<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended JUNE 30, 1997.
--------------
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to .
----- -----
Commission File Number: 1-12478 (Irvine Apartment Communities, Inc.)
0-22569 (Irvine Apartment Communities, L.P.)
IRVINE APARTMENT COMMUNITIES, INC.
IRVINE APARTMENT COMMUNITIES, L.P.
----------------------------------
(Exact Name of Registrants as Specified in Their Charters)
Maryland 33-0698698
Delaware 33-0587829
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification Number)
550 Newport Center Drive, Suite 300, Newport Beach, California 92660
--------------------------------------------------------------------
(Address of principal executive offices)
(714) 720-5500
--------------
(Registrants' telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrants (1) have 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 time as required), and
(2) have been subject to such filing requirements for the past 90 days.
Irvine Apartment Communities, Inc.: Yes X No
---- ----
Irvine Apartment Communities, L.P.: Yes No X
---- ----
(Irvine Apartment Communities, L.P. only subject to such filing requirements
since July 3, 1997)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date. Irvine Apartment Communities,
Inc.: common stock, $0.01 Par Value - 19,815,057 shares as of July 29, 1997;
Irvine Apartment Communities, L.P.: units of partnership interest - 43,901,910
units as of July 29, 1997.
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<PAGE> 2
IRVINE APARTMENT COMMUNITIES, INC.
IRVINE APARTMENT COMMUNITIES, L.P.
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements - Irvine Apartment Communities, Inc.
- Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 1
- Consolidated Statements of Operations for the three and six months
ended June 30, 1997 and 1996 2
- Consolidated Statements of Changes in Shareholders' Equity for
the six months ended June 30, 1997 and 1996 3
- Consolidated Statements of Cash Flows for the six months ended
June 30, 1997 and 1996 4
- Notes to Consolidated Financial Statements 5
Financial Statements - Irvine Apartment Communities, L.P.
- Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 10
- Consolidated Statements of Operations for the three and six months
ended June 30, 1997 and 1996 11
- Consolidated Statements of Changes in Partners' Capital for the
six months ended June 30, 1997 and 1996 12
- Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 13
- Notes to Consolidated Financial Statements 14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Changes in Securities 30
Item 3. Defaults Upon Senior Securities 30
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Item 4. Submission of Matters to a Vote of Shareholders 30
Item 5. Other Information 30
Item 6. Exhibits and Reports on Form 8-K 30
SIGNATURES 32
</TABLE>
<PAGE> 4
PART I - FINANCIAL INFORMATION
Item 1.
Irvine Apartment Communities, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
(in thousands, except per share amounts) 1997 1996
---------- ------------
<S> <C> <C>
Assets (unaudited)
Real estate assets, at cost
Land $ 205,576 $ 176,070
Buildings and improvements 992,858 849,924
---------- ----------
1,198,434 1,025,994
Accumulated depreciation (232,815) (219,193)
---------- ----------
965,619 806,801
Under development, including land 70,941 58,241
---------- ----------
1,036,560 865,042
Cash and cash equivalents 5,278 3,205
Restricted cash 1,452 1,376
Deferred financing costs, net 18,891 20,187
Other assets 13,135 11,188
---------- ----------
$1,075,316 $ 900,998
---------- ----------
Liabilities
Mortgages and notes payable
Line of credit $ 118,000 $ 16,000
Tax-exempt mortgage bond financings 327,479 329,248
Conventional mortgage financings 133,533 134,761
Mortgage notes payable to The Irvine Company 50,817 51,227
Tax-exempt assessment district debt 21,758 21,828
---------- ----------
651,587 553,064
Accounts payable and accrued liabilities 19,997 21,496
Security deposits 7,247 6,094
---------- ----------
678,831 580,654
Minority Interest 186,028 140,327
Shareholders' Equity
Preferred stock, par value $1.00 per share; 10,000 shares authorized;
no shares issued or outstanding
Common stock, par value $0.01 per share; 150,000 shares authorized;
19,815 shares and 18,556 shares issued and outstanding, respectively 198 186
Excess stock, par value $0.01 per share; 160,000 shares authorized;
no shares issued or outstanding
Additional paid-in capital 233,623 202,116
Retained earnings (deficit) (23,364) (22,285)
---------- ----------
210,457 180,017
---------- ----------
$1,075,316 $ 900,998
========== ==========
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
Page 1
<PAGE> 5
Irvine Apartment Communities, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
(unaudited, in thousands, except per share amounts) 1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES
Rental income $85,441 $74,430 $43,349 $38,012
Other income 1,941 1,440 1,001 872
Interest income 571 186 323 83
------- ------- ------- -------
87,953 76,056 44,673 38,967
------- ------- ------- -------
EXPENSES
Property expenses 18,536 16,212 9,350 8,407
Real estate taxes 6,930 6,695 3,465 3,326
Property management fees 2,471 2,168 1,256 1,105
Interest expense, net 13,389 15,092 6,528 7,790
Amortization of deferred financing costs 1,296 1,320 647 658
Depreciation and amortization 13,734 13,557 6,983 6,939
General and administrative 2,988 3,168 1,354 1,586
------- ------- ------- -------
59,344 58,212 29,583 29,811
------- ------- ------- -------
Income before Minority Interest in Income 28,609 17,844 15,090 9,156
Minority interest in income 15,689 9,739 8,281 4,998
------- ------- ------- -------
NET INCOME $12,920 $ 8,105 $ 6,809 $ 4,158
------- ------- ------- -------
SHARE DATA:
Weighted average number of shares outstanding 19,449 16,981 19,798 16,986
Net income per share $ 0.66 $ 0.48 $ 0.34 $ 0.24
Cash distributions declared and paid per share $ 0.730 $ 0.710 $ 0.365 $ 0.355
------- ------- ------- -------
</TABLE>
See accompanying notes.
Page 2
<PAGE> 6
Irvine Apartment Communities, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Six Months Ended June 30,
(unaudited, in thousands) 1997 1996
--------- --------
<S> <C> <C>
COMMON STOCK, PAR VALUE $0.01 PER SHARE
Balance at beginning of period $ 186 $ 170
Net proceeds from common stock offering 11
Proceeds from stock options exercised 1
-------- --------
Balance at end of period $198 $170
======== ========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period $202,116 $170,747
Net proceeds from dividend reinvestment and additional
cash investment plan 255 14
Proceeds from stock options exercised 1,452
Stock awards issued 241 200
Net proceeds from common stock offering 29,559
-------- --------
Balance at end of period $233,623 $170,961
======== ========
RETAINED EARNINGS (DEFICIT)
Balance at beginning of period $(22,285) $(15,484)
Net income 12,920 8,105
Distributions to shareholders (13,999) (12,056)
-------- --------
Balance at end of period $(23,364) $(19,435)
======== ========
-------- --------
TOTAL SHAREHOLDERS' EQUITY $210,457 $151,696
-------- --------
SHARES OF COMMON STOCK OUTSTANDING
Balance at beginning of period 18,556 16,975
Additional shares issued under the dividend reinvestment
and additional cash investment plan 10 2
Stock options exercised 90
Stock awards issued 9 10
Additional shares issued under common stock offering 1,150
-------- --------
Balance at end of period 19,815 16,987
======== ========
</TABLE>
See accompanying notes.
Page 3
<PAGE> 7
IRVINE APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
(unaudited, in thousands) 1997 1996
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $12,920 $ 8,105
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs 1,296 1,320
Depreciation and amortization 13,734 13,557
Minority interest in income 15,689 9,739
Increase (decrease) in cash attributable to changes in assets and liabilities:
Restricted cash (76) (478)
Other assets (2,084) 965
Accounts payable and accrued liabilities (548) 1,841
Security deposits 1,153 639
------- -------
Net Cash Provided by Operating Activities 42,084 35,688
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital improvements to operating real estate assets (1,687) (1,892)
Investment in real estate assets, net of construction payables (174,152) (24,653)
------- -------
Net Cash Used in Investing Activities (175,839) (26,545)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit 123,000 54,900
Payments on lines of credit (21,000) (33,900)
Payments on tax-exempt mortgage bond financings (1,769) (1,646)
Principal payments (1,708) (2,128)
Proceeds from dividend reinvestment and additional cash investment plan 618 77
Proceeds from stock options exercised 1,452
Contributions from The Irvine Company 36,333
Proceeds from common stock offerings 29,969
Distributions to limited partner (55)
Distributions to The Irvine Company (17,013) (14,492)
Distributions to shareholders (13,999) (12,056)
------- -------
Net Cash Provided by (Used in) Financing Activities 135,828 (9,245)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,073 (102)
Cash and Cash Equivalents at Beginning of Period 3,205 4,392
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,278 $ 4,290
------- -------
Supplemental Disclosure of Cash Flow Information
Interest paid, net of amounts capitalized $13,468 $15,087
Tax-exempt assessment district debt assumed $ 0 $ 2,771
======= =======
</TABLE>
See accompanying notes.
Page 4
<PAGE> 8
IRVINE APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION
Irvine Apartment Communities, Inc., a Maryland corporation (the "Company"),
operates as a real estate investment trust ("REIT") under the Internal Revenue
Code of 1986, as amended. At June 30, 1997 the Company had a 45.1% general
partnership interest in and was the sole managing general partner of Irvine
Apartment Communities, L.P. (the "Operating Partnership") which began operations
as of December 8, 1993, the date of the Company's initial public offering of
common stock (the "Offering"). In connection with the Offering, The Irvine
Company transferred 42 apartment communities and a 99% interest in a limited
partnership which owns one apartment community to the Operating Partnership. At
June 30, 1997, The Irvine Company had a 54.7% limited partnership interest in
the Operating Partnership. On February 4, 1997, the Operating Partnership
acquired the assets of Thompson Residential Company, Inc. (see Note 5). The
purchase price was paid by the issuance of 74,523 limited partnership units in
the Operating Partnership. At June 30, 1997, Thompson Residential Company, Inc.
had a 0.2% limited partnership interest in the Operating Partnership. The
Operating Partnership's management and operating decisions are under the
unilateral control of the Company. The Company was incorporated in Delaware on
September 10, 1993. On May 2, 1996, the Company changed its state of
incorporation from Delaware to Maryland.
The Company is a self-administered equity REIT engaged in the operation and
development of apartment communities in Orange County, California and beginning
in 1997, other locations in California. The Company utilizes independent third
party property management and construction management firms. As of June 30, 1997
the Operating Partnership owned 55 apartment communities representing 14,991
operating apartment units and 1,110 units under construction (collectively, the
"Properties"). The Company broke ground on its first "off-Ranch" apartment
community, located in Northern California's Silicon Valley, in May 1997. On June
30, 1997, the Operating Partnership acquired a 923-unit apartment community in
the La Jolla region of north San Diego County (see Note 6). Until July 31, 2020,
the Company has the exclusive right, but not the obligation, to acquire land
from The Irvine Company for development of additional apartment communities on
the Irvine Ranch.
Certain amounts in the 1996 financial statements have been reclassified to
conform with financial statement presentations in 1997.
NOTE 2 - BASIS OF PRESENTATION
The accompanying financial statements include the consolidated accounts of the
Operating Partnership and its financially controlled subsidiary. All
intercompany accounts and transactions have been eliminated in consolidation.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
June 30, 1997 and December 31, 1996 and the revenues and expenses for the three
months and six months ended June 30, 1997 and 1996. Actual results could differ
from those estimates.
Page 5
<PAGE> 9
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. These financial
statements should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
NOTE 3 - MORTGAGES AND NOTES PAYABLE
Line of Credit: In June 1997, the Operating Partnership renewed its $250 million
unsecured revolving credit facility. The line of credit facility has a term of
three years and currently bears interest at LIBOR plus 0.70% or prime. The
credit facility provides for the borrowing interest rates to be adjusted up or
down reflecting credit ratings on the Operating Partnership's senior unsecured
long-term indebtedness (if any). This revolving credit facility, which is
guaranteed by the Company, is available to finance the Operating Partnership's
ongoing rental property development program and for general working capital
needs. The Company and the Operating Partnership must comply with certain
affirmative and negative covenants, including limitations on distributions, and
the maintenance of certain net worth, cash flow and financial ratios. At June
30, 1997 the Company and the Operating Partnership were in compliance with all
of these covenants. As of June 30, 1997, $118 million was outstanding and $132
million was available under the line of credit.
Shelf Registration Statements: On May 14, 1997 the Company filed a shelf
registration statement with the Securities and Exchange Commission providing for
the issuance from time to time of up to $350 million of common stock, preferred
stock, debt securities, and warrants to purchase common stock, preferred stock
and debt securities. The Company plans to use the proceeds raised from any
securities issued under its shelf registration statement for general corporate
purposes, including the development of new apartment communities, acquisitions
and the repayment of existing debt. Availability under the Company's shelf
registration statement was $350 million at June 30, 1997. Concurrently, the
Operating Partnership filed a shelf registration statement with the Securities
and Exchange Commission providing for the issuance from time to time of up to
$350 million of debt securities. The Operating Partnership plans to use the
proceeds raised from any securities issued under its shelf registration
statement for general corporate purposes, including the development of new
apartment communities, acquisitions and the repayment of existing debt.
Availability under the Operating Partnership's shelf registration statement was
$350 million at June 30, 1997.
NOTE 4 - MINORITY INTEREST AND SHAREHOLDERS' EQUITY
On February 20, 1997 the Company sold, pursuant to its shelf registration
statement filed on May 8, 1995, 1.15 million shares of common stock at $27.50
per share. Concurrently, The Irvine Company (see Note 7), pursuant to its rights
under the partnership agreement, purchased 1.39 million additional limited
partnership units at $26.06 per unit (which is equal to the public offering
price of the common stock less an amount equivalent to the underwriting
discount) which are exchangeable for common stock on a one for one basis,
subject to adjustment and certain limitations. The proceeds from the two
transactions totaled $66 million and were used to repay all indebtedness
outstanding under the revolving line of credit, and will be used for general
corporate purposes, including ongoing development activities on and off the
Irvine Ranch.
Page 6
<PAGE> 10
The Company paid cash distributions of $0.365 per common share on February 28
and May 30, 1997. On July 25, 1997 the Company declared a cash dividend of
$0.375 per common share that is payable on August 29, 1997. During the first and
second quarters of 1996, the Company paid a cash dividend of $0.355 per common
share.
As of June 30, 1997 the Company had $350 million of availability under its shelf
registration statement, which provides for the issuance from time to time of
common stock, preferred stock, debt securities, and warrants to purchase common
stock, preferred stock and debt securities (see Note 3).
The computation of primary earnings per share is based on a weighted average of
19,789,196 and 19,448,832 shares of common stock outstanding during the three
and six months ended June 30, 1997, respectively. The weighted average number of
shares excludes the effect of the conversion of partnership units into shares.
Such a conversion would increase the weighted average number of shares
outstanding to 43,880,924 and 43,060,050 for the three and six months ended June
30, 1997, respectively.
RECONCILIATION OF PARTNERSHIP UNITS OUTSTANDING
<TABLE>
<CAPTION>
(in thousands) Six Months Ended June 30, 1997 Six Months Ended June 30, 1996
------------------------------------- --------------------------------
The Irvine The Irvine
Company Company Other Total Company Company Total
-------- --------- -------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period 18,556 22,292 40,848 16,975 20,397 37,372
Stock awards issued and options exercised 99 99 10 10
Dividend reinvestment plan 10 13 23 2 2 4
Common stock offering and related cash
contribution from The Irvine Company 1,150 1,394 2,544
Acquisition of Thompson Residential
assets 75 75
Contributions of property by The Irvine
Company 313 313 28 28
-------- ------- ----- ------- --------- ------ ------
Balance at end of period 19,815 24,012 75 43,902 16,987 20,427 37,414
-------- ------- ----- ------- --------- ------ ------
Ownership interest at end of period 45.1% 54.7% 0.2% 100% 45.4% 54.6% 100%
======== ======= ===== ======= ========= ====== ======
</TABLE>
The following tables represent a reconciliation of the minority interest
balances and the computation of the minority interest in income.
RECONCILIATION OF MINORITY INTEREST
<TABLE>
<CAPTION>
Six Months Ended June 30,
(in thousands) 1997 1996
------------ ----------
<S> <C> <C>
Balance at beginning of period $140,327 $109,133
Minority interest in income 15,689 9,739
Distributions (17,068) (14,492)
Cash contributions 36,333
Contributions of property 8,408 572
Acquisition of Thompson Residential assets 2,000
Contributions under dividend reinvestment plan 339 42
--------- --------
Balance at end of period $186,028 $104,994
--------- --------
</TABLE>
Page 7
<PAGE> 11
COMPUTATION OF MINORITY INTEREST IN INCOME
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
(in thousands) 1997 1996 1997 1996
------- ------- ------- --------
<S> <C> <C> <C> <C>
Income before minority interest $28,609 $17,844 $15,090 $9,156
Income allocated to the Company based on
its ownership interest (12,920) (8,105) (6,809) (4,158)
------- -------- ------- ------
Minority interest in income $15,689 $9,739 $8,281 $4,998
======= ======== ======= ======
</TABLE>
NOTE 5 - ACQUISITION OF THOMPSON RESIDENTIAL ASSETS
On February 4, 1997, the Operating Partnership acquired for $2 million the
assets of Thompson Residential Company, Inc. ("TRC"), a privately held, Northern
California-based multi-family development company. Included in the purchase were
options to purchase three development sites located in Northern California's
Silicon Valley. The purchase price was paid by the issuance of 74,523 limited
partnership units in the Operating Partnership, exchangeable for common stock of
the Company, with the price per unit of $26.838 which was based on the average
closing price of the Company's common stock for the 10 trading days preceding
the acquisition's closing date. In addition, TRC may be paid up to an additional
$2 million in cash or limited partnership units if the apartment community (The
Hamptons) achieves certain performance targets. The three senior real estate
executives at TRC have also joined the Company with primary responsibility for
the Company's operations outside of the Irvine Ranch.
NOTE 6 - ACQUISITION OF THE VILLAS OF RENAISSANCE
On June 30, 1997 the Operating Partnership acquired a 923-unit apartment
community located in the La Jolla region of north San Diego County from an
unrelated third party for $127.0 million. $118.0 million of the purchase price
was funded by borrowings under the Operating Partnership's $250 million
unsecured line of credit (see Note 3) and $9.0 million was funded from cash on
hand. A more detailed description of the transaction is described in the
Company's Current Report on Form 8-K filed with the Securities Exchange
Commission on July 15, 1997, as amended on July 23, 1997.
NOTE 7 - CERTAIN TRANSACTIONS WITH RELATED PARTIES
Included in general and administrative expenses are charges from The Irvine
Company pursuant to an administrative services agreement covering services for
risk management, income taxes and other services of $66,000 and $53,000 for the
six months ended June 30, 1997 and 1996, respectively, and $37,000 and $25,000
for the three months ended June 30, 1997 and 1996, respectively. The Irvine
Company and the Company jointly purchase employee health care insurance and
property and casualty insurance. In addition, the Company incurred rent totaling
$172,000 and $155,000 for the six months ended June 30, 1997 and 1996,
respectively, and $85,000 and $78,000 for the three months ended June 30, 1997
and 1996, respectively, related to leases with The Irvine Company that expire at
the end of 1997 and 1998. For the six months ended June 30, 1997 The Irvine
Company contributed $339,000, or the maximum allowable, in connection with stock
issuances under the dividend reinvestment and additional cash investment plan.
On February 10, 1997, the Company acquired a land site for $8.4 million from The
Irvine Company for the development of 316 rental units pursuant to the Land
Rights Agreement between the Company and The Irvine Company. The Company's board
committee of independent directors approved the purchase in accordance with
Page 8
<PAGE> 12
the Land Rights Agreement. The purchase price was paid through the issuance of
313,439 additional limited partnership units in the Operating Partnership to The
Irvine Company. Pursuant to the terms of the acquisition, a portion of the
limited partnership units in the Operating Partnership are subject to refund if
the apartment community developed on the site does not achieve a 10% unleveraged
return on costs for the first twelve months following stabilized occupancy.
Concurrent with the Company's common stock offering on February 20, 1997 (see
Note 4), The Irvine Company, pursuant to its rights under the partnership
agreement, purchased 1.39 million limited partnership units at a price equal to
the public offering price of $26.06 per unit (which is equal to the public
offering price of the common stock less an amount equivalent to the underwriting
discount) which are exchangeable for common stock on a one for one basis,
subject to adjustment and certain limitations.
One of the Company's directors is chairman of a bank which participates in the
Company's line of credit. Based on the bank's percentage participation in the
credit facility, the Company estimates that the amount of interest and fees paid
to the bank totaled $76,000 and $30,000 in the first half of 1997 and the three
months ended June 30, 1997, respectively. Interest and fees for the
corresponding periods in 1996 were $170,000 and $113,000, respectively.
Page 9
<PAGE> 13
Irvine Apartment Communities, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
(in thousands, except per unit amounts) 1997 1996
---------- ---------
Assets (unaudited)
<S> <C> <C>
Real estate assets, at cost
Land $205,576 $176,070
Buildings and improvements 992,858 849,924
---------- ---------
1,198,434 1,025,994
Accumulated depreciation (232,815) (219,193)
---------- ---------
965,619 806,801
Under development, including land 70,941 58,241
---------- ---------
1,036,560 865,042
Cash and cash equivalents 5,278 3,205
Restricted cash 1,452 1,376
Deferred financing costs, net 18,891 20,187
Other assets 13,135 11,188
---------- ---------
$1,075,316 $900,998
========== =========
Liabilities
Mortgages and notes payable
Line of credit $118,000 $16,000
Tax-exempt mortgage bond financings 327,479 329,248
Conventional mortgage financings 133,533 134,761
Mortgage notes payable to The Irvine Company 50,817 51,227
Tax-exempt assessment district debt 21,758 21,828
---------- ---------
651,587 553,064
Accounts payable and accrued liabilities 19,997 21,496
Security deposits 7,247 6,094
---------- ---------
678,831 580,654
Partners' Capital
43,902 partnership units outstanding at June 30, 1997
and 40,848 at December 31, 1996.
General partner, 19,815 partnership units at June 30, 1997
and 18,556 at December 31, 1996. 210,457 180,017
Limited partners, 24,087 partnership units at June 30, 1997
and 22,292 at December 31, 1996. 186,028 140,327
---------- ---------
396,485 320,344
---------- ---------
$1,075,316 $900,998
========== =========
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
Page 10
<PAGE> 14
Irvine Apartment Communities, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
(unaudited, in thousands, except per unit amounts) 1997 1996 1997 1996
------- ------- ------- ------
<S> <C> <C> <C> <C>
Revenues
Rental income $85,441 $74,430 $43,349 $38,012
Other income 1,941 1,440 1,001 872
Interest income 571 186 323 83
------- ------- ------- ------
87,953 76,056 44,673 38,967
------- ------- ------- ------
Expenses
Property expenses 18,536 16,212 9,350 8,407
Real estate taxes 6,930 6,695 3,465 3,326
Property management fees 2,471 2,168 1,256 1,105
Interest expense, net 13,389 15,092 6,528 7,790
Amortization of deferred financing costs 1,296 1,320 647 658
Depreciation and amortization 13,734 13,557 6,983 6,939
General and administrative 2,988 3,168 1,354 1,586
------- ------- ------- ------
59,344 58,212 29,583 29,811
------- ------- ------- ------
Net Income $28,609 $17,844 $15,090 $9,156
======= ======= ======= ======
Allocation of Net Income:
General Partner $12,920 $8,105 $6,809 $4,158
Limited Partners $15,689 $9,739 $8,281 $4,998
======= ======= ======= ======
PARTNERSHIP UNIT DATA:
Weighted average number of partnership units outstanding 43,060 37,397 43,881 37,411
Net income per unit $0.66 $0.48 $0.34 $0.24
Cash distributions declared and paid per unit $0.730 $0.710 $0.365 $0.355
====== ====== ====== ======
</TABLE>
See accompanying notes.
Page 11
<PAGE> 15
Irvine Apartment Communities, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Irvine Apartment
(unaudited, in thousands) Communities, Inc. Limited Partners Total
----------------- ---------------- ---------
<S> <C> <C> <C> <C>
Partners' Capital
Balance at January 1, 1996 $155,433 $109,133 $264,566
Net income 8,105 9,739 17,844
Contributions 214 614 828
Distributions (12,056) (14,492) (26,548)
-------- -------- --------
Balance at June 30, 1996 $151,696 $104,994 $256,690
-------- -------- --------
Balance at January 1, 1997 $180,017 $140,327 $320,344
Net income 12,920 15,689 28,609
Contributions 31,519 47,080 78,599
Distributions (13,999) (17,068) (31,067)
-------- -------- --------
Balance at June 30, 1997 $210,457 $186,028 $396,485
-------- -------- --------
Partnership Units Outstanding
Balance at January 1, 1996 16,975 20,397 37,372
Additional partnership units issued 12 30 42
-------- -------- --------
Balance at June 30, 1996 16,987 20,427 37,414
-------- -------- --------
Balance at January 1, 1997 18,556 22,292 40,848
Additional partnership units issued 1,259 1,795 3,054
-------- -------- --------
Balance at June 30, 1997 19,815 24,087 43,902
======== ======== ========
</TABLE>
See accompanying notes.
Page 12
<PAGE> 16
Irvine Apartment Communities, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
(unaudited, in thousands) 1997 1996
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $28,609 $17,844
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred financing costs 1,296 1,320
Depreciation and amortization 13,734 13,557
Increase (decrease) in cash attributable to changes
in assets and liabilities:
Restricted cash (76) (478)
Other assets (2,084) 965
Accounts payable and accrued liabilities (548) 1,841
Security deposits 1,153 639
-------- --------
Net Cash Provided by Operating Activities 42,084 35,688
-------- --------
Cash Flows from Investing Activities
Capital improvements to operating real estate assets (1,687) (1,892)
Investment in real estate assets, net of construction payables (174,152) (24,653)
-------- --------
Net Cash Used in Investing Activities (175,839) (26,545)
-------- --------
Cash Flows from Financing Activities
Borrowings under lines of credit 123,000 54,900
Payments on lines of credit (21,000) (33,900)
Payments on tax-exempt mortgage bond financings (1,769) (1,646)
Principal payments (1,708) (2,128)
Contributions from partners 68,372 77
Distributions to partners (31,067) (26,548)
-------- --------
Net Cash Provided by (Used in) Financing Activities 135,828 (9,245)
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 2,073 (102)
Cash and Cash Equivalents at Beginning of Period 3,205 4,392
-------- --------
Cash and Cash Equivalents at End of Period $5,278 $4,290
-------- --------
Supplemental Disclosure of Cash Flow Information
Interest paid, net of amounts capitalized $13,468 $15,087
Tax-exempt assessment district debt assumed $0 $2,771
======== ========
</TABLE>
See accompanying notes.
Page 13
<PAGE> 17
IRVINE APARTMENT COMMUNITIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION
Irvine Apartment Communities, L.P., a Delaware limited partnership (the
"Operating Partnership"), was formed on November 15, 1993. In connection with an
initial public offering of common shares on December 8, 1993, Irvine Apartment
Communities, Inc. (the "Company") obtained a general partnership interest in and
became the sole managing general partner of the Operating Partnership. The
Irvine Company transferred 42 apartment communities and a 99% interest in a
limited partnership which owns one apartment community to the Operating
Partnership. At June 30, 1997, the Company had a 45.1% general partnership
interest and The Irvine Company had a 54.7% limited partnership interest in the
Operating Partnership. On February 4, 1997, the Operating Partnership acquired
the assets of Thompson Residential Company, Inc. (see Note 5). The purchase
price was paid by the issuance of 74,523 partnership units in the Operating
Partnership. At June 30, 1997, Thompson Residential Company, Inc. had a 0.2%
limited partnership interest in the Operating Partnership. The Operating
Partnership's management and operating decisions are under the unilateral
control of the Company.
The Operating Partnership owns, operates and develops apartment communities in
Orange County, California and beginning in 1997, other locations in California.
The Operating Partnership utilizes independent third party property management
and construction management firms. As of June 30, 1997 the Operating Partnership
owned 55 apartment communities representing 14,991 operating apartment units and
1,110 units under construction (collectively, the "Properties"). The Operating
Partnership broke ground on its first "off-Ranch" apartment community, located
in Northern California's Silicon Valley, in May 1997. On June 30, 1997, the
Operating Partnership acquired a 923-unit apartment community in the La Jolla
region of north San Diego County (see Note 6). Until July 31, 2020, the
Operating Partnership has the exclusive right, but not the obligation, to
acquire land from The Irvine Company for development of additional apartment
communities on the Irvine Ranch.
NOTE 2 - BASIS OF PRESENTATION
Profits and losses are generally allocated to the Company and to the limited
partners based upon their respective ownership interests in the Operating
Partnership. Under the terms of the partnership agreement, all costs incurred by
the Company relating to the ownership of its interest in and operation of the
Operating Partnership, including the compensation of its officers and employees,
stock incentive plans, director fees and the costs and expenses of being a
public company, are paid by the Operating Partnership. In addition, The Irvine
Company has the right, but not the obligation, to match on the same terms and
conditions any capital contributions made by the Company based on the pro rata
ownership interest at the time of such contribution.
The accompanying financial statements include the consolidated accounts of the
Operating Partnership and its financially controlled subsidiary. All
intercompany accounts and transactions have been eliminated in consolidation.
Page 14
<PAGE> 18
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
June 30, 1997 and December 31, 1996 and the revenues and expenses for the three
months and six months ended June 30, 1997 and 1996. Actual results could differ
from those estimates.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. These financial
statements should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in the Operating Partnership's
Registration Statement on Form 10 filed on May 14, 1997.
NOTE 3 - MORTGAGES AND NOTES PAYABLE
Line of Credit: In June 1997, the Operating Partnership renewed its $250 million
unsecured revolving credit facility. The line of credit facility has a term of
three years and currently bears interest at LIBOR plus 0.70% or prime. The
credit facility provides for the borrowing interest rates to be adjusted up or
down reflecting credit ratings on the Operating Partnership's senior unsecured
long-term indebtedness (if any). This revolving credit facility, which is
guaranteed by the Company, is available to finance the Operating Partnership's
ongoing rental property development program and for general working capital
needs. The Company and the Operating Partnership must comply with certain
affirmative and negative covenants, including limitations on distributions, and
the maintenance of certain net worth, cash flow and financial ratios. At June
30, 1997 the Company and the Operating Partnership were in compliance with all
of these covenants. As of June 30, 1997, $118 million was outstanding and $132
million was available under the line of credit.
Shelf Registration Statements: On May 14, 1997 the Company filed a shelf
registration statement with the Securities and Exchange Commission providing for
the issuance from time to time of up to $350 million of common stock, preferred
stock, debt securities, and warrants to purchase common stock, preferred stock
and debt securities. This registration statement replaced the Company's previous
registration statement. The Company plans to use the proceeds raised from any
securities issued under its shelf registration statement for general corporate
purposes, including the Company's development of new apartment communities,
acquisitions and the repayment of existing debt. Availability under the
Company's shelf registration statement was $350 million at June 30, 1997.
Concurrently, the Operating Partnership filed a shelf registration statement
with the Securities and Exchange Commission providing for the issuance from time
to time of up to $350 million of debt securities. The Operating Partnership
plans to use the proceeds raised from any securities issued under its shelf
registration statement for general corporate purposes, including the development
of new apartment communities, acquisitions and the repayment of existing debt.
Availability under the Operating Partnership's shelf registration statement was
$350 million at June 30, 1997.
NOTE 4 - PARTNERS' CAPITAL
On February 20, 1997 the Company sold, pursuant to its shelf registration
statement filed on May 8, 1995, 1.15 million shares of common stock at $27.50
per share. Concurrently, The Irvine Company (see Note 7), pursuant to its rights
under the partnership agreement, purchased 1.39 million additional partnership
units at $26.06 per unit (which is equal to the public offering price of the
Company's common stock less an amount
Page 15
<PAGE> 19
equivalent to the underwriting discount) which are exchangeable for the
Company's common stock on a one for one basis, subject to adjustment and certain
limitations. The proceeds from the two transactions totaled $66 million and were
used to repay all indebtedness outstanding under the revolving line of credit,
and will be used for general corporate purposes, including ongoing development
activities on and off the Irvine Ranch.
The Operating Partnership paid cash distributions of $0.365 per partnership unit
on February 28 and May 30, 1997. On July 25, 1997 the Operating Partnership
declared a cash distribution of $0.375 per partnership unit that is payable on
August 29, 1997. During each of the first and second quarters of 1996, the
Operating Partnership paid a cash distribution of $0.355 per partnership unit.
As of June 30, 1997 the Company had $350 million of availability under its shelf
registration statement, which provides for the issuance from time to time of
common stock, preferred stock, debt securities, and warrants to purchase common
stock, preferred stock and debt securities (see Note 3).
The computation of primary earnings per unit is based on a weighted average of
43,880,924 and 43,060,050 units of partnership interest outstanding during the
three and six months ended June 30, 1997, respectively.
RECONCILIATION OF PARTNERSHIP UNITS OUTSTANDING
<TABLE>
<CAPTION>
(in thousands) Six Months Ended June 30, 1997 Six Months Ended June 30, 1996
------------------------------------------ --------------------------------
Irvine Irvine
Apartment Apartment
Communities, The Irvine Communities, The Irvine
Inc. Company Other Total Inc. Company Total
------------- ---------- ------- ------- ------------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period 18,556 22,292 40,848 16,975 20,397 37,372
Stock awards issued and options exercised 99 99 10 10
Dividend reinvestment plan 10 13 23 2 2 4
Common stock offering and related cash
contribution from The Irvine Company 1,150 1,394 2,544
Acquisition of Thompson Residential 75 75
assets
Contributions of property by The Irvine
Company 313 313 28 28
------ ------ ---- ------ ------ ------ ------
Balance at end of period 19,815 24,012 75 43,902 16,987 20,427 37,414
------ ------ ---- ------ ------ ------ ------
Ownership interest at end of period 45.1% 54.7% 0.2% 100% 45.4% 54.6% 100%
====== ====== ==== ====== ====== ====== ======
</TABLE>
NET INCOME ALLOCATION
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
-------------------------- ---------------------------
(in thousands) 1997 1996 1997 1996
------- ------ ------ ------
<S> <C> <C> <C> <C>
Income allocated to The Irvine Company
based on its ownership interest $15,648 $9,739 $8,256 $4,998
Income allocated to Thompson Residential
Company, Inc. based on its ownership
interest 41 25
Income allocated to Irvine Apartment
Communities, Inc. based on its ownership
interest 12,920 8,105 6,809 4,158
------- ------ ------- ------
Net Income $28,609 17,844 $15,090 $9,156
------- ------ ------- ------
</TABLE>
Page 16
<PAGE> 20
NOTE 5 - ACQUISITION OF THOMPSON RESIDENTIAL ASSETS
On February 4, 1997, the Operating Partnership acquired for $2 million the
assets of Thompson Residential Company, Inc. ("TRC"), a privately held, Northern
California-based multi-family development company. Included in the purchase were
options to purchase three development sites located in Northern California's
Silicon Valley. The purchase price was paid by the issuance of 74,523
partnership units in the Operating Partnership, exchangeable for common stock of
the Company, with the price per unit of $26.838 which was based on the average
closing price of the Company's common stock for the 10 trading days preceding
the acquisition's closing date. In addition, TRC may be paid up to an additional
$2 million in cash or limited partnership units if the apartment community (The
Hamptons) achieves certain performance targets. The three senior real estate
executives at TRC have also joined the Company with primary responsibility for
the Operating Partnership's operations outside of the Irvine Ranch.
NOTE 6 - ACQUISITION OF THE VILLAS OF RENAISSANCE
On June 30, 1997 the Operating Partnership acquired a 923-unit apartment
community located in the La Jolla region of north San Diego County from an
unrelated third party for $127.0 million. $118.0 million of the purchase price
was funded by borrowings under the Operating Partnership's $250 million
unsecured line of credit (see Note 3) and $9.0 million was funded from cash on
hand. A more detailed description of the transaction is described in the
Operating Partnership's Current Report on Form 8-K filed with the Securities
Exchange Commission on July 15, 1997, as amended on July 23, 1997.
NOTE 7 - CERTAIN TRANSACTIONS WITH RELATED PARTIES
Substantially all costs incurred by the Company are borne by the Operating
Partnership. Included in general and administrative expenses are charges from
The Irvine Company pursuant to an administrative services agreement covering
services for risk management, income taxes and other services of $66,000 and
$53,000 for the six months ended June 30, 1997 and 1996, respectively and
$37,000 and $25,000 for the three months ended June 30, 1997 and 1996,
respectively. The Irvine Company and the Operating Partnership jointly purchase
employee health care insurance and property and casualty insurance. In addition,
the Operating Partnership incurred rent totaling $172,000 and $155,000 for the
six months ended June 30, 1997 and 1996 and $85,000 and $78,000 for the three
months ended June 30, 1997 and 1996, respectively, related to leases with The
Irvine Company that expire in 1997 and 1998. For the six months ended June 30,
1997 The Irvine Company contributed $339,000, or the maximum allowable, in
connection with stock issuances under the dividend reinvestment and additional
cash investment plan.
On February 10, 1997, the Operating Partnership acquired a land site for $8.4
million from The Irvine Company for the development of 316 rental units pursuant
to the Land Rights Agreement between the Operating Partnership and The Irvine
Company. The Company's board committee of independent directors approved the
purchase in accordance with the Land Rights Agreement. The purchase price was
paid through the issuance of 313,439 additional limited partnership units to The
Irvine Company. Pursuant to the terms of the acquisition, a portion of the
limited partnership units in the Operating Partnership are subject to refund if
the apartment community developed on the site does not achieve a 10% unleveraged
return on costs for the first twelve months following stabilized occupancy.
Concurrent with the Company's common stock offering on February 20, 1997 (see
Note 4), The Irvine Company, pursuant to its rights under the partnership
agreement, purchased 1.39 million limited partnership units at a price equal to
the public offering price of $26.06 per unit (which is equal to the public
offering price of the Company's
Page 17
<PAGE> 21
common stock less an amount equivalent to the underwriting discount) which are
exchangeable for the Company's common stock on a one for one basis, subject to
adjustment and certain limitations.
One of the Company's directors is chairman of a bank which participates in the
Operating Partnership's line of credit. Based on the bank's percentage
participation in the credit facility, the Operating Partnership estimates that
the amount of interest and fees paid to the bank totaled $76,000 and $30,000 in
the first half of 1997 and three months ended June 30, 1997, respectively.
Interest and fees for the corresponding periods in 1996 were $170,000 and
$113,000, respectively.
Page 18
<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion compares the activities of the Company for the three
month and six month periods ended June 30, 1997 (unaudited) with the activities
of the Company for the three month and six month periods ended June 30, 1996
(unaudited). As used herein, the term "Company" includes Irvine Apartment
Communities, Inc. and the Operating Partnership (Irvine Apartment Communities,
L.P.).
The following discussion should be read in conjunction with all the financial
statements appearing elsewhere in this report, as well as the information
presented in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 and the Operating Partnership's Registration Statement on Form
10.
Certain information set forth below is forward looking and involves various
risks and uncertainties. Such information is based upon a number of estimates
and assumptions that inherently are subject to business, economic and
competitive uncertainties and contingencies, many of which are beyond the
Company's control.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996.
The Company's income before minority interest in income (and the Operating
Partnership's net income) was $15.1 million for the three months ended June 30,
1997, up from $9.2 million for the same period of 1996. The improvement was due
to the contribution of newly delivered rental units from the Company's
development program, as well as an increase in revenues within its stabilized
portfolio achieved through higher rental rates slightly offset by lower
occupancy (see Selected Operating Data on page 29).
Page 19
<PAGE> 23
REVENUE AND EXPENSE DATA
<TABLE>
<CAPTION>
Three Months Ended June 30,
(dollars in thousands) 1997 1996
------- -------
<S> <C> <C>
COMMUNITIES STABILIZED MORE THAN TWO YEARS (A)
Number of communities 43 43
Number of units at end of period 11,334 11,334
Operating revenues $34,757 $33,210
Property expenses $7,772 $7,339
Real estate taxes $2,632 $2,650
Property management fees $1,004 $959
Depreciation and amortization of real estate assets $5,158 $5,223
COMMUNITIES STABILIZED LESS THAN TWO YEARS (B)
Number of communities 5 5
Number of units at end of period 2,207 2,077
Operating revenues $7,818 $5,674
Property expenses $1,256 $1,068
Real estate taxes $699 $676
Property management fees $204 $146
Depreciation and amortization of real estate assets $1,434 $1,670
LEASE-UP COMMUNITIES (C)
Number of communities 2
Number of units at end of period 527
Operating revenues $1,692
Property expenses $310
Real estate taxes $131
Property management fees $48
Depreciation and amortization of real estate assets $333
</TABLE>
(A) Excludes The Villas of Renaissance (see Note 6), an apartment community
acquired by the Company on June 30, 1997.
(B) Represents five communities that began leasing in 1995 and reached
stabilized occupancy (95%) at various dates in 1996.
(C) Represents Baypointe and Santa Maria communities that began leasing in 1996,
completed deliveries in June 1997, and reached stabilized occupancy (95%) in
July 1997.
OPERATING REVENUES (rental and other income) increased to $44.4 million in the
second quarter of 1997, up from $38.9 million in the same period of 1996.
Operating revenues rose as a result of higher rental rates and the contribution
of newly delivered rental units from five properties which achieved
stabilization during 1996 and two new lease-up communities. In total, these new
units added $9.5 million to operating revenues in the second quarter of 1997
compared to $5.7 million in the second quarter of 1996. Within communities
stabilized more than two years, operating revenues increased 4.7% from the
second quarter of 1996, as a result of improvement in average monthly rental
rates and higher non-rental income, slightly offset by a decrease in physical
occupancy to 95.0% from 95.2%. Average monthly rental rates increased to $1,064
in the second quarter of 1997 from $1,001 in the year-earlier quarter. Healthy
job growth in the Company's marketplace has been a key factor in the upward
trend in rental rates.
PROPERTY EXPENSES increased to $9.4 million in the second quarter of 1997 from
$8.4 million in the second quarter of 1996. This increase reflects the added
expenses of newly delivered rental units from five properties which achieved
stabilization during 1996 and two new lease-up communities. Property expenses
within communities stabilized more than two years increased by $0.5 million to
$7.8 million in the second quarter of 1997 from $7.3 million a year ago. In the
second quarter of 1997, average monthly property expenses increased to $229 per
Page 20
<PAGE> 24
unit from $216 in the second quarter of 1996. Properties stabilized less than
two years added $1.3 million to property expenses in the second quarter of 1997
and $1.1 million a year ago. Lease-up properties added $0.3 million to 1997
second quarter property expenses.
REAL ESTATE TAXES totaled $3.5 million in the second quarter of 1997 compared to
$3.3 million in the second quarter of 1996. Taxes increased in the second
quarter of 1997 due to the addition of rental units from lease-up properties,
partially offset by a small reduction in assessed values.
PROPERTY MANAGEMENT FEES increased to $1.3 million in the second quarter of 1997
from $1.1 million a year ago. Management fees increased in the second quarter of
1997 due to the addition of rental units and an increase in revenue from
communities stabilized more than two years.
NET INTEREST EXPENSE decreased to $6.5 million in the second quarter of 1997
from $7.8 million in the second quarter of 1996. The decrease was largely due to
a lower level of borrowings under the revolving line of credit. The Company
capitalizes interest on projects actively under development using average
qualifying asset balances and applicable weighted average interest rates. The
average monthly qualifying asset balances for projects under development in the
second quarter of 1997 and 1996 were approximately $66.0 million and $33.5
million, respectively. Interest capitalized totaled $1.4 million in the second
quarter of 1997 compared to $0.7 million in the second quarter of 1996. Interest
incurred was $7.9 million in the second quarter of 1997 compared to $8.5 million
in the second quarter of 1996.
AMORTIZATION OF DEFERRED FINANCING COSTS was comparable in the second quarters
of 1997 and 1996.
DEPRECIATION AND AMORTIZATION EXPENSE of $7.0 million in the second quarter of
1997 was comparable to the second quarter of 1996.
GENERAL AND ADMINISTRATIVE EXPENSE of $1.4 million was $0.2 million lower than
the same quarter of the prior year due to lower executive compensation expenses.
The Company's chief executive officer resigned in February 1997. A new chief
executive officer was named in July 1997.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996.
The Company's income before minority interest in income (and the Operating
Partnership's net income) was $28.6 million for the six months ended June 30,
1997, up from $17.8 million for the same period of 1996. The improvement was due
to the contribution of newly delivered rental units from the Company's
development program, as well as an increase in revenues within its stabilized
portfolio achieved through higher occupancy and higher rental rates (see
Selected Operating Data on page 29).
Page 21
<PAGE> 25
REVENUE AND EXPENSE DATA
<TABLE>
<CAPTION>
Six Months Ended June 30,
(dollars in thousands) 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMUNITIES STABILIZED MORE THAN TWO YEARS (a)
Number of communities 43 43
Number of units at end of period 11,334 11,334
Operating revenues $69,259 $65,705
Property expenses $15,595 $14,410
Real estate taxes $5,364 $5,472
Property management fees $1,999 $1,900
Depreciation and amortization of real estate assets $10,304 $10,386
COMMUNITIES STABILIZED LESS THAN TWO YEARS (b)
Number of communities 5 5
Number of units at end of period 2,207 2,077
Operating revenues $15,484 $10,165
Property expenses $2,430 $1,802
Real estate taxes $1,387 $1,222
Property management fees $404 $269
Depreciation and amortization of real estate assets $2,868 $3,109
LEASE-UP COMMUNITIES (c)
Number of communities 2
Number of units at end of period 527
Operating revenues $2,556
Property expenses $499
Real estate taxes $176
Property management fees $68
Depreciation and amortization of real estate assets $450
- ---------------------------------------------------------------------------- ------------------
</TABLE>
(a) Excludes The Villas of Renaissance (see Note 6), an apartment community
acquired by the Company on June 30, 1997.
(b) Represents five communities that began leasing in 1995 and reached
stabilized occupancy (95%) at various dates in 1996.
(c) Represents Baypointe and Santa Maria communities that began leasing in 1996,
completed deliveries in June 1997, and reached stabilized occupancy (95%) in
July 1997.
OPERATING REVENUES (rental and other income) increased to $87.4 million in the
first half of 1997, up from $75.9 million in the same period of 1996. Operating
revenues rose as a result of higher occupancy and rental rates, as well as the
contribution of newly delivered rental units from five properties which achieved
stabilization during 1996 and two new lease-up communities. In total, these new
units added $18.0 million to operating revenues in the first half of 1997
compared to $10.2 million in the first half of 1996. Within communities
stabilized more than two years, operating revenues increased 5.4% from the first
half of 1996, as a result of improvement in average monthly rental rates, higher
non-rental income, and a rise in physical occupancy to 95.0% from 94.7%. Average
monthly rental rates increased to $1,057 in the first half of 1997 from $1,001
in the year-earlier period. Healthy job growth in the Company's marketplace has
been a key factor in the upward trend in rental rates.
PROPERTY EXPENSES increased to $18.5 million in the first half of 1997 from
$16.2 million in the first half of 1996. This increase reflects the added
expenses of newly delivered rental units from five properties which achieved
stabilization during 1996 and two new lease-up communities. Property expenses
within communities stabilized more than two years increased by $1.2 million to
$15.6 million in the first half of 1997 from $14.4 million a year ago. In the
first half of 1997, average monthly property expenses increased to $229 per unit
from $212 in the first
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<PAGE> 26
half of 1996. Properties stabilized less than two years added $2.4 million to
property expenses in the first half of 1997 and $1.8 million a year ago.
Lease-up properties added $0.5 million to property expenses in the first half of
1997.
REAL ESTATE TAXES totaled $6.9 million in the first half of 1997 compared to
$6.7 million in the first half of 1996. Taxes increased in the first half of
1997 due to the addition of rental units from lease-up properties, partially
offset by a small reduction in assessed values.
PROPERTY MANAGEMENT FEES increased to $2.5 million in the first half of 1997
from $2.2 million a year ago. Management fees increased in the first half of
1997 due to the addition of rental units and an increase in revenue from
communities stabilized more than two years.
NET INTEREST EXPENSE decreased to $13.4 million in the first half of 1997 from
$15.1 million for the same period of 1996. The decrease was largely due to a
lower level of borrowings under the revolving line of credit. The Company
capitalizes interest on projects actively under development using average
qualifying asset balances and applicable weighted average interest rates. The
average monthly qualifying asset balances for projects under development in the
first six months of 1997 and 1996 were approximately $60.1 million and $42.9
million, respectively. Interest capitalized totaled $2.5 million in the first
half of 1997 compared to $1.6 million in the same period of 1996. Interest
incurred was $15.8 million and $16.7 million for the first six months of 1997
and 1996, respectively.
AMORTIZATION OF DEFERRED FINANCING COSTS was comparable in the first half of
1997 and 1996.
DEPRECIATION AND AMORTIZATION EXPENSE increased to $13.7 million in the first
half of 1997, up from $13.6 million in the first half of 1996. This increase
reflects the completion and delivery of newly developed rental units from the
Company's lease-up properties.
GENERAL AND ADMINISTRATIVE EXPENSE of $3.0 million was $0.2 million lower than
the same six month period of the prior year due to lower executive compensation
expenses. The Company's chief executive officer resigned in February 1997. A new
chief executive officer was named in July 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that cash provided by operations will be adequate to meet
both operating requirements and payment of distributions by the Company in
accordance with REIT requirements in both the short and long term.
LIQUIDITY: The Company expects to meet its long-term liquidity requirements,
such as construction, scheduled debt maturities and potential future property
acquisitions, through the issuance or refinancing of long-term debt, borrowings
from financial institutions, or the issuance of additional equity securities of
the Company and/or partnership units. On June 27, 1997, the Operating
Partnership renewed its $250 million unsecured credit facility for a three-year
term. The new credit facility currently bears interest at LIBOR plus 0.70% or
prime. The credit facility provides for the borrowing interest rates to be
adjusted up or down reflecting the credit ratings on the Operating Partnership's
senior unsecured long-term indebtedness (if any). Availability under the credit
facility was $132 million at June 30, 1997.
Page 23
<PAGE> 27
ADDITIONAL EQUITY: On February 20, 1997 the Company sold, pursuant to its shelf
registration statement filed on May 8, 1995, 1.15 million shares of common stock
at $27.50 per share. Concurrently, The Irvine Company, pursuant to its rights
under the Operating Partnership Agreement, purchased 1.39 million additional
limited partnership units at $26.06 per unit (which is equal to the public
offering price of the common stock less an amount equivalent to the underwriting
discount) which are exchangeable for common stock on a one for one basis,
subject to adjustment and certain limitations. The proceeds from the two
transactions totaled $66 million and were used to repay all indebtedness
outstanding under the revolving line of credit, and will be used for general
corporate purposes, including development of new apartment communities.
SHELF REGISTRATION STATEMENTS: On May 14, 1997 the Company filed a shelf
registration statement with the Securities and Exchange Commission providing for
the issuance from time to time of up to $350 million of common stock, preferred
stock, debt securities, and warrants to purchase common stock, preferred stock
and debt securities. The Company plans to use the proceeds raised from any
securities issued under its shelf registration statement for general corporate
purposes, including the development of new apartment communities, acquisitions
and the repayment of existing debt. Concurrently, the Operating Partnership
filed a shelf registration statement with the Securities and Exchange Commission
providing for the issuance from time to time of up to $350 million of debt
securities. The Operating Partnership plans to use the proceeds raised from any
securities issued under its shelf registration statement for general corporate
purposes, including the development of new apartment communities, acquisitions
and the repayment of existing debt.
DEBT: The Company's conventional and tax-exempt mortgage debt bears interest at
fixed interest rates, or variable rates that have been effectively fixed through
interest rate swap agreements. Interest rates on conventional mortgage debt were
reduced to then-current market rates at the time of the Company's December 1993
initial public offering through interest rate buy-down agreements that are
scheduled to expire at various dates prior to loan maturity. The weighted
average effective interest rate on the Company's debt, including the non-cash
charges of amortization of deferred financing costs, was 6.47% at June 30, 1997.
The Company uses interest rate swap agreements to effectively convert its
floating rate tax-exempt mortgage bond financings to a fixed-rate basis, thus
reducing the impact of fluctuations in interest rates on future income. A
buy-down agreement relating to $36.0 million of conventional debt will expire in
September 1997. The interest rate on that loan will increase from 5.82% to 8.3%.
At June 30, 1997, the average fixed interest rate on the tax-exempt mortgage
bond financings, after giving effect to the swap agreements and including all
fees, was 5.83%.
DEBT STRUCTURE AT JUNE 30, 1997
<TABLE>
<CAPTION>
Debt Weighted Average
(dollars in millions) Balance Interest Rate
------- ----------------
<S> <C> <C>
Fixed rate debt
Conventional mortgage financings $133.5 6.45%
Mortgage notes payable to The Irvine Company 50.8 5.75%
Tax-exempt mortgage bond financings 327.5 5.83%
Tax-exempt assessment district debt 5.6 6.27%
------ ----
Total fixed rate debt 517.4 5.99%
------ ----
Variable rate debt
Revolver line of credit 118.0 6.69%
Tax-exempt assessment district debt 16.2 4.46%
------ ----
Total variable rate debt 134.2 6.42%
====== ====
Total debt $651.6 6.08%
====== ====
</TABLE>
Page 24
<PAGE> 28
DEFERRED FINANCING COSTS
<TABLE>
<CAPTION>
Balance at Weighted Average
(dollars in millions) June 30, 1997 Remaining Term
------------- ----------------
<S> <C> <C>
Interest rate buy-downs on
conventional mortgage financings $9.0 9.1 yrs
Loan origination costs and other 9.9 25.7 yrs
----- --------
Total $18.9 17.7 yrs
===== ========
</TABLE>
OPERATING ACTIVITIES: Cash flow provided by operating activities were $42.1
million and $35.7 million in the first half of 1997 and 1996, respectively. Cash
provided by operating activities increased in 1997 primarily due to higher
revenues from newly developed apartment units, as well as an increase in
revenues within the Company's stabilized portfolio achieved through higher
occupancy and higher rental rates.
INVESTING ACTIVITIES: Cash flow used in investing activities was $175.8 million
and $26.5 million in the first half of 1997 and 1996, respectively. This
increase resulted from increased development activity in the first half of 1997
(see Capital Expenditures below), and the acquisition of The Villas of
Renaissance (see Note 6).
FINANCING ACTIVITIES: Cash flow provided by (used in) financing activities was
$135.8 million and ($9.2) million in the first half of 1997 and 1996,
respectively. The Company received $66 million from the sale of common stock and
partnership units in the first quarter of 1997. These proceeds were used to pay
down borrowings from the lines of credit. In June 1997, the Company borrowed
$118 million under the revolving credit facility to fund the acquisition of The
Villas of Renaissance. Additionally, the Company paid $31.1 million in
distributions in the first half of 1997 compared to $26.5 million in the first
half of 1996.
CAPITAL EXPENDITURES
CAPITAL EXPENDITURES ON NEW DEVELOPMENT: The Company's major cash requirements
in the next twelve months are expected to be for the construction of new
apartment communities and possibly for acquisitions of apartment communities.
Currently, the Company has four apartment communities under development (The
Colony, Santa Rosa II, Rancho Santa Fe and The Hamptons) that will require total
expenditures of approximately $160.9 million, of which $71.3 million had been
incurred at June 30, 1997. The Company broke ground on its first "off-Ranch"
apartment community, The Hamptons, located in Northern California's Silicon
Valley, in May 1997. Initial funding for these developments is expected to come
from the Company's $250 million unsecured revolving credit facility. In
addition, the Company may issue other debt or equity securities as discussed in
the Liquidity section.
CONSTRUCTION INFORMATION
<TABLE>
<CAPTION>
Estimated Total
Commencement Initial Estimated
Commencement of Leasing Stabilized Costs
Apartment Community Village, City Units of Construction Activity Occupancy (in millions)
- ---------------------- ------------------------------ ------- -------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Colony Newport Center, Newport Beach 245 7/96 4Q '97 1Q '99 $ 42.8
Santa Rosa II Westpark II, Irvine 207 12/96 4Q '97 3Q '98 27.2
Rancho Santa Fe Tustin Ranch, Tustin 316 2/97 4Q '97 1Q '99 39.0
The Hamptons Cupertino 342 5/97 1Q '98 1Q '99 51.9
------ ------------
Total 1,110 $160.9
====== ============
</TABLE>
Page 25
<PAGE> 29
The timing of future commencement of construction and initial stabilized
occupancy and estimated costs of apartment communities that are in development
are only estimates. Actual results will depend on numerous factors, many of
which are beyond the control of the Company. These include the extent and timing
of economic growth in the Company's rental markets; future trends in the pricing
of construction materials and labor; entitlement decisions by local government
authorities; changes in interest rate levels; and other changes in capital
markets. No assurance can be given that the timing, or estimates set forth in
the foregoing table will not vary substantially from actual results.
CAPITAL REPLACEMENTS ON STABILIZED PROPERTIES: Expenditures for capital
replacements totaled $1.7 million and $1.9 million in the first half of 1997 and
1996, respectively. Average capital replacements per unit for communities
stabilized more than two years decreased to $145 from $166 in the first half of
1997 and 1996, respectively, due to the nature and timing of scheduled capital
programs. Expenditures for capital replacements in 1997 are expected to be
similar to 1996 levels. The Company has a policy of capitalizing expenditures
related to asset acquisitions, costs which increase the value of an existing
asset, or costs which substantially extend in existing asset's useful life.
Capital replacements for communities stabilized more than two years were as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
(in thousands, except per unit amounts) Total Per unit
------ --------
<S> <C> <C>
Carpet replacements $648 $57
Exterior painting, siding and stucco 338 30
Upgrades, renovations and major building items 287 25
Appliances, water heaters and air conditioning 88 8
Roofing, concrete and pavement 111 10
Equipment and other 171 15
------ --------
Total $1,643 $145
====== ========
</TABLE>
The Company also plans to incur approximately $5.2 million in capital
expenditures over the next two years at one of its existing apartment
communities, Promontory Point. Management believes that these capital
expenditures will generate additional revenue by enhancing the community's
appeal in the luxury segment of the marketplace. In addition, the Company plans
to incur approximately $4.0 million to $5.0 million in capital expenditures over
the next six months at The Villas of Renaissance which was acquired on June 30,
1997 (see Note 6). The Company believes these capital expenditures will generate
additional revenue by enhancing the community's appeal in the luxury segment of
the marketplace. A more detailed description of the capital expenditures planned
at The Villas of Renaissance, is included in the Company's Current Report on
Form 8-K filed with the Securities and Exchange Commission on July 15, 1997, as
amended on July 23, 1997. Funding for these expenditures is expected to come
from the Company's revolving credit facility.
IRVINE RANCH MASTER PLAN
The Irvine Company is a real estate investment and community development firm
engaged in the long-term development of the Irvine Ranch. The urbanization of
the Irvine Ranch began in the 1960s with the adoption of a comprehensive Master
Plan for future community development which originally constituted a large map
of the Irvine Ranch and a series of supporting maps detailing land uses.
Subsequently, The Irvine Company worked closely with the various local
jurisdictions which govern the Irvine Ranch to adopt general plans for the
future development of their jurisdictions. The Irvine Company's overall Master
Plan was refined to accord with the approved general plans and the residential,
commercial, industrial, environmental and aesthetic balance desired by each
jurisdiction. As a result, today the Master Plan is a compilation of the various
interlocking general plans described above. The Irvine Company continuously
engages in planning activities and the Master Plan refinement
Page 26
<PAGE> 30
process is ongoing. The Irvine Company works closely with local government
representatives, community residents, the Company and other civic and
environmental groups to obtain the necessary local support and entitlement for
its developments. The goal of the Master Plan was and remains to create
innovative urban and suburban environments through the well-planned, coordinated
development of residential communities and employment centers (which include
major business and retail centers, and research and development and industrial
parks) as well as civil, cultural, recreational, educational and other
supportive facilities, all with an emphasis on improving the quality of life and
achieving long-term balanced regional economic growth.
The Irvine Company's land use planning emphasizes market segmentation in order
to ensure adequate and appropriate allocation of land uses which support
sustained growth for the long term. Through careful planning, design and
marketing, The Irvine Company also promotes compatibility and synergy among
properties of the same type in order to maximize the likelihood of success of
new projects, to preserve and build value for existing projects and to build
sustainable long-term market value for homeowners, local merchants and
employers. In accordance with the Master Plan, The Irvine Company has created
numerous villages which are used as micro-planning areas in an effort to
facilitate the desired segmentation of products.
Each village on the Irvine Ranch has a thematic identity which characterizes the
primary features and attributes of the village and helps to identify the target
market for the village's residential product lines. For example, Tustin Ranch,
in the City of Tustin, is a family-oriented village featuring an 18-hole
championship golf course, athletic fields, jogging, hiking and equestrian
trails. Along the ocean is the village of Newport Coast, an upscale community
featuring ocean views and million-dollar custom built homes. The village of
Westpark, in Irvine, caters to young professionals with growing families and
offers the highly renowned public school system and recreational facilities of
the City of Irvine.
IMPACT OF INFLATION
The Company's business is affected by general economic conditions, including the
impact of inflation and interest rates. Substantially all of the Company's
leases allow, at time of renewal, for adjustments in the rent payable
thereunder, and thus may enable the Company to seek increases in rents.
Substantially all leases are for a period of one year or less. The short-term
nature of these leases generally serves to minimize the risk to the Company of
the adverse effects of inflation. For construction, the Company has entered into
various contracts for the development and construction of new apartment
communities. These are fixed-fee contracts and thus partially insulate the
Company from inflationary risk.
FUNDS FROM OPERATIONS
The Company generally considers funds from operations ("FFO") a useful measure
of performance for an equity REIT. The Company computes FFO in accordance with
standards established by the National Association of Real Estate Investment
Trusts ("NAREIT"). FFO is defined as net income (computed in accordance with
generally accepted accounting principles), excluding gains or losses from debt
restructuring and sales of property, plus depreciation and amortization of real
estate assets, and after adjustments for unconsolidated partnerships and joint
ventures. Other REITs may not consistently use this definition of FFO. FFO
should be considered in conjunction with net income as presented in the
Company's Consolidated Financial Statements and Notes thereto. FFO should not be
considered an alternative to net income as an indication of the Company's
performance and is not indicative of cash available to fund all cash flow needs.
FFO does not represent cash flows from operating, investing or financing
activities as defined by generally accepted accounting principles.
Page 27
<PAGE> 31
CALCULATION OF FFO
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
(in thousands, unaudited) 1997 1996 1997 1996
----------- -------------- ----------- ----------------
<S> <C> <C> <C> <C>
Net income $12,920 $8,105 $6,809 $4,158
Add:
Depreciation and amortization of real estate assets 13,622 13,495 6,925 6,893
Minority interest in income 15,689 9,739 8,281 4,998
----------- -------------- ----------- ---------------
Funds from operations $42,231 $31,339 $22,015 $16,049
=========== ============== =========== ===============
Weighted average equivalent number of shares
outstanding assuming conversion of Operating
Partnership units (see Note 4) 43,060 37,397 43,881 37,411
=========== ============== =========== ===============
</TABLE>
SUPPLEMENTAL INFORMATION
The following section provides supplemental operating information. The
information is unaudited and is provided as a supplement to the accompanying
financial statements and management's discussion and analysis. It should be read
in conjunction with the Consolidated Financial Statements and Notes thereto
included herein and in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and the Operating Partnership's Registration Statement
on Form 10. Operating results for the three or six months ended June 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
Page 28
<PAGE> 32
Irvine Apartment Communities, Inc.
Irvine Apartment Communities, L.P.
SELECTED OPERATING DATA
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
(unaudited) 1997 1996 Variance 1997 1996 Variance
------- ------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
UNIT DATA
Average rentable units during the period 13,879 13,176 703 13,986 13,323 663
Rentable units at the end of the period (a) 14,991 13,411 1,580 14,991 13,411 1,580
------- ------- ---- ------ ------ --------
COMMUNITIES STABILIZED MORE THAN TWO YEARS (b)
Average physical occupancy 95.0% 94.7% 0.3% 95.0% 95.2% (0.2%)
Average economic occupancy (c) 93.4% 94.1% (0.7%) 93.1% 94.7% (1.6%)
Average monthly gross scheduled rent per unit $1,057 $1,001 $56 $1,064 $1,001 $63
Average monthly rental income per occupied unit $1,045 $1,000 $45 $1,050 $1,001 $49
------- ------- ---- ------ ------ --------
COMMUNITIES STABILIZED LESS THAN TWO YEARS (d)
Average physical occupancy 94.4% 66.9% 94.8% 74.7%
Average economic occupancy (c) 92.7% 63.5% 93.2% 70.9%
Average monthly gross scheduled rent per unit $1,238 $1,188 $1,243 $1,186
Average monthly rental income per occupied unit $1,227 $1,135 $1,233 $1,132
------- ------- ---- ------ ------ --------
LEASE-UP COMMUNITIES (e)
Operating revenues (rental income and other income) - in
thousands $2,556 $1,692
Units delivered in the period 412 225
Cumulative units delivered at the end of the period 527 527
Units occupied at the end of the period 489 489
Average units occupied during the period 303 403
------- ------- ---- ------ ------ --------
OTHER FINANCIAL DATA (IRVINE APARTMENT COMMUNITIES, INC.)
Dividends paid per share $0.730 $0.710 $0.365 $0.355
Funds from operations (FFO) payout ratio 74.5% 84.5% 73.0% 82.6%
======= ======= ==== ======= ======= ========
</TABLE>
Footnotes:
(a) Includes the 923-unit Villas of Renaissance apartment community purchased
on June 30, 1997.
(b) Financial results are for 43 properties totaling 11,334 units for
comparable periods of 1997 and 1996.
(c) Rental income divided by rental income plus vacant units at market rent.
(d) Financial results are for five properties totaling 2,207 units that
achieved stabilized occupancy during 1996.
(e) Financial results are for two properties that were in the lease-up phase in
1997.
Page 29
<PAGE> 33
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
During the second quarter of 1997 the Operating Partnership sold
to affiliates of The Irvine Company the following units of
limited partnership interest ("L.P. units") in the Operating
Partnership pursuant to Section 4(2) of the Securities Act of
1933:
An aggregate of 6,362 L.P. units were sold in May 1997
for $173,915 in cash at prices ranging from $27.32 to
$27.88 per L.P. unit, in connection with The Irvine
Company's exercise of its proportional purchase rights
with respect to sales of the Company's common stock
pursuant to its Dividend Reinvestment and Additional
Cash Investment Plan.
Each of the foregoing L.P. units is exchangeable for common
stock of the Company on a one-for-one basis, subject to
adjustment and certain limitations set forth in the Amended and
Restated Agreement of Limited Partnership of the Operating
Partnership.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No. 2.1:
Purchase and Sale Agreement and Joint Escrow Instructions dated
April 18, 1997 by and between Aoki Construction (CA) Co., Ltd.
and the Operating Partnership (incorporated by reference to
Exhibit 2.1 of the Current Report on Form 8-K of the Company and
the Operating Partnership filed on August 6, 1997)
Exhibit No. 10.1:
Purchase and Sale Agreement and Joint Escrow Instructions dated
April 18, 1997 by and between Aoki Construction (CA) Co., Ltd.
and the Operating Partnership (see Exhibit 2.1)
Page 30
<PAGE> 34
Exhibit No. 10.11:
Revolving Credit Agreement dated as of June 27, 1997
Exhibit No. 10.13:
Employment Agreement Letter with Chief Executive Officer
Exhibit No. 27:
Financial Data Schedule (only included in electronically-filed
document)
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the
three months ended June 30, 1997.
Page 31
<PAGE> 35
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibits
- -------- --------
<S> <C>
Exhibit No. 2.1: Purchase and Sale Agreement and Joint Escrow Instructions
dated April 18, 1997 by and between Aoki Construction (CA)
Co., Ltd. and the Operating Partnership (incorporated by
reference to Exhibit 2.1 of the Current Report on Form 8-K
of the Company and the Operating Partnership filed on August
6, 1997)
Exhibit No. 10.1: Purchase and Sale Agreement and Joint Escrow Instructions
dated April 18, 1997 by and between Aoki Construction (CA)
Co., Ltd. and the Operating Partnership (see Exhibit 2.1)
Exhibit No. 10.11: Revolving Credit Agreement dated as of June 27, 1997
Exhibit No. 10.13: Employment Agreement Letter with Chief Executive Officer
Exhibit No. 27: Financial Data Schedule (only included in electronically-
filed document)
</TABLE>
<PAGE> 36
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.
IRVINE APARTMENT COMMUNITIES, INC.
Date: August 13, 1997 By: /s/ James E. Mead
----------------------------------------
James E. Mead
Senior Vice President,
Chief Financial Officer and Secretary
By: /s/ Shawn Howie
----------------------------------------
Shawn Howie
Vice President, Corporate Finance and
Controller (Principal Accounting Officer)
IRVINE APARTMENT COMMUNITIES, L.P.
By: Irvine Apartment Communities, Inc.,
its sole general partner
Date: August 13, 1997 By: /s/ James E. Mead
----------------------------------------
James E. Mead
Senior Vice President,
Chief Financial Officer and Secretary
By: /s/ Shawn Howie
----------------------------------------
Shawn Howie
Vice President, Corporate Finance and
Controller (Principal Accounting Officer)
Page 32
<PAGE> 1
REVOLVING CREDIT AGREEMENT
dated as of June 27, 1997
among
IRVINE APARTMENT COMMUNITIES, L.P.,
THE BANKS LISTED HEREIN,
BANK OF AMERICA NT&SA,
as Administrative Agent,
and
WELLS FARGO BANK, N.A.,
as Documentation Agent
with
J.P. MORGAN SECURITIES, INC.,
as Syndication Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.3. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE II. THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.1. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.2. Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.3. Money Market Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.4. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.5. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.6. Method of Electing Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.7. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.8. Swing Line Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.9. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.10. Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.11. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.12. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.13. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.14. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE III. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.2. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.1. Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.2. Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.3. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.4. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.6. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.7. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.8. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.9. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.10. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.11. Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.12. Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.13. Investment Company Act; Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.14. Principal Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.15. REIT Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.16. Patents, Trademarks, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.17. Qualifying Unencumbered Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.18. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.19. Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.20. Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.21. No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.22. Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.23. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.25. Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
ii
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<TABLE>
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ARTICLE V. AFFIRMATIVE AND NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.1. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.2. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.3. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.4. Maintenance of Property; Insurance; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.5. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.6. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.7. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.8. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.9. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.10. Restriction on Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.11. Changes in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.12. Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.13. Hedging Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.14. Guarantor Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.15. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.16. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.17. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VI. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.2. Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.3. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.4. Distribution of Proceeds after Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE VII. THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.1. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
iii
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<TABLE>
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<S> <C>
SECTION 7.2. Agency and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.3. Action by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.4. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.5 Liability of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.7. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.8. Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.9. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE VIII. CHANGE IN CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.1. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.2. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.3. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.5. Base Rate Loans Substituted for Affected LIBOR Loans . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.2. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.3. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.4. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.5. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.6. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.7. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.8. Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.9. Counterparts; Integration; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
</TABLE>
iv
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<TABLE>
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<S> <C> <C>
SECTION 9.11. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.12. Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.13. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.14. Recourse Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.15. Bank's Failure to Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.16. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
v
<PAGE> 7
Schedule 1 - Commitments
Schedule 4.6 - Borrower and Guarantor ERISA Plans
Schedule 4.17 - Initial Qualified Unencumbered Property
Schedule 5.14(c)(i) - Guarantor Investments
Schedule 5.14(c)(2) - Guarantor Property
Exhibit A - Notice of Borrowing (Section 2.2)
Exhibit B - Form of Money Market Quote Request (Section 2.3(b))
Exhibit C - Form of Invitation for Money Market Quotes (Section 2.3(c))
Exhibit D - Form of Money Market Quote (Section 2.3(d)(2))
Exhibit E - Form of Note (Section 2.5(a))
Exhibit F - Form of Money Market Note (Section 2.5(b))
Exhibit G - Form of Notice of Notice of Interest Rate Election
(Section 2.6(a)(ii))
Exhibit H - Form of Notice of Swing Line Borrowing (Section 2.8(b))
Exhibit I - Form of Swing Line Note (Section 2.8(d))
Exhibit J - Transfer Supplement (Section 9.6(c))
vi
<PAGE> 8
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "Agreement") dated as of
June 27, 1997 among IRVINE APARTMENT COMMUNITIES, L.P., a Delaware limited
partnership (the "Borrower"), the BANKS listed on the signature pages hereof,
BANK OF AMERICA NT&SA, as Administrative Agent, and WELLS FARGO BANK, N.A., as
Documentation Agent.
ARTICLE I.
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used
herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.3.
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.7(b).
"Administrative Agent" shall mean Bank of America NT&SA in its
capacity as Administrative Agent hereunder, and its permitted successors in
such capacity in accordance with the terms of this Agreement.
"Administrative Questionnaire" means, with respect to each
Bank, an administrative questionnaire in the form prepared by the
Administrative Agent and submitted to the Administrative Agent (with a copy to
the Borrower) duly completed by such Bank.
"Aggregate Commitment" shall mean the aggregate of all of the
Commitments hereunder, for a total of $250,000,000 unless and until such time
as the Commitments are reduced pursuant hereto.
"Agreement" shall mean this Revolving Credit Agreement as the
same may from time to time hereafter be modified, supplemented or amended.
"Applicable Interest Rate" means (i) with respect to any Fixed
Rate Indebtedness, the fixed interest rate applicable to such Fixed Rate
Indebtedness at the time in question, and (ii) with respect to any Floating
Rate Indebtedness, either (x) the rate at which the interest rate applicable to
such Floating Rate Indebtedness is actually capped (or fixed pursuant to an
interest rate hedging device), at the time of calculation, if Borrower has
entered into an interest rate cap agreement or other interest rate hedging
device with respect thereto or (y) if Borrower has not entered into an interest
rate cap agreement or other interest rate hedging device with respect to such
Floating Rate Indebtedness, the greater of (A) the rate at which the interest
rate applicable to such Floating Rate
<PAGE> 9
Indebtedness could be fixed for the remaining term of such Floating Rate
Indebtedness, at the time of calculation, by Borrower's entering into any
unsecured interest rate hedging device either not requiring an upfront payment
or if requiring an upfront payment, such upfront payment shall be amortized
over the term of such device and included in the calculation of the interest
rate (or, if such rate is incapable of being fixed by entering into an
unsecured interest rate hedging device at the time of calculation, a fixed rate
equivalent reasonably determined by Administrative Agent) or (B) the floating
rate applicable to such Floating Rate Indebtedness at the time in question.
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Base Rate Loans, its Domestic Lending Office, (ii) in
the case of its LIBOR Loans, its LIBOR Lending Office, and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.
"Applicable Margin" means, with respect to each Loan, the
respective percentages per annum determined, at any time, based on the range
into which Borrower's Credit Rating then falls, in accordance with the table
set forth below. So long as only a Credit Rating from Fitch has been assigned
to such debt, the Credit Rating shall be deemed to be BBB-/Baa3 (Level IV) for
ninety (90) days following the Closing Date. After such ninety-day period, so
long as S&P or Moody's Credit Rating shall not have been assigned, the Credit
Rating shall be deemed to be Below Investment Grade (Level V) until such time
as an S&P or Moody's Credit Rating shall have been assigned, at which time
Borrower's Credit Rating shall be immediately adjusted. Any change in
Borrower's Credit Rating causing it to move to a different range on the table
shall effect an immediate change in the Applicable Margin (including existing
Loans). Promptly after learning of a change in the Borrower's Credit Rating,
Administrative Agent shall give notice of such change to the Banks and include
in such notice the new Applicable Margin and the effective date of such change.
In the event that two (2) different Credit Ratings have been assigned, the
lower of the two Credit Ratings will prevail unless such Credit Ratings are
more than one Level (as shown in the table below) apart, in which case the
average of the margins corresponding to the two Credit Ratings will constitute
the Applicable Margin. In the event that three (3) different Credit Ratings
have been assigned, the average of the margins corresponding to the two highest
Credit Ratings will constitute the Applicable Margin. For purposes of
illustration only, if (i) two (2) different Credit Ratings were assigned and
one was Level I and the other was Level III, the Applicable Margin for LIBOR
Loans would be 0.675 (i.e., the average of Level I (0.600) and Level III
(0.750)); or (ii) three (3) different Credit Ratings had been assigned and such
levels were Level I, Level III and Level IV, the Applicable Margin for LIBOR
Loans would be 0.675 (i.e., the average of Level I and Level III).
2
<PAGE> 10
<TABLE>
<CAPTION>
Applicable
Margin for Applicable
Range of Base Rate Margin for
Borrower's Loans LIBOR Loans
Credit Rating (% per annum) (% per annum)
------------- ------------- ---------------
<S> <C> <C> <C>
Level I A-/A3
or better 0.0 0.600
Level II BBB+/Baa1 0.0 0.650
Level III BBB/Baa2 0.0 0.750
Level IV BBB-/Baa3 0.0 0.950
Level V Below Investment
Grade 0.50 1.25
</TABLE>
"Approved Financial Institutions" shall mean financial
institutions which have (i)(a) a minimum net worth of $500,000,000 or (b) total
assets of $10,000,000,000, and (ii) a minimum long term debt rating of (a) BBB+
or higher by S&P, and (b) Baa1 or higher by Moody's.
"Acquired Asset" means a Qualifying Unencumbered Property
which has been acquired by Borrower (directly or indirectly) after the date of
this Agreement.
"Acquired Stabilized Asset" means a Qualifying Unencumbered
Property which had an Occupancy Rate greater than or equal to 85% on the date
acquired by Borrower.
"Assignee" has the meaning set forth in Section 9.6(c).
"Bank" means each bank listed on the signature pages hereof,
each Assignee which becomes a Bank pursuant to Section 9.6(c), and their
respective successors and assigns.
"Bank of America" means Bank of America NT&SA, in its
individual capacity.
"Bankruptcy Code" shall mean Title 11 of the United States
Code, entitled "Bankruptcy", as amended from time to time, and any successor
statute or statutes.
"Base Rate" means, for any day, a rate per annum equal to the
greater of (i) the rate of interest most recently publicly announced by the
Administrative Agent in San Francisco, California from time to time as its rate
for domestic commercial loans for such day and (ii) the sum of 0.5% plus the
Federal Funds Rate for such day.
3
<PAGE> 11
"Base Rate Loan" means a Committed Loan to be made by a Bank
as a Base Rate Loan in accordance with the applicable Notice of Borrowing or
pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means Irvine Apartment Communities, L.P., a
Delaware limited partnership.
"Borrower Party" means the Borrower and any Subsidiary of the
Borrower. "Borrower Parties" shall mean each of the foregoing Persons
individually, and all of the foregoing Persons collectively.
"Borrower's Share" means Borrower's or Guarantor's share of
the liabilities of an Investment Affiliate based upon Borrower's or Guarantor's
percentage ownership of such Investment Affiliate, as the case may be.
"Borrowing" has the meaning set forth in Section 1.3.
"Capital Leases" as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is or should be accounted for as a capital lease on
the balance sheet of that Person.
"Cap Rate" means the Treasury Rate plus 2.8%.
"Capital Reserve" shall mean, for any period, $50.00 for each
Fiscal Quarter to occur during such period.
"Capital Stock" means, with respect to any Person, all (i)
shares, interests, participations or other equivalents (however designated) of
capital stock and other equity interests of such Person and (ii) rights (other
than debt securities convertible into capital stock or other equity interests),
warrants or options to acquire any such capital stock or other equity
interests.
"Cash and Cash Equivalents" shall mean (i) cash, (ii) direct
obligations of the United States Government, including without limitation,
treasury bills, notes and bonds, (iii) interest bearing or discounted
obligations of Federal agencies and Government sponsored entities or pools of
such instruments offered by Approved Financial Institutions and dealers,
including without limitation, Federal Home Loan Mortgage Corporation
participation sale certificates, Government National Mortgage Association
modified pass through certificates, Federal National Mortgage Association bonds
and notes, and Federal Farm Credit System securities, (iv) time deposits,
Domestic and Eurodollar certificates of deposit, bankers acceptances,
commercial paper rated at least A-1 by S&P and P-1 by Moody's and/or guaranteed
by an Aa rating by Moody's, a AA rating by S&P or better rated credit, floating
rate notes, other money market instruments and letters of credit each
4
<PAGE> 12
issued by Approved Financial Institutions (and in the case of a letter of
credit, an Approved Financial Institution which is a bank) (provided that the
same shall cease to be a "Cash or Cash Equivalent" if at any time any such bank
shall cease to be an Approved Financial Institution), (v) obligations of
domestic corporations, including, without limitation, commercial paper, bonds,
debentures and loan participations, each of which is rated at least AA by S&P
and/or Aa2 by Moody's and/or guaranteed by an Aa rating by Moody's, a AA rating
by S&P or better rated credit, (vi) obligations issued by states and local
governments or their agencies, rated at least MIG-1 by Moody's and/or SP-1 by
S&P and/or guaranteed by an irrevocable letter of credit of an Approved
Financial Institution, which is a bank (provided that the same shall cease to
be a "Cash or Cash Equivalent" if at any time any such financial institution
shall cease to be an Approved Financial Institution), (vii) repurchase
agreements with major financial institutions and primary government security
dealers fully secured by the U.S. Government or agency collateral equal to or
exceeding the principal amount on a daily basis and held in safekeeping, and
(viii) real estate loan pool participations, guaranteed by an AA rating given
by S&P or Aa2 rating given by Moody's or better rated credit.
"Certifying Officer" has the meaning set forth in Section
5.1(c).
"Closing Date" means the date on or after the Effective Date
on which the conditions set forth in Section 3.1 shall have been satisfied to
the satisfaction of the Administrative Agent.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"Committed Borrowing" has the meaning set forth in Section
1.3.
"Committed Loan" means a loan made by a Bank pursuant to
Section 2.1; provided that, if any such loan or loans (or portions thereof) are
combined or subdivided pursuant to a Notice of Interest Rate Election, the term
"Committed Loan" shall refer to the combined principal amount resulting from
such combination or to each of the separate principal amounts resulting from
such subdivision, as the case may be.
"Commitment" means, with respect to each Bank, the amount set
forth in Schedule 1 attached hereto and incorporated herein by this reference
(and, for each Bank which is an Assignee, the amount set forth in the Transfer
Supplement entered into pursuant to Section 9.6(c) as the Assignee's
Commitment), as such amount may be reduced from time to time pursuant to
Section 2.11(c) or in connection with an assignment to an Assignee.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity which is consolidated with Borrower in accordance with GAAP.
5
<PAGE> 13
"Consolidated Tangible Net Worth" means at any date the
consolidated partners' capital (determined on a book basis and without
duplication), less their consolidated Intangible Assets and loans to officers
and directors of Borrower or its Consolidated Subsidiaries, all determined as
of such date. For purposes of this definition "Intangible Assets" means the
amount (to the extent reflected in determining such consolidated partners'
capital) of (i) unamortized deferred charges and debt discount; (ii) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of assets of a going concern business made within twelve months
after the acquisition of such business) subsequent to December 31, 1996 in the
book value of any asset owned by the Borrower or a Consolidated Subsidiary and
(iii) goodwill, patents, trademarks, service marks, trade names, anticipated
future benefit of tax loss carry forwards, copyrights, organization or
developmental expenses and other intangible assets.
"Contingent Obligation" means, as to any Person, without
duplication, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) with respect to any Indebtedness or other obligation of another
Person, including any direct or indirect guarantee of such Indebtedness (other
than any endorsement for collection in the ordinary course of business) or any
other direct or indirect obligation, by agreement or otherwise, to purchase or
repurchase any such Indebtedness or obligation or any security therefor, or to
provide funds for the payment or discharge of any such Indebtedness or
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), (ii) to provide funds to maintain the financial
condition of any other Person, (iii) otherwise to assure or hold harmless the
holders of Indebtedness or other obligations of another Person against loss in
respect thereof, or (iv) under Hedging Contracts other than Exempt Hedging
Contracts. The amount of any Contingent Obligation under clause (i) or (ii)
shall be the lesser of (a) the amount of such Indebtedness or obligation
guaranteed or otherwise supported thereby, or (b) the maximum amount so
guaranteed or supported. The amount of any obligation under a Hedging Contract
shall be determined in accordance with standard methods of calculating credit
exposure under similar arrangements as prescribed by the Administrative Agent
from time to time, taking into account potential movements in interest rates,
exchange rates or other relevant indices and the notional principal amount,
term and termination provisions of the arrangement. For the purposes of this
definition only, "Indebtedness" shall be deemed not to include subclause (c) of
the definition of "Indebtedness" set forth in this Agreement.
"Contractual Obligation," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject (including without limitation any
restrictive covenant affecting such Person or any of its properties).
"Convertible Securities" means evidences of shares of stock,
limited or general partnership interests or other ownership interests,
warrants, options, or other rights or securities which are convertible into or
exchangeable for, with or without payment of additional consideration, shares
of common stock of Guarantor or partnership
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<PAGE> 14
interests of Borrower, as the case may be, either immediately or upon the
arrival of a specified date or the happening of a specified event.
"Credit Rating" means the rating(s) assigned by the Rating
Agencies to Borrower's senior unsecured long term indebtedness.
"Debt Restructuring" means a restatement of, or material
change in, the amortization or other financial terms of any Indebtedness of
Guarantor, the Borrower or any Investment Affiliate.
"Debt Service" means, for any period, Interest Expense for
such period plus scheduled principal amortization (excluding any individual
scheduled principal payment which exceeds 25% of the original principal amount
of an issuance of Indebtedness) for such period on all Indebtedness of
Guarantor (calculated as provided in Section 1.2), on a consolidated basis,
plus Borrower's Share of scheduled principal amortization for such period on
all Indebtedness of Investment Affiliates for which there is no recourse to
Guarantor or Borrower (or any Property thereof), plus, without duplication,
Guarantor's and Borrower's actual or potential liability for principal
amortization for such period on all Indebtedness of Investment Affiliates that
is recourse to Guarantor or Borrower (or any Property thereof).
"Default" means any condition or event which with the giving
of notice or lapse of time or both would, unless cured or waived, become an
Event of Default.
"Default Rate" has the meaning set forth in Section 2.7(c).
"Designated Bidder" shall mean a Person, designated by a Bank
in the Bank's signature page to this Agreement (or otherwise in the manner set
forth by the Administrative Agent), to make Money Market Loans on behalf of
such Bank.
"Documentation Agent" shall mean Wells Fargo Bank, N.A. in its
capacity as Documentation Agent hereunder, and its successors in such capacity.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in San Francisco, California are
authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address in the United States set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Domestic Lending office) or such other office as such Bank may hereafter
designate as its Domestic Lending Office by notice to the Borrower and the
Administrative Agent.
"EBITDA" means, for any period, (i) Net Income for such
period, plus (ii) depreciation and amortization expense and other non- cash
items deducted in the calculation of
7
<PAGE> 15
Net Income for such period, plus (iii) Interest Expense deducted in the
calculation of Net Income for such period, plus (iv) Taxes deducted in the
calculation of Net Income for such period, plus (v) Borrower's Share of
distributed earnings of Investment Affiliates for such period, minus (vi) the
gains (and plus the losses) from extraordinary items or asset sales or
write-ups or forgiveness of indebtedness included in the calculation of Net
Income, for such period, minus (vii) Borrower's Share of accrued income and
losses of Investment Affiliates for such period minus (viii) earnings of
Subsidiaries for such period distributed to third parties, all of the foregoing
without duplication.
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 9.9.
"Environmental Affiliate" means any partnership, joint
venture, trust or corporation for which Borrower or Guarantor is liable
contractually or under applicable law for Environmental Claims against such
entity.
"Environmental Approvals" means any permit, license, approval,
ruling, variance, exemption or other authorization required under applicable
Environmental Laws.
"Environmental Claim" means, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by any other
Person alleging potential liability of such Person for investigatory costs,
cleanup costs, governmental response costs, natural resources damage, property
damages, personal injuries, fines or penalties arising out of, based on or
resulting from (i) the presence, or release into the environment, of any
Materials of Environmental Concern at any location, whether or not owned by
such Person or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
"Environmental Laws" means any and all federal, state, and
local statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
licenses, agreements and other governmental restrictions relating to the
environment, or to emissions, discharges or releases of Materials of
Environmental Concern into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern or the clean up or
other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower or any Subsidiary, are treated as a single employer under Section 414
of the Code.
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<PAGE> 16
"Estimated Environmental Cost" shall have the meaning set
forth in Section 5.15 hereof.
"Exempt Hedging Contract" means a Hedging Contract existing on
the date hereof relating to any tax-exempt bond financing of the Borrower (or
refinancing thereof) which financing is outstanding on the date hereof,
together with any replacement or successor Hedging Contract entered into by the
Borrower with respect to such Hedging Contract.
"Event of Default" has the meaning set forth in Section 6.1.
"Facility Notes" shall mean all promissory notes issued by
Borrower pursuant to this Agreement, including Money Market Notes, Notes and
Swing Line Note.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Administrative
Agent on such day on such transactions as determined by the Administrative
Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System as constituted from time to time.
"FFO" means "Funds From Operations" computed in accordance
with standards promulgated by the National Association of Real Estate
Investment Trusts ("NAREIT") as of the date hereof, and is defined to mean, for
any period, Net Income before Borrower's Share of the Net Income or loss of any
Investment Affiliate, plus any and all cash distributions received by Borrower
representing Borrower's Share of the Net Income (plus Borrower's Share of
depreciation and amortization expenses of Investment Affiliates) of any
Investment Affiliate, plus depreciation and amortization expense for such
period and excluding gains (or losses) from Debt Restructurings and sales or
other dispositions of Property of the Borrower or any Investment Affiliate.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Borrower, Guarantor and
their Consolidated Subsidiaries which shall be the twelve (12) month period
ending on the last day of December in each year.
"Fitch" means Fitch Investors Service, or any successor
thereto.
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<PAGE> 17
"Fixed Charges" for any Fiscal Quarter period means the sum of
(i) Debt Service for such period, plus (ii) the greater of (a) the product of
the number of apartment units owned (directly or beneficially) by Borrower at
the beginning of the applicable period and the Capital Reserve for such period
or (b) the average quarterly amount of recurring capital expenditures of the
Borrower based upon the actual recurring capital expenditures of Borrower and
Consolidated Subsidiaries over the immediately preceding four calendar
quarters, plus (iii) Borrower's Share of the aggregate sum of the product of
the number of apartment units owned (directly or beneficially) by each
Investment Affiliate at the beginning of the applicable period and the Capital
Reserve for such period, plus (iv) dividends on preferred units payable by
Borrower or on preferred stock payable by Guarantor for such period.
"Fixed Rate Borrowing" has the meaning set forth in Section
1.3.
"Fixed Rate Indebtedness" means all Indebtedness which accrues
interest at a fixed rate.
"Floating Rate Indebtedness" means all Indebtedness which is
not Fixed Rate Indebtedness and which is not a Contingent Obligation or an
Unused Commitment.
"FMV Cap Rate" means 8.5%.
"Funds Available for Distribution" means FFO, plus
amortization of deferred financing costs, plus amortization of non-real estate
assets, less capital expenditures for the preceding four Fiscal Quarters.
"GAAP" means generally accepted accounting principles
recognized as such in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Gross Asset Value" means, with respect to any Person or
Property, (i) the product of four (4) and a fraction, the numerator of which is
EBITDA for such Fiscal Quarter (exclusive of EBITDA from any Property which has
been acquired or been disposed of by the Borrower in the Fiscal Quarter most
recently ended) and the denominator of which is the FMV Cap Rate, plus (ii) for
any Property which has been acquired by the Borrower in the Fiscal Quarter most
recently ended, the Net Price of the Property paid by Borrower for such
Property, plus (iii) in the case of any Person, the value of any Cash or Cash
Equivalents owned by such Person and not subject to any Lien, plus (iv) the
value of all construction in process (including, without limitation, the value
of the land owned by the Borrower or any Subsidiary upon which construction has
commenced, at the lower of cost or fair market value determined in accordance
with GAAP) plus (v) the value of all land owned by the Borrower or any
Subsidiary for which construction has not commenced, as of the end of the most
recently concluded Fiscal Quarter,
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<PAGE> 18
calculated at the lower of cost or fair market value (in each case determined
in accordance with GAAP).
"Guarantor" means Irvine Apartment Communities, Inc., a
Maryland corporation, and any successor thereto.
"Guaranty" means the General Continuing Repayment Guaranty,
dated as of the Initial Closing Date executed by Guarantor in favor of
Administrative Agent and the Banks.
"Guarantor 1996 Form 10-K" means Guarantor's annual report on
Form 10-K for 1996, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
"Hedging Contract" means, for any Person, any interest rate,
commodity, foreign exchange or other hedging agreement (including swaps,
collars, caps and forward contracts) between such Person and one or more
counterparties providing for the transfer or mitigation of fluctuations of
interest rates, exchange rates or other prices either generally or under
specific contingencies.
"Indebtedness" as applied to any Person (and without
duplication), means (a) all indebtedness, obligations or other liabilities of
such Person for borrowed money, (b) all indebtedness, obligations or other
liabilities of such Person evidenced by Securities or other similar
instruments, (c) all Contingent Obligations of such Person exclusive of all
indebtedness, obligations and other liabilities in respect of Hedging contracts
purchased to hedge Indebtedness, (d) all reimbursement obligations and other
liabilities of such Person with respect to letters of credit or banker's
acceptances issued for such Person's account or other similar instruments for
which a contingent liability exists, (e) all obligations of such Person to pay
the deferred purchase price of Property or services, (f) all obligations in
respect of Capital Leases (including ground leases) of such Person, (g) all
indebtedness obligations or other liabilities of such Person or others secured
by a Lien on any asset of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by, or are a personal liability of such
Person, (h) all indebtedness, obligations or other liabilities (other than
interest expense liability) in respect of Interest Rate Contracts and foreign
currency exchange agreements (other than Interest Rate Contracts purchased to
hedge Indebtedness), (i) ERISA obligations currently due and payable, and (j)
all trade payables for construction in progress. As used herein,
"Indebtedness" shall not include assessment district or community facilities
district indebtedness not shown on the Borrower's balance sheet.
"Indemnitee" has the meaning set forth in Section 9.3(b).
"Initial Closing Date" means June 27, 1997.
"Interest Expense" means, for any period, the sum (without
duplication) for such period of (i) total interest expense, whether paid or
accrued, of the Borrower and the
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<PAGE> 19
Consolidated Subsidiaries, including without limitation the portion of any
obligations under any Capital Lease allocable to interest expense, and the
Borrower's Share of interest expenses in Unconsolidated Joint Ventures but
excluding amortization or write-off of debt discount and expense, (ii)
capitalized interest, (iii) to the extent not included in clauses (i) and (ii)
the Borrower's pro rata share of interest expense and other amounts of the type
referred to in such clauses of the Unconsolidated Joint Ventures, and (iv)
interest incurred on any liability or obligation that constitutes a contingent
Obligation of Borrower or any Consolidated Subsidiary, and in each case taking
into account the benefit of any Hedging Contract and the amortized cost
therefor for the applicable period. For purposes of clause (iii), Borrower's
pro rata share of interest expense or other amount of any Unconsolidated Joint
Venture shall be deemed equal to the product of (a) the interest expense or
other relevant amount of such Unconsolidated Joint Venture, multiplied by (b)
the percentage of the total outstanding Capital Stock of such Person held by
Borrower or any Consolidated Subsidiary, expressed as a decimal.
"Interest Period" means:
(1) with respect to each LIBOR Borrowing, the period commencing on the
date of such Borrowing specified in the Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 1, 2,
3, or 6 months thereafter, as the Borrower may elect in the applicable Notice
of Borrowing or Notice of Interest Rate Election; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a LIBOR Business Day shall be extended to the next
succeeding LIBOR Business Day unless such LIBOR Business Day falls in
another calendar month, in which case such Interest Period shall end
on the next preceding LIBOR Business Day; and
(b) any Interest Period which begins on the last LIBOR
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last LIBOR Business Day of a
calendar month
(2) with respect to each Money Market LIBOR Loan, the period commencing on
the date of borrowing specified in the applicable Money Market Quote Request
and ending 1, 2, 3, or 6 months thereafter as the Borrower may elect in
accordance with Section 2.3; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a LIBOR Business Day shall be extended to the next
succeeding LIBOR Business Day unless such LIBOR Business Day falls in
another calendar month, in which case such Interest Period shall end
on the next preceding LIBOR Business Day;
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<PAGE> 20
(b) any Interest Period which begins on the last LIBOR
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
LIBOR Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after
the Maturity Date shall end on the Maturity Date.
(3) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Money Market
Quote Request and ending such number of days thereafter (but not less than 14
days or more than 365/366 days) as the Borrower may elect in accordance with
Section 2.3; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a LIBOR Business Day shall be extended to the next
succeeding LIBOR Business Day; and
(b) any Interest Period which would otherwise end after
the Maturity Date shall end on the Maturity Date.
"Interest Rate Contracts" means, collectively, interest rate
swap, collar, cap or similar agreements providing interest rate protection.
"Interest Rate Hedges" has the meaning set forth in Section
5.13.
"Investment" means, with respect to any Person, (i) any direct
or indirect purchase or other acquisition by that Person of stock or
securities, or any beneficial interest in stock or other securities, of any
other Person, any partnership interest (whether general or limited) in any
other Person, or all or any substantial part of the business or assets of any
other Person, (ii) any direct or indirect loan, advance or capital contribution
by that Person to any other Person, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business. The amount
of any Investment shall be the original cost of such Investment plus the cost
of all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
"Investment Affiliate" means any Person in whom Guarantor or
Borrower holds an equity interest, directly or indirectly, whose financial
results are not consolidated under GAAP with the financial results of Guarantor
or Borrower on the consolidated financial statements of Guarantor and Borrower.
"Invitation for Money Market Quotes" has the meaning set forth
in Section 2.3(c).
"Joint Venture" means a joint venture, partnership or similar
arrangement, whether in corporate, partnership or other legal form.
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<PAGE> 21
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.3.
"LIBOR Borrowing" has the meaning set forth in Section 1.3.
"LIBOR Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"LIBOR Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its LIBOR
Lending Office) or such other office, branch or affiliate of such Bank as it
may hereafter designate as its LIBOR Lending Office by notice to the Borrower
and the Administrative Agent.
"LIBOR Loan" means a Committed Loan to be made by a Bank as a
LIBOR Loan in accordance with the applicable Notice of Borrowing.
"LIBOR Reserve Percentage" has the meaning set forth in
Section 2.7(b).
"Lien" means with respect to any Property, any mortgage,
pledge, negative pledge, charge, security interest or encumbrance of any kind,
or any other type of preferential arrangement, in each case that has the effect
of creating a security interest, in respect of such Property, including without
limitation, all assessment district and community facility district debt shown
on the balance sheet of the owner of such Property. For the purposes of this
Agreement, the Borrower or any Consolidated Subsidiary shall be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Loan" means a Base Rate Loan, a LIBOR Loan, a Money Market
Loan or a Swing Line Loan and "Loans" means Base Rate Loans, LIBOR Loans, Money
Market Loans or Swing Line Loans or any combination of the foregoing.
"Loan Documents" means this Agreement, the Facility Notes and
the Guaranty.
"London Interbank Offered Rate" or "LIBOR" has the meaning set
forth in Section 2.7(b).
"Mandate Letter" means that certain letter dated June 4, 1997,
as amended or supplemented from time to time, between Borrower and the
Administrative Agent.
"Margin Stock" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
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<PAGE> 22
"Material Adverse Effect" means an effect resulting from any
circumstance or event or series of circumstances or events, of whatever nature
(but excluding general economic conditions), which does or could reasonably be
expected to, materially and adversely (i) effect the business, operations,
properties, assets or financial condition of the Borrower and its Consolidated
Subsidiaries taken as a whole, or (ii) impair the ability of the Borrower and
its Consolidated Subsidiaries, taken as a whole, to perform their respective
obligations under the Loan Documents.
"Materials of Environmental Concern" means any chemical
substance (i) the presence of which requires investigation or remediation under
any Environmental Laws; or (ii) that is or becomes defined as a "hazardous
waste" or "hazardous substance" under any Environmental Laws, including the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.) or the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.); or (iii) that is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is
or becomes regulated by any governmental authority; or (iv) the presence of
which on any Real Property Asset causes a nuisance upon the Real Property Asset
or to adjacent properties or poses a hazard to any Real Property Asset or to
the health or safety of Persons on or about any Real Property Asset; or (v)
without limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons; or (vi) without limitation which contains polychlorinated
biphenyls (PCBs) or asbestos.
"Maturity Date" shall mean the date when all of the
Obligations hereunder shall be due and payable which shall be June 27, 2000,
unless accelerated pursuant to the terms hereof.
"Money Market Absolute Rate" has the meaning set forth in
Section 2.3(d).
"Money Market Absolute Rate Loan" means a loan to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Borrowing" has the meaning set forth in Section
1.3.
"Money Market Lending Office" means, as to each Bank, its
Domestic Lending Office or such other office, branch, Designated Bidder or
affiliate of such Bank as it may hereafter designate as its Money Market
Lending Office by notice to the Borrower and the Administrative Agent; provided
that any Bank may from time to time by notice to the Borrower and the
Administrative Agent designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate
Loans, on the other hand, in which case all references herein to the Money
Market Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
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<PAGE> 23
"Money Market LIBOR Loan" means a loan to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the Base
Rate pursuant to Article VIII).
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.3(d)(2).
"Money Market Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit "F" hereto, evidencing the obligation of
the Borrower to repay the Money Market Loans, and "Money Market Notes" means
any one of such promissory notes issued hereunder.
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.3.
"Moody's" means Moody's Investors Services, Inc. or any
successor thereto.
"Morgan" means Morgan Guaranty Trust Company of New York, in
its individual capacity.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
ERISA Group during such five year period.
"Multiple Employer Plan" means a Plan to which Section 413(c)
of the Code applies.
"Net Income" means, for any period, the net earnings (or loss)
after Taxes of the Borrower, on a consolidated basis for such period,
calculated in conformity with GAAP.
"Net Offering Proceeds" means all cash or other assets
received by Guarantor or Borrower as a result of the sale or issuance of common
shares of beneficial interest, preferred shares of beneficial interest,
partnership interests, limited liability company interests, Convertible
Securities or other ownership or equity interests in Guarantor or Borrower less
customary costs and discounts of issuance paid by Guarantor or Borrower, as the
case may be.
"Net Operating Income" means, for any period with respect to
any Property owned (directly or beneficially) by Borrower, the net operating
income of such Property for such period (i) determined in accordance with GAAP,
(ii) determined in a manner which is consistent with the past practices of
Guarantor and Borrower, and
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<PAGE> 24
(iii) inclusive of an allocation of reasonable management fees and
administrative costs to each Property, consistent with the past practices of
Guarantor and Borrower, except that, for purposes of determining Net Operating
Income, income shall not (a) include any items reasonably deemed by
Administrative Agent to be of a non-recurring nature or (b) be reduced by
depreciation or amortization.
"Net Price" means, with respect to the purchase and sale of
any Property, without duplication, (i) Cash and Cash Equivalents paid as
consideration for such purchase or sale (after adjusting for the proration of
taxes, assessments, utility and security deposits and other items prorated or
adjusted) plus (ii) the principal amount of any note received or other deferred
payment to be made in connection with such purchase or sale (except as
described in clause (iv) below), plus (iii) the value of any other
considerations delivered in connection with such purchase or sale (including,
without limitation, shares of beneficial interest in Guarantor) (as reasonably
determined by Administrative Agent), minus (only in the case of a sale) (iv)
until actually received, the value of any consideration deposited into escrow
or subject to disbursement or claim upon the occurrence of any event, minus
(only in the case of a sale), (v) the value of any consideration required to be
paid to any Person other than the Borrower and its Subsidiaries owning a
beneficial interest in such Property, minus (vi) reasonable costs of sale and
taxes paid or payable in connection with such purchase or sale.
"Net Present Value" shall mean, as to a specified or
ascertainable dollar amount, the present value, as of the date of calculation
of any such amount using a discount rate equal to the Base Rate in effect as of
the date of such calculation.
"Non-Recourse Indebtedness" means Indebtedness with respect to
which recourse is limited to (i) specific assets related to a particular
Property or group of Properties encumbered by a Lien securing such Indebtedness
or (ii) any Subsidiary (provided that if a Subsidiary is a partnership, there
is no recourse to Borrower or Guarantor as a general partner of such
partnership); provided, however, that personal recourse of Borrower or
Guarantor for any such Indebtedness for fraud, misrepresentation,
misapplication of cash, waste, environmental claims and liabilities and other
circumstances customarily excluded by institutional lenders from exculpation
provisions and/or included in separate indemnification agreements in
non-recourse financing of real estate shall not, by itself, prevent such
Indebtedness from being characterized as Non-Recourse Indebtedness.
"Notes" means promissory notes of the Borrower, substantially
in the form of Exhibit D hereto, evidencing the obligation of the Borrower to
repay the Loans (other than Money Market Loans and Swing Line Loans), and
"Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Borrowing (as defined
in Section 2.4).
"Notice of Interest Rate Election" has the meaning set forth
in Section 2.6.
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<PAGE> 25
"Obligations" means all obligations, liabilities, indemnity
obligations and Indebtedness of every nature of the Borrower, from time to time
owing to Administrative Agent or any Bank under or in connection with this
Agreement or any other Loan Document.
"Occupancy Rate" with respect to any Real Property Asset,
shall mean the ratio of (a) apartment units in such Real Property Asset which
are physically occupied by tenants paying rent pursuant to a lease to (b) the
number of apartment units in such Real Property Asset, expressed as a
percentage.
"Other Indebtedness" means all Indebtedness other than the
Obligations.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section 9.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" means:
a. liens for Taxes, assessments or other governmental
charges not yet due and payable or which are being contested in good
faith by appropriate proceedings promptly instituted and diligently
conducted in accordance with the terms hereof;
b. statutory liens of carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are incurred
in the ordinary course of business for sums not more than sixty (60)
days delinquent or which are being contested in good faith in
accordance with the terms hereof;
c. deposits made in the ordinary course of business to
secure liabilities to insurance carriers;
d. liens for purchase money obligations for equipment;
provided that (i) the Indebtedness secured by any such Lien does not
exceed the purchase price of such equipment, and (ii) any such Lien
encumbers only the asset so purchased and the proceeds upon sale,
disposition, loss or destruction thereof;
e. easements, rights-of-way, zoning restrictions, other
similar charges or encumbrances and all other items listed on Schedule
B to Borrower's owner's title insurance policies, except in connection
with any Indebtedness, for any of Borrower's Real Property Assets, so
long as the foregoing do not interfere in any material respect with
the use or ordinary conduct of the business of Borrower and do not
diminish in any material respect the value of the Property to which it
is attached or for which it is listed;
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f. liens and judgments which have been or will be bonded
or released of record within thirty (30) days after the date such Lien
or judgment is entered or filed against Guarantor, Borrower, or any
Subsidiary;
g. liens on Property of the Borrower or its Subsidiaries
(other than Qualifying Unencumbered Property) securing Indebtedness
which may be incurred or remain outstanding without resulting in an
Event of Default hereunder; and
h. assessment or community facilities district
indebtedness, in each case not then in default, building restrictions,
zoning laws and the like, and residential leases entered into in the
ordinary course of business.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for employees of any Person
which was at such time a member of the ERISA Group.
"Property" means, with respect to any Person, any real or
personal property, building, facility, structure, equipment or unit, or other
asset owned by such Person.
"Qualifying Unencumbered Property" means, as of the Initial
Closing Date, the Real Property Assets set forth on Schedule 4.17 hereto (the
"Initial Qualifying Unencumbered Properties") and thereafter any other Real
Property Assets (without duplication) as designated by Borrower from time to
time; provided, however that each such Real Property Asset, including the
Initial Qualifying Unencumbered Property, must: (v) be a Real Property Asset
upon which an apartment project and related improvements has been, or is being,
constructed; (w) be wholly-owned (directly or beneficially) by Borrower; (x)
not be subject (nor may any equity interests in such Property be subject) to a
Lien (other than Permitted Liens) which secures Indebtedness of any Person; (y)
not be subject (nor may any equity interests in such Property be subject) to
any covenant, condition, or other restriction which prohibits the creation or
assumption of any Lien upon such Real Property Asset; and (z) to the best
knowledge of Borrower, not have Materials of Environmental Concern located on,
under or above such Real Property Asset, which are reasonably expected,
pursuant to Section 5.15, to involve an expenditure of Significant
Environmental Cost. The Borrower may designate, in its sole discretion and at
any time, the Real Property Assets which satisfy the requirements set forth
herein and are thus Qualifying Unencumbered Properties. If, at any time, a
Real Property Asset does not
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satisfy the requirements of subclauses (v) through (z) above, then it shall not
be a Qualifying Unencumbered Property.
"Rating Agencies" means, collectively, S&P, Moody's and Fitch;
other nationally recognized rating agencies shall be "Rating Agencies"
following approval thereof by the Administrative Agent.
"Real Property Asset(s)" means as of any time, the real
property asset(s) owned directly or indirectly by the Borrower and the
Consolidated Subsidiaries at such time.
"Recourse Debt" shall mean Indebtedness that is not
Non-Recourse Indebtedness.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 61%
of the Aggregate Commitments or, if the Commitments shall have been terminated,
holding Notes evidencing at least 61% of the aggregate unpaid principal amount
of the Loans.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any Capital Stock of any
Borrower Party now or hereafter outstanding, except (a) a dividend or other
distribution payable solely in shares or equivalents of the same class of
Capital Stock and (b) the issuance of equity interests upon the exercise of
outstanding warrants, options or other rights, or (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any Capital Stock of any Borrower Party now or
hereafter outstanding.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or any successor thereto.
"Secured Debt" means Indebtedness, the payment of which is
secured by a Lien on any Property owned or leased by Guarantor, Borrower, or
any Subsidiary.
"Securities" means any stock, partnership interests, shares,
shares of beneficial interest, voting trust certificates, bonds, debentures,
notes or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities," or any certificates of interest, shares, or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the obligations.
"Significant Environmental Costs" means, as to any Real
Property Asset, Estimated Environmental Costs determined pursuant to Section
5.15 hereof, to exceed one and one-half percent (1.5%) of (i) the Gross Asset
Value of such Real Property Asset in the case of a Real Property Asset that has
been fully constructed, or (ii) the sum of land
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cost (at the lower of cost or fair market value) plus Borrower's estimated
construction cost in the case of any other Real Property Asset.
"Stabilized Asset" means any Qualifying Unencumbered Property
which, while owned by Borrower achieved (i) an average Occupancy Rate greater
than or equal to 85% during a calendar month and (ii) an Occupancy Rate of at
least 85% on the last day of such month. As used herein, "Stabilized Asset"
means any Qualifying Unencumbered Property which, while owned by Borrower, at
one time satisfied the foregoing requirements, regardless of whether such
Property subsequently fails to maintain such Occupancy Rates.
"Solvent" means, with respect to any Person, that the fair
saleable value of such Person's assets exceeds the Indebtedness of such Person.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Borrower.
"Super-Majority Banks" means at any time Banks having at least
66 2/3% of the Aggregate Commitment or, if the Commitments shall have been
terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.
"Swing Line Borrowing Notice" has the meaning set forth in
Section 2.8(b).
"Swing Line Commitment" has the meaning set forth in Section
2.8(a).
"Swing Line Loan" has the meaning set forth in Section 2.8(a).
"Syndication Agent" shall mean J.P. Morgan Securities, Inc..
"Taxes" means all federal, state, local and foreign income and
gross receipts taxes.
"Term" has the meaning set forth in Section 2.10.
"Termination Event" shall mean (i) a "reportable event", as
such term is described in Section 4043 of ERISA (other than a "reportable
event" not subject to the provision for 30-day notice to the PBGC), or an event
described in Section 4062(e) of ERISA, (ii) the withdrawal by any member of the
ERISA Group from a Multiple Employer Plan during a plan year in which it is a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA), or the
incurrence of liability by any member of the ERISA Group under Section 4064 of
ERISA upon the termination of a Multiple Employer Plan, (iii) the filing of a
notice of intent to terminate any Plan under Section 4041 of ERISA, other than
in a standard termination within the meaning of Section 4041 of ERISA, or the
treatment of a Plan amendment as a distress termination under Section 4041 of
ERISA,
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(iv) the institution by the PBGC of proceedings to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or cause a
trustee to be appointed to administer, any Plan or (v) any other event or
condition that might reasonably constitute grounds for the termination of, or
the appointment of a trustee to administer, any Plan or the imposition of any
liability or encumbrance or Lien on the Real Property Assets or any member of
the ERISA Group under ERISA.
"Total Liabilities" means, as of the date of determination and
without duplication, all Indebtedness of Guarantor (calculated as provided in
Section 1.2), on a consolidated basis, plus Borrower's Share of all
Indebtedness of Investment Affiliates for which there is no recourse to
Guarantor or Borrower (or any Property thereof) plus the actual or potential
liability of Guarantor, Borrower or any Subsidiary for any Indebtedness of
Investment Affiliates that is recourse to Guarantor or Borrower (or Property
thereof) plus accounts payable incurred in the ordinary course of business,
plus all other items which, in accordance with GAAP, would be included as
liabilities on the liability side of the balance sheet of such Person.
"Treasury Rate" means, as of any date, a rate equal to the
annual yield to maturity on the U.S. Treasury Constant Maturity Series with a
ten year maturity, as such yield is reported in Federal Reserve Statistical
Release H.15 -- Selected Interest Rates, published most recently prior to the
date the applicable Treasury Rate is being determined. Such yield shall be
determined by straight line linear interpolation between the yields reported in
Release H.15, if necessary. In the event Release H.15 is no longer published,
the Administrative Agent shall select, in its reasonable discretion, an
alternate basis for the determination of Treasury yield for U.S. Treasury
Constant Maturity Series with ten year maturities.
"Unconsolidated Joint Venture" means (i) any Joint Venture of
Borrower or any Consolidated Subsidiary in which Borrower or such Consolidated
Subsidiary holds any Capital Stock but which would not be combined with
Borrower or such Consolidated Subsidiary in the consolidated financial
statements of Borrower in accordance with GAAP, and (ii) any Investment of
Borrower or any Consolidated Subsidiary in any Person that is not a Joint
Venture.
"Unencumbered Asset Pool Value" means, without duplication,
the sum of the following with respect to Qualifying Unencumbered Properties:
(i) the Net Price of any Acquired Asset that was acquired
(directly or indirectly) by the Borrower during the most recent Fiscal Quarter;
plus
(ii) the aggregate Unencumbered Net Operating Income for
the three (3) calendar months most recently ended multiplied by four (4) and
divided by the FMV Cap Rate with respect to (v) any Acquired Stabilized Asset
that was acquired (directly or indirectly) by the Borrower during one of the
four (4) consecutive Fiscal Quarters most recently ended (other than the most
recent Fiscal Quarter), (w) any Acquired Asset which was not an Acquired
Stabilized Asset and which has not become a Stabilized Asset during
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one of the four (4) consecutive Fiscal Quarters most recently ended, (x) any
Acquired Asset which was not an Acquired Stabilized Asset but which has become
a Stabilized Asset during one of the four (4) consecutive Fiscal Quarters most
recently ended, (y) any Qualifying Unencumbered Property which became a
Stabilized Asset during the four (4) consecutive Fiscal Quarters most recently
ended, and (z) any Qualifying Unencumbered Property which is not a Stabilized
Asset (provided, however, that the Unencumbered Asset Pool Value attributable
to the Qualifying Unencumbered Properties included in subclauses (w) and (z)
above, together with Acquired Assets in (i) above which were not Acquired
Stabilized Assets, may not exceed twenty-five percent (25%) of the aggregate
Unencumbered Asset Pool Value); and
(iii) the aggregate Unencumbered Net Operating Income for
the four (4) consecutive Fiscal Quarters most recently ended divided by the FMV
Cap Rate with respect to (x) any Acquired Stabilized Asset which has been owned
(directly or beneficially) by the Borrower for more than four (4) consecutive
Fiscal Quarters and which is a Qualifying Unencumbered Property, and (y) any
Qualifying Unencumbered Property which became a Stabilized Asset prior to the
beginning of the four (4) consecutive Fiscal Quarters most recently ended and
which has been owned (directly or indirectly) by the Borrower for more than
four (4) consecutive Fiscal Quarters. Notwithstanding the foregoing, in the
event that Borrower or Administrative Agent has determined that there is a
Significant Environmental Cost with respect to any Real Property Asset referred
to in this definition (and only for so long as Borrower or Administrative Agent
has made such determination), then the value attributed to such asset shall be
reduced, but not below zero, by the amount of such Significant Environmental
Cost.
"Unencumbered Net Operating Income" means for any period for
all Qualifying Unencumbered Properties owned (directly or beneficially) by the
Borrower during the applicable period, Net Operating Income from each such
Qualifying Unencumbered Property.
"United States" means the United States of America, including
the fifty states and the District of Columbia.
"Unsecured Debt" means Indebtedness of Borrower which is not
Secured Debt, including without limitation the aggregate amount of all Loans
outstanding hereunder.
"Unsecured Interest Expense" means Interest Expense other than
Interest Expense payable in respect of Secured Debt.
"Unused Commitments" shall mean an amount equal to all
unadvanced funds (other than unadvanced funds in connection with any
construction loan) which any third party is obligated to advance to Borrower or
another Person or otherwise pursuant to any loan document, written instrument
or otherwise.
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"Wells Fargo" means Wells Fargo Bank, N.A., in its individual
capacity.
SECTION 1.2. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a basis consistent (except for changes
concurred in by Ernst & Young LLP) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries
delivered to the Administrative Agent; provided that for purposes of references
to the financial results and information of "Guarantor, on a consolidated
basis," Guarantor shall be deemed to own one hundred percent (100%) of the
partnership interests in Borrower; and provided further that, if the Borrower
notifies the Administrative Agent that the Borrower wishes to amend any
covenant in Article V to eliminate the effect of any change in GAAP on the
operation of such covenant (or if the Administrative Agent notifies the
Borrower that the Required Banks wish to amend Article V for such purpose),
then the Borrower's compliance with such covenant shall be determined on the
basis of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant is amended in
a manner reasonably satisfactory to the Borrower and the Required Banks.
SECTION 1.3. Types of Borrowings. The term "Borrowing"
denotes the aggregation of Loans of one or more Banks to be made to the
Borrower pursuant to Article 2 on the same date, all of which Loans are of the
same type (subject to Article VIII) and, except in the case of Base Rate Loans,
have the same initial Interest Period. Borrowings are classified for purposes
of this Agreement either by reference to the pricing of Loans comprising such
Borrowing (e.g., a "Fixed Rate Borrowing" is a LIBOR Borrowing or a Money
Market Borrowing (excluding any such Borrowing consisting of Money Market LIBOR
Loans bearing interest at the Base Rate pursuant to Article VIII), and a "LIBOR
Borrowing" is a Borrowing comprised of LIBOR Loans) or by reference to the
provisions of Article 2 under which participation therein is determined (i.e.,
a "Committed Borrowing" is a Borrowing under Section 2.1 in which all Banks
participate in proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.3 in which a Bank's share is
determined on the basis of its bid in accordance therewith and a "Swing Line
Loan" is a Borrowing under Section 2.8).
ARTICLE II.
THE CREDITS
SECTION 2.1. Commitments to Lend. Each Bank severally
agrees, on the terms and conditions set forth in this Agreement, to make Loans
to the Borrower pursuant to this Article from time to time during the term
hereof in amounts such that the aggregate principal amount of Committed Loans
by such Bank at any one time outstanding shall not exceed the amount of its
Commitment. Each Borrowing outstanding under this Section 2.1 shall be in an
aggregate principal amount of $3,000,000 for LIBOR Loans or $500,000 for Base
Rate Loans, or an integral multiple of $100,000 in excess
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thereof (except that any such Borrowing may be in the aggregate amount
available in accordance with Section 3.2(c)) and, other than with respect to
Money Market Loans, shall be made from the several Banks ratably in proportion
to their respective Commitments. Subject to the limitations set forth herein,
any amounts repaid may be reborrowed.
SECTION 2.2. Notice of Borrowing. The Borrower shall give
Administrative Agent notice, in the form set forth as Exhibit "A" attached
hereto and incorporated herein by this reference ("Notice of Borrowing"), not
later than 11:00 a.m. (San Francisco time) (x) one Domestic Business Day before
each Base Rate Borrowing, or (y) three LIBOR Business Days before each LIBOR
Borrowing, specifying:
(i) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Base Rate Borrowing or a LIBOR Business
Day in the case of a LIBOR Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are
to be Base Rate Loans or LIBOR Loans; and
(iv) in the case of a LIBOR Borrowing, the duration
of the Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.3. Money Market Borrowings.
(a) The Money Market Option. From time to time during
the Term, the Borrower may, as set forth in this Section 2.3, request the Banks
during the Term to make offers to make Money Market Loans to the Borrower, not
to exceed, at such time, the lesser of (i) $125,000,000 in the aggregate
outstanding, and (ii) the Aggregate Commitment less all Loans then outstanding.
Subject to the provisions of this Agreement, the Borrower may repay any
outstanding Money Market Loan on any day which is the end of an Interest Period
and any amounts so repaid may be reborrowed, up to the amount available under
this Section 2.3 at the time of such Borrowing, until the Domestic Business Day
immediately prior to the Maturity Date. The Banks may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.3.
(b) Money Market Quote Request. When the Borrower wishes
to request offers to make Money Market Loans under this Section, it shall
transmit to the Administrative Agent by telex or facsimile transmission a Money
Market Quote Request substantially in the form of Exhibit "B" hereto so as to
be received not later than 10:30 A.M. (San Francisco time) on (x) the fourth
LIBOR Business Day prior to the date of Borrowing proposed therein, in the case
of a LIBOR Auction or (y) the second Domestic Business Day immediately prior to
the date of Borrowing proposed therein, in
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the case of an Absolute Rate Auction (or, in either case, such other earlier
time or date as the Borrower and the Administrative Agent shall have mutually
agreed and shall have notified to the Banks not later than the date of the
Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction
for which such change is to be effective) specifying:
1. the proposed date of Borrowing, which shall be a
LIBOR Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction;
2. the aggregate amount of such Borrowing, which shall
be $5,000,000 or a larger multiple of $1,000,000;
3. the duration of the Interest Period applicable
thereto (which shall not be less than 14 days or more than 365/366
days), subject to the provisions of the definition of Interest Period;
and
4. whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
(1), but no more than three (3), Interest Period(s) in a single Money Market
Quote Request. No Money Market Quote Request shall be given within five (5)
LIBOR Business Days (or such other number of days as the Borrower and the
Administrative Agent may agree) of any other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon
receipt of a Money Market Quote Request, the Administrative Agent shall send to
the Banks by telex or facsimile transmission an Invitation for Money Market
Quotes substantially in the form of Exhibit "C" hereto, which shall constitute
an invitation by the Borrower to each Bank to submit Money Market Quotes
offering to make the Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes.
1. Each Bank may submit a Money Market Quote containing
an offer or offers to make Money Market Loans in response to any Invitation for
Money Market Quotes. Each Money Market Quote must comply with the requirements
of this subsection (d) and must be submitted to the Administrative Agent by
telex or facsimile transmission at its offices specified in or pursuant to
Section 9.1 not later than (x) 6:30 A.M. (San Francisco time) on the third
LIBOR Business Day prior to the proposed date of Borrowing, in the case of a
LIBOR Auction or (y) 6:30 A.M. (San Francisco time) on the first Domestic
Business Day before the proposed date of Borrowing, in the case of an Absolute
Rate Auction (or, in either case, such other earlier time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote
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Request for the first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective); provided that Money Market Quotes submitted by the
Administrative Agent (or any affiliate of the Administrative Agent) in the
capacity of a Bank may be submitted, and may only be submitted, if the
Administrative Agent or such affiliate notifies the Borrower of the terms of
the offer or offers contained therein not later than fifteen (15) minutes prior
to the deadline for the other Banks. Subject to Articles III and VI, any Money
Market Quote so made shall be irrevocable except with the written consent of
the Administrative Agent given on the instructions of the Borrower.
2. Each Money Market Quote shall be in substantially the
form of Exhibit "D" hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount (w) may be
greater than or less than the Commitment of the quoting Bank, (x) must
be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed
the principal amount of Money Market Loans for which offers were
requested and (z) may be subject to an aggregate limitation as to the
principal amount of Money Market Loans for which offers being made by
such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or
below the applicable London Interbank Offered Rate (the "Money Market
Margin") offered for each such Money Market Loan, expressed as a
percentage (specified to the nearest 1/10,000th of 1%) to be added to
or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of
interest per annum (specified to the nearest 1/10,000th of 1%) (the
"Money Market Absolute Rate") offered for each such Money Market Loan,
and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five (5) separate offers by the
quoting Bank with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
3. Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit "D"
hereto or does not specify all of the information required by
subsection (d)(2) above;
(B) contains qualifying, conditional or similar language
(except for an aggregate limitation as provided in subsection
(d)(2)(B)(z) above);
(C) proposes terms other than or in addition to those set
forth in the applicable Invitation for Money Market Quotes; or
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(D) arrives after the time set forth in subsection
(d)(1).
(e) Notice to Borrower. The Administrative Agent shall
promptly (and in any event before 7:30 a.m. (San Francisco time) on the third
LIBOR Business Day before the proposed date of borrowing, in the case of a
LIBOR Auction, or on the first Domestic Business Day before the proposed date
of Borrowing, in the case of an Absolute Rate Auction) notify the Borrower in
writing of the terms (x) of any Money Market Quote submitted by a Bank that is
in accordance with subsection (d) and (y) of any Money Market Quote that
amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Administrative Agent unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money Market Quote. The
Administrative Agent's notice to the Borrower shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been received for
each Interest Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered (C) if applicable, limitations
on the aggregate principal amount of Money Market Loans for which offers in any
single Money Market Quote may be accepted, and (D) the identity of the quoting
Bank.
(f) Acceptance and Notice by Borrower. Not later than
8:00 A.M. (San Francisco time) on the third LIBOR Business Day before the
proposed date of Borrowing, in the case of a LIBOR Auction, and the first
Domestic Business Day in the case of an Absolute Rate Auction, the Borrower
shall notify the Administrative Agent of its acceptance or non-acceptance of
the offers so notified to it pursuant to subsection (e). In the case of
acceptance, such notice (a "Notice of Money Market Borrowing") shall specify
the aggregate principal amount of offers for each Interest Period that are
accepted. The Borrower may accept any Money Market Quote in whole or in part;
provided that:
1. the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request;
2. the principal amount of each Money Market Borrowing
must be $5,000,000 or a larger multiple of $1,000,000;
3. acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be; and
4. the Borrower may not accept any offer that is
described in subsection (d)(3) or that otherwise fails to comply with
the requirements of this Agreement.
Upon receipt of a Notice of Money Market Borrowing, the
Administrative Agent shall promptly (i) transmit a copy of such Notice of Money
Market Borrowing
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together with instructions for funding such Money Market Borrowing to the Bank
whose offer was accepted in such notice and (ii) inform each Bank that
submitted a Money Market Quote in connection with such Borrowing of (i) the
range of the Money Market Quotes received, and (ii) the Money Market Quotes
accepted by the Borrower pursuant hereto.
(g) Allocation by Administrative Agent. If offers are
made by two or more Banks with the same Money Market Margins or Money Market
Absolute Rates, as the case may be, for a greater aggregate principal amount
than the amount in respect of which such offers are accepted for the related
Interest Period, the principal amount of Money Market Loans in respect of which
such offers are accepted shall be allocated by the Administrative Agent among
such Banks as nearly as possible (in multiples of $1,000,000, as the
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. The Administrative Agent shall promptly (and
in any event within one (1) Domestic Business Day after such offers are
accepted) notify the Borrower and each such Bank in writing of any such
allocation of Money Market Loans. Determinations by the Administrative Agent
of the allocation of Money Market Loans shall be conclusive in the absence of
manifest error.
(h) Effect of Money Market Loans on Commitment.
Notwithstanding anything to the contrary contained herein, each Bank shall be
required to fund its pro rata share of Committed Loans in accordance with
Section 2.1 hereof despite the fact that any Bank's Commitment may have been or
may be exceeded as a result of such Bank's making of Money Market Loans.
(i) Bid Auction Fee. A Bid Auction Fee in the amount of
$150 per Bank per Interest Period requested shall be paid to Administrative
Agent by Borrower for its account on the date of each request for a Bid
Auction. Such Bid Auction Fee shall be payable upon receipt of Administrative
Agent's written demand therefor.
SECTION 2.4. Notice to Banks; Funding of Loans.
(a) Upon receipt of a notice from Borrower in accordance
with Section 2.2 or 2.3 hereof (each such notice being a "Notice of
Borrowing"), the Administrative Agent shall, on the date such Notice of
Borrowing is received by the Administrative Agent, notify each Bank of the
contents thereof and of such Bank's share of such Borrowing, of the interest
rate determined pursuant thereto and the Interest Period(s) and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (San Francisco time) on the
date of each Borrowing as indicated in the Notice of Borrowing, each Bank shall
(except as provided in subsection (c) of this Section) make available its share
of such Borrowing in Federal funds immediately available in San Francisco, to
the Administrative Agent at its address referred to in Section 9.1.
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(c) Unless the Administrative Agent shall have received
notice from a Bank prior to the date of any Borrowing that such Bank will not
make available to the Administrative Agent such Bank's share of such Borrowing,
the Administrative Agent may assume that such Bank has made such share
available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (b) of this Section 2.4 and the Administrative Agent
may, in reliance upon such assumption, but shall not be obligated to, make
available to the Borrower on such date a corresponding amount on behalf of such
Bank. If and to the extent that such Bank shall not have so made such share
available to the Administrative Agent, such Bank and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand, and in the case
of the Borrower two (2) Domestic Business Days after demand, such corresponding
amount together with interest thereon, for each day from the date such amount
is made available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, a rate per annum
equal to the interest rate applicable thereto pursuant to Section 2.7 and (ii)
in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to
the Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.5. Notes.
(a) The Loans (other than Money Market Loans and Swing
Line Notes) of each Bank shall be evidenced by a single Note in the form of
Exhibit "E" payable to the order of such Bank for the account of its Applicable
Lending Office.
(b) The Money Market Loans of each Bank shall be
evidenced by a single Money Market Note in the form of Exhibit "F", payable to
the order of such Bank for the account of its Applicable Lending Office.
(c) Upon receipt of each Bank's Note and Money Market
Note pursuant to Sections 3.1(a), 3.1(b), the Administrative Agent shall
forward such Note and Money Market Note to such Bank. Each Bank shall record
the date, amount, type and maturity of each Loan made by it and the date and
amount of each payment of principal made by the Borrower with respect thereto,
and may, if such Bank so elects in connection with any transfer or enforcement
of its Note and its Money Market Note, endorse on the appropriate schedule
appropriate notations to evidence the foregoing information with respect to
each such Loan (or Money Market Loan) then outstanding; provided that the
failure of any Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Facility Notes.
Each Bank is hereby irrevocably authorized by the Borrower so to endorse its
Facility Notes and to attach to and make a part of its Facility Notes a
continuation of any such schedule as and when required.
(d) The Committed Loans shall mature, and the principal
amount thereof shall be due and payable, on the Maturity Date.
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(e) Each Money Market Loan included in any Money Market
Borrowing shall mature, and the principal amount thereof shall be due and
payable, together with accrued interest thereon, on the earlier to occur of (i)
last day of the Interest Period applicable to such Borrowing or (ii) the
Maturity Date.
(f) There shall be no more than five (5) LIBOR Loans
outstanding at any one time.
SECTION 2.6. Method of Electing Interest Rates. (a) The
Loans included in each Committed Borrowing shall bear interest initially at the
type of rate specified by the Borrower in the applicable Notice of Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Loan (subject in each case to the
provisions of Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower
may elect to convert all or any portion of such Loans to LIBOR Loans as of any
LIBOR Business Day;
(ii) if such Loans are LIBOR Loans, the Borrower may
elect to convert all or any portion of such Loans to Base Rate Loans and/or
elect to continue all or any portion of such Loans as LIBOR Loans for an
additional Interest Period or additional Interest Periods, in each case
effective on the last day of the then current Interest Period applicable to
such Loans, or on such other date designated by Borrower in the Notice of
Interest Rate Election provided Borrower shall pay any losses pursuant to
Section 2.13.
Each such election shall be made by delivering a notice in the
form of Exhibit "G" (a "Notice of Interest Rate Election") to the
Administrative Agent by 11:00 A.M. (San Francisco time) at least three (3)
LIBOR Business Days before the conversion or continuation selected in such
notice is to be effective. A Notice of Interest Rate Election may, if it so
specifies, apply to only a portion of the aggregate principal amount of the
relevant Loans; provided that (i) such portion is allocated ratably among such
Loans, (ii) the portion to which such Notice applies, and the remaining portion
to which it does not apply, are each $3,000,000 or any larger multiple of
$100,000, (iii) there shall be no more than five (5) LIBOR Loans outstanding at
any time, (iv) no Committed Loan may be continued as, or converted into, a
LIBOR Loan when any Event of Default has occurred and is continuing, and (v) no
Interest Period shall extend beyond the Maturity Date.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or
continuation selected in such notice is to be effective, which shall comply
with the applicable clause of subsection (a) above;
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(iii) if the Loans are to be converted, the new type
of Loans and, if such new Loans are LIBOR Loans, the duration of the initial
Interest Period applicable thereto; and
(iv) if such Loans are to be continued as LIBOR
Loans for an additional Interest Period, the duration of such additional
Interest Period. Each Interest Period specified in a Notice of Interest Rate
Election shall comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election
from the Borrower pursuant to subsection (a) above, the Administrative Agent
shall notify each Bank the same day as it receives such Notice of Interest Rate
Election of the contents thereof and the Interest Periods (if different from
those requested by the Borrower) and such notice shall not thereafter be
revocable by the Borrower. If the Borrower fails to deliver a timely Notice of
Interest Rate Election to the Administrative Agent for any LIBOR Loans, such
Loans shall be converted into Base Rate Loans on the last day of the then
current Interest Period applicable thereto. Within one LIBOR Business Day
after receipt of a Notice of Interest Rate Election from the Borrower pursuant
to subsection (a) above, the Administrative Agent shall notify each Bank of the
interest rates determined pursuant thereto.
SECTION 2.7. Interest Rates.
(a) Each Base Rate Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date such Loan is
made until the date it is repaid or converted into a LIBOR Loan pursuant to
Section 2.6 or at the Maturity Date, at a rate per annum, equal to the Base
Rate plus the Applicable Margin for Base Rate Loans for such day. Such
interest shall be payable for each Interest Period on the first day of each
calendar month.
(b) Each LIBOR Loan shall bear interest on the
outstanding principal amount thereof, for each day during the Interest Period
applicable thereto, at a rate per annum equal to the sum of the Applicable
Margin for LIBOR Loans for such day plus the Adjusted London Interbank Offered
Rate applicable to such Interest Period. Such interest shall be payable for
each Interest Period on the first day of each calendar month.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
London Interbank Offered Rate applicable during such Interest Period by (ii)
1.00 minus the LIBOR Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest
Period means the respective per annum U.S. Dollar rates listed on page 3750
(i.e., the LIBOR page) of the Telerate New Services titled "British Banker
Association Interest Settlement
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Rates" (rounded upward, if necessary, to the next highest 1/100 of 1%)
determined at approximately 11:00 a.m. (London time) two LIBOR Business Days
before the first day of such Interest Period in an amount approximately equal
to the principal amount of the LIBOR Borrowing or Loans or portion thereof to
be converted into or continued as LIBOR Loans to which such Interest Period is
to apply and for a period of time comparable to such Interest Period. If the
Telerate New Services ceases to publish the "London Interbank Offered Rate",
then such rate shall be determined from such substitute financial reporting
service as the Administrative Agent in its reasonable discretion shall
determine.
"LIBOR Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D, as Regulation D may be amended, modified or supplemented, for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
LIBOR Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
LIBOR Reserve Percentage.
(c) Subject to Section 8.1, each Money Market LIBOR Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of the
London Interbank Offered Rate for such Interest Period (determined in
accordance with Section 2.7(b) as if the related Money Market LIBOR Borrowing
were a LIBOR Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.3. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.3. Such interest shall be payable for each Interest
Period on the last day thereof; provided, however, if such Interest Period is
longer than three (3) months, the accrued interest shall be payable on the date
which is three (3) months after the first day of such Interest Period, on the
date which is every three (3) months thereafter, and on the last day of such
Interest Period. Any overdue principal of or interest on any Money Market Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the Base Rate until such failure shall become an Event of
Default and thereafter at a rate per annum equal to the sum of four percent
(4%) plus the Base Rate (the "Default Rate").
(d) In the event that, and for so long as, any Event of
Default shall have occurred and be continuing, the outstanding principal amount
of the Loans, and, to the extent permitted by applicable law, overdue interest
in respect of all Loans, shall bear interest at the Default Rate.
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(e) The Administrative Agent shall determine each
interest rate applicable to the Loans hereunder. The Administrative Agent
shall give prompt notice to the Borrower and the Banks of each rate of interest
so determined, and its determination thereof shall be conclusive in the absence
of demonstrable error.
SECTION 2.8. Swing Line Loans.
(a) Swing Line Commitment. The Administrative Agent
agrees, on the terms and conditions set forth in this Agreement, to make loans
to the Borrower pursuant to this Section (each, a "Swing Line Loan") from time
to time during the Term; provided that, immediately after each such loan is
made, (i) the aggregate outstanding principal amount of Swing Line Loans shall
not exceed Ten Million Dollars ($10,000,000) (the "Swing Line Commitment") and
(ii) the aggregate principal amount of Swing Line Loans outstanding at any
time, when added to all other Loans of all Banks at such time, shall not exceed
the Aggregate Commitment. Each loan under this Section shall be in a principal
amount of at least $500,000 and integral multiples of $100,000, and shall bear
interest for each day at the Base Rate for such day. Within the foregoing
limits, the Borrower may borrow under this Section, repay Swing Line Loans and
reborrow at any time during the Term.
(b) Notice of Swing Line Borrowing. The Borrower shall
give the Administrative Agent notice in the form of Exhibit "H" (a "Swing Line
Borrowing Notice") not later than 12:00 Noon (San Francisco time) on the date
of each Swing Line Borrowing, specifying (i) the date of such Borrowing, which
shall be a Domestic Business Day, and (ii) the amount of such Borrowing. Any
Swing Line Borrowing Notice delivered pursuant to this Section shall be
irrevocable and the Borrower shall be bound to make a borrowing in accordance
therewith.
(c) Funding of Swing Line Loans. Not later than 4:00
P.M. (San Francisco time) on the date of each Swing Line Borrowing, the
Administrative Agent shall, unless any applicable condition specified in
Article 3 has not been satisfied, make available the amount of such Swing Line
Borrowing, in Federal or other funds immediately available to Borrower.
(d) Swing Line Note. The Borrower's obligation to repay
the Swing Line Loans shall be evidenced by a single note substantially in form
of Exhibit "I" hereto (the "Swing Line Note").
(e) Optional Prepayment of Swing Line Loans. The
Borrower may prepay Swing Line Loans in whole at any time, or from time to time
in part in a principal amount of at least $500,000, by giving notice of such
prepayment to the Administrative Agent not later than 10:00 A.M. (San Francisco
time) on the date of prepayment and paying the principal amount to be prepaid,
together with interest accrued thereon to the date of prepayment, to the
Administrative Agent in Federal or other funds immediately available, not later
than 10:00 A.M. (San Francisco time) on the date of prepayment.
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(f) Mandatory Prepayment of Swing Line Loans; Funding by
Banks. On the date of each Borrowing pursuant to Section 2.4, the Borrower
shall prepay all Swing Line Loans then outstanding, together with interest
accrued thereon to the date of prepayment. If not prepaid in accordance with
this Section on or before five (5) Domestic Business Days following the funding
of a Swing Loan to Borrower, each Bank shall, on such fifth (5th) Domestic
Business Day, fund a Base Rate Loan in its proportionate amount of the Swing
Line Loan, and the Swing Line Loan shall be repaid from such funding.
(g) Maturity of Swing Line Loans. All Swing Line Loans
outstanding on the Maturity Date shall be due and payable on such date,
together with interest accrued thereon to such date.
(h) Refunding Unpaid Swing Line Loans. If the Swing Line
Loans are not paid in full on the Maturity Date, the Administrative Agent may,
by notice to the Banks, require each Bank to pay to the Administrative Agent an
amount equal to such Bank's Commitment Percentage of the aggregate unpaid
principal amount of the Swing Line Loans then outstanding. Such notice shall
specify the date on which such payments are to be made, which shall be the
first Domestic Business Day after such notice is given. Not later than 10:00
A.M. (San Francisco time) on the date so specified, each Bank shall pay the
amount so notified to it to the Administrative Agent in Federal or other
immediately available funds. The amount so paid by each Bank shall constitute
a Base Rate Loan to the Borrower; provided that, if the Banks are prevented
from making such Base Rate Loans to the Borrower by the provisions of the
United States Bankruptcy Code or otherwise, the amount so paid by each Bank
shall constitute a purchase by it of a participation in the unpaid principal
amount of the Swing Line Loans (and interest accruing thereon after the date of
such payment). Each Bank's obligation to make such payment to the
Administrative Agent under this subsection (h) shall be absolute, unconditional
and irrevocable, and as a primary obligor, not as surety, notwithstanding any
circumstance or event whatsoever, including, without limitation, (i) any
set-off, counterclaim, recoupment, defense or other right which such Bank or
any other Person may have against the Administrative Agent or the Borrower,
(ii) the occurrence or continuance of a Default or and Event of Default or the
termination of the Commitments, (iii) any adverse change in the condition
(financial or otherwise ) of the Borrower or any other Person, (iv) any breach
of this Agreement by the Borrower or any other party hereto, or (v) the failure
of any other Bank to fund its participation as required hereby, (v) the
termination or cancellation of a Bank's Commitment or (vi) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
SECTION 2.9. Fees.
(a) Facility Fee. The Borrower shall pay to the
Administrative Agent for the account of the Banks ratably in proportion to
their respective Commitments a Facility Fee (the "Facility Fee") on the
Aggregate Commitment at the respective per annum percentages based upon the
range into which the Borrower's Credit Rating falls, in accordance with the
following table. So long as only a Credit Rating from Fitch has been
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assigned to such debt, the Credit Rating shall be deemed to be BBB-/Baa3 (Level
IV) for ninety (90) days following the Closing Date. After such ninety-day
period, so long as S&P or Moody's rating shall not have been assigned, the
Credit Rating shall be deemed to be Below Investment Grade (Level V) until such
time as a S&P or Moody's Credit Rating shall have been assigned and
Administrative Agent shall have received evidence reasonably satisfactory to
Administrative Agent that such Credit Rating has been assigned, at which time
Borrower's Credit Rating shall be immediately adjusted. Any change in
Borrower's Credit Rating causing it to move to a different range on the table
shall effect an immediate change in the applicable Facility Fee percentage.
Promptly after learning of a change in the Borrower's Credit Rating,
Administrative Agent shall give notice of such change to the Banks and include
in such notice the new Facility Fee percentage and the effective date of such
change. In the event that two (2) different Credit Ratings have been assigned,
the lower of the two Credit Ratings will prevail unless such Credit Ratings are
more than one level (as shown in the table below) apart, in which case the
average of the margins corresponding to the two Credit Ratings will constitute
the applicable Facility Fee percentage. In the event that three (3) different
Credit Ratings have been assigned, the average of the margins corresponding to
the two highest Credit Ratings will constitute the applicable Facility Fee
percentage. For purposes of illustration only, if (i) two (2) different Credit
Ratings had been assigned and one was Level 1 and the other was Level III, the
Facility Fee percentage would be 0.125 (i.e., the average of Level I (0.100)
and Level III (0.150); or (ii) three (3) different Credit Ratings had been
assigned and such levels were Level I, Level III and Level IV, the Facility Fee
percentage would be 0.125 (i.e., the average of Level I and Level III). The
Facility Fee shall be payable in arrears in quarterly installments which shall
be due on each January 1, April 1, July 1 and October 1 during the Term. The
amount of each installment shall be one quarter of the product of (i) the
applicable Facility Fee for the date the payment is due and (ii) the Aggregate
Commitment.
<TABLE>
<S> <C> <C>
Level I A-/A3 or better 0.100%
Level II BBB+/Baa1 0.100%
Level III BBB/Baa2 0.150%
Level IV BBB-/Baa3 0.200%
Level V Below Investment Grade 0.325%
</TABLE>
(b) Other Fees. On the Initial Closing Date and from
time to time thereafter as specified in the Mandate Letter, the Borrower shall
pay to the Administrative Agent, for the benefit of the Administrative Agent
and Documentation Agent, the fees specified therein.
(c) Fees Non-Refundable. All fees set forth in this
Section 2.9 shall be deemed to have been earned on the earlier of when accrued
or when payable hereunder and shall be non-refundable. The obligation of the
Borrower to pay such fees in accordance with provisions hereof shall be binding
upon the Borrower and shall inure to the benefit of the Administrative Agent,
and the Documentation Agent, the Syndication Agent and the Banks regardless of
whether any Loans are actually made.
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SECTION 2.10. Maturity Date.
The term (the "Term") of the Commitments (and each Bank's
obligations to make Loans hereunder) shall terminate and expire on the Maturity
Date. Upon the date of the termination of the Term, any Loans then outstanding
(together with accrued interest thereon and all other Obligations) shall be due
and payable on such date.
SECTION 2.11. Optional Prepayments.
(a) The Borrower may, upon at least one (1) Domestic
Business Day's notice to the Administrative Agent, prepay any Base Rate Loans
(or any Money Market Borrowing bearing interest at the Base Rate pursuant to
Section 8.1), in whole or in part at any time, or from time to time in part in
amounts aggregating Five Hundred Thousand Dollars ($500,000) or any larger
multiple of One Hundred Thousand Dollars ($100,000), by paying the principal
amount thereof. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Borrowing.
(b) The Borrower may, upon at least three (3) LIBOR
Business Days' notice to the Administrative Agent, prepay any LIBOR Loan (but
not a Money Market LIBOR Loan) as of the last day of the Interest Period
applicable thereto. Except as provided in Article VIII and except with respect
to any LIBOR Loan which has been converted to a Base Rate Loan pursuant to
Section 8.2, 8.3 or 8.4 hereof, the Borrower may not prepay all or any portion
of the principal amount of any LIBOR Loan prior to the end of the Interest
Period applicable thereto unless the Borrower shall also pay any applicable
expenses pursuant to Section 2.13. Each such optional prepayment shall be in
the amounts set forth in Section 2.11(a) above, except that any LIBOR Loan
which has been converted to a Base Rate Loan pursuant to Section 8.2, 8.3 or
8.4 hereof may be prepaid without ratable payment of other Loans which have not
been so converted.
(c) The Borrower may at any time and from time to time
cancel all or any part of the Commitments by the delivery to the Administrative
Agent of a notice of cancellation within the applicable time periods set forth
in Sections 2.11(a) and (b) if there are Loans then outstanding or, if there
are no Loans outstanding at such time as to which the Commitments with respect
thereto are being canceled, upon at least one (1) Domestic Business Day's
notice to the Administrative Agent, whereupon, in either event, all or such
portion of the Commitments, as applicable, shall terminate as to the Banks, pro
rata on the date set forth in such notice of cancellation, and, if there are
any Loans then outstanding, Borrower shall prepay, as applicable, all or such
portion of Loans outstanding on such date in accordance with the requirements
of Section 2.11(a) and (b). Borrower shall be required to designate in its
notice of cancellation which Loans, if any, are to be prepaid.
(d) Any amounts so prepaid pursuant to Section 2.11(a) or
(b) may be reborrowed. In the event Borrower elects to cancel all or any
portion of the Commitments pursuant to Section 2.11(c) hereof, such amounts may
not be reborrowed.
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SECTION 2.12. General Provisions as to Payments.
(a) The Borrower shall make each payment of interest and
principal on the Loans and of fees hereunder, not later than 10:00 A.M. (San
Francisco time) on the date when due, in Federal or other funds immediately
available in San Francisco, to the Administrative Agent at its address referred
to in Section 9.1. The Administrative Agent will promptly (and in any event
within one (1) Domestic Business Day after receipt thereof) distribute to each
Bank its ratable share (or applicable share with respect to Money Market Loans)
of each such payment received by the Administrative Agent for the account of
the Banks. If and to the extent that the Administrative Agent shall receive
any such payment for the account of the Banks on or before 10:00 A.M. (San
Francisco time) on any Domestic Business Day, and Administrative Agent shall
not have distributed to any Bank its applicable share of such payment on such
Domestic Business Day, Administrative Agent shall distribute such amount to
such Bank together with interest thereon, for each day from the date such
amount should have been distributed to such Bank until the date Administrative
Agent distributes such amount to such Bank, at the Federal Funds Rate.
Whenever any payment of principal of, or interest on the Base Rate Loans or of
fees shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the LIBOR Loans shall be
due on a day which is not a LIBOR Business Day, the date for payment thereof
shall be extended to the next succeeding LIBOR Business Day unless such LIBOR
Business Day falls in another calendar month, in which case the date for
payment thereof shall be the next preceding LIBOR Business Day. Whenever any
payment of principal of, or interest on, the Money Market Loans shall be due on
a day which is not a LIBOR Business Day, the date for payment thereof shall be
extended to the next succeeding LIBOR Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received
notice from the Borrower prior to the date on which any payment is due to the
Banks hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent
that the Borrower shall not have so made such payment, each Bank shall repay to
the Administrative Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Administrative Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any
payment of principal with respect to any LIBOR Loan or Money Market LIBOR Loan
(pursuant to Article II, VI or VIII or otherwise) on any day other than the
last day of the Interest Period applicable thereto, or if the Borrower fails to
borrow any LIBOR Loans or Money Market LIBOR Loans after notice has been given
to any Bank in accordance with
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Section 2.4(a), or if Borrower shall deliver a Notice of Interest Rate Election
specifying that a LIBOR Loan shall be converted on a date other than the first
(1st) day of the then current Interest Period applicable thereto, the Borrower
shall reimburse each Bank within fifteen (15) days after certification of such
Bank of such loss or expense (which shall be delivered by each such Bank to
Administrative Agent for delivery to Borrower) for any resulting loss or
expense incurred by it (or by an existing Participant in the related Loan),
including (without limitation) any loss incurred in obtaining, liquidating or
employing deposits from third parties, but excluding loss of margin for the
period after any such payment or failure to borrow, provided that such Bank
shall have delivered to Administrative Agent and Administrative Agent shall
have delivered to the Borrower a certification as to the amount of such loss or
expense, which certification shall set forth in reasonable detail the basis for
and calculation of such loss or expense and shall be conclusive in the absence
of demonstrable error. Nothing herein shall, or shall be deemed to, allow
Borrower to voluntarily prepay any Money Market Loan.
SECTION 2.14. Computation of Interest and Fees. All interest
and fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.15. Use of Proceeds. The Borrower shall use the
proceeds of the Loans for general corporate purposes, including, without
limitation, the acquisition of multifamily apartment projects and real property
to be used in connection with construction, management, development,
acquisition and operation of multifamily apartment projects and for general
working capital needs of the Borrower.
ARTICLE III.
CONDITIONS
SECTION 3.1. Closing. The closing hereunder shall occur on
the date when each of the following conditions is satisfied (or waived by the
Administrative Agent and the Banks), each document to be dated the Closing Date
unless otherwise indicated:
(a) the Borrower shall have executed and delivered to the
Administrative Agent duly executed original Notes and Money Market Notes for
the account of each Bank dated on or before the Closing Date complying with the
provisions of Section 2.5 and the Borrower shall have executed and delivered to
the Administrative Agent a duly executed original Swing Line Note dated on or
before the Closing Date complying with the provisions of Section 2.8 ;
(b) the Borrower, the Administrative Agent, each of the
Banks and any Designated Bidders shall have executed and delivered to the
Borrower and the Administrative Agent a duly executed original of this
Agreement;
(c) Guarantor shall have executed and delivered to the
Administrative Agent a duly executed original of the Guaranty;
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(d) the Administrative Agent shall have received an
opinion of O'Melveny & Myers, LLP, counsel for the Borrower and the Guarantor,
acceptable to the Administrative Agent, and its counsel;
(e) the Borrower shall have repaid in full all monies
borrowed and shall have discharged all of its obligations under that certain
Revolving Credit Agreement dated November 30, 1995, as amended, among Borrower,
the lenders listed therein, Wells Fargo Bank, N.A., as Managing Agent and Bank
of America National Trust and Savings Association, as Administrative Agent
(which repayment may occur pursuant to concurrent Borrowings made under this
Agreement);
(f) the Administrative Agent shall have received all
documents the Administrative Agent may reasonably request relating to the
existence of the Borrower and Guarantor, the authority for and the validity of
this Agreement and the other Loan Documents, and any other matters relevant
hereto, all in form and substance satisfactory to the Administrative Agent.
Such documentation shall include, without limitation, the agreement of limited
partnership of the Borrower, as well as the certificate of limited partnership
of the Borrower, both as amended, modified or supplemented to the Closing Date,
certified to be true, correct and complete by a senior officer of the Borrower
as of a date not more than ten (10) days prior to the Closing Date, together
with a long-form certificate of good standing as to the Borrower from the
Secretary of State (or the equivalent thereof) of Delaware, a good standing
certificate issued by the Secretary of State of the State of California, each
to be dated not more than thirty (30) days prior to the Closing Date, as well
as the articles of incorporation and bylaws of Guarantor, as amended, modified
or supplemented to the Closing Date, certified to be true, correct and complete
by a senior officer of Guarantor as of a date not more than ten (10) days prior
to the Closing Date, together with a good standing certificate as to Guarantor
from the Secretary of State (or the equivalent thereof) of Maryland, to be
dated not more than thirty (30) days prior to the Closing Date;
(g) the Administrative Agent shall have received all
certificates, agreements and other documents and papers referred to in this
Section 3.1 and the Notice of Borrowing referred to in Section 3.2, if
applicable, unless otherwise specified, in sufficient counterparts,
satisfactory in form and substance to the Administrative Agent in its sole
discretion;
(h) the Borrower shall have taken all actions required to
authorize the execution and delivery of this Agreement and the other Loan
Documents and the performance thereof by the Borrower;
(i) the Administrative Agent shall be satisfied that none
of the Borrower, Guarantor nor any Consolidated Subsidiary is subject to any
present or contingent environmental liability which could have a Material
Adverse Effect;
(j) the Administrative Agent shall have received, for its
and any other Bank's account, all fees due and payable pursuant to Section 2.9
hereof on or before the
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Closing Date, and the fees and expenses accrued through the Closing Date of
Gibson, Dunn & Crutcher LLP;
(k) the Administrative Agent shall have received copies
of all consents, licenses and approvals, if any, required in connection with
the execution, delivery and performance by the Borrower, Guarantor and the
applicable Consolidated Subsidiaries, and the validity and enforceability, of
the Loan Documents, or in connection with any of the transactions contemplated
thereby, and such consents, licenses and approvals shall be in full force and
effect;
(l) the Administrative Agent shall have received the
audited financial statements of the Borrower and its Consolidated Subsidiaries
and of Guarantor for the Fiscal Year ending December 31, 1996; and
(m) no Default or Event of Default shall have occurred.
SECTION 3.2. Borrowings. The obligation of any Bank to make
a Loan is subject to the satisfaction of the following conditions:
(a) the Closing Date shall have occurred on or prior to
July 11, 1997;
(b) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.2, a Notice of Money Market Borrowing as
required by Section 2.3 or a Swing Line Borrowing Notice as required by Section
2.8, in all cases signed by (i) a Certifying Officer or (ii) such other Person
as may be designated in writing from time to time in a written notice delivered
to Administrative Agent which has been signed by a Certifying Officer;
(c) immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the Aggregate
Commitments;
(d) immediately before and after such Borrowing, no
Default or Event of Default shall have occurred and be continuing both before
and after giving effect to the making of such Loans;
(e) the representations and warranties of the Borrower
contained in this Agreement (other than representations and warranties which
expressly speak as of a different date) shall be true and correct in all
material respects on and as of the date of such Borrowing both before and after
giving effect to the making of such Loans;
(f) no law or regulation shall have been adopted, no
order, judgment or decree of any governmental authority shall have been issued,
and no litigation shall be pending, which does or seeks to enjoin, prohibit or
restrain, the making or repayment of the Loans or the consummation of the
transactions contemplated by this Agreement; and
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(g) no event, act or condition shall have occurred after
the Closing Date which, in the reasonable judgment of the Super- Majority Banks
has had or is reasonably expected to have a Material Adverse Effect.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(c), (d), (e), (f), and (g) (to the extent that Borrower is or should have been
aware of any Material Adverse Effect) of this Section, except as otherwise
disclosed in writing by Borrower to the Banks.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and each of the
other Banks which is or may become a party to this Agreement to make the Loans,
the Borrower makes the following representations and warranties as of the
Closing Date. Such representations and warranties shall survive the
effectiveness of this Agreement, the execution and delivery of the other Loan
Documents and the making of the Loans.
SECTION 4.1. Existence and Power. The Borrower is a limited
partnership, duly formed and validly existing as a limited partnership under
the laws of the State of Delaware and has all powers and all material
governmental licenses, authorizations, consents and approvals required to own
its property and assets and carry on its business as now conducted or as it
presently proposes to conduct and has been duly qualified and is in good
standing in the State of California and in every other jurisdiction in which
the failure to be so qualified and/or in good standing is likely to have a
Material Adverse Effect. Guarantor is a corporation, duly formed, validly
existing and in good standing as a real estate investment trust under the laws
of the State of Maryland and has all powers and all material governmental
licenses, authorizations, consents and approvals required to own its property
and assets and carry on its business as now conducted or as it presently
proposes to conduct and has been duly qualified and is in good standing in
every jurisdiction in which the failure to be so qualified and/or in good
standing is reasonably expected to have a Material Adverse Effect.
SECTION 4.2. Power and Authority. The Borrower has the
partnership power and authority to execute, deliver and carry out the terms and
provisions of each of the Loan Documents to which it is a party and has taken
all necessary partnership action, if any, to authorize the execution and
delivery on behalf of the Borrower and the performance by the Borrower of such
Loan Documents. The Borrower has duly executed and delivered each Loan
Document to which it is a party in accordance with the terms of this Agreement,
and each such Loan Document constitutes the legal, valid and binding obligation
of the Borrower, enforceable in accordance with its terms, except as
enforceability may be limited by applicable insolvency, bankruptcy or other
laws affecting creditors rights generally, or general principles of equity,
whether such enforceability is considered in a proceeding in equity or at law.
Guarantor has the power and authority to
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execute, deliver and carry out the terms and provisions of each of the Loan
Documents on behalf of the Borrower to which the Borrower is a party and has
taken all necessary action to authorize the execution and delivery on behalf of
the Borrower and the performance by the Borrower of such Loan Documents.
SECTION 4.3. No Violation. Neither the execution, delivery
or performance by or on behalf of the Borrower of the Loan Documents to which
it is a party, nor compliance by the Borrower with the terms and provisions
thereof nor the consummation of the transactions contemplated by the Loan
Documents, (i) will contravene any applicable provision of any law, statute,
rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict with or result in any breach
of, any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Borrower
or any of its Consolidated Subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, or other agreement or other instrument to which the
Borrower (or of any partnership of which the Borrower is a partner) or any of
its Consolidated Subsidiaries is a party or by which it or any of its property
or assets is bound or to which it is subject, or (iii) will cause a default by
the Borrower under any organizational document of any Person in which the
Borrower has an interest, or cause a default under the Borrower's agreement or
certificate of limited partnership, the consequences of any such contravention,
conflict, breach or default described in clauses (i), (ii) or (iii) is
reasonably expected to have a Material Adverse Effect, or result in or require
the creation or imposition of any Lien whatsoever upon any Property (except as
contemplated herein).
SECTION 4.4. Financial Information.
(a) The consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries, dated as of December 31, 1996, and the related
consolidated statements of Borrower's financial position for the Fiscal Year
then ended, reported on by Ernst & Young LLP, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with GAAP, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such Fiscal Year.
(b) The consolidated balance sheet of Guarantor, dated as
of December 31, 1996, and the related consolidated statements of Guarantor's
financial position for the Fiscal Year then ended, reported on by Ernst & Young
LLP and set forth in the Guarantor's 1996 Form 10- K, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with GAAP, the
consolidated financial position of Guarantor and its Consolidated Subsidiaries
as of such date and their consolidated results of operations and cash flows for
such Fiscal Year.
(c) The unaudited consolidated balance sheet of Guarantor
as at March 31, 1997 and related statements of income, retained earnings and
cash flow for the period then ended, certified by the chief accounting officer
or chief financial officer of Guarantor,
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a copy of which has been delivered to Administrative Agent, were prepared in
accordance with GAAP consistently applied (except to the extent noted therein)
and fairly present the consolidated financial position of Guarantor, Borrower
and the Consolidated Subsidiaries as of such date and the results of operations
and cash flow for the period covered thereby, subject to normal year-end
adjustments. Neither Borrower, Guarantor nor any Consolidated Subsidiary had on
such date any material Contingent Obligations, liabilities for taxes or
long-term leases, unusual forward or long-term commitments or unrealized losses
from any unfavorable commitments which are not reflected in the foregoing
statements or in the notes thereto and which are material.
(d) Since December 31, 1996, (i) except as may have been
disclosed in writing to the Banks, nothing has occurred having a Material
Adverse Effect, and (ii) except as previously disclosed to the Banks, neither
the Borrower nor Guarantor has incurred any material indebtedness or guaranty
on or before the Closing Date.
SECTION 4.5. Litigation. Except as previously disclosed by
the Borrower in writing to the Banks, there is no action, suit or proceeding
pending against, or to the knowledge of the Borrower threatened against or
affecting, (i) the Borrower, Guarantor or any of their Consolidated
Subsidiaries, (ii) the Loan Documents or any of the transactions contemplated
by the Loan Documents or (iii) any of their assets, before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which actions, suits or
proceedings described in clauses (i), (ii) or (iii) would, individually, or in
the aggregate have a Material Adverse Effect or which in any manner draws into
question the validity of this Agreement or the other Loan Documents.
SECTION 4.6. Compliance with ERISA.
(a) Except as set forth on Schedule 4.6 attached hereto,
neither Borrower nor Guarantor is a member of any Plan or Multiemployer Plan or
any other Benefit Arrangement.
(b) The transactions contemplated by the Loan Documents
will not constitute a nonexempt prohibited transaction (as such term is defined
in Section 4975 of the Code or Section 406 of ERISA) which would, individually
or in the aggregate, have a Material Adverse Effect on Borrower or that could
subject the Administrative Agent or the Banks to any tax or penalty or
prohibited transactions imposed under Section 4975 of the Code or Section
502(i) of ERISA.
SECTION 4.7. Environmental Matters. The Borrower conducts
reviews of the effect of Environmental Laws on the business, operations and
properties of the Borrower and its Consolidated Subsidiaries when necessary in
the course of which it identifies and evaluates associated liabilities and
costs (including, without limitation, any capital or operating expenditures
required for clean-up or closure of properties presently owned, any capital or
operating expenditures required to achieve or maintain compliance with
environmental protection standards imposed by law or as a condition of any
license,
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permit or contract, any related constraints on operating activities, and any
actual or potential liabilities to third parties, including employees, and any
related costs and expenses). On the basis of this review, the Borrower has
reasonably concluded that no such associated liabilities and costs, including
the costs of compliance with Environmental Laws, (i) are, as of the date
hereof, Significant Environmental Costs, or (ii) would have a Material Adverse
Effect on the Borrower, Guarantor and their Consolidated Subsidiaries.
SECTION 4.8. Taxes. United States Federal income tax returns
of the Borrower, Guarantor and their Consolidated Subsidiaries have been
prepared and filed through the Fiscal Year ended December 31, 1995 and an
extension has been filed for the Fiscal Year ended December 31, 1996. The
Borrower, Guarantor and their Consolidated Subsidiaries 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 the Borrower, Guarantor or
any Consolidated Subsidiary, except such taxes, if any, as are reserved against
in accordance with GAAP, such taxes as are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which
when due and payable will not have, in the aggregate, a Material Adverse
Effect. The charges, accruals and reserves on the books of the Borrower,
Guarantor and their Consolidated Subsidiaries in respect of taxes or other
governmental charges are, in the opinion of the Borrower, adequate.
SECTION 4.9. Full Disclosure. All factual information
heretofore prepared by the Borrower and furnished by the Borrower to the
Administrative Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby or thereby is true and
accurate in all material respects as of the date as of which such information
is stated or certified. There is no fact known to the Borrower (other than
matters of a general economic nature) that has had or could reasonably be
expected to have a Material Adverse Effect and that has not been disclosed
herein or in such other documents, certificates or statements executed or
delivered in connection herewith.
SECTION 4.10. Solvency. On the Closing Date and after giving
effect to the transactions contemplated by the Loan Documents occurring on the
Closing Date, the Borrower will be Solvent.
SECTION 4.11. Use of Proceeds; Margin Regulations. All
proceeds of the Loans will be used by the Borrower only in accordance with the
provisions hereof. No part of the proceeds of any Loan will be used by the
Borrower to purchase or carry any Margin Stock or to extend credit to others
for the purpose of purchasing or carrying any Margin Stock. Neither the making
of any Loan nor the use of the proceeds thereof will violate or be inconsistent
with the provisions of Regulations G, T, U or X of the Federal Reserve Board.
SECTION 4.12. Governmental Approvals. No order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is
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required to authorize, or is required in connection with the execution,
delivery and performance of any Loan Document or the consummation of any of the
transactions contemplated thereby other than those that have already been duly
made or obtained and remain in full force and effect or those which, if not
made or obtained, would not have a Material Adverse Effect.
SECTION 4.13. Investment Company Act; Public Utility Holding
Company Act. Neither the Borrower, Guarantor nor any Consolidated Subsidiary
is (x) an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended,
(y) a "holding company" or a subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (z)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
SECTION 4.14. Principal Offices. As of the Closing Date, the
principal office, chief executive office and principal place of business of the
Borrower is 550 Newport Center Drive, Newport Beach, California 92660.
SECTION 4.15. REIT Status. For the Fiscal Year ended
December 31, 1996, Guarantor qualified and Guarantor shall continue to qualify
as a real estate investment trust under the Code.
SECTION 4.16. Patents, Trademarks, etc. The Borrower has
obtained and holds in full force and effect all patents, trademarks,
servicemarks, trade names, copyrights and other such rights, free from
burdensome restrictions, which are necessary for the operation of its business
as presently conducted, the impairment of which is reasonably expected to have
a Material Adverse Effect.
SECTION 4.17. Qualifying Unencumbered Properties. Schedule
4.17 attached hereto and made a part hereof sets forth all the Qualifying
Unencumbered Property owned by the Borrower, directly or indirectly, as of the
Closing Date. As of the Closing Date, all of the Properties set forth in
Schedule 4.17 are Qualifying Unencumbered Properties.
Borrower represents and warrants that, as of the Closing Date,
the Borrower has good and insurable fee title to the Qualifying Unencumbered
Property, free of all Liens other than Permitted Liens and that to its best
knowledge, except as disclosed in writing to the Administrative Agent in
connection with the extension of credit contemplated hereby or hereafter
disclosed in writing to the Administrative Agent from time to time, no
Materials of Environmental Concern are located on, under, over or about such
real property.
SECTION 4.18. No Default. As of the date hereof, no Event of
Default or Default exists under or with respect to any Indebtedness of the
Borrower and the Borrower is not in default in any material respect beyond any
applicable grace period
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under or with respect to any other material agreement, instrument or
undertaking to which it is a party or by which it or any of its property is
bound in any respect in any such case, the existence of which default is
reasonably expected to result in a Material Adverse Effect.
SECTION 4.19. Licenses, etc. The Borrower has obtained and
does hold in full force and effect, all franchises, licenses, permits,
certificates, authorizations, qualifications, accreditation, easements, rights
of way and other consents and approvals which are necessary for the operation
of its businesses as presently conducted, the absence of which is reasonably
expected to have a Material Adverse Effect.
SECTION 4.20. Compliance With Law. The Borrower and each of
the Real Property Assets are in compliance with all laws, rules, regulations,
orders, judgments, writs and decrees, including, without limitation, all
building and zoning ordinances and codes, the failure to comply with which is
reasonably expected to have a Material Adverse Effect.
SECTION 4.21. No Burdensome Restrictions. Except as may have
been disclosed by the Borrower in writing to the Banks, Borrower is not a party
to any agreement or instrument or subject to any other obligation or any
charter or corporate or partnership restriction, as the case may be, which,
individually or in the aggregate, is reasonably expected to have a Material
Adverse Effect.
SECTION 4.22. Brokers' Fees. The Borrower has not dealt with
any broker or finder with respect to the transactions contemplated by this
Agreement or otherwise in connection with this Agreement, and the Borrower has
not done any act, had any negotiations or conversation, or made any agreements
or promises which will in any way create or give rise to any obligation or
liability for the payment by the Borrower of any brokerage fee, charge,
commission or other compensation to any party with respect to the transactions
contemplated by the Loan Documents, other than the fees payable to the
Administrative Agent, the Documentation Agent and the Banks, and certain other
Persons as previously disclosed in writing to the Administrative Agent.
SECTION 4.23. Labor Matters. As of the date hereof, there
are no collective bargaining agreements or Multiemployer Plans covering the
employees of the Borrower. As of the date hereof, the Borrower is not
suffering any strikes, walkouts, work stoppages or other material labor
difficulty which are reasonably expected to result in a Material Adverse
Effect.
SECTION 4.24. Insurance. The Borrower currently maintains
100% replacement cost insurance coverage (subject to customary deductibles) in
respect of each of the Real Property Assets, as well as commercial general
liability insurance (including "builders' risk" where applicable) against
claims for personal, and bodily injury and/or death, to one or more persons, or
property damage, as well as workers' compensation insurance, in each case with
respect to liability and casualty insurance with insurers having an A.M. Best
policyholders, rating of not less than A-VII (or such lesser rating
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satisfactory to Administrative Agent in its reasonable discretion) in amounts
that prudent owner of assets such as the Real Property Assets would maintain.
SECTION 4.25. Organizational Documents. The documents
delivered pursuant to Section 3.1(g) constitute, as of the Closing Date, all of
the material organizational documents (together with all amendments and
modifications thereof) of the Borrower and Guarantor. The Borrower represents
that it has delivered to the Administrative Agent true, correct and complete
copies of each of the documents set forth in Section 3.1(g).
ARTICLE V.
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank
has any Commitment hereunder or any Obligations remain unpaid:
SECTION 5.1. Financial Information. The Borrower will
deliver to Administrative Agent (with sufficient copies to distribute to all of
the Banks):
(a) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than 95 days after
the end of each Fiscal Year of the Borrower) an audited consolidated balance
sheet of the Borrower, Guarantor and their Consolidated Subsidiaries as of the
end of such Fiscal Year and the related consolidated statements of Borrower's
and Guarantor's operations and consolidated statements of Borrower's and
Guarantor's cash flow for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, all reported on in a
manner acceptable to the Securities and Exchange Commission on Borrower's and
Guarantor's Form 10K and reported on by Ernst Young LLP or other independent
public accountants of nationally recognized standing;
(b) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than sixty (60) days
after the end of each of the first three Fiscal Quarters of the Borrower and
Guarantor), (i) a consolidated balance sheet of the Borrower, Guarantor and
their Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of Borrower's and Guarantor's operations and
consolidated statements of Borrower's and Guarantor's cash flow for such Fiscal
Quarter and for the portion of the Borrower's or Guarantor's Fiscal Year ended
at the end of such Fiscal Quarter, all reported on in the form provided to the
Securities and Exchange Commission on Borrower's and Guarantor's Form 10Q, and
(ii) and such other information reasonably requested by the Administrative
Agent or any Bank;
(c) forty-five (45) days after the end of each Fiscal
Quarter, a certificate of the chief financial officer or the chief accounting
officer of the Borrower or
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its general partner (the "Certifying Officer") (i) setting forth in reasonable
detail the calculations required to establish whether the Borrower was in
compliance with the requirements of Section 5.9 on the date of such financial
statements; (ii) certifying (x) that such financial statements fairly present
the financial condition and the results of operations of the Borrower on the
dates and for the periods indicated, on the basis of GAAP, with respect to the
Borrower subject, in the case of interim financial statements, to normally
recurring year- end adjustments, and (y) that such officer has reviewed the
terms of the Loan Documents and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the business and condition of the
Borrower during the period beginning on the date through which the last such
review was made pursuant to this Section 5.1(c) (or, in the case of the first
certification pursuant to this Section 5.1(c), the Closing Date) and ending on
a date not more than ten (10) Domestic Business Days prior to the date of such
delivery and that (1) on the basis of such financial statements and such review
of the Loan Documents, no Event of Default existed under Section 6.1(b) with
respect to Sections 5.9 and 5.10 at or as of the date of said financial
statements, and (2) on the basis of such review of the Loan Documents and the
business and condition of the Borrower, to the best knowledge of such officer,
as of the last day of the period covered by such certificate no Default or
Event of Default under any other provision of Section 6.1 occurred and is
continuing or, if any such Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof and, the action the
Borrower proposes to take in respect thereof. Such certificate shall set forth
the calculations required to establish the matters described in clause (1)
above and shall attach as exhibits thereto the following: escrow closing
statements, certified by the Certifying Officer, for each Qualifying
Unencumbered Property which was acquired during the preceding Fiscal Quarter;
an occupancy report setting forth the average Occupancy Rate for each
Qualifying Unencumbered Property during the preceding Fiscal Quarter; and a
report stating the Net Operating Income for each Qualifying Unencumbered
Property during the preceding Fiscal Quarter with reasonable detail as to all
property expenses and capital expenditures.
(d) not less frequently than annually, and in any event
within fifteen (15) days after adoption by Borrower's Board of Directors, the
Borrower's business plan, any subsequent material revisions thereto, and a
statement of projected cash flow of the Borrower and its Consolidated
Subsidiaries for the twelve (12) month period following the date of such
Business Plan.
SECTION 5.2. Other Information. The Borrower will deliver to
the Administrative Agent (with sufficient copies to distribute to all of the
Banks):
(a) (i) within five (5) Domestic Business Days after any
executive officer of the Borrower or its general partner obtains knowledge of
any Default, if such Default is then continuing, a certificate of a Certifying
Officer, or other executive officer of the Borrower or its general partner
setting forth the details thereof and the action which the Borrower is taking
or proposes to take with respect thereto; and (ii) promptly and in any event
within five (5) Domestic Business Days after an executive officer of the
Borrower or its general partner obtains knowledge thereof, notice of (y) any
litigation or
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governmental proceeding pending or threatened against the Borrower or the Real
Property Assets as to which there is a reasonable possibility of an adverse
determination and which, if adversely determined, would individually or in the
aggregate, result in a Material Adverse Effect and (z) any other event, act or
condition which is reasonably expected to result in a Material Adverse Effect;
(b) promptly upon the mailing thereof to the shareholders
of Guarantor generally, copies of all financial statements, reports and proxy
statements so mailed;
(c) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and
8-K (or their equivalents) (other than the exhibits thereto, which exhibits
will be provided upon request therefor by any Bank) which Guarantor shall have
filed with the Securities and Exchange Commission;
(d) promptly and in any event within thirty (30) days
after any member of the ERISA Group (i) gives or is required to give notice to
the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event, a copy of
the notice of such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412 of the
Code, a copy of such application; (v) gives notice of intent to terminate any
Plan under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from any Plan
pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, and in the case of clauses (i)
through (vii) above, which event could result in a Material Adverse Effect, a
certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA Group is required or
proposes to take;
(e) promptly and in any event within ten (10) days after
an executive officer of the Borrower or its general partner obtains actual
knowledge of any of the following events, a certificate of the Borrower,
executed by a Certifying Officer of the Borrower or its general partner,
specifying the nature of such condition, and the Borrower's or, if the Borrower
has actual knowledge thereof, the Environmental Affiliate's proposed initial
response thereto: (i) the receipt by an executive officer of the Borrower or
its general partner, or, if the Borrower has actual knowledge thereof, any of
the
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Environmental Affiliates of any communication (written or oral), whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Borrower, or, if the Borrower has actual knowledge thereof, any of the
Environmental Affiliates, is not in compliance with applicable Environmental
Laws, and such noncompliance is reasonably expected to have a Material Adverse
Effect, (ii) the Borrower shall obtain actual knowledge that there exists any
Environmental Claim pending against the Borrower or any Environmental Affiliate
and such Environmental Claim is reasonably expected to have a Material Adverse
Effect or is reasonably expected to involve an expenditure of Significant
Environmental Cost or (iii) the Borrower obtains actual knowledge of any
release, emission, discharge or disposal of any Material of Environmental
Concern that is likely to form the basis of any Environmental Claim against the
Borrower or any Environmental Affiliate which in any such event is likely to
have a Material Adverse Effect or is reasonably expected to involve an
expenditure of Significant Environmental Cost;
(f) promptly and in any event within five (5) Domestic
Business Days after receipt of any material notices or correspondence from any
company or agent for any company providing insurance coverage to the Borrower
relating to any loss which is reasonably expected to result in a Material
Adverse Effect, copies of such notices and correspondence;
(g) promptly and in any event within five (5) days after
an executive officer of the Borrower or its general partner obtains actual
knowledge of a change in the Credit Rating, a certificate of the Borrower,
executed by a Certifying Officer of the Borrower or its general partner,
specifying the new Credit Rating, and
(h) from time to time such additional information
regarding the financial position or business of the Borrower, Guarantor and
their Subsidiaries as the Administrative Agent, at the request of any Bank, may
reasonably request in writing.
SECTION 5.3. Payment of Obligations. The Borrower, Guarantor
and their Consolidated Subsidiaries will pay and discharge, at or before
maturity, all its respective material obligations and liabilities including,
without limitation, Taxes and any obligation pursuant to any agreement by which
it or any of its properties is bound, in each case where the failure to so pay
or discharge such obligations or liabilities is reasonably expected to result
in a Material Adverse Effect, and will maintain in accordance with GAAP,
appropriate reserves for the accrual of any of the same.
SECTION 5.4. Maintenance of Property; Insurance; Leases
(a) The Borrower will keep, and will cause each
Consolidated Subsidiary to keep, all property useful and necessary in its
business, including without limitation the Real Property Assets (for so long as
it constitutes Real Property Assets), in good repair, working order and
condition, ordinary wear and tear excepted, in each case where the failure to
so maintain and repair will have a Material Adverse Effect.
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(b) The Borrower shall maintain, or cause to be
maintained, insurance comparable to that described in Section 4.24 hereof with
insurers meeting the qualifications described therein, which insurance shall in
any event not provide for less coverage than insurance customarily carried by
owners of properties similar to, and in the same locations as, the Real
Property Assets. The Borrower will deliver to the Administrative Agent (i)
upon the reasonable request of the Administrative Agent from time to time full
information as to the insurance carried, and (ii) forthwith, notice of any
cancellation or nonrenewal of coverage by any insurer of the Borrower (other
than any cancellation or non-renewal due to Borrower's placement of replacement
coverage with new insurers meeting the requirements of this Section 5.4(b)).
SECTION 5.5. Conduct of Business and Maintenance of
Existence. The Borrower and Guarantor will continue to engage in business of
the same general type as now conducted by the Borrower and Guarantor, and each
will preserve, renew and keep in full force and effect, its partnership and
corporate existence and its respective rights, privileges and franchises
necessary for the normal conduct of business unless the failure to maintain
such rights and franchises does not have a Material Adverse Effect.
SECTION 5.6. Compliance with Laws. The Borrower will and
will cause its Subsidiaries to comply in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws,
and all zoning and building codes with respect to the Real Property Assets and
ERISA and the rules and regulations thereunder and all federal securities laws)
except where the necessity of compliance therewith is contested in good faith
by appropriate proceedings or where the failure to do so will not have a
Material Adverse Effect or expose Administrative Agent or Banks to any material
liability therefor.
SECTION 5.7. Inspection of Property, Books and Records. The
Borrower (i) will keep proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to its business and activities in conformity with GAAP, modified as required by
this Agreement and applicable law; (ii) will permit representatives of any Bank
at such Bank's expense to visit any of its properties, including without
limitation the Real Property Assets, without notice; provided that the Bank
shall not unreasonably interfere with the operation of such properties or any
tenants thereon and such visitation shall occur within normal business hours;
(iii) will permit the representatives of any Bank, at such Bank's expense, to
inspect its properties, examine and make abstracts from any of its books and
records and to discuss its affairs, finances and accounts with its executive
officers, property managers and independent public accountants, in each such
case under this subclause (iii) all at such reasonable times during normal
business hours, upon reasonable prior notice and as often as may reasonably be
desired. Administrative Agent shall coordinate any such visit or inspection to
arrange for review by any Bank requesting any such visit or inspection.
SECTION 5.8. Existence. The Borrower shall do or cause to be
done, all things necessary to preserve and keep in full force and effect its,
Guarantor's and their Consolidated Subsidiaries' existence and its patents,
trademarks, servicemarks,
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tradenames, copyrights, franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other rights, consents and approvals the nonexistence of which is reasonably
expected to have a Material Adverse Effect.
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SECTION 5.9. Financial Covenants.
(a) Total Liabilities to Gross Asset Value. Borrower
shall not permit the ratio of Total Liabilities to Gross Asset Value of
Borrower and its Subsidiaries to exceed 0.55:1 at any time.
(b) Secured Debt to Gross Asset Value. Borrower shall
not permit the ratio of Secured Debt to Gross Asset Value of Borrower and its
Subsidiaries to exceed 0.45:1 at any time.
(c) Unencumbered Pool. Borrower shall not permit the
ratio of the Unencumbered Asset Pool Value to outstanding Unsecured Debt to be
less than 1.75:1 at any time.
(d) EBITDA to Fixed Charges Ratio. Borrower shall not
permit the ratio of EBITDA for the then most recently completed Fiscal Quarter
to Fixed Charges for the then most recently completed Fiscal Quarter to be less
than 1.75:1.
(e) Interest Coverage Ratio. Borrower shall not permit
the ratio of EBITDA for the then most recently completed Fiscal Quarter to
Interest Expense for the then most recently completed Fiscal Quarter to be less
than 2.25:l.
(f) Dividends. The Borrower will not, as determined for
any four (4) consecutive Fiscal Quarters, pay any partnership distributions in
excess of 100% of the Borrower's Funds Available For Distribution calculated
for such four (4) Fiscal Quarters.
(g) Minimum Consolidated Tangible Net Worth. The
Consolidated Tangible Net Worth of the Borrower and its Consolidated
Subsidiaries will at no time be less than $200,000,000 plus ninety percent
(90%) of all Net Offering Proceeds received by Guarantor or Borrower after
December 31, 1996.
SECTION 5.10. Restriction on Fundamental Changes.
(a) Neither the Borrower, the Guarantor, nor any
Consolidated Subsidiary shall directly or indirectly enter into any merger or
consolidation without the prior written consent of the Required Banks which
consent may be withheld in its sole and absolute discretion unless (i) the
Borrower or the Guarantor is the surviving entity, (ii) the entity which is
merged into the Borrower or the Guarantor is not engaged in any substantial
business other than the management, development, ownership or operation of
multifamily residential apartment communities, and (iii) the gross fair market
value of the assets of the entity which is merged into the Borrower or the
Guarantor is not in excess of ten percent (10%) of Borrower's aggregate Gross
Asset Value immediately prior to such merger or consolidation. Neither the
Borrower, the Guarantor, nor any Consolidated Subsidiary shall directly or
indirectly enter into any reorganization or recapitalization, reclassify its
Capital Stock, liquidate, wind up or dissolve or sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or
substantially all of its or their business or assets, whether now owned or
hereafter acquired. Nothing in
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this Section shall be deemed to prohibit the sale or leasing of portions of the
Real Property Assets in the ordinary course of business.
(b) The Borrower shall not amend its agreement of limited
partnership or other organizational documents in any manner that would have a
Material Adverse Effect. Guarantor shall not amend its articles of
incorporation, by-laws, or other organizational documents in any manner that
would have a Material Adverse Effect.
(c) The Borrower shall deliver to Administrative Agent
copies of all amendments to its agreement of limited partnership or to
Guarantor's articles of incorporation, by-laws, or other organizational
documents (other than amendments solely reflecting changes in ownership
interests occurring in the ordinary course of business) no less than ten (10)
Domestic Business Days after the effective date of any such amendment.
SECTION 5.11. Changes in Business.
(a) The Borrower shall carry on its business operations
through the Borrower and its Subsidiaries.
(b) All or substantially all of Borrower's assets shall
be multifamily residential properties, unimproved land held for the development
of multifamily residential property, or equity interests in companies whose
primary business is the ownership, operation, development or management of
multifamily residential property. Borrower shall not engage in any line of
business other than ownership, operation and development of multifamily
residential property and the provision of services incidental thereto, whether
directly or through its Subsidiaries and Investment Affiliates.
SECTION 5.12. Margin Stock. None of the proceeds of the Loan
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any Margin Stock.
SECTION 5.13. Hedging Requirements. Within five (5) Domestic
Business Days after the last day of each calendar quarter, commencing June 30,
1997, the Borrower shall have in effect "Interest Rate Hedges" on Borrower's
Indebtedness so that such Indebtedness, together with all Fixed Rate
Indebtedness of Borrower, shall constitute at least fifty percent (50%) of the
then aggregate Indebtedness of the Borrower. "Interest Rate Hedges" shall mean
(A) Exempt Hedging Contracts, or (B) interest rate exchange, collar, cap, swap,
adjustable strike cap, adjustable strike corridor or similar agreements, each
of which (i) shall have a minimum term of two (2) years, or, in the case of
loans pursuant to which interest shall accrue at a rate other than a fixed
rate, a term equal to the term of such floating rate loan (to the extent the
term of such floating rate loan is less than two (2) years), (ii) shall have
the effect of capping the interest rates covered thereby at a rate equal to or
lower than the Cap Rate at the time of purchase or execution, and (iii) shall
be with an Approved Financial Institution as the counterparty. It is
acknowledged and agreed that the Borrower shall have no obligation to replace
any Interest Rate Hedge even if the counterparty thereto shall cease to be an
Approved
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Financial Institution. The Borrower shall certify its compliance with Interest
Rate Hedges to the Administrative Agent in the certificate required to be
delivered by the Borrower pursuant to Section 5.1(c).
SECTION 5.14. Guarantor Status.
(a) Status. Guarantor shall at all times (i) remain a
publicly traded company listed on the New York Stock Exchange, and (ii)
maintain its status as a self-directed and self-administered real estate
investment trust under the Code.
(b) Indebtedness. Guarantor shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume or otherwise become or remain directly or indirectly liable with respect
to, any Indebtedness, except:
(1) the Obligations; and
(2) indebtedness which, after giving effect thereto, may
be incurred or may remain outstanding without giving rise to an Event
of Default or Default under any provision of this Article V.
(c) Restriction on Fundamental Changes.
(1) Guarantor shall not have an Investment in any Person
other than Borrower and the interests identified on Schedule
5.14(c)(1) as being owned by Guarantor.
(2) Guarantor shall not acquire an interest in any
Property other than Securities issued by Borrower and the interests
identified on Schedule 5.14(c)(2).
(d) Disposal of Partnership Interests. Guarantor will
not directly or indirectly convey, sell, transfer, assign, pledge or otherwise
encumber or dispose of any of its partnership interests in Borrower.
SECTION 5.15. Environmental Matters.
(a) Promptly upon the discovery of any Environmental
Claim or of any violation or alleged violation of Environmental Laws with
respect to any Qualifying Unencumbered Asset, the Borrower shall attempt in
good faith, as soon as practicable, to determine all costs it reasonably
expects any party to expend in connection with the investigation and resolution
of such Environmental Claim or of such violation or alleged violation of
Environmental Laws. The Borrower shall thereupon notify the Administrative
Agent in writing of the Borrower's reasonable, good faith estimate of the cost
to investigate and resolve such Environmental Claim or such violation or
alleged violation if such cost is equal to or greater than $250,000. Such good
faith estimate of such costs, as revised from time to time pursuant hereto,
shall be deemed to be the "Estimated Environmental Cost" of such Environmental
Claim or such violation or alleged violation of Environmental Laws. After the
end of each Fiscal Quarter, the Borrower shall review and
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update all Estimated Environmental Costs and shall deliver, with the Borrower's
quarterly reports delivered in accordance with Section 5.1 hereof, a written
report to the Administrative Agent, setting forth, in reasonable detail, each
Estimated Environmental Cost which is in excess of $250,000, the basis for the
determination of such Estimated Environmental Cost, and the Borrower's plans
with respect to such Environmental Claim or such violation or alleged violation
of Environmental Laws. If the Borrower at any time is not diligently and in
good faith pursuing a determination of or an update of a Estimated
Environmental Cost which exceeds $250,000, the Administrative Agent may, in
reliance upon the opinions and judgments of environmental consultants (either
independent or employed by the Administrative Agent), estimate or update, in
good faith, the cost to investigate and resolve an Environmental Claim or
alleged or actual violation of Environmental Laws. In the event that the
Administrative Agent makes any such determination, the Estimated Environmental
Cost of investigating and resolving such Environmental Claim or such alleged or
actual violation of Environmental Laws shall be the Administrative Agent's
estimate, until such time as Borrower again diligently pursues in good faith
the determination or update of Estimated Environmental Cost, and upon
Borrower's determination of a Estimated Environmental Cost in compliance
herewith the Estimated Environmental Cost shall thereafter be Borrower's
estimate thereof, as set forth herein.
(b) The Borrower shall, at all times, diligently and in
good faith pursue resolution of all Environmental Claims, and all violations or
alleged violations of Environmental Laws, with respect to its Properties.
SECTION 5.16. Cooperation. The Borrower shall take any
action reasonably requested by the Administrative Agent to carry out the intent
of the Loan Documents.
SECTION 5.17. Distributions. Unless waived by the Required
Banks, no Borrower Party shall make any Restricted Payments after the
occurrence of and during the continuation of an Event of Default under Section
6.1(a); provided however that Borrower may make Restricted Payments to partners
in Borrower to the extent necessary to enable Guarantor to make dividend
payments to its stockholders as required for Guarantor to maintain its status
as a real estate investment trust under the Code. In such case, Borrower shall
cause Guarantor to make such dividend payments.
ARTICLE VI.
DEFAULTS
SECTION 6.1. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) (i) the Borrower shall fail to pay when due any
principal of any Loan; or (ii) the Borrower shall fail to pay when due interest
on any Loan or any fees or
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any other amount payable hereunder or under the Mandate Letter and the same
shall continue for a period of ten (10) calendar days after the same becomes
due;
(b) the Borrower shall fail to observe or perform any
covenant contained in Section 5.9, Section 5.10(a) or (b), or Sections 5.11,
5.12, and 5.14;
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those covered by
clause (a), (b), (e), (f), (g), (h), (j), (n) or (o) of this Section 6.1) for
30 days after written notice thereof has been given to the Borrower by the
Administrative Agent, or if such default is of such a nature that it cannot
with reasonable effort be completely remedied within said period of thirty (30)
days such additional period of time as may be reasonably necessary to cure
same, provided Borrower commences such cure within said thirty (30) day period
and diligently prosecutes same, until completion, but in no event shall such
extended period exceed ninety (90) days;
(d) any representation, warranty, certification or
statement made by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when made (or deemed
made) and the defect causing such representation or warranty to be incorrect
when made (or deemed made) is not removed within thirty (30) days after written
notice thereof from Administrative Agent to Borrower, or if such default is of
such a nature that it cannot with reasonable effort be completely removed
within said period of thirty (30) days such additional period of time as may be
reasonably necessary to remove same, provided Borrower commences such removal
within said thirty (30) day period and diligently prosecutes same, until
completion, but in no event shall such extended period exceed ninety (90) days;
(e) the Borrower, Guarantor, any Subsidiary or any
Investment Affiliate shall default in the payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) of
any amount owing in respect of any Recourse Debt (other than the Obligations)
for which the aggregate outstanding principal amount exceeds $10,000,000 and
such default shall continue beyond the giving of any required notice and the
expiration of any applicable grace period and such default has not been waived,
in writing, by the holder of any such Debt; or the Borrower, Guarantor, any
Subsidiary or any Investment Affiliate shall default in the performance or
observance of any other obligation or condition with respect to any such
Recourse Debt or any other event shall occur or condition exist beyond the
giving of any required notice and the expiration of any applicable grace
period, if the effect of such other default, event or condition is to
accelerate the maturity of any such indebtedness or to permit (without any
further requirement of notice or lapse of time) the holder or holders thereof,
or any trustee or agent for such holders, to accelerate the maturity of any
such indebtedness;
(f) the Borrower or Guarantor shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect
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or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any action to
authorize any of the foregoing;
(g) an involuntary case or other proceeding shall be
commenced against the Borrower or Guarantor seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
90 days; or an order for relief shall be entered against the Borrower or
Guarantor under the federal bankruptcy laws as now or hereafter in effect;
(h) one or more final, non-appealable judgments or
decrees in an aggregate amount of Ten Million Dollars ($10,000,000) or more
shall be entered by a court or courts of competent jurisdiction against the
Borrower, Guarantor or its Consolidated Subsidiaries (other than any judgment
as to which, and only to the extent, a reputable insurance company has
acknowledged coverage of such claim in writing) and (i) any such judgments or
decrees shall not be stayed, discharged, paid, bonded or vacated within thirty
(30) days or (ii) enforcement proceedings shall be commenced by any creditor on
any such judgments or decrees and such enforcement proceedings shall not
immediately be stayed;
(i) there shall be a change in the majority of the Board
of Directors of Guarantor during any twelve (12) month period, excluding any
change in directors resulting from (x) the death, resignation (in the ordinary
course and not in connection with any change in control) or disability of any
director, or (y) satisfaction of any requirement for the majority of the
members of the board of directors of Guarantor to qualify under applicable law
as independent directors or (z) the replacement of any director who is an
officer or employee of Guarantor or an affiliate of Guarantor with any other
officer or employee of Guarantor or an affiliate of Guarantor;
(j) any Person (including affiliates of such Person) or
"group" (as such term is defined in applicable federal securities laws and
regulations) shall acquire more than thirty percent (30%) of the common shares
of Guarantor;
(k) Guarantor shall cease at any time to qualify as a
real estate investment trust under the Code;
(l) if any Termination Event with respect to a Plan shall
occur as a result of which Termination Event or Events any member of the ERISA
Group has incurred or may incur any liability to the PBGC or any other Person
and the sum (determined as of the date of occurrence of such Termination Event)
of the insufficiency
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of such Plan and the insufficiency of any and all other Plans with respect to
which such a Termination Event shall occur and be continuing (or, in the case
of a Multiple Employer Plan with respect to which a Termination Event described
in clause (ii) of the definition of Termination Event shall occur and be
continuing, the liability of the Borrower) is equal to or greater than
$10,000,000 and which the Administrative Agent reasonably determines will have
a Material Adverse Effect;
(m) if, any member of the ERISA Group shall commit a
failure described in Section 302(f)(1) of ERISA or Section 412(n)(1) of the
Code and the amount of the lien determined under Section 302(f)(3) of ERISA or
Section 412(n)(3) of the Code that could reasonably be expected to be imposed
on any member of the ERISA Group or their assets in respect of such failure
shall be equal to or greater than $10,000,000 and which the Administrative
Agent reasonably determines will have a Material Adverse Effect;
(n) at any time, for any reason the Borrower seeks to
repudiate its obligations under any Loan Document; or
(o) a default beyond any applicable notice and grace
period under any of the other Loan Documents.
SECTION 6.2. Rights and Remedies.
(a) Upon the occurrence of any Event of Default described
in Sections 6.1(f) or (g), the Commitment shall immediately terminate and the
unpaid principal amount of, and any and all accrued interest on, the Loans and
any and all accrued fees and other Obligations hereunder shall automatically
become immediately due and payable, with all additional interest from time to
time accrued thereon and without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by the
Borrower; and upon the occurrence and during the continuance of any other Event
of Default, the Administrative Agent upon the demand of the Required Banks
shall, by written notice to the Borrower, in addition to the exercise of all of
the rights and remedies permitted the Administrative Agent and the Banks at law
or equity or under any of the other Loan Documents, declare the unpaid
principal amount of and any and all accrued and unpaid interest on the Loans
and any and all accrued fees and other obligations hereunder to be, and the
same shall thereupon be, immediately due and payable with all additional
interest from time to time accrued thereon and (except as otherwise as provided
in the Loan Documents) without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by the
Borrower.
(b) Notwithstanding anything to the contrary contained in
this Agreement or in any other Loan Document, the Administrative Agent, and the
Banks each
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agree that any exercise or enforcement of the rights and remedies granted to
the Administrative Agent or the Banks under this Agreement or at law or in
equity with respect to this Agreement or any other Loan Documents shall be
commenced and maintained by the Administrative Agent on behalf of the
Administrative Agent and/or the Banks. The Administrative Agent shall act at
the direction of the Required Banks in connection with the exercise of any and
all remedies at law, in equity or under any of the Loan Documents or, if the
Required Banks are unable to reach agreement on the exercise of remedies, then,
from and after Administrative Agent shall have declared the Loan immediately
due and payable, the Administrative Agent may pursue such rights and remedies
as it may determine.
SECTION 6.3. Notice of Default. The Administrative Agent
shall give notice to the Borrower under Section 6.1(c) promptly upon being
requested to do so by the Required Banks and shall thereupon notify all the
Banks thereof. The Administrative Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default (other than
nonpayment of principal of or interest on the Loans) unless the Administrative
Agent has received notice in writing from a Bank or Borrower referring to this
Agreement or the other Loan Documents, describing such event or condition.
Should Administrative Agent receive notice of the occurrence of a Default or
Event of Default expressly stating that such notice is a notice of a Default or
Event of Default, or should Administrative Agent send Borrower a notice of
Default or Event of Default, Administrative Agent, shall promptly give notice
thereof to each Bank.
SECTION 6.4. Distribution of Proceeds after Default. Subject
to Section 7.6, from and after an Event of Default, to the extent proceeds are
received by Administrative Agent, such proceeds will be distributed to the
Banks pro rata in accordance with the unpaid principal amount of the Loans.
Regardless of how each Bank may treat payments received by it pursuant to this
Agreement and the Facility Notes delivered to evidence debt hereunder for the
purpose of its own accounting, for the purpose of computing the Borrower's and
Guarantor's obligations under this Agreement and under such Facility Notes, the
payments shall be applied first, to the costs and expenses (including
attorneys' fees and disbursements and the allocated costs and expenses of
in-house legal and other professional services) of the Administrative Agent,
acting as Administrative Agent, and of the Banks as set forth herein, second,
to the payment of accrued and unpaid interest on all Facility Notes to and
including the date of such application (ratably according to the accrued and
unpaid interest on the Facility Notes), third, to the ratable payment of the
unpaid principal of all the Facility Notes, and fourth, to the payment of all
other amounts (including fees) then owing to the Administrative Agents or the
Banks under the Loan Documents. No application of the payments will cure any
Event of Default or prevent acceleration, or continued acceleration, of amounts
payable under the Loan Documents or prevent the exercise, or continued
exercise, of rights or remedies of the Banks under this Agreement or under law.
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ARTICLE VII.
THE AGENTS
SECTION 7.1. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to the Administrative Agent by
the terms hereof or thereof, together with all such powers as are reasonably
incidental thereto. Except as set forth in Sections 7.8 and 7.9 hereof, the
provisions of this Article VII are solely for the benefit of Administrative
Agent and the Banks, and Borrower shall not have any rights to rely on or
enforce any of the provisions hereof. In performing its functions and duties
under this Agreement, the Administrative Agent shall act solely as an agent of
the Banks and shall not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for the Borrower.
SECTION 7.2. Agency and Affiliates. Bank of America, Wells
Fargo and Morgan shall have the same rights and powers under this Agreement as
any other Bank and may exercise or refrain from exercising the same as though
it were not the Administrative Agent, Documentation Agent or an affiliate of
the Syndication Agent, respectively, and Bank of America, Wells Fargo, Morgan
and their affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower, Guarantor or any Subsidiary
or affiliate of the Borrower as if they were not the Administrative Agent,
Documentation Agent or an affiliate of the Syndication Agent, respectively,
hereunder, and the term "Bank" and "Banks" shall include Bank of America, Wells
Fargo and Morgan in their individual capacities.
SECTION 7.3. Action by Administrative Agent. The obligations
of the Administrative Agent hereunder are only those expressly set forth
herein. Without limiting the generality of the foregoing, the Administrative
Agent shall not be required to take any action with respect to any Default or
Event of Default, except as expressly provided in Article VI. The duties of
Administrative Agent shall be administrative in nature. Subject to the
provisions of Sections 7.1, 7.5 and 7.6, Administrative Agent shall administer
the Loans in the same manner as it administers its own loans.
SECTION 7.4. Consultation with Experts. As between
Administrative Agent and the Banks, the Administrative Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.5 Liability of Administrative Agent. As between
Administrative Agent and the Banks, none of the Administrative Agent nor any of
their affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or (ii)
in the absence of its own gross negligence or willful
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misconduct. As between Administrative Agent and the Banks, none of the
Administrative Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with this
Agreement or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article III, except receipt of items required to be
delivered to the Administrative Agent; or (iv) the validity, effectiveness or
genuineness of this Agreement, the other Loan Documents or any other instrument
or writing furnished in connection herewith. As between Administrative Agent
and the Banks, the Administrative Agent shall not incur any liability by acting
in reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex or similar writing) believed by it to be
genuine or to be signed by the proper party or parties.
SECTION 7.6. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Administrative Agent and its
affiliates and its respective directors, officers, agents and employees (to the
extent not reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitee's gross negligence or willful
misconduct) that such indemnitee may suffer or incur in connection with its
duties as Administrative Agent under this Agreement, the other Loan Documents
or any action taken or omitted by such indemnitee hereunder. In the event that
the Administrative Agent shall, subsequent to its receipt of indemnification
payment(s) from Banks in accordance with this Section, recoup any amount from
the Borrower, or any other party liable therefor in connection with such
indemnification, the Administrative Agent shall reimburse the Banks which
previously made the payment(s) pro rata, based upon the actual amounts which
were theretofore paid by each Bank. The Administrative Agent shall reimburse
such Banks so entitled to reimbursement within two (2) Domestic Business Days
of its receipt of such funds from the Borrower or such other party liable
therefor.
SECTION 7.7. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.8. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving notice thereof to the
Banks and the Borrower and the Administrative Agent shall resign in the event
its Commitment is reduced to below six percent (6%) of the Aggregate
Commitment. Upon any such resignation, the Required Banks shall have the right
to appoint a successor Administrative Agent, which successor Administrative
Agent shall, provided no Event of Default has occurred and is then
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continuing, be subject to Borrower's approval, which approval shall not be
unreasonably withheld or delayed (except that Borrower shall, in all events, be
deemed to have approved Wells Fargo as a successor Administrative Agent). If
no successor Administrative Agent shall have been so appointed by the Required
Banks and approved by the Borrower, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent gives notice of
resignation, then the retiring Administrative Agent may, on behalf of the
Banks, appoint a successor Administrative Agent, who shall act until the
Required Banks shall appoint a Administrative Agent. Upon the acceptance of
its appointment as the Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation hereunder, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
the Administrative Agent. For gross negligence or willful misconduct, as
determined by the Super-Majority Banks (excluding for such determination
Administrative Agent in its capacity as a Bank), Administrative Agent may be
removed at any time by giving at least thirty (30) Domestic Business Days prior
written notice to Administrative Agent and Borrower. Such resignation or
removal shall take effect upon the acceptance of appointment by a successor
Administrative Agent, in accordance with the provisions of this Section 7.8.
SECTION 7.9. Consents and Approvals. All communications from
Administrative Agent to the Banks requesting the Banks' determination, consent,
approval or disapproval (i) shall be given in the form of a written notice to
each Bank (ii) shall be accompanied by a description of the matter or item as
to which such determination, approval, consent or disapproval is requested, or
shall advise each Bank where such matter or item may be inspected, or shall
otherwise describe the matter or issue to be resolved, (iii) shall include, if
reasonably requested by a Bank and to the extent not previously provided to
such Bank, written materials and a summary of all oral information provided to
Administrative Agent by Borrower in respect of the matter or issue to be
resolved, and (iv) shall include Administrative Agent's recommended course of
action or determination in respect thereof. Each Bank shall reply promptly,
but in any event within ten (10) Domestic Business Days after receipt of the
request therefor from Administrative Agent (the "Bank Reply Period"). Unless a
Bank shall give written notice to Administrative Agent that it objects to the
recommendation or determination of Administrative Agent (together with a
written explanation of the reasons behind such objection) within the Bank Reply
Period, such Bank shall be deemed to have approved of or consented to such
recommendation or determination. With respect to decisions requiring the
approval of the Required Banks or all the Banks, Administrative Agent shall
submit its recommendation or determination for approval of or consent to such
recommendation or determination to all Banks and upon receiving the required
approval or consent shall follow the course of action or determination of the
Required Banks (and each non-responding Bank shall be deemed to have concurred
with such recommended course of action) or all the Banks, as the case may be.
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ARTICLE VIII.
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period for any
LIBOR Borrowing or Money Market LIBOR Loan:
(a) the Administrative Agent has determined in good faith
that deposits in dollars (in the applicable amounts) are not being offered in
the relevant market for such Interest Period, or
(b) Banks having 50% or more of the Aggregate Commitment
advise the Administrative Agent that the Adjusted London Interbank Offered
Rate, as determined by the Administrative Agent, will not adequately and fairly
reflect the cost to such Bank of funding its LIBOR Loans for such Interest
Period, the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such suspension no longer exist,
the obligations of the Banks to make LIBOR Loans shall be suspended. Unless
the Borrower notifies the Administrative Agent at least two Domestic Business
Days before the date of (i) any LIBOR Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, such
Borrowing shall instead be made as a Base Rate Borrowing, or (ii) any Money
Market LIBOR Borrowing for which a Notice of Money Market Borrowing has
previously been given, the Money Market LIBOR Loans comprising such Borrowing
shall bear interest for each day from and including the first day to but
excluding the last day of the Interest Period applicable thereto at the Base
Rate for such day. For purposes of this Section 8.1(b), in determining whether
the Adjusted London Interbank Offered Rate, as determined by Administrative
Agent, will not adequately and fairly reflect the cost to any Bank of funding
its LIBOR Loans for such Interest Period, such determination will be based
solely on the ability of such Bank to obtain matching funds in the London
interbank market at a reasonably equivalent rate.
SECTION 8.2. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its LIBOR Lending Office) with any
request or directive (whether or not having the force of law) made after the
Closing Date of any such authority, central bank or comparable agency shall
make it unlawful for any Bank (or its LIBOR Lending Office) to make, maintain
or fund its LIBOR Loans, the Administrative Agent shall forthwith give notice
thereof to the other Banks and the Borrower, whereupon until such Bank notifies
the Borrower and the Administrative Agent that the circumstances giving rise to
such suspension no longer exist, the obligation of such Bank to make LIBOR
Loans shall be suspended. With respect to LIBOR Loans, before giving any
notice to the Administrative Agent pursuant to
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this Section, such Bank shall designate a different LIBOR Lending Office if
such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
Bank shall determine that it may not lawfully continue to maintain and fund any
of its outstanding LIBOR Loans to maturity and shall so specify in such notice,
the Borrower shall be deemed to have delivered a Notice of Interest Rate
Election and such LIBOR Loan shall be converted as of such date to a Base Rate
Loan (without payment of any amounts that Borrower would otherwise be obligated
to pay pursuant to Section 2.13 hereof with respect to Loans converted pursuant
to this Section 8.2) in an equal principal amount from such Bank (on which
interest and principal shall be payable contemporaneously with the related
LIBOR Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
If at any time, it shall be unlawful for any Bank to make,
maintain or fund its LIBOR Loans, the Borrower shall have the right, upon five
(5) Domestic Business Day's notice to the Administrative Agent, to either (x)
cause a bank, reasonably acceptable to the Administrative Agent, to offer to
purchase the Commitments of such Bank for an amount equal to such Bank's
outstanding Loans, and to become a Bank hereunder, or obtain the agreement of
one or more existing Banks to offer to purchase the Commitments of such Bank
for such amount, which offer such Bank is hereby required to accept, or (y) to
repay in full all Loans then outstanding of such Bank, together with interest
and all other amounts due thereon, upon which event, such Bank's Commitments
shall be deemed to be canceled pursuant to Section 2.11(c).
SECTION 8.3. Increased Cost and Reduced Return.
(a) If, on or after (x) the date hereof in the case of
Committed Loans made pursuant to Section 2.1, or (y) the date of the related
Money Market Quote, in the case of any Money Market Loan, the adoption of any
applicable law, rule or regulation, or any change in any applicable law, rule
or regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) made at the Closing Date of any such authority, central bank
or comparable agency shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System (but excluding with respect to any
LIBOR Loan any such requirement reflected in an applicable LIBOR Reserve
Percentage)), special deposit, insurance assessment or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the London interbank market any other
condition materially more burdensome in nature, extent or consequence than
those in existence as of the Closing Date affecting such Bank's LIBOR Loans,
its Note, or its obligation to make LIBOR Loans, and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any LIBOR Loan, or to reduce the amount of any
sum received or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or under its Note with respect to such LIBOR Loans, by an
amount
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deemed by such Bank to be material, then, within fifteen (15) days after demand
by such Bank (with a copy to the Administrative Agent), the Borrower shall pay
to such Bank such additional amount or amounts (based upon a reasonable
allocation thereof by such Bank to the LIBOR Loans made by such Bank hereunder)
as will compensate such Bank for such increased cost or reduction to the extent
such Bank generally imposes such additional amounts on other borrowers of such
Bank in similar circumstances.
(b) If any Bank shall have reasonably determined that,
after the date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change in any such law, rule or regulation,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) made after the
Closing Date of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on capital of such Bank
(or its Parent) as a consequence of such Bank's obligations hereunder to a
level below that which such Bank (or its Parent) could have achieved but for
such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount reasonably deemed by
such Bank to be material, then from time to time, within fifteen (15) days
after demand by such Bank (with a copy to the Administrative Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its Parent) for such reduction to the extent such Bank
generally imposes such additional amounts on other borrowers of such Bank in
similar circumstances.
(c) Each Bank will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the reasonable judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall fail to notify Borrower of
any such event within ninety (90) days following the end of the month during
which such event occurred, then Borrower's liability for any amounts described
in this Section incurred by such Bank as a result of such event shall be
limited to those attributable to the period occurring subsequent to the
ninetieth (90th) day prior to the date upon which such Bank actually notified
Borrower of the occurrence of such event. A certificate of any Bank claiming
compensation under this Section and setting forth a reasonably detailed
calculation of the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of demonstrable error. In determining such
amount, such Bank may use any reasonable averaging and attribution methods.
(d) If at any time, any Bank shall be owed amounts
pursuant to this Section 8.3, the Borrower shall have the right, upon five (5)
Domestic Business Day's notice to the Administrative Agent to either (x) cause
a bank, reasonably acceptable to the Administrative Agent, to offer to purchase
the Commitments of such
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Bank for an amount equal to such Bank's outstanding Loans, and to become a Bank
hereunder, or to obtain the agreement of one or more existing Banks to offer to
purchase the Commitments of such Bank for such amount, which offer such Bank is
hereby required to accept, or (y) to repay in full all Loans then outstanding
of such Bank, together with interest and all other amounts due thereon, upon
which event, such Bank's Commitment shall be deemed to be canceled pursuant to
Section 2.11(c).
SECTION 8.4. Taxes.
(a) Any and all payments by the Borrower to or for the
account of any Bank or the Administrative Agent hereunder or under any other
Loan Document shall be made free and clear of and without deduction for any and
all present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Bank or the Administrative Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Bank, taxes imposed on
its income, and franchise or similar taxes imposed on it, by the jurisdiction
of such Bank's Applicable Lending Office or any political subdivision thereof
or by any other jurisdiction (or any political subdivision thereof) as a result
of a present or former connection between such Bank or Administrative Agent and
such other jurisdiction or by the United States (all such non-excluded taxes,
duties, levies, imposts, deductions, charges, withholdings and liabilities
being hereinafter referred to as "Non-Excluded Taxes"). If the Borrower shall
be required by law to deduct any Non-Excluded Taxes from or in respect of any
sum payable hereunder or under any Note, (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 8.4) such Bank or the
Administrative Agent (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law and (iv) the Borrower shall furnish to the Administrative
Agent, at its address referred to in Section 9.1, the original or a certified
copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present
or future stamp or documentary taxes and any other excise or property taxes, or
charges or similar levies which arise from any payment made hereunder or under
any Facility Note or from the execution or delivery of, or otherwise with
respect to, this Agreement or any Facility Note (hereinafter referred to as
"Other Taxes").
(c) The Borrower agrees to indemnify each Bank and the
Administrative Agent for the full amount of Non-Excluded Taxes or Other Taxes
(including, without limitation, any Non-Excluded Taxes or Other Taxes imposed
or asserted by any jurisdiction on amounts payable under this Section 8.4) paid
by such Bank or the Administrative Agent (as the case may be) and, so long as
such Bank or Administrative Agent has promptly paid any such Non-Excluded Taxes
or Other Taxes, any liability for penalties and interest arising therefrom or
with respect thereto. This
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indemnification shall be made within fifteen (15) days from the date such Bank
or the Administrative Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Bank listed on the signature
pages hereof and on or prior to the date on which it becomes a Bank in the case
of each other Bank, shall provide the Borrower with (a) two duly completed
copies of Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, and (b) an Internal
Revenue Service Form W-8 or W-9, or any successor form prescribed by the
Internal Revenue Service, and shall provide Borrower with two further copies of
any such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously delivered by it to
Borrower, certifying (i) in the case of a Form 1001 or 4224, that such Bank is
entitled to benefits under an income tax treaty to which the United States is a
party which reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States, and
(ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from
United States backup withholding tax. If the form provided by a Bank at the
time such Bank first becomes a party to this Agreement indicates a United
States interest withholding tax rate in excess of zero, withholding tax at such
rate shall be considered excluded from "Non-Excluded Taxes" as defined in
Section 8.4(a).
(e) For any period with respect to which a Bank has
failed to provide the Borrower with the appropriate form pursuant to Section
8.4(d) (unless such failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which a form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.4(c) with respect to Non-Excluded Taxes imposed by the United States,
provided, however, that should a Bank, which is otherwise exempt from or
subject to a reduced rate of withholding tax, become subject to Non-Excluded
Taxes because of its failure to deliver a form required hereunder, the Borrower
shall take such steps as such Bank shall reasonably request to assist such Bank
to recover such Taxes so long as Borrower shall incur no cost or liability as a
result thereof.
(f) If the Borrower is required to pay additional amounts
to or for the account of any Bank pursuant to this Section 8.4, then such Bank
will change the jurisdiction of its Applicable Lending Office so as to
eliminate or reduce any such additional payment which may thereafter accrue if
such change, in the judgment of such Bank, is not otherwise disadvantageous to
such Bank.
(g) If at any time, any Bank shall be owed amounts
pursuant to this Section 8.4, the Borrower shall have the right, upon five (5)
Domestic Business Day's notice to the Administrative Agent to either (x) cause
a bank, reasonably acceptable to the Administrative Agent, to offer to purchase
the Commitments of such Bank for an amount equal to such Bank's outstanding
Loans, and to become a Bank hereunder, or to obtain the
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agreement of one or more existing Banks to offer to purchase the Commitments of
such Bank for such amount, which offer such Bank is hereby required to accept,
or (y) to repay in full all Loans then outstanding of such Bank, together with
interest and all other amounts due thereon, upon which event, such Bank's
Commitment shall be deemed to be canceled pursuant to Section 2.11(c).
SECTION 8.5. Base Rate Loans Substituted for Affected LIBOR
Loans. If (i) the obligation of any Bank to make LIBOR Loans has been
suspended pursuant to Section 8.2 or (ii) any Bank has demanded compensation
under Section 8.3 or 8.4 with respect to its LIBOR Loans and the Borrower
shall, by at least five LIBOR Business Days' prior notice to such Bank through
the Administrative Agent, have elected that the provisions of this Section
shall apply to such Bank, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) Borrower shall be deemed to have delivered a Notice
of Interest Rate Election with respect to such affected LIBOR Loans and
thereafter all Loans which would otherwise be made by such Bank as LIBOR Loans
shall be made instead as Base Rate Loans (on which interest and principal shall
be payable contemporaneously with the related LIBOR Loans of the other Banks),
and
(b) after each of its LIBOR Loans has been repaid, all
payments of principal which would otherwise be applied to repay such LIBOR
Loans shall be applied to repay its Base Rate Loans instead, and
(c) Borrower will not be required to make any payment
which would otherwise be required by Section 2.12 with respect to such LIBOR
Loans converted to Base Rate Loans pursuant to clause (a) above.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission followed by telephonic confirmation or similar
writing) and shall be given to such party: (x) in the case of the Borrower or
the Administrative Agent, at its address, telex number or facsimile number set
forth on the signature pages hereof with a duplicate copy thereof, in the case
of the Borrower, to the Borrower, at Irvine Apartment Communities, L.P. c/o
Irvine Apartment Communities, Inc., 550 Newport Center Drive, Newport Beach,
California 92660, Attn: Vice President, Corporate Finance, and to O'Melveny &
Myers, LLP, 610 Newport Center Drive, 17th Floor, Newport Beach, California
92660, Attn: Patricia Frobes, Esq., (y) in the case of any Bank, at its
address, telex number or facsimile number set forth on the signature pages
hereof or (z) in the case of any party, such other address, telex number or
facsimile number as such party may hereafter specify for the purpose by notice
to the Administrative Agent and the Borrower.
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Each such notice, request or other communication shall be effective (i) if
given by telex or facsimile transmission, when such telex or facsimile is
transmitted to the telex number or facsimile number specified in this Section
and the appropriate answerback or facsimile confirmation is received (provided,
however, if the date of such transmission and confirmation is not a Domestic
Business Day, then the next succeeding Domestic Business Day), (ii) if given by
certified registered mail, return receipt requested, with first class postage
prepaid, addressed as aforesaid, upon receipt or refusal to accept delivery,
(iii) if given by a nationally recognized overnight carrier, 24 hours after
such communication is deposited with such carrier with postage prepaid for next
day delivery, or (iv) if given by any other means, when delivered at the
address specified in this Section; provided that notices to the Administrative
Agent under Article II or Article VIII shall not be effective until received.
SECTION 9.2. No Waivers. No failure or delay by the
Administrative Agent or any Bank in exercising any right, power or privilege
hereunder or under any Note 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, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.3. Expenses; Indemnification.
(a) The Borrower shall pay within thirty (30) days after
written notice from the Administrative Agent all reasonable out-of-pocket
costs and expenses of the Administrative Agent (including the fees and
disbursements of outside counsel as well as the allocated cost of
Administrative Agent's internal legal services), in connection with the
preparation of this Agreement, the Loan Documents and the documents and
instruments referred to therein, and any waiver, consent hereunder and any
amendment hereof, the administration hereof and any Default or alleged Default
hereunder, (ii) in connection with the syndication of the Loans and (iii) if an
Event of Default occurs, all reasonable out-of-pocket expenses incurred by the
Administrative Agent and the Banks as a group, including fees and disbursements
of counsel for the Administrative Agent and each of the Banks, in connection
with the enforcement of the Loan Documents and the instruments referred to
therein and such Event of Default and collection, bankruptcy, insolvency and
other enforcement proceedings resulting therefrom; provided, however, that the
attorneys' fees and disbursements for which Borrower is obligated under this
subsection (a)(iii) shall be limited to the reasonable non-duplicative fees
and disbursements of (a) counsel for Administrative Agent and (b) counsel for
all of the Banks as a group. For purposes of this Section 9.3(a)(iii), (1)
counsel for Administrative Agent shall mean a single outside law firm
representing Administrative Agent together with the allocated cost of
Administrative Agent's internal legal services, and (2) counsel for all of the
Banks as a group shall mean a single outside law firm representing such Banks
as a group (which law firm may or may not be the same law firm representing
Administrative Agent).
(b) The Borrower agrees to indemnify the Administrative
Agent, each Bank and their respective affiliates and the respective directors,
officers, agents and
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employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding that
may at any time (including, without limitation, at any time following the
payment of the Obligations) be asserted against any Indemnitee, as a result of,
or arising out of, or related to or by reason of, (i) any of the transactions
contemplated by the Loan Documents or the execution, delivery or performance of
any Loan Document, (ii) any violation by the Borrower or the Environmental
Affiliates of any applicable Environmental Law, (iii) any Environmental Claim
arising out of the management, use, control, ownership or operation of property
or assets by the Borrower or any of the Environmental Affiliates, including,
without limitation, all on-site and off-site activities of Borrower or any
Environmental Affiliate involving Materials of Environmental Concern, (iv) the
breach of any environmental representation or warranty set forth herein, but in
all cases excluding those liabilities, losses, damages, costs and expenses (a)
for which such Indemnitee has been compensated pursuant to the terms of this
Agreement, (b) incurred solely by reason of the gross negligence, willful
misconduct, bad faith or fraud of any Indemnitee as finally determined by a
court of competent jurisdiction, (c) violations of Environmental Laws relating
to a Property which are caused by the act or omission of such Indemnitee after
such Indemnitee takes possession or control (but in no event shall appointment
of a receiver or a trustee be deemed control) of such Property or (d) any
liability of such Indemnitee to any third party based upon Contractual
Obligations of such Indemnitee owing to such third party which are not
expressly set forth in the Loan Documents. In addition, the indemnification
set forth in this Section 9.3(b) in favor of any director, officer, agent or
employee of Administrative Agent or any Bank shall be solely in their
respective capacities as such director, officer, agent or employee. The
Borrower's obligations under this Section shall survive the termination of this
Agreement and the payment of the Obligations.
(c) Each Indemnitee will promptly notify the Borrower of
each event of which it has knowledge that may give rise to a claim under clause
(b) of Section 9.3, provided that the failure to so notify the Borrower shall
in no way impair the Borrower's obligations under this Section 9.3 (except to
the extent that such failure to so notify arises from the gross negligence or
willful misconduct of such Indemnitee and has an adverse effect on the
Borrower). If any investigative, judicial or administrative proceeding is
brought against any Indemnitee indemnified or intended to be indemnified
pursuant to this Section 9.3, the Borrower, to the extent and in the manner
directed by the Indemnitee, will resist and defend such proceeding with counsel
designated by the Borrower (which counsel shall be reasonably satisfactory to
the Indemnitee). Each Indemnitee will use its best efforts to cooperate in the
defense of any such action, writ, or proceeding. The Borrower shall keep such
Indemnitee advised of the status of such defense and consult with such
Indemnitee prior to taking any material position with respect thereto. Such
Indemnitee shall, however, be entitled to employ counsel separate from counsel
for the Borrower and from any other party in such proceeding if such Indemnitee
shall reasonably determine that a conflict of interest or other circumstance
exists that makes representation
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by counsel chosen by the Borrower not advisable. The fees and disbursements of
such separate counsel shall be paid by the Borrower. Such Indemnitee shall not
agree to the settlement of any such claim without the consent of the Borrower,
unless the Borrower shall have been given notice of the commencement of an
action and shall have failed to provide the defense thereof as herein provided
or an Event of Default shall have occurred.
SECTION 9.4. Sharing of Set-Offs. In addition to any rights
now or hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, and after acceleration of the Obligations, each
Bank is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, but subject to
the prior consent of the Administrative Agent, to set off and to appropriate
and apply any and all deposits (general or special, time or demand, provisional
or final) and any other indebtedness at any time held or owing by such Bank
(including, without limitation, by branches and agencies of such Bank wherever
located) to or for the credit or the account of the Borrower against and on
account of the Obligations of the Borrower then due and payable to such Bank
under this Agreement or under any of the other Loan Documents, including,
without limitation, all interests in Obligations purchased by such Bank. Each
Bank shall notify the Borrower in writing promptly after any such set-off and
the application thereof made by such Bank; provided however that the failure to
give such notice shall not affect the validity of such set-off and application.
Each Bank agrees that if it shall by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion of the aggregate
amount of principal and interest due with respect to any Note held by it which
is greater than the proportion received by any other Bank, the Bank receiving
such proportionately greater payment shall purchase such participations in the
Notes held by the other Banks, and such other adjustments shall be made, as may
be required so that all such payments of principal and interest with respect to
the Notes held by the Banks shall be shared by the Banks pro rata; provided
that nothing in this Section shall impair the right of any Bank to exercise any
right of setoff or counterclaim it may have to any deposits not received in
connection with the Loans and to apply the amount subject to such exercise to
the payment of indebtedness of the Borrower other than its indebtedness under
the Notes. The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a Note, whether or
not acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation. Notwithstanding anything to the
contrary contained herein, any Bank may, by separate agreement with the
Borrower, waive its right to set off contained herein or granted by law and any
such written waiver shall be effective against such Bank under this Section
9.4.
SECTION 9.5. Amendments and Waivers. Any provision of this
Agreement, the Notes or any other Loan Documents may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Borrower and the Required Banks; provided that no such amendment or waiver with
respect to this Agreement, the Notes or any other Loan Documents shall, unless
signed by all the Banks,
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(i) except as contemplated by this Agreement, increase or decrease the
Commitment of any Bank (except for a ratable decrease in the Commitments of all
Banks) or subject any Bank to any additional obligation, (ii) reduce the
principal of or rate of interest on any Loan or any fees hereunder, (iii)
postpone the date fixed for any payment of principal of or interest on any Loan
or any fees hereunder or for any reduction or termination of any Commitment,
(iv) except as contemplated by this Agreement, change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or the
number of Banks, which shall be required for the Banks or any of them to take
any action under this Section or any other provision of this Agreement, release
the Guaranty or (vi) modify the provisions of this Section 9.5. No amendment
or waiver shall be binding against the Administrative Agent until it shall have
been notified thereof in writing.
SECTION 9.6. Successors and Assigns.
(a) The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or otherwise
transfer any of its rights under this Agreement or the other Loan Documents
without the prior written consent of all Banks and the Administrative Agent and
a Bank may not assign or otherwise transfer any of its interest under this
Agreement except as permitted in subsection (b) and (c) of this Section 9.6.
(b) Any Bank may at any time grant to any Person in any
amount, participating interests in any Loans made pursuant to this Agreement.
In addition, any Bank may at any time grant to any an existing Bank or one or
more banks, finance companies, insurance or other financial institutions which
(A) has (or, in the case of a bank which is a subsidiary, such bank's parent
has) a rating of its senior debt obligations of not less than Baa-1 by Moody's,
BBB by S&P or a comparable rating by a rating agency acceptable to
Administrative Agent and (b) has total assets in excess of Ten Billion Dollars
($10,000,000,000, participating interests in its Commitment, in an amount not
less than $10,000,000; provided that such Bank retains at least one-half of its
Commitment. If any Bank sells or grants an interest to a Person described
above (in each case, a "Participant"), (i) such Bank shall make and receive all
payments for the account of its Participant, (ii) such Bank's obligations under
this Agreement shall remain unchanged, (iii) such Bank shall continue to be the
sole holder of its Facility Notes and other Loan Documents subject to the
participation and shall have the sole right to enforce its rights and remedies
under the Loan Documents, (iv) the Borrower, the Administrative Agent and the
Banks shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under the Loan Documents, and (v) the
participation agreement shall not restrict such Bank's ability to agree to any
amendment of the terms of the Loan Documents, or to exercise or refrain from
exercising any powers or rights that such Bank may have under or in respect of
the Loan Documents, except that the Participant may be granted the right to
consent to any (A) reduction of the rate or amount, or any extension of the
stated maturity or due date, of any principal, interest or fees payable by the
Borrower and subject to the participation, (B) increase in the amount or
extension of the stated termination or any reduction date of the affected
Commitment or (C) release of the Guaranty, except to the extent otherwise
provided in the Loan Documents. The Borrower
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agrees that each Participant shall, to the extent provided in its participation
agreement, be entitled to the benefits of Article VIII with respect to its
participating interest.
(c) Subject to the requirement that each Bank continues
to hold a minimum of six percent (6%) of the Aggregate Commitment for so long
as it is a Bank hereunder, any Bank may at any time assign, prior to the
occurrence of an Event of Default, to an existing Bank or one or more banks,
finance companies, insurance or other financial institutions which (A) has (or,
in the case of a bank which is a subsidiary, such bank's parent has) a rating
of its senior debt obligations of not less than Baa-1 by Moody's, BBB by S&P or
a comparable rating by a rating agency acceptable to Administrative Agent and
(b) has total assets in excess of Ten Billion Dollars ($10,000,000,000), in
minimum amounts of not less than six percent (6%) of the Aggregate Commitment
and integral multiples of One Million Dollars ($1,000,000) thereafter (or any
lesser amount in the case of assignments to an existing Bank) so long as such
assignment is made with (and subject to) the consent of the Administrative
Agent, which shall not be unreasonably withheld or delayed; provided that if an
Assignee is an affiliate of such transferor Bank or was a Bank immediately
prior to such assignment, no such consent shall be required. After the
occurrence and during the continuance of an Event of Default, any Bank may at
any time assign to any Person in any amount, all or a proportionate part of
all, of its rights and obligations under this Agreement, the Notes and the
other Loan Documents. In either case, such Person (in each case, an
"Assignee") shall assume such rights and obligations, pursuant to a Transfer
Supplement in substantially the form of Exhibit "J" hereto executed by such
Assignee and such transferor Bank, and a copy thereof shall be promptly
furnished to the Administrative Agent. Such assignment may, but need not,
include rights of the transferor Bank in respect of outstanding Money Market
Loans. Upon execution and delivery of a Transfer Supplement and payment by
such Assignee to such transferor Bank of an amount equal to the purchase price
agreed between such transferor Bank and such Assignee, such Assignee shall be a
Bank party to this Agreement and shall have all the rights and obligations of a
Bank with a Commitment as set forth in such a Transfer Supplement, and no
further consent or action by any party shall be required and the transferor
Bank shall be released from its obligations hereunder to a corresponding
extent. Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Bank, the Administrative Agent and the Borrower shall make
appropriate arrangements so that, if required, a new Note is issued to the
Assignee. In connection with any such assignment, the transferor Bank shall
pay to the Administrative Agent an administrative fee for processing such
assignment in the amount of $2,500. If the Assignee is not incorporated under
the laws of the United States of America or a state thereof, it shall deliver
to the Borrower and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal, income taxes in
accordance with Section 8.4. Any assignment, made during the continuation of
an Event of Default shall not be affected by any subsequent cure of such Event
of Default.
(d) Any Bank may at any time assign all or any portion of
its rights under this Agreement and its Note to a Federal Reserve Bank. No
such assignment shall release the transferor Bank from its obligations
hereunder.
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(e) No Assignee, Participant or other transferee of any
Bank's rights shall be entitled to receive any greater payment under Section
8.3 or 8.4 than such Bank would have been entitled to receive with respect to
the rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.2, 8.3 or 8.4
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.7. Collateral. Each of the Banks represents to the
Administrative Agent and each of the other Banks that it in good faith is not
relying upon any "margin stock" (as defined in Regulation U) as collateral in
the extension or maintenance of the credit provided for in this Agreement.
SECTION 9.8. Governing Law; Submission to Jurisdiction. THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA EXCEPT TO THE EXTENT PREEMPTED
BY FEDERAL LAW (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of any
judgment in respect thereof may be brought in the courts of the State of
California or of the United States of America located in Orange County,
California, and, by execution and delivery of this Agreement, the Banks and the
Borrower each hereby accepts for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of the aforesaid
courts and appellate courts from any thereof. The Banks and the Borrower
irrevocably consent to the service of process out of any of the aforementioned
courts in any such action or proceeding by the hand delivery, or mailing of
copies thereof by registered or certified mail, postage prepaid, to the Banks
and the Borrower at their respective addresses set forth below. The Banks and
the Borrower hereby irrevocably waive any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Loan Document brought in the courts referred to above and hereby further
irrevocably waive and agree not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of the Borrower or
Administrative Agent to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against any other party in
any other jurisdiction.
SECTION 9.9. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating
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to the subject matter hereof. This Agreement shall become effective upon
receipt by the Administrative Agent and the Borrower of counterparts hereof
signed by each of the parties hereto (or, in the case of any party as to which
an executed counterpart shall not have been received, receipt by the
Administrative Agent in form satisfactory to it of telegraphic, telex or other
written confirmation from such party of execution of a counterpart hereof by
such party), and the date on which such receipt occurs shall be the "Effective
Date."
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER,
THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVE ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Survival. All indemnities set forth herein
shall survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder.
SECTION 9.12. Domicile of Loans. Each Bank may transfer and
carry its Loans at, to or for the account of any domestic or foreign branch
office, subsidiary or affiliate of such Bank.
SECTION 9.13. Limitation of Liability. No claim may be made
by the Borrower or any other Person acting by or through Borrower against the
Administrative Agent or any Bank or the affiliates, directors, officers,
employees, attorneys or agent of any of them for any consequential or punitive
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement or by the other Loan Documents, or any act, omission or event
occurring in connection therewith; and the Borrower hereby waives, releases and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
SECTION 9.14. Recourse Obligation. This Agreement and the
Obligations hereunder are fully recourse to the Borrower. Notwithstanding the
foregoing, no recourse under or upon any obligation, covenant, or agreement
contained in this Agreement shall be had against any limited partner of
Borrower, any shareholder of Guarantor or any of their or Borrower's or
Guarantor's respective officers, directors, shareholders or employees except in
the event of fraud or misappropriation of funds on the part of such officer,
director, shareholder or employee.
SECTION 9.15. Bank's Failure to Fund.
(a) Unless the Administrative Agent shall have received
notice from a Bank prior to the date of any Borrowing that such Bank will not
make available to the Administrative Agent such Bank's share of such Borrowing,
the Administrative Agent may assume that such Bank has made such share
available to the Administrative Agent on the
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date of such Borrowing in accordance with subsection (b) of Section 2.4 hereof,
and the Administrative Agent may, in reliance upon such assumption, make
available to Borrower on such date a corresponding amount. If and to the
extent that such Bank shall not have so made such share available to the
Administrative Agent, such Bank and Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, in accordance with the provisions of Section 2.4(c)
hereof. If such Bank shall repay to the Administrative Agent such
corresponding amount, such amount so repaid shall constitute such Bank's Loan
included in such Borrowing for purposes of this Agreement. Nothing contained
in this Section or Section 2.4(c) shall be deemed to reduce the Commitment of
any Bank or in any way affect the rights of Borrower with respect to any
defaulting Bank or Administrative Agent. The failure of any Bank to make
available to the Administrative Agent such Bank's share of any Borrowing in
accordance with Section 2.4(b) hereof shall not relieve any other Bank of its
obligations to fund its Commitment, in accordance with the provisions hereof.
(b) If a Bank does not advance to Administrative Agent
such Bank's pro rata share of a Loan in accordance herewith, then neither
Administrative Agent nor the other Banks shall be required or obligated to fund
such Bank's pro rata share of such Loan.
(c) As used herein, the following terms shall have the
meanings set forth below:
(i) "Defaulting Bank" shall mean any Bank which (x)
does not advance to the Administrative Agent such Bank's pro rata share of a
Loan in accordance herewith for a period of five (5) Domestic Business Days
after notice of such failure from Administrative Agent, (y) shall otherwise
fail to perform such Bank's obligations under the Loan Documents for a period
of five (5) Domestic Business Days after notice of such failure from
Administrative Agent, or (z) shall fail to pay the Administrative Agent or any
other Bank, as the case may be, upon demand, such Bank's pro rata share of any
costs, expenses or disbursements incurred or made by the Administrative Agent
pursuant to the terms of the Loan Documents for a period of five (5) Domestic
Business Days after notice of such failure from Administrative Agent, and in
all cases, such failure is not as a result of a good faith dispute as to
whether such advance is properly required to be made pursuant to the provisions
of this Agreement, or as to whether such other performance or payment is
properly required pursuant to the provisions of this Agreement.
(ii) "Junior Creditor" means any Defaulting Bank
which has not (x) fully cured each and every default on its part under the Loan
Documents and (y) unconditionally tendered to the Administrative Agent such
Defaulting Bank's pro rata share of all costs, expenses and disbursements
required to be paid or reimbursed pursuant to the terms of the Loan Documents.
(iii) "Payment in Full" means, as of any date, the
receipt by the Banks who are not Junior Creditors of an amount of cash, in
lawful currency of the United States, sufficient to indefeasibly pay in full
all Senior Debt.
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(iv) "Senior Debt" means (x) collectively, any and
all indebtedness, obligations and liabilities of the Borrower to the Banks who
are not Junior Creditors from time to time, whether fixed or contingent, direct
or indirect, joint or several, due or not due, liquidated or unliquidated,
determined or undetermined, arising by contract, operation of law or otherwise,
whether on open account or evidenced by one or more instruments, and whether
for principal, premium, interest (including, without limitation, interest
accruing after the filing of a petition initiating any proceeding referred to
in Section 6.1(f) or (g)), reimbursement for fees, indemnities, costs, expenses
or otherwise, which arise under, in connection with or in respect of the Loans
or the Loan Documents, and (y) any and all deferrals, renewals, extensions and
refundings of, or amendments, restatements, rearrangements, modifications or
supplements to, any such indebtedness, obligation or liability.
(v) "Subordinated Debt" means (x) any and all
indebtedness, obligations and liabilities of Borrower to one or more Junior
Creditors from time to time, whether fixed or contingent, direct or indirect,
joint or several, due or not due, liquidated or unliquidated, determined or
undetermined, arising by contract, operation of law or otherwise, whether on
open account or evidenced by one or more instruments, and whether for
principal, premium, interest (including, without limitation, interest accruing
after the filing of a petition initiating any proceeding referred to in Section
6.1(f) or (g)), reimbursement for fees, indemnities, costs, expenses or
otherwise, which arise under, in connection with or in respect of the Loans or
the Loan Documents, and (y) any and all deferrals, renewals, extensions and
refundings of, or amendments, restatements, rearrangements, modifications or
supplements to, any such indebtedness, obligation or liability.
(d) Immediately upon a Bank's becoming a Junior Creditor,
no Junior Creditor shall, prior to Payment in Full of all Senior Debt:
(i) accelerate, demand payment of, sue upon,
collect, or receive any payment upon, in any manner, or satisfy or otherwise
discharge, any Subordinated Debt, whether for principal, interest and
otherwise;
(ii) take or enforce any Liens to secure
Subordinated Debt or attach or levy upon any assets of Borrower, to enforce any
Subordinated Debt;
(iii) enforce or apply any security for any
Subordinated Debt; or
(iv) incur any debt or liability, or the like, to,
or receive any loan, return of capital, advance, gift or any other property,
from, the Borrower.
(e) In the event of:
(i) any insolvency, bankruptcy, receivership,
liquidation, dissolution, reorganization, readjustment, composition or other
similar proceeding relating to Borrower;
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(ii) any liquidation, dissolution or other
winding-up of the Borrower, voluntary or involuntary, whether or not involving
insolvency, reorganization or bankruptcy proceedings;
(iii) any assignment by the Borrower for the benefit
of creditors;
(iv) any sale or other transfer of all or
substantially all assets of the Borrower; or
(v) any other marshaling of the assets of the
Borrower;
each of the Banks shall first have received Payment in Full of all Senior Debt
before any payment or distribution, whether in cash, securities or other
property, shall be made in respect of or upon any Subordinated Debt. Any
payment or distribution, whether in cash, securities or other property that
would otherwise be payable or deliverable in respect of Subordinated Debt to
any Junior Creditor but for this Agreement shall be paid or delivered directly
to the Administrative Agent for distribution to the Banks in accordance with
this Agreement until Payment in Full of all Senior Debt. If any Junior
Creditor receives any such payment or distribution, it shall promptly pay over
or deliver the same to the Administrative Agent for application in accordance
with the preceding sentence.
(f) Each Junior Creditor shall file in any bankruptcy or
other proceeding of Borrower in which the filing of claims is required by law,
all claims relating to Subordinated Debt that such Junior Creditor may have
against Borrower and assign to the Banks who are not Junior Creditors all
rights of such Junior Creditor thereunder. If such Junior Creditor does not
file any such claim prior to forty-five (45) days before the expiration of the
time to file such claim, Administrative Agent, as attorney-in-fact for such
Junior Creditor, is hereby irrevocably authorized to do so in the name of such
Junior Creditor or, in Administrative Agent's sole discretion, to assign the
claim to a nominee and to cause proof of claim to be filed in the name of such
nominee. The foregoing power of attorney is coupled with an interest and
cannot be revoked. The Administrative Agent shall, to the exclusion of each
Junior Creditor, have the sole right, subject to Section 9.5 hereof, to accept
or reject any plan proposed in any such proceeding and to take any other action
that a party filing a claim is entitled to take. In all such cases, whether in
administration, bankruptcy or otherwise, the Person or Persons authorized to
pay such claim shall pay to Administrative Agent the amount payable on such
claim and, to the full extent necessary for that purpose, each Junior Creditor
hereby transfers and assigns to the Administrative Agent all of the Junior
Creditor's rights to any such payments or distributions to which Junior
Creditor would otherwise be entitled.
(g) (i) If any payment or distribution of any character
or any security, whether in cash, securities or other property, shall be
received by any Junior Creditor in contravention of any of the terms hereof,
such payment or distribution or security shall be received in trust for the
benefit of, and shall promptly be paid over or delivered and transferred to,
Administrative Agent for application to the payment of all Senior Debt, to the
extent necessary to achieve Payment in Full. In the event of the failure
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of any Junior Creditor to endorse or assign any such payment, distribution or
security, Administrative Agent is hereby irrevocably authorized to endorse or
assign the same as attorney-in-fact for such Junior Creditor.
(ii) Each Junior Creditor shall take such action
(including, without limitation, the execution and filing of a financing
statement with respect to this Agreement and the execution, verification,
delivery and filing of proofs of claim, consents, assignments or other
instructions that Administrative Agent may require from time to time in order
to prove or realize upon any rights or claims pertaining to Subordinated Debt
or to effectuate the full benefit of the subordination contained herein) as
may, in Administrative Agent's sole and absolute discretion, be necessary or
desirable to assure the effectiveness of the subordination effected by this
Agreement.
(h) (i) Each Bank that becomes a Junior Creditor
understands and acknowledges by its execution hereof that each other Bank is
entering into this Agreement and the Loan Documents in reliance upon the
absolute subordination in right of payment and in time of payment of
Subordinated Debt to Senior Debt as set forth herein.
(ii) Only upon the Payment in Full of all Senior
Debt shall any Junior Creditor be subrogated to any remaining rights of the
Banks which are not Defaulting Banks to receive payments or distributions of
assets of the Borrower made on or applicable to any Senior Debt.
(iii) Each Junior Creditor agrees that it will
deliver all instruments or other writings evidencing any Subordinated Debt held
by it to Administrative Agent, promptly after request therefor by the
Administrative Agent.
(iv) No Junior Creditor may at any time sell, assign
or otherwise transfer any Subordinated Debt, or any portion thereof, including,
without limitation, the granting of any Lien thereon, unless and until
satisfaction of the requirements of Section 9.6 above and the proposed
transferee shall have assumed in writing the obligation of the Junior Creditor
to the Banks under this Agreement, in a form acceptable to the Administrative
Agent.
(v) If any of the Senior Debt, should be
invalidated, avoided or set aside, the subordination provided for herein
nevertheless shall continue in full force and effect and, as between the Banks
which are not Defaulting Banks and all Junior Creditors, shall be and be deemed
to remain in full force and effect.
(vi) Each Junior Creditor hereby irrevocably waives,
in respect of Subordinated Debt, all rights (x) under Sections 361 through 365,
502(e) and 509 of the Bankruptcy Code (or any similar sections hereafter in
effect under any other Federal or state laws or legal or equitable principles
relating to bankruptcy, insolvency, reorganizations, liquidations or otherwise
for the relief of debtors or protection of creditors), and (y) to seek or
obtain conversion to a different type of proceeding or to seek or obtain
dismissal of a proceeding, in each case in relation to a bankruptcy,
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reorganization, insolvency or other proceeding under similar laws with respect
to the Borrower. Without limiting the generality of the foregoing, each Junior
Creditor hereby specifically waives (A) the right to seek to give credit
(secured or otherwise) to the Borrower in any way under Section 364 of the
Bankruptcy Code unless the same is subordinated in all respects to Senior Debt
in a manner acceptable to Administrative Agent in its sole and absolute
discretion and (B) the right to receive any collateral security (including any
"super priority" or equal or "priming" or replacement Lien) for any
Subordinated Debt unless the Banks which are not Defaulting Banks have received
a senior position acceptable to the Banks in their sole and absolute discretion
to secure all Senior Debt (in the same collateral to the extent collateral is
involved).
(i) (i) In addition to and not in limitation of the
subordination effected by this Section 9.15, the Administrative Agent and each
of the Banks which are not Defaulting Banks may in their respective sole and
absolute discretion, also exercise any and all other rights and remedies
available at law or in equity in respect of a Defaulting Bank; and
(ii) The Administrative Agent shall give each of the
Banks notice of the occurrence of a default under this Section 9.15 by a
Defaulting Bank and if the Administrative Agent and/or one or more of the other
Banks shall, at their option, fund any amounts required to be paid or advanced
by a Defaulting Bank, the other Banks who have elected not to fund any portion
of such amounts shall not be liable for any reimbursements to the
Administrative Agent and/or to such other funding Banks.
(j) Notwithstanding anything to the contrary contained or
implied herein, a Defaulting Bank shall not be entitled to vote on any matter
as to which a vote by the Banks is required hereunder, including, without
limitation, any actions or consents on the part of the Administrative Agent as
to which the approval or consent of all the Banks or the Required Banks is
required under Article VIII, Section 9.5 or elsewhere, so long as such Bank is
a Defaulting Bank; provided, however, that in the case of any vote requiring
the unanimous consent of the Banks, if all the Banks other than the Defaulting
Bank shall have voted in accordance with each other, then the Defaulting Bank
shall be deemed to have voted in accordance with such Banks.
5. Each of the Administrative Agent and any one or more
of the Banks which are not Defaulting Banks may, at their respective option,
(i) advance to the Borrower such Bank's pro rata share of the Loans not
advanced by a Defaulting Bank in accordance with the Loan Documents, or (ii)
pay to the Administrative Agent such Bank's pro rata share of any costs,
expenses or disbursements incurred or made by the Administrative Agent pursuant
to the terms of this Agreement not theretofore paid by a Defaulting Bank.
Immediately upon the making of any such advance by the Administrative Agent or
any one of the Banks, such Bank's pro rata share and the pro rata share of the
Defaulting Bank shall be recalculated to reflect such advance. All payments,
repayments and other disbursements of funds by the Administrative Agent to
Banks shall thereupon and, at all times thereafter be made in accordance with
such Bank's recalculated pro rata share unless and until a Defaulting Bank
shall fully cure all defaults on the part of
82
<PAGE> 90
such Defaulting Bank under the Loan Documents or otherwise existing in respect
of the Loans or this Agreement, at which time the pro rata share of the Bank(s)
which advanced sums on behalf of the Defaulting Bank and of the Defaulting Bank
shall be restored to their original percentages.
SECTION 9.16. Dispute Resolution.
(a) Mandatory Arbitration
(i) If requested by any party thereto, any
controversy or claim between the parties hereto arising out of or relating to
this Agreement or any of the other Loan Documents (including any controversy or
claim regarding the arbitrability of such controversy or claim or based on or
arising out of an alleged tort) shall be determined by arbitration to be held
in Orange County, California in accordance with Title 9 of the U.S. Code and
the Commercial Arbitration Rules of the American Arbitration Association (the
"AAA") and the AAA's Supplementary Procedures for Large, Complex Disputes.
(ii) Any arbitration hereunder shall be held
before a single arbitrator mutually agreed to by the parties thereto, except
that, if the parties shall fail to agree to such an arbitrator within ten (10)
days from the date on which the claimant's request for arbitration is delivered
to the other party to the arbitration, such arbitration shall be held before a
panel of three arbitrators and each party shall appoint one arbitrator. The
arbitrator(s) must be either a retired judge from the California Superior or
Appellate Courts or the United States District Courts located in California or
a member of the AAA panel for hearing large, complex cases in Orange County,
California. If a party fails to nominate an arbitrator within 10 days from the
date on which the claimant's request for arbitration has been communicated to
the other party, the appointment shall be made by the AAA. The two arbitrators
so appointed shall attempt to agree upon the third arbitrator to act as
chairman. If the two arbitrators fail to nominate the chairman within 10 days
from the date of appointment of the later appointed arbitrator, the chairman
shall be selected by the AAA.
(iii) Discovery may be taken in the arbitration
proceedings pursuant to the provisions of California Code of Civil Procedure
Section 1283.05, which are incorporated herein by reference and made applicable
to any arbitration held pursuant to this Section.
(iv) The award of the arbitrator(s) shall be
final, and the parties agree to waive their right to any form of appeal, to the
greatest extent allowed by law, and to share equally the fees and expenses of
the arbitrators. Judgment upon any award of the arbitrators may be entered in
any court having jurisdiction or application may be made to such court for the
judicial acceptance of the award and for order of enforcement. All statutes of
limitation and waivers that would otherwise be applicable shall apply to any
arbitration proceeding under this Section 9.16(a).
83
<PAGE> 91
(b) Judicial Reference
If any such controversy or claim is not submitted to
arbitration as provided in subsection (a), but becomes the subject of a
judicial action, it shall be resolved solely and exclusively pursuant to the
provisions for reference and trial by referee set forth in California Code of
Civil Procedure Section 638 et seq., or any statute containing reasonably
similar provisions that replaces such sections, except as expressly modified by
the provisions hereof. The referee shall be a retired or former Superior Court
judge practicing in Orange County, California, who is either (i) agreed to by
the parties within ten (10) days of the notice by any party to the other of the
intention to invoke this Section to resolve the dispute, or (ii) failing such
agreement, is appointed pursuant to California Code of Civil Procedure Section
638.l (or any statute containing reasonably similar provisions that replaces
such section) in an action filed in the Superior Court of Orange County,
California. The parties agree that any party may file (and, if necessary, the
other party shall join in such filing) with the Clerk of the Orange County
Superior Court, or with the appropriate judge of such Court, any and all
petitions, motions, applications or other documents necessary to obtain the
appointment of such a referee immediately upon the commencement of any action
or proceeding to resolve any such dispute and to conduct all necessary
discovery and to proceed to a trial as expeditiously as possible. All
proceedings, including trial, before the referee shall be conducted at a
neutral location (unless otherwise stipulated by the parties) within five miles
of the Orange County Superior Court. The parties agree that the referee shall
be a judge for all purposes (including (i) ruling on any and all discovery
matters and motions and any and all pretrial or trial motions, (ii) setting a
schedule of pretrial proceedings, and (iii) making any other orders or rulings
a sitting judge of the Superior Court would be empowered to make in any action
or proceeding in the Superior Court). Any matter before the referee shall be
governed by the California Code of Civil Procedure, the California Rules of
Court, the California Evidence Code and the Local Rules of the Orange County
Superior Court. Any decision of the referee shall be appealable to the same
extent and in the same manner that such decisions would be appealable if
rendered by a judge of the Orange County Superior Court. The Referee shall in
his or her statement of decision set forth his or her findings of fact and
conclusions of law. The parties intend this reference agreement to be
specifically enforceable in accordance with Section 638.l of the California
Code of Civil Procedure.
(c) Provisional Remedies, Self-Help
Subject to Section 9.4, nothing herein shall limit the right
of any party to exercise self-help remedies such as setoff or to obtain
provisional or ancillary remedies, including an order of attachment, a
temporary restraining order, preliminary injunction or other interim relief
from any court of competent jurisdiction if such is necessary to preserve that
party's rights before, during or after the pendency of any arbitration,
reference or bankruptcy proceeding.
84
<PAGE> 92
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
IRVINE APARTMENT COMMUNITIES, L.P.,
a Delaware limited partnership
By: Irvine Apartment Communities,
Inc., a Maryland corporation
By: _______________________________________
Name: James E. Mead
Title: Senior Vice President
and Chief Financial Officer
By:________________________________________
Name: Shawn Howie
Title: Vice President
Corporate Finance
Facsimile number: (714) 720-5550
Address:
c/o Irvine Apartment Communities, Inc.
550 Newport Center Drive
Newport Beach, California 92260
Attn: Vice President, Corporate Finance
85
<PAGE> 93
Commitment Amount
$45,000,000
LIBOR Lending Office: BANK OF AMERICA NT & SA
5 Park Plaza, Suite 500
Irvine, California 92614 By: __________________________________
Name: Michael V. Atkins
Title: Vice President
and Sr. Relationship Manager
Attn: Michael V. Atkins
Telecopy: (714) 260-5639
Domestic Lending Office:
5 Park Plaza, Suite 500
Irvine, California 92614
Attn: Michael V. Atkins
Telecopy: (714) 260-5639
Money Market Lending Office:
555 California Street
10th Floor
San Francisco, California 94101
Attn: Linda Webster
Telecopy: (415) 622-2237
<PAGE> 94
Commitment Amount
$45,000,000
LIBOR Lending Office: WELLS FARGO BANK, NA
Wells Fargo Bank, NA
Disbursement and Operations Center By:______________________________
2120 East Park Place, Suite 100 Name: ________________________
El Segundo, California 90245 Title:________________________
Attn: Anne Colvin
Telecopy: (310) 615-1014
Domestic Lending Office:
Wells Fargo Bank, NA
2030 Main Street, Suite 800
Irvine, California 92614
Attn: Office Manager
Telecopy: (714) 851-9728
Money Market Lending Office:
Wells Fargo Bank, NA
2030 Main Street, Suite 800
Irvine, California 92614
Attn: Office Manager
Telecopy: (714) 851-9728
<PAGE> 95
Commitment Amount
$45,000,000
LIBOR Lending Office: MORGAN GUARANTY
TRUST COMPANY OF NEW YORK
___________________________________
___________________________________ By: ___________________________________
___________________________________ Name:_______________________________
Title:______________________________
Attn: _____________________________
Telecopy: (___)___________________
Domestic Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
Money Market Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
<PAGE> 96
Commitment Amount
$35,000,000
LIBOR Lending Office: FIRST BANK NATIONAL ASSOCIATION
- -----------------------------------
- ----------------------------------- By:
- ----------------------------------- ------------------------------------
Name: Stephen P. Bailey
-----------------------------
Title: Vice President
-----------------------------
Attn: _____________________________
Telecopy: (___)___________________
Domestic Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
Money Market Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
<PAGE> 97
Commitment Amount
$20,000,000
LIBOR Lending Office: COMERICA BANK
___________________________________
___________________________________ By: ___________________________________
___________________________________ Name:_______________________________
Title:______________________________
Attn: _____________________________
Telecopy: (___)___________________
Domestic Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
Money Market Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
<PAGE> 98
Commitment Amount
$20,000,000
LIBOR Lending Office: CORESTATES BANK, N.A.
___________________________________
___________________________________ By: ___________________________________
___________________________________ Name:_______________________________
Title:______________________________
Attn: _____________________________
Telecopy: (___)___________________
Domestic Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
Money Market Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
<PAGE> 99
Commitment Amount
$20,000,000
LIBOR Lending Office: DRESDNER BANK A.G.
___________________________________
___________________________________ By: ___________________________________
___________________________________ Name:_______________________________
Title:______________________________
Attn: _____________________________
Telecopy: (___)___________________
Domestic Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
Money Market Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
<PAGE> 100
Commitment Amount
$20,000,000
LIBOR Lending Office: FLEET NATIONAL BANK
___________________________________
___________________________________ By: ___________________________________
___________________________________ Name:_______________________________
Title:______________________________
Attn: _____________________________
Telecopy: (___)___________________
Domestic Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
Money Market Lending Office:
___________________________________
___________________________________
___________________________________
Attn: _____________________________
Telecopy: (___)___________________
<PAGE> 101
BANK OF AMERICA NT & SA,
as Administrative Agent
By: _____________________________________
Name: Elena Bennett
Title: Vice President
Attn: Michael V. Atkins
Telecopy: (714) 260-5639
DOMESTIC AND LIBOR LENDING OFFICE:
5 Park Plaza, Suite 500
Irvine, California 92614
Attn: Michael V. Atkins
Telecopy: (714) 260-5639
<PAGE> 102
Address: WELLS FARGO BANK, N.A.,
Wells Fargo Bank, NA as Documentation Agent
2030 Main Street, Suite 800 By: ____________________________________
Irvine, California 92614 Name: ______________________________
Title:______________________________
Attn: Office Manager
Telecopy: (714) 851-9728
<PAGE> 103
SCHEDULE 1
Bank Commitments
<TABLE>
<CAPTION> SHARE OF AGGREGATE
BANK COMMITMENT COMMITMENT
- ------------------------------------- -------------- -------------------
<S> <C> <C>
Bank of America NT & SA $45,000,000 18.00%
Wells Fargo Bank, NA $45,000,000 18.00%
Morgan Guaranty Trust Company
of New York $45,000,000 18.00%
First Bank National Association $35,000,000 14.00%
Comerica Bank $20,000,000 8.00%
CoreStates Bank, N.A. $20,000,000 8.00%
Dresdner Bank, A.G. $20,000,000 8.00%
Fleet National Bank $20,000,000 8.00%
Total $250,000,000 100.00%
</TABLE>
<PAGE> 104
SCHEDULE 4.6
Borrower and Guarantor ERISA Plans
Irvine Apartment Communities, Inc. Savings Plan
Customary health, life and disability plans for active employees
<PAGE> 105
Schedule 4.17
Qualifying Unencumbered Properties
Amherst Court
Newport Ridge
Orchard Park
Rancho Monterey
San Carlo
San Mateo
Santa Clara
Santa Rosa
Sierra Vista
Villa Coronado
Windwood Knoll
Woodbridge Oaks
Woodbridge Villas
Baypointe
Cupertino
Santa Fe
Santa Maria
Santa Rosa II
The Colony
<PAGE> 106
SCHEDULE 5.14(c)(1)
San Rafael Limited Partnership, L.P.
IAC Management, Inc.
<PAGE> 107
SCHEDULE 5.14(c)(2)
None
<PAGE> 108
Exhibit A
EXHIBIT A
FORM OF
NOTICE OF BORROWING
TO: BANK OF AMERICA, NATIONAL
TRUST AND SAVINGS ASSOCIATION
___________________________________
___________________________________
___________________________________
Attention:_________________________
Loan No.:__________________________
Accounting Unit No.:_______________
Reference is hereby made to the Revolving Credit Agreement
dated as of June 27, 1997 (as amended, supplemented, replaced, renewed or
otherwise modified from time to time, the "Credit Agreement") among IRVINE
APARTMENT COMMUNITIES, L.P., a Delaware limited partnership (the "Borrower"),
the banks listed on the signature pages thereof, Bank of America NT&SA, as
Administrative Agent, and Wells Fargo Bank, N.A., as Documentation Agent.
Terms with initial capital letters used but not defined herein have the
meanings assigned to them in the Credit Agreement.
Pursuant to Article 2 of the Credit Agreement:
1. The Borrower hereby requests a Loan in the amount of
$___________________ on _____________________, ____(1) in the form of a
______________________________(2) [with an interest period of ________](3); and
__________________________________
(1) Must be a Business Day.
(2) Insert form of Loan (Base Rate Loan or Fixed Rate Loan).
(3) Insert Fixed Rate Period in the case of a Fixed Rate Loan.
A-1
<PAGE> 109
2. The Borrower hereby represents and warrants as
follows:
(a) All of the representations and warranties contained
in the Credit Agreement are true and correct in all material respects on and as
of the date hereof as though made on and as of this date (except to the extent
that such representations and warranties expressly were made only as of a
specific date);
(b) No Default or Event of Default exists or would result
from the making of the Loan; and
(c) All other conditions to borrowing set forth in the
Credit Agreement are satisfied.
Date: ____________________, ____
IRVINE APARTMENT COMMUNITIES, L.P.,
a Delaware limited partnership
By: IRVINE APARTMENT
COMMUNITIES, INC., a
Maryland corporation,
General Partner
By: [Certifying Officer]
---------------------------
Name:
---------------------------
Title:
---------------------------
A-2
<PAGE> 110
Exhibit B
EXHIBIT B
Form of Money Market Quote Request
[Date]
To: Bank of America NT&SA (the "Administrative Agent")
From: Irvine Apartment Communities, L.P.
Re: Revolving Credit Agreement dated as of June 27, 1997 (as
amended, supplemented, replaced, renewed or otherwise modified
from time to time, the "Credit Agreement") among the Borrower,
the banks listed on the signature pages thereof, Bank of
America NT&SA, as Administrative Agent, and Wells Fargo Bank,
N.A., as Documentation Agent.
We hereby give notice pursuant to Section 2.3 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s):
Date of Borrowing: ______________________
<TABLE>
<CAPTION>
Principal Amount* Interest Period**
- ----------------- -----------------
<S> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.] Terms
__________________________________
** Amount must be $[MINIMUM BORROWING] or a larger multiple of $[MINIMUM
BORROWING INCREMENT].
*** Not less than 14 days (LIBOR Auction) or not less than 14 days (Absolute
Rate Auction), subject to the provisions of the definition of Interest
Period.
B-1
<PAGE> 111
used herein have the meanings assigned to them in the Credit Agreement.
IRVINE APARTMENT COMMUNITIES, L.P., a
Delaware limited partnership
By: Irvine Apartment Communities, Inc.,
a Maryland corporation,
its general partner
By:__________________________________
Name:_____________________________
Title:____________________________
B-2
<PAGE> 112
Exhibit C
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Irvine Apartment Communities,
L.P. (the "Borrower")
Pursuant to Section 2.3 of the Revolving Credit Agreement
dated as of June 27, 1997, as amended, supplemented, replaced, renewed or
otherwise modified from time to time, among the Borrower, the banks listed on
the signature pages thereof, Bank of America NT&SA, as Administrative Agent,
and Wells Fargo Bank, N.A., as Documentation Agent, we are pleased on behalf of
the Borrower to invite you to submit Money Market Quotes to the Borrower for
the following proposed Money Market Borrowing(s):
Date of Borrowing: ______________________
<TABLE>
<CAPTION>
Principal Amount Interest Period
- ---------------- ---------------
<S> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than 6:30 A.M.
(San Francisco time) on [date].
BANK OF AMERICA NT&SA,
as Administrative Agent
By:_____________________________________
Authorized Officer
C-1
<PAGE> 113
Exhibit D
EXHIBIT D
Form of Money Market Quote
To: Bank of America NT&SA, as Administrative Agent
Re: Money Market Quote to Irvine Apartment Communities, L.P. (the
"Borrower")
In response to your invitation on behalf of the Borrower dated
________________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank or Designated Bidder:
2. Person to contact at Quoting Bank or Designated Bidder:
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
<TABLE>
<CAPTION>
Money Market
Principal Amount** Interest Period*** [Margin****] Absolute Rate*****
- ------------------ ------------------- ------------ ------------------
<S> <C> <C> <C>
$
$
</TABLE>
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$_______________.]**
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in
the Revolving Credit Agreement dated as of June 27, 1997, as amended,
supplemented, replaced, renewed or otherwise modified from time to
time, among the Borrower, the banks listed on the signature pages
thereof, Bank of America NT&SA, as Administrative Agent, and Wells
Fargo Bank, N.A., as Documentation Agent, which irrevocably obligates
us to make the Money Market Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK/DESIGNATED BIDDER]
Dated:___________________ By:__________________________________
Authorized Officer
D-1
<PAGE> 114
__________
*As specified in the related Invitation.
**Principal amount bid for each Interest Period may not exceed principal amount
requested. Specify aggregate limitation if the sum of the individual offers
exceeds the amount the Bank is willing to lend. Bids must be made for
$3,000,000 or a larger multiple of $1,000,000.
***Not less than 14 days, as specified in the related Invitation. No more than
five bids are permitted for each Interest Period.
****Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
*****Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
D-2
<PAGE> 115
Exhibit E
EXHIBIT E
NOTE
$___________ Irvine, California
June 27, 1997
For value received, IRVINE APARTMENT COMMUNITIES, L.P., a
Delaware limited partnership (the "Borrower"), promises to pay to the order of
__________________ (the "Bank"), for the account of its Applicable Lending
Office, the unpaid principal amount of each Base Rate Loan and LIBOR Loan made
by the Bank to the Borrower pursuant to the Credit Agreement referred to below
on the maturity date provided for in the Credit Agreement). The Borrower
promises to pay interest on the unpaid principal amount of each such Loan on
the dates and at the rate or rates provided for in the Credit Agreement. All
such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office
designated by Bank.
All Base Rate Loans and LIBOR Loans made by the Bank, the
respective types and maturities thereof and all repayments of the principal
thereof shall be recorded by the Bank and, if the Bank so elects in connection
with any transfer or enforcement hereof, appropriate notations to evidence the
foregoing information with respect to each such Base Rate Loan and LIBOR Loan
then outstanding may be endorsed by the Bank on the schedule attached hereto,
or on a continuation of such schedule attached to and made a part hereof;
provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Facility Notes referred to in, and is
delivered pursuant to and subject to all of the terms of, the Revolving Credit
Agreement dated as of June 27, 1997 among the Borrower, the banks listed on the
signature pages thereof, Bank of America NT&SA, as Administrative Agent, and
Wells Fargo Bank, N.A., as Documentation Agent (as the same may be amended,
supplemented, replaced, renewed or otherwise modified from time to time, the
"Credit Agreement"). Terms defined in the
E-1
<PAGE> 116
Credit Agreement are used herein with the same meanings. Reference is made to
the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
IRVINE APARTMENT COMMUNITIES, L.P., a
Delaware limited partnership
By: Irvine Apartment Communities,
Inc., a Maryland corporation,
its general partner
By:_____________________________________
Name:___________________________
Title:__________________________
By:_____________________________________
Name:___________________________
Title:__________________________
E-2
<PAGE> 117
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of
Amount of Principal Notation
Date Loan Type of Loan Repaid Maturity Date Made By
- ----------- ----------- --------------------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
E-3
<PAGE> 118
Exhibit F
EXHIBIT F
Form of Money Market Note
NOTE
$125,000,000 Irvine, California
June 27, 1997
For value received, IRVINE APARTMENT COMMUNITIES, L.P., a
Delaware limited partnership (the "Borrower"), promises to pay to the order of
__________________ (the "Bank"), for the account of its Applicable Lending
Office, the unpaid principal amount of each Money Market Loan made by the Bank
to the Borrower pursuant to the Credit Agreement referred to below on the
maturity date provided for in the Credit Agreement). The Borrower promises to
pay interest on the unpaid principal amount of each such Money Market Loan on
the dates and at the rate or rates provided for in the Credit Agreement. All
such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office
designated by Bank.
All Money Market Loans made by the Bank, the respective types
and maturities thereof and all repayments of the principal thereof shall be
recorded by the Bank and, if the Bank so elects in connection with any transfer
or enforcement hereof, appropriate notations to evidence the foregoing
information with respect to each such Money Market Loan then outstanding may be
endorsed by the Bank on the schedule attached hereto, or on a continuation of
such schedule attached to and made a part hereof; provided that the failure of
the Bank to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Credit Agreement.
This note is one of the Money Market Notes referred to in, and
is delivered pursuant to and subject to all of the terms of, the Revolving
Credit Agreement dated as of June 27, 1997 among the Borrower, the banks listed
on the signature pages thereof, Bank of America NT&SA, as Administrative Agent,
and Wells Fargo Bank, N.A., as Documentation Agent (as the same may be amended,
supplemented, replaced, renewed or otherwise modified from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the
F-1
<PAGE> 119
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.
IRVINE APARTMENT COMMUNITIES, L.P.,
a Delaware limited partnership
By: Irvine Apartment Communities, Inc.,
a Maryland corporation,
its general partner
By: ______________________________
Name: _____________________
Title: ____________________
By: ______________________________
Name: _____________________
Title: ____________________
F-2
<PAGE> 120
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Amount of
Money Market Type of Money Principal Notation
Date Loan Market Loan Repaid Maturity Date Made By
- ----------- ----------- --------------------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
F-3
<PAGE> 121
Exhibit G
EXHIBIT G
[FORM OF NOTICE OF CONTINUATION/ CONVERSION]
NOTICE OF CONTINUATION/CONVERSION
Pursuant to that certain Revolving Credit Agreement dated as
of June 27, 1997 among Irvine Apartment Communities, L.P., a Delaware limited
partnership (the "Borrower"), the banks listed on the signature pages thereof,
Bank of America NT&SA, as Administrative Agent, and Wells Fargo Bank, N.A., as
Documentation Agent (as the same may be amended, supplemented, replaced,
renewed or otherwise modified from time to time, the "Credit Agreement"), this
represents Borrower's request to [SELECT A OR B WITH APPROPRIATE INSERTIONS AND
DELETIONS: [A: convert $_______ in principal amount of presently outstanding
Loans that are [Base/LIBOR] Rate Loans [having an Interest Period that expires
on ___________, ____] to [Base/LIBOR] Rate Loans on ___________, ____. [The
initial Interest Period for such LIBOR Rate Loans is requested to be a ________
month period.]] [B: continue as LIBOR Rate Loans $_____ in principal amount
of presently outstanding Loans having an Interest Period that expires on
____________, ____. The Interest Period for such LIBOR Rate Loans commencing
on _________, ____ is requested to be a _______ month period.]] Terms with
initial capital letters used but not defined herein have the meanings assigned
to them in the Credit Agreement.
The undersigned Certifying Officer, to the best of his or her
knowledge, and Borrower certify that no Event of Default or Default has
occurred and is continuing under the Credit Agreement.
IRVINE APARTMENT COMMUNITIES,
L.P., a Delaware limited partnership
By: Irvine Apartment Communities, Inc.,
a Maryland corporation,
its general partner
By: [Certifying Officer]___________________
Name: _________________________________
Title:_________________________________
G-1
<PAGE> 122
Exhibit H
EXHIBIT H
SWING LINE BORROWING NOTICE
TO: BANK OF AMERICA, NATIONAL
TRUST AND SAVINGS ASSOCIATION
__________________________________
__________________________________
__________________________________
Attention:________________________
Loan No.:_________________________
Accounting Unit No.:________________
Reference is hereby made to the Revolving Credit Agreement
dated as of June 27, 1997 among IRVINE APARTMENT COMMUNITIES, L.P., a Delaware
limited partnership (the "Borrower"), the banks listed on the signature pages
thereof, Bank of America NT&SA, as Administrative Agent, and Wells Fargo Bank,
N.A., as Documentation Agent (as the same may be amended, supplemented,
replaced, renewed or otherwise modified from time to time, the "Credit
Agreement"). Terms with initial capital letters used but not defined herein
have the meanings assigned to them in the Credit Agreement.
Pursuant to Article 2 of the Credit Agreement:
1. The Borrower hereby requests a Loan in the amount of
$___________________ on _____________________, 19__(4) in the form of a Swing
Line Loan; and
2. The Borrower hereby represents and warrants as
follows:
(a) All of the representations and warranties contained
in the Credit Agreement are true and correct in all material respects on and as
of the date hereof as though made on and as of this date (except to the extent
that such representations and warranties expressly were made only as of a
specific date);
__________________________________
(4) Must be a Business Day.
H-1
<PAGE> 123
(b) No Default or Event of Default exists or would result
from the making of the Loan; and
(c) All other conditions to borrowing set forth in the
Credit Agreement are satisfied.
Date: ____________________, ____
IRVINE APARTMENT COMMUNITIES, L.P.,
a Delaware limited partnership
By: IRVINE APARTMENT COMMUNITIES, INC.,
a Maryland corporation,
its general partner
By: [Certifying Officer]_________
Name: _____________________________
Title:_____________________________
H-2
<PAGE> 124
Exhibit I
EXHIBIT I
LOAN NO. ___________
SWING LINE NOTE
$10,000,000
Irvine, California
June 27, 1997
FOR VALUE RECEIVED, the undersigned, IRVINE APARTMENT
COMMUNITIES, L.P., a Delaware limited partnership (the "Borrower"), hereby
promises to pay to the order of BANK OF AMERICA, NT& SA (the "Lender"), for the
account of its Lending Office, the lesser of (i) the principal sum of TEN
MILLION DOLLARS ($10,000,000), or (ii) the aggregate unpaid principal amount of
the Swing Line Loans (the "Advances") made by the Lender to the Borrower under
the Credit Agreement referred to below, on the dates and in the amounts set
forth in the Credit Agreement. The Borrower further promises to pay interest
on the unpaid principal amount of each such Advance from time to time
outstanding on the dates and at the rates specified in the Credit Agreement.
This Swing Line Note (the "Note") is the Swing Line Note
referred to in, and is entitled to the benefits of, the Revolving Credit
Agreement dated as of June 27, 1997 among the Borrower, the banks listed on the
signature pages thereof, Bank of America NT&SA, as Administrative Agent, and
Wells Fargo Bank, N.A., as Documentation Agent (as the same may be amended,
supplemented, replaced, renewed or otherwise modified from time to time, the
"Credit Agreement"), to which reference is hereby made for a more complete
statement of the terms and conditions on which the Advances evidenced hereby
are made and are to be repaid. The Credit Agreement provides for, among other
things, the acceleration of the maturity hereof upon the occurrence of certain
events and for voluntary and mandatory prepayments under certain circumstances
and upon certain terms and conditions.
Terms with initial capital letters used but not defined herein
have the meanings assigned to them in the Credit Agreement. All payments due
hereunder shall be made to the Lender at the time and place, in the type of
funds, and in the manner set forth in the Credit Agreement, without any
deduction whatsoever, including, without limitation, any deduction for any
set-off, recoupment, counterclaim or Taxes, except as otherwise set forth in
the Credit Agreement. The Borrower hereby waives diligence, presentment,
demand, protest, notice of dishonor and all other demands and notices in
connection with the execution, delivery, performance or enforcement of this
Note, except as otherwise set forth in the Credit Agreement.
The Lender is authorized (but not obligated) to endorse on the
Schedule hereto, or on a continuation thereof, each Advance made by the Lender
and each payment
I-1
<PAGE> 125
or prepayment with respect thereto. The Borrower promises to pay all costs and
expenses, including attorneys' fees and disbursements, incurred in the
collection or enforcement hereof.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA. THE BORROWER AND, BY ACCEPTANCE
HEREOF, THE LENDER WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS
NOTE OR ANY ACTION ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY,
REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.
IRVINE APARTMENT COMMUNITIES L.P.,
a Delaware limited partnership
By: IRVINE APARTMENT COMMUNITIES, INC.,
a Maryland corporation,
General Partner
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:
I-2
<PAGE> 126
SCHEDULE A
SWING LINE NOTE
<TABLE>
<CAPTION>
Amount of
Principal
Type and Interest Interest Paid or Unpaid Principal Notation
Date Amount of Advance Period Rate Prepaid Amount of Note Made By
- --------- ------------------- --------- --------- ----------- --------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
I-3
<PAGE> 127
Exhibit J
EXHIBIT J
TRANSFER SUPPLEMENT
TRANSFER SUPPLEMENT (this "Transfer Supplement") dated as of
_______________, 199_ between _________________ (the "Assignor") and
____________________ having an address at ____________________________ (the
"Purchasing Bank").
W I T N E S S E T H:
WHEREAS, the Assignor has made loans to Irvine Apartment
Communities, L.P., a Delaware limited partnership (the "Borrower"), pursuant to
the Revolving Credit Agreement, dated as of June 27, 1997 (as the same may be
amended, supplemented, replaced, renewed or otherwise modified from time to
time through the date hereof, the "Credit Agreement"), among the Borrower, the
banks listed on the signature pages thereof, Bank of America NT&SA, as
Administrative Agent, and Wells Fargo Bank, N.A., as Documentation Agent. All
capitalized terms used and not otherwise defined herein shall have the
respective meanings set forth in the Credit Agreement;
WHEREAS, the Purchasing Bank desires to purchase and assume
from the Assignor, and the Assignor desires to sell and assign to the
Purchasing Bank, certain rights, title, interest and obligations under the
Credit Agreement.
NOW, THEREFORE, IT IS AGREED:
1. In consideration of the amount set forth in the receipt (the
"Receipt") given by Assignor to Purchasing Bank of even date herewith, and
transferred by wire to Assignor, the Assignor hereby assigns and sells, without
recourse, representation or warranty except as specifically set forth herein,
to the Purchasing Bank, and the Purchasing Bank hereby purchases and assumes
from the Assignor, a ___% interest (the "Purchased Interest") of the Loans
constituting a portion of the Assignor's rights and obligations under the
Credit Agreement as of the Effective Date (as defined below) including, without
limitation, such percentage interest of the Assignor in any Loans owing to the
Assignor, and Note held by the Assignor, any Loan Commitment of the Assignor
and any other interest of the Assignor under any of the Loan Documents.
2. The Assignor (i) represents and warrants that as of the date
hereof the aggregate outstanding principal amount of its share of the Loans
owing to it (without giving effect to assignments thereof which have not yet
become effective) is $______________; (ii) represents and warrants that it is
the legal and beneficial owner of the interests being assigned by it hereunder
and that such interests are free and clear of any adverse claim; (iii)
represents and warrants that it has not received any notice of Default or Event
of Default from the Borrower; (iv) represents and warrants that it has full
power and authority to execute and deliver, and perform under, this Transfer
Supplement, and all necessary corporate and/or partnership action has been
taken to authorize, and all
J-1
<PAGE> 128
approvals and consents have been obtained for, the execution, delivery and
performance thereof; (v) represents and warrants that this Transfer Supplement
constitutes its legal, valid and binding obligation enforceable in accordance
with its terms; (vi) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
(or the truthfulness or accuracy thereof) made in or in connection with the
Credit Agreement, or the other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, or the other Loan Documents or any other instrument or document
furnished pursuant thereto; and, (vii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement or the other Loan Documents or any other
instrument or document furnished pursuant thereto. Except as specifically set
forth in this Paragraph 2, this assignment shall be without recourse to
Assignor.
3. The Purchasing Bank (i) confirms that it has received a copy
of the Credit Agreement, and the other Loan Documents, together with such
financial statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Transfer Supplement and to become a party to the Credit Agreement, and has not
relied on any statements made by Assignor or Gibson, Dunn & Crutcher LLP; (ii)
agrees that it will, independently and without reliance upon any of the
Administrative Agent, the Assignor or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own appraisal of and investigation into the business, operations,
property, prospects, financial and other conditions and creditworthiness of the
Borrower and will make its own credit analysis, appraisals and decisions in
taking or not taking action under the Credit Agreement, and the other Loan
Documents; (iii) appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement, and the other Loan Documents as are delegated to the Agent by the
terms thereof, together with such powers as are incidental thereto; (iv) agrees
that it will be bound by and perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank; (v) specifies as its address for notices and lending
office, the office set forth beneath its name on the signature page hereof;
(vi) it has full power and authority to execute and deliver, and perform under,
this Transfer Supplement, and all necessary corporate and/or partnership action
has been taken to authorize, and all approvals and consents have been obtained
for, the execution, delivery and performance thereof; (vii) this Transfer
Supplement constitutes its legal, valid and binding obligation enforceable in
accordance with its terms; and (viii) the interest being assigned hereunder is
being acquired by it for its own account, for investment purposes only and not
with a view to the public distribution thereof and without any present
intention of its resale in either case that would be in violation of applicable
securities laws.
4. This Transfer Supplement shall be effective on the date (the
"Effective Date") on which all of the following have occurred (i) it shall have
been executed and delivered by the parties hereto, (ii) copies hereof shall
have been delivered to the
J-2
<PAGE> 129
Administrative Agent and the Borrower, (iii) Purchasing Bank shall have
received an original Note and (iv) the Purchasing Bank shall have paid to the
Assignor the agreed purchase price as set forth in the Receipt.
5. On and after the Effective Date, (i) the Purchasing Bank shall
be a party to the Credit Agreement and, to the extent provided in this Transfer
Supplement, have the rights and obligations of a Bank thereunder and be
entitled to the benefits and rights of the Banks thereunder and (ii) the
Assignor shall, to the extent provided in this Transfer Supplement as to the
Purchased Interest, relinquish its rights and be released from its obligations
under the Credit Agreement.
6. From and after the Effective Date, the Assignor shall cause
the Administrative Agent to make all payments under the Credit Agreement, and
the Notes in respect of the Purchased Interest assigned hereby (including,
without limitation, all payments of principal, fees and interest with respect
thereto and any amounts accrued but not paid prior to such date) to the
Purchasing Bank.
7. This Transfer Supplement may be executed in any number of
counterparts which, when taken together, shall be deemed to constitute one and
the same instrument.
8. Assignor hereby represents and warrants to Purchasing Bank
that it has made all payments demanded to date by Bank of America, NT&SA ("Bank
of America") as Administrative Agent in connection with the Assignor's pro rata
share of the obligation to reimburse the Agent for its expenses and made all
Loans required. In the event Bank of America, as Administrative Agent, shall
demand reimbursement for fees and expenses from Purchasing Bank for any period
prior to the Effective Date, Assignor hereby agrees to promptly pay Bank of
America, as Administrative Agent, such sums directly, subject, however, to
Paragraph 12 hereof.
9. Assignor will, at the cost of Assignor, and without expense to
Purchasing Bank, do, execute, acknowledge and deliver all and every such
further acts, deeds, conveyances, assignments, notices of assignments,
transfers and assurances as Purchasing Bank shall, from time to time,
reasonably require, for the better assuring conveying, assigning, transferring
and confirming unto Purchasing Bank the property and rights hereby given,
granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, assigned
and/or intended now or hereafter so to be, on which Assignor may be or may
hereafter become bound to convey or assign to Purchasing Bank, or for carrying
out the intention or facilitating the performance of the terms of this
Agreement or for filing, registering or recording this Agreement.
10. The parties agree that no broker or finder was instrumental in
bringing about this transaction. Each party shall indemnify, defend the other
and hold the other free and harmless from and against any damages, costs or
expenses (including, but not limited to, reasonable attorneys, fees and
disbursements) suffered by such party arising from claims by any broker or
finder that such broker or finder has dealt with said party in connection with
this transaction.
J-3
<PAGE> 130
11. Subject to the provisions of Paragraph 12 hereof, if, with
respect to the Purchased Interest only, Assignor shall on or after the
Effective Date receive (a) any cash, note, securities, property, obligations or
other consideration in respect of or relating to the Loan or the Loan Documents
or issued in substitution or replacement Of the Loan or the Loan Documents, (b)
any cash or non-cash consideration in any form whatsoever distributed, paid or
issued in any bankruptcy proceeding in connection with the Loan or the Loan
Documents or (c) any other distribution (whether by means of repayment,
redemption, realization of security or otherwise), Assignor shall accept the
same as Purchasing Bank's agent and hold the same in trust on behalf of and for
the benefit of Purchasing Bank, and shall deliver the same forthwith to
Purchasing Bank in the same form received, with the endorsement (without
recourse) of Assignor when necessary or appropriate. If the Assignor shall
fail to deliver any funds received by it within the same Business Day of
receipt, unless such funds are received by Assignor after 4:00 p.m., Pacific
Standard Time, then the following business day after receipt, said funds shall
accrue interest at the federal funds interest rate and in addition to promptly
remitting said amount, Assignor shall remit such interest from the date
received to the date such amount is remitted to the Purchasing Bank.
12. Assignor and Purchasing Bank each hereby agree to indemnify
and hold harmless the other, each of its directors and each of its officers in
connection with any claim or cause of action based on any matter or claim based
on the acts of either while acting as a Bank under the Credit Agreement.
Promptly after receipt by the indemnified party under this Section of notice of
the commencement of any action, such indemnified party shall notify the
indemnifying party in writing of the commencement thereof. If any such action
is brought against any indemnified party and that party notifies the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein, and to the extent that it may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after receipt of
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof. In no event shall the indemnified party settle or consent to a
settlement of such cause of action or claim without the consent of the
indemnifying party.
J-4
<PAGE> 131
13. THIS TRANSFER SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF CALIFORNIA.
Wire Transfer Instructions:
____________________________________
____________________________________
____________________________________
____________________________________
By:_____________________________________
Name:________________________________
Title________________________________
By:_____________________________________
Name:________________________________
Title________________________________
Receipt and Consent acknowledged this
_________ day of ____________, 199_:
BANK OF AMERICA, NT&SA,
as Administrative Agent
By:____________________________________________
Name:_____________________________________
Title:____________________________________
[IF REQUIRED ADD THE FOLLOWING:]
IRVINE APARTMENT COMMUNITIES, L.P.,
By: Irvine Apartment Communities, Inc.
J-5
<PAGE> 132
By: [Certifying Officer]
-----------------------------
Name:________________________
Title:_______________________
J-6
<PAGE> 1
July 14, 1997
Mr. William McFarland
6 Weymouth Court
Newport Beach, CA 92660
Dear Bill:
I am very pleased to offer you the position of President & Chief Executive
Officer of Irvine Apartment Communities. This letter confirms the terms of your
employment in this new role.
Position Title: President & Chief Executive Officer
- ---------------
Effective Date: July 15, 1997
- ---------------
Base Salary: $33,333/month ($400,000 annual equivalency)
- ------------
Cash Bonus: You will be eligible to earn an annual payment
- ----------- of 0-100% of your base salary based upon
your performance and the Company's performance. Your
bonus potential for 1997 will be prorated based upon
your length of service with IAC this year. Your cash
bonus awards for 1997 and 1998 will be guaranteed at
$183,000 and $400,000 respectively, assuming
continued employment.
Stock Options: You will be provided with 100,000 stock
- -------------- options awarded effective July 15, 1997 at an
exercise price equivalent to the closing market price
on July 15.
Restricted Stock: You will receive an award of 27,500 shares of
- ----------------- restricted stock for 1997. In addition, you will
receive an annual award of 27,500 shares of
restricted stock in each of the following three years
1998 through 2000 assuming continued employment. All
of these restricted stock awards (totaling 110,000
shares) will become fully vested on December 31,
2001. You will receive quarterly dividend equivalent
payments on the awarded but unvested shares of
restricted stock assuming continued employment. If
your employment is terminated by the Company prior to
December 31, 2001 for other than just cause, then all
110,000 shares of restricted stock will become
vested. Please refer to your Restricted Stock
Agreement for a detailed description of these awards.
<PAGE> 2
Auto Allowance: $700 per month.
- ---------------
Physical Examination You will be eligible for a periodic physical
- -------------------- examination at the Company's expense.
Club Membership: You will continue to be provided with a membership
- ---------------- at Big Canyon Country Club at the Company's expense.
Benefits: You will participate in corporate fringe benefits
- --------- programs (health, life insurance, etc.) as
established by Irvine Apartment Communities policy.
Your 20 years of prior service will be recognized for
the purposes of vacation accrual and service award
gifts.
Your official acceptance of these terms of employment will be indicated by
signing and returning the duplicate of this letter to me. If you have any
questions, please do not hesitate to call.
Sincerely,
Donald L. Bren
Chairman of the Board
I understand and accept that the terms of this employment letter are all
inclusive and supersede all other verbal or written discussions of my terms of
employment.
Signature: /s/William McFarland Date:
--------------------------------- --------------------
William McFarland
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0000912084
<NAME>IRVINE APARTMENTS COMMUNITIES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,278
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,198,434
<DEPRECIATION> 232,815
<TOTAL-ASSETS> 1,075,316
<CURRENT-LIABILITIES> 0
<BONDS> 651,587
0
0
<COMMON> 198
<OTHER-SE> 210,259
<TOTAL-LIABILITY-AND-EQUITY> 1,075,316
<SALES> 0
<TOTAL-REVENUES> 87,953
<CGS> 0
<TOTAL-COSTS> 41,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,389
<INCOME-PRETAX> 28,609
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,920
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,920
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001038358
<NAME>IRVINE APARTMENTS COMMUNITIES, L.P.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,278
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,198,434
<DEPRECIATION> 232,815
<TOTAL-ASSETS> 1,075,316
<CURRENT-LIABILITIES> 0
<BONDS> 651,587
0
0
<COMMON> 0
<OTHER-SE> 396,485
<TOTAL-LIABILITY-AND-EQUITY> 1,075,316
<SALES> 0
<TOTAL-REVENUES> 87,953
<CGS> 0
<TOTAL-COSTS> 41,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,389
<INCOME-PRETAX> 28,609
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,609
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,609
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
