There shall be a series of
preferred shares of the Trust, $0.01 par value per share, which shall be
designated "Series A Junior Participating Preferred Shares," $0.01 par value per
share (hereinafter called "Series A Preferred Shares"), and the number of shares
constituting that series shall be 2,300,000. Such number of shares may be
increased or decreased by resolution of the Board of Trustees and by the filing
of articles supplementary in accordance with the provisions of Title 8 of the
Corporations and Associations Article of the Code of Maryland stating that such
increase or reduction has been so authorized; provided, however, that no
decrease shall reduce the number of shares of Series A Preferred Shares to a
number less than the number of shares of the series then outstanding plus the
number of shares of Series A Preferred Shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Trust.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any class or series of preferred shares of the Trust ranking prior and
superior to the shares of Series A Preferred Shares with respect to dividends,
the holders of shares of Series A Preferred Shares shall be entitled to receive,
when, as and if declared by the Board of Trustees out of funds legally available
for the purpose, quarterly dividends payable in cash to holders of record on the
last business day of January, April, July and October in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
(commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A
<PAGE>
Preferred Shares) in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Shares (hereinafter defined) or a subdivision of the
outstanding shares of Common Shares (by a reclassification or otherwise),
declared on the Shares of Beneficial Interest, par value $0.01 per share, of the
Trust (the "Common Shares") since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of Series A
Preferred Shares. In the event the Trust shall at any time following December
31, 1993 (i) declare any dividend on Common Shares payable in shares of Common
Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the
outstanding Common Shares into a smaller number of shares, then in each such
case the amount to which holders of Series A Preferred Shares were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying each such amount by a fraction the numerator of which
is the number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were outstanding
immediately prior to such event.
(B) The Trust shall declare a dividend or distribution on the Series A
Preferred Shares as provided in paragraph (A) above at the time it declares a
dividend or distribution on the Common Shares (other than a dividend payable in
shares of Common Shares).
(C) No dividend or distribution (other than a dividend or distribution
payable in Common Shares) shall be paid or payable to the holders of Common
Shares unless, prior thereto, all accrued but unpaid dividends to the date of
that dividend or distribution shall have been paid to the holders of Series A
Preferred Shares.
(D) Dividends shall begin to accrue and be cumulative on outstanding
Series A Preferred Shares from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Shares, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue and be cumulative from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Preferred
Shares entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the Series A
Preferred Shares in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Trustees may fix a record date for the determination of holders of shares of
Series A Preferred Shares entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
2
<PAGE>
Section 3. Voting Rights. The holders of Series A Preferred Shares
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each one one-hundredth of a share of Series A Preferred Shares shall entitle the
holder thereof to one vote on all matters submitted to a vote of the
shareholders of the Trust. In the event the Trust shall at any time following
December 31, 1993 (i) declare any dividend on Common Shares payable in shares of
Common Shares, (ii) subdivide the outstanding shares of Common Shares or (iii)
combine the outstanding Common Shares into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Preferred Shares were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is the
number of shares of Common Shares outstanding immediately after such event and
the denominator of which is the number of shares of Common Shares that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or required by law, the
holders of Series A Preferred Shares and the holders of Common Shares and any
other capital shares of the Trust having general voting rights shall vote
together as one class on all matters submitted to a vote of shareholders of the
Trust.
(C) (i) Whenever, at any time or times, dividends payable on any
share or shares of Series A Preferred Shares shall be in arrears in an
amount equal to at least six full quarterly dividends (whether or not
declared and whether or not consecutive), the holders of record of the
outstanding Preferred Shares shall have the exclusive right, voting
separately as a single class, to elect two trustees of the Trust at a
special meeting of shareholders of the Trust or at the Trust's next
annual meeting of shareholders, and at each subsequent annual meeting
of shareholders, as provided below. At elections for such trustees,
the holders of shares of Series A Preferred Shares shall be entitled
to cast one vote for each one one-hundredth of a share of Series A
Preferred Shares held.
(ii) Upon the vesting of such right of the holders of the
Preferred Shares, the maximum authorized number of members of the
Board of Trustees shall automatically be increased by two and the two
vacancies so created shall be filled by vote of the holders of the
outstanding Preferred Shares as hereinafter set forth. A special
meeting of the shareholders of the Trust then entitled to vote shall
be called by the Chairman or the President or the Secretary of the
Trust, if requested in writing by the holders of record of not less
than 10% of the Preferred Shares then outstanding. At such special
meeting, or, if no such special meeting shall have been called, then
at the next annual meeting of shareholders of the Trust, the holders
of the shares of the Preferred Shares shall elect, voting as above
provided, two trustees of the Trust to fill the aforesaid vacancies
created by the automatic increase in the number of members of the
Board of Trustees. At any and all such meetings for such election, the
holders of a majority of the outstanding shares of the Preferred
Shares shall be necessary to constitute a quorum for such election,
whether present in person or by proxy, and such two trustees shall be
3
<PAGE>
elected by the vote of at least a plurality of shares held by such
shareholders present or represented at the meeting. Any trustee
elected by holders of shares of the Preferred Shares pursuant to this
Section may be removed at any annual or special meeting, by vote of a
majority of the shareholders voting as a class who elected such
trustee, with or without cause. In case any vacancy shall occur among
the trustees elected by the holders of the Preferred Shares pursuant
to this Section, such vacancy may be filled by the remaining trustee
so elected, or his successor then in office, and the trustee so
elected to fill such vacancy shall serve until the next meeting of
shareholders for the election of trustees. After the holders of the
Preferred Shares shall have exercised their right to elect trustees in
any default period and during the continuance of such period, the
number of trustees shall not be further increased or decreased except
by vote of the holders of Preferred Shares as herein provided or
pursuant to the rights of any equity securities ranking senior to or
pari passu with the Series A Preferred Shares.
(iii) The right of the holders of the Preferred Shares, voting
separately as a class, to elect two members of the Board of Trustees
of the Trust as aforesaid shall continue until, and only until, such
time as all arrears in dividends (whether or not declared) on the
Preferred Shares shall have been paid or declared and set apart for
payment, at which time such right shall terminate, except as herein or
by law expressly provided, subject to revesting in the event of each
and every subsequent default of the character above-mentioned. Upon
any termination of the right of the holders of the shares of the
Preferred Shares as a class to vote for trustees as herein provided,
the term of office of all trustees then in office elected by the
holders of Preferred Shares pursuant to this Section shall terminate
immediately. Whenever the term of office of the trustees elected by
the holders of the Preferred Shares pursuant to this Section shall
terminate and the special voting powers vested in the holders of the
Preferred Shares pursuant to this Section shall have expired, the
maximum number of members of the Board of Trustees of the Trust shall
be such number as may be provided for in the Bylaws of the Trust
irrespective of any increase made pursuant to the provisions of this
Section.
(D) Except as otherwise provided herein or required by law, holders of
Series A Preferred Shares shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Shares as provided herein) for taking any trust action.
Section 4. Certain Restrictions.
(A) Whenever any quarterly dividends or other dividends or
distributions payable on the Series A Preferred Shares as provided in Section 2
are in arrears, then, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Shares
outstanding shall have been paid in full, the Trust shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any
shares ranking junior (either as
4
<PAGE>
to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Shares;
(ii) declare or pay dividends on or make any other distributions
on any shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Shares, except dividends paid ratably on the Series A Preferred Shares
and all such parity shares on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Shares, provided that the Trust may at any time redeem, purchase or
otherwise acquire any such parity shares in exchange for shares of the
Trust ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Shares; or
(iv) purchase or otherwise acquire for consideration any Series A
Preferred Shares, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Trustees) to
all holders of such shares upon such terms as the Board of Trustees,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Trust shall not permit any subsidiary of the Trust to purchase
or otherwise acquire for consideration any shares of the Trust unless the Trust
could, under paragraph (A) of this Section, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any Series A Preferred Shares purchased or
otherwise acquired by the Trust in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Shares and
may be reissued as part of a new series of Preferred Shares to be created by
resolution or resolutions of the Board of Trustees, subject to the conditions
and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
voluntary liquidation, dissolution or winding up of the Trust, no distribution
shall be made to the holders of shares ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Shares
unless, prior thereto, the holders of shares of Series A Preferred Shares shall
have received $1.00 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of
5
<PAGE>
Series A Preferred Shares unless, prior thereto, the holders of shares of Common
Shares shall have received an amount per share (the "Common Adjustment") equal
to the quotient obtained by dividing (i) the Series A Liquidation Preference by
(ii) 100 (as appropriately adjusted as set forth in subparagraph C below to
reflect such events as share splits, share dividends and recapitalizations with
respect to the Common Shares) (such number in clause (ii), the "Adjustment
Number"). Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series A Preferred Shares and Common Shares, respectively, holders of Series A
Preferred Shares and holders of shares of Common Shares shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio, on a per share basis, of the Adjustment Number to 1 with respect to such
Preferred Shares and Common Shares, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Shares, if any, which
rank on a parity with the Series A Preferred Shares, then such remaining assets
shall be distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences.
(C) In the event the Trust shall at any time following December 31, 1993
(i) declare any dividend on Common Shares payable in shares of Common Shares,
(ii) subdivide the outstanding shares of Common Shares or (iii) combine the
outstanding Common Shares into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Shares outstanding immediately after
such event and the denominator of which is the number of shares of Common Shares
that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Trust shall enter into
any consolidation, merger, combination or other transaction in which the Common
Shares are exchanged for or changed into other shares or securities, cash and/or
any other property, then in any such case, the shares of Series A Preferred
Shares shall at the same time be similarly exchanged or changed in an amount per
share (subject to the provision for adjustment hereinafter set forth) equal to
100 times the aggregate amount of shares, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
Common Share is exchanged or changed. In the event the Trust shall at any time
(i) declare any dividend on Common Shares payable in shares of Common Shares,
(ii) subdivide the outstanding Common Shares or (iii) combine the outstanding
Common Shares into a smaller number of shares, then in each such case the amount
set forth in the preceding sentence with respect to the exchange or change of
shares of Series A Preferred Shares shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common Shares
outstanding immediately after such event and the denominator of which is the
number of shares of Common Shares that were outstanding immediately prior to
such event.
6
<PAGE>
Section 8. Redemption. The Series A Preferred Shares shall not be
redeemable by the Trust. The preceding sentence shall not limit the ability of
the Trust to purchase or otherwise deal in such shares to the extent permitted
by law.
Section 9. Ranking. The Series A Preferred Shares shall rank junior to
all other series of the Trust's preferred shares (whether with or without par
value) as to the payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.
Section 10. Amendment. Neither the Declaration of Trust nor any Articles
Supplementary relating to the Series A Preferred Shares shall be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Series A Preferred Shares so as to affect the holders of Series A
Preferred Shares adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Preferred Shares, voting
separately as a class.
Section 11. Fractional Shares. Series A Preferred Shares may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends and
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Shares.
The undersigned officer acknowledges these 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.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned officer, duly authorized by a
majority of the Trustees, has executed these Articles of Amendment as of this
1st day of July, 1998.
/s/ JEFFREY A. KLOPF
---------------------
Jeffrey A. Klopf
Senior Vice President
ATTEST:
/s/ LUCINDA G. MARKER
- ---------------------
Lucinda G. Marker
Assistant Secretary
8
<PAGE>
Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED DECLARATION OF TRUST
OF
SECURITY CAPITAL INDUSTRIAL TRUST
The undersigned, being a vice president and an assistant secretary of
Security Capital Industrial Trust, a Maryland real estate investment trust (the
"Trust"), do hereby certify pursuant to the provisions of Article 8 of the
Amended and Restated Declaration of Trust (the "Declaration of Trust"), and in
accordance with the applicable provisions of Maryland law:
1. That the Board of Trustees had adopted a resolution to amend the
Declaration of Trust as hereinafter set forth and has declared that such
amendment is advisable.
2. That the amendment to the Declaration of Trust has been presented to
the shareholders of the Trust.
3. That the amendment has been approved by the shareholders of the Trust by
the affirmative vote of at least a majority of the shares entitled to notice of,
and to vote at, the annual meeting of shareholders of the Trust held on June 30,
1998.
Therefore, the Declaration of Trust is hereby amended as follows:
Article 1, Section 1 is hereby amended by deleting the words "Security
Capital Industrial Trust" appearing in the first sentence thereof and
substituting the words "ProLogis Trust", such amendment to be effective as of
the first day of July, 1998.
The undersigned vice president and assistant secretary acknowledge this
Certificate of Amendment to be the act of the Trust and further, as to all
matters or facts required to be verified under oath, each acknowledges 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 of perjury.
IN WITNESS WHEREOF, the undersigned vice president and assistant secretary
of the Trust, have hereunto set their hands effective as of the 30th day of
June, 1998.
/s/ DAVID B. DANIEL
-----------------------------------------
David B. Daniel, Vice President
/s/ EDWARD S. NEKRITZ
-----------------------------------------
Edward S. Nekritz, Assistant Secretary
<PAGE>
Exhibit 10.1
AMENDED AND RESTATED
CREDIT AGREEMENT
among
PROLOGIS TRUST
(formerly known as Security Capital Industrial Trust),
Borrower
NATIONSBANK, N.A.,
Administrative Agent
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
Documentation Agent
COMMERZBANK AKTIENGESELLSCHAFT, LOS ANGELES BRANCH,
Syndication Agent
and
THE LENDERS NAMED HEREIN,
Lenders
$350,000,000
AS OF
AUGUST 11, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC,
Lead Arranger and Book Manager
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS AND TERMS................................................... 1
1.1 Definitions............................................................. 1
1.2 Time References......................................................... 16
1.3 Other References........................................................ 17
1.4 Accounting Principles................................................... 17
SECTION 2 COMMITMENT.............................................................. 17
2.1 Revolving Facility...................................................... 17
2.2 Borrowing Procedure..................................................... 18
2.3 Termination............................................................. 18
2.4 Swing Line Subfacility.................................................. 18
2.5 Competitive Bid Subfacility............................................. 19
SECTION 3 TERMS OF PAYMENT........................................................ 22
3.1 Notes and Payments...................................................... 22
3.2 Interest and Principal Payments......................................... 22
3.3 Interest Options........................................................ 23
3.4 Quotation of Rates...................................................... 23
3.5 Default Rate............................................................ 23
3.6 Interest Recapture...................................................... 23
3.7 Interest Calculations................................................... 24
3.8 Maximum Rate............................................................ 24
3.9 Interest Periods........................................................ 24
3.10 Conversions............................................................. 25
3.11 Order of Application.................................................... 25
3.12 Sharing of Payments, Etc................................................ 25
3.13 Offset.................................................................. 26
3.14 Booking Borrowings...................................................... 26
3.15 Basis Unavailable or Inadequate for the Eurodollar Rate................. 26
3.16 Additional Costs........................................................ 26
3.17 Change in Law........................................................... 28
3.18 Funding Loss............................................................ 28
3.19 Foreign Lenders......................................................... 28
3.20 Extension of Termination Date........................................... 28
3.21 Conversion to Term Loan................................................. 29
3.22 Option to Replace Lenders............................................... 30
SECTION 4 FEES.................................................................... 30
4.1 Treatment of Fees....................................................... 30
4.2 Administrative Agent Fees............................................... 31
4.3 Commitment Fees......................................................... 31
4.4 Extension Fee........................................................... 31
4.5 Conversion Fee.......................................................... 31
4.6 Competitive Bid Fee..................................................... 31
SECTION 5 CONDITIONS PRECEDENT.................................................... 31
SECTION 6 REPRESENTATIONS AND WARRANTIES.......................................... 32
6.1 Purpose of Credit Facility.............................................. 32
6.2 Corporate Existence, Good Standing, Authority and Compliance............ 32
6.3 Affiliates.............................................................. 32
6.4 Authorization and Contravention......................................... 32
6.5 Binding Effect.......................................................... 33
6.6 Financial Statements; Fiscal Year....................................... 33
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
6.7 Litigation................................................................ 33
6.8 Taxes..................................................................... 33
6.9 Environmental Matters..................................................... 33
6.10 Pension Plans............................................................. 34
6.11 Properties; Liens......................................................... 34
6.12 Locations................................................................. 34
6.13 Government Regulations.................................................... 34
6.14 Transactions with Affiliates.............................................. 34
6.15 Liabilities............................................................... 35
6.16 Insurance................................................................. 35
6.17 Labor Matters............................................................. 35
6.18 Solvency.................................................................. 35
6.19 Full Disclosure........................................................... 35
6.20 Exemption from ERISA; Plan Assets......................................... 35
6.21 Intercreditor Agreement................................................... 35
6.22 Minority Interests........................................................ 35
6.23 Year 2000 Compliance...................................................... 35
SECTION 7 AFFIRMATIVE COVENANTS..................................................... 36
7.1 Items to be Furnished..................................................... 36
7.2 Use of Proceeds........................................................... 37
7.3 Books and Records......................................................... 38
7.4 Inspections............................................................... 38
7.5 Taxes..................................................................... 38
7.6 Payment of Obligations.................................................... 38
7.7 Expenses.................................................................. 38
7.8 Maintenance of Existence, Assets, and Business............................ 38
7.9 Insurance................................................................. 38
7.10 Preservation and Protection of Rights..................................... 39
7.11 Environmental Laws........................................................ 39
7.12 Indemnification........................................................... 39
7.13 REIT Status............................................................... 40
7.14 ERISA Exemptions.......................................................... 40
7.15 Property Pool............................................................. 40
7.16 Year 2000 Compliance...................................................... 40
7.17 Subsidiary Guaranties; Intercompany Indebtedness.......................... 41
7.18 Hedging Agreements........................................................ 41
SECTION 8 NEGATIVE COVENANTS........................................................ 41
8.1 Payment of Obligations.................................................... 41
8.2 Employee Plans............................................................ 41
8.3 Recourse Debt............................................................. 41
8.4 Transactions with Affiliates.............................................. 42
8.5 Compliance with Laws and Documents........................................ 42
8.6 Loans, Advances and Investments........................................... 42
8.7 Dividends and Distributions............................................... 44
8.8 Sale of Assets............................................................ 44
8.9 Mergers and Dissolutions.................................................. 44
8.10 Assignment................................................................ 45
8.11 Fiscal Year and Accounting Methods........................................ 45
8.12 New Businesses............................................................ 45
8.13 Government Regulations.................................................... 45
8.14 Negative Pledge Agreements................................................ 45
SECTION 9 FINANCIAL COVENANTS....................................................... 45
9.1 Leverage Ratios........................................................... 45
9.2 Minimum Tangible Net Worth................................................ 45
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
9.3 Interest Expense Coverage Ratio.......................................... 45
9.4 Fixed Charge Coverage Ratio.............................................. 45
9.5 Debt to Total Asset Value Ratio.......................................... 46
SECTION 10 DEFAULT.................................................................. 46
10.1 Payment of Obligation.................................................... 46
10.2 Covenants................................................................ 46
10.3 Debtor Relief............................................................ 46
10.4 Judgments and Attachments................................................ 46
10.5 Government Action........................................................ 46
10.6 Misrepresentation........................................................ 46
10.7 Default Under Other Agreements........................................... 47
10.8 Validity and Enforceability of Loan Documents............................ 47
10.9 Management Changes....................................................... 47
10.10 Plan Assets.............................................................. 47
SECTION 11 RIGHTS AND REMEDIES...................................................... 47
11.1 Remedies Upon Default.................................................... 47
11.2 Waivers.................................................................. 48
11.3 Performance by Administrative Agent...................................... 48
11.4 Not in Control........................................................... 48
11.5 Course of Dealing........................................................ 48
11.6 Cumulative Rights........................................................ 49
11.7 Application of Proceeds.................................................. 49
11.8 Diminution in Value of Collateral........................................ 49
11.9 Certain Proceedings...................................................... 49
SECTION 12 AGENTS AND LENDERS....................................................... 49
12.1 Agents................................................................... 49
12.2 Delegation of Duties; Reliance........................................... 50
12.3 Limitation of Agents' Liability.......................................... 51
12.4 Limitation of Liability.................................................. 52
12.5 Intercreditor Agreement.................................................. 52
12.6 Confirmation of Intercreditor Agreement.................................. 52
SECTION 13 MISCELLANEOUS............................................................ 52
13.1 Headings................................................................. 52
13.2 Nonbusiness Days; Time................................................... 52
13.3 Communications........................................................... 52
13.4 Form and Number of Documents............................................. 53
13.5 Survival................................................................. 53
13.6 Governing Law............................................................ 53
13.7 Invalid Provisions....................................................... 53
13.8 Venue; Service of Process; Jury Trial.................................... 53
13.9 Amendments, Consents, Conflicts, and Waivers............................. 54
13.10 Multiple Counterparts.................................................... 54
13.11 Successors and Assigns; Participations................................... 54
13.12 Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances............................................................ 56
13.13 Confidentiality.......................................................... 56
13.14 Arbitration.............................................................. 57
(a) SPECIAL RULES....................................................... 57
(b) RESERVATION OF RIGHTS............................................... 57
13.15 Limitation of Liability of Trustees, Shareholders and Officers of
Borrower................................................................. 58
13.16 Entirety................................................................. 58
13.17 Amendment and Restatement................................................ 58
</TABLE>
(iii)
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 Parties, Addresses, Commitments and Wiring Information
Schedule 2 Adjusted Leverage Ratio as of June 30, 1998
Schedule 5 Closing Documents
Schedule 6.2 Jurisdictions of Incorporation, Business, and Names
Schedule 6.7 Litigation
Schedule 6.9 Environmental Matters
Schedule 6.12 Chief Executive Office
Schedule 6.14 Affiliates Transactions
Schedule 6.22 Minority Interests
Schedule 7.17-1 Excluded Guarantors
Schedule 7.17-2 Existing Pledged Indebtedness - Unconsolidated Affiliates
Schedule 8.6 Permitted Minority Interests
Exhibit A-1 Form of Revolving Credit Note
Exhibit A-2 Form of Competitive Bid Note
Exhibit B-1 Borrowing Request
Exhibit B-2 Competitive Bid Request
Exhibit C Compliance Certificate
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Swing Line Note
Exhibit F Form of Competitive Bid
Exhibit G Form of Subsidiary Guaranty
Exhibit H-1 Form of Borrower Pledge Agreement
Exhibit H-2 Form of Subsidiary Pledge Agreement
(iv)
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of August 11, 1998,
among PROLOGIS TRUST (formerly known as SECURITY CAPITAL INDUSTRIAL TRUST), a
Maryland real estate investment trust ("BORROWER"), the Lenders (defined below),
NATIONSBANK, N.A., a national banking association (successor in interest by
merger to NationsBank of Texas, N.A.) ("NATIONSBANK"), for itself and as
Administrative Agent for the Lenders (in such capacity, together with its
successors and assigns, "ADMINISTRATIVE AGENT"), CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, for itself and as Documentation Agent (in such capacity, together
with its successors and assigns, "DOCUMENTATION AGENT"), COMMERZBANK
AKTIENGESELLSCHAFT, LOS ANGELES BRANCH, for itself and as Syndication Agent (in
such capacity, together with its successors and assigns, "SYNDICATION AGENT").
R E C I T A L S:
- - - - - - - -
1. Reference is hereby made to that certain Credit Agreement dated as of
May 3, 1995, by and between Borrower, Administrative Agent, and the Lenders
defined therein (the "ORIGINAL CREDIT AGREEMENT").
2. Administrative Agent, Lenders, and Borrower amended and restated the
Original Credit Agreement in its entirety as and pursuant to that certain
Amended and Restated Credit Agreement dated as of June 1, 1995 (the "RESTATED
CREDIT AGREEMENT").
3. Administrative Agent, Lenders, and Borrower amended the Restated
Credit Agreement pursuant to that certain First Amendment to Credit Agreement
dated as of June 1, 1995 and that certain Second Amendment to Credit Agreement
dated as of February 15, 1996.
4. Administrative Agent, Lenders, and Borrower amended and restated the
Restated Credit Agreement in its entirety as and pursuant to that certain
Amended and Restated Credit Agreement dated as of May 2, 1996 (the "SECOND
RESTATED CREDIT AGREEMENT").
5. Administrative Agent, Lenders, and Borrower amended and restated the
Second Restated Credit Agreement in its entirety as and pursuant to that certain
Amended and Restated Credit Agreement dated as of May 1, 1997 (the "THIRD
RESTATED CREDIT AGREEMENT").
6. Borrower has requested that Lenders modify certain provisions
contained in the Third Restated Credit Agreement.
7. Administrative Agent, Lenders, and Borrower desire and have agreed to
amend and restate the Third Restated Credit Agreement in its entirety as and
pursuant to this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1 DEFINITIONS AND TERMS.
- ---------- ---------------------
1.1 DEFINITIONS. Unless otherwise indicated, as used in the Loan
Documents:
"ADJUSTED LEVERAGE RATIO" means, as of any date, the ratio of (a) all
Indebtedness, to (b) Tangible Net Worth, in each case for Borrower and its
Consolidated Affiliates, and its and their Unconsolidated Affiliates, calculated
on a combined basis in a manner consistent with the calculation set forth on
SCHEDULE 2 (which reflects the calculation of such ratio as of June 30, 1998).
Solely for purposes of this ratio, Tangible Net
<PAGE>
Worth shall be increased by the amount of consolidated goodwill of Frigoscandia
AB and its Consolidated Affiliates set forth on the Financial Statements of such
Persons as of March 30, 1998.
"ADMINISTRATIVE AGENT" is defined in the preamble to this Agreement.
"AFFILIATE" of a Person means any other individual or entity who directly
or indirectly controls, or is controlled by, or is under common control with,
that Person. For purposes of this definition "control," "controlled by," and
"under common control with" mean possession, directly or indirectly, of power to
direct (or cause the direction of) management or policies (whether through
ownership of voting securities or other ownership interests, by contract, or
otherwise).
"AGENTS" means Administrative Agent, Documentation Agent, and Syndication
Agent, and "AGENT" means any one of the Agents.
"AGREEMENT" means this Credit Agreement, as amended, supplemented, or
restated from time to time.
"APPLICABLE MARGIN" means, at the time of determination thereof, the
interest margin over the Base Rate or the Eurodollar Rate, as the case may be,
based on the Rating Requirement as follows:
<TABLE>
<CAPTION>
====================================================================
RATING REQUIREMENT APPLICABLE MARGIN
====================================================================
Moody's S & P Rating DCR Base Rate Eurodollar
Rating Rating Borrowings Borrowings
=====================================================================
<S> <C> <C> <C> <C>
Less than Less than Less than 0.5% 2.00%
Baa3 or not BBB- or not BBB- or not
rated rated rated
---------------------------------------------------------------------
Baa3 BBB- BBB- 0% 1.20%
---------------------------------------------------------------------
Baa2 BBB BBB 0% 1.00%
---------------------------------------------------------------------
Baa1 BBB+ BBB+ 0% 0.75%
---------------------------------------------------------------------
A3 A- A- 0% 0.65%
---------------------------------------------------------------------
A2 or better A or better A or better 0% 0.55%
=====================================================================
</TABLE>
"APPLICABLE PENSION LEGISLATION" means, with respect to any Person, all
pension Laws applicable to such Person, including, without limitation, ERISA.
"BASE RATE" means, for any day, the greater of (a) the sum of the Federal
Funds Rate plus one-half of one percent (0.5%), and (b) the annual interest rate
most recently announced by Administrative Agent as its prime rate (or, if the
Person then acting as Administrative Agent under this Agreement is not a bank
organized under the Laws of the United States or any State, then the rate
announced by NationsBank, N.A. as its prime rate) in effect at its office in
Dallas, Texas, automatically fluctuating upward and downward with and as
specified in each announcement without special notice to Borrower or any other
Person (which prime rate may not necessarily represent the lowest or best rate
actually charged to a customer).
"BASE RATE BORROWING" means a Borrowing bearing interest at the sum of the
Base Rate plus the Applicable Margin.
"BORROWER" is defined in the preamble to this Agreement.
2
<PAGE>
"BORROWING" means (without duplication) any amount disbursed by (a) Lenders
to or on behalf of Borrower under the Loan Documents (under the Competitive Bid
Subfacility, the Swing Line Subfacility, or otherwise), or (b) any Lender in
accordance with, and to satisfy the obligations of Borrower under, any Loan
Document.
"BORROWING DATE" means for any Borrowing (a) the date for which funds are
requested by Borrower, or (b) the date any Borrowing is converted hereunder to
another Type of Borrowing.
"BORROWING REQUEST" means a request substantially in the form of EXHIBIT
B-1.
"BUSINESS DAY" means (a) for all purposes, any day other than Saturday,
Sunday, and any other day that commercial banks are authorized by Law to be
closed in Texas or New York, and (b) for purposes of any Eurodollar Borrowing, a
day that satisfies the requirements of CLAUSE (A) and is a day when commercial
banks are open for domestic or international business in London.
"CAPITAL EXPENDITURES" means, on an annual basis, an amount equal to the
product of (a) the sum of the total square footage with respect to all completed
industrial space in all Properties of Borrower and its Consolidated Affiliates
as of the last day of each of the immediately preceding five (5) calendar
quarters, divided by five (5), and (b) $0.15.
"CAPITAL LEASE" means any capital lease or sublease that has been (or under
GAAP should be) capitalized on a balance sheet.
"CASH EQUIVALENTS" means (a) investments and direct obligations of the
United States of America or any agency thereof, or obligations fully guaranteed
by the United States of America or any agency thereof, provided that such
obligations mature within one (1) year of the date of acquisition thereof, (b)
commercial paper rated "A-1" (or higher) according to S & P, or "P-1" (or
higher) according to Moody's and maturing not more than one hundred eighty (180)
days from the date of acquisition thereof, (c) time deposits with, and
certificates of deposit and bankers' acceptances issued by, Administrative Agent
or any United States bank having capital surplus and undivided profits
aggregating at least $1,000,000,000, and (d) mutual funds whose investments are
substantially limited to the foregoing.
"CHANGE IN CONTROL" means, with respect to Borrower, the transfer of
beneficial ownership of the outstanding Stock of Borrower such that (a) Security
Capital Group Incorporated and/or its Affiliates own, directly or indirectly,
less than twenty percent (20%) of the Stock (other than non-voting perpetual
preferred Stock) of Borrower, and (b) any Person other than Security Capital
Group Incorporated and/or its Affiliates owns, directly or indirectly, more than
twenty percent (20%) of the Stock (other than non-voting perpetual preferred
Stock) of Borrower.
"CLOSING DATE" means the date this Agreement is fully executed and
delivered.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMITMENT" means, for a Lender, the amount (which is subject to reduction
and cancellation as provided in this Agreement) stated beside such Lender's name
on SCHEDULE 1 as most recently amended under this Agreement.
3
<PAGE>
"COMMITMENT PERCENTAGE" means, for any Lender, the proportion (stated as a
percentage) that its Commitment bears to the Total Commitment.
"COMPETITIVE BID" means an offer by a Lender to fund a Borrowing under the
Competitive Bid Subfacility pursuant to SECTION 2.5.
"COMPETITIVE BID NOTES" means one of the promissory notes substantially in
the form of EXHIBIT A-2, and all renewals, extensions, modifications,
rearrangements, and replacements thereof and any and all substitutions therefor,
and "COMPETITIVE BID NOTE" means any one of the Competitive Bid Notes.
"COMPETITIVE BID RATE" means, as to any Competitive Bid made by a Lender
pursuant to SECTION 2.5, (a) in the case of a Eurodollar Borrowing, the margin
which shall be added to or subtracted from the Eurodollar Rate, and (b) in the
case of a Fixed Rate Borrowing, the fixed rate of interest, in each case,
offered by the Lender making such Competitive Bid.
"COMPETITIVE BID REQUEST" means a request for Competitive Bids made
pursuant to SECTION 2.5(B) substantially in the form of EXHIBIT B-2.
"COMPETITIVE BID SUBFACILITY" means the subfacility of the Total Commitment
(the Principal Debt of which may never exceed $100,000,000 in the aggregate) as
described in, and subject to the limitations of, SECTION 2.5.
"COMPETITIVE BORROWING" means any Borrowing under the Competitive Bid
Subfacility.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of
EXHIBIT C and signed by a Responsible Officer.
"CONSENTING LENDERS" is defined in SECTION 3.20.
"CONSOLIDATED AFFILIATE" means, in respect of any Person, any other Person
in whom such Person holds an equity or ownership interest and whose financial
results would be consolidated under GAAP with the financial results of such
Person on the consolidated financial statements of such Person.
"CONSTITUENT DOCUMENTS" means, with respect to any Person, its articles or
certificate of incorporation, charter, bylaws, certificates of limited
partnership, partnership agreements, limited liability company agreements,
organizational documents, and such other documents as may govern such Person's
formation or organization.
"CONSTRUCTION INTEREST" means Interest Expense for the construction of
projects on Properties, which Interest Expense is capitalized in accordance with
GAAP.
"CONVERSION DATE" is defined in SECTION 3.21.
"CONVERSION NOTICE" is defined in SECTION 3.21.
"CURRENT FINANCIALS" means, at any time, the consolidated Financial
Statements of Borrower and its Consolidated Affiliates most recently delivered
to Administrative Agent under SECTION 7.1(A) or 7.1(B), as the case may be.
4
<PAGE>
"CUSTOMARY RECOURSE EXCEPTIONS" means, with respect to any Non-Recourse
Debt, exclusions from the exculpation provisions with respect to such Non-
Recourse Debt for fraud, misapplication of cash, environmental claims, and other
circumstances customarily excluded by institutional lenders from exculpation
provisions and/or included in separate indemnification agreements in non-
recourse financings of real estate.
"DCR" means Duff & Phelps Credit Rating Co. or, if DCR no longer publishes
ratings, then another ratings agency selected by Borrower and acceptable to
Administrative Agent.
"DCR RATING" means the most recently-announced rating from time to time of
DCR assigned to any class of long-term senior, unsecured Liability securities
issued by Borrower, as to which no letter of credit, guaranty, or third party
credit support is in place, regardless of whether all or any part of such
Liability has been issued at the time such rating was issued.
"DEBTOR RELIEF LAWS" means Title 11 of the United States Code and all other
applicable state or federal liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar Laws affecting creditors' Rights in effect from time to
time.
"DEBT TO TOTAL ASSET VALUE RATIO" means, for Borrower and its Consolidated
Affiliates as of any date, the ratio of (a) all Indebtedness, to (b) Total Asset
Value.
"DEFAULT" is defined in SECTION 10.
"DEFAULT RATE" means an annual rate of interest equal from day to day to
the lesser of (a) the then-existing Base Rate plus four percent (4%), and (b)
the Maximum Rate.
"DISQUALIFIED STOCK" means any of Borrower's Stock which by its terms (or
by the terms of any Stock 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 a Liability or Disqualified Stock during the
term of this Agreement, (c) is redeemable during the term of this Agreement at
the option of the holder of such Stock, or (d) otherwise requires any payments
by Borrower, in each case on or before the Termination Date.
"DISTRIBUTION" means, with respect to any Stock of any Person, (a) the
retirement, redemption, purchase, or other acquisition for value of such Stock
by such Person, (b) the declaration or payment of any dividend on or with
respect to such Stock by such Person, (c) any loan or advance by that Person to,
or other investment by that Person in, the holder of any of such Stock, and (d)
any other payment by that Person with respect to such Stock.
"DOCUMENTATION AGENT" is defined in the preamble to this Agreement.
"DOMESTIC PROPERTIES" means each Property located in the United States, and
"DOMESTIC PROPERTY" means any one of the Domestic Properties.
"EBITDA" means, for any Refrigerated Warehouse Property for any period, and
without duplication, (a) net income with respect to such Refrigerated Warehouse
Property determined in accordance with GAAP, plus (b) extraordinary losses
determined in accordance with GAAP and reflected in the determination of net
income, minus (c) extraordinary gains determined in accordance with GAAP and
reflected in the determination of income, plus (d) losses determined in
accordance with GAAP in connection with foreign currency exchange transactions,
minus (e) gains determined in accordance with GAAP in connection with foreign
currency
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exchange transactions, plus (f) all amounts deducted in calculating net income,
in conformity with GAAP, for Interest Expense, taxes, depreciation, and
amortization.
"ELIGIBLE INSTITUTION" means a commercial bank or a finance company,
insurance company, or other financial institution that is regularly engaged in
making, purchasing, or investing in loans, but shall not include any Person
which is an Affiliate of Borrower.
"ENVIRONMENTAL LAW" means any Law that relates to the pollution or
protection of the environment or to Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not incorporated)
which, together with Borrower, are treated as a single employer under Section
414(b) or (c) of the Code (and Section 414(m) or (o) of the Code for purposes of
provisions related to Section 412 of the Code).
"EURODOLLAR BORROWING" means either (a) a Borrowing (other than a
Competitive Borrowing) bearing interest at the sum of the Eurodollar Rate plus
the Applicable Margin, or (b) a Competitive Borrowing bearing interest at the
sum of the Eurodollar Rate plus or minus the margin indicated for such
Competitive Borrowing in the related Competitive Bid.
"EURODOLLAR RATE" means, for any Eurodollar Borrowing for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any successor
page) as the London interbank offered rate (Eurodollar) for deposits in Dollars
at approximately 11:00 a.m. (London time) two (2) Business Days prior to the
first (1st) day of such Interest Period for a term comparable to such Interest
Period. If for any reason such rate is not available, then the term "EURODOLLAR
RATE" shall mean, for any Eurodollar Borrowing for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first (1st) day of such Interest Period for a term comparable
to such Interest Period; provided, however, if more than one (1) rate is
specified on Reuters Screen LIBO Page, then the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest
1/100 of 1%).
"EXCLUDED DEBT SERVICE" means, for any period, any regularly scheduled
principal payments on (a) the Term Loans, (b) any Indebtedness which pays such
Indebtedness in full, but only to the extent that the amount of such final
payment is greater than the scheduled principal payment immediately preceding
such final payment, and (c) any Indebtedness that is rated investment grade or
better by at least two (2) of Moody's, S & P, and DCR and issued prior to
December 31, 1997 (as such date may be extended for one (1) year for each one-
(1-) year extension pursuant to SECTION 3.20).
"EXTENSION REQUEST" is defined in SECTION 3.20.
"FEDERAL FUNDS RATE" means, on any day, the annual rate (rounded upwards,
if necessary, to the nearest 0.01%) determined by Administrative Agent (which
determination is conclusive and binding, absent manifest error) to be equal to
the weighted average of the rates on overnight federal funds transactions with
member banks of the Federal Reserve System arranged by federal funds brokers as
published by the Federal Reserve Bank of New York on the next successive
Business Day; provided, however, that (a) if such
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determination date is not a Business Day, then the Federal Funds Rate for such
day shall be the rate for such transactions on the next preceding Business Day
as published on the next successive Business Day, or (b) if those rates are not
published for any Business Day, then the Federal Funds Rate shall be the average
of the quotations at approximately 10:00 a.m. on such Business Day received by
Administrative Agent from three (3) federal funds brokers of recognized standing
selected by Administrative Agent in its sole discretion.
"FINANCIAL STATEMENTS" of a Person means balance sheets and statements of
earnings, shareholders' equity, and cash flow prepared (a) according to GAAP,
(b) except as stated in SECTION 1.4, in comparative form to prior year-end
figures or corresponding periods of the preceding fiscal year, as applicable,
and (c) on a consolidated basis if that Person had any Consolidated Affiliates
during the applicable period; provided that Financial Statements for any fiscal
quarter may omit footnotes and shall be subject to normal audit adjustments.
"FIXED CHARGE COVERAGE RATIO" means, as of any date, the ratio of (a) (i)
Funds from Operations, plus (ii) Interest Expense, minus (iii) Capital
Expenditures, to (b) the sum of (i) Interest Expense, plus (ii) Distributions of
any kind or character or other proceeds paid or payable with respect to
Disqualified Stock, plus (iii) any regularly scheduled principal payments on
Indebtedness (other than Excluded Debt Service), in each case for Borrower and
its Consolidated Affiliates and for the four (4) fiscal quarters ending on the
date of determination.
"FIXED RATE BORROWING" means any Competitive Borrowing made from a Lender
pursuant to SECTION 2.5 based upon an actual percentage rate per annum offered
by such Lender, expressed as a decimal (to no more than four (4) decimal places)
and accepted by Borrower.
"FUNDING LOSS" means, without duplication, any loss, expense, or costs
incurred by any Lender (including any loss, expense, or cost incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
Lender to make or maintain any portion of any Borrowing as a Eurodollar
Borrowing or a Fixed Rate Borrowing, but excluding loss of anticipated profit)
when (a) Borrower fails or refuses (for any reason other than any Lender's
failure to comply with this Agreement) to take any Borrowing that it has
requested under this Agreement, or (b) Borrower prepays or pays any Borrowing or
converts any Borrowing to a Borrowing of another Type, in each case, before the
last day of the applicable Interest Period.
"FUNDS FROM OPERATIONS" means, for Borrower for any period, net earnings
(before Distributions in respect of preferred shares) plus depreciation and
amortization (exclusive of amortization of financing costs), all as determined
in accordance with GAAP; provided that there shall not be included in such
calculation (a) any proceeds of any insurance policy other than rental or
business interruption insurance received by such Person, (b) any gain or loss
which is classified as "extraordinary" in accordance with GAAP, (c) any capital
gains and taxes on capital gains (in each case exclusive of such amounts that
are attributable to ProLogis Services and other build to suit sales that are
considered operating income in accordance with GAAP), (d) any non-recurring and
non-cash event that is excluded from Borrower's reported Funds from Operations
in its quarterly 10-Q and annual 10-K Financial Statements, (e) any tax expense
which is classified as "deferred" in accordance with GAAP, (f) any tax income
which is classified as a tax benefit in accordance with GAAP, (g) any foreign
exchange gain or loss which is the result of a period ending "mark to market" of
intercompany or third-party loans in accordance with GAAP, and (h) gains or
losses from sales of depreciated Properties. The Funds from Operations
contribution from Unconsolidated Affiliates shall be calculated on the same
basis as this definition. Funds from Operations shall be calculated as if all
minority interests in Consolidated Affiliates have been converted into Stock of
Borrower.
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"GAAP" means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board that are applicable on the date of this
Agreement, subject to changes permitted by SECTION 1.4.
"HAZARDOUS SUBSTANCE" means any substance (a) the presence of which
requires removal, remediation, or investigation under any Environmental Law, or
(b) that is defined or classified as a hazardous waste, hazardous material,
pollutant, contaminant, or toxic or hazardous substance under any Environmental
Law.
"HEDGING AGREEMENTS" means any and all agreements, devices, or arrangements
designed to protect at least one of the parties thereto from fluctuations of
interest rates, exchange rates, or forward rates applicable to such party's
assets, liabilities, or exchange transactions, including, without limitation,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap, swap, or collar protection
agreements, and forward rate currency or interest rate options, as the same may
be amended or modified and in effect from time to time, and any and all
cancellations, buybacks, reversals, terminations, or assignments of the
foregoing.
"HISTORICAL VALUE" means the purchase price of any Property (including
improvements) and ordinary related purchase transaction costs, plus the cost of
subsequent capital improvements made by Borrower or a Consolidated Affiliate,
less any provision for losses, all as determined in accordance with GAAP.
"INDEBTEDNESS" means, for any Person, all Liabilities (without duplication)
of such Person that are (a) Liabilities for borrowed money of such Person, (b)
evidenced by bonds, debentures, notes, or similar instruments of such Person,
(c) obligations to pay the deferred purchase price of assets, services, or
Stock, except (i) trade payables arising in the ordinary course of business,
(ii) obligations incurred in the ordinary course of business to pay the purchase
price of Stock so long as such obligations are paid within customary settlement
terms, and (iii) obligations to purchase Stock (other than Stock of Borrower or
any of its Affiliates) pursuant to subscription or Stock purchase agreements in
the ordinary course of business, (d) secured by a Lien existing on any property
of such Person or any interest of such Person therein, whether or not such
Liability shall have been assumed by such Person, (e) Capital Leases, (f) net
obligations arising under Hedging Agreements, (g) a guaranty, endorsement, or
other contingent obligation of such Person (other than (i) endorsements in the
ordinary course of business of negotiable instruments or documents for deposit
or collection, and (ii) indemnification obligations and purchase price
adjustments pursuant to acquisition agreements entered into in the ordinary
course of business), and (h) accounts payable, accrued expenses, and other
liabilities which in the aggregate are in excess of five percent (5%) of the
amount of total assets of such Person determined in accordance with GAAP plus
the amount of any accumulated depreciation with respect to such assets, as of
the date of determination.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement dated
as of June 1, 1995, among Administrative Agent and Lenders, as modified,
amended, or supplemented from time to time.
"INTEREST EXPENSE" means, for any Person for any period, all of such
Person's paid, accrued, or capitalized interest expense on such Person's
Indebtedness (whether direct, indirect, or contingent, and including interest on
all convertible Liabilities), but excluding (a) Construction Interest, and (b)
Interest Expense that is not paid or payable in cash.
"INTEREST EXPENSE COVERAGE RATIO" means, as of any date, the ratio of (a)
the sum of (i) Funds from Operations, plus (ii) Interest Expense to (b) the sum
of (i) Interest Expense, plus (ii) Distributions of any kind or character or
other proceeds paid or payable with respect to any Disqualified Stock, in each
case for
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Borrower and its Consolidated Affiliates and calculated for the four (4) fiscal
quarters ending on the date of determination.
"INTEREST PERIOD" has the meaning set forth in SECTION 3.9.
"INTERNATIONAL PROPERTIES" means each Property located outside the United
States, and "INTERNATIONAL PROPERTY" means any one of the International
Properties.
"INTERNATIONAL CONSOLIDATED AFFILIATES" means each Consolidated Affiliate
of Borrower that is not organized under the laws of a state located in the
United States, and "INTERNATIONAL CONSOLIDATED AFFILIATE" means any one of the
International Consolidated Affiliates.
"INVESTMENT" in any Person means any investment, whether by means of share
purchase, loan, advance, extension of credit, capital contribution, or
otherwise, in or to such Person, the guaranty of any Liabilities of such Person,
or the subordination of any claim against such Person to other Liabilities of
such Person.
"LAWS" means all applicable statutes, laws, treaties, ordinances, rules,
regulations, orders, writs, injunctions, decrees, judgments, opinions, and
interpretations of any Tribunal.
"LENDERS" means the financial institutions named on SCHEDULE 1 or on the
most recently amended SCHEDULE 1, if any, delivered by Administrative Agent
under this Agreement, and, subject to this Agreement, their respective
successors and assigns (but not any Participant who is not otherwise a party to
this Agreement).
"LEVERAGE RATIO" means, as of any date, the ratio of (a) all Indebtedness,
to (b) Tangible Net Worth, in each case for Borrower and its Consolidated
Affiliates on a consolidated basis.
"LIABILITIES" means (without duplication), for any Person, (a) any
obligations required by GAAP to be classified upon such Person's balance sheet
as liabilities, (b) any liabilities secured (or for which the holder of the
Liability has an existing Right, contingent or otherwise, to be so secured) by
any Lien existing on property owned or acquired by that Person, (c) any
obligations that have been (or under GAAP should be) capitalized for financial
reporting purposes, (d) any guaranties, endorsements, and other contingent
obligations with respect to Liabilities or obligations of others, and (e) such
Person's Share of all Indebtedness of any Unconsolidated Affiliates of such
Person, and "LIABILITY" means any of the Liabilities.
"LIEN" means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind and any other
substantially similar arrangement for a creditor's claim to be satisfied from
assets or proceeds prior to the claims of other creditors or the owners.
"LITIGATION" means any action by or before any Tribunal.
"LOAN DOCUMENTS" means (a) this Agreement, certificates and reports
delivered under this Agreement, and exhibits and schedules to this Agreement,
(b) the Notes, (c) the Subsidiary Guaranties, (d) the Pledge Agreements, (e) any
Hedging Agreements with any Lender, (f) all other agreements, documents, and
instruments in favor of any Agent or Lenders (or any Agent on behalf of Lenders)
ever delivered in connection with or under this Agreement or otherwise delivered
in connection with all or any part of the Obligation, and (g) all renewals,
extensions, and restatements of, and amendments and supplements to, any of the
foregoing.
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"MATERIAL ADVERSE EVENT" means any circumstance or event that, individually
or collectively with other circumstances or events, reasonably is expected to
result in any (a) material impairment of the ability of Borrower to perform any
of its payment or other material obligations under any Loan Document, (b)
material impairment of the ability of Administrative Agent or any Lender to
enforce (i) any of the material obligations of Borrower under this Agreement or
(ii) any of their respective Rights under the Loan Documents, and, in the case
of (I) and (II), such impairment shall substantially interfere with the
realization of the principal legal benefits provided by this Agreement or the
other Loan Documents, (c) material and adverse effect on the financial condition
of Borrower and its Consolidated Affiliates as a whole as represented to Lenders
in the Current Financials, or (d) Default.
"MAXIMUM AMOUNT" and "MAXIMUM RATE" respectively mean, for a Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest that,
under applicable Law, such Lender is permitted to contract for, charge, take,
reserve, or receive on the Obligation.
"MOODY'S" means Moody's Investors Service, Inc. or, if Moody's no longer
publishes ratings, another ratings agency selected by Borrower and acceptable to
Administrative Agent.
"MOODY'S RATING" means the most recently-announced rating from time to time
of Moody's assigned to any class of long-term senior, unsecured Liability
securities issued by Borrower, as to which no letter of credit, guaranty, or
third party credit support is in place, regardless of whether all or any part of
such Liability has been issued at the time such rating was issued.
"NEW VENTURES" means corporations, limited liability companies,
partnerships, joint ventures, and similar entities that are in the business of
providing logistics, distribution, or related services, but whose primary
business is not the ownership of industrial properties.
"NOI" means, for any period and any Property owned for three (3) or more
months as of any determination date or on which substantial completion of
improvements thereon was completed for three (3) or more months as of any
determination date, the difference between (a) any cash rentals, proceeds,
expense reimbursements, or income received from such Property (but excluding
security or other deposits, late fees, early lease termination or other
penalties of a non-recurring nature), less (b) all cash costs and expenses
(including interest on assessment bonds) incurred as a result of, or in
connection with, the development, operation, or leasing of such Property, in
each case determined in accordance with GAAP.
"NON-CONSENTING LENDERS" is defined in SECTION 3.20.
"NON-INDUSTRIAL PROPERTIES" means Properties that are not used for
manufacturing, processing, or warehousing. The term "NON-INDUSTRIAL PROPERTIES"
excludes Refrigerated Warehouse Properties.
"NON-RECOURSE DEBT" means, for any Person, any Indebtedness of such Person
in which the holder of such Indebtedness may not look to such Person personally
for repayment, other than to the extent of any security therefor or pursuant to
Customary Recourse Exceptions.
"NOTES" means the Revolving Credit Notes, the Swing Line Note, and the
Competitive Bid Notes, and "NOTE" means any one of the Notes.
"OBLIGATION" means all present and future indebtedness and obligations, and
all renewals, increases, and extensions thereof, or any part thereof, now or
hereafter owed to any Agent or any Lender by Borrower under any Loan Document,
together with all interest accruing thereon, fees, costs, and expenses
(including
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all reasonable attorneys' fees and expenses incurred in the enforcement or
collection thereof) payable under the Loan Documents or in connection with the
protection of Rights under the Loan Documents.
"OPERATING SUB-POOL" is defined in SECTION 7.15.
"ORIGINAL UNPAID PRINCIPAL BALANCE" is defined in SECTION 3.21(A).
"PARTICIPANT" is defined in SECTION 13.11(B).
"PENSION PLAN" means an employee pension or benefit plan covered by Title
IV of ERISA or any other Applicable Pension Laws and established or maintained
by Borrower or any ERISA Affiliate.
"PERMITTED DISTRIBUTIONS" means, for Borrower for any fiscal year of
Borrower, an amount not to exceed ninety-five percent (95%) of Funds from
Operations for such fiscal year.
"PERMITTED LIENS" means (a) Liens granted to any Agent to secure the
Obligation, (b) pledges or deposits made to secure payment of worker's
compensation (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions, or social security
programs, (c) 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, (d) the following: (i) Liens for taxes not yet due and payable or that
are being contested in good faith by appropriate proceedings diligently
conducted, and for which reserves in accordance with GAAP or otherwise
reasonably acceptable to Administrative Agent have been provided; or (ii) Liens
imposed by mandatory provisions of law such as for materialmen's, mechanic's,
warehousemen's, and other like Liens arising in the ordinary course of business,
securing payment of any Liability whose payment is not yet due, (e) Liens for
taxes, assessments, and governmental charges or assessments that are being
contested in good faith by appropriate proceedings diligently conducted, and for
which reserves in accordance with GAAP or otherwise reasonably acceptable to
Administrative Agent have been provided, (f) Liens on Properties where Borrower
is insured against such Liens by title insurance, (g) Liens securing assessments
or charges payable to a property owner association or similar entity, which
assessments are not yet due and payable or that are being contested in good
faith by appropriate proceedings diligently conducted, and for which reserves in
accordance with GAAP or otherwise reasonably acceptable to Administrative Agent
have been provided, (h) Liens securing assessment bonds, so long as Borrower or
its Consolidated Affiliates are not in material default under the terms thereof,
(i) Liens granted to Borrower by a Consolidated Affiliate or an Unconsolidated
Affiliate of Borrower, and (j) leases to tenants of space in Properties that are
entered into in the ordinary course of business.
"PERSON" means any individual, entity, or Tribunal.
"PLEDGE AGREEMENTS" means (a) the Borrower Pledge Agreement executed by
Borrower in substantially the form of EXHIBIT H-1, and (b) the Subsidiary Pledge
Agreement executed by Borrower's Consoldiated Affiliates in substantially the
form of EXHIBIT H-2, and "PLEDGE AGREEMENT" means any one of the Pledge
Agreements.
"POOL" is defined in SECTION 7.15.
"POOL CONSOLIDATED AFFILIATES" means (a) ProLogis Services, and (b)
Subsidiary Guarantors (i) that have no Recourse Debt (other than to Borrower),
(ii) whose Stock is not subject to any Lien (other than Permitted Liens), (iii)
in which Borrower shall have at least similar control as it has with respect to
any of the
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Consolidated Affiliates set forth on SCHEDULE 8.6, and (iv) in which Borrower
has the ability to cause such Subsidiary Guarantors to incur, assume, guarantee,
or grant Liens to secure, any Liabilities of Borrower.
"POTENTIAL DEFAULT" means the occurrence of any event or the existence of
any circumstance that would, upon notice or lapse of time or both, become a
Default.
"PREFERRED STOCK SUBSIDIARY" of any Person means a corporation issuing non-
voting preferred Stock (or, if applicable, non-voting common Stock) and no more
than ten percent (10%) of the issued and outstanding voting common Stock to such
Person, which corporation either (a) is a Consolidated Affiliate of such Person,
or (b) owns no assets other than (i) investments otherwise permitted under
SECTION 8.6, (ii) securities of Consolidated Affiliates of such Preferred Stock
Subsidiary, or (iii) fifty-one percent (51%) or more of the voting Stock of
Unconsolidated Affiliates of such Preferred Stock Subsidiary.
"PRINCIPAL DEBT" means, for a Lender and at any time, the unpaid principal
balance of all outstanding Borrowings from such Lender hereunder.
"PROLOGIS SERVICES" means ProLogis Development Services Incorporated
(formerly known as SCI Development Services Incorporated).
"PROPERTIES" means real estate properties owned by Borrower, a Consolidated
Affiliate of Borrower, or an Unconsolidated Affiliate of Borrower, and
"PROPERTY" means any one of the Properties.
"PRO RATA" and "PRO RATA PART" means, when determined for any Lender, the
proportion (stated as a percentage) that such Lender's Commitment bears to the
Total Commitment, or, if the Total Commitments shall have been terminated, then
the proportion (stated as a percentage) that the sum of the Principal Debt owed
to such Lender bears to the Total Principal Debt owed to all Lenders.
"PURCHASER" is defined in SECTION 13.11(C).
"RATING REQUIREMENT" means, as of any date of determination, the lower of
the two (2) highest ratings of the Moody's Rating, the S & P Rating, and the DCR
Rating. For purposes hereof, the correlation of the levels or grades of the
Moody's Rating, the S & P Rating, and the DCR Rating shall be as set forth in
the table included herein in the definition of "APPLICABLE MARGIN" in the column
labeled "Rating Requirement." Each change in the Rating Requirement shall be
effective commencing on the fifth (5th) Business Day following the earlier to
occur of (a) Administrative Agent's receipt of notice from Borrower, as required
in SECTION 7.1(K), of a change in the Moody's Rating, the S & P Rating, or the
DCR Rating and (b) Administrative Agent's actual knowledge of a change in the
Moody's Rating, the S & P Rating, or the DCR Rating.
"RECOURSE DEBT" means all Indebtedness that is not Non-Recourse Debt;
provided that "Recourse Debt" shall not include Recourse Debt of Unconsolidated
Affiliates of such Person unless the holder of such Recourse Debt has recourse
against such Person for the payment of such Recourse Debt other than to the
extent of any security therefor or pursuant to any Customary Recourse
Exceptions.
"REFRIGERATED WAREHOUSE PROPERTIES" means each Property that is a
temperature-controlled facility, and "REFRIGERATED WAREHOUSE PROPERTY" means any
one of the Refrigerated Warehouse Properties.
"REIT" means a "real estate investment trust" for purposes of the Code.
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"REPRESENTATIVES" means representatives, officers, directors, employees,
attorneys, and agents.
"REQUIRED LENDERS" means the Lenders required under the Intercreditor
Agreement to modify, amend, or waive any term or condition herein, or to require
Administrative Agent to take any action hereunder.
"REQUIRED LEVEL" means, as of any determination date with respect to
Properties in the Operating Sub-Pool, the lesser of (a) the aggregate Historical
Value less the outstanding balance of any assessment bonds of the Properties in
the Operating Sub-Pool, and (b) (i) in the case of Domestic Properties in the
Operating Sub-Pool that are not Refrigerated Warehouse Properties, the aggregate
NOI of such Properties divided by nine and one quarter percent (9.25%), (ii) in
the case of Domestic Properties in the Operating Sub-Pool that are Refrigerated
Warehouse Properties, the aggregate EBITDA (adjusted to include a capital
reserve of the greater of (x) actual recurring capital expenditures for the
twelve (12) month period ending on the date of determination, and (y) $0.10 per
cubic foot) of such Refrigerated Warehouse Properties divided by ten percent
(10%), and (iii) in the case of International Properties in the Operating Sub-
Pool, the aggregate NOI (adjusted to include a capital reserve of $0.15 per
square foot and for actual income and withholding taxes) of such Properties
divided by eleven percent (11%); provided that for Properties in the Operating
Sub-Pool owned for less than three (3) months, the Required Level shall equal
the Historical Value of such Properties. For purposes of the foregoing, NOI
shall be determined for the twelve- (12-) month period ending on the date of
determination; provided, however, that for any Property (i) owned by Borrower or
a Consolidated Affiliate for less than twenty-four (24) months as of the date of
determination, or (ii) on which substantial completion of improvements thereon
was completed less than twenty-four (24) months prior to the date of
determination, NOI shall be annualized based upon the NOI of such Property in a
manner satisfactory to Administrative Agent.
"RESERVE REQUIREMENT" means, with respect to any Eurodollar Borrowing for
the relevant Interest Period, the actual aggregate reserve requirements
(including all basic, supplemental, emergency, special, marginal, and other
reserves required by applicable Law) applicable to a member bank of the Federal
Reserve System for eurocurrency fundings or liabilities.
"RESPONSIBLE OFFICER" means any chairman, president, chief executive
officer, chief financial officer, controller, secretary, senior vice president,
or vice president of Borrower.
"REVOLVING CREDIT NOTES" means one of the promissory notes substantially in
the form of EXHIBIT A-1, and all renewals, extensions, modifications,
rearrangements, and replacements thereof and any and all substitutions therefor,
and "REVOLVING CREDIT NOTE" means any one of the Revolving Credit Notes.
"RIGHTS" means rights, remedies, powers, privileges, and benefits.
"SHARE" means, for any Person, such Person's share of the Total Assets or
Liabilities of an Unconsolidated Affiliate based on such Person's percentage
ownership of such Unconsolidated Affiliate.
"SOLVENT" means, as to a Person, that (a) the aggregate fair market value
of its assets exceeds its liabilities, (b) it has sufficient cash flow to enable
it to pay its Liabilities as they mature, and (c) it does not have unreasonably
small capital to conduct its businesses.
"S & P" means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc., a New York corporation, or, if S & P no longer publishes ratings, then
another ratings agency selected by Borrower and acceptable to Administrative
Agent.
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"S & P RATING" means the most recently-announced rating from time to time
of S & P assigned to any class of long-term senior, unsecured Liability
securities issued by Borrower, as to which no letter of credit, guaranty, or
third party credit support is in place, regardless of whether all or any part of
such Liability has been issued at the time such rating was issued.
"STABILIZED PROPERTIES" means, as of any date, Properties that (a) are
owned for the full quarterly period ending on such date, and (b) either (i) have
achieved an average occupancy level based upon bona fide tenant leases requiring
current rent payments of at least ninety-three percent (93%), or (ii) as of such
date, have been owned for not less than twelve (12) consecutive months following
Borrower's or a Consolidated Affiliate's acquisition thereof or substantial
completion of improvements thereon.
"STOCK" means all shares, options, warrants, general or limited partnership
interests, membership interests, or other ownership interests (regardless of how
designated) of or in a corporation, partnership, limited liability company,
trust, or other entity, whether voting or nonvoting, including common stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended).
"SUBSIDIARY GUARANTORS" means each Consolidated Affiliate of Borrower
executing a Subsidiary Guaranty.
"SUBSIDIARY GUARANTIES" means (a) an Unconditional Guaranty Agreement in
substantially the form of EXHIBIT G, executed by each Consolidated Affiliate
(other than International Consolidated Affiliates) of Borrower pursuant to
SECTION 7.17, and (b) any Unconditional Guaranty Agreement in substantially the
form of EXHIBIT G and modified to the extent required under applicable Laws,
executed by an International Consolidated Affiliate of Borrower pursuant to
SECTION 7.17, in each case as modified, amended, and supplemented from time to
time, and "SUBSIDIARY GUARANTY" means any one of the Subsidiary Guaranties.
"SWING LINE LOAN" means a Borrowing made pursuant to SECTION 2.4.
"SWING LINE MATURITY DATE" means May 1, 1999, and successive one-year
extensions thereof if agreed to in writing by NationsBank in its sole
discretion, but in no event, a date later than the Termination Date.
"SWING LINE NOTE" means that certain promissory note executed by Borrower
and payable to the order of NationsBank in the original principal amount of
$50,000,000 substantially in the form of EXHIBIT E, and all renewals,
extensions, modifications, rearrangements, and replacements thereof and any and
all substitutions therefor.
"SWING LINE SUBFACILITY" means the subfacility under the Total Commitment
(the Principal Debt of which may never exceed $50,000,000 in the aggregate), as
described in, and subject to the limitations of, SECTION 2.4.
"SYNDICATION AGENT" is defined in the preamble to this Agreement.
"TANGIBLE NET WORTH" means, for any Person as of any date, (a) Total Assets
less (to the extent included therein) the book value of all assets that would be
treated as intangible assets under GAAP (including goodwill, trademarks, trade
names, copyrights, patents, deferred charges, and unamortized debt discount and
expense), minus (b) all Liabilities of such Person, minus (c) the amount
determined in accordance with GAAP attributable to any minority interests in
Consolidated Affiliates of such Person.
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"TAXES" means, for any Person, taxes, assessments, or other governmental
charges or levies imposed upon it, its income, or any of its properties,
franchises, or assets.
"TERMINATION DATE" means the earlier of (a) May 1, 2000 (subject to annual
extensions under SECTION 3.20), and (b) the effective date that Lenders'
commitments to lend hereunder are otherwise canceled or terminated in accordance
with this Agreement.
"TERM LOAN" and "TERM LOANS" are defined in SECTION 3.21(A).
"TOTAL ASSETS" means, for any Person as of any date, (a) such Person's
total assets determined in accordance with GAAP, plus (b) accumulated
depreciation with respect to such assets, minus (c) the total book value of such
Person's equity investments in each Unconsolidated Affiliate of such Person,
plus (d) such Person's Share of any total assets determined in accordance with
GAAP of each Unconsolidated Affiliate of such Person.
"TOTAL ASSET VALUE" means, for Borrower and its Consolidated Affiliates as
of any date, the sum of (a) aggregate NOI (based on the three- (3-) month period
ending on the date of determination and annualized in a manner satisfactory to
Administrative Agent) from Stabilized Properties divided by eight and three-
quarters of one percent (8.75%), plus (b) the total book value of (i) Properties
other than Stabilized Properties, 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 other assets not described in (A), (B) or (C) above,
excluding all intangibles and all equity investments in Unconsolidated
Affiliates, plus (e) Borrower's and its Consolidated Affiliates' Share of the
total book value of assets of Unconsolidated Affiliates determined in accordance
with GAAP. Total Asset Value shall be calculated on a consolidated basis in
accordance with GAAP.
"TOTAL COMMITMENT" means, at any time, the sum of the Commitments of all of
the Lenders.
"TOTAL PRINCIPAL DEBT" means, at any time, the sum of the Principal Debt of
all of the Lenders.
"TRIBUNAL" means any (a) local, state, or federal judicial, executive, or
legislative instrumentality, (b) private arbitration board or panel, or (c)
central bank.
"TYPE" means any type of Borrowing determined with respect to the
applicable interest option.
"UNCONSOLIDATED AFFILIATE" means, in respect of any Person, any other
Person in whom such Person holds Stock and whose financial results would not be
consolidated under GAAP with the financial results of such Person on the
consolidated financial statements of such Person.
"UNUSED COMMITMENT" means, at any time, (a) the Total Commitment minus (b)
the Total Principal Debt.
1.2 TIME REFERENCES. Unless otherwise specified in the Loan Documents (a)
time references are to time in Dallas, Texas, and (b) in calculating a period
from one date to another, the word "from" means "from and including" and the
word "to" or "until" means "to but excluding."
1.3 OTHER REFERENCES. Unless otherwise specified in the Loan Documents
(a) where appropriate, the singular includes the plural and vice versa, and
words of any gender include each other gender, (b) headings and caption
references may not be construed in interpreting provisions, (c) monetary
references are to currency of the United States of America, (d) section,
paragraph, annex, schedule, exhibit, and similar
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references are to the particular Loan Document in which they are used, (e)
references to "telecopy," "facsimile," "fax," or similar terms are to facsimile
or telecopy transmissions, (f) references to "including" mean including without
limiting the generality of any description preceding that word, (g) the rule of
construction that references to general items that follow references to specific
items are limited to the same type or character of those specific items is not
applicable in the Loan Documents, (h) references to any Person include that
Person's heirs, personal representatives, successors, trustees, receivers, and
permitted assigns, (i) references to any Law include every amendment or
supplement to it, rule and regulation adopted under it, and successor or
replacement for it, and (j) references to any Loan Document or other document
include every renewal and extension of it, amendment and supplement to it, and
replacement or substitution for it.
1.4 ACCOUNTING PRINCIPLES. Under the Loan Documents, unless otherwise
stated, (a) GAAP determines all accounting and financial terms and compliance
with financial covenants, (b) GAAP in effect on the date of this Agreement
determines compliance with financial covenants, (c) otherwise, all accounting
principles applied in a current period must be comparable in all material
respects to those applied during the preceding comparable period, and (d) while
Borrower has any Consolidated Affiliates, all accounting and financial terms and
compliance with financial covenants must be on a consolidated basis, as
applicable. If there is a change in GAAP after the date hereof, the Compliance
Certificate shall include calculations setting forth the adjustments from the
relevant financial items as shown in the Current Financials, based on the then-
current GAAP, to the corresponding financial items based on GAAP as used in the
Current Financials delivered to Administrative Agent and Lenders on or prior to
the date hereof, so as to demonstrate how such financial covenant compliance was
derived from the Current Financials; provided that Administrative Agent or
Borrower may request the other to, whereupon the other party shall, negotiate in
good faith for a period for not more than thirty (30) days regarding amendments
to any affected covenants to make such covenants consistent with the prior
covenants and GAAP, as then in effect, and, after any such revision as shall be
agreed to by Borrower and Administrative Agent, this Agreement will be construed
in accordance with GAAP as then in effect.
SECTION 2 COMMITMENT.
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2.1 REVOLVING FACILITY. Subject to the provisions in the Loan Documents,
each Lender severally and not jointly agrees to lend to Borrower one or more
Borrowings (except for Competitive Borrowings and Swing Line Loans) hereunder
which Borrower may borrow, repay, and reborrow under this Agreement, subject to
the following conditions:
(A) each Borrowing requested by Borrower hereunder must occur on a
Business Day and no later than the Business Day immediately preceding the
Termination Date;
(B) each Borrowing requested by Borrower must be in an amount not less
than $1,000,000 or a greater integral multiple of $100,000 or, if less, the
Unused Commitment less the Principal Debt of any Swing Line Loans;
(C) the Total Principal Debt may not exceed the Total Commitment; and
(D) no Lender's Principal Debt may exceed such Lender's Commitment.
2.2 BORROWING PROCEDURE. The following procedures apply to Borrowings
(other than Competitive Borrowings and Swing Line Loans):
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(A) Borrower may request a Borrowing by submitting to Administrative
Agent a Borrowing Request. The Borrowing Request must be received by
Administrative Agent no later than 11:00 a.m. on (i) the third (3rd) Business
Day preceding the Borrowing Date for any Eurodollar Borrowing or (ii) the
Business Day preceding the Borrowing Date for any Base Rate Borrowing.
Administrative Agent shall promptly notify each Lender of its receipt of any
Borrowing Request and its contents. A Borrowing Request is irrevocable and
binding on Borrower.
(B) By 11:00 a.m. on the applicable Borrowing Date, each Lender shall
remit its Pro Rata Part of each requested Borrowing by wire transfer to
Administrative Agent pursuant to Administrative Agent's wire transfer
instructions on SCHEDULE 1 (or as otherwise directed by Administrative Agent) in
funds that are available for immediate use by Administrative Agent. Subject to
receipt of such funds, Administrative Agent shall make such funds available to
Borrower in Dallas, Texas at 12:00 noon on such Borrowing Date (unless it has
actual knowledge that any applicable condition precedent has not been satisfied
by Borrower).
(C) Absent contrary written notice from a Lender, Administrative Agent
may assume that each Lender has made its Pro Rata Part of the requested
Borrowing available to Administrative Agent on the applicable Borrowing Date,
and Administrative Agent may, in reliance upon such assumption (but is not
required to), make available to Borrower a corresponding amount. If a Lender
fails to make its Pro Rata Part of any requested Borrowing available to
Administrative Agent on the applicable Borrowing Date, Administrative Agent may
recover the applicable amount on demand (i) from such Lender, together with
interest at the Federal Funds Rate for the period commencing on the date the
amount was made available to Borrower by Administrative Agent and ending on (but
excluding) the date Administrative Agent recovers the amount from such Lender,
or (ii) if such Lender fails to pay its amount upon demand, then from Borrower,
together with interest at an annual interest rate equal to the rate applicable
to the requested Borrowing for the period commencing on the Borrowing Date and
ending on (but excluding) the date Administrative Agent recovers the amount from
Borrower. No Lender is responsible for the failure of any other Lender to make
its Pro Rata Part of any Borrowing.
2.3 TERMINATION. Without premium or penalty, and upon giving at least
three (3) Business Days prior written and irrevocable notice to Administrative
Agent, Borrower may terminate all or part of the unused portion of the Total
Commitment, provided that Borrower may not partially terminate the unused
portion of the Total Commitment such that the Total Commitment is less than
$200,000,000. Each partial termination must be in an amount of not less than
$1,000,000 or a greater integral multiple of $1,000,000, and shall be Pro Rata
among all Lenders. Once terminated, the Total Commitment may not be increased
or reinstated.
2.4 SWING LINE SUBFACILITY.
(A) Subject to the terms and conditions hereof, if necessary to meet
Borrower's funding deadlines, NationsBank agrees to make Swing Line Loans to
Borrower at any time on or prior to the Swing Line Maturity Date, not to exceed
an amount at any one time outstanding equal to the lesser of (i) $50,000,000,
and (ii) the difference between the Total Commitment and the Total Principal
Debt. Swing Line Loans shall constitute "Borrowings" for all purposes hereunder,
except that Swing Line Loans shall not be considered a utilization of any
Lender's Commitment. Notwithstanding the foregoing, the Total Principal Debt
(including, without limitation, all Swing Line Loans) shall not at any time
exceed the Total Commitment.
(B) Each request for a Swing Line Loan shall be in an amount equal to
$1,000,000 or a greater integral multiple of $50,000. Borrower may request a
Swing Line Loan by submitting a Borrowing Request to Administrative Agent and
NationsBank. Such Borrowing Request must be received by Administrative Agent
and NationsBank no later than 11:00 a.m. on the Borrowing Date for such Swing
Line Loan, provided
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that Borrower shall have provided telephonic notice to Administrative Agent and
NationsBank no later than 11:00 a.m. on the Borrowing Date for such Swing Line
Loan. NationsBank shall make such Swing Line Loan available to Borrower in
Dallas, Texas at 1:00 p.m. on such Borrowing Date.
(C) If necessary to meet Borrower's funding deadlines, Administrative
Agent may treat any Borrowing Request as a request for a Swing Line Loan from
NationsBank and NationsBank may fund it as a Swing Line Loan. Within one (1)
Business Day after each Swing Line Loan is funded, NationsBank shall request
that each Lender, and each Lender shall, on the first (1st) Business Day after
such request is made, purchase a portion of any one or more Swing Line Loans in
an amount equal to such Lender's Pro Rata Part of such Swing Line Loans by
funding under such Lender's Revolving Credit Note, such purchase to be made in
accordance with the terms of SECTION 2.2 of this Agreement just as if such
Lender were funding directly to Borrower under its Revolving Credit Note (such
that all Lenders other than NationsBank shall fund only under their respective
Revolving Credit Note and not under the Swing Line Loan Note). Unless
Administrative Agent knew when NationsBank funded a Swing Line Loan that
Borrower had not satisfied the conditions in this Agreement to obtain a
Borrowing, each Lender's obligation to purchase an interest in all Swing Line
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 NationsBank or any other Person for any reason whatsoever, (ii) the
occurrence or continuance of a Potential Default or Default or the termination
of any Lender's Commitment, (iii) the occurrence of any Material Adverse Event,
(iv) any breach of this Agreement or any other Loan Document by Borrower, any of
its Affiliates, Administrative 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 Line Loan not so purchased and converted
may be treated by NationsBank as a Borrowing which was not funded by the non-
purchasing Lenders as contemplated in SECTION 2.2(C) of this Agreement, and as a
funding by NationsBank under the Total Commitment in excess of NationsBank's
Commitment. Each Swing Line Loan, once so sold, shall cease to be a Swing Line
Loan for the purposes of this Agreement, but shall be a Borrowing made under the
Total Commitment and each Lender's Commitment.
2.5 COMPETITIVE BID SUBFACILITY.
(A) In addition to Borrowings otherwise provided for herein, but subject
to the terms and conditions of the Loan Documents, Borrower may, as set forth in
this SECTION 2.5, request Lenders to make offers to make Competitive Borrowings
under the Total Commitment. Lenders may, but shall have no obligation to, make
any such offers, and Borrower may, but shall have no obligation to, accept any
such offers. Any Competitive Borrowings made available to Borrower hereunder
shall be subject, however, to the conditions that on any date of determination:
(i) the aggregate principal outstanding under all Competitive Borrowings made by
all Lenders shall not exceed $100,000,000; (ii) on any date of determination,
the Principal Debt of all Borrowings (whether under the Competitive Bid
Subfacility, the Swing Line Subfacility, or otherwise) shall not exceed the
Total Commitment; and (iii) each Borrowing under the Competitive Bid Subfacility
must occur on a Business Day and prior to the Business Day immediately preceding
the Termination Date.
(B) In order to request Competitive Bids, Borrower shall deliver a
Competitive Bid Request to Administrative Agent no later than 10:00 a.m. Dallas,
Texas time (i) on the fifth (5th) Business Day preceding the Borrowing Date for
any requested Competitive Borrowing that will be comprised of Eurodollar
Borrowings, or (ii) not later than 9:00 a.m. Dallas, Texas time one (1) Business
Day before the Borrowing Date for any requested Competitive Borrowing that will
be comprised of Fixed Rate Borrowings. A Competitive Bid Request that does not
conform substantially to the format of EXHIBIT B-2 may be rejected by
Administrative Agent, and Administrative Agent shall promptly notify Borrower of
such rejection. Each
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Competitive Bid Request shall refer to this Agreement and shall specify (i)
whether the Competitive Borrowing then being requested will be comprised of
Eurodollar Borrowings or Fixed Rate Borrowings, (ii) the Borrowing Date of such
Competitive Borrowing (which shall be a Business Day) and the aggregate
principal amount thereof (which shall not be less than $10,000,000 or a greater
integral multiple of $1,000,000), and (iii) the Interest Period with respect
thereto (which may not be more than six (6) months and which may not extend
beyond the Conversion Date). Promptly after its receipt of a Competitive Bid
Request that is not rejected as aforesaid, Administrative Agent shall notify
Lenders of the Competitive Bid Request on a form substantially similar to
EXHIBIT B-2, pursuant to which Lenders are invited to bid, subject to the terms
and conditions of this Agreement, to make Competitive Borrowings pursuant to
such Competitive Bid Request. Notwithstanding the foregoing, Administrative
Agent shall have no obligation to invite any Lender to make a Competitive Bid
pursuant to this SECTION 2.5 until such Lender has delivered a completed
Administrative Questionnaire to Administrative Agent.
(C) Each Lender may make one (1) or more Competitive Bids to Borrower
responsive to each respective Competitive Bid Request. Each Competitive Bid by
a Lender must be received by Administrative Agent substantially in the form of
EXHIBIT F, (i) no later than 11:00 a.m. Dallas, Texas time on the fourth (4th)
Business Day preceding the Borrowing Date for any requested Competitive
Borrowing that will be comprised of Eurodollar Borrowings, or (ii) prior to 9:00
a.m. Dallas, Texas time on the Borrowing Date for any requested Competitive
Borrowing that will be comprised of Fixed Rate Borrowings. Competitive Bids
that do not conform substantially to the format of EXHIBIT F may be rejected by
Administrative Agent after conferring with, and upon the instruction of,
Borrower, and Administrative Agent shall notify the appropriate Lender of such
rejection as soon as practicable. Each Competitive Bid shall refer to this
Agreement and shall (x) specify the principal amount (which shall be in a
minimum principal amount of $5,000,000 or a greater integral multiple of
$1,000,000 and which may equal the entire principal amount of the Competitive
Borrowing requested by Borrower and may exceed such Lender's Commitment, subject
to the limitations set forth in SECTION 2.5(A)) of the Competitive Borrowing
such Lender is willing to make to Borrower, (y) specify the Competitive Bid Rate
at which such Lender is prepared to make its Competitive Borrowing, and (z)
confirm the Interest Period with respect thereto specified by Borrower in its
Competitive Bid Request. A Competitive Bid submitted by a Lender pursuant to
this SECTION 2.5(C) shall be irrevocable.
(D) Administrative Agent shall promptly notify Borrower of all
Competitive Bids made and the Competitive Bid Rate and the principal amount of
each Competitive Borrowing in respect of which a Competitive Bid was made and
the identity of the Lender that made each bid.
(E) Borrower may, subject only to the provisions of this SECTION 2.5(E),
accept or reject any or all of the Competitive Bids referred to in SECTION
2.5(C); provided, however, that the aggregate amount of the Competitive Bids so
accepted by Borrower may not exceed the principal amount of the Competitive
Borrowing requested by Borrower (subject to the further limitations of SECTION
2.5(A)). Borrower shall notify Administrative Agent whether and to what extent
it has decided to accept or reject any or all of the bids referred to in SECTION
2.5(C) (i) not later than 10:00 a.m. Dallas, Texas time three (3) Business Days
before the Borrowing Date specified for a proposed Competitive Borrowing that is
deemed a Eurodollar Borrowing or (ii) not later than 10:00 a.m., Dallas, Texas
time on the day specified for a proposed Competitive Borrowing that is deemed a
Fixed Rate Borrowing; provided, however, that (A) the failure by Borrower to
give such notice shall be deemed to be a rejection of all the bids referred to
in SECTION 2.5(C), (B) Borrower shall not accept a bid in the same or lower
principal amount made at a particular Competitive Bid Rate if Borrower has
decided to reject a bid made at a lower Competitive Bid Rate, (C) if Borrower
shall accept bids made at a particular Competitive Bid Rate but shall be
restricted by other conditions hereof from borrowing the principal amount of the
Competitive Borrowing in respect of which bids at such Competitive Bid Rate have
been made, then Borrower shall accept a ratable portion of each bid made at such
Competitive Bid Rate based as nearly
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as possible on the respective principal amounts of the Competitive Borrowing for
which such bids were made, and (D) no bid shall be accepted for a Competitive
Borrowing unless the aggregate principal amount to be funded pursuant to all
accepted bids hereunder shall be in a minimum amount of $10,000,000 or a greater
integral multiple of $1,000,000 for each respective Lender whose bid is
accepted. Notwithstanding the foregoing, if it is necessary for Borrower to
accept a ratable allocation of the bids made in response to a Competitive Bid
Request (whether pursuant to the events specified in CLAUSE (Y) above or
otherwise) and the available principal amount of the Competitive Borrowing to be
allocated among the Lenders submitting Competitive Bids is not sufficient to
enable Competitive Borrowings to be allocated to each such Lender in a minimum
principal amount of $10,000,000 or a greater integral multiple of $1,000,000,
then Borrower shall select the Lenders to be allocated such Competitive
Borrowings and shall round allocations up or down to the next higher or lower
multiple of $500,000 as it shall deem appropriate. A notice given by Borrower
pursuant to this SECTION 2.5(E) shall be irrevocable.
(F) Administrative Agent shall promptly notify each bidding Lender
whether or not its Competitive Bid has been accepted (which notice to such
Lenders whose Competitive Bids have been accepted will be given within one (1)
hour (except in the case of Fixed Rate Borrowings, in which case as soon as
possible) from the time such bid was accepted by Borrower and shall further
indicate in what amount and at what Competitive Bid Rate), and each successful
bidder will thereupon become bound, subject to the other applicable conditions
hereof, to advance the Competitive Borrowing in respect of which its bid has
been accepted. After completing the notifications referred to in the immediately
preceding sentence, Administrative Agent shall notify each bidding Lender of the
aggregate principal amount of all Competitive Bids accepted for and the range of
Competitive Bid Rates submitted in connection with that Competitive Borrowing.
(G) If Administrative Agent shall at any time elect to submit a
Competitive Bid in its capacity as a Lender, then it shall submit such bid
directly to Borrower one-half hour earlier than the latest time at which the
other Lenders are required to submit their bids to Administrative Agent pursuant
to SECTION 2.5(C).
(H) The Principal Debt of each Competitive Borrowing and all unpaid
interest thereon shall be due and payable on the last day of the applicable
Interest Period; provided that if Borrower fails to repay any Competitive
Borrowing on such day, then Borrower shall be deemed to have given a Notice of
Borrowing requesting Lenders to make a Borrowing hereunder in the amount of such
Competitive Borrowing, subject to satisfaction of the conditions specified in
SECTION 5; provided that failure to repay such Competitive Borrowing on the last
day of the applicable Interest Period shall not constitute a failure to satisfy
such conditions.
SECTION 3 TERMS OF PAYMENT.
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3.1 NOTES AND PAYMENTS.
(A) The Principal Debt (other than Competitive Borrowings and under the
Swing Line Loan) shall be evidenced by the Revolving Credit Notes, one payable
to each Lender in the stated principal amount of its Commitment. The Principal
Debt of all Competitive Borrowings shall be evidenced by the Competitive Bid
Notes. The Principal Debt under the Swing Line Loan shall be evidenced by the
Swing Line Note.
(B) Borrower must make each payment and prepayment on the Obligation,
without offset, counterclaim, or deduction, to Administrative Agent's principal
office in Dallas, Texas, in funds that will be available for immediate use by
Administrative Agent by 12:00 noon on the day due. Payments received after such
time shall be deemed received on the next Business Day. Administrative Agent
shall pay to each Lender any payment to which such Lender is entitled on the
same day Administrative Agent receives the funds from
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Borrower if Administrative Agent receives the payment or prepayment before 12:00
noon, and otherwise before 12:00 noon on the following Business Day. If and to
the extent that Administrative Agent does not make payments to Lenders when due,
then unpaid amounts shall accrue interest at the Federal Funds Rate from the due
date until (but not including) the payment date.
3.2 INTEREST AND PRINCIPAL PAYMENTS.
(A) INTEREST PAYMENTS. Accrued interest on each Borrowing (other than
Competitive Borrowings) is due and payable monthly as it accrues on the first
(1st) day of each month during the term hereof (commencing on September 1, 1998)
and on the Termination Date. Accrued interest on each Competitive Borrowing is
due and payable on the last day of its respective Interest Period; provided that
if any such Interest Period is a period greater than three (3) months, then
accrued interest on such Competitive Borrowing shall also be due and payable on
the date ending each three (3) month period after the commencement of such
Interest Period.
(B) PRINCIPAL PAYMENTS. The Total Principal Debt is due and payable on
the Termination Date.
(C) VOLUNTARY PREPAYMENT. Borrower may voluntarily repay or prepay all
or any part of the Total Principal Debt at any time without premium or penalty,
subject to the following conditions:
(I) Administrative Agent must receive Borrower's written payment
notice by 11:00 a.m. on (A) the Business Day preceding the date of payment
of a Eurodollar Borrowing and (B) the Business Day preceding the date of
payment of a Base Rate Borrowing, which shall specify the payment date and
the Type and amount of the Borrowing(s) to be paid, and which shall
constitute an irrevocable and binding obligation of Borrower to make a
repayment or prepayment on the designated date;
(II) each partial repayment or prepayment must be in a minimum
amount of at least $1,000,000 or a greater integral multiple of $100,000,
or, if less, the Total Principal Debt; and
(III) Borrower shall pay any related Funding Loss upon demand.
Notwithstanding anything contained herein to the contrary, Borrower shall not
voluntarily prepay any Competitive Borrowing prior to the last day of the
Interest Period therefor.
3.3 INTEREST OPTIONS. Except as specifically otherwise provided,
Borrowings (other than Competitive Borrowings) shall bear interest at an annual
rate equal to the lesser of (a) the Base Rate plus the Applicable Margin, or,
except for Swing Line Loans, the Eurodollar Rate plus the Applicable Margin (in
each case as designated or deemed designated by Borrower and, in the case of
Eurodollar Borrowings, for the Interest Period designated by Borrower), and (b)
the Maximum Rate. Except as specifically otherwise provided, Competitive
Borrowings shall bear interest at an annual rate of interest equal to the lesser
of (i) the Competitive Bid Rate, and (ii) the Maximum Rate. Each change in the
Base Rate and Maximum Rate is effective, without notice to Borrower or any other
Person, upon the effective date of such change.
3.4 QUOTATION OF RATES. A Representative of Borrower may call
Administrative Agent before delivering a Borrowing Request to receive an
indication of the interest rates then in effect, but the indicated rates do not
bind Administrative Agent or Lenders or affect the interest rate that is
actually in effect when Borrower delivers its Borrowing Request or on the
Borrowing Date.
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3.5 DEFAULT RATE. If permitted by Law, all past-due Principal Debt and
past-due interest accruing on any of the foregoing, bears interest from the date
due (stated or by acceleration) at the Default Rate until paid, regardless
whether payment is made before or after entry of a judgment.
3.6 INTEREST RECAPTURE. If the designated interest rate applicable to
any Borrowing exceeds the Maximum Rate, the interest rate on that Borrowing is
limited to the Maximum Rate, but any subsequent reductions in the designated
rate shall not reduce the interest rate thereon below the Maximum Rate until the
total amount of accrued interest equals the amount of interest that would have
accrued if that designated rate had always been in effect. If at maturity
(stated or by acceleration), or at final payment of the Notes, the total
interest paid or accrued is less than the interest that would have accrued if
the designated rates had always been in effect, then, at that time and to the
extent permitted by applicable Law, Borrower shall pay an amount equal to the
difference between (a) the lesser of the amount of interest that would have
accrued if the designated rates had always been in effect and the amount of
interest that would have accrued if the Maximum Rate had always been in effect,
and (b) the amount of interest actually paid or accrued on the Notes.
3.7 INTEREST CALCULATIONS.
(A) Interest will be calculated on the basis of actual number of days
elapsed (including the first day but excluding the last day) but computed as if
each calendar year consisted of 360 days for all Borrowings (unless the
calculation would result in an interest rate greater than the Maximum Rate, in
which event interest will be calculated on the basis of a year of 365 or 366
days, as the case may be). All interest rate determinations and calculations by
Administrative Agent are conclusive and binding absent manifest error.
(B) The provisions of this Agreement relating to calculation of the Base
Rate, the Eurodollar Rate, and the Competitive Bid Rate are included only for
the purpose of determining the rate of interest or other amounts to be paid
under this Agreement that are based upon those rates. Each Lender may fund and
maintain its funding of all or any part of each Borrowing as it selects.
3.8 MAXIMUM RATE. Regardless of any provision contained in any Loan
Document or any document related thereto, it is the intent of the parties to
this Agreement that no Agent or any Lender contract for, charge, take, reserve,
receive, or apply, as interest on all or any part of the Obligation any amount
in excess of the Maximum Rate or the Maximum Amount or receive any unearned
interest in violation of any applicable Law, and, if Lenders ever do so, then
any excess shall be treated as a partial repayment or prepayment of principal
and any remaining excess shall be refunded to Borrower. In determining if the
interest paid or payable exceeds the Maximum Rate, Borrower and Lenders shall,
to the maximum extent permitted under applicable Law, (a) treat all Borrowings
as but a single extension of credit (and Lenders and Borrower agree that is the
case and that provision in this Agreement for multiple Borrowings is for
convenience only), (b) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary repayments or
prepayments and their effects, and (d) amortize, prorate, allocate, and spread
the total amount of interest throughout the entire contemplated term of the
Obligation. However, if the Obligation is paid in full before the end of its
full contemplated term, and if the interest received for its actual period of
existence exceeds the Maximum Amount, then Lenders shall refund any excess (and
Lenders may not, to the extent permitted by Law, be subject to any penalties
provided by any Laws for contracting for, charging, taking, reserving or
receiving interest in excess of the Maximum Amount). If the Laws of the State of
Texas are applicable for purposes of determining the "Maximum Rate" or the
"Maximum Amount," then those terms mean the "weekly ceiling" from time to time
in effect under Article 5069-1D.009, Title 79, Revised Civil Statutes of Texas,
as amended. Borrower agrees that Chapter 346 of the Texas Finance Code, as
amended (which regulates certain revolving credit loan accounts and revolving
tri-party accounts), does not apply to the Obligation.
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3.9 INTEREST PERIODS. When Borrower requests any Eurodollar Borrowing or
a Fixed Rate Borrowing, Borrower may elect the applicable interest period (each
an "INTEREST PERIOD"), which may be, at Borrower's option, one (1), two (2),
three (3) or six (6) months for Eurodollar Borrowings and any period of up to
six (6) months (with respect to any Fixed Rate Borrowing), subject to the
following conditions: (a) the initial Interest Period for a Eurodollar Borrowing
commences on the applicable Borrowing Date or conversion date, and each
subsequent Interest Period applicable to any Borrowing commences on the day when
the next preceding applicable Interest Period expires; (b) if any Interest
Period for a Eurodollar Borrowing begins on a day for which there exists no
numerically corresponding Business Day in the calendar month at the end of the
Interest Period ("ENDING CALENDAR MONTH"), then the Interest Period ends on the
next succeeding Business Day of the Ending Calendar Month, unless there is no
succeeding Business Day in the Ending Calendar Month in which case the Interest
Period ends on the next preceding Business Day of the Ending Calendar Month; (c)
no Interest Period for any portion of Principal Debt may extend beyond the
scheduled repayment date for that portion of Principal Debt; and (d) there may
not be in effect at any one time more than twelve (12) Interest Periods
(including, without limitation, Interest Periods for Competitive Borrowings).
Notwithstanding the foregoing, subject to the foregoing conditions and the
consent of Administrative Agent (such consent to be in Administrative Agent's
reasonable discretion), Borrower may, not more often than during four (4) thirty
(30) day periods during any twelve (12) month period during the term of this
Agreement in anticipation of Borrower's prepayment of Borrowings from equity or
debt offerings or financings, elect Interest Periods of seven (7) days, fourteen
(14) days, or twenty-one (21) days.
3.10 CONVERSIONS. Borrower may (a) on the last day of the applicable
Interest Period convert all or part of a Eurodollar Borrowing to a Base Rate
Borrowing, (b) at any time convert all or part of a Base Rate Borrowing to a
Eurodollar Borrowing, and (c) on the last day of an Interest Period, elect a new
Interest Period for a Eurodollar Borrowing. Any such conversion is subject to
the dollar limits and denominations of SECTION 2.1 and may be accomplished by
delivering a Borrowing Request to Administrative Agent no later than 11:00 a.m.
(i) on the third (3rd) Business Day before (A) the conversion date for
conversion to a Eurodollar Borrowing and (B) the last day of the Interest
Period, for the election of a new Interest Period, and (ii) one (1) Business Day
before the last day of the Interest Period for conversion to a Base Rate
Borrowing. Absent Borrower's notice of conversion or election of a new Interest
Period, a Eurodollar Borrowing shall be converted to a Base Rate Borrowing when
the applicable Interest Period expires.
3.11 ORDER OF APPLICATION.
(A) If no Default exists, any payment shall be applied to the Obligation
in the order and manner as provided in this Agreement.
(B) If a Default exists, any payment (including proceeds from the
exercise of any Rights) shall be applied in the following order: (i) to all fees
and expenses for which Administrative Agent or Lenders have not been paid or
reimbursed in accordance with the Loan Documents (and if such payment is less
than all unpaid or unreimbursed fees and expenses, then the payment shall be
paid against unpaid and unreimbursed fees and expenses in the order of
incurrence or due date); (ii) to accrued interest on the Principal Debt; (iii)
to the Principal Debt of any Swing Line Loans; and (iv) to the remaining
Obligation in the order and manner as Administrative Agent deems appropriate.
3.12 SHARING OF PAYMENTS, ETC. If any Lender obtains any amount (whether
voluntary, involuntary or otherwise, including as a result of exercising its
Rights under SECTION 3.13) that exceeds the part of that payment that such
Lender is then entitled to receive under the Loan Documents, then such Lender
shall purchase from the other Lenders participations that will cause the
purchasing Lender to share the excess amount ratably with each other Lender. If
all or any portion of any excess amount is subsequently recovered
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from the purchasing Lender, then the purchase shall be rescinded and the
purchase price restored to the extent of the recovery. Borrower agrees that any
Lender purchasing a participation from another Lender under this SECTION may, to
the fullest extent permitted by Law, exercise all of its Rights of payment
(including the Right of offset) with respect to that participation as fully as
if such Lender were the direct creditor of Borrower in the amount of that
participation.
3.13 OFFSET. If a Default exists, then each Lender is entitled, but is
not obligated, to exercise (for the benefit of all Lenders in accordance with
SECTION 3.12) the Rights of offset and banker's Lien against each and every
account and other property, or any interest therein, that Borrower may now or
hereafter have with, or which is now or hereafter in the possession of, that
Lender to the extent of the full amount of the Obligation owed to it.
3.14 BOOKING BORROWINGS. To the extent permitted by Law, any Lender may
make, carry or transfer its Borrowings at, to, or for the account of any of its
branch offices or the office of any of its Affiliates. However, no Affiliate is
entitled to receive any greater payment under SECTION 3.16 than the transferor
Lender would have been entitled to receive with respect to those Borrowings.
3.15 BASIS UNAVAILABLE OR INADEQUATE FOR THE EURODOLLAR RATE. If (a)
Administrative Agent determines that the basis for determining the applicable
rate is not available, or (b) any Lender determines that the resulting rate does
not accurately reflect the cost to such Lender of making or converting
Borrowings at that rate for the applicable Interest Period, then:
(1) In the case of (A), Administrative Agent shall promptly notify
Borrower and Lenders of that determination (which is conclusive and binding
on Borrower absent manifest error), and all Borrowings shall bear interest
at the sum of the Base Rate plus the Applicable Margin. Until
Administrative Agent notifies Borrower that such circumstances no longer
exist, Lenders' commitments under this Agreement to make, or to convert to,
Eurodollar Borrowings will be suspended.
(2) In the case of (B), such Lender shall promptly notify
Administrative Agent and Borrower, and all Borrowings of such Lender shall
bear interest at the sum of the Base Rate plus the Applicable Margin.
Until Administrative Agent notifies Borrower that such circumstances no
longer exist, such Lender's commitment under this Agreement to make, or to
convert to, Eurodollar Borrowings will be suspended.
3.16 ADDITIONAL COSTS. With respect to any Law, requirement, request,
directive, or change affecting banking institutions generally:
(A) EUROCURRENCY RESERVES. If any Lender shall be required under any
Reserve Requirement to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, then (i) such Lender
(through Administrative Agent) shall, within sixty (60) days after the end of
any Interest Period with respect to any Eurodollar Borrowing during which such
Lender was so required to maintain reserves, deliver to Borrower a certificate
stating (A) that such Lender was required to maintain reserves and as a result
such Lender incurred additional costs in connection with making Eurodollar
Borrowings and (B) in reasonable detail, such Lender's computations of the
amount of additional interest payable by Borrower, pursuant to the provisions
below, and (ii) Borrower shall, promptly upon receipt of any such certificate,
pay to Administrative Agent, for the account to such Lender, additional interest
on the unpaid principal amount of each Eurodollar Borrowing of such Lender made
to it outstanding during the Interest Period with respect to which the above-
referenced certificate was delivered to Administrative Agent, at a rate per
annum equal to
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the difference obtained by subtracting (x) the Eurodollar Rate for such Interest
Period from (y) the rate obtained by dividing such Eurodollar Rate by a
percentage equal to 100% minus the Reserve Requirement of such Lender for such
Interest Period. The amount of interest payable by Borrower to any Lender as
stated in any certificate delivered to Administrative Agent pursuant to the
provisions of this SECTION 3.16(A) shall be conclusive and binding for all
purposes, absent manifest error. The provisions of this SECTION 3.16(A) shall
survive the termination of this Agreement.
(B) RESERVES. With respect to any Eurodollar Borrowing or any Fixed Rate
Borrowing, if (i) any change in present Law, any change in the interpretation or
application of any present Law, or any future Law imposes, modifies, or deems
applicable (or if compliance by any Lender with any such requirement of any
Tribunal results in) any such requirement that any reserves (including any
marginal, emergency, supplemental or special reserves) be maintained, and (ii)
those reserves reduce any sums receivable by such Lender under this Agreement or
increase the costs incurred by such Lender in advancing or maintaining any
portion of any Eurodollar Borrowing or any Fixed Rate Borrowing, then (unless
the effect is already reflected in the rate of interest then applicable under
this Agreement) such Lender (through Administrative Agent) shall deliver to
Borrower a certificate setting forth in reasonable detail the calculation of the
amount necessary to compensate it for its reduction or increase (which
certificate is conclusive and binding absent manifest error), and Borrower shall
promptly pay that amount to that Lender upon demand. Such Lender shall notify
Administrative Agent and Borrower of any such determination as soon as
practicable (but in any event within 120 days) after such Lender obtains actual
knowledge of the event or condition prompting such Lender to make such
determination, and Borrower shall not be liable for any such amount or amounts
that accrue between the date such notification is required to be given and the
date notice was actually given. The provisions of and undertakings and
indemnification set forth in this paragraph shall survive the satisfaction and
payment of the Obligation and termination of this Agreement.
(C) CAPITAL ADEQUACY. With respect to any Borrowing, if any change in
present Law or any future Law regarding capital adequacy or compliance by
Administrative Agent or any Lender with any request, directive or requirement
now existing or hereafter imposed by any Tribunal regarding capital adequacy, or
any change in its written policies or in the risk category of this transaction,
reduces the rate of return on its capital as a consequence of its obligations
under this Agreement to a level below that which it otherwise could have
achieved (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by it to be material (and it may, in determining
the amount, use reasonable assumptions and allocations of costs and expenses and
use any reasonable averaging or attribution method), then (unless the effect is
already reflected in the rate of interest then applicable under this Agreement)
Administrative Agent or such Lender (through Administrative Agent) shall notify
Borrower and deliver to Borrower a certificate setting forth in reasonable
detail the calculation of the amount necessary to compensate it (which
certificate is conclusive and binding absent manifest error), and Borrower shall
promptly pay that amount to Administrative Agent or such Lender upon demand.
Such Lender shall notify Administrative Agent and Borrower of any such
determination as soon as practicable (but in any event within 120 days) after
such Lender obtains actual knowledge of the event or condition prompting such
Lender to make such determination, and Borrower shall not be liable for any such
amount or amounts that accrue between the date such notification is required to
be given and the date notice was actually given. The provisions of and
undertakings and indemnification set forth in this paragraph shall survive the
satisfaction and payment of the Obligation and termination of this Agreement.
(D) TAXES. Any Taxes payable by Administrative Agent or any Lender or
ruled (by a Tribunal) payable by Administrative Agent or any Lender in respect
of this Agreement or any other Loan Document shall, if permitted by Law, be paid
by Borrower, together with interest and penalties, if any (except for (i) (1)
Taxes imposed on or measured by the overall net income of Administrative Agent
or such Lender, (2) franchise or similar taxes of Administrative Agent or such
Lender, and (3) amounts requested to be
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withheld for Taxes pursuant to the last sentence of SECTION 3.19, and (ii) such
interest and penalties incurred as a result of the gross negligence or willful
misconduct of Administrative Agent or any Lender). Administrative Agent or such
Lender (through Administrative Agent) shall notify Borrower and deliver to
Borrower a certificate setting forth in reasonable detail the calculation of the
amount of payable Taxes, which certificate is conclusive and binding (absent
manifest error), and Borrower shall promptly pay that amount to Administrative
Agent for its account or the account of such Lender, as the case may be. If
Administrative Agent or such Lender subsequently receives a refund of the Taxes
paid to it by Borrower, then the recipient shall promptly pay the refund to
Borrower.
3.17 CHANGE IN LAW. If any Law makes it unlawful for any Lender to make
or maintain Eurodollar Borrowings, then such Lender shall promptly notify
Borrower and Administrative Agent, and (a) as to undisbursed funds, that
requested Borrowing shall be made as a Base Rate Borrowing, and (b) as to any
outstanding Borrowing, (i) if maintaining the Borrowing until the last day of
the applicable Interest Period is unlawful, the Borrowing shall be converted to
a Base Rate Borrowing as of the date of notice, and Borrower shall pay any
related Funding Loss, or (ii) if not prohibited by Law, the Borrowing shall be
converted to a Base Rate Borrowing as of the last day of the applicable Interest
Period, or (iii) if any conversion will not resolve the unlawfulness, then
Borrower shall promptly prepay the Borrowing, without penalty, together with any
related Funding Loss.
3.18 FUNDING LOSS. BORROWER AGREES TO INDEMNIFY EACH LENDER AGAINST, AND
PAY TO IT UPON DEMAND, ANY FUNDING LOSS OF EACH LENDER. When any Lender demands
that Borrower pay any Funding Loss, such Lender shall deliver to Borrower and
Administrative Agent a certificate setting forth in reasonable detail the basis
for imposing Funding Loss and the calculation of the amount, which calculation
is conclusive and binding absent manifest error. The provisions of and
undertakings and indemnification set forth in this paragraph shall survive the
satisfaction and payment of the Obligation and termination of this Agreement.
3.19 FOREIGN LENDERS. Each Lender that is organized under the Laws of any
jurisdiction other than the United States of America or any State thereof (a)
represents to Administrative Agent and Borrower that (i) no Taxes are required
to be withheld by Administrative Agent or Borrower with respect to any payments
to be made to it in respect of the Obligation, and (ii) it has furnished to
Administrative Agent and Borrower two duly completed copies of U.S. Internal
Revenue Service Form 4224, Form 1001, Form W-8, or any other tax form acceptable
to Administrative Agent (wherein it claims entitlement to complete exemption
from U.S. federal withholding tax on all interest payments under the Loan
Documents), and (b) covenants to (i) provide Administrative Agent and Borrower a
new tax form upon the expiration or obsolescence of any previously delivered
form according to Law, duly executed and completed by it, and (ii) comply from
time to time with all Laws with regard to the withholding tax exemption. If any
of the foregoing is not true or the applicable forms are not provided, then
Borrower or Administrative Agent (without duplication) may deduct and withhold
from interest payments under the Loan Documents United States federal income tax
at the full rate applicable under the Code.
3.20 EXTENSION OF TERMINATION DATE. If no Default or Potential Default
exists, Borrower may request one-year extensions of the then-existing
Termination Date by making such request in writing (an "EXTENSION REQUEST") to
Administrative Agent between seventy-five (75) and ninety (90) days prior to the
date that is one (1) year prior to the then-existing Termination Date. The
then-existing Termination Date shall be extended for one (1) year only if (i)
Administrative Agent and each Lender consent in writing to such extension within
thirty (30) days following the receipt of the Extension Request, and (ii)
Borrower pays to Administrative Agent the extension fee set forth in SECTION
4.4. The failure to respond by Administrative Agent or any Lender to an
Extension Request shall be deemed to be a denial of such consent by such Person.
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If Lenders having a Pro Rata Part of at least eighty percent (80%) consent to
such extension (such Lenders being "CONSENTING LENDERS" and the Lenders not
consenting being "NON-CONSENTING LENDERS"), then the Termination Date shall be
extended as to the Consenting Lenders provided that Borrower on or before the
then-current Termination Date either (a) pays to the Non-Consenting Lenders the
Principal Debt owing to such Non-Consenting Lenders, together with all interest
and fees owing to such Non-Consenting Lenders, in which case the Commitments of
such Non-Consenting Lenders shall be terminated, or (b) effects an assignment
from the Non-Consenting Lenders to a new Lender or Lenders pursuant to SECTION
13.10 who shall consent to the extension of the Termination Date.
3.21 CONVERSION TO TERM LOAN.
(A) Subject to the terms and conditions of this Agreement, if any
Extension Request shall be denied as provided in SECTION 3.20, then, on the date
that is one (1) year prior to the then-existing Termination Date (the
"CONVERSION DATE"), Borrower may elect to convert the aggregate unpaid principal
amount of the Total Principal Debt (provided that any outstanding Swing Line
Loans shall be purchased and converted on or before the Conversion Date in
accordance with SECTION 2.4) outstanding on the Conversion Date (such amount
being the "ORIGINAL UNPAID PRINCIPAL BALANCE" into a term loan from each Lender
(each a "TERM LOAN" and collectively, the "TERM LOANS"), provided that (i) all
conditions precedent to a Borrowing set forth in SECTION 5 are satisfied as of
the Conversion Date, (ii) no Default exists, (iii) Borrower shall have delivered
to Administrative Agent a written request ("CONVERSION NOTICE") to convert the
Total Principal Debt to Term Loans at least thirty (30) days prior to the date
that is one (1) year prior to the then-current Termination Date, and (iv)
Borrower shall have paid the conversion fee set forth in SECTION 4.5.
(B) Upon the conversion of the Original Unpaid Principal Balance to the
Term Loans, the Commitments shall terminate and Borrower shall have no further
right to receive, and no Lender shall have the obligation to make, any
Borrowings or to extend the Termination Date beyond the scheduled maturity of
the Term Loans.
(C) If Borrower elects to convert the Original Unpaid Principal Balance
into Term Loans, then Borrower shall repay the principal balance of the Term
Loans in quarterly installments, commencing on the August 1 immediately
following the Conversion Date, and thereafter on the first (1st) day of each
succeeding November, February, May, and August. The amount of each quarterly
principal installment shall be equal to the following amount during the
corresponding period:
<TABLE>
<CAPTION>
================================================================================================
PERIOD QUARTERLY PAYMENT AMOUNT
================================================================================================
<S> <C>
During the First Year After the Conversion Date An amount equal to the Original Unpaid
Principal Balance times 1.25%
- ------------------------------------------------------------------------------------------------
During the Second Year After the Conversion Date An amount equal to the Original Unpaid
Principal Balance times 3.75%
- ------------------------------------------------------------------------------------------------
During the Third Year After the Conversion Date An amount equal to the Original Unpaid
Principal Balance times 7.5%
================================================================================================
</TABLE>
(D) If Borrower elects to convert the Original Unpaid Principal Balance
into Term Loans, then interest on the unpaid principal of the Term Loans shall
continue to accrue and be due and payable as provided in SECTION 3.
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(E) If Borrower elects to convert the Original Unpaid Principal Balance
into Term Loans, then the unpaid principal balance of, and accrued interest on,
the Term Loans, together with all other amounts due under this Agreement, shall
be finally due and payable on the third (3rd) anniversary of the Conversion
Date.
3.22 OPTION TO REPLACE LENDERS. If any Lender shall make demand for
payment or reimbursement pursuant to SECTION 3.15(B) or SECTIONS 3.16(A), (B),
(C), or (D), or notify Borrower of the occurrence of the circumstances described
in SECTION 3.17, then, provided that (a) no Default has occurred and is
continuing, and (b) the circumstances resulting in such demand for payment or
reimbursement are not applicable to all Lenders, Borrower may terminate the
Commitment of such Lender, in whole but not in part, by either (i) (A) giving
such Lender and Administrative Agent not less than five (5) Business Days'
written notice thereof, which notice shall be irrevocable and effective only
upon receipt thereof by such Lender and Administrative Agent and shall specify
the date of such termination, and (B) paying such Lender (and there shall become
due and payable) on such date the outstanding Principal Debt of all Borrowings
made by such Lender, all interest thereon, and any other Obligation owed to such
Lender (including under SECTION 3.18), if any, or (ii) pursuant to the
provisions of SECTION 13.11, proposing the introduction of a replacement Lender
satisfactory to Administrative Agent, or obtaining the agreement of one or more
existing Lenders, to assume the entire amount of the Commitment of the Lender
whose Commitment is being terminated, on the effective date of such termination.
Upon the satisfaction of all of the foregoing conditions, such Lender that is
being terminated shall cease to be a "Lender" for purposes of this Agreement,
provided that Borrower shall continue to be obligated to such Lender under
SECTION 7.12 with respect to Indemnified Liabilities (as defined in SECTION
7.12) arising prior to such termination.
SECTION 4 FEES.
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4.1 TREATMENT OF FEES. The fees described in this SECTION 4 (a) are not
compensation for the use, detention, or forbearance of money, (b) are in
addition to, and not in lieu of, interest and expenses otherwise described in
this Agreement, (c) are payable in accordance with SECTION 3.1(B), (d) are non-
refundable, (e) to the fullest extent permitted by Law, bear interest, if not
paid when due, at the Default Rate, and (f) are calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed, but computed as if each calendar year consisted of 360 days, unless
computation would result in an interest rate in excess of the Maximum Rate in
which event the computation is made on the basis of a year of 365 or 366 days,
as the case may be. The fees described in this SECTION 4 are in all events
subject to the provisions of SECTION 3.8.
4.2 ADMINISTRATIVE AGENT FEES. Borrower shall pay to Administrative
Agent, solely for its own account, the fees described in the letter agreement
between Borrower and Administrative Agent dated June 1, 1995.
4.3 COMMITMENT FEES.
(A) On or before the date hereof, Borrower shall pay to Administrative
Agent, for the ratable account of Lenders, a commitment fee of $350,000.00.
Such fee shall be in lieu of the extension fee required by Section 4.4 of the
Third Restated Credit Agreement.
(B) Borrower agrees to pay to Administrative Agent for the ratable
account of Lenders a commitment fee equal to the sum of the amounts obtained by
multiplying each portion of the daily Unused
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Commitment times 0.15% per annum. Such commitment fee shall be due and payable
on the first (1st) day of each August, November, February, and May during the
term hereof, commencing on September 1, 1998, and on the Termination Date, based
upon the Unused Commitment for each day during the quarter ending on such date.
Solely for purposes of this SECTION 4.3(B) (A) determinations of the average
daily Unused Commitment shall exclude the Principal Debt of Competitive
Borrowings and Swing Line Loans; and (B) "ratable" means, for any calculation
period, with respect to any Lender, the proportion that (x) the average daily
unused Commitment of such Lender during the period bears to (y) the aggregate
amount of the average daily unused Total Commitment during the period.
4.4 EXTENSION FEE. Upon each extension of the Termination Date, as
provided in SECTION 3.20, Borrower agrees to pay Administrative Agent, on or
before the existing Termination Date, for the ratable account of Lenders, an
extension fee equal to one-tenth of one percent (.10%) of the Commitments of
Lenders.
4.5 CONVERSION FEE. Borrower agrees to pay to Administrative Agent, for
the ratable account of Lenders, a fee equal to one-quarter of one percent (.25%)
of the unpaid Principal Debt of the Term Loans (a) on the date that is the first
(1st) anniversary date of the Conversion Date if any portion of the Term Loans
is unpaid on that date, and (b) on the date that is the second (2nd) anniversary
of the Conversion Date if any portion of the Term Loans is unpaid on that date.
4.6 COMPETITIVE BID FEE. Each Competitive Bid Request hereunder
submitted by Borrower to Administrative Agent shall be accompanied by a
competitive bid fee of $1,500 (payable solely to Administrative Agent for its
own account) and shall only request bids for a single Borrowing Date.
SECTION 5 CONDITIONS PRECEDENT. Administrative Agent will not be obligated to
- --------- --------------------
fund the initial Borrowing unless Administrative Agent has timely received (a) a
Borrowing Request, and (b) all of the items described on SCHEDULE 5. In
addition, Administrative Agent will not be obligated to make any Borrowing
(including any Competitive Borrowing), unless on the applicable Borrowing Date
(and after giving effect to the requested Borrowing): (i) Administrative Agent
shall have timely received a Borrowing Request or Notice of Competitive
Borrowing, as the case may be; (ii) Administrative Agent shall have received any
applicable fees; (iii) all of the representations and warranties of Borrower in
the Loan Documents are true and correct in all material respects (unless they
speak to a specific date or are based on facts which have changed by
transactions contemplated or permitted by this Agreement); (iv) no Default or
Potential Default exists; and (v) the funding of the Borrowing is permitted by
Law. Upon Administrative Agent's request, Borrower shall deliver to
Administrative Agent evidence substantiating any of the matters in the Loan
Documents that are necessary to enable Borrower to qualify for the Borrowing.
Each condition precedent in this Agreement (including those on SCHEDULE 5) is
material to the transactions contemplated by this Agreement, and time is of the
essence with respect to each condition precedent. Administrative Agent may fund
any Borrowing without all conditions being satisfied, but, to the extent
permitted by Law, that funding and issuance shall not be deemed to be a waiver
of the requirement that each condition precedent be satisfied as a prerequisite
for any subsequent funding or issuance, unless Administrative Agent specifically
waives each item in writing.
SECTION 6 REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
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Agents and Lenders as follows:
6.1 PURPOSE OF CREDIT FACILITY. Borrower will use proceeds of the
Borrowings hereunder for working capital and general business purposes of
Borrower, its Consolidated Affiliates, and its Unconsolidated Affiliates.
Borrower is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, as amended. No part of the proceeds
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of any Borrowing will be used, directly or indirectly, for a purpose that
violates any Law, including the provisions of Regulation U.
6.2 CORPORATE EXISTENCE, GOOD STANDING, AUTHORITY AND COMPLIANCE. Each of
Borrower and its Consolidated Affiliates is duly formed, validly existing, and
in good standing under the Laws of the jurisdiction in which it is incorporated
or formed as identified on SCHEDULE 6.2 (as supplemented from time to time).
Each of Borrower and its Consolidated Affiliates (a) is duly qualified to
transact business and is in good standing as a foreign trust, corporation,
partnership, limited liability company, or other entity in each jurisdiction
where the nature and extent of its business and properties require due
qualification and good standing, which jurisdictions are identified on SCHEDULE
6.2 (as supplemented from time to time), (b) possesses all requisite authority,
permits, and power to conduct its business as is now being, or is contemplated
by this Agreement to be, conducted, and (c) is in compliance with all applicable
Laws, except in any such case where violation of the foregoing could not
reasonably be expected to result in a Material Adverse Event.
6.3 AFFILIATES. As of the date of this Agreement, Borrower has no
Consolidated Affiliates or Unconsolidated Affiliates except as disclosed on
SCHEDULE 6.2 (as supplemented from time to time to reflect changes as a result
of transactions permitted by this Agreement).
6.4 AUTHORIZATION AND CONTRAVENTION. The execution and delivery by
Borrower of each Loan Document or related document to which it is a party and
the performance by it of its obligations thereunder (a) are within its trust
power, (b) have been duly authorized by all necessary trust action, (c) require
no action by or filing with any Tribunal (other than any action or filing that
has been taken or made on or before the date of this Agreement), (d) do not
violate any provision of its declaration of trust or bylaws, (e) do not violate
any provision of Law or order of any Tribunal applicable to it, (f) do not
violate any material agreements to which it is a party, or (g) do not result in
the creation or imposition of any Lien on any asset of Borrower or any
Consolidated Affiliate, except in such case where failure to do so could not
reasonably be expected to result in a Material Adverse Event.
6.5 BINDING EFFECT. Upon execution and delivery by all parties thereto,
each Loan Document to which it is a party will constitute a legal and binding
obligation of Borrower, enforceable against it in accordance with its terms,
subject to applicable Debtor Relief Laws and general principles of equity.
6.6 FINANCIAL STATEMENTS; FISCAL YEAR. The Current Financials were
prepared in accordance with GAAP (except that quarterly Financial Statements may
omit footnotes required by GAAP) and present fairly, in all material respects,
the consolidated financial condition, results of operations, and cash flows of
Borrower and its Consolidated Affiliates as of, and for the portion of the
fiscal year ending on the date or dates thereof (subject only to normal audit
adjustments). All material liabilities of Borrower and its Consolidated
Affiliates as of the date or dates of the Current Financials are reflected
therein or in the notes thereto. Except for transactions directly related to, or
specifically contemplated by, the Loan Documents or disclosed in the Current
Financials, no subsequent material adverse changes have occurred in the
consolidated financial condition of Borrower and its Consolidated Affiliates
from that shown in the Current Financials, nor has Borrower or any Consolidated
Affiliate incurred any subsequent material liability. The fiscal year of
Borrower and its Consolidated Affiliates ends on December 31.
6.7 LITIGATION. Except as disclosed on SCHEDULE 6.7 and as otherwise
disclosed pursuant to SECTION 7.1(D)(I), neither Borrower nor any of its
Consolidated Affiliates is subject to, or aware of the threat of, any Litigation
that is reasonably likely to be determined adversely to Borrower or such
Consolidated Affiliate or, if so adversely determined, is a Material Adverse
Event. Except as permitted under SECTION 10.4, no outstanding and unpaid
judgments against Borrower or any of its Consolidated Affiliates exist.
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6.8 TAXES.
(A) All Tax returns of Borrower and its Consolidated Affiliates required
to be filed have been filed (or extensions have been granted) before
delinquency, except for returns for which the failure to file could not
reasonably be expected to result in a Material Adverse Event, and all Taxes
imposed upon Borrower and its Consolidated Affiliates that are due and payable
have been paid before delinquency or are being contested in good faith by
appropriate proceedings diligently conducted and for which reserves in
accordance with GAAP or otherwise reasonably acceptable to Administrative Agent
have been provided.
(B) As of the date hereof, no United States federal income tax returns of
the "affiliated group" (as defined in the Code) of which Borrower is a member
have been examined and closed. The members of such affiliated group have filed
all United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by or any of them. The
charges, accruals and reserves on the books of Borrower in respect of taxes or
other governmental charges are, in the opinion of Borrower, adequate.
(C) Borrower qualifies as a REIT.
6.9 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 6.9, and
except for any of the following which could not reasonably be expected to result
in a Material Adverse Event, (a) no environmental condition or circumstance
exists that adversely affects any of Borrower's or any of its Consolidated
Affiliates properties or operations, (b) neither Borrower nor any of its
Consolidated Affiliates has received any report of Borrower or any of its
Consolidated Affiliates' violation of any Environmental Law, (c) neither
Borrower nor any of its Consolidated Affiliates knows that any of Borrower or
its Consolidated Affiliates is under any obligation to remedy any violation of
any Environmental Law, or (d) no facility of Borrower or any of its Consolidated
Affiliates is used for, or to the knowledge of Borrower or any of its
Consolidated Affiliates has been used for, storage, treatment or disposal of any
Hazardous Substance, except for (i) the storage and use of cleaning and
maintenance materials, used and stored in commercially reasonable quantities and
in compliance with applicable Environmental Laws, and (ii) light manufacturing
and distribution activities of tenants, in compliance with applicable
Environmental Laws, provided that such tenants are not primarily engaged in the
treatment, processing, recycling or disposal of any Hazardous Substance, or for
any other use that would give rise to the release of any Hazardous Substance on
such facility. Each of Borrower and its Consolidated Affiliates has taken
prudent steps to determine that its properties and operations do not violate any
Environmental Law, other than violations that, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Event.
6.10 PENSION PLANS. Except to the extent that any such termination,
liability, penalty, or fine would not (either individually or in the aggregate)
reasonably be expected to have a Material Adverse Event (a) no steps have been
taken to terminate any Pension Plan, and no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under any
Applicable Pension Laws, (b) no condition exists or event or transaction has
occurred with respect to any Pension Plan which could reasonably be expected to
result in the incurrence by Borrower or any ERISA Affiliate of any material
liability with respect to any contribution thereto, fine, or penalty, and (c)
neither Borrower nor any ERISA Affiliate has any material contingent liability
with respect to any post-retirement benefit under a Pension Plan.
6.11 PROPERTIES; LIENS. Each of Borrower and its Consolidated Affiliates
has good title to all its property reflected on the Current Financials (except
for property that is obsolete or that has been disposed in the ordinary course
of business or, after the date of this Agreement, as otherwise permitted by
SECTION 8.10 or SECTION 8.11). Except for Permitted Liens and Liens on
Properties acquired by Borrower or a Consolidated
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Affiliate, provided that such Liens are not incurred in contemplation of
Borrower's or such Consolidated Affiliate's acquisition of such Properties, no
Lien exists on any Property of Borrower or any of its Consolidated Affiliates in
the Pool, and the execution, delivery, performance, or observance of the Loan
Documents will not require or result in the creation of any Lien on any of
Borrower's or any of its Consolidated Affiliates' Property in the Pool.
6.12 LOCATIONS. Borrower's chief executive office is located at the
address on SCHEDULE 6.12 (as supplemented from time to time). Borrower's books
and records are located at its chief executive office.
6.13 GOVERNMENT REGULATIONS. Neither Borrower nor any of its Consolidated
Affiliates is subject to regulation under the Investment Company Act of 1940, as
amended, or the Public Utility Holding Company Act of 1935, as amended.
6.14 TRANSACTIONS WITH AFFILIATES. Except as disclosed on SCHEDULE 6.14
(as supplemented from time to time) (if the disclosures are approved by
Administrative Agent) or as permitted by SECTION 8.4, neither Borrower nor any
of its Consolidated Affiliates is a party to a material transaction with any of
its Affiliates, other than transactions in the ordinary course of business and
upon fair and reasonable terms not materially less favorable than it could
obtain or could become entitled to in an arm's-length transaction with a Person
that was not its Affiliate.
6.15 LIABILITIES. Except for transactions directly related to, or
specifically contemplated or permitted by, the Loan Documents, neither Borrower
nor any of its Consolidated Affiliates is an obligor on any Liabilities, other
than Liabilities set forth in the Current Financials.
6.16 INSURANCE. Each of Borrower and its Consolidated Affiliates
maintains with financially sound, responsible, and reputable insurance companies
or associations (or, as to workers' compensation or similar insurance, with an
insurance fund or by self-insurance authorized by the jurisdictions in which it
operates) insurance concerning its properties and businesses against casualties
and contingencies and of types and in amounts (and with co-insurance and
deductibles) as is customary in the case of similar businesses.
6.17 LABOR MATTERS. No actual or, to Borrower's knowledge, threatened
strikes, labor disputes, slow downs, walkouts, or other concerted interruptions
of operations by the employees of Borrower or any of its Consolidated Affiliates
that could reasonably be expected to result in a Material Adverse Event exist.
All payments due from Borrower or any of its Consolidated Affiliates for
employee health and welfare insurance have been paid or accrued as a liability
on its books, other than any non-payment that are not, individually or
collectively, a Material Adverse Event.
6.18 SOLVENCY. On each Borrowing Date, Borrower is, and after giving
effect to the requested Borrowing will be, Solvent.
6.19 FULL DISCLOSURE. Each material fact or condition relating to the
financial condition or business of Borrower or any of its Consolidated
Affiliates which could reasonably be expected to result in a Material Adverse
Event has been disclosed to Administrative Agent. All information previously
furnished, furnished on the date of this Agreement, and furnished in the future,
by Borrower or any of its Consolidated Affiliates to Administrative Agent in
connection with the Loan Documents (a) was, is, and will be, true and accurate
in all material respects or based on good faith estimates on the date the
information is stated or certified, and (b) did not, does not, and will not,
fail to state any material fact the omission of which would otherwise make any
such information materially misleading, in each case taken as a whole.
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6.20 EXEMPTION FROM ERISA; PLAN ASSETS. The assets of Borrower are not
"plan assets" as defined in 29 C.F.R. (S) 2510.3-101(a)(1) (or any successor
regulation) of any Pension Plan.
6.21 INTERCREDITOR AGREEMENT. Borrower is aware of, and has been
furnished a copy of, the Intercreditor Agreement.
6.22 MINORITY INTERESTS. All Consolidated Affiliates of Borrower having
minority interests are set forth on SCHEDULE 6.22 (as supplemented from time to
time).
6.23 YEAR 2000 COMPLIANCE. Borrower has (a) initiated a review and
assessment of all areas within its and each of its Consolidated Affiliates'
business and operations (including those affected by suppliers and vendors) that
could be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by Borrower or any of its Consolidated Affiliates (or
its suppliers and vendors) may be unable to recognize and perform properly date-
sensitive functions involving certain dates prior to and any date after December
31, 1999), (b) developed a plan and timeline for addressing the Year 2000
Problem on a timely basis, and (c) to date, implemented that plan in accordance
with that timetable. Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its Consolidated Affiliates' business and operations will on a timely basis
be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent
that a failure to do so could not reasonably be expected to have Material
Adverse Effect.
SECTION 7 AFFIRMATIVE COVENANTS. So long as Lenders are committed to fund any
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Borrowings under this Agreement and until the Obligation is paid in full,
Borrower covenants and agrees as follows:
7.1 ITEMS TO BE FURNISHED. Borrower shall cause the following to be
furnished to Administrative Agent (with sufficient copies for each Lender):
(A) Promptly after preparation, and no later than one hundred (100) days
after the last day of each fiscal year of Borrower, Financial Statements showing
the consolidated financial condition and results of operations of Borrower and
its Consolidated Affiliates as of, and for the year ended on, that last day,
accompanied by:
(I) the unqualified opinion of the firm of Arthur Andersen & Co.
or another firm of nationally-recognized independent certified public
accountants, based on an audit using generally accepted auditing standards,
that the Financial Statements were prepared in accordance with GAAP and
present fairly, in all material respects, the consolidated financial
condition and results of operations of Borrower and its Consolidated
Affiliates;
(II) any management letter prepared by the accounting firm
delivered in connection with its audit;
(III) a certificate from the accounting firm to Administrative Agent
indicating that during its audit it obtained no knowledge of any Default or
Potential Default or, if it obtained knowledge, the nature and period of
existence thereof;
(IV) a Compliance Certificate with respect to the Financial
Statements; and
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(V) a certificate listing the Properties in the Pool and Operating
Sub-Pool, together with a computation in reasonable detail of the
Historical Values and the Required Level and showing Borrower's compliance
with SECTIONS 7.15 and 8.14.
(B) Promptly after preparation, and no later than fifty (50) days after
the last day of each fiscal quarter (except the last) of Borrower, (i) Financial
Statements showing the consolidated financial condition and results of
operations of Borrower and its Consolidated Affiliates for the fiscal quarter
and for the period from the beginning of the current fiscal year to the last day
of the fiscal quarter, (ii) a Compliance Certificate with respect to the
Financial Statements, and (iii) a certificate listing the Properties in the Pool
and Operating Sub-Pool, together with a computation in reasonable detail of the
Historical Values and the Required Level and showing Borrower's compliance with
SECTIONS 7.15 and 8.14.
(C) Promptly after receipt, a copy of each interim or special audit
report and management letter issued by independent accountants with respect to
Borrower or any of its Consolidated Affiliates or its financial records.
(D) Notice, promptly after a Responsible Officer of Borrower knows of (i)
the existence and status of any Litigation that, if determined adversely to
Borrower or any of its Consolidated Affiliates, could reasonably be expected to
result in a Material Adverse Event, (ii) any change in any material fact or
circumstance represented or warranted by Borrower or any of its Consolidated
Affiliates in any Loan Document, (iii) the receipt by Borrower or any of its
Consolidated Affiliates of notice of any violation or alleged violation of any
Applicable Pension Legislation or any Environmental Law (which individually or
collectively with other violations or allegations could reasonably be expected
to result in a Material Adverse Event), or (iv) a Default or Potential Default,
specifying the nature thereof and what action Borrower has taken, is taking, or
proposes to take.
(E) Promptly after filing, true, correct, and complete copies of all
material reports or filings filed by or on behalf of Borrower or any of its
Consolidated Affiliates with any Tribunal (including copies of each Form 10-K,
Form 10-Q, and Form S-8 filed by or on behalf of Borrower or any of its
Consolidated Affiliates with the Securities and Exchange Commission).
(F) Promptly after the mailing or delivery thereof, copies of all
material reports or other information from Borrower to its shareholders.
(G) Promptly upon the consummation thereof, a description in reasonable
detail of any acquisition of material assets other than investments in
industrial Properties.
(H) Promptly upon any Change in Control, notice of such event together
with a description of the transaction giving rise thereto and a list of all
shareholders of Borrower after giving effect thereto.
(I) Promptly upon written request by Administrative Agent and to the
extent available after reasonable inquiry by Borrower, a list of all major
shareholders of Borrower.
(J) Promptly upon the filing thereof, the annual report of Borrower filed
with the Maryland Department of Corporations.
(K) Promptly upon the receipt of notice thereof, and in any event within
five (5) Business Days after any change in the Moody's Rating, the S & P Rating
or the DCR Rating, notice of such change.
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(L) Promptly upon reasonable request by Administrative Agent, information
(not otherwise required to be furnished under the Loan Documents) respecting the
business affairs, assets, and liabilities of Borrower and its Consolidated
Affiliates and opinions, certifications, and documents in addition to those
mentioned in this Agreement.
7.2 USE OF PROCEEDS. Borrower shall use the proceeds of Borrowings only
for the purposes represented in this Agreement.
7.3 BOOKS AND RECORDS. Borrower shall, and shall cause each of its
Consolidated Affiliates to, maintain books, records, and accounts necessary to
prepare financial statements in accordance with GAAP.
7.4 INSPECTIONS. Upon reasonable request, and subject to SECTION 13.13,
Borrower shall, and shall cause each of its Consolidated Affiliates to, allow
Administrative Agent (or its Representatives) to inspect any of its properties,
to review reports, files, and other records and to make and take away copies, to
conduct tests or investigations, and to discuss in the presence of Borrower any
of its affairs, conditions, and finances with its other creditors, directors,
officers, employees, or representatives from time to time, during reasonable
business hours.
7.5 TAXES. Borrower shall, and shall cause each of its Consolidated
Affiliates to, promptly pay when due any and all Taxes, other than Taxes which
are being contested in good faith by lawful proceedings diligently conducted,
against which reserve or other provision required by GAAP has been made, and in
respect of which levy and execution of any Lien have been and continue to be
stayed.
7.6 PAYMENT OF OBLIGATIONS. Borrower shall, and shall cause each of its
Consolidated Affiliates to, promptly pay (or renew and extend) all of their
respective material obligations as they become due (unless any such obligations
are being contested in good faith by appropriate proceedings).
7.7 EXPENSES. Borrower shall promptly pay upon reasonable notice (a) all
costs, fees, and expenses paid or incurred by Administrative Agent in connection
with the arrangement, syndication, and negotiation of the loan evidenced by this
Agreement and the other Loan Documents and the negotiation, preparation,
delivery, and execution of the Loan Documents and any related amendment, waiver,
or consent (including in each case the reasonable fees and expenses of
Administrative Agent's counsel), and (b) all costs, fees, and expenses of
Administrative Agent and, after the occurrence and during the continuance of a
Default, Lenders incurred by Administrative Agent or any Lender in connection
with the enforcement of the obligations of Borrower arising under the Loan
Documents or the exercise of any Rights arising under the Loan Documents
(including reasonable attorneys' fees, expenses, and costs paid or incurred in
connection with any workout or restructure and any action taken in connection
with any Debtor Relief Laws), all of which shall be a part of the Obligation and
shall bear interest, if not paid upon demand, at the Default Rate until repaid.
7.8 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Except as otherwise
permitted by SECTION 8.09, Borrower shall continue, and shall cause each of its
Consolidated Affiliates to continue, to engage in business of the same general
type as now conducted by Borrower and its Consolidated Affiliates, and will
preserve, renew and keep in full force and effect, and will cause each
Consolidated Affiliate to preserve, renew and keep in full force and effect,
their respective trust or corporate existence and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business, except in any such case where failure to do so could not reasonably be
expected to result in a Material Adverse Event.
7.9 INSURANCE. Borrower shall, and shall cause each of its Consolidated
Affiliates to, maintain with financially sound, responsible, and reputable
insurance companies or associations (or, as to workers'
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compensation or similar insurance, with an insurance fund or by self-insurance
authorized by the jurisdictions in which it operates) insurance acceptable to
Administrative Agent concerning its properties and businesses against casualties
and contingencies and of types and in amounts (and with co-insurance and
deductibles) as is customary in the case of similar businesses. Borrower shall
deliver to Administrative Agent (i) at Administrative Agent's request from time
to time, full information as to the insurance carried, (ii) within five (5) days
of receipt of notice from any insurer a copy of any notice of cancellation or
material change in coverage from that existing on the date of this Agreement,
and (iii) forthwith, notice of any cancellation or non-renewal of coverage by
Borrower. At Administrative Agent's request, Borrower shall and shall cause each
of its Consolidated Affiliates to deliver to Administrative Agent evidence of
insurance for each policy of insurance and evidence of payment of all premiums.
7.10 PRESERVATION AND PROTECTION OF RIGHTS. Borrower shall, and shall
cause each of its Consolidated Affiliates to, perform the acts and duly
authorize, execute, acknowledge, deliver, file, and record any additional
writings as Administrative Agent may reasonably deem necessary or appropriate to
preserve and protect the Rights of Administrative Agent and Lenders under any
Loan Document.
7.11 ENVIRONMENTAL LAWS. Borrower shall, and shall cause each of its
Consolidated Affiliates to (a) conduct its business so as to comply with all
applicable Environmental Laws and shall promptly take corrective action to
remedy any non-compliance with any Environmental Law, except where failure to
comply or take action could not reasonably be expected to result in a Material
Adverse Event, and (b) establish and maintain a management system designed to
ensure compliance with applicable Environmental Laws and minimize financial and
other risks to Borrower and each of its Consolidated Affiliates arising under
applicable Environmental Laws or as the result of environmentally related
injuries to Persons or property. Borrower shall deliver reasonable evidence of
compliance with the foregoing covenant to Administrative Agent within thirty
(30) days after any request from Administrative Agent.
7.12 INDEMNIFICATION. BORROWER SHALL, AND SHALL CAUSE EACH OF ITS
CONSOLIDATED AFFILIATES TO, JOINTLY AND SEVERALLY, INDEMNIFY, PROTECT, AND HOLD
AGENTS AND LENDERS AND THEIR RESPECTIVE REPRESENTATIVES, SUCCESSORS, AND ASSIGNS
(INCLUDING ALL OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS) (COLLECTIVELY, THE
"INDEMNIFIED PARTIES") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, AND
PROCEEDINGS AND ALL COSTS, EXPENSES (INCLUDING ALL REASONABLE ATTORNEYS' FEES
AND LEGAL EXPENSES WHETHER OR NOT SUIT IS BROUGHT) AND DISBURSEMENTS OF ANY KIND
OR NATURE (THE "INDEMNIFIED LIABILITIES") THAT MAY AT ANY TIME BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE INDEMNIFIED PARTIES, IN ANY WAY RELATING TO
OR ARISING OUT OF (A) THE DIRECT OR INDIRECT RESULT OF THE VIOLATION BY BORROWER
OR ANY OF ITS CONSOLIDATED AFFILIATES OF ANY ENVIRONMENTAL LAW, (B) BORROWER'S
OR ANY OF ITS CONSOLIDATED AFFILIATE'S GENERATION, MANUFACTURE, PRODUCTION,
STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE IN
CONNECTION WITH ITS PROPERTIES OF A HAZARDOUS SUBSTANCE (INCLUDING (I) ALL
DAMAGES OF ANY USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE,
THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE, OR (II) THE COSTS OF ANY
ENVIRONMENTAL INVESTIGATION, MONITORING, REPAIR, CLEANUP, OR DETOXIFICATION AND
THE PREPARATION AND IMPLEMENTATION OF ANY CLOSURE, REMEDIAL, OR OTHER PLANS), OR
(C) THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN.
HOWEVER, ALTHOUGH EACH INDEMNIFIED PARTY HAS THE RIGHT TO BE INDEMNIFIED UNDER
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THE LOAN DOCUMENTS FOR ITS OWN ORDINARY NEGLIGENCE, NO INDEMNIFIED PARTY HAS THE
- --------------------------------------------------
RIGHT TO BE INDEMNIFIED UNDER THE LOAN DOCUMENTS FOR ITS OWN FRAUD, GROSS
NEGLIGENCE, OR WILLFUL MISCONDUCT. THE PROVISIONS OF AND UNDERTAKINGS AND
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INDEMNIFICATION SET FORTH IN THIS PARAGRAPH SHALL SURVIVE THE SATISFACTION AND
PAYMENT OF THE OBLIGATION AND TERMINATION OF THIS AGREEMENT.
7.13 REIT STATUS. At all times, Borrower (including its organization and
method of operations and those of its subsidiaries) shall qualify as a REIT.
7.14 ERISA EXEMPTIONS. The assets of Borrower are not "plan assets" as
defined in 29 C.F.R. (S) 2510.3-101(a)(1) (or any successor regulation) of any
Pension Plan.
7.15 PROPERTY POOL.
(A) Borrower and its Pool Consolidated Affiliates shall, as of any date
during the term hereof, own, free and clear of any Liens (other than Permitted
Liens), (i) fee simple title to Domestic Properties, and (ii) the equivalent of
fee simple title to International Properties, (the Properties and other assets
described in (i) and (II) being the "POOL") with an aggregate Historical Value
less the outstanding balance of any assessment bonds on such Properties (plus
the sum of Borrower's and its Pool Consolidated Affiliates' cash and Cash
Equivalents, but only if no Principal Debt is outstanding as of the date of
determination) of at least one hundred seventy-five percent (175%) of Borrower's
consolidated unsecured Indebtedness outstanding on such date (including
unsecured Indebtedness of Unconsolidated Affiliates if the holder of such
Indebtedness has recourse against Borrower or a Consolidated Affiliate of
Borrower for the payment of such Indebtedness other than to the extent of any
security therefor or pursuant to any Customary Recourse Exceptions).
(B) The Pool must include income-producing operating industrial Domestic
Properties and International Properties owned by Borrower or a Pool Consolidated
Affiliate (the "OPERATING SUB-POOL"): (i) with a Required Level (plus the sum of
Borrower's and its Pool Consolidated Affiliates' cash and Cash Equivalents, but
only if no Principal Debt is outstanding as of the date of determination) of at
least one hundred fifty percent (150%) of Borrower's consolidated unsecured
Indebtedness outstanding from time to time (including unsecured Indebtedness of
Unconsolidated Affiliates if the holder of such Indebtedness has recourse
against Borrower or a Consolidated Affiliate of Borrower for the payment of such
Indebtedness other than to the extent of any security therefor or pursuant to
any Customary Recourse Exceptions); (ii) (A) in the case of Properties that are
not Refrigerated Warehouse Properties, which have an aggregate occupancy level
based on bona fide tenant leases requiring current rent payments of at least
eighty-five percent (85%), and (B) in the case of Properties that are
Refrigerated Warehouse Properties, which have an aggregate occupancy level based
on bona fide tenant leases, licenses, or other agreements requiring current rent
or other payments of at least eighty percent (80%), in each case where the
occupancy level is the average of the occupancy level for each of the
immediately preceding three (3) months; and (iii) for which Borrower and its
Pool Consolidated Affiliates 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. Notwithstanding the foregoing,
the Operating Sub-Pool shall not, as of any date, include International
Properties exceeding twenty percent (20%) of the Required Level as of such date.
(C) For purposes of calculating the Historical Value or the Required
Level, any amounts attributable to Properties owned by an International
Consolidated Affiliate whose Subsidiary Guaranty is, pursuant to the
requirements of any Laws, limited in amount shall not exceed the amount of
Obligation guaranteed by such International Consolidated Affiliate pursuant to
its Subsidiary Guaranty.
7.16 YEAR 2000 COMPLIANCE. Borrower will promptly notify Administrative
Agent in the event Borrower discovers or determines that any computer
application (including those of its suppliers and vendors)
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that is material to its or any of its Consolidated Affiliates' business and
operations will not be Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to have a Material
Adverse Effect.
7.17 SUBSIDIARY GUARANTIES; INTERCOMPANY INDEBTEDNESS.
(A) Borrower shall cause each of its Consolidated Affiliates (other than
International Consolidated Affiliates and the Consolidated Affiliates listed on
SCHEDULE 7.17-1) to execute a Subsidiary Guaranty. To the fullest extent
permitted under applicable Laws, Borrower shall cause each of its International
Consolidated Affiliates to execute a Subsidiary Guaranty, except to the extent
that the execution of a Subsidiary Guaranty would result in material adverse tax
Liabilities to Borrower in the United States.
(B) Pursuant to the Pledge Agreements, Borrower shall, and shall cause
each of its Consolidated Affiliates to, grant to Administrative Agent, for the
benefit of Agents and Lenders, a first-priority Lien in all Indebtedness of each
Unconsolidated Affiliate (and its Consolidated Affiliates) to Borrower and
Borrower's Consolidated Affiliates if the aggregate amount of Indebtedness of
such Unconsolidated Affiliate (and its Consolidated Affiliates) to Borrower and
Borrower's Consolidated Affiliates equals or exceeds $5,000,000, including,
without limitation, the existing Indebtedness listed on SCHEDULE 7.17-2.
7.18 HEDGING AGREEMENTS. Borrower shall, promptly after the date hereof,
enter into such Hedging Agreements in respect of interest rate and currency
risks as are reasonably acceptable to Administrative Agent.
SECTION 8 NEGATIVE COVENANTS. So long as Lenders are committed to fund
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Borrowings and until the Obligation is paid in full, Borrower covenants and
agrees as follows:
8.1 PAYMENT OF OBLIGATIONS. Borrower shall not, and shall not permit any
of its Consolidated Affiliates to, voluntarily prepay principal of, or interest
on, any Liabilities other than the Obligation, if a Default or Potential Default
exists.
8.2 EMPLOYEE PLANS. Except where a Material Adverse Event would not
result, Borrower shall not, and shall not permit any ERISA Affiliate to, permit
any of the events or circumstances described in SECTION 6.10 to exist or occur.
8.3 RECOURSE DEBT. Borrower shall not, and shall not permit any of its
Consolidated Affiliates to, as of any date during the term hereof, create,
incur, or suffer to exist any Recourse Debt, other than:
(A) Recourse Debt (including Indebtedness under this Agreement) not to
exceed $700,000,000 in the aggregate at any time outstanding; provided, however,
that with respect to any commitments or fundings of Recourse Debt that exceed
the Total Commitment, a majority of the lenders providing each such commitment
or funding must be Lenders hereunder (unless the Lenders hereunder decline to
participate in providing such commitment or funding); and
(B) Recourse Debt (i) that has a final maturity date of greater than five
(5) years from the date of incurrence thereof, and (ii) in which no more than
fifty percent (50%) of the original principal amount thereof is required to be
paid in the first four (4) years of the term thereof; and
(C) Recourse Debt not to exceed $200,000,000 in the aggregate at any time
outstanding assumed by Borrower or any of its Consolidated Affiliates in
connection with Borrower's or such Consolidated
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Affiliate's acquisition of Properties, provided that such Liability was not
incurred in contemplation of Borrower's or Consolidated Affiliate's acquisition;
and
(D) purchase money Recourse Debt not to exceed $200,000,000 the proceeds
of which are used to purchase International Properties; and
(E) Recourse Debt issued by Borrower and rated investment grade or better
at the time of issuance by at least two (2) of Moody's, S & P, and DCR; and
(F) Recourse Debt not to exceed $150,000,000 in the aggregate at any time
outstanding secured by International Properties.
8.4 TRANSACTIONS WITH AFFILIATES. Except as disclosed on SCHEDULE 6.14
(as supplemented from time to time to reflect changes as a result of
transactions permitted by this Agreement or approved by Administrative Agent),
Borrower shall not, and shall not permit any of its Consolidated Affiliates to,
enter into any material transaction with any of its Affiliates, other than (a)
transactions with existing shareholders of Consolidated Affiliates and
Unconsolidated Affiliates, (b) transactions in the ordinary course of business
and upon fair and reasonable terms not materially less favorable than it could
obtain or could become entitled to in an arm's-length transaction with a Person
that was not its Affiliate or that comply with the requirements of the North
America Security Administrators Association's Statement of Policy of Real Estate
Investment Trusts, (c) payments to or from such Affiliates under leases of
office space on market terms, (d) payment of fees under property management
agreements under terms and conditions available from qualified management
companies, (e) intercompany Liabilities and other Investments between Borrower
and its Consolidated Affiliates and its Unconsolidated Affiliates otherwise
permitted pursuant to this Agreement, and (f) transactions otherwise permitted
hereunder.
8.5 COMPLIANCE WITH LAWS AND DOCUMENTS. Borrower shall not, and shall not
permit any of its Consolidated Affiliates to, (a) violate the provisions of any
Laws applicable to it or of any material agreement to which it is a party if
that violation alone, or when aggregated with all other violations, could
reasonably be expected to result in Material Adverse Event, (b) violate the
provisions of its charter or bylaws, or (c) repeal, replace or amend any
provision of its charter or bylaws if that action could reasonably be expected
to result in a Material Adverse Event.
8.6 LOANS, ADVANCES AND INVESTMENTS. Borrower shall not, and shall not
permit any of its Consolidated Affiliates to, have or make any direct or
indirect Investments in:
(A) Raw land (other than land under development or planned for
commencement of development within twelve (12) months following the date such
land was acquired) exceeding in the aggregate ten percent (10%) of Borrower's
Total Assets;
(B) Non-Industrial Properties and New Ventures exceeding in the aggregate
fifteen percent (15%) of Borrower's Total Assets;
(C) Unconsolidated Affiliates consisting of corporations, limited
liability companies, partnerships, joint ventures, and similar entities
accounted for on a cost or equity basis (determined in accordance with GAAP)
exceeding in the aggregate thirty percent (30%) of Borrower's Total Assets;
provided that Investments in any such Unconsolidated Affiliates whose primary
business is not the ownership of industrial distribution properties shall not
exceed in the aggregate fifteen percent (15%) of Borrower's Total Assets;
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(D) Consolidated Affiliates, other than (i) Consolidated Affiliates
through which Borrower invests in Properties and that are existing on the date
hereof, and (ii) Consolidated Affiliates through which Borrower invests in
Properties and that are formed or acquired after the Closing Date, provided that
(A) Borrower shall own at least fifty-one percent (51%) of the voting control of
each such Consolidated Affiliate, and (B) each such Consolidated Affiliate does
not constitute more than thirty percent (30%) of Borrower's Total Assets at the
time of formation or acquisition thereof;
(E) ProLogis Services, unless (i) ProLogis Services shall have no
Liabilities, other than trade payables incurred in the ordinary course of
ProLogis Services' business and loans or advances from Borrower, (ii) except as
provided in (III) below, all loans, advances, or extensions of credit from
Borrower to ProLogis Services are secured by leasehold loans or first priority
liens and security interests (subject only to prior liens and security interests
securing performance guaranties granted in the ordinary course of ProLogis
Services' business) in real properties developed or acquired by ProLogis
Services, (iii) all loans, advances, or extensions of credit from Borrower to
ProLogis Services for international purposes (A) are either (x) secured by first
priority liens and security interests (subject only to prior liens and security
interests securing performance guaranties granted in the ordinary course of
ProLogis Services' business) in real properties held for development, under
development, and/or acquired by ProLogis Services, or (y) unsecured and payable
on demand, and (B) do not exceed $100,000,000 in the aggregate, (iv) ProLogis
Services shall be internally managed or managed by Borrower, (v) Borrower shall,
at all times, beneficially own at least ninety percent (90%) of the aggregate
economic interest in ProLogis Services, (vi) the financial condition and results
of operation of ProLogis Services shall be consolidated with those of Borrower
for purposes of the Financial Statements or as required by GAAP, (vii) ProLogis
Services shall engage primarily in the acquisition and construction of
industrial real estate properties, or land that will be used for the
construction of such properties, for sale or lease to third parties on an arms-
length basis and under market terms, (viii) all equity Investments of Borrower
in ProLogis Services do not exceed $40,000,000 in the aggregate, and (ix) all
Investments (equity or otherwise) of Borrower in ProLogis Services do not exceed
$350,000,000 in the aggregate;
(F) Any Preferred Stock Subsidiary or Unconsolidated Affiliate (other
than ProLogis Services, SCI Logistics, CS Integrated, LLC, and Frigoscandia SA),
unless (i) Borrower shall, at all times, beneficially own at least ninety
percent (90%) of the aggregate economic interest in such Preferred Stock
Subsidiary, (ii) neither such Preferred Stock Subsidiary nor any of its
Consolidated Affiliates are prohibited or restricted from making any payments,
directly or indirectly, to Borrower by way of Dividends, advances, repayments of
loans, repayments of expenses, accruals, or otherwise, other than customary
third-party lender debt service covenants or as required by applicable Laws,
(iii) such Preferred Stock Subsidiary is internally managed or managed by
Borrower, (iv) such Preferred Stock Subsidiary does not constitute more than
fifteen percent (15%) of Borrower's Total Assets at the time of formation or
acquisition thereof, and (v) such Preferred Stock Subsidiary owns fifty-one
percent (51%) or more of its respective equity Investments, which assets must be
otherwise permitted Investments under this SECTION 8.6;
(G) The Stock of any Person (other than Consolidated Affiliates and
Unconsolidated Affiliates permitted by (A) through (F) above), other than Stock
received in settlement of Liabilities of such Person created in the ordinary
course of business or in other REITs acquired in exchange for Properties not to
exceed ten percent (10%) of Borrower's Total Assets;
(H) Loans, advances, and extensions of credit to Persons (other than
loans, advances, and extensions of credit to Consolidated Affiliates and
Unconsolidated Affiliates to the extent permitted hereunder), other than loans,
advances, and extensions of credit to Persons secured by valid and enforceable
first priority liens on real estate for the purpose of acquiring and developing
such property for eventual
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ownership by, or to be acquired by, Borrower prior to, or within a reasonable
period of time consistent with a business purpose after, the completion of
construction or development of such property;
(I) International Properties, Consolidated Affiliates domiciled outside
of the United States, Unconsolidated Affiliates domiciled outside of the United
States, and loans or advances to Consolidated Affiliates and Unconsolidated
Affiliates for international purposes exceeding in the aggregate fifty percent
(50%) of Borrower's Total Assets; and
(J) Refrigerated Warehouse Properties (including Investments through
Unconsolidated Affiliates) exceeding thirty percent (30%) of Borrower's Total
Assets.
8.7 Dividends and Distributions. Borrower shall not, on a consolidated
basis, declare, make, or pay any Distributions, other than (a) Permitted
Distributions, and (b) Distributions declared, made, or paid by (i) Borrower
wholly in the form of its Stock, and (ii) to the extent it can do so, any
Consolidated Affiliate to Borrower. Borrower may not and may not permit any of
its Consolidated Affiliates to enter into or permit to exist any arrangement or
agreement (other than this Agreement) that prohibits it from paying
Distributions to its shareholders.
8.8 SALE OF ASSETS. Borrower shall not, and shall not permit any of its
Consolidated Affiliates to, sell, assign, lease, transfer, or otherwise dispose
of any of its assets, other than to Borrower or a Consolidated Affiliate, and
except for (a) occasional sales, leases, or other dispositions of immaterial
assets for consideration not less than fair market value, (b) sales, leases, or
other dispositions of assets that are obsolete or have negligible fair market
value, (c) sales of equipment for a fair and adequate consideration (but if
replacement equipment is necessary for the proper operation of the business of
the seller, the seller must promptly replace the sold equipment), and (d) sales
or other transfers of Properties during any twelve (12) month period having a
fair market value of not more than twenty percent (20%) of the fair market value
of all Properties of Borrower and its Consolidated Affiliates prior to such sale
or transfer.
8.9 MERGERS AND DISSOLUTIONS. Borrower shall not, and shall not permit
any of its Consolidated Affiliates to, merge or consolidate with any other
Person or liquidate, wind up or dissolve (or suffer any liquidation or
dissolution); provided, however, that the foregoing shall not operate to prevent
(a) mergers or consolidations of any Consolidated Affiliate into Borrower or any
Consolidated Affiliate (if such transaction does not reduce the net worth of
Borrower determined in accordance with GAAP, except for minor transaction costs
related to such merger or consolidation), or (b) a merger or consolidation in
which Borrower is the surviving entity and, immediately after giving effect to
such merger or consolidation, no Change in Control has occurred.
8.10 ASSIGNMENT. Borrower shall not, and shall not permit any of its
Consolidated Affiliates to, assign or transfer any of its Rights, duties, or
obligations under any of the Loan Documents.
8.11 FISCAL YEAR AND ACCOUNTING METHODS. Borrower shall not change its
fiscal year or its method of accounting (other than immaterial changes in
methods or as required by GAAP).
8.12 NEW BUSINESSES. Borrower shall not, and shall not permit any of its
Consolidated Affiliates to, engage in any business except (a) in the case of
Consolidated Affiliates that are New Ventures, the businesses permitted by
SECTION 8.6, and (b) in all other cases, the businesses in which they are
presently engaged and any other reasonably related business (including
distribution and logistics services).
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8.13 GOVERNMENT REGULATIONS. Borrower shall not, and shall not permit any
of its Consolidated Affiliates to, conduct its business in a way that it becomes
regulated under the Investment Company Act of 1940, as amended, or the Public
Utility Holding Company Act of 1935, as amended.
8.14 NEGATIVE PLEDGE AGREEMENTS. Borrower shall not, and shall not permit
any of its Consolidated Affiliates to, enter into any negative pledge agreements
with any other Person such that Borrower shall be prohibited from granting, or
causing any Consolidated Affiliates from granting, to Administrative Agent, for
the benefit of Agents and Lenders, a first priority lien and security interest
in the Operating Sub-Pool as security for the Obligation in an amount equal to
one hundred thirty-three and one-third percent (133.33%) of the Obligation.
Nothing herein should be construed as creating a Lien.
SECTION 9 FINANCIAL COVENANTS. So long as Lenders are committed to fund
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Borrowings under this Agreement and until the Obligation is paid and performed
in full, Borrower covenants and agrees with Agents and Lenders that Borrower
will not directly or indirectly permit, in each case for Borrower and its
Consolidated Affiliates on a consolidated basis:
9.1 LEVERAGE RATIOS.
(A) The Leverage Ratio, as of any date, to exceed 1.0 to 1.0.
(B) The Adjusted Leverage Ratio, as of any date, to exceed 1.0 to 1.0.
9.2 MINIMUM TANGIBLE NET WORTH. Tangible Net Worth, as of any date, to
be less than $1,500,000,000.
9.3 INTEREST EXPENSE COVERAGE RATIO. The Interest Expense Coverage
Ratio, as of the last day of each fiscal quarter during the term hereof, to be
less than 2.0 to 1.0.
9.4 FIXED CHARGE COVERAGE RATIO. The Fixed Charge Coverage Ratio, as of
the last day of each fiscal quarter during the term hereof, to be less than 1.75
to 1.0.
9.5 DEBT TO TOTAL ASSET VALUE RATIO. The Debt to Total Asset Value
Ratio, as of any date following the Conversion Date, to exceed .50 to 1.0.
SECTION 10 DEFAULT. The term "DEFAULT" means the occurrence of any one or
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more of the following events:
10.1 PAYMENT OF OBLIGATION. The failure of Borrower (a) to pay any part
of the Obligation (other than the Principal Debt or any other principal of the
Obligation) within three (3) days after it becomes due and payable under the
Loan Documents, and (b) to pay any Principal Debt or any other principal of the
Obligation when it becomes due and payable under the Loan Documents.
10.2 COVENANTS. The failure of Borrower (and, if applicable, any of its
Consolidated Affiliates) to punctually and properly perform, observe and comply
with:
(A) Any covenant or agreement contained in SECTIONS 7.15, 8.3, 8.7,
8.14, and 9; or
(B) Any other covenant or agreement contained in any Loan Document
(other than the covenants to pay the Obligation and the covenants in CLAUSE (A)
preceding), and failure continues for thirty (30) days
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after the first to occur of (i) Borrower knows of or (ii) Borrower receives
notice from Administrative Agent of, such failure.
10.3 DEBTOR RELIEF. Borrower or any of its Consolidated Affiliates (a)
is not Solvent, (b) fails to pay its Liabilities generally as they become due,
(c) voluntarily seeks, consents to, or acquiesces in the benefit of any Debtor
Relief Law, or (d) becomes a party to or is made the subject of any proceeding
provided for by any Debtor Relief Law, other than as a creditor or claimant,
that could suspend or otherwise adversely affect the Rights of any Agent or any
Lender granted in the Loan Documents (unless, if the proceeding is involuntary,
the applicable petition is dismissed within ninety (90) days after its filing).
10.4 JUDGMENTS AND ATTACHMENTS. Borrower or any of its Consolidated
Affiliates fails, within sixty (60) days after entry, to pay, bond or otherwise
discharge any judgment or order for the payment of money in excess of $5,000,000
(individually or collectively) or any warrant of attachment, sequestration or
similar proceeding against Borrower or any of its Consolidated Affiliates'
assets having a value (individually or collectively) of $5,000,000 which is
neither (a) stayed on appeal nor (b) diligently contested in good faith by
appropriate proceedings and adequate reserves have been set aside on its books
in accordance with GAAP.
10.5 GOVERNMENT ACTION. (a) A final non-appealable order is issued by
any Tribunal (including the United States Justice Department) requiring Borrower
or any of its Consolidated Affiliates, to divest all or a substantial portion of
its assets under any antitrust, restraint of trade, unfair competition, industry
regulation or similar Laws, or (b) any Tribunal condemns, seizes, or otherwise
appropriates, or takes custody or control of all or any substantial portion of
the assets of Borrower and its Consolidated Affiliates, taken as a whole.
10.6 MISREPRESENTATION. Any material representation or warranty made by
Borrower contained in any Loan Document at any time proves to have been
incorrect in any material respect when made.
10.7 DEFAULT UNDER OTHER AGREEMENTS.
(A) Borrower or any of its Consolidated Affiliates shall fail to make
any payment in respect of any Liability when due or within any applicable grace
period; provided that the failure of Borrower or any of its Consolidated
Affiliates to make any payment when due or within any applicable grace period in
respect of (i) any Recourse Debt arising in one or more related or unrelated
transactions in an aggregate principal amount not exceeding $10,000,000, and
(ii) any non-recourse Liabilities arising in one or more related or unrelated
transactions in an aggregate principal amount not exceeding $50,000,000, shall
not constitute a Default hereunder; or
(B) the acceleration of the maturity of any Liabilities of Borrower or
any of its Consolidated Affiliates or default shall occur in the payment of any
Liabilities of Borrower or any of its Consolidated Affiliates or in respect of
any note or credit agreement relating to any such Liabilities and such default
shall continue for more than the period of grace, if any, specified therein or
otherwise granted by the lender thereof; provided that the acceleration of the
maturity of (i) any Recourse Debt arising in one or more related or unrelated
transactions in an aggregate principal amount not exceeding $10,000,000, and
(ii) any non-recourse Liabilities arising in one or more related or unrelated
transactions in an aggregate principal amount not exceeding $50,000,000 shall
not constitute a Default hereunder;
10.8 VALIDITY AND ENFORCEABILITY OF LOAN DOCUMENTS. Except in accordance
with its terms or as otherwise expressly permitted by this Agreement, any Loan
Document at any time after its execution and delivery ceases to be in full force
and effect in any material respect or is declared by a Tribunal to be null and
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void or its validity or enforceability is contested by Borrower or Borrower
denies that it has any further liability or obligations under any Loan Document
to which it is a party.
10.9 MANAGEMENT CHANGES.
(A) During any period of twelve (12) consecutive calendar months,
individuals who were directors or trustees of Borrower on the first day of such
period shall cease to constitute a majority of the board of directors or
trustees of Borrower; provided, however, that the directors or trustees of
Borrower may include new directors or trustees that (i) are an officer or
employee of an Affiliate, or (ii) that are required in order (as a practical
matter) for the majority of the board of directors or trustees of Borrower to be
independent directors or trustees.
(B) Borrower shall change its present executive management, which
change could result in a Material Adverse Event.
10.10 Plan Assets. The assets of Borrower at any time constitute "plan
assets" as defined in 29 C.F.R. (S) 2510.3-101(a)(1) (or any successor
regulation).
SECTION 11 RIGHTS AND REMEDIES.
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11. REMEDIES UPON DEFAULT.
(A) If a Default (i) occurs under SECTION 10.3(C) or (ii) occurs and is
continuing under SECTION 10.3(A), (B) OR (D), the commitment to extend credit
under this Agreement automatically terminates, the entire unpaid balance of the
Obligation automatically becomes due and payable without any action of any kind
whatsoever.
(B) If a Default occurs and is continuing, subject to the terms of
SECTION 12.3(B), Administrative Agent may do any one or more of the following:
(i) if the maturity of the Obligation has not already been accelerated under
SECTION 11.1(A), declare the entire unpaid balance of all or any part of the
Obligation immediately due and payable, whereupon it is due and payable; (ii)
terminate the commitments of Lenders to extend credit under this Agreement;
(iii) reduce any claim to judgment; (iv) to the extent permitted by Law,
exercise (or request each Lender to, and each Lender is entitled to, exercise)
the Rights of offset or banker's Lien against the interest of Borrower and its
Consolidated Affiliates in and to every account and other property of Borrower
and its Consolidated Affiliates that are in the possession of any Agent or any
Lender to the extent of the full amount of the Obligation (and to the extent
permitted by Law, Borrower and its Consolidated Affiliates are deemed directly
obligated to each Lender in the full amount of the Obligation for this purpose);
and (v) exercise any and all other legal or equitable Rights afforded by the
Loan Documents, the Laws of the State of Texas, or any other applicable
jurisdiction.
11.2 WAIVERS. To the extent permitted by Law, Borrower waives
presentment and demand for payment, protest, notice of intention to accelerate,
notice of acceleration, and notice of protest and nonpayment, and agrees that
its liability with respect to all or any part of the Obligation is not affected
by any renewal or extension in the time of payment of all or any part of the
Obligation, by any indulgence, or by any release or change in any security for
the payment of all or any part of the Obligation.
11.3 PERFORMANCE BY ADMINISTRATIVE AGENT. If any covenant, duty, or
agreement of Borrower is not performed in accordance with the terms of the Loan
Documents, then Administrative Agent may, while a Default exists, at its option,
perform or attempt to perform that covenant, duty or agreement on behalf of
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Borrower (and any amount expended by Administrative Agent in its performance or
attempted performance is payable by Borrower to Administrative Agent on demand,
becomes part of the Obligation, and bears interest at the Default Rate from the
date of Administrative Agent's expenditure until paid). However, no Agent or any
Lender assumes or shall have, except by its express written consent, any
liability or responsibility for the performance of any covenant, duty, or
agreement of Borrower.
11.4 NOT IN CONTROL. None of the covenants or other provisions
contained in any Loan Document shall, or shall be deemed to, give Agents or
Lenders the Right to exercise control over the assets (including real property),
affairs, or management of Borrower or any of its Consolidated Affiliates; the
power of Agents and Lenders is limited to the Right to exercise the remedies
provided in this SECTION 11.
11.5 COURSE OF DEALING. The acceptance by Agents or Lenders of any
partial payment on the Obligation shall not be deemed to be a waiver of any
Default then existing. No waiver by Agents or Lenders of any Default shall be
deemed to be a waiver of any other then-existing or subsequent Default. No delay
or omission by Agents or Lenders in exercising any Right under the Loan
Documents will impair that Right or be construed as a waiver thereof or any
acquiescence therein, nor will any single or partial exercise of any Right
preclude other or further exercise thereof or the exercise of any other Right
under the Loan Documents or otherwise.
11.6 CUMULATIVE RIGHTS. All Rights available to Agents and Lenders under
the Loan Documents are cumulative of and in addition to all other Rights granted
to Agents and Lenders at law or in equity, whether or not the Obligation is due
and payable and whether or not Agents or Lenders have instituted any suit for
collection, foreclosure, or other action in connection with the Loan Documents.
11.7 APPLICATION OF PROCEEDS. Any and all proceeds ever received by
Agents or Lenders from the exercise of any Rights pertaining to the Obligation
shall be applied to the Obligation according to SECTION 3.11.
11.8 DIMINUTION IN VALUE OF COLLATERAL. No Agent or any Lender has any
liability or responsibility whatsoever for any diminution in or loss of value of
any collateral now or hereafter securing payment or performance of all or any
part of the Obligation (other than diminution in or loss of value caused by its
gross negligence or willful misconduct).
11.9 CERTAIN PROCEEDINGS. Borrower will promptly execute and deliver, or
cause the execution and delivery of, all applications, certificates,
instruments, registration statements, and all other documents and papers
Administrative Agent or any Lender reasonably request in connection with the
obtaining of any consent, approval, registration, qualification, permit,
license, or authorization of any Tribunal or other Person necessary or
appropriate for the effective exercise of any Rights under the Loan Documents.
Because Borrower agrees that Agents' and Lenders' remedies at Law for failure of
Borrower to comply with the provisions of this paragraph would be inadequate and
that failure would not be adequately compensable in damages, Borrower agrees
that the covenants of this paragraph may be specifically enforced.
SECTION 12 AGENTS AND LENDERS.
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12.1 AGENTS.
(A) APPOINTMENT OF ADMINISTRATIVE AGENT. Each Lender appoints
Administrative Agent (and Administrative Agent accepts appointment) as its
nominee and agent, in its name and on its behalf: (i) to act as its nominee and
on its behalf in and under all Loan Documents; (ii) to arrange the means whereby
its funds
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are to be made available to Borrower under the Loan Documents; (iii) to take any
action that it properly requests under the Loan Documents (subject to the
concurrence of other Lenders as may be required under the Loan Documents or the
Intercreditor Agreement); (iv) to receive all documents and items to be
furnished to it under the Loan Documents; (v) to be the secured party,
mortgagee, beneficiary, recipient, and similar party in respect of any
collateral, if any, for the benefit of Lenders; (vi) to promptly distribute to
it all material information, requests, documents, and items received from
Borrower under the Loan Documents; (vii) to promptly distribute to it its
ratable part of each payment or prepayment (whether voluntary, as proceeds of
collateral upon or after foreclosure, as proceeds of insurance thereon, or
otherwise) in accordance with the terms of the Loan Documents; and (viii) to
deliver to the appropriate Persons requests, demands, approvals, and consents
received from it. However, Administrative Agent may not be required to take any
action that exposes it to personal liability or that is contrary to any Loan
Document or applicable Law.
(B) SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may
voluntarily resign. If the initial or any successor Administrative Agent ever
ceases to be a party to this Agreement or if the initial or any successor
Administrative Agent ever resigns or is removed, then the successor
Administrative Agent shall be appointed as provided in the Intercreditor
Agreement. So long as no Default has occurred and is continuing, Borrower shall
have the right to consent to any successor Administrative Agent that is not a
Lender at the time of such appointment. Any successor Administrative Agent must
be a commercial bank having a combined capital and surplus of at least
$10,000,000,000 (as shown on its most recently published statement of condition)
and whose debt obligations (or whose parent's debt obligations) are rated not
less than investment grade or its equivalent by Moody's or S & P. Upon its
acceptance of appointment as successor Administrative Agent, the successor
Administrative Agent succeeds to and becomes vested with all of the Rights of
the prior Administrative Agent, and the prior Administrative Agent is discharged
from its duties and obligations of Administrative Agent under the Loan
Documents, and each Lender shall execute the documents that any Lender, the
resigning or removed Administrative Agent, or the successor Administrative Agent
reasonably request to reflect the change. After any Administrative Agent's
resignation as Administrative Agent under the Loan Documents, the provisions of
this section inure to its benefit as to any actions taken or not taken by it
while it was Administrative Agent under the Loan Documents.
(C) DOCUMENTATION AGENT. Documentation Agent, in such capacity, shall
have no rights, duties, or obligations hereunder, except as specifically
provided in this Agreement. Documentation Agent (a) may voluntarily resign by
notice to Administrative Agent, Lenders, and Borrower, and (b) shall resign upon
the request of the Required Lenders for cause. Upon the resignation of
Documentation Agent, the Required Lenders may elect to designate a successor
Documentation Agent (which, if no Default or Potential Default exists, is
subject to Borrower's approval that may not be unreasonably withheld), which
must be a Lender who is a commercial bank having a combined capital and surplus
of at least $10,000,000,000 (as shown on its most recently published statement
of condition)and whose debt obligations (or whose parent's debt obligations) are
rated not less than investment grade or its equivalent by Moody's or S & P.
(D) SYNDICATION AGENT. Syndication Agent, in such capacity, shall have
no rights, duties, or obligations hereunder, except as specifically provided in
this Agreement. Syndication Agent (a) may voluntarily resign by notice to
Administrative Agent, Lenders, and Borrower, and (b) shall resign upon the
request of the Required Lenders for cause. Upon the resignation of Syndication
Agent, the Required Lenders may elect to designate a successor Syndication Agent
(which, if no Default or Potential Default exists, is subject to Borrower's
approval that may not be unreasonably withheld), which must be a Lender who is a
commercial bank having a combined capital and surplus of at least
$10,000,000,000 (as shown on its most recently published statement of
condition)and whose debt obligations (or whose parent's debt obligations) are
rated not less than investment grade or its equivalent by Moody's or S & P.
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12.2 DELEGATION OF DUTIES; RELIANCE. Lenders may perform any of their
duties or exercise any of their Rights under the Loan Documents by or through
Administrative Agent, and Lenders and Administrative Agent may perform any of
their duties or exercise any of their Rights under the Loan Documents by or
through their respective Representatives. Administrative Agent, Lenders, and
their respective Representatives (a) are entitled to rely upon (and shall be
protected in relying upon) any written or oral statement believed by it or them
to be genuine and correct and to have been signed or made by the proper Person
and, with respect to legal matters, upon opinion of counsel selected by
Administrative Agent or any Lender (but nothing in this CLAUSE (A) permits
Administrative Agent to rely on (i) oral statements if a writing is required by
this agreement or (ii) any other writing if a specific writing is required by
this agreement), (b) are entitled to deem and treat each Lender as the owner and
holder of its portion of the Obligation for all purposes until, written notice
of the assignment or transfer is given to and received by Administrative Agent
(and any request, authorization, consent, or approval of any Lender is
conclusive and binding on each subsequent holder, assignee, or transferee of or
Participant in such Lender's portion of the Obligation until that notice is
given and received), (c) are not deemed to have notice of the occurrence of a
Default unless a responsible officer of Administrative Agent, who handles
matters associated with the Loan Documents and transactions thereunder, has
actual knowledge or Administrative Agent has been notified by a Lender or
Borrower, and (d) are entitled to consult with legal counsel (including counsel
for Borrower), independent accountants, and other experts selected by
Administrative Agent and are not liable for any action taken or not taken in
good faith by it in accordance with the advice of counsel, accountants, or
experts.
12.3 LIMITATION OF AGENTS' LIABILITY.
(A) EXCULPATION. No Agent or any of its Representatives will be liable
for any action taken or omitted to be taken by it or them under the Loan
Documents in good faith and believed by it or them to be within the discretion
or power conferred upon it or them by the Loan Documents or be responsible for
the consequences of any error of judgment (except for fraud, gross negligence,
or willful misconduct), and no Agent or any of its Representatives has a
fiduciary relationship with any Lender by virtue of the Loan Documents (but
nothing in this Agreement negates the obligation of Administrative Agent to
account for funds received by it for the account of any Lender).
(B) INDEMNITY. Unless indemnified to its satisfaction against loss, cost,
liability, and expense, Administrative Agent may not be compelled to do any act
under the Loan Documents or to take any action toward the execution or
enforcement of the powers thereby created or to prosecute or defend any suit in
respect of the Loan Documents. If Administrative Agent requests instructions
from Lenders, with respect to any act or action in connection with any Loan
Document, then Administrative Agent is entitled to refrain (without incurring
any liability to any Person by so refraining) from that act or action unless and
until it has received instructions. In no event, however, may Administrative
Agent or any of its Representatives be required to take any action that it or
they determine could incur for it or them criminal or onerous civil liability.
Without limiting the generality of the foregoing, no Lender has any right of
action against Administrative Agent as a result of Administrative Agent's acting
or refraining from acting under this Agreement in accordance with instructions
of Required Lenders.
(C) RELIANCE. Administrative Agent is not responsible to any Lender or
any Participant for, and each Lender represents and warrants that it has not
relied upon Administrative Agent in respect of, (i) the creditworthiness of
Borrower and its Consolidated Affiliates and the risks involved to such Lender,
(ii) the effectiveness, enforceability, genuineness, validity, or the due
execution of any Loan Document (except by Administrative Agent), (iii) any
representation, warranty, document, certificate, report, or statement made
therein (except by Administrative Agent) or furnished thereunder or in
connection therewith, (iv) the adequacy of any collateral now or hereafter
securing the Obligation or the existence, priority, or perfection of any Lien
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now or hereafter granted or purported to be granted on the collateral under any
Loan Document, or (v) observation of or compliance with any of the terms,
covenants, or conditions of any Loan Document on the part of Borrower and its
Consolidated Affiliates. EACH LENDER AGREES TO INDEMNIFY ADMINISTRATIVE AGENT
AND ITS REPRESENTATIVES AND HOLD THEM HARMLESS FROM AND AGAINST (BUT LIMITED TO
SUCH LENDER'S PRO RATA PART OF) ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, REASONABLE EXPENSES, AND
REASONABLE DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER THAT MAY BE IMPOSED
ON, ASSERTED AGAINST, OR INCURRED BY THEM IN ANY WAY RELATING TO OR ARISING OUT
OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE LOAN
DOCUMENTS IF ADMINISTRATIVE AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR
SUCH AMOUNTS BY BORROWER. ALTHOUGH ADMINISTRATIVE AGENT AND ITS REPRESENTATIVES
-----------------------------------------------------
HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN
- --------------------------------------------------------------------------
ORDINARY NEGLIGENCE, ADMINISTRATIVE AGENT AND ITS REPRESENTATIVES DO NOT HAVE
- -------------------
THE RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN FRAUD,
GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT.
12.4 LIMITATION OF LIABILITY. No Lender or any Participant will incur
any liability to any other Lender or Participant except for acts or omissions in
bad faith, and neither Administrative Agent nor any Lender or Participant will
incur any liability to any other Person for any act or omission of any other
Lender or any Participant.
12.5 INTERCREDITOR AGREEMENT. Administrative Agent and Lenders agree
that, so long as no Default has occurred and is continuing, they will not amend
or modify SECTION 2.03 or the related definitions therein (including the
definition of "Required Lenders") of the Intercreditor Agreement without the
prior written consent of Borrower, which consent shall not be unreasonably
withheld.
12.5 CONFIRMATION OF INTERCREDITOR AGREEMENT. Agents and Lenders
hereby (a) confirm the terms, conditions, rights, and obligations set forth in
the Intercreditor Agreement and (b) that all references to the "Credit
Agreement" in the Intercreditor Agreement shall be to this Agreement, as
modified, amended, extended, or restated from time to time.
SECTION 13 MISCELLANEOUS.
- ---------- -------------
13.1 HEADINGS. The headings, captions, and arrangements used in any of
the Loan Documents are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify, or modify the terms of the Loan
Documents, nor affect the meaning thereof.
13.2 NONBUSINESS DAYS; TIME. Any payment or action that is due under
any Loan Document on a non-Business Day may be delayed until the next-succeeding
Business Day (but interest shall continue to accrue on any applicable payment
until payment is in fact made) unless the payment concerns a Eurodollar
Borrowing, in which case if the next-succeeding Business Day is in the next
calendar month, then such payment shall be made on the next-preceding Business
Day.
13.3 COMMUNICATIONS. Unless otherwise specifically provided, whenever
any Loan Document requires or permits any consent, approval, notice, request,
demand, or other communication from one party to another, communication must be
in writing (which may be by telex or telecopy) to be effective and shall be
deemed to have been given (a) if by telex, when transmitted to the appropriate
telex number and the appropriate answerback is received, (b) if by telecopy,
when transmitted to the appropriate telecopy number (and all communications sent
by telecopy must be confirmed promptly thereafter by telephone; but any
requirement in this parenthetical shall not affect the date when the telecopy
shall be deemed to have been
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delivered), (c) if by mail, on the fifth (5th) Business Day after it is enclosed
in an envelope and properly addressed, stamped, sealed, certified mail, return
receipt requested, and deposited in the appropriate official postal service, or
(d) if by any other means, when actually delivered. Until changed by notice
pursuant to this Agreement, the address (and telecopy number) for each party to
a Loan Document is set forth on SCHEDULE 1.
13.4 FORM AND NUMBER OF DOCUMENTS. The form, substance, and number of
counterparts of each writing to be furnished under this Agreement must be
satisfactory to Administrative Agent and its counsel.
13.5 SURVIVAL. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Documents survive all
closings under the Loan Documents and, except as otherwise indicated, are not
affected by any investigation made by any party.
13.6 GOVERNING LAW. Except as expressly provided in a Loan Document,
the Laws (other than conflict-of-laws provisions) of the State of Texas and of
the United States of America govern the Rights and duties of the parties to the
Loan Documents and the validity, construction, enforcement, and interpretation
of the Loan Documents.
13.7 INVALID PROVISIONS. Any provision in any Loan Document held to be
illegal, invalid or unenforceable is fully severable; the appropriate Loan
Document shall be construed and enforced as if that provision had never been
included; and the remaining provisions shall remain in full force and effect and
shall not be affected by the severed provision. Agents, Lenders, and Borrower
agree to negotiate, in good faith, the terms of a replacement provision as
similar to the severed provision as may be possible and be legal, valid and
enforceable. However, if the provision held to be illegal, invalid or
unenforceable is a material part of this Agreement, such invalid, illegal or
unenforceable provision shall be, to the extent permitted by Law, replaced by a
clause or provision judicially construed and interpreted to be as similar in
substance and content to the original terms of such illegal, invalid or
unenforceable clause or provision as the context thereof would reasonably allow,
so that such clause or provision would thereafter be legal, valid and
enforceable.
13.8 VENUE; SERVICE OF PROCESS; JURY TRIAL. EACH PARTY TO ANY LOAN
DOCUMENT, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS (AND IN THE CASE
OF BORROWER, FOR EACH OF ITS CONSOLIDATED AFFILIATES), (a) IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF
TEXAS, (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS AND THE
OBLIGATION BROUGHT IN DISTRICT COURTS OF DALLAS OR HARRIS COUNTY, TEXAS, OR IN
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN OR SOUTHERN DISTRICT OF TEXAS,
DALLAS OR HOUSTON DIVISION, (c) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY
LITIGATION BROUGHT IN ANY OF THE AFOREMENTIONED COURTS HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, (d) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THOSE COURTS IN ANY LITIGATION BY THE MAILING OF COPIES THEREOF BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR
BY DELIVERY BY A NATIONALLY RECOGNIZED COURIER SERVICE, AND SERVICE SHALL BE
DEEMED COMPLETE UPON DELIVERY OF THE LEGAL PROCESS AT ITS ADDRESS SET FORTH IN
THIS AGREEMENT, (e) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY
PARTY TO ANY LOAN DOCUMENT ARISING OUT OF OR IN CONNECTION WITH THE LOAN
DOCUMENTS OR THE OBLIGATION MAY BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS,
AND (f) IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT
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OF ANY LOAN DOCUMENT. The scope of each of the foregoing waivers is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Borrower (for itself and on behalf of each of its Consolidated
Affiliates) acknowledges that these waivers are a material inducement to each
Agent's and each Lender's agreement to enter into a business relationship, that
each Agent and each Lender has already relied on these waivers in entering into
this Agreement, and that each Agent and each Lender will continue to rely on
each of these waivers in related future dealings. Borrower (for itself and on
behalf of each of its Consolidated Affiliates) further warrants and represents
that it has reviewed these waivers with its legal counsel, and that it knowingly
and voluntarily agrees to each waiver following consultation with legal counsel.
THE WAIVERS IN THIS SECTION 13.8 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS, OR REPLACEMENTS TO OR OF THIS OR ANY OTHER
LOAN DOCUMENT. In the event of Litigation, this Agreement may be filed as a
written consent to a trial by the court.
13.9 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS.
(A) Any provision of the Loan Documents may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by Borrower
and Administrative Agent; provided that no such amendment or waiver shall be
effective, without the consent of the Required Lenders as provided in the
Intercreditor Agreement furnished to Borrower.
(B) Any conflict or ambiguity between the terms and provisions of
this Agreement and terms and provisions in any other Loan Document is controlled
by the terms and provisions of this Agreement to the extent (and only to the
extent) of such conflict.
(C) No course of dealing or any failure or delay by any Agent, any
Lender, or any of their respective Representatives with respect to exercising
any Right of any Agent or any Lender under this Agreement operates as a waiver
thereof. A waiver must be in writing and signed by Administrative Agent and
Lenders to be effective, and a waiver will be effective only in the specific
instance and for the specific purpose for which it is given.
13.10 MULTIPLE COUNTERPARTS. Any Loan Document may be executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of thereof, it shall not be necessary to produce or account for
more than one counterpart. Each Lender need not execute the same counterpart of
this Agreement so long as identical counterparts are executed by Borrower, each
Lender, and each Agent. This Agreement shall become effective when counterparts
of this Agreement have been executed and delivered to Administrative Agent by
each Lender, each Agent, and Borrower, or, in the case only of Lenders, when
Administrative Agent has received telecopied, telexed or other evidence
satisfactory to it that each Lender has executed and is delivering to
Administrative Agent a counterpart of this Agreement.
13.11 SUCCESSORS AND ASSIGNS; PARTICIPATIONS.
(A) Each Loan Document binds and inures to the benefit of the parties
thereto, any intended beneficiary thereof, and each of their respective
successors and permitted assigns. No Lender may, without the prior written
consent of Administrative Agent and, so long as no Default has occurred and is
continuing, Borrower, transfer, pledge, assign, sell any participation in, or
otherwise encumber its portion of the Obligation, except as specifically
permitted by this SECTION 13.11.
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(B) Subject to the provisions of this section and in accordance with
applicable Law, any Lender having a Commitment equal to or greater than
$25,000,000, or if the Total Commitments have been terminated, then Notes having
outstanding Principal Debt equal to or greater than $25,000,000, may, in the
ordinary course of its commercial banking business, at any time sell to one or
more Persons (each a "PARTICIPANT") participating interests in its portion of
the Obligation; provided that (i) each such participation is not less than
$10,000,000, (ii) except in the case of participations of Competitive Borrowings
or to any of such Lender's Affiliates, Administrative Agent and, so long as no
Default has occurred and is continuing, Borrower have consented to such
participation, such consents not to be unreasonably withheld, and (iii) after
giving effect to such participation, the Lender granting such participation
shall retain a Commitment of at least $15,000,000, or if the Total Commitments
have been terminated, then Notes having outstanding Principal Debt of at least
$15,000,000. The selling Lender shall remain a "Lender" under this Agreement
(and the Participant shall not constitute a "Lender" under this Agreement) and
its obligations under this Agreement shall remain unchanged. The selling Lender
shall remain solely responsible for the performance of its obligations under the
Loan Documents and shall remain the holder of its share of the Principal Debt
for all purposes under this Agreement. Borrower and Administrative Agent shall
continue to deal solely and directly with the selling Lender in connection with
such Lender's Rights and obligations under the Loan Documents. Participants have
no Rights under the Loan Documents, other than certain voting Rights as provided
below. Subject to the following, each Lender may obtain (on behalf of its
Participants) the benefits of SECTION 3 with respect to all participations in
its part of the Obligation outstanding from time to time so long as Borrower is
not obligated to pay any amount in excess of the amount that would be due to
such Lender under SECTION 3 calculated as though no participations have been
made. No Lender may sell any participating interest under which the Participant
has any Rights to approve any amendment, modification or waiver of any Loan
Document, except to the extent the amendment, modification or waiver extends the
due date for payment of any principal, interest or fees due under the Loan
Documents, reduces the interest rate or the amount of principal or fees
applicable to the Obligation (except reductions contemplated by this Agreement),
or releases any guaranty or collateral, if any, for the Obligation. However, if
a Participant is entitled to the benefits of SECTION 3 or a Lender grants Rights
to its Participants to approve amendments to or waivers of the Loan Documents
respecting the matters described in the previous sentence, then such Lender must
include a voting mechanism in the relevant participation agreement whereby a
majority of its portion of the Obligation (whether held by it or participated)
shall control the vote for all of such Lender's portion of the Obligation.
(C) Subject to the provisions of this section, any Lender may at any
time, in the ordinary course of its commercial banking business, (i) without the
consent of Borrower or Administrative Agent, assign all or any part of its
Rights and obligations under the Loan Documents to any of its Affiliates so long
as such Affiliate is an Eligible Institution (each a "PURCHASER") and (ii) upon
the prior written consent of Administrative Agent, and so long as no Default has
occurred and is continuing, Borrower, such consents not to be unreasonably
withheld, assign to any other Eligible Institution (each of which is also a
"PURCHASER") a proportionate part (not less than $15,000,000 and an integral
multiple of $1,000,000) of all or any part of its Rights and obligations under
the Loan Documents; provided that (x) each such assignment shall exclude
Competitive Borrowings, unless the assigning Lender is selling all of its Rights
and obligations under the Loan Documents, and (y) after giving effect to such
assignment, unless the assigning Lender is assigning all of its Rights and
Commitments hereunder, the Lender granting such assignment shall retain a
Commitment of at least $15,000,000, or if the Total Commitments have been
terminated, then Notes having outstanding Principal Debt of at least
$15,000,000. Notwithstanding the foregoing, each Agent shall, at all times prior
to its resignation or replacement as an Agent hereunder, retain a minimum
Commitment of $25,000,000, or if the Total Commitments have been terminated,
then Notes having outstanding Principal Debt of at least $25,000,000. In each
case, the Purchaser shall assume those Rights and obligations under an
assignment agreement substantially in the form of EXHIBIT D. Upon (i) delivery
of an executed copy of the assignment agreement to Borrower and Administrative
Agent and (ii) payment of a fee of $3,000 from the transferor to
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Administrative Agent, from and after the assignment's effective date (which
shall be after the date of delivery), the Purchaser shall for all purposes be a
Lender party to this Agreement and shall have all the Rights and obligations of
a Lender under this Agreement to the same extent as if it were an original party
to this Agreement with commitments as set forth in the assignment agreement, and
the transferor Lender shall be released from its obligations under this
Agreement to a corresponding extent, and, except as provided in the following
sentence, no further consent or action by Borrower, Lenders, or any Agent shall
be required. Upon the consummation of any transfer to a Purchaser under this
CLAUSE (C), the then-existing SCHEDULE 1 shall automatically be deemed to
reflect the name, address, and Commitment of such Purchaser, Administrative
Agent shall deliver to Borrower and Lenders an amended SCHEDULE 1 reflecting
those changes, Borrower shall execute and deliver to each of the transferor
Lender and the Purchaser a Revolving Credit Note in the face amount of its
respective Commitment following transfer, and, upon receipt of its new Revolving
Credit Note, the transferor Lender shall return to Borrower the Revolving Credit
Note previously delivered to it under this Agreement. A Purchaser is subject to
all the provisions in this SECTION as if it were a Lender signatory to this
Agreement as of the date of this Agreement.
(D) Any Lender may at any time, without the consent of Borrower or
Administrative Agent, assign all or any part of its Rights under the Loan
Documents to a Federal Reserve Bank without releasing the transferor Lender from
its obligations thereunder.
(E) Notwithstanding any contrary provision in this Agreement, a
Lender may not sell or participate any of its interests for a purchase price
that, directly or indirectly, reflects a discount from face value, without first
offering the sale or participation to the other Lenders on a Pro Rata basis
(which must be accepted or rejected within five (5) Business Days after the
offer).
13.12 DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. Borrower's obligations under the Loan Documents remain in full
force and effect until the Total Commitment is terminated and the Obligation is
paid in full (except for provisions under the Loan Documents which by their
terms expressly survive payment of the Obligation and termination of the Loan
Documents). If at any time any payment of the principal of or interest on any
Note or any other amount payable by Borrower or any other obligor on the
Obligation under any Loan Document is rescinded or must be restored or returned
upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, the
obligations of Borrower under the Loan Documents with respect to that payment
shall be reinstated as though the payment had been due but not made at that
time.
13.13 CONFIDENTIALITY. Each Lender agrees to hold any confidential
information which (a) it has received prior to the Closing Date from Borrower
which is confidential and is not otherwise publicly available, and (b) it may
receive from Borrower pursuant to this Agreement after the Closing Date which
Borrower has marked "confidential" and is not otherwise publicly available, in
confidence, except (i) to other Lenders, (ii) to legal counsel, accountants, and
other professional advisors to such Lender who agree to be bound by the terms of
this Section, (iii) to regulatory officials, but only to the extent required by
such officials, (iv) upon prior notice to Borrower (which Lenders agree shall be
delivered as promptly as practicable), in connection with or response to
compliance with any Law or at the request of any Tribunal, but only to the
extent required by such Law or Tribunal, (v) upon prior notice to Borrower
(which Lenders agree shall be delivered as promptly as practicable), in
connection with any legal proceedings to which such Lender is a party, but only
to the extent required by such proceedings, and (vi) to prospective Participants
or Purchasers who agree to be bound by the terms of this Section.
13.14 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
THIS
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AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON
OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN
ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF J.A.M.S./ENDISPUTE, INC. OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE
"SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL
RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF
ADMINISTRATIVE AGENT'S DOMICILE AT THE TIME OF THE ARBITRATION AND ADMINISTERED
BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP
TO AN ADDITIONAL 60 DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED
TO (i) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (ii) BE A
WAIVER BY LENDERS OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. (S) 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (iii) LIMIT THE RIGHT OF LENDERS OR
AGENTS HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO)
SET-OFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL,
OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF OR THE APPOINTMENT OF A RECEIVER. AGENTS AND
LENDERS MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE
PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. AT
ADMINISTRATIVE AGENT'S AND LENDERS' OPTION, FORECLOSURE UNDER A DEED OF TRUST OR
MORTGAGE MAY BE ACCOMPLISHED BY ANY OF THE FOLLOWING: THE EXERCISE OF A POWER OF
SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL SALE UNDER THE DEED OF
TRUST OR MORTGAGE, OR BY JUDICIAL FORECLOSURE. NEITHER THIS EXERCISE OF SELF
HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
13.15 LIMITATION OF LIABILITY OF TRUSTEES, SHAREHOLDERS AND OFFICERS OF
BORROWER. ANY OBLIGATION OR LIABILITY WHATSOEVER OF BORROWER WHICH MAY ARISE AT
ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE
INCURRED BY BORROWER PURSUANT TO ANY OTHER INSTRUMENT, TRANSACTION, OR
UNDERTAKING CONTEMPLATED HEREBY SHALL BE SATISFIED OUT OF BORROWER'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
BORROWER'S TRUSTEES,
53
<PAGE>
SHAREHOLDERS, OFFICERS, EMPLOYEES OR AGENTS, REGARDLESS OF
WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT, OR
OTHERWISE.
13.16 ENTIRETY. THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS
(EACH AS AMENDED IN WRITING FROM TIME-TO-TIME) EXECUTED BY BORROWER, ANY LENDER,
OR ANY AGENT REPRESENT THE FINAL AGREEMENT AMONG BORROWER, LENDERS, AND AGENTS
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
13.17 AMENDMENT AND RESTATEMENT. This Agreement is in renewal,
amendment, modification, and restatement of the Third Restated Loan Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES TO FOLLOW]
54
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
PROLOGIS TRUST (FORMERLY KNOWN AS
SECURITY CAPITAL INDUSTRIAL TRUST),
a Maryland real estate investment trust,
as Borrower
By: /s/ Authorized Officer
---------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
NATIONSBANK, N.A.,
as Administrative Agent and a Lender
By: /s/ Authorized Officer
-----------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Documentation Agent and a Lender
By: /s/ Authorized Officer
---------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
COMMERZBANK AKTIENGESELLSCHAFT,
LOS ANGELES BRANCH, as Syndication Agent and a
Lender
By: /s/ Authorized Officer
----------------------------------
Name:
----------------------------
Title:
----------------------------
By: /s/ Authorized Officer
----------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
BANK OF AMERICA NT & SA, a national banking
association, as a Lender
By: /s/ Authorized Officer
----------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as a Lender
By: /s/ Authorized Officer
----------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH, as a Lender
By: /s/ Authorized Officer
---------------------------------
Name:____________________________
Title:___________________________
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
BANKBOSTON, N.A., as a Lender
By: /s/ Authorized Officer
---------------------------------
Name:____________________________
Title:___________________________
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
FLEET NATIONAL BANK, as a Lender
By: /s/ Authorized Officer
---------------------------------
Name:____________________________
Title:___________________________
<PAGE>
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT
EXECUTED BY PROLOGIS TRUST (FORMERLY KNOWN AS SECURITY CAPITAL INDUSTRIAL
TRUST),
NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT FOR THE LENDERS DEFINED THEREIN,
THE DOCUMENTATION AGENT DEFINED THEREIN, THE SYNDICATION AGENT DEFINED THEREIN,
AND THE LENDERS
UNION BANK OF CALIFORNIA, N.A., as a Lender
By: /s/ Authorized Officer
---------------------------------
Name:____________________________
Title:___________________________
<PAGE>
SCHEDULE 1
PARTIES, ADDRESSES, COMMITMENTS AND WIRING INFORMATION
================================================
BORROWER
================================================
ProLogis Trust
14100 East 35th Place
Aurora, Colorado 80011
Attn: Mr. Gordon Keiser, Jr.
Fax: (303) 576-2600
================================================
ADMINISTRATIVE AGENT
================================================
NationsBank, N.A.
901 Main Street, 51st Floor
Dallas, Texas 75283-1000
Attn: Mr. M. David Howard
Vice President
Fax: (214) 508-0085
Wiring Instructions:
NationsBank, N.A.
ABA No. 111000025
Acct.: 1292000883
Attn: Corporate Loans
Reference: ProLogis Trust
Re: Ms. Sheri Starbuck
================================================
DOCUMENTATION AGENT
================================================
Chase Bank of Texas National Association
717 Travis Street, 6th Floor North
Houston, Texas 77002
Attn: Mr. Kent Kaiser
Vice President
Fax: (713) 216-7713
Wiring Instructions:
Chase Bank of Texas, National Association
ABA # 113000609
Reference: ProLogis Trust
GL # 700113681/5800
Attention: Monica L. Goodrum
(713) 216-5379
================================================
SYNDICATION AGENT
================================================
Exhibits to Amended and Restated
Credit Agreement
Page 1
<PAGE>
================================================
Commerzbank Aktiengesellschaft
Los Angeles Branch
633 West 5th Street, Suite 6600
Los Angeles, California 90071
Attn: Mr. Steven Larsen
Fax: (213) 623-0039
With a copy to:
Commerzbank Aktiengesellschaft
New York Branch
2 World Financial Center
New York, New York 10281-1050
Attn: Mr. David Schwarz
Fax: (212) 266-7565
Wiring Instructions:
Commerzbank A.G. New York Branch
ABA # 026008044
Name of Account: Commerzbank AG, Los
Angeles Branch
Account No.: 123100479505
Reference: ProLogis Trust
================================================
Exhibits to Amended and Restated
Credit Agreement
Page 2
<PAGE>
<TABLE>
<CAPTION>
======================================================================================
Pro Rata Part of the
LENDERS Commitment Commitments
======================================================================================
<S> <C> <C>
NationsBank, N.A. $100,000,000 28.5714286%
901 Main Street, 51st Floor
P.O. Box 831000
Dallas, Texas 75283-1000
Attn: Mr. M. David Howard
Vice President
Fax: (214) 508-0085
Wiring Instructions:
NationsBank of Texas, N.A.
ABA No. 111000025
Acct.: 1292000883
Attn: Corporate Loans
Reference: ProLogis Trust
Re: Ms. Sheri Starbuck
======================================================================================
Chase Bank of Texas, National Association 50,000,000 14.2857143%
717 Travis Street, 6th Floor North
Houston, Texas 77002
Attn: Mr. Kent Kaiser
Vice President
Fax: (713) 216-7713
Wiring Instructions:
Chase Bank of Texas National Association
ABA # 113000609
Reference: ProLogis Trust
GL # 700113681/5800
Attention: Monica L. Goodrum
(713) 216-5379
======================================================================================
Exhibits to Amended and Restated
Credit Agreement
Page 3
<PAGE>
======================================================================================
Commerzbank Aktiengesellschaft 50,000,000 14.2857143%
Los Angeles Branch
633 West 5th Street, Suite 6600
Los Angeles, California 90071
Attn: Mr. Steven Larsen
Fax: (213) 623-0039
With a copy to:
Commerzbank Aktiengesellschaft
New York Branch
2 World Financial Center
New York, New York 10281-1050
Attn: Mr. David Schwarz
Fax: (212) 266-7565
Wiring Instructions:
Commerzbank A.G. New York Branch
ABA # 026008044
Name of Account: Commerzbank AG, Los
Angeles Branch
Account No.: 123100479505
Reference: ProLogis Trust
======================================================================================
Fleet National Bank 35,000,000 10.0000000%
111 Westminster Street RI MO 0215
Providence, Rhode Island 02903-2305
Attn: Mr. Mark Dalton
Vice President
Fax: (401) 278-5166
Wiring Instructions:
Fleet National Bank
ABA # 011900571
Reference: ProLogis Trust
Attention: Carol Rooney
Beneficiary: Commercial Loan Services Wire
A/C #1510351-03121
======================================================================================
Exhibits to Amended and Restated
Credit Agreement
Page 4
<PAGE>
======================================================================================
Bank of America NT & SA 35,000,000 10.0000000%
CRESG-National Accounts #1313
555 South Flower Street, 6th Floor
Los Angeles, California 90071
Attn: Ms. Mary Bowman
Fax: (213) 228-5389
Wiring Instructions:
Bank of America NT & SA
ABA # 121000358
Reference: ProLogis Trust
Loan # 9874877863
CLSSS # 1503
333 S. Beaudry Street, 26th Floor
Account No.: 15033-00401
Attention: Unit Rep. - ProLogis
======================================================================================
Union Bank of California, N.A. 25,000,000 7.1428571%
REIG
350 California Street, 7th Floor
San Francisco, California 94104
Attn: Ms. Michelle Guerrra
Vice President
Fax: (415) 433-7438
Wiring Instructions:
Union Bank, Monterey Park, CA
ABA # 122-000-496
Account # 070-196421
Account Name: Wire Transfer Clearing
Reference: ProLogis Trust
Attention: 192 Note Center
======================================================================================
Exhibits to Amended and Restated
Credit Agreement
Page 5
<PAGE>
======================================================================================
First Union National Bank of North Carolina 20,000,000 5.7142857%
One First Union Center
Charlotte, North Carolina 28288-0166
Attn: Mr. Dan Sullivan
Director
Fax: (704) 383-6205
Wiring Instructions:
First Union National Bank
ABA # 053-000-219
Acct. # 465906-0010352
Reference: ProLogis Trust
Attention: Christy Foster
======================================================================================
Dresdner Bank AG New York Branch and 20,000,000 5.7142857%
Grand Cayman Branch
75 Wall Street, 29th Floor
New York, New York 10005-2889
Attn: Mr. Johannes Boeckmann
Vice President
Fax: (212) 429-2781
Wiring Instructions:
Chase Manhattan Bank, New York
ABA No. 021 000 021
Dresdner Bank AG New York Branch
(T.I.N. 13-2722082)
Account No. 920 1 059 079
For further credit to: NYB ACC. NO.
107 591/15
Reference: ProLogis Trust
Attention: Lora M. Lamb
======================================================================================
Exhibits to Amended and Restated
Credit Agreement
Page 6
<PAGE>
======================================================================================
BankBoston, N.A. 15,000,000 4.2857143%
115 Perimeter Center Place N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Mr. Michael S. Doss
Fax: (770) 390-8434
Wiring Instructions:
First National Bank, Boston
ABA # 011-000-390
Reference: ProLogis Trust
041-5355-030000-34978
Attention: Keith Call - Commercial Loan
Services
======================================================================================
Total Commitments $350,000,000 100.00%
======================================================================================
</TABLE>
Exhibits to Amended and Restated
Credit Agreement
Page 7
<PAGE>
SCHEDULE 2
ADJUSTED LEVERAGE RATIO AS OF JUNE 30, 1998
Page 8
<PAGE>
SCHEDULE 5
CLOSING DOCUMENTS
1. Credit Agreement.
2. Notes.
3. Subsidiary Guaranties.
4. Pledge Agreements.
5. Administrative Agent's fee letter.
6. Commitment fee letter.
7. Opinion of Borrower's and the Subsidiary Guarantor's counsel acceptable to
Administrative Agent.
8. Officer's Certificate of Borrower certifying (a) its Constituent Documents,
(b) resolutions of its Board of Directors approving and authorizing the
execution, delivery, and performance of this Agreement and the other Loan
Documents, certified as being in full force and effect without modification
or amendment, (c) signatures and incumbency of its officers executing this
Agreement and the other Loan Documents, (d) that the representations and
warranties of Borrower contained in this Agreement and the other Loan
Documents are true and correct, and (e) that no event has occurred and is
continuing which constitutes a Potential Default or a Default.
9. Officer's Certificate of each Subsidiary Guarantor certifying (a) its
Constituent Documents, (b) resolutions of its Board of Directors approving
and authorizing the execution, delivery, and performance of the Loan
Documents to which it is a party, certified as being in full force and
effect without modification or amendment, and (c) signatures and incumbency
of its officers executing the Loan Documents to which it is a party, and
(d) that the representations and warranties of such Guarantor contained in
this Agreement and the other Loan Documents are true and correct.
10. Certificates of incorporation, formation, existence, and good standing for
Borrower and each Subsidiary Guarantor issued by the state of incorporation
or formation, and certificates of qualification and good standing for
Borrower and each Subsidiary Guarantor issued by each of the states wherein
Borrower and each Subsidiary Guarantor is qualified to do business as a
foreign trust, corporation, or entity.
11. A copy of the certificate of incorporation, declaration of trust, or other
similar Constituent Documents of Borrower and each Subsidiary Guarantor,
and all amendments thereto, certified by the state of incorporation,
formation, or organization.
12. Such other information as Administrative Agent shall reasonably request.
Page 9
<PAGE>
SCHEDULE 6.2
JURISDICTIONS OF INCORPORATION AND BUSINESS
CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
============================================================================================
COMPANY INCORPORATED/ QUALIFIED TO DO
FORMED BUSINESS
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ProLogis Trust 1/15/93 Maryland,
Arizona,
California,
Florida,
Kansas,
New Jersey,
Ohio,
Oregon,
Utah, Washington
- --------------------------------------------------------------------------------------------
SCI Limited Partnership I 12/20/93 Delaware,
California
- --------------------------------------------------------------------------------------------
SCI Limited Partnership II 1/11/94 Delaware,
California,
Colorado,
Missouri
North Carolina,
Texas,
Virginia
- --------------------------------------------------------------------------------------------
SCI Limited Partnership III 8/17/94 Delaware, Florida,
Texas,
Virginia
- --------------------------------------------------------------------------------------------
SCI Limited Partnership IV 8/18/94 Delaware, Florida,
Ohio,
Oklahoma,
Texas
- --------------------------------------------------------------------------------------------
SCI IV, Inc. 8/18/94 Delaware, Florida,
New Jersey,
Ohio,
Oklahoma,
Texas
- --------------------------------------------------------------------------------------------
SCI Houston Holdings, Inc. 2/4/94 Delaware,
Texas
- --------------------------------------------------------------------------------------------
Red Mountain Joint Venture 9/6/91 Texas,
New Mexico
- --------------------------------------------------------------------------------------------
Page 10
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================
COMPANY INCORPORATED/ QUALIFIED TO DO
FORMED BUSINESS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Security Capital Alabama Industrial Trust 3/25/94 Alabama
- ---------------------------------------------------------------------------------------------
ProLogis-Alabama (1) Incorporated 3/25/94 Maryland,
Alabama
- ---------------------------------------------------------------------------------------------
ProLogis-Alabama (2) Incorporated 3/25/94 Maryland
- ---------------------------------------------------------------------------------------------
ProLogis-North Carolina (1) Incorporated 3/25/94 Maryland,
Illinois,
Indiana,
North Carolina,
Tennessee
- ---------------------------------------------------------------------------------------------
ProLogis-North Carolina (2) Incorporated 3/29/94 Maryland
- ---------------------------------------------------------------------------------------------
SCI-North Carolina Limited Partnership 3/25/94 Delaware,
Illinois,
Indiana,
North Carolina,
Tennessee
- ---------------------------------------------------------------------------------------------
1440 Goodyear Partners 5/17/94 Texas
- ---------------------------------------------------------------------------------------------
</TABLE>
Page 11
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
COMPANY INCORPORATED/ QUALIFIED TO DO
FORMED BUSINESS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ProLogis Development Services Incorporated 8/23/94 Delaware,
Alabama,
Arizona,
California,
Colorado,
Florida,
Georgia,
Illinois,
Indiana,
Kansas,
Kentucky,
Maryland,
Michigan,
Missouri,
Nevada,
New Mexico,
North Carolina
Ohio,
Oklahoma,
Oregon,
Tennessee,
Texas,
Utah,
Virginia,
Washington
- ---------------------------------------------------------------------------------------------
SCI - DS Mexico Incorporated 10/3/96 Maryland
- ---------------------------------------------------------------------------------------------
SCI Mexico Industrial Trust 12/18/96 Maryland
- ---------------------------------------------------------------------------------------------
ProLogis de Mexico S.A. de C.V. 10/16/97 Mexico
- ---------------------------------------------------------------------------------------------
</TABLE>
Page 12
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
COMPANY INCORPORATED/ QUALIFIED TO DO
FORMED BUSINESS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ProLogis Management Incorporated 3/17/97 Delaware,
Arizona,
California,
Colorado,
Florida,
Georgia,
Illinois,
Indiana,
Kansas,
Kentucky,
Maryland,
Missouri,
Nevada,
New Jersey,
New Mexico,
North Carolina,
Ohio,
Oklahoma,
Oregon,
Tennessee,
Texas,
Utah,
Virginia,
Washington,
Washington D.C.
- ---------------------------------------------------------------------------------------------
SCI Kansas City (1) Incorporated 5/19/98 Delaware,
Missouri
- ---------------------------------------------------------------------------------------------
International Industrial Investments Incorporated 6/12/97 Delaware
- ---------------------------------------------------------------------------------------------
PLD International Incorporated 6/2/97 Delaware
=============================================================================================
</TABLE>
Page 13
<PAGE>
UNCONSOLIDATED AFFILIATES AND FOREIGN ENTITIES
<TABLE>
<CAPTION>
================================================================================
COMPANY INCORPORATED/ QUALIFIED TO
FORMED DO
BUSINESS
- --------------------------------------------------------------------------------
<S> <C> <C>
CS Integrated LLC 4/21/97 Alabama,
California,
Colorado,
Delaware,
Georgia,
Minnesota,
Missouri,
New Jersey,
New York,
Pennsylvania
- --------------------------------------------------------------------------------
CS Integrated Texas Limited Partnership 8/01/97 Delaware,
Texas
- --------------------------------------------------------------------------------
Enterprise Refrigerated Services LLC 6/25/97 Delaware
- --------------------------------------------------------------------------------
CS Integrated Investment Management LLC 7/13/97 Delaware,
New Jersey
- --------------------------------------------------------------------------------
CS Integrated Retail Services LLC 8/08/97 Delaware,
Indiana
- --------------------------------------------------------------------------------
PLD International Fund SCA 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
ProLogis, Sarl 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
ProLogis Netherlands, Sarl 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
ProLogis France, Sarl 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
ProLogis UK, Sarl 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
ProLogis Belgium, Sarl 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
ProLogis Spain, Sarl 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
ProLogis Poland, Sarl 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
ProLogis Italy, Sarl 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
Frigoscandia SA 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
Frigoscandia, Sarl 6/2/97 Luxembourg
- --------------------------------------------------------------------------------
Frigoscandia Holding AB 6/2/97 Sweden
- --------------------------------------------------------------------------------
Page 14
<PAGE>
================================================================================
COMPANY INCORPORATED/ QUALIFIED TO
FORMED DO
BUSINESS
- --------------------------------------------------------------------------------
<S> <C> <C>
Frigoscandia AB 6/2/97 Sweden
- --------------------------------------------------------------------------------
ProLogis Logistics Holdings LLC 4/22/97 Delaware
- --------------------------------------------------------------------------------
ProLogis Logistics Services Incorporated 4/21/97 Delaware,
Illinois
================================================================================
</TABLE>
Page 15
<PAGE>
SCHEDULE 6.7
LITIGATION
NONE
Page 16
<PAGE>
SCHEDULE 6.9
ENVIRONMENTAL MATTERS
NONE
Page 17
<PAGE>
SCHEDULE 6.12
CHIEF EXECUTIVE OFFICE
ProLogis Trust
14100 E. 35th Place
Aurora, Colorado 80011
Phone: (303) 375-9292
Page 18
<PAGE>
SCHEDULE 6.14
AFFILIATE TRANSACTIONS
1. Third Amended and Restated Investor Agreement, dated as of September 9,
1997, between Borrower and Security Capital Group.
2. Administrative Services Agreement, dated as of September 9, 1997, between
Borrower and Security Capital Group.
3. Inter-company loans, advances, transactions otherwise permitted in this
Agreement.
Page 19
<PAGE>
SCHEDULE 6.22
MINORITY INTERESTS
1. SCI Limited Partnership-I
2. SCI Limited Partnership-II
3. SCI Limited Partnership-III
4. SCI Limited Partnership-IV
5. Red Mountain Joint Venture
Page 20
<PAGE>
SCHEDULE 7.17-1
EXCLUDED GUARANTORS
1. SCI Limited Partnership IV
2. ProLogis Development Services Incorporated ("PDSI")
. SCI - DS Mexico Incorporated, a wholly-owned subsidiary of PDSI
. ProLogis de Mexico S.A. de C.V., a wholly-owned subsidiary of PDSI
3. SCI IV, Inc.
Page 21
<PAGE>
SCHEDULE 7.17-2
EXISTING PLEDGED INDEBTEDNESS
Intercompany Loans O/S between ProLogis Trust and Frigoscandia
as of June 30, 1998
. ProLogis Trust & Frigoscandia Holding $ 182,948,334 (1)
. ProLogis Trust & Frigoscandia's UK
Subsidiary $ 30,000,000 (1)
--------------------
$ 212,948,334
====================
Intercompany Loans between ProLogis Trust and ProLogis
Logistics Services Incorporated as of June 30, 1998
. ProLogis Trust & ProLogis Logistics Services $ 140,973,469 (2)
---------------------
TOTAL $ 353,921,803
=====================
(1) Note amount above does not include accrued interest of $3,646,039 and
$525,000, respectively.
(2) Note amount above does not include accrued interest of $7,027,431.
Page 22
<PAGE>
SCHEDULE 8.6
PERMITTED MINORITY INTERESTS
1. SCI Limited Partnership-I
2. SCI Limited Partnership-II
3. SCI Limited Partnership-III
4. SCI Limited Partnership-IV
Page 23
<PAGE>
EXHIBIT A-1
REVOLVING CREDIT NOTE
$________ Dallas, Texas As of August 11, 1998
1. FOR VALUE RECEIVED, PROLOGIS TRUST, a Maryland real estate investment
trust (formerly known as Security Capital Industrial Trust) ("MAKER"), hereby
unconditionally promises to pay to the order of ________________ ("PAYEE"), at
the address of Administrative Agent (defined below) set forth in the Credit
Agreement defined below, the sum of ______ Dollars ($____) (or, if less, so much
thereof as may be advanced), in lawful money of the United States of America.
Capitalized terms not defined herein shall have the meaning assigned to those
terms in the Credit Agreement defined below.
2. The unpaid principal amount of, and accrued unpaid interest on, this
Note is payable in accordance with the Credit Agreement (as defined in SECTION 5
below).
3. The unpaid principal balance advanced and outstanding hereunder shall
bear interest from the date of advance until maturity at the rate per annum
provided in the Credit Agreement that is selected by Maker pursuant to the
Credit Agreement. The interest rate specified in this section is subject to
adjustment under the circumstances described in the Credit Agreement. Interest
shall be computed in the manner provided in the Credit Agreement.
4. Notwithstanding any provision contained in this Note or any other
document executed or delivered in connection with this Note or in connection
with the Credit Agreement, Payee shall never be deemed to have contracted for or
be entitled to receive, collect or apply as interest on this Note, any amount in
excess of the maximum rate of interest permitted to be charged by applicable
law, and, if Payee ever receives, collects or applies as interest any such
excess, then the amount that would be excessive interest shall be applied to
reduce the unpaid principal balance of this Note, and, if the principal balance
of this Note is paid in full by that application, then any remaining excess
shall promptly be paid to Maker. In determining whether the interest paid or
payable under any specific contingency exceeds the highest lawful rate, Maker
and Payee shall, to the maximum extent permitted under applicable law, (a)
characterize any non-principal payment (other than payments expressly designated
as interest payments hereunder) as an expense or fee rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) spread the
total amount of interest throughout the entire contemplated term of this Note so
that the interest rate is uniform throughout that term.
5. This Note has been executed and delivered pursuant to an Amended and
Restated Credit Agreement (as amended, modified or restated from time to time,
the "CREDIT AGREEMENT") dated as of August 11, 1998, executed by and between
Maker, NationsBank, N.A., as Administrative Agent ("ADMINISTRATIVE AGENT"), the
Documentation Agent defined therein, the Syndication Agent defined therein, and
the Lenders defined therein, and is one of the "Revolving Credit Notes" referred
to therein, and the holder of this Note is entitled to the benefits provided in
the Credit Agreement. Reference is hereby made to the Credit Agreement for a
statement of (a) the obligation of Payee to advance funds hereunder, (b) the
prepayment rights and obligations of Maker, and (c) the events upon which the
maturity of this Note may be accelerated.
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6. If the principal of, or any installment of interest on, this Note
becomes due and payable on a day other than a Business Day, then the maturity
thereof shall be extended to the next succeeding Business Day. If this Note, or
any installment or payment due hereunder, is not paid when due, whether at
maturity or by acceleration, or if it is collected through a bankruptcy, probate
or other court, whether before or after maturity, then Maker shall pay all costs
of collection, including, but not limited to, attorney's fees incurred by the
holder of this Note. All past due principal of, and to the extent permitted by
applicable law, interest on this Note shall bear interest until paid at the rate
provided in the Credit Agreement.
7. Maker and all sureties, endorsers, guarantors, and other parties ever
liable for payment of any sums payable pursuant to the terms of this Note,
jointly and severally waive demand, presentment for payment, protest, notice of
protest, notice of acceleration, notice of intent to accelerate, diligence in
collection, the bringing of any suit against any party, and any notice of or
defense on account of any extensions, renewals, partial payments, or changes in
any manner of or in this Note or in any of its terms, provisions, and covenants,
or any releases or substitutions of any security, or any delay, indulgence, or
other act of any trustee or any holder hereof, whether before or after maturity.
8. All Borrowings made by Payee, the respective Interest Periods thereof
(if applicable), and all repayments of the principal thereof may be recorded by
Payee and, before any transfer hereof, endorsed by Payee on the schedule
attached hereto, or on a continuation of the schedule attached to and a part
hereof, provided that the failure of Payee to record any endorsement shall not
affect the obligation of Maker hereunder or under the Credit Agreement.
9. This Note is being executed and delivered, and is intended to be
performed in the State of Texas. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall govern the validity, construction, enforcement, and
interpretation of this Note.
10. This Note is in renewal, extension, modification, and amendment of
that certain Revolving Credit Note dated as of _________, executed by Maker and
payable to the order of Payee in the original principal amount of $___________.
PROLOGIS TRUST, a Maryland real estate investment
trust (formerly known as Security Capital
Industrial Trust)
By: _________________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
EXHIBIT A-2
COMPETITIVE BID NOTE
$_________ Dallas, Texas As of August 11, 1998
1. FOR VALUE RECEIVED, PROLOGIS TRUST, a Maryland real estate investment
trust (formerly known as Security Capital Industrial Trust) ("MAKER"), hereby
unconditionally promises to pay to the order of ___________ ("PAYEE"), at
the address of Administrative Agent (defined below) set forth in the Credit
Agreement defined below:
(A) On the last day of the Interest Period for any Competitive Borrowing
dispersed by Lender to Borrower, which Interest Period ends prior to the
Termination Date, the aggregate principal amount of such Competitive Borrowing
outstanding and unpaid on such last day of such Interest Period; and
(B) On the Termination Date, the aggregate principal amount of all
Competitive Borrowings disbursed by Lender to Borrower and outstanding and
unpaid on the Termination Date.
2. The unpaid principal balance advanced and outstanding hereunder shall
bear interest from the date of advance until maturity at the rate per annum
provided in the Credit Agreement that is selected by Maker pursuant to the
Credit Agreement. The interest rate specified in this section is subject to
adjustment under the circumstances described in the Credit Agreement. Interest
shall be computed in the manner provided in the Credit Agreement.
3. Notwithstanding any provision contained in this Note or any other
document executed or delivered in connection with this Note or in connection
with the Credit Agreement, Payee shall never be deemed to have contracted for or
be entitled to receive, collect or apply as interest on this Note, any amount in
excess of the maximum rate of interest permitted to be charged by applicable
law, and, if Payee ever receives, collects or applies as interest any such
excess, then the amount that would be excessive interest shall be applied to
reduce the unpaid principal balance of this Note, and, if the principal balance
of this Note is paid in full by that application, then any remaining excess
shall promptly be paid to Maker. In determining whether the interest paid or
payable under any specific contingency exceeds the highest lawful rate, Maker
and Payee shall, to the maximum extent permitted under applicable law, (a)
characterize any non-principal payment (other than payments expressly designated
as interest payments hereunder) as an expense or fee rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) spread the
total amount of interest throughout the entire contemplated term of this Note so
that the interest rate is uniform throughout that term.
4. This Note has been executed and delivered pursuant to an Amended and
Restated Credit Agreement (as amended, modified or restated from time to time,
the "CREDIT AGREEMENT") dated as of August 11, 1998, executed by and between
Maker, NationsBank, N.A., as Administrative Agent ("ADMINISTRATIVE AGENT"), the
Documentation Agent defined therein, the Syndication Agent defined therein, and
the Lenders defined therein, and is one of the "Competitive Bid Notes" referred
to therein, and the holder of this Note is entitled to the benefits provided in
the Credit Agreement. Reference is hereby made to the Credit Agreement for a
statement of (a) the prepayment rights and obligations of Maker, and (b) the
events upon which the maturity of this Note may be accelerated.
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<PAGE>
5. If the principal of, or any installment of interest on, this Note
becomes due and payable on a day other than a Business Day, then the maturity
thereof shall be extended to the next succeeding Business Day. If this Note, or
any installment or payment due hereunder, is not paid when due, whether at
maturity or by acceleration, or if it is collected through a bankruptcy, probate
or other court, whether before or after maturity, then Maker shall pay all costs
of collection, including, but not limited to, attorney's fees incurred by the
holder of this Note. All past due principal of, and to the extent permitted by
applicable law, interest on this Note shall bear interest until paid at the rate
provided in the Credit Agreement.
6. Maker and all sureties, endorsers, guarantors, and other parties ever
liable for payment of any sums payable pursuant to the terms of this Note,
jointly and severally waive demand, presentment for payment, protest, notice of
protest, notice of acceleration, notice of intent to accelerate, diligence in
collection, the bringing of any suit against any party, and any notice of or
defense on account of any extensions, renewals, partial payments, or changes in
any manner of or in this Note or in any of its terms, provisions, and covenants,
or any releases or substitutions of any security, or any delay, indulgence, or
other act of any trustee or any holder hereof, whether before or after maturity.
7. This Note is being executed and delivered, and is intended to be
performed in the State of Texas. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall govern the validity, construction, enforcement, and
interpretation of this Note.
PROLOGIS TRUST, a Maryland real estate investment trust
(formerly known as Security Capital Industrial Trust)
By: __________________________________________________
Name:_____________________________________________
Title:____________________________________________
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<PAGE>
EXHIBIT B-1
BORROWING REQUEST
1. SUBMISSION PURSUANT TO CREDIT AGREEMENT. This Borrowing Request is
executed and delivered by ProLogis Trust, a Maryland real estate investment
trust ("BORROWER"), to NationsBank, N.A., as Administrative Agent
("ADMINISTRATIVE AGENT"), pursuant to SECTION 2.2 of the Amended and Restated
Credit Agreement dated as of August 11, 1998, between Borrower, Administrative
Agent, the Documentation Agent defined therein, the Syndication Agent defined
therein, and the Lenders defined therein (the "CREDIT AGREEMENT"). Any
capitalized terms used and not defined herein shall have the meanings assigned
to them in the Credit Agreement.
2. REQUEST FOR BORROWING. Borrower hereby requests that Lenders make a
Borrowing to Borrower pursuant to the Credit Agreement as follows:
A. BASE RATE BORROWING.
-------------------
(i) Amount of Base Rate Borrowing: _________(Minimum of
$1,000,000, or to the nearest $100,000 increment in excess
thereof).
[_] Borrowing
[_] Rollover/Conversion
(ii) Date of Borrowing or Rollover/Conversion of Existing Borrowing:
____________
B. EURODOLLAR BORROWING.
--------------------
(i) Amount of Eurodollar Borrowing: _____________
(Minimum of $1,000,000, or to the nearest $100,000 increment in
excess thereof).
[_] Borrowing
[_] Rollover/Conversion
(ii) Date of Borrowing or Rollover/Conversion of Existing Borrowing:
____________
(iii) Eurodollar Interest Period:___________________day/months (7,
14, or 21 days or one, two, three, or six months).
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<PAGE>
C. SWING LINE LOAN.
---------------
(i) Amount of Swing Line Loan:_____________________(Minimum of
$1,000,000 or to the nearest $100,000 increment in excess
thereof)
(ii) Date of Borrowing: ____________________
3. REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS. Borrower hereby
represents, warrants, and certifies to Administrative Agent and Lenders that, as
of the date of the Borrowing requested herein:
(A) There exists no Default or Potential Default.
(B) Borrower has performed and complied with all agreements and conditions
contained in the Credit Agreement that are required to be performed or
complied with by Borrower.
(C) The representations and warranties of a continuing nature contained in
the Credit Agreement and each of the other Loan Documents are true and
correct in all material respects, with the same force and effect as
though made on and as of the date of the Borrowing.
4. PROCEEDS OF BORROWING. Administrative Agent is authorized to deposit
the proceeds of the Borrowing requested hereby, other than a Borrowing
constituting a rollover or conversion of an existing Borrowing, to:_____________
5. RATING. As of the date hereof, Borrower's (a) Moody's Rating is
____________, (b) S & P Rating is ________________, and (c) DCR Rating is
_________________.
6. EXECUTION AUTHORIZED. This Borrowing Request is executed on
___________________, 19___, by a Responsible Officer. The undersigned, in such
capacity, hereby certifies each and every matter contained herein to be true and
correct.
____________________________________
__________
____________________________________ of
ProLogis Trust, a Maryland real estate
investment trust
Page 29
<PAGE>
THE STATE OF __________ (S)
(S)
COUNTY OF ______________ (S)
This instrument was acknowledged before me on this ____ day of
____________, 199__, by ______________________________________, of
PROLOGIS TRUST, a Maryland real estate investment trust, on behalf of said real
estate investment trust.
__________________________________________
Notary Public Signature
(PERSONALIZED SEAL)
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<PAGE>
EXHIBIT B-2
FORM OF COMPETITIVE BID REQUEST
______________ __, ____
NationsBank, N.A., as Administrative Agent
NationsBank Plaza
901 Main Street, 51st Floor
Dallas, Texas 75202
Attn: Real Estate Administration
Reference is made to the Amended and Restated Credit Agreement, dated as of
August 11, 1998, among the undersigned, NationsBank, N.A., as Administrative
Agent, the Documentation Agent defined therein, the Syndication Agent defined
therein, and the Lenders defined therein (as amended, modified, supplemented, or
restated from time to time, "CREDIT AGREEMENT"). Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned to such terms
in the Credit Agreement. The undersigned hereby gives you notice pursuant to
SECTION 2.5(B) of the Credit Agreement that it requests a Competitive Borrowing,
and in that connection sets forth below the terms on which such Competitive
Borrowing is requested to be made:
(A) Borrowing Date of Competitive Borrowing* (A) ________
(B)Principal amount of Competitive Borrowing** (B) ________
(C)Type of Borrowing*** (C) ________
(D) Interest Period and the last day thereof**** (D) ________
Accompanying this notice is payment of the competitive bid fee payable to
Administrative Agent for its own account pursuant to SECTION 4.6 of the Credit
Agreement.
Borrower hereby represents, warrants, and certifies to Administrative Agent
and Lenders that, as of the date of the Borrowing requested herein:
(A) There exists no Default or Potential Default.
(B) Borrower has performed and complied with all agreements and conditions
contained in the Credit Agreement that are required to be performed or
complied with by Borrower.
(C) The representations and warranties of a continuing nature contained in
the Credit Agreement and each of the other Loan Documents are true and
correct in all material respects, with the same force and effect as
though made on and as of the date of the Borrowing.
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<PAGE>
___________________________________
________________________________ of
ProLogis Trust, a Maryland real
estate investment trust
THE STATE OF __________ (S)
(S)
COUNTY OF ______________ (S)
This instrument was acknowledged before me on this ____ day of
____________, 199__, by ______________________________________, of
PROLOGIS TRUST, a Maryland real estate investment trust, on behalf of said real
estate investment trust.
___________________________________
Notary Public Signature
(PERSONALIZED SEAL)
* Must be a Business Day occurring prior to the Termination Date and be at
least (i) five (5) Business Days following receipt by Administrative Agent
of this Competitive Bid Request for any Competitive Borrowing that will be
comprised of Eurodollar Borrowings, and (ii) one (1) Business Day following
receipt by Administrative Agent of this Competitive Bid Request for any
Competitive Borrowing that will be comprised of Fixed Rate Borrowings.
** Not less than $10,000,000 (and in integral multiples of $1,000,000
thereafter), and not greater than the lesser of (i) the unused and
available portion of the Total Commitment, and (ii) an amount which, when
added to the aggregate outstanding principal amount of Competitive
Borrowings made by all Lenders under the Credit Agreement, does not exceed
$100,000,000.
*** Eurodollar Borrowing or Fixed Rate Borrowing.
**** Eurodollar Borrowing -- 1, 2, 3 or 6 months.
Fixed Rate Borrowing -- up to 6 months.
In no event may the Interest Period end after the Termination Date.
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<PAGE>
EXHIBIT C
COMPLIANCE CERTIFICATE
Under Amended and Restated Credit Agreement dated as of August 11, 1998,
between ProLogis Trust,
NationsBank, N.A., as Administrative Agent, and
the Lenders defined therein (the "CREDIT AGREEMENT")
PROLOGIS TRUST
The undersigned, as_____________of ProLogis Trust, a Maryland real estate
investment trust ("BORROWER"), pursuant to SECTION 7.1 of the Credit Agreement,
hereby, certifies to NationsBank, N.A., as Administrative Agent as follows:
1. A review of the activities of Borrower during the most recently ended
fiscal quarter of Borrower has been made under my supervision.
2. As of the date hereof, all of the representations and warranties of
Borrower contained in the Credit Agreement and each of the Loan Documents (as
defined in the Credit Agreement) are true and correct.
3. No event has occurred and is continuing which constitutes a Default or
a Potential Default.
4. The following covenant computations, together with the supporting
scheduled attached hereto, are true and correct:
A. TANGIBLE NET WORTH.
Actual: $______________
Required Minimum: $1,500,000,000
B. LEVERAGE RATIO (BORROWER AND CONSOLIDATED AFFILIATES).
Actual:
Total Indebtedness $_________ (1)
Tangible Net Worth $_________ (2)
Ratio of (1) to (2): _________
Required Maximum: 1.0 to 1.0
C. ADJUSTED LEVERAGE RATIO (BORROWER, CONSOLIDATED AFFILIATES, AND
UNCONSOLIDATED AFFILIATES).
Actual:
Total Indebtedness $________ (1)
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<PAGE>
Tangible Net Worth $________ (2)
Ratio of (1) to (2): _________
Required Maximum: 1.0 to 1.0
D. INTEREST EXPENSE COVERAGE RATIO.
Funds from Operations
Plus Interest Expense $________ (1)
Interest Expense _________ (2)
Plus Distributions with
respect to Disqualified
Stock _________ (3)
Subtotal (1) + (2) _________ (4)
Ratio of (1) to (4): _________
Required Minimum: 2.0 to 1.0
E. FIXED CHARGE COVERAGE RATIO.
Funds from Operations $________
Plus (a) Interest Expense_________
Minus (b) Capital Expenditures
_________
Subtotal _________ (1)
Interest Expense _________
Plus Scheduled principal _________
payments in respect of
Total Indebtedness _________
Subtotal _________ (2)
Ratio of (1) to (2): _________
Required Minimum: 1.75 to 1.0
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<PAGE>
F. INVESTMENTS. PERCENT OF
AMOUNT TOTAL ASSETS
------ ------------
Investments in raw land $__________ ____________%
Investments in Non-Industrial
Properties and New Ventures ___________ ____________%
Investments in Unconsolidated
Affiliates ___________ ____________%
Investments in Unconsolidated
Affiliates whose primary business
is not ownership of industrial
distribution properties ___________ ____________%
Investments in Consolidated
Affiliates ___________ ____________%
Investments in ProLogis Services-
Debt ___________ ____________%
Investments in ProLogis Services-
Equity ___________ ____________%
Investments in ProLogis Services -
All ___________ ____________%
Investments in Preferred Stock
Subsidiaries (other than ProLogis Services,
SCI Logistics, CS Integrated, LLC, and
Frigoscandia SA) ___________ ____________%
Investments in the Stock of any
Person (other than Consolidated Affiliates
and Unconsolidated Affiliates) ___________ ____________%
Investments in Loans to Affiliates ___________ ____________%
Investments in Properties outside
the U.S., foreign Affiliates, etc. ___________ ____________%
Investments in Refrigerated
Warehouse Properties ___________ ____________%
Total Assets $___________
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<PAGE>
G. DISTRIBUTIONS
Funds from Operations $___________ (1)
Distributions $___________ (2)
Percent (2) / (1) ___________
H. POOL.
Amount $___________
175% of Unsecured Total
Indebtedness $___________
I. SUB-POOL.
Amount $___________
150% of Unsecured Total
Indebtedness $___________
J. DEBT TO TOTAL ASSET VALUE.
Total Indebtedness $___________ (1)
Total Asset Value:
NOI from
Stabilized Properties $___________ (a)
8.75% (b)
Asset Value (a) / (b): $___________
Other Assets $___________
Total Asset Value $___________ (2)
Ratio of (1) to (2):
Required Maximum: .50 to 1.0/*/
Date:_______________
______________________________
/*/ Applicable only after the Conversion Date.
Page 36
<PAGE>
_______________________________________________________
___________________________________________________ of
ProLogis Trust, a Maryland real estate investment trust
Page 37
<PAGE>
EXHIBIT D
FORM OF ASSIGNMENT AND ACCEPTANCE
This Assignment and Acceptance (the "ASSIGNMENT AND ACCEPTANCE") is made as
of _________, 199_ (the "EFFECTIVE DATE"), between ____________ (the "ASSIGNOR")
_____________ and (the "ASSIGNEE").
Reference is made to that certain Amended and Restated Credit Agreement
dated as of August 11, 1998 (the "CREDIT AGREEMENT") among ProLogis Trust, a
Maryland real estate investment trust ("BORROWER"), NationsBank, N.A., a
national banking association, individually and as agent for the Lenders defined
therein (collectively, "LENDERS"), and Lenders. This Assignment and Acceptance
is executed and delivered pursuant to, and as contemplated in, the Credit
Agreement. Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
The Assignor and the Assignee hereby covenant and agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, $____ of the Assignor's
Commitment and Principal Debt, representing a Pro Rata Part of the Total
Commitment of ____% as of the Effective Date. The foregoing interest for all
events and circumstances shall be deemed such Assignee's Pro Rata Part (in
addition to any other Pro Rata Part of Assignee, if any) in the Total
Commitment, the Total Principal Debt, the Loan Documents and all payments made
to or received from Borrower pursuant to the Loan Documents and is subject to
the terms and conditions provided in the Loan Documents.
2. The Assignor (a) hereby represents and warrants to the Assignee that
Assignor is the legal and beneficial owner of the Pro Rata Part being assigned
by it hereunder and such interest is free and clear of any adverse claim, and
(b) hereby represents and warrants that as of the date hereof the Pro Rata Part
in the Total Commitment and the Total Principal Debt being assigned hereunder is
______% without giving effect to assignments that are not yet effective.
3. The Assignee hereby confirms and acknowledges that, except as
specifically set forth herein, the Assignor: (a) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents,
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (b) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower or any other
person or entity which is a party to any of the Loan Documents (collectively,
"OTHER PARTY"); and (c) makes no representation or warranty and assumes no
responsibility with respect to the performance or observance by Borrower or any
Other Party of any of its obligations under any of the Loan Documents or any
other instrument or document furnished pursuant thereto.
4. The Assignee hereby: (a) confirms that it has received a copy of the
Loan Documents, together with such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor or any other counter-party and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents.
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<PAGE>
5. The Assignee hereby: (a) appoints and authorizes Administrative Agent
under the Loan Documents to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to Administrative
Agent by the terms of the Loan Documents; and (b) agrees with the Assignor for
the benefit of Administrative Agent and Borrower that it will perform all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a counter-party (including, without limitation, the
obligation to make payments pursuant to the Loan Documents) and that it shall be
liable directly to the Assignor, Administrative Agent, Borrower and, as provided
in the Credit Agreement, to each Lender for the performance of such obligations.
6. If the Assignee is organized under the laws of a jurisdiction outside
the United States, it hereby represents and agrees that it has delivered or will
within three (3) days after the date of the execution of this Agreement deliver
to the Assignor and Administrative Agent completed and signed copies of any
forms that may be required by the United States Internal Revenue Service in
order to certify the Assignee's exemption from United States withholding taxes
with respect to any payment or distributions made or to be made to the Assignee
with respect to the Loan Documents.
7. As of the Effective Date, (a) the Assignee shall be a party to the
Loan Documents and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a counter-party thereunder, and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations in the Loan Documents
with respect to the Pro Rata Part being assigned hereunder.
8. The Assignee hereby represents and warrants as of the Effective Date:
(a) The Assignee has all necessary corporate power and authority to
purchase and own the interest being assigned to it hereunder, and has all
necessary corporate power and authority to perform all its obligations with
respect to this Assignment and Acceptance;
(b) The execution and delivery of this Assignment and Acceptance and all
other instruments and documents executed in connection herewith have been duly
authorized by all requisite corporate action of the Assignee; and
(c) No approval, authorization, order, license or consent of, or
registration or filing with, any governmental authority or other person is
required in connection with this Assignment and Acceptance.
9. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Texas, without giving effect to the
conflict of laws principles thereof.
10. This Agreement may be executed in two or more counterparts each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
11. Assignee's address for notices and payments under the Agreement and
this Assignment and Acceptance are set forth in SCHEDULE 1 attached hereto and
made a part hereof. Assignee may by notice in
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<PAGE>
accordance with the Credit Agreement to the Assignor, Administrative Agent and
Borrower change the address or telex number or facsimile number at which
notices, communications and payments are to be given to it.
ASSIGNOR:
______________________________________
By: _________________________________
Name:____________________________
Title:___________________________
ASSIGNEE:
______________________________________
By: _________________________________
Name:____________________________
Title:___________________________
ACCEPTED BY ADMINISTRATIVE AGENT THIS ____ DAY OF __________
ADMINISTRATIVE AGENT:
_____________________________________
By: ________________________________
Name:___________________________
Title:__________________________
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<PAGE>
SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE
ADDRESS FOR NOTICES AND ACCOUNTS FOR PAYMENTS
Address: ____________________________
____________________________
____________________________
Telecopier:_________________
ACCOUNT FOR PAYMENTS
- --------------------
Account No.: ____________________________
Attention: ____________________________
____________________________
Reference: ____________________________
Depository: ____________________________
____________________________
____________________________
Page 41
<PAGE>
EXHIBIT E
SWING LINE NOTE
$50,000,000 Dallas, Texas As of August 11, 1998
1. FOR VALUE RECEIVED, PROLOGIS TRUST, a Maryland real estate investment
trust (formerly known as Security Capital Industrial Trust) ("MAKER"), hereby
unconditionally promises to pay to the order of NATIONSBANK, N.A. ("PAYEE"), at
the address of Administrative Agent (defined below) set forth in the Credit
Agreement defined below, the sum of FIFTY MILLION AND 00/100 DOLLARS
($50,000,000) (or, if less, so much thereof as may be advanced), in lawful money
of the United States of America. Capitalized terms not defined herein shall
have the meaning assigned to those terms in the Credit Agreement defined below.
2. The unpaid principal amount of, and accrued unpaid interest on, this
Note is payable in accordance with the Credit Agreement (defined in SECTION 5
below).
3. The unpaid principal balance advanced and outstanding hereunder shall
bear interest from the date of advance until maturity at the rate per annum
provided in the Credit Agreement that is selected by Maker pursuant to the
Credit Agreement. The interest rate specified in this section is subject to
adjustment under the circumstances described in the Credit Agreement. Interest
shall be computed in the manner provided in the Credit Agreement.
4. Notwithstanding any provision contained in this Note or any other
document executed or delivered in connection with this Note or in connection
with the Credit Agreement, Payee shall never be deemed to have contracted for or
be entitled to receive, collect or apply as interest on this Note, any amount in
excess of the maximum rate of interest permitted to be charged by applicable
law, and, if Payee ever receives, collects or applies as interest any such
excess, then the amount that would be excessive interest shall be applied to
reduce the unpaid principal balance of this Note, and, if the principal balance
of this Note is paid in full by that application, then any remaining excess
shall promptly be paid to Maker. In determining whether the interest paid or
payable under any specific contingency exceeds the highest lawful rate, Maker
and Payee shall, to the maximum extent permitted under applicable law, (a)
characterize any non-principal payment (other than payments expressly designated
as interest payments hereunder) as an expense or fee rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) spread the
total amount of interest throughout the entire contemplated term of this Note so
that the interest rate is uniform throughout that term.
5. This Note has been executed and delivered pursuant to an Amended and
Restated Credit Agreement (as amended, modified or restated from time to time,
the "CREDIT AGREEMENT") dated as of August 11, 1998, executed by and between
Maker, NationsBank, N.A., as Administrative Agent ("ADMINISTRATIVE AGENT"),
Payee, the Documentation Agent defined therein, the Syndication Agent defined
therein, and the Lenders defined therein, and is the "Swing Line Note" referred
to therein, and the holder of this Note is entitled to the benefits provided in
the Credit Agreement. Reference is hereby made to the Credit Agreement for a
statement of (a) the obligation of Payee to advance funds hereunder, (b) the
prepayment rights and obligations of Maker, and (c) the events upon which the
maturity of this Note may be accelerated.
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6. If the principal of, or any installment of interest on, this Note
becomes due and payable on a day other than a Business Day, then the maturity
thereof shall be extended to the next succeeding Business Day. If this Note, or
any installment or payment due hereunder, is not paid when due, whether at
maturity or by acceleration, or if it is collected through a bankruptcy, probate
or other court, whether before or after maturity, then Maker shall pay all costs
of collection, including, but not limited to, attorney's fees incurred by the
holder of this Note. All past due principal of, and to the extent permitted by
applicable law, interest on this Note shall bear interest until paid at the rate
provided in the Credit Agreement.
7. Maker and all sureties, endorsers, guarantors, and other parties ever
liable for payment of any sums payable pursuant to the terms of this Note,
jointly and severally waive demand, presentment for payment, protest, notice of
protest, notice of acceleration, notice of intent to accelerate, diligence in
collection, the bringing of any suit against any party, and any notice of or
defense on account of any extensions, renewals, partial payments, or changes in
any manner of or in this Note or in any of its terms, provisions, and covenants,
or any releases or substitutions of any security, or any delay, indulgence or
other act of any trustee or any holder hereof, whether before or after maturity.
8. This Note is being executed and delivered, and is intended to be
performed in the State of Texas. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall govern the validity, construction, enforcement, and
interpretation of this Note.
PROLOGIS TRUST, a Maryland real estate
investment trust (formerly known as Security
Capital Industrial Trust)
By: ______________________________________
Name:_________________________________
Title:________________________________
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EXHIBIT F
FORM OF COMPETITIVE BID
_____________, ____
NationsBank, N.A.
NationsBank Plaza, 51st Floor
901 Main Street
Dallas, TX 75202
Attn: Real Estate Administration
The undersigned, [Name of Lender] , refers to the Amended and
------------------------
Restated Credit Agreement dated as of August 11, 1998 (as amended, modified,
supplemented, or restated from time to time, "CREDIT AGREEMENT"), among ProLogis
Trust, a Maryland real estate investment trust ("BORROWER"), NationsBank, N.A.,
a national banking association, as Administrative Agent, the Documentation Agent
defined therein, the Syndication Agent defined therein, and the Lenders defined
therein. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in Credit Agreement. The undersigned
hereby makes a Competitive Bid pursuant to SECTION 2.5(C) of the Facility A, in
response to the Competitive Bid Request made by Borrower on
____________________, ________, and in that connection sets forth below the
terms on which such Competitive Bid is made:
-----------------
(A) Principal amount* (A) ___________
(B)Competitive Bid Rate** (B) ___________
(C)Interest Period and the last day thereof*** (C) ___________
-----------------
The undersigned hereby confirms that it is prepared to extend credit to
Borrower upon acceptance by Borrower of this bid in accordance with SECTION
2.5(E) of the Credit Agreement.
Sincerely,
[NAME OF LENDER]
By: ____________________________________
Name:_______________________________
Title:______________________________
* Not less than $5,000,000 (and in integral multiples of $1,000,000
thereafter) and which may equal the entire principal amount of the
Competitive Borrowing requested by Borrower and which may exceed such
Lender's Commitment under the Credit Agreement (subject to the
limitations set forth in SECTION 2.5(A) of the Credit Agreement).
Multiple bids will be accepted by Administrative Agent.
** Eurodollar Rate + ____________ % or - ____________%, in the case of
Eurodollar Borrowings; or ________%, in the case of Fixed Rate
Borrowings (in each case, expressed in the form of a decimal to no
more than four decimal places).
*** The Interest Period must be the Interest Period specified in the
Competitive Bid Request.
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EXHIBIT G
FORM OF SUBSIDIARY GUARANTY
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT is executed as of August 11, 1998, by each of the
Consolidated Affiliates of PROLOGIS TRUST (formerly known as SECURITY CAPITAL
INDUSTRIAL TRUST), a Maryland real estate investment trust ("BORROWER"), listed
on SCHEDULE 1 attached hereto or who became a party hereto pursuant to SECTION
5.11 below (each a "GUARANTOR" and, collectively, the "GUARANTORS") for the
benefit of the Credit Parties defined below.
R E C I T A L S:
- - - - - - - -
1. Borrower may from time to time be indebted to the Credit Parties
pursuant to that certain Credit Agreement dated of even date herewith (herein
referred to, together with all amendments, modifications, restatements, or
supplements thereof, as the "CREDIT AGREEMENT"), by and between Borrower,
NationsBank, N.A., a national banking association ("ADMINISTRATIVE AGENT"), as
Administrative Agent, the Documentation Agent defined therein, the Syndication
Agent defined therein, and the Lenders defined therein (Administrative Agent,
Documentation Agent, Syndication Agent, and the Lenders, together with their
respective successors and assigns, are herein called the "CREDIT PARTIES").
2. Capitalized terms used herein shall, unless otherwise indicated, have
the respective meanings set forth in the Credit Agreement.
3. The Credit Parties are not willing to make loans under the Credit
Agreement or otherwise extend credit to Borrower unless Guarantors
unconditionally guarantee payment of all present and future indebtedness and
obligations of Borrower to the Credit Parties under the Credit Agreement and the
Loan Documents, subject to the limitations set forth herein.
4. Each Guarantor is a direct or indirect Consolidated Affiliate of
Borrower and will benefit from the Credit Parties' extension of credit to
Borrower.
NOW, THEREFORE, as an inducement to the Credit Parties to enter into the
Credit Agreement and to make loans to Borrower thereunder, and to extend such
credit to Borrower as the Credit Parties may from time to time agree to extend,
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged, Guarantors hereby jointly and severally
guarantee payment of the Guaranteed Debt (hereinafter defined) as more
specifically described hereinbelow in SECTION 1.3 and hereby agree as follows:
SECTION 1
NATURE AND SCOPE OF GUARANTY
1.1 DEFINITION OF GUARANTEED DEBT. As used herein, the term "GUARANTEED
DEBT" means:
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(a) All principal, interest, fees, reasonable attorneys' fees, commitment
fees, liabilities for costs and expenses, and other indebtedness, obligations,
and liabilities of Borrower to the Credit Parties at any time created or arising
in connection with the Credit Agreement including, but not limited to, all
indebtedness, obligations, and liabilities of Borrower to the Credit Parties
arising under the Credit Agreement, the Notes, and the other Loan Documents; and
(b) All costs, expenses, and fees including, but not limited to, court
costs and reasonable attorneys' fees, arising in connection with the collection
of any or all amounts, indebtedness, obligations, and liabilities of Borrower to
the Credit Parties described in ITEM (A) of this SECTION 1.1.
1.2 GUARANTEED DEBT NOT REDUCED BY OFFSET. The indebtedness, liabilities,
obligations, and other Guaranteed Debt guaranteed hereby, and the liabilities
and obligations of Guarantors to the Credit Parties hereunder, shall not be
reduced, discharged, or released because or by reason of any existing or future
offset, claim, or defense of Borrower, or any other party, against any Credit
Party or against payment of the Guaranteed Debt, whether such offset, claim or
defense arises in connection with the Guaranteed Debt (or the transactions
creating the Guaranteed Debt) or otherwise. Without limiting the foregoing or
Guarantors' liability hereunder, to the extent that any Credit Party advances
funds or extends credit to Borrower, and does not receive payments or benefits
thereon in the amounts and at the times required or provided by applicable
agreements or laws, Guarantors are absolutely liable to make such payments to
(and confer such benefits on) such Credit Party, on a timely basis.
1.3 GUARANTY OF OBLIGATION. Subject to the limitations set forth in
SECTION 1.10, Guarantors hereby irrevocably and unconditionally guarantee,
jointly and severally, to the Credit Parties (a) the due and punctual payment of
the Guaranteed Debt, and (b) the timely performance of all other obligations now
or hereafter owed by Borrower to the Credit Parties under the Credit Agreement.
Each Guarantor hereby irrevocably and unconditionally covenants and agrees that
it is liable for the Guaranteed Debt as primary obligor.
1.4 NATURE OF GUARANTY. This Guaranty Agreement is intended to be an
irrevocable, absolute, continuing guaranty of payment and is not a guaranty of
collection. This Guaranty Agreement may not be revoked by any Guarantor;
provided, however, if, according to applicable law, it shall ever be determined
or held that a guarantor under a continuing guaranty such as this Guaranty
Agreement shall have the absolute right, notwithstanding the express agreement
of such a guarantor otherwise, to revoke such guaranty as to Guaranteed Debt
which has then not yet arisen, then any Guarantor may deliver to Agent written
notice, in addition to giving such notice as provided in SECTION 5.2 hereof,
that such Guarantor will not be liable hereunder for any Guaranteed Debt
created, incurred, or arising after the giving of such notice, and such notice
will be effective as to such Guarantor from and after (but not before) such
times as said written notice is actually delivered to, in addition to giving
such notice as provided in SECTION 5.2 hereof, and received by and receipted for
in writing by Administrative Agent; provided that such notice shall not in
anywise affect, impair, or limit the liability and responsibility of any other
person or entity with respect to any Guaranteed Debt theretofore existing or
thereafter existing, arising, renewed, extended, or modified; provided, further,
that such notice shall not affect, impair, or release the liability and
responsibility of any such Guarantor with respect to Guaranteed Debt created,
incurred, or arising (or in respect of any Guaranteed Debt agreed or
contemplated, in any respect, to be created, whether advanced or not and whether
committed to by the Credit Parties or not, including, without limitation, any
discretionary advances or extensions of credit which may be made by any Credit
Party at its option in the future under any type of loan or credit agreement,
arrangement or undertaking) prior to the receipt of such notice by
Administrative Agent as aforesaid, or in respect of any renewals,
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extensions, or modifications of such Guaranteed Debt, or in respect of interest
or costs of collection thereafter accruing on or with respect to such Guaranteed
Debt, or with respect to attorneys' fees thereafter becoming payable hereunder
with respect to such Guaranteed Debt, and shall continue to be effective with
respect to any Guaranteed Debt arising or created after any attempted revocation
by any Guarantor. The fact that at any time or from time to time the Guaranteed
Debt may be increased, reduced, or paid in full shall not release, discharge, or
reduce the obligation of Guarantors with respect to indebtedness or obligations
of Borrower to the Credit Parties thereafter incurred (or other Guaranteed Debt
thereafter arising) under the Credit Agreement, the Notes, or otherwise. This
Guaranty Agreement may be enforced by the Credit Parties and any subsequent
holder of the Guaranteed Debt and shall not be discharged by the assignment or
negotiation of all or part of the Guaranteed Debt.
1.5 PAYMENT BY GUARANTORS. If all or any part of the Guaranteed Debt
shall not be punctually paid when due, whether at maturity or earlier by
acceleration or otherwise, then Guarantors shall, immediately upon demand by
Administrative Agent, and without presentment, protest, notice of protest,
notice of nonpayment, notice of intention to accelerate or acceleration, or any
other notice whatsoever, pay in lawful money of the United States of America,
the amount due on the Guaranteed Debt to Administrative Agent, for the benefit
of the Credit Parties, at Administrative Agent's principal office in Dallas,
Texas. Such demand(s) may be made at any time coincident with or after the time
for payment of all or part of the Guaranteed Debt, and may be made from time to
time with respect to the same or different items of Guaranteed Debt. Such
demand shall be deemed made, given, and received in accordance with SECTION 5.2
hereof.
1.6 PAYMENT OF EXPENSES. In the event that any Guarantor should breach or
fail to timely perform any provisions of this Guaranty Agreement, then
Guarantors shall, immediately upon demand by Administrative Agent, pay to
Administrative Agent, for the benefit of the Credit Parties, all costs and
expenses (including court costs and reasonable attorneys' fees) incurred by the
Credit Parties in the enforcement hereof or the preservation of the Credit
Parties' rights hereunder. The covenant contained in this SECTION 1.6 shall
survive the payment of the Guaranteed Debt.
1.7 NO DUTY TO PURSUE OTHERS. It shall not be necessary for any Credit
Party (and Guarantors hereby waive any rights which Guarantors may have to
require any Credit Party), in order to enforce payment by any Guarantor, first
to (a) institute suit or exhaust its remedies against Borrower or others liable
on the Guaranteed Debt or any other person, (b) enforce the Credit Parties'
rights against any security which shall ever have been given to secure the
Guaranteed Debt, (c) enforce the Credit Parties's rights against any other
Guarantor or any other guarantors of the Guaranteed Debt, (d) join Borrower, any
other Guarantor, or any others liable on the Guaranteed Debt in any action
seeking to enforce this Guaranty Agreement, (e) exhaust any remedies available
to the Credit Parties against any security which shall ever have been given to
secure the Guaranteed Debt, or (e) resort to any other means of obtaining
payment of the Guaranteed Debt. The Credit Parties shall not be required to
mitigate damages or take any other action to reduce, collect, or enforce the
Guaranteed Debt. Further, each Guarantor expressly waives each and every right
to which it may be entitled by virtue of the suretyship law of the State of
Texas, including without limitation, any rights pursuant to Rule 31, Texas Rules
of Civil Procedure, Articles 1986 and 1987, Revised Civil Statutes of Texas and
Chapter 34 of the Texas Business and Commerce Code.
1.8 WAIVER OF NOTICES, ETC. Each Guarantor agrees to the provisions of
the Credit Agreement, the Notes, and the other Loan Documents, and hereby waives
notice of (a) any loans or advances made by any Credit Party to Borrower, (b)
acceptance of this Guaranty Agreement, (c) any amendment or extension of the
Credit Agreement, the Notes, the other Loan Documents, or any other instrument
or document pertaining to
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all or any part of the Guaranteed Debt, (d) the execution and delivery by
Borrower and any Credit Party of any other loan or credit agreement or of
Borrower's execution and delivery of any promissory notes or other documents in
connection therewith, (e) the occurrence of any Potential Default or Event of
Default, (f) any Credit Party's transfer or disposition of the Guaranteed Debt,
or any part thereof, (g) sale or foreclosure (or posting or advertising for sale
or foreclosure) of any collateral for the Guaranteed Debt, (h) protest, proof of
nonpayment, or default by Borrower, (i) the release of any other Guarantor, or
(j) any other action at any time taken or omitted by any Credit Party, and,
generally, all demands and notices of every kind in connection with this
Guaranty Agreement, the Credit Agreement, the Notes, the other Loan Documents,
and any documents or agreements evidencing, securing, or relating to any of the
Guaranteed Debt and the obligations hereby guaranteed.
1.9 EFFECT OF BANKRUPTCY, OTHER MATTERS. In the event that, pursuant to
any insolvency, bankruptcy, reorganization, receivership, or other debtor relief
law, or any judgment, order, or decision thereunder, or for any other reason,
(a) any Credit Party must rescind or restore any payment, or any part thereof,
received by such Credit Party in satisfaction of the Guaranteed Debt, as set
forth herein, any prior release or discharge from the terms of this Guaranty
Agreement given to any Guarantor by such Credit Party shall be without effect,
and this Guaranty Agreement shall remain in full force and effect, (b) Borrower
shall cease to be liable to the Credit Parties for any of the Guaranteed Debt
(other than by reason of the indefeasible payment in full thereof by Borrower),
then the obligations of each Guarantor under this Guaranty Agreement shall
remain in full force and effect. It is the intention of the Credit Parties and
Guarantors that Guarantors' obligations hereunder shall not be discharged except
by Guarantors' performance of such obligations and then only to the extent of
such performance. Without limiting the generality of the foregoing, it is the
intention of the Credit Parties and Guarantors that the filing of any bankruptcy
or similar proceeding by or against Borrower or any other person or party
obligated on any portion of the Guaranteed Debt shall not affect the obligations
of Guarantors under this Guaranty Agreement or the rights of the Credit Parties
under this Guaranty Agreement, including, without limitation, the right or
ability of the Credit Parties to pursue or institute suit against Guarantors for
the entire Guaranteed Debt.
1.10 LIMITATION. It is the intention of Guarantors and the Credit Parties
that the amount of the Guaranteed Debt shall be in, but not in excess of, the
maximum amount permitted by fraudulent conveyance, fraudulent transfer, or other
similar laws applicable to Guarantors. Accordingly, notwithstanding anything to
the contrary contained in this Guaranty Agreement or any other agreement or
instrument executed in connection with the payment of any of the Guaranteed
Debt, the amount of the Guaranteed Debt shall be limited to that amount which
after giving effect thereto would not (a) render Guarantor insolvent, (b) result
in the fair saleable value of the assets of any Guarantor being less than the
amount required to pay its debts and other liabilities (including contingent
liabilities) as they mature, or (c) leave any Guarantor with unreasonably small
capital to carry out its business as now conducted and as proposed to be
conducted, including its capital needs, as such concepts described in (A), (B),
and (C) herein are determined under applicable law, if the obligations of any
such Guarantor hereunder would otherwise be set aside, terminated, annulled, or
avoided for such reason by a court of competent jurisdiction in a proceeding
actually pending before such court.
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SECTION 2
ADDITIONAL EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR'S OBLIGATIONS
Guarantors hereby consent and agree to each of the following, and agree
that Guarantors' obligations under this Guaranty Agreement shall not be
released, diminished, impaired, reduced, or adversely affected by any of the
following, and waives any common law, equitable, statutory, or other rights
(including without limitation rights to notice) which Guarantors might otherwise
have as a result of or in connection with any of the following:
2.1 MODIFICATIONS, ETC. Any renewal, extension, increase, modification,
alteration, or rearrangement of all or any part of the Guaranteed Debt, or of
the Credit Agreement, the Notes, or any other Loan Document;
2.2 ADJUSTMENT, ETC. Any adjustment, indulgence, forbearance, or
compromise that might be granted or given by any Credit Party to Borrower or any
Guarantor;
2.3 CONDITION, COMPOSITION OR STRUCTURE OF BORROWER OR GUARANTORS. The
insolvency, bankruptcy, arrangement, adjustment, composition, structure,
liquidation, disability, dissolution, or lack of power of Borrower or any other
party at any time liable for the payment of all or part of the Guaranteed Debt;
or any dissolution of Borrower or any Guarantor, or any sale, lease, or transfer
of any or all of the assets of Borrower or any Guarantor, or any changes in
name, business, location, composition, structure, or changes in the
shareholders, partners, or members (whether by accession, secession, cessation,
death, dissolution, transfer of assets, or other matter) of Borrower or any
Guarantor; or any reorganization of Borrower or any Guarantor;
2.4 INVALIDITY OF GUARANTEED DEBT. The invalidity, illegality, or
unenforceability of all or any part of the Guaranteed Debt, or any document or
agreement executed in connection with the Guaranteed Debt, for any reason
whatsoever, including without limitation the fact that (a) the Guaranteed Debt,
or any part thereof, exceeds the amount permitted by law, (b) the act of
creating the Guaranteed Debt or any part thereof is ultra vires, (c) the
officers or representatives executing the Credit Agreement, the Notes, the other
Loan Documents, or other documents or otherwise creating the Guaranteed Debt
acted in excess of their authority, (d) the Guaranteed Debt violates applicable
usury laws, (e) Borrower has valid defenses, claims, or offsets (whether at law,
in equity, or by agreement) which render the Guaranteed Debt wholly or partially
uncollectible from Borrower, (f) the creation, performance, or repayment of the
Guaranteed Debt (or the execution, delivery, and performance of any document or
instrument representing part of the Guaranteed Debt or executed in connection
with the Guaranteed Debt, or given to secure the repayment of the Guaranteed
Debt) is illegal, uncollectible, or unenforceable, or (g) the Credit Agreement,
the Notes, the other Loan Documents, or other documents or instruments
pertaining to the Guaranteed Debt have been forged or otherwise are irregular or
not genuine or authentic.
2.5 RELEASE OF OBLIGORS. Any full or partial release of the liability of
Borrower on the Guaranteed Debt or any part thereof, or of any co-guarantors, or
any other person or entity now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee, or assure the payment of the Guaranteed Debt or any part thereof, it
being recognized, acknowledged and agreed by Guarantors that Guarantors may be
required to pay the Guaranteed Debt in full without assistance or support
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of any other party, and Guarantors have not been induced to enter into this
Guaranty Agreement on the basis of a contemplation, belief, understanding, or
agreement that other parties will be liable to perform the Guaranteed Debt, or
that the Credit Parties will look to other parties to perform the Guaranteed
Debt; notwithstanding the foregoing, Guarantors do not hereby waive or release
(expressly or impliedly) any rights of subrogation, reimbursement, or
contribution which it may have, after payment in full of the Guaranteed Debt,
against others liable on the Guaranteed Debt; Guarantors' rights of subrogation
and reimbursement are, however, subordinate to the rights and claims of the
Credit Parties;
2.6 OTHER SECURITY. The taking or accepting of any other security,
collateral, or guaranty, or other assurance of payment, for all or any part of
the Guaranteed Debt;
2.7 RELEASE OF COLLATERAL, ETC. Any release, surrender, exchange,
subordination, deterioration, waste, loss, or impairment (including without
limitation negligent, willful, unreasonable, or unjustifiable impairment) of any
collateral, property, or security, at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Debt;
2.8 CARE AND DILIGENCE. The failure of any Credit Party or any other
party to exercise diligence or reasonable care or act, fail to act, or comply
with any duty in the administration, preservation, protection, enforcement, sale
application, disposal, or other handling or treatment of all or any part of
Guaranteed Debt or any collateral, property, or security at any time securing
any portion thereof, including, without limiting the generality of the
foregoing, the failure to conduct any foreclosure or other remedy fairly, in a
commercially reasonable manner, or in such a way so as to obtain the best
possible price or a favorable price or otherwise act or fail to act;
2.9 STATUS OF LIENS. The fact that any collateral, security, security
interest, or lien contemplated or intended to be given, created, or granted as
security for the repayment of the Guaranteed Debt shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by Guarantors
that Guarantors are not entering into this Guaranty Agreement in reliance on, or
in contemplation of the benefits of, the validity, enforceability,
collectibility, or value of any of the collateral for the Guaranteed Debt;
notwithstanding the foregoing, Guarantors do not hereby waive or release
(expressly or impliedly) any right to be subrogated to the rights of the Credit
Parties in any collateral or security for the Guaranteed Debt after payment in
full of the Guaranteed Debt; Guarantors' rights of subrogation are, however,
subordinate to the rights, claims, liens, and security interests of the Credit
Parties;
2.10 OFFSET. Any existing or future right of offset, claim, or defense of
Borrower against the Credit Parties, or any other party, or against payment of
the Guaranteed Debt, whether such right of offset, claim, or defense arises in
connection with the Guaranteed Debt (or the transactions creating the Guaranteed
Debt) or otherwise;
2.11 MERGER. The reorganization, merger, or consolidation of Borrower or
any Guarantor into or with any other corporation or entity;
2.12 PREFERENCE. Any payment by Borrower to any Credit Party is held to
constitute a preference under bankruptcy laws, or for any reason any Credit
Party is required to refund such payment or pay such amount to Borrower or
someone else; or
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2.13 OTHER ACTIONS TAKEN OR OMITTED. Any other action taken or omitted to
be taken with respect to the Credit Agreement, the Guaranteed Debt, or the
security and collateral therefor, whether or not such action or omission
prejudices Guarantors or increases the likelihood or risk that Guarantors will
be required to pay the Guaranteed Debt pursuant to the terms hereof; it is the
unambiguous and unequivocal intention of Guarantors that Guarantors shall be
obligated to pay the Guaranteed Debt when due, notwithstanding any occurrence,
circumstance, event, action, or omission whatsoever, whether contemplated or
uncontemplated, and whether or not otherwise or particularly described herein,
except for the full and final payment and satisfaction of the Guaranteed Debt.
SECTION 3
REPRESENTATIONS AND WARRANTIES
To induce the Credit Parties to enter into the Credit Agreement and extend
credit to Borrower, each Guarantor represents and warrants to the Credit Parties
that:
3.1 BENEFIT. Each Guarantor has received, or will receive, direct or
indirect benefit from the making of this Guaranty and the Guaranteed Debt;
3.2 FAMILIARITY AND RELIANCE. Each Guarantor is familiar with, and has
independently reviewed books and records regarding, the financial condition of
Borrower and is familiar with the value of any and all collateral intended to be
created as security for the payment of the Guaranteed Debt; however, no
Guarantor is relying on such financial condition or the collateral as an
inducement to enter into this Guaranty Agreement;
3.3 NO REPRESENTATION BY THE CREDIT PARTIES. No Credit Party or any other
party has made any representation, warranty, or statement to any Guarantor in
order to induce any Guarantor to execute this Guaranty Agreement;
3.4 GUARANTOR'S FINANCIAL CONDITION. As of the date hereof, and after
giving effect to this Guaranty Agreement and the contingent obligation evidenced
hereby, each Guarantor is, and will be, Solvent;
3.5 DIRECTORS' DETERMINATION OF BENEFIT. The Board of Directors,
partners, members, or other managers and owners of each Guarantor have, acting
pursuant to a duly called and constituted meeting, after proper notice, or
pursuant to a valid unanimous consent, has determined that this Guaranty
directly or indirectly benefits such Guarantor and is in the best interests of
such Guarantor;
3.6 LEGALITY. The execution, delivery, and performance by each Guarantor
of this Guaranty Agreement and the consummation of the transactions contemplated
hereunder (a) have been duly authorized by all necessary trust action of each
Guarantor, and (b) do not, and will not, contravene or conflict with any law,
statute, or regulation whatsoever to which any Guarantor is subject or
constitute a default (or an event which with notice or lapse of time or both
would constitute a default) under, or result in the breach of, any indenture,
mortgage, deed of trust, charge, lien, or any contract, agreement, or other
instrument to which any Guarantor is a party or which may be applicable to any
Guarantor or any of its assets, or violate any provisions of its Constituent
Documents; this Guaranty Agreement is a legal and binding obligation of each
Guarantor and is enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors' rights; and
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3.7 SURVIVAL. All representations and warranties made by each Guarantor
herein shall survive the execution hereof.
SECTION 4
SUBORDINATION OF CERTAIN INDEBTEDNESS
4.1 SUBORDINATION OF GUARANTOR CLAIMS. As used herein, the term
"GUARANTOR CLAIMS" shall mean all debts and liabilities of Borrower to any
Guarantor, whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligations of Borrower thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note,
contract, open account, or otherwise, and irrespective of the person or persons
in whose favor such debts or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by any Guarantor. The Guarantor Claims shall include without
limitation all rights and claims of each Guarantor against Borrower (arising as
a result of subrogation or otherwise) as a result of any Guarantor's payment of
all or a portion of the Guaranteed Debt. Until the Guaranteed Debt shall be
paid and satisfied in full and each Guarantor shall have performed all of its
obligations hereunder, if a Potential Default or Event of Default exists, then
Guarantors shall not receive or collect, directly or indirectly, from Borrower
or any other party any amount upon the Guarantor Claims.
4.2 CLAIMS IN BANKRUPTCY. In the event of receivership, bankruptcy,
reorganization, arrangement, debtor's relief, or other insolvency proceedings
involving Borrower as debtor, the Credit Parties shall have the right to prove
its claim in any such proceeding so as to establish its rights hereunder and
receive directly from the receiver, trustee, or other court custodian dividends
and payments which would otherwise be payable upon Guarantor Claims. Each
Guarantor hereby assigns such dividends and payments to the Credit Parties.
Should any Credit Party receive, for application upon the Guaranteed Debt, any
such dividend or payment which is otherwise payable to any Guarantor, and which,
as between Borrower and such Guarantor, shall constitute a credit upon the
Guarantor Claims, then upon payment to the Credit Parties in full of the
Guaranteed Debt, such Guarantor shall become subrogated to the rights of the
Credit Parties to the extent that such payments to the Credit Parties on the
Guarantor Claims have contributed toward the liquidation of the Guaranteed Debt,
and such subrogation shall be with respect to that proportion of the Guaranteed
Debt which would have been unpaid if the Credit Parties had not received
dividends or payments upon the Guarantor Claims.
4.3 PAYMENTS HELD IN TRUST. In the event that, notwithstanding SECTIONS
4.1 and 4.2 above, any Guarantor should receive any funds, payment, claim or
distribution which is prohibited by such Sections, such Guarantor agrees to hold
in trust for the Credit Parties, in kind, all funds, payments, claims, or
distributions so received, and agrees that he shall have absolutely no dominion
over such funds, payments, claims, or distributions so received except to pay
them promptly to Administrative Agent, for the benefit of the Credit Parties,
and such Guarantor covenants promptly to pay the same to Administrative Agent,
for the benefit of the Credit Parties.
4.4 LIENS SUBORDINATE. Each Guarantor agrees that any liens, security
interests, judgment liens, charges, or other encumbrances upon Borrower's assets
securing payment of the Guarantor Claims shall be and remain inferior and
subordinate to any liens, security interests, judgment liens, charges, or other
encumbrances upon Borrower's assets securing payment of the Guaranteed Debt,
regardless of whether such encumbrances in favor of such Guarantor or the Credit
Parties presently exist or are hereafter created or attach.
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Without the prior written consent of Administrative Agent, no Guarantor shall
(a) exercise or enforce any creditor's right it may have against Borrower, or
(b) foreclose, repossess, sequester, or otherwise take steps or institute any
action or proceedings (judicial or otherwise, including, without limitation, the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor's relief, or insolvency proceeding) to enforce any liens, mortgages,
deeds of trust, security interest, collateral rights, judgments, or other
encumbrances on assets of Borrower held by any Guarantor.
4.5 NOTATION OF RECORDS. All promissory notes, accounts receivable
ledgers, or other evidences of the Guarantor Claims accepted by or held by each
Guarantor shall contain a specific written notice thereon that the indebtedness
evidenced thereby is subordinated under the terms of this Guaranty Agreement.
SECTION 5
MISCELLANEOUS
5.1 WAIVER. No failure to exercise, and no delay in exercising, on the
part of any Credit Party, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right. The rights of the Credit
Parties hereunder shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Guaranty Agreement, nor consent
to departure therefrom, shall be effective unless in writing and no such consent
or waiver shall extend beyond the particular case and purpose involved. No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar, or other instances without such notice
or demand.
5.2 NOTICES. Any notices or other communications required or permitted to
be given by this Guaranty Agreement must be (a) given in writing and personally
delivered or mailed by prepaid certified or registered mail, return receipt
requested, or (b) made by tested telex delivered or transmitted to the party to
whom such notice or communication is directed to, in the case of any Guarantor,
the address of such Guarantor set forth on the signature pages hereof, and in
the case of the Credit Parties hereof:
GUARANTORS:
c/o ProLogis Trust
14100 East 35th Place
Aurora, Colorado 80011
Attention: Mr. Gordon Keiser, Jr.
CREDIT PARTIES:
NationsBank, N.A., Administrative Agent
901 Main Street, 51st Floor
Dallas, Texas 75283-1000
Attention: Mr. M. David Howard
Any such notice or other communication shall be deemed to have been given
(whether actually received or not) on the day it is personally delivered as
aforesaid or, if mailed, on the day it is mailed as aforesaid, or, if
transmitted by telex, on the day that such notice is transmitted as aforesaid.
Any party may change its address
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<PAGE>
for purposes of this Guaranty Agreement by giving notice of such change to the
other party pursuant to this SECTION 5.2.
5.3 GOVERNING LAW. THIS GUARANTY AGREEMENT HAS BEEN PREPARED, AND IS
INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND THE SUBSTANTIVE LAWS OF SUCH
STATE SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION
OF THIS GUARANTY AGREEMENT. FOR PURPOSES OF THIS GUARANTY AGREEMENT AND THE
RESOLUTION OF DISPUTES HEREUNDER, EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS AND
CONSENTS TO, AND WAIVES ANY OBJECTION TO, THE NON-EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF TEXAS LOCATED IN THE COUNTY OF DALLAS AND OF THE FEDERAL
COURT LOCATED IN THE NORTHERN DISTRICT OF TEXAS.
5.4 INVALID PROVISIONS. If any provision of this Guaranty Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Guaranty Agreement, such provision shall be
fully severable and this Guaranty Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never comprised a part
of this Guaranty Agreement, and the remaining provisions of this Guaranty
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Guaranty Agreement, unless such continued effectiveness of this Guaranty
Agreement, as modified, would be contrary to the basic understandings and
intentions of the parties as expressed herein.
5.5 ENTIRETY AND AMENDMENTS. This Guaranty Agreement embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof, and this Guaranty
Agreement may be amended only by an instrument in writing executed by an
authorized officer of the party against whom such amendment is sought to be
enforced.
5.6 PARTIES BOUND; ASSIGNMENT. This Guaranty Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, assigns, and legal representatives; provided, however, that no
Guarantor may, without the prior written consent of Administrative Agent, assign
any of its rights, powers, duties, or obligations hereunder.
5.7 HEADINGS. Section headings are for convenience of reference only and
shall in no way affect the interpretation of this Guaranty Agreement.
5.8 MULTIPLE COUNTERPARTS. This Guaranty Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same agreement, and any of the parties hereto may execute this Guaranty
Agreement by signing any such counterpart.
5.9 RIGHTS AND REMEDIES. If any Guarantor becomes liable for any
indebtedness owing by Borrower to the Credit Parties, by endorsement or
otherwise, other than under this Guaranty Agreement, then such liability shall
not be in any manner impaired or affected hereby and the rights of the Credit
Parties hereunder shall be cumulative of any and all other rights that the
Credit Parties (or any of them) may ever have against such Guarantor. The
exercise by the Credit Parties of any right or remedy hereunder or under any
other instrument, or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy.
5.10 WAIVER OF TRIAL BY JURY. EACH GUARANTOR HEREBY WAIVES ITS RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS GUARANTY
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<PAGE>
AGREEMENT. THIS WAIVER IS IRREVOCABLE AND SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, MODIFICATIONS, RENEWALS, EXTENSIONS, OR SUPPLEMENTS TO THIS GUARANTY
AGREEMENT. IN THE EVENT OF LITIGATION, THIS GUARANTY AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO TRIAL BY THE COURT.
5.11 ADDITIONAL GUARANTORS. The initial Guarantors hereunder shall be each
of the Consolidated Affiliates of Borrower that are signatories hereto and that
are listed on SCHEDULE 1 attached hereto. From time to time subsequent to the
time hereof, additional Consolidated Affiliates of Borrower may become parties
hereto as additional guarantors (each an "ADDITIONAL GUARANTOR") by executing a
counterpart of this Guaranty Agreement in the form of EXHIBIT A attached hereto.
Upon delivery of any such counterpart to Administrative Agent, notice of which
is hereby waived by Guarantors, each such Additional Guarantor shall be a
Guarantor and shall be a party hereto as if such Additional Guarantor were an
original signatory hereof. Each Guarantor expressly agrees that its obligations
arising hereunder shall not be affected or diminished by the addition or release
of any other Guarantor hereunder, or by any election by Administrative Agent not
to cause any Consolidated Affiliates of Borrower to become an Additional
Guarantor hereunder. This Guaranty Agreement shall be fully effective as to any
Guarantor that is or becomes a party hereto regardless of whether any such
person becomes or fails to become or ceases to be a Guarantor hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS.]
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<PAGE>
SCHEDULE 1
PROLOGIS TRUST
SUBSIDIARY GUARANTORS
ENTITY STATE OF FORMATION
SCI Houston Holdings, Inc. Delaware
ProLogis-Alabama (1) Incorporated Maryland
ProLogis-Alabama (2) Incorporated Maryland
ProLogis-North Carolina (1) Incorporated Maryland
ProLogis-North Carolina (2) Incorporated Maryland
PLD International Incorporated Delaware
ProLogis Management Incorporated Delaware
SCI Kansas City (1) Incorporated Delaware
International Industrial Investments Incorporated Maryland
Security Capital Alabama Industrial Trust Alabama
SCI Mexico Industrial Trust Maryland
SCI Limited Partnership I Delaware
SCI Limited Partnership II Delaware
SCI Limited Partnership III Delaware
SCI North Carolina Limited Partnership Delaware
Red Mountain Joint Venture Texas
1440 Goodyear Partners Texas
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<PAGE>
EXHIBIT A
TO SUBSIDIARY GUARANTY
COUNTERPART TO SUBSIDIARY GUARANTY
In witness whereof, the undersigned Additional Guarantor has caused this
Guaranty to be executed by delivered by its officer thereunto duly authorized as
of _______________, 19____.
________________________________________
[NAME OF ADDITIONAL GUARANTOR]
By: ____________________________________
Name:_______________________________
Title:______________________________
Address for Notice:
__________________________________
__________________________________
__________________________________
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<PAGE>
EXHIBIT H-1
BORROWER PLEDGE AGREEMENT
THIS BORROWER PLEDGE AGREEMENT (this "AGREEMENT") is dated as of August 11,
1998, and entered into by and between PROLOGIS TRUST (formerly known as SECURITY
CAPITAL INDUSTRIAL TRUST), a Maryland real estate investment trust ("PLEDGOR"),
in favor of NATIONSBANK, N.A., a national banking association, for itself and as
agent for and representative of (in such capacity herein called "SECURED PARTY")
the Documentation Agent defined in the Credit Agreement defined below, the
Syndication Agent defined in the Credit Agreement defined below, and the Lenders
defined in the Credit Agreement defined below (collectively, the "CREDIT
PARTIES").
R E C I T A L S
- - - - - - - -
1. Reference is made to that certain Amended and Restated Credit
Agreement dated as of August 11, 1998, by and between Pledgor, Secured Party, as
Administrative Agent, the Documentation Agent defined therein, the Syndication
Agent defined therein, and the Lenders defined therein (as renewed, extended,
amended, or restated, the "CREDIT AGREEMENT"), pursuant to which Lenders have
made certain Commitments, subject to the terms and conditions set forth in the
Credit Agreement, to make loans to Pledgor.
2. Capitalized terms used herein shall, unless otherwise indicated, have
the respective meanings set forth in the Credit Agreement.
3. Pledgor is the legal and beneficial owner of the intercompany
indebtedness (collectively the "PLEDGED DEBT") described in PART A of SCHEDULE 1
attached hereto and issued by the corporations named therein and issued by the
obligors named therein.
4. To secure the Obligation, Pledgor will grant a security interest in,
among other things, the Pledged Debt pursuant to this agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party, for the benefit of the Credit Parties, as follows:
1. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to Secured
------------------
Party, for the ratable benefit of the Credit Parties, and hereby grants to
Secured Party, for the ratable benefit of the Credit Parties, a security
interest in, all of Pledgor's right, title, and interest in and to the following
(the "COLLATERAL"):
(A) the Pledged Debt and the instruments evidencing the Pledged Debt, and
all interest, cash, instruments, and other property or proceeds from time to
time received, receivable, or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(B) all additional indebtedness from time to time owed to Pledgor by any
obligor on the Pledged Debt (which indebtedness shall be deemed to be part of
the Pledged Debt) and the instruments evidencing such indebtedness, and all
interest, cash, instruments, and other property or proceeds from time to time
received, receivable, or otherwise distributed in respect of or in exchange for
any or all of such indebtedness;
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(C) all indebtedness from time to time owed to Pledgor by any Person that,
after the date of this Agreement, becomes, as a result of any occurrence, any
Unconsolidated Affiliate of Pledgor (which indebtedness shall be deemed to be
part of the Pledged Debt) if the indebtedness of such Person to Pledgor equals
or exceeds $5,000,000 individually or in the aggregate, and all interest, cash,
instruments, and other property or proceeds from time to time received,
receivable, or otherwise distributed in respect of or in exchange for any or all
of such indebtedness;
(D) to the extent not included in any other paragraph of this SECTION 1,
all other general intangibles (including without limitation, tax refunds and
rights to demand issuance of a certificate evidencing the Collateral), arising
out of or in connection with rights to payment or performance, choses in action,
and judgments taken on any rights or claims included in the Collateral;
(E) all of Pledgor's right, title, and interest in and to all books,
records, ledger cards, files, correspondence, computer programs, tapes, disks,
and related data processing software that at any time evidence or contain
information relating to any of the Collateral or are otherwise necessary or
helpful in the collection thereof or realization thereupon; and
(F) to the extent not covered by CLAUSES (A) through (E) above, all
proceeds of any or all of the foregoing Collateral. For purposes of this
Agreement, the term "PROCEEDS" includes whatever is receivable or received when
Collateral or proceeds are sold, exchanged, collected, or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, proceeds of any indemnity or guaranty payable to Pledgor or Secured
Party from time to time with respect to any of the Collateral.
2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the Collateral
------------------------
is collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand, or otherwise (including the payment of amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. (S) 362(a)), of all obligations and liabilities of every nature
of Pledgor now or hereafter existing under or arising out of or in connection
with the Credit Agreement and the other Loan Documents and all renewals or
extensions thereof, whether for principal, interest (including without
limitation interest that, but for the filing of a petition in bankruptcy with
respect to Pledgor, would accrue on such obligations), fees, expenses,
indemnities, or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created, or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from Secured Party or any
Lender as a preference, fraudulent transfer, or otherwise (all such obligations
and liabilities being the "UNDERLYING DEBT"), and all obligations of every
nature of Pledgor now or hereafter existing under this Agreement (all such
obligations of Pledgor, together with the Underlying Debt, being the "SECURED
OBLIGATIONS").
3. DELIVERY OF COLLATERAL; RELEASE OF COLLATERAL.
---------------------------------------------
(A) All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of Secured Party
pursuant hereto and shall be in suitable form for transfer by delivery or, as
applicable, shall be accompanied by Pledgor's endorsement, where necessary, or
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Secured Party. Secured Party shall have the right, at
any time in its discretion and without notice to Pledgor, to transfer to or
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to register in the name of Secured Party or any of its nominees any or all of
the Collateral, subject only to the revocable rights specified in Section 6(a).
In addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Collateral for
certificates or instruments of smaller or larger denominations.
(B) If the indebtedness of any obligor with respect to the Pledged Debt or
any other indebtedness pledged hereunder is less than $5,000,000 individually or
in the aggregate, then, upon the request of Pledgor so long as no Event of
Default exists, Secured Party shall release such Collateral and all certificates
or instruments representing or evidencing such Collateral shall be delivered to
Pledgor.
4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants as
------------------------------
follows:
(A) DUE AUTHORIZATION, ETC. OF COLLATERAL. All of the Pledged Debt has
-------------------------------------
been duly authorized, authenticated or issued, and delivered and is the legal,
valid, and binding obligation of the issuers thereof, subject to the general
laws of insolvency (including the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)), and is not in default.
(B) DESCRIPTION OF COLLATERAL. The Pledged Debt constitutes all of the
-------------------------
issued and outstanding intercompany indebtedness evidenced by a promissory note
of the respective issuers thereof owing to Pledgor.
(C) OWNERSHIP OF COLLATERAL. Pledgor is the legal, record, and beneficial
-----------------------
owner of the Collateral free and clear of any Lien except for the security
interest created by this Agreement.
(D) GOVERNMENTAL AUTHORIZATIONS. No authorization, approval, or other
---------------------------
action by, and no notice to or filing with, any Governmental Authority is
required for either (i) the pledge by Pledgor of the Collateral pursuant to this
Agreement and the grant by Pledgor of the security interest granted hereby, (ii)
the execution, delivery, or performance of this Agreement by Pledgor, or (iii)
the exercise by Secured Party of the voting or other rights, or the remedies in
respect of the Collateral, provided for in this Agreement (except as may be
required in connection with a disposition of Collateral by laws affecting the
offering and sale of securities generally).
(E) PERFECTION. The pledge of the Collateral pursuant to this Agreement
----------
creates a valid and perfected first priority security interest in the
Collateral, securing the payment of the Secured Obligations.
(F) OTHER INFORMATION. All information heretofore, herein or hereafter
-----------------
supplied to Secured Party by or on behalf of Pledgor with respect to the
Collateral is accurate and complete in all material respects.
5. ASSURANCES AND COVENANTS OF PLEDGOR.
-----------------------------------
(A) TRANSFERS AND OTHER LIENS. Pledgor shall not:
-------------------------
(I) except as expressly permitted by the Credit Agreement, sell,
assign (by operation of law or otherwise), pledge, or hypothecate or
otherwise dispose of, or grant any option with respect to, any of the
Collateral; or
(II) create or suffer to exist any Lien upon or with respect to any
of the Collateral, except for Permitted Encumbrances.
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(B) ADDITIONAL COLLATERAL. Pledgor shall (i) pledge hereunder, immediately
---------------------
upon their issuance, any and all instruments or other evidences of additional
indebtedness from time to time owed to Pledgor by any obligor on the Pledged
Debt, and (ii) pledge hereunder, immediately upon their issuance, any and all
instruments or other evidences of indebtedness from time to time owed to Pledgor
by any Person that after the date of this Agreement becomes, as a result of any
occurrence, an Unconsolidated Affiliate of Pledgor if the indebtedness of such
Person to Pledgor equals or exceeds $5,000,000 individually or in the aggregate.
(C) PLEDGE AMENDMENTS. Pledgor shall, upon obtaining any additional
-----------------
indebtedness required to be pledged hereunder as provided in SECTION 5(B),
promptly (and in any event within five (5) Business Days) deliver to Secured
Party a Pledge and Security Amendment, duly executed by Pledgor, in
substantially the form of EXHIBIT A attached hereto (a "PLEDGE AND SECURITY
AMENDMENT"), in respect of the additional Pledged Debt to be pledged pursuant to
this Agreement. Pledgor hereby authorizes Secured Party to attach each Pledge
and Security Amendment to this Agreement and agrees that all Pledged Debt listed
on any Pledge and Security Amendment delivered to Secured Party shall for all
purposes hereunder be considered Collateral; provided that the failure of
Pledgor to execute a Pledge and Security Amendment with respect to any
additional Pledged Debt pledged pursuant to this Agreement shall not impair the
security interest of Secured Party therein or otherwise adversely affect the
rights and remedies of Secured Party hereunder with respect thereto.
(D) LOSS OR DEPRECIATION OF COLLATERAL. Pledgor shall promptly notify
----------------------------------
Secured Party of any event of which such becomes aware causing material loss or
depreciation in the value of any portion of the Collateral.
(E) WRITTEN NOTICES. Pledgor shall promptly deliver to Secured Party all
---------------
written notices received by it with respect to the Collateral.
(F) TAXES AND ASSESSMENTS. Pledgor shall pay promptly when due all taxes,
---------------------
assessments, and governmental charges or levies imposed upon, and all claims
against, the Collateral, except to the extent the validity thereof is being
contested in good faith and by appropriate proceedings and in which reserves or
other appropriate provisions, if any, as shall be required in conformity with
GAAP, have been made or provided therefor; provided that Pledgor shall in any
event pay such taxes, assessments, charges, levies, or claims not later than
five (5) days prior to the date of any proposed sale under any judgement, writ,
or warrant of attachment entered or filed against Pledgor or any of the
Collateral as a result of the failure to make such payment.
(G) FURTHER ASSURANCES; PERFECTION. Pledgor shall from time to time, at
------------------------------
the expense of Pledgor, promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, Pledgor will:
(I) at the request of Secured Party, mark conspicuously each item of
its records pertaining to the Collateral with a legend in form and
substance satisfactory to Secured Party, indicating that such Collateral is
subject to the security interest granted hereby;
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(II) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as Secured Party may reasonably request, in
order to perfect and preserve the security interests granted or purported
to be granted hereby; and
(III) at Secured Party's request, appear in and defend any action or
proceeding that may affect Pledgor's title to or Secured Party's security
interest in all or any part of the Collateral.
(H) AUTHORIZATION TO FILE FINANCING STATEMENTS.
------------------------------------------
(I) Pledgor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral, in such filing offices as Secured Party
shall deem appropriate, and Pledgor shall execute and deliver to Secured
Party such financing or continuation statements, and amendments thereto,
promptly upon the request of Secured Party and shall pay Secured Party's
reasonable costs and expenses incurred in connection therewith.
(II) Pledgor hereby further authorizes Secured Party to file one or
more financing or continuation statements, and amendments thereto, relative
to all or any part of the Collateral without the signature of Pledgor, and
Pledgor agrees that a carbon, photographic, or other reproduction of this
Agreement or of a financing statement signed by Pledgor shall be sufficient
as a financing statement and may be filed as a financing statement in any
and all jurisdictions.
6. RIGHT TO RECEIVE PAYMENTS.
--------------------------
(A) So long as no Event of Default shall have occurred and be continuing:
(I) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all interest paid in
respect of the Collateral; provided, however, that any and all interest
paid or payable other than in cash in respect of, and instruments and other
property received, receivable, or otherwise distributed in respect of, or
in exchange for, any Collateral shall be, and shall forthwith be delivered
to Secured Party to hold as, Collateral and shall, if received by Pledgor,
be received in trust for the benefit of Secured Party, be segregated from
the other property or funds of Pledgor and be forthwith delivered to
Secured Party as Collateral in the same form as so received (with all
necessary endorsements); and
(II) Secured Party shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgor all such instruments as Pledgor may
from time to time reasonably request for the purpose of enabling Pledgor to
receive the principal or interest payments which it is authorized to
receive and retain pursuant to PARAGRAPH (I) above.
(B) Upon the occurrence and during the continuation of an Event of
Default:
(I) all rights of Pledgor to receive the interest payments which it
would otherwise be authorized to receive and retain pursuant to SECTION
6(A)(I) shall cease, and all such rights shall thereupon become vested in
Secured Party who shall thereupon have the sole right to receive and hold
as Collateral such interest payments; and
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(II) all principal and interest payments which are received by
Pledgor contrary to the provisions of this SECTION 6(B)(I) shall be
received in trust for the benefit of Secured Party, shall be segregated
from other funds of Pledgor and shall forthwith be paid over to Secured
Party as Collateral in the same form as so received (with any necessary
endorsements).
(C) Notwithstanding any of the foregoing, Pledgor agrees that this
Agreement shall not in any way be deemed to obligate Secured Party or any Lender
to assume any of Pledgor's obligations, duties, expenses, or liabilities arising
out of this Agreement (including, without limitation, Pledgor's obligations as
the holder of the Pledged Debt) or under any and all other agreements now
existing or hereafter drafted or executed (collectively, the "PLEDGOR
OBLIGATIONS") unless Secured Party or Lender otherwise expressly agrees to
assume any or all of said Pledgor Obligations in writing. Without limiting the
generality of the foregoing, neither the grant of the security interest in the
Collateral in favor of Secured Party as provided herein nor the exercise by
Secured Party of any of its rights hereunder nor any action by Secured Party in
connection with a foreclosure on the Collateral shall be deemed to constitute
Secured Party as a partner of any partnership or a member of any limited
liability company; provided, however, that in the event Secured Party or any
Lender elects to become a substituted partner of any partnership or a member of
any limited liability company in place of Pledgor, Secured Party or such Lender,
as the case may be, shall be entitled to and shall become such a substitute
partner or member.
7. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby irrevocably
----------------------------------------
appoints Secured Party as Pledgor's attorney-in-fact, with full authority in the
place and stead of Pledgor and in the name of Pledgor, Secured Party or
otherwise, from time to time in Secured Party's discretion to take any action
and to execute any instrument that Secured Party may deem necessary or advisable
to accomplish the purposes of this Agreement, including without limitation:
(A) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Collateral without the
signature of Pledgor;
(B) subsequent to an Event of Default, to ask, demand, collect, sue for,
recover, compound, receive, and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral;
(C) subsequent to an Event of Default, to receive, endorse, and collect
any instruments made payable to Pledgor representing any principal, or interest
payment, or other distribution in respect of the Collateral or any part thereof
and to give full discharge for the same; and
(D) subsequent to an Event of Default, to file any claims or take any
action or institute any proceedings that Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party with respect to any of the Collateral.
8. SECURED PARTY MAY PERFORM. If Pledgor fails to perform any agreement
-------------------------
contained herein, then Secured Party may itself perform, or cause performance
of, such agreement, and the expenses of Secured Party incurred in connection
therewith shall be payable by Pledgor under SECTION 12(B).
9. STANDARD OF CARE. The powers conferred on Secured Party hereunder are
----------------
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the exercise of reasonable care
in the custody of any Collateral in its possession and the accounting for moneys
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<PAGE>
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral, it being understood that Secured Party shall have no responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders, or other matters relating to any Collateral,
whether or not Secured Party has or is deemed to have knowledge of such matters,
(b) taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the Collateral) to
preserve rights against any parties with respect to any Collateral, (c) taking
any necessary steps to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Collateral, or (d)
initiating any action to protect the Collateral against the possibility of a
decline in market value. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property consisting of negotiable securities.
10. REMEDIES. If any Event of Default shall have occurred and be
--------
continuing, then Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as adopted in the State of Texas (the "CODE")
(whether or not the Code applies to the affected Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange or broker's board or at any of Secured Party's offices or
elsewhere, for cash, on credit, or for future delivery, at such time or times
and at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Collateral. Secured Party or any Lender may be the
purchaser of any or all of the Collateral at any such sale and Secured Party, as
agent for and representative of Lenders (but not any Lender or Lenders in its or
their respective individual capacities unless Requisite Lenders shall otherwise
agree in writing), shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Secured Party at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
Pledgor, and Pledgor hereby waives (to the extent permitted by applicable law)
all rights of redemption, stay, and/or appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten (10) days' notice to Pledgor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Pledgor hereby waives any claims against Secured Party arising by reason of the
fact that the price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if Secured Party accepts the first offer received and does not offer such
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, then Pledgor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
11. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in
-----------------------
this Agreement, all proceeds received by Secured Party in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
may, in the discretion of Secured Party, be held by Secured Party as Collateral
for, and/or then, or at any time thereafter, applied in full or in part by
Secured Party against, the Secured Obligations in the following order of
priority:
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<PAGE>
FIRST: To the payment of all costs and expenses of such sale,
collection, or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities, and advances made or incurred by Secured Party in connection
therewith, and all amounts for which Secured Party is entitled to
indemnification hereunder and all advances made by Secured Party hereunder
for the account of Pledgor, and to the payment of all costs and expenses
paid or incurred by Secured Party in connection with the exercise of any
right or remedy hereunder, all in accordance with SECTION 12;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the Credit Parties); and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
12. INDEMNITY AND EXPENSES.
----------------------
(A) Pledgor agrees to indemnify each Credit Party from and against any and
all claims, losses, and liabilities in any way relating to, growing out of, or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses, or liabilities result solely from Secured Party's or
such Lender's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
(B) Pledgor shall pay to Secured Party upon demand the amount of any and
all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder, or (iv) the failure by Pledgor to perform or observe
any of the provisions hereof.
13. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This Agreement shall
-----------------------------------------------
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until the payment in full of all Secured Obligations and
the cancellation or termination of the Commitments, (b) be binding upon Pledgor,
its successors and assigns, and (c) inure, together with the rights and remedies
of Secured Party hereunder, to the benefit of Secured Party and its successors,
transferees, and assigns. Without limiting the generality of the foregoing
CLAUSE (C), but subject to the provisions of SECTION 13.11 of the Credit
Agreement, any Lender may assign or otherwise transfer any of its Rights and
obligations to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to Lenders herein or
otherwise. Upon the indefeasible payment in full of all Secured Obligations and
the cancellation or termination of the Commitments, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
Pledgor. Upon any such termination Secured Party will, at Pledgor's expense,
execute and deliver to Pledgor such documents as Pledgor shall reasonably
request to evidence such termination and Pledgor shall be entitled to the
return, upon its request and at its expense, against receipt and without
recourse to Secured Party, of such of the Collateral as shall not have been sold
or otherwise applied pursuant to the terms hereof.
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<PAGE>
14. SECURED PARTY AS AGENT.
----------------------
(A) Secured Party has been appointed to act as Secured Party hereunder by
Lenders. Secured Party shall be obligated, and shall have the right hereunder,
to make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking any action (including, without
limitation, the release or substitution of Collateral), solely in accordance
with this Agreement and the Credit Agreement.
(B) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to the Credit Agreement shall also constitute
notice of resignation as Secured Party under this Agreement; removal of
Administrative Agent pursuant to the Credit Agreement shall also constitute
removal as Secured Party under this Agreement; and appointment of a successor
Administrative Agent pursuant to the Credit Agreement shall also constitute
appointment of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Administrative Agent under SECTION 12.1 of the
Credit Agreement by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges, and duties of the retiring or removed Secured Party
under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Administrative Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
15. AMENDMENTS; ETC. No amendment, modification, termination, or waiver
----------------
of any provision of this Agreement, and no consent to any departure by Pledgor
from the terms and conditions hereof, shall in any event be effective unless the
same shall be in writing and signed by Secured Party and, in the case of any
such amendment or modification, by Pledgor. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.
16. NOTICES. Any notice or other communication herein required or
-------
permitted to be given shall be in writing and may be personally served, telexed,
or sent by telecopy or United States mail or courier service to each such party
at its address set forth in the Credit Agreement, on the signature pages hereof
or to such other addresses as each such party may in writing hereafter indicate.
Such notice or other communication shall be deemed to have been given when
delivered in person or by courier service, upon receipt of telecopy or telex, or
three (3) Business Days after depositing it in the United states mail with
postage prepaid and properly addressed; provided that any notice, request, or
demand to or upon Administrative Agent or Lenders shall not be effective until
received.
17. FAILURE OR INDULGENCE NOT WAIVER: REMEDIES CUMULATIVE. No failure or
-----------------------------------------------------
delay on the part of Secured Party in the exercise of any power, right, or
privilege hereunder shall impair such power, right, or privilege or be construed
to be a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right, or privilege preclude any other or
further exercise thereof or of any other
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<PAGE>
power, right, or privilege. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
18. SEVERABILITY. In case any provision in or obligation under this
------------
Agreement shall be invalid, illegal, or unenforceable in any jurisdiction, the
validity, legality, and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
19. HEADINGS. SECTION and subsection headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
20. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
--------------------
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS. Unless otherwise defined herein or
in the Credit Agreement, terms used in Articles 8 and 9 of the Code are used
herein as therein defined.
21. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF TEXAS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT PLEDGOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor hereby agrees that service
of all process in any such proceeding in any such court may be made by
registered or certified mail, return receipt requested, to Pledgor at its
address provided on the signature page hereof, such service being hereby
acknowledged by Pledgor to be sufficient for personal jurisdiction in any action
against Pledgor in any such court and to be otherwise effective and binding
service in every respect. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of Secured
Party to bring proceedings against Pledgor in the courts of any other
jurisdiction.
22. WAIVER OF JURY TRIAL. PLEDGOR AND SECURED PARTY HEREBY AGREE TO WAIVE
--------------------
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including without
limitation contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. Pledgor and Secured Party each acknowledge
that this waiver is a material inducement for Pledgor and Secured Party to enter
into a business relationship, that Pledgor and Secured Party have already relied
on this waiver in entering into this Agreement and that each will continue to
rely on this waiver in their related future dealings. Pledgor and Secured Party
further warrant
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<PAGE>
and represent that each has reviewed this waiver with its legal counsel, and
that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
23. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGES TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly executed
and delivered by its respective officers thereunto duly authorized as of the
date first written above.
PROLOGIS TRUST (formerly known as SECURITY
CAPITAL INDUSTRIAL TRUST), a Maryland real
estate investment trust, as Borrower
By: _______________________________________
Name:_________________________________
Title:________________________________
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<PAGE>
SCHEDULE 1
PART A
------
Pledged Debt
- ---------------------------------------------------------------------------
Maker Date Amount
- ---------------------------------------------------------------------------
None
- ---------------------------------------------------------------------------
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<PAGE>
EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated__________, 19___, is delivered pursuant to
SECTION 6(C) of the Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Borrower Pledge
Agreement dated as of August ___, 1998, between the undersigned and NationsBank,
N.A., as successor in interest by merger to NationsBank of Texas, N.A., as
Secured Party (the "PLEDGE AGREEMENT;" capitalized terms defined therein being
used herein as therein defined), and that the Pledged Debt listed on this Pledge
Amendment shall be deemed to be part of the Pledged Debt and shall become part
of the Collateral and shall secure all Secured Obligations.
PROLOGIS TRUST (FORMERLY KNOWN AS
SECURITY CAPITAL INDUSTRIAL TRUST),
a Maryland real estate investment trust, as
Borrower
By:_____________________________________________
Name:_______________________________________
Title:______________________________________
- --------------------------------------------------------------------------------
Debt Issuer Amount of Indebtedness
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE>
EXHIBIT H-2
SUBSIDIARY PLEDGE AGREEMENT
THIS SUBSIDIARY PLEDGE AGREEMENT (this "AGREEMENT") is dated as of August
11, 1998, and entered into by and between _________________, a ________________
("PLEDGOR"), in favor of NATIONSBANK, N.A., a national banking association, for
itself and as agent for and representative of (in such capacity herein called
"SECURED PARTY") the Documentation Agent defined in the Credit Agreement defined
below, the Syndication Agent defined in the Credit Agreement defined below, and
the Lenders defined in the Credit Agreement defined below (collectively, the
"CREDIT PARTIES").
R E C I T A L S
- - - - - - - -
1. Reference is made to that certain Amended and Restated Credit
Agreement dated as of August 11, 1998, by and between PROLOGIS TRUST (formerly
known as SECURITY CAPITAL INDUSTRIAL TRUST), a Maryland real estate investment
trust ("BORROWER"), Secured Party, as Administrative Agent, the Documentation
Agent defined therein, the Syndication Agent defined therein, and the Lenders
defined therein (as renewed, extended, amended, or restated, the "CREDIT
AGREEMENT"), pursuant to which Lenders have made certain Commitments, subject to
the terms and conditions set forth in the Credit Agreement, to make loans to
Borrower.
2. Capitalized terms used herein shall, unless otherwise indicated, have
the respective meanings set forth in the Credit Agreement.
3. Pledgor is the legal and beneficial owner of the intercompany
indebtedness (collectively the "PLEDGED DEBT") described in PART A of SCHEDULE 1
attached hereto and issued by the corporations named therein and issued by the
obligors named therein.
4. To secure the Obligation, Pledgor will grant a security interest in,
among other things, the Pledged Debt pursuant to this agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party, for the benefit of the Credit Parties, as follows:
1. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to Secured
------------------
Party, for the ratable benefit of the Credit Parties, and hereby grants to
Secured Party, for the ratable benefit of the Credit Parties, a security
interest in, all of Pledgor's right, title, and interest in and to the following
(the "COLLATERAL"):
(A) the Pledged Debt and the instruments evidencing the Pledged Debt, and
all interest, cash, instruments, and other property or proceeds from time to
time received, receivable, or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(B) all additional indebtedness from time to time owed to Pledgor by any
obligor on the Pledged Debt (which indebtedness shall be deemed to be part of
the Pledged Debt) and the instruments evidencing such indebtedness, and all
interest, cash, instruments, and other property or proceeds from time to time
received, receivable, or otherwise distributed in respect of or in exchange for
any or all of such indebtedness;
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<PAGE>
(C) all indebtedness from time to time owed to Pledgor by any Person that,
after the date of this Agreement, becomes, as a result of any occurrence, any
Unconsolidated Affiliate of Pledgor (which indebtedness shall be deemed to be
part of the Pledged Debt) if the indebtedness of such Person to Pledgor equals
or exceeds $5,000,000 individually or in the aggregate, and all interest, cash,
instruments, and other property or proceeds from time to time received,
receivable, or otherwise distributed in respect of or in exchange for any or all
of such indebtedness;
(D) to the extent not included in any other paragraph of this SECTION 1,
all other general intangibles (including without limitation, tax refunds and
rights to demand issuance of a certificate evidencing the Collateral), arising
out of or in connection with rights to payment or performance, choses in action,
and judgments taken on any rights or claims included in the Collateral;
(E) all of Pledgor's right, title, and interest in and to all books,
records, ledger cards, files, correspondence, computer programs, tapes, disks,
and related data processing software that at any time evidence or contain
information relating to any of the Collateral or are otherwise necessary or
helpful in the collection thereof or realization thereupon; and
(F) to the extent not covered by CLAUSES (A) through (E) above, all
proceeds of any or all of the foregoing Collateral. For purposes of this
Agreement, the term "PROCEEDS" includes whatever is receivable or received when
Collateral or proceeds are sold, exchanged, collected, or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, proceeds of any indemnity or guaranty payable to Pledgor or Secured
Party from time to time with respect to any of the Collateral.
2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the Collateral
------------------------
is collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand, or otherwise (including the payment of amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. (S) 362(a)), of all obligations and liabilities of every nature
of Pledgor now or hereafter existing under or arising out of or in connection
with the Credit Agreement and the other Loan Documents and all renewals or
extensions thereof, whether for principal, interest (including without
limitation interest that, but for the filing of a petition in bankruptcy with
respect to Pledgor, would accrue on such obligations), fees, expenses,
indemnities, or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created, or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from Secured Party or any
Lender as a preference, fraudulent transfer, or otherwise (all such obligations
and liabilities being the "UNDERLYING DEBT"), and all obligations of every
nature of Pledgor now or hereafter existing under this Agreement (all such
obligations of Pledgor, together with the Underlying Debt, being the "SECURED
OBLIGATIONS").
3. DELIVERY OF COLLATERAL; RELEASE OF COLLATERAL.
---------------------------------------------
(A) All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of Secured Party
pursuant hereto and shall be in suitable form for transfer by delivery or, as
applicable, shall be accompanied by Pledgor's endorsement, where necessary, or
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Secured Party.
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<PAGE>
Secured Party shall have the right, at any time in its discretion and without
notice to Pledgor, to transfer to or to register in the name of Secured Party or
any of its nominees any or all of the Collateral, subject only to the revocable
rights specified in Section 6(a). In addition, Secured Party shall have the
right at any time to exchange certificates or instruments representing or
evidencing Collateral for certificates or instruments of smaller or larger
denominations.
(B) If the indebtedness of any obligor with respect to the Pledged Debt or
any other indebtedness pledged hereunder is less than $5,000,000 individually or
in the aggregate, then, upon the request of Pledgor so long as no Event of
Default exists, Secured Party shall release such Collateral and all certificates
or instruments representing or evidencing such Collateral shall be delivered to
Pledgor.
4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants as
------------------------------
follows:
(A) DUE AUTHORIZATION, ETC. OF COLLATERAL. All of the Pledged Debt has
-------------------------------------
been duly authorized, authenticated or issued, and delivered and is the legal,
valid, and binding obligation of the issuers thereof, subject to the general
laws of insolvency (including the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)), and is not in default.
(B) DESCRIPTION OF COLLATERAL. The Pledged Debt constitutes all of the
-------------------------
issued and outstanding intercompany indebtedness evidenced by a promissory note
of the respective issuers thereof owing to Pledgor.
(C) OWNERSHIP OF COLLATERAL. Pledgor is the legal, record, and beneficial
-----------------------
owner of the Collateral free and clear of any Lien except for the security
interest created by this Agreement.
(D) GOVERNMENTAL AUTHORIZATIONS. No authorization, approval, or other
---------------------------
action by, and no notice to or filing with, any Governmental Authority is
required for either (i) the pledge by Pledgor of the Collateral pursuant to this
Agreement and the grant by Pledgor of the security interest granted hereby, (ii)
the execution, delivery, or performance of this Agreement by Pledgor, or (iii)
the exercise by Secured Party of the voting or other rights, or the remedies in
respect of the Collateral, provided for in this Agreement (except as may be
required in connection with a disposition of Collateral by laws affecting the
offering and sale of securities generally).
(E) PERFECTION. The pledge of the Collateral pursuant to this Agreement
----------
creates a valid and perfected first priority security interest in the
Collateral, securing the payment of the Secured Obligations.
(F) OTHER INFORMATION. All information heretofore, herein or hereafter
-----------------
supplied to Secured Party by or on behalf of Pledgor with respect to the
Collateral is accurate and complete in all material respects.
5. ASSURANCES AND COVENANTS OF PLEDGOR.
-----------------------------------
(A) TRANSFERS AND OTHER LIENS. Pledgor shall not:
-------------------------
(I) except as expressly permitted by the Credit Agreement, sell,
assign (by operation of law or otherwise), pledge, or hypothecate or
otherwise dispose of, or grant any option with respect to, any of the
Collateral; or
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<PAGE>
(II) create or suffer to exist any Lien upon or with respect to any
of the Collateral, except for Permitted Encumbrances.
(B) ADDITIONAL COLLATERAL. Pledgor shall (i) pledge hereunder, immediately
---------------------
upon their issuance, any and all instruments or other evidences of additional
indebtedness from time to time owed to Pledgor by any obligor on the Pledged
Debt, and (ii) pledge hereunder, immediately upon their issuance, any and all
instruments or other evidences of indebtedness from time to time owed to Pledgor
by any Person that after the date of this Agreement becomes, as a result of any
occurrence, any Unconsolidated Affiliate of Pledgor if the indebtedness of such
Person to Pledgor equals or exceeds $5,000,000 individually or in the aggregate.
(C) PLEDGE AMENDMENTS. Pledgor shall, upon obtaining any additional
-----------------
indebtedness required to be pledged hereunder as provided in SECTION 5(B),
promptly (and in any event within five (5) Business Days) deliver to Secured
Party a Pledge and Security Amendment, duly executed by Pledgor, in
substantially the form of EXHIBIT A attached hereto (a "PLEDGE AND SECURITY
AMENDMENT"), in respect of the additional Pledged Debt to be pledged pursuant to
this Agreement. Pledgor hereby authorizes Secured Party to attach each Pledge
and Security Amendment to this Agreement and agrees that all Pledged Debt listed
on any Pledge and Security Amendment delivered to Secured Party shall for all
purposes hereunder be considered Collateral; provided that the failure of
Pledgor to execute a Pledge and Security Amendment with respect to any
additional Pledged Debt pledged pursuant to this Agreement shall not impair the
security interest of Secured Party therein or otherwise adversely affect the
rights and remedies of Secured Party hereunder with respect thereto.
(D) LOSS OR DEPRECIATION OF COLLATERAL. Pledgor shall promptly notify
----------------------------------
Secured Party of any event of which such becomes aware causing material loss or
depreciation in the value of any portion of the Collateral.
(E) WRITTEN NOTICES. Pledgor shall promptly deliver to Secured Party all
---------------
written notices received by it with respect to the Collateral.
(F) TAXES AND ASSESSMENTS. Pledgor shall pay promptly when due all taxes,
---------------------
assessments, and governmental charges or levies imposed upon, and all claims
against, the Collateral, except to the extent the validity thereof is being
contested in good faith and by appropriate proceedings and in which reserves or
other appropriate provisions, if any, as shall be required in conformity with
GAAP, have been made or provided therefor; provided that Pledgor shall in any
event pay such taxes, assessments, charges, levies, or claims not later than
five (5) days prior to the date of any proposed sale under any judgement, writ,
or warrant of attachment entered or filed against Pledgor or any of the
Collateral as a result of the failure to make such payment.
(G) FURTHER ASSURANCES; PERFECTION. Pledgor shall from time to time, at
------------------------------
the expense of Pledgor, promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, Pledgor will:
Page 75
<PAGE>
(I) at the request of Secured Party, mark conspicuously each item
of its records pertaining to the Collateral with a legend in form and
substance satisfactory to Secured Party, indicating that such Collateral is
subject to the security interest granted hereby;
(II) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as Secured Party may reasonably request, in
order to perfect and preserve the security interests granted or purported
to be granted hereby; and
(III) at Secured Party's request, appear in and defend any action or
proceeding that may affect Pledgor's title to or Secured Party's security
interest in all or any part of the Collateral.
(H) AUTHORIZATION TO FILE FINANCING STATEMENTS.
------------------------------------------
(I) Pledgor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral, in such filing offices as Secured Party
shall deem appropriate, and Pledgor shall execute and deliver to Secured
Party such financing or continuation statements, and amendments thereto,
promptly upon the request of Secured Party and shall pay Secured Party's
reasonable costs and expenses incurred in connection therewith.
(II) Pledgor hereby further authorizes Secured Party to file one or
more financing or continuation statements, and amendments thereto, relative
to all or any part of the Collateral without the signature of Pledgor, and
Pledgor agrees that a carbon, photographic, or other reproduction of this
Agreement or of a financing statement signed by Pledgor shall be sufficient
as a financing statement and may be filed as a financing statement in any
and all jurisdictions.
6. RIGHT TO RECEIVE PAYMENTS.
--------------------------
(A) So long as no Event of Default shall have occurred and be continuing:
(I) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all interest paid in
respect of the Collateral; provided, however, that any and all interest
paid or payable other than in cash in respect of, and instruments and other
property received, receivable, or otherwise distributed in respect of, or
in exchange for, any Collateral shall be, and shall forthwith be delivered
to Secured Party to hold as, Collateral and shall, if received by Pledgor,
be received in trust for the benefit of Secured Party, be segregated from
the other property or funds of Pledgor and be forthwith delivered to
Secured Party as Collateral in the same form as so received (with all
necessary endorsements); and
(II) Secured Party shall promptly execute and deliver (or cause to be
executed and delivered) to Pledgor all such instruments as Pledgor may from
time to time reasonably request for the purpose of enabling Pledgor to
receive the principal or interest payments which it is authorized to
receive and retain pursuant to PARAGRAPH (I) above.
(B) Upon the occurrence and during the continuation of an Event of
Default:
Page 76
<PAGE>
(I) all rights of Pledgor to receive the interest payments which it
would otherwise be authorized to receive and retain pursuant to SECTION
6(A)(I) shall cease, and all such rights shall thereupon become vested in
Secured Party who shall thereupon have the sole right to receive and hold
as Collateral such interest payments; and
(II) all principal and interest payments which are received by Pledgor
contrary to the provisions of this SECTION 6(B)(I) shall be received in
trust for the benefit of Secured Party, shall be segregated from other
funds of Pledgor and shall forthwith be paid over to Secured Party as
Collateral in the same form as so received (with any necessary
endorsements).
(C) Notwithstanding any of the foregoing, Pledgor agrees that this
Agreement shall not in any way be deemed to obligate Secured Party or any Lender
to assume any of Pledgor's obligations, duties, expenses, or liabilities arising
out of this Agreement (including, without limitation, Pledgor's obligations as
the holder of the Pledged Debt) or under any and all other agreements now
existing or hereafter drafted or executed (collectively, the "PLEDGOR
OBLIGATIONS") unless Secured Party or Lender otherwise expressly agrees to
assume any or all of said Pledgor Obligations in writing. Without limiting the
generality of the foregoing, neither the grant of the security interest in the
Collateral in favor of Secured Party as provided herein nor the exercise by
Secured Party of any of its rights hereunder nor any action by Secured Party in
connection with a foreclosure on the Collateral shall be deemed to constitute
Secured Party as a partner of any partnership or a member of any limited
liability company; provided, however, that in the event Secured Party or any
Lender elects to become a substituted partner of any partnership or a member of
any limited liability company in place of Pledgor, Secured Party or such Lender,
as the case may be, shall be entitled to and shall become such a substitute
partner or member.
7. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby irrevocably
----------------------------------------
appoints Secured Party as Pledgor's attorney-in-fact, with full authority in the
place and stead of Pledgor and in the name of Pledgor, Secured Party or
otherwise, from time to time in Secured Party's discretion to take any action
and to execute any instrument that Secured Party may deem necessary or advisable
to accomplish the purposes of this Agreement, including without limitation:
(A) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Collateral without the
signature of Pledgor;
(B) subsequent to an Event of Default, to ask, demand, collect, sue for,
recover, compound, receive, and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral;
(C) subsequent to an Event of Default, to receive, endorse, and collect
any instruments made payable to Pledgor representing any principal, or interest
payment, or other distribution in respect of the Collateral or any part thereof
and to give full discharge for the same; and
(D) subsequent to an Event of Default, to file any claims or take any
action or institute any proceedings that Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party with respect to any of the Collateral.
Page 77
<PAGE>
8. SECURED PARTY MAY PERFORM. If Pledgor fails to perform any agreement
-------------------------
contained herein, then Secured Party may itself perform, or cause performance
of, such agreement, and the expenses of Secured Party incurred in connection
therewith shall be payable by Pledgor under SECTION 12(B).
9. STANDARD OF CARE. The powers conferred on Secured Party hereunder are
----------------
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the exercise of reasonable care
in the custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral, it being understood that Secured Party shall have no responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders, or other matters relating to any Collateral,
whether or not Secured Party has or is deemed to have knowledge of such matters,
(b) taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the Collateral) to
preserve rights against any parties with respect to any Collateral, (c) taking
any necessary steps to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Collateral, or (d)
initiating any action to protect the Collateral against the possibility of a
decline in market value. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property consisting of negotiable securities.
10. REMEDIES. If any Event of Default shall have occurred and be
--------
continuing, then Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as adopted in the State of Texas (the "CODE")
(whether or not the Code applies to the affected Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange or broker's board or at any of Secured Party's offices or
elsewhere, for cash, on credit, or for future delivery, at such time or times
and at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Collateral. Secured Party or any Lender may be the
purchaser of any or all of the Collateral at any such sale and Secured Party, as
agent for and representative of Lenders (but not any Lender or Lenders in its or
their respective individual capacities unless Requisite Lenders shall otherwise
agree in writing), shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Secured Party at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
Pledgor, and Pledgor hereby waives (to the extent permitted by applicable law)
all rights of redemption, stay, and/or appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten (10) days' notice to Pledgor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Pledgor hereby waives any claims against Secured Party arising by reason of the
fact that the price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if Secured Party accepts the first offer received and does not offer such
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, then Pledgor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
Page 78
<PAGE>
11. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in
-----------------------
this Agreement, all proceeds received by Secured Party in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
may, in the discretion of Secured Party, be held by Secured Party as Collateral
for, and/or then, or at any time thereafter, applied in full or in part by
Secured Party against, the Secured Obligations in the following order of
priority:
FIRST: To the payment of all costs and expenses of such sale,
collection, or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities, and advances made or incurred by Secured Party in connection
therewith, and all amounts for which Secured Party is entitled to
indemnification hereunder and all advances made by Secured Party hereunder
for the account of Pledgor, and to the payment of all costs and expenses
paid or incurred by Secured Party in connection with the exercise of any
right or remedy hereunder, all in accordance with SECTION 12;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the Credit Parties); and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
12. INDEMNITY AND EXPENSES.
----------------------
(A) Pledgor agrees to indemnify each Credit Party from and against any and
all claims, losses, and liabilities in any way relating to, growing out of, or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses, or liabilities result solely from Secured Party's or
such Lender's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
(B) Pledgor shall pay to Secured Party upon demand the amount of any and
all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder, or (iv) the failure by Pledgor to perform or observe
any of the provisions hereof.
13. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This Agreement shall
-----------------------------------------------
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until the payment in full of all Secured Obligations and
the cancellation or termination of the Commitments, (b) be binding upon Pledgor,
its successors and assigns, and (c) inure, together with the rights and remedies
of Secured Party hereunder, to the benefit of Secured Party and its successors,
transferees, and assigns. Without limiting the generality of the foregoing
CLAUSE (C), but subject to the provisions of SECTION 13.11 of the Credit
Agreement, any Lender may assign or otherwise transfer any of its Rights and
obligations to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to Lenders herein or
otherwise. Upon the indefeasible payment in full of all Secured Obligations and
the cancellation or termination of the Commitments, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert
Page 79
<PAGE>
to Pledgor. Upon any such termination Secured Party will, at Pledgor's expense,
execute and deliver to Pledgor such documents as Pledgor shall reasonably
request to evidence such termination and Pledgor shall be entitled to the
return, upon its request and at its expense, against receipt and without
recourse to Secured Party, of such of the Collateral as shall not have been sold
or otherwise applied pursuant to the terms hereof.
14. SECURED PARTY AS AGENT.
----------------------
(A) Secured Party has been appointed to act as Secured Party hereunder by
Lenders. Secured Party shall be obligated, and shall have the right hereunder,
to make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking any action (including, without
limitation, the release or substitution of Collateral), solely in accordance
with this Agreement and the Credit Agreement.
(B) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to the Credit Agreement shall also constitute
notice of resignation as Secured Party under this Agreement; removal of
Administrative Agent pursuant to the Credit Agreement shall also constitute
removal as Secured Party under this Agreement; and appointment of a successor
Administrative Agent pursuant to the Credit Agreement shall also constitute
appointment of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Administrative Agent under SECTION 12.1 of the
Credit Agreement by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges, and duties of the retiring or removed Secured Party
under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Administrative Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
15. AMENDMENTS; ETC. No amendment, modification, termination, or waiver
----------------
of any provision of this Agreement, and no consent to any departure by Pledgor
from the terms and conditions hereof, shall in any event be effective unless the
same shall be in writing and signed by Secured Party and, in the case of any
such amendment or modification, by Pledgor. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.
16. NOTICES. Any notice or other communication herein required or
-------
permitted to be given shall be in writing and may be personally served, telexed,
or sent by telecopy or United States mail or courier service to each such party
at its address set forth in the Credit Agreement, on the signature pages hereof
or to such other addresses as each such party may in writing hereafter indicate.
Such notice or other communication shall be deemed to have been given when
delivered in person or by courier service, upon receipt of telecopy or telex, or
three (3) Business Days after depositing it in the United states mail with
postage prepaid and properly addressed; provided that any notice, request, or
demand to or upon Administrative Agent or Lenders shall not be effective until
received.
Page 80
<PAGE>
17. FAILURE OR INDULGENCE NOT WAIVER: REMEDIES CUMULATIVE. No failure or
-----------------------------------------------------
delay on the part of Secured Party in the exercise of any power, right, or
privilege hereunder shall impair such power, right, or privilege or be construed
to be a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right, or privilege preclude any other or
further exercise thereof or of any other power, right, or privilege. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
18. SEVERABILITY. In case any provision in or obligation under this
------------
Agreement shall be invalid, illegal, or unenforceable in any jurisdiction, the
validity, legality, and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
19. HEADINGS. SECTION and subsection headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
20. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
--------------------
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS. Unless otherwise defined herein or
in the Credit Agreement, terms used in Articles 8 and 9 of the Code are used
herein as therein defined.
21. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF TEXAS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT PLEDGOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor hereby agrees that service
of all process in any such proceeding in any such court may be made by
registered or certified mail, return receipt requested, to Pledgor at its
address provided on the signature page hereof, such service being hereby
acknowledged by Pledgor to be sufficient for personal jurisdiction in any action
against Pledgor in any such court and to be otherwise effective and binding
service in every respect. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of Secured
Party to bring proceedings against Pledgor in the courts of any other
jurisdiction.
22. WAIVER OF JURY TRIAL. PLEDGOR AND SECURED PARTY HEREBY AGREE TO WAIVE
--------------------
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including without
limitation contract claims, tort claims, breach of duty
Page 81
<PAGE>
claims, and all other common law and statutory claims. Pledgor and Secured Party
each acknowledge that this waiver is a material inducement for Pledgor and
Secured Party to enter into a business relationship, that Pledgor and Secured
Party have already relied on this waiver in entering into this Agreement and
that each will continue to rely on this waiver in their related future dealings.
Pledgor and Secured Party further warrant and represent that each has reviewed
this waiver with its legal counsel, and that each knowingly and voluntarily
waives its jury trial rights following consultation with legal counsel. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS RENEWALS,
SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
23. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGES TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly executed
and delivered by its respective officers thereunto duly authorized as of the
date first written above.
______________________________________, as Pledgor
By:______________________________________________
Name:______________________________________
Title:_____________________________________
Page 83
<PAGE>
SCHEDULE 1
PART A
------
Pledged Debt
- --------------------------------------------------------------------------------
Maker Date Amount
- --------------------------------------------------------------------------------
None
- --------------------------------------------------------------------------------
Page 84
<PAGE>
EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated ___________, 19___, is delivered pursuant to
SECTION 6(C) of the Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Borrower Pledge
Agreement dated as of August ___, 1998, between the undersigned and NationsBank,
N.A., as successor in interest by merger to NationsBank of Texas, N.A., as
Secured Party (the "PLEDGE AGREEMENT;" capitalized terms defined therein being
used herein as therein defined), and that the Pledged Debt listed on this Pledge
Amendment shall be deemed to be part of the Pledged Debt and shall become part
of the Collateral and shall secure all Secured Obligations.
____________________________
as Pledgor
By:___________________________________
Name:______________________________
Title:_____________________________
- --------------------------------------------------------------------------------
Debt Issuer Amount of Indebtedness
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 85
<PAGE>
EXHIBIT 12.1
PROLOGIS TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
-------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Earnings from Operations $ 68,993 $ 53,672 $ 32,371 $ 79,384 $ 47,660 $ 25,066 $ 4,412
Add:
Interest Expense 34,007 24,558 52,704 38,819 32,005 7,568 321
-------- -------- -------- -------- -------- --------- -------
Earnings as Adjusted $103,000 $ 78,230 $ 85,075 $118,203 $ 79,665 $ 32,634 $ 4,733
========= ======== ======== ======== ======== ========= =======
Fixed Charges:
Interest Expense $ 34,007 $ 24,558 $ 52,704 $ 38,819 $ 32,005 $ 7,568 $ 321
Capitalized Interest 8,928 8,505 18,365 16,138 8,599 2,208 98
-------- -------- -------- -------- -------- --------- -------
Total Fixed Charges $ 42,935 $ 33,063 $ 71,069 $ 54,957 $ 40,604 $ 9,776 $ 419
======== ======== ======== ======== ======== ========= =======
Ratio of Earnings to Fixed Charges 2.4 2.4 1.2 2.2 2.0 3.3 11.3
======== ======== ======== ======== ======== ========= =======
</TABLE>
<PAGE>
EXHIBIT 12.2
PROLOGIS TRUST
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED SHARE DIVIDENDS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------------- -------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Earnings from Operations $ 68,993 $ 53,672 $ 32,371 $ 79,384 $ 47,660 $ 25,066 $ 4,412
Add:
Interest Expense 34,007 24,558 52,704 38,819 32,005 7,568 321
-------- -------- -------- --------- -------- -------- -------
Earnings as Adjusted $103,000 $ 78,230 $ 85,075 $ 118,203 $ 79,665 $ 32,634 $ 4,733
======== ======== ======== ========= ======== ======== =======
Combined Fixed Charges and
Preferred Share Dividends:
Interest Expense $ 34,007 $ 24,558 $ 52,704 $ 38,819 $ 32,005 $ 7,568 $ 321
Capitalized Interest 8,928 8,505 18,365 16,138 8,599 2,208 98
-------- -------- -------- --------- -------- -------- -------
Total Fixed Charges 42,935 33,063 71,069 54,957 40,604 9,776 419
Preferred Share Dividends (a) 21,874 17,659 35,318 25,895 6,698 - -
-------- -------- -------- --------- -------- -------- -------
Combined Fixed Charges and
Preferred Share Dividends $ 64,809 $ 50,722 $106,387 $ 80,852 $ 47,302 $ 9,776 $ 419
======== ======== ======== ========= ======== ======== =======
Ratio of Earnings to Combined Fixed
Charges and Preferred Share Dividends 1.6 1.5 (b) 1.5 1.7 3.3 11.3
======== ======== ======== ========= ======== ======== =======
</TABLE>
(a) ProLogis had no preferred shares prior to 1995.
(b) Earnings were insufficient to cover combined fixed charges and preferred
dividends for the year ended December 31, 1997 by $21.3 million due to a
one-time, non-recurring charge of $75.4 million relating to the costs
incurred in acquiring the REIT management and property management companies
from Security Capital Group Incorporated.
<PAGE>
EXHIBIT 15.2
August 13, 1998
Board of Trustees and Shareholders
of ProLogis Trust:
We are aware that ProLogis Trust has incorporated by reference in its
Registration Statement Nos. 33-91366, 33-92490, 333-4961, 333-31421, 333-39797,
333-38515, 333-52867 and 333-26597 its Form 10-Q for the quarter ended June 30,
1998, which includes our report dated August 13, 1998 covering the unaudited
interim financial information contained therein. Pursuant to Regulation C of the
Securities Act of 1933 (the "Act"), that report is not considered a part of the
registration statements prepared or certified by our firm or a report prepared
or certified by our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Form 10-Q for the six months ended June 30, 1998, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 63,250
<SECURITIES> 0
<RECEIVABLES> 386,579
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,259,536
<DEPRECIATION> 209,062
<TOTAL-ASSETS> 3,582,112
<CURRENT-LIABILITIES> 0
<BONDS> 842,193
0
683,118
<COMMON> 1,229
<OTHER-SE> 1,677,051
<TOTAL-LIABILITY-AND-EQUITY> 3,582,112
<SALES> 162,918
<TOTAL-REVENUES> 176,518
<CGS> 0
<TOTAL-COSTS> 13,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,007
<INCOME-PRETAX> 51,397
<INCOME-TAX> 0
<INCOME-CONTINUING> 51,397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,397
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
