<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, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period From _______________ to
_______________.
Commission file number 1-14132
AMBASSADOR APARTMENTS, INC.
- --------------------------------------------------------------------------------
(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
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(312) 917-1600
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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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 period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
As of August 11, 1997 the registrant had outstanding 10,490,180 shares of
Common Stock, $.01 par value per share.
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AMBASSADOR APARTMENTS, INC. Form 10-Q
INDEX
Part I: Financial Information Page
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Item 1. Financial Statements
Consolidated balance sheets of Ambassador Apartments, Inc. as of
June 30, 1997 and December 31, 1996.............................. 4
Consolidated statements of operations of Ambassador Apartments,
Inc. for the three- and six-month periods ended June 30, 1997 and
1996, respectively............................................... 5
Consolidated statements of cash flows of Ambassador Apartments,
Inc. for the six-month period ended June 30, 1997 and 1996,
respectively..................................................... 6
Notes to consolidated financial statements....................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 14
Part II: Other Information
Item 1. Legal Proceedings................................................ 23
Item 2. Changes in Securities............................................ 23
Item 3. Defaults Upon Senior Securities.................................. 23
Item 4. Submission of Matters to a Vote of Security Holders.............. 23
Item 5. Other Information................................................ 24
Item 6. Exhibits or Reports on Form 8-K.................................. 25
Signature................................................................. 27
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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
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, 1997 AND DECEMBER 31, 1996
(Dollars in thousands, except for per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
<S> <C> <C>
ASSETS
Rental property:
Land.................................................. $ 89,440 $ 82,124
Buildings and improvements............................ 444,581 407,002
Furniture and equipment............................... 7,011 6,166
-------- --------
541,032 495,292
Accumulated depreciation................................ (42,246) (33,340)
-------- --------
498,786 461,952
Cash and cash equivalents............................... 10,177 4,002
Escrow deposits......................................... 26,819 30,897
Escrowed bond funds--restricted......................... 403 549
Note receivable - Officer............................... 1,000 1,000
Accounts receivable..................................... 1,609 1,870
Investment in and advances to unconsolidated real estate
limited partnerships.................................... 3,741 4,549
Deferred financing costs, net........................... 11,585 9,640
Other................................................... 2,836 1,325
-------- --------
TOTAL ASSETS............................................ $556,956 $515,784
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bonds payable........................................... $315,860 $279,355
Notes payable........................................... 59,427 79,974
Accrued interest........................................ 1,315 913
Real estate taxes payable............................... 4,600 3,837
Tenant security deposits................................ 2,554 2,231
Accounts payable and other liabilities.................. 2,875 2,138
Distributions/dividends payable......................... 730 750
-------- --------
Total liabilities....................................... 387,361 369,198
-------- --------
Minority interest....................................... 30,556 32,006
Preferred Stock, $.01 par value; 20,000,000 shares
authorized, 1,351,351 shares of Class A Senior
Cumulative Convertible Preferred Stock issued and
outstanding............................................. 24,132 24,132
Stockholders' equity:
Common Stock, $.01 par value; 100,000,000
shares authorized, 10,485,180 and 8,958,525
shares issued and outstanding at June 30, 1997
and December 31, 1996, respectively..................... 105 90
Additional paid-in capital.............................. 144,376 112,975
Distributions in excess of accumulated earnings......... (29,574) (22,617)
-------- --------
Total stockholders' equity.............................. 114,907 90,448
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............. $556,956 $515,784
======== ========
</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
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Rental............................................ $ 21,013 $ 15,015 $ 41,319 $ 29,467
Other............................................. 1,692 1,220 3,167 2,393
------- -------- ------- -------
Total revenues.................................. 22,705 16,235 44,486 31,860
Expenses:
Property operating................................ 5,751 3,942 10,545 7,450
Real estate taxes................................. 2,117 1,272 4,180 2,749
General and administrative........................ 1,808 1,090 3,128 2,380
Depreciation...................................... 4,563 3,376 8,906 6,190
Advertising and marketing......................... 55 277 725 543
Repairs and maintenance........................... 708 574 1,156 1,093
Bad debt expense.................................. 16 87 97 222
Financing fees.................................... 623 782 1,318 1,662
Interest.......................................... 5,863 3,041 11,148 5,620
Amortization of deferred financing fees........... 273 388 484 1,103
(Income) losses from unconsolidated real estate
limited partnerships............................. (416) 126 (322) 21
------- ------- ------- ------
Total expenses.................................. 21,361 14,955 41,365 29,225
------- ------- ------- -------
Income before allocation to minority interest, loss
on sale of interest rate cap and extraordinary
item.............................................. 1,344 1,280 3,121 2,635
Income allocated to minority interest.............. (347) (282) (743) (477)
------- ------- ------- -------
Income before loss on sale of interest rate cap
and extraordinary item............................ 997 998 2,378 2,158
Loss on sale of interest rate cap, net of minority
interest.......................................... -- -- -- 2,084
------- ------- ------- -------
Income before extraordinary item................... 997 998 2,378 74
Extraordinary item (net of minority interest)...... (900) -- (900) --
------- ------- ------- -------
Net income......................................... 97 998 1,478 74
Income allocated to preferred stockholders......... (567) -- (1,135) --
------- ------- ------- -------
Net (loss) income allocable to common
stockholders...................................... $ (470) $ 998 $ 343 $ 74
========= ========= ========= ==========
Income per share of weighted average common stock
outstanding:
Before extraordinary item.......................... $ 0.05 $ 0.11 $ 0.14 $ --
========= ========= ========= ==========
Extraordinary item................................. $ (0.10) $ -- $ (0.10) $ --
========= ========= ========= ==========
Net (loss) income.................................. $ (0.05) $ 0.11 $ 0.04 $ --
========= ========= ========= ==========
Weighted average common shares outstanding......... 9,192,246 8,958,525 9,125,622 8,958,525
========= ========= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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AMBASSADOR APARTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................ $ 1,478 $ 74
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 8,906 6,190
Bad debt expense.................................... 97 222
Amortization of deferred financing fees............. 407 1,103
Minority interest................................... 743 477
(Income) losses from investments in unconsolidated
real estate limited partnerships.................. (322) 213
Loss from sale of interest rate cap................. -- 2,084
Extraordinary item, net of minority interest........ 900 --
Changes in operating assets and liabilities:
Accounts receivable............................... 164 (460)
Other assets...................................... (1,511) (554)
Accrued interest payable.......................... 402 197
Real estate taxes payable......................... 763 (2,082)
Tenant security deposits.......................... 323 13
Accounts payable and other liabilities............ 737 (4)
------- -------
Net cash provided by operating activities........... 13,087 7,473
INVESTING ACTIVITIES
Purchase of rental property........................... (24,179) (24,605)
Improvements to rental property....................... (8,311) (8,465)
Repayment from unconsolidated real estate limited
partnerships........................................ 1,130 --
------- -------
Net cash used in investing activities............... (31,360) (33,070)
FINANCING ACTIVITIES
Escrowed bond funds - restricted...................... 146 (9,025)
Escrow deposit........................................ 4,078 (1,060)
Deferred financing fees paid.......................... (4,731) (2,310)
Proceeds from sale of interest rate cap............... -- 1,485
Proceeds from bonds payable........................... 32,505 10,250
Repayment of bonds payable............................ (9,250) --
Proceeds from notes payable........................... 72,681 87,312
Repayment of notes payable............................ (93,228) (77,011)
Net proceeds from joint venture partner............... -- 21,730
Net proceeds from sale of shelf offering.............. 29,025 --
Proceeds from exercise of stock options............... 2,068 --
Proceeds from sale of common units.................... 100 --
Partner capital contributions......................... 1,322 8
Dividends paid to preferred stockholders.............. (1,135) --
Dividends paid to common stockholders................. (7,300) (7,166)
Distributions paid to minority interest............... (1,833) (1,299)
------- -------
Net cash provided by financing activities........... 24,448 22,914
------- -------
Net increase (decrease) in cash and cash equivalents 6,175 (2,683)
Cash and cash equivalents at beginning of period........ 4,002 5,270
------- -------
Cash and cash equivalents at end of period.............. $10,177 $ 2,587
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated 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. They should be read in conjunction with the consolidated
financial statements and notes thereto included in the Ambassador Apartments,
Inc. (the "Company") 1996 Annual Report on Form 10-K. The following notes to
the consolidated financial statements highlight significant changes to the
notes included in the 1996 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 statement presentation. In the opinion of
management, all adjustments considered necessary for a fair presentation 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
control or in which the Company does not have a majority interest are accounted
for on the equity method.
Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 consolidated presentation. Such reclassifications have
not changed the results of operations for 1996.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
Revenue Recognition
Rental revenue is recognized as income in the period earned.
Cash Equivalents
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.
Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share,
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<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
the dilutive effect of stock options will be excluded. The Company believes
that the new requirements for calculating primary earnings per share will have
no material impact since there is no dilutive effect with respect to stock
options. The impact of Statement 128 on the calculation of fully diluted
earnings per share for these quarters is not expected to be material.
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 recurring maintenance and repairs are expensed to
operations as incurred. Renovation and improvement costs which improve and/or
extend the useful life of the asset are capitalized and depreciated over the
estimated useful life. In addition, initial "turn over" costs such as
electrical, plumbing and painting generally incurred during the renovation,
re-tenanting and stabilization period, which are necessary to restore apartment
units to their intended use, are capitalized and depreciated over their
estimated useful life.
Leasing costs, such as commissions, locator fees and other costs incurred
in connection with renting the Company's apartment units, are amortized on a
straight-line basis over a period of nine months. The amortization period is
consistent with the weighted average life of the associated lease agreements.
Marketing costs incurred to rent real estate during the approximate
two-year renovation, re-tenanting and stabilization period are capitalized and
amortized over such stabilization period.
2. REAL ESTATE ACQUISITION AND DEBT
On April 17, 1997, the Company refinanced $8.5 million of fixed-rate,
tax-exempt bonds issued by The Industrial Development Board of the Metropolitan
Government of Nashville and Davidson County (the "Bellevue Bonds") and secured
by the Crossings of Bellevue property. The Bellevue Bonds bear interest at a
floating rate that is reset weekly by the remarketing agent at a minimum rate
required to remarket the bonds at par. The Bellevue Bonds are credit enhanced
by a credit facility (the "FNMA Facility") issued by Federal National Mortgage
Association ("FNMA"). The Bellevue Bonds mature on December 15, 2027.
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<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
2. REAL ESTATE ACQUISITION AND DEBT (continued)
On April 25, 1997, The Harris County Housing Finance Corporation issued
$4.0 million of variable-rate, taxable bonds (the "Sandalwood Bonds") for the
benefit of the Sandalwood property. The Sandalwood Bonds bear interest at a
floating rate that is reset weekly by the remarketing agent at the minimum rate
required to remarket the bonds at par. The Sandalwood Bonds are credit
enhanced by FNMA under the FNMA Facility. The Sandalwood Bonds mature on
December 15, 2036.
On April 25, 1997, The Harris County Housing Finance Corporation issued
$9.1 million in variable-rate, tax-exempt bonds (the "Ashford Bonds") for the
benefit of the Trails of Ashford property. The Ashford Bonds bear interest at
a floating rate that is reset weekly by the remarketing agent at the minimum
rate required to remarket the bonds at par. The Ashford Bonds are credit
enhanced by FNMA under the FNMA Facility. The Ashford Bonds mature on December
15, 2036.
On May 1, 1997, the Company sold at par $4.0 million of tax-exempt bonds
(the "Stonybrook Bonds") and approximately $900,000 of tax-exempt subordinate
bonds (the "Madera Bonds") to TEB Municipal Trust II, a New York Trust ("TEB
II"). The Company has an approximately 1% ownership interest in TEB II through
G.P. Municipal Holdings, L.L.C., an Illinois limited liability company of which
the Company is a member ("G.P. Holdings"). The interest rate on the $4.0
million of fixed rate tax-exempt Stonybrook Bonds is 10% per annum. The
Stonybrook Bonds are collateralized by the Stonybrook property and mature on
October 1, 2012. The interest rate on approximately $900,000 of tax-exempt
Madera Bonds is fixed at 11% per annum. The Madera Bonds are collateralized by
the Madera Point property and mature on June 1, 2027.
Concurrent with its purchase of the bonds, TEB II sold a $4.9 million
Class A Receipt of beneficial interest in TEB II at a fixed rate of 9.5% per
annum, payable monthly. G.P. Holdings holds an approximately $14,500 Class G
Receipt, which is entitled to a distribution in an amount equal to the excess
of interest earned by TEB II from its ownership of the Madera Bonds and the
Stonybrook Bonds over the distributions paid to the Class A Receipt holders.
Under the terms of certain agreements between members of G.P. Holdings, the
Company receives 100% of any excess cash flows, as defined, from G.P. Holdings.
This amounted to approximately $10,000 for the period May 1, 1997 through June
30, 1997.
Effective April 17, 1997, the Company entered into an interest rate cap
agreement with Credit Lyonnais New York Branch ("CLNY") at a purchase price of
$756,370 to protect against interest rate fluctuations with respect to the
Bellevue Bonds and the Ashford Bonds. Pursuant to the terms of such interest
rate cap agreement, the interest rate is limited to 4.95% per annum on a
notional amount of $17.6 million. The interest rate cap agreement terminates
on April 17, 2004.
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<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
2. REAL ESTATE ACQUISITION AND DEBT (continued)
Effective April 25, 1997, the Company entered into an interest rate cap
agreement with CLNY at a purchase price of $234,000 to protect against
interest rate fluctuations with respect to the Sandalwood Bonds. Pursuant to
the terms of such interest rate cap agreement, the interest rate is limited to
6.5% per annum on a notional amount of $4.0 million. The interest rate cap
agreement terminates on April 26, 2004.
On May 28, 1997, the Company entered into an unsecured revolving credit
facility with CLNY for $25.0 million (as amended on June 27, 1997, the "CLNY
Unsecured Line of Credit") at Prime plus 1.25% or, at the option of the
Company, the Eurorate plus 2.25% or LIBOR plus 2.25%. Unpaid principal
balance, together with any accrued or unpaid interest thereon, shall be due and
payable 90 days following the date of any advance under the CLNY Unsecured Line
of Credit. As of June 30, 1997, there were no amounts outstanding under the
CLNY Unsecured Line of Credit. The CLNY Unsecured Line of Credit matures on
December 31, 1997.
On June 22, 1997, the Company entered into a secured revolving credit
facility to refinance its credit facility with Bank One Arizona (the "Bank One
Credit Facility") with Nomura Asset Capital Corporation (as amended, the "NACC
Revolving Loan"). The NACC Revolving Loan bears interest at LIBOR plus 1.50%
and has a maximum commitment of $75.0 million subject to the amount of
collateral pledged by the Company. As of June 30, 1997, five properties were
pledged as collateral under the NACC Revolving Loan, and approximately $22.0
million was outstanding. As of June 30, 1997, the Company was entitled to
borrow an additional $7.0 million under the NACC Revolving Loan. On July 2,
1997, the Cedar Creek property was added to the NACC Revolving Loan collateral
pool to provide the Company with an aggregate borrowing capacity of
approximately $35.0 million, of which $22.0 million remained outstanding, and
$13.0 million was available to the Company. The NACC Revolving Loan matures on
December 31, 1997. Additionally, on June 26, 1997, the Company entered into an
amendment to the NACC Revolving Loan to permit the Company, notwithstanding the
maximum availability provisions described above, to borrow $20.7 million to
acquire the Cedar Creek and Park Colony apartments. This advance was intended
to serve as short-term bridge financing and was required to be repaid by July
2, 1997. On June 30, 1997, the Company repaid the $20.7 million short-term
bridge loan with proceeds from the Company's Shelf Offering, as described in
footnote 6.
On June 27, 1997, the Company purchased Cedar Creek and Park Colony
apartments for $7.2 million and $14.5 million, respectively. Cedar Creek is a
392-unit apartment complex located in San Antonio, Texas, and Park Colony is a
352-unit apartment complex located in Norcross, Georgia. The Company financed
these acquisitions using borrowings under the NACC Revolving Loan, which were
repaid from proceeds of the Shelf Offering. The Company acquired these
properties from an unaffiliated third party.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
3. ESCROWED BOND FUNDS--RESTRICTED
As of June 30, 1997, the Company had approximately $403,000 in escrow, of
which approximately $197,000 related to those properties owned by Ambassador I,
L.P., a partnership in which the Company holds a 50.1% interest. The escrow
monies will be used to complete certain renovation projects associated with
tax-exempt bond requirements on those properties.
4. STOCK OPTION PLAN
Pursuant to the 1994 stock incentive plan, as amended (the "1994 Stock
Incentive Plan") and the 1996 stock incentive plan, as amended (the "1996 Stock
Incentive Plan") as discussed in note 6 to the 1996 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. In March
1997, the Board of Directors adopted the 1997 stock incentive plan (the "1997
Stock Incentive Plan") for the purpose of attracting and retaining directors,
officers and key employees. The 1997 Incentive Plan provides for the issuance
of options to purchase up to 1.6 million shares of Common Stock.
Collectively, the 1994, 1996 and 1997 Stock Incentive Plans are referred to
herein as the "Stock Incentive Plan." During the quarter ended June 30, 1997,
9,000 options were exercised under the Stock Incentive Plan at prices ranging
from $15.25 to $18.00 per share of Common Stock. On April 7, 1997, the Company
granted 47,010 stock options to Debra Cafaro, the Company's new president. In
addition, the Company granted 7,500 stock options to certain non-executive
officers during the quarterly period ended June 30, 1997. At June 30, 1997,
options for 1,672,990 shares of Common Stock are available for grant under the
Stock Incentive Plan. The amendment to the 1994 Stock Incentive Plan, the 1996
Stock Incentive Plan and the 1997 Stock Incentive Plan were approved by the
stockholders at the Annual Meeting of Stockholders held on May 15, 1997.
5. DECLARATION OF DISTRIBUTIONS TO STOCKHOLDERS AND LIMITED PARTNERS
On July 24, 1997, the Board of Directors of the Company authorized
distribution payments of approximately $4.2 million and $358,127, or $0.40 per
Common Unit, to holders of Common Units of Ambassador Apartments, L.P. (the
"Operating Partnership") for the quarter ended June 30, 1997. The
distributions are payable on August 20, 1997. Also on July 24, 1997, the Board
of Directors of the Company authorized distribution payments of $567,567, or
$0.42 per Class A Senior Cumulative Convertible Preferred Unit ("Class A
Preferred Units"), to the holder of Class A Preferred Units of the Operating
Partnership, for the quarter ended June 30, 1997. This distribution is also
payable on August 20, 1997.
On July 24, 1997, the Board of Directors of the Company declared a
quarterly dividend of $0.40 per share of Common Stock to the Common
Stockholders of the Company for the quarter ended June 30, 1997. The dividends
are payable on August 20, 1997, to holders of record as of August 18, 1997.
The Board of Directors of the Company also authorized a quarterly dividend in
the amount of $0.42 per Class A Senior Cumulative Convertible Preferred Stock
("Class A Preferred
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<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
5. DECLARATION OF DISTRIBUTIONS TO STOCKHOLDERS AND LIMITED PARTNERS (continued)
Stock") to the holder of Class A Preferred Stock for the quarterly period ended
June 30, 1997. The Class A Preferred Stock dividend is also payable on August
20, 1997.
6. COMMON STOCK
In June 1997, the Company registered 2.5 million shares of Common Stock
pursuant to an equity shelf registration statement (the "Equity Shelf
Registration") of which 1.3 million registered Common Shares were sold on June
30, 1997 (collectively, the "Shelf Offering") at prices between $22.375 and
$22.625. The closing price of a Common Share on June 17, 1997 (the date the
Company entered into an agreement to sell 1.3 million shares of Common Stock)
was $22.625. The Company received gross proceeds of approximately $29.3
million and net proceeds of approximately $29.0 million in connection
therewith. The Company used $20.7 million of the net proceeds received from
the Shelf Offering to repay the short-term bridge loan borrowed pursuant to the
amendment to the NACC Revolving Loan, $3.1 million to repay funds borrowed
under the CLNY Unsecured Line of Credit and the remainder was used to repay
additional principal outstanding under the NACC Revolving Loan.
7. OTHER
On April 7, 1997, the Company entered into an employment agreement with
Debra Cafaro. The employment agreement provides that the Company loan $700,000
to Ms. Cafaro in connection with the purchase of 32,990 of Common Units in the
Operating Partnership at a price of $24.25 per Common Unit, equal to a total
purchase price of $800,000. The loan bears interest at 6.38% and matures not
later than June 30, 2000.
8. EXTRAORDINARY ITEM
On June 22, 1997, the Company refinanced its Bank One Credit Facility with
the NACC Revolving Loan. Unamortized deferred financing fees associated with
the Bank One Credit Facility were written off upon issuance of the NACC
Revolving Loan. As a result of this write-off, the Company recognized a
$900,000 extraordinary loss, net of minority interest.
9. LEGAL PROCEEDINGS
The Company is involved in a variety of legal proceedings arising in the
ordinary course of business. It is management's belief that, collectively, all
such proceedings are not expected to have material impact on the Company's
financial position.
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<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
10. PRO FORMA INFORMATION - UNAUDITED
The following unaudited table of pro forma information has been prepared
as if the Company's acquisitions and related debt in 1996 and 1997 had all
occurred as of the beginning of each quarter 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 Six-Month Period Ended June 30
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Total revenue............................... $47,217 $45,756
Property operating.......................... 20,540 19,752
Depreciation and amortization............... 9,798 9,923
Interest.................................... 13,825 13,591
------- -------
Total expenses.............................. 44,163 43,266
------- -------
Income before Minority Interest, loss from
sale of interest rate cap, and extraordinary
item........................................ $3,054 $2,490
======= ======
Income per share of Common Stock............ $0.25 $0.20
======= ======
</TABLE>
The pro forma financial information includes the following adjustments:
(i) an increase to rental revenues, property operating expenses and related
interest expense to reflect the acquisitions in 1996 and 1997; (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 associated with acquisitions in 1996 and 1997; and (iv) 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 conversion into Common Stock of (i) all limited partnership
interests in the Operating Partnership; (ii) certain limited partnership
interests in Jupiter I, L.P. and Jupiter II, L.P.; and (iii) the Class A
Preferred Stock. Therefore, the total Common Stock outstanding at January 1,
1996 and January 1, 1997 would have been 12,192,181 and 12,290,746,
respectively.
-13-
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
INTRODUCTION
The following is a discussion and analysis of the results of operations
and financial condition of Ambassador Apartments, Inc. (together with its
affiliates, the "Company"). As of June 30, 1997, the Company owned 52
multifamily residential properties, including ownership interests in two
unconsolidated joint ventures. 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 and combined financial statements and the management discussion
and analysis contained in the Company's 1996 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 currently 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 of capitalized leasing
expenses and tenant allowances or improvements, after adjustments for
unconsolidated partnerships and joint ventures. 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. 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.
The following table sets forth the calculations of FFO for the Company
using NAREIT's current computation method and all references to FFO in this
Form 10-Q reflect NAREIT's current computation method.
<TABLE>
<CAPTION>
(In 000's, except per share amounts)
For the Quarter Ended
June 30, 1997
------------------------------------
<S> <C>
Net income before minority interest and
extraordinary item.................... $1,344
FFO ADJUSTMENTS:
Depreciation........................... 4,563
Adjustments to joint ventures.......... 211
--------
FFO.................................... $6,118
========
FFO per share (1)...................... $0.50
========
</TABLE>
(1) FFO per share is based upon the weighted average number of 12,354,699
fully diluted common shares outstanding for the quarter ended June 30,
1997.
-14-
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS
During the twelve-month period from July 1, 1996 through June 30, 1997,
the Company acquired 13 properties containing 4,202 units from unaffiliated
third-party sellers (the "Additional Properties"). In addition, four separate
issuances of tax-exempt bonds totaling $32.0 million and one taxable bond
issuance of $4.0 million (collectively, the "New Bonds") occurred during the
twelve-month period from July 1, 1996 through June 30, 1997, to reimburse
acquisition and renovation costs on five properties. Of the New Bonds, $14.6
million and $2.3 million of variable-rate, tax-exempt bonds were issued on
November 13, 1996, and November 26, 1996, for the benefit of The Mills and
Shallow Creek properties, respectively. On March 6, 1997, $6.0 million of
variable-rate, tax-exempt bonds were issued for the benefit of the Crossroads
property. On April 25, 1997, $9.1 million of variable-rate, tax-exempt bonds
were issued for the benefit of the Trails of Ashford property, and $4.0 million
of variable-rate, taxable bonds were issued for the benefit of the Sandalwood
property.
On May 1, 1997, the Company sold at par $4.0 million of tax-exempt bonds
(the "Stonybrook Bonds") and approximately $900,000 of tax-exempt subordinate
bonds (the "Madera Bonds") to TEB Municipal Trust II, a New York Trust ("TEB
II"). The Company has an approximately 1% ownership interest in TEB II through
G.P. Municipal Holdings, L.L.C., an Illinois limited-liability company of which
the Company is a member ("G.P. Holdings"). The Stonybrook Bonds bear interest
at 10% per annum and are collateralized by the Stonybrook property. The
Stonybrook Bonds mature on October 1, 2012. The Madera Bonds bear interest at
11% per annum and are collateralized by the Madera Point property. The Madera
Bonds mature on June 1, 2027.
On August 20, 1996, the Company assumed $39.0 million in face amount of
tax-exempt bonds (the "Florida Bonds"), in connection with the acquisition of
four properties located in Florida (the "Florida Properties"). In addition, on
October 1, 1996 and November 21, 1996, the Company assumed $24.1 million in
variable-rate, tax-exempt bonds with respect to the acquisition of two
properties.
The acquisition of the Additional Properties, the assumption of tax-exempt
bonds associated with the purchase of the Additional Properties, the issuance
of the New Bonds and the sale of the Stonybrook Bonds and the Madera Bonds
included in the consolidated financial statements of the Company accounted for
the significant changes in operating results for the six months ended June 30,
1997, when compared to the same period in 1996.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 TO THE SIX MONTHS ENDED JUNE
30, 1996.
For the six months ended June 30, 1997, income before allocation to
minority interest, loss from sale of interest rate cap and extraordinary item
increased $486,000 to $3.1 million when
-15-
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
compared to the same period in 1996. This increase was primarily due to
increases in total revenues, partially offset by increases in total expenses.
These items are discussed in greater detail below.
Total revenues increased by $12.6 million, or 39.6%, to $44.5 million, for
the six-month period ended June 30, 1997, when compared with the same period in
1996. Of this increase, approximately $10.5 million is attributable to the
acquisition of the Additional Properties.
Total expenses (exclusive of depreciation, amortization of deferred
financing fees and interest expense) increased $4.5 million, or 27.7%, to $20.8
million for the six months ended June 30, 1997, when compared with the same
period in 1996. Property operating expenses increased $3.1 million, of which
approximately $2.8 million is due to the acquisition of the Additional
Properties. Real estate taxes increased approximately $1.4 million, of which
$1.0 million is related to the purchase of the Additional Properties. General
and administrative expenses increased $748,000. This increase was due
primarily to increased administrative costs incurred in connection with the
Company increasing the size of its portfolio from 11,526 units at June 30,
1996, to 15,728 units at June 30, 1997. These increases in expenses were
offset by a decrease in financing fees and an increase in income from
unconsolidated real estate limited partnerships. Financing fees decreased
$344,000 primarily resulting from the Company replacing its existing credit
enhancement on approximately $184.5 million of variable-rate, tax-exempt bonds
with the FNMA Facility (as defined below). Income from unconsolidated real
estate limited partnerships increased $535,000 primarily as a result of the
Company's investment in G.P. Holdings.
Depreciation and amortization increased $2.1 million, or 28.8%, to $9.4
million for the six-month period ended June 30, 1997, when compared to the
same period in 1996. This increase is primarily related to an increase in
depreciable assets associated with the purchase of the Additional Properties,
partially offset by lower amortization as a result of a longer amortization
period for those costs incurred in connection with the FNMA Facility and lower
deferred financing fees resulting from the write-off of approximately $5.8
million of deferred financing costs in the fourth quarter of 1996. The
Company incurred approximately $4.5 million of deferred financing costs as a
result of the FNMA Facility transaction. These costs are being amortized over
the term of the FNMA Facility (25 years) compared to an average term of seven
years for those costs written off in the fourth quarter of 1996.
Interest expense increased $5.5 million to $11.1 million for the six-month
period ended June 30, 1997, when compared to the same period in 1996. This
increase is primarily attributable to interest costs associated with the bonds
assumed by the Company in connection with the acquisition of the Additional
Properties during the twelve-month period July 1, 1996 through June 30, 1997
($2.9 million); the issuance of the New Bonds ($414,000); two conventional
long-term secured financings with Nomura Asset Capital Corporation for $16.1
million and $21.5 million entered into in March 1996 and March 1997,
respectively ($872,000); the December 1996
-16-
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
remarketing of $7.2 million of tax-exempt bonds secured by Madera Point and the
sale of Stonybrook and Madera Bonds ($290,000); and an increase of swap interest
expense ($675,000).
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1997 TO THE THREE MONTHS ENDED
JUNE 30, 1996.
For the three months ended June 30, 1997, income before allocation to
minority interest, loss from sale of interest rate cap and extraordinary item
increased $64,000 to $1.3 million when compared to the same period in 1996.
This increase was primarily due to increases in rental and other revenues,
partially offset by increases in total expenses. These increases are discussed
in greater detail below.
Total revenues increased by $6.5 million, or 39.9%, to $22.7 million, for
the three-month period ended June 30, 1997, when compared with the same period
in 1996. Of this increase, approximately $4.9 million is attributable to the
acquisition of the Additional Properties.
Total expenses (exclusive of depreciation, amortization of deferred
financing fees and interest expense) increased $2.5 million, or 30.8%, to $10.7
million for the three months ended June 30, 1997, when compared with the same
period in 1996. Property operating expenses increased $1.8 million, of which
$1.3 million was due to the acquisition of the Additional Properties. Real
estate taxes increased $845,000, of which $494,000 was related to the purchase
of the Additional Properties. General and administrative expenses increased
$718,000. This increase was due primarily to increased administrative costs
incurred in connection with the Company increasing the size of its portfolio.
Repairs and maintenance increased $134,000, primarily attributable to the
acquisition of the Additional Properties. Financing fees decreased $159,000 as
a result of reduced credit enhancement costs associated with the replacement of
existing credit enhancement with the FNMA Facility. Income from unconsolidated
real estate limited partnerships increased $542,000 primarily as a result of
the Company's investment in G.P. Holdings.
Depreciation and amortization increased $1.1 million, or 28.5%, to $4.8
million for the three-month period ended June 30, 1997. This increase is
primarily related to an increase in depreciable assets associated with the
purchase of the Additional Properties, partially offset by a reduction in
amortization as a result of the Company entering into the FNMA Facility.
Interest expense increased $2.8 million to $5.9 million for the
three-month period ended June 30, 1997, when compared to the same period in
1996. This increase is primarily attributable to interest costs associated
with the bonds assumed by the Company in connection with the acquisition of the
Additional Properties during the twelve-month period July 1, 1996 through June
30, 1997, the issuance of the New Bonds, the December 1996 remarketing of $7.2
million of tax-exempt bonds secured by Madera Point and the sale of the
Stonybrook and Madera Bonds.
-17-
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH
Interest rates on approximately $232.3 million (including the
non-consolidated Williamsburg property) of the Company's variable-rate,
tax-exempt and taxable bonds as of June 30, 1997, are determined weekly by a
remarketing agent at the minimum interest rate necessary for the bonds to be
remarketed at par. In an effort to reduce risk, as of June 30, 1997, the
Company had successfully hedged all of its variable-rate, tax-exempt and
taxable bonds through interest rate swaps or caps for an average term of
approximately 6.5 years at an all in cost of approximately 6.1% annually.
On April 7, 1997, the Company entered into an employment agreement with
Debra Cafaro, the Company's new President. The employment agreement provides
that the Company loan $700,000 to Ms. Cafaro in connection with the purchase of
32,990 of Common Units in the Operating Partnership at a price of $24.25 per
Common Unit, equal to a total purchase price of $800,000. The loan bears
interest at 6.38% and matures not later than June 30, 2000.
On May 1, 1997, the Company sold at par $4.0 million of tax-exempt bonds
(the "Stonybrook Bonds") and approximately $900,000 of tax-exempt subordinate
bonds (the "Madera Bonds") to TEB Municipal Trust II, a New York Trust ("TEB
II"). The Company has an approximately 1% ownership interest in TEB II through
G.P. Municipal Holdings, L.L.C., an Illinois limited liability company of which
the Company is a member ("G.P. Holdings"). The interest rate on the $4.0
million of fixed rate tax-exempt Stonybrook Bonds is 10% per annum. The
Stonybrook Bonds are collateralized by the Stonybrook property and mature on
October 1, 2012. The interest rate on approximately $900,000 of tax-exempt
Madera Bonds is fixed at 11% per annum. The Madera Bonds are collateralized by
the Madera Point property and mature on June 1, 2027.
Concurrent with its purchase of the bonds, TEB II sold a $4.9 million
Class A Receipt of beneficial interest in TEB II at a fixed rate of 9.5% per
annum, payable monthly. G.P. Holdings holds an approximately $14,500 Class G
Receipt, which is entitled to a distribution in an amount equal to the excess
of interest earned by TEB II from its ownership of the Madera Bonds and the
Stonybrook Bonds over the distributions paid to the Class A Receipt holders.
Under the terms of certain agreements between members of G.P. Holdings, the
Company receives 100% of any excess cash flows, as defined, from G.P. Holdings.
This amounted to approximately $10,000 for the period May 1, 1997 through June
30, 1997.
On May 28, 1997, the Company entered into an unsecured revolving credit
facility with Credit Lyonnais New York Branch ( "CLNY") for $25.0 million (as
amended on June 27, 1997, the "CLNY Unsecured Line of Credit") at Prime plus
1.25% or, at the option of the Company, the Eurorate plus 2.25% or LIBOR plus
2.25%. Unpaid principal balance, together with any accrued or unpaid interest
thereon, shall be due and payable 90 days following the date of any advance
under
-18-
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
the CLNY Unsecured Line of Credit. As of June 30, 1997, there were no
amounts outstanding under the CLNY Unsecured Line of Credit. The CLNY
Unsecured Line of Credit matures on December 31, 1997.
In June 1997, the Company registered 2.5 million shares of Common Stock
pursuant to an equity shelf registration statement (the "Equity Shelf
Registration"), of which 1.3 million registered
Common Shares were sold on June 30, 1997 (collectively, the "Shelf Offering")
at prices between $22.375 and $22.625. The closing price of a Common Share on
June 17, 1997 (the date the Company entered into an agreement to sell 1.3
million shares of Common Stock) was $22.625. The Company received gross
proceeds of approximately $29.3 million and net proceeds of approximately $29.0
million in connection therewith. The Company used $20.7 million of the net
proceeds received from the Shelf Offering to repay the short-term bridge loan
borrowed pursuant to the amendment to the NACC Revolving Loan, as defined
below, $3.1 million to repay funds borrowed under the CLNY Unsecured Line of
Credit and the remainder was used to repay additional principal outstanding
under the NACC Revolving Loan.
On June 22, 1997, the Company entered into a secured revolving credit
facility to refinance its credit facility with Bank One Arizona (the "Bank One
Credit Facility") with Nomura Asset Capital Corporation (as amended, the "NACC
Revolving Loan"). The NACC Revolving Loan bears interest at LIBOR plus 1.50%
and has a maximum commitment of $75.0 million subject to the amount of
collateral pledged by the Company. As of June 30, 1997, five properties were
pledged as collateral under the NACC Revolving Loan, and approximately $22.0
million was outstanding. As of June 30, 1997, the Company was entitled to
borrow an additional $7.0 million under the NACC Revolving Loan. On July 2,
1997, the Cedar Creek property was added to the NACC Revolving Loan collateral
pool to provide the Company with an aggregate borrowing capacity of
approximately $35.0 million, of which $22.0 million remained outstanding, and
$13.0 million was available to the Company. The NACC Revolving Loan matures on
December 31, 1997. Additionally, on June 26, 1997, the Company entered into an
amendment to the NACC Revolving Loan to permit the Company, notwithstanding the
maximum availability provisions described above, to borrow $20.7 million to
acquire the Cedar Creek and Park Colony apartments. This advance was intended
to serve as short-term bridge financing and was required to be repaid by July
2, 1997. On June 30, 1997, the Company repaid the $20.7 million short-term
bridge loan with proceeds from the Company's Shelf Offering, as described in
footnote 6.
On June 27, 1997, the Company purchased Cedar Creek and Park Colony
apartments for $7.2 million and $14.5 million, respectively. Cedar Creek is a
392-unit apartment complex located in San Antonio, Texas, and Park Colony is a
352-unit apartment complex located in Norcross, Georgia. The Company financed
these acquisitions using borrowings under the NACC Revolving Loan, which were
repaid from proceeds of the Shelf Offering. The Company acquired these
properties from an unaffiliated third party.
-19-
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
On July 24, 1997, the Board of Directors of the Company authorized
distribution payments of approximately $4.2 million and $358,127, or $0.40 per
Common Unit, to holders of Common Units of Ambassador Apartments, L.P. (the
"Operating Partnership") for the quarter ended June 30, 1997. The
distributions are payable on August 20, 1997. Also on July 24, 1997, the Board
of Directors of the Company authorized distribution payments of $567,567, or
$0.42 per Class A Senior Cumulative Convertible Preferred Unit ("Class A
Preferred Units"), to the holder of Class A Preferred Units of the Operating
Partnership, for the quarter ended June 30, 1997. This distribution is also
payable on August 20, 1997.
On July 24, 1997, the Board of Directors of the Company declared a
quarterly dividend of $0.40 per share of Common Stock to the Common
Stockholders of the Company for the quarter ended June 30, 1997. The dividends
are payable on August 20, 1997, to holders of record as of August 18, 1997.
The Board of Directors of the Company also authorized a quarterly dividend in
the amount of $0.42 per Class A Senior Cumulative Convertible Preferred Stock
("Class A Preferred Stock") to the holder of Class A Preferred Stock for the
quarterly period ended June 30, 1997. The Class A Preferred Stock dividend is
also payable on August 20, 1997.
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 NACC Revolving
Loan and the CLNY unsecured line of credit.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 TO THE SIX MONTHS ENDED JUNE 30,
1996
Cash and cash equivalents increased $7.6 million to $10.2 million at June
30, 1997, when compared to the same period in 1996. This increase is primarily
attributable to an increase in net cash provided by financing activities, an
increase in net cash provided by operating activities and a decrease in cash
used in investing activities.
Net cash provided by operating activities increased $5.6 million to $13.1
million for the six-month period ended June 30, 1997, when compared to the
same period in 1996. The primary reason for this increase was an increase in
operating cash flow as a result of the purchase of the Additional Properties as
more fully described in Results of Operations and the Company paying the
majority of its 1996 real estate taxes in December 1996, compared to paying its
1995 real estate taxes in the first quarter of 1996.
Net cash used in investing activities decreased $1.7 million to $31.4
million for the six-month period ended June 30, 1997, when compared to the same
period in 1996. Of this decrease, $1.1 million resulted from a repayment of
an advance to an unconsolidated real estate limited partnerships.
-20-
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Net cash provided by financing activities increased $1.5 million to $24.4
million for the six-month period ended June 30, 1997, when compared to the same
period in 1996. This increase is primarily attributable to an increase in
proceeds received from new bond issues, proceeds received from the Company's
Shelf Offering and proceeds from stock options held by officers and employees
and exercised during the six-month period ended June 30, 1997. These increases
were partially offset by the repayments of the Crossing of Bellevue and Falls
of Bells Ferry bonds and an increase in repayments of the Company's short-term
borrowings.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE LITIGATION REFORM ACT OF 1995
Except for historical matters, the matters discussed in this Form 10-Q are
forward-looking statements that involve risks and uncertainties. The Company
wishes to caution readers that in addition to the important factors described
elsewhere in this Form 10-Q, the following important factors, among others,
sometimes have affected and in the future could affect the Company's actual
results and could cause the Company's actual results during fiscal 1997 and
beyond to differ materially from those expressed in any forward-looking
statements made by or on behalf of the Company.
FINANCING RISKS. Increases in interest rates on the Company's
variable-rate debt, or the inability of the Company to refinance its
indebtedness, to replace any credit enhancement with respect to its
credit-enhanced bonds or to remarket any of its bonds on acceptable terms or at
all, could increase the Company's interest expense, force the Company to
dispose of one or more of its properties upon disadvantageous terms, or result
in a loss of the applicable property or pool of properties securing such
obligation by foreclosure or otherwise.
RISKS OF EQUITY REAL ESTATE INVESTMENTS. Changes in the national and
regional economic climates, changes in local real estate conditions such as the
oversupply of apartments or a reduction in demand for apartments, competition
from single family housing, apartment properties and other forms of multifamily
residential housing, the inability to provide adequate maintenance and to
obtain adequate insurance, increased operating costs, changes in zoning,
building, environmental, rent control and other laws and regulations, the costs
of compliance with current and future laws, changes in real property taxes and
acts of God (such as earthquakes and floods) and other factors beyond the
control of the Company may adversely affect the income from, and value of, the
Company's properties.
RISKS OF RENOVATION AND ACQUISITIONS. Construction delays or cost
overruns, the risk that occupancy or rental rates upon completion of a project
will not meet expectations, and the risk of incurrence of predevelopment costs
in connection with projects that are not pursued to completion, could adversely
affect the results of operations from any such property or the return on
investment that the Company recognizes in connection with the renovation of
existing properties. The
-21-
<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
acquisition of existing properties entails risks that investments will fail to
perform in accordance with expectations, and that judgments with respect to the
costs of improvements to bring an acquired property up to standards established
for the market position intended for that property will prove inaccurate, as
well as general investment risks associated with any new real estate
investment.
FAILURE TO QUALIFY AS A REIT. If the Company fails to qualify as a REIT
in any taxable year, the Company would not be allowed a deduction for
distributions to stockholders in computing taxable income, and such
distributions would be subject to federal income tax at regular corporate
rates. If the Operating Partnership or any of its subsidiary partnerships were
to fail to qualify as a partnership for federal income tax purposes, such
entity would be taxable as a corporation, and the Company could cease to
qualify as a REIT for federal income tax purposes.
-22-
<PAGE> 23
PART II
Other Information
Item 1. Legal Proceedings
There are no material legal proceedings.
Item 2. Changes in Securities
None
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 May 15, 1997.
(b) (i) The following directors were elected at the meeting:
Norman R. Bobins Debra A. Cafaro
Michael W. Reschke Matthew W. Kaplan
(ii) The following directors continued in office:
Jane R. Patterson
David M. Glickman
David B. Heller
Richard F. Levy
(c) The matters voted upon and the results of the voting were as
follows:
(i) Election of the following as directors:
Norman R. Bobins Debra A. Cafaro
---------------------- -------------------
Results: FOR 6,824,301 6,824,301
--------- ---------
AGAINST 18,945 18,945
--------- ---------
ABSTENTION 0 0
--------- ---------
BROKER NONVOTER 0 0
--------- ---------
-23-
<PAGE> 24
(ii) Election of Matthew W. Kaplan as director:
Results: FOR 1,351,351
---------
AGAINST 0
---------
ABSTENTION 0
---------
BROKER NONVOTER 0
---------
(iii) Election of Michael W. Reschke as director:
Results: FOR 6,823,301
---------
AGAINST 19,945
---------
ABSTENTION 0
BROKER NONVOTER 0
---------
(iv) To approve an amendment to the 1994 Stock Incentive Plan:
Results: FOR 4,341,558
---------
AGAINST 999,577
---------
ABSTENTION 15,697
---------
BROKER NONVOTER 1,486,414
---------
(v) To approve the 1996 Stock Incentive Plan:
Results: FOR 4,315,635
---------
AGAINST 1,025,400
---------
ABSTENTION 15,797
---------
BROKER NONVOTER 1,486,414
---------
(vi) To approve the 1997 Stock Incentive Plan:
Results: FOR 3,982,135
---------
AGAINST 1,359,600
---------
ABSTENTION 15,097
---------
BROKER NONVOTER 1,486,414
---------
Item 5. Other Information
None
-24-
<PAGE> 25
Item 6. Exhibits or Reports on Form 8-K
(a) Exhibits
10.63 Interest rate cap agreement dated April 10, 1997, for a
notional amount of $17.6 million by and between the Company and
Credit Lyonnais New York Branch.
10.64 Interest rate cap agreement dated April 16, 1997, for a notional
amount of $4.0 million by and between the Company and Credit
Lyonnais New York Branch.
10.65 Revolving Credit Agreement dated May 28, 1997, in the amount of
$25.0 million by and between the Company and Credit Lyonnais
New York Branch.
10.66 Amendment to Credit Lyonnais Revolving Credit Agreement, dated
as of June 27, 1997, by and between the Company and Credit
Lyonnais New York Branch.
10.67 Note Agreement dated June 22, 1997, in the amount of $75.0
million by and between the Company and Nomura Asset Capital
Corporation.
10.68 First Amendment to Nomura Note Agreement dated as of June
26, 1997, by and between the Company and Nomura Asset Capital
Corporation.
10.69 Employment Agreement dated April 7, 1997, by and between the
Company and David M. Glickman.
10.70 Employment Agreement dated April 7, 1997, by and between the
Company and Debra A. Cafaro.
10.71 Employment Agreement dated April 7, 1997, by and between the
Company and Adam D. Peterson.
10.72 Employment Agreement dated April 7, 1997, by and between the
Company and Thomas J. Coorsh.
10.73 Secured nonrecourse promissory note dated April 7, 1997, by and
between the Company and Debra A. Cafaro in connection with the
purchase of common units of Ambassador Apartments, L.P.
10.74 Amendment No. 4, dated as of April 7, 1997, to Amended and
Restated Agreement of Limited Partnership of Ambassador
Apartments, L.P.
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<PAGE> 26
10.75 Amendment No. 1 to the Exchange Rights Agreement, dated
April 7, 1997.
10.76 Deferred compensation agreement dated May 1, 1995.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated June 23,
1997, reporting under Item 5 certain developments with respect to
the Company's credit facilities, and a Current Report on Form 8-K
dated June 27, 1997, reporting under Item 2 the acquisition of
two apartment properties. The June 27, 1997, Form 8-K will be
amended prior to September 10, 1997, to include Statements of
Revenue and Certain Expenses for the year ended December 31,
1996, and for the three-month period ended March 31, 1997, for
the acquired properties.
-26-
<PAGE> 27
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.
AMBASSADOR APARTMENTS, INC.
Registrant
Date: August 12, 1997 /s/ Thomas J. Coorsh
---------------- ---------------------------
Thomas J. Coorsh
Senior Vice President and
Chief Accounting Officer
-27-
<PAGE> 1
EXHIBIT 10.63
[LOGO]
April 22, 1997
TO: Ambassador VIII, L.P. ("Counterparty")
77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
Att: Adam Peterson
Tel: 312-917-4401 Fax: 312-917-9910
FR: Credit Lyonnais New York Branch ("CLNY")
1301 Avenue of the Americas, 17th Floor
New York, New York 10019
Att: Kathrin W. Gray
Tel: 212-261-7349 Fax: 212-459-3167
RE: Transaction dated as of April 10, 1997
(CLNY Ref: OA5289)
- --------------------------------------------------------------------------------
AMENDED GUARANTEED TRANSACTION
CONFIRMATION
THIS CONFIRMATION AMENDS AND REPLACES THE CONFIRMATION DATED AS OF APRIL 10,
1997
The purpose of this letter agreement is to confirm the terms and
conditions of the transaction entered into between us on the Trade Date
specified below which constitutes a "Transaction" under the Master Agreement
specified below.
This letter agreement constitutes a "Confirmation" under, and it
supplements, forms part of, and is subject to, the Master Agreement dated as of
December 5, 1996, as amended and supplemented from time to time (the
"Guaranteed Agreement"), between you and us. THE GUARANTEED AGREEMENT AND ALL
TRANSACTIONS ENTERED INTO THEREUNDER SHALL BENEFIT FROM A CLFG GUARANTEE ISSUED
BY CLFG (AS SUCH TERMS ARE DEFINED IN THE SCHEDULE TO THE GUARANTEED AGREEMENT)
IN FAVOR OF COUNTERPARTY.
CLNY'S AND COUNTERPARTY'S RIGHTS AND OBLIGATIONS IN RESPECT OF PAYMENTS
DUE HEREUNDER ARE SUBJECT ENTIRELY TO THE "WAIVER OF SETOFF" PROVISION IN PART
5 OF THE SCHEDULE TO THE GUARANTEED AGREEMENT.
1. The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
1
<PAGE> 2
2. The terms of the particular guaranteed Transaction to which this
Confirmation relates are as follows:
Transaction Type: Interest Rate Cap
Notional Amount:USD 17,590,000.
Trade Date: April 10, 1997
Effective Date: April 17, 1997
Termination Date: April 17, 2004, subject to
adjustment in accordance with
the Modified Following
Business Day Convention
Fixed Amounts:
Fixed Rate Payer: Counterparty
Fixed Amount: USD 756,370
Fixed Rate Payer Payment Dates: April 14, 1997
Floating Amounts:
- -----------------
Floating Rate Payer: CLNY
Cap Rate: 4.95%
CLNY Floating Rate
Day Count Fraction: Actual /Actual
CLNY Payment Dates: The 17th day of each month of
each year prior to and
including the Termination
Date, commencing with May 17,
1997 with No Adjustment to
Period End Dates for the
purpose of interest accruals
and in accordance with the
Modified Following Business
Day Convention for payments.
CLNY rate setting dates: Every Wednesday
CLNY Reset Dates: Every Thursday
CLNY Floating Rate Option: 1. PSA Municipal Swap Index
(TM) (the "Index").
"PSA Municipal Swap Index"
means the rate determined on
the basis of an index based
upon the weekly interest
rates of tax-exempt variable
rate issues included in a
data base maintained by
2
<PAGE> 3
Municipal Market Data which meet specific
criteria established by the Public
Securities Association (as set forth in
Exhibit A attached hereto).
2. Alternative Floating Rate Option:
In the event the indexing Agent no longer
publishes an index satisfying the
requirements of the preceding
paragraph, the Relevant Rate in respect of
a Reset Date shall be the "J.J. Kenny
Index" (as defined below), provided
further, however, that if the J.J. Kenny
Index also ceases to be published, an
alternative index shall be calculated by an
entity selected in good faith by CLNY and
approved by Counterparty, and shall be
determined using the criteria for the PSA
Municipal Swap Index that is set forth in
Exhibit A attached hereto.
3. "J.J. Kenny Index" means the index
generally made available on the Reset Date
by Kenny Information Systems or any
successor indexing agent hereunder (the
"Indexing Agent"). The Index is announced
by Kenny Information Systems at the
beginning of business on Tuesday, and shall
be effective as of the same day, or if
Tuesday is not a New York Business Day, the
Index is announced on the next succeeding
New York Business Day, and shall be
effective as of the same day. The Index is
generally effective until the next Reset
Date. The Index shall be based upon 30-day
yield evaluations at par of bonds, the
interest on which is exempt from Federal
income taxation under the Internal Revenue
Code of 1986 as amended, of not less than
five "high grade" component issuers
selected by the Indexing Agent which shall
include, without limitation, issuers of
general obligation bonds. The specific
issuers included among the component
issuers may be changed from time to time by
the Indexing Agent in its discretion. The
bonds on which the Index is based shall not
include any bonds the interest on which is
subject to a "minimum tax" or similar tax
under the Internal Revenue Code, unless all
tax-exempt bonds are subject to such tax.
Designated Maturity: Weekly
Spread: Inapplicable
3
<PAGE> 4
Compounding: Inapplicable
Method of Averaging; Weighted Average Rate
Business Days: New York
Calculation Agent: CLNY
4. Account Details:
USD Payment to CLNY: Credit Lyonnais, New York
ABA#: 026008073
A/C#: 01-88180-3211-00-001-180
Ref: Triple-A Derivative Products
Payment to Counterparty: PLEASE PROVIDE
6. Offices:
a) The office of Credit Lyonnais for this Transaction is New York, New York;
and
b) The office of Counterparty for this Transaction is Chicago, Illinois.
Please provide confirmation that this letter correctly sets forth our Agreement
by responding within two (2) Business Days by returning an executed copy of
this Confirmation by telecopier (Att: Kathrin W. Gray - Documentation) to the
following numbers:
Telecopier Number: 212-459-3167
Telephone Number for confirmation of
Telecopier transmission: 212-261-7349
IN WITNESS WHEREOF the parties hereto accept and confirm the terms of this
Confirmation.
CREDIT LYONNAIS AMBASSADOR VIII, L.P.
NEW YORK BRANCH
Authorized Signature: Authorized Signature:
- --------------------- ----------------------------
Name: Ian Cheung Name:
----------------- ----------------------
4
<PAGE> 5
Title: Vice President Title:
----------------- ----------------------
CREDIT LYONNAIS
NEW YORK BRANCH
Marketing Signature:
- ----------------------------
Name: Chris Phelan
- ----------------------------
Title: Vice President
- ----------------------------
CLNY Ref: OA5289
5
<PAGE> 6
EXHIBIT A
PSA Municipal Swap Index
Produced By Municipal Market Data
FINAL INDEX CRITERIA
- --------------------
1. Issue must be a weekly reset effective on Thursday.
2. No lag resets will be considered.
3. Only Non-AMT issues will be included.
4. Issue must have a VMIG1 or A1+ rating.
5. Issue must pay interest on a monthly basis.
6. Interest must be calculated on a ACT/ACT basis.
7. Only one quote per obligator per dealer will be included.
8. All states will be considered.
9. Issue must have an outstanding amount of $10 million or more.
INDEX CALCULATION
- -----------------
1. The rates of the issues which qualify for inclusion in the index are not
weighted by issue size.
2. The standard divination of the rates is calculated. Any issue falling
outside +/- 1 SD is dropped.
3. Each participating dealer is limited to no more than 15% of the index by an
averaging method.
Any dealer originally having a total number of issues greater than 15%
will have sufficient number of issues reduced from its distribution to meet
the desired limitation.
6
<PAGE> 1
[LOGO] EXHIBIT 10.64
April 16, 1997
TO: Ambassador VIII, L.P. ("Counterparty")
77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
Att: Adam Peterson
Tel: 312-917-4401 Fax: 312-917-9910
FR: Credit Lyonnais New York Branch ("CLNY")
1301 Avenue of the Americas, 17th Floor
New York, New York 10019
Att: Kathrin W. Gray
Tel: 212-261-7349 Fax: 212-459-3167
RE: Transaction dated as of April 16, 1997
(CLNY Ref: 2286 )
- -------------------------------------------------------------------------------
GUARANTEED TRANSACTION CONFIRMATION
- -------------------------------------------------------------------------------
The purpose of this letter agreement is to confirm the terms and
conditions of the transaction entered into between us on the Trade Date
specified below which constitutes a "Transaction" under the Master Agreement
specified below.
This letter agreement constitutes a "Confirmation" under, and it
supplements, forms part of, and is subject to, the Master Agreement dated as of
December 5, 1996, as amended and supplemented from time to time (the
"Guaranteed Agreement"), between you and us. THE GUARANTEED AGREEMENT AND ALL
TRANSACTIONS ENTERED INTO THEREUNDER SHALL BENEFIT FROM A CLFG GUARANTEE ISSUED
BY CLFG (AS SUCH TERMS ARE DEFINED IN THE SCHEDULE TO THE GUARANTEED AGREEMENT)
IN FAVOR OF COUNTERPARTY.
CLNY'S AND COUNTERPARTY'S RIGHTS AND OBLIGATIONS IN RESPECT OF PAYMENTS
DUE HEREUNDER ARE SUBJECT ENTIRELY TO THE "WAIVER OF SETOFF" PROVISION IN PART
5 OF THE SCHEDULE TO THE GUARANTEED AGREEMENT.
1. The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
1
<PAGE> 2
2. The terms of the particular guaranteed Transaction to which this
Confirmation relates are as follows:
Transaction Type: Interest Rate Cap
Notional Amount: USD 4,000,000.
Trade Date: April 16, 1997
Effective Date: April 25, 1997
Termination Date: April 26, 2004, subject to adjustment
in accordance with the Modified
Following Business Day Convention
Fixed Amounts:
Fixed Rate Payer: Counterparty
Fixed Amount: USD 234,000
Fixed Rate Payer Payment Dates: April 18, 1997
Floating Amounts:
-----------------
Floating Rate Payer: CLNY
Cap Rate: 6.50%
CLNY Payment Dates: The 25th day of each month of each
year prior to and including the
Termination Date, commencing with May
25, 1997 and subject to the Modified
Following Business Day Convention
Floating Rate Option: USD-LIBOR-BBA (Telerate 3750)
Designated Maturity: One month
Floating Rate Day Count Fraction: Actual/360
Spread: None
Compounding: Not applicable
Reset Dates: The first day of each Calculation
Period
2
<PAGE> 3
Business Days: New York and London
Calculation Agent: CLNY
4. Account Details:
USD Payment to CLNY: Credit Lyonnais, New York
ABA#: 026008073
A/C#: 01-88180-3211-00-001-180
Ref: Triple-A Derivative Products
Payment to Counterparty: PLEASE PROVIDE
6. Offices:
a) The office of Credit Lyonnais for this Transaction is New York, New York;
and
b) The office of Counterparty for this Transaction is Chicago, Illinois.
Please provide confirmation that this letter correctly sets forth our Agreement
by responding within two (2) Business Days by returning an executed copy of
this Confirmation by telecopier (Att: Kathrin W. Gray - Documentation) to the
following numbers:
Telecopier Number: 212-459-3167
Telephone Number for confirmation of
Telecopier transmission: 212-261-7349
IN WITNESS WHEREOF the parties hereto accept and confirm the terms of this
Confirmation.
CREDIT LYONNAIS AMBASSADOR VIII, L.P.
NEW YORK BRANCH
Authorized Signature: Authorized Signature:
- --------------------- ----------------------------
Name: Ian Cheung Name:
- ----------------- ----------------------
Title: Vice President Title:
- --------------------- ---------------------
CREDIT LYONNAIS
NEW YORK BRANCH
3
<PAGE> 4
Marketing Signature:
- ----------------------------
Name: Chris Phelan
-----------------------
Title: Vice President
-----------------------
CLNY Ref: 2286
4
<PAGE> 1
REVOLVING CREDIT AGREEMENT
Dated: As of May 28, 1997
BY AND BETWEEN
AMBASSADOR APARTMENTS, L.P.
77 West Wacker Drive
Chicago, Illinois 60601
-and-
CREDIT LYONNAIS NEW YORK BRANCH
Credit Lyonnais Building
1301 Avenue of the Americas
New York, New York 10019
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE NO. Page
- ----------- ----
<S> <C> <C>
1 INCORPORATION OF RECITALS AND EXHIBITS....................... 1
1.1 Incorporation of Recitals 1
1.2 Incorporation of Exhibits 1
2 DEFINITIONS.................................................. 2
2.1 Defined Terms 2
2.2 Use of Defined Terms 9
2.3 Use of Recital, Article, Section and Exhibit References.. 9
3 REPRESENTATIONS AND WARRANTIES............................... 9
3.1 Representations and Warranties of Borrower............... 9
3.2 Survival of Representations and Warranties............... 14
4 TERMS OF LOAN AND DOCUMENTS.................................. 14
4.1 Agreement to Borrow and Lend............................. 14
4.2 Loan Documents........................................... 14
4.3 Interest Rate............................................ 15
4.4 Term of the Loan......................................... 15
4.5 Prepayments.............................................. 16
5 LOAN EXPENSES AND ADVANCES; SECURITY OF
MORTGAGE FOR SAME........................................... 16
5.1 Loan Expenses............................................ 16
5.2 Lender's Commitment Fee.................................. 16
5.3 Lender's Draw Fee........................................ 16
5.4 Unused Fee............................................... 17
5.5 Administration Fee....................................... 17
5.6 Time of Payment and Calculation of Fees.................. 17
5.7 Expenses and Advances Secured by Loan Documents.......... 17
6 REQUIREMENTS PRECEDENT TO THE OPENING OF THE LOAN............ 18
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
7 LENDER'S OBLIGATION TO DISBURSE PROCEEDS OF LOAN............. 19
7.1 Loan Opening........................................... 19
7.2 Conditions for All Subsequent Disbursements............ 19
7.3 Additionals Conditions for Acquisition Disbursements... 20
8 BORROWER'S AGREEMENTS........................................ 20
9 FINANCIAL COVENANTS.......................................... 28
9.1 Minimum Consolidated Tangible Net Worth................ 28
9.2 Interest Coverage Ratio................................ 28
9.3 EBITDA to Debt Service................................. 28
9.4 Unhedged Floating Rate Debt............................ 29
10 ASSIGNMENTS.................................................. 29
10.1 Lender's Right to Assign............................... 29
10.2 Prohibition of Assignments by Borrower................. 31
10.3 Restrictions on Transfers of Interest.................. 31
10.4 Prohibition of Transfers in Violation of ERISA......... 31
10.5 Successors and Assigns................................. 31
11 EVENTS OF DEFAULT............................................ 32
12 LENDER'S REMEDIES IN EVENT OF DEFAULT........................ 34
12.1 Remedies Conferred Upon Lender......................... 34
12.2 Non-Waiver of Remedies................................. 35
13 GENERAL PROVISIONS........................................... 35
13.1 Captions............................................... 35
13.2 Notices................................................
13.3 Entire Agreement; Modification; Waiver................. 37
13.4 Governing Law.......................................... 37
13.5 Acquiescence Not to Constitute Waiver of Lender's
Requirements.......................................... 37
13.6 Disclaimer by Lender................................... 38
13.7 Right of Lender to Make Advances to Cure Borrower's
Defaults.............................................. 38
13.8 Definitions Included in Amendment...................... 39
13.9 Time Is of the Essence................................. 39
13.10 Execution in Counterparts.............................. 39
13.11 Waiver of Consequential Damages........................ 39
13.12 Claims Against Lender.................................. 39
13.13 Jurisdiction; Service of Process....................... 40
13.14 Set-Offs............................................... 40
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
13.15 Severability........................................... 41
13.16 Waiver of Jury Trial................................... 41
13.17 Survival of Indemnities................................ 42
</TABLE>
EXHIBITS
- --------
A FORM OF MORTGAGE
B COMPLIANCE CERTIFICATE
C REQUEST FOR DISBURSEMENT
-iii-
<PAGE> 5
EXHIBIT 10.65
REVOLVING CREDIT AGREEMENT
--------------------------
THIS REVOLVING CREDIT AGREEMENT is made as of May 28, 1997, by and between
AMBASSADOR APARTMENTS, L.P., a Delaware limited partnership, having an office
address at 77 West Wacker Drive, Suite 4040, Chicago, Illinois 60601
("Borrower"), and CREDIT LYONNAIS NEW YORK BRANCH, a branch, licensed under the
laws of the State of New York, of a banking corporation organized under the
laws of the Republic of France, having an office at Credit Lyonnais Building,
1301 Avenue of the Americas, New York, New York 10019 ("Lender"), and its
successors and assigns.
RECITALS
--------
A. Borrower is a limited partnership whose sole general partner is
Ambassador Apartments, Inc., a Maryland corporation (the "REIT"), which owns a
[ %] general partnership interest in Borrower.
B. The REIT is listed on the New York Stock Exchange and qualifies as a
real estate investment trust.
C. Borrower has applied to Lender for a revolving loan (the "Loan") in the
maximum principal amount of TWENTY FIVE MILLION DOLLARS ($25,000,000), and
Lender has agreed to make the Loan, on the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE
INCORPORATION OF RECITALS AND EXHIBITS
--------------------------------------
INCORPORATION OF RECITALS
- -------------------------
1.1 The foregoing Recitals are made a part of this Agreement.
INCORPORATION OF EXHIBITS
- -------------------------
1.2 All Exhibits hereto (whether or not listed in the Index)
are incorporated herein and expressly made a part hereof.
<PAGE> 6
ARTICLE 2.
DEFINITIONS
-----------
DEFINED TERMS
- -------------
2.1 The following terms as used herein or in any of the other Loan
Documents, as the case may be, shall have the following meanings:
ACM's: Any product or material containing more than 0.1 percent asbestos
by weight, which material, when dry, can be crumbled, pulverized or reduced to
powder by hand pressure or any substance containing asbestos and deemed
hazardous by any applicable Laws.
Acquisition Advance: Any disbursement of the Loan the proceeds of which
are used to acquire an apartment project provided that the conditions set forth
in Section 7.3 have been satisfied.
Administration Fee: The meaning set forth in Section 5.5.
Affiliate: When used with respect to any Person, shall mean any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such Person. For purposes of this definition,
the term "control" (including the correlative meanings of the terms "controlled
by" and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
Agreement: This Loan Agreement, as originally executed or as may be
hereafter supplemented, amended or restated in accordance with its terms from
time to time in writing.
Assignee: The meaning set forth in Section 10.1(a).
Business Day: Any day other than a Saturday or Sunday or other day on
which commercial banks are required or permitted to close in New York City, on
which dealings in United States dollars are carried on in the London interbank
market.
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.
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.
-2-
<PAGE> 7
Change of 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 interest in
Borrower.
Co-Agent: The meaning set forth in Section 10.1(e).
Commitment Fee: The meaning set forth in Section 5.2.
Consolidated Debt Service: shall mean, for any period, Consolidated
Interest Expense plus the scheduled amortization payments of principal of any
of the Consolidated Indebtedness of the REIT during such period, excluding any
principal payments due on the maturity date of such Indebtedness.
Consolidated Indebtedness: means, as of any date of determination, all
Indebtedness of the Borrower, the REIT and their Subsidiaries outstanding at
such date, determined on a consolidated basis in accordance with GAAP, after
eliminating intercompany items.
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,
all remarketing, trustee, and other fees associated with outstanding bond
issues, 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, the 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,
-3-
<PAGE> 8
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.
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, the REIT or any Subsidiary, are treated as a
single employer under Section 414 of the Code.
Credit Lyonnais Branches: The meaning set forth in Section 13.14.
Default or default: Any event which, if it were to continue uncured,
would, with notice or lapse of time or both, constitute an Event of Default.
Default Rate: The default interest rate specified in the Note.
Dollars and $: Dollars in 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 Lender 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.
-4-
<PAGE> 9
Effective Date: The date on which Borrower is entitled to request a
disbursement of the Loan, regardless of when the Loan Opening actually occurs.
Equity Securities: Common or preferred stock of the REIT and any
debentures or other instruments that are convertible into common stock of the
REIT.
ERISA: Employee Retirement Income Security Act of 1974, as amended, and
the regulations promulgated thereunder from time to time.
Event of Default: The meaning set forth in Section 11.1.
Extension Fee: An amount equal to 0.50% of the maximum amount of the
Loan.
Governmental Authority: Any federal, state, county or municipal
government, or political subdivision thereof, any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality, or public body, or any court, administrative tribunal or
public utility, whether foreign or domestic.
Hazardous Material: Gasoline, petroleum and other petroleum by-products,
asbestos, explosives, PCBs, radioactive materials or any "hazardous" or "toxic"
material, substance or waste which is defined by those or similar terms or is
regulated as such under any statute, law, ordinance, rule or regulation of any
Governmental Authority having jurisdiction over the Project or any portion
thereof or its use, including any material, substance or waste which is: (a)
defined as a "hazardous substance" under Section 311 of the Water Pollution
Control Act (33 U.S.C. Section 1317), as amended; (b) defined as a "hazardous
waste" under Section 1004 of The Resource Conservation and Recovery Act of
1976, 42 U.S.C. Section 6901 et seq., as amended; (c) defined as a "hazardous
substance" or "hazardous waste" under Section 101 of The Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq., or
any so-called "superfund" or "superlien" law, including the judicial
interpretations thereof; (d) defined as a "pollutant" or "contaminant" under 42
U.S.C.A. Section 9601(33); (e) defined as "hazardous waste" pursuant to 40
C.F.R. Part 260; (f) defined as a "hazardous chemical" under 29 C.F.R. Part
1910; or (g) subject to any other law or other present or future requirement of
any Governmental Authority regulating, relating to, or imposing obligations,
liability or standards of conduct concerning, the protection of human health,
plant life, animal life, natural resources, property or the enjoyment of life
or property free from the presence in the environment of any solid, liquid,
gas, odor or any form of energy from whatever source.
Including or including: Including but not limited to.
Indebtedness: of a Person means, without duplication, such Person's:
(i) obligations for borrowed money,
-5-
,
<PAGE> 10
(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,
(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.
Indemnified Persons: The meaning set forth in Section 8.1(i).
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.
Internal Revenue Code: The Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder from time to time.
knowledge: When used to modify a representation or warranty, actual
knowledge after due inquiry of Adam Peterson, Laura Kaak, any other individuals
occupying the office of the chief executive officer, president, or chief
financial officer, and any successors performing the duties currently being
performed by each of the foregoing.
Laws: Collectively, all federal, state and local laws, statutes, codes,
ordinances, orders, rules and regulations, including judicial opinions or
precedential authority in the applicable jurisdiction, foreign or domestic and
all directions, requirements, orders and notices of violation of any
governmental or quasi-governmental agency, body or office having or asserting
jurisdiction over any party to any of the Loan Documents.
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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: The meaning set forth in Recital C.
Loan Documents: Collectively, this Agreement, the Note, the Mortgages and
all other documents and instruments listed in Section 4.2, and all other
documents, instruments or certificates delivered to Lender herewith or from
time to time to evidence or secure the Loan and the payment and performance of
Borrower's obligations hereunder, as the same may be amended, modified or
restated from time to time with the prior written consent of the Borrower and
Lender.
Loan Opening or Opening of the Loan: The first disbursement of Loan
Proceeds in accordance with the terms of this Agreement.
Loan Opening Date: The date of the Loan Opening.
Material Adverse Effect: means a material adverse effect in the
reasonable estimation of the Lender on (i) the business, properties, condition
(financial or otherwise), or results of operations of Borrower and the REIT,
taken as a whole, (ii) the ability of Borrower to perform its obligations under
any of the Loan Documents, or (iii) the validity or enforceability under
applicable law of any of the Loan Documents or the rights or remedies of Lender
thereunder.
Maturity Date: The meaning set forth in Section 4.4.
Mortgages: The mortgages and deeds of trusts delivered pursuant to
Section 4.2(b) hereof, as originally executed or as may be hereafter
supplemented, amended or restated from time to time in writing.
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, the REIT or any member of the Controlled Group is a
party to which more than one employer is obligated to make contributions.
Note: The note or notes aggregating the principal amount of the Loan
described and defined in Section 4.2(a), as originally executed or as may be
hereafter supplemented, amended or restated from time to time in writing.
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<PAGE> 12
Participant: The meaning set forth in Section 10.1(b).
PBGC: means the Pension Benefit Guaranty Corporation, or any successor
thereto.
Permitted Liens: The meaning set forth in Section 8.1(t).
Person: Any individual, partnership, corporation, trust, unincorporated
association, joint venture, government or any department or agency thereof, or
any other entity.
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, the REIT or any member of the Controlled Group may
have any liability.
Proceeding: The meaning set forth in Section 13.13.
Prohibited transaction: A prohibited transaction as described under
Section 406 of ERISA and Section 4975 of the Internal Revenue Code.
Properties: The real estate assets owned by the Borrower or any entity
directly or indirectly wholly-owned by the Borrower and/or the REIT.
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
agreement, 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.
REIT: The meaning set forth in Recital A.
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 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.
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Routine Uses: Refers to the use of Hazardous Materials in connection with
the routine maintenance and operation of a residential apartment complex,
including cleaning and maintenance fluids, office supplies and other similar
items, in each case used in accordance with, and so as not to cause a violation
of, Environmental Laws and in quantities and in a manner which do not pose a
hazard to persons on or about the Properties.
Single Employer Plan: means a Plan maintained by the Borrower, the REIT
or any member of the Controlled Group for employees of the Borrower, the REIT
or any member of the Controlled Group.
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 Borrower.
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.
Unhedged Floating Rate Debt: 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 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 Lender, be entered into after the date of this
Agreement.
Working Capital Advance: Any disbursement of the Loan which is not an
Acquisition Advance.
USE OF DEFINED TERMS
- --------------------
2.2 Defined terms may be used in the singular or the plural. When used
in the singular preceded by "a", "an", or "any", such term shall be taken to
indicate one or more members of the relevant class. When used in the plural,
such term shall be taken to indicate all members of the relevant class.
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<PAGE> 14
USE OF RECITAL, ARTICLE, SECTION AND EXHIBIT REFERENCES
- -------------------------------------------------------
2.3 The use herein of references to Recitals, Articles, Sections and
Exhibits shall refer to the referenced Recital, Article or Section in, or
Exhibit annexed to, this Agreement.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
------------------------------
REPRESENTATIONS AND WARRANTIES OF BORROWER
- ------------------------------------------
3.1 To induce Lender to execute and deliver this Agreement and to perform
the obligations of Lender hereunder, Borrower hereby represents and warrants to
Lender as follows:
(a) Borrower is a limited partnership duly and validly formed and
validly existing under the laws of the State of Delaware. Borrower
has full power and authority to execute, deliver and perform the
obligations and carry out the duties imposed upon Borrower by this
Agreement and the other Loan Documents to which it is a party, and
Borrower has taken all action necessary to carry out Borrower's
obligations and duties in connection with the Loan.
(b) All of the Loan Documents executed by Borrower, have been duly
and properly executed and delivered by Borrower.
(c) This Agreement, the Note, and all of the other Loan Documents
each constitute legal, valid and binding obligations of the Borrower
or the REIT, as the case may be, and each of the Loan Documents and the
security interests granted therein are enforceable in accordance with
their respective terms subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally and limitations imposed by general principles
of equity.
(d) No provision of any mortgage, indenture, agreement, contract,
or other instrument requires the consent or authorization of any other
person, firm or corporation as a condition precedent to the consummation
of the transactions contemplated herein or in any of the other Loan
Documents, the violation of which would have a Material Adverse Effect,
and to the best of Borrower's knowledge, there is no such provision
requiring consent or authorization regardless of whether the violation
would result in a Material Adverse Effect.
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<PAGE> 15
(e) No approvals, consents or permits are required in connection
with the execution, delivery and performance by Borrower, of this
Agreement or any of the other Loan Documents or in connection with the
performance or consummation of any of the transactions contemplated hereby
or thereby, or if required, such approvals, consents or permits have been
obtained, or the failure to obtain them will not result in a Material
Adverse Effect, and to the best of Borrower's knowledge there are no such
approvals, consents, or permits required regardless of whether the failure
to obtain them would result in a Material Adverse Effect.
(f) The execution, delivery and performance of the Loan Documents,
the granting of the security interests therein and compliance with the
provisions of this Agreement and the other Loan Documents, (i) have not
constituted (and will not, upon the giving of notice or lapse of time or
both, constitute) either (A) a breach or default under any organizational
document of the Borrower, the REIT or any Affiliate of the Borrower or the
REIT, any indenture, mortgage, deed of trust, franchise, permit, license,
note or any other agreement or instrument to which the Borrower or the
REIT is a party or by which the Borrower, the REIT, or any of their
respective properties may be bound or affected, or (B) a violation of any
Law, court order, writ, injunction or other decree which may affect the
Borrower or the REIT, and (ii) will not result in a lien against any
property or assets of the Borrower or the REIT (other than liens in favor
of Lender pursuant to the Loan Documents).
(g) The execution, delivery and performance of this Agreement and
the other Loan Documents have not constituted (and will not, upon the
giving of notice or lapse of time or both, constitute) a breach or default
under any other agreement to which the Borrower, the REIT, or any
Affiliate of the Borrower or the REIT is a party or by which the Borrower,
the REIT or such Affiliate may be bound or affected, to the extent such
breach or default would result in a Material Adverse Effect, and to the
best of Borrower's knowledge there will be no such breach or default
regardless of whether a Material Adverse Effect results.
(h) All financial statements furnished to Lender by the Borrower,
the REIT or any Affiliate of the Borrower or the REIT are true, correct
and complete in all material respects as of the date thereof, and all
other information previously furnished by Borrower to Lender in connection
with the transactions contemplated by the Loan Documents is true, correct
and complete in all material respects as of the date thereof and does not
fail to state any material fact necessary to make the statements made not
misleading. Neither the Borrower, the REIT nor any Affiliate of the
Borrower or the REIT has any liability, contingent or otherwise, not
disclosed in such financial statements or such other information which
would affect Borrower's ability to perform or discharge its obligations
under the Loan Documents.
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<PAGE> 16
(i) No material adverse change in the operations or financial
condition of the Borrower, the REIT or any Affiliate of the Borrower
or the REIT has occurred since the respective effective dates of their
financial statements previously submitted to Lender.
(j) Borrower is in material compliance with, and the use of its
Properties is in material compliance with and does not violate in any
material respect (i) to the best of Borrower's knowledge, Laws of any kind
whatsoever (including, without limitation, the Americans With Disabilities
Act and all other zoning and building Laws, environmental protection Laws
and wetlands protection Laws), or (ii) any building permits or other
approvals or restrictions of record, which violation would individually or
in the aggregate cause a Material Adverse Effect.
(k) Borrower has dealt with no brokers in connection with this Loan
transaction, and no brokerage fees or commissions are payable by or to
any person in connection with any of the Loan Documents or the
transactions contemplated thereby.
(l) Neither Borrower nor the REIT, is in the business of extending
credit for the purpose of purchasing or carrying "margin stock" within
the meaning of Regulation G, T, U or X issued by the Board of Governors of
the Federal Reserve System, as at any time amended, and none of the
proceeds of the Loan will be used for the purpose of purchasing or
carrying any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock, and Borrower agrees to execute
all instruments necessary to comply with all the requirements of
Regulation U of the Federal Reserve System, as at any time amended.
(m) The Loan and the execution and performance of the Loan
Documents do not constitute a "prohibited transaction" under ERISA;
the assets of Borrower do not constitute "plan assets" within the meaning
of 29 C.F.R. Section 2510.3-101; and Borrower is a "real estate operating
company" as defined in ERISA.
(n) 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, 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, 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.
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<PAGE> 17
(o) No aspect of the Loan transaction violates or will violate any
usury laws or laws regarding the validity of agreements to pay
interest in effect on the date hereof.
(p) To the best of Borrower's knowledge, neither Borrower nor any
Affiliate of Borrower nor any of its the Properties is in violation
of any environmental Law; neither Borrower nor any Affiliate of Borrower
has received any written notice of any such violation or claimed violation
and Borrower is not aware of any circumstances which could give rise to
the issuance of any such notice. To the best of Borrower's knowledge,
there are no pending civil (including actions by private parties),
criminal or administrative actions, suits or proceedings affecting
Borrower or any Affiliate of Borrower or any of its Properties relating to
environmental matters ("Environmental Proceedings"), and Borrower has no
knowledge of any threatened Environmental Proceedings or any facts or
circumstances which could give rise to any future Environmental
Proceedings. To the best of Borrower's knowledge, neither Borrower nor
any Affiliate of Borrower has ever caused or permitted any Hazardous
Material to be released, transported, placed, held, located or disposed of
over, on, under or at any of its Properties, or any part thereof, or any
other property adjacent thereto, or used any of its Properties permanently
or temporarily as a dump site or storage site for any Hazardous Material.
To the best of Borrower's knowledge, each of the Properties is free of all
Hazardous Material except for Routine Uses of Hazardous Materials and
Hazardous Materials which are in such amounts and condition that do not
violate any environmental Law.
(q) All statements set forth in the Recitals are true and correct.
(r) Borrower is not a "foreign person" within the meaning of
Section 1445 or 7701 of the Internal Revenue Code.
(s) Borrower uses no trade name and has not and does not do
business under any name other than its actual name set forth herein.
The principal place of business of Borrower is as stated on page 1 hereof.
(t) Neither Borrower nor the REIT is a "Public Utility Holding
Company" as defined in The Public Utility Holding Company Act of 1935,
as amended.
(u) No notices of any claimed violations of Laws arising from the
operation, use or occupancy of any Properties which have not been cured
have been served upon Borrower or any of its agents or representatives,
and Borrower is not aware of any circumstances which could give rise to
the issuance of any such notice of claimed violation. Borrower has not
received notice of, and to the best of Borrower's knowledge, Borrower is
not involved in any investigation by or before any Governmental Authority,
nor to Borrower's knowledge has any such investigation been threatened.
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<PAGE> 18
(v) No Default or Event of Default has occurred and is continuing.
(w) The copies of the organizational documents of the Borrower and
the REIT furnished to Lender are true, correct and complete copies thereof
and are all in full force and effect. No default has occurred under any
of the organizational documents of Borrower and no event has occurred
which with the giving of notice or lapse of time or both would result in
any default thereunder.
(x) The information provided by Borrower to Lender in connection
herewith does not include an untrue statement of a material fact or
omit to state any material fact or any other fact which is necessary to
make the statements contained therein (in the light of the circumstances
under which they were made) not misleading.
(y) To the best of Borrower's knowledge, the Borrower, the REIT, or
their Subsidiaries has good and marketable title to the Properties and
assets reflected in the financial statements as owned by it, the REIT, or
any such Subsidiaries free and clear of Liens except for the Permitted
Liens.
(z) Borrower has not received notice of, and to the best of
Borrower's knowledge, there are no suits, arbitrations, claims, disputes
or other proceedings (including, without limitation, any civil, criminal,
administrative or environmental proceedings), pending or, to the best of
Borrower's knowledge, threatened against or affecting the Borrower, the
REIT, or any of the Properties, the adverse determination of which
individually or in the aggregate would have a Material Adverse Effect,
except as disclosed on Schedule 3.1 hereto, or otherwise disclosed to
Lender in accordance with the terms hereof.
(aa) Borrower and the REIT possess all licenses, permits,
franchises, patents, copyrights, trademarks and tradenames or rights
related thereto to conduct their respective businesses substantially as
now conducted, and is presently proposed to be conducted, with such
exceptions as have not had and would not reasonably be expected to have a
Material Adverse Effect.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
- ------------------------------------------
3.2 Borrower agrees that all of its representations and warranties set
forth in Section 3.1 and elsewhere in this Agreement and the other Loan
Documents will be true at the Loan Opening Date, and except with respect to
matters which have been disclosed in writing to and approved by Lender, at all
times thereafter. Without limiting the generality of the foregoing, the
representations and warranties contained in Section 3.1(q) shall survive in
perpetuity (or for such period as may be permitted by Law), notwithstanding the
payment in full and the performance of all obligations of Borrower under the
Loan Documents.
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<PAGE> 19
ARTICLE 4.
TERMS OF LOAN AND DOCUMENTS
---------------------------
AGREEMENT TO BORROW AND LEND
- ----------------------------
4.1 Subject to all of the terms, provisions and conditions set forth in
this Agreement and the other Loan Documents, Lender agrees to make and Borrower
agrees to accept the Loan. This facility is a revolving credit facility and,
subject to the provisions of this Agreement, Borrower may request advances
hereunder, repay such advances and reborrow advances at any time prior to the
Maturity Date. The maximum principal amount of the Loan outstanding from time
to time shall in no event exceed an amount equal to $25,000,000, and the
maximum principal amount of the Loan outstanding from time to time for Working
Capital Advances shall in no event exceed $6,250,000.
LOAN DOCUMENTS
- --------------
4.2 (a) In consideration of Lender's entry into this Agreement and
Lender's agreement to make the Loan, Borrower shall, contemporaneously
with the execution of this Agreement, execute and deliver a note (the
"Note") duly executed and delivered by Borrower payable to the order of
Lender in the amount of the Loan;
(b) As a condition to any Acquisition Advance for properties being
acquired that will either not be subject to any other mortgage or will be
subject to a mortgage that permits junior liens, Borrower shall, in
sufficient time for review by Lender and its counsel prior to the
requested date of such disbursement, execute and deliver (or cause its
Subsidiary to execute and deliver, as applicable) to Lender the following
documents:
(i) A valid and subsisting first (or junior, as the case may
be) mortgage (or deed of trust) and assignment of rents, income
and profits in the statutory form for the state where the applicable
Property is located, together with Rider substantially in the form
attached hereto as Exhibit A with such modifications as may be
required due to state law issues (a "Mortgage") made by Borrower (or
a Subsidiary) to Lender encumbering the applicable Property,
including all real estate and personalty, securing the Note, the Loan
and all obligations of Borrower under the Loan Documents, subject
only to Permitted Liens;
(ii) All Uniform Commercial Code financing statements as are
necessary or advisable to perfect, or notify third parties of, the
security interests intended to be created by the Loan Documents; and
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<PAGE> 20
(iii) Such other papers, documents and instruments as may be
required by this Agreement or as Lender may reasonably require in
connection with the Property being acquired with the proceeds of the
Acquisition Advance.
(c) As a condition to an Acquisition Advance for a property being
acquired by Borrower through the acquisition of outstanding bonds, a
first priority assignment and pledge of such bonds together with such
evidence of the perfection of such pledge as Lender may reasonably
require.
INTEREST RATE
- -------------
4.3 The Loan will bear interest at the rate set forth in the Note.
Interest on the Loan shall be computed on the principal sum of the entire
amount of the Loan from time to time outstanding on the basis of a 360-day
year, as set forth in the Note, but shall be charged for the actual number of
days within the period for which interest is being charged. Upon default or
delinquency in the making of payments when due hereunder or under the Note, the
interest rate under the Loan shall be at the Default Rate.
TERM OF THE LOAN
- ----------------
4.4 Without limiting the provisions of the Note, the unpaid principal
balance of each advance made hereunder shall be due and payable on or before
120 days following the date of such advance, and the full amount of the unpaid
principal balance of the Loan, together with any accrued and unpaid interest
and all other sums then due and payable under the Note and under the other Loan
Documents, if not sooner paid, whether by reason of acceleration or otherwise,
shall be paid in full on May 22, 1998 (the "Maturity Date"). Lender shall have
no obligation to make a disbursement of the Loan on or after the Maturity Date.
PREPAYMENTS
- -----------
4.5 Borrower shall have the right to make prepayments of the Loan in
whole or in part (without premium or penalty) in accordance with the terms of
the Note. Principal amounts of the Loan which are repaid may be reborrowed
subject to the terms and conditions contained herein.
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<PAGE> 21
ARTICLE 5.
LOAN EXPENSES AND ADVANCES;
SECURITY OF MORTGAGE FOR SAME
-----------------------------
LOAN EXPENSES
- -------------
5.1 Borrower agrees to pay all reasonable expenses of the Loan, including
all amounts payable pursuant to Sections 5.2, 5.3, 5.4 and 5.5 below, and also
including all recording charges, all brokerage fees and commissions, and all
reasonable fees and expenses (including word processing and photocopying
expenses) of Lender's attorneys, including all costs and expenses incurred by
Lender in connection with the determination of whether or not Borrower has
performed its obligations hereunder and under the other Loan Documents or has
satisfied the conditions precedent to the obligations of Lender hereunder.
Upon the occurrence of an Event of Default, Borrower shall also pay all fees,
expenses and charges of appraisal, architectural, engineering, environmental,
insurance and the consultants retained by Lender in connection with the
Properties subject to the Mortgages. All such reasonable expenses, charges,
costs and fees shall be Borrower's obligation regardless of whether the Loan is
disbursed in whole or in part, and shall be secured by the Mortgages and other
Loan Documents.
LENDER'S COMMITMENT FEE
- -----------------------
5.2 Borrower agrees to pay to Lender a commitment fee (the "Commitment
Fee") of One Hundred Twenty Five Thousand Dollars ($125,000). The first fifty
percent (50%) of the Commitment Fee, in the amount of Sixty Two Thousand Five
Hundred Dollars ($62,500), has been previously paid to Lender. The balance of
the Commitment Fee, in the amount of Sixty Two Thousand Five Hundred Dollars
($62,500), shall be paid to Lender on the Loan Opening Date.
LENDER'S DRAW FEE
- -----------------
5.3 At the time of each disbursement of the Loan, Borrower shall pay a draw
fee ("Draw Fee") equal to .50 percent of the amount disbursed. In no event
shall Borrower be obligated to pay an aggregate Draw Fee of more than $250,000
(one percent of the total amount of the commitment for the Loan) during the
term of the Loan. If as of the Maturity Date, the cumulative amount of the
Draw Fee paid by Borrower during the term of the Loan has been less than
$125,000, then Borrower shall be required to pay on the Maturity Date an amount
equal to the difference between $125,000 and the aggregate amount of the draw
fee previously paid.
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<PAGE> 22
UNUSED FEE
- ----------
5.4 Borrower agrees to pay to Lender a fee calculated at the rate of
.125% per annum on the daily unborrowed portion of the Loan payable monthly in
arrears on the last day of each calendar month beginning May 31, 1997 (with the
first such payment covering the period from the Effective Date through May 31,
1997) and on the Maturity Date. (or such earlier date as the Loan is repaid
and the Lender's obligation to disburse proceeds is terminated).
ADMINISTRATION FEE
- ------------------
5.5 In consideration of the costs and expenses which have been and will be
incurred by Lender in connection with the administration of the Loan, Borrower
shall pay to Lender an annual administration fee (the "Administration Fee")
equal to Five Thousand Dollars ($5,000). The Administration Fee shall be
payable by Borrower to Lender quarterly in arrears on the last day of each
calendar quarter beginning June 30, 1997, and on the Maturity Date.
TIME OF PAYMENT AND CALCULATION OF FEES
- ---------------------------------------
5.6 Borrower shall pay all reasonable fees and expenses incurred by
Lender at the Loan Opening Date and on demand at such subsequent times as
Lender may determine, except for the Administration Fee, Draw Fee, and Unused
Fee, which shall be paid as provided in Section 5.3, 5.4 and 5.5, respectively.
Lender may require the payment of such fees and expenses as a condition to any
disbursement of the Loan. All fees shall be calculated on basis of actual days
elapsed and a year consisting of 360 days.
EXPENSES AND ADVANCES SECURED BY LOAN DOCUMENTS
- -----------------------------------------------
5.7 If Borrower fails to pay Lender the fees described in Sections 5.3,
5.4 or 5.5 within 10 days after notice and demand therefor, Lender is hereby
authorized, upon notice to Borrower, to make disbursements of Loan proceeds
from time to time to pay such fees whether or not at such time there may be any
undisbursed Loan proceeds. Any such advances made by Lender on account of such
fees shall, as and when advanced or incurred by Lender, constitute additional
indebtedness evidenced by the Note and secured by the Mortgages and the other
Loan Documents to the same extent and effect as if the terms and provisions of
this Agreement were set forth therein, whether or not the aggregate of such
indebtedness shall exceed the aggregate face amount of the Note.
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<PAGE> 23
ARTICLE 6.
REQUIREMENTS PRECEDENT
TO THE OPENING OF THE LOAN
6.1 Borrower shall perform and satisfy all of the following conditions
precedent on or before the Loan Opening Date, and Borrower agrees that Lender's
obligation to disburse the Loan is conditioned upon Borrower's performance or
satisfaction of all such conditions precedent:
(a) No Default or Event of Default by Borrower or the REIT shall
exist under this Agreement or any of the other Loan Documents.
(b) Borrower shall have executed and delivered or caused to be
executed and delivered to Lender all of the Loan Documents as
required by, and in accordance with, Section 4.2, duly and properly
executed by the respective parties thereto, and Borrower shall have paid
all amounts required to be paid by Borrower on or before the Loan Opening
Date pursuant to Article 5.
(c) Borrower shall have furnished to Lender the following, in
sufficient time for review by Lender and its counsel prior to the Loan
Opening Date, all of which shall be in form and substance reasonably
satisfactory to Lender and its counsel:
(i) Certified copy of the Certificate of Limited Partnership
and Agreement of Limited Partnership of Borrower and good
standing certificates for Borrower from the States of Delaware
and Illinois.
(ii) Certified copies of the Articles of Incorporation,
Certificate of Incorporation and By-Laws for the REIT, an
incumbency certificate showing specimen signatures for all
individuals executing any Loan Documents and resolutions for the REIT
evidencing its authority to enter into the Loan Documents on behalf
of Borrower, and a good standing certificate for the REIT from the
state of its incorporation and Illinois.
(iii) Evidence satisfactory to Lender that the Loan and the
execution and performance of this Agreement and the other Loan
Documents are authorized and that the individuals executing this
Agreement and the other Loan Documents on behalf of Borrower and the
REIT have been duly authorized by all appropriate action to execute
and deliver this Agreement and the other Loan Documents.
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<PAGE> 24
(iv) Opinions from counsel to Borrower and the REIT reasonably
satisfactory to Lender, and such other opinions as Lender may
reasonably require.
(v) A copy of the most recent audited consolidated annual
financial statements of Borrower and the REIT, and the most recent
unaudited consolidated quarterly financial statements of Borrower and
the REIT, all of which shall have been certified by the REIT as being
true, complete and correct, prepared in accordance with generally
accepted accounting principles (as applied in the United States),
consistently applied, and fully disclosing any and all contingent
liabilities.
ARTICLE 7.
LENDER'S OBLIGATION TO DISBURSE PROCEEDS OF LOAN
------------------------------------------------
LOAN OPENING
- ------------
7.1 Upon Borrower's compliance with and satisfaction of all conditions
precedent to the Loan Opening and if applicable the conditions in Section 7.3
below, Lender shall make the initial disbursement of the Loan.
CONDITIONS FOR ALL SUBSEQUENT DISBURSEMENTS
- -------------------------------------------
7.2 Disbursements of the Loan after the Loan Opening shall be made from
time to time as requested by Borrower and the obligation of Lender to make any
such disbursements is subject to the following terms and conditions:
(a) All disbursements of Working Capital Advances shall be in
minimum increments of $250,000, and disbursements of Acquisition
Advances shall be in an amount equal to the actual acquisition costs,
including fees and expenses, as evidenced by closing statements from such
acquisitions, less cash contributed by Borrower or the Affiliate of
Borrower purchasing such property.
(b) Prior to such disbursement no Default shall have occurred and
be continuing under this Agreement or any of the Loan Documents and,
if requested by Lender, Borrower shall deliver a Certificate of Borrower
to such effect;
(c) The representations and warranties of Borrower contained herein
shall be true and correct 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 its representation or warranty shall be true
and correct on and as of an earlier date;
-20-
<PAGE> 25
(d) The outstanding balance of Working Capital Advances following
such disbursement shall be not more than $6,250,000 and the total
outstanding balance of the Loan shall not exceed $25,000,000; and
(e) Borrower shall have delivered to Lender a completed Request for
Disbursement in the form of Exhibit C no less than two Business Days
prior to the date of the requested disbursement for Working Capital
Advances, and seven Business Days prior to the date of the requested
disbursement for Acquisition Advances.
Provided that all of the conditions contained in this Section 7.2 (and Section
7.3 if applicable) have been satisfied, Lender shall make disbursements on the
date of the requested disbursement as set forth in Borrower's Request for
Disbursement.
ADDITIONAL CONDITIONS FOR ACQUISITION ADVANCES
- ----------------------------------------------
7.3 In addition to the conditions set forth in Section 7.2 above, if the
disbursement requested is for acquisition of a Property, Borrower shall have
furnished to Lender the following, all of which shall be in form and substance
reasonably satisfactory to Lender and its counsel:
(a) The additional Loan Documents referred to in Section 4.2(b) or
Section 4.2(c) hereof as applicable.
(b) For each Property which will be encumbered by a Mortgage in
accordance with Section 4.2(b):
(i) An ALTA loan policy of title insurance (the "Title Policy")
in the amount of the acquisition price for such Property, insuring
the Mortgage delivered to Lender for such Property as a valid
and subsisting first mortgage lien subject to only Permitted Liens,
provided such policy can be obtained for a substantially nominal cost
in conjunction with the issuance of the owner's policy. If a title
insurance policy is not issued, then Borrower shall furnish a local
counsel opinion confirming that the Mortgage is in appropriate form to
create a valid lien against the Property.
(ii) Property and casualty insurance coverage consistent with
insurance maintained by institutional owners of similar properties,
which insurance shall name Lender as a Mortgagee and as an additional
insured.
(iii) If requested by Lender, copies of all existing environmental
reports relating to the Property that is being acquired with the
proceeds of the Acquisition Advance and an MAI certified appraisal of
the Property if otherwise
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<PAGE> 26
available, provided that Lender acknowledges such appraisal may not
be addressed to Lender.
(c) For each Property which will be acquired with proceeds of an
Acquisition Advance, Borrower represents, warrants, and covenants as
follows:
(i) The Property shall be a multi-family residential property
of a similar type and nature to properties currently owned by
Affiliates of the REIT;
(ii) No portion of any improvement on the Property shall be
located in an area identified by the Secretary of Housing and Urban
Development or any successor thereto as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the
Flood Disaster Protection Act of 1973, as amended, or any successor
law, or, if located within any such area, Borrower shall have obtained
and will maintain flood insurance in connection therewith (to the
extent such insurance is available).
(iii) To the Borrower's knowledge, the Property and the present
use and occupancy thereof are in material compliance with all
applicable zoning ordinances (without reliance upon adjoining or
other properties), building codes, land use and Environmental Laws,
and other similar laws ("Applicable Laws").
(iv) To the Borrower's knowledge there is no latent or patent
structural or other significant deficiency of the Property; the
Property is free of damage and waste that would materially and
adversely affect the value of the Property; the Property is free from
damage caused by fire or other casualty; and there is no pending or
threatened condemnation proceedings affecting the Property, or any
material part thereof.
(v) To Borrower's knowledge, all liquid and solid waste
disposal, septic and sewer systems located on the Property are in a
good and safe condition and repair and to Borrower's knowledge, in
material compliance with all Applicable Laws with respect to such
systems.
(vi) To the best of Borrower's knowledge, all improvements on
the Property lie within the boundaries and building restrictions of
the legal description of record of the Property, no such improvements
encroach upon easements benefitting the Property other than
encroachments that do not materially adversely affect the use or
occupancy of the Property and no improvements on adjoining properties
encroach upon the Property or easements benefitting the Property other
than encroachments that do not materially adversely affect the use or
occupancy of the Property. To the best of Borrower's knowledge, all
amenities, access routes or other items that
-22-
<PAGE> 27
materially benefit the Property are under direct control of Borrower,
constitute permanent easements that benefit all or part of the
Property or are public property, and the Property, by virtue of such
easements or otherwise, is contiguous to a physically open, dedicated
all weather public street, and has the necessary permits for ingress
and egress.
(vii) To the best of Borrower's knowledge, there are no
delinquent taxes, ground rents, water charges, sewer rents,
assessments, insurance premiums, leasehold payments, or other
outstanding charges affecting the Property except to the extent such
items are being contested in good faith and as to which adequate
reserves have been provided.
(viii) Borrower has completed due diligence in connection with
the acquisition of such Property consistent with Borrowers the
usual and customary practices of Borrower and its Affiliates.
(d) Such other documents and instruments as may be reasonably
required by Lender in connection with such Property.
Subject to satisfaction of all of the conditions contained in Section 7.2
and this Section 7.3, Lender shall make disbursements on the date of the
requested disbursements as set forth in Borrower's Request for Disbursement.
Upon repayment of an Acquisition Advance provided no Event of Default
exists, Lender agrees to release any collateral (including any Mortgage or
assignment of bonds) provided in connection with such Acquisition Advance.
ARTICLE 8.
BORROWER'S AGREEMENTS
---------------------
8.1 Borrower further covenants and agrees to and with Lender as follows:
COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES
- --------------------------------------------------------
(a) At all times after the Loan Opening Date, Borrower will comply
in all material respects with all applicable Laws and requirements of
Governmental Authorities, including all requirements and conditions set
forth in all permits, licenses and other approvals which have been
obtained or are required to be obtained from Governmental Authorities for
the operation, use or occupancy of the Properties.
-23-
<PAGE> 28
INSPECTION BY LENDER
- --------------------
(b) Borrower will cooperate with Lender in arranging for inspections,
from time to time, of the Properties by Lender and its agents and
representatives at any time during normal business hours following
reasonable notice, except in the case of an emergency when no notice shall
be required.
RENEWAL OF INSURANCE
- --------------------
(c) Throughout the term of the Loan, Borrower shall maintain or
cause to be maintained in full force and effect insurance with respect
to the Properties as is customary for similar properties owned by
institutional owners. Borrower shall timely pay, or cause to be paid, all
premiums on all insurance policies required under this Agreement from time
to time, and upon request by Lender furnish evidence of such insurance to
Lender.
PAYMENT OF TAXES
- ----------------
(d) Borrower shall pay, or cause to be paid, all general and special
taxes, real estate taxes, assessments and charges, sales and excise
taxes, any tax that is due or becomes due in respect of the issuance of
the Note or the recording of any Mortgage, and shall, upon request,
furnish to Lender copies of the receipts therefor; provided, however, that
Borrower shall have the right to pay any such tax under protest, or to
otherwise contest any such tax or assessment or charge, but only if (i)
such contest has the effect of preventing the collection of such taxes so
contested (if applicable law permits such contest to be conducted prior to
the payment in full of the disputed tax or assessment) and also preventing
the sale or forfeiture of the applicable Property or any part thereof or
any interest therein, or (ii) adequate reserves have been established in
accordance with GAAP.
LENDER'S ATTORNEYS' FEES AND EXPENSES
- -------------------------------------
(e) In case of any default under this Agreement or any of the other
Loan Documents, Borrower (in addition to Lender's reasonable
attorneys' fees and expenses to be paid by Borrower under Section 5.1)
shall pay all of Lender's reasonable attorneys' fees and expenses in
connection with the enforcement of this Agreement and the other Loan
Documents and with the collection of all amounts payable hereunder and
thereunder. In addition to, and without limiting the generality of the
foregoing, if at any time hereafter prior to repayment of the Loan in
full, Lender employs counsel (i) to review and/or prepare documentation in
connection with an Acquisition Advance, (ii) because it in good faith
believes a Default may exist, or (iii) because it is responding to a
request made by the Borrower, then, in any such event, all of the
attorneys' fees and expenses arising from such services, and all expenses,
costs and
-24-
<PAGE> 29
charges relating thereto, shall be paid by Borrower within 10 days
after notice and demand by Lender, and, if Borrower fails to pay such
fees, costs and expenses, payment thereof by Lender shall be deemed to
constitute additional indebtedness evidenced by the Note (even if the
total amount of such indebtedness would then exceed the face amount of the
Note), payable on demand and secured by the Mortgages and the other Loan
Documents.
LENDER'S ACTION FOR ITS OWN PROTECTION ONLY
- -------------------------------------------
(f) The authority herein conferred upon Lender, and any action
taken by Lender, to inspect the Properties and to approve all other
documents and instruments submitted to Lender, will be exercised and taken
by Lender and by Lender's employees, agents and representatives for their
own protection only and may not be relied upon by Borrower or any other
party for any purposes whatever; and neither Lender nor Lender's
employees, agents and representatives shall be deemed to have assumed any
responsibility to Borrower or any other party with respect to any such
action herein authorized or taken by Lender or Lender's employees, agents
and representatives. Any review, investigation or inspection conducted by
Lender, any architectural, engineering or other consultants retained by
Lender or any agent or representative of Lender in order to verify
independently Borrower's satisfaction of any conditions precedent to the
disbursement of Loan proceeds under this Agreement, Borrower's performance
of any of the other covenants, agreements and obligations of Borrower
under this Agreement, or the validity of any representations and
warranties made by Borrower hereunder (regardless of whether or not the
party conducting such review, investigation or inspection should have
discovered that any of such conditions precedent were not satisfied or
that any such covenants, agreements or obligations were not performed or
that any such representations or warranties were not true), shall not
affect (or constitute a waiver by Lender of) (i) any of Borrower's
representations and warranties under this Agreement or Lender's reliance
thereon or (ii) Lender's reliance upon any certifications of Borrower, or
any other party required under this Agreement, or any other facts,
information or reports furnished to Lender by Borrower or any other party.
FURNISHING INFORMATION
- ----------------------
(g) Borrower shall deliver or cause to be delivered to Lender:
(i) As soon as publicly available but in no event later than
the date such reports are to be filed with the Securities
Exchange Commission, copies of all Form 10Ks, 10Qs, 8Ks, and any other
annual, quarterly, monthly or other reports, copies of all
registration statements and any other public information which the
Borrower, the REIT or any of their Affiliates files with the
Securities Exchange Commission.
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<PAGE> 30
(ii) Not later than forty-five (45) days after the end of each
of the first three fiscal quarters, and not later than ninety (90)
days after the end of the fiscal year, a compliance certificate in
substantially the form of Exhibit B hereto signed by the REIT's chief
financial officer or chief accounting officer confirming that Borrower
is in compliance with all of the covenants of the Loan Documents,
showing the calculations and computations necessary to determine
compliance with the financial covenants contained in this Agreement
(including such schedules and backup information as may be necessary
to demonstrate such compliance) and stating that to such officer's
best knowledge, no other Default or Event of Default exists, or if any
Default or Event of Default exists, stating the nature and status
thereof;
(iii) (a) As soon as possible and in any event within 10
Business Days after the Borrower knows that any Reportable Event
has occurred with respect to any Plan, a statement, signed by the
chief financial officer of the REIT, describing said Reportable Event
and within 20 days after such Reportable Event, a statement signed by
such chief financial officer describing the action which Borrower
proposes to take with respect thereto; and (b) within 10 Business Days
of receipt, any notice from the Internal Revenue Service, PBGC or
Department of Labor with respect to a Plan regarding any excise tax,
proposed termination of a Plan, prohibited transaction or fiduciary
violation under ERISA or the Code which could result in any liability
to Borrower or any member of the Controlled Group in excess of
$100,000; and (c) within 10 Business Days of filing, any Form 5500
filed by Borrower with respect to a Plan, or any member of the
Controlled Group which includes a qualified accountant's opinion.
(iv) As soon as possible and in any event within 30 days after
receipt by the Borrower, or any of its Affiliates, a copy of (a) any
notice or claim to the effect that the Borrower or any of its
Affiliates is or may be liable to any Person as a result of the
release by such entity, or any of its Affiliates, or any other Person
of any Hazardous Material into the environment, and (b) any notice
alleging any violation of any federal, state or local environmental,
health or safety law or regulation by the Borrower or any of its
Affiliates, which, in either case, could be reasonably likely to have
a Material Adverse Effect;
(v) Promptly upon the furnishing thereof to the shareholders
of the REIT, copies of all financial statements, reports and proxy
statements so furnished;
(vi) Promptly upon the distribution thereof to the press or
the public, copies of all press releases;
-26-
<PAGE> 31
(viii) Such other information (including, without limitation,
non-financial information) as the Lender may from time to time
reasonably request.
Additionally, Borrower and the REIT will:
(1) promptly supply Lender with such information concerning
its and the REIT's their respective affairs and property as
Lender may reasonably request from time to time hereafter;
(2) promptly notify Lender of any condition or event which
constitutes (or which upon the giving of notice or lapse of time,
or both, would constitute) a default or Event of Default or any event
or circumstance which causes any information which has previously been
provided by it to Lender to include an untrue statement of material
fact or to omit to state any material fact or any fact necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading and, in such event, Borrower
shall promptly furnish to Lender updated or revised information which
will correct such untrue statement or include such omitted fact;
(3) promptly notify Lender of the occurrence or failure to
occur of any event that has a Material Adverse Effect on its
financial condition, and maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles
(as applied in the United States) consistently applied;
(4) permit Lender to copy and make abstracts from any and all
of its books and records provided that Lender agrees to take normal
and reasonable precautions to maintain the confidentiality of
non-public information obtained from such books and records provided
that Lender may disclose such information (x) when required to do so
by applicable law, regulatory authorities, or subpoena, (y) to its
employees, agent, attorneys, and advisors, and (z) in connection with
any litigation.
(5) promptly notify Lender of the institution of any action,
suit or proceeding involving, Borrower or the REIT; and
(6) promptly furnish to Lender copies of all other information
concerning the Borrower and/or the Properties as is reasonably
requested from time to time by Lender.
DOCUMENTS OF FURTHER ASSURANCE
- ------------------------------
-27-
<PAGE> 32
(h) From time to time, Borrower shall execute, deliver, record and
furnish such documents as may be reasonably necessary or desirable to (i)
perfect and maintain perfected as valid liens the liens granted by
Borrower to Lender under the Mortgages, (ii) correct any errors of a
typographical nature or inconsistencies which may be contained in any of
the Loan Documents and (iii) consummate fully the transaction contemplated
under this Agreement.
INDEMNIFICATION
- ---------------
(i) Borrower shall unconditionally indemnify, defend and hold
harmless Lender, its officers, directors, shareholders, employees and
agents, and any successor to any interest of Lender in or to the Loan and
such successor's officers, directors, shareholders, employees, agents,
partners and principals (all of the foregoing are collectively called
"Indemnified Persons") from and against any and all claims, losses, costs
and expenses (including reasonable litigation costs and reasonable
attorneys' fees, expenses and disbursements), damages, obligations and
liabilities of any nature whatsoever made against or suffered or incurred
by any Indemnified Persons by reason of the assertion against such
Indemnified Persons by any party of any claim relating to (i) any breach
of any representation or warranty, any default or Event of Default
hereunder or under any of the other Loan Documents; (ii) any other matter
arising in connection with the Loan, Borrower, the Properties, the Loan
Documents, or entry into or consummation of the transactions contemplated
by any of the Loan Documents, (iii) Hazardous Material and ACM's at any of
the Properties, or (iv) the investigation, defense and settlement of
claims and in obtaining any prohibited transaction exemption under ERISA
necessary or desirable in Lender's sole judgment or otherwise by reason of
a breach by Borrower of Section 10.4 of this Agreement, provided, however
that Borrower shall not be obligated to indemnify any of the Indemnified
Parties against any of the Indemnified Parties' gross negligence or
willful misconduct or any loss, cost, and expense arising solely from
Lender's breach of this Agreement.
INSURANCE REPORTING REQUIREMENTS
- --------------------------------
(j) Borrower shall promptly notify its insurance carrier or agent
therefor (with a copy of such notification being provided to Lender)
if there is any occurrence which, under the terms of any insurance
policy then in effect requires such notification.
COMPLIANCE WITH LAWS
- --------------------
(k) Borrower shall promptly comply in all material respects with
all Laws (including all applicable zoning, building, health, fire
and environmental Laws) of any Governmental Authority having
jurisdiction over Borrower or the Properties.
-28-
<PAGE> 33
HAZARDOUS MATERIAL
- ------------------
(l) Except for Routine Uses (but only to the extent such materials
are properly contained, labeled and used in accordance with all
applicable Laws), Borrower shall (i) keep, and shall use good faith
efforts to cause all tenants, subtenants and managers to keep, the
Properties free of all Hazardous Material, (ii) comply, and shall use good
faith efforts to cause all tenants, subtenants and managers to comply,
with all environmental Laws, including Laws regarding Hazardous Material,
and (iii) keep the Properties free of any lien imposed pursuant to such
Laws.
ASBESTOS
- --------
(m) Borrower shall not install or permit to be installed any ACM's
in any of the Properties. Borrower shall promptly remove and dispose
of (or otherwise abate) all ACM's currently present at the Properties in
accordance with Laws, at Borrower's expense and sole risk.
PAYMENTS TO AFFILIATES
- ----------------------
(n) None of Borrower, the REIT, or any Affiliate of Borrower or the
REIT shall receive any overhead fees, leasing fees, management fees,
marketing fees, consulting fees (or any fees similar to the foregoing)
during the term of the Loan, except to the extent such fees do not exceed
the amount that would have been paid to non-affiliated parties for the
same services in an arms-length transaction.
USE OF LOAN PROCEEDS
- --------------------
(o) Borrower will use the proceeds of the Loan to fund apartment
project acquisitions made by Borrower or its Subsidiaries and for general
working capital and general corporate purposes provided that the maximum
amount outstanding at any one time for purposes other than apartment
project acquisitions shall be not more than $6,250,000. Borrower shall
not use or permit any Loan proceeds to be used for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any
margin stock. Borrower shall not be entitled to use proceeds of a new
advance of the Loan to repay an advance already outstanding.
CONDUCT OF BUSINESS
- -------------------
(p) Borrower and the REIT will continue to engage solely in the
business of acquisition, ownership, development and operation of
multi-family residential properties and shall do all things necessary to
remain duly organized, validly existing
-29-
<PAGE> 34
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.
REIT STATUS
- -----------
(q) The REIT shall at all times remain (i) a fully qualified real
estate investment trust under Sections 856, et. seq. of the Internal
Revenue Code and (ii) listed on the New York Stock Exchange, NASDAQ or any
other nationally recognized securities exchange.
MERGER
- ------
(r) Borrower and/or the REIT will not merge or consolidate with or
into any other Person unless the REIT continues to have a controlling
interest in the resulting entity; provided that if the REIT fails to have
a controlling interest in such resulting entity, Borrower shall be
required to repay the Loan in full within 30 days after notice and demand
by Lender and Lender in its sole discretion may elect not to make any
further disbursements of the Loan during such period.
ERISA
- -----
(s) Borrower and the REIT shall comply in all material respects
with all requirements of ERISA applicable to it with respect to each
Plan.
LIENS
- -----
(t) Borrower shall not create, incur, or suffer to exist (or permit
any of its Subsidiaries to create, incur, or suffer to exist) any Lien in,
of or on the Property of the Borrower, the REIT, or any of their
Subsidiaries except:
(i) Liens for taxes, assessments or governmental charges or
levies on their Property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings and for which
adequate reserves shall have been set aside on their books;
(ii) Liens which arise by operation of law, such as carriers',
warehousemen's, landlords', materialmen and mechanics' liens and
other similar liens arising in the ordinary course of business which
secure payment of obligations not more than 30 days past due or which
are being contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on its books;
-30-
<PAGE> 35
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions,
or other social security or retirement benefits, or similar
legislation;
(iv) Utility easements, building restrictions, zoning
restrictions, easements and such other covenants, restriction
agreements, encumbrances or charges against real property as are of a
nature generally existing with respect to properties of a similar
character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in the
business of the Borrower or its Subsidiaries;
(v) Liens of any Subsidiary in favor of the Borrower; and
(vi) Liens arising in connection with any Indebtedness
permitted hereunder to the extent such Liens will not result in a
violation of any of the provisions of this Agreement. Notwithstanding
the foregoing, no Liens described in subsections (iii), (v), and (vi)
shall be permitted on Properties acquired with the proceeds of an
Acquisition Advance until such Acquisition Advance has been repaid.
Notwithstanding the foregoing, Liens permitted pursuant to this Section 8.1(t)
shall be deemed to be "Permitted Liens".
ARTICLE 9.
FINANCIAL COVENANTS
-------------------
MINIMUM CONSOLIDATED TANGIBLE NET WORTH
- ---------------------------------------
9.1 The Consolidated Tangible Net Worth shall not at any time be less
than (i) $110,000,000 plus (ii) 90% of the net cash proceeds or value derived
from any Equity Securities issued by the REIT after January 1, 1997.
INTEREST COVERAGE RATIO
- -----------------------
9.2 The Interest Coverage Ratio shall not at any time be less than 2.00 to
1.00 as measured for the most recent four fiscal quarter period.
EBITDA TO DEBT SERVICE
- ----------------------
9.3 The ratio of EBITDA to Debt Service shall not at any time be less than
1.75 to 1 for the most recent four fiscal quarter period.
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<PAGE> 36
UNHEDGED FLOATING RATE DEBT
- ---------------------------
9.4 The Unhedged Floating Rate Debt of the Borrower, the REIT and their
Subsidiaries on a consolidated basis shall at no time exceed 30% of
Consolidated Indebtedness.
ARTICLE 10.
ASSIGNMENTS
-----------
LENDER'S RIGHT TO ASSIGN
- ------------------------
10.1 (a) Assignment. Lender shall have the right, without the consent
of Borrower and at no cost or expense to Borrower, to assign, transfer,
sell, negotiate, pledge or otherwise hypothecate this Agreement and any of
its rights and security hereunder and under the Loan Documents, including
the Note, the Mortgages and any of the other Loan Documents, to any other
party (an "Assignee"). Borrower hereby agrees that all of the rights and
remedies of Lender in connection with the interest so assigned shall be
enforceable against Borrower by an Assignee with the same force and effect
and to the same extent as the same would have been enforceable by Lender
but for such assignment. Lender hereby agrees that all of the rights of
Borrower hereunder shall in no way be affected by any such assignment.
(b) Participants. Lender shall have the right, without the consent
of Borrower and at no cost or expense to Borrower, to syndicate or sell
participations to one or more other lenders (a "Participant") in or to all
or a portion of its rights and obligations under the Loan and the Loan
Documents.
(c) Availability of Records; Further Assurances. Borrower
acknowledges and agrees that Lender may provide to any Assignee or
Participant, originals or copies of this Agreement, the Note, the
Mortgages, any other Loan Documents and any other documents, instruments,
certificates, opinions, insurance policies, letters of credit, reports,
requisitions and other materials and information of every nature or
description, and may communicate all oral information, at any time
submitted by or on behalf of Borrower or the REIT, or received by Lender
in connection with the Loan, Borrower, the REIT or any Affiliate of
Borrower or the REIT, provided that prior to any such delivery or
communication, such Assignees or Participants shall agree to preserve the
confidentiality of any of the foregoing to the same extent that the Lender
agreed to preserve such confidentiality. In order to facilitate
assignments to Assignees and sales to Participants, Borrower shall execute
such further documents, instruments or agreements as Lender may reasonably
require. In addition, Borrower agrees to cooperate fully with Lender in
the exercise of Lender's rights pursuant to this Section 10.1, including
providing such information and documentation regarding Borrower, the
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<PAGE> 37
REIT, and Affiliates and their businesses and finances as Lender or any
potential Assignee or Participant may reasonably request and to meet with
potential Assignees and Participants.
(d) Lender as Agent. Borrower acknowledges, that Lender, as agent
for itself and any Assignees, shall have the sole and exclusive
authority to execute and perform this Agreement and each other Loan
Document on behalf of itself, as Lender, and as agent for itself and the
Assignees. Except as otherwise provided herein, Borrower shall have no
obligation to recognize or take any action or to deal directly with any
Assignee, and no Assignee shall have any right to take any action or to
deal directly with Borrower with respect to the rights, benefits and
obligations of Borrower under this Agreement, the other Loan Documents or
any one or more documents or instruments in respect thereof. Borrower may
rely conclusively on the actions of Lender as agent to bind Lender and the
Assignees, notwithstanding that the particular action in question may,
pursuant to this Agreement or any other agreement, be subject to the
consent or direction of any Assignee or any Co-Agent appointed pursuant to
the succeeding paragraph.
(e) Co-Agents. Lender may, at its sole option and from time to
time, with the prior written consent of Borrower (which consent shall
not be unreasonably withheld or delayed) appoint any Assignee or any
affiliate of Lender as a co-agent ("Co-Agent"). If any Co-Agent is
appointed, such Co-Agent and Lender shall allocate among themselves, as
they may agree from time to time, and so exercise and perform, the rights
and duties of Lender to administer the Loan.
(f) Successor Agent. Lender and any Co-Agent may resign as agent
of the Assignees, at the discretion of either of them, without the consent
of Borrower, provided that upon any such resignation of any Co-Agent,
Lender may replace such Co-Agent with a successor Co-Agent reasonably
approved by Borrower. Upon the resignation of Lender as agent, (i) if a
Co-Agent shall be acting with respect to the Loan, such Co-Agent shall
become the sole agent with respect to the Loan, on behalf of itself and as
agent for itself and the Assignees, or (ii) if no Co-Agent shall be acting
with respect to the Loan, the Assignees shall have the right to appoint a
successor agent reasonably approved by Borrower. If Lender resigns and
(1) no Co-Agent shall be acting with respect to the Loan, and (2) no
successor agent shall have been so appointed by the Assignees and approved
by the Borrower and shall have accepted such appointment within thirty
(30) days after the retiring agent's giving of notice of resignation, then
the retiring agent may, on behalf of the Assignees, appoint a successor
agent. Upon the acceptance of any appointment as agent hereunder by a
successor agent, such successor agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring agent, and the retiring agent shall be discharged from its duties
and obligations under this Agreement.
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(g) Lender's Right to Re-book Loan. In addition to, and not in
limitation of, any of Lender's rights under this Section 10.1, Lender,
in its sole discretion, shall have the right, from time to time, to
re-book the Loan with, or assign or transfer the Loan to, any of the
Credit Lyonnais Branches or any other Affiliate of Credit Lyonnais, in
which case such Credit Lyonnais Branch or other Affiliate of Credit
Lyonnais shall, from and after the date of any such re-booking, assignment
or transfer, (i) succeed to all of the rights and remedies and be subject
to all of the obligations of Lender under this Agreement and the other
Loan Documents and (ii) constitute the "Lender" under this Agreement and
the other Loan Documents. The Credit Lyonnais Branch or the Affiliate of
Credit Lyonnais designated as the "Lender" immediately prior to such
re-booking, assignment or transfer shall, upon the occurrence of such
re-booking, assignment or transfer, be released from its rights and
obligations hereunder and under the other Loan Documents. Borrower shall
execute any documents reasonably required by Lender in order to effectuate
or evidence such re-booking, assignment or transfer.
PROHIBITION OF ASSIGNMENTS BY BORROWER
- --------------------------------------
10.2 Borrower shall not assign or attempt to assign its rights under this
Agreement.
RESTRICTIONS ON TRANSFERS OF INTEREST
- -------------------------------------
10.3 The REIT shall at all times maintain a controlling interest in
Borrower. Under no circumstances shall Borrower or the REIT, or an Affiliate
of the Borrower, or the REIT convey, transfer, lease or otherwise dispose of
all or substantially all of its property, assets or business.
PROHIBITION OF TRANSFERS IN VIOLATION OF ERISA
- ----------------------------------------------
10.4 In addition to the prohibitions set forth above in Section 10.2 and
Section 10.3, and not in limitation thereof, Borrower shall not assign, sell,
pledge, encumber, transfer, hypothecate or otherwise dispose of its interest or
rights in this Agreement, or attempt to do any of the foregoing or suffer any
of the foregoing, nor shall any party owning a direct or indirect interest in
Borrower assign, sell, pledge, encumber, transfer, hypothecate or otherwise
dispose of any of its rights or interest (direct or indirect) in Borrower,
attempt to do any of the foregoing or suffer any of the foregoing, if such
action would cause the Loan, or the exercise of any of Lender's rights in
connection therewith, to constitute a prohibited transaction under ERISA or the
Internal Revenue Code or otherwise result in Lender being deemed in violation
of any applicable provision of ERISA or the Internal Revenue Code.
SUCCESSORS AND ASSIGNS
- ----------------------
10.5 Subject to the foregoing restrictions on transfer and assignment
contained in this Article 10, this Agreement shall inure to the benefit of and
shall be binding on the parties
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hereto and their respective heirs, executors, legal representatives,
successors and permitted assigns.
ARTICLE 11.
EVENTS OF DEFAULT
11.1 The occurrence of any one or more of the following shall constitute an
"Event of Default," as such term is used herein:
(a) If Borrower fails to pay the unpaid principal amount of the
Loan when due, whether when due hereunder or upon acceleration or
otherwise as provided herein and in the Note;
(b) If Borrower fails to pay any monthly installment of interest
under the Note when due and such failure continues for five (5) days
after notice from Lender;
(c) If Borrower fails to observe or perform any covenant, agreement
or obligation hereunder or under the other Loan Documents involving
the payment of money, other than the payment of principal or
interest under the Note, and such failure shall continue for fifteen
(15) days;
(d) If there is a breach of any of the financial covenants
contained in Article 9 of this Agreement;
(e) If Borrower fails to perform any of its non-monetary covenants,
agreements and obligations under this Agreement, or has otherwise
breached any of the covenants, agreements and conditions of this
Agreement, and such failure or breach shall continue for thirty (30) days
after written notice thereof from Lender; provided, however, that if such
failure or breach by its nature can be cured but cannot be cured within
such thirty (30) day period, then the same shall not constitute an Event
of Default so long as Borrower commences cure within such thirty (30) day
period and diligently and in good faith prosecutes such cure to completion
within ninety (90) days of said written notice from Lender to Borrower;
(f) If at any time or times hereafter any representation or
warranty (including the representations and warranties of Borrower set
forth in Article 3 of this Agreement), statement, report or certificate
now or hereafter made or delivered by Borrower or the REIT, or any
Affiliate of the Borrower or the REIT (i) proves to have been untrue,
incorrect or misleading in any material respect when made or delivered or
(ii) thereafter becomes untrue, incorrect or misleading in any material
respect, unless, if the representation or warranty is of a nature that can
be made to be true or correct,
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<PAGE> 40
Borrower duly notifies Lender of such fact and diligently proceeds to and
does make such representation or warranty true and correct and not
misleading, within any applicable grace period contained herein, or, if no
grace period is provided herein, within thirty (30) days; provided,
however, that nothing herein shall be deemed to extend any applicable
grace period beyond the Maturity Date;
(g) If all or substantially all of the assets of the Borrower, the
REIT or any Affiliate of the Borrower or the REIT are attached, seized,
subjected to a writ of distress warrant, or are levied upon, or come into
the possession of any receiver, trustee, custodian or assignee for the
benefit of creditors, and the same is not vacated, stayed, dismissed, set
aside or otherwise remedied within sixty (60) days after the occurrence
thereof;
(h) If any petition is filed by or against the Borrower or the REIT
under the Federal Bankruptcy Code or any similar state or federal law,
whether now or hereafter existing (and, in the case of involuntary
proceedings, either failure to cause the same to be vacated, stayed or set
aside within ninety (90) days after filing or the entry of an order for
relief); or if the Borrower or the REIT makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
as they become due;
(i) Failure of the Borrower or the REIT to pay when due (after any
applicable notice or grace period), any Indebtedness equal to or
exceeding $10 million in the aggregate or if any other event shall occur
or condition exist (after applicable notice or grace periods) the effect
of which is to permit the holder of such indebtedness (which includes
liabilities under guaranties) exceeding $10 million to cause such
indebtedness to become due prior to its date of maturity.
(j) 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.
(k) The Borrower 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 the Borrower 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 the Borrower, the REIT or the
Controlled Group member, as applicable, is contesting in good faith the
imposition of withdrawal liability.
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<PAGE> 41
(l) The Borrower, 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 the Borrower, the
REIT and the other members of the Controlled Group.
(m) If a default occurs under any of the other Loan Documents and
continues beyond the applicable notice and grace period, if any,
contained therein.
(n) If a default occurs under the Amended and Restated Master
Reimbursement Agreement (Pool 1 Properties) dated as of December 1,
1996 between Ambassador VIII, L.P. and Federal National Mortgage
Association (as amended) and continues beyond the applicable grace period,
if any, contained therein.
(o) If a default occurs under that certain Credit Agreement (the
"Bank One Credit Agreement") dated as of June 26, 1996, among
Ambassador II, L.P., a Delaware limited partnership, the banks identified
therein and Bank One Arizona, NA (as amended) and continues beyond the
applicable grace period, if any, contained therein.
ARTICLE 12.
LENDER'S REMEDIES IN EVENT OF DEFAULT
-------------------------------------
REMEDIES CONFERRED UPON LENDER
- ------------------------------
12.1 (a) Upon the occurrence of an Event of Default under Section
11.1(i), the Note shall immediately and automatically become due and
payable in full without notice, presentment, demand, protest or other
action of any kind, all of which Borrower hereby expressly waives, and
Lender shall, in addition to the foregoing and all other remedies
conferred upon Lender by law and by the terms of the Note, the Mortgage
and the other Loan Documents, have the right, but not the obligation, to
pursue one or more of the remedies set forth in Section 12.1(b),
concurrently or successively, it being the intent hereof that all of such
remedies shall be cumulative and that no such remedy shall be to the
exclusion of any other.
(b) Upon the occurrence of any Event of Default, Lender shall, in
addition to all other remedies conferred upon Lender by law and by the
terms of the Note, the Mortgages and the other Loan Documents, have the
right but not the obligation to pursue any one or more of the following
remedies, concurrently or successively, it being the intent hereof that
all such remedies shall be cumulative and that no such remedy shall be to
the exclusion of any other:
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<PAGE> 42
(i) Withhold further disbursement of the proceeds of the Loan
(if any);
(ii) Declare the Note to be immediately due and payable;
(iii) Use and apply any monies deposited by Borrower with
Lender, regardless of the purpose for which the same was deposited,
to cure any default or to apply on account of any indebtedness under
this Agreement which is due and owing to Lender; and
(iv) Exercise or pursue any other right or remedy permitted
under this Agreement or any of the other Loan Documents or conferred
upon Lender by operation of Law.
NON-WAIVER OF REMEDIES
- ----------------------
12.2 No waiver of any breach or default of any provision of this
Agreement or any other Loan Document shall constitute or be construed as a
waiver by Lender of any subsequent or prior breach or default or of any breach
or default of any other provision of this Agreement or such other Loan Document.
ARTICLE 13.
GENERAL PROVISIONS
------------------
CAPTIONS
- --------
13.1 The captions and headings of various Articles and Sections of this
Agreement and Exhibits pertaining hereto are for convenience only and are not
to be considered as defining or limiting in any way, the scope or intent of the
provisions hereof.
NOTICES
- -------
13.2 Any notice, demand, request or other communication which any party
hereto may be required or may desire to give hereunder shall be in writing and
shall be deemed to have been properly given and received: (a) if hand
delivered, on the day so delivered to the address set forth below; (b) if
mailed, on the third Business Day after the day on which it is deposited in the
United States mails in the continental United States, registered or certified
mail, postage prepaid, return receipt requested, addressed as set forth below;
(c) if by Federal Express or other reputable express courier service, on the
next Business Day after delivery to such express courier service, addressed as
set forth below; or (d) if by telecopy transmission, on the day and at the time
on which delivered to such party at the address and the telecopier number set
forth below:
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<PAGE> 43
If to Borrower:
Ambassador Apartments, L.P.
77 West Wacker Drive
Suite 4040
Chicago, IL 60601
Telephone: 312-917-1600
Telecopier: 312-917-9910
Attention: Adam D. Peterson
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler LLP
425 Park Avenue
New York, NY 10022-3598
Telephone: 212-836-8618
Telecopier: 212-836-8689
Attention: Stephen Gliatta, Esq.
If to Lender:
Credit Lyonnais New York Branch
227 West Monroe, Suite 3800
Chicago, Illinois 60606
Telephone: (312) 220-7322
Telecopier: (312) 220-7339
Attention: Real Estate Group
with copies to:
Credit Lyonnais New York Branch
Credit Lyonnais Building
1301 Avenue of the Americas
New York, New York 10019-6092
Telephone: (212) 261-7050
Telecopier: (212) 459-3187
Attention: Legal Department
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<PAGE> 44
and:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Telephone: (312) 876-8000
Telecopier: (312) 876-7934
Attention: Steven R. Davidson, Esq.
or at such other address or to such other addressee as the party to be served
with notice may have furnished in writing to the party seeking or desiring to
serve notice as a place for the service of notice.
ENTIRE AGREEMENT; MODIFICATION; WAIVER
- --------------------------------------
13.3 This Agreement and the other Loan Documents and instruments delivered
in connection herewith constitute the entire agreement among the parties with
respect to the Loan and supersede all prior agreements, written and oral,
relating to the subject matter hereof. Neither Lender nor any employee of
Lender has made or is authorized to make any representation or agreement upon
which Borrower may rely unless such matter is made for the benefit of Borrower
and is in writing signed by an authorized officer of Lender. Borrower agrees
that it has not and will not rely on any custom or practice of Lender, or on
any course of dealing with Lender, in connection with the Loan unless such
matter is set forth in this Agreement or the other Loan Documents or in a
written instrument made for the benefit of Borrower and signed by an authorized
officer of Lender. No modification, waiver, amendment, discharge or change of
this Agreement shall be valid unless the same is in writing and signed by the
party against whom the enforcement of such modification, waiver, amendment,
discharge or change is sought.
GOVERNING LAW
- -------------
13.4 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL
LAWS (AS OPPOSED TO THE LAWS OF CONFLICTS) OF THE STATE OF NEW YORK.
ACQUIESCENCE NOT TO CONSTITUTE WAIVER OF LENDER'S REQUIREMENTS
- --------------------------------------------------------------
13.5 Each and every covenant and condition for the benefit of Lender
contained in this Agreement may be waived by Lender; provided, however, that
to the extent Lender may have acquiesced in any noncompliance with any
conditions, covenants or obligations of Borrower contained herein, such
acquiescence shall not be deemed to constitute a waiver by Lender of the
performance by Borrower of any subsequent conditions, covenants or obligations
to be performed by Borrower hereunder.
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DISCLAIMER BY LENDER
- --------------------
13.6 (a) This Agreement is made for the sole benefit of Borrower and
Lender (and Lender's successors and assigns and participants, if any), and
no other person or persons shall have any benefits, rights or remedies
under or by reason of this Agreement, or by reason of any actions taken by
Lender pursuant to this Agreement. Lender shall not be liable to any
party for any debts or claims accruing in favor of any such party against
Borrower or others. Borrower is not and shall not be an agent of the
Lender for any purposes. Except as expressly set forth in the Loan
Documents, Lender is not and shall not be an agent of Borrower for any
purposes. Lender, by making the Loan or any action taken pursuant to any
of the Loan Documents, shall not be deemed a partner or a joint venturer
with Borrower or fiduciary of Borrower.
(b) By accepting or approving anything required to be observed,
performed, fulfilled or given to Lender pursuant to the Loan Documents,
including, without limitation, any certificate, statement of profit and
loss or other financial statement, survey, appraisal, lease or insurance
policy, Lender shall not be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of the same, or of
any term, provision or condition thereof, and such acceptance or approval
thereof shall not constitute (i) a warranty or representation to anyone
with respect thereto by Lender or (ii) a waiver of any of Borrower's
obligations or liabilities under this Agreement or any of the other Loan
Documents with respect to any facts, matters or circumstances disclosed in
any of the reports or other documents described in this Section 13.6(b).
(c) Lender owes no duty of care to protect Borrower with respect to
any matter reviewed or investigated by Lender in connection with the Loan.
RIGHT OF LENDER TO MAKE ADVANCES TO CURE BORROWER'S DEFAULTS
- ------------------------------------------------------------
13.7 If (i) Borrower shall fail to perform in a timely fashion any of
Borrower's covenants, agreements or obligations contained in this Agreement or
the other Loan Documents, or (ii) Lender determines in good faith that an
emergency or other exigent circumstances exist, Lender may (but shall not be
obligated to) perform any of such covenants, agreements and obligations. Any
amounts expended by Lender to cure Borrower's defaults shall constitute
additional indebtedness evidenced by the Note (even if the total amount of such
indebtedness would then exceed the face amount of the Note), payable on demand
and secured by the Mortgages and the other Loan Documents.
DEFINITIONS INCLUDED IN AMENDMENT
- ---------------------------------
13.8 Definitions contained in this Agreement which identify documents,
including the other Loan Documents, shall be deemed to include all amendments
and supplements to such
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<PAGE> 46
documents from the date hereof, and all future amendments and supplements
thereto entered into from time to time to satisfy the requirements of this
Agreement or otherwise with the consent of Lender. Reference to this
Agreement contained in any of the foregoing documents shall be deemed to
include all amendments and supplements to this Agreement.
TIME IS OF THE ESSENCE
- ----------------------
13.9 Time is hereby declared to be of the essence of this Agreement and of
every part hereof.
EXECUTION IN COUNTERPARTS
- -------------------------
13.10 This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
WAIVER OF CONSEQUENTIAL DAMAGES
- -------------------------------
13.11 In no event shall Lender be liable to Borrower for consequential
damages, whatever the nature of a breach by Lender of its obligations under this
Agreement or any of the other Loan Documents, and Borrower for itself and all
Affiliated Parties hereby waives all claims for consequential damages.
CLAIMS AGAINST LENDER
- ---------------------
13.12 Lender shall not be liable for monetary damages for default under
this Agreement, or under any other Loan Documents, unless a written notice
specifically setting forth the claim of Borrower shall have been given to
Lender within sixty (60) days after Borrower first had knowledge of, or
reasonably should have had knowledge of, the occurrence of the event which
Borrower alleges gave rise to such default and Lender does not remedy or cure
the default (if any) with reasonable promptness. Regardless of whether
Borrower gives Lender the notice required to seek such monetary damages,
Borrower at all times shall have the right to seek specific performance of
Lender's obligations hereunder.
JURISDICTION; SERVICE OF PROCESS
- --------------------------------
13.13 WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS
AGREEMENT, THE PROJECT OR ANY OTHER LOAN DOCUMENT (EACH, A "PROCEEDING"),
BORROWER IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS LOCATED IN THE COUNTY OF COOK AND THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS LOCATED IN THE
COUNTY OF COOK; AND (B) WAIVES ANY OBJECTION
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<PAGE> 47
WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING
BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH
RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER
SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE LENDER FROM BRINGING A
PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN
ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY
OTHER JURISDICTION. BORROWER FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO
ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL
SERVICE OF PROCESS IN ANY PROCEEDING IN ANY ILLINOIS STATE OR UNITED STATES
COURT SITTING IN THE CITY OF CHICAGO MAY BE MADE BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO BORROWER AT THE ADDRESS INDICATED
ABOVE, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; PROVIDED, HOWEVER,
THAT IF BORROWER SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED
COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.
SET-OFFS
- --------
13.14 (a) From time to time in connection with the payment of interest
due and payable under the Note and (b) in all other instances, after the
occurrence and during the continuance of an Event of Default, Borrower hereby
irrevocably authorizes and directs each branch of Credit Lyonnais (the "Credit
Lyonnais Branches") from time to time, but only upon the specific request of
Lender, to charge Borrower's accounts and deposits with the Credit Lyonnais
Branches (general or special, time or demand, provisional or final), other than
tenant security accounts, and to pay over to Lender an amount equal to any
amounts from time to time due and payable to the Lender hereunder, under the
Note or under any other Loan Document. Borrower hereby grants to the Lender a
security interest in and to all such accounts and deposits maintained by the
Borrower with the Credit Lyonnais Branches.
SEVERABILITY
- ------------
13.15 The parties hereto intend and believe that each provision in this
Agreement comports with all applicable local, state and federal laws and
judicial decisions. However, if any provision or provisions, or if any portion
of any provision or provisions, in this Agreement is found by a court of law to
be in violation of any applicable local, state, or federal law, statute,
ordinance, administrative or judicial decision, or public policy, and if such
courts declare such portion, provision, or provisions of this Agreement to be
illegal, invalid, unlawful, void or unenforceable as written, then it is the
intent of all parties hereto that such portion, provision, or provisions shall
be given force to the fullest possible extent that they are
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<PAGE> 48
legal, valid and enforceable, and that the remainder of this Agreement shall
be construed as if such illegal, invalid, unlawful, void, or unenforceable
portion, provision, or provisions were not contained therein, and that the
rights, obligations, and interests of Borrower and Lender under the remainder
of this Agreement shall continue in full force and effect.
WAIVER OF JURY TRIAL
- --------------------
13.16 BORROWER AND LENDER EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS OR RELATING THERETO OR ARISING FROM THE
LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS AGREEMENT AND AGREE THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
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<PAGE> 49
SURVIVAL OF INDEMNITIES
- -----------------------
13.17 All indemnities of Borrower contained in this Agreement shall
survive in perpetuity (or for such period as may be permitted by Law),
notwithstanding the payment in full and the performance of all obligations
under the Loan Documents.
RECOURSE
- --------
13.18 The REIT, by executing this Agreement as general partner of the
Borrower, hereby specifically confirms that as general partner it is fully
liable for all obligations of the Borrower.
Borrower and Lender have executed this Agreement as of the day and
year first set forth above.
BORROWER: AMBASSADOR APARTMENTS, L.P.
By: Ambassador Apartments, Inc.,
its general partner
By:
-------------------------
Print Name:
--------------
Title:
-------------------
LENDER: CREDIT LYONNAIS NEW YORK BRANCH,
a branch of a French banking corporation
By:
-----------------------------
Print Name:
----------------------
Title:
---------------------------
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<PAGE> 50
THE UNDERSIGNED HEREBY AGREES TO BE BOUND BY, AND TO PERFORM, ALL
COVENANTS AND OBLIGATIONS contained herein that expressly apply to the
undersigned in the same manner as if it were a party to this Agreement.
AMBASSADOR APARTMENTS, INC.
By:
--------------------------------
Print Name:
------------------------
Title:
-----------------------------
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<PAGE> 51
EXHIBIT A
---------
FORM OF MORTGAGE RIDER
----------------------
This Rider is incorporated into and is an integral part of the foregoing
Mortgage.
1. Mortgagor does hereby absolutely and unconditionally assign to
Mortgagee all of Mortgagor's right, title, and interest in all current and
future leases and all rents, issues and profits derived from the operation of
the premises mortgaged hereby (the "Property"), it being intended by Mortgagor
that this assignment constitutes a present, absolute assignment and not an
assignment for additional security only. Nevertheless, Mortgagee grants to
Mortgagor a revocable license to operate and manage the Property and to collect
the rents, until such time as an Event of Default occurs and is continuing in
which event the license granted to Mortgagor shall be revoked upon notice to
Mortgagor.
2. This Mortgage has been executed and delivered to Mortgagee pursuant to
the terms of that certain Revolving Credit Agreement dated as of April __, 1997
between Ambassador Apartments, L.P. and Mortgagee (the "Credit Agreement").
The occurrence of an Event of Default (as defined in the Credit Agreement)
shall constitute an Event of Default hereunder. Upon the occurrence and
during the continuance of an Event of Default Mortgagee shall have the right to
foreclose this mortgage in the manner provided by law and to the maximum extent
permitted by law Mortgagor hereby waives any right of redemption. Mortgagor
shall also have the right to the appointment of a receiver as a matter of
strict right without regard to the adequacy of the security or the solvency of
the Mortgagor and any such receiver shall have all of the usual powers and
duties of receivers in similar cases. Mortgagee shall also have such other
rights and remedies that may be available at law or in equity or under the
Uniform Commercial Code.
3. This Mortgage shall also constitute a "Security Agreement" within the
meaning of the Uniform Commercial Code of the state where the Property is
located. Mortgagor by executing, delivering this Mortgage has granted and
hereby grants to Lender as security for the indebtedness secured by this
Mortgage a security interest in the Property to the full extent that the
Property constitutes personal Property subject to the Uniform Commercial Code.
This Mortgage will also constitute a "fixture filing" and a financing statement
for purposes of the Uniform Commercial Code of the state where the Property is
located.
4. Mortgagor shall protect, defend, indemnify and hold harmless Mortgagee
from and against all liabilities, obligations, claims, demands, damages,
penalties, losses, fines, costs and expenses (including without limitation
reasonable attorney's fees and disbursements) imposed upon or incurred by or
asserted against Mortgagee by reason of (a) ownership of this Mortgage or an
interest therein; (b) any accident, injury to or death of persons or loss of or
damage to property occurring in, on or about the Property or any part thereof;
and (c) the presence, disposal, seepage, leakage, spillage, discharge,
emission, or release or any
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<PAGE> 52
Hazardous Material (as defined in the Credit Agreement), or the failure of the
Property to comply with all environmental laws and regulations, except for
liability arising from the gross negligence or wilful misconduct of Mortgagee.
The obligations and liabilities of Mortgagor under this paragraph shall
survive the termination of this Mortgage.
5. All notices to the Mortgagor pursuant to this Mortgage shall be sent in
care of Ambassador Apartments, L.P., in the same manner as is provided in the
Credit Agreement.
6. WAIVER OF JURY TRIAL. MORTGAGOR AND MORTGAGEE HEREBY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS MORTGAGE.
NOTE: IF A DEED OF TRUST IS USED RATHER THAN A MORTGAGE, THE TERMINOLOGY IN
THE ABOVE RIDER WILL NEED TO BE MODIFIED ACCORDINGLY.
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<PAGE> 53
EXHIBIT B
---------
CERTIFICATE OF COMPLIANCE
FINANCIAL COVENANTS CERTIFICATION
The undersigned Ambassador Apartments, Inc. (the "REIT") is the general
partner of Ambassador Apartments, L.P., a Delaware limited partnership. Such
limited partnership has entered into a Revolving Credit Agreement with Credit
Lyonnais New York Branch dated May 28, 1997 (as amended from time to time, the
"Credit Agreement"). In compliance with the requirements of the Credit
Agreement, the REIT hereby certifies to Credit Lyonnais New York Branch that,
as of the date hereof:
1. The REIT's Consolidated Tangible Net Worth, including minority
interests in Ambassador Apartments, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), is equal to or greater than
_____________, which is not less than $110,000,000 plus (ii) ninety
percent (90%) of the net cash proceeds or value derived from any Equity
Securities which have been issued by the REIT after January 1, 1997.
Attached hereto are current Financial Statements and calculations,
certified by the Chief Financial Officer of the REIT confirming the
foregoing certification.
2. The REIT's Interest Coverage Ratio is not and, at any time
during the last four (4) calendar months preceding the date of this
Certification (including the month of this Certification), has not been
less than 2.00 to 1.
3. The ratio of EBITDA to Debt Service is not, and, at any time during
the last four (4) calendar months preceding the date of this
Certification (including the month of this Certification), has not been
less than 1.75 to 1.
4. The Unhedged Floating Rate Debt of the Borrower, REIT, and their
Subsidiaries does not exceed thirty percent (30%) of Consolidated
Indebtedness.
5. All capitalized terms used herein, which are not otherwise defined,
shall have the meanings attributed to them in the Credit Agreement.
Certified this ___ day of ______, 199__.
_________________________________
Adam D. Peterson
Chief Financial Officer of
Ambassador Apartments, Inc.
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<PAGE> 54
Attachments to
Compliance Certificate
[Attach updated calculations substantially
similar to the attached.]
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<PAGE> 55
EXHIBIT C
REQUEST FOR DISBURSEMENT
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<PAGE> 1
EXHIBIT 10.66
AMENDMENT TO REVOLVING CREDIT AGREEMENT
AND OTHER LOAN DOCUMENTS
This Amendment to Revolving Credit Agreement and Other Loan Documents
("Amendment") is made as of this 27th day of June, 1997, by and between
AMBASSADOR APARTMENTS, L.P., a Delaware limited partnership, having an office
address at 77 West Wacker Drive, Suite 4040, Chicago, Illinois 60601
("Borrower"), and CREDIT LYONNAIS NEW YORK BRANCH, a branch, licensed under the
laws of the state of New York, of a banking corporation organized under the
laws of the Republic of France, having an office at Credit Lyonnais Building,
1301 Avenue of Americas, New York, New York 10019 ("Lender") and its successors
and assigns.
PRELIMINARY STATEMENT
A. Borrower is a limited partnership whose sole general partner is
Ambassador Apartments, Inc., a Maryland corporation (the "REIT").
B. The REIT is listed on the New York Stock Exchange and qualifies as a
real estate investment trust.
C. Borrower and Lender are parties to a certain Revolving Credit Agreement
dated May 28, 1997 (the "Credit Agreement"). By the terms of the Credit
Agreement, Lender has agreed to extend to Borrower a revolving loan (the
"Loan") in the maximum amount of $25,000,000. All terms used herein shall have
the meaning set forth in the Credit Agreement.
D. As of May 30, 1997, Borrower was in default under the Bank One Credit
Agreement (the "Violation") which is an Event of Default pursuant to Section
11.1(o) of the Credit Agreement (the "Default").
E. By the certain Letter Agreement dated May 30, 1997 (the "Side Letter"),
executed by Borrower, Borrower agreed that no more than $3,125,000 of Working
Capital Advances and no Acquisition Advances shall be outstanding until the
Bank One Credit Agreement is amended to eliminate the Violation.
F. Borrower has arranged for a replacement line of credit with Nomura
Asset Capital Corporation ("Nomura"), to repay all indebtedness outstanding
under the Bank One Credit Agreement, thereby eliminating the Violation.
G. Borrower has requested that Lender waive the Default pursuant to
Section 11.1(o), and to once again make disbursements of the Loan, and Lender
has agreed to do so subject to the terms contained herein.
E. Borrower and Lender desire to amend the Credit Agreement, and the Note,
as provided herein.
<PAGE> 2
THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENTS
1. Incorporation of Preliminary Statement and all Exhibits: The foregoing
Preliminary Statement is hereby incorporated as if fully set forth herein.
2. Defined Terms: The terms used in this Amendment shall have the same
definitions as set forth in the Credit Agreement, to the extent that such terms
are not redefined in this Amendment.
3. Credit Agreement: Borrower and Lender hereby amend the Credit
Agreement as follows:
(a) Term of Loan. Section 4.4 of the Credit Agreement is hereby
amended to read as follows:
Without limiting the provisions of the Note, the unpaid principal
balance of each advance made hereunder shall be due and payable on or
before 90 days following the date of such advance, and the full amount of
the unpaid principal balance of the Loan, together with any accrued and
unpaid interest and all other sums then due and payable under the Note and
under the other Loan Documents, if not sooner paid, whether by reason of
acceleration or otherwise, shall be paid in full on December 31, 1997 (the
"Maturity Date"). Lender shall have no obligation to make a disbursement
of the Loan on or after the Maturity Date.
(b) Events of Default. Section 11.1(o) of the Credit Agreement is
hereby amended to read as follows:
If a default occurs under that certain Credit Agreement (the "Nomura
Credit Agreement") dated as of June 22, 1997, among Ambassador II, L.P., a
Delaware limited partnership and Nomura Asset Capital Corporation (as
amended) and continues beyond the applicable grace period, if any,
contained therein, or if a default occurs under any other revolving line
of credit facility for which Borrower or the REIT is the borrower or a
guarantor, and such default continues beyond the applicable cure period,
if any.
4. Waiver. To the extent that there is or was any default, Default or
Event of Default under the Credit Agreement or any of the other Loan Documents
solely arising out of or on account of the existence, terms or status of the
Bank One Credit Agreement or any of the documents or instruments further
evidencing or securing the loan governed by the Bank One
-2-
<PAGE> 3
Credit Agreement, the Lender hereby waives such default, Default and Event of
Default ab initio. Lender further agrees that (a) it is not entitled to
exercise any rights or remedies under the Credit Agreement or any of the other
Loan Documents on account of such default, Default or Event of Default; and (b)
no such default, Default, Event of Default now exists or previously existed
under the Credit Agreement or any of the other Loan Documents because of
the waiver set forth in the immediately preceding sentence.
5. Note: Borrower and Lender hereby amend the Note as follows:
(a) The definition "Maturity Date" in the Note is amended to be
December 31, 1997.
6. Status of Side Letter. Borrower represents and warrants to Lender that
all indebtedness outstanding under the Bank One Credit Agreement has been
repaid and the Bank One Credit Agreement has been terminated. Based on such
representation, Lender agrees that such termination and the execution and
delivery of the Nomura Credit Agreement satisfy the requirements of the Side
Letter and that Acquisition Advances are available in accordance with the terms
contained in the Credit Agreement.
7. Payment of Costs. Borrower agrees to pay all reasonable fees and
expenses of the Lender incurred as of the date hereof in connection with the
Amendment as contemplated herein, including Lender's reasonable legal fees and
expenses.
8. Representations and Warranties: Borrower represents and warrants to
Lender as follows: (a) all representations and warranties contained in the
Credit Agreement are each true and correct in all material respects on the date
hereof and are made as of the date hereof; (b) there exists no default or event
of default under the Credit Agreement or any other Loan Document (other than
the Violation which will be waived pursuant to Paragraph 4 above); (c) the
Borrower has no defenses or offsets to the enforcement of the Loan Documents.
9. Amendment Controlling: In the event of a conflict or inconsistency
between the provisions of the original Loan Documents and the provisions of
this Amendment the provisions of this Amendment shall govern. All of the Loan
Documents, as hereby amended are ratified and confirmed hereby by Borrower.
10. Successor and Assigns: Subject to the limitations set forth in the
Credit Agreement, this Amendment shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
11. Counterparts: This Amendment may be executed in two or more
counterparts, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, shall constitute but one
Agreement.
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<PAGE> 4
12. WAIVER OF JURY TRIAL: LENDER AND BORROWER, BY THEIR EXECUTION HEREOF,
EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHT HEREOF UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENTS RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS
THE SUBJECT OF THIS AMENDMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
13. Integration: This Amendment together with the Loan Documents and the
Waiver executed by Borrower and Lender on June 26, 1997, constitute the entire
Agreement between Lender and the Borrower, and all other affiliated parties
with respect to the Loan and to the subject matter of the foregoing documents,
and all prior writings and discussions and all contemporaneous discussion are
hereby merged into and superseded by the provisions of the foregoing documents.
[SIGNATURES ARE CONTAINED ON THE FOLLOWING PAGE]
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<PAGE> 5
IN WITNESS WHEREOF, Borrower and Lender have caused this Amendment to be
executed as an instrument under seal as of the date hereof.
BORROWER:
AMBASSADOR APARTMENTS, L.P., A
DELAWARE LIMITED PARTNERSHIP
BY: AMBASSADOR APARTMENTS, INC., a
Maryland corporation
By:
------------------------------
Its:
------------------------------
LENDER:
CREDIT LYONNAIS NEW YORK BRANCH, A BRANCH,
LICENSED UNDER THE LAWS OF THE STATE OF NEW
YORK, OF A BANKING CORPORATION ORGANIZED
UNDER THE LAWS OF THE REPUBLIC OF FRANCE
By:
------------------------------
Its:
------------------------------
-5-
<PAGE> 1
EXHIBIT 10.67
- -------------------------------------------------------------------------------
---------
NOTE AGREEMENT
Dated as of June 22, 1997
---------
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached but
is inserted for convenience only.
<TABLE>
<S> <C> <C>
Section 1. Definitions and Accounting Matters.............................. 1
1.01 Certain Defined Terms............................................ 1
1.02 Accounting Terms and Determinations.............................. 17
Section 2. Facility........................................................ 18
2.01 Mortgage Loans................................................... 18
2.02 Borrowings....................................................... 18
2.03 Changes of Commitment............................................ 19
2.04 Fees............................................................. 19
2.05 Note............................................................. 19
2.06 Optional Prepayments............................................. 19
2.07 Mandatory Prepayments............................................ 19
2.08 Additional Properties............................................ 20
2.09 Releases......................................................... 22
2.10 Appraisals....................................................... 23
Section 3. Payments of Principal and Interest.............................. 23
3.01 Repayment of Mortgage Loans...................................... 23
3.02 Interest......................................................... 23
Section 4. Payments; Computations; Etc..................................... 23
4.01 Payments......................................................... 23
4.02 Computations..................................................... 24
4.03 Setoff........................................................... 24
4.04 Minimum Amounts.................................................. 24
4.05 Certain Notices.................................................. 24
Section 5. Yield Protection and Illegality................................. 25
5.01 Additional Costs................................................. 25
5.02 Illegality....................................................... 27
5.03 Limitation on Types of Mortgage Loans............................ 27
5.04 Compensation..................................................... 28
Section 6. Conditions Precedent............................................ 28
6.01 Closing Date..................................................... 28
6.02 Initial and Subsequent Mortgage Loans............................ 35
Section 7. Representations and Warranties.................................. 38
7.01 Existence........................................................ 38
7.02 Financial Condition.............................................. 38
7.03 Litigation....................................................... 38
7.04 No Breach........................................................ 38
7.05 Action........................................................... 39
7.06 Approvals........................................................ 39
7.07 Use of Mortgage Loans............................................ 39
7.08 ERISA............................................................ 39
7.09 Taxes............................................................ 40
7.10 Investment Company Act........................................... 40
7.11 Equal Employment and Non-Discrimination.......................... 40
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
7.12 Subsidiaries, Etc................................................ 40
7.13 Title............................................................ 41
7.14 Partners, Etc.................................................... 41
7.15 Restricted Activities ........................................... 41
7.16 Other Activities................................................. 41
7.17 Employees........................................................ 42
7.18 Solvency......................................................... 43
7.19 Delinquent Property Liens........................................ 43
7.20 Insurance........................................................ 43
7.21 Lien Priority.................................................... 43
7.22 Improvements..................................................... 43
7.23 Casualty; Condemnation........................................... 43
7.24 Zoning and Other Laws............................................ 44
7.25 Management Agreement............................................. 44
7.26 Contracts........................................................ 44
7.27 Permits.......................................................... 44
7.28 Utilities........................................................ 45
7.29 Certificates of Occupancy........................................ 45
7.30 Assessments...................................................... 45
7.31 Condition of Properties.......................................... 45
7.32 Environmental Reports/Appraisals................................. 45
7.33 Leases........................................................... 45
7.34 No Cooperative or Condominium.................................... 46
Section 8. Covenants of the Borrower....................................... 46
8.01 Financial Statements............................................. 46
8.02 Litigation, Etc.................................................. 49
8.03 Existence, Etc................................................... 49
8.04 Insurance........................................................ 49
8.05 Prohibition of Fundamental Changes............................... 50
8.06 Limitation on Liens.............................................. 50
8.07 Indebtedness..................................................... 51
8.08 Investments...................................................... 52
8.09 Dividend Payments................................................ 52
8.10 Activities....................................................... 52
8.11 Transactions with Affiliates..................................... 53
8.12 Intentionally Omitted............................................ 53
8.13 Modifications of Certain Documents............................... 53
8.14 Additional Subsidiaries.......................................... 54
8.15 Debt Service Ratio............................................... 54
8.16 Property Management.............................................. 55
8.17 Residential Leases............................................... 55
Section 9. Events of Default............................................... 55
Section 10. Miscellaneous.................................................. 60
10.01 Waiver.......................................................... 60
10.02 Notices......................................................... 60
10.03 Expenses, Etc................................................... 60
10.04 Amendments, Etc................................................. 61
10.05 Successors and Assigns.......................................... 61
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.06 Assignments and Participation................................... 62
10.07 Survival........................................................ 63
10.08 Captions........................................................ 63
10.09 Counterparts.................................................... 63
10.10 Governing Law; Submission to Jurisdiction....................... 63
10.11 Waiver of Jury Trial............................................ 64
10.12 Marshalling; Recapture.......................................... 64
10.13 Cross Collateralization......................................... 64
10.14 Confidentiality................................................. 64
10.15 Appointment of Servicer......................................... 65
</TABLE>
SCHEDULE I Indebtedness
SCHEDULE II Litigation
SCHEDULE III Subsidiaries and Investments
SCHEDULE IV Initial Properties
SCHEDULE V Material Property Contracts
SCHEDULE VI Property Condition
SCHEDULE VII Environmental
SCHEDULE VIII Defaults
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Borrowing Notice
EXHIBIT C Form of Residential Leases for Initial Properties
- 3 -
<PAGE> 5
THIS NOTE AGREEMENT dated as of June 22, 1997 (as amended, modified or
supplemented from time to time, this "Agreement") is by and between AMBASSADOR
II, L.P., a limited partnership duly organized and validly existing under the
laws of the State of Delaware (the "Borrower"), and NOMURA ASSET CAPITAL
CORPORATION, a corporation organized under the laws of the State of Delaware
(together with its successors and assigns, the "Lender").
RECITALS
WHEREAS, the Borrower desires to obtain from the Lender, and the Lender
has agreed to make to the Borrower, a series of loans, under the guarantee of
the Guarantors and under the terms and conditions hereof, in an aggregate
principal amount not exceeding $75,000,000 (the "Commitment") at any one time
outstanding.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when
used in the plural and vice versa):
"Addition" shall have the meaning assigned to such term in Section
2.08(a).
"Addition Notice" shall have the meaning assigned to such term in Section
2.08(a).
"Additional Collateral Conditions" shall have the meaning assigned to such
term in Section 2.08(b).
"Additional Costs" shall have the meaning assigned to such term in Section
5.01(a).
"Additional Mortgages" shall mean any and all Mortgages delivered pursuant
to Section 2.08(b).
"Additional Properties" shall have the meaning assigned to such term in
Section 2.08(a).
"Affiliate" shall mean, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person and, if such Person is an individual, any member of the immediate
family (including parents, spouse and children) of such individual and any trust
whose principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with")
<PAGE> 6
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise), provided
that, in any event, any Person which owns directly or indirectly 10% or more of
the securities having ordinary voting power for the election of directors or
other governing body of a corporation or 10% or more of the partnership or
other ownership interests of any other Person (other than as a limited partner
of such other Person) will be deemed to control such corporation or other
Person. Notwithstanding the foregoing, no individual shall be deemed to be an
Affiliate of a corporation solely by reason of his or her being an officer or
director of such corporation.
"Allocated Title Amount" shall mean, as at any date of determination
thereof, with respect to any Collateral Property, an amount equal to (a) the
Cash Flow of such Collateral Property for the twelve month period ending on or
most recently ended prior to such date divided by (b) 10% multiplied by (c)
115%; provided that the Allocated Title Amount for any Collateral Property
shall not exceed the maximum principal amount secured by the Mortgage on such
Collateral Property as set forth in such Mortgage (as reduced by prepayments
allocated to such Collateral Property pursuant to Section 4.01(b)). If, with
respect to any Collateral Property, such twelve month period includes periods
prior to the Borrower's ownership of such Collateral Property, Cash Flow shall
include the Borrower's predecessor's cash flow with respect to such Collateral
Property (which cash flow (a) shall be certified to the best knowledge of a
senior financial officer of the Borrower and evidenced by such supporting
information as reasonably requested by the Lender) and (b) shall be adjusted to
reflect the amount, if any, that the Borrower has demonstrated, in the Lender's
sole discretion, is appropriate to reflect reductions in Property Expenses
which the Borrower expects to achieve as a result of increased efficiency of
operation of such Collateral Property or otherwise).
"Ambassador" shall mean Ambassador Apartments, Inc., a Maryland
corporation.
"Ambassador Cash Flow" shall mean, for any period for Ambassador and its
Consolidated Subsidiaries, the sum (determined on a consolidated basis in
accordance with GAAP and without duplication) of the following: (a) all rental
revenue and operating income (including, without limitation, actual rental
income and other income, base rents, percentage rents, common area maintenance,
charges, property tax recoveries, insurance recoveries, Consumer Price Index
rent adjustments and other miscellaneous income items) received by Ambassador
and its Consolidated Subsidiaries from the ownership and operation of any
Property during such period (but excluding income from advance payments,
deposits, escrows or a sale or other capital item transaction), plus (b)
depreciation and amortization (to the
- 2 -
<PAGE> 7
extent deducted in determining rental revenue and operating income), minus (c)
all Ambassador Property Expenses incurred by Ambassador and its Consolidated
Subsidiaries during such period.
"Ambassador Debt Service" shall mean, for any period for Ambassador and
its Consolidated Subsidiaries, the sum (determined on a consolidated basis in
accordance with GAAP and without duplication) of the following: (a) all
payments of principal of Indebtedness (other than payments of principal due on
the maturity date of a loan) of Ambassador and its Consolidated Subsidiaries
scheduled to be made during such period plus (b) the greater of (1) all
Interest Expense payable by Ambassador and its Consolidated Subsidiaries during
such period or (2) all Interest Expense payable by Ambassador and its
Consolidated Subsidiaries during such period calculated in accordance with the
definition of Interest Expense set forth in this Section 1.01 but assuming for
purposes of the calculation of Interest Expense that all interest payable in
respect of Indebtedness during such period is at the Mortgage Loan Constant.
"Ambassador Debt Service Ratio" shall mean, as to any date of
determination on or after the Closing Date, the ratio of (A) Ambassador Cash
Flow for the twelve month period ending on the last day of the calendar month
ending on or most recently ended prior to such date of determination to (B)
Ambassador Debt Service for such period.
"Ambassador Property Expenses" shall mean, for any Property owned by
Ambassador or any of its Consolidated Subsidiaries, all operating expenses
relating to such Property including the following items (provided, however,
that Ambassador Property Expenses shall not include Debt Service, Interest
Expense, Capital Expenditures, contributions to capital expenditure reserves,
non-cash items such as depreciation and amortization and any extraordinary
one-time expenditures not considered operating expenses under GAAP):
(1) all expenses for the operation of such Property including management
fees in respect thereof, all insurance premiums and expenses, accounting
expenses, advertising expenses, expenses for architectural services, bank
charges, utility charges, expenses for extermination, cleaning, and trash
removal services, expenses relating to window washing, landscaping and security
services, reasonable and necessary legal expenses incurred in connection with
the operation of such Property, tenant improvements, marketing costs (but not
including any expenses incurred in connection with a sale or other capital or
interim capital transaction);
(2) impositions, water charges, property and real estate taxes, sewer
rents, other than fines, penalties, interest or such impositions (or portions
thereof) that are payable by reason of the failure by Ambassador or any such
Consolidated Subsidiary to pay an imposition timely; and
- 3 -
<PAGE> 8
(3) the cost of routine interior and exterior maintenance, repairs and
minor alterations, the cost of which can be expensed under GAAP.
"Applicable Margin" shall mean 1.50% per annum and shall apply to all
outstanding principal amounts under this Agreement commencing on the Closing
Date.
"Approval Notice" shall have the meaning assigned to such term in Section
2.08(c).
"Assignments" shall mean, collectively, each Assignment of Leases and
Rents relating to a Collateral Property.
"Available Amount" shall mean, as at any date of determination, the
maximum aggregate principal amount of Mortgage Loans that can be outstanding
such that the Debt Service Ratio is not lower than 1.40 to 1.00, and in no
event exceeding the Commitment.
"Basic Documents" shall mean, collectively, this Agreement, the Note, the
Environmental Indemnity Agreement, the Security Documents and all other
agreements executed and delivered to the Lender by the Borrower, Ambassador or
any Guarantor in connection with any of the foregoing agreements, as any of the
foregoing agreements may be further amended, modified and supplemented and in
effect from time to time.
"Borrower" shall have the meaning assigned to such term in the preamble.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York City and, for purposes of
determining the LIBOR Rate, any day on which dealings in Dollar deposits are
carried out in the London interbank market (even if commercial banks in New
York City are authorized or required to close on such day).
"Capital Expenditures" shall mean, for any period as to any Person,
expenditures (including the aggregate amount of Capital Lease Obligations
incurred during such period) made by such Person or any of its Consolidated
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with GAAP.
"Capital Lease Obligations" shall mean, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person
- 4 -
<PAGE> 9
under GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board) and, for purposes of this Agreement, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with GAAP (including such Statement No. 13).
"Cash Flow" shall mean, for any period (without duplication) with respect
to any Collateral Property, the sum of (a) Property NOI of such Collateral
Property (calculated before Interest Expense, extraordinary and unusual items
and income or loss attributable to equity in Affiliates) for such period plus
(b) depreciation and amortization in respect of such Collateral Property (to
the extent deducted in determining Property NOI) for such period minus (c)
Capital Expenditures and contributions to capital expenditure reserves in
respect of such Collateral Property made during such period; provided that for
purposes of calculating Cash Flow for any Collateral Property, Capital
Expenditures and contributions to capital expenditure reserves shall be assumed
to be $250 per annum per rentable unit for such Collateral Property.
"Cedar Creek Property" shall have the meaning assigned to such term in
Section 2.02.
"Closing Date" shall mean June 23, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" shall mean any and all Property from time to time subject to
the Lien of any Security Document.
"Collateral Properties" shall mean, collectively, the Initial Properties
and the Additional Properties which from time to time comprise the Collateral.
"Commitment" shall mean the obligation of the Lender to make Mortgage
Loans in an aggregate principal amount at any one time outstanding up to but
not exceeding $75,000,000 (as the same may be reduced or terminated by the
Borrower at any time or from time to time pursuant to Section 2.03).
"Common Units" shall have the meaning assigned to such term in the
Prospectus.
"Consolidated Subsidiary" shall mean, as to any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with GAAP.
"Debt Service" shall mean (i) for any period for any Person
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other than the Borrower, the sum (determined on a consolidated basis in
accordance with GAAP and without duplication) of the following: (a) all
payments of principal of Indebtedness of such Person and its Consolidated
Subsidiaries scheduled to be made during such period plus (b) all Interest
Expense payable during such period and (ii) for any period for the Borrower, the
aggregate amount of principal and interest payments that would be due and
payable during the applicable period calculated using the Mortgage Loan
Constant and assuming that the principal amount of the Mortgage Loans
outstanding as of the date of the determination was the principal amount
applicable to the entire period for which the calculation is made.
"Debt Service Ratio" shall mean with respect to the Borrower as to any
date of determination on or after the Closing Date, the ratio of (A) the
aggregate Cash Flow of all of the Collateral Properties for the twelve month
period ending on the last day of the calendar month ending on or most recently
ended prior to such date of determination to (B) Debt Service of the Borrower
for such period. Notwithstanding the foregoing, (i) Cash Flow with respect to
an Additional Property shall be included in such calculations from the date of
the Approval Notice with respect to such Additional Property only, but, once so
included, shall include Cash Flow with respect to such Additional Property for
the same period used for the other Collateral Properties, and (ii) if, with
respect to any Collateral Property, such twelve month period includes periods
prior to the Borrower's ownership of such Collateral Property, Cash Flow shall
include the Borrower's predecessor's cash flow with respect to such Collateral
Property (which cash flow (a) shall be certified to the best knowledge of a
senior financial officer of the Borrower and evidenced by such supporting
information as reasonably requested by the Lender) and (b) shall be adjusted to
reflect the amount, if any, that the Borrower has demonstrated, in the Lender's
sole discretion, is appropriate to reflect reductions in Property Expenses
which the Borrower expects to achieve as a result of increased efficiency of
operation of such Collateral Property or otherwise).
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"Dividend Payment" shall mean, as to any Person, any dividend or any
partnership distribution (in cash, property or obligations) on, or any other
payment or distribution on account of, or the setting apart of money for a
sinking or other analogous fund for, the purchase, redemption, retirement or
other acquisition of, any shares of any class of stock of such Person, (but
excluding dividends payable solely in shares of common stock) of such Person or
any portion of any partnership interest (whether general or limited) of such
Person.
"Dollars" and "$" shall mean lawful money of the United States of America.
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"Environmental Indemnity Agreement" shall mean the Environmental Indemnity
Agreement dated as of the date hereof among the Borrower, Ambassador, the
Guarantors and the Lender, as modified and supplemented and in effect from
time to time.
"Environmental Laws" shall mean any and all federal, state, and local
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to soil, surface waters, ground waters,
land, stream sediments, surface or subsurface strata or ambient air or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into soil, surface waters, ground waters, land, stream sediments, surface or
subsurface strata or ambient air or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business which is
a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower, Ambassador or any Guarantor or is
under common control (within the meaning of Section 414(c) of the Code) with
the Borrower, Ambassador or any Guarantor.
"Event of Default" shall have the meaning assigned to such term in Section
9.
"Excess Cash Flow" shall mean, as at any date of determination thereof,
the excess (if any) of (a) Property NOI (calculated before the deduction of
Property Expenses, Interest Expense, extraordinary and unusual items and income
or loss attributable to equity in Affiliates) plus depreciation and
amortization (to the extent deducted in determining Property NOI) of the
Borrower and its Consolidated Subsidiaries, in each case for the calendar month
ending on the last day of the calendar month most recently ended prior to such
date of determination over (b) the amount of Debt Service (without regard to
clause (b)(2) of the definition of Debt Service), the amount of Property
Expenses (excluding the Management Fee) of the Borrower and its Consolidated
Subsidiaries for such period as set forth in the budgets submitted for the
Collateral Properties and the amount of Capital Expenditures (except to the
extent made from capital expenditure reserves) and contributions to capital
expenditure reserves made by the Borrower and its Consolidated Subsidiaries
during such period, in each case to the extent previously approved by the
Lender.
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"GAAP" shall mean generally accepted accounting principles applied on a
basis consistent with those which, in accordance with the last sentence of
Section 1.02(a), are to be used in making the calculations for purposes of
determining compliance with the terms of this Agreement.
"General Partner" shall mean Ambassador II, Inc., a Delaware corporation.
"GP Guarantee Agreement" shall mean the Guarantee and Pledge Agreement
dated as of the date hereof executed by the General Partner in favor of the
Lender, as modified and supplemented and in effect from time to time.
"Guarantee" shall mean a guarantee, an endorsement, a contingent agreement
to purchase or to furnish funds for the payment or maintenance of, or otherwise
to be or become contingently liable under or with respect to, Indebtedness, net
worth, working capital or earnings of any Person, or a guarantee of the payment
of dividends or other distributions upon the stock of any corporation or
ownership interests of any entity or an agreement to purchase, sell or lease
(as lessee or lessor) property, products, materials, supplies or services
primarily for the purpose of enabling a debtor to make payment of his, her or
its obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank to open a letter of credit for
the benefit of another Person, but excluding endorsements for collection or
deposit in the ordinary course of business. The terms "Guarantee" and
"Guaranteed" used as a verb shall have a correlative meaning.
"Guarantee Agreements" shall mean, collectively, the GP Guarantee
Agreement and the LP Guarantee Agreement, each as modified and supplemented and
in effect from time to time.
"Guarantor" shall mean each of the General Partner and the Operating
Partnership.
"Hazardous Materials" shall have the meaning assigned to such term in the
Environmental Indemnity Agreement.
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<PAGE> 13
"Indebtedness" shall mean, as to any Person: (a) indebtedness created,
issued or incurred by such Person for borrowed money (whether by loan or the
issuance and sale of debt securities); (b) obligations of such Person to pay
the deferred purchase or acquisition price of property or services, including
trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business; (c) Indebtedness of
others secured by a Lien on the property of such Person, whether or not the
respective indebtedness so secured has been assumed by such Person; (d)
obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for
the account of such Person; (e) Capital Lease Obligations and other lease
obligations arising under leases that are in the nature of title retention
agreements of such Person; and (f) Indebtedness of others Guaranteed by such
Person.
"Independent Director" shall have the meaning assigned to such term in
Section 7.16.
"Initial Mortgages" shall have the meaning assigned to such term in
Section 6.01.
"Initial Properties" shall mean the properties listed on Schedule IV.
"Interest Expense" shall mean, for any period for any Person, all interest
in respect of Indebtedness accrued or capitalized by such Person during such
period (whether or not actually paid during such period).
"Interest Payment Date" shall mean, with respect to any Mortgage Loan, the
first (1st) day of each calendar month.
"Interest Period" shall mean, with respect to any Mortgage Loan, (a)
initially, the period (the "Stub Period") commencing on the date such Mortgage
Loan is made and ending on and including the last day of the calendar month in
which such Mortgage Loan is made, and (b) thereafter, each one-month period
commencing on the first day of each succeeding calendar month and ending on and
including the last day of such calendar month. Notwithstanding the foregoing:
(i) if any Interest Period would otherwise commence before and end after the
Maturity Date, such Interest Period shall end on the Maturity Date; and (ii)
notwithstanding clause (i) above, no Interest Period (other than the Stub
Period) shall have a duration of less than one month and, if the Interest
Period for any Mortgage Loan would otherwise be a shorter period, such Mortgage
Loan shall not be available hereunder.
"Investment" in any Person shall mean: (a) the acquisition (whether for
cash, property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of such Person; and (b) any
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<PAGE> 14
deposit with, or advance, loan or other extension of credit to, such Person
(other than any such advance, loan or extension of credit having a term not
exceeding 90 days representing the purchase price of inventory or supplies
purchased in the ordinary course of business) or Guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of such
Person and (without duplication) any amount committed to be advanced, lent or
extended to such Person (other than any such advance, loan or extension of
credit having a term not exceeding 90 days representing the purchase price of
inventory or supplies purchased in the ordinary course of business).
"Jurisdictional Capped Mortgage" shall have the meaning assigned to such
term in Section 6.02.
"Lender" shall have the meaning assigned to such term in the preamble.
"LIBOR Rate" shall mean, with respect to any Interest Period for any
Mortgage Loan, the 30-day London interbank offered rate for United States
dollar deposits as of 11:00 a.m. (London time) on the date which is two
Business Days prior to the first day of such Interest Period, in each case as
quoted on Telerate page 3750 or on such replacement system as is then
customarily used to quote the London interbank offered rate. If two or more
such rates appear on Telerate page 3750 or associated pages, the rate in
respect of such Interest Period shall be the arithmetic mean of such offered
rates(rounded upward to the nearest 1/16).
"Lien" shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For purposes of this Agreement, the Borrower and each of its Subsidiaries shall
be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"LP Cash Flow" shall mean, for any period for the Operating Partnership
and its Consolidated Subsidiaries, the sum (determined on a consolidated basis
in accordance with GAAP and without duplication) of the following: (a) all
rental revenue and operating income (including, without limitation, actual
rental income and other income, base rents, percentage rents, common area
maintenance, charges, property tax recoveries, insurance recoveries, Consumer
Price Index rent adjustments and other miscellaneous income items) received by
the Operating Partnership and its Consolidated Subsidiaries from the ownership
and operation of any Property during such period (but excluding income from
advance payments, deposits, escrows or a sale or other capital item
transaction), plus (b) depreciation and amortization (to the extent deducted in
determining rental revenue and operating income), minus (c) all LP Property
Expenses incurred by the Operating Partnership and its Consolidated
Subsidiaries during such
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<PAGE> 15
period.
"LP Debt Service" shall mean, for any period for the Operating Partnership
and its Consolidated Subsidiaries, the sum (determined on a consolidated basis
in accordance with GAAP and without duplication) of the following: (a) all
payments of principal of Indebtedness (other than payments of principal due on
the maturity date of a loan) of the Operating Partnership and its Consolidated
Subsidiaries scheduled to be made during such period plus (b) the greater of
(1) all Interest Expense payable by the Operating Partnership and its
Consolidated Subsidiaries during such period or (2) all Interest Expense
payable by the Operating Partnership and its Consolidated Subsidiaries during
such period calculated in accordance with the definition of Interest Expense
set forth in this Section 1.01 but assuming for purposes of the calculation of
Interest Expense that all interest payable in respect of Indebtedness during
such period is at the Mortgage Loan Constant.
"LP Debt Service Ratio" shall mean, as to any date of determination on or
after the Closing Date, the ratio of (A) LP Cash Flow for the twelve month
period ending on the last day of the calendar month ending on or most recently
ended prior to such date of determination to (B) LP Debt Service for such
period.
"LP Guarantee Agreement" shall mean that Guarantee and Pledge Agreement
dated as of the date hereof executed by the Operating Partnership in favor of
the Lender, as modified and supplemented and in effect from time to time.
"LP Property Expenses" shall mean, for any Property owned by the Operating
Partnership or any of its Consolidated Subsidiaries, all operating expenses
relating to such Property including the following items (provided, however,
that LP Property Expenses shall not include Debt Service, Interest Expense,
Capital Expenditures, contributions to capital expenditure reserves, non-cash
items such as depreciation and amortization and any extraordinary one-time
expenditures not considered operating expenses under GAAP):
(1) all expenses for the operation of such Property including management
fees in respect thereof, all insurance premiums and expenses, accounting
expenses, advertising expenses, expenses for architectural services, bank
charges, utility charges, expenses for extermination, cleaning, and trash
removal services, expenses relating to window washing, landscaping and security
services, reasonable and necessary legal expenses incurred in connection with
the operation of such Property, tenant improvements, marketing costs (but not
including any expenses incurred in connection with a sale or other capital or
interim capital transaction);
(2) impositions, water charges, property and real estate taxes, sewer
rents, other than fines, penalties, interest or such
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<PAGE> 16
impositions (or portions thereof) that are payable by reason of the failure by
the Operating Partnership or any such Consolidated Subsidiary to pay an
imposition timely; and
(3) the cost of routine interior and exterior maintenance, repairs and
minor alterations, the cost of which can be expensed under GAAP.
"Management Agreements" shall mean the Property Management Agreement dated
as of October 16, 1996 between the Borrower and the Operating Partnership, and
such other management agreements which are entered into from time to time with
respect to any Collateral Properties, in each case as modified and supplemented
(without prejudice to Section 8.13) and in effect from time to time.
"Management Fee" shall mean, with respect to each Collateral Property, the
fee (if any) payable to each Manager pursuant to the Management Agreements.
"Manager" shall mean the Operating Partnership and any other manager under
the Management Agreements.
"Market Study" shall mean a market study, prepared by the Borrower (or a
third party at the option of the Borrower), with respect to a Collateral
Property including, without limitation, (i) information relating to the rental
rates and sales of similar properties in the area in which such Collateral
Property is located, (ii) a discussion of the submarkets in which such
Collateral Property is located and (iii) a new construction analysis.
"Material Adverse Effect" means a material adverse effect on any of (a)
the condition (financial or otherwise), business, performance, properties,
assets or operations of any Guarantor and its Consolidated Subsidiaries taken
as a whole or Ambassador and its Consolidated Subsidiaries taken as a whole or
the Borrower and its Consolidated Subsidiaries taken as whole, (b) the ability
of any Guarantor, Ambassador, the Borrower or any of its Subsidiaries to
perform its obligations under any Basic Document to which it is a party, (c)
the legality, validity or enforceability of any Basic Document or any
significant provision thereof or the rights and remedies of the Lender under
any Basic Document or any significant provision thereof, (d) the timely payment
of principal or interest on any Mortgage Loan or other amounts payable under
the Basic Documents, (e) the perfection or priority of the Liens on the
Collateral (under and as defined in each of the Security Agreement, the REIT
Agreement and the Guarantee Agreements), (f) any Collateral Property whose
Property NOI (before the deduction of Property Expenses) prior to the
occurrence or circumstance resulting in such effect is equal to or greater than
10% of the aggregate Property NOI (before the deduction of Property Expenses)
of all the Collateral Properties, (g) the value, utility, operation or legality
of any Collateral Property whose
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<PAGE> 17
Property NOI (before the deduction of Property Expenses) prior to the occurrence
or circumstance resulting in such effect is equal to or greater than 10% of the
aggregate Property NOI (before the deduction of Property Expenses) of all the
Collateral Properties, (h) any Collateral Property whose Property NOI (before
the deduction of Property Expenses) prior to the occurrence or circumstance
resulting in such effect is less than or equal to 10% of the aggregate Property
NOI (before the deduction of Property Expenses) of all the Collateral Properties
but when taken together with any other Collateral Property whose Property NOI
(before deduction of Property Expenses) is less than or equal to 10% of the
aggregate Property NOI (before the deduction of Property Expenses) of all the
Collateral Properties results in an aggregate Property NOI (before deduction of
Property Expenses) equal to or greater than 10% of the aggregate Property
NOI (before deduction of Property Expenses) of all the Collateral Properties,
or (i) the Property NOI (before the deduction of Property Expenses)
of any Collateral Property.
"Maturity Date" shall mean December 31, 1997, or such earlier date
resulting from acceleration.
"Mortgage Loan Constant" shall mean, as at any date of determination
thereof, the greater of (a) 8.81% per annum or (b) a mortgage loan constant
derived using a 360 month amortization schedule and an interest rate equal to
the sum of (1) 1.50% plus (2) the Treasury Yield per annum on such date of U.S.
Treasury Securities with a maturity of 10 years. The "Treasury Yield" shall be
determined by reference to the most recent Federal Reserve Statistical Release
Section 15(519) or any comparable successor publication which has become
publicly available on the Business Day immediately preceding the date of
determination (or, if such Statistical Release is no longer published, any
publicly available source of similar market data acceptable to the Lender).
"Mortgage Loans" shall mean the loans provided for by Section 2.01.
"Mortgages" shall mean, collectively, each mortgage, deed of trust,
assignment of leases and rents, security agreement and fixture financing
statement and similar instrument executed by the Borrower in favor of the
Lender, covering each of the Collateral Properties, including, without
limitation, the respective properties and leasehold interests identified in the
schedules thereto including, without limitation, the Initial Mortgages and the
Additional Mortgages, as each such mortgage, deed of trust, assignment of rents
and fixture filing shall be modified and supplemented and in effect from time
to time.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Borrower,
Ambassador or any Guarantor or any ERISA
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<PAGE> 18
Affiliate and which is covered by Title IV of ERISA.
"Note" shall mean the promissory note dated the date hereof executed by
the Borrower and provided for by Section 2.05.
"Operating Partnership" or "Ambassador L.P." shall mean Ambassador
Apartments, L.P., a Delaware limited partnership.
"Partnership Agreement" shall mean the Limited Partnership Agreement of
the Borrower dated as of August 16, 1994 between the General Partner and the
Operating Partnership, as amended by Amendment No. 1 to Limited Partnership
Agreement dated February 15, 1995 and Amendment to Limited Partnership
Agreement dated as of June 20, 1996 and as further modified and supplemented
(without prejudice to Section 8.13) and in effect from time to time.
"Participation Agreement" shall have the meaning assigned to such term in
Section 10.06.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Investments" of any Person shall mean: (a) direct obligations
of the United States of America, or of any agency thereof, or obligations
guaranteed as to principal and interest by the United States of America, or of
any agency thereof; (b) deposit accounts with or certificates of deposit and
bankers' acceptances issued by any bank or trust company organized under the
laws of the United States of America or any state thereof and having capital,
surplus and undivided profits of at least $500,000,000, or such other bank or
trust company reasonably acceptable to the Lender; (c) commercial paper rated
A-1 or better or P-1 by Standard & Poor's Corporation ("S&P") or Moody's
Investors Services, Inc. ("Moody's"), respectively, and maturing not more than
90 days from the date of acquisition thereof by such Person; and (d)
Investments in money market funds rated AAAm or AAAm-G by S&P and P-1 by
Moody's.
"Permitted Liens" shall have the meaning assigned to such term in Section
8.06.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Borrower, Ambassador, any Guarantor or any ERISA Affiliate
and which is covered by Title IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal
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<PAGE> 19
of any Mortgage Loan or any other amount payable by the Borrower, Ambassador
or any Guarantor under this Agreement or the Basic Documents that is not paid
when due (whether at stated maturity, by acceleration or otherwise), a rate
per annum during the period from and including the due date thereof to but
excluding the date on which such amount is paid in full equal to 4% above the
LIBOR Rate as in effect from time to time plus the Applicable Margin.
"Preliminary Approval Notice" shall have the meaning assigned to such term
in Section 2.08(b).
"Principal Office" shall mean the principal office of the Lender, located
at 2 World Financial Center, New York, New York 10281 or any other office
designated as such in writing by the Lender.
"Property" shall mean assets and properties, whether real, personal or
mixed, tangible or intangible.
"Property Expenses" shall mean, for any Collateral Property, all operating
expenses relating to such Collateral Property including the following items
(provided, however, that Property Expenses shall not include Debt Service,
Interest Expense, Capital Expenditures, non-cash items such as depreciation and
amortization and any extraordinary one-time expenditures not considered
operating expenses under GAAP):
(1) all expenses for the operation of such Collateral Property including
the Management Fee in respect thereof, all insurance premiums and expenses,
accounting expenses, advertising expenses, expenses for architectural services,
bank charges, utility charges, expenses for extermination, cleaning and trash
removal services, expenses relating to window washing, landscaping and security
services, reasonable and necessary legal expenses incurred in connection with
the operation of such Collateral Property, tenant improvements, marketing costs
(but not including any expenses incurred in connection with a sale or other
capital or interim capital transaction);
(2) impositions, water charges, property and real estate taxes, sewer
rents, other than fines, penalties, interest or such impositions (or portions
thereof) that are payable by reason of the Borrower's failure to pay an
imposition timely; and
(3) the cost of routine interior and exterior maintenance, repairs and
minor alterations, the cost of which can be expensed under GAAP.
For purposes of computing Property Expenses for any Collateral Property the
Management Fee shall be assumed to be an amount equal to 4% of all gross
revenues actually received by the Borrower from the operations of such
Collateral Property or otherwise in respect of such Collateral Property.
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<PAGE> 20
"Property NOI" shall mean, as of any date of determination thereof, for
each Collateral Property, the sum of (1) all rental revenue and operating
income (including, without limitation, actual rental income and other income,
base rents, percentage rents, common area maintenance, charges, property tax
recoveries, insurance recoveries, Consumer Price Index rent adjustments and
other miscellaneous income items) actually received by the Borrower from the
ownership and operation of such Collateral Property (but excluding income from
advance payments, deposits, escrows or a sale or other capital item
transaction) computed on a cash basis for the twelve month period ending on or
most recently ended prior to such date of determination minus (2) all Property
Expenses to the extent actually expended by the Borrower during such period.
"Prospectus" shall mean the Prospectus dated August 24, 1994 relating to
the offering of 7,821,000 shares of Common Stock of Ambassador.
"REIT Agreement" shall mean the REIT Agreement dated as of the date hereof
executed by Ambassador in favor of the Lender, as modified and supplemented and
in effect from time to time.
"Regulatory Change" shall mean any change after the date of this Agreement
in United States Federal, state or foreign law, rules or regulations or the
adoption or making after such date of any interpretation, directive or request
applying to a class of financial institutions including the Lender of or under
any United States Federal, state or foreign laws, rules or regulations (whether
or not having the force of law) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Related Person" shall mean, with respect to any specified Person, any
other Person that is an Affiliate of the specified Person or any limited
partner of the specified Person (if such Person is a limited partnership) or
any shareholder of the specified Person (if such Person is a corporation).
"Release" shall mean any satisfaction, release, assignment instrument,
deed of reconveyance or similar instrument or instruments (each in recordable
form and otherwise in form reasonably satisfactory to the Borrower but without
any representation or warranty of the Lender (other than a warranty as to the
Lender's own acts)) necessary to release any Collateral Property from the Lien
of all applicable Security Documents.
"Release Conditions" shall have the meaning assigned to such term in
Section 2.09.
"Release Date" shall have the meaning assigned to such term in Section
2.09.
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<PAGE> 21
"Release Notice" shall have the meaning assigned to such term in Section
2.09.
"Release Property" shall mean any Collateral Property which is proposed to
be or is the subject of a Release.
"Revolver Period" shall have the meaning assigned to such term in Section
2.01.
"Revolving Credit Termination Date" shall mean December 15, 1997, or such
earlier date resulting from acceleration.
"Security Agreement" shall mean the Security Agreement dated as of the
date hereof among the Borrower and the Lender, as modified and supplemented and
in effect from time to time.
"Security Documents" shall mean, collectively, the Guarantee Agreements,
the REIT Agreement, the Security Agreement, the Mortgages, the Assignments and
all Uniform Commercial Code financing statements required by this Agreement,
the Guarantee Agreements, the Security Agreement and the Mortgages to be filed
with respect to the security interests in personal property and fixtures
created pursuant to the Guarantee Agreements, the Security Agreement, the
Mortgages and all other documents and agreements executed or delivered to the
Lender by the Borrower, Ambassador or any Guarantor in connection with any of
the foregoing documents.
"Servicer" shall have the meaning assigned to such term in Section 10.15.
"Specific Event of Default" shall mean (a) any Event of Default of the
type described in Section 9(a), 9(b), 9(f), 9(g), 9(h), 9(l) or 9(n) or (b) the
delivery by the Lender to the Borrower of a written notice of its intent to
accelerate the Indebtedness arising under the Basic Documents in accordance
with Section 9.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a sufficient number of the
securities or other ownership interests having by the terms thereof ordinary
voting power directly or indirectly to elect a majority of the board of
directors or other persons performing similar functions of such corporation,
partnership or other entity (irrespective of whether or not at the time
securities or other ownership interests of any other class or classes of such
corporation, partnership or other entity shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more of the
Subsidiaries or by such Person and one or more of the Subsidiaries.
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<PAGE> 22
"Title Companies" shall have the meaning assigned to such term in Section
6.01.
"Total Market Value" shall mean, for any day, the product of (a) the
closing price of the relevant class of shares on the New York Stock Exchange
and (b) the total number of such shares outstanding on such day, including
shares issuable in exchange for then outstanding Common Units of the Operating
Partnership (other than Common Units held by Ambassador).
"Wholly-Owned Subsidiary" shall mean, with respect to any Person, any such
corporation, partnership or other entity of which all of such securities or
other ownership interests, other than in case of a corporation, qualifying
shares, are so owned or controlled.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lender
hereunder shall (unless otherwise disclosed to the Lender in writing at the time
of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lender hereunder after the date hereof (subject, in
the case of quarterly financial statements furnished hereunder, to normal
year-end audit adjustments and the absence of footnotes). All calculations made
for the purposes of determining compliance with the terms of this Agreement
shall (except as otherwise expressly provided herein) be made by application
of generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the annual or quarterly financial statements
furnished to the Lender pursuant to Section 8.01 unless (i) the Borrower shall
have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Lender shall so object in
writing within 30 days after delivery of such financial statements, in
either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01, shall
mean the financial statements referred to in Section 7.02).
(b) The Borrower shall deliver to the Lender at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01 a
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or
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<PAGE> 23
quarterly financial statements as to which no objection has been made in
accordance with the last sentence of subsection (a) above, and reasonable
estimates of the difference between such statements arising as a consequence
thereof.
(c) To enable the ready and consistent determination of compliance with
the covenants set forth in Section 8, the Borrower will not change the last day
of its fiscal year from December 31, or the last days of the first three fiscal
quarters in each of its fiscal years from March 31, June 30 and September 30,
respectively.
(d) The Borrower and the Lender hereby agree that for purposes of
calculating "Cash Flow", "Debt Service", "Debt Service Ratio", "Property
Expenses", and "Property NOI", as each such term is defined in Section 1.01
(herein called the "Specific Defined Terms") all rents, revenue and other
amounts received by the Borrower with respect to any Collateral Property which
has suffered and continues to suffer a Material Adverse Effect shall be
excluded from all calculations made under this Agreement in connection with, in
accordance with or pursuant to, such Specific Defined Terms and shall be
excluded for purposes of determining compliance by the Borrower with the Debt
Service Ratio and all other terms of this Agreement until such time as the
Lender shall have sent to the Borrower a notice in writing to the contrary.
(e) The Borrower and the Lender hereby further agree that an Additional
Property will be included in the calculation of the Specific Defined Terms only
after the Borrower receives the Approval Notice specified in Section 2.08(c)
with respect to such Additional Property.
Section 2. Facility.
2.01 Mortgage Loans. The Lender agrees, subject to the terms and
conditions of this Agreement, to make Mortgage Loans to the Borrower in Dollars
during the period (the "Revolver Period") from and including the date hereof to
but not including the Revolving Credit Termination Date in an aggregate
principal amount at any one time outstanding to the Borrower up to but not
exceeding the Available Amount as then in effect. Subject to the preceding
sentence and the other terms of this Agreement, during the Revolver Period the
Borrower may borrow, prepay and reborrow the amount of the Commitment; provided
that the aggregate principal amount of Mortgage Loans at any one time
outstanding to the Borrower shall not exceed the amount of the Available Amount
as then in effect.
2.02 Borrowings. The Borrower shall give the Lender notice of each
borrowing of Mortgage Loans hereunder as provided in Section 4.05. On the date
specified for each borrowing hereunder, the Lender shall, subject to the terms
and conditions of this Agreement, make available the amount of such Mortgage
Loan to the Borrower by
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<PAGE> 24
depositing the same, in immediately available funds, in an account of the
Borrower designated by the Borrower in writing. Borrowings of Mortgage Loans
hereunder shall occur only once during any calendar month, except that,
assuming all conditions to such borrowing are satisfied, the Borrower may
borrow in June 1997 a Mortgage Loan with respect to a property known as "Cedar
Creek Apartments" located in Bexar County, Texas (the "Cedar Creek Property").
2.03 Changes of Commitment. The Borrower shall have the right to
terminate or reduce the Commitment at any time or from time to time, provided
that: (i) the Borrower shall give notice of each such termination or reduction
as provided in Section 4.05; (ii) each partial reduction shall be in an amount
at least equal to $1,000,000; and (iii) if after giving effect to such
termination or reduction of the Commitment the outstanding principal amount of
the Mortgage Loans shall exceed the Commitment then the Borrower shall prepay
the Mortgage Loans in an amount equal to such excess together with interest
accrued thereon to the date of prepayment plus any amounts payable in respect
of such prepayment pursuant to Section 5.04. The Commitment once terminated or
reduced may not be reinstated or increased.
2.04 Fees. The Borrower shall pay to the Lender on the Closing Date a
nonrefundable structuring fee in an amount equal to $562,500. The Lender
acknowledges receipt of such other fees and amounts payable prior to the date
hereof by the Borrower to the Lender.
2.05 Note. The Mortgage Loans shall be evidenced by the Note. The date,
amount, and initial interest rate of each Mortgage Loan made by the Lender to
the Borrower, and each payment made on account of the principal thereof, shall
be recorded by the Lender on its books and, prior to any transfer of the Note,
endorsed by the Lender on the schedule attached to the Note or any continuation
thereof which notations and endorsement shall be controlling absent
demonstrable error; provided that the failure of the Lender to make any such
notation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Note.
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<PAGE> 25
2.06 Optional Prepayments. Subject to Section 4.04, the Borrower shall
have the right to prepay Mortgage Loans at any time or from time to time,
provided that: (1) the Borrower shall give the Lender notice of each such
prepayment as provided in Section 4.05; (2) the Borrower shall prepay the
Mortgage Loans in an amount equal to 101% of the aggregate principal amount of
the Mortgage Loans so being prepaid (unless the Mortgage Loans are being
prepaid (x) pursuant to Section 5.01, 5.02 or 5.03 or (y) in full on or before
July 8, 1997 with the proceeds from an issuance or sale by Ambassador of
capital stock) plus any amounts payable under Section 5.04 in connection with
such prepayment; and (3) the Borrower shall pay interest on the principal
amount prepaid, accrued to the date of prepayment, on the prepayment date.
2.07 Mandatory Prepayments. Upon the occurrence and during the
continuance of a Specific Event of Default or at any time when the Borrower
shall fail to comply with Section 8.15 the Borrower shall prepay the Mortgage
Loans in an aggregate principal amount equal to 100% of Excess Cash Flow on the
next Interest Payment Date and on each Interest Payment Date thereafter until
all Mortgage Loans and all other amounts due under the Basic Documents shall
have been paid in full.
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<PAGE> 26
2.08 Additional Properties.
(a) Subject to the terms and conditions hereof, the Borrower may
from time to time notify the Lender of its intention to add additional real
properties to the Collateral Property (each, an "Addition"), upon compliance
with the provisions of this Section 2.08. The Borrower may exercise its rights
under this Section by delivering a written notice (an "Addition Notice") to the
Lender which shall refer to this Section, identifying the Property (the
"Additional Property") which the Borrower intends to add to the Collateral.
The Addition Notice shall be accompanied by all of the documents in the
possession of the Borrower (the "Approval Documents") referred to in clauses
(m), (n), (o), (p), (t) through (bb) (inclusive), (ee), (ff) and (gg) of
Section 6.01 (assuming for purposes of this Section 2.08 such proposed
Additional Property were an Initial Property). The Lender shall review the
Approval Documents and notify the Borrower within 10 Business Days after
receipt of the last of the Approval Documents whether it (i) approves the
proposed Additional Property as Collateral, (ii) rejects the proposed
Additional Property as Collateral (and if the Lender rejects the proposed
Additional Property as Collateral the Lender shall provide a statement of the
reasons for such rejection) or (iii) requires a Market Study prepared by a
third party. If the Lender requires a Market Study prepared by a third party,
the Lender shall review such Market Study of the Additional Property and shall
notify the Borrower within 10 Business Days after receipt of such Market Study
whether the Lender accepts or rejects the proposed Additional Property as
Collateral and if the Lender rejects such Additional Property as Collateral the
Lender shall provide a statement of the reasons for such rejection. If within
10 Business Days after receipt by the Lender of the Approval Documents or the
third party Market Study, as the case may be, the Lender has not given the
notice required by the preceding sentences, the Borrower shall notify the
Lender in writing, and if within 5 days of such notification the Lender has not
provided the required notice, then such proposed Additional Property shall be
deemed unacceptable to the Lender as Collateral. All Property which the
Borrower proposes as Collateral must be satisfactory in all respects to the
Lender in its sole discretion and the Lender shall not have any obligation to
accept any Additional Property as Collateral even if the Borrower satisfies all
of the express conditions of this Agreement. The Borrower shall pay on demand
all reasonable fees and expenses incurred by the Lender in connection with its
review of the Approval Documents and any due diligence related to the
Additional Property notwithstanding that the Lender may reject any Additional
Property as Collateral or an Addition shall not occur. With respect to the
Cedar Creek Property, the Lender agrees to shorten the time periods specified
in this Section 2.08(a) and in Section 2.08(c) as the Lender determines is
reasonably necessary.
(b) If the Lender shall have notified the Borrower that an Additional
Property is acceptable Collateral (a "Preliminary
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<PAGE> 27
Approval Notice") then such proposed Additional Property shall become an
Addition to Collateral subject to the fulfillment of the following conditions
(the "Additional Collateral Conditions"):
(1) no Default with respect to Section 9(a), 9(f), 9(g) or 9(h)
shall have occurred and be continuing and no Event of Default shall have
occurred and be continuing, in each case, as of the date of the Addition Notice
or as of the date of the Preliminary Approval Notice and the Lender shall have
received the documents referred to in clause (3) below;
(2) the Borrower shall have delivered to the Lender a certificate
of a senior financial officer of the Borrower setting forth the Debt Service
Ratio immediately prior to and after such Addition (assuming the Approval
Notice has been given) and showing in reasonable detail such computations;
(3) the Lender shall have received the documents referred to in
clauses (d), (e), (i), (j), (k), (l), (m), (q) and (s) of Section 6.01 with
respect to the Additional Property (assuming for purposes of this Section 2.08
such proposed Additional Property were an Initial Property), each in form and
substance reasonably satisfactory to the Lender;
(4) the Borrower shall have delivered certified copies of all
corporate action taken by the General Partner on behalf of the Borrower
approving the Mortgage and any other Basic Document which the Borrower shall
execute and deliver in connection with such Additional Property (including,
without limitation, a certificate setting forth the resolutions of the board of
directors of the General Partner adopted with respect of such transactions),
together with an incumbency certificate for the General Partner;
(5) the Borrower shall have delivered to the Lender such documents
amending the Basic Documents to reflect the Addition to the Collateral
(including, without limitation, an amendment to the Environmental Indemnity
Agreement) and such other documents as the Lender or counsel to the Lender
shall reasonably request, each in form and substance reasonably satisfactory to
the Lender; and
(6) the conditions set forth in Section 6.02 (other than that set
forth in Section 6.02(a) as to which the preceding clause (b)(1) shall be
applicable and Section 6.02(d)) shall have been satisfied (including, without
limitation, evidence that in connection with such Addition (i) all fees and
expenses payable to the Lender and its counsel have been (or contemporaneously
are being) paid in full and (ii) all mortgage, mortgage recording and intangible
taxes and recording charges required to be paid in connection with the
execution, delivery or recording of the Security Documents as well as all title
premiums and other title and survey charges have been or
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<PAGE> 28
contemporaneously are being) paid in full).
(c) Within 5 Business Days after the satisfaction of the Additional
Collateral Conditions as determined by the Lender in its sole discretion, the
Lender shall deliver to the Borrower written notice (the "Approval Notice")
that the proposed Additional Property shall be deemed an Addition to the
Collateral.
2.09 Releases. Subject to Sections 2.06, 4.04 and 4.05, the Borrower
shall have the right to prepay the Mortgage Loans and to obtain a Release
terminating and releasing the Lien of the Security Documents in respect of any
Release Property upon compliance with the provisions of this Section 2.09. The
Borrower shall exercise its rights under this Section by delivering a written
notice (a "Release Notice") to the Lender which shall refer to this Section,
identify the Release Property and be accompanied by a counterpart of the
Release executed and acknowledged by all parties thereto (if any) other than
the Lender and in form for execution by the Lender and by a certificate of a
senior officer of the Borrower certifying that the Release Conditions have been
satisfied. Subject to the terms hereof, the Lender shall execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, to the
Borrower such counterpart within ten Business Days after receipt thereof. The
obligation of the Lender to deliver a Release in respect of any Release
Property shall be subject to the fulfillment of the following conditions (the
"Release Conditions"):
(a) no Default with respect to Section 9(a), 9(f), 9(g) or 9(h)
shall have occurred and be continuing and no Event of Default shall have
occurred and be continuing, in each case, as of the date of the Release Notice
or as of the date (the "Release Date") that the Lender delivers the applicable
Release;
(b) if after giving effect to such Release, the aggregate outstanding
principal amount of Mortgage Loans exceeds the Available Amount, the Borrower
shall prepay such excess, together with interest accrued thereon to the date of
prepayment plus any amounts payable in respect of such prepayment pursuant to
Section 5.04;
(c) after giving effect to such Release of Collateral Property and
the payments contemplated by clause (b) above, the Debt Service Ratio for the
Borrower and the LP Debt Service Ratio for the Operating Partnership each shall
not be less than 1.40 to 1.00 as set forth in the certificate delivered
pursuant to Section 6.01(c) and the Borrower shall provide the Lender with a
certificate of a senior financial officer of the Borrower setting forth in
reasonable detail computations indicating such compliance;
(d) the Lender shall have received such updates or confirmations
relating to the tie-in endorsement(s) as the Lender may reasonably request;
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<PAGE> 29
(e) the conditions set forth in Section 6.02 (other than that set
forth in Section 6.02(a) as to which clause (a) above shall be applicable)
shall have been satisfied; and
(f) the Borrower shall have delivered to the Lender such documents
amending the Basic Documents to reflect such Release and such other documents
as the Lender or counsel to the Lender shall reasonably request, in each case
in form and substance reasonably satisfactory to the Lender.
2.10 Appraisals. Prior to the occurrence of a Default with respect to
Section 9(a), 9(f), 9(g) or 9(h) or an Event of Default, the Lender shall be
entitled to request only one appraisal (an "Appraisal") to be performed by an
appraiser who is a member of the American Institute of Real Estate Appraisers
and satisfactory to the Lender with respect to each Collateral Property or all
the Collateral Properties. After the occurrence and during the continuance of
a Default with respect to Section 9(a), 9(f), 9(g), or 9(h) or an Event of
Default the Lender shall be entitled to request one or more Appraisals with
respect to each Collateral Property or all the Collateral Properties. The
Borrower shall pay all reasonable fees for any appraisals performed pursuant to
this Section 2.10.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Mortgage Loans. The Borrower will pay to the Lender
the principal of the outstanding Mortgage Loans, and each Mortgage Loan shall
mature, on the Maturity Date.
3.02 Interest. Subject to Section 5.02, the Borrower will pay to the
Lender interest on the unpaid principal amount of each Mortgage Loan for the
period from and including the date of such Mortgage Loan to but excluding the
date such Mortgage Loan shall be paid in full, at the LIBOR Rate (as in effect
from time to time) plus the Applicable Margin. Notwithstanding the foregoing
upon the occurrence and during the continuance of any Event of Default, the
Borrower will pay to the Lender interest at the applicable Post-Default Rate on
the principal of all Mortgage Loans and (to the fullest extent permitted by
law) on all other amounts payable by the Borrower hereunder or under the Note
or under the other Basic Documents for the period from and including the date
of such Event of Default to but excluding the date the same is paid in full or
such Event of Default shall have been cured and is no longer continuing.
Accrued interest on each Mortgage Loan shall be payable (i) on the Interest
Payment Dates and (ii) upon the payment or prepayment thereof (but only on the
principal amount so paid or prepaid), except that interest payable at the
Post-Default Rate shall be payable from time to time on demand. Promptly after
the determination of any interest rate provided for herein or any change
therein, Lender shall give written notice thereof to the Borrower.
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Section 4. Payments; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrower under this
Agreement and the Note shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Lender at the
Principal Office, not later than 2:00 p.m. New York time on the date on which
such payment shall become due (each such payment made after such time on such
due date to be deemed to have been made on the next succeeding Business Day).
(b) All payments of principal of the Mortgage Loans under this Agreement
(including, without limitation, prepayments pursuant to Section 2.06, 2.07 or
2.09 or as a result of the acceleration of the Mortgage Loans pursuant to
Section 9) and under the other Basic Documents shall be applied to the Mortgage
Loans in such manner and order of priority as the Lender shall elect in its sole
and absolute discretion (subject to the Borrower's right under Section 4.05 to
select the Mortgage Loan being prepaid under Section 2.06). Notwithstanding the
foregoing, the amounts secured by any Jurisdictional Capped Mortgage (as defined
in Section 6.02) shall not be reduced in connection with any payments of
principal which the Lender has the right to apply to the Mortgage Loans in such
manner and order of priority as the Lender shall elect in its sole and absolute
discretion in accordance with the immediately preceding sentence until the
aggregate principal amount of Mortgage Loans secured by such Jurisdictional
Capped Mortgage(s) shall exceed the total principal amount of all Mortgage
Loans then outstanding. In any such event, the Lender will determine in its
sole discretion which Mortgages comprising such Jurisdictional Capped Mortgages
are to be reduced.
(c) If the due date of any payment under this Agreement or the Note would
otherwise fall on a day which is not a Business Day such date shall be extended
to the next succeeding Business Day and interest shall be payable for any
amount so extended for the period of such extension.
4.02 Computations. Interest on Mortgage Loans shall be computed on the
basis of a year of 360 days and actual days elapsed occurring in the period for
which payable.
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4.03 Setoff. The Borrower agrees that, in addition, to (and without
limitation of) any right of set-off or counterclaim the Lender may otherwise
have, the Lender shall be entitled, at its option, to offset balances held by
it for account of the Borrower, Ambassador or any Guarantor (or amounts due
from it to the Borrower, Ambassador or any Guarantor) at any of its offices, in
Dollars or in any other currency, against any principal of or interest on any
of the Mortgage Loans, or any other amount payable to the Lender hereunder,
which is not paid when due (regardless of whether such balances are then due to
the Borrower), in which case it shall promptly notify the Borrower thereof,
provided that the Lender's failure to give such notice shall not affect the
validity thereof.
4.04 Minimum Amounts. Each borrowing and optional prepayment of
principal of Mortgage Loans shall be in an amount at least equal to $2,000,000.
4.05 Certain Notices. Notices by the Borrower to the Lender of any
termination or reduction of the Commitment, of borrowings of Mortgage Loans and
of prepayments of Mortgage Loans pursuant to Section 2.06 shall be irrevocable
and shall be effective only if received by the Lender not later than 2:00 p.m.
New York time on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, or prepayment specified below:
Number of
Business
Notice Days Prior
------ ----------
Termination or
reduction of Commitment 15
Borrowing or prepayment
of Mortgage Loans 5
Each such notice of termination or reduction of Commitment shall specify the
amount of the Commitment to be terminated or reduced. Each such notice of
prepayment shall specify the Mortgage Loans to be prepaid and the amount
(subject to Section 4.04), and the date of prepayment (which shall be a
Business Day). Each notice of borrowing of Mortgage Loans shall be
substantially in the form of Exhibit B hereto and shall specify the amount
(subject to Section 4.04) to be borrowed, the date of borrowing (which shall be
a Business Day), the Debt Service Ratio immediately prior to and immediately
after such borrowing and shall be accompanied by such other information as the
Lender may reasonably request. Each notice of borrowing by the Borrower
hereunder shall constitute a certification by the Borrower to the effect set
forth in clauses (a), (b) and (e) of Section 6.02 (both as of the date of such
notice and, unless the Borrower otherwise notifies the Lender prior to the date
of such borrowing, as of the
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<PAGE> 32
date of such borrowing).
Section 5. Yield Protection and Illegality.
5.01 Additional Costs.
(a) The Borrower shall pay to the Lender from time to time such amounts as
the Lender may reasonably determine to be necessary to compensate it for any
increase in costs which the Lender reasonably determines are attributable to
its making or maintaining any Mortgage Loans or its obligation to make any
Mortgage Loans hereunder, or any reduction in any amount receivable by the
Lender hereunder in respect of any of such Mortgage Loans or such obligation
(such increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any Regulatory Change which:
(i) imposes or modifies any reserve, capital or similar requirement
relating to any extensions of credit or other assets of the Lender or any
commitment of the Lender (including the Commitment); or
(ii) imposes any other condition affecting this Agreement or the Note
(or any of such extensions of credit) or the Commitment.
If the Lender requests compensation from the Borrower under this Section
5.01(a), the Borrower may, by notice to the Lender, suspend the obligation of
the Lender to make Mortgage Loans until the Regulatory Change giving rise to
such request ceases to be in effect. In the event that the amount of
compensation requested under this Section 5.01(a) in any twelve month period
exceeds an amount equal to the product of (a) .35% and (b) the outstanding
principal amount of the Mortgage Loans as of the date of the request for such
compensation, then the Borrower shall have the right at any time thereafter to
prepay all or any part of the Mortgage Loans hereunder together with any
amounts payable pursuant to this Section and Section 5.04 in connection with
such prepayment and accrued interest thereon.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Borrower shall pay directly to the
Lender from time to time on request such amounts as the Lender may reasonably
determine to be necessary to compensate the Lender for any costs which it
determines are attributable to the maintenance by the Lender, pursuant to any
law or regulation or any interpretation, directive or request (whether or not
having the force of law) of any court or governmental or monetary authority, or
pursuant to any risk-based capital guideline or other requirement (whether or
not having force of law and whether or not the failure to comply therewith
would be unlawful) heretofore or hereafter issued by any government or
governmental or supervisory authority, of capital in respect to its Commitment
or the Mortgage Loans (such compensation to
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<PAGE> 33
be in an amount equal to any reduction of the rate of return on assets or
equity of the Lender to a level below that which the Lender could have achieved
but for such law, regulation, interpretation, directive or request).
(c) The Lender will notify the Borrower of any event occurring after the
date of this Agreement that will entitle the Lender to compensation under
paragraph (a) or (b) of this Section 5.01 as promptly as practicable, but in
any event within 45 days, after the Lender obtains actual knowledge thereof;
provided, however, that if the Lender fails to give such notice within 45 days
after it obtains actual knowledge of such an event, the Lender shall, with
respect to compensation payable pursuant to this Section 5.01 in respect of any
costs resulting from such event, only be entitled to payment under this Section
5.01 for costs incurred from and after the date 45 days prior to the date that
the Lender does give such notice. The Lender will furnish to the Borrower a
certificate setting forth the basis and amount of each request by the Lender
for compensation under paragraph (a) or (b) of this Section 5.01.
Determinations and allocations by the Lender for purposes of this Section 5.01
of the effect of any Regulatory Change pursuant to Section 5.01(a), on its
costs or rate of return of maintaining Mortgage Loans or its obligation to make
Mortgage Loans, or on amounts receivable by it in respect of Mortgage Loans,
and of the amounts required to compensate the Lender under this Section 5.01,
shall be conclusive absent manifest error; provided that such determinations
and allocations are made on a reasonable basis.
5.02 Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for the Lender to honor its obligation to
make or maintain Mortgage Loans bearing interest at the LIBOR Rate hereunder
then the Lender shall promptly notify (a "Lender's Notice") the Borrower
thereof and the Lender's obligation to make Mortgage Loans bearing interest at
the LIBOR Rate shall be suspended until such time as the Lender may again make
and maintain Mortgage Loans bearing interest at the LIBOR Rate and the Lender
may offer to establish the interest rate applicable to the Mortgage Loans at
the Lender's then customary spread (the "Substitute Spread"), taking into
account the amount of the Mortgage Loans and the credit worthiness of the
Borrower, above an index used for variable rate loans as reasonably determined
by the Lender (the "Substitute Rate"). By written notice to the Lender within
ten (10) days of receipt of the Lender's Notice, the Borrower may accept such
offer in which case the interest rate applicable to the Mortgage Loans shall be
a rate equal to the Substitute Rate as in effect from time to time plus the
Substitute Spread. If the Borrower does not timely accept such offer, then from
the date of Lender's Notice, the interest rate applicable to the Mortgage Loans
shall be a rate equal to the Substitute Rate as in effect from time to time plus
the Substitute Spread and the Borrower shall, upon the request of the Lender,
prepay any Mortgage Loans then outstanding hereunder together with any
amounts payable in connection with such prepayment pursuant to Section
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<PAGE> 34
5.04 and together with accrued interest thereon.
5.03 Limitation on Types of Mortgage Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of the LIBOR
Rate for any Interest Period, the Lender determines (which determination shall
be conclusive absent manifest error) that:
(a) quotations of interest rates for the deposits referred to in the
definition of "LIBOR Rate" in Section 1.01 are not being provided for
purposes of determining rates of interest for Mortgage Loans; or
(b) the rates of interest referred to in the definition of "LIBOR Rate"
in Section 1.01 upon the basis of which the rate of interest for Mortgage
Loans is to be determined are not likely to adequately cover the cost to the
Lender of making or maintaining Mortgage Loans for such Interest Period;
then the Lender shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lender may offer to establish the
interest rate applicable to the Mortgage Loans at the Substitute Rate plus the
Substitute Spread and the Borrower may, by written notice to the Lender within
ten (10) days of receipt of such notice, accept such offer, in which case the
interest rate applicable to the Mortgage Loans shall be a rate equal to the
Substitute Rate in effect from time to time plus the Substitute Spread,
provided that if the Borrower does not timely accept such offer, then from the
date of such notice, the interest rate applicable to the Mortgage Loans shall
be a rate equal to the Substitute Rate in effect from time to time plus the
Substitute Spread and the Lender shall be under no obligation to make
additional Mortgage Loans and the Borrower shall on the last day(s) of the
then current Interest Period(s) for the outstanding Mortgage Loans prepay such
Mortgage Loans.
5.04 Compensation. The Borrower shall pay to the Lender, upon the
request of the Lender, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Lender) to compensate it for any loss, cost or
expense which the Lender reasonably determines are attributable to:
(a) any payment or prepayment of a Mortgage Loan for any reason
(including, without limitation, the acceleration of the Mortgage Loans
pursuant to Section 9) on a date other than the last day of the Interest
Period for such Mortgage Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 to be satisfied) to borrow a Mortgage Loan on the date for such
borrowing specified in the relevant notice of borrowing given pursuant to
Section 4.05.
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<PAGE> 35
Such compensation shall equal the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or prepaid
or not borrowed for the period from the date of such payment or failure to
borrow to the last day of the then current Interest Period for such Mortgage
Loan (or, in the case of a failure to borrow, the Interest Period for such
Mortgage Loan which would have commenced on the date specified for such
borrowing) at the applicable rate of interest for such Mortgage Loan provided
for herein over (ii) the cost of funds to the Lender of making such Mortgage
Loan (as reasonably determined by the Lender).
Section 6. Conditions Precedent.
6.01 Closing Date. This Agreement shall become effective on the Closing
Date, provided that the Lender shall have received the following documents,
each of which shall be satisfactory to the Lender in form and substance:
(a) Corporate and Partnership Documents. The following documents, each
certified as indicated below:
(i) a copy of the certificate of limited partnership, as amended, of
the Borrower, certified by the Secretary of State of the State of Delaware
as of a recent date and a copy of the partnership certificate or articles
of incorporation, as amended, of Ambassador and each Guarantor, certified
by the Secretary of State of its jurisdiction of organization, and a
certificate as to the good standing of and organizational documents filed
by the Borrower, Ambassador and each Guarantor from such Secretary of
State, dated as of a recent date;
(ii) a certificate of the Secretary or an Assistant Secretary of the
Borrower, Ambassador and each Guarantor dated the Closing Date and
certifying (A) that, in the case of the Borrower and the Operating
Partnership, attached thereto is a true and complete copy of the
partnership certificate as in effect on the date of such certificate, and
that, in the case of the General Partner and Ambassador, attached thereto
is a true and complete copy of the charter and by-laws of such Person, (B)
that attached thereto is a true and complete copy of, in the case of the
Borrower, the Partnership Agreement and, in the case of the Operating
Partnership, the partnership agreement of the Operating Partnership, as in
effect on the date of such certificate, (C) that attached thereto is a true
and complete copy of resolutions duly adopted the board of directors of the
General Partner and Ambassador, authorizing the execution, delivery and
performance of such of the Basic Documents to which such Person
(and, in the case of the General Partner,
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the Borrower) is or is intended to be party and the extensions of
credit hereunder, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect, and
(D) that the partnership certificates of the Borrower and the
Operating Partnership have not been amended since the date of the
certification thereto furnished pursuant to clause (i) above.
(b) Incumbency. A certificate of the General Partner and Ambassador
as to the incumbency and specimen signature of each officer of such Person
executing such of the Basic Documents to which such Person (and, in the case of
the General Partner, the Borrower and, in the case of Ambassador, the Operating
Partnership) is intended to be a party and each other document to be delivered
by such Person (and, in the case of the General Partner, the Borrower and, in
the case of Ambassador, the Operating Partnership) from time to time in
connection therewith (and the Lender may conclusively rely on such certificate
until it receives notice in writing from such Person); and a certificate of
another officer of each such Person as to the incumbency and specimen
signature of such Person, and a corresponding certificate of another officer
of such Person as to its signing officers.
(c) Officer's Certificate. A certificate of a senior financial
officer of the Borrower to the effect set forth in Section 6.02(h).
(d) Opinion of Counsel to the Borrower, Ambassador and the
Guarantors. Opinions of counsel to the Borrower, Ambassador and the Guarantors
with respect to such matters as the Lender may reasonably request and otherwise
in form and substance reasonably satisfactory to the Lender.
(e) Local Counsel Opinions. Opinions of local counsel to the Lender
in each of the states in which the Initial Properties are located with respect
to such matters as the Lender may reasonably request and otherwise in form and
substance reasonably satisfactory to the Lender.
(f) Note. The Note, duly completed and executed.
(g) Security Documents. The GP Guarantee Agreement, the LP Guarantee
Agreement and the REIT Agreement, duly executed and delivered by each
Guarantor, the Borrower, Ambassador and the Lender, as applicable.
(h) Indemnity Agreement. The Environmental Indemnity Agreement, duly
executed by the Borrower, Ambassador, the Guarantors and the Lender.
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(i) Mortgages, Etc. Duly recorded first Mortgages which shall
constitute valid first mortgage liens on the fee simple title to the
Initial Properties (collectively, the "Initial Mortgages") and which shall
secure all of the Secured Obligations (as defined in the Initial
Mortgages), subject only to such defects, Liens, encumbrances,
assessments, security interests, restrictions, easements and other title
exceptions as shall be approved by the Lender, together with duly recorded
first Assignments relating to the Initial Properties.
(j) UCC Financing Statements. UCC-1 financing statements covering
fixtures on each Initial Property, in each case appropriately completed
and duly executed and delivered to the Lender for filing in the
appropriate county land offices.
(k) Searches. Copies of the UCC filing searches, tax lien searches,
judgment, real estate tax searches and municipal department searches
setting forth any and all building violations (if available) conducted in
respect of the Borrower and each Initial Property in all relevant
jurisdictions and in each county where an Initial Property is located
demonstrating as at a recent date the existence of no other financing
statements (other than in respect of Permitted Liens) with respect to the
Borrower or to such Initial Property, together with evidence that any
filing fees or recording taxes payable in connection with any such
searches have been paid.
(l) Management Agreements. Certified copy of each Management
Agreement for the Initial Properties, duly executed by the parties
thereto, together with a consent and subordination agreement relating
thereto (in form and substance satisfactory to the Lender), duly executed
by each Manager.
(m) Title Insurance. Policies of title insurance on forms of and
issued by one or more title companies satisfactory to the Lender (the
"Title Companies"), showing fee simple title vested in the Borrower and
insuring the first priority of the Liens created under the Initial
Mortgages in an amount for each Initial Property equal to not less than
the Allocated Title Amount for such Initial Property, subject only to such
defects, Liens, restrictions, easements and other title exceptions as are
reasonably satisfactory to the Lender, together with, as may be reasonably
required by the Lender, such reinsurance schedules and agreements in
respect of all then existing title insurance policies for the Collateral
Properties in amounts and otherwise in form and substance reasonably
satisfactory to the Lender and executed by the Title Companies, and
containing such endorsements and affirmative insurance provisions as the
Lender may reasonably require. In addition, the Borrower shall have paid
to the Title Companies all expenses and premiums of the Title Companies in
connection with the issuance of such policies and endorsements
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and an amount equal to the recording and stamp taxes (including mortgage
recording taxes) payable in connection with recording the Initial
Mortgages in the appropriate county land offices.
(n) Environmental Audit. Evidence reasonably satisfactory to the
Lender that (1) there are no pending or threatened claims, suits, actions
or proceedings arising out of or relating to the existence of any
Hazardous Materials at, in, on or under any Initial Property, (2) each
Initial Property is in compliance with all Environmental Laws applicable
to such Initial Property, and (3) no Hazardous Materials exist at, in, on
or under such Initial Property except in compliance with applicable
Environmental Laws. Such evidence shall include, without limitation, (i)
a comprehensive environmental audit (which shall include, without
limitation, a visual survey, a record review and an area reconnaissance,
an asbestos and lead paint analysis and a Phase I environmental study and,
if the Lender shall request, a Phase II environmental study), reasonably
satisfactory, in form and substance, to the Lender, conducted and
certified by a qualified, independent environmental consultant licensed by
the relevant state(s) in which each Initial Property is located, (ii)
evidence that all required approvals from all governmental and
quasi-governmental authorities having jurisdiction with respect to the
Initial Properties, if any, in connection with Environmental Laws have
been obtained, and (iii) such other environmental reports, inspections and
investigations as the Lender shall, in its reasonable discretion, require,
prepared, in each instance, by engineers or other consultants reasonably
satisfactory to the Lender. All such audits, approvals, reports,
inspections and investigations shall be paid for by the Borrower and shall
be reasonably satisfactory, in form and substance, to the Lender.
Evidence satisfactory to the Lender that (A) the Borrower has complied (or
has made arrangements to comply) with the recommendations of all
environmental consultant(s) referred to above, and (B) except as otherwise
described in the reports set forth on Schedule VII hereto, all Hazardous
Materials have been removed from each Initial Property to the extent
required by applicable law.
(o) Insurance. Certificates of insurance evidencing the existence of
all insurance required to be maintained by the Borrower pursuant to the
Basic Documents and the designation of the Lender as the loss payee
thereunder, such certificates to be in such form and contain such
information as is specified in the Basic Documents. In addition, an
original prepaid policy or policies of general liability insurance, boiler
and machinery insurance, hazard, fire and other casualty insurance
(including earthquake insurance, if available at commercially reasonable
rates), rent loss and business interruption insurance and such other types
of insurance as the Lender may reasonably deem appropriate, all in such
amounts as are required under the Basic
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Documents providing full extended coverage and naming the Lender, in each
instance, as the first mortgagee under a New York Standard Mortgagee Clause
(or local equivalent) or otherwise covering the Lender's interest in each
Initial Property in a manner reasonably satisfactory to the Lender. All
insurance shall be issued by an insurance company or companies acceptable
to the Lender. If any Initial Property, or any part thereof, is located in
an area designated by the U.S. Secretary of Housing and Urban Development
as an area having special flood hazards and in which flood insurance has
been made available under the National Flood Insurance Act of 1968,
as amended, then such insurance shall be furnished.
(p) Operating Statements. Operating statements for each Initial
Property for the one-year period most recently ended prior to the Closing
Date, in form and substance reasonably satisfactory to the Lender,
together with the financial information for each Initial Property
described in Section 8.01(g); provided, however, that, if such operating
statements or financial information are not available, the Borrower shall
provide the Lender with operating statements and financial information for
such periods as the Borrower can obtain using reasonable efforts and any
other financial information reasonably requested by the Lender.
(q) Security Agreement. A security agreement granting a valid first
priority security interest, free of chattel mortgages, security
agreements, conditional sales contracts and other Liens or title retention
arrangements, on all fixtures, equipment and articles of personal property
now or thereafter affixed to, or used in connection with, each Initial
Property to the extent owned by the Borrower. Such security interest
shall be granted in the Initial Mortgages or in such other instruments as
the Lender may reasonably require, and the Borrower shall execute and
deliver such UCC financing statements as the Lender may reasonably require
in connection therewith.
(r) Intentionally Omitted.
(s) Tie-In Endorsement. To the extent available, a tie-in
endorsement with respect to the Initial Properties issued by a Title
Company.
(t) Survey. A survey of each Initial Property, prepared by a
licensed or registered land surveyor satisfactory to the Lender, in
compliance with the minimum standard detail requirements for land title
surveys adopted by the American Land Title Association and American
Congress on Surveying and Mapping, and certified to the Lender, the
Borrower, the Title Companies and any other parties requested by the
Lender as of a certification date approved by the Lender. The survey
shall show
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<PAGE> 40
the dimensions and total acreage of each Initial Property, all interior lot
lines of each Initial Property, the locations of all buildings, parking
areas and other improvements situated on each Initial Property, all visible
utility structures affecting each Initial Property, all visible easements
and rights of way pertaining to or affecting each Initial Property, all
encroachments onto or from each Initial Property, all easements and rights
of way pertaining to or affecting each Initial Property of which the
surveyor[s] have been advised, the location and name of all streets
adjacent to each Initial Property, all modes of ingress and egress
to and from each Initial Property and such other details as to each Initial
Property (and any property abutting such Initial Property) as may be
reasonably requested by the Lender.
(u) Zoning Compliance; Occupancy. Evidence reasonably satisfactory
to the Lender regarding compliance with (i) all applicable zoning,
subdivision, environmental and other laws, orders, rules, regulations and
requirements of all governmental or quasi-governmental authorities having
jurisdiction with respect to the Initial Properties, and (ii) a copy of
the certificates of occupancy certified by the Borrower for each Initial
Property.
(v) Legal Description. A satisfactory legal description of each
Initial Property which is consistent, in all respects, with the survey
delivered pursuant to Section 6.01(t).
(w) Budget. An itemized budget for the operation of each Initial
Property for the 1997 calendar year, which budget(s) shall be reasonably
satisfactory, in form and substance, to the Lender.
(x) Material Contracts. Certified copies of all material contracts
and agreements relating to each Initial Property, including, without
limitation, all service contracts and management agreements covering or
affecting each Initial Property, the form of residential lease for each
Initial Property and all permits, approvals and licenses issued with
respect to each Initial Property.
(y) Access. Evidence that each Initial Property has access for
ingress and egress between such Initial Property and all public roadways
in the immediate vicinity of such Initial Property.
(z) Utility Services. Evidence that all utility services required
for each Initial Property are available and in adequate supply at the
boundaries of such Initial Property and are not subject to curtailment,
termination or revocation.
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<PAGE> 41
(aa) Property Condition Report. Reports covering the structural
condition of each Initial Property together with "as-built" plans and
specifications prepared, in each case, by an engineer or other
professional reasonably satisfactory to the Lender.
(bb) Tax Assessment. Evidence that each Initial Property is
assessed separate and apart from any other Property for local property tax
and subdivision purposes.
(cc) Fees and Expenses. Evidence (including, without limitation,
payment instructions given by the Borrower) that (1) all fees and expenses
payable to the Lender, including without limitation, the fees and expenses
referred to in Sections 2.04 and 10.03, to the extent then due and
payable, have been (or contemporaneously are being) paid in full, and (2)
all mortgage, mortgage recording and intangible taxes and recording
charges required to be paid in connection with the execution, delivery or
recording of the Security Documents as well as all title premiums and
other title and survey charges have been (or contemporaneously are being)
paid in full.
(dd) Financials. A certificate of a senior financial officer of the
Borrower attaching thereto (1) the financial statements referred to in
Section 7.02 and (2) a budget and financial forecast of income and
expenses and sources and uses of cash for the Borrower for the 1997
calendar year (in form and detail satisfactory to the Lender), together
with a written statement of the assumptions used in the preparation thereof
and a certificate of such senior financial officer to the effect that such
budget, financial forecast and assumptions are reasonable and represent the
Borrower's best good faith estimates of its future financial performance
and requirements, it being understood that such budget, financial forecast
and assumptions are not to be viewed as facts to the extent that they
relate to future events and that actual results may differ materially from
those projected therein.
(ee) Rent Roll, Etc. A rent roll and delinquency report for each
Initial Property, in form and substance reasonably satisfactory to the
Lender, certified by a senior officer of the Borrower.
(ff) Market Study. A Market Study for each Initial Property, in
form and substance reasonably satisfactory to the Lender.
(gg) Other Documents. Such other documents relating to the
transactions contemplated hereby as the Lender may reasonably request.
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<PAGE> 42
6.02 Initial and Subsequent Mortgage Loans. The obligation of the Lender
to make any Mortgage Loan to the Borrower upon the occasion of each borrowing
hereunder (including the initial borrowing) is subject to the further
conditions precedent that the Lender shall have received the following
documents, and that both immediately prior to the making of such Mortgage Loan
and also after giving effect thereto:
(a) Default. No Default shall have occurred and be continuing.
(b) Representations. Except for representations and warranties
expressly made or deemed made as of a specific date which shall be expressly
stated to be true and correct on and as of such date when made again on the
date of the making of a Mortgage Loan, the representations and warranties
made by the Borrower in Section 7 and in the other Basic Documents and
made by each Guarantor in Section 3 of each Guarantee Agreement and in the
other Basic Documents and made by Ambassador in Section 2 of the REIT
Agreement shall be true and complete in all material respects on and as of
the date of the making of such Mortgage Loan with the same force and effect
as if made on and as of such date.
(c) Recording Taxes.
(1) The Borrower shall have paid all mortgage recording taxes payable
(if any) in each jurisdiction in which any Collateral Property is located.
(2) Without limiting the generality of the foregoing, and
notwithstanding anything to the contrary contained in any Mortgage, the
Borrower and the Lender specifically acknowledge and agree that, to the
extent there is a payment of principal in connection with the Mortgage
Loans which results in the aggregate outstanding principal amount of the
Mortgage Loans being less than the aggregate maximum principal amount of
the Mortgage Loans secured by any Jurisdictional Capped Mortgage(s) in any
one state (whether or not such aggregate outstanding principal amount of
the Mortgage Loans was originally less than the aggregate maximum
principal amount of the Mortgage Loans secured by such Jurisdictional
Capped Mortgage(s) prior to such payment), then (a) the Borrower may
thereafter be required to pay additional mortgage recording taxes in
connection with any future advance or re-advance pursuant to this
Agreement so that the Jurisdictional Capped Mortgages in existence at the
time of such advance or re-advance will secure, in accordance with
applicable law, the amount of such advance or re-advance up to the
aggregate maximum original principal amount secured by such Jurisdictional
Capped Mortgage(s), and (b) if and to the extent that the Lender
reasonably and in good faith determines that any such additional
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mortgage recording taxes are so due and payable in connection with any such
future advance or re-advance, the Borrower shall pay such additional
mortgage recording taxes to the appropriate governmental taxing
authorities, and shall duly execute and deliver to the Lender any and all
supplemental or additional mortgages and consolidation agreements in form
and substance reasonably satisfactory to the Lender (or otherwise
containing terms and conditions substantially similar to those contained
in the Jurisdictional Capped Mortgages in existence on the date hereof)
as may be reasonably required by the Lender in connection therewith.
(3) As used herein, "Jurisdictional Capped Mortgages" shall
collectively mean, for each state, all of the Mortgage(s) now or hereafter
covering Collateral Property located in such state which by their terms
secure a maximum original principal amount of indebtedness which is less
than the Commitment as in effect from time to time, whether for the purpose
of limiting the debt secured by such Mortgage and the mortgage recording
taxes payable in connection therewith or otherwise with the Lender's
approval; and the "aggregate maximum principal amount of the Mortgage Loans
secured by any such Jurisdictional Capped Mortgage(s)" shall mean the
aggregate maximum original principal amount of indebtedness secured by all
of the Mortgages covering Collateral Property in such state as specified in
such Mortgages.
(d) Title Updates. The Lender shall have received a notice of title
continuation and an endorsement to each of the existing title insurance
policies covering the Collateral Properties insuring that since the making
of the last Mortgage Loan there has been no change in state of title or
priority of the Lender's Lien and no survey exceptions not theretofore
approved by the Lender, together with other evidence satisfactory to the
Lender that no mechanics liens or other Liens have been filed and remain
filed with respect to the Collateral Properties, which endorsement shall
have the effect of (i) updating the date of the existing title insurance
policies covering the Collateral Properties to the date of the making of
such Mortgage Loan and insuring that the priority of the Lender's Lien is
not subject to any intervening Liens arising between the date of the
existing title policies and the date of the making of such Mortgage Loan
and (ii) increasing the coverage of the existing title insurance policies
by an amount equal to the Mortgage Loan then being made, together with, as
may be required by the Lender, such reinsurance schedules and agreements
in respect of all existing title insurance policies for the Collateral
Properties in amounts and otherwise in form and substance reasonably
satisfactory to the Lender and executed by the Title Companies; provided
that (1) the Borrower shall not have any obligation to deliver such notice
of title continuation or endorsement if the Borrower shall have delivered
such notices and endorsements within 60 days prior to
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<PAGE> 44
the date of the making of such Mortgage Loan (unless the aggregate
principal amount of the Mortgage Loan(s) being made is equal to or greater
than $10,000,000 in which case notwithstanding the foregoing the Borrower
shall deliver such notice of title continuation and endorsement) and (2)
with respect to Collateral Properties located in the State of Texas
the Borrower shall not have any obligation to deliver such notice of title
continuation or endorsement for any such Collateral Property but shall
deliver to the Lender in lieu thereof a clean abstract issued by the Title
Company or letter from the Title Company in form and substance reasonably
satisfactory to the Lender indicating that there does not exist any
unreleased Liens on any such Collateral Property on the date of the making
of such Mortgage Loans and indicating that the state of title or priority
of the Lender's Lien with respect to such Collateral Property on the date
of the making of such Mortgage Loans has not been impaired from the state
of title or priority of the Lender's Lien on the Closing Date with respect
to such Collateral Property (or on such date on which a Property becomes
an Addition to Collateral with respect to an Additional Property). The
Lender shall have also received such updates relating to the tie-in
endorsement(s) as the Lender may reasonably request.
(e) Ratios. (1) Each of the Debt Service Ratio, the Ambassador Debt
Service Ratio and the LP Debt Service Ratio shall not be less than 1.40 to
1.00 and (2) the Total Market Value of all outstanding shares of common
stock of Ambassador plus all outstanding Common Units of the Operating
Partnership (other than Common Units held by Ambassador) shall not be less
than $75,000,000.
(f) Accommodation Documents. The Borrower shall have executed and
delivered to the Lender such documents and agreements and taken such
action including, without limitation, executing such amendments or
supplements to the Basic Documents, which in the reasonable judgment of
the Lender, are necessary so that the Lender shall not (in the reasonable
judgment of the Lender) be required to qualify to do business in or obtain
any licenses or authorization in any jurisdiction in which any Collateral
Property is located.
(g) Fees and Expenses. Evidence (including, without limitation,
payment instructions given by the Borrower) that (1) all fees and expenses
payable to the Lender, including, without limitation, the fees and
expenses referred to in Sections 2.04 and 10.03, to the extent then due
and payable, have been (or contemporaneously are being) paid in full and
(2) all mortgage, mortgage recording and intangible taxes and recording
charges required to be paid in connection with the execution, delivery or
recording of the Security Documents as well as all title premiums
and other title and survey charges have been (or
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<PAGE> 45
contemporaneously are being) paid in full.
(h) Officer's Certificate. A certificate of a senior officer of the
Borrower certifying that to the best of his/her knowledge after due
inquiry the conditions set forth in clauses (a), (b), and (e) of this
Section 6.02 are satisfied.
(i) Other Documents. Such other documents relating to such
transactions as the Lender may reasonably request.
Section 7. Representations and Warranties. The Borrower represents and
warrants to the Lender that:
7.01 Existence. Each of the Borrower and its Subsidiaries: (a) is a
corporation, partnership or other entity duly organized and validly existing
under the laws of the jurisdiction of its organization; (b) has all requisite
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify would have a Material
Adverse Effect.
7.02 Financial Condition. The actual balance sheet of the Borrower as at
December 31, 1996, the actual statement of operations of the Borrower for the
period ended on December 31, 1996 and the statement of operations of the
Borrower for the trailing twelve month period ended on April 30, 1997
heretofore furnished to Lender pursuant to Section 6.01(dd) fairly present the
financial condition of the Borrower as at December 31, 1996 and the results of
operations for the period ended on December 31, 1996 and April 30, 1997,
respectively, (subject in the case of such statements to the assumption that
the Initial Properties have during such entire period, constituted all of the
Collateral Properties) all in accordance with reasonable financial projection
methodology and based upon reasonable assumptions, it being understood that any
such projections and assumptions are not to be viewed as facts to the extent
that they relate to future events and that actual results may differ from those
projected therein. The Borrower did not have on said date any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said balance
sheet as at said date and except to the extent not required to be so disclosed
under GAAP. Since April 30, 1997, there has been no material adverse change
in the financial condition, operations or business of the Borrower from that
set forth in said financial statements as at said date.
7.03 Litigation. Except as disclosed on Schedule II hereto, there are no
legal or arbitral proceedings or any proceedings
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<PAGE> 46
by or before any governmental or regulatory authority or agency, now pending or
(to the knowledge of the Borrower) threatened against the Borrower or any of
its Subsidiaries which, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
7.04 No Breach. Except as set forth on Schedule VIII hereto, none of the
execution and delivery of this Agreement or any other Basic Document to which
the Borrower is a party, the consummation of the transactions herein and
therein contemplated and compliance with the terms and provisions hereof and
thereof will conflict with or result in a breach of, or require any consent
(except such consents as have been obtained) under, the charter or by-laws, the
Partnership Agreement or the organizational documents of the Borrower or the
General Partner, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency, or any
agreement or instrument to which the Borrower or the General Partner or any of
their respective Subsidiaries is a party or by which any of them is bound or to
which any of them is subject, or constitute a default under any such agreement
or instrument, or (except for the Lien arising under the Security Documents)
result in the creation or imposition of any Lien upon any of the revenues or
assets of the Borrower or the General Partner or any of their respective
Subsidiaries pursuant to the terms of any such agreement or instrument.
7.05 Action. The Borrower has all necessary power and authority to
execute, deliver and perform its obligations under this Agreement and the other
Basic Documents to which it is a party; the execution, delivery and performance
by the Borrower of this Agreement and the other Basic Documents to which it is
a party have been duly authorized by all necessary action on its part; and each
of this Agreement and the other Basic Documents to which the Borrower is a
party has been duly and validly executed and delivered by the Borrower and
constitutes, and the Note when executed and delivered for value will
constitute, its legal, valid and binding obligation, enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
7.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Borrower
of this Agreement and the other Basic Documents to which it is a party (other
than in connection with the creation or perfection of Liens arising under the
Security Documents) or for the validity or enforceability thereof.
7.07 Use of Mortgage Loans. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose,
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whether immediate, incidental or ultimate, of buying or carrying margin stock
and no part of the proceeds of any Mortgage Loan hereunder will be used to buy
or carry any margin stock.
7.08 ERISA. (a) No Plan has an "accumulated funding deficiency" within
the meaning of Section 412 of the Code or Section 302 of ERISA and each Plan is
in compliance in all material respects with the presently applicable provisions
of ERISA and the Code, and (b) none of the Borrower, Ambassador, any Guarantor
or, to the extent that the Borrower, Ambassador or any Guarantor could have
joint and several liability therefor, any ERISA Affiliate has incurred any
liability to the PBGC or any Plan or Multiemployer Plan (other than to make
contributions in the ordinary course of business or to pay premiums to the
PBGC). Except as disclosed on the financial statements provided to the Lender
in accordance with this Agreement, no employee welfare benefit plan (within the
meaning of Section 3(1) of ERISA) that the Borrower, Ambassador or any
Guarantor maintains, sponsors, contributes to or is obligated to contribute to
provides benefits, including, without limitation, death or medical benefits
(whether or not insured) with respect to any current or former employee beyond
retirement or termination of service other than (a) coverage mandated by law,
(b) retirement or death benefits under any Plan that is intended to be qualified
under Section 401(a) of the Code or (c) disability benefits under any such
employee welfare benefit plan that have been fully provided for by insurance or
otherwise, in an amount which, in the aggregate, would be material in relation
to the consolidated financial condition, business, operations or prospects taken
as a whole of Ambassador and its Consolidated Subsidiaries taken as a whole or,
with respect to an obligation solely of the Borrower, of the Borrower and its
Consolidated Subsidiaries taken as a whole. None of the Borrower, the General
Partner or the Operating Partnership is, or, in connection with this Agreement
or any Mortgage Loan, is acting on behalf of, any employee benefit plan subject
to either Title I of ERISA or Section 4975 of the Code.
7.09 Taxes. Each Guarantor, Ambassador, the Borrower and its
Subsidiaries have filed all United States Federal income tax returns and all
other material tax returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment received
by them; except such taxes which are being contested in good faith and by
proper proceedings and against which adequate reserves are being maintained as
required by Section 8.03. The charges, accruals and reserves on the books of
each Guarantor, Ambassador, the Borrower and its Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the Borrower,
adequate. There are not presently pending any special assessments against the
Collateral or any part thereof.
7.10 Investment Company Act. Neither Ambassador nor any Guarantor nor
the Borrower is an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
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7.11 Equal Employment and Non-Discrimination. The Borrower has complied
with all applicable federal, state and local legal requirements regarding equal
employment opportunity and non-discrimination (including, without limitation,
the requirements of Executive Order 11246).
7.12 Subsidiaries, Etc. Set forth in Schedule III hereto is a complete
and correct list, as of the date of this Agreement, of all Subsidiaries of the
Borrower (and the respective jurisdiction of organization of each such
Subsidiary) and of all Investments (other than Permitted Investments) held by
the Borrower and its Subsidiaries in any joint venture or other Person. Except
as disclosed in Schedule III hereto and except with respect to any Subsidiary
which is a Delaware corporation any Lien arising under Section 324 of the
Delaware General Corporation Law, the Borrower owns, free and clear of Liens,
all outstanding shares or equity interests of such Subsidiaries (and each such
Subsidiary owns, free and clear of Liens (other than with respect to any
Subsidiary which is a Delaware corporation any Lien arising under Section 324 of
the Delaware General Corporation Law), all outstanding shares or equity
interests of its Subsidiaries) and all such shares are validly issued, fully
paid and non-assessable and the Borrower (or the respective Subsidiary)
also owns, free and clear of Liens (other than with respect to any Subsidiary
which is a Delaware corporation any Lien arising under Section 324 of the
Delaware General Corporation Law), all such Investments.
7.13 Title. The Borrower is the sole beneficial owner of, and has good
and marketable title to, all of the tangible Property and assets reflected as
owned by it in the balance sheet referred to in Section 7.02 and good and valid
leasehold interests in all Properties held under lease, and none of such
Properties or assets will be subject to any Lien (other than Permitted Liens).
The Borrower has good title to all of the Collateral reflected as owned in the
balance sheet of the Borrower referred to in Section 7.02, free and clear of
all Liens, other than Permitted Liens, which, in the aggregate, are not
substantial in amount, do not in any case materially detract from the value,
utility, operation or legality of the Property subject thereto or materially
impair the operation of the Borrower and have only arisen in the ordinary
course of business of the Borrower.
7.14 Partners, Etc. The sole general partner of the Borrower is the
General Partner. The only limited partner of the Borrower is the Operating
Partnership. Neither the Borrower nor any of its Subsidiaries has any
obligation to any Person to purchase, repurchase or issue any ownership
interest in it. Neither the Borrower nor any of its Subsidiaries has any
obligation to any Person to sell, pledge or otherwise transfer any of its
interest in any of its Subsidiaries except pursuant to the Security Documents.
7.15 Restricted Activities. The Partnership Agreement
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provides that so long as any Secured Obligation (as defined in the Security
Agreement) remains outstanding and the Commitment remains in effect the
Borrower may not engage in any business activity other than activities
necessary, appropriate, suitable or convenient to (i) acquiring, owning,
operating, leasing, developing, renovating, marketing, managing and selling or
otherwise disposing of the Collateral Properties and any properties which have
been released from the Lien of the Security Documents, (ii) borrowing
Indebtedness that is not prohibited under Section 8.07, (iii) granting Liens
that are not prohibited under Section 8.06, and (iv) entering into, or
modifying, contractual arrangements for the management of the Collateral
Properties and any properties which have been released from the Liens of the
Security Documents.
7.16 Other Activities. The charter of the General Partner of the
Borrower requires that the board of directors of the General Partner will at
all times consist of at least one director who is not an officer, director or
employee of, or subject to control by, Ambassador or any Guarantor or any
Subsidiaries or any Affiliates thereof and does not own, directly or
indirectly, stock or ownership interests in the Borrower, Ambassador, any
Guarantor, any Subsidiary or Affiliate thereof or any shareholders or partners
of any of the foregoing and is otherwise independent of the Borrower,
Ambassador and each Guarantor and their respective Subsidiaries and Affiliates
(the "Independent Director"); provided that an Independent Director of
Ambassador may be an Independent Director of the General Partner. The Borrower
has at all times since its formation, (i) kept its own separate books and
records, used separate stationary, invoices and checks, filed its own tax
returns, maintained its own bank accounts, kept its funds or other assets
separate from the funds or other assets of Ambassador, each Guarantor and all
other Persons, all to the extent necessary, to maintain an existence separate
and apart from Ambassador, each Guarantor and any Affiliate, (ii) funded from
its own assets (including its initial working capital reserve) all of its
activities, expenses and liabilities, (iii) paid its own operating expenses and
liabilities from its own funds, (iv) observed all customary partnership
procedures and formalities, (v) identified itself, in all dealings with the
public, under its own partnership name and as a separate and distinct entity,
and not identified itself as being a division or a part of Ambassador, any
Guarantor or any other Person or identified Ambassador, any Guarantor or any
other Person as being a division or a part of the Borrower, (vi) maintained
financial statements, records and books of account separate from those of
Ambassador, each Guarantor or any other Person, (vii) insured that its office
bears a reasonable allocation of the expenses associated with the offices of
its partners and Affiliates, and (viii) except as expressly permitted by this
Agreement, conducted all transactions and dealings between it and its
Affiliates on an arm's length basis and otherwise as set forth in Section 8.11.
Without limiting the forgoing, the Borrower has maintained in place, and has
caused each of its Subsidiaries to maintain in place, all policies and
procedures and has
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taken and will continue to take, and has caused each of its Subsidiaries to
take and will continue to take, all actions to ensure that (A) creditors deal
with the Borrower and each of its Subsidiaries as separate economic units (and
not as a single economic unit with any of its partners or any other Affiliate
of the Borrower or such Subsidiary) and (B) the affairs of the Borrower and
each of its Subsidiaries are kept separate from those of its partners and each
other Affiliate of the Borrower or such Subsidiary (and not entangled with the
affairs of any of its partners or any other Affiliate of the Borrower or such
Subsidiary). The corporate charter of the General Partner of the Borrower
provides that a majority vote of all the directors of the General Partner
(including the affirmative vote of the Independent Director) is necessary (i)
for any dissolution, liquidation, merger or consolidation, or to transfer all
or substantially all of the assets of the General Partner (ii) to seek relief
under any federal or state bankruptcy law or (iii) for any amendment of the
General Partner's charter related to the purpose of the General Partner, the
vote of the Board of Directors required to do any of the acts described in
clauses (i) and (ii) of this sentence, the requirement for an Independent
Director, and the subordination of indemnification obligations.
7.17 Employees. The Borrower has no employees.
7.18 Solvency. None of the transactions contemplated by the Basic
Documents will be or have been made with an actual intent to hinder, delay or
defraud any present or future creditors of the Borrower, and the Borrower is
not and will not be rendered insolvent by such transactions and will have
received fair and reasonably equivalent value in good faith for the grant of
the Liens created by the Security Documents. The Borrower is able to pay its
debts as they become due, including contingent obligations reasonably likely to
become due.
7.19 Delinquent Property Liens. Except for claims which are not material
in amount or which are expressly permitted to exist under this Agreement or
which otherwise constitute Permitted Liens, there is no delinquent tax, sewer
rent, water charge, assessment or other outstanding charge against any
Collateral Property; and, except as shown in the title policies, there are no
mechanics' or similar Liens or, to the Borrower's knowledge, claims for overdue
payment for work performed by or on behalf of the Borrower, labor or material
affecting the Collateral Properties which are or could reasonably be expected
to become Liens prior to, or equal with, the Liens of the Mortgages and, except
as previously disclosed in writing to the Lender, there are no mechanics' or
similar Liens or claims affecting a material portion of the Collateral
Properties which have not been insured or endorsed over by the Title Companies
issuing the title policies.
7.20 Insurance. Each Collateral Property is covered by
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insurance of the type and in the amounts and provided by the carriers required
by the Mortgage encumbering such Collateral Property.
7.21 Lien Priority. Upon due recordation in the appropriate recording
offices, the Mortgages will constitute valid, subsisting and enforceable first
priority Liens and perfected security interests on the Collateral Properties
owned by the Borrower, including all buildings and fixtures which constitute
part of such Collateral Properties under applicable law, and all additions,
alterations and replacements made at any time with respect to the foregoing,
subject only to Permitted Liens.
7.22 Improvements. Except as disclosed in the surveys or title policies
delivered to Lender hereunder, all improvements comprising a portion of any
Collateral Property lie wholly within the boundary and building restriction
lines of such Collateral Property and no improvements on adjoining properties
encroach upon any Collateral Property in any material respect.
7.23 Casualty; Condemnation. The Collateral Properties are free of
material damage and waste and there is no proceeding pending or, to the best of
the Borrower's knowledge, threatened, for the total or partial taking of any
Collateral Property.
7.24 Zoning and Other Laws. Each Collateral Property and the use and
operation thereof, separate and apart from any other properties, constitutes a
legal use under applicable zoning regulations and complies in all material
respects with all applicable requirements of law and all applicable insurance
requirements. With respect to each Initial Property, since the date of the
zoning letter from the applicable municipality delivered to the Lender on or
prior to the Closing Date, (i) there has been no change in the use of such
Initial Property, (ii) there has been no construction at such Initial Property
and (iii) the Borrower has not received any notice from the applicable
municipality regarding (A) any alleged violation of applicable zoning
regulations or (B) a change in the zoning applicable to such Initial Property.
Each Collateral Property complies in all material respects with the applicable
provisions of the Americans with Disabilities Act and the Fair Housing
Amendments Act of 1988 and all applicable regulations issued thereunder and
each similar applicable state law and regulation.
7.25 Management Agreement. The Borrower has made available to Lender a
correct and complete copy of each Management Agreement relating to the
Collateral Properties and all amendments thereto.
7.26 Contracts. Schedule V sets forth a description of each contract,
service contract or other agreement and management agreement (including all
amendments thereto) to which the Borrower, each Guarantor or any Affiliate
thereof is a party which is material to the value, utility, operation or
legality of any Collateral
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Property other than any such contract or agreement which may be terminated on
thirty days' or less notice and without any material penalty and the information
set forth in such Schedule is correct and complete in all material respects. A
correct and complete copy of each contract or other agreement and management
agreement (including all such amendments) specified on Schedule V has been
provided to the Lender and each thereof is unmodified (except as set forth on
Schedule V) and in full force and effect and neither the Borrower nor, to the
Borrower's knowledge, any other party to any thereof is in default thereunder
(other than any defaults which, if uncured, would not have a material adverse
effect on the value, utility, operation or legality of the applicable Collateral
Property).
7.27 Permits. There has been issued in respect of each Collateral
Property all permits and governmental approvals necessary or required to own,
operate, use and occupy such Collateral Property in the manner currently
operated, including any required permits relating to Hazardous Materials, other
than any such permit or approval which, if not obtained, would not have a
material adverse effect on the value, utility, operation or legality of such
Collateral Property. Each such permit is in full force and effect and the
Borrower has not received any notice of violation or revocation thereof. No
other permits are required from any governmental entity in order to operate any
Collateral Property as it is now operated.
7.28 Utilities. The Borrower has not received any written notice of
actual or threatened reduction or curtailment of any utility service now
supplied to any Collateral Property.
7.29 Certificates of Occupancy. The Borrower has not received any
written notice of actual or threatened cancellation or suspension of any
certificate of occupancy for any portion of any Collateral Property and all
existing certificates of occupancy (to the extent required by applicable law)
are in full force and effect.
7.30 Assessments. The Borrower has not received any written notice of
actual or threatened special assessments or reassessments of any Collateral
Property which is not reflected on financial information previously delivered
to Lender or which would have a Material Adverse Effect.
7.31 Condition of Properties. Except as set forth in the reports listed
on Schedule VI, the buildings, structures and improvements included on or
within each of the Collateral Properties are structurally sound, and all
mechanical, electrical, heating, air conditioning, drainage, sewer, water and
plumbing systems are in proper working order.
7.32 Environmental Reports/Appraisals. The Borrower has delivered to the
Lender correct and complete copies of all written environmental audits,
appraisals and market studies in its possession
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respecting the Collateral Properties and all such environmental audits are
listed in Schedule VII hereto.
7.33 Leases. There are no commercial leases relating to any Collateral
Property except as set forth in rent rolls for such Collateral Property. In
connection with each rental of a unit or apartment at each Collateral Property,
the Borrower has used only (i) the forms of residential lease attached hereto
as Exhibit C for each Initial Property and (ii) the forms of residential lease
delivered to, and approved in writing by, the Lender for each Additional
Property at the time such Additional Property becomes an Addition to
Collateral. The rents listed on the rent roll(s) for each Collateral Property
delivered to and accepted by, the Lender are the rents actually being
collected, and, except as noted on said rent roll(s) and the delinquency
reports, to the Borrower's best knowledge after a due and careful inquiry,
there are no such rents more than thirty (30) days past due, and said rents do
not exceed the legal maximum rent allowed by applicable law. None of the units
or apartments at any of the Collateral Properties are subject to any rent
control or rent stabilization laws and the Borrower has not received any notice
from any governmental authority stating otherwise. To the Borrower's best
knowledge after a due and careful inquiry, there are no applications, orders,
protests or complaints with reference to rents, services or equipment, pending
within governmental authority or court for any Collateral Property, and the
Borrower has not received written notices stating otherwise. For the past
twelve (12) months there has been no organized rent strike or joint action by a
tenants' group to withhold rent at any of the Collateral Properties. Except as
disclosed on Schedule II hereto, as of the date hereof, there is no litigation
pending or threatened against the Borrower, as landlord, which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
7.34 No Cooperative or Condominium. The Borrower does not operate any
Collateral Property, or permit any Collateral Property to be operated, as a
cooperative or condominium building or buildings in which the tenants or
occupants participate in the ownership, control or management of such
Collateral Property or any part thereof as tenant stockholders or otherwise.
The Borrower has not, during the period of its ownership of each Collateral
Property, presented an offering plan to the tenants thereof to convert the same
to a cooperative or condominium status.
Section 8. Covenants of the Borrower. The Borrower agrees that so long
as the Commitment is in effect and until payment in full of all Mortgage Loans
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder:
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8.01 Financial Statements. The Borrower shall deliver or cause to be
delivered to the Lender (and upon the Lender's request to any Person which is a
Servicer or trustee of any Collateral Property):
(a) as soon as available and in any event within 45 days after the
end of each quarterly fiscal period of each fiscal year of the Borrower,
unaudited consolidated statements of income, retained earnings and changes
in financial position (or of cash flow, as the case may be) of the
Borrower and its Consolidated Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated balance sheet as at the end of such
period, setting forth in each case in comparative form the corresponding
consolidated figures for the corresponding period in the preceding fiscal
year, accompanied by a certificate of a senior financial officer of the
Borrower, which certificate shall state that said financial statements
fairly present the consolidated financial condition and results of
operations, as the case may be, of the Borrower and its Consolidated
Subsidiaries in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments and the absence of footnotes);
(b) (Intentionally omitted);
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the
Borrower shall have filed with the Securities and Exchange Commission (or
any governmental agency substituted therefor) or any national securities
exchange;
(d) promptly upon the mailing thereof to the partners of the Borrower
generally, copies of all financial statements, reports and statements so
mailed, if any;
(e) as soon as possible, and in any event within 10 Business Days
after the Borrower knows or has reason to know that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan
have occurred or exist, a statement signed by a senior financial officer
of the Borrower setting forth, to the extent the Borrower has knowledge or
information about such extent or condition, details respecting such event
or condition and the action, if any, which any Guarantor, Ambassador, the
Borrower or its ERISA Affiliate proposes to take with respect thereto (and
a copy of any report or notice required to be filed with or given to PBGC
by such Guarantor, Ambassador, the Borrower or an ERISA Affiliate with
respect to such event or condition):
(i) any reportable event, as defined in Section
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4043(b) of ERISA and the regulations issued thereunder, with respect
to a Plan, as to which PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30
days of the occurrence of such event (provided that a failure to meet
the minimum funding standard of Section 412 of the Code or Section
302 of ERISA shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the
Code);
(ii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan;
(iv) the complete or partial withdrawal by any Guarantor,
Ambassador, the Borrower or any ERISA Affiliate under Section 4201
or 4204 of ERISA from a Multiemployer Plan, provided that such
withdrawal would result in the imposition of withdrawal liability
(within the meaning of Section 4201 of ERISA) on any Guarantor,
Ambassador, the Borrower or any ERISA Affiliate, or the receipt by
any Guarantor, Ambassador, the Borrower or any ERISA Affiliate of
notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A of ERISA;
and
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against any Guarantor, Ambassador, the Borrower
or any ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days;
(f) promptly after the Borrower knows or has reason to know that any
Event of Default has occurred and is continuing, a written notice of such
Event of Default describing the same in reasonable detail and, together
with such notice or as soon thereafter as possible, a description of
the action that the Borrower has taken and proposes to take with respect
thereto;
(g) as soon as available but in any event within 30 days after the
end of each quarterly fiscal period of each fiscal year of the Borrower, a
report (certified by a senior financial officer of the Borrower) setting
forth for each Collateral Property: (i) a profit and loss statement and
income statement, (ii) a detailed statement of operations on a cash basis
(including an analysis on a month-to-month and year-to-date basis showing
and explaining any variance between the results of actual operations and
the projected results of operations), and (iii) a
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detailed calculation of Property NOI for such Collateral Property;
(h) as soon as available and in any event within 30 days after the
end of each quarterly fiscal period of each fiscal year of the Borrower,
operating statements showing all elements of income and expenses for the
operation of each Collateral Property, occupancy rates, rent rolls
(identifying the leased premises, names of all tenants, units leased,
monthly rental and all other charges payable under each lease, date to
which paid, term of lease, date of occupancy, date of expiration, any and
every special provision, concession or inducement granted to tenants) and
a delinquency report for each Collateral Property and such other relevant
information with respect to each Collateral Property as requested by the
Lender, in each case certified by a senior financial officer of the
Borrower;
(i) as soon as available and in any event within twenty-one (21) days
after the end of each month, (w) a current rent roll (identifying the
leased premises, names of all tenants, units leased, monthly rental and
all other charges payable under each lease, date to which paid, term of
lease, date of occupancy, date of expiration, any and every special
provision, concession or inducement granted to tenants) for each
Collateral Property, (x) an operating statement showing all elements of
income and expenses for the operation of each Collateral Property for such
month, (y) a delinquency report for each Collateral Property for such
month and (z) a detailed calculation of the Property NOI for each
Collateral Property for the trailing twelve month period ending on the
last day of the second preceding month, on an EXCEL disk, in each case
certified by a senior financial officer of the Borrower; and
(j) promptly upon receipt thereof, copies of all monthly, quarterly
and annual reports delivered under the Management Agreements; and
(k) from time to time such other information regarding the business,
affairs or financial condition of any Guarantor, Ambassador, the Borrower
or any of their respective Subsidiaries (including, without limitation,
any Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA) and such additional statements, reports,
projections, budget and other information regarding any Collateral
Property or the Collateral as the Lender may reasonably request.
The Borrower will furnish to the Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a) above, a certificate of a senior
financial officer of the Borrower (1) to the effect that no Event of Default
has occurred and is continuing (or, if any Event of Default has occurred and is
continuing, describing the
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same in reasonable detail and describing the action that the Borrower has taken
and proposes to take with respect thereto) and (2) setting forth in reasonable
detail the computations necessary to determine whether the Borrower is in
compliance with Section 8.15 as at the end of the respective quarterly period.
8.02 Litigation, Etc. The Borrower will promptly give to the Lender
notice of (a) all legal or arbitral proceedings, and of all proceedings by or
before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceeding affecting the Borrower
or any Subsidiary, except proceedings which, if adversely determined, would not
have a Material Adverse Effect and (b) of any proposal by any public authority
to acquire any Collateral Property or any portion thereof.
8.03 Existence, Etc. The Borrower will, and will cause each of its
Subsidiaries to: preserve and maintain its corporate or partnership existence
and all of its material rights, privileges and franchises; comply with the
requirements of all applicable laws, rules, regulations and orders of
governmental or regulatory authorities if failure to comply with such
requirements would have a Material Adverse Effect; pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its income
or profits or on any of its Property prior to the date on which penalties attach
thereto, except for any such tax, assessment, charge or levy the payment of
which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained; maintain all of its Properties
used or useful in its business in good working order and condition, ordinary
wear and tear excepted; and permit representatives of the Lender, during normal
business hours and upon reasonable prior notice, to examine, copy and make
extracts from its books and records, to inspect its Properties, and to discuss
its business and affairs with its officers, all to the extent reasonably
requested by the Lender.
8.04 Insurance. The Borrower will, and will cause each of its
Subsidiaries to, keep insured by financially sound and reputable insurers all
Property of a character usually insured by entities engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such entities and carry such other
insurance as is usually carried by such entities.
8.05 Prohibition of Fundamental Changes. The Borrower will not, nor will
it permit any of its Subsidiaries to, enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution). The Borrower will not, nor will it
permit any of its Subsidiaries to, acquire any business or assets from, or
capital stock or equity interests of, or be a party to any acquisition of, any
Person except for (a) purchases of inventory and other assets to be sold or
used in
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the ordinary course of business, (b) purchases of other Property, and (c)
Investments permitted under Section 8.08. Except as otherwise expressly
permitted under this Agreement, the Borrower will not convey, sell, transfer or
otherwise dispose of any Collateral Property or the Collateral without the prior
written consent of the Lender. The Borrower will not, nor will it permit any of
its Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in
one transaction or a series of transactions, all or a substantial part of its
business or assets, whether now owned or hereafter acquired (including, without
limitation, receivables and leasehold interests, but excluding (i) any inventory
or other assets sold or disposed of in the ordinary course of business, (ii)
obsolete, worn-out and other property, tools or equipment no longer used or
useful in its business so long as the amount thereof sold in any single fiscal
year by the Borrower and its Subsidiaries shall not have a fair market value in
excess of $500,000 in aggregate, or (iii) Collateral Properties sold or
transferred in compliance with this Agreement). The Borrower will not admit
or replace or permit the admission or replacement of any limited partner or
general partner, in each case without the prior written consent of the Lender.
The Borrower shall not become a Person other than a limited partnership and
shall not become a general or limited partner in any general or limited
partnership other than a limited partner in any direct limited partnership
Subsidiary of the Borrower permitted by Section 8.14, or permit any of its
Subsidiaries to become a general or limited partner in any general or limited
partnership.
8.06 Limitation on Liens. The Borrower will not, nor will it permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its Property, assets or revenues, whether now owned or hereafter
acquired, except (the following Liens, "Permitted Liens"):
(a) Liens imposed by any governmental authority for taxes,
assessments or charges not yet delinquent or which are being contested in
good faith and by appropriate proceedings (and, with respect to the
Borrower and the Collateral Properties, in accordance with the Mortgages
relating thereto) if adequate reserves with respect thereto are maintained
on the books of the Borrower or any of its Subsidiaries, as the case may
be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings (and with respect to the
Borrower and the Collateral Properties, in accordance with the Mortgages
relating thereto);
(c) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
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(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on
the use of property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or any
of its Subsidiaries;
(f) Liens arising or permitted to exist under any of the Basic
Documents and Liens set forth in any title policies covering the
Collateral Properties; and
(g) any extension, renewal or replacement of the foregoing, provided,
however, that the Liens permitted hereunder shall not be spread to cover
any additional Indebtedness or property (other than a substitution of like
property).
8.07 Indebtedness. The Borrower will not, nor will it permit any of its
Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lender hereunder and under any other Basic
Documents;
(b) Indebtedness outstanding on the date hereof and listed in
Schedule I hereto;
(c) Indebtedness of the Borrower consisting of trade accounts payable
(other than for borrowed money) incurred in the ordinary course of
business in an aggregate principal amount (excluding real estate taxes and
insurance) not at any time exceeding an amount equal to $300 multiplied by
the number of apartment units contained in the Collateral Properties; and
(d) Indebtedness secured by Permitted Liens.
8.08 Investments. The Borrower will not, nor will it permit any of its
Subsidiaries to, make or permit to remain outstanding any Investments except:
(a) operating deposit accounts with banks and Permitted Investments;
and
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(b) Investments by the Borrower consisting of advances or loans to the
Operating Partnership; provided, however, that the Borrower may not make
such advances or loans unless it has reserved sufficient Property NOI to
pay the amount of interest due on the next succeeding Interest Payment
Date.
8.09 Dividend Payments. The Borrower will not, nor will it permit any
of its Subsidiaries to, declare or make any Dividend Payment (i) at any time
that a Specific Event of Default shall have occurred and be continuing or at
any time that the Borrower shall fail to comply with Section 8.15 and (ii)
unless the Borrower, prior to such Dividend Payment, has reserved sufficient
Property NOI to pay the amount of interest due on the next succeeding Interest
Payment Date.
8.10 Activities.
(a) Neither the Borrower nor any of its Subsidiaries shall engage to any
substantial extent in any line or lines of business activity other than the
business described in Section 7.15. The Borrower shall not, nor shall it
permit any of its Subsidiaries to, purchase any real properties other than the
Collateral Properties, conduct any business other than that permitted under the
Partnership Agreement or charter and by-laws of the General Partner of the
Borrower or such Subsidiary, have any assets or liabilities other than assets
or liabilities derived from or related to the Collateral Properties or
properties which previously constituted Collateral or otherwise related to a
business that is permitted under the Partnership Agreement or such Subsidiary's
partnership agreement or charter and by-laws, violate any of the provisions of
the Partnership Agreement or such Subsidiary's charter or by-laws or
partnership agreement or amend the Partnership Agreement or such Subsidiary's
partnership agreement or charter or by-laws.
(b) The Borrower (i) will keep its own separate books and records, use
separate stationary, invoices and checks, maintain its own bank accounts, keep
its funds or other assets separate from the funds or other assets of Ambassador,
each Guarantor and all other Persons, all to the extent necessary to maintain an
existence separate and apart from Ambassador, each Guarantor and any Subsidiary
or Affiliate thereof, (ii) will fund from its own assets (including its initial
working capital reserve) all of its activities, expenses and liabilities,
(iii) will pay its own operating expenses and liabilities from its own funds and
will be adequately capitalized for such business purpose, (iv) will observe all
customary partnership procedures and formalities and hold such appropriate
meetings or obtain such appropriate consents of its partners as are necessary to
authorize all of its actions as required by applicable law or the Partnership
Agreement, (v) will in all dealings with the public act under its own
partnership name and as a separate and distinct legal entity, and will not
identify itself as being a division or a part of Ambassador, any Guarantor or
any other Person or identify Ambassador, any Guarantor or any other Person as
being a division or a part of the
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Borrower, (vi) will maintain financial statements, records and books of account
separate from those of Ambassador, each Guarantor or any other Person, (vii)
will have its office bear a reasonable allocation of the expenses associated
with the offices of its partners and Affiliates, and (viii) except as expressly
permitted under this Agreement, will conduct all transactions and dealings
between it and its Affiliates on an arm's length basis and otherwise as set
forth in Section 8.11. Without limiting the foregoing, the Borrower will
maintain in place, and cause each of its Subsidiaries to maintain in place, all
policies and procedures and take and continue to take, and cause each of its
Subsidiaries to take and continue to take, all actions to ensure that (A)
creditors deal with the Borrower and each of its Subsidiaries as a separate
economic unit (and not as a single economic unit with any of its partners or any
other Affiliate of the Borrower or such Subsidiary) and (B) the affairs of the
Borrower and each of its Subsidiaries are kept separate from those of its
partners and each other Affiliate of the Borrower or such Subsidiary (and not
entangled with the affairs of any of its partners or any other Affiliate of the
Borrower or such Subsidiary).
8.11 Transactions with Affiliates. Except as expressly permitted by this
Agreement or as otherwise consented to by the Lender in writing, the Borrower
will not, nor will it permit any of its Subsidiaries to, directly or
indirectly: (a) make any Investment in an Affiliate except as provided in
Section 8.08(b); (b) transfer, sell, lease, assign or otherwise dispose of any
assets to an Affiliate; (c) merge into or consolidate with or purchase or
acquire assets from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including,
without limitation, guarantees and assumptions of obligations of an Affiliate);
provided that (x) the Borrower may enter into and comply with the Management
Agreement, (y) any Affiliate who is an individual may serve as a director,
officer or employee of the General Partner of the Borrower or its Subsidiaries
and receive reasonable compensation for his or her services in such capacity
and (z) the Borrower and its Subsidiaries may enter into transactions (other
than extensions of credit by the Borrower or any of its Subsidiaries to an
Affiliate) providing for the leasing of property, the rendering or receipt of
services or the purchase or sale of inventory and other assets in the ordinary
course of business if the monetary or business consideration arising therefrom
would be substantially as advantageous to the Borrower and its Subsidiaries as
the monetary or business consideration which would obtain in a comparable
transaction with a Person not an Affiliate.
8.12 Intentionally Omitted.
8.13 Modifications of Certain Documents. The Borrower will not consent
to any modification, supplement or waiver of any of the provisions of the
Partnership Agreement or any Management Agreement or terminate the Partnership
Agreement or any Management Agreement without the prior written consent of the
Lender. The Borrower will not permit any Subsidiary thereof to consent to any
modification, supplement or waiver of any provisions of its charter, by-laws,
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certificate of partnership or partnership agreement, as the case may be, or
terminate any such documents without the prior written consent of the Lender.
The Borrower will not, and will not permit any Subsidiary thereof to, consent
to any modification, supplement or waiver of any provision of a service
contract which would have a material adverse effect on the value, utility,
operation or legality of any Collateral Property or terminate any service
contract if such termination would have a material adverse effect on the value,
utility, operation or legality of any Collateral Property.
8.14 Additional Subsidiaries. The Borrower shall not form or acquire any
Subsidiaries without the prior written consent of the Lender. In the event
that the Lender shall permit a Person to become a Subsidiary of the Borrower
(a) the structure capitalization, shareholders and/or partners of such
Subsidiary and purpose and organizational documents of such Subsidiary shall be
reasonably acceptable and satisfactory to the Lender and (b) the Borrower shall
(i) notify the Lender promptly after such Person becomes a Subsidiary of the
Borrower, (ii) execute and deliver to the Lender a security agreement (in form
and substance reasonably satisfactory to the Lender) providing that all of the
outstanding shares of capital stock or equity or ownership interests of such
Subsidiary shall be pledged to the Lender as collateral security for the
Mortgage Loans, and deliver to the Lender the certificate(s) representing such
capital stock or equity or ownership interests, together with instruments of
collateral assignment in such form as the Lender may reasonably request, (iii)
cause such Subsidiary to execute and deliver a security agreement (in form and
substance reasonably satisfactory to the Lender) and take such other actions to
grant to the Lender a first priority security interest in all of its assets and
to deliver proof of corporate or partnership action, incumbency of officers,
opinions of counsel and other documents as the Lender may reasonably request,
(iv) cause such Subsidiary to make such representations and warranties and
undertake such obligations as the Lender may reasonably request, (v) cause such
Subsidiary to execute and deliver such documents and agreements and do such
acts as the Lender may request, and (vi) deliver to the Lender such
certificates, documents and opinions (each in form and substance satisfactory
to Lender) as the Lender shall request. Except as permitted by the Basic
Documents, the Borrower shall not sell, transfer or otherwise dispose of any
shares of stock or equity or ownership interests in any of its Subsidiaries,
nor permit any of its Subsidiaries to issue any shares of stock of any class or
equity or ownership interests whatsoever to any Person (other than to the
Borrower). In the event that any such additional shares of stock or equity or
ownership interests shall be issued by any Subsidiary, the Borrower agrees
forthwith to deliver or cause to be delivered to the Lender pursuant to the
relevant security agreement the certificates evidencing such shares of stock or
equity or ownership interests, accompanied by undated stock powers or
assignments executed in blank and shall take such other action as the Lender
shall request to perfect the security interest created therein pursuant to the
relevant security agreement.
8.15 Debt Service Ratio. The Borrower will not at any time
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permit the Debt Service Ratio for the Borrower to be less than 1.40 to 1.00.
8.16 Property Management. The Borrower shall cause each of the
Collateral Properties to be managed solely pursuant to the Management
Agreements by the Managers. The Borrower shall diligently perform and observe
all of the terms, covenants and conditions of the Management Agreements to be
performed and observed by it and promptly deliver to the Lender a true copy of
each notice the Borrower gives of any default by a Manager in the performance
or observance of any of the terms, covenants or conditions of such Manager
contained in a Management Agreement and any notice received by the Borrower of
any default of any of its obligations contained in the Management Agreements.
The Borrower shall not surrender the Management Agreements or (except pursuant
to the Security Documents) assign its interest therein or consent to the
assignment by any Manager of its interest therein. Upon the Lender's request,
the Borrower shall exercise each option (if any) to extend or renew the term of
the Management Agreements. In the event that (A) there shall have occurred and
be continuing an Event of Default or (B) the Debt Service Ratio of the Borrower
shall be less than 1.25 to 1.00 at any time, the Lender may instruct the
Borrower to remove any Manager and so designate a replacement property manager
acceptable to the Lender and the Borrower shall so remove such property Manager
and so designate a replacement manager. The Borrower shall not, without the
prior written consent of the Lender (which shall not be unreasonably withheld),
enter into any property management agreement concerning the Collateral
Properties (other than the Management Agreements), or (b) enter into any
property management agreement in respect of any Collateral Property (other than
the Management Agreements).
8.17 Residential Leases. In connection with each rental of a unit at
each Collateral Property, the Borrower shall only use one of the forms of
residential lease attached hereto as Exhibit C for each such Collateral
Property that constitutes an Initial Property or a form of residential lease
delivered to, and approved in writing by, the Lender for each such Collateral
Property that constitutes an Additional Property at the time such Additional
Property becomes an Addition to Collateral.
Section 9. Events of Default. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) (1) The Borrower shall default in the payment when due of any
principal of any Mortgage Loan; or (2) the Borrower shall default in the
payment when due of any interest on any Mortgage Loan or any fee payable
hereunder or any other amount payable by it hereunder or under the other
Basic Documents and such default shall continue for a period of more than
three Business Days; or
(b) (1) Ambassador, the General Partner or the Borrower or any of
their respective Subsidiaries (other than the Operating Partnership and
its Subsidiaries as to which clause (3) below
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shall be applicable) shall default in the payment when due of any principal
of or interest on any of its other Indebtedness aggregating $500,000 or
more; or (2) except as set forth in Schedule VIII hereto, any event
specified in any note, agreement, indenture or other document evidencing or
relating to any Indebtedness of Ambassador, the General Partner or the
Borrower or any of their respective Subsidiaries (other than the Operating
Partnership and it Subsidiaries as to which clause (4) below shall be
applicable) aggregating $500,000 or more shall occur if the effect of such
event is to cause, or (with the giving of any notice or the lapse of time
or both) to permit the holder or holders of such Indebtedness (or a trustee
or agent on behalf of such holder or holders) to cause, such Indebtedness
to become due, or to be prepaid in full (whether by redemption, purchase or
otherwise), prior to its stated maturity; or (3) the Operating Partnership
or any of its Subsidiaries (other than the Borrower and its Subsidiaries)
shall default in the payment when due of any principal of or interest on
any of its other Indebtedness aggregating $1,500,000 or more; or (4) any
event specified in any note, agreement, indenture or other document
evidencing or relating to any Indebtedness of the Operating Partnership or
any its Subsidiaries (other than the Borrower and its Subsidiaries)
aggregating $1,500,000 or more shall occur if the effect of such event is
to cause, or (with the giving of any notice or the lapse of time or both)
to permit the holder or holders of such Indebtedness (or a trustee or agent
on behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase or
otherwise), prior to its stated maturity; or
(c) Any representation, warranty or certification made or deemed made
in any Basic Document (or in any modification or supplement thereto) by
the Borrower, Ambassador or by any Guarantor or in any certificate
furnished to the Lender pursuant to the provisions hereof (or thereof),
shall prove to have been false or misleading as of the time made or
furnished in any material respect; or
(d) (1) The Borrower shall default in the performance of any of its
obligations under Sections 8.01(a) or 8.01(f) or Sections 8.05 through
8.10 (inclusive) or Section 8.12, 8.13, 8.14 or 8.16; or (2) the Borrower
shall default in the performance of any of its obligations under any
Mortgage (other than its obligation to pay any amounts payable under any
Mortgage as to which Section 9(a)(2) shall be applicable) and such default
shall continue unremedied for a period of more than 10 days after the
grace and notice periods set forth therein; or (3) the Borrower shall
default in the performance of any of its obligations under Sections 4,
5.02, 5.04 or 5.07 of the Security Agreement; or (4) the Borrower shall
default in the performance of any of its obligations under the
Environmental Indemnity Agreement; or (5) the Borrower shall default in
the performance of any of its other obligations under this Agreement
(other than under Section 8.15 as to which clause (6) shall be applicable
and
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it being understood that the failure to comply with Section 8.15 shall
not constitute a Default or Event of Default, or a Default or Event of
Default under any Basic Document) or any other Basic Document and such
default shall continue unremedied for a period of 30 days after receipt by
the Borrower of written notice from the Lender; or (6) the Debt Service
Ratio for the Borrower shall be less than 1.25 to 1.00 at any time; or
(e) (1) Any Guarantor shall default in the performance of any of its
obligations under Sections 5.03 through 5.07 (inclusive), 5.10 or 5.11 of
any Guarantee Agreement; or (2) the General Partner shall default in the
performance of any of its obligations under Sections 5.13, 5.14, 6.02,
6.04 or 6.07 of the GP Guarantee Agreement; or (3) the Operating
Partnership shall default in the performance of any of its obligations
under Sections 5.12, 5.13, 6.02, 6.04 or 6.07 of the LP Guarantee
Agreement; or (4) the LP Debt Service Ratio shall be less than 1.25 to
1.00 at any time; or (5) the Ambassador Debt Service Ratio shall be less
than 1.25 to 1.00 at any time; or (6) the Total Market Value of all
outstanding shares of common stock of Ambassador plus all outstanding
Common Units of the Operating Partnership other than Common Units held by
Ambassador shall be less than $75,000,000 at any time; or (7) Ambassador
or any Guarantor shall default in the performance of any of its
obligations under the Environmental Indemnity Agreement; or (8) any
Guarantor shall default in the performance of any of its other obligations
in any Guarantee Agreement or any other Basic Document and such default
shall continue unremedied for a period of 30 days after receipt by the
Borrower of written notice from the Lender; or (9) Ambassador shall
default in the performance of any of its obligations under Sections 4.03
through 4.09 (inclusive), 4.12 through 4.16 (inclusive), or 5.02, 5.04 or
5.07 of the REIT Agreement; or (10) Ambassador shall default in the
performance of any of its other obligations in the REIT Agreement or any
other Basic Document and such default shall continue unremedied for a
period of 30 days after receipt by the Borrower of written notice from the
Lender; or
(f) Any Guarantor, Ambassador, the Borrower or any of their
respective Subsidiaries shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(g) Any Guarantor, Ambassador, the Borrower or any of their
respective Subsidiaries shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition as debtor seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in
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writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any action for the purpose of effecting any
of the foregoing; or
(h) A proceeding or case shall be commenced, without the application
or consent of any Guarantor, Ambassador, the Borrower or any of their
respective Subsidiaries, in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of any Guarantor,
Ambassador, the Borrower or any Subsidiary or of all or any substantial
part of its assets, or (iii) similar relief in respect of any Guarantor,
Ambassador, the Borrower or any Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more consecutive days; or an order for relief against any
Guarantor, Ambassador, the Borrower or any such Subsidiary shall be
entered in an involuntary case under the Bankruptcy Code; or
(i) A final judgment or judgments for the payment of money in excess
of $500,000 (but only to the extent not covered by insurance) in the
aggregate shall be rendered by a court or courts against any Guarantor,
Ambassador, the Borrower and/or any of their respective Subsidiaries and
the same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within
60 consecutive days from the date of entry thereof and such Guarantor, the
Borrower or the relevant Subsidiary shall not, within said period of 60
consecutive days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof
to be stayed during such appeal; or
(j) An event or condition specified in Section 8.01(e) shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or condition, together with all other such events or
conditions, any Guarantor, Ambassador, the Borrower or any ERISA Affiliate
shall incur, or in the opinion of the Lender shall be reasonably likely to
incur, a current liability to a Plan, a Multiemployer Plan or PBGC (or any
combination of the foregoing) which is, in the reasonable good faith
determination of the Lender, material in relation to the consolidated
financial condition, business, operations or prospects taken as a whole of
Ambassador, and its Consolidated Subsidiaries taken as a whole or, with
respect to an obligation solely of the Borrower, of the Borrower and its
Consolidated Subsidiaries taken as a whole; or
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(k) Except for expiration or termination in accordance with its
terms, any of the Security Documents or the Environmental Indemnity
Agreement or the Management Agreement shall be terminated or shall cease
to be in full force and effect, for whatever reason; or any of the
Security Documents shall be declared null and void, or shall fail to
create the Liens, rights, powers and privileges purported to be created
thereby (including, without limitation, a perfected security interest in
and Lien on all of the Collateral, subject to no equal or prior Lien other
than Permitted Liens); or
(l) The Operating Partnership shall cease to be the sole limited
partner of the Borrower; or the General Partner shall cease to be the sole
general partner of the Borrower; or the General Partner shall cease to be
a Wholly-Owned Subsidiary of Ambassador; or the Borrower shall cease to be
an indirect Subsidiary of Ambassador; or
(m) Ambassador shall fail or cease to qualify as a "real estate
investment trust" pursuant to Sections 856 through 860 of the Code; or the
General Partner shall fail to qualify as a "qualified REIT subsidiary"
under the Code; or
(n) Any Guarantor, Ambassador or the Borrower shall be terminated,
dissolved or liquidated (as a matter of law or otherwise); or proceedings
shall be commenced by or on behalf of any Person (including a Guarantor,
Ambassador or the Borrower) seeking the termination, dissolution or
liquidation of any Guarantor, Ambassador or the Borrower and such
proceedings (commenced by any Person other than a Guarantor, Ambassador or
the Borrower) shall continue undismissed, or an order, judgment or decree
approving or ordering any such proceedings shall be entered and continue
unstayed and in effect, for a period of 60 or more consecutive days; or
any event specified in Section 10.01 of the Partnership Agreement shall
occur; or
(o) Without the Lender's prior written consent, any Collateral
Property or any part hereof or interest therein becomes subject to any
easement, covenant, lien, charge, mortgage or other encumbrance whether
junior or senior to the related Mortgage, except for the Permitted Liens;
or
(p) Without the Lender's prior written consent, any Collateral
Property or any part thereof becomes subject to any nonresidential lease
(other than commercial leases relating to laundry facilities, leases
described in the title policies relating to any Collateral Property which
create Liens and commercial leases set forth on the rent rolls relating to
any Collateral Property), license or occupancy agreement; or
(q) Without the Lender's prior written consent, the leases, rents,
income or revenues of any Collateral Property are assigned, pledged or
otherwise encumbered or become subject to any lien, charge or mortgage,
except for Permitted Liens; or
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(r) Without the Lender's prior written consent, any Collateral
Property or any part thereof or interest therein is sold, assigned,
transferred, conveyed or otherwise disposed of or is the subject of any
attempted sale, assignment, transfer or conveyance except as expressly
permitted under this Agreement;
THEREUPON: (i) in the case of an Event of Default other than one referred to
in clause (g) or (h) of this Section 9 with respect to the Borrower, Ambassador
or any Guarantor, the Lender may, by notice to the Borrower, terminate the
Commitment and/or declare the principal amount then outstanding of, and the
accrued interest on, the Mortgage Loans and all other amounts payable by the
Borrower hereunder and under the Note (including, without limitation, any
amounts payable under Section 5.04) to be forthwith due and payable, whereupon
such amounts shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Borrower; and (ii) in the case of the occurrence of an Event of
Default referred to in clause (g) or (h) of this Section 9 with respect to the
Borrower, Ambassador or any Guarantor, the Commitment shall automatically be
terminated and the principal amount then outstanding of, and the accrued
interest on, the Mortgage Loans and all other amounts payable by the Borrower
hereunder and under the Note (including, without limitation, any amounts
payable under Section 5.04) shall become automatically due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
Section 10. Miscellaneous.
10.01 Waiver. No failure on the part of the Lender to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under this Agreement or the Note shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
this Agreement or the Note preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
10.02 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telecopy or in writing and
telecopied or delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party, at
such other address as shall be designated by such party in a written notice to
each other party given in accordance with this Section 10.02. Except as
otherwise provided in this Agreement, all such communications shall be deemed
to have been duly given when transmitted by telecopier or delivered in each
case given or addressed as aforesaid.
10.03 Expenses, Etc.
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(a) The Borrower agrees to pay or reimburse the Lender for paying: (1)
all reasonable out-of-pocket expenses of the Lender, (including, without
limitation, the reasonable fees and expenses of Messrs. Milbank, Tweed, Hadley
& McCloy, counsel to the Lender and of any local counsel to the Lender), in
connection with (A) the negotiation, preparation, execution and delivery of
this Agreement, the Note and the other Basic Documents and the making of the
Mortgage Loans hereunder (including, without limitation, all reasonable
out-of-pocket expenses of the Lender (including fees and expenses of counsel to
the Lender) in connection with the preparation, negotiation, review and
execution of any documents required pursuant to Section 2.08 and 2.09 hereof in
connection with the Addition and/or Release of any Collateral Properties, and
(B) any amendment, modification or waiver of any of the terms of this Agreement
or the other Basic Documents; (2) all reasonable costs and expenses of the
Lender (including reasonable counsel fees) in connection with any Event of
Default and any enforcement or collection proceedings resulting therefrom
including, without limitation, in connection with any bankruptcy, insolvency,
liquidation, reorganization, moratorium or other similar proceedings involving
the Borrower, Ambassador or any Guarantor or a "workout" of the Mortgage Loans;
(3) all transfer, stamp, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement, the other Basic Documents or any other document referred to herein or
therein and all costs, expenses, taxes, assessments and other charges incurred
in connection with any filing, registration, recording or perfection of any
security interest contemplated by this Agreement, the other Basic Documents or
any document referred to therein; and (4) all taxes and assessments, recording
fees, registration taxes, title insurance premiums, appraisal fees, costs of
surveys, fees of third-party consultants and all other fees and expenses
reasonably incurred by the Lender in connection with any Collateral (including,
without limitation, all mortgage loan servicing fees incurred in connection with
the Collateral).
(b) The Borrower hereby agrees to indemnify the Lender and its directors,
officers, employees and agents from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages or expenses incurred by any of
them arising out of or by reason of any claim of any Person (1) relating to or
arising out of any Basic Document or the transactions contemplated thereby, (2)
resulting from the ownership or Lien on any Collateral Property or receipt of
any Rents (as defined in the Security Agreement), (3) relating to any accident,
injury to or death of persons or loss of or damage to property occurring, in,
on or about any Collateral Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(4) relating to any use, nonuse or condition in, on or about any Collateral
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (5) relating to the
performance of any labor or services or the furnishing of any materials or
other property in respect of any Collateral Property or any part thereof, or
(6) relating to any actual or proposed use by the Borrower of the proceeds of
any of the Mortgage Loans, including,
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without limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other necessary
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Lender or any other Person to be indemnified).
10.04 Amendments, Etc. Any provision of this Agreement may be amended or
modified only by any instrument in writing signed by the Borrower and the
Lender.
10.05 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Without limiting the generality of the foregoing, the
Lender may, at any time and from time to time without the consent of the
Borrower, assign or otherwise transfer all or any portion of its rights and
remedies in this Agreement to any other person or entity, either separately or
together with such other property of the Lender for such purposes and on such
terms as the Lender shall elect, and such other person or entity shall thereupon
become vested with all of the rights and obligations in respect thereof granted
to the Lender herein or otherwise. Without limiting the foregoing, in connection
with any assignment of the Mortgage Loans pursuant to Section 10.06(b), the
Lender may, subject to Section 10.06(b), assign or otherwise transfer all of its
rights and remedies under this Agreement to the assignee, and such assignee
shall thereupon become vested with all of the rights and obligations in respect
thereof granted to the Lender herein or otherwise. Each representation and
agreement made by the Borrower in this Agreement shall be deemed to run to
and each reference to the Lender herein shall be deemed to refer to the Lender
and all of its successors and assigns.
10.06 Assignments and Participation.
(a) The Borrower may not assign its rights or obligations hereunder or
under the Note without the prior written consent of the Lender.
(b) The Lender may sell, assign, syndicate or otherwise transfer and/or
dispose of all or any part of any Mortgage Loan or Mortgage Loans and/or all or
any portion of the Note or the Commitment without the prior written consent of
the Borrower. Upon written notice to the Borrower of an assignment (which
notice shall identify the assignee, the amount of the assigning Commitment and
Mortgage Loans assigned) the assignee shall have, to the extent of such
assignment (unless otherwise provided in such assignment), the obligations,
rights and benefits of the Lender hereunder holding the Commitment and Mortgage
Loans (or portions thereof) assigned to it (in addition to the Commitment and
Mortgage Loans if any, theretofore held by such Assignee) and the Lender,
shall, to the extent of such assignment, be released from the Commitment (or
portions thereof) so assigned.
- 66 -
<PAGE> 71
(c) The Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any Mortgage Loan or Mortgage Loans made or
to be made and the collateral security therefor, but such participant shall not
have any rights or benefits under this Agreement or the Note or the other Basic
Documents (the participant's rights against the Lender in respect of such
participation to be those set forth in the agreement (the "Participation
Agreement") executed by the Lender in favor of the participant). All amounts
payable by the Borrower to the Lender under Section 5 shall be determined as if
the Lender had not sold or agreed to sell any participation in such Mortgage
Loan and as if the Lender were funding all of such Mortgage Loan in the same way
that it is funding the portion of such Mortgage Loan in which no participation
have been sold. In no event shall the Lender be obligated to the participant
under the Participation Agreement to take or refrain from taking any action
hereunder or under the Note or under the other Basic Documents except that the
Lender may agree in the Participation Agreement that it will not, without the
consent of the participant, agree to (i) the increase or extension of the term,
or the extension of the time or waiver of any requirement for the reduction or
termination, of the Commitment, (ii) the extension of any date fixed for the
payment of principal of or interest on the related Mortgage Loan or Mortgage
Loans, (iii) the reduction of any payment of principal thereof, (iv) the
reduction of the rate at which either interest is payable thereon to a level
below the rate at which the participant is entitled to receive interest in
respect of such participation, (v) except as provided in the Basic Documents,
release or otherwise terminate the Lien on any of the Collateral or (vi) except
as provided in the Guarantee Agreements, terminate a Guarantee Agreement or
release any Guarantor from its obligations thereunder.
(d) Subject to Section 10.14, the Lender may furnish any information
concerning the Guarantors, the Borrower, Ambassador or any of their respective
Subsidiaries in the possession of the Lender from time to time to assignees and
participants (including prospective assignees and participants); provided that
any such prospective assignees and participants shall agree in writing to be
bound by the provisions of Section 10.14.
10.07 Survival. The obligations of the Borrower under Sections 5.01,
5.04 and 10.03 shall survive the repayment of the Mortgage Loans and the
termination or expiration of the Commitment and any Addition or Release of the
Collateral pursuant to the Basic Documents (including, without limitation,
pursuant to Sections 2.08 and 2.09). In addition, each representation and
warranty made, or deemed to be made by a notice of borrowing of any Mortgage
Loan, hereunder shall survive the making of such Mortgage Loan and the Lender
shall not be deemed to have waived, by reason of making such Mortgage Loan, any
Default or Event of Default which may arise by reason of such representation or
warranty proving to have been false or misleading, notwithstanding that the
Lender may have had notice or knowledge or reason to know that such
representation or warranty was false or misleading at the time such Mortgage
Loan was made.
- 67 -
<PAGE> 72
10.08 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
10.09 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
10.10 Governing Law; Submission to Jurisdiction. This Agreement and the
Note shall be governed by, and construed in accordance with, the law of the
State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State Court sitting in New York City for the
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
10.11 Waiver of Jury Trial. THE BORROWER AND THE LENDER HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.12 Marshalling; Recapture. The Lender shall not be under any
obligation to marshall any assets in favor of the Borrower, Ambassador or any
Guarantor. To the extent the Lender receives any payment by or on behalf of
the Borrower, Ambassador or any Guarantor, which payment or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to the Borrower, Ambassador or any Guarantor or their
respective estate, trustee, receiver, custodian or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to
the extent of such payment or repayment, the obligation or part thereof which
has been paid, reduced or satisfied by the amount so repaid shall be reinstated
by the amount so repaid and shall be included within the liabilities of the
Borrower, Ambassador or any such Guarantor to the Lender as of the date such
initial payment, reduction or satisfaction occurred.
10.13 Cross Collateralization. The Borrower represents, warrants and
covenants that in the case of an Event of Default (i) the Lender shall have
the right to pursue all of its rights and remedies in one proceeding, or
separately and independently in separate proceedings from time to time, as the
Lender, in its sole and absolute discretion, shall determine from time to time,
(ii) the Lender is not required to either marshall assets, sell Collateral in
any inverse order of alienation, or be subject to any "one action" or
"election of remedies" law or rule, (iii) the exercise by the Lender of any
remedies against any one item of Collateral will not impede the Lender
- 68 -
<PAGE> 73
from subsequently or simultaneously exercising remedies against any other item
of Collateral, and (iv) all Liens and other rights, remedies or privileges
provided to the Lender shall remain in full force and effect until the
Lender has exhausted all of its remedies against the Collateral and all
Collateral has been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Mortgage Loans.
10.14 Confidentiality. The Lender agrees (on behalf of itself and each
of its Affiliates, directors, officers, agents, employees and representatives)
to use reasonable precautions to keep confidential, in accordance with its
customary procedures for handling confidential information of this nature and
in accordance with safe and sound practices, any non-public information
supplied to it by the Borrower or its agents or any other Person pursuant to
the negotiation or performance of this Agreement and further agrees that it
shall not use any such non-public information in a manner which would violate
and federal or state securities laws; provided that nothing herein shall limit
the disclosure of any such information (i) to the extent required by statute,
rule, regulation or judicial process, (ii) to counsel for the Lender, (iii) to
examiners, auditors or accountants, (iv) in connection with any litigation to
which the Lender is a party, or (v) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant
(or prospective assignee or participant) first agrees to be bound by these
provisions; provided, further, that, unless specifically prohibited by
applicable law or court order, the Lender shall, prior to disclosure thereof,
notify the Borrower of any request for disclosure of any such non-public
information (x) by any governmental agency or representative thereof (other
than any such request in connection with an examination of the financial
condition of the Lender by such governmental agency) or (y) pursuant to legal
process; and provided finally that in no event shall the Lender be obligated or
required to return any materials furnished by the Borrower. The Borrower
agrees (on behalf of itself and each of its Affiliates, officers, agents,
employees and representatives) that it will not, and will not permit any of its
Affiliates to, issue any press release or make any public statement or disclose
any information to the public about the Mortgage Loan or the transactions
contemplated by the Basic Documents without the prior written consent of the
Lender in each instance.
10.15 Appointment of Servicer. The Lender may from time to time appoint
a servicer ("Servicer") to administer the Mortgage Loans on behalf of the
Lender, which Servicer shall have the power and authority to exercise all the
rights and remedies of the Lender hereunder and under the other Basic Documents
and to act as agent of the Lender hereunder and under the other Basic
Documents. Once notified in writing of the appointment of a Servicer, the
Borrower shall recognize the Servicer as the agent of the Lender and shall make
all payments and deliver all notices as directed by the Servicer and accept all
notices from the Servicer hereunder and under the other Basic Documents until
otherwise instructed in writing by the Lender.
- 69 -
<PAGE> 74
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWER:
AMBASSADOR II, L.P.
By: Ambassador II, Inc.,
its General Partner
By:
------------------------
Adam D. Peterson
Executive Vice President
Address for Notices:
77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
Attention: President
Telecopier No.: (312) 917-0910
with a copy to:
Greenberg Traurig Hoffman
Lipoff Rosen & Quentel
One Commerce Square, Suite 2050
2005 Market Street
Philadelphia, Pennsylvania 19103
Attention: Dianne Coady Fisher, Esq.
Telecopier No: (215) 988-7801
LENDER:
NOMURA ASSET CAPITAL CORPORATION
By:
--------------------------
John Burke
Vice President
Address for Notices:
2 World Financial Center
Building B
New York, New York 10281
Attention: Sheryl McAfee
Telecopier No.: (212) 667-1206
and
Attention: Barry Funt
- 70 -
<PAGE> 75
Telecopy No.: (212) 667-1547
- 71 -
<PAGE> 76
SCHEDULE I
Indebtedness
NONE
<PAGE> 77
SCHEDULE II
Litigation
NONE
<PAGE> 78
SCHEDULE III
Subsidiaries and Investments
NONE
<PAGE> 79
SCHEDULE IV
Initial Properties
1. Heather Ridge Apartments, 4707 E. McDowell Road, Maricopa County,
Phoenix, Arizona
2. Pine Shadows Apartments, 4839 S. Darrow Drive, Maricopa County, Tempe,
Arizona
3. Orangewood Apartments, 444 West Orange Grove Road, Pima County, Tucson,
Arizona
4. Hidden Lakes Apartments, 2701 W. Waters Avenue, Hillsborough County,
Tampa, Florida
5. Woodlands Apartments, 4714 N. Habana Avenue, Hillsborough County, Tampa,
Florida
<PAGE> 80
SCHEDULE V
MATERIAL PROPERTY CONTRACTS FOR EACH INITIAL PROPERTY
1. HIDDEN LAKES
ALL AMERICAN COIN LAUNDRIES, INC. dated October 27, 1995 for commercial
clothes washers and dryers lease
ACCESS TO APARTMENTS dated May 16, 1996 for prospect resident referrals
ASSOCIATED CREDIT & COLLECTION, INC. dated April 25, 1996 for unpaid
accounts
APARTMENTS FOR RENT dated August 18, 1995 for advertising agreement
G&A VENDALL, INC. for soft drink vending machines
HAAS PUBLISHING COMPANIES dated April 1, 1995 for advertising
HERSH RECONSTRUCTION COMPANIES dated June 14, 1993 for carpentry and
painting
THE LAKE DOCTORS, INC. dated November 1, 1990 for manage of noxius
aquatic weeds and algae of lakefront and two ponds
LIVING PLANTS dated December 28, 1993 for maintenance service
PARAGON CABLE for cable service
SUNSHINE POOL SERVICE dated October 27, 1995 for service of two pools
TAMPA BAY TOWING, INC. dated May 11, 1995 for towing service
TAMPA ELECTRIC dated February 3, 1993 for outdoor lighting equipment
TERMINIX for formosan termites
VICKERS SECURITY SERVICE dated September 1, 1992 for security services
VOICE-TEL dated February 1, 1996 for answering service contract
2. THE WOODLANDS
ALL AMERICAN COIN LAUNDRIES, INC. dated October 27, 1995 for commercial
clothes washers and dryers lease
COMMERCIAL POOL CLEANERS, INC. dated July 22, 1996 for pool maintenance
COPYPRO, INC. dated May 18, 1996 for copier maintenance agreement
TAMPA CABLE TELEVISION, INC. dated February 28, 1986
TAMPA ELECTRIC dated June 21, 1993 for outdoor lighting equipment
INTERNATIONAL SECURITY MANAGEMENT GROUP dated December 7, 1994 for
security officer
APARTMENTS FOR RENT dated April 26, 1996 for advertising agreement
HAAS PUBLISHING COMPANIES dated March 19, 1996 for advertising
GREENVIEW LANDSCAPING, INC. for landscape maintenance
HAAS PUBLISHING COMPANIES dated May, 1991 for advertising
THE LAKE DOCTORS, INC. dated March 8, 1996 for manage of noxius aquatic
weeds and algae of lakefront and two ponds
3. HEATHER RIDGE
AMERICAN CABLE TELEVISION dated July 12, 1994 for cable service
maintenance agreement
ALL VALLEY IMPOUND dated September 28, 1995 for vehicle towing agreement
APARTMENTS FOR RENT dated March 22, 1996 for advertising agreement
ARIZONA COIN TELEPHONE, INC. dated November 30, 1994 for coin telephones
BURNS PEST ELIMINATION dated January 2, 1996 for pest elimination
DANKA INDUSTRIES, INC. dated May 13, 1995 for copier maintenance
GOOD SHEPPARD EXTERMINATING CO., INC. dated May 3, 1995 for subterranean
termite control
WASTE MANAGEMENT OF PHOENIX dated December 18, 1995 for waste disposal
service
W&O SERVICE, INC. dated March 11, 1996 for landscape maintenance
WACKENHUT dated February 1, 1996 for standard guard services
WEB SERVICE CO. dated January 15, 1996 for commercial clothes washers and
dryers lease
<PAGE> 81
SCHEDULE V
MATERIAL PROPERTY CONTRACTS FOR EACH COLLATERAL PROPERTY
(continued)
4. ORANGEWOOD
APARTMENTS FOR RENT dated November 11, 1995 for advertising agreement
ESSENTIAL TERMITE & PEST CONTROL dated June 20, 1990 for pest control
HAAS PUBLISHING COMPANY, INC. dated June 30, 1994 for advertising
agreement
JONES INTERCABLE, INC. dated December 18, 1992 for cable television
installation agreement
DESERT ARROW LANDSCAPE MAINTENANCE dated August 14, 1995 for landscape
maintenance
WASTE MANAGEMENT OF TUCSON dated August 4, 1995 for waste disposal
WEB SERVICE COMPANY, INC. dated July 30, 1990 for commercial clothes
washers and dryers lease
5. PINE SHADOWS
APARTMENTS FOR RENT dated February 23, 1996 for advertising agreement
ARIZONA TOWING dated June 1, 1994 for vehicle towing service
ARIZONA COIN TELEPHONE, INC. dated June 30, 1994 for coin telephones
BURNS PEST ELIMINATION dated May 10, 1996 for pest elimination
DANKA INDUSTRIES, INC. dated May 13, 1995 for copier maintenance
AUTOMATIC LAUNDRY COMPANY, LTD. dated July 19, 1994 commercial clothes
washers and dryers lease
W & O SERVICES, INC. June 6, 1994 for landscape maintenance
WACKENHUT dated February 1, 1995 for standard guard services
- 2 -
<PAGE> 82
SCHEDULE VI
Property Condition
INTERNALLY PREPARED PROPERTY CONDITION REPORT
FOR EACH INITIAL PROPERTY
1. HIDDEN LAKES
Please refer to "Physical Inspection Summary" in the Board of Directors
Submission Consent for Acquisition, dated October 3, 1996.
2. THE WOODLANDS
Please refer to "Physical Inspection Summary" in the Board of Directors
Submission Consent for Acquisition, dated October 3, 1996.
3. HEATHER RIDGE
Please refer to "Physical Inspection Summary" in the Board of Directors
Submission Consent for Acquisition, dated August 29, 1996.
4. ORANGEWOOD
Please refer to "Physical Inspection Summary" in the Board of Directors
Submission Consent for Acquisition, dated April 12, 1996.
5. PINE SHADOWS
Please refer to "Physical Inspection Summary" in the Board of Directors
Submission Consent for Acquisition, dated August 29, 1996
<PAGE> 83
SCHEDULE VII
List of Environmental Reports For Each Initial Property
1. Woodlands: That certain Phase I Environmental Site Assessment of Woodlands
Apartments, 4714 N.Habana Avenue, Tampa Florida, 33614, dated October 1996, and
prepared by Adams Consulting Engineers, Inc. (Project No. 96-159).
2. Hidden Lake: That certain Phase I Environmental Site Assessment of Hidden
Lake Apartments, 2701 Waters Avenue, Tampa, Florida, 33614, dated October 1996,
and prepared by Adams Consulting Engineers, Inc. (Project No. 96-160).
3. Pine Shadows: That certain Phase I Environmental Site Assessment of Pine
Shadows Apartments, 4839 South Darrow Drive, Tempe, Arizona, 85282, dated
August 1996, and prepared by Adams Consulting Engineers, Inc. (Project No.
96-162).
4. Orangewood: That certain Phase I Environmental Site Assessment of
Orangewood Apartments, 444 W. Orange Grove Road, Tucson, Arizona, 85074, dated
April 1996, and prepared by Adams Consulting Engineers, Inc. (Project No.
96-064).
5. Heather Ridge: That certain Phase I Environmental Site Assessment of
Heather Ridge Apartments, 4707 East McDowell Road, Phoenix, Arizona, 85008,
dated August 1996, and prepared by Adams Consulting Engineers, Inc. (Project
No. 96-161).
<PAGE> 84
SCHEDULE VIII
Defaults
1. Default under Bank One, Arizona, N.A., Revolving Line of Credit Agreement
dated June 26, 1996 resulting from failure to maintain (a) interest coverage
ratio of 2.50 to 1.00, (b) debt service coverage ratio of 2.00 to 1.00, and (c)
liabilities to gross asset value ratio of .7 to 1.00. Proceeds from the
initial funding of the Nomura Loan will be used to repay in full and cancel the
Bank One, Arizona, N.A. loan.
- 2 -
<PAGE> 85
EXHIBIT A
[Form of Promissory Note]
<PAGE> 86
EXHIBIT B
[Form of Borrowing Notice]
NOTICE OF BORROWING
_______________, 1997
Nomura Asset Capital Corporation
311 South Wacker Drive
61st Floor
Chicago, Illinois 60606
Attention: David M. Murdoch, Jr.
Ladies and Gentlemen:
We refer to the Note Agreement dated as of June 22, 1997 (as amended or
otherwise modified from time to time, the "Note Agreement"), between the
undersigned (the "Borrower") and Nomura Asset Capital Corporation.
Capitalized terms used herein but not defined herein are used herein with
the same meanings as are ascribed to them in the Note Agreement.
The Borrower hereby gives the Lender notice pursuant to Section 4.05 of
the Note Agreement that the Borrower requests a Mortgage Loan under the Note
Agreement and, in that connection, sets forth below the information relating to
such proposed borrowing (the "Proposed Borrowing") as required by Section 4.05
of the Note Agreement.
(i) The aggregate principal amount of the Mortgage Loan is
$_______________, which, together with the aggregate principal amount of the
other Mortgage Loans outstanding ($_________) will not exceed the Available
Amount.
(ii) The Business Day of the Proposed Borrowing is ___________, 1997.
(iii) The Debt Service Ratio on the date hereof is ____________.
(iv) The Debt Service Ratio on the date immediately following the
Proposed Borrowing will be __________.
The undersigned hereby certifies that it shall pay reasonably necessary
transaction costs incurred in connection with the Proposed Borrowing.
The undersigned hereby certifies to the Lender that to the
<PAGE> 87
best of [his/her] knowledge after due inquiry as of the date set forth above
(i) no Default has occurred and is continuing, (ii) each representation and
warranty of the Borrower in Section 7 of the Note Agreement and in the other
Basic Documents and of each Guarantor in Section 3 of each Guarantee Agreement
and in the other Basic Documents and of Ambassador in Section 2 of the REIT
Agreement is true and correct in all material respects on and as of the date
set forth above as though made on as of such date; (iii) after giving effect to
the Proposed Borrowing (1) each of the Debt Service Ratio, the LP Debt Service
Ratio and the Ambassador Debt Service Ratio shall not be less than 1.40 to
1.00, and (2) the Total Market Value of all outstanding shares of common stock
of Ambassador plus all outstanding Common Units of Ambassador L.P. (other than
Common Units held by Ambassador) shall not be less than $75,000,000, and (iv)
the undersigned is the duly elected, qualified and acting __________________ of
the General Partner, and as such, is authorized to execute this Notice on its
behalf.
Very truly yours,
AMBASSADOR II, L.P.
By: Ambassador II, Inc.,
its General Partner
By: __________________
Name:
Title:
<PAGE> 88
EXHIBIT C
FORM OF RESIDENTIAL LEASES FOR INITIAL PROPERTIES
[to be attached]
<PAGE> 1
EXHIBIT 10.68
Nomura Asset Capital Corporation
2 World Financial Center
Building B
New York, New York 10281
As of June 26, 1997
Ambassador II, L.P.
c/o Ambassador Apartments, Inc.
77 West Wacker Drive
Suite 4040
Chicago, Illinois 60601
Gentlemen:
Reference is made to that certain Note Agreement dated as of June 22, 1997
(the "Note Agreement") between Nomura Asset Capital Corporation (the "Lender")
and Ambassador II, L.P. (the "Borrower"). Any capitalized term not defined
herein shall have the meaning assigned to such term in the Note Agreement.
The Lender and the Borrower hereby agree to amend the Note Agreement as
follows:
Section 1. Notwithstanding any terms, requirements or conditions contained
in the Note Agreement to the contrary, the Lender shall make a Mortgage Loan in
the principal amount of $20,703,000 to the Borrower on June 27, 1997 (the "June
27th Mortgage Loan"), provided that the Lender receives the following on or
before June 27, 1997:
(a) a facsimile counterpart of this letter agreement executed
by the Borrower;
(b) a facsimile copy of the executed deeds (the "Deeds")
transferring to the Borrower fee title to the following properties (i) the
Cedar Creek Property and (ii) Park Colony Apartments, Gwinett County, Georgia
(collectively, the "June Additional Properties");
(c) a facsimile copy of the executed letter of instructions to
the Borrower's title company (the "Title Company"), irrevocably authorizing the
Title Company to record the Deeds upon receipt of the proceeds from the June
27th Mortgage Loan, along with a copy of the Borrower's marked commitment for
an owner's policy for each June Additional Property, signed by the Title
Company and showing no mortgages or monetary liens on the June Additional
Properties;
(d) a nonrefundable structuring fee in an amount equal to
$103,000; and
<PAGE> 2
(e) wire instructions for the Title Company.
Provided the Borrower satisfies its obligations in Section 2 (taking into
account the grace periods set forth therein), to the extent the making of the
June 27th Mortgage Loan results in a violation or breach of any express term,
condition or requirement of the Note Agreement, such violation or breach shall
not constitute a default or Event of Default under the Note Agreement. The
Lender shall not be obligated to make any additional Mortgage Loans to the
Borrower until such time as the Borrower has complied with its obligations
under Section 2.
Section 2. (a) The Borrower shall repay the June 27th Mortgage Loan and
all interest accrued thereon through the date of prepayment (plus all amounts
due under Section 5.04 of the Note Agreement other than interest), in Dollars,
in immediately available funds, without deduction, set-off or counterclaim, to
the Lender at the Principal Office, not later than 2:00 p.m. New York time on
July 2, 1997.
(b) In the event the Borrower defaults in its obligation to
repay the June 27th Mortgage Loan in accordance with Section 2(a), such
default shall not constitute an Event of Default under the Note Agreement
unless:
(i) the Borrower fails to repay in full on or before
July 10, 1997 the June 27th Mortgage Loan, together with all interest accrued
thereon through such date (and all amounts due under Section 5.04 of the Note
Agreement other than interest); or
(ii) (A) the Borrower fails to deliver to the Lender on or
before July 8, 1997 all Approval Documents for Additional Properties
(including, but not limited to, the June Additional Properties), all in form
and substance satisfactory to the Lender, (B) the Borrower fails to satisfy
(in the Lender's reasonable discretion) on or before July 10, 1997 all
Additional Collateral Conditions relating to such Additional Properties, and
(iii) if, as of July 10, 1997, after giving effect to the Collateral Property
(including the Additional Properties), the aggregate outstanding principal
amount of the Mortgage Loans (including the June 27th Mortgage Loan) exceeds
the Available Amount and the Borrower fails to prepay to the Lender on July 10,
1997 the amount of such excess, together with interest accrued thereon to such
date (and all amounts payable in respect of such prepayment pursuant to
Section 5.04 other than interest).
(c) Provided no Event of Default has occurred and is
continuing, all payments of principal made under this Section 2 shall be
applied first, to repay in full the June 27th Mortgage Loan, and then, to
repay any other outstanding Mortgage Loan, in full or in part. Provided no
Event of Default
2
<PAGE> 3
has occurred and is continuing, all payments of principal made under this
Section 2 (whether applied to the June 27th Mortgage Loan or to any other
Mortgage Loan, in full or in part) shall be made without the imposition of the
101% prepayment requirement set forth in Section 2.06(2) of the Note Agreement.
Section 3. Except to the extent modified hereby, the Note Agreement, the
Note and all other documents executed in connection therewith remain unchanged
and in full force and effect.
Section 4. This letter agreement may be executed in counterparts,
including counterpart facsimile copies thereof, all of which when taken
together shall constitute one and the same letter agreement. The Lender and
the Borrower intend that a facsimile copy and signature shall have the same
effect as an original.
3
<PAGE> 4
IN WITNESS WHEREOF, the Lender and the Borrower have caused this letter
agreement to be executed as of the 26th day of June, 1997.
NOMURA ASSET CAPITAL CORPORATION
By: _________________________
John Burke
Vice President
AMBASSADOR II, L.P., a Delaware limited
partnership
By: Ambassador II, Inc., a Delaware
corporation, its general partner
By: _________________________
Adam D. Peterson
Executive Vice President
[Signatures continued on next page]
4
<PAGE> 5
By their respective signatures below, the undersigned hereby ratify and
affirm all of their respective obligations under the LP Guarantee Agreement,
the GP Guarantee Agreement, the REIT Agreement and the Environmental Indemnity
Agreement.
AMBASSADOR II, L.P., a Delaware limited
partnership
By: Ambassador II, Inc., a Delaware
corporation, its general partner
By: _________________________
Adam D. Peterson
Executive Vice President
AMBASSADOR APARTMENTS, L.P., a Delaware
limited partnership
By: Ambassador Apartments, Inc., a
Maryland corporation, its general
partner
By: _________________________
Adam D. Peterson
Executive Vice President
AMBASSADOR II, INC., a Delaware corporation
By: _________________________
Adam D. Peterson
Executive Vice President
AMBASSADOR APARTMENTS, INC., a Maryland
corporation
By: _________________________
Adam D. Peterson
Executive Vice President
5
<PAGE> 1
EXHIBIT 10.69
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April
, 1997, between Ambassador Apartments, Inc., a Maryland corporation
("Employer") and the sole general Partner of Ambassador Apartments, L.P., a
Delaware limited partnership (the "Operating Partnership" and, together with
Employer and its other subsidiaries, the "Company"), and David M. Glickman, an
individual domiciled in the State of Illinois ("Executive").
RECITALS
A. The Company is engaged primarily in the acquisition, development,
construction, renovation, leasing, ownership and management of multifamily
apartment properties throughout the United States.
B. Employer believes that it would benefit from the application of
Executive's particular and unique skill, experience and background to the
management and operation of the Company.
C. Employer considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of Employer and its stockholders. Accordingly, the Board of Directors of
Employer has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including Executive, to their assigned duties without distraction.
In order to induce Executive to remain in the employ of Employer, among other
things, this Agreement sets forth certain benefits Executive shall receive in
the event there is a change of control of Employer under the circumstances
described herein.
D. Executive wishes to commit himself to serve Employer in the position
set forth herein on the terms herein provided.
E. The parties wish by this Agreement to set forth the terms and
conditions of the employment relationship between Employer and Executive.
Employer and Executive hereby agree as follows:
1. EMPLOYMENT AND DUTIES. During the Employment Term (as defined in
Section 2), Employer agrees to employ Executive, and Executive agrees to be
employed by Employer, as Chief Executive
<PAGE> 2
Officer of Employer on the terms and conditions provided in this Agreement.
Executive shall conduct, operate, manage and promote the business of the
Company, and exercise such other powers and authority as are customarily
inherent in a similar position in a comparable publicly-held entity or as
provided by the By-laws of Employer (the "By-laws"). The Board of Directors of
Employer (the "Board") may from time to time further define and clarify
Executive's duties and services hereunder or under the By-laws in a manner
consistent with the scope of work set forth herein. Executive agrees to devote
his best efforts and substantially all of his business time, attention, energy
and skill to performing his duties to Employer under this Agreement. Employer
also agrees during the Employment Term to nominate Executive as a director of
Employer.
2. TERM. Unless terminated earlier pursuant to the provisions of Section
5, the initial term of this Agreement (the "Initial Term") shall commence on
January 1, 1997 and expire on December 31, 1999 (the "Scheduled Termination
Date"), provided, however, that this Agreement shall extend automatically for
one-year terms following the Initial Term (each a "Renewal Term" and, together
with the Initial Term, the "Employment Term"), unless either party shall give
the other party, prior to 180 days before the end of the Initial Term or
respective Renewal Term, written notice of its intention to terminate the
Employment Term.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. As compensation for performing the services required by
this Agreement, and during the Employment Term, Employer shall pay to Executive
a salary at a rate of no less than $250,000 per year in the first year of the
Employment Term, $275,000 in the second year, $302,500 in the third year and an
amount equal to 110% of the prior year minimum amount in each year thereafter
("Base Compensation"), payable in accordance with the general policies and
procedures for payment of salaries to its executive personnel implemented by
Employer (but no less frequently than monthly), subject to withholding for
applicable federal, state and local taxes. Increases in Base Compensation
above that provided for in this Section 3(a), if any, shall be determined by
the Board or the Compensation and Benefits Committee of the Board or such other
committee of the Board then performing such function (the "Committee") based on
periodic reviews of Executive's performance conducted on at least an annual
basis.
(b) BONUS. In addition to Base Compensation, the Board or the Committee,
as applicable, in its sole and absolute discretion
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<PAGE> 3
may, but shall in no event be obligated to, authorize the payment of a bonus to
Executive, payable in cash or shares of Common Stock of Employer ("Common
Stock"), based upon achievement of corporate and individual performance
objectives established by the Board or the Committee, as applicable.
(c) BENEFITS. During the Employment Term and subject to the limitations
and alternative rights set forth in this Section 3(c), Executive and his
eligible dependents shall have the right to participate in any retirement,
pension, insurance, health or other benefit plan or program that has been or is
hereafter adopted by Employer (or in which Employer participates) according to
the terms of such plan or program with all the benefits, rights and privileges
as are enjoyed by any other senior executive officer of Employer. If the
participation of Executive would adversely affect the qualification of a plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as the same may be amended from time to time (the "Code"), Employer shall
have the right to exclude Executive from that plan in return for his
participation in (i) a nonqualified deferred compensation plan or (ii) an
arrangement providing substantially comparable benefits under a plan that is
either a qualified or nonqualified plan under the Code, at Employer's option.
(d) VACATION AND LEAVES OF ABSENCE. Executive shall be entitled to four
weeks of paid vacation leave during each 12-month period and paid holidays in
accordance with Employer's established policies. In addition to the foregoing,
Executive may be granted leaves of absence with or without pay as shall be
mutually agreed upon by the Board and Executive.
(e) EXPENSES. Executive shall be reimbursed, subject to the Company's
receipt of invoices or similar records as the Company may reasonably request in
accordance with its policies and procedures, for all reasonable and necessary
expenses incurred by Executive in the performance of his duties hereunder.
(f) OPTIONS. During the Employment Term, Executive shall have the right
to participate in Employer's 1994 Stock Incentive Plan, 1996 Stock Incentive
Plan, 1997 Long Term Incentive Plan and any similar plan adopted by Employer;
provided, however, all grants of stock options with respect to such plans, and
the terms of such options, shall be in the sole and absolute discretion of the
Board or the Committee, as applicable. Notwithstanding the foregoing, the
vesting of the 170,000 options to purchase Common Stock held by Executive as of
the date of this Agreement shall be accelerated so that such options shall be
fully vested and exercisable as of the date of this Agreement.
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<PAGE> 4
4. CHANGE OF CONTROL COMPENSATION. On only one occasion, in the event of
a Change of Control of Employer during the Employment Term or within 6 months
after a termination of the Employment Term by Employer pursuant to Sections
5(a)(i) or 5(a)(iii) in contemplation of such Change of Control or by Executive
pursuant to Section 5(b)(i), Employer shall pay to Executive, within 30 days
after the date of such Change of Control, in one lump sum, subject to
withholding for applicable federal, state and local taxes, an amount equal to
the lesser of (a) $2,595,000 and (b) 2.99 times Executive's "base amount" (as
such term is used in Code Section 280G) ("Change of Control Compensation");
provided, however, that in the event that tax is imposed on Executive under
Code Section 4999 that would not have been imposed had Executive not received
the Change of Control Compensation, the amount of the Change of Control
Compensation shall be increased such that the actual net after-tax amount,
taking into account such increase and the federal and state income tax and the
tax imposed by Code Section 4999 on such increase, equals the hypothetical net
after-tax amount that Executive would have received if the Change of Control
Compensation was not increased and no tax was imposed by Code Section 4999 as a
result of the Change of Control Compensation.
For purposes of this Agreement, a "Change of Control" shall be deemed to
have occurred if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
(i) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company, (ii) a corporation owned directly or indirectly by the
stockholders of Employer in substantially the same proportions as their
ownership of stock of Employer, or controlled directly or indirectly by the
stockholders of Employer, or (iii) David M. Glickman or any of his affiliates
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Employer representing 50% or
more of the total voting power represented by Employer's then outstanding
securities which vote generally in the election of directors (referred to
herein as "Voting Securities"); or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by Employer's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board; or
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<PAGE> 5
(c) the stockholders of Employer approve a merger or consolidation of
Employer with any other corporation, other than a merger or consolidation which
would result in the Voting Securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 50% of the
total voting power represented by the Voting Securities of Employer or such
surviving entity outstanding immediately after such merger or consolidation,
and such transaction is consummated; or
(d) the stockholders of Employer approve a plan of complete liquidation of
Employer or an agreement for the sale, assignment, conveyance, transfer, lease
or other disposition by Employer of (in one transaction or a series of
transactions) all or substantially all of Employer's assets, and such
transaction is consummated.
5. TERMINATION AND TERMINATION BENEFITS.
(a) TERMINATION BY EMPLOYER. (i) WITHOUT CAUSE. Employer may terminate
the Employment Term and Executive's employment at any time for any reason or
for no reason at all upon two weeks' prior written notice to Executive.
Employer may elect to require Executive to continue his employment under this
Agreement for a period up to 60 days. In connection with the termination of
Executive's employment pursuant to this Section 5(a)(i), Executive shall (A) be
paid his Base Compensation and any bonus otherwise payable to him in accordance
with Sections 3(a) and 3(b) and be entitled to the benefits set forth in
Sections 3(c), 3(d) and 3(e) up to the effective date of such termination and
(B) receive the Termination Compensation specified in Section 5(d).
(ii) WITH CAUSE. Employer may terminate the Employment Term with Cause
immediately with written notice to Executive. Employer may elect to require
Executive to continue to perform his duties under this Agreement for a period
up to 30 days following notice of termination. In connection with the
termination of Executive's employment pursuant to this Section 5(a)(ii),
Executive shall (A) be paid his Base Compensation up to the effective date of
such termination, (B) forfeit his entitlement to any bonus otherwise payable to
him in accordance with Section 3(b) and (C) be entitled to the benefits set
forth in Sections 3(c), 3(d) and 3(e) up to the effective date of such
termination. For purposes of this Agreement, "Cause" shall mean a finding by
the Board:
(1) that Executive has materially harmed
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<PAGE> 6
Employer or the Operating Partnership through an act of dishonesty
or material conflict of interest which relates to the performance
of Executive's duties hereunder,
(2) that Executive was convicted of a felony, or
(3) that Executive failed to perform in any material
respect the duties required by this Agreement (other than a failure due to
disability) after written notice specifying the failure and a
reasonable opportunity to cure (it being understood that if
Executive's failure to perform is not of a type requiring a single
action to fully cure, then Executive may commence the cure
promptly after such written notice and thereafter diligently
prosecute such cure to completion).
(iii) DISABILITY. If due to illness, physical or mental
disability, or other incapacity, Executive shall fail during any four
consecutive months to perform in any material respect the duties required by
this Agreement, Employer may terminate the Employment Term upon 30 days'
written notice to Executive. In connection with the termination of Executive's
employment pursuant to this Section 5(a)(iii), Executive shall (A) continue to
receive his Base Compensation payable to him in accordance with Section 3(a)
and be entitled to the benefits set forth in Sections 3(c) (or the after-tax
cash equivalent thereof), 3(d) and 3(e) up to the effective date of such
termination, (B) be paid any bonus otherwise payable to him in accordance with
Section 3(b) and (C) receive the Termination Compensation specified in
Section 5(d). This Section 5(a)(iii) shall not limit the entitlement of
Executive, his estate or beneficiaries to any disability or other benefits
available to Executive under any disability insurance or other benefits plan
or policy which is maintained by Employer for Executive's benefit.
(b) TERMINATION BY EXECUTIVE. (i) WITH GOOD REASON. Executive may
terminate this Agreement with Good Reason upon written notice to Employer. At
the election of Employer, Executive shall continue his employment under this
Agreement for a period up to 30 days following notice of termination. In
connection with the termination of Executive's employment pursuant to this
Section 5(b)(i), Executive shall (A) be paid his Base Compensation and any
bonus otherwise payable to him in accordance with Sections 3(a) and 3(b) and be
entitled to the benefits set forth in Sections 3(c), 3(d) and 3(e) up to the
- 6 -
<PAGE> 7
effective date of such termination and (B) receive the Termination Compensation
specified in Section 5(d).
For purposes of this Agreement, "Good Reason" shall mean (x) the material
breach by Employer of its obligations hereunder and the failure of Employer to
cure such breach within 30 days after receipt by Employer of a written notice
from Executive specifying in reasonable detail the nature of the breach or (y)
any material diminution in the scope of Executive's responsibilities and
duties.
(ii) WITHOUT GOOD REASON. Executive may terminate the
Employment Term at any time for any reason or for no reason at all upon
60 days' written notice to Employer, during which period Executive shall
continue to perform his duties under this Agreement if Employer so elects,
provided, however, that, by written notice to Executive, Employer shall have
the right to accelerate the effective date of such termination to any date
following Executive's notice of termination (including the day on which such
notice is given). In connection with the termination of Executive's employment
pursuant to this Section 5(b)(ii), Executive shall be paid his Base
Compensation and any bonus otherwise payable to him in accordance with
Sections 3(a) and 3(b) and be entitled to the benefits set forth in
Sections 3(c), 3(d) and 3(e) up to the effective date of termination.
(c) DEATH. Notwithstanding any other provision of this Agreement, the
Employment Term shall terminate on the date of Executive's death. In
connection with the termination of Executive's employment pursuant to this
Section 5(c), Executive shall be paid his Base Compensation and any bonus
otherwise payable to Executive by reason of Executive's performance up to the
date of Executive's death in accordance with Sections 3(a) and 3(b). This
Section 5(c) shall not limit the entitlement of Executive under any insurance
or other benefits plan or policy which is maintained by Employer for
Executive's benefit.
(d) TERMINATION COMPENSATION. In the event of a termination of the
Employment Term pursuant to Section 5(a)(i), 5(a)(iii) or 5(b)(i), Employer
shall pay to Executive, within 30 days of termination, in one lump sum, subject
to withholding for applicable federal, state and local taxes, an amount equal
to the greater of (i) 50% of Executive's annual Base Compensation as of the
effective date of termination or (ii) 50% of the product of (A) Executive's
annual Base Compensation as of the effective date of termination times (B) a
fraction, the numerator of which is the number of days between such date of
termination and expiration of the Employment Term and the denominator of which
is 365 ("Termination Compensation"); provided, however, if there
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<PAGE> 8
shall have been a Change of Control such that Executive has received or within
the six-month plus 30-day period after the date of such termination receives
the Change of Control Compensation provided for in Section 4, then the amount
of the Termination Compensation shall be zero.
6. COVENANTS OF EXECUTIVE.
(a) NO CONFLICTS. Executive represents and warrants that he is not
personally subject to any agreement, order or decree which restricts his
entering into this Agreement and performing his duties with Employer hereunder.
(b) RESTRICTIVE COVENANT; CONSULTING SERVICES. (i) During the Employment
Term and, except for serving solely as a director of a corporation with no
other material interest therein, for a period of one year following the
termination of the Employment Term (the Employment Term and such one-year
period are referred to together as the "Restrictive Period"), except for
Passive Investments and except for investments held as of the date hereof and
identified on Exhibit A, Executive shall not engage in, directly or indirectly,
or be interested in (as owner, partner, shareholder, employee, director,
officer, agent, consultant or otherwise), with or without compensation, the
acquisition, development, construction, renovation, leasing, ownership or
management of multifamily apartment properties in the Territory.
(ii) For a period of one year following the termination of the
Employment Term, Executive hereby agrees to consult with the Board and
management of Employer and its subsidiaries in such manner and on such
business and financial matters as may be reasonably requested from time to
time by the Board, including but not limited to corporate strategy, budgeting
and future investments, acquisitions and dispositions and strategies therefor,
and debt and equity financings; provided, however, in no event shall Executive
be required to provide more than 20 hours of such services in any month.
(iii) As compensation for the restrictions after the Employment
Term contained in Section 6(b)(i) and the services to be performed pursuant to
Section 6(b)(ii), Employer shall pay to Executive, within 30 days of
termination, in one lump sum, subject to withholding for applicable federal,
state and local taxes, an amount equal to $900,000.
(iv) In the event of a termination of the Employment pursuant
to Section 5(a)(ii), Employer may, in its sole and absolute discretion, with
notice to Executive within 15 days after the date of such termination, elect
to waive the
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<PAGE> 9
restrictions contained in Section 6(b)(i) and its right to receive the services
set forth in Section 6(b)(ii), and in such event Employer shall be relieved of
its obligations to make the payment set forth in Section 6(b)(iii).
(v) For purposes of this Agreement,
(A) a "Passive Investment" is an investment where
(1) Executive beneficially holds an equity interest in
such investment which is no greater than 5% of all
equity interests in such entity or venture, whether or
not such entity or venture is subject to the reporting
requirements of the Exchange Act and (2) Executive's
return is based in all material aspects upon the money
or other assets invested and as to which no services
are provided;
(B) a "Principal Market" is a geographic market area
in which the Company, directly or indirectly through
the Operating Partnership or any of their respective
subsidiaries or affiliates (collectively, the "Group"),
during the Employment Term and, for purposes of the
Restrictive Period following the termination of the
Employment Term, on the last day of the Employment
Term, owns or manages more than 1,000 apartment units;
and
(C) "Territory" means (1) during the Employment Term, anywhere in
the United States of America, and (2) during the Restrictive Period
following the termination of the Employment Term, the Principal
Markets.
(c) NO SOLICITATION. During the Restrictive Period, Executive shall not,
directly or indirectly, solicit or contact any employee of any member of the
Group with a view to inducing or encouraging such employee to leave the employ
of the Company or such other person for the purpose of being hired by
Executive, an employer affiliated with Executive or any competitor of any
member of the Group.
(d) NON-DISCLOSURE. Executive shall not disclose or use, during the
Restrictive Period or any time thereafter, except in the pursuit of the
business for or on behalf of the Group, any Trade Secret of the Group, whether
such Trade Secret is in Executive's memory or embodied in writing or other
physical form.
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<PAGE> 10
For purposes of this Agreement, "Trade Secret" means any information which
derives independent economic value, actual or potential, with respect to the
Group from not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its
disclosure or use and is the subject of efforts to maintain its secrecy that
are reasonable under the circumstances, including, but not limited to, trade
secrets, tenant lists and other proprietary commercial information. However,
the term "Trade Secrets" shall not include general "know-how" information
acquired by Executive during the course of his employment which could have been
obtained by him from public sources without the expenditure of significant
time, effort and expense which does not relate to the Group.
(e) RETURN OF DOCUMENTS. Upon termination of employment, Executive shall
return all originals and copies of books, records, documents, customer lists,
sales materials, tapes, keys, credit cards and other property of the Company
within Executive's possession or under his control, but specifically excluding
personal effects of Executive such as his personal rolodex, diary and files,
whether in written or electronic form, including computer files.
(f) ACKNOWLEDGMENT. Executive acknowledges that he will be directly and
materially involved as a senior executive officer in all important policy and
operational decisions of Employer and other members of the Group. Executive
further acknowledges that the scope of the foregoing restrictions has been
specifically bargained between Employer and Executive, each being fully
informed of all relevant facts. Accordingly, Executive acknowledges that the
foregoing restrictions of this Section 6 are fair and reasonable, are the
minimum necessary to protect Employer, other members of the Group, the
stockholders of Employer and the public from the unfair actions, direct or
indirect, of Executive who, as a result of his employment with Employer, will
have had unlimited access to the most confidential and important information of
Employer, other members of the Group, and the business and future plans of the
Group.
7. PRIOR AGREEMENT. This Agreement supersedes and is in lieu of any and
all other employment arrangements between Executive and Employer or its
predecessor or any subsidiary and any and all such employment agreements and
arrangements are hereby terminated and deemed of no further force or effect.
8. ASSIGNMENT. Neither this Agreement nor any rights or duties of
Executive hereunder shall be assignable by Executive and any such purported
assignment by him shall be void. Employer may assign all or any of its rights
hereunder to any member of
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<PAGE> 11
the Group, and to any other person provided that substantially all of the
assets of the Company are also transferred to such other person.
9. SUCCESSOR TO EMPLOYER. Employer will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all the business or assets of Employer, as the case may
be, expressly, absolutely and unconditionally to assume and agree to perform
this Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession or assignment had taken place.
Any failure of Employer to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement.
This Agreement shall inure to the benefit of and be enforceable by Executive's
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Executive should die while any
amounts are still payable to Executive hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee or, if there be no
such designee, to Executive's estate.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally, by overnight courier service, or by facsimile
transmission, in any case with receipt acknowledged, or three days after being
sent by registered or certified mail, return receipt requested, postage
prepaid, to the following addresses (or to any other address that any party may
designate by notice to the other parties hereto):
(a) if to Executive, to:
David M. Glickman
c/o Ambassador Apartments, Inc.
77 West Wacker Drive, Suite 4040
Chicago, IL 60601
Telephone: (312) 917-1600
Facsimile: (312) 917-9910
With a copy to:
--------------
Eastman & Eastman
39 West 54th Street
New York, NY 10019
Attention: John L. Eastman
Telephone: (212) 246-9812
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<PAGE> 12
Facsimile: (212) 977-8408
(b) if to Employer, to:
Ambassador Apartments, Inc.
77 West Wacker Drive, Suite 4040
Chicago, IL 60601
Attention: President
Telephone: (312) 917-1600
Facsimile: (312) 917-9910
With a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Robert S. Osborne, P.C.
Telephone: (312) 861-2368
Facsimile: (312) 861-2200
11. AMENDMENT. This Agreement may not be changed, modified or amended
except in writing signed by both parties hereto.
12. WAIVER OF BREACH. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by either party.
13. SEVERABILITY. Employer and Executive each expressly agree and
contract that it is not the intention of either party to violate any public
policy, statutory or common law, and that if any sentence, paragraph, clause or
combination of the same of this Agreement is in violation of the law of any
state where applicable, such sentence, paragraph, clause or combination of the
same shall be void in the jurisdictions where it is unlawful, and the remainder
of this Agreement shall remain binding on the parties to make the covenants of
this Agreement binding only to the extent that it may be lawfully done under
the existing applicable laws. In the event that any part of any covenant of
this Agreement is determined by a court of competent jurisdiction to be overly
broad thereby making the covenant unenforceable, the parties hereto agree, and
it is their desire that such court shall substitute a judicially enforceable
limitation in its place, and that as so modified the covenant shall be binding
upon the parties as if originally set forth herein.
14. OPPORTUNITY TO EMPLOY COUNSEL. Executive acknowledges receipt of a
copy of this Agreement prior to its execution by him and also acknowledges that
he has had ample time and opportunity to employ counsel of his choice to
provide advice concerning the
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<PAGE> 13
terms and conditions of this Agreement and Executive's prospective employment
with Employer.
15. EQUITABLE RELIEF; LIMITATIONS ON RELIEF. In the event of any breach
by either party of any of the covenants contained in this Agreement, including,
without limitation, any covenant contained in Section 6 other than Section 6(b)
as described below, it is specifically understood and agreed that the other
party shall be entitled, in addition to any other remedy which it may have, to
equitable relief by way of injunction, an accounting or otherwise and, in the
case of Employer, to notify any employer or prospective employer of Executive
as to the terms and conditions hereof. Notwithstanding any other provision of
this Agreement to the contrary, in the event that Executive breaches the
restrictions after the Employment Term contained in Section 6(b)(i) or fails to
perform the services required by Section 6(b)(ii), Employer's sole and only
remedy therefor shall be to receive from Executive liquidated damages in, and,
within 30 days of notice from Employer to Executive of such breach or failure,
Executive shall pay to Employer, an amount equal to (x) $75,000 times (y) the
number of months remaining in the one-year period following the termination of
the Employment Term as of the date of such breach or failure, including the
month in which such breach or failure occurred.
16. INDEMNIFICATION.
(a) INDEMNIFICATION BY EMPLOYER. To the extent permitted by applicable
law, Employer shall indemnify Executive as provided in its Articles of
Incorporation and Bylaws as of the date of this Agreement.
(b) INDEMNIFICATION BY EXECUTIVE. Executive shall indemnify the Company
for any and all damages, costs and expenses resulting from any of his acts or
omissions that cause harm to the Company, its business or its reputation if and
to the extent that Employer is not required to indemnify Executive therefor
pursuant to Section 16(a).
17. GOVERNING LAW. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Illinois,
exclusive of the conflict of laws provisions of the State of Illinois.
18. NOTICE OF FUTURE EMPLOYMENT. Executive agrees that during the
Restrictive Period, Employee will within 14 days of each instance of new
employment, notify Employer in writing of the identify of his new employer and
the job title associated
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<PAGE> 14
with such employment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
AMBASSADOR APARTMENTS, INC.
By: _________________________
Name:
Title:
______________________________
David M. Glickman
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<PAGE> 15
EXHIBIT A
to
EMPLOYMENT AGREEMENT
<PAGE> 1
EXHIBIT 10.70
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April
7, 1997, between Ambassador Apartments, Inc., a Maryland corporation
("Employer") and the sole general Partner of Ambassador Apartments, L.P., a
Delaware limited partnership (the "Operating Partnership" and, together with
Employer and its other subsidiaries, the "Company"), and Debra A. Cafaro, an
individual domiciled in the State of Illinois ("Executive").
RECITALS
A. The Company is engaged primarily in the acquisition, development,
construction, renovation, leasing, ownership and management of multifamily
apartment properties throughout the United States.
B. Employer believes that it would benefit from the application of
Executive's particular and unique skill, experience and background to the
management and operation of the Company.
C. Employer considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of Employer and its stockholders. Accordingly, the Board of Directors of
Employer has determined that appropriate steps should be taken to reinforce and
encourage the attention and dedication of members of the Company's management,
including Executive, to their assigned duties without distraction. In order to
induce Executive to enter the employ of Employer, among other things, this
Agreement sets forth certain benefits Executive shall receive in the event
there is a change of control of Employer under the circumstances described
herein.
D. Executive wishes to commit herself to serve Employer in the position
set forth herein on the terms herein provided.
E. The parties wish by this Agreement to set forth the terms and
conditions of the employment relationship between Employer and Executive.
Employer and Executive hereby agree as follows:
1. EMPLOYMENT AND DUTIES. During the Employment Term (as defined in
Section 2), Employer agrees to employ Executive, and Executive agrees to be
employed by Employer, as President of Employer on the terms and conditions
provided in this Agreement.
<PAGE> 2
Executive shall conduct, operate, manage and promote the business of the
Company, and exercise such other powers and authority as are customarily
inherent in a similar position in a comparable publicly-held entity or as
provided by the By-laws of Employer (the "By-laws"). The Board of Directors of
Employer (the "Board") may from time to time further define and clarify
Executive's duties and services hereunder or under the By-laws in a manner
consistent with the office of President and the scope of work set forth herein.
Executive agrees to devote her best efforts and substantially all of her
business time, attention, energy and skill to performing her duties to Employer
under this Agreement. Employer also agrees during the Employment Term to take
all reasonably necessary or desirable actions within its control to cause
Executive to continuously serve as a member of the Board, including, without
limitation, nominating Executive as a director of Employer for purposes of the
periodic election of directors by Employer's stockholders, and including
Executive in such proxy materials, annual reports and other documents in which
directors of Employer are appropriately included, whether for purposes of
election or otherwise. Pending the upcoming annual meeting of stockholders of
Employer, Executive has, as of the date hereof, become a member of the Board
through the appropriate vote of the members of the Board, having been appointed
to fill the vacancy created by the resignation of Richard F. Cavenaugh.
2. TERM. Unless terminated earlier pursuant to the provisions of Section
5, the initial term of this Agreement (the "Initial Term") shall commence on
April 4, 1997 (the "Effective Date") and expire on December 31, 1999 (the
"Scheduled Termination Date"), provided, however, that this Agreement shall
extend automatically for one-year terms following the Initial Term (each a
"Renewal Term" and, together with the Initial Term, the "Employment Term"),
unless either party shall give the other party, prior to 180 days before the
end of the Initial Term or respective Renewal Term, written notice of its
intention to terminate the Employment Term.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. As compensation for performing the services required by
this Agreement, and during the Employment Term, Employer shall pay to Executive
a salary at a rate of no less than $225,000 per year in the period from the
Effective Date until December 31, 1997, $247,500 in the year thereafter (i.e.,
calendar 1998), $272,250 in the year thereafter (i.e., calendar 1999), and in
each year thereafter an amount no less than 110% of the prior year minimum
amount ("Base Compensation"), payable in accordance with the general policies
and procedures for payment of salaries to its executive personnel implemented
by Employer
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<PAGE> 3
(but no less frequently than monthly), subject to withholding for applicable
federal, state and local taxes. Increases in Base Compensation above that
provided for in this Section 3(a), if any, shall be determined by the Board, or
the Compensation and Benefits Committee of the Board or such other committee of
the Board then performing such function (the "Committee") based on periodic
reviews of Executive's performance conducted on at least an annual basis.
(b) BONUS. In addition to Base Compensation, the Board or the Committee,
as applicable, in its sole and absolute discretion may, but shall in no event
be obligated to, authorize the payment of a bonus to Executive, payable in cash
or shares of Common Stock of Employer ("Common Stock"), based upon achievement
of corporate and individual performance objectives established by the Board or
the Committee, as applicable. Notwithstanding the foregoing, provided that
Executive remains employed by Employer through December 31, 1997, for the
period from the Effective Date until December 31, 1997, Executive shall receive
a bonus in an amount not less than 90% of the bonus received by the Chief
Executive Officer of Employer for the year ended December 31, 1997, payable at
the time and in the manner as the bonus for the Chief Executive Officer of
Employer (with no reduction or proration for a partial year).
(c) BENEFITS. During the Employment Term and subject to the limitations
and alternative rights set forth in this Section 3(c), Executive and her
eligible dependents shall have the right to participate in any retirement,
pension, insurance, health or other benefit plan or program that has been or is
hereafter adopted by Employer (or in which Employer participates) according to
the terms of such plan or program with all the benefits, rights and privileges
as are enjoyed by any other senior executive officer of Employer. If the
participation of Executive would adversely affect the qualification of a plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as the same may be amended from time to time (the "Code"), Employer shall
have the right to exclude Executive from that plan or limit Executive's
participation in that plan to the extent required to maintain such
qualification; provided that Executive shall be treated with respect to such
plan no less favorably than the Chief Executive Officer of the Company.
(d) VACATION AND LEAVES OF ABSENCE. Executive shall be entitled to four
weeks of paid vacation leave during each 12-month period and paid holidays in
accordance with Employer's established policies. In addition to the foregoing,
Executive may be granted leaves of absence with or without pay as shall be
mutually agreed upon by the Board and Executive.
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<PAGE> 4
(e) EXPENSES. Executive shall be reimbursed, subject to the Company's
receipt of invoices or similar records as the Company may reasonably request in
accordance with its generally applicable policies and procedures, for all
reasonable and necessary expenses incurred by Executive in the performance of
her duties hereunder.
(f) OPTIONS. During the Employment Term, Executive shall have the right
to participate in Employer's 1994 Stock Incentive Plan, 1996 Stock Incentive
Plan, 1997 Long Term Incentive Plan and any similar plan adopted by Employer;
provided, however, all grants of stock options with respect to such plans, and
the terms of such options, shall be in the sole and absolute discretion of the
Board or the Committee, as applicable. Notwithstanding the foregoing, Employer
shall on the date of this Agreement, but subject to approval of Employer's 1996
Stock Incentive Plan by its stockholders, at its forthcoming annual meeting of
stockholders to be held on May 15, 1997 (which approval is being requested in
Employer's proxy statement with respect to such meeting), grant to Executive
stock options to purchase a number of shares of Common Stock equal to 80,000
minus the number of Common Units purchased by Executive pursuant to Section
3(g), and one-fourth of such options shall vest on each of the dates six
months, twelve months, eighteen months and twenty-four months after the
Effective Date, with all such options vesting and becoming immediately
exercisable upon a Change of Control or the Termination of Employment of
Executive as a result of Executive's death, by Employer for Disability or not
for Cause, or by Executive for Good Reason, and shall have an exercise price
equal to the Fair Market Value (as defined in Employer's 1996 Stock Incentive
Plan of the Common Stock on the date of such grant (i.e., the Effective Date
hereunder, such price being listed on Exhibit B hereto), and a term of 10
years; provided, however, in the event of Executive's Termination of Employment
for Cause, any outstanding options (whether or not vested and exercisable)
shall be forfeited and shall terminate immediately on the date of such
Termination of Employment; and provided further that any outstanding
exercisable options shall be exercisable following the Termination of
Employment of Executive only for a period of 12 months following such
termination if such termination is due to death, Disability or Retirement and
only for a period of 3 months if such termination is for any other reason other
than for Cause (in the case of for Cause, the options are immediately forfeited
and are not exercisable). For purposes of this Section 3(f), the terms Cause,
Change of Control, Disability, Good Reason, Retirement and Termination of
Employment shall have the meanings assigned to such terms in Employer's 1996
Stock Incentive Plan.
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<PAGE> 5
(g) LOAN. The Company shall lend to Executive $700,000 (the "Loan"),
which, together with $100,000 of Executive's own funds, shall be used to
purchase Common Units in the Operating Partnership at a price equal to the
closing price of the Common Stock on the New York Stock Exchange on the date of
such purchase, to be the date hereof, and such price being listed on Exhibit B
hereto. The Loan shall bear interest, payable quarterly, at the applicable
federal rate, have (subject to the next sentence hereof) a maturity date of the
earlier of June 30, 2000, and the date 6 months after the termination of
Executive's employment with the Company, shall be secured by a pledge of all of
the Common Units purchased and shall be non-recourse to Executive's assets
other than the pledged Common Units. Notwithstanding the preceding sentence,
the June 30, 2000, maturity date of the Loan shall not be accelerated by any
termination of the Employment Term pursuant to Sections 5(a)(i), 5(a)(iii),
5(b)(i) (other than pursuant to clause (z) of the definition of Good Reason) or
5(c) of this Agreement. In addition, the accelerated maturity date applicable
to any other termination of the Employment Term (i.e., the date which is 6
months following such termination) shall be extended by the duration of and for
so long as there shall exist any blackout period or other condition not in the
control of Executive which becomes operative during the period following such
termination and which prohibits the conversion of the Common Units pledged in
connection with the Loan into Common Stock, or a delay not in the control of
Executive in registering the Common Stock received upon conversion of such
Common Units for sale, either due to the pendency of a registration blackout or
caused by the unavailability of such a registration statement or a prospectus
as may be necessary for such sale to be effectuated. The intent of the
foregoing extensions of the accelerated maturity date is to afford Executive
the full benefit of a "normal" six-month period following termination of the
Employment Term in which to convert such Common Units and to sell such Common
Stock, so as to be able to repay the Loan.
(h) PARKING. During the Employment Term, Employer shall provide Executive
with parking privileges equal to those provided by Employer to the Chief
Executive Officer of Employer.
(i) SCHEDULE OF EXERCISE AND PURCHASE PRICE. The exercise price for the
options granted hereunder and the purchase price for the Common Units to be
purchased on the date hereof, having been determined as of the date hereof, are
listed on Exhibit B hereto, as are the respective numbers of options and units
granted and to be sold.
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<PAGE> 6
4. CHANGE OF CONTROL COMPENSATION. On only one occasion, in the event of
a Change of Control of Employer during the Employment Term or within 6 months
after a termination of the Employment Term by Employer pursuant to Sections
5(a)(i) or 5(a)(iii) in contemplation of such Change of Control or by Executive
pursuant to Section 5(b)(i), Employer shall pay to Executive, within 30 days
after the date of such Change of Control, in one lump sum, subject to
withholding for applicable federal, state and local taxes, an amount equal to
(a) if the Change of Control occurs before December 31, 1997, $700,000 and (b)
if the Change of Control occurs after December 31, 1997, two times the sum of
Executive's Base Compensation for the prior calendar year and Executive's Bonus
with respect to the prior calendar year, in each case, annualized if the
Employment Term was less than a full year in such year ("Change of Control
Compensation"); provided, however, Executive may, at her election, and only at
her election, (i) extend the otherwise effective duration of the covenants
under Section 6(b) (excluding those relating to the private practice of law) by
up to an additional 24 months, in exchange for a payment to her by Employer of
$24,000 per month with respect to the first 12 months of such extension and
$12,000 per month with respect to the next 12 months of such extension, payable
in the same manner and at the same time as the Change of Control Compensation;
and provided further that Executive agrees to and accepts an offsetting
reduction, on a dollar-for-dollar basis, in the Change of Control Compensation
and in no event shall the aggregate amount of such additional payments exceed
the amount by which the Change of Control Compensation is so reduced or, in the
alternative, (ii) elect to terminate the Employment Term pursuant to Section
5(b)(i), whereby the Termination Compensation payable in respect thereto shall
reduce the Change of Control Compensation on a dollar-for-dollar basis by the
amount of the Termination Compensation received by her. Any such election by
Executive shall be made within thirty days after a Change of Control.
For purposes of this Agreement, a "Change of Control" shall be deemed to
have occurred if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
(i) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company, (ii) a corporation owned directly or indirectly by the
stockholders of Employer in substantially the same proportions as their
ownership of stock of Employer, or controlled directly or indirectly by the
stockholders of Employer, or (iii) David M. Glickman or any of his affiliates
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or
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<PAGE> 7
indirectly, of securities of Employer representing 50% or more of the total
voting power represented by Employer's then outstanding securities which vote
generally in the election of directors (referred to herein as "Voting
Securities"); or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by Employer's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board; or
(c) the stockholders of Employer approve a merger or consolidation of
Employer with any other corporation, other than a merger or consolidation which
would result in the Voting Securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 50% of the
total voting power represented by the Voting Securities of Employer or such
surviving entity outstanding immediately after such merger or consolidation,
and such transaction is consummated; or
(d) the stockholders of Employer approve a plan of complete liquidation of
Employer or an agreement for the sale, assignment, conveyance, transfer, lease
or other disposition by Employer of (in one transaction or a series of
transactions) all or substantially all of Employer's assets, and such
transaction is consummated.
5. TERMINATION AND TERMINATION BENEFITS.
(a) TERMINATION BY EMPLOYER. (i) WITHOUT CAUSE. Employer may terminate
the Employment Term and Executive's employment at any time for any reason or
for no reason at all upon two weeks' prior written notice to Executive.
Employer may elect to require Executive to continue her employment under this
Agreement for a period up to 60 days, subject to the definition of duties set
forth in Section 1. In connection with the termination of Executive's
employment pursuant to this Section 5(a)(i), Executive shall (A) be paid her
Base Compensation and any bonus otherwise payable to her in accordance with
Sections 3(a) and 3(b) and be entitled to the benefits set forth in Sections
3(c), 3(d), 3(e) and 3(h) up to the effective date of such termination and such
other benefits as are required by law and (B) receive the Termination
Compensation specified in Section 5(d).
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<PAGE> 8
(ii) WITH CAUSE. Employer may terminate the Employment Term with
Cause immediately with written notice to Executive. Employer may elect to
require Executive to continue to perform her duties under this Agreement for a
period up to 30 days following notice of termination, subject to the definition
of duties set forth in Section 1. In connection with the termination of
Executive's employment pursuant to this Section 5(a)(ii), Executive shall (A)
be paid her Base Compensation up to the effective date of such termination, (B)
forfeit her entitlement to any bonus otherwise payable to her in accordance
with Section 3(b) (other than bonuses previously awarded for prior years and
remaining unpaid, and with nonforfeiture of any cash or stock previously
transferred to Executive in payment of bonuses for prior years) and (C) be
entitled to the benefits set forth in Sections 3(c), 3(d), 3(e) and 3(h) up to
the effective date of such termination and such other benefits as are required
by law. For purposes of this Agreement, "Cause" shall mean a finding by the
Board:
(1) that Executive has materially harmed Employer or the
Operating Partnership through an act of dishonesty or material
conflict of interest which relates to the performance of
Executive's duties hereunder,
(2) that Executive was convicted of a felony, or
(3) that Executive has failed to perform in any material
respect the duties required by this Agreement (other than a
failure due to disability) after written notice specifying the
failure and a reasonable opportunity to cure (it being understood
that if Executive's failure to perform is not of a type requiring
a single action to fully cure, then Executive may commence the
cure promptly after such written notice and thereafter diligently
prosecute such cure to completion).
(iii) DISABILITY. If due to illness, physical or mental
disability, or other incapacity, Executive shall fail during any four
consecutive months to perform in any material respect the duties required by
this Agreement, Employer may terminate the Employment Term upon 30 days'
written notice to Executive. In connection with the termination of Executive's
employment pursuant to this Section 5(a)(iii), Executive shall (A) continue to
receive her Base Compensation payable to her in accordance with Section 3(a)
and be entitled to the benefits set forth in Sections 3(c) (or the after-tax
cash equivalent
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<PAGE> 9
thereof), 3(d), 3(e) and 3(h) up to the effective date of such termination, (B)
be paid any bonus otherwise payable to her in accordance with Section 3(b) and
(C) receive the Termination Compensation specified in Section 5(d). This
Section 5(a)(iii) shall not limit the entitlement of Executive, her estate or
beneficiaries to any disability or other benefits available to Executive under
any disability insurance or other benefits plan or policy which is maintained
by Employer for Executive's benefit.
(b) TERMINATION BY EXECUTIVE. (i) WITH GOOD REASON. Executive may
terminate this Agreement with Good Reason upon written notice to Employer. At
the election of Employer, Executive shall continue her employment under this
Agreement, subject to the definition of duties set forth in Section 1, for a
period up to 30 days following notice of termination. In connection with the
termination of Executive's employment pursuant to this Section 5(b)(i),
Executive shall (A) be paid her Base Compensation and any bonus otherwise
payable to her in accordance with Sections 3(a) and 3(b) and be entitled to the
benefits set forth in Sections 3(c), 3(d), 3(e) and 3(h) up to the effective
date of such termination and (B) receive the Termination Compensation specified
in Section 5(d).
For purposes of this Agreement, "Good Reason" shall mean (x) the material
breach by Employer of its obligations hereunder and the failure of Employer to
cure such breach within 30 days after receipt by Employer of a written notice
from Executive specifying in reasonable detail the nature of the breach, or (y)
any material diminution in the scope of Executive's responsibilities and
duties, or (z) if and only if Executive makes an election following a Change of
Control to receive Termination Compensation and a corresponding reduction in
the Change of Control Compensation as specified in Section 4 and under no other
circumstances following a Change of Control.
(ii) WITHOUT GOOD REASON. Executive may terminate the Employment
Term at any time for any reason or for no reason at all upon 60 days' written
notice to Employer, during which period Executive shall, subject to the
definition of duties set forth in Section 1, continue to perform her duties
under this Agreement if Employer so elects, provided, however, that, by written
notice to Executive, Employer shall have the right to accelerate the effective
date of such termination to any date following Executive's notice of termination
(including the day on which such notice is given). In connection with the
termination of Executive's employment pursuant to this Section 5(b)(ii),
Executive shall be paid her Base Compensation and any bonus otherwise payable
to her in accordance with Sections 3(a) and
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<PAGE> 10
3(b) and be entitled to the benefits set forth in Sections 3(c), 3(d), 3(e) and
3(h) up to the effective date of termination.
(c) DEATH. Notwithstanding any other provision of this Agreement, the
Employment Term shall terminate on the date of Executive's death. In
connection with the termination of Executive's employment pursuant to this
Section 5(c), Executive shall be paid her Base Compensation and any bonus
otherwise payable to Executive by reason of Executive's performance up to the
date of Executive's death in accordance with Sections 3(a) and 3(b). This
Section 5(c) shall not limit the entitlement of Executive under any insurance
or other benefits plan or policy which is maintained by Employer for
Executive's benefit.
(d) TERMINATION COMPENSATION. In the event of a termination of the
Employment Term pursuant to Section 5(a)(i), 5(a)(iii) or 5(b)(i), Employer
shall pay to Executive, within 30 days of termination, in one lump sum, subject
to withholding for applicable federal, state and local taxes, an amount equal
to (i) if the termination occurs after the Effective Date but prior to December
31, 1997, $375,000 and (ii) if the termination occurs after December 31, 1997,
the greater of (A) 50% of Executive's annual Base Compensation as of the
effective date of termination or (B) 50% of the product of (1) Executive's
annual Base Compensation as of the effective date of termination times (2) a
fraction, the numerator of which is the number of days between such date of
termination and expiration of the Employment Term and the denominator of which
is 365 ("Termination Compensation"); provided, however, if there shall have
been a Change of Control such that Executive has received or within the
six-month plus 30-day period after the date of such termination receives the
Change of Control Compensation provided for in Section 4, then the amount of
the Termination Compensation shall be zero unless Executive shall have made an
election following a Change of Control to receive the Termination Compensation
and a corresponding reduction in the Change of Control Compensation as
specified in Section 4, in which case the amount of the Termination
Compensation shall not be reduced.
6. COVENANTS OF EXECUTIVE.
(a) NO CONFLICTS. Executive represents and warrants that she is not
personally subject to any agreement, order or decree which restricts her
entering into this Agreement and performing her duties with Employer hereunder.
(b) RESTRICTIVE COVENANT;. (i) During the Employment Term and for a
period of one year following the termination of the
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<PAGE> 11
Employment Term (the "One Year Period" and, together with the Employment Term,
the "Restrictive Period"), except for Passive Investments and except for
investments held as of the date hereof and identified on Exhibit A and except
for the Permitted Practice of Law (as defined below) during the One Year
Period, Executive shall not engage in, directly or indirectly, or be interested
in (as owner, partner, shareholder, employee, director, officer, agent,
consultant or otherwise), with or without compensation, in a profit-making
activity involving the acquisition, development, construction, renovation,
leasing, ownership or management of multifamily apartment properties in the
Territory; provided, however, notwithstanding the foregoing, Executive shall
not be prohibited during the One Year Period from practicing law, either in
private practice or as an employee of an entity, so long as she does not
participate in the representation or counseling of any Competitor (as defined
below) or receive a special benefit as a result of the representation or
counseling of such Competitor by another person (such practicing of law,
including such restriction, is herein referred to as "Permitted Practice of
Law"). The term Competitor shall mean a business enterprise that, as a
significant component of its activities, and not merely incidental to an
unrelated business, engages on an ongoing basis in the acquisition,
development, construction, renovation, leasing, ownership or management of
multifamily apartment properties in the Territory.
(ii) Unless Executive has elected following a Change of
Control pursuant to Section 4 to extend the period of the restrictions
contained in this Section 6(b), a termination of the Employment Term pursuant
to Sections 5(a)(i), 5(a)(iii) or 5(b)(i) (other than pursuant to clause (z) of
the definition of Good Reason) shall automatically and ipso facto terminate
the restrictions contained in Section 6(b)(i) as of the date of such
termination, and in addition a failure by either party to extend this
Agreement pursuant to Section 2 shall, notwithstanding any other provision of
this Agreement to the contrary, allow Executive as of the termination of the
Employment Term to engage in the practice of law in any capacity except
directly or indirectly as general counsel of a Competitor. If the restrictions
contained in Section 6(b)(i) have been terminated pursuant to this
Section 6(b)(ii), and Executive thereafter makes an election to extend the
duration of such restrictions pursuant to Section 4, such restrictions shall
be reinstated as of the date of and for the period requested in such election,
except that thereafter Executive shall be permitted to engage in the private
practice of law in any capacity except directly or indirectly as general
counsel of a Competitor.
(iii) Executive may reduce the duration of the
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<PAGE> 12
restrictions contained in this Section 6(b) during the one year period
following the termination of her employment (but as to no portion of the
Restrictive Period occurring prior to such termination) by as many as 10 months
(the duration of an extension by Executive following a Change of Control and
pursuant to Section 4, if any, to be added to the end of such reduced period),
in exchange for a lump sum payment by her to Employer in an amount equal to
$36,000 times the number of months by which the term of such covenants are to
be reduced, such amount to be paid in cash at the time of election or offset
against sums otherwise due Executive from Employer in respect of the
termination. In addition, Executive may, at any time, terminate an extension
by Executive pursuant to Section 4, if any, in which case Employer shall be
relieved of its obligation to make the payments required as a result of such
extension allocable to the period after the termination of the extension and
Executive shall reimburse Employer for any payment thereof previously made to
Executive allocable to the period after the termination of the extension. In
each case, such election shall be by written notice prior to the date of such
election.
(iii) For purposes of this Agreement,
(A) a "Passive Investment" is an investment where
(1) Executive beneficially holds an equity interest in
such investment which is no greater than 5% of all
equity interests in such entity or venture, whether or
not such entity or venture is subject to the reporting
requirements of the Exchange Act and (2) Executive's
federal income tax return is based in all material
aspects upon the money or other assets invested and as
to which no services are provided;
(B) a "Principal Market" is a geographic market area
in which the Company, directly or indirectly through
the Operating Partnership or any of their respective
subsidiaries or affiliates (collectively, the "Group"),
during the Employment Term and, for purposes of the
Restrictive Period following the termination of the
Employment Term, on the last day of the Employment
Term, owns or manages more than 1,000 apartment units;
and
(C) "Territory" means (1) during the Employment Term, anywhere in
the United States of America, and (2) during the Restrictive Period
following the termination
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<PAGE> 13
of the Employment Term, the Principal Markets.
(c) NO SOLICITATION. During the Restrictive Period, Executive shall not,
directly or indirectly, solicit or contact any employee of any member of the
Group with a view to inducing or encouraging such employee to leave the employ
of the Company or such other person for the purpose of being hired by
Executive, an employer affiliated with Executive or any competitor of any
member of the Group.
(d) NON-DISCLOSURE. Executive shall not disclose or use, during the
Restrictive Period or any time thereafter, except in the pursuit of the
business for or on behalf of the Group, any Trade Secret of the Group, whether
such Trade Secret is in Executive's memory or embodied in writing or other
physical form.
For purposes of this Agreement, "Trade Secret" means any information which
derives independent economic value, actual or potential, with respect to the
Group from not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its
disclosure or use and is the subject of efforts to maintain its secrecy that
are reasonable under the circumstances, including, but not limited to, trade
secrets, tenant lists and other proprietary commercial information. However,
the term "Trade Secrets" shall not include general "know-how" information
acquired by Executive during the course of her employment which could have been
obtained by her from public sources without the expenditure of significant
time, effort and expense which does not relate to the Group.
(e) RETURN OF DOCUMENTS. Upon termination of employment, Executive shall
return all originals and copies of books, records, documents, customer lists,
sales materials, tapes, keys, credit cards and other property of the Company
within Executive's possession or under her control, but specifically excluding
personal effects of Executive such as her personal rolodex, diary and files,
whether in written or electronic form, including computer files.
(f) ACKNOWLEDGMENT. Each of Employer and Executive acknowledges that
Executive will be directly and materially involved as a senior executive
officer in important policy and operational decisions of Employer and other
members of the Group. Executive further acknowledges that the scope of the
foregoing restrictions has been specifically bargained between Employer and
Executive, each being fully informed of all relevant facts. Accordingly,
Executive acknowledges that the foregoing restrictions of this Section 6 are
fair and reasonable, are the
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<PAGE> 14
minimum necessary to protect Employer, other members of the Group, the
stockholders of Employer and the public from the unfair actions, direct or
indirect, of Executive who, as a result of her employment with Employer, will
have had unlimited access to the most confidential and important information of
Employer, other members of the Group, and the business and future plans of the
Group.
7. PRIOR AGREEMENT. This Agreement supersedes and is in lieu of any and
all other employment arrangements between Executive and the Company and any and
all such employment agreements and arrangements are hereby terminated and
deemed of no further force or effect.
8. ASSIGNMENT. Neither this Agreement nor any rights or duties of
Executive hereunder shall be assignable by Executive and any such purported
assignment by her shall be void. Employer may assign all or any of its rights
hereunder to any member of the Group (which in itself shall not constitute a
Change of Control), in which case, the term Employer as used in the definition
of Change of Control shall continue to refer to Ambassador Apartments, Inc.,
and Employer may assign all or any of its rights hereunder to any other person
provided that substantially all of the assets of the Company are also
transferred to such other person (which in itself may or may not constitute a
Change of Control and which will in any event not otherwise affect the Change
of Control provisions hereof), in which case, after such assignment the term
Employer shall refer to such other person, and provided further that Employer
complies with Section 9.
9. SUCCESSOR TO EMPLOYER. Employer will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all the business or assets of Employer, as the case may
be, expressly, absolutely and unconditionally to assume and agree to perform
this Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession or assignment had taken place.
Any failure of Employer to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement.
This Agreement shall inure to the benefit of and be enforceable by Executive's
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Executive should die while any
amounts are still payable to Executive hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee or, if there be no
such designee, to
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<PAGE> 15
Executive's estate.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally, by overnight courier service, or by facsimile
transmission, in any case with receipt acknowledged, or three days after being
sent by registered or certified mail, return receipt requested, postage
prepaid, to the following addresses (or to any other address that any party may
designate by notice to the other parties hereto):
(a) if to Executive, to:
Debra A. Cafaro
248 South Avenue
Glencoe, IL 60022
With a copy to:
--------------
Barack Ferrazzano Kirschbaum Perlman & Nagelberg
333 W. Wacker Drive, Suite 2700
Chicago, IL 60606
Attention: Howard A. Nagelberg
Telephone: (312) 984-3198
Facsimile: (312) 984-3150
(b) if to Employer, to:
Ambassador Apartments, Inc.
77 West Wacker Drive, Suite 4040
Chicago, IL 60601
Attention: Chief Executive Officer
Telephone: (312) 917-1600
Facsimile: (312) 917-9910
With a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Robert S. Osborne, P.C.
Telephone: (312) 861-2368
Facsimile: (312) 861-2200
11. AMENDMENT. This Agreement may not be changed, modified or amended
except in writing signed by both parties hereto.
12. WAIVER OF BREACH. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be
- 15 -
<PAGE> 16
construed as a waiver of any subsequent breach by either party.
13. SEVERABILITY. Employer and Executive each expressly agree and
contract that it is not the intention of either party to violate any public
policy, statutory or common law, and that if any sentence, paragraph, clause or
combination of the same of this Agreement is in violation of the law of any
state where applicable, such sentence, paragraph, clause or combination of the
same shall be void in the jurisdictions where it is unlawful, and the remainder
of this Agreement shall remain binding on the parties to make the covenants of
this Agreement binding only to the extent that it may be lawfully done under
the existing applicable laws. In the event that any part of any covenant of
this Agreement is determined by a court of competent jurisdiction to be overly
broad thereby making the covenant unenforceable, the parties hereto agree, and
it is their desire that such court shall substitute a judicially enforceable
limitation in its place, and that as so modified the covenant shall be binding
upon the parties as if originally set forth herein.
14. OPPORTUNITY TO EMPLOY COUNSEL. Executive acknowledges receipt of a
copy of this Agreement prior to its execution by her and also acknowledges that
she has had ample time and opportunity to employ counsel of her choice to
provide advice concerning the terms and conditions of this Agreement and
Executive's prospective employment with Employer.
15. EQUITABLE RELIEF; LIMITATIONS ON RELIEF. In the event of any breach
by either party of any of the covenants contained in this Agreement, including,
without limitation, any covenant contained in Section 6, it is specifically
understood and agreed that the other party shall be entitled, in addition to
any other remedy which it may have, to equitable relief by way of injunction,
an accounting or otherwise and, in the case of Employer, to notify any employer
or prospective employer of Executive as to the terms and conditions hereof.
16. INDEMNIFICATION.
(a) INDEMNIFICATION BY EMPLOYER. To the extent permitted by applicable
law, Employer shall indemnify Executive to no lesser extent than as provided in
its Articles of Incorporation and Bylaws as of the date of this Agreement.
(b) INDEMNIFICATION BY EXECUTIVE. Executive shall indemnify the Company
for any and all damages, costs and expenses resulting from any of her acts or
omissions that cause harm to the Company, its business or its reputation, but
only if and to
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<PAGE> 17
the extent that Employer is not required to indemnify Executive therefor
pursuant to Section 16(a).
(c) INSURANCE. Executive shall be entitled to the same benefits under
Employer's director's and officer's liability insurance policy as are provided
to the other members of the Board and senior executive officers of Employer.
(d) TAXES. All payments under this Agreement shall be net of any income
or other taxes imposed on Executive that the Company is required to withhold.
If it is determined that the Company is liable for any tax (or any interest,
penalty or additional amount with respect to such tax) as a result of any
failure to withhold any income or other taxes with respect to any amounts
received by Executive in connection with Sections 3(g), 4, 5(d) or 6, Executive
shall indemnify and hold harmless the Company against such taxes, interest,
penalties and additional amounts.
17. GOVERNING LAW. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Illinois,
exclusive of the conflict of laws provisions of the State of Illinois.
18. NOTICE OF FUTURE EMPLOYMENT. Executive agrees that during the period
that Executive is subject to the restrictions contained in Section 6(b),
Executive will within 14 days of each instance of new employment, notify
Employer in writing of the identify of her new employer and the job title
associated with such employment.
19. OPERATING PARTNERSHIP AND RELATED AGREEMENTS. Employer shall take all
reasonably necessary or desirable actions within its control to cause the
Operating Partnership to effectuate the purpose and intent of this Agreement.
Employer shall also take all reasonably necessary or desirable actions within
its control to cause Executive to become a party to, and beneficiary of, the
Exchange Rights Agreement and the Registration Rights Agreement to which other
senior executives of Employer are parties, it being intended that the Common
Units to be acquired by Executive in connection with this Agreement and the
Common Stock issuable upon exchange of such Common Units be subject to the
benefits and burdens of such agreements; provided, however, in the event that
Executive is unable to become a party to and beneficiary of such agreement,
Employer and Executive agree to negotiate in good faith to reach mutually
acceptable arrangements that provide for benefits and burdens as close to those
contained in such agreements as is possible so as to provide Executive with the
practical substantive equivalents of the exchange rights with
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<PAGE> 18
respect to her Common Units and registration rights with respect to the Common
Stock received upon exchange thereof that are held by the Chief Executive
Officer of Employer.
20. COVENANTS OF EMPLOYER. Employer represents that it is duly authorized
to enter into this Agreement; and that effect as of the execution of this
Agreement Executive has been duly elected, on an interim basis, to the Board by
valid Board action.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
AMBASSADOR APARTMENTS, INC.
By: _________________________
Name:
Title:
______________________________
Debra A. Cafaro
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<PAGE> 19
EXHIBIT A
to
EMPLOYMENT AGREEMENT
None.
<PAGE> 20
EXHIBIT B
to
EMPLOYMENT AGREEMENT
Fair Market Value of Common Stock as of Effective Date of April 7, 1997,
determined by the closing price of Common Stock as of that date: $24.25 per
share.
Resulting Option Exercise Price: $24.25 per share
Resulting Common Unit Purchase Price: $24.25 per share
Resulting Number of Options: 47,010
Resulting Number of Common Units: 32,990
<PAGE> 1
EXHIBIT 10.71
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April
, 1997, between Ambassador Apartments, Inc., a Maryland corporation
("Employer") and the sole general Partner of Ambassador Apartments, L.P., a
Delaware limited partnership (the "Operating Partnership" and, together with
Employer and its other subsidiaries, the "Company"), and Adam D. Peterson, an
individual domiciled in the State of Illinois ("Executive").
RECITALS
A. The Company is engaged primarily in the acquisition, development,
construction, renovation, leasing, ownership and management of multifamily
apartment properties throughout the United States.
B. Employer believes that it would benefit from the application of
Executive's particular and unique skill, experience and background to the
management and operation of the Company.
C. Employer considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of Employer and its stockholders. Accordingly, the Board of Directors of
Employer has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including Executive, to their assigned duties without distraction.
In order to induce Executive to remain in the employ of Employer, among other
things, this Agreement sets forth certain benefits Executive shall receive in
the event there is a change of control of Employer under the circumstances
described herein.
D. Executive wishes to commit himself to serve Employer in the position
set forth herein on the terms herein provided.
E. The parties wish by this Agreement to set forth the terms and
conditions of the employment relationship between Employer and Executive.
Employer and Executive hereby agree as follows:
1. EMPLOYMENT AND DUTIES. During the Employment Term (as defined in
Section 2), Employer agrees to employ Executive, and Executive agrees to be
employed by Employer, as Executive Vice
<PAGE> 2
President and Chief Financial Officer of Employer on the terms and conditions
provided in this Agreement. Executive shall conduct, operate, manage and
promote the business of the Company, and exercise such other powers and
authority as are customarily inherent in a similar position in a comparable
publicly-held entity or as provided by the By-laws of Employer (the "By-laws").
The Board of Directors of Employer (the "Board") may from time to time further
define and clarify Executive's duties and services hereunder or under the
By-laws in a manner consistent with the scope of work set forth herein.
Executive agrees to devote his best efforts and substantially all of his
business time, attention, energy and skill to performing his duties to Employer
under this Agreement.
2. TERM. Unless terminated earlier pursuant to the provisions of Section
5, the initial term of this Agreement (the "Initial Term") shall commence on
January 1, 1997 and expire on December 31, 1999 (the "Scheduled Termination
Date"), provided, however, that this Agreement shall extend automatically for
one-year terms following the Initial Term (each a "Renewal Term" and, together
with the Initial Term, the "Employment Term"), unless either party shall give
the other party, prior to 180 days before the end of the Initial Term or
respective Renewal Term, written notice of its intention to terminate the
Employment Term.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. As compensation for performing the services required by
this Agreement, and during the Employment Term, Employer shall pay to Executive
a salary at a rate of no less than $150,000 per year in the first year of the
Employment Term, $165,000 in the second year, $181,500 in the third year and an
amount equal to 110% of the prior year minimum amount in each year thereafter
("Base Compensation"), payable in accordance with the general policies and
procedures for payment of salaries to its executive personnel implemented by
Employer (but no less frequently than monthly), subject to withholding for
applicable federal, state and local taxes. Increases in Base Compensation
above that provided for in this Section 3(a), if any, shall be determined by
the Board or the Compensation and Benefits Committee of the Board or such other
committee of the Board then performing such function (the "Committee") based on
periodic reviews of Executive's performance conducted on at least an annual
basis.
(b) BONUS. In addition to Base Compensation, the Board or the Committee,
as applicable, in its sole and absolute discretion may, but shall in no event
be obligated to, authorize the payment
- 2 -
<PAGE> 3
of a bonus to Executive, payable in cash or shares of Common Stock of Employer
("Common Stock"), based upon achievement of corporate and individual
performance objectives established by the Board or the Committee, as
applicable.
(c) BENEFITS. During the Employment Term and subject to the limitations
and alternative rights set forth in this Section 3(c), Executive and his
eligible dependents shall have the right to participate in any retirement,
pension, insurance, health or other benefit plan or program that has been or is
hereafter adopted by Employer (or in which Employer participates) according to
the terms of such plan or program with all the benefits, rights and privileges
as are enjoyed by any other senior executive officer of Employer. If the
participation of Executive would adversely affect the qualification of a plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as the same may be amended from time to time (the "Code"), Employer shall
have the right to exclude Executive from that plan in return for his
participation in (i) a nonqualified deferred compensation plan or (ii) an
arrangement providing substantially comparable benefits under a plan that is
either a qualified or nonqualified plan under the Code, at Employer's option.
(d) VACATION AND LEAVES OF ABSENCE. Executive shall be entitled to four
weeks of paid vacation leave during each 12-month period and paid holidays in
accordance with Employer's established policies. In addition to the foregoing,
Executive may be granted leaves of absence with or without pay as shall be
mutually agreed upon by the Board and Executive.
(e) EXPENSES. Executive shall be reimbursed, subject to the Company's
receipt of invoices or similar records as the Company may reasonably request in
accordance with its policies and procedures, for all reasonable and necessary
expenses incurred by Executive in the performance of his duties hereunder.
(f) OPTIONS. During the Employment Term, Executive shall have the right
to participate in Employer's 1994 Stock Incentive Plan, 1996 Stock Incentive
Plan, 1997 Long Term Incentive Plan and any similar plan adopted by Employer;
provided, however, all grants of stock options with respect to such plans, and
the terms of such options, shall be in the sole and absolute discretion of the
Board or the Committee, as applicable. Notwithstanding the foregoing, the
vesting of the 87,000 options to purchase Common Stock held by Executive as of
the date of this Agreement shall be accelerated so that such options shall be
fully vested and exercisable as of the date of this Agreement.
- 3 -
<PAGE> 4
4. CHANGE OF CONTROL COMPENSATION. On only one occasion, in the event of
a Change of Control of Employer during the Employment Term or within 6 months
after a termination of the Employment Term by Employer pursuant to Sections
5(a)(i) or 5(a)(iii) in contemplation of such Change of Control or by Executive
pursuant to Section 5(b)(i), Employer shall pay to Executive, within 30 days
after the date of such Change of Control, in one lump sum, subject to
withholding for applicable federal, state and local taxes, an amount equal to
the lesser of (a) $310,000 and (b) 2.99 times Executive's "base amount" (as
such term is used in Code Section 280G) ("Change of Control Compensation");
provided, however, that in the event that such amount when aggregated with any
other amounts that are or, absent this provision, would be "parachute payments"
(as such term is used in Code Section 280G) with respect to Executive exceeds
2.99 times Executive's base amount, then the amount of the Change of Control
Compensation shall be reduced such that when aggregated with such other
amounts, the aggregate amount shall not exceed 2.99 times Executive's base
amount if and only if the net after-tax amount received by Executive, taking
into account such reduction, exceeds the net after-tax amount, taking into
account any additional tax as a result of the application of Code Section 4999,
that Executive would have received if the amount of the Change of Control
Compensation had not been reduced.
For purposes of this Agreement, a "Change of Control" shall be deemed to
have occurred if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
(i) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company, (ii) a corporation owned directly or indirectly by the
stockholders of Employer in substantially the same proportions as their
ownership of stock of Employer, or controlled directly or indirectly by the
stockholders of Employer, or (iii) David M. Glickman or any of his affiliates
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Employer representing 50% or
more of the total voting power represented by Employer's then outstanding
securities which vote generally in the election of directors (referred to
herein as "Voting Securities"); or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by Employer's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election
- 4 -
<PAGE> 5
or nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board; or
(c) the stockholders of Employer approve a merger or consolidation of
Employer with any other corporation, other than a merger or consolidation which
would result in the Voting Securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 50% of the
total voting power represented by the Voting Securities of Employer or such
surviving entity outstanding immediately after such merger or consolidation,
and such transaction is consummated; or
(d) the stockholders of Employer approve a plan of complete liquidation of
Employer or an agreement for the sale, assignment, conveyance, transfer, lease
or other disposition by Employer of (in one transaction or a series of
transactions) all or substantially all of Employer's assets, and such
transaction is consummated.
5. TERMINATION AND TERMINATION BENEFITS.
(a) TERMINATION BY EMPLOYER. (i) WITHOUT CAUSE. Employer may terminate
the Employment Term and Executive's employment at any time for any reason or
for no reason at all upon two weeks' prior written notice to Executive.
Employer may elect to require Executive to continue his employment under this
Agreement for a period up to 60 days. In connection with the termination of
Executive's employment pursuant to this Section 5(a)(i), Executive shall (A) be
paid his Base Compensation and any bonus otherwise payable to him in accordance
with Sections 3(a) and 3(b) and be entitled to the benefits set forth in
Sections 3(c), 3(d) and 3(e) up to the effective date of such termination and
(B) receive the Termination Compensation specified in Section 5(d).
(ii) WITH CAUSE. Employer may terminate the Employment Term with Cause
immediately with written notice to Executive. Employer may elect to require
Executive to continue to perform his duties under this Agreement for a period
up to 30 days following notice of termination. In connection with the
termination of Executive's employment pursuant to this Section 5(a)(ii),
Executive shall (A) be paid his Base Compensation up to the effective date of
such termination, (B) forfeit his entitlement to any bonus otherwise payable to
him in accordance with Section 3(b) and (C) be entitled to the benefits set
forth in Sections 3(c), 3(d) and 3(e) up to the effective date of such
termination. For purposes of this Agreement, "Cause" shall mean
- 5 -
<PAGE> 6
a finding by the Board:
(1) that Executive has materially harmed Employer or the
Operating Partnership through an act of dishonesty or material
conflict of interest which relates to the performance of
Executive's duties hereunder,
(2) that Executive was convicted of a felony, or
(3) that Executive failed to perform in any material respect
the duties required by this Agreement (other than a failure due to
disability) after written notice specifying the failure and a
reasonable opportunity to cure (it being understood that if
Executive's failure to perform is not of a type requiring a single
action to fully cure, then Executive may commence the cure
promptly after such written notice and thereafter diligently
prosecute such cure to completion).
(iii) DISABILITY. If due to illness, physical or mental disability, or
other incapacity, Executive shall fail during any four consecutive months to
perform in any material respect the duties required by this Agreement, Employer
may terminate the Employment Term upon 30 days' written notice to Executive.
In connection with the termination of Executive's employment pursuant to this
Section 5(a)(iii), Executive shall (A) continue to receive his Base
Compensation payable to him in accordance with Section 3(a) and be entitled to
the benefits set forth in Sections 3(c) (or the after-tax cash equivalent
thereof), 3(d) and 3(e) up to the effective date of such termination, (B) be
paid any bonus otherwise payable to him in accordance with Section 3(b) and (C)
receive the Termination Compensation specified in Section 5(d). This Section
5(a)(iii) shall not limit the entitlement of Executive, his estate or
beneficiaries to any disability or other benefits available to Executive under
any disability insurance or other benefits plan or policy which is maintained
by Employer for Executive's benefit.
(b) TERMINATION BY EXECUTIVE. (i) WITH GOOD REASON. Executive may
terminate this Agreement with Good Reason upon written notice to Employer. At
the election of Employer, Executive shall continue his employment under this
Agreement for a period up to 30 days following notice of termination. In
connection with the termination of Executive's employment pursuant to this
Section 5(b)(i), Executive shall (A) be paid his
- 6 -
<PAGE> 7
Base Compensation and any bonus otherwise payable to him in accordance with
Sections 3(a) and 3(b) and be entitled to the benefits set forth in Sections
3(c), 3(d) and 3(e) up to the effective date of such termination and (B)
receive the Termination Compensation specified in Section 5(d).
For purposes of this Agreement, "Good Reason" shall mean (x) the material
breach by Employer of its obligations hereunder and the failure of Employer to
cure such breach within 30 days after receipt by Employer of a written notice
from Executive specifying in reasonable detail the nature of the breach or (y)
any material diminution in the scope of Executive's responsibilities and
duties.
(ii) WITHOUT GOOD REASON. Executive may terminate the Employment Term at
any time for any reason or for no reason at all upon 60 days' written notice to
Employer, during which period Executive shall continue to perform his duties
under this Agreement if Employer so elects, provided, however, that, by written
notice to Executive, Employer shall have the right to accelerate the effective
date of such termination to any date following Executive's notice of
termination (including the day on which such notice is given). In connection
with the termination of Executive's employment pursuant to this Section
5(b)(ii), Executive shall be paid his Base Compensation and any bonus otherwise
payable to him in accordance with Sections 3(a) and 3(b) and be entitled to the
benefits set forth in Sections 3(c), 3(d) and 3(e) up to the effective date of
termination.
(c) DEATH. Notwithstanding any other provision of this Agreement, the
Employment Term shall terminate on the date of Executive's death. In
connection with the termination of Executive's employment pursuant to this
Section 5(c), Executive shall be paid his Base Compensation and any bonus
otherwise payable to Executive by reason of Executive's performance up to the
date of Executive's death in accordance with Sections 3(a) and 3(b). This
Section 5(c) shall not limit the entitlement of Executive under any insurance
or other benefits plan or policy which is maintained by Employer for
Executive's benefit.
(d) TERMINATION COMPENSATION. In the event of a termination of the
Employment Term pursuant to Section 5(a)(i), 5(a)(iii) or 5(b)(i), Employer
shall pay to Executive, within 30 days of termination, in one lump sum, subject
to withholding for applicable federal, state and local taxes, an amount equal
to the greater of (i) 50% of Executive's annual Base Compensation as of the
effective date of termination or (ii) 50% of the product of (A) Executive's
annual Base Compensation as of the effective date of termination times (B) a
fraction, the numerator of which is
- 7 -
<PAGE> 8
the number of days between such date of termination and expiration of the
Employment Term and the denominator of which is 365 ("Termination
Compensation"); provided, however, if there shall have been a Change of Control
such that Executive has received or within the six-month plus 30-day period
after the date of such termination receives the Change of Control Compensation
provided for in Section 4, then the amount of the Termination Compensation
shall be zero.
6. COVENANTS OF EXECUTIVE.
(a) NO CONFLICTS. Executive represents and warrants that he is not
personally subject to any agreement, order or decree which restricts his
entering into this Agreement and performing his duties with Employer hereunder.
(b) RESTRICTIVE COVENANT; CONSULTING SERVICES. (i) During the Employment
Term and for a period of one year following the termination of the Employment
Term (the Employment Term and such one-year period are referred to together as
the "Restrictive Period"), except for Passive Investments and except for
investments held as of the date hereof and identified on Exhibit A, Executive
shall not engage in, directly or indirectly, or be interested in (as owner,
partner, shareholder, employee, director, officer, agent, consultant or
otherwise), with or without compensation, the acquisition, development,
construction, renovation, leasing, ownership or management of multifamily
apartment properties in the Territory.
(ii) For a period of eighteen months following the termination of the
Employment Term, Executive hereby agrees to consult with the Board and
management of Employer and its subsidiaries in such manner and on such business
and financial matters as may be reasonably requested from time to time by the
Board, including but not limited to corporate strategy, budgeting and future
investments, acquisitions and dispositions and strategies therefor, and debt
and equity financings; provided, however, in no event shall Executive be
required to provide more than 20 hours of such services in any month.
(iii) As compensation for the restrictions after the Employment Term
contained in Section 6(b)(i) and the services to be performed pursuant to
Section 6(b)(ii), Employer shall pay to Executive, within 30 days of
termination, in one lump sum, subject to withholding for applicable federal,
state and local taxes, an amount equal to $440,000.
(iv) In the event of a termination of the Employment pursuant to
Section 5(a)(ii), Employer may, in its sole and
- 8 -
<PAGE> 9
absolute discretion, with notice to Executive within 15 days after the date of
such termination, elect to waive the restrictions contained in Section 6(b)(i)
and its right to receive the services set forth in Section 6(b)(ii), and in
such event Employer shall be relieved of its obligations to make the payment
set forth in Section 6(b)(iii).
(v) For purposes of this Agreement,
(A) a "Passive Investment" is an investment where
(1) Executive beneficially holds an equity interest in
such investment which is no greater than 5% of all
equity interests in such entity or venture, whether or
not such entity or venture is subject to the reporting
requirements of the Exchange Act and (2) Executive's
return is based in all material aspects upon the money
or other assets invested and as to which no services
are provided;
(B) a "Principal Market" is a geographic market area
in which the Company, directly or indirectly through
the Operating Partnership or any of their respective
subsidiaries or affiliates (collectively, the "Group"),
during the Employment Term and, for purposes of the
Restrictive Period following the termination of the
Employment Term, on the last day of the Employment
Term, owns or manages more than 1,000 apartment units;
and
(C) "Territory" means (1) during the Employment Term, anywhere in
the United States of America, and (2) during the Restrictive Period
following the termination of the Employment Term, the Principal
Markets.
(c) NO SOLICITATION. During the Restrictive Period, Executive shall not,
directly or indirectly, solicit or contact any employee of any member of the
Group with a view to inducing or encouraging such employee to leave the employ
of the Company or such other person for the purpose of being hired by
Executive, an employer affiliated with Executive or any competitor of any
member of the Group.
(d) NON-DISCLOSURE. Executive shall not disclose or use, during the
Restrictive Period or any time thereafter, except in the pursuit of the
business for or on behalf of the Group, any Trade Secret of the Group, whether
such Trade Secret is in
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<PAGE> 10
Executive's memory or embodied in writing or other physical form.
For purposes of this Agreement, "Trade Secret" means any information which
derives independent economic value, actual or potential, with respect to the
Group from not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its
disclosure or use and is the subject of efforts to maintain its secrecy that
are reasonable under the circumstances, including, but not limited to, trade
secrets, tenant lists and other proprietary commercial information. However,
the term "Trade Secrets" shall not include general "know-how" information
acquired by Executive during the course of his employment which could have been
obtained by him from public sources without the expenditure of significant
time, effort and expense which does not relate to the Group.
(e) RETURN OF DOCUMENTS. Upon termination of employment, Executive shall
return all originals and copies of books, records, documents, customer lists,
sales materials, tapes, keys, credit cards and other property of the Company
within Executive's possession or under his control, but specifically excluding
personal effects of Executive such as his personal rolodex, diary and files,
whether in written or electronic form, including computer files.
(f) ACKNOWLEDGMENT. Executive acknowledges that he will be directly and
materially involved as a senior executive officer in all important policy and
operational decisions of Employer and other members of the Group. Executive
further acknowledges that the scope of the foregoing restrictions has been
specifically bargained between Employer and Executive, each being fully
informed of all relevant facts. Accordingly, Executive acknowledges that the
foregoing restrictions of this Section 6 are fair and reasonable, are the
minimum necessary to protect Employer, other members of the Group, the
stockholders of Employer and the public from the unfair actions, direct or
indirect, of Executive who, as a result of his employment with Employer, will
have had unlimited access to the most confidential and important information of
Employer, other members of the Group, and the business and future plans of the
Group.
7. PRIOR AGREEMENT. This Agreement supersedes and is in lieu of any and
all other employment arrangements between Executive and Employer or its
predecessor or any subsidiary and any and all such employment agreements and
arrangements are hereby terminated and deemed of no further force or effect.
8. ASSIGNMENT. Neither this Agreement nor any rights or
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<PAGE> 11
duties of Executive hereunder shall be assignable by Executive and any such
purported assignment by him shall be void. Employer may assign all or any of
its rights hereunder to any member of the Group, and to any other person
provided that substantially all of the assets of the Company are also
transferred to such other person.
9. SUCCESSOR TO EMPLOYER. Employer will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all the business or assets of Employer, as the case may
be, expressly, absolutely and unconditionally to assume and agree to perform
this Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession or assignment had taken place.
Any failure of Employer to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement.
This Agreement shall inure to the benefit of and be enforceable by Executive's
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Executive should die while any
amounts are still payable to Executive hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee or, if there be no
such designee, to Executive's estate.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally, by overnight courier service, or by facsimile
transmission, in any case with receipt acknowledged, or three days after being
sent by registered or certified mail, return receipt requested, postage
prepaid, to the following addresses (or to any other address that any party may
designate by notice to the other parties hereto):
(a) if to Executive, to:
Adam D. Peterson
15822 West 132nd Street
Lemont, IL 60439
Telephone: (630) 243-9708
Facsimile (630) 243-9709
With a copy to:
--------------
________________________
________________________
________________________
_________________________
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<PAGE> 12
Attention: ______________
(b) if to Employer, to:
Ambassador Apartments, Inc.
77 West Wacker Drive, Suite 4040
Chicago, IL 60601
Attention: Chief Executive Officer
Telephone: (312) 917-1600
Facsimile: (312) 917-9910
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Robert S. Osborne, P.C.
Telephone: (312) 861-2368
Facsimile: (312) 861-2200
11. AMENDMENT. This Agreement may not be changed, modified or amended
except in writing signed by both parties hereto.
12. WAIVER OF BREACH. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by either party.
13. SEVERABILITY. Employer and Executive each expressly agree and
contract that it is not the intention of either party to violate any public
policy, statutory or common law, and that if any sentence, paragraph, clause or
combination of the same of this Agreement is in violation of the law of any
state where applicable, such sentence, paragraph, clause or combination of the
same shall be void in the jurisdictions where it is unlawful, and the remainder
of this Agreement shall remain binding on the parties to make the covenants of
this Agreement binding only to the extent that it may be lawfully done under
the existing applicable laws. In the event that any part of any covenant of
this Agreement is determined by a court of competent jurisdiction to be overly
broad thereby making the covenant unenforceable, the parties hereto agree, and
it is their desire that such court shall substitute a judicially enforceable
limitation in its place, and that as so modified the covenant shall be binding
upon the parties as if originally set forth herein.
14. OPPORTUNITY TO EMPLOY COUNSEL. Executive acknowledges receipt of a
copy of this Agreement prior to its execution by him and also acknowledges that
he has had ample time and opportunity to employ counsel of his choice to
provide advice concerning the
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<PAGE> 13
terms and conditions of this Agreement and Executive's prospective employment
with Employer.
15. EQUITABLE RELIEF; LIMITATIONS ON RELIEF. In the event of any breach
by either party of any of the covenants contained in this Agreement, including,
without limitation, any covenant contained in Section 6 other than Section 6(b)
as described below, it is specifically understood and agreed that the other
party shall be entitled, in addition to any other remedy which it may have, to
equitable relief by way of injunction, an accounting or otherwise and, in the
case of Employer, to notify any employer or prospective employer of Executive
as to the terms and conditions hereof. Notwithstanding any other provision of
this Agreement to the contrary, in the event that Executive breaches the
restrictions after the Employment Term contained in Section 6(b)(i) or fails to
perform the services required by Section 6(b)(ii), Employer's sole and only
remedy therefor shall be to receive from Executive liquidated damages in, and,
within 30 days of notice from Employer to Executive of such breach or failure,
Executive shall pay to Employer, an amount equal to (x) $24,444 times (y) the
number of months remaining in the eighteen-month period following the
termination of the Employment Term as of the date of such breach or failure,
including the month in which such breach or failure occurred.
16. INDEMNIFICATION.
(a) INDEMNIFICATION BY EMPLOYER. To the extent permitted by applicable
law, Employer shall indemnify Executive as provided in its Articles of
Incorporation and Bylaws as of the date of this Agreement.
(b) INDEMNIFICATION BY EXECUTIVE. Executive shall indemnify the Company
for any and all damages, costs and expenses resulting from any of his acts or
omissions that cause harm to the Company, its business or its reputation if and
to the extent that Employer is not required to indemnify Executive therefor
pursuant to Section 16(a).
17. GOVERNING LAW. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Illinois,
exclusive of the conflict of laws provisions of the State of Illinois.
18. NOTICE OF FUTURE EMPLOYMENT. Executive agrees that during the
Restrictive Period, Employee will within 14 days of each instance of new
employment, notify Employer in writing of the identify of his new employer and
the job title associated
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with such employment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
AMBASSADOR APARTMENTS, INC.
By: _________________________
Name:
Title:
______________________________
Adam D. Peterson
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<PAGE> 15
EXHIBIT A
to
EMPLOYMENT AGREEMENT
<PAGE> 1
EXHIBIT 10.72
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April
, 1997, between Ambassador Apartments, Inc., a Maryland corporation
("Employer") and the sole general Partner of Ambassador Apartments, L.P., a
Delaware limited partnership (the "Operating Partnership" and, together with
Employer and its other subsidiaries, the "Company"), and Thomas J. Coorsh, an
individual domiciled in the State of Illinois ("Executive").
RECITALS
A. The Company is engaged primarily in the acquisition, development,
construction, renovation, leasing, ownership and management of multifamily
apartment properties throughout the United States.
B. Employer believes that it would benefit from the application of
Executive's particular and unique skill, experience and background to the
management and operation of the Company.
C. Employer considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of Employer and its stockholders. Accordingly, the Board of Directors of
Employer has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including Executive, to their assigned duties without distraction.
In order to induce Executive to remain in the employ of Employer, among other
things, this Agreement sets forth certain benefits Executive shall receive in
the event there is a change of control of Employer under the circumstances
described herein.
D. Executive wishes to commit himself to serve Employer in the position
set forth herein on the terms herein provided.
E. The parties wish by this Agreement to set forth the terms and
conditions of the employment relationship between Employer and Executive.
Employer and Executive hereby agree as follows:
1. EMPLOYMENT AND DUTIES. During the Employment Term (as defined in
Section 2), Employer agrees to employ Executive, and Executive agrees to be
employed by Employer, as Senior Vice
<PAGE> 2
President and Chief Administrative Officer of Employer on the terms and
conditions provided in this Agreement. Executive shall conduct, operate,
manage and promote the business of the Company, and exercise such other powers
and authority as are customarily inherent in a similar position in a comparable
publicly-held entity or as provided by the By-laws of Employer (the "By-laws").
The Board of Directors of Employer (the "Board") may from time to time further
define and clarify Executive's duties and services hereunder or under the
By-laws in a manner consistent with the scope of work set forth herein.
Executive agrees to devote his best efforts and substantially all of his
business time, attention, energy and skill to performing his duties to Employer
under this Agreement.
2. TERM. Unless terminated earlier pursuant to the provisions of Section
5, the initial term of this Agreement (the "Initial Term") shall commence on
January 1, 1997 and expire on December 31, 1999 (the "Scheduled Termination
Date"), provided, however, that this Agreement shall extend automatically for
one-year terms following the Initial Term (each a "Renewal Term" and, together
with the Initial Term, the "Employment Term"), unless either party shall give
the other party, prior to 180 days before the end of the Initial Term or
respective Renewal Term, written notice of its intention to terminate the
Employment Term.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. As compensation for performing the services required by
this Agreement, and during the Employment Term, Employer shall pay to Executive
a salary at a rate of no less than $140,000 per year in the first year of the
Employment Term, $154,000 in the second year, $169,400 in the third year and an
amount equal to 110% of the prior year minimum amount in each year thereafter
("Base Compensation"), payable in accordance with the general policies and
procedures for payment of salaries to its executive personnel implemented by
Employer (but no less frequently than monthly), subject to withholding for
applicable federal, state and local taxes. Increases in Base Compensation
above that provided for in this Section 3(a), if any, shall be determined by
the Board or the Compensation and Benefits Committee of the Board or such other
committee of the Board then performing such function (the "Committee") based on
periodic reviews of Executive's performance conducted on at least an annual
basis.
(b) BONUS. In addition to Base Compensation, the Board or the Committee,
as applicable, in its sole and absolute discretion may, but shall in no event
be obligated to, authorize the payment
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<PAGE> 3
of a bonus to Executive, payable in cash or shares of Common Stock of Employer
("Common Stock"), based upon achievement of corporate and individual
performance objectives established by the Board or the Committee, as
applicable.
(c) BENEFITS. During the Employment Term and subject to the limitations
and alternative rights set forth in this Section 3(c), Executive and his
eligible dependents shall have the right to participate in any retirement,
pension, insurance, health or other benefit plan or program that has been or is
hereafter adopted by Employer (or in which Employer participates) according to
the terms of such plan or program with all the benefits, rights and privileges
as are enjoyed by any other senior executive officer of Employer. If the
participation of Executive would adversely affect the qualification of a plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as the same may be amended from time to time (the "Code"), Employer shall
have the right to exclude Executive from that plan in return for his
participation in (i) a nonqualified deferred compensation plan or (ii) an
arrangement providing substantially comparable benefits under a plan that is
either a qualified or nonqualified plan under the Code, at Employer's option.
(d) VACATION AND LEAVES OF ABSENCE. Executive shall be entitled to four
weeks of paid vacation leave during each 12-month period and paid holidays in
accordance with Employer's established policies. In addition to the foregoing,
Executive may be granted leaves of absence with or without pay as shall be
mutually agreed upon by the Board and Executive.
(e) EXPENSES. Executive shall be reimbursed, subject to the Company's
receipt of invoices or similar records as the Company may reasonably request in
accordance with its policies and procedures, for all reasonable and necessary
expenses incurred by Executive in the performance of his duties hereunder.
(f) OPTIONS. During the Employment Term, Executive shall have the right
to participate in Employer's 1994 Stock Incentive Plan, 1996 Stock Incentive
Plan, 1997 Long Term Incentive Plan and any similar plan adopted by Employer;
provided, however, all grants of stock options with respect to such plans, and
the terms of such options, shall be in the sole and absolute discretion of the
Board or the Committee, as applicable. Notwithstanding the foregoing, the
vesting of the 25,000 options to purchase Common Stock held by Executive as of
the date of this Agreement shall be accelerated so that such options shall be
fully vested and exercisable as of the date of this Agreement.
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<PAGE> 4
4. CHANGE OF CONTROL COMPENSATION. On only one occasion, in the event of
a Change of Control of Employer during the Employment Term or within 6 months
after a termination of the Employment Term by Employer pursuant to Sections
5(a)(i) or 5(a)(iii) in contemplation of such Change of Control or by Executive
pursuant to Section 5(b)(i), Employer shall pay to Executive, within 30 days
after the date of such Change of Control, in one lump sum, subject to
withholding for applicable federal, state and local taxes, an amount equal to
the lesser of (a) $385,000 and (b) 2.99 times Executive's "base amount" (as
such term is used in Code Section 280G) ("Change of Control Compensation");
provided, however, that in the event that such amount when aggregated with any
other amounts that are or, absent this provision, would be "parachute payments"
(as such term is used in Code Section 280G) with respect to Executive exceeds
2.99 times Executive's base amount, then the amount of the Change of Control
Compensation shall be reduced such that when aggregated with such other
amounts, the aggregate amount shall not exceed 2.99 times Executive's base
amount if and only if the net after-tax amount received by Executive, taking
into account such reduction, exceeds the net after-tax amount, taking into
account any additional tax as a result of the application of Code Section 4999,
that Executive would have received if the amount of the Change of Control
Compensation had not been reduced.
For purposes of this Agreement, a "Change of Control" shall be deemed to
have occurred if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
(i) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company, (ii) a corporation owned directly or indirectly by the
stockholders of Employer in substantially the same proportions as their
ownership of stock of Employer, or controlled directly or indirectly by the
stockholders of Employer, or (iii) David M. Glickman or any of his affiliates
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Employer representing 50% or
more of the total voting power represented by Employer's then outstanding
securities which vote generally in the election of directors (referred to
herein as "Voting Securities"); or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by Employer's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election
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<PAGE> 5
or nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board; or
(c) the stockholders of Employer approve a merger or consolidation of
Employer with any other corporation, other than a merger or consolidation which
would result in the Voting Securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 50% of the
total voting power represented by the Voting Securities of Employer or such
surviving entity outstanding immediately after such merger or consolidation,
and such transaction is consummated; or
(d) the stockholders of Employer approve a plan of complete liquidation of
Employer or an agreement for the sale, assignment, conveyance, transfer, lease
or other disposition by Employer of (in one transaction or a series of
transactions) all or substantially all of Employer's assets, and such
transaction is consummated.
5. TERMINATION AND TERMINATION BENEFITS.
(a) TERMINATION BY EMPLOYER. (i) WITHOUT CAUSE. Employer may terminate
the Employment Term and Executive's employment at any time for any reason or
for no reason at all upon two weeks' prior written notice to Executive.
Employer may elect to require Executive to continue his employment under this
Agreement for a period up to 60 days. In connection with the termination of
Executive's employment pursuant to this Section 5(a)(i), Executive shall (A) be
paid his Base Compensation and any bonus otherwise payable to him in accordance
with Sections 3(a) and 3(b) and be entitled to the benefits set forth in
Sections 3(c), 3(d) and 3(e) up to the effective date of such termination and
(B) receive the Termination Compensation specified in Section 5(d).
(ii) WITH CAUSE. Employer may terminate the Employment Term with Cause
immediately with written notice to Executive. Employer may elect to require
Executive to continue to perform his duties under this Agreement for a period
up to 30 days following notice of termination. In connection with the
termination of Executive's employment pursuant to this Section 5(a)(ii),
Executive shall (A) be paid his Base Compensation up to the effective date of
such termination, (B) forfeit his entitlement to any bonus otherwise payable to
him in accordance with Section 3(b) and (C) be entitled to the benefits set
forth in Sections 3(c), 3(d) and 3(e) up to the effective date of such
termination. For purposes of this Agreement, "Cause" shall mean
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<PAGE> 6
a finding by the Board:
(1) that Executive has materially harmed Employer or the
Operating Partnership through an act of dishonesty or material
conflict of interest which relates to the performance of
Executive's duties hereunder,
(2) that Executive was convicted of a felony, or
(3) that Executive failed to perform in any material respect
the duties required by this Agreement (other than a failure due to
disability) after written notice specifying the failure and a
reasonable opportunity to cure (it being understood that if
Executive's failure to perform is not of a type requiring a single
action to fully cure, then Executive may commence the cure
promptly after such written notice and thereafter diligently
prosecute such cure to completion).
(iii) DISABILITY. If due to illness, physical or mental disability, or
other incapacity, Executive shall fail during any four consecutive months to
perform in any material respect the duties required by this Agreement, Employer
may terminate the Employment Term upon 30 days' written notice to Executive.
In connection with the termination of Executive's employment pursuant to this
Section 5(a)(iii), Executive shall (A) continue to receive his Base
Compensation payable to him in accordance with Section 3(a) and be entitled to
the benefits set forth in Sections 3(c) (or the after-tax cash equivalent
thereof), 3(d) and 3(e) up to the effective date of such termination, (B) be
paid any bonus otherwise payable to him in accordance with Section 3(b) and (C)
receive the Termination Compensation specified in Section 5(d). This Section
5(a)(iii) shall not limit the entitlement of Executive, his estate or
beneficiaries to any disability or other benefits available to Executive under
any disability insurance or other benefits plan or policy which is maintained
by Employer for Executive's benefit.
(b) TERMINATION BY EXECUTIVE. (i) WITH GOOD REASON. Executive may
terminate this Agreement with Good Reason upon written notice to Employer. At
the election of Employer, Executive shall continue his employment under this
Agreement for a period up to 30 days following notice of termination. In
connection with the termination of Executive's employment pursuant to this
Section 5(b)(i), Executive shall (A) be paid his
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<PAGE> 7
Base Compensation and any bonus otherwise payable to him in accordance with
Sections 3(a) and 3(b) and be entitled to the benefits set forth in Sections
3(c), 3(d) and 3(e) up to the effective date of such termination and (B)
receive the Termination Compensation specified in Section 5(d).
For purposes of this Agreement, "Good Reason" shall mean (x) the material
breach by Employer of its obligations hereunder and the failure of Employer to
cure such breach within 30 days after receipt by Employer of a written notice
from Executive specifying in reasonable detail the nature of the breach or (y)
any material diminution in the scope of Executive's responsibilities and
duties.
(ii) WITHOUT GOOD REASON. Executive may terminate the Employment Term
at any time for any reason or for no reason at all upon 60 days' written notice
to Employer, during which period Executive shall continue to perform his duties
under this Agreement if Employer so elects, provided, however, that, by written
notice to Executive, Employer shall have the right to accelerate the effective
date of such termination to any date following Executive's notice of
termination (including the day on which such notice is given). In connection
with the termination of Executive's employment pursuant to this Section
5(b)(ii), Executive shall be paid his Base Compensation and any bonus otherwise
payable to him in accordance with Sections 3(a) and 3(b) and be entitled to the
benefits set forth in Sections 3(c), 3(d) and 3(e) up to the effective date of
termination.
(c) DEATH. Notwithstanding any other provision of this Agreement, the
Employment Term shall terminate on the date of Executive's death. In
connection with the termination of Executive's employment pursuant to this
Section 5(c), Executive shall be paid his Base Compensation and any bonus
otherwise payable to Executive by reason of Executive's performance up to the
date of Executive's death in accordance with Sections 3(a) and 3(b). This
Section 5(c) shall not limit the entitlement of Executive under any insurance
or other benefits plan or policy which is maintained by Employer for
Executive's benefit.
(d) TERMINATION COMPENSATION. In the event of a termination of the
Employment Term pursuant to Section 5(a)(i), 5(a)(iii) or 5(b)(i), Employer
shall pay to Executive, within 30 days of termination, in one lump sum, subject
to withholding for applicable federal, state and local taxes, an amount equal
to the greater of (i) 50% of Executive's annual Base Compensation as of the
effective date of termination or (ii) 50% of the product of (A) Executive's
annual Base Compensation as of the effective date of termination times (B) a
fraction, the numerator of which is
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<PAGE> 8
the number of days between such date of termination and expiration of the
Employment Term and the denominator of which is 365 ("Termination
Compensation"); provided, however, if there shall have been a Change of Control
such that Executive has received or within the six-month plus 30-day period
after the date of such termination receives the Change of Control Compensation
provided for in Section 4, then the amount of the Termination Compensation
shall be zero.
6. COVENANTS OF EXECUTIVE.
(a) NO CONFLICTS. Executive represents and warrants that he is not
personally subject to any agreement, order or decree which restricts his
entering into this Agreement and performing his duties with Employer hereunder.
(b) RESTRICTIVE COVENANT; CONSULTING SERVICES. (i) During the Employment
Term and for a period of one year following the termination of the Employment
Term (the Employment Term and such one-year period are referred to together as
the "Restrictive Period"), except for Passive Investments and except for
investments held as of the date hereof and identified on Exhibit A, Executive
shall not engage in, directly or indirectly, or be interested in (as owner,
partner, shareholder, employee, director, officer, agent, consultant or
otherwise), with or without compensation, the acquisition, development,
construction, renovation, leasing, ownership or management of multifamily
apartment properties in the Territory.
(ii) For a period of six months following the termination of the
Employment Term, Executive hereby agrees to consult with the Board and
management of Employer and its subsidiaries in such manner and on such business
and financial matters as may be reasonably requested from time to time by the
Board, including but not limited to corporate strategy, budgeting and future
investments, acquisitions and dispositions and strategies therefor, and debt
and equity financings; provided, however, in no event shall Executive be
required to provide more than 20 hours of such services in any month.
(iii) As compensation for the restrictions after the Employment Term
contained in Section 6(b)(i) and the services to be performed pursuant to
Section 6(b)(ii), Employer shall pay to Executive, within 30 days of
termination, in one lump sum, subject to withholding for applicable federal,
state and local taxes, an amount equal to $215,000.
(iv) In the event of a termination of the Employment pursuant to
Section 5(a)(ii), Employer may, in its sole and
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<PAGE> 9
absolute discretion, with notice to Executive within 15 days after the date of
such termination, elect to waive the restrictions contained in Section 6(b)(i)
and its right to receive the services set forth in Section 6(b)(ii), and in
such event Employer shall be relieved of its obligations to make the payment
set forth in Section 6(b)(iii).
(v) For purposes of this Agreement,
(A) a "Passive Investment" is an investment where
(1) Executive beneficially holds an equity interest in
such investment which is no greater than 5% of all
equity interests in such entity or venture, whether or
not such entity or venture is subject to the reporting
requirements of the Exchange Act and (2) Executive's
return is based in all material aspects upon the money
or other assets invested and as to which no services
are provided;
(B) a "Principal Market" is a geographic market area
in which the Company, directly or indirectly through
the Operating Partnership or any of their respective
subsidiaries or affiliates (collectively, the "Group"),
during the Employment Term and, for purposes of the
Restrictive Period following the termination of the
Employment Term, on the last day of the Employment
Term, owns or manages more than 1,000 apartment units;
and
(C) "Territory" means (1) during the Employment Term, anywhere in
the United States of America, and (2) during the Restrictive Period
following the termination of the Employment Term, the Principal
Markets.
(c) NO SOLICITATION. During the Restrictive Period, Executive shall not,
directly or indirectly, solicit or contact any employee of any member of the
Group with a view to inducing or encouraging such employee to leave the employ
of the Company or such other person for the purpose of being hired by
Executive, an employer affiliated with Executive or any competitor of any
member of the Group.
(d) NON-DISCLOSURE. Executive shall not disclose or use, during the
Restrictive Period or any time thereafter, except in the pursuit of the
business for or on behalf of the Group, any Trade Secret of the Group, whether
such Trade Secret is in
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<PAGE> 10
Executive's memory or embodied in writing or other physical form.
For purposes of this Agreement, "Trade Secret" means any information which
derives independent economic value, actual or potential, with respect to the
Group from not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its
disclosure or use and is the subject of efforts to maintain its secrecy that
are reasonable under the circumstances, including, but not limited to, trade
secrets, tenant lists and other proprietary commercial information. However,
the term "Trade Secrets" shall not include general "know-how" information
acquired by Executive during the course of his employment which could have been
obtained by him from public sources without the expenditure of significant
time, effort and expense which does not relate to the Group.
(e) RETURN OF DOCUMENTS. Upon termination of employment, Executive shall
return all originals and copies of books, records, documents, customer lists,
sales materials, tapes, keys, credit cards and other property of the Company
within Executive's possession or under his control, but specifically excluding
personal effects of Executive such as his personal rolodex, diary and files,
whether in written or electronic form, including computer files.
(f) ACKNOWLEDGMENT. Executive acknowledges that he will be directly and
materially involved as a senior executive officer in all important policy and
operational decisions of Employer and other members of the Group. Executive
further acknowledges that the scope of the foregoing restrictions has been
specifically bargained between Employer and Executive, each being fully
informed of all relevant facts. Accordingly, Executive acknowledges that the
foregoing restrictions of this Section 6 are fair and reasonable, are the
minimum necessary to protect Employer, other members of the Group, the
stockholders of Employer and the public from the unfair actions, direct or
indirect, of Executive who, as a result of his employment with Employer, will
have had unlimited access to the most confidential and important information of
Employer, other members of the Group, and the business and future plans of the
Group.
7. PRIOR AGREEMENT. This Agreement supersedes and is in lieu of any and
all other employment arrangements between Executive and Employer or its
predecessor or any subsidiary and any and all such employment agreements and
arrangements are hereby terminated and deemed of no further force or effect.
8. ASSIGNMENT. Neither this Agreement nor any rights or
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<PAGE> 11
duties of Executive hereunder shall be assignable by Executive and any such
purported assignment by him shall be void. Employer may assign all or
any of its rights hereunder to any member of the Group, and to any other person
provided that substantially all of the assets of the Company are also
transferred to such other person.
9. SUCCESSOR TO EMPLOYER. Employer will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all the business or assets of Employer, as the case may
be, expressly, absolutely and unconditionally to assume and agree to perform
this Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession or assignment had taken place.
Any failure of Employer to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement.
This Agreement shall inure to the benefit of and be enforceable by Executive's
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Executive should die while any
amounts are still payable to Executive hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee or, if there be no
such designee, to Executive's estate.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally, by overnight courier service, or by facsimile
transmission, in any case with receipt acknowledged, or three days after being
sent by registered or certified mail, return receipt requested, postage
prepaid, to the following addresses (or to any other address that any party may
designate by notice to the other parties hereto):
(a) if to Executive, to:
Thomas J. Coorsh
4335 Lindenwood
Northbrook, IL 60062
With a copy to:
________________________
________________________
________________________
_________________________
Attention: ______________
- 11 -
<PAGE> 12
(b) if to Employer, to:
Ambassador Apartments, Inc.
77 West Wacker Drive, Suite 4040
Chicago, IL 60601
Attention: Chief Executive Officer
Telephone: (312) 917-1600
Facsimile: (312) 917-9910
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Robert S. Osborne, P.C.
Telephone: (312) 861-2368
Facsimile: (312) 861-2200
11. AMENDMENT. This Agreement may not be changed, modified or amended
except in writing signed by both parties hereto.
12. WAIVER OF BREACH. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by either party.
13. SEVERABILITY. Employer and Executive each expressly agree and
contract that it is not the intention of either party to violate any public
policy, statutory or common law, and that if any sentence, paragraph, clause or
combination of the same of this Agreement is in violation of the law of any
state where applicable, such sentence, paragraph, clause or combination of the
same shall be void in the jurisdictions where it is unlawful, and the remainder
of this Agreement shall remain binding on the parties to make the covenants of
this Agreement binding only to the extent that it may be lawfully done under
the existing applicable laws. In the event that any part of any covenant of
this Agreement is determined by a court of competent jurisdiction to be overly
broad thereby making the covenant unenforceable, the parties hereto agree, and
it is their desire that such court shall substitute a judicially enforceable
limitation in its place, and that as so modified the covenant shall be binding
upon the parties as if originally set forth herein.
14. OPPORTUNITY TO EMPLOY COUNSEL. Executive acknowledges receipt of a
copy of this Agreement prior to its execution by him and also acknowledges that
he has had ample time and opportunity to employ counsel of his choice to
provide advice concerning the terms and conditions of this Agreement and
Executive's
- 12 -
<PAGE> 13
prospective employment with Employer.
15. EQUITABLE RELIEF; LIMITATIONS ON RELIEF. In the event of any breach
by either party of any of the covenants contained in this Agreement, including,
without limitation, any covenant contained in Section 6 other than Section 6(b)
as described below, it is specifically understood and agreed that the other
party shall be entitled, in addition to any other remedy which it may have, to
equitable relief by way of injunction, an accounting or otherwise and, in the
case of Employer, to notify any employer or prospective employer of Executive
as to the terms and conditions hereof. Notwithstanding any other provision of
this Agreement to the contrary, in the event that Executive breaches the
restrictions after the Employment Term contained in Section 6(b)(i) or fails to
perform the services required by Section 6(b)(ii), Employer's sole and only
remedy therefor shall be to receive from Executive liquidated damages in, and,
within 30 days of notice from Employer to Executive of such breach or failure,
Executive shall pay to Employer, an amount equal to (x) $17,917 times (y) the
number of months remaining in the one-year period following the termination of
the Employment Term as of the date of such breach or failure, including, the
month in which such breach or failure occurred.
16. INDEMNIFICATION.
(a) INDEMNIFICATION BY EMPLOYER. To the extent permitted by applicable
law, Employer shall indemnify Executive as provided in its Articles of
Incorporation and Bylaws as of the date of this Agreement.
(b) INDEMNIFICATION BY EXECUTIVE. Executive shall indemnify the Company
for any and all damages, costs and expenses resulting from any of his acts or
omissions that cause harm to the Company, its business or its reputation if and
to the extent that Employer is not required to indemnify Executive therefor
pursuant to Section 16(a).
17. GOVERNING LAW. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Illinois,
exclusive of the conflict of laws provisions of the State of Illinois.
18. NOTICE OF FUTURE EMPLOYMENT. Executive agrees that during the
Restrictive Period, Employee will within 14 days of each instance of new
employment, notify Employer in writing of the identify of his new employer and
the job title associated with such employment.
- 13 -
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
AMBASSADOR APARTMENTS, INC.
By: _________________________
Name:
Title:
______________________________
Thomas J. Coorsh
- 14 -
<PAGE> 15
EXHIBIT A
to
EMPLOYMENT AGREEMENT
<PAGE> 1
EXHIBIT 10.73
THE SECURITY REPRESENTED BY THIS INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS SO REGISTERED OR UNLESS AN EXCEPTION FROM SUCH
REGISTRATION IS AVAILABLE
SECURED NON-RECOURSE PROMISSORY NOTE
------------------------------------
$700,000 Chicago, Illinois
April 7, 1997
FOR VALUE RECEIVED, the undersigned, DEBRA A. CAFARO (the "Borrower"),
hereby promises to pay to AMBASSADOR APARTMENTS, L.P., ("Lender"), the
principal amount of SEVEN HUNDRED THOUSAND DOLLARS ($700,000), together with
interest accruing from the date hereof until maturity on the principal amount
from time to time remaining unpaid hereunder computed on the basis of a 365-day
year at a rate of SIX AND THIRTY-EIGHT HUNDREDTHS percent (6.38%) per annum.
The Borrower shall use the principal amount of this Note advanced to the
Borrower to purchase 32,990 common units of partnership interest in the Lender
(the "Pledged Common Units").
1. Payment of Principal and Interest. The Borrower shall pay to the
Lender any and all accrued and unpaid interest on this Note, quarterly in
arrears, which payment shall be due on the same date as regular quarterly
distributions are made with respect to the Pledged Common Units; provided,
however, that any such payment of interest shall be in respect of (and based
upon the number of days in) the fiscal quarter of Lender that the corresponding
distribution is in respect of. If no such distribution is made by the last day
of the second month of any fiscal quarter of the Lender, then on such date the
Borrower shall pay to the Lender any and all accrued and unpaid interest on
this Note as of the last day of the immediately preceding fiscal quarter. Any
and all distributions to which the Borrower may be entitled under the terms of
the Amended and Restated Agreement of Limited Partnership of Ambassador
Apartments, L.P. dated as of August 31, 1994, as amended through the date
hereof (the "Partnership Agreement"), in respect of the Pledged Common Units
shall immediately be applied by the Lender first to pay any and all accrued and
unpaid interest on this Note required to be paid by Borrower pursuant to the
first two sentences of this Section 1, with the Borrower being entitled to
receive and retain the amount of cash distributions, if any, which are in
excess of such interest payments ("Excess Distributions"). In addition, the
proceeds of the transfer of all or any portion of the Pledged Common Units
(which transfer requires the prior written consent of the Lender, which it may
withhold in its sole discretion)
<PAGE> 2
shall be applied by the Lender first to pay any and all accrued and unpaid
interest on this Note and then to pay any unpaid principal on this Note. All
principal and interest which have not theretofore been prepaid pursuant to the
previous four sentences shall be due and payable on the earlier of (i) June 30,
2000, and (ii) six months after the termination of Borrower's employment with
the Company and the Partnership for any reason; provided, however, that the
June 30, 2000, maturity date of this Note shall not be accelerated by any
termination of the Employment Term (as defined in the Employment Agreement,
dated as of the date hereof, between Ambassador Apartments, Inc. and the
undersigned (the "Employment Agreement")) pursuant to Sections 5(a)(i),
5(a)(iii), 5(b)(i) (other than pursuant to clause (z) of the definition of Good
Reason (as defined in the Employment Agreement) or 5(c) of the Employment
Agreement. In addition, the accelerated maturity date applicable to any other
termination of the Employment Term (i.e., the date which is 6 months following
such termination) shall be extended by the duration of and for so long as there
shall exist any blackout period or other condition not in the control of
Executive which becomes operative during the period following such termination
and which prohibits the conversion of the Pledged Common Units, or a delay not
in the control of Borrower in registering the Common Stock of Ambassador
Apartments, Inc. received upon conversion of the Pledged Common Units for sale,
either due to the pendency of a registration blackout or caused by the
unavailability of such a registration statement or a prospectus as may be
necessary for such sale to be effectuated. The intent of the foregoing
extensions of the accelerated maturity date is to afford Borrower the full
benefit of a "normal" six-month period following termination of her employment
in which to convert the Pledged Common Units and to sell such Common Stock, so
as to be able to repay this Note.
2. Security Interest; Exculpation. All of the obligations of the Borrower
constitute one loan secured by the Lender's security interests in the Pledged
Common Units pledged by the Borrower to the Lender pursuant to that certain
Pledge and Security Agreement date of even date herewith executed by the
Borrower and the Lender (the "Pledge Agreement"), and by all other security
interests, liens, mortgages, claims and encumbrances now or from time to time
hereafter granted by the Borrower to the Lender under the Pledge Agreement
(collectively, the "Collateral"). Notwithstanding anything to the contrary
contained herein or in any documents or instruments at any time evidencing or
securing the Loan (including the Pledge Agreement), this Note and the
obligations and liabilities evidenced or secured hereby, or by such documents
and instruments, are non-recourse, and it is understood and agreed that the
Borrower shall not be personally liable for the repayment of this Note, or any
of such obligations or liabilities, and that in any proceeding for the
enforcement of the indebtedness evidenced by this Note,
-2-
<PAGE> 3
or such obligations or liabilities, the Lender shall only have the right to
exercise its lien on, or security interest in, the Collateral, and may not seek
or obtain any personal or other judgment against the Borrower or any other
person personally or any other assets or properties of the Borrower or any
other person.
3. Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Note:
(i) the Borrower fails to pay any of its obligations,
including, without limitation, any payment of interest or
principal under this Note, when such obligations are due;
(ii) the Borrower fails or neglects to perform, keep or
observe any of the covenants, conditions or agreements contained
in this Note;
(iii) any warranty or representation now or hereafter made by
the Borrower in connection with this Note is untrue or incorrect in
any material respect;
(iv) bankruptcy, reorganization, receivership, insolvency or
other similar proceedings shall be instituted by or against the
Borrower or all or any part of the Borrower's property under the
Federal Bankruptcy Act or other law of the United States or of any
state or other competent jurisdiction and, if against the
Borrower, the Borrower shall consent thereto or shall fail to
cause the same to be discharged within 30 days;
(v) any "Event of Default" as such term is defined in the Pledge
Agreement.
4. Deliveries. Simultaneously with the execution of this Note, the
Borrower shall deliver to the Lender the following:
(i) the Pledge Agreement executed by the Borrower; and
(ii) a direction letter ("Direction Letter") executed by the
Borrower to the Lender of even date herewith requesting and
authorizing the Lender to (a) apply all distributions to which the
Borrower is entitled under the Partnership Agreement directly
against the accrued and unpaid interest due and payable by the
Borrower under this Note and (b) deliver any Excess Distributions
to the Borrower.
-3-
<PAGE> 4
5. Form and Place of Payment. Payments on this Note shall be in lawful
currency of the United States of America. Payments shall be applied by the
Lender against the Borrower's obligations under this Note as provided herein.
6. Binding Effect. This Note has been duly executed and delivered by the
Borrower, is the legal, valid and binding obligation of the Borrower and is
enforceable against the Borrower in accordance with its terms.
7. Business Address. As of the execution hereof, the Borrower's principal
and only place of business and residence are located at the addresses set forth
in Section 14. The Borrower shall give the Lender at least 15 days' prior
written notice of any change in the Borrower's principal place of business or
residence. With respect to any such new business or residence location, the
Borrower shall execute and deliver to the Lender such documents and take such
actions as the Lender deems reasonably necessary to perfect and protect the
Lender's security interest in the Pledged Common Units.
8. Reliance by the Lender. All covenants, agreements, representations and
warranties made herein or in the Pledge Agreement by the Borrower shall,
notwithstanding any investigation by the Lender, be deemed to be material to
and to have been relied upon by the Lender.
9. Parties and Assignment. Whenever in this Note, a reference is made to
any of the parties hereto, such reference shall be deemed to include, wherever
applicable, a reference to the successors and assigns of the Borrower and the
Lender. Notwithstanding the foregoing, the Borrower may not sell, assign or
transfer this Note, or the Pledge Agreement or any portion thereof, including,
without limitation, its rights, titles, interests, remedies, powers or duties
hereunder or thereunder.
10. APPLICABLE LAW; SEVERABILITY. THIS NOTE AND THE PLEDGE AGREEMENT HAVE
BEEN SUBMITTED TO THE LENDER AT ITS OFFICE IN CHICAGO, ILLINOIS, AND THIS NOTE
AND THE PLEDGE AGREEMENT, SHALL NOT BE BINDING UPON THE LENDER OR EFFECTIVE
UNTIL ACCEPTED BY THE LENDER AND SHALL BE CONSTRUED AND ENFORCED IN ALL
RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, ALL OF THE PROVISIONS OF THE
UNIFORM COMMERCIAL CODE OF THE STATE OF ILLINOIS AND BY THE OTHER INTERNAL LAWS
(AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS. WHENEVER
POSSIBLE, EACH PROVISION OF THIS NOTE SHALL BE INTERPRETED IN SUCH A MANNER AS
TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS
NOTE SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION
SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY,
WITHOUT INVALIDATING THE REMAINDER OF
-4-
<PAGE> 5
SUCH PROVISIONS OR THE REMAINING PROVISIONS OF THIS NOTE, PROVIDED THAT WHERE
SUCH PROVISIONS MAY BE WAIVED, THEY HEREBY ARE WAIVED BY THE BORROWER TO THE
FULL EXTENT PERMITTED BY LAW TO THE END THAT THIS NOTE SHALL BE DEEMED TO BE
VALID AND BINDING IN ACCORDANCE WITH ITS TERMS.
11. SUBMISSION TO JURISDICTION; WAIVER OF JURY AND BOND. THE BORROWER
HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN CHICAGO IN THE STATE OF ILLINOIS, AND IRREVOCABLY AGREES THAT, SUBJECT
TO THE LENDER'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS RELATING
TO THIS NOTE AND THE PLEDGE AGREEMENT SHALL BE LITIGATED IN SUCH COURTS, AND
THE BORROWER WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE BASED ON IMPROPER
VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH
COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON THE BORROWER, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED
TO THE BORROWER AT THE ADDRESS SET FORTH IN SECTION 14 AND THAT SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR FIVE DAYS
AFTER THE SAME SHALL HAVE BEEN POSED TO THE BORROWER'S ADDRESS. THE LENDER AND
THE BORROWER ACKNOWLEDGE THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY
EXCEED THE TIME AND EXPENSE REQUIRED FOR A BENCH TRIAL AND HEREBY WAIVE, TO THE
EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
LENDER. NOTHING CONTAINED IN THIS SECTION 11 SHALL AFFECT THE RIGHT OF THE
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER
OR THE PLEDGED COMMON UNITS IN THE COURTS OF ANY OTHER JURISDICTION.
12. Section Titles. The section and subsection titles contained in this
Agreement shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties.
13. Incorporation by Reference. The provisions of the Pledge Agreement
are incorporated in this Note by this reference. Except as otherwise provided
in this Note and except as otherwise provided in the Pledge Agreement by
specific reference to the applicable provisions of this Note, if any provision
contained in this Note is in conflict with, or inconsistent with, any
provisions in the Pledge Agreement, the provision contained in this Note shall
govern and control.
14. Notices. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered
five days after deposit in the United States mails, with proper postage
prepaid,
-5-
<PAGE> 6
or upon deliver by courier or upon transmission by telex, telecopy or similar
electronic medium to the following addresses:
If to the Lender: Ambassador Apartments, L.P.
77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
Attention: Chief Executive Officer
And a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Robert S. Osborne, P.C.
If to the Borrower: Debra A. Cafaro
Residence:
248 South Avenue
Glencoe, Illinois 60022
Business:
c/o Ambassador Apartments, Inc.
77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
(Notices to be sent to residence address)
And a copy to: Barrack Ferrazzano Kirschbaum Perlman &
Nagelberg
333 West Wacker Drive, Suite 2700
Chicago, Illinois 60606
Attention: Howard A. Nagelberg
or to such other address as each party designates to the other in the manner
herein prescribed.
15. Waivers. The Borrower, for herself and her heirs, successors and
assigns, expressly waives presentment, demand, protest, notice of presentment,
notice of protest, notice of dishonor, notice of nonpayment, notice of maturity
and presentment for the purpose of accelerating maturity and diligence in
collection.
16. Entire Agreement. This Notice, the Pledge Agreement and the Direction
Letter, including all exhibits and other documents attached hereto or thereto
or incorporated by reference herein or therein, constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede all
other understandings, oral or written, with respect to the subject matter
hereof.
-6-
<PAGE> 7
17. No Fiduciary Relationship. No provision herein or in the Pledge
Agreement and no course of dealing between the parties shall be deemed to
create any fiduciary relationship between the Lender and the Borrower.
18. COUNSEL. THE BORROWER ACKNOWLEDGES THAT THE BORROWER HAS BEEN ADVISED
BY COUNSEL OF THE BORROWER'S CHOICE WITH RESPECT TO THIS NOTE AND THE
TRANSACTIONS CONTEMPLATED HEREBY, AND THE BORROWER ACKNOWLEDGES AND AGREES THAT
(i) EACH OF THE WAIVERS SET FORTH HEREIN WERE KNOWINGLY AND VOLUNTARILY MADE,
(ii) THE OBLIGATIONS OF THE LENDER HEREUNDER SHALL BE STRICTLY CONSTRUED AND
SHALL BE EXPRESSLY SUBJECT TO THE BORROWER'S COMPLIANCE IN ALL RESPECTS WITH
THE TERMS AND CONDITIONS HEREIN SET FORTH, AND (iii) NO REPRESENTATIVE OF THE
LENDER HAS WAIVED OR MODIFIED ANY OF THE PROVISIONS OF THIS NOTE AS OF THE DATE
HEREOF.
_________________________
DEBRA A. CAFARO,
without personal recourse
-7-
<PAGE> 1
EXHIBIT 10.74
AMENDMENT NO. 4
TO
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AMBASSADOR APARTMENTS, L.P.
AMENDMENT NO. 4, dated as of April 7, 1997 (this "Amendment No. 4"), by
and among Ambassador Apartments, Inc. (formerly Prime Residential, Inc.), a
Maryland corporation, in its capacity as general partner (the "General
Partner") of Ambassador Apartments, L.P. (formerly Prime Residential, L.P.), a
Delaware limited partnership (the "Partnership"), and the limited partners
listed on Exhibit A to the Partnership's Amended and Restated Agreement of
Limited Partnership dated as of August 31, 1994, as amended through the date
hereof (the "Partnership Agreement"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the
Partnership Agreement.
RECITALS:
WHEREAS, prior to the date hereof, the General Partner issued and sold in
the aggregate 116,000 shares of Common Stock, par value $.01 per share, to
certain current and former employees upon the exercise of outstanding stock
options, the net proceeds of which were contributed to the Partnership in
exchange for 116,000 Common Units;
WHEREAS, on April 7, 1997, the Partnership issued 32,990 Common Units to
Debra A. Cafaro in exchange for $800,000 and Ms. Cafaro agreed to become a
Limited Partner in the Partnership and to be bound the terms and conditions of
the Partnership Agreement; and
WHEREAS, Section 14.7 of the Partnership Agreement authorizes the General
Partner to amend the Partnership Agreement without the Consent of the Partners
to reflect the issuance of Common Units pursuant to Sections 4.3 and 4.4 of the
Partnership Agreement.
NOW THEREFORE, the General Partner, on behalf of all Partners, hereby
amends the Partnership Agreement as follows:
1. Exhibit A to the Partnership Agreement is hereby amended and
restated in its entirety as set forth on Exhibit A attached hereto to
reflect the issuance to the General Partner of 116,000 Common Units and
the issuance to Debra A. Cafaro of 32,990 Common Units.
<PAGE> 2
2. Except as amended by this Amendment No. 4, the Partnership
Agreement remains unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 4
as of the date and year first above written.
GENERAL PARTNER:
AMBASSADOR APARTMENTS, INC.
By: ________________________________
Name:
Title:
LIMITED PARTNERS:
THE PRIME GROUP, INC.
PRIME GROUP LIMITED PARTNERSHIP
DAVID M. GLICKMAN
ADAM D. PETERSON
PRIME GROUP IV, L.P.
EDWARD J. JOHN
MICHAEL W. RESCHKE
RAY R. GRINVALDS
ROBERT J. RUDNICK
WARREN H. JOHN
DEBRA A. CAFARO
By: Ambassador Apartments, Inc. as
Attorney in Fact for the Limited
Partners pursuant to Section 2.6
of the Partnership Agreement
By: ___________________________
Name:
Title:
2
<PAGE> 3
EXHIBIT A
PARTNERSHIP UNITS (AS OF APRIL 7, 1997)
<TABLE>
<CAPTION>
NUMBER OF
COMMON UNITS
NUMBER OF OTHER THAN TOTAL NUMBER OF
INITIAL INITIAL NUMBER OF CLASS A
GENERAL PARTNER COMMON UNITS COMMON UNITS COMMON UNITS PREFERRED UNITS
- --------------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Ambassador Apartments, Inc. 17,280 9,158,900 9,176,180 1,351,351
LIMITED PARTNERS
- ----------------
The Prime Group, Inc. 359,375 359,375
David M. Glickman 156,250* 156,250*
Adam D. Peterson 15,625 15,625
Prime Group IV, L.P. 244,166** 244,166**
Edward J. John 52,839*** 52,839***
Michael W. Reschke 29,505*** 29,505***
Ray R. Grinvalds 1,568*** 1,568***
Robert J. Rudnick 1,500*** 1,500***
Warren H. John 1,500*** 1,500***
Debra A. Cafaro 32,990 32,990
Total Common Units Held by
Limited Partners 895,318
TOTAL COMMON UNITS 10,071,498
TOTAL CLASS A
PREFERRED UNITS 1,351,351
</TABLE>
* Includes 2,683 and 153,567 Initial Common Units, respectively, that The
Prime Group, Inc. and Prime Group Limited Partnership transferred to David M.
Glickman immediately following the Completion of the Offering. All Common
Units transferred to David M. Glickman constitute Initial Common Units.
** Represents 328,125 Initial Common Units transferred by Prime Group Limited
Partnership to Prime Group IV, L.P. immediately following the Completion of the
Offering. All of these Common Units transferred to Prime Group IV, L.P.
constitute Initial Common Units.
*** Represents Initial Common Units transferred by Prime Group Limited
Partnership and/or Prime Group IV, L.P. in February 1996. All such Common
Units constitute Initial Common Units.
<PAGE> 4
CAPITAL CONTRIBUTIONS OF GENERAL PARTNER
1. Initial Capital Contribution of General Partner: $110,592,149
2. Additional Capital Contribution of General Partner as of September 20,
1994: $17,105,376
3. Additional Capital Contribution of General Partner as of August 12, 1996:
$24,123,000
4. Additional Capital Contribution of General Partner as of February 5,
1997: $1,902,500
5. Additional Capital Contribution of General Partner as of March 24, 1997:
$15,250
Total Capital Contribution of General Partner: $153,738,275
<PAGE> 5
JOINDER
Effective as of the date written below, the undersigned hereby joins in
that certain Amended and Restated Agreement of Limited Partnership Agreement of
Ambassador Apartments, L.P. (formerly Prime Residential, L.P.), dated as of
August 31, 1994, as amended from time to time (the "Partnership Agreement"),
for the purposes of becoming a party thereto as a Limited Partner therein and
agrees to be bound by all of the terms and conditions of the Partnership
Agreement, including, without limitation, the power of attorney granted in
Section 2.6. Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Partnership Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Joinder as of the
7th day of April, 1997.
______________________
Debra A. Cafaro
<PAGE> 1
EXHIBIT 10.75
AMENDMENT NO. 1
TO
EXCHANGE RIGHTS AGREEMENT
AMENDMENT NO. 1, dated as of April 7, 1997 (this "Amendment No. 1"), to
the Exchange Rights Agreement, dated as of August 31, 1994 (the "Exchange
Rights Agreement"), by and among Ambassador Apartments, Inc. (formerly Prime
Residential, Inc.), a Maryland corporation (the "Company") and the sole general
partner of Ambassador Apartments, L.P. (formerly Prime Residential, L.P.), a
Delaware limited partnership (the "Operating Partnership"), and each existing
and future limited partner of the Operating Partnership (individually, a
"Limited Partner" and collectively, the "Limited Partners") now or hereafter
listed on Exhibit A to the Exchange Rights Agreement. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
them in the Exchange Rights Agreement.
RECITALS:
WHEREAS, prior to the date hereof Prime Group Limited Partnership
transferred all of its Common Units to Edward J. John and Michael W. Reschke,
and prior to the date hereof Prime Group IV, L.P. transferred a portion of its
Common Units to Edward J. John, Michael W. Reschke, Ray R. Grinvalds, Robert J.
Rudnick and Warren H. John, each of whom has been admitted as a new Limited
Partner to the Operating Partnership who is entitled to Exchange Rights;
WHEREAS, prior to the date hereof Richard F. Cavenaugh and LG Trust have
exchanged all of the Common Units owned by each of them for Common Stock and
have withdrawn from the Operating Partnership as Limited Partners;
WHEREAS, on the date hereof Debra A. Cafaro has purchased Common Units and
has been admitted as a new Limited Partner to the Operating Partnership who is
entitled to Exchange Rights; and
WHEREAS, Section 16(d) of the Exchange Rights Agreement permits the
Company to amend Exhibit A to the Exchange Rights Agreement from time to time
to reflect the admission of any new Limited Partner to the Operating
Partnership who is entitled to Exchange Rights and the withdrawal of any
existing Limited Partner who had Exchange Rights;
NOW, THEREFORE, the Exchange Rights Agreement is hereby amended as
follows:
<PAGE> 2
1. Exhibit A to the Exchange Rights Agreement is hereby amended and
restated in its entirety as set forth on Exhibit A attached hereto to reflect
the addition of new Limited Partners to and the withdrawal of prior Limited
Partners from the Operating Partnership.
2. Except as amended by this Amendment No. 1, the Exchange Rights
Agreement remains unchanged and in full force and effect.
IN WITNESS WHEREOF, the Company has executed this Amendment No. 1 as of
the date and year first above written.
AMBASSADOR APARTMENTS, INC.
By: ______________________________
Name:
Title:
2
<PAGE> 3
EXHIBIT A
LIMITED PARTNERS
1. The Prime Group, Inc.
2. David M. Glickman
3. Adam D. Peterson
4. Prime Group IV, L.P.
5. Edward J. John
6. Michael W. Reschke
7. Ray R. Grinvalds
8. Robert J. Rudnick
9. Warren H. John
10. Debra A. Cafaro
<PAGE> 4
JOINDER
Effective as of the date written below, the undersigned hereby joins in
that certain Exchange Rights Agreement, dated as of August 31, 1994 (the
"Exchange Rights Agreement"), by and among Ambassador Apartments, Inc.
(formerly Prime Residential, Inc.) and each existing and future limited partner
of Ambassador Apartments, L.P. (formerly Prime Residential, L.P.), for the
purposes of becoming a party thereto as a Limited Partner therein and agrees to
be bound by all of the terms and conditions of the Exchange Rights Agreement.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Exchange Rights Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Joinder as of the
7th day of April, 1997.
______________________
Debra A. Cafaro
<PAGE> 1
EXHIBIT 10.76
PRIME RESIDENTIAL, INC.
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is entered into on
Residential, Inc., a Maryland corporation (the
"Company"), and
_, 1995, by and between Prime ("Director").
Director is a non-employee member of the Board of Directors of the Company. The
Company and Director mutually desire to enter into a compensation agreement
whereby
- -Director will irrevocably elect to defer receipt of payment for his
services as a member of the Board and whereby the payments so deferred
will be adjusted to reflect the performance of the Company's common stock
during the deferral period.
In consideration of the foregoing, the parties agree as follows:
1. The Company shall pay and Director shall receive compensation for any
and all services rendered by him as a director of the Company from and after
the date hereof to the extent, at the time, and in the manner hereinafter
provided.
2. The Company shall establish and maintain two bookkeeping accounts, the
first to be known as the Director's Deferred Compensation Cash Account
(hereinafter referred to as the "Cash Account"), and the second to be known as
Director's Deferred Compensation Stock Account (hereinafter referred to as the
"Stock Account").
(a) Cash Account
The Company shall regularly credit to the Cash Account (i) the dollar
amount that Director would otherwise (but for this Agreement) have been
entitled to receive for his services as a director of the Board in accordance
with the terms and provisions of any plan, policy, agreement or resolution duly
adopted by the Board from time to time, (ii) the dollar amount of dividends
that would have been payable, as of the record date applicable to any cash
dividend on the Company's common stock (the "Common Stock"), with respect to a
number of shares of common stock equal to the number of notional shares
credited to the Stock Account as of such record date and (iii) the amount of
cash or other property that would have been payable as a result of any stock
dividend or split, recapitalization, merger, consolidation or similar change or
distribution, with respect to a number of shares of Common Stock equal to the
number of notional shares then credited to the Stock Account. Such credits
shall continue for so long as there shall be notional shares of Common Stock
credited to the Stock Account.
<PAGE> 2
(b) Stock Account
On the tenth day (or, if such day is not a business day, the next business
day thereafter) of January, April, July and October of each year, the Company
shall determine the number of whole shares of Common Stock that could have been
purchased on such date with the amounts then in the Cash Account, based upon
the closing price of such shares as reported for such date in Lee Wall Street
Journal (or, if not so reported for such date, the most recent trading date so
reported). A number of notional shares corresponding to such share amount shall
be credited to the Stock Account and the amount in the Cash Account shall be
reduced accordingly. In addition, the Stock Account shall be credited with
notional securities equal to the amount of securities that would have been
payable, as a result of any stock dividend or split, recapitalization, merger,
consolidation or similar change or distribution, with respect to a number of
shares of Common Stock equal to the number of notional shares then credited to
such Account.
The foregoing accounts shall be established for bookkeeping purposes only,
shall not represent either a cash deposit or actual shares, shall not give
Director any special right in cash or shares held or owned by the Company,
shall be unfunded and unsecured, and shall not give rise to any cause of action
by Director against the Company, except at such time as Director shall become
entitled to receive payment of compensation in accordance with the terms of
this Agreement. Amounts payable under the terms of this Agreement shall be paid
from the general assets of the Company. The Company shall furnish Director
quarterly statements showing the current balances in each of the foregoing
accounts.
3. Director shall be entitled to receive, in cash, all amounts payable
hereunder [in one lump sum payment on 1 [in _ annual installments commencing on
1i except in the event of Director's death, disability or termination of
service as a director of the Board prior to such date, in which case Director
(or his beneficiary designated in accordance with paragraph 4 below) shall be
entitled to receive such payments commencing on the first business day of April
in the calendar year following such death, disability or termination of
service. The amount of each such payment shall be determined by dividing (a)
the sum of (i) the amount then credited to the Cash Account and (ii) the fair
market value of a number of shares of Common Stock equal to the number of
notional shares then credited to the Stock Account (as determined by
multiplying such number by the closing price of the Common Stock as reported
for the last business day preceding the date of such payment in The Wall Street
Journal, by (b) THE NUMBER OF PAYMENTS then remaining due hereunder.
' Select either lump sum or up to 5 annual installments. First payment
date must be more than six months after date of the Agreement. Election must be
made on date of Agreement.
<PAGE> 3
4. Any payments due hereunder that have not been paid to Director during
his lifetime shall be paid to his surviving spouse or to any other person he
may have designated in a writing filed with the Company for such purpose. The
Company may rely upon the last of any such written designations in its
possession in making any such payments, which shall be made at the same time(s)
and in the same amount(s) as would have been made to Director's surviving
spouse (or other beneficiary designated in accordance with this paragraph)
during the lifetime of such person may be paid to the executor or administrator
of the estate of such person; such payments shall be made at the same time(s)
and in the same amount(s) as would have been made to Director had he survived.
5. The rights of Director (or his surviving spouse or other designated
beneficiary) to receive payments hereunder are personal and are not subject to
acceleration or assignment, and the Company shall have no liability for
payments hereunder to any person at any time or in any manner other than as
herein provided. Notwithstanding the foregoing, the Company shall have the
right, upon resolution duly adopted by its Board of Directors (without giving
effect to any vote by Director), to pay in cash, in advance of any scheduled
date or dates provided for herein, all or any part of the aggregate amount of
payments that would otherwise be due hereunder.
6. This Agreement may be amended only in writing with the consent of
Director and the Company, provided that no such amendment shall have
retroactive effect or modify the cash nature of the amounts payable to Director
hereunder, and provided further, that any such amendments shall become
effective only as to the next succeeding calendar quarter following the date of
such amendment and thereafter.
7. This Agreement shall be binding upon, and shall inure to the benefits
of, the successors and assigns of the Company.
8. If any provision of this Agreement shall be held illegal or invalid for
any reason, such illegality or invalidity shall not affect the remaining
provisions hereof, and this Agreement shall be construed and enforced as if the
invalid provisions had never been set forth herein. As used herein, the
masculine includes feminine, the singular includes the plural and the plural
includes the singular.
<PAGE> 4
9. This Agreement shall be considered a contract under, and shall for all
purposes be construed in accordance with and governed by the laws of, the State
of Illinois.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in its name and on its behalf pursuant to the authorization of its Board of
Directors, and Director has hereunto set his hand, all on the date first above
written.
PRIME RESIDENTIAL, INC.
By:
Its:
[DIRECTOR]
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,177
<SECURITIES> 0
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<PP&E> 541,032
<DEPRECIATION> (42,246)
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0
0
<COMMON> 105
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<TOTAL-LIABILITY-AND-EQUITY> 556,956
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