<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, For the Transition Period From to
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----------.
Commission file number 0-24704
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AMBASSADOR APARTMENTS, INC.
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(Exact name of registrant as specified in its charter)
MARYLAND 36-3948161
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
77 W. Wacker Drive
Suite 4040
Chicago, Illinois 60601
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(Address of principal executive offices) (Zip code)
(312) 917-1600
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(Registrant's telephone number, including area code)
PRIME RESIDENTIAL, INC.
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(Former name, former address, or former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of August 13, 1996 the registrant had outstanding 8,958,525
shares of Common Stock, $.01 par value per share.
Page 1 of 20
<PAGE> 2
Ambassador Apartments, Inc.
Form 10-Q
INDEX
Part I: Financial Information Page
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Item 1. Financial Statements (Unaudited)
Consolidated balance sheets of Ambassador Apartments, Inc. as of
June 30, 1996 and December 31, 1995............................. 4
Consolidated statements of operations of Ambassador Apartments,
Inc. for the three month and six month periods ended June 30,
1996 and 1995, respectively..................................... 5
Consolidated statements of cash flows of Ambassador Apartments,
Inc. for the six month periods ended June 30, 1996 and 1995,
respectively.................................................... 6
Notes to consolidated financial statements...................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 11
Part II: Other Information
Item 1. Legal Proceedings............................................... 18
Item 2. Changes in Securities........................................... 18
Item 3. Defaults Upon Senior Securities................................. 18
Item 4. Submission of Matters to a Vote of Security Holders............. 18
Item 5. Other Information............................................... 18
Item 6. Exhibits or Reports on Form 8-K................................. 18
Signature................................................................ 19
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<PAGE> 3
Part I
ITEM 1. FINANCIAL INFORMATION
The information furnished in the accompanying balance sheets, statements
of operations, and statements of cash flows reflects all adjustments which are,
in the opinion of management, necessary for a fair presentation of the
aforementioned financial statements for the interim period.
The aforementioned financial statements should be read in conjunction with
the notes to the consolidated financial statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations.
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AMBASSADOR APARTMENTS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
(Dollars in thousands, except for per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
<S> <C> <C>
ASSETS
Rental property:
Land............................................... $ 60,857 $ 57,718
Buildings and improvements......................... 312,153 283,062
Furniture and equipment............................ 3,929 3,089
---------- --------
376,939 343,869
Accumulated depreciation........................... (26,100) (19,910)
---------- --------
350,839 323,959
Cash and cash equivalents.......................... 2,587 5,270
Escrow deposit..................................... 14,005 12,945
Escrowed bond funds--restricted.................... 11,804 2,779
Note receivable - Officer.......................... 1,000 1,000
Accounts receivable................................ 1,468 1,230
Investment in unconsolidated real estate
limited partnerships............................. 444 657
Deferred financing costs, net...................... 8,944 11,530
Other.............................................. 1,173 619
---------- --------
TOTAL ASSETS....................................... $ 392,264 $359,989
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bonds payable...................................... $ 192,300 $182,050
Notes payable...................................... 58,232 47,931
Accrued interest................................... 197 --
Real estate taxes payable.......................... 2,916 4,998
Tenant security deposits........................... 1,645 1,632
Accounts payable and other liabilities............. 2,139 2,143
---------- --------
Total liabilities.................................. 257,429 238,754
Minority interest.................................. 32,746 12,062
Stockholders' equity:
Preferred Stock, $.01 par value; 20,000,000 shares
authorized, none outstanding..................... -- --
Common Stock, $0.1 par value; 100,000,000 shares
authorized, 8,958,525 shares issued and
outstanding...................................... 90 90
Additional paid-in capital......................... 112, 965 112,957
Distributions in excess of accumulated earnings.... (10,966) (3,874)
---------- --------
Total stockholders' equity......................... 102,089 109,173
---------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $ 392,264 $359,989
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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AMBASSADOR APARTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except for per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
------------------------ --------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental........................................ $ 15,015 $ 11,472 $ 29,467 $ 22,053
Other......................................... 1,220 907 2,393 1,656
---------- ---------- ---------- ----------
16,235 12,379 31,860 23,709
Expenses:
Property operating............................ 3,942 3,326 7,450 6,168
Real estate taxes............................. 1,272 1,157 2,749 2,253
General and administrative.................... 1,090 1,010 2,380 1,880
Depreciation.................................. 3,376 1,998 6,190 3,755
Advertising and marketing..................... 277 234 543 432
Repairs and maintenance....................... 574 398 1,093 710
Bad debt expense.............................. 87 97 222 310
Financing fees................................ 782 250 1,662 544
Interest...................................... 3,041 1,729 5,620 2,892
Amortization of deferred financing fees....... 388 629 1,103 1,140
Losses from unconsolidated real estate limited
partnerships................................. 126 51 213 77
---------- ---------- ---------- ----------
Total expenses................................ 14,955 10,879 29,225 20,161
---------- ---------- ---------- ----------
Income before allocation to minority interest,
loss on sale of interest rate cap and
extraordinary item........................... 1,280 1,500 2,635 3,548
Income allocated to minority interest......... (282) (191) (477) (418)
---------- ---------- ---------- ----------
Income before loss on sale of interest rate
cap and extraordinary item................... 998 1,309 2,158 3,130
Loss on sale of interest rate cap, net of
minority interest............................ -- -- 2,084 --
---------- ---------- ---------- ----------
Income before extraordinary item.............. 998 -- 74 --
Extraordinary item (net of minority interest). -- 2,657 -- 2,657
---------- ---------- ---------- ----------
Net income.................................... $ 998 $ 3,966 $ 74 $ 5,787
========== ========== ========== ==========
Income per share of common stock outstanding:
Before extraordinary item..................... $ 0.11 $ 0.14 $ -- $ 0.35
========== ========== ========== ==========
Extraordinary item............................ $ -- $ 0.30 $ -- $ 0.30
========== ========== ========== ==========
Net income.................................... $ 0.11 $ 0.44 $ -- $ 0.65
========== ========== ========== ==========
Common shares outstanding..................... 8,958,525 8,958,525 8,958,525 8,958,525
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 6
AMBASSADOR APARTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 75 $ 5,787
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.............................................. 6,190 3,755
Bad debt expense.......................................... 222 310
Amortization of deferred financing fees................... 1,103 1,140
Minority interest......................................... 477 418
Losses from investments in unconsolidated real estate
limited partnerships.................................... 213 77
Loss from sale of interest rate cap....................... 2,084 --
Extraordinary item, net of minority interest.............. -- (2,657)
Changes in operating assets and liabilities:
Accounts receivable..................................... (460) (157)
Other assets............................................ (554) (122)
Accrued interest payable................................ 197 238
Real estate taxes payable............................... (2,082) (442)
Tenant security deposits................................ 13 276
Accounts payable and other liabilities.................. (4) (71)
-------- --------
Net cash provided by operating activities............... 7,473 8,552
INVESTING ACTIVITIES
Purchase of rental property................................. (24,605) (46,233)
Improvements to rental property............................. (8,465) (4,241)
-------- --------
Cash used in investing activities................... (33,070) (50,474)
FINANCING ACTIVITIES
Net proceeds from joint venture partners.................... 21,730 --
Escrowed bond funds-restricted.............................. (9,025) (1,433)
Proceeds from bonds payable................................. 10,250 17,870
Escrow deposit.............................................. (1,060) (1,980)
Proceeds from notes payable................................. 87,312 78,728
Proceeds from sale of interest rate cap..................... 1,485 --
Repayment of notes payable.................................. (77,011) (10,060)
Purchase of fixed rate bonds................................ -- (17,151)
Deferred financing fees paid................................ (2,310) (2,306)
Partner capital contributions............................... 8 8
Contribution to unconsolidated real estate limited
partnerships.............................................. -- (15,755)
Distributions to joint venture partners..................... (528) --
Distributions paid to minority interest..................... (771) (771)
Distributions paid to stockholders.......................... (7,166) (7,167)
-------- --------
Net cash provided by financing activities..................... 22,914 39,983
-------- --------
Net decrease in cash and cash equivalents..................... (2,683) (1,939)
Cash and cash equivalents at beginning of period.............. 5,270 2,424
-------- --------
Cash and cash equivalents at end of period.................... $ 2,587 $ 485
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 7
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X and should be read in conjunction with the Financial
Statements and notes thereto included in Ambassador Apartments, Inc.
(formerly known as Prime Residential, Inc.) and its affiliates (the
"Company") 1995 Annual Report on Form 10-K. The following notes to the
consolidated and combined financial statements highlight significant changes
to the notes included in the 1995 Annual Report on Form 10-K and present
interim disclosures as required by the SEC. 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,
consisting only of recurring accruals and sale of the interest rate cap have
been included. Operating results for such interim periods are not
necessarily indicative of the results that may be expected for a full fiscal
year.
Investments in Joint Venture Partnerships which the Company does not
have a majority interest in, or control of, are accounted for on the equity
method, except that any gains or loses of Williamsburg Limited Partnership
resulting from financing transactions are allocated to the Operating
Partnership, the managing general partner of Williamsburg Limited
Partnership. To the extent the Company's investment basis differs from its
share of the capital of an unconsolidated Joint Venture Partnership, such
difference is amortized over the depreciable life (20 years) of the
unconsolidated Joint Venture Partnership's investment assets.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
REVENUE RECOGNITION
Rental revenue is recognized as income in the period earned.
DEVELOPMENT COSTS
All property renovation costs, including construction, design and other
similar renovation costs, incurred during the renovation period are capitalized
to rental property.
CASH EQUIVALENTS
All highly liquid investments, with a maturity of three months or less
when purchased, are considered to be cash equivalents.
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<PAGE> 8
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
RENTAL PROPERTY
Rental property is carried at lower of cost or fair value.
Depreciation is calculated on the straight-line basis over the estimated
useful lives of the assets which are as follows:
<TABLE>
<S> <C>
Building ................................. 30-40 years
Building improvements .................... 5-30 years
Furniture and equipment .................. 3-12 years
</TABLE>
Expenditures for ordinary maintenance and repairs are expensed to
operations as incurred. Significant renovations and improvements which improve
and/or extend the useful life of the asset are capitalized and depreciated over
the estimated useful life.
2. DEBT
On April 17, 1996 and May 1, 1996 the Harris County Housing Finance
Corporation and the Travis County Housing Finance Corporation issued $4.3
million and $6.0 million in variable rate tax-exempt bonds for the benefit of
the Cypress Ridge and Broadmoor properties, respectively. The Company will use
the bond proceeds as collateral for temporary letters of credit until permanent
credit enhancement can be obtained. The company is currently in the process of
negotiating permanent credit enhancement and expects this facility to be in
place by September 30, 1996. These bonds are currently credit enhanced by Bank
One, Arizona.
On April 18, 1996, the Company acquired the Orangewood property for $4.9
million. Orangewood is a 223 unit apartment complex located in Tucson,
Arizona. The Company financed this acquisition by borrowing under its Nomura
line of credit.
On May 23, 1996, the Company acquired the Stonybrook property (a 411 unit
apartment complex located in Tucson, Arizona) and its $4.1 million variable
rate, tax-exempt bonds for $8.8 million. The Company financed the acquisition
of the property and the bonds by assuming the property's $4.1 million of
variable rate, tax-exempt bonds and borrowing the remaining $4.7 million under
the Nomura line of credit.
On June 26, 1996 the Company refinanced its revolving line of credit,
previously held by Nomura Asset Capital Corporation, with Bank One, Arizona, NA
(the, "Bank One Loan"). The Bank One Loan bears interest between LIBOR plus
1.70% and LIBOR plus 1.90% (as defined in the Credit Agreement) and has a
maximum commitment of $75.0 million based upon the amount of collateral pledged
by the Company. As of June 30, 1996, the amount available under the Bank One
Loan is approximately $60.0 million; the amount available will be increased as
additional properties are added to the collateral pool. As of June 30, 1996,
eight properties are pledged as collateral under the Bank One Loan and $41.3
million is outstanding. The Bank One Loan matures on June 26, 1999; however,
the Company may request one year extensions pursuant to the terms of the
agreement.
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<PAGE> 9
3. ESCROWED BOND FUNDS--RESTRICTED
As of June 30, 1996 the Company has $11.8 million in escrow, of which
$10.3 million is currently being used as collateral for the Cypress Ridge and
Broadmoor bonds and the remaining $1.5 million will be used to complete certain
renovation projects associated with tax-exempt bond requirements on certain
properties.
4. STOCK OPTION PLAN
Pursuant to the 1994 Stock Option plan as discussed in note 6 to the 1995
Annual Report on Form 10-K, directors, executive officers, and certain key
employees were offered the opportunity to acquire shares of common stock
through stock options. During the quarter ended June 30, 1996, no options were
exercised.
5. DECLARATION OF DISTRIBUTIONS TO STOCKHOLDERS AND LIMITED PARTNERS
On August 1, 1996, the Board of Directors of the Company declared a
quarterly dividend of $0.40 per share to the stockholders of the Company for
the quarter ended June 30, 1996. The dividends are payable on August 15, 1996
to holders of record as of August 9, 1996.
On August 1, 1996, the Board of Directors of the Company also authorized
distribution payments of $385,593, or $0.40 per unit holder, to limited
partners of the Operating Partnership for the quarter ended June 30, 1996. The
distributions are payable on August 15, 1996.
6. SAVINGS PLAN
Effective January 1, 1996, the Company established a retirement plan with
a salary deferral retirement feature which management believes will qualify
under section 401 of the Code (the "401(k) Plan"), for the employees of the
Company. The 401(k) Plan will permit the employees of the Company to defer a
portion of their compensation in accordance with the provisions of section
401(k) of the Code. The 401(k) Plan will allow participants to defer up to 15%
of their eligible compensation on a pre-tax basis subject to certain maximum
amounts. In addition, a profit sharing feature of the 401(k) Plan provides for
a contribution by the Company to be made annually (beginning in February 1997
and in each February thereafter) on behalf of each participant in an amount, if
any, as determined by the Company based upon a to-be-determined percentage of
increases in profitability from year to year. Amounts contributed by the
Company on behalf of the participants will vest over a period of five years
(20% per year). Amounts contributed by the Company and amounts contributed by
the participants will be held in trust until distributed to the participants
pursuant to the provisions of the 401(k) Plan.
7. LEGAL PROCEEDINGS
The Company is involved in certain legal proceedings arising in the
ordinary course of business. It is management's belief that, collectively, all
such proceedings are not expected to have a material impact on the Company's
financial position.
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<PAGE> 10
8. PRO FORMA INFORMATION - UNAUDITED
The following unaudited table of pro forma information has been prepared
as if the acquisitions in 1995 and 1996 had occurred as of the beginning of
each period presented. In management's opinion, the pro forma is not
indicative of consolidated results of operations that may have occurred had the
above transactions taken place on January 1 of each year.
Pro Forma for the sixth month period ended June 30
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Total Revenue.................... $ 33,514 $ 31,529
Property Operating............... 15,086 14,204
Depreciation and Amortization.... 7,627 6,490
Interest......................... 8,192 7,432
---------- ----------
Total expenses................... 30,905 28,126
---------- ----------
Income before Minority Interest
loss from sale of interest rate
cap and extraordinary item....... $ 2,609 $ 3,403
========== ==========
Income per share of Common Stock. $ 0.26 $ 0.34
========== ==========
</TABLE>
The pro forma financial information includes the following adjustments:
(i) an increase in rental revenues and property operating expenses to reflect
the acquisitions in 1995 and 1996 (ii) an increase in general and
administrative expense to reflect additional costs associated with increasing
the size of the portfolio; (iii) an increase in interest expenses in 1995 to
reflect the issuance of new bonds; (iv) an increase in amortization to reflect
deferred financing costs incurred in connection with new financing; (v) an
increase in depreciation to reflect the acquisitions noted in (i) above.
Net income has not been reduced for Minority Interests and net income per
share assumes that all limited partnership interests in the Operating
Partnership have been converted to shares of Common Stock; therefore, the total
Common Stock outstanding at both January 1, 1995 and January 1, 1996 would have
been 11,117,741 which includes the minimum of 1,195,233 shares reserved for
issuance upon conversion of the limited partnership interests in Jupiter
I, L.P. and Jupiter II, L.P. under certain circumstances. The limited partners
in those partnerships may convert their interests into common stock.
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion and analysis of the results of
operations and financial condition of Ambassador Apartments, Inc.
(formerly known as Prime Residential, Inc.) (together with its affiliates,
the "Company"). As of June 30, 1996, the Company owned 39 multifamily
residential properties including ownership interests in two unconsolidated
real estate limited partnerships. Historical results and percentage
relationships presented herein are not necessarily indicative of future
operations.
The following discussion should be read in conjunction with the
consolidated financial statements and the management's discussion and
analysis contained in the Company's 1995 Annual Report on Form 10-K.
The Company believes that to facilitate a clear understanding of its
operating results, funds from operations ("FFO") should be examined
in conjunction with net income as presented in the consolidated statements
as included herein. Industry analysts generally consider FFO an
appropriate measure of performance of an equity REIT. FFO is defined by
the National Association of Real Estate Investment Trusts ("NAREIT") as
net income (loss) computed in accordance with GAAP, excluding gains (or
losses) from debt restructuring or sales of property plus depreciation and
amortization, after adjustments for unconsolidated partnerships and joint
ventures. FFO should not be considered as an alternative to net income as
an indication of the Company's performance or as an alternative to cash
flows as a measure of liquidity.
In 1995, the Board of Governors of NAREIT approved a revision to the
method for computing FFO. The pre-1996 computation method for FFO permits
a company to "add back" to net income all depreciation and amortization in
the calculation of FFO (The Company's method). The current method for
computing FFO will only permit a company to "add back" (i) depreciation of
real estate assets and (ii) amortization of capitalized leasing expenses
and tenant allowances or improvements. Items such as amortization of
deferred financing fees and depreciation of computer software and a
company's office improvements are specifically excluded from the
computation and may not be "added back" to FFO.
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<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OVERVIEW (CONTINUED)
The Company will continue to report funds from operations using both
definitions as it believes that both definitions are useful in analyzing its
operations in light of its use of tax-exempt debt and issuance costs related
thereto.
The following table sets forth the calculations of FFO for the Company
using the Company's computation methods. The Company has decided to adopt
NAREIT's revised method for computing FFO and all references to FFO in this
Form 10-Q reflect NAREIT's revised computation method.
<TABLE>
<CAPTION>
(In 000's)
----------------------------------------------
For the six month period Ended June 30, 1996
----------------------------------------------
Company's Computation NAREIT'S Computation
Method Method
--------------------- ----------------------
<S> <C> <C>
Net income before minority interest
and loss from from sale
of interest rate cap................. $ 2,635 $ 2,635
FFO ADJUSTMENTS:
Depreciation........................... 6,190 6,118
Amortization of deferred financing fees 1,103 --
Adjustments to joint ventures.......... 347 284
Other non-recurring FFO adjustments.... 151 151
Distributions to joint venture partners (529) (529)
--------------------- ----------------------
Funds From Operations.................. $ 9,897 $ 8,659
===================== ======================
</TABLE>
RESULTS OF OPERATIONS
During the twelve month period from June 30, 1995 through June 30, 1996,
the Company acquired five properties containing 2,078 units from unaffiliated
third party sellers (the "Additional Properties"). In addition, five separate
issuances of variable rate, tax-exempt bonds totaling $27.8 million (the "New
Bonds") were issued in March and August 1995 and in April and May 1996 to
reimburse acquisition costs and renovate five properties. Of the New Bonds,
$6.0 million and $5.6 million were issued with respect to Tierra Bonita and
Shadow Creek in March 1995, respectively, and $5.9 million were issued in
August 1995 with respect to The Stratford. In April and May 1996, $4.3 million
and $6.0 million of variable rate tax-exempt bonds were issued for the benefit
of the Cypress Ridge and Broadmoor properties, respectively. In addition, on
April 25, 1995, the Company sold the $6.3 million of variable rate tax-exempt
bonds which it owned and which are secured by Windridge. Furthermore, in
connection with the acquisition of Franklin Oaks and Falls of Bells Ferry, the
Company assumed $17.7 million and $29.5 million, respectively, of variable rate
tax-exempt bonds. The Franklin Oaks bonds are secured by such property and the
Falls of Bells Ferry bonds are secured by such property and a pledge of
approximately $3.4 million in certificates of deposits purchased by the Company
upon the acquisition of the property. On December 15, 1995 the Company sold
the Laurelwood property to an unaffiliated third party. Laurelwood is located
in Marietta, Georgia and has 207 units.
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<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
The acquisition of the Additional Properties, the New Bonds, the sale of
the Windridge bonds and the sale of the Laurelwood property included in the
consolidated financial statements of the Company accounted for the significant
changes in operating results for the three months ended June 30, 1996, when
compared to the same period in 1995.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 TO THE SIX MONTHS ENDED
JUNE 30, 1995.
For the six months ended June 30, 1996, income before allocation to
minority interest, loss from sale of interest rate cap and extraordinary item
decreased $913,000 to $2.6 million when compared to the same period in 1995.
This decrease was primarily due to increases in total expenses, partially
offset by increases in rental and other revenues. The aforementioned increases
and decreases are discussed in greater detail below.
Total revenues increased by $8.2 million, or 34.4%, to $31.9 million, for
the six month period ended June 30, 1996 when compared with the same period in
1995. Of this increase approximately $7.2 million is attributable to the
acquisition of the Additional Properties. These increases were partially offset
by a decrease of $701,000 as a result of the Company's sale of the Laurelwood
property.
Total expenses (exclusive of depreciation, amortization of deferred
financing fees and interest expense) increased $3.9 million, or 31.8%, to $16.3
million for the six months ended June 30, 1996 when compared with the same
period in 1995. Property operating expenses increased $1.3 million, primarily
due to the acquisition of the Additional Properties. Real estate taxes
increased $496,000. Of this increase in real estate taxes, $452,000 related to
the Additional Properties, partially offset by the elimination of approximately
$27,000 in real estate taxes resulting from the sale of the Laurelwood property
and an estimated reduction of approximately $262,000 in real estate taxes due
to favorable tax protests. General and administrative expenses increased
$500,000. This increase was due primarily to increased administrative costs
incurred in connection with the Company increasing the size of its portfolio
from 9,655 units at June 30, 1995 to 11,526 units at June 30, 1996. Repairs
and maintenance increased $383,000, primarily attributable to the acquisition
of the Additional Properties. Financing fees increased $1.1 million as a
result of increased credit enhancement costs associated with the New Bonds.
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<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Depreciation and amortization increased $2.4 million, or 49%, to $7.3
million for the six month period ended June 30, 1996. This increase is
primarily related to an increase in depreciable assets associated with the
purchase of the Additional Properties. These increases were partially offset
by a decrease in depreciation associated with the sale of the Laurelwood
property.
Interest expense increased $2.7 million to $5.6 million for the six month
period ended June 30, 1996. This increase includes an approximately $170,000
increase in interest costs associated with the issuance of the New Bonds and
the Company's sale of the variable rate tax-exempt bonds securing the Windridge
property, $842,000 of interest costs for Franklin Oaks and the Falls of Bells
Ferry, an increase of approximately $919,000 in interest costs incurred in
connection with the Revolving Loan, and an increase of approximately $460,000
in interest costs with respect to the swap transactions.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1996 TO THE THREE MONTHS ENDED
JUNE 30, 1995.
For the three months ended June 30, 1996, income before allocation to
minority interest, loss from sale of interest rate cap and extraordinary item
decreased $220,000 to $1.3 million when compared to the same period in 1995.
This decrease was primarily due to increases in total expenses, partially
offset by increases in rental and other revenues. The aforementioned increases
are discussed in greater detail below.
Total revenues increased by $3.9 million, or $31.2%, to $16.2 million, for
the three month period ended June 30, 1996 when compared with the same period
in 1995. Of this increase approximately $3.5 million is attributable to the
acquisition of the Additional Properties. These increases were partially offset
by a decrease of $351,000 as a result of the Company's sale of the Laurelwood
property.
Total expenses (exclusive of depreciation, amortization of deferred
financing fees and interest expense) increased $1.6 million, or 24.9%, to $8.2
million for the three months ended June 30, 1996 when compared with the same
period in 1995. Property operating expenses increased $616,000, primarily due
to the acquisition of the Additional Properties. Real estate taxes increased
$115,000. Of this increase in real estate taxes, $208,000 related to the
acquisition of the Additional Properties partially offset by the elimination of
approximately $5,000 in real estate taxes resulting from the sale of the
Laurelwood property. General and administrative expenses increased $80,000.
This increase was due primarily to increased administrative costs incurred in
connection with the Company increasing the size of its portfolio from 9,655
units at June 30, 1995 to 11,526 units at June 30, 1996. Repairs and
maintenance increased $176,000 primarily attributable to the acquisition of the
Additional Properties. Financing fees increased $532,000 as a result of
increased credit enhancement costs associated with the New Bonds.
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<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Depreciation and amortization increased $1.1 million, or 43.3%, to $3.8
million for the three month period ended June 30, 1996. This increase is
primarily related to an increase in depreciable assets associated with the
purchase of the Additional Properties, partially offset by the sale of the
Laurelwood property.
Interest expense increased $1.3 million to $3.0 million for the three
month period ended June 30, 1996. This increase includes an approximately
$118,000 increase in interest costs associated with the issuance of the New
Bonds and the Company's sale of the variable rate tax-exempt bonds securing the
Windridge property, $378,000 of interest costs with respect to Franklin Oaks
and the Falls of Bells Ferry bonds, an increase of approximately $79,000 in
interest costs incurred in connection with the Revolving Loan, and an increase
of approximately $383,000 in interest costs for the swap transaction.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH
Interest on $163.4 million (excluding the Revolving Loan) of the Company's
long-term debt fluctuates based upon changes in prevailing market interest
rates, while the remaining $28.9 million is a one year adjustable rate
determined by the remarketing agent. On May 26, 1995, the Company entered into
a swap transaction with Nomura Capital Services, Inc. ("NCSI") pursuant to
which the Company paid a fixed rate on approximately $130.0 million of its
variable rate, tax-exempt bonds through May 26, 2005. Under the terms of the
swap agreement, the Company paid, quarterly in advance, a fixed rate of 6.498%
on a notional amount of $94.0 million to NCSI which management believes will
result in an effective interest rate of 4.7% on the $130.0 million of
tax-exempt bonds. On March 14, 1996, the Company entered into another interest
rate swap transaction with NCSI pursuant to which the Company paid a fixed rate
on approximately $23.6 million of its variable rate, tax-exempt debt. Under
this swap agreement, the Company paid a fixed rate of 6.55% on a notional
amount of approximately $17.0 million to NCSI, which results in an effective
interest rate of approximately 4.73% on $23.6 million of variable rate
tax-exempt bonds. This swap agreement matures on March 14, 2003. Management
believes that there is a reasonable correlation between changes in the LIBOR
rate (on which the fixed rate was based) and the J.J. Kenny Index (a tax-exempt
bond rate index). Management chose to execute a LIBOR based interest rate swap
as opposed to a tax-exempt rate swap because in management's opinion the market
for LIBOR based interest rate hedging is more efficient than the tax-exempt
hedge market, therefore a more economic pricing could be obtained.
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<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
There are no balloon maturities of the Company's tax-exempt bond issues
over the next five years. However, principal payments with respect to the $1.2
million loan issued with respect to the LaJolla property are scheduled during
this period at a rate of $10,000 per month and began on February 1, 1995.
On April 17, 1996 and May 1, 1996 the Harris County Housing Finance
Corporation and the Travis County Housing Finance Corporation issued $4.3
million and $6.0 million in variable rate tax-exempt bonds for the benefit of
the Cypress Ridge and Broadmoor properties, respectively. The Company used the
bond proceeds as collateral for temporary letters of credit until permanent
credit enhancement can be obtained. The Company is currently in the process of
negotiating permanent credit enhancement and expects this facility to be in
place by September 30, 1996. These bonds are currently credit enhanced by Bank
One, Arizona.
On April 18, 1996, the Company acquired the Orangewood property for $4.9
million. Orangewood is a 223 unit apartment complex located in Tucson,
Arizona. The Company financed this acquisition by borrowing under its Nomura
line of credit.
On May 23, 1996, the Company acquired the Stonybrook property (a 411 unit
apartment complex located in Tucson, Arizona) and its $4.1 million variable
rate tax-exempt bonds for $8.8 million. The Company financed the acquisition
of the property and the bonds by assuming the properties $4.1 million of
variable rate, tax-exempt bonds and borrowing the remaining $4.7 million under
the Nomura line of credit.
On June 26, 1996 the Company refinanced its revolving line of credit,
previously held by Nomura Asset Capital Corporation, with Bank One, Arizona, NA
(the, "Bank One Loan"). The Bank One Loan bears interest between LIBOR plus
1.70% and LIBOR plus 1.90% (as defined in the Credit Agreement) and has a
maximum commitment of $75.0 million based upon the amount of collateral pledged
by the Company. As of June 30, 1996, the amount available under the Bank One
Loan of approximately $60.0 million; the amount available will be increased as
additional properties are added to the collateral pool. As of June 30, 1996,
eight properties are pledged as collateral under the Bank One Loan and $41.3
million is outstanding. The Bank One Loan matures on June 26, 1999; however,
the Company may request one year extensions pursuant to the terms of the
agreement.
On July 29, 1996, the Board of Directors of the Company declared a
quarterly dividend of $0.40 per share to the stockholders of the Company and
$0.40 per unit distribution to the limited partners of Prime Residential, L.P.
for the quarter ended June 30, 1996. The dividends/distributions are payable
on August 15, 1996 to holders of record as of August 9, 1996.
The Company expects to meet its liquidity requirements, including, for
example, scheduled debt maturities, future property acquisitions and capital
improvements, using its cash flow from operating activities or cash provided by
collateralized or uncollateralized borrowings including the Revolving Loan.
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<PAGE> 17
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 TO THE THREE MONTHS ENDED
MARCH 31, 1995
Cash and cash equivalents increased $2.1 million to $2.6 million at June
30, 1996 when compared to June 30, 1995. This increase was due to a decrease
in cash used in investing activities, partially offset by a decrease in cash
provided by operating activities and net cash provided by financing activities.
Net cash provided by operating activities decreased $1.1 million to $7.5
million for the six month period ended June 30, 1996 when compared to the same
period in 1995. The primary reason for this decrease was an increase in the
payment of real estate taxes during the period ended June 30, 1996.
Net cash used in investing activities decreased $17.4 million to $33.1
million for the six month period ended June 30, 1996 when compared to the same
period in 1995. This decrease is primarily attributable to a reduction in the
number of units acquired during the first six months of 1996 as compared to the
same period in 1995. This reduction was partially offset by an increase in
improvements to rental property.
Net cash provided by financing activities decreased $17.1 million to $22.9
million for the six month period ended June 30, 1996 when compared to the same
period in 1995. This decrease is primarily attributable to an increase in the
repayment of notes payable, partially offset by an increase in proceeds from
notes payable borrowings (resulting from the refinancing of the Nomura line of
credit) and the receipt of net proceeds of approximately $21.7 million in March
1996 with respect to the Nomura financing transaction.
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<PAGE> 18
PART II
Other Information
Item 1. Legal Proceedings
There are no material legal proceedings.
Item 2. Changes in Securities
(a) Pursuant to the amendment to the Company's Articles of
Incorporation described below in item 4(c)(ii), the Company no
longer has the ability to cancel transactions on the New York
Stock Exchange which are in violation of the ownership limitations
in the Company's Articles of Incorporation. Such violations must
be remedied by issuing Excess Stock
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders was held on April 26,
1996.
(b) (i) The following directors were elected at the meeting:
David M. Glickman
David B. Heller
Richard F. Levy
(ii) The following directors continued in office:
Norman Bobins
Richard F. Cavenaugh
Jane R. Patterson
Michael W. Reschke
(c) The matters voted upon and the results of the voting were as
follows:
(i) Election of David M. Glickman, David B. Heller
and Richard F. Levy as directors.
Results 6,466,404 FOR
---------
0 AGAINST
---------
0 WITHHELD
---------
1,975 ABSTENTION
---------
2,490,146 BROKER NON VOTERS
---------
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<PAGE> 19
(ii) Proposal to amend the Company's Articles of Incorporation
to eliminate the Company's right to cancel transactions that occur
on the New York Stock Exchange that are in violation of the
ownership limitation rules in the Company's Articles of
Incorporation Results. Such violations must be remedied using
Excess Stock:
Results 6,467,979 FOR
---------
0 AGAINST
---------
0 WITHHELD
---------
400 ABSTENTION
---------
2,490,146 BROKER NON VOTERS
---------
(iii) Proposal to amend the Company's Articles of Incorporation
to change the name of the Company to "Ambassador Apartments, Inc."
Results 6,413,804 FOR
54,175 AGAINST
0 WITHHELD
400 ABSTENTION
2,490,146 BROKER NON VOTERS
Item 5. Other Information
None
Item 6. Exhibits or Reports on Form 8-K
(a) Exhibits
10.40 Bank One, Arizona, NA, Credit Agreement, dated June 26, 1996.
10.41 Bank One, Arizona, NA, Promissory Note, dated June 26, 1996.
21 List of subsidiaries filed with this report on Form 10-Q
27 Financial data schedule
(b) Reports on Form 8-K
The Company's current report on Form 8-K dated May 29, 1996 regarding
amending its articles of incorporation to (i) change its name from Prime
Residential, Inc. to Ambassador Apartments, Inc. and (ii) eliminate the
Company's right to cancel certain transactions in the Company's common stock
that are in violation of the ownership limitation rules necessary for the
company to qualify as a real estate investment trust ("REIT") so that it was
in compliance with the policy of the New York Stock Exchange that prohibits
the cancellation of trades which have occurred on the exchange.
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<PAGE> 20
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.
PRIME RESIDENTIAL, INC.
Registrant
Date: August 14, 1996 /s/ Adam D. Peterson
---------------------------
Adam D. Peterson
Senior Vice President and
Chief Financial Officer
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<PAGE> 1
Exhibit 10.40
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of June 26, 1996, among AMBASSADOR
II, L.P., a Delaware limited partnership, the Banks listed on the signature
pages of this Agreement, and BANK ONE, ARIZONA, NA, a national banking
association, as Agent. The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Additional Projects" means apartment projects (other than the Initial
Projects) that satisfy the conditions in Section 5.2.
"Adjusted Asset Value" of the REIT shall mean, on any date of
determination, the REIT's EBITDA, annualized on the basis of its most recent
quarter ended prior to such date of determination and adjusted for property
acquisitions and dispositions, divided by 10.0%.
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made by Banks to Borrower of the same Type and, in
the case of a LIBOR Advance, for the same Interest Period.
"Affected Bank" is defined in Section 2.21.
"Affiliate" means, when used in connection with any Person, any other
Person that directly or indirectly Controls, is Controlled by, or is under
common Control with such Person.
"Agent" means Bank One, Arizona, NA, a national banking association,
in its capacity as agent for Banks pursuant to Article XIII, and not in its
individual capacity as a Bank, and any successor Agent appointed pursuant to
Article XIII.
"Aggregate Available Credit" means the aggregate of the Available
Credits of all of Banks.
"Aggregate Commitment" means the aggregate of the Commitments of all
Banks, as the same may be reduced from time to time pursuant to the terms
hereof. As of the date of this Agreement, the Aggregate Commitment is
$75,000,000.
"Agreement" means this Credit Agreement, as it may be amended or
modified and in effect from time to time.
<PAGE> 2
"Applicable Floating Rate Margin" means, as at any date of
determination, the margin indicated in Section 2.11 as then applicable in the
determination of the Floating Rate.
"Applicable LIBOR Rate Margin" means, as at any date of determination,
the margin indicated in Section 2.11 as then applicable in the determination of
LIBOR Rates.
"Applicable Margin(s)" means the Applicable LIBOR Rate Margin and/or
the Applicable Floating Rate Margin, as the case may be.
"Appraisal" is defined in Section 4.1(a)(x).
"Article" means an article of this Agreement unless another document
is specifically referenced.
"Authorized Officer" means any one or more of the Chairman, President,
Senior Vice President or any Vice President, Chief Financial Officer, or other
officer of General Partner or the REIT, as applicable, acting singly or
together, in accordance with the applicable resolutions, bylaws and
authorizations of Borrower, General Partner, Guarantor or the REIT, as
applicable.
"Available Credit" means, at any date with respect to any Bank, the
amount (if any) by which such Bank's Commitment exceeds the outstanding
principal balance of such Bank's Loans as of such date.
"Bank One" means Bank One, Arizona, NA, in its individual capacity,
and its successors.
"Banks" means the lending institutions listed on the signature pages
of this Agreement and their respective permitted successors and assigns
pursuant to this Agreement.
"Bond Deed of Trust" means a first deed of trust solely for the
benefit of a trustee under an indenture of trust, holding for the benefit of
the holders of the Bonds, encumbering a Bond Project as security for the
obligations only with respect to Bonds issued in connection with such Bond
Project.
"Bond Project" means an Additional Project that is subject to a Bond
Deed of Trust securing obligations only with respect to Bonds issued in
connection with such Bond Project and owned by Borrower.
"Bonds" means tax exempt bonds issued with respect to a Bond Project
that have been purchased and are owned by Borrower.
"Borrower" means AMBASSADOR II, L.P., a Delaware limited partnership.
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<PAGE> 3
"Borrowing Base" means, as at any date of determination, an amount
equal to the lesser of the following:
(i) An amount equal to the sum of (A) seventy-five
percent (75%) of the aggregate of the Fair Market Values, as set forth
in the applicable Appraisals, of all of the Eligible Collateral having
an average occupancy rate over the immediately preceding three (3)
consecutive months of not less than eighty percent (80%), and (B)
fifty percent (50%) of the aggregate of the Fair Market Values, as set
forth in the applicable Appraisals, of all of the Eligible Collateral
having an average occupancy rate over the immediately preceding three
(3) consecutive months of less than eighty percent (80%) but not less
than seventy percent (70%); or
(ii) An amount equal to the aggregate NOI for all Eligible
Collateral, divided by 12.5%; or
(iii) An amount equal to the principal amount of a phantom
loan which provides for a Debt Coverage Ratio of one hundred
twenty-five percent (125%). For purposes hereof, Debt Coverage Ratio
means the ratio of (i) the aggregate NOI for all Eligible Collateral
to (ii) the annual principal and interest expense becoming due and
payable under the phantom loan, assuming that principal is fully
amortized over twenty (20) years and that interest accrues at the rate
per annum equal to two and one-quarter percent (2.25%) in excess of
the weekly average yield on United States Treasury Securities-
Constant Maturity Series issued by the United States Government for a
term of ten (10) years, as most recently published by The Board of
Governors of the Federal Reserve System in Federal Reserve Statistical
Release H.15 (519) and received by Agent prior to the date of
determination.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment or
rate selection of LIBOR Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Phoenix and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market, and
(ii) for all other purposes, a day (other than a Saturday or Sunday) on which
banks generally are open in Phoenix for the conduct of substantially all of
their commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
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<PAGE> 4
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.
"Change in Control" means the acquisition by any Person (other than
the REIT), or two or more Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934) of 50% or more of the ownership
interests in Borrower or Guarantor.
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
"Collateral" means all the real and personal property, general
intangibles, and other property owned or acquired by Borrower subject from time
to time to the liens and security interests of the Loan Documents and all
proceeds and products of the foregoing.
"Collateral Project" means each Initial Project and each Additional
Project that hereafter becomes Collateral pursuant to this Agreement.
"Commitment" means, for each Bank, the obligation of such Bank to make
Loans, not exceeding the amount set forth opposite its signature below or as
set forth in any Notice of Assignment relating to any assignment that has
become effective pursuant to Section 15.3.2, as such amount may be modified
from time to time pursuant to the terms hereof.
"Consolidated Interest Expense" means for any period, without
duplication, the aggregate amount of interest which, in conformity with GAAP,
would be set opposite the caption "interest expense" or any like caption on a
consolidated income statement for the REIT for such period, including, without
limitation, imputed interest included on Capitalized Lease Obligations, all
commissions, discounts and other fees and charges owed with respect to letters
of credit, the net costs associated with Rate Hedging Obligations, the interest
portion of any deferred payment obligation, amortization of discount or
premiums, if any, and all other noncash interest expense, other than interest
and other charges amortized to cost of sales, plus the REIT's pro rata share of
interest expense in unconsolidated Affiliates and 100% of any accrued, paid
interest incurred (without redundancy) on any obligation for which the REIT is
wholly or partially liable under repayment, interest carry, or performance
guarantees, or other relevant liabilities. Consolidated Interest Expense shall
not include any interest that is capitalized.
"Consolidated Net Income" means, for any period, the net income (or
loss) of the REIT (excluding equity in net earnings or loss of unconsolidated
Affiliates) on a consolidated basis for such period taken as a single
accounting period, determined in conformity with GAAP. For the purposes of
determining Consolidated Net Income in connection with Sections 9.3 and 9.4,
the
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<PAGE> 5
REIT shall expense (i) all costs associated with the re-leasing of apartment
units, and (ii) a reserve for replacement equal to $150 per unit per year.
"Consolidated Tangible Net Worth" means, as to the REIT, at any date,
the sum of all capital accounts (including without limitation, any paid-in
capital, capital surplus, retained earnings, and minority interests) determined
on a consolidated basis in conformity with GAAP, plus increases in accumulated
depreciation that occur subsequent to the date of this Agreement, less its
consolidated Intangible Assets. For purposes of this definition "Intangible
Assets" means the amount (to the extent reflected in determining such
consolidated stockholders' equity) of (I) all write-ups in the book value of
any asset owned by the REIT or any Subsidiary, (II) any amount, however
designated on the balance sheet, representing the excess of the purchase price
paid for assets or stock acquired over the value assigned thereto on the books
of the REIT or any Subsidiary, (III) all unamortized debt discount, goodwill,
patents, trademarks, service marks, trade names, copyrights, organization or
developmental expenses and other intangible items, and (IV) all items that
would be considered intangible assets under GAAP.
"Control" shall mean the exercise of the power to direct or cause the
direction of the management or policies of a Person, whether through the
exercise of rights of ownership under voting securities, under contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, Guarantor, the REIT or any
Subsidiary, are treated as a single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Debt Service" of the REIT shall mean, for any period, its
Consolidated Interest Expense plus its scheduled amortization payments of
principal of any of its consolidated Indebtedness during such period, excluding
any principal payments due on the maturity date of such Indebtedness.
"Deed of Trust" means each and all Deeds of Trust, Assignment of
Rents, Security Agreement and Fixture Filing, securing the Obligations, granted
from time to time by Borrower, as Trustor, for the benefit of Agent on behalf
of Banks, as Beneficiary, as the same may be amended or modified and in effect
from time to time, each being substantially in the form of Exhibit A attached
hereto (conformed as necessary with respect to the laws of the state where the
Collateral described therein is located), and each and all Mortgages,
Assignment of Rents, Security Agreement and Fixture Filing, securing the
Obligations, granted from time to time by Borrower, as Mortgagor, for the
benefit of Agent on behalf of Banks, as Mortgagee, as the same may be amended
or modified and in effect from time to time, each being substantially in the
form
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<PAGE> 6
of the deed of trust described above (conformed as necessary to constitute a
mortgage and with respect to the laws of the state where the Collateral
described therein is located).
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"EBITDA" means, for any period, without duplication, the following,
all as determined on a consolidated basis for the REIT in conformity with GAAP,
(i) the sum of the amounts for such period of (a)
Consolidated Net Income, (b) Consolidated Interest Expense, (c)
charges against income for all federal, state and local taxes, (d)
depreciation expense, (e) amortization expense, (f) other non-cash
charges and expenses, (g) earnings distributed by any unconsolidated
Affiliates and, without duplication, the REIT's share of undistributed
earnings of any unconsolidated Affiliates from whom Agent has received
satisfactory assurances that such share of earnings will be
distributed to the REIT at least annually (all calculated in the same
manner as in the case of consolidated Affiliates), and (h) any losses
(other than non-cash losses) arising outside of the ordinary course of
business which have been included in the determination of Consolidated
Net Income, less
(ii) any gains arising outside of the ordinary course of
business which have been included in the determination of Consolidated
Net Income.
"Eligible Collateral" means each Collateral Project that satisfies the
conditions precedent in Sections 4.1(a), 5.1 and 5.2, as applicable.
"Environmental Agreement" means each and all Environmental Indemnity
Agreements executed by Borrower and Guarantor, from time to time for the
benefit of Banks and Agent, and relating to the Collateral, as the same may be
amended or modified and in effect from time to time, each being substantially
in the form of Exhibit B.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Event of Default" means an event described in Article X after the
expiration of any applicable cure or notice period provided in Article X.
"Excluded Taxes" is defined in Section 3.1(i).
"Extension Request" is defined in Section 2.20(a).
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<PAGE> 7
"Facility Termination Date" means June 26, 1999, as the same may be
extended as provided in Section 2.20.
"Fair Market Value" means (i) the "as is" fair market value for a
Collateral Project that constitutes Eligible Collateral, or (ii) if all
rehabilitation work recommended for completion in the physical inspection
report for such Collateral Project has been completed to the satisfaction of
Agent, the "as if stabilized" fair market value for such Collateral Project.
"Federal Funds Effective Rate" means, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10:00
a.m., Phoenix time, on such day on such transactions received by Agent from
three (3) Federal funds brokers of recognized standing selected by Agent in its
sole discretion.
"Financial Covenant" is defined in Article IX.
"Financing Statements" means those Financing Statements executed from
time to time by Borrower, as Debtor, for the benefit of Agent, as Secured
Party, pursuant to this Agreement, as the same may be amended, modified,
replaced or renewed from time to time.
"Floating Rate" means, for any day, a rate per annum equal to (i) the
Prime Rate for such day, plus (ii) the Applicable Floating Rate Margin, in each
case changing when and as the Prime Rate changes.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Funds From Operations" of the REIT shall mean, at any date of
determination, its Consolidated Net Income for the twelve consecutive month
period most recently ended, excluding gains or losses from debt restructuring
and sales of property, plus depreciation and amortization (excluding
amortization of financing costs other than existing interest rate cap
amortization) after adjustment for unconsolidated partnerships and joint
ventures, which adjustment will be calculated to reflect funds from operations
on the same basis. Other than the addition of the interest rate cap
amortization, Funds From Operations shall be based on the definition of Funds
From Operation adopted by the board of directors of the National Association of
Real Estate Investment Trusts effective as of January 1, 1996.
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<PAGE> 8
"GAAP" means generally accepted accounting principles in effect from
time to time, consistently applied.
"General Partner" means Ambassador II, Inc., a Delaware corporation,
the general partner of Borrower
"Gross Asset Value" of the REIT shall mean the sum of the REIT's
Adjusted Asset Value and cash and cash equivalents.
"Gross Income" means, for any period, all income from all of the
Eligible Collateral of any type, including, without limitation, rents,
corporate premium rents, forfeited security deposits, rent interruption
insurance, parking revenue, cable television contracts, income received from
laundry, washer/dryer rental, pet fees, vending machines, redecoration fees and
application fees, and other miscellaneous income items not to exceed five
percent (5%) of Gross Income, excluding non-recurring income and non-property
related income.
"Guarantor" means Ambassador Apartments, L.P., a Delaware limited
partnership.
"Guaranty" means a Guaranty, in substantially the form of Exhibit C,
duly executed by Guarantor, as the same may be amended or modified and in
effect from time to time.
"Indebtedness" of a Person means, without duplication, such Person's
(i) obligations for borrowed money,
(ii) obligations representing the deferred purchase price
of Property or services (other than trade accounts payable and accrued
expenses arising or occurring in the ordinary course of such Person's
business),
(iii) obligations, whether or not assumed, secured by Liens
on, or payable out of the proceeds or production from, Property now or
hereafter owned or acquired by such Person,
(iv) obligations which are evidenced by notes, bonds,
debentures, or other similar instruments,
(v) Capitalized Lease Obligations,
(vi) net liabilities under Rate Hedging Obligations,
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<PAGE> 9
(vii) all liabilities and obligations of others of the kind
described in clauses (i) through (vi) and (viii) that such Person has
guaranteed or that is otherwise its legal liability, and
(viii) reimbursement obligations for which such Person is
obligated with respect to a letter of credit.
"Initial Project" means each of the apartment projects described on
Schedule "1" attached hereto.
"Interest Coverage Ratio" means, as of any date of determination, the
ratio of the REIT's EBITDA during its most recent four (4) fiscal quarters to
its Consolidated Interest Expense during such period.
"Interest Period" means, for each LIBOR Advance, the period commencing
on the date of such LIBOR Advance and ending on the last day of the period
selected by Borrower pursuant to the provisions herein and, thereafter, each
subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by Borrower
pursuant to the provisions of this Agreement. The duration of each Interest
Period shall be one (1), two (2), three (3), six (6), nine (9) or twelve (12)
months as selected by Borrower (A), for a new Advance, in the Borrowing Notice,
or (B), for an outstanding Advance, in the Conversion/Continuation Notice;
provided, however, that:
(i) Whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided that if such extension would cause the last day
of such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next preceding
Business Day; and
(ii) No Interest Period with respect to any LIBOR Advance
shall extend beyond the Facility Termination Date.
"Lending Installation" means, with respect to a Bank or Agent, any
office, branch, banking subsidiary of the holding company of a Bank or Agent,
or banking Affiliate of such Bank or Agent.
"LIBOR Advance" means an Advance which bears interest at a LIBOR Rate.
"LIBOR Base Rate" means, with respect to a LIBOR Advance for the
relevant Interest Period, the rate of interest determined by Agent, based on
Telerate System reports or other source as may be selected by Agent, to be the
"London Interbank Offered Rate" at which deposits in
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<PAGE> 10
United States dollars are offered by major banks in London, England, two (2)
Business Days before the first day of the respective Interest Period, in the
approximate amount of the relevant LIBOR Advance and having a maturity
approximately equal to such LIBOR Advance's Interest Period.
"LIBOR Loan" means a Loan which bears interest at a LIBOR Rate.
"LIBOR Rate" means, with respect to a LIBOR Advance for the relevant
Interest Period, the sum of (i) the quotient of (a) the LIBOR Base Rate
applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) the Applicable LIBOR Rate Margin. The LIBOR Rate shall be rounded to the
next higher multiple of 1/16 of 1% if the rate is not such a multiple.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment (the purpose of which is to grant a security
interest), deposit arrangement (the purpose of which is to grant a security
interest), encumbrance or other security agreement or arrangement of any kind
or nature whatsoever the purpose of which is to grant a security interest,
whether or not filed or recorded or otherwise perfected (including the interest
of a vendor or lessor under any conditional sale, any Capitalized Lease or any
lease deemed to constitute a security interest, or any other title retention
agreement).
"Loan" means, with respect to a Bank, such Bank's portion of any
Advance.
"Loan Documents" means this Agreement, the Notes, the Deeds of Trust
and Environmental Agreements.
"Material Adverse Effect" means a material adverse effect, based on
commercially reasonable standards, on (i) the business, Property, condition
(financial or otherwise), or results of operations of Borrower, Guarantor and
the REIT, taken as a whole, (ii) the ability of Borrower, Guarantor or the REIT
to perform its obligations under any of the Loan Documents or the Guaranty, or
(iii) the validity or enforceability under applicable law of any of the Loan
Documents or the Guaranty or the rights or remedies of Agent or Banks
thereunder.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement as described in Section 3(37) of
ERISA to which Borrower, Guarantor, the REIT or any member of the Controlled
Group is a party to which more than one employer is obligated to make
contributions.
"NOI" means the amount by which the aggregate Gross Income of all of
the Eligible Collateral exceeds the aggregate Operating Expenses of all of the
Eligible Collateral for the period equal to the most recent twelve (12) month
period, tested quarterly, from either company prepared quarterly financial
information or from annual financial information audited by an independent
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<PAGE> 11
certified public accountant, in either case prepared according to GAAP. If the
operating history of any Eligible Collateral is not available for an entire
twelve (12) month period, NOI shall be calculated on an annualized basis for
the period available, but not less than one (1) quarter.
"Note" means a promissory note, in substantially the form of Exhibit D
hereto, duly executed by Borrower and payable to the order of a Bank in the
amount of its Commitment, including any amendment, modification, renewal or
replacement of such promissory note.
"Notice of Assignment" is defined in Section 15.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of Borrower to Banks or to
any Bank, Agent, or any indemnified party hereunder arising under the Loan
Documents.
"Operating Expenses" means, for any period, without duplication, all
actual ordinary and normal expenses of operation of all of the Eligible
Collateral, on a cash basis adjusted for the accrual of property taxes and
insurance premiums, including without limitation, utilities, repair and
maintenance (but excluding any capital items and expenditures), salaries and
wages, commissions paid to any leasing agent, reasonable advertising and
marketing expenses and management fees of at least three percent (3%) of the
Gross Income and a replacement reserve of at least $150 per apartment per year;
excluding, however, interest expense, debt service, depreciation and
amortization, income or franchise taxes and any extraordinary one-time
expenditures not considered operating expenses under GAAP.
"Participants" is defined in Section 15.2.1.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code as to which Borrower, Guarantor, the REIT or any member of the
Controlled Group may have any liability.
"Pledge and Security Agreement" means a Pledge and Security Agreement,
in substantially the form of Exhibit E, duly executed by Borrower, as the same
may be amended or modified and in effect from time to time.
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<PAGE> 12
"Prime Rate" means the rate per annum most recently publicly announced
by Bank One, or its successors, in Phoenix, Arizona, as its "prime rate," as in
effect from time to time. The Prime Rate will change on each day the "prime
rate" changes. The "prime rate" is not necessarily the best or lowest rate
offered by said bank, and said bank may lend to its customers at rates that are
at, above, or below its "prime rate."
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.
"Purchasers" is defined in Section 15.3.1.
"Rate Hedging Obligations" of a Person means any and all obligations
of such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to the extension of credit by banks for the purpose of purchasing or
carrying margin stocks applicable to member banks of the Federal Reserve
System.
"Rejecting Bank" is defined in Section 2.20(b).
"REIT" means Ambassador Apartments, Inc., a Maryland corporation.
"Replacement Bank" is defined in Section 2.21.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it
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<PAGE> 13
be notified within thirty (30) days of the occurrence of such event; provided,
however, that a failure to meet the minimum funding standard of Section 412 of
the Code and of Section 302 of ERISA shall be a Reportable Event regardless of
the issuance of any such waiver of the notice requirement in accordance with
either Section 4043(a) of ERISA or waiver of the funding requirements under
Section 412(d) of the Code.
"Required Banks" means a Bank or Banks in the aggregate having at
least 66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has
been terminated, a Bank or Banks in the aggregate holding at least 66-2/3% of
the aggregate unpaid principal amount of the outstanding Advances.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
Eurocurrency liabilities (as defined therein).
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by Borrower, Guarantor,
the REIT or any member of the Controlled Group for employees of Borrower,
Guarantor, the REIT or any member of the Controlled Group.
"Solvent" means, with respect to any Person, that as of any date of
determination (a) the then present fair saleable value of the assets of such
Person is (i) greater than the then total amount of liabilities (including
contingent liabilities) of such Person and (ii) greater than the amount that
will be required to pay such Person's probable liability on such Person's then
existing Indebtedness as it becomes absolute and matured, (b) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction, and (c) such Person does not intend to
incur, or believe or reasonably should have believed that it will incur,
Indebtedness beyond its ability to pay such Indebtedness as it become due.
"Subsidiary" of a Person means (i) any corporation more than 50% of
the outstanding securities having ordinary voting power for the election of the
board of directors of which shall at the time be beneficially owned (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended)
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, or (ii) any partnership,
association, joint venture, limited liability company or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a direct
or indirect Subsidiary of the REIT and/or Guarantor.
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<PAGE> 14
"Substantial Portion" means, with respect to the Property of Borrower,
Guarantor and the REIT, taken as a whole, Property which represents more than
10% of Consolidated Tangible Net Worth, as would be shown in the consolidated
financial statements of Borrower, Guarantor or the REIT as of the beginning of
the fiscal quarter in which such determination is made.
"Total Liabilities" shall mean all liabilities of the REIT, determined
on a consolidated basis, in accordance with GAAP, including without limitation,
any mortgage debt whether recourse or non-recourse, letters of credit issued
for the account of such Person, purchase obligations, repurchase obligations,
forward commitments, unsecured debt, accounts payable, lease obligations
(including ground leases), guarantees of indebtedness, subordinated debt,
unfunded obligations. Total Liabilities of the REIT shall also include,
without redundancy, (i) 100% of the consolidated recourse liability of the REIT
and Guarantor (A) under guarantees of indebtedness, and (B) loans where the
REIT is liable for debt as a general partner, and (ii) the REIT's share of
non-recourse debt in unconsolidated Affiliates.
"Transferee" is defined in Section 15.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or LIBOR Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer Plans
exceeds the fair market value of the assets of such Plans allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans, using the actuarial methods and assumptions utilized in the actuarial
report for each such Plan as of such date.
"Unmatured Event of Default" means an event which but for the lapse of
time or the giving of notice, or both, would constitute an Event of Default.
"Unprotected Floating Rate Indebtedness" of a Person shall mean its
variable rate Indebtedness, including without limitation that of its
unconsolidated Affiliates which is recourse to such Person and any Debt that
reprices within 365 days, but excluding any "low-floater" tax-exempt bonds and
any such Indebtedness for which such Person is protected from interest rate
risk pursuant to any interest rate cap, swap, hedge or collar protection
agreement now existing or that may, to the reasonable satisfaction of Agent, be
entered into after the date of this Agreement.
"Unused Commitment" means, at any date with respect to any Bank, the
amount (if any) by which such Bank's Commitment exceeds the sum of the
outstanding principal balance of such Bank's Loans as of such date.
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<PAGE> 15
"Unused Commitment Fee" means a fee payable by Borrower, without
redundancy, to each Bank with respect to such Bank's Unused Commitment,
calculated in accordance with Section 2.5(b).
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1 Commitment. From and including the date of this Agreement and
prior to the Facility Termination Date, each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to make Loans to Borrower
from time to time in amounts not to exceed in the aggregate at any one time
outstanding the amount of its Commitment; provided, however, that (i) a Bank
shall not be required to make any Loan or Loans in excess of the amount of such
Bank's then Available Credit, and (ii) the aggregate principal amount of all
Advances outstanding at any time and from time to time (without duplication)
shall not exceed the Borrowing Base. Subject to the terms of this Agreement,
Borrower may borrow, repay and reborrow at any time prior to the Facility
Termination Date. The Commitments to lend hereunder shall expire on the
Facility Termination Date.
2.2 Required Payments. Any outstanding Advances and all other
unpaid Obligations shall be paid in full by Borrower on the Facility
Termination Date. Additionally, if for any reason at any time either (i) the
principal amount of all Advances outstanding (without duplication) exceeds the
Aggregate Commitment, or (ii) the aggregate principal amount of all Advances
outstanding (without duplication) exceeds the Borrowing Base, then Borrower
shall, within fifteen (15) days after notice from Agent, make a payment to
Agent for the benefit of Banks in an amount equal to such excess principal
amount.
2.3 Ratable Loans. Each Advance hereunder shall consist of Loans
made by the several Banks ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment, in each case without
duplication.
2.4 Types of Advances. The Advances may be Floating Rate Advances
or LIBOR Advances, or a combination thereof, selected by Borrower in accordance
with Sections 2.8 and 2.9.
2.5 Fees; Reduction in Commitment.
(a) Commitment Fee. Borrower agrees to pay to Agent, for
the account of each Bank, a commitment fee in the amount of one-half
of one percent (.5%) of
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<PAGE> 16
each Bank's Commitment. The commitment fee shall be paid by Borrower
to Agent, contemporaneously with the execution of this Agreement, and
shall be non-refundable in any event.
(b) Unused Commitment Fee. Borrower agrees to pay to
Agent for the account of each Bank an Unused Commitment Fee, at a rate
per annum of one-quarter of one percent (.25%), calculated on the
basis of a 365-day year in accordance with this Section from the date
hereof and to and including the Facility Termination Date, and payable
quarterly in arrears on the first day of each January, April, July and
October hereafter and on the Facility Termination Date. For each
quarter (or portion thereof), the Unused Commitment Fee shall be equal
to (A) such Bank's average daily Commitment during such quarter (or
portion thereof) minus (B) such Bank's "average daily outstandings"
for the quarter (or portion thereof) with respect to which the Unused
Commitment Fee is being computed, with the resulting number multiplied
by (C) one-quarter of one percent (.25%), and the final product
divided by (D) four (4).
As used herein, "average daily outstandings" means the
aggregate outstanding principal balance of such Bank's Loans,
calculated for each day during the quarter (or portion thereof) for
which the fee is being computed, divided by the number of days in that
quarter (or portion thereof). If the Unused Commitment Fee is being
computed for less than a full quarter, the number used in clause (D)
above shall be computed on a daily basis for the number of days for
which the fee is being computed.
All accrued Unused Commitment Fees shall be payable on the
effective date of any termination of the obligations of Banks to make
Loans hereunder.
(c) Extension Fee. If the Facility Termination Date is
extended pursuant to the provisions of Section 2.20, then Borrower
shall pay to Agent, for the account of each Bank an extension fee for
each such extension, at a rate equal to one-quarter of one percent
(.25%) of the amount of each Bank's Commitment. The extension fee
shall be paid by Borrower to Agent in advance, in the manner provided
in Section 2.20(d). The extension fee shall be non-refundable in any
event.
(d) Reductions in Aggregate Commitment. Borrower, at its
sole option, may permanently reduce the Aggregate Commitment in whole,
or in part ratably among Banks (in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment) in integral
multiples of $5,000,000 at any time or from time to time, upon at
least three (3) Business Days' written notice to Agent, which notice
shall specify the amount of any such reduction; provided, however,
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<PAGE> 17
that the amount of the Aggregate Commitment may not be reduced below
the aggregate principal amount of the outstanding Advances.
2.6 Minimum Amount of Each Advance. Each Advance shall be in the
minimum amount of $1,000,000 (and in multiples of $100,000 if in excess
thereof).
2.7 Optional Principal Payments. Borrower may at any time or from
time to time pay, without penalty or premium, all Floating Rate Advances, or,
in a minimum aggregate amount of $1,000,000 or any integral multiple of
$100,000 in excess thereof, any portion of the outstanding Floating Rate
Advances upon one (1) Business Day's prior notice to Agent. Borrower may, (i)
upon one (1) Business Day's prior notice to Agent, pay, without penalty or
premium, any LIBOR Advance in full on the last day of the Interest Period for
such LIBOR Advance, and (ii) upon three (3) Business Days' prior notice to
Agent, prepay any LIBOR Advance in full prior to the last day of the Interest
Period for such LIBOR Advance, provided that Borrower shall also pay at the
time of such prepayment all amounts payable with respect thereto pursuant to
Section 3.4 hereof.
2.8 Method of Selecting Types and Interest Periods for New
Advances. Borrower, when requesting an Advance, shall select the Type of
Advance and, in the case of each LIBOR Advance, the Interest Period applicable
to each Advance from time to time. Borrower shall give Agent irrevocable
notice (a "Borrowing Notice") in the form of Exhibit F not later than (a) 10:00
a.m., Phoenix time, one (1) Business Day before the Borrowing Date of each
Floating Rate Advance, and (b) 10:00 a.m., Phoenix time, three (3) Business
Days before the Borrowing Date of each LIBOR Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of
such Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected; provided, however, that
the aggregate number of LIBOR Advances outstanding at any one time
shall not exceed three (3), and
(iv) in the case of each LIBOR Advance, the Interest
Period applicable thereto.
Not later than 11:00 a.m., Phoenix time, on each Borrowing Date, each Bank
shall make available its Loan or Loans, in funds immediately available in
Phoenix to Agent at its address specified pursuant to Article XVI. Agent will
make the funds so received from Banks available to Borrower at Agent's
aforesaid address. Disbursements of all Advances to Borrower may be made not
more frequently than one time per Business Day.
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<PAGE> 18
2.9 Conversion and Continuation of Outstanding Advances. Floating
Rate Advances shall continue as Floating Rate Advances unless and until such
Floating Rate Advances are converted by Borrower into LIBOR Advances. Each
LIBOR Advance shall continue as a LIBOR Advance until the end of the then
applicable Interest Period therefor, at which time such LIBOR Advance shall be
automatically converted into a Floating Rate Advance unless the Borrower shall
have given Agent a Conversion/Continuation Notice requesting that, at the end
of such Interest Period, such LIBOR Advance either continues as a LIBOR Advance
for the same or another Interest Period or be repaid. Subject to the terms of
Section 2.6, Borrower may elect from time to time to convert all or any part of
an Advance of any Type into any other Type or Types of Advances; provided,
however, that any conversion of any LIBOR Advance may be made on, and only on,
the last day of the Interest Period applicable thereto, and further provided
that the aggregate number of LIBOR Advances outstanding at any one time shall
not exceed three (3).
Borrower shall give Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an Advance or
continuation of a LIBOR Advance not later than 10:00 a.m., Phoenix time, at
least one (1) Business Day, in the case of a conversion into a Floating Rate
Advance, or three (3) Business Days, in the case of a conversion into or
continuation of a LIBOR Advance, prior to the date of the requested conversion
or continuation, specifying:
(i) the requested date which shall be a Business Day, of
such conversion or continuation;
(ii) the aggregate amount and Type of the Advance which is
to be converted or continued; and
(iii) the amount and Type(s) of Advance(s) into which such
Advance is to be converted or continued and, in the case of a
conversion into or continuation of a LIBOR Advance, the Interest
Period applicable thereto.
2.10 Changes in Interest Rate, etc. Each Floating Rate Advance
shall bear interest on the outstanding principal amount thereof, for each day
from and including the date such Advance is made or is converted from a LIBOR
Advance into a Floating Rate Advance pursuant to Section 2.9 to but excluding
the date it becomes due or is converted into a LIBOR Advance pursuant to
Section 2.9 hereof, at a rate per annum equal to the Floating Rate for such
day. Changes in the rate of interest on any Advance maintained as a Floating
Rate Advance will take effect simultaneously with each change in the Floating
Rate or in the Applicable Floating Rate Margin in accordance with the terms of
this Agreement. Each LIBOR Advance shall bear interest from and including the
first day of the Interest Period applicable thereto to (but not including) the
last day of such Interest Period at the interest rate determined as applicable
to such LIBOR Advance. No Interest Period may end after the Facility
Termination Date.
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<PAGE> 19
2.11 Determination of Applicable Margins.
(a) Interest Coverage Ratio. The Applicable Margins
shall be determined by reference to the Interest Coverage Ratio based
upon the REIT's most recent financial statements provided to Agent, in
accordance with the following table:
<TABLE>
<CAPTION>
Applicable Applicable
Interest LIBOR Rate Floating Rate
Coverage Ratio Margin (%) Margin (%)
-------------- ----------- -------------
<S> <C> <C>
Interest Coverage Ratio 1.70 0
is greater than 3.00 to 1
Interest Coverage Ratio
is equal to or less than
3.00 to 1 but not less
than 2.75 to 1 1.80 .125
Interest Coverage Ratio
is less than 2.75 to 1 1.95 .25
</TABLE>
(b) Adjustment of Margins. The Applicable Floating Rate
Margin shall be adjusted, as applicable from time to time, effective
on the first Business Day after any change in the Interest Coverage
Ratio. The applicable LIBOR Rate Margin in respect of any LIBOR
Advance shall be adjusted, as applicable from time to time, effective
on the first day of the Interest Period for any LIBOR Advance after
any change in the Interest Coverage Ratio as and when measured
pursuant to Section 9.3.
2.12 Rates Applicable After Event of Default. Notwithstanding
anything to the contrary contained in Section 2.8, 2.9 or 2.10, during the
continuance of an Event of Default the Required Banks may, at their option, by
notice to Borrower (which notice may be revoked at the option of the Required
Banks notwithstanding any provision of Section 11.2 requiring unanimous consent
of Banks to changes in interest rates), declare that no Advance may thereafter
be made as, converted into or continued as a LIBOR Advance until Borrower has
cured such Event of Default. Notwithstanding anything to the contrary
contained in Section 2.8, 2.9 or 2.10, during the continuance of an Unmatured
Event of Default of a monetary obligation the Required Banks may, at their
option, by notice to Borrower (which notice may be revoked at the option of the
Required Banks notwithstanding any provision of Section 11.2 requiring
unanimous consent of Banks to changes in interest rates), declare that no
Advance may be made as or converted into a LIBOR Advance until such default is
cured. During the continuance of an Event of Default, the Required
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<PAGE> 20
Banks may, at their option, by notice to Borrower (which notice may be revoked
at the option of the Required Banks notwithstanding any provision of Section
11.2 requiring unanimous consent of Banks to changes in interest rates),
declare that (i) each LIBOR Advance shall bear interest for the remainder of
the applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 4% per annum and (ii) each Floating Rate Advance shall
bear interest at a rate per annum equal to the Floating Rate otherwise
applicable to the Floating Rate Advance plus 4% per annum.
2.13 Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to Agent at Agent's address specified pursuant to Article XVI,
or at any other Lending Installation of Agent specified in writing by Agent to
Borrower, by noon (local time at the place of receipt) on the date when due.
Each payment delivered to Agent for the account of any Bank shall be delivered
promptly by Agent to such Bank in the same type of funds that Agent received at
its address specified pursuant to Article XVI or at any Lending Installation
specified in a notice received by Agent from such Bank. If Agent receives, for
the account of a Bank, a payment from Borrower and fails to remit such payment
to the Bank on the Business Day such payment is received (if received by noon,
Phoenix time, by Agent) or on the next Business Day (if received after noon,
Phoenix time, by Agent), Agent shall pay to such Bank interest on such payment
at a rate per annum equal to the Federal Funds Effective Rate for each day for
which such payment is so delayed and Borrower shall have no responsibility to
any such Bank in connection with any such payment or any interest thereon
pursuant hereto.
2.14 Notes; Telephonic Notices. Each Bank is hereby authorized to
record the principal amount of each of its Loans and each repayment on the
schedule attached to its Note; provided, however, that the failure to so record
shall not affect Borrower's obligations under such Note. Borrower hereby
authorizes Agent to extend, convert or continue Advances, effect selections of
Types of Advances and to transfer funds based on telephonic notices made by any
person or persons who Agent in good faith believes to be acting on behalf of
Borrower. Borrower agrees to deliver promptly to Agent a written confirmation,
if such confirmation is requested by Agent, of each telephonic notice signed by
an Authorized Officer of Borrower. If the written confirmation differs in any
material respect from the action taken by Agent, the records of Agent shall
govern absent manifest error.
2.15 Interest Payment Dates; Interest Basis. Interest on all
Advances shall be calculated on the basis of a 365-day year, based on the
actual days elapsed. Interest accrued on each Advance shall be payable on the
first day of each calendar month, commencing with the first such date to occur
after the date hereof, and on any date on which the Advance is prepaid, whether
due to acceleration or otherwise. Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if
payment is received prior to noon (local time at the place of receipt). If any
payment of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business
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<PAGE> 21
Day, and such extension of time shall be included in computing interest in
connection with such payment.
2.16 Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, Agent will notify each
Bank of the contents of each Aggregate Commitment reduction notice, Borrowing
Notice, Conversion/Continuation Notice, and repayment notice received by it
hereunder. Agent will notify each Bank of the interest rate applicable to each
LIBOR Advance promptly upon determination of such interest rate and will give
each Bank prompt notice of each change in the Floating Rate or the Applicable
Margin.
2.17 Lending Installations. Each Bank may book its Loans at any
Lending Installation selected by such Bank and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Bank for
the benefit of such Lending Installation. Each Bank may, by written or telex
notice to Agent and Borrower, designate a Lending Installation through which
Loans will be made by it and for whose account Loan payments are to be made.
2.18 Non-Receipt of Funds by Agent. Unless Borrower or a Bank, as
the case may be, notifies Agent prior to the date on which such payment is due
to Agent of (i) in the case of a Bank, the proceeds of a Loan or (ii) in the
case of Borrower, a payment of principal, interest, fees or other amounts due
under the Loan Documents to Agent for the account of Banks, that it does not
intend to make such payment, Agent may assume that such payment has been made.
Agent may, but shall not be obligated to, make the amount of such payment
available to the intended recipient in reliance upon such assumption. If
Borrower or such Bank, as the case may be, has not in fact made such payment to
Agent, the recipient of such payment shall, on demand by Agent, repay to Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made available
by Agent until the date Agent recovers such amount at a rate per annum equal to
(a) in the case of payment by a Bank, the Federal Funds Effective Rate for such
day or (b) in the case of payment by Borrower, the interest rate applicable to
the relevant Advance.
2.19 Withholding Tax Exemption. At least five (5) Business Days
prior to the first date on which interest or fees are payable hereunder for the
account of any Bank, each Bank (if any) that is not incorporated under the laws
of the United States of America, or a state thereof, agrees that it will
deliver to each of Borrower and Agent two (2) duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in either case
that such Bank is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal taxes and
an Internal Revenue Service Form W-8 or W-9 entitling such Bank to receive a
complete exemption from United States tax backup withholding. Each Bank which
so delivers a Form 1001 or 4224 further undertakes to deliver to each of
Borrower and Agent two (2) additional copies of such form (or a successor form)
on or before the date that such form expires (currently, three (3) successive
calendar years for Form 1001 and one (1) calendar year
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<PAGE> 22
for Form 4224) or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by Borrower or Agent, in each case certifying that such Bank is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it and
such Bank advises Borrower and Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal tax.
If a Bank does not provide duly executed forms to Borrower and Agent
within the time periods set forth in the preceding paragraph, Borrower or Agent
shall withhold taxes from payments to such Bank at the applicable statutory
rates and Borrower shall not be required to pay any additional amounts as a
result of such withholding. Upon the reasonable request of Borrower or Agent,
each Bank that has not provided the forms or other documents, as provided
above, on the basis of being a "United States person," shall submit to Borrower
and Agent a certificate or other evidence to the effect that it is such a
"United States person."
2.20 Extension of Facility Termination Date.
(a) Extension Requests. Borrower may request a one-year
extension of the Facility Termination Date by submitting a request for
an extension to Agent (an "Extension Request") no more than
twenty-seven (27) months nor less than twenty-four (24) months prior
to the then scheduled Facility Termination Date. Promptly upon (but
not later than five (5) Business Days after) receipt of the Extension
Request, Agent shall notify each Bank of the contents thereof and
shall request each Bank to approve the Extension Request. Each Bank
approving the Extension Request shall deliver its written approval no
later than ninety (90) days after the date of the Extension Request.
If the approval of each of Banks is received by Agent within ninety
(90) days after the date of the Extension Request (or as otherwise
provided in Section 2.20(b)), Agent shall promptly so notify Borrower
and each Bank, and the Facility Termination Date shall be extended by
one (1) year, and in such event Borrower may thereafter request
further extension(s) of the then scheduled Facility Termination Date
in accordance with this Section 2.20. If any of Banks does not
deliver to Agent such Bank's written approval to any Extension Request
within ninety (90) days after the date of such Extension Request, the
Facility Termination Date shall not be extended, except as otherwise
provided in Section 2.20(b) or 2.20(c).
(b) Rejecting Banks/Full Assignment. If (i) any Banks
("Rejecting Banks") shall not approve an Extension Request, (ii) all
rights and obligations of
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such Rejecting Banks under this Agreement and under the other Loan
Documents (including, without limitation, their Commitment and all
Loans owing to them) shall have been assigned, within one hundred
twenty (120) days following such Extension Request, in accordance with
Section 2.21, to one or more Replacement Banks who shall have approved
in writing such Extension Request at the time of such assignment, and
(iii) no other Bank shall have given written notice to Agent of such
Bank's withdrawal of its approval of the Extension Request, Agent
shall promptly so notify Borrower and each Bank and the Facility
Termination Date shall be extended by one (1) year, and in such event
Borrower may thereafter request further extension(s) as provided in
Section 2.20(a).
(c) Rejecting Banks/No Full Assignment. If (A) the
Rejecting Banks shall not approve an Extension Request, (B) the
provisions of clause (b)(ii) above do not apply, and (iii) no other
Bank shall have given written notice to Agent of such Bank's
withdrawal of its approval of the Extension Request, Agent shall
promptly notify Borrower and each Bank and any Replacement Bank, and
the Facility Termination Date shall be extended by one (1) year, and
in such event Borrower may thereafter request further extension(s) as
provided in Section 2.20(a); provided, however, that the Aggregate
Commitment shall be automatically reduced, effective as of the first
day of the extension period, and shall equal the aggregate Commitments
of the Banks who are not Rejecting Banks and the Banks who are
Replacement Banks. All rights and obligations of such Rejecting Banks
under this Agreement and under the other Loan Documents (including,
without limitation, their Commitment and all Loans owing to them)
shall either be (I) assigned to Replacement Banks pursuant to Section
2.20(b), or (II) terminated, effective as of the then existing
Facility Termination Date (or such earlier date as Borrower and Agent
may designate), in which case the terminated Bank shall have
concurrently received, in cash, all amounts due and owing to the
terminated Bank hereunder or under any other Loan Document, including
without limitation the aggregate outstanding principal amount of the
Loans owed to such Bank, together with accrued interest thereon
through the date of such termination, all amounts payable under
Sections 3.1 and 3.2 with respect to such Bank and all fees payable to
such Bank hereunder (and payment of such amount may not be waived
except with the consent of each Bank, as more specifically provided in
Section 11.2(i)); provided that, upon such Bank's termination, such
Bank shall cease to be a party hereto but shall continue to be
entitled to the benefits of Article III and Section 12.7, as well as
to any fees accrued hereunder and not yet paid, and shall continue to
be obligated under Section 13.8 with respect to obligations and
liabilities accruing prior to the termination of such Bank.
(d) Approval of Extension. Prior to the commencement of
each extension period (whether approved pursuant to Section 2.20(a),
(b) or (c)),
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<PAGE> 24
Borrower shall pay to Agent for the account of each Bank approving the
extension and each Replacement Bank an extension fee calculated in the
manner set forth in Section 2.5(c). However, if prior to the
commencement of any such extension period Borrower shall have repaid
the Obligations in full and terminated the obligation of Banks to make
further Advances hereunder, Borrower shall not be liable for the
payment of the extension fee that would have been payable prior to the
commencement of such extension period.
2.21 Replacement of Certain Banks. In the event a Bank (the
"Affected Bank"):
(i) shall have requested compensation from Borrower
under Sections 3.1 or 3.2 to cover additional costs incurred by such
Bank that are not being incurred generally by the other Banks, or
(ii) shall have delivered a notice pursuant to Section 3.3
that such Affected Bank is unable to extend LIBOR Loans for reasons
not generally applicable to the other Banks, or
(iii) is a Rejecting Bank pursuant to Section 2.20,
then, in any such case, and at any time after such event occurs,
Borrower or Agent may make written demands on such Affected Bank (with
a copy to Agent in the case of a demand by Borrower and a copy to
Borrower in the case of a demand by Agent) for the Affected Bank to
assign, and such Affected Bank shall assign, pursuant to one or more
duly executed assignment agreements in substantially the form provided
for in Section 15.3.1, within five (5) Business Days after the date of
such demand, to one or more financial institutions that comply with
the provisions of Section 15.3, and that are selected by Borrower
and/or Agent, that are reasonably acceptable to Agent and Borrower, as
applicable (provided, that if an Event of Default has occurred and is
continuing, the approval of Borrower shall not be required), that
Borrower or Agent, as the case may be, shall have engaged for such
purpose (the "Replacement Bank"), all of such Affected Bank's rights
and obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment and all Loans owing to
it) in accordance with Section 15.3. If any Affected Bank fails to
execute and deliver such assignment agreements within thirty (30) days
after demand, then such Affected Bank shall have no further right to
receive any amounts payable under Sections 3.1 and 3.2 with respect to
such Affected Bank.
Agent agrees, upon the occurrence of such events with respect to an
Affected Bank and upon written request of Borrower, to use its reasonable
efforts to obtain the commitments from one or more financial institutions to
act as a Replacement Bank. Agent is authorized, but shall
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<PAGE> 25
not be obligated to, execute one or more of such assignment agreements as
attorney-in-fact for any Affected Bank failing to execute and deliver the same
within five (5) Business Days after the date of such demand. Further, with
respect to such assignment, the Affected Bank shall have concurrently received,
in cash, all amounts due and owing to the Affected Bank hereunder or under any
other Loan Document, including without limitation the aggregate outstanding
principal amount of the Loans owed to such Bank, together with accrued interest
thereon through the date of such assignment, amounts payable under Sections 3.1
and 3.2 with respect to such Affected Bank and all fees payable to such
Affected Bank hereunder; provided that, upon such Affected Bank's replacement,
such Affected Bank shall cease to be a party hereto but shall continue to be
entitled to the benefits of Article III and Section 12.7, as well as to any
fees accrued hereunder and not yet paid, and shall continue to be obligated
under Section 13.8 with respect to obligations and liabilities accruing prior
to the replacement of such Affected Bank.
2.22 Purpose of Advances. The purpose of the Loans shall be to
provide financing for acquisition of apartment projects, capital expenditures,
corporate working capital, equity investments (including the purchase of stock
of other Real Estate Investment Trusts), repayment of indebtedness and
scheduled amortization of payments of debt. In addition, Loans may be used for
the payment of distributions to the shareholders of the REIT and the holders of
partnership units in Guarantor, to the extent permitted herein, but not more
frequently than twice per calendar year and not in consecutive quarters.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1 Yield Protection. In the event of any change after the date
of this Agreement of any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any interpretation thereof, which:
(i) subjects any Bank or any applicable Lending
Installation to any tax, duty, charge or withholding on or from
payments due from Borrower (excluding any taxes imposed on, or based
on, or determined by reference to the net income of any Bank or
applicable Lending Installation, including, without limitation,
franchise taxes, alternative minimum taxes and any branch profits tax
(collectively, "Excluded Taxes")), any taxes imposed on, or based on,
or determined by reference to or changes the basis of taxation of
payments to any Bank in respect of its Loans or other amounts due it
hereunder (except for Excluded Taxes),
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Bank or any applicable
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Lending Installation (other than reserves and assessments taken into
account in determining the interest rate applicable to LIBOR Rates),
or
(iii) imposes any other condition or requirement the result
of which is to materially increase the cost to any Bank or any
applicable Lending Installation of making, funding or maintaining
loans or reduces any amount receivable by any Bank or any applicable
Lending Installation in connection with loans, or requires any Bank or
any applicable Lending Installation to make any payment calculated by
reference to the amount of loans held or interest received by it, by
an amount reasonably deemed material by such Bank,
then, within thirty (30) days after demand by such Bank, Borrower
shall pay Agent for the benefit of such Bank that portion of such
increased expense incurred or reduction in an amount received which
such Bank reasonably determines is attributable to making, funding and
maintaining its Loans and its Commitment; provided, however, that
Borrower shall not be required to increase any such amounts payable to
Agent on behalf of any Bank (1) if such Bank fails to comply with the
requirements of Section 2.19 hereof, (2) if such increase results from
a circumstance that applies only to the affected Bank and not to other
banks in general, or (3) to the extent that such Bank determines, in
its reasonable discretion, that it can, after notice from Borrower,
through reasonable efforts, eliminate or reduce the amount of tax
liabilities payable (without additional costs or expenses unless
Borrower agrees to bear such costs or expenses) or other disadvantages
or risks (economic or otherwise) to such Bank or Agent. If any Bank
receives a refund in respect of any tax for which such Bank has
received payment from Borrower hereunder, such Bank shall promptly
notify Borrower of such refund and such Bank shall repay the amount of
such refund to Borrower, provided that Borrower, upon the request of
such Bank, agrees to return such refund (plus any penalties, interest
or other charges imposed on such Bank) to such Bank in the event such
Bank is required to repay such refund. The determination as to
whether any Bank has received a refund shall be reasonably made by
such Bank.
3.2 Changes in Capital Adequacy Regulations. If a Bank reasonably
determines the amount of capital required or expected to be maintained by such
Bank or any Lending Installation of such Bank or any corporation controlling
such Bank is increased solely as a result of a Change, then, within thirty (30)
days after demand by such Bank, Borrower shall pay to Agent for the benefit of
such Bank the amount necessary to compensate for any shortfall in the rate of
return on the portion of such increased capital which such Bank reasonably
determines is attributable to this Agreement, its Loans or its obligation to
make Loans hereunder (after taking into account such Bank's policies as to
capital adequacy). "Change" means (i) any change after the date of this
Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or
change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or
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directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Bank, Lending Installation or any corporation controlling any
Bank. Change shall not include a change that applies only to the affected Bank
and not to other banks in general. "Risk-Based Capital Guidelines" means (A)
the risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (B) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3 Availability of Types of Advances. If any Bank reasonably
determines and notifies Agent that maintenance of any of such Bank's LIBOR
Loans at a suitable Lending Installation would violate any applicable law,
rule, regulation or directive enacted after the date of the Agreement, whether
or not having the force of law, Agent shall suspend the availability of the
affected Type of Advance and require any LIBOR Advances of the affected Type to
be repaid; or if the Required Banks determine and notify Agent that (i)
deposits of a type or maturity appropriate to match fund LIBOR Advances are not
available, Agent shall suspend the availability of the affected Type of Advance
with respect to any LIBOR Advances made after the date of any such
determination, or (ii) an interest rate applicable to a Type of Advance does
not accurately reflect the cost of making a LIBOR Advance of such Type, then,
if for any reason whatsoever the provisions of Section 3.1 are inapplicable,
Agent shall suspend the availability of the affected Type of Advance with
respect to any LIBOR Advance made after the date of any such determination and
such Advance shall be converted into a Floating Rate Advance.
3.4 Funding Indemnification. If any payment of a LIBOR Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a LIBOR Advance is
not made on the date specified by Borrower for any reason other than default by
Banks, Borrower will indemnify each Bank for any loss or reasonable cost or
expense incurred by it resulting therefrom, including, without limitation, any
loss or reasonable cost in liquidating or employing deposits acquired to fund
or maintain the LIBOR Advance.
3.5 Bank Statements; Survival of Indemnity. To the extent
reasonably possible, each Bank shall designate an alternate Lending
Installation with respect to its LIBOR Advances to reduce any liability of
Borrower to such Bank under Sections 3.1 and 3.2 or to avoid the unavailability
of a Type of Advance under Section 3.3, so long as such designation is not
materially disadvantageous to such Bank. Each Bank shall deliver a written
statement of such Bank as to the amount due, if any, under Sections 3.1, 3.2 or
3.4. Such written statement shall set forth in reasonable detail the
calculations upon which such Bank determined such amount and shall be final,
conclusive and binding on Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a LIBOR
Advance shall
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be calculated as though each Bank funded its LIBOR Advance through the purchase
of a deposit of the type and maturity corresponding to the deposit used as a
reference in determining the LIBOR Advance applicable to such Loan, whether in
fact that is the case or not. Unless otherwise provided herein, the amount
specified in the written statement shall be payable within three (3) days after
receipt by Borrower of the written statement. The obligations of Borrower
under Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and
termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions Precedent to Closing. The obligation of each Bank
to enter into this Agreement and to make each and every Advance hereunder is
subject to the following conditions precedent, all of which shall have been
satisfied prior to the initial Advance:
(a) Documents. Borrower shall have executed (or obtained
the execution or issuing of) and delivered to Agent the following
documents all in form satisfactory to Agent and (except for the Notes)
in sufficient executed copies for each Bank:
(i) This Agreement;
(ii) Notes payable to the order of each of Banks.
(iii) The Guaranty duly executed by Guarantor.
(iv) Deeds of Trust with respect to the Initial
Projects;
(v) Financing Statements executed by Borrower, as
required by Agent;
(vi) An Environmental Agreement executed by
Borrower and Guarantor with respect to the Initial Projects;
(vii) Non-Disturbance, Attornment Estoppel and
Subordination Agreements from each non-residential tenant of
the Initial Projects;
(viii) Written money transfer instructions, in form
acceptable to Agent, addressed to Agent and signed by an
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Authorized Officer, together with such other related money
transfer authorizations as Agent may have reasonably
requested.
(ix) Financial statements for Borrower and, to the
extent available, operating statements for the Initial
Projects, each covering the two-year period immediately
preceding the date of this Agreement, and each showing a
financial condition satisfactory to Agent and Banks.
(x) A current appraisal (the "Appraisal") of the
Initial Projects, satisfactory to Banks, by an appraiser
reasonably acceptable to Banks. All Appraisals shall be
ordered by Agent and shall be submitted to Banks for review
and approval. Appraisals shall be deemed acceptable to Banks
only upon approval by Required Banks. Each Bank shall have
the right to object to an appraisal by written notice given to
Agent on or before that day that is ten (10) Business Days
after said Bank received the appraisal, which notice shall
specify in reasonable detail the reason for such Bank's
disapproval, shall request modifications to the appraisal as
necessary to correct the reason for such disapproval, and
shall set forth such Bank's estimate of the fair market value
of the Initial Project. If a Bank fails to object to an
appraisal within the 10-Business Day period, then such Bank
shall be deemed to have approved the Appraisal. Upon the
closing the transactions contemplated by this Agreement with
respect to the Initial Projects and the inclusion of the
Initial Projects as Eligible Collateral, the Appraisals of the
Initial Collateral will be deemed to have been approved by the
Required Banks.
Agent shall have the right to obtain reappraisals of
the Collateral Projects, at Borrower's expense, (A) if
required by applicable law or regulation, (B) no more often
than once every twelve (12) months during the continuation of
an Event of Default, and (C) no more often than once every
twelve (12) months if Agent reasonably determines that there
has been a material adverse change in the status of a
Collateral Project.
(xi) A survey of each Initial Project by a
licensed surveyor reasonably acceptable to Agent in form
reasonably acceptable to Agent and providing information
pursuant to ALTA standards. All surveys shall be certified to
Agent and Banks and the title company issuing the title policy
required herein.
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(xii) An ALTA extended coverage mortgagee's title
insurance policy or policies [ALTA Loan Policy - 1970 (Rev.
10-17-70)], or comparable policy or policies, with such
endorsements as Agent may reasonably require, together with
such reinsurance and co-insurance as Agent may reasonably
require, issued by a title insurance company or companies
reasonably satisfactory to Agent in an amount to be designated
by Agent, insuring the lien of the Deed of Trust against each
Initial Project to be a first and prior lien upon such Initial
Project as security for the Loans, subject only to such
exceptions as Agent may expressly approve in writing, and
insuring against any lien claims that could arise out of the
construction of any improvements related to such Initial
Project.
(xiii) An environmental questionnaire and disclosure
statement completed and signed by Borrower covering the
current and former condition and uses of each Initial Project
and adjacent property, followed by a current preliminary
environmental assessment (Phase I assessment) of each Initial
Project and adjacent property, plus any sampling and analysis
(Phase II assessment) or special limited assessment that Banks
may reasonably require after review of the Phase I assessment,
together with any other environmental investigations and
reports that Banks may reasonably require, all of which shall
be by an environmental consulting firm reasonably acceptable
to Agent and none of which shall reveal any existing or
potential environmental condition adversely affecting the use
or value of any such Initial Project. The environmental
questionnaire and disclosure statements and all assessments
performed pursuant hereto shall be deemed acceptable upon the
written approval of the Required Banks.
(xiv) Evidence that the each Initial Project is
properly zoned for its current use.
(xv) Evidence of the following insurance policies:
(1) A comprehensive General Liability
Policy of Insurance including Completed Operation,
providing coverage of not less than $5,000,000 for
each Initial Project (combined single limit for
bodily injury and property damage), and an umbrella
excess
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liability coverage in an amount not less than
$10,000,000 for each Initial Project.
(2) Policies of fire, lightning, and
other perils extended coverage insurance in amounts
equal to the full insurable value, on a
replacement-cost basis, on the improvements on each
Initial Project without coinsurance or depreciation.
(3) A Flood Insurance Policy or evidence
that each Initial Project is not located in a
flood-prone area or a "special flood hazard area" as
defined by the U.S. Department of Housing and Urban
Development pursuant to the Flood Disaster Protection
Act of 1973, as amended.
(4) Such other insurance as Agent may
reasonably require, including earthquake insurance if
reasonably required by Agent, rental interruption and
extra expense insurance in amounts sufficient to
cover any loss of income from each Initial Project
and any anticipated expenses associated with the same
for a term of not less than twelve (12) months, and
insurance covering vandalism and malicious mischief
and sprinkler leakage.
Each of the foregoing insurance policies may be provided under
a blanket policy of insurance and each of the foregoing
insurance policies shall, where applicable, (A) be from an
insurance company reasonably acceptable to Agent, (B) contain
an endorsement naming Banks as an additional insured on all
liability and first mortgagee on all casualty insurance, (C)
stipulate that Agent is to receive a thirty (30) day notice
prior to any cancellation, and (D) be in an original form to
be held by Agent.
(xvi) Evidence of worker's compensation insurance
coverage satisfactory to Agent.
(xvii) If required by Banks, evidence that all
utilities and services to each Initial Project, including
without limitation water, sewer, gas, electric and telephone,
are available in amounts that are sufficient to service each
Initial Project.
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<PAGE> 32
(xviii) If required by Banks, copies of all
certificates of occupancy issued by the municipality having
jurisdiction over each Initial Project, together with evidence
that Borrower has obtained all other licenses, permits,
consents, approvals and authorizations necessary or
appropriate in connection with the management and operation of
each Initial Project.
(xix) Copies of any Declaration of Covenants,
Conditions and Restrictions and related documents pertaining
to each Initial Project.
(xx) Evidence that all taxes and assessments levied
against or affecting each Initial Project have been paid
current, together with a Type B tax service contract for each
Initial Project.
(xxi) Evidence that there exists adequate and proper
ingress and egress to each Initial Project.
(xxii) A written opinion of counsel to Borrower and
Guarantor reasonably acceptable to Agent, addressed to Agent
and Banks in form reasonably acceptable to Agent.
(xxiii) A written opinion of local counsel to
Borrower and Guarantor reasonably acceptable to Agent,
addressed to Agent and Banks in form reasonably acceptable to
Agent.
(xxiv) Physical condition reports as to each Initial
Project acceptable to Agent.
(xxv) Certified copies of all material contracts and
agreements relating to each Initial Project, including,
without limitation, all service contracts and management
agreements covering or affecting each Initial Project, and the
form of residential lease for each Initial Project.
(xxvi) A rent roll and delinquency report for each
Initial Project, in form and substance reasonably satisfactory
to Agent, certified by an Authorized Officer.
(xxvii) Such other information and documents that
Agent may reasonably require.
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(b) Other Information. Borrower, at its expense, shall
have obtained and delivered to Bank the following items, all of which
shall be in form and content reasonably satisfactory to Agent and
shall be subject to approval in writing by Agent and in sufficient
executed copies for each Bank:
(i) A copy of the executed Partnership Agreement for
Borrower, including all amendments thereto, together with
copies of recorded/filed certificates of limited partnership,
recorded fictitious name certificates and such other documents
as Agent may reasonably require relating to the existence of
Borrower, the qualification as a foreign limited partnership
and good standing of Borrower in each state where an Initial
Project is located and the authority of any person executing
documents on behalf of Borrower.
(ii) A certificate of the corporate secretary of
General Partner, signed by the duly appointed secretary
thereof and issued as of the date of this Agreement,
certifying that (A) attached thereto is a true and complete
copy of the corporate by-laws of General Partner in effect on
the date of passage of the corporate resolutions described
immediately below and at all subsequent times to and including
the date of the certificate, (B) attached thereto is a true
and complete copy of the resolutions adopted by the Board of
Directors of General Partner authorizing the execution,
delivery, and performance of the Loan Documents to which
Borrower is a party, and that such resolutions have not been
modified, rescinded, or amended and are in full force and
effect, (C) no change has been made to General Partner's
charter documents other than as reflected in the certified
copies submitted in connection with the delivery of this
Agreement, and (D) set forth therein and appropriately
identified are the names, current official titles, and
signatures of the officers of General Partner authorized to
sign the Loan Documents.
(iii) A copy of the current Articles of
Incorporation (or other charter documents, however named) of
General Partner, including all amendments thereto, certified
as current and complete by the appropriate authority of the
state of incorporation of General Partner, together with
evidence of its good standing in said corporation's state of
incorporation and in every other state in which it is doing
business or the conduct of Borrower's business requires such
standing for the enforcement of material contracts.
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(iv) A copy of the executed Partnership Agreement
for Guarantor, including all amendments thereto, together with
copies of recorded/filed certificates of limited partnership,
recorded fictitious name certificates and such other documents
as Agent may require relating to the existence and good
standing of Guarantor and the authority of any person
executing documents on behalf of Guarantor.
(v) A certificate of the corporate secretary of
the REIT, signed by the duly appointed secretary thereof and
issued as of the date of this Agreement, certifying that (A)
attached thereto is a true and complete copy of the corporate
by-laws of the REIT in effect on the date of passage of the
corporate resolutions described immediately below and at all
subsequent times to and including the date of the certificate,
(B) attached thereto is a true and complete copy of the
resolutions adopted by the Board of Directors of the REIT, on
behalf of itself and as the general partner of Guarantor,
authorizing the execution, delivery, and performance of the
Guaranty.
(vi) A copy of the current Articles of
Incorporation (or other charter documents, however named) of
the REIT, including all amendments thereto, certified as
current and complete by the appropriate authority of the state
of incorporation of the REIT, together with evidence of its
good standing in said corporation's state of incorporation and
in every other state in which it is doing business or the
conduct of its business requires such standing for the
enforcement of material contracts.
(vii) Such other certificates, opinions, consents
or documents and instruments as Agent may reasonably request.
(c) Representations and Warranties. All representations
and warranties by Borrower in the Loan Documents shall be true and
correct as of the date of this Agreement and all Loan Documents shall
be valid and binding against Borrower and Guarantor, as applicable,
and enforceable against Borrower and Guarantor, as applicable, in
accordance with their terms, subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to the rights of
creditors generally and general principles of equity.
(d) Default. There shall exist no Event of Default or
Unmatured Event of Default.
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(e) Fees. Borrower shall have paid to Agent the fees set
forth in the letter agreement of even date herewith between Agent and
Borrower and the commitment fee due pursuant to Section 2.5(a).
4.2 Each Advance. Banks shall not be required to make any Advance
(other than the conversion of an Advance of one Type to an Advance of another
Type that does not increase the aggregate amount of outstanding Advances),
unless on the applicable Borrowing Date:
(i) There exists no Event of Default or monetary
Unmatured Event of Default.
(ii) The representations and warranties contained in
Article VI are true and correct in all material respects as of such
Borrowing Date except to the extent any such representation or
warranty is stated to relate solely to an earlier date, in which case
such representation or warranty shall be true and correct in all
material respects on and as of such earlier date and except for
changes permitted by this Agreement.
(iii) After the making of such Advance, the aggregate
principal amount of all Advances outstanding shall not exceed (A) the
Aggregate Commitment, and (B) the Borrowing Base.
(iv) Borrower shall have delivered to Agent, within the
time period specified in Section 2.8, a duly completed Borrowing
Notice in substantially the form of Exhibit G hereto.
(v) All legal matters incident to the making of such
Advance shall be reasonably satisfactory to Agent and its counsel.
(vi) All costs, expenses, and fees to be paid by Borrower
or Guarantor on or before the date of the Advance under the Loan
Documents or the Guaranty shall have been paid in full.
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by Borrower that the conditions
contained in Sections 4.2(i) and (ii) have been satisfied.
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ARTICLE V
COLLATERAL
5.1 Security for the Loan. The Loans and Borrower's obligations
under the Loan Documents shall be secured by the following:
(i) One or more Deeds of Trust constituting a
first and prior lien on each Collateral Project (other than any Bond
Project that becomes a Collateral Project pursuant to this Agreement,
which shall be subject to a prior Bond Deed of Trust), subject only to
such matters as specifically approved by Banks therein;
(ii) A valid and effectual assignment(s) of rents
and leases covering each Collateral Project;
(iii) A valid and effectual security agreement(s)
granting Banks a first and prior security interest in all of the
property described below in, to, or under which Borrower now has or
hereafter acquires any right, title or interest, whether present,
future, or contingent: all equipment, inventory, accounts, security
deposits, general intangibles, instruments, documents, and chattel
paper, as those terms are defined in the Uniform Commercial Code, and
all other personal property of any kind (including without limitation
money and rights to the payment of money), whether now existing or
hereafter created, that are now or at any time hereafter (i) in the
possession or control of Agent or Banks in any capacity; (ii) erected
upon, attached to, or appurtenant to, each Collateral Project; (iii)
located or used on each Collateral Project or identified for use on
each Collateral Project (whether stored on each Collateral Project or
elsewhere); or (iv) used in connection with, arising from, related to,
or associated with the Collateral Project or any of the personal
property described herein, the construction of any improvements on
each Collateral Project, the ownership, development, maintenance,
leasing, management, or operation of each Collateral Project, the use
or enjoyment of each Collateral Project, or the operation of any
business conducted on each Collateral Project; together with all
products and proceeds of all of the foregoing, in any form but
excluding equipment such as laundry equipment that is not owned by
Borrower, but is leased;
(iv) If required by Agent, valid and effectual
assignments of Borrower's interest in all management agreements and
documents relating to the ownership, development, construction and
maintenance of each Collateral Project;
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(v) With respect only to each Bond Project, a
Pledge and Security Agreement in favor of Banks constituting a valid
and effectual first and prior security interest in and assignment of
the Bonds related to such Bond Project;
together with any UCC financing statements for filing and/or recording and any
other items required by Banks to fully perfect the liens and security interests
of Banks. The foregoing documents, together with any other documents or
instruments securing the Loans, shall be in form and content reasonably
satisfactory to Banks.
5.2 Conditions for Additional Projects. Subject to the terms and
conditions hereof, Borrower may from time to time notify Agent of its intention
to add additional apartment projects to the Eligible Collateral (each, an
"Additional Project"),upon compliance with the provisions of this Section 5.2
and the requirements of Section 4.1(a). Borrower may exercise its rights under
this Section by delivering a written notice (an "Addition Notice") to Agent
which shall refer to this Section, identifying the Additional Project which
Borrower intends to add to the Eligible Collateral. The Addition Notice shall
be accompanied by all of the documents in the possession of Borrower with
respect to such Additional Project (the "Approval Documents") referred to in
Sections 4.1(a)(ix), (xi)-(xxi) and (xxiv)-(xxvii). Agent shall notify
Borrower within ten (10) Business Days after receipt of the last of the
Approval Documents whether Required Banks have approved the proposed Additional
Project subject only to the receipt of a satisfactory Appraisal in accordance
with the provisions of Section 4.1(a)(x). If such approval by Required Banks
is obtained, Agent shall order the Appraisal of such proposed Additional
Project for submission to Banks for approval in accordance with the provisions
of Section 4.1(a)(x). Any failure of Agent to timely notify Borrower of the
approval by Required Banks of a proposed Additional Project after receipt of
the Approval Documents or after receipt of an Appraisal shall not be deemed to
be an approval of the proposed Additional Project. Upon final approval of a
proposed Additional Project by Required Banks, Borrower shall satisfy all of
the remaining requirements set forth in Section 4.1(a) and, to the extent
reasonably required by Agent, Section 4.1(b). In addition, in connection with
each Bond Project, Borrower shall also execute and deliver to Agent (i) a
Pledge and Security Agreement covering the Bonds related to such Bond Project,
and (ii) a transfer in blank, in form and substance reasonably satisfactory to
Agent, with Borrower's signature guaranteed as applicable. Banks shall have
the right to review and evaluate each Additional Project proposed by Borrower
to determine in their sole and absolute discretion whether such Additional
Project is acceptable to Required Banks.
5.3 Conditions Precedent for Eligible Collateral. A Collateral
Project shall be deemed to be "Eligible Collateral" only when (and only so long
as) (i) the conditions precedent set forth in Sections 4.1(a), 5.1 and 5.2, as
applicable, have been satisfied, and (ii) the average occupancy rate for such
Collateral Project over the immediately preceding three (3) consecutive months
remains equal to or greater than seventy percent (70%).
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5.4 Partial Releases. So long as no Event of Default or Unmatured
Event of Default has occurred and is continuing (after taking into account the
effect of the release), and so long as the release would not cause the
outstanding Advances to exceed the lesser of (i) the Aggregate Commitment, or
(ii) the Borrowing Base, taking into account any release price paid to Agent to
satisfy the requirements of this Section 5.4, Borrower may from time to time
request releases of one or more of the Collateral Projects in which case Agent
shall cause any such Collateral Project to be released from the lien of its
respective Deed of Trust and related security documents. Any amounts paid to
Agent as release prices shall be applied to the payment of the Obligations
hereunder in the manner set forth in Section 2.13.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Banks and Agent as of the date
hereof that:
6.1 Existence and Standing. Borrower is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted. Guarantor is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted. The REIT is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.
6.2 Authorization and Validity. Borrower has the requisite power
and authority to execute and deliver the Loan Documents to which it is a party
and to perform its obligations hereunder and thereunder. The execution and
delivery by Borrower of the Loan Documents to which it is a party and the
performance of its obligations thereunder have been duly authorized and the
Loan Documents to which it is a party constitute legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with their
terms, subject to bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and general principles of equity.
Guarantor and the REIT have the requisite power and authority to execute and
deliver the Guaranty and the Loan Documents to which they are a party and to
perform their respective obligations thereunder. The execution and delivery by
Guarantor and the REIT of the Guaranty and the Loan Documents to which they are
a party and the performance of their respective obligations thereunder have
been duly authorized, and the Guaranty and the Loan Documents to which they are
a party constitute the legal, valid and binding obligations of Guarantor and
the REIT enforceable against Guarantor and the REIT in accordance with their
terms, subject to bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and general principles of equity.
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6.3 No Conflict; Government Consent. Neither the execution and
delivery by Borrower of the Loan Documents to which it is a party or by
Guarantor and the REIT of the Guaranty and the Loan Documents to which they are
a party, nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof or thereof will violate in any material
respect any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on Borrower, Guarantor or the REIT, or Borrower's, Guarantor's or
the REIT's organizational documents or the provisions of any indenture,
instrument or agreement to which Borrower, Guarantor or the REIT is a party or
is subject, or by which it, or its Property, is bound, or conflict with or
constitute a default thereunder, or result in the creation or imposition of any
Lien in, of or on the Property of Borrower, Guarantor or the REIT pursuant to
the terms of any such indenture, instrument or agreement. To the best of
Borrower's knowledge, except as set forth on Schedule "6.3" hereto, 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 required to authorize, or is
required in connection with the execution, delivery and performance of, or the
legality, validity, binding effect or enforceability of, any of the Loan
Documents or the Guaranty.
6.4 Financial Statements. Banks have been furnished with, the
March 31, 1996 financial statements of Borrower and the March 31, 1996
consolidated financial statements of Guarantor and the REIT. Such statements
fairly present, in all material respects, the financial condition and
operations of Borrower and Guarantor and the REIT at such date and the results
of their operations for the period then ended.
6.5 Material Adverse Change. Since the date of the financial
statements (whether quarterly or annual) of Borrower, Guarantor and the REIT
described in Section 6.4, there has been no change in the business, Property,
condition (financial or otherwise) or results of operations of Borrower,
Guarantor and the REIT that has had or would reasonably be expected to have a
Material Adverse Effect.
6.6 Taxes. To the best of Borrower's knowledge, Borrower,
Guarantor and the REIT have filed all United States federal income tax returns
and all other material tax returns which are required to be filed and have paid
all taxes due pursuant to said returns or pursuant to any assessment received
by Borrower, Guarantor or the REIT, except such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been provided.
To the best of Borrower's knowledge, no tax Liens have been filed and no claims
are being asserted with respect to any such taxes. To the best of Borrower's
knowledge, the charges, accruals and reserves on the books of Borrower,
Guarantor and the REIT in respect of any taxes or other governmental charges
are adequate in accordance with GAAP.
6.7 Litigation and Contingent Obligations. To the best of
Borrower's knowledge, there is no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or threatened against or affecting
Borrower, Guarantor or the REIT that has had or would reasonably
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be expected to have a Material Adverse Effect. To the best of Borrower's
knowledge, Borrower, Guarantor and the REIT have no material contingent
obligations not provided for or disclosed in the financial statements (whether
quarterly or annual) of Borrower, Guarantor and the REIT that have been most
recently delivered by Guarantor, the REIT and Borrower to Agent that has had or
would reasonably be expected to have a Material Adverse Effect.
6.8 ERISA. To the best of Borrower's knowledge, the Unfunded
Liabilities of all Single Employer Plans do not in the aggregate exceed
$5,000,000. To the best of Borrower's knowledge, the withdrawal liabilities to
Multiemployer Plans of the Borrower, any Guarantor and any other member of the
Controlled Group do not, and are not reasonably expected to, exceed $5,000,000
in the aggregate. To the best of Borrower's knowledge, each Plan complies in
all material respects with all applicable requirements of law and regulations,
no Reportable Event has occurred with respect to any Plan, neither Borrower,
Guarantor nor the REIT, nor any other member of the Controlled Group has
withdrawn from any Multiemployer Plan or initiated steps to do so, and no steps
have been taken to terminate any Plan.
6.9 Accuracy of Information. All factual information heretofore
or contemporaneously furnished in writing by or on behalf of Borrower,
Guarantor or the REIT to Agent for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished in writing by or on behalf of Borrower,
Guarantor or the REIT to Agent will be, true and accurate (taken as a whole),
in all material respects, on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact necessary
to make such information (taken as a whole) not misleading at such time.
6.10 Regulation U. Neither Borrower nor Guarantor nor the REIT is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock (as
defined in Regulation U).
6.11 Material Agreements. To the best of Borrower's knowledge,
neither Borrower nor Guarantor nor the REIT is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in (i) any agreement to which it is a party, or (ii) any agreement or
instrument evidencing or governing Indebtedness, which default has had or would
reasonably be expected to have a Material Adverse Effect.
6.12 Labor Disputes and Acts of God. Neither the business nor the
Property of Borrower or of Guarantor or the REIT is affected by any fire,
explosion, accident, strike, lockout, or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance), which has had or would reasonably be
expected to have a Material Adverse Effect.
6.13 Ownership. To the best of Borrower's knowledge, Borrower,
Guarantor and the REIT (or the Subsidiaries of any of the foregoing) have title
to, or valid leasehold interests in, all
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of their respective properties and assets, real and personal, including the
properties and assets and leasehold interests reflected in the financial
statements referred to in Section 6.4 (except to the extent that (i) such
properties or assets have been disposed of in the ordinary course of business
or (ii) the failure to have such title has not had and would not reasonably be
expected to have a Material Adverse Effect).
6.14 Operation of Business. To the best of Borrower's knowledge,
Borrower, Guarantor and the REIT possess all licenses, permits, franchises,
patents, copyrights, trademarks, and trade names, or rights thereto, to conduct
their respective businesses substantially as now conducted, and as presently
proposed to be conducted, with such exceptions as have not had and would not
reasonably be expected to have a Material Adverse Effect.
6.15 Laws; Environment. To the best of Borrower's knowledge,
Borrower, Guarantor and the REIT have duly complied, and their businesses,
operations and Property are in compliance, in all material respects, with the
provisions of all federal, state, and local statutes, laws, codes, and
ordinances and all rules and regulations promulgated thereunder (including
without limitation those relating to the environment, health and safety). To
the best of Borrower's knowledge, Borrower, Guarantor and the REIT have been
issued all required federal, state, and local permits, licenses, certificates,
and approvals relating to (1) air emissions; (2) discharges to surface water or
groundwater; (3) solid or liquid waste disposal; (4) the use, generation,
storage, transportation, or disposal of toxic or hazardous substances or
hazardous wastes (intended hereby and hereafter to include any and all such
materials listed in any federal, state, or local law, code, or ordinance and
all rules and regulations promulgated thereunder as hazardous); or (5) other
environmental, health or safety matters. Except in accordance with a valid
governmental permit, license, certificate or approval, to the best knowledge of
Borrower, there has been no material emission, spill, release, or discharge
into or upon (1) the air; (2) soils, or any improvements located thereon; (3)
surface water or groundwater; or (4) the sewer, septic system or waste
treatment, storage or disposal system servicing any Property of Borrower,
Guarantor, or the REIT of any toxic or hazardous substances or hazardous wastes
at or from such Property. To the best of Borrower's knowledge, neither
Borrower nor Guarantor nor the REIT has received notice of any written
complaint, order, directive, claim, citation, or notice from any governmental
authority or any person or entity with respect to violations of law or damage
by reason of Borrower's or any Guarantor's (1) air emissions; (2) spills,
releases, or discharges to soils or improvements located thereon, surface
water, groundwater or the sewer, septic system or waste treatment, storage or
disposal systems servicing any Property; (3) solid or liquid waste disposal;
(4) use, generation, storage, transportation, or disposal of toxic or hazardous
substances or hazardous waste; or (5) other environmental, health or safety
matters affecting Borrower, Guarantor or the REIT or its business, operation or
Property. To the best of Borrower's knowledge, neither Borrower, nor Guarantor
nor the REIT has any material Indebtedness, obligation, or liability, absolute
or contingent, matured or not matured, with respect to the storage, treatment,
cleanup, or disposal of any solid wastes, hazardous wastes, or other toxic or
hazardous substances (including without limitation any such indebtedness,
obligation, or liability with respect to any
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current regulation, law or statute regarding such storage, treatment, cleanup,
or disposal). A matter will not constitute a breach of this Section 6.15
unless it is reasonably likely to result in uninsured costs or liabilities to
Borrower, Guarantor or the REIT in excess of $1,000,000 in the aggregate.
6.16 Investment Company Act. Neither Borrower, nor Guarantor nor
the REIT is an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
6.17 Public Utility Holding Company Act. Neither Borrower, nor
Guarantor nor the REIT is a "holding company" or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
6.18 Validity of Loan Documents. The Deeds of Trust will, upon
recordation thereof in the county in which the property and collateral
described therein is located, create valid and perfected unavoidable security
interests in and liens on the collateral described therein, enforceable against
third parties and securing the obligations purported to be secured thereby,
subject only to the respective exceptions permitted by Agent.
6.19 Solvency.
(a) Borrower is, on a consolidated and unconsolidated
basis, Solvent as of the date hereof. Borrower will not be rendered
insolvent by reason of incurring its obligations under this Agreement
or the Loan Documents or by the granting of any lien under the Loan
Documents or the consummation of any transaction contemplated herein;
(b) By incurring its obligations under this Agreement and
the Loan Documents, Borrower will not have incurred debts beyond its
ability to pay as they mature;
(c) Borrower is not engaged in or is about to engage in
business or in a transaction for which its property, after the
incurrence of its obligations hereunder and under the Loan Documents,
is an unreasonably small capital; and
(d) Borrower has not executed this Agreement or any Loan
Document or made any transfer or incurred any obligations thereunder
with the intent to hinder, delay or defraud either present or future
creditors.
6.20 Offices. The chief executive office and chief place of
business (as such terms are used in the Uniform Commercial Code of each state
whose law would purport to govern the
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attachment and perfection of the security interests granted by the Loan
Documents) of Borrower is 77 West Wacker Drive, Suite 4040, Chicago, Illinois
60601.
ARTICLE VII
AFFIRMATIVE COVENANTS
During the term of this Agreement, unless the Required Banks shall
otherwise consent in writing:
7.1 Financial Reporting. Borrower, Guarantor and the REIT will
maintain systems of accounting established and administered in accordance with
GAAP, and furnish to Banks:
(i) Within one hundred twenty (120) days after the close
of each fiscal year, unqualified audited financial statements of
Borrower and Guarantor certified by one of the "Big Six" accounting
firms or other nationally recognized independent certified public
accountants, reasonably acceptable to Banks, prepared in accordance
with GAAP, including balance sheets as of the end of such fiscal year
and statements of income and retained earnings and a statement of cash
flows, in each case setting forth in comparative form the figures for
the preceding fiscal year, and in the case of Guarantor on a
consolidated and a consolidating basis with the REIT.
(ii) Within sixty (60) days after the close of each fiscal
quarter, for Borrower and Guarantor, unaudited financial statements,
including balance sheets as of the end of such period, statements of
income and retained earnings, and a statement of cash flows for the
portion of the fiscal year ending with such fiscal period, and in the
case of Guarantor on a consolidated and a consolidating basis with the
REIT, and with each quarterly financial statement, the information
necessary to calculate NOI as it relates to each Collateral Project,
on a trailing twelve-month basis, all certified by an Authorized
Officer. All such balance sheets shall set forth in comparative form
figures for the preceding year end. All such income statements shall
reflect current period and year-to-date figures.
(iii) Within sixty (60) days after the end of each of the
first three quarterly periods, and within one hundred twenty (120)
days after the end of each fiscal year, a certificate of an Authorized
Officer as to the REIT's compliance with the Financial Covenants in
the form of Exhibit G hereto.
(iv) Within 270 days after the close of each fiscal year,
a statement of the Unfunded Liabilities of each Single Employer Plan,
certified as correct by an
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actuary enrolled under ERISA (which requirement may be satisfied by
the delivery of the most recent actuarial valuation of each such
Single Employer Plan).
(v) As soon as possible and in any event within ten (10)
days after Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by an Authorized Officer of
Borrower, describing said Reportable Event and the action which
Borrower (or Guarantor or the REIT) proposes to take with respect
thereto.
(vi) As soon as possible, and in any event within thirty
(30) days after Borrower knows or has reason to know that any
circumstances exist that constitute grounds entitling the PBGC to
institute proceedings to terminate a Plan subject to ERISA with
respect to Borrower or any member of the Controlled Group and promptly
but in any event within two (2) Business Days of receipt by Borrower,
Guarantor, the REIT, or any member of the Controlled Group of notice
that the PBGC intends to terminate a Plan or appoint a trustee to
administer the same, and promptly but in any event within five (5)
Business Days of the receipt of notice concerning the imposition of
withdrawal liability in excess of $500,000 with respect to Borrower,
any Guarantor or any member of the Controlled Group, a certificate of
an Authorized Officer setting forth all relevant details of such event
and the action which Borrower (or Guarantor or the REIT) proposes to
take with respect thereto.
(vii) Promptly after the commencement thereof, notice of
all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality,
domestic or foreign, affecting Borrower, Guarantor or the REIT (a)
which, if determined adversely to Borrower, Guarantor or the REIT,
could reasonably be expected to have a Material Adverse Effect or (b)
in which uninsured liability in excess of $1,000,000 (in the aggregate
with respect to any action, suit or proceeding) is claimed and alleged
against Borrower, Guarantor or the REIT.
(viii) Such other information as Banks may from time to time
reasonably request, including, without limitation, all financial
information maintained on Borrower, Guarantor and/or the REIT and all
Property (including the Collateral Projects) owned directly or
indirectly by Borrower, Guarantor or the REIT, including, without
limitation, property cash flow projections, property budgets,
operating statements, leasing status reports, contingent liability
summaries, note receivable summaries, summaries of cash and cash
equivalents and overhead and capital improvement budgets.
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7.2 Use of Proceeds. Subject to the limitations contained in this
Agreement, Borrower will use the proceeds of Advances to fund apartment project
acquisitions, capital expenditures, corporate working capital, equity
investments (including the purchase of stock in other Real Estate Investment
Trusts), repayment of indebtedness and scheduled amortization of payments of
debt. In addition, Advances may be used for the payment of distributions to
the shareholders of the REIT and the holders of partnership units in Guarantor,
to the extent permitted herein, but not more frequently than twice per calendar
year and not in consecutive quarters. Borrower will not, and will not permit
Guarantor or the REIT to, use any of the proceeds of the Advances to purchase
or carry any "margin stock" (as defined in Regulation U) or to purchase any
securities in any transaction that is subject to Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended.
7.3 Notice of Event of Default. Borrower, Guarantor and the REIT
will give prompt notice in writing to Agent of the occurrence of (i) any Event
of Default or Unmatured Event of Default and (ii) any other development,
financial or otherwise, that has had or would be reasonably expected to have a
Material Adverse Effect.
7.4 Conduct of Business. Except as otherwise permitted under this
Agreement, Borrower, Guarantor and the REIT will carry on and conduct business
in the same general manner and in substantially the same fields of enterprise
as presently conducted and to do all things necessary to remain duly organized,
validly existing and in good standing as a domestic limited partnership or
corporation in their respective jurisdictions of organization and maintain all
requisite authority to conduct business in each jurisdiction in which business
is conducted.
7.5 Taxes. Borrower, Guarantor and the REIT will pay prior to
delinquency all taxes, assessments and governmental charges and levies upon
them or their income, profits or Property, including without limitation the
Collateral, except those that are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been established
in accordance with GAAP.
7.6 Insurance. Borrower, Guarantor and the REIT will maintain
with financially sound and reputable insurance companies insurance on all their
Property, including without limitation the Collateral, as required under this
Agreement.
7.7 Compliance with Laws. Borrower, Guarantor and the REIT will
comply with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which they may be subject, except to the
extent that the failure to do so would not reasonably be expected to have and
does not have a Material Adverse Effect.
7.8 Maintenance of Properties. Borrower, Guarantor and the REIT
will do all things necessary to maintain, preserve, protect and keep their
Property, including without limitation the
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Collateral, in good repair, working order and condition, except to the extent
that the failure to do so would not reasonably be expected to have and does not
have a Material Adverse Effect.
7.9 Inspection. Borrower, Guarantor and the REIT will permit
Agent, by its respective representatives and agents, to inspect any of the
Property, including without limitation the Collateral, corporate (or
partnership) books and financial records of Borrower, Guarantor and the REIT,
to examine and make copies of the books of accounts and other financial records
of Borrower, Guarantor and the REIT, and to discuss the affairs, finances and
accounts of Borrower, Guarantor and the REIT with, and to be advised as to the
same by, their respective officers at such reasonable times and intervals as
Agent may reasonably designate. The reasonable costs and expenses of such
inspection shall be paid by Borrower. Borrower hereby irrevocably grants Agent
or any agent or representative of Agent permission to enter upon any premises
upon which the Collateral may be located for the purpose of inspection of the
Collateral at any time, upon reasonable notice, during regular business hours
and as often as reasonably requested.
7.10 REIT Status. The REIT shall at all times remain (i) a fully
qualified real estate investment trust under Sections 856, et seq. of the Code,
and (ii) listed on the New York Stock Exchange, NASDAQ, or the American Stock
Exchange.
7.11 Affirmation of Representations and Warranties. Each request by
Borrower for an Advance shall constitute an affirmation on the part of Borrower
that each of the representations and warranties contained in Article VI are
true and correct as of the date of such request.
7.12 Management. Borrower, Guarantor and the REIT shall, at all
times, maintain management personnel with expertise in tax-exempt bond
financing reasonably satisfactory to Agent. Agent acknowledges that management
personnel of Borrower, Guarantor and the REIT in place as of the date hereof is
satisfactory to Agent.
ARTICLE VIII
NEGATIVE COVENANTS
During the term of the Agreement, unless the Required Banks shall
otherwise consent in writing:
8.1 Indebtedness.
(a) Borrower will not create, incur or suffer to exist
any Indebtedness, except:
(i) The Loans.
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(ii) Rate Hedging Obligations.
(iii) Trade accounts payable and accrued expenses
arising or occurring in the ordinary course of business.
(iv) Indebtedness constituting Capitalized Lease
Obligations.
(v) Indebtedness that is not secured by the
Property of Borrower.
(vi) Performance bonds, completion bonds and
guarantees of performance entered into in the ordinary cause
of business.
(b) Guarantor and/or the REIT will not create, incur or
suffer any Indebtedness for the acquisition or financing of real
property, except lines of credit or other Indebtedness secured by, and
incurred for the acquisition or financing of, apartment projects that
have previously been submitted for financing hereunder and such
requested financing has been rejected for any reason, including,
without limitation the rejection of individual properties or the
failure to increase the Aggregate Commitment.
8.2 Merger. Borrower and/or Guarantor will not merge or
consolidate with or into any other Person, unless the REIT continues to have a
controlling interest in the resulting entity. The REIT shall at all times
maintain a controlling interest in Borrower and Guarantor.
8.3 Investments and Acquisitions. Borrower, Guarantor and/or the
REIT will not make or permit any loans to or investments in any Person other
than (i) direct obligations of the United States of America or any agency
thereof, or obligations guaranteed by the United States of America or any
agency thereof deposited with Agent or acquired through and held by Agent and
subject to a lien or security interest in favor of Banks, in each case maturing
not later than the Facility Termination Date; and (ii) time deposits with Agent
maturing not later than the Facility Termination Date, including certificates
of deposit issued by Agent and subject to a lien or security interest in favor
of Banks.
8.4 Liens. Borrower will not create or suffer to exist any Lien,
security interest or other charge or encumbrance or any other type of
preferential arrangement upon or with respect to any asset of Borrower, whether
now owned or hereafter acquired, or assign any right to receive income in each
case to secure or provide for the payment of any Debt of any Person, other than
(i) liens for taxes for which Borrower have established and maintain adequate
reserves for payment of the same in conformity with GAAP; (ii) assessments or
governmental charges or levies (other than taxes as provided for in clause (i)
above) to the extent not past due or that are being
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contested in good faith by appropriate proceedings being diligently conducted
by Borrower and for which reasonable reserves have been established by
Borrower; (iii) pledges or deposits to secure obligations under workmen's
compensations laws or similar legislation or to secure public statutory
obligations of Borrower; (iv) liens created under the Loan Documents; (v) liens
for easements, rights-of-way, restrictions and other similar charges or
encumbrances on real property owned or leased by Borrower that do not interfere
with the ordinary conduct of the businesses of Borrower; and (vi) liens arising
in the ordinary course of business for sums not due.
ARTICLE IX
FINANCIAL COVENANTS
During the term of this Agreement, unless the Required Banks shall
otherwise consent in writing, Borrower, Guarantor and the REIT shall comply
with each of the following financial covenants (the "Financial Covenants"):
9.1 Minimum Consolidated Tangible Net Worth. The REIT's
Consolidated Tangible Net Worth shall not at any time be less than (i)
$110,000,000 plus (ii) ninety percent (90%) of the net cash proceeds or value
derived from any equity securities issued by the REIT after the date of this
Agreement. The REIT's compliance with the foregoing covenant shall be measured
on a quarterly basis, based on the financial statements delivered to Agent
pursuant to Section 7.1. If the REIT fails to maintain Consolidated Tangible
Net Worth in the amount required herein for one (1) fiscal quarter, but the
REIT does maintain Consolidated Tangible Net Worth within $10,000,000 of the
amount required herein, an Event of Default shall not occur; however, Borrower
shall not be entitled to any further Advance under this Agreement unless and
until Agent receives financial statements showing that the REIT's Consolidated
Tangible Net Worth is not less than the amount required herein. If (i) the
REIT's Consolidated Net Worth is more than $10,000,000 less than the amount
required herein for one (1) fiscal quarter, or (ii) the REIT fails to maintain
Consolidated Tangible Net Worth in the amount required herein for two (2)
consecutive fiscal quarters, then an Event of Default shall have occurred.
9.2 Total Liabilities to Gross Asset Value. The REIT's ratio of
its Total Liabilities to its Gross Asset Value shall not at any time (i) prior
to April 1, 1997, be more than .70 to 1, (ii) during the period from April 1,
1997 to March 31, 1998, be more than .67 to 1, and (iii) after March 31, 1998,
be more than .65 to 1. The REIT's compliance with the foregoing covenant shall
be measured on a quarterly basis, based on the financial statements delivered
to Agent pursuant to Section 7.1.
9.3 Interest Coverage Ratio. The REIT's Interest Coverage Ratio
shall not at any time be less than 2.50 to 1 during its most recent four (4)
fiscal quarters. The REIT's compliance with the foregoing covenant shall be
measured on a four (4) consecutive rolling quarter basis, based on the
financial statements delivered to Agent pursuant to Section 7.1.
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9.4 EBITDA to Debt Service. The REIT's ratio of its EBITDA to its
Debt Service shall not at any time be less than 2.25 to 1 during its most
recent four (4) fiscal quarters. The REIT's compliance with the foregoing
covenant shall be measured on a four (4) consecutive rolling quarter basis,
based on the financial statements delivered to Agent pursuant to Section 7.1.
9.5 Distributions. The REIT shall not make distributions to the
shareholders of the REIT that exceed ninety-five percent (95%) of the REIT's
Funds From Operations. Upon the occurrence of any material non-monetary Event
of Default, the REIT shall not make distributions to the shareholders of the
REIT in excess of the amount required to remain a fully qualified real estate
investment trust under Sections 856, et seq. of the Code, until such Event of
Default is cured or the Loans are repaid in full and the Commitments to lend
hereunder are terminated. Upon the occurrence of any monetary Event of
Default, the REIT shall not make any distributions to the shareholders of the
REIT.
9.6 Unprotected Floating Rate Indebtedness. The Unprotected
Floating Rate Indebtedness of the REIT shall not at any time exceed thirty
percent (30%) of the total Indebtedness of the REIT.
ARTICLE X
EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall
constitute an Event of Default:
10.1 Representations and Warranties. Any representation or
warranty (except the representations and warranties in Section 6.7, but only to
the extent the same are made, or deemed made, after the date hereof) made or
deemed made by or on behalf of Borrower, Guarantor or the REIT to Banks or
Agent under or in connection with this Agreement, any Loan Document, or any
certificate or information delivered in connection with this Agreement or any
other Loan Document shall not be true and correct in any material respect on
the date as of which made.
10.2 Non-payment. Nonpayment of principal of any Note when due, or
nonpayment of interest upon any Note or of any fees or other obligations under
any of the Loan Documents within ten (10) days after the same becomes due.
10.3 Other Defaults. The breach by Borrower (other than a breach
which constitutes an Event of Default under any other Section of this Article
X) of any of the terms or provisions of this Agreement or any of the other Loan
Documents and such breach either (i) can be remedied within ninety (90) days by
prompt and diligent action, but it either is not remedied within ninety (90)
days after the occurrence of such breach or Borrower fails to provide Agent
with monthly certifications from an Authorized Officer that Borrower is
diligently pursuing such remedy, or (ii)
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cannot be remedied within ninety (90) days even by prompt and diligent action,
but it either is not remedied within one hundred eighty (180) days after the
occurrence of such breach or Borrower fails to provide Agent with monthly
certifications from an Authorized Officer and supporting documentation that
Borrower is diligently pursuing such remedy.
10.4 Other Indebtedness.
(a) Failure of Borrower, Guarantor or the REIT to pay
when due (after any applicable grace period and after notice from the
holder thereof) any Indebtedness equal to or exceeding $5,000,000 (in
the aggregate); or
(b) Any other event shall occur or condition exist (after
any applicable grace period and after notice from the holder thereof),
the effect of which is to cause, or to permit the holder or holders of
any Indebtedness of Borrower, Guarantor or the REIT equal to or
exceeding $5,000,000 to cause such Indebtedness to become due prior to
its stated maturity; or
(c) Any Indebtedness of Borrower, Guarantor or the REIT
equal to or exceeding $5,000,000 (in the aggregate) shall be declared
to be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior to the stated maturity thereof
(after any applicable grace period and after notice from the holder
thereof); or
(d) Borrower, Guarantor or the REIT shall not pay, or
shall admit in writing its inability to pay, its debts generally as
they become due; or
(e) Within ninety (90) days prior to the stated maturity
of any Indebtedness of Borrower, Guarantor or the REIT equal to or
exceeding $5,000,000, such entity shall not reasonably believe that
such Indebtedness will be extended or take-out financing will be
available upon maturity.
10.5 Bankruptcy. Borrower, Guarantor or the REIT shall:
(i) have an order for relief entered with respect to it
under the Federal bankruptcy laws as now or hereafter in effect;
(ii) make an assignment for the benefit of creditors;
(iii) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it, any portion of the Collateral, or any
Substantial Portion of its Property;
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(iv) institute any proceeding seeking an order for relief
under the Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail
to file, within the applicable time period for the filing thereof, an
answer or other pleading denying the material allegations of any such
proceeding filed against it; or
(v) fail to contest in good faith any appointment or
proceeding described in Section 10.6.
10.6 Receiver. A receiver, trustee, examiner, liquidator or
similar official shall be appointed for Borrower, Guarantor, the REIT, any
portion of the Collateral, or any Substantial Portion of its Property without
the application, approval or consent of Borrower, Guarantor, the REIT, or a
proceeding described in Section 10.5(iv) shall be instituted against Borrower,
Guarantor or the REIT and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of forty-five (45)
consecutive days.
10.7 Judgment. Borrower, Guarantor or the REIT shall fail within
thirty (30) days after Borrower receives notice or has actual knowledge to pay,
bond or otherwise discharge any judgment or order for the payment of money in
excess of $1,000,000 which has not been stayed on appeal or is not otherwise
being appropriately contested in good faith.
10.8 Unfunded Liabilities. The Unfunded Liabilities of all Single
Employer Plans shall exceed in the aggregate $5,000,000 or any Reportable Event
shall occur in connection with any Plan, which Reportable Event has had or
would reasonably be expected to have a Material Adverse Effect.
10.9 Withdrawal Liability. Borrower, Guarantor or the REIT or any
member of the Controlled Group shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred withdrawal liability to such
Multiemployer Plan in an amount which, when aggregated with all other amounts
required to be paid to Multiemployer Plans by Borrower, Guarantor or the REIT
or any other member of the Controlled Group as withdrawal liability (determined
as of the date of such notification), exceeds $5,000,000 or requires payments
exceeding $2,000,000 per annum; provided, however, that such event shall not
constitute an Event of Default as long as Borrower, Guarantor, the REIT or the
Controlled Group member, as applicable, is contesting in good faith the
imposition of withdrawal liability.
10.10 Increased Contributions. Borrower, Guarantor, the REIT, or
any other member of the Controlled Group shall have been notified by the
sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization, if as a result of such reorganization the aggregate annual
contributions of Borrower, Guarantor, the REIT and the other members of the
Controlled Group
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(taken as a whole) to all Multiemployer Plans which are then in reorganization
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the respective plan years of each such Multiemployer
Plan immediately preceding the plan year in which the reorganization occurs by
an amount exceeding $5,000,000.
10.11 Change in Control. Any Change in Control shall occur.
10.12 Dissolution. The dissolution, termination or liquidation of
Borrower, Guarantor or the REIT shall occur.
10.13 Guaranty. The Guaranty shall fail to remain in full force or
effect with respect to Guarantor or any action shall be taken by Guarantor to
discontinue or to assert the invalidity or unenforceability of the Guaranty, or
Guarantor shall fail to comply with any of the terms or provisions of the
Guaranty, or Guarantor denies that it has any further liability under the
Guaranty or gives notice to such effect.
10.14 Financial Covenants. The breach of any Financial Covenant.
10.15 Seizure of Collateral. Any levy or execution upon, or
judicial seizure of, any portion of the Collateral.
10.16 Garnishment. Any attachment or garnishment of, or the
existence or filing of any lien or encumbrance, other than any lien or
encumbrance permitted by any Deed of Trust, against any portion of the
Collateral that is not removed, released or bonded within thirty (30) days
after Borrower receives notice or has knowledge of its creation.
10.17 Legal Proceeding. The institution of any legal action or
proceedings to enforce any lien or encumbrance upon any portion of the
Collateral that is not stayed or dismissed within thirty (30) days after
Borrower receives notice or has knowledge of its institution.
10.18 Abandonment. The abandonment by Borrower of all or any part
of the Collateral.
10.19 Encroachment. The existence of any encroachment upon the
Collateral that has occurred without the approval of Agent that is not removed
or corrected within thirty (30) days after Borrower receives notice or has
knowledge of its creation.
10.20 Uninsured or Underinsured Loss. The demolition or destruction
of, or any substantial damage to, any portion of the Collateral that is not
adequately covered by insurance, or the loss, theft or destruction of, or any
substantial damage to, any portion of the Collateral that is not adequately
covered by insurance.
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10.21 Loan Documents. The occurrence of any event of default under
the Notes or any other Loan Document and the expiration of any applicable
notice and cure period.
10.22 Material Adverse Effect. A change in the business or
financial condition of Borrower, Guarantor or the REIT that constitutes a
Material Adverse Effect.
ARTICLE XI
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
11.1 Acceleration; Remedies.
(a) If any Event of Default described in Section 10.5 or
10.6 occurs with respect to Borrower, Guarantor or the REIT, the
obligations of Banks to make Loans hereunder shall automatically
terminate and the Obligations shall immediately become due and payable
without any election or action on the part of Agent or any Bank. If
any other Event of Default occurs and continues uncured, the Required
Banks may terminate or suspend the obligations of Banks to make Loans
hereunder, or declare the Obligations to be due and payable, or both,
whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of
which Borrower hereby expressly waives. If, within five (5) days
after acceleration of the maturity of the Obligations or termination
of the obligations of Banks to make Loans hereunder as a result of any
Event of Default (other than any Event of Default as described in
Section 10.5 or 10.6 with respect to Borrower, Guarantor or the REIT)
and before any judgment or decree for the payment of the Obligations
due shall have been obtained or entered, the Required Banks (in their
sole discretion) shall so direct, Agent shall, by notice to Borrower,
rescind and annul such acceleration and/or termination.
(b) Upon the occurrence and during the continuance of any
Event of Default and upon the directive of the Required Banks, Agent
shall proceed to protect, exercise and enforce the rights and remedies
of Agent and Banks under the Loan Documents and the Guaranty against
Borrower, Guarantor, the REIT and any other party and such other
rights and remedies as are provided by law or equity. In addition, if
any Event of Default occurs and is continuing, Agent on behalf of
Banks, shall at the written request of the Required Banks, or may,
solely with the written consent of the Required Banks, at its option
and without presentment, demand, protest, or notice of legal process
of any kind, all of which are hereby expressly waived by Borrower, do
any one or more of the following (in addition to all other rights and
remedies provided for in this Agreement):
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(i) Obtain the appointment of a receiver of the
Collateral;
(ii) As applicable, foreclose all security
interests in or liens on the Collateral in the manner provided
under the Uniform Commercial Code. Expenses of retaking,
holding, preparing for sale, selling or the like shall include
Banks' reasonable attorneys' fees and legal expenses;
(iii) As to any Collateral consisting of real
property, foreclose all liens in the manner provided under the
laws of the state where such property is located and pursue
all other remedies thereunder;
(iv) Exercise all the remedies of a secured party
under the Uniform Commercial Code as enacted in Arizona;
(v) As applicable for the type of Collateral,
without regard to the adequacy of any security for the
Obligations, enter upon any premises where the Collateral may
be located, exclude Borrower therefrom and take immediate
possession of the Collateral, either personally or by means of
a receiver appointed by a court therefor, and Agent may, at
Agent's option, operate and maintain all or any part of the
Collateral to such extent as Agent deems advisable and may
collect and receive all rents and income therefrom and
collect, compromise, extend, modify, repair, renovate, alter
or remove all or part of the Collateral as Agent may determine
in Agent's discretion, and any monies so collected or received
by Agent shall be applied to, or may be accumulated for
application upon, the payment of all costs and expenses
payable by Borrower hereunder, including without limitation
all costs and expenses of Agent's taking and maintaining
possession of the Collateral, reasonable management fees for
such operation thereof, all costs and expenses of such actions
and counsel fees in a reasonable sum with the remainder, if
any, to be applied upon the Notes, as the same may have been
accelerated, the application of all such monies to be made in
accordance herewith;
(vi) Take immediate possession of all records,
instruments, documents and writings of Borrower pertaining to
the Collateral, without notice or demand and without resort to
legal process, and for such purpose to enter upon any premises
on which
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such records, instruments, documents, writings or any part
thereof may be situated and remove the same therefrom;
(vii) Retain the funds due or to become due on the
Collateral or other rights to payment in satisfaction of the
obligations secured hereunder by sending written notice of
such election to Borrower, but unless such written notice is
sent by Agent as aforesaid, retention of such funds or rights
to payment shall not be in satisfaction of any obligation
under the Agreement;
(viii) If the proceeds realized from disposition of
the Collateral shall fail to satisfy all of the obligations of
Borrower to Banks, Borrower shall pay any deficiency balance
to Agent, for the benefit of Banks, upon demand.
(c) In the election of any remedy, Agent and Banks shall
not be deemed to have waived any right with respect to any other
remedies. In all cases, Agent invoking any remedy shall be entitled
to recover from Borrower Agent's reasonable costs incurred in
connection therewith, including reasonable attorneys' fees, whether or
not suit is brought.
(d) In the event Agent takes possession of the Collateral
or a receiver appointed upon Agent's application takes possession of
the Collateral, Agent or the receiver may use such Collateral or cause
the same to be used by its agents or other persons without charge or
cost whatsoever to Agent or the receiver for such use and without
compensation therefor to Borrower during the exercise by Agent or the
receiver of any rights or powers herein contained with reference
thereto, as well as pending any sale thereof or pending any
foreclosure proceedings and during and at all times Agent may, by
legal proceedings or otherwise, cause a receiver or agent to be placed
and maintained upon the premises upon which the Collateral may be
situated and neither the present nor the entry of such receiver or
such agent in or upon such premises and the use of such premises shall
be deemed a trespass thereupon or an interference with any person's
possession thereof.
(e) Upon the occurrence and during the continuation of
any Event of Default hereunder, Agent shall be entitled to enter upon
and use Borrower's business premises and shall be entitled to use
Borrower's equipment and facilities in leasing any of the Collateral,
or exercising its remedies as a secured creditor under the Uniform
Commercial Code and Borrower shall not be entitled to charge or
collect any rental or other fee for such use by Agent.
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(f) Upon any sale, lease, or other disposition of the
Collateral by Agent (whether by virtue of a power granted in any
security agreement, pursuant to judicial process, or otherwise), the
receipt of Agent or the officer making such sale, lease, or other
disposition, shall be a sufficient discharge to the person or persons
making payment for such sale, lease, or other disposition of the
Collateral and such person or persons shall not be obligated to see to
the application of any part of the money paid over to Agent or such
officer or be answerable in any way for the misapplication or
nonapplication thereof.
(g) As to any matters relating to the Collateral, Banks
hereby appoint and authorize Agent to take such action as agent on
their behalf and to exercise such powers under the Loan Documents as
are delegated by the terms thereof, together with such powers as are
reasonably incidental thereto. Without limiting the generality of the
foregoing, Banks hereby authorize Agent to release Collateral, subject
to the terms of this Section 11.1, and to execute on behalf of Banks
all documents and to take all other actions necessary to effect such
release. As to any matters not expressly provided for by this
Agreement or the other Loan Documents (including without limitation,
enforcement of rights against any Collateral prior to or after the
Facility Termination Date), Agent shall not be required to exercise
any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Banks
and such instructions shall be binding upon all Banks; provided,
however, that Agent shall not be required to take any action that
exposes Agent to personal liability or that is contrary to this
Agreement, any other Loan Documents or applicable law.
(h) Neither Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Section 11.1,
except for its or their own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, Agent: (i) may
consult with legal counsel (including counsel for Borrower),
independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel,
accountants or experts; (ii) makes no warranty or representation to
any Bank and shall not be responsible to any Bank for any statements,
warranties or representations made in or in connection with this
Agreement; (iii) shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of Borrower or to inspect the
Collateral or other property (including the books and records) of
Borrower or Guarantor; (iv) shall not be responsible to any Bank for
the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or
document furnished pursuant
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hereto; and (v) shall incur no liability under or in respect of this
Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram or telefax) believed
by it to be genuine and signed or sent by the proper party or parties.
(i) The order and manner in which Banks' rights and
remedies are to be exercised shall be determined by the Required Banks
in their sole discretion, and all payments received by Agent and
Banks, or any of them, shall be applied first to the costs and
expenses (including reasonable attorneys' fees and disbursements) of
Agent and of Banks, and thereafter paid pro rata to each Bank in the
same proportions that each Bank's Commitment bears to the Aggregate
Commitment, without priority or preference among Banks. Regardless of
how each Bank may treat payments for the purpose of its own
accounting, for the purpose of computing Borrower's obligations
hereunder and under the Notes, payments shall be applied first, to the
costs and expenses of Agent and Banks, as set forth above, second, to
the payment of accrued and unpaid interest due under any Loan
Documents to and including the date of such application (ratably, and
without duplication, according to the accrued and unpaid interest due
under each of the Loan Documents), and third, to the payment of all
other amounts (including principal and fees) then owing to Agent or
Banks under the Loan Documents. No application of 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 Banks
hereunder or thereunder or at law or in equity.
11.2 Amendments. Subject to the provisions of this Article XI, the
Required Banks (or Agent with the consent in writing of the Required Banks) and
Borrower may enter into agreements supplemental hereto for the purpose of
adding or modifying any provisions to the Loan Documents or changing in any
manner the rights of Banks or Borrower hereunder or waiving any Event of
Default hereunder; provided, however, that no such supplemental agreement
shall, without the consent of each Bank affected thereby:
(i) Extend the maturity of any Loan or Note or forgive
all or any portion of the principal amount thereof, or reduce the rate
of, or extend the time of payment of, interest or fees thereon;
(ii) Release Guarantor or the REIT from any of their
obligations, as applicable, under the Guaranty or the Environmental
Agreements;
(iii) Change the percentage specified in the definition of
Required Banks;
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(iv) Increase the amount of the Commitment of any Bank
hereunder, or permit Borrower to assign its rights under this
Agreement;
(v) Amend this Section 11.2, Section 12.7, Section 14.1
or Section 15.2.3.
No amendment of any provision of this Agreement relating to Agent shall be
effective without the written consent of Agent. Agent may waive payment or
reduce the amount of the fees referred to in Section 13.12 or the fee required
under Section 15.3.2 without obtaining the consent of any other party to this
Agreement.
11.3 Preservation of Rights. No delay or omission of any Bank or
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Event of Default or an acquiescence therein,
and the making of a Loan notwithstanding the existence of an Event of Default
or the inability of Borrower to satisfy the conditions precedent to such Loan
shall not constitute any waiver or acquiescence. Any single or partial
exercise of any such right shall not preclude other or further exercise thereof
or the exercise of any other right, and no waiver, amendment or other variation
of the terms, conditions or provisions of the Loan Documents whatsoever shall
be valid unless in writing signed by Banks (and, if applicable, Agent) required
pursuant to Section 11.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to Agent and Banks
until the Obligations have been paid in full.
ARTICLE XII
GENERAL PROVISIONS
12.1 Survival of Representations. All representations and
warranties of Borrower contained in this Agreement shall survive delivery of
the Notes and the making of the Loans herein contemplated.
12.2 Governmental Regulation. Anything contained in this Agreement
to the contrary notwithstanding, no Bank shall be obligated to extend credit to
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation effective after the date of this Agreement.
12.3 Taxes. Any recording, intangible, filing or stamp fees or
taxes or other similar assessments or charges made by any governmental or
revenue authority in respect of the Loan Documents shall be paid by Borrower,
together with interest and penalties, if any.
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12.4 Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any
of the provisions of the Loan Documents.
12.5 Entire Agreement. The Loan Documents and the letter
agreement(s) referred to in this Agreement embody the entire agreement and
understanding among Borrower, Agent and Banks and supersede all prior
agreements and understandings among Borrower, Agent, and Banks relating to the
subject matter thereof.
12.6 Nature of Obligations; Benefits of this Agreement.
(a) The respective obligations of Banks hereunder are
several and not joint and no Bank shall be the partner or agent of any
other (except to the extent to which Agent is authorized to act as
such). The failure of any Bank to perform any of its obligations
hereunder shall not relieve any other Bank from any of its obligations
hereunder.
(b) This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.
12.7 Expenses; Indemnification. Borrower shall reimburse Agent for
any reasonable costs, internal charges and out-of-pocket expenses (including
reasonable attorneys' fees and costs, title insurance premiums, other title
company charges, recording fees and filing fees, costs of Uniform Commercial
Code searches, appraisal fees, appraisal review fees, inspections of the
Collateral, any intangible or recording taxes and any other charges that may be
imposed on Agent as a result of the transactions contemplated herein) paid or
incurred by Agent in connection with the preparation, negotiation, execution,
delivery, review, amendment, modification, and administration of the Loan
Documents and the making of Advances. Borrower also agrees to reimburse Agent
and Banks for any reasonable costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and time charges of attorneys for Agent
and Banks) paid or incurred by Agent or any Bank in connection with the
collection and enforcement of the Loan Documents. Borrower further agrees to
indemnify and hold harmless Agent and each Bank, its directors, officers and
employees against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all reasonable
expenses of litigation or preparation therefor whether or not Agent or any Bank
is a party thereto) which any of them may pay or incur arising out of or
relating to this Agreement, the other Loan Documents, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder (except to the extent arising
due to the gross negligence or willful misconduct of the indemnified Person).
The obligations of Borrower under this Section shall survive the termination of
this Agreement.
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12.8 Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to Agent with sufficient
counterparts so that Agent may furnish one to each of Banks.
12.9 Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP.
12.10 Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
12.11 Nonliability of Banks. The relationship between Borrower and
Banks and Agent shall be solely that of borrower and lender. Neither Agent nor
any Bank shall have any fiduciary responsibilities to Borrower. Neither Agent
nor any Bank undertakes any responsibility to Borrower to review or inform
Borrower of any matter in connection with any phase of Borrower's business or
operations.
12.12 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
OF ARIZONA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
NOTWITHSTANDING THAT VARIOUS PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS MAY HAVE BEEN DRAFTED TO ADDRESS OR WAIVE THE LAWS OF OTHER STATES,
IN THE EVENT OF ANY FORECLOSURE BY BANKS ON ANY COLLATERAL, REGARDLESS OF WHERE
THE COLLATERAL IS LOCATED, THE PARTIES AGREE AND INTEND THAT THE LAWS OF THE
STATE OF ARIZONA SHALL GOVERN THAT RIGHT OF AGENT AND BANKS TO COLLECT AND
OBTAIN A JUDGMENT FOR ANY DEFICIENCY FOLLOWING FORECLOSURE, AND THE PARTIES
SPECIFICALLY INTEND THAT THE LAWS OF OTHER STATES SHALL NOT BE APPLICABLE. IN
SUCH CONNECTION, THE PARTIES FURTHER AGREE THAT:
(a) BANKS AND AGENT MAY ENFORCE THEIR RIGHTS UNDER THE
LOAN DOCUMENTS TO COLLECT ANY OUTSTANDING INDEBTEDNESS, OR TO OBTAIN A
JUDGMENT AGAINST BORROWER IN ANY STATE (INCLUDING WITHOUT LIMITATION A
JUDGMENT FOR ANY DEFICIENCY FOLLOWING FORECLOSURE), IN ACCORDANCE WITH
ARIZONA LAW, AND IF BANKS OR AGENT OBTAINS A JUDGMENT (INCLUDING
WITHOUT LIMITATION A DEFICIENCY
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JUDGMENT), THEN BANKS AND AGENT SHALL HAVE THE RIGHT TO ENFORCE SUCH
JUDGMENT IN ANY STATE; AND
(b) ANY STATE'S ANTIDEFICIENCY, ONE-ACTION, AND
SECURITY-FIRST RULES ARE INAPPLICABLE TO THE OBLIGATIONS AND
INDEBTEDNESS SECURED BY THE DEEDS OF TRUST AND OTHER LOAN DOCUMENTS
AND TO THE ENFORCEMENT OR REALIZATION BY AGENT AND BANKS OF THEIR
RIGHTS AND REMEDIES RELATING THERETO.
12.13 Arbitration. Subject to the provisions of this Section 12.13,
Borrower, Banks and Agent agree to submit to binding arbitration any and all
claims, disputes and controversies between or among them (and their respective
employees, officers, directors, attorneys, and other agents if permitted by law
or a contract between them and such persons) relating to this Agreement and the
Loan Documents and the negotiation, execution, collateralization,
administration, repayment, modification, extension or collection thereof or
arising thereunder. Such arbitration shall proceed in Phoenix, Arizona, shall
be governed by Arizona law and shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"), as modified in this Section 12.13. Judgment upon the award rendered by
each arbitrator(s) may be entered in any court having jurisdiction.
(a) Nothing in the preceding paragraph, nor the exercise
of any right to arbitrate thereunder, shall limit the right of any
party hereto (1) to foreclose against any real or personal property
collateral encumbered by a Deed of Trust or other Loan Document, or
otherwise permitted under applicable law; (2) subject to provisions of
applicable law, to exercise self-help remedies such as setoff or
repossession or other self-help remedies provided in this Agreement or
any other Loan Document; or (3) to obtain provisional or ancillary
remedies such as replevin, injunctive relief, attachment, or
appointment of a receiver from a court having jurisdiction, before,
during or after the pendency of any arbitration proceeding, or (4) to
defend or obtain injunctive or other equitable relief from a court of
competent jurisdiction against the foregoing or assert mandatory
counterclaims, if any, prior to and during the pendency of a
determination in arbitration of issues of performance, default,
damages and other such claims and disputes.
(b) Arbitration hereunder shall be before a three-person
panel of neutral arbitrators, consisting of one person from each of
the following categories: (1) an attorney who has practiced in the
area of commercial real estate law for at least ten (10) years; (2) a
person with at least ten (10) years' experience in real estate
lending; and (3) a person with at least ten (10) years' experience in
the homebuilding industry. The AAA shall submit a list of persons
meeting the
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criteria outlined above for each category of arbitrator, and the
parties shall select one person from each category in the manner
established by the AAA.
(c) In any dispute between the parties that is
arbitratable hereunder, where the aggregate of all claims and the
aggregate of all counterclaims is an amount less than Fifty Thousand
And No/100ths Dollars ($50,000), the arbitration shall be before a
single neutral arbitrator to be selected in accordance with the
Commercial Rules of the American Arbitration Association and shall
proceed under the Expedited Procedures of said Rules.
(d) In any arbitration hereunder, the arbitrators shall
decide (by documents only or with a hearing, at the arbitrators'
discretion) any pre-hearing motions which are substantially similar to
pre-hearing motions to dismiss for failure to state a claim or motions
for summary adjudication.
(e) In any arbitration hereunder, discovery shall be
permitted in accordance with the Arizona Rules of Civil Procedure.
Scheduling of such discovery may be determined by the arbitrators, and
any discovery disputes shall be finally determined by the arbitrators.
(f) The Arizona Rules of Evidence shall control the
admission of evidence at the hearing in any arbitration conducted
hereunder; provided, however, no error by the arbitrators in
application of the Rules of Evidence shall be grounds, as such, for
vacating the arbitrators' award.
(g) Notwithstanding any AAA rule to the contrary, the
arbitration award shall be in writing and shall specify the factual
and legal basis for the award, including findings of fact and
conclusions of law.
(h) Each party shall each bear its own costs and expenses
and an equal share of the arbitrators' costs and administrative fees
of arbitration.
12.14 CONSENT TO JURISDICTION. BORROWER AND EACH BANK HEREBY
IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ARIZONA STATE COURT SITTING IN PHOENIX, ARIZONA IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND BORROWER AND
EACH BANK HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVE ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING IN THIS SECTION 12.14 SHALL
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LIMIT THE RIGHT OF AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST BORROWER IN
THE COURTS OF ANY OTHER JURISDICTION. SUBJECT TO THE PROVISIONS OF SECTION
12.13, UNLESS PROHIBITED BY LAW, ANY JUDICIAL PROCEEDING BY BORROWER AGAINST
AGENT OR ANY BANK OR ANY AFFILIATE OF AGENT OR ANY BANK INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT SHALL BE BROUGHT IN A COURT IN PHOENIX, ARIZONA.
12.15 WAIVER OF JURY TRIAL. SUBJECT TO THE PROVISIONS OF SECTION
12.13, BORROWER, AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
12.16 Confidentiality. Bank and Agent agree to use commercially
reasonable efforts to keep confidential any financial reports and other
information from time to time supplied to them by Borrower hereunder to the
extent that such information is not and does not become publicly available
through or with the consent or acquiescence of Borrower, except for disclosure
(i) to Agent and the other Banks or to a Transferee, (ii) to legal counsel,
accountants, and other professional advisors to a Bank, Agent or a Transferee,
(iii) to regulatory officials, (iv) to any Person as required by law,
regulation, or legal process, (v) to any Person in connection with any legal
proceeding to which that Bank is a party, and (vi) permitted by Section 15.4.
Any Bank or Agent disclosing such information shall use commercially reasonable
efforts to advise the Person to whom such information is disclosed of the
foregoing confidentiality agreement and to direct such Person to comply
therewith.
ARTICLE XIII
AGENT
13.1 Appointment. Bank One is hereby appointed Agent hereunder and
under each other Loan Document, and each of Banks irrevocably authorizes Agent
to act as the agent of such Bank. Agent agrees to act as such upon the express
conditions contained in this Article XIII. Agent shall not have a fiduciary
relationship in respect of Borrower or any Bank by reason of this Agreement.
13.2 Powers. Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. Agent
shall have no implied duties to Banks, or any obligation to Banks to take any
action thereunder except any action specifically provided by the Loan Documents
to be taken by Agent.
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13.3 General Immunity. Neither Agent (in its capacity as Agent and
not in its capacity as a Bank) nor any of its directors, officers, agents or
employees shall be liable to Borrower or any Bank for action taken or omitted
to be taken by it or them hereunder or under any other Loan Document or in
connection herewith or therewith except for its or their own gross negligence
or willful misconduct.
13.4 No Responsibility for Loans, Recitals, etc. Neither 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 any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Bank; (iii) the satisfaction of any condition specified in Article IV or V,
except receipt of items required to be delivered to Agent; or (iv) the
validity, effectiveness or genuineness of any Loan Document or any other
instrument or writing furnished in connection with any of the foregoing. Agent
shall have no duty to disclose to Banks information that is not required to be
furnished by Borrower to Agent at such time, but is voluntarily furnished by
Borrower to Agent (either in its capacity as Agent or in its individual
capacity).
13.5 Action on Instructions of Banks. Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Banks (except as otherwise provided in Section 11.2), and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of Banks and on all holders of Notes. Agent shall be fully
justified in failing or refusing to take any action hereunder and under any
other Loan Document unless it shall first be indemnified to its satisfaction by
Banks pro rata against any and all liability, cost and expense that it may
incur by reason of taking or continuing to take any such action.
13.6 Employment of Agents and Counsel. Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to Banks,
except as to money or securities or other Property received by it or its
authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Agent shall be entitled
to advice of counsel concerning all matters pertaining to the agency hereby
created and its duties hereunder and under any other Loan Document.
13.7 Reliance on Documents; Counsel. Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by Agent, which counsel may
be employees of Agent.
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13.8 Agent's Reimbursement and Indemnification. Banks agree to
reimburse and indemnify Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by Borrower for which Agent is
entitled to reimbursement by Borrower under the Loan Documents, (ii) for any
other expenses incurred by Agent on behalf of Banks, in connection with the
preparation, execution, delivery, administration and enforcement of the Loan
Documents, and (iii) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against Agent in any way relating to or arising out of the Loan Documents or
any other document delivered in connection therewith or the transactions
contemplated thereby, or the enforcement of any of the terms thereof or of any
such other documents, provided that no Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of Agent. The obligations of Banks under this Section 13.8 shall
survive payment of the Obligations and termination of this Agreement.
13.9 Rights as a Bank. In the event Agent is a Bank, Agent shall
have the same rights and powers hereunder and under any other Loan Document as
any Bank and may exercise the same as though it were not Agent, and the term
"Bank" or "Banks" shall, at any time when Agent is a Bank, unless the context
otherwise indicates, include Agent in its individual capacity. Agent may
accept deposits from, lend money to, and generally engage in any kind of trust,
debt, equity or other transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with Borrower, Guarantor or the REIT or
any of their Affiliates in which Borrower, Guarantor, the REIT or such
Affiliate is not restricted hereby from engaging with any other Person.
13.10 Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon Agent or any other Bank and based on
the financial statements prepared by Borrower, Guarantor and the REIT and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Bank also acknowledges that it will, independently and without
reliance upon 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 action under this Agreement and the
other Loan Documents.
13.11 Successor Agent. Agent may resign at any time by giving
written notice thereof to Banks and Borrower, such resignation to be effective
upon the appointment of a successor Agent reasonably approved by Borrower
(provided, that if an Event of Default has occurred and is continuing, the
approval of Borrower shall not be required) or, if no successor Agent has been
appointed and an Event of Default has occurred and is continuing, sixty (60)
days after the retiring Agent gives notice of its intention to resign. Agent
may be removed at any time with or without cause by written notice received by
Agent from the Required Banks, such removal to be effective on the date
specified by such Banks. The consent of Borrower shall be required prior to
any removal of Agent becoming effective; provided, however, that if an Event of
Default has occurred
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and is continuing, the consent of Borrower shall not be required. Upon any
such resignation or removal, the Required Banks shall have the right to
appoint, subject to the consent of Borrower which consent shall not be
unreasonably withheld (provided, that if an Event of Default has occurred and
is continuing, the consent of Borrower shall not be required), on behalf of
Borrower and Banks, a successor Agent. Any Bank can be a successor Agent upon
the approval of the Required Banks. Any other successor Agent shall be
appointed only with the prior reasonable consent of Borrower. If no successor
Agent shall have been so appointed by the Required Banks within forty-five (45)
days after the resigning Agent's giving notice of its intention to resign, then
the resigning Agent may appoint, on behalf of Borrower and Banks, a successor
Agent subject to the consent of Borrower which consent shall not be
unreasonably withheld (provided, that if an Event of Default has occurred and
is continuing, the consent of Borrower shall not be required).
If Agent has resigned or been removed as permitted herein and no
successor Agent has been appointed in accordance with the terms hereof, Banks
may perform all the duties of Agent hereunder and Borrower shall make all
payments in respect of the Obligations to the applicable Bank and for all other
purposes shall deal directly with Banks. No successor Agent shall be deemed to
be appointed hereunder until such successor Agent has accepted the appointment.
Any such successor Agent shall be a commercial bank having capital and retained
earnings of at least $250,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning or removed Agent.
13.12 Agent's Fee. Borrower agree to pay to Agent, for its own
account, the fees agreed to by Borrower and Agent pursuant to that certain
letter agreement of even date herewith, or as otherwise agreed from time to
time.
ARTICLE XIV
SETOFF; RATABLE PAYMENTS
14.1 Setoff. In addition to, and without limitation of, any rights
of any Bank under applicable law, if Borrower becomes insolvent, however
evidenced, or any Event of Default occurs and is continuing, any and all
deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Indebtedness at any time
held or owing by any Bank to or for the credit or account of Borrower may be
offset and applied toward the payment of the Obligations owing to such Bank,
whether or not the Obligations, or any part thereof, shall then be due.
14.2 Ratable Payments. If any Bank (whether by setoff or
otherwise) has payment made to it upon its Loans (other than payments received
pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than that
received by any other Bank, such Bank agrees, promptly upon demand, to purchase
a portion of the Loans held by the other Banks so that after such purchase
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each Bank will hold its ratable proportion of Loans. If any Bank, whether in
connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its Obligations or such
amounts which may be subject to setoff, such Bank agrees, promptly upon demand,
to take such action necessary such that all Banks share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
prevented, restricted or otherwise impeded by legal process, or otherwise,
appropriate further adjustments shall be made.
ARTICLE XV
BENEFIT OF AGREEMENT, ASSIGNMENTS; PARTICIPATIONS
15.1 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of Borrower, Agent and
Banks and their respective successors and assigns, except that (i) Borrower
shall not have the right to assign its rights or obligations under the Loan
Documents, and (ii) any assignment by any Bank must be made in compliance with
Section 15.3. Notwithstanding clause (ii) of this Section, any Bank may at any
time, without the consent of Borrower or Agent, assign all or any portion of
its rights under this Agreement and its Notes to a Federal Reserve Bank;
provided, however, that no such assignment shall release the transferor Bank
from its obligations hereunder. Agent may treat the payee of any Note as the
owner thereof for all purposes hereof unless and until such payee complies with
Section 15.3 in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with Agent. Any assignee
or transferee of a Note agrees by acceptance thereof to be bound by all the
terms and provisions of the Loan Documents. Any request, authority or consent
of any Person, who at the time of making such request or giving such authority
or consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
15.2 Participations.
15.2.1 Permitted Participants; Effect. Any Bank may, in
the ordinary course of its business and in accordance with applicable law, at
any time sell to one or more banks or other Persons ("Participants")
participating interests in any Loan owing to such Bank, any Note held by such
Bank, any Commitment of such Bank or any other interest of such Bank under the
Loan Documents in an amount of not less than $5,000,000, so long as immediately
following such sale the selling Bank shall retain at least one-half ( 1/2) of
its Commitment. In the event of any such sale by a Bank of participating
interests to a Participant, such Bank's obligations under the Loan Documents
shall remain unchanged, such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Bank shall remain
the holder of any such Note for all purposes under the Loan Documents, all
amounts payable by Borrower under this Agreement shall be determined as if such
Bank has not sold such participating interests, and
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Borrower and Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under the Loan Documents.
15.2.2 Voting Rights. Each Bank shall retain the sole
right to approve, and/or grant its consent to, without the consent of any
Participant, any amendment, modification or waiver or other matter relating to
any provision of the Loan Documents.
15.2.3 No Benefit of Setoff. No Participant shall have a
right of setoff with respect to the Obligations. By entering into a
participation with any Bank, such Participant shall be deemed to have waived
with respect to the Obligations its rights to offset any accounts of Borrower
or other Indebtedness at any time held or owing by any Participant to or for
the credit or account of Borrower.
15.3 Assignments.
15.3.1 Permitted Assignments. Any Bank may, in the
ordinary course of its business and in accordance with applicable law, at any
time assign to one or more banks or other financial institutions ("Purchasers")
all or any part of its rights and obligations under the Loan Documents in the
amount of not less than $7,500,000, provided that each such assignment shall be
of a constant, and not a varying, percentage of the assigning Bank's rights and
obligations under the Loan Documents; and provided further, that immediately
following such assignment, the assigning Bank either (i) shall retain a
Commitment of not less than $7,500,000 or, if the assigning Bank is Agent, not
less than $15,000,000, or (ii) shall have assigned all of its Commitment and
have no remaining interest in the Obligations. Such assignment shall be
substantially in the form of Exhibit H hereto or in such other form as may be
agreed to by the parties thereto. The consent of Borrower and Agent shall be
required prior to an assignment becoming effective; provided, however, that if
an Event of Default has occurred and is continuing, the consent of Borrower
shall not be required.
15.3.2 Effect; Effective Date. Upon (i) delivery to Agent
of a notice of assignment, substantially in the form attached as Exhibit "1" to
Exhibit H hereto (a "Notice of Assignment"), together with any consents
required by Section 15.3.1, and (ii) payment by the Bank of a $5,000 fee to
Agent for processing such assignment, such assignment shall become effective on
the effective date specified in such Notice of Assignment. The Notice of
Assignment shall contain a representation by the Purchaser to the effect that
none of the consideration used to make the purchase of the Commitment and Loans
under the applicable assignment agreement are "plan assets" as defined under
ERISA and that the rights and interests of the Purchaser in and under the Loan
Documents will not be "plan assets" under ERISA.
On and after the effective date of such assignment, such Purchaser
shall for all purposes be a Bank party to this Agreement and any other Loan
Document executed by Banks and shall have all the rights and obligations of a
Bank under the Loan Documents, to the same extent as if
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it were an original party hereto, and no further consent or action by Borrower,
Banks or Agent shall be required to release the transferor Bank with respect to
the percentage of the Aggregate Commitment and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to
this Section 15.3.2, the transferor Bank, Agent and Borrower shall make
appropriate arrangements so that replacement Notes are issued to such
transferor Bank and new Notes or, as appropriate, replacement Notes, are issued
to such Purchaser, in each case in principal amounts reflecting their
Commitment, as adjusted pursuant to such assignment.
15.4 Dissemination of Information. Borrower authorizes each Bank
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and
any prospective Transferee any and all public information in such Bank's
possession concerning the creditworthiness of Borrower, Guarantor and the REIT,
and their Affiliates; provided that each Transferee and prospective Transferee
agrees to be bound by Section 12.15 of this Agreement.
15.5 Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Bank shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.19.
ARTICLE XVI
NOTICES
16.1 Giving Notice. Except as otherwise permitted by Section 2.14
with respect to borrowing notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by telex or by facsimile and addressed or delivered to
such party at its address set forth below its signature hereto or at such other
address as may be designated by such party in a notice to the other parties.
Any notice, if mailed and properly addressed with postage prepaid, shall be
deemed given when received; any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted (answerback confirmed in the case of
telexes).
16.2 Change of Address. Borrower, Agent and any Bank may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XVII
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement
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by signing any such counterpart. This Agreement shall be effective when it has
been executed by Borrower, Agent, and Banks and each party has notified Agent
by telex or telephone, that it has taken such action.
IN WITNESS WHEREOF, Borrower, Banks, and Agent have executed this
Agreement as of the date first above written.
BORROWER:
AMBASSADOR II, L.P., a Delaware limited
partnership
BY: AMBASSADOR II, INC., a Delaware
corporation, General Partner
By:
----------------------------
Name: Adam D. Peterson
Title: Senior Vice President
c/o Ambassador Apartments, Inc.
77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
Attention: President
With a copy to:
Kaye, Scholer, Fierman, Hays & Handler,
LLP
425 Park Avenue
New York, New York 10022
Attention: Stephen Gliatta, Esq.
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<PAGE> 71
Commitments BANKS:
-----------
75,000,000 BANK ONE, ARIZONA, NA, a national banking
association, Individually and as Agent
By:
--------------------------------------
Name: Mark R. Young
Title: Senior Vice President
Western Region Real Estate
241 North Central Avenue
Phoenix, Arizona 85004
Attention: Department A-392
ACKNOWLEDGMENT, CONSENT AND AGREEMENT
The undersigned are referred to in the foregoing Credit Agreement as
Guarantor and the REIT. The undersigned acknowledge that certain terms and
provisions of the foregoing Credit Agreement apply to Guarantor and the REIT.
The undersigned hereby consent to such provisions and agree to comply therewith
and to be bound thereby in the same manner as though the undersigned were
parties to the Credit Agreement.
AMBASSADOR APARTMENTS, L.P., a Delaware
limited partnership
BY: AMBASSADOR APARTMENTS, INC., a
Maryland corporation,
General Partner
By:
--------------------------------------
Name: Adam D. Peterson
Title: Senior Vice President
GUARANTOR
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<PAGE> 72
AMBASSADOR APARTMENTS, INC., a
Maryland corporation
By:
-----------------------------------
Name: Adam D. Peterson
Title: Senior Vice President
REIT
-72-
<PAGE> 73
SCHEDULE "1"
Initial Projects:
<TABLE>
<CAPTION>
=========================================================================================
Property Location
- -----------------------------------------------------------------------------------------
<S> <C>
Country Club West Greeley, CO
- -----------------------------------------------------------------------------------------
Courtney Park Ft. Collins, CO
- -----------------------------------------------------------------------------------------
Orangewood Tucson, AZ
- -----------------------------------------------------------------------------------------
Sandalwood Houston, TX
- -----------------------------------------------------------------------------------------
The Mills Houston, TX
- -----------------------------------------------------------------------------------------
Trails of Ashford Houston, TX
- -----------------------------------------------------------------------------------------
Crossroads Phoenix, AZ
- -----------------------------------------------------------------------------------------
Shallow Creek San Antonio, TX
=========================================================================================
</TABLE>
<PAGE> 74
SCHEDULE "6.3"
Required Orders, Consents and Approvals:
None
<PAGE> 75
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2 Required Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3 Ratable Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4 Types of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.5 Fees; Reduction in Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.6 Minimum Amount of Each Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.7 Optional Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.8 Method of Selecting Types and Interest Periods for New Advances . . . . . . . . . . . . . . . . 17
2.9 Conversion and Continuation of Outstanding Advances . . . . . . . . . . . . . . . . . . . . . . 18
2.10 Changes in Interest Rate, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.11 Determination of Applicable Margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.12 Rates Applicable After Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.13 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.14 Notes; Telephonic Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.15 Interest Payment Dates; Interest Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.16 Notification of Advances, Interest Rates, Prepayments and Commitment Reductions . . . . . . . . 21
2.17 Lending Installations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.18 Non-Receipt of Funds by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.19 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.20 Extension of Facility Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.21 Replacement of Certain Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.22 Purpose of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE III CHANGE IN CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1 Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2 Changes in Capital Adequacy Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3 Availability of Types of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.4 Funding Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5 Bank Statements; Survival of Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.1 Conditions Precedent to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Each Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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<S> <C>
ARTICLE V COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.1 Security for the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.2 Conditions for Additional Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.3 Conditions Precedent for Eligible Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.4 Partial Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VI REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.1 Existence and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.2 Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.3 No Conflict; Government Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.5 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.7 Litigation and Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.9 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.10 Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.11 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.12 Labor Disputes and Acts of God . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.13 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.14 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.15 Laws; Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.16 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.17 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.18 Validity of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.19 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.20 Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.1 Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.3 Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.4 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.8 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.9 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.10 REIT Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.11 Affirmation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VIII NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.2 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.3 Investments and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.4 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE IX FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.1 Minimum Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.2 Total Liabilities to Gross Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.3 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4 EBITDA to Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.5 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.6 Unprotected Floating Rate Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE X EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.2 Non-payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.3 Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.4 Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.5 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.6 Receiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.7 Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.8 Unfunded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.9 Withdrawal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.10 Increased Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.11 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.12 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.13 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.14 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.15 Seizure of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.16 Garnishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.17 Legal Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.18 Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.19 Encroachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.20 Uninsured or Underinsured Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.21 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.22 Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE XI ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.1 Acceleration; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.3 Preservation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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<TABLE>
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ARTICLE XII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.1 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.2 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.6 Nature of Obligations; Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . 59
12.7 Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.8 Numbers of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.9 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.10 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.11 Nonliability of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.12 CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.13 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.14 CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.15 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE XIII AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.3 General Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.4 No Responsibility for Loans, Recitals, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.5 Action on Instructions of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.6 Employment of Agents and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.7 Reliance on Documents; Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.8 Agent's Reimbursement and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.9 Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.10 Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.11 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.12 Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XIV SETOFF; RATABLE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
14.1 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
14.2 Ratable Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XV BENEFIT OF AGREEMENT, ASSIGNMENTS; PARTICIPATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
15.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
15.2 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
15.2.1 Permitted Participants; Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
15.2.2 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
-iv-
<PAGE> 79
<TABLE>
<S> <C>
15.2.3 No Benefit of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
15.3 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
15.3.1 Permitted Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
15.3.2 Effect; Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
15.4 Dissemination of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
15.5 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE XVI NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
16.1 Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
16.2 Change of Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE XVII COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
-v-
<PAGE> 80
LIST OF SCHEDULES AND EXHIBITS
EXHIBITS:
<TABLE>
<S> <C>
Exhibit A Form of Deed of Trust
Exhibit B Form of Environmental Agreement
Exhibit C Form of Guaranty
Exhibit D Form of Note
Exhibit E Form of Pledge and Security Agreement
Exhibit F Form of Borrowing Notice
Exhibit G Form of Compliance Certificate of Authorized Officer (Financial Covenants)
Exhibit H Form of Assignment (with Form of Notice of Assignment attached)
</TABLE>
SCHEDULES:
Schedule "1" Initial Projects
Schedule "6.3" Required Orders, Consents and Approvals
<PAGE> 81
CREDIT AGREEMENT
DATED AS OF JUNE 26, 1996
AMONG
AMBASSADOR II, L.P.
as Borrower
AND
BANK ONE, ARIZONA, NA
as Agent
AND
THE BANKS NAMED HEREIN
as Banks
<PAGE> 1
EXHIBIT 10.41
PROMISSORY NOTE
$75,000,000.00 June 26, 1996
Phoenix, Arizona
FOR VALUE RECEIVED, AMBASSADOR II, L.P., a Delaware limited
partnership ("Maker"), hereby promises and agrees to pay to the order of BANK
ONE, ARIZONA, NA, a national banking association ("Payee"), the principal sum
of SEVENTY-FIVE MILLION AND NO/100 DOLLARS ($75,000,000.00) in lawful money of
the United States of America, or, if less than such principal amount, the
aggregate unpaid principal amount of all Advances made to Maker by the Payee
pursuant to the Credit Agreement hereinafter referenced. Such payment shall be
made on the Facility Termination Date, as defined in the Credit Agreement.
Maker shall pay interest from the date hereof on the unpaid
principal amount of this Note from time to time outstanding during the period
from the date hereof until such principal amount is paid in full at the rates,
determined in the manner, and on the dates or occurrences specified in the
Credit Agreement (as hereinafter defined).
This promissory note is one of the Notes referred to in the
Credit Agreement dated as of June 26, 1996, among Maker, Bank One, Arizona, NA,
as Agent, and the Banks named therein (as the same may be amended, modified,
replaced, or renewed from time to time, the "Credit Agreement") and is entitled
to the benefits of the Credit Agreement and the Loan Documents. Capitalized
terms used in this Note without definition shall have the same meanings as are
ascribed to such terms in the Credit Agreement.
Both principal and interest are payable to the Agent for the
account of Payee pursuant to the terms of the Credit Agreement. All Advances
made by Payee pursuant to the Credit Agreement and all payments of the
principal amount of such Advances, shall be endorsed by the holder of this Note
on the schedule attached hereto. Failure to record such Advances or payment
shall not diminish any rights of Payee or relieve Maker of any liability
hereunder or under the Credit Agreement. This Note is subject to prepayment and
its maturity is subject to acceleration, in each case upon the terms provided
in the Credit Agreement.
This Note may not be modified or discharged orally, by course
of dealing or otherwise, but only by a writing duly executed by the holder
hereof.
In the event that any action, suit or proceeding is brought by
the holder hereof to collect this Note, Maker agrees to pay and shall be liable
for all costs and expenses of collection, including without limitation,
reasonable attorneys' fees and disbursements.
<PAGE> 2
Maker and all sureties, guarantors and/or endorsers hereof (or of any
obligation hereunder) and accommodation parties hereon (all of which, including
Maker, are severally each hereinafter called a "Surety") each: (a) agree that
the liability under this Note of all parties hereto is joint and several; (b)
severally waive any homestead or exemption laws and right thereunder affecting
the full collection of this Note; (c) severally waive any and all formalities
in connection with this Note to the maximum extent allowed by law, including
(but not limited to) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment of
this Note; and (d) consent that the holder hereof may extend the time of
payment or otherwise modify the terms of payment of any part or the whole of
the debt evidenced by this Note, at the request of any other person liable
hereon, and such consent shall not alter nor diminish the liability of any
person hereon.
In addition, each Surety waives and agrees not to assert: (a) any
right to require the holder hereof to proceed against any other Surety, to
proceed against or exhaust any security for the Note, to pursue any other
remedy available to the holder hereof, or to pursue any remedy in any
particular order or manner; (b) the benefit of any statute of limitations
affecting its liability hereunder or the enforcement hereof; (c) the benefits
of any legal or equitable doctrine or principle of marshaling; (d) notice of
the existence, creation or incurring of new or additional indebtedness of Maker
to the holder hereof; (e) the benefits of any statutory provision limiting the
liability of a surety, including without limitation the provisions of Sections
12-1641, et seq., of the Arizona Revised Statutes; (f) any defense arising by
reason of any disability or other defense of any Maker or by reason of the
cessation from any cause whatsoever (other than payment in full) of the
liability of Maker for payment of this Note; and (g) the benefits of any
statutory provision limiting the right of the holder hereof to recover a
deficiency judgment, or to otherwise proceed against any person or entity
obligated for payment of this Note, after any foreclosure or trustee's sale of
any security for this Note, including without limitation the benefits, if any,
to a Surety of Arizona Revised Statutes Section 33-814. Until payment in full
of this Note and such time as the holder hereof has no obligation to make any
further advances of the proceeds hereof, no Surety shall have any right of
subrogation and each hereby waives any right to enforce any remedy which the
holder hereof now has, or may hereafter have, against Maker or any other
Surety, and waives any benefit of, and any right to participate in, any
security now or hereafter held by the holder hereof.
Maker agrees that to the extent any Surety makes any payment to the
holder hereof in connection with the indebtedness evidenced by this Note, and
all or any part of such payment is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid by the holder
hereof or paid over to a trustee, receiver or any other entity, whether under
any bankruptcy act or otherwise (any such payment is hereinafter referred to as
a "Preferential Payment"), then the indebtedness of Maker under this Note shall
be reinstated to the extent of such payment or repayment by the holder hereof
and the indebtedness evidenced by this Note or part thereof intended to be
satisfied by such Preferential Payment shall be revived and continued in full
force and effect as if said Preferential Payment had not been made.
-2-
<PAGE> 3
This Note has been delivered in the City of Phoenix and State
of Arizona, and shall be enforced under and governed by the laws of the State
of Arizona applicable to contracts made and to be performed entirely within
said state, without references to any choice or conflicts of law principles.
AMBASSADOR II, L.P., a Delaware limited
partnership
BY: AMBASSADOR II, INC., a Delaware
corporation, General Partner
By:
-------------------------------
Name: Adam D. Peterson
Title: Senior Vice President
-3-
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Entity Ownership/Partners State of Formation
- ------ ------------------ -------------------
<S> <C> <C>
Prime Residential, L.P. Prime Residential, Inc. Delaware
The Prime Group, Inc.
Prime Group Limited
Partnership
Richard F. Cavenaugh
LG Trust
David M. Glickman
Adam D. Peterson
Prime Group IV. L.P.
Prime Residential Texas, Inc. Prime Residential, Inc. Delaware
(100% Common Stock)
Prime MFP Residential, Inc. Prime Residential, Inc. Delaware
(100% Common Stock)
Prime MFP II Residential, Inc. Prime Residential, Inc. Delaware
(100% Common Stock)
Prime Residential Texas Partners, L.P. Prime Residential Texas, Inc. Delaware
Prime Residential, L.P.
Prime MFP IV Residential, Inc. Prime Residential, Inc. Delaware
(100% Common Stock)
Prime MFP V Residential, Inc. Prime Residential, Inc. Delaware
(100% Common Stock)
Prime MFP VI Residential, Inc. Prime Residential, Inc. Delaware
(100% Common Stock)
Prime MFP VII Residential, Inc. Prime Residential, Inc. Delaware
(100% Common Stock)
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Entity Ownership/Partners State of Formation
- ------ ------------------ -------------------
<S> <C> <C>
A.J. One, Inc. Prime Residential, Inc. Delaware
(100% Common Stock)
A.J. Two, Inc. Prime Residential, Inc. Delaware
(100% Common Stock)
Prime MFP Limited Partnership Prime MFP Residential, Inc. Illinois
Jupiter I, L.P.
Prime MFP II Limited Partnership Prime MFP II Residential, Inc. Texas
Prime Residential, L.P.
Braesview Partnership Prime Residential Texas, Inc. Texas
Prime Residential Texas Partners, L.P.
Cape Cod Partnership Prime Residential Texas, Inc. Texas
Prime Residential Texas Partners, L.P.
Eagle's Nest Partnership Prime Residential Texas, Inc. Texas
Prime Residential Texas Partners, L.P.
Mesa Ridge Partnership Prime Residential Texas, Inc. Texas
Prime Residential Texas Partners, L.P.
LaJolla Partnership Prime Residential Texas, Inc. Texas
Prime Residential Texas Partners, L.P.
Prime Aspen Limited Partnership Prime Residential, L.P. Texas
Prime Residential Texas Partners, L.P.
AJ One Limited Partnership AJ One, Inc. Delaware
Prime Residential, L.P.
AJ Two Limited Partnership AJ Two, Inc. Delaware
Prime Residential, L.P.
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
Entity Ownership/Partners State of Formation
- ------ ------------------ -------------------
<S> <C> <C>
Jupiter I, L.P. Yugenkeisha Sekiyu Delaware
AJ One Limited Partnership
Jupiter II, L.P. Makito Maki Delaware
AJ Two Limited Partnership
Prime H.C. Limited Partnership Prime Residential Texas Partners, L.P. Texas
Prime Residential, L.P.
Prime Crest, L.P. Prime Residential Texas Partners, L.P. Texas
Prime Residential, L.P.
Brookdale Lakes Partnership Prime Residential, Inc. Illinois
Prime Residential, L.P.
Williamsburg Limited Partnership Prime Residential, L.P. Illinois
Williamsburg Group L.L.C.
Richard Curto
Brook Run Associates, L.P. Prime Residential, L.P. Illinois
Kemper Realty Corp.
Richard J. Brown
Prime MFP III Limited Partnership Prime Residential Texas, Inc. Delaware
Prime Residential Texas Partners, L.P.
Prime MFP IV Limited Partnership Prime MFP IV Residential, Inc. Delaware
Prime Residential, L.P.
Prime MFP V Limited Partnership Prime MFP V Residential, Inc. Delaware
Prime Residential, L.P.
Prime MFP VI Limited Partnership Prime MFP VI Residential, Inc. Delaware
Prime Residential, L.P.
Prime MFP VII Limited Partnership Jupiter II, L.P. Delaware
Prime MFP VII Residential, Inc.
</TABLE>
3
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,587
<SECURITIES> 0
<RECEIVABLES> 1,468
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 376,939
<DEPRECIATION> (26,100)
<TOTAL-ASSETS> 392,264
<CURRENT-LIABILITIES> 0
<BONDS> 250,532
0
0
<COMMON> 90
<OTHER-SE> 102,089
<TOTAL-LIABILITY-AND-EQUITY> 392,264
<SALES> 0
<TOTAL-REVENUES> 31,860
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,385
<INCOME-PRETAX> 2,635
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
