<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-13136
HOME PROPERTIES OF NEW YORK, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 16-1455126
--------- ----------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
850 Clinton Square, Rochester, New York 14604
(Address of principal executive offices) (Zip Code)
(716) 546-4900
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former
year, if changed since last report)
Indicate by check mark whether 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:
Class of Common Stock Outstanding at October 31, 1998
--------------------- -------------------------------
$.01 par value 16,854,165
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997
(Unaudited) (Note1)
----------- -----------
<S> <C> <C>
ASSETS
Real estate:
Land $119,218 $ 62,640
Buildings, improvements and equipment 809,018 462,488
-------- --------
928,236 525,128
Less: accumulated depreciation (61,390) (46,531)
-------- --------
Real estate, net 866,846 478,597
Cash and cash equivalents 6,949 3,809
Cash in escrows 17,193 10,211
Accounts receivable 5,176 3,531
Prepaid expenses 8,838 5,305
Deposits 110 605
Investments in and advances to affiliates 60,546 35,585
Deferred financing costs 2,540 1,637
Other assets 9,471 4,543
-------- --------
Total assets $977,669 $543,823
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $389,402 $210,096
Line of credit 16,300 8,750
Accounts payable 7,999 5,082
Accrued interest payable 2,211 1,077
Accrued expenses and other liabilities 4,380 4,374
Security deposits 11,336 6,165
-------- --------
Total liabilities 431,628 235,544
-------- --------
Minority interest 205,107 156,847
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Common stock, $.01 par value; 50,000,000
shares authorized; 16,512,560 and 9,317,556 shares
issued and outstanding at September 30, 1998 and
December 31, 1997, respectively 166 93
Excess stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Additional paid-in capital 376,197 176,021
Distributions in excess of accumulated earnings ( 23,644) ( 19,700)
Treasury stock, at cost, 79,600 shares ( 1,863) ( 426)
Officer and director notes for stock purchases ( 9,922) ( 4,556)
-------- --------
Total stockholders' equity 340,934 151,432
-------- --------
Total liabilities and stockholders' equity $977,669 $543,823
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revenues:
Rental income $ 94,196 $41,486
Property other income 2,497 1,223
Interest income 3,623 1,270
Other income 1,927 1,128
-------- --------
Total revenues 102,243 45,107
-------- --------
Expenses:
Operating and maintenance 43,479 20,692
General and administrative 4,527 1,306
Interest 16,347 7,737
Depreciation and amortization 14,949 7,447
-------- --------
Total expenses 79,302 37,182
-------- --------
Income before loss on disposition of property,
minority interest and extraordinary item 22,941 7,925
Loss on disposition of property - 2,155
-------- --------
Income before minority interest and extraordinary item 22,941 5,770
Minority interest 9,195 1,797
-------- --------
Income before extraordinary item 13,746 3,973
Extraordinary item, prepayment penalties, net of $298
allocated to minority interest (446) -
-------- --------
Net income $ 13,300 $ 3,973
======== ========
Basic earnings per share data:
Income before extraordinary item $1.08 $.57
Extraordinary item (.04) -
-------- --------
Net income $1.04 $.57
======== ========
Diluted earnings per share data:
Income before extraordinary item $1.06 $.56
Extraordinary item (.03) -
-------- --------
Net income $1.03 $.56
======== ========
Weighted average number of shares outstanding:
Basic 12,785,427 6,916,434
========== =========
Diluted 12,951,135 7,036,160
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Revenues:
Rental income $39,732 $15,379
Property other income 1,151 428
Interest income 1,462 675
Other income 813 319
Total revenues 43,158 16,801
------- -------
Expenses:
Operating and maintenance 17,842 7,179
General and administrative 1,983 514
Interest 7,260 3,012
Depreciation and amortization 6,050 2,690
------- -------
Total expenses 33,135 13,395
------- -------
Income before loss on disposition of property,
minority interest and extraordinary item 10,023 3,406
Loss on disposition of property - 2,155
------- -------
Income before minority interest and extraordinary item 10,023 1,251
Minority interest 3,726 423
------- -------
Income before extraordinary item 6,297 828
Extraordinary item, prepayment penalties, net of $93
allocated to minority interest (156) -
------- -------
Net income $ 6,141 $ 828
------- -------
Basic earnings per share data:
Income before extraordinary item $.39 $.11
Extraordinary item (.01) -
---- ----
Net income $.38 $.11
==== ====
Diluted earnings per share data:
Income before extraordinary item $.39 $.11
Extraordinary item (.01) -
---- ----
Net income $.38 $.11
==== ====
Weighted average number of shares outstanding:
Basic 16,085,368 7,325,543
========== =========
Diluted 16,228,512 7,448,560
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,300 $ 3,145
-------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in income of HP Management and Conifer Realty ( 226) 115
Income allocated to minority interest 9,195 1,374
Extraordinary item allocated to minority interest ( 298) -
Depreciation and amortization 15,824 5,187
Changes in assets and liabilities:
Other assets ( 8,819) ( 1,137)
Accounts payable and accrued liabilities 9,228 333
-------- -------
Total adjustments 24,904 5,872
-------- -------
Net cash provided by operating activities 38,204 9,017
-------- -------
Cash flows used in investing activities:
Purchase of properties, net of mortgage notes assumed (225,259) (18,233)
Additions to properties ( 26,604) ( 6,465)
Deposits on property 495 -
Advances to affiliates ( 47,273) (14,465)
Payments on advances to affiliates 22,538 5,519
-------- -------
Net cash used in investing activities (276,103) (33,644)
-------- -------
Cash flows from financing activities:
Proceeds from sale of common stock 173,862 22,406
Purchase of treasury stock ( 1,437) ( 426)
Proceeds from mortgage and other notes payable 128,600 -
Payments of mortgage and other notes payable ( 31,196) ( 1,529)
Proceeds from line of credit 146,300 36,100
Payments on line of credit (138,750) (23,195)
Additions to deferred loan costs ( 1,779) ( 80)
Additions to cash escrows ( 6,982) ( 1,381)
Dividends and distributions paid ( 27,579) ( 7,581)
-------- --------
Net cash provided by financing activities 241,039 24,314
-------- -------
Net increase (decrease) in cash 3,140 ( 313)
Cash and cash equivalents:
Beginning of period 3,809 1,523
-------- -------
End of period $ 6,949 $ 1,210
======== =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 15,499 $ 4,447
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. Unaudited Interim Financial Statements
The interim consolidated financial statements of Home
Properties of New York, Inc. (the "Company") are prepared
pursuant to the requirements for reporting on Form 10-Q.
Accordingly, certain disclosures accompanying annual
financial statements prepared in accordance with generally
accepted accounting principles are omitted. The year-end
balance sheet data was derived from audited financial
statements, but does not include all disclosures required by
generally accepted accounting principles. In the opinion of
management, all adjustments, consisting solely of normal
recurring adjustments, necessary for the fair presentation
of the consolidated financial statements for the interim
periods have been included. The current period's results of
operations are not necessarily indicative of results which
ultimately may be achieved for the year. The interim
consolidated financial statements and notes thereto should
be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10-K, as filed
with the Securities and Exchange Commission on March 24,
1998.
2. Organization and Basis of Presentation
Organization
Home Properties of New York, Inc. (the " Company " ) was
formed in November 1993, as a Maryland corporation and is
engaged primarily in the ownership, management, acquisition
and development of residential apartment communities in the
Northeastern, Mid-Atlantic and Midwestern United States. As
of September 30, 1998, the Company operated 260 apartment
communities with 34,247 apartments. Of this total, the
Company owned 97 communities, consisting of 23,936
apartments, managed as general partner 7,479 apartments and
fee managed 2,832 apartments for affiliates and third
parties. The Company also fee manages 1.7 million square
feet of office and retail properties.
Basis of Presentation
The accompanying consolidated financial statements include
the accounts of the Company and its 62.4% (65.1% at
September 30, 1997) general partnership interest in the
Operating Partnership. The remaining 37.6% (34.9% at
September 30, 1997) is reflected as Minority Interest in
these consolidated financial statements. For financing purposes
the Company has formed a limited liability company (the "LLC")
and a partnership (the "Financing Partnership") which
beneficially own certain apartment communities encumbered
by mortgage indebtedness. The LLC is wholly owned by the
Operating Partnership. The Financing Partnerhsip is owned
99.9% by the Operating Partnership and .1% by Home Properties
Trust, a wholly owned qualified REIT subsidiry (QRS) of Home
Properties of New York, Inc. All significant intercompany
balances and transactions have been eliminated in these
consolidated financial statements.
3. Earnings Per Common Share
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share", which was
issued by the Financial Accounting Standards Board in
February 1997. SFAS No. 128 requires dual presentation of
basic earnings per share (EPS) and diluted EPS on the face
of all statements of earnings for periods ending after
December 15, 1997. Basic EPS is computed as net income
divided by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the
potential dilution that could occur from common shares
issuable through stock-based compensation including stock
options. The exchange of an Operating Partnership Unit for
common stock will have no effect on diluted EPS as
unitholders and stockholders effectively share equally in
the net income of the Operating Partnership.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. Earnings Per Common Share Cont'd
Net income is the same for both the basic and diluted
calculation. The reconciliation of the basic weighted
average shares outstanding and diluted weighted average
shares outstanding for the nine and three months ended
September 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Nine Months Three Months
----------------------- -----------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Basic weighted average number
of shares outstanding 12,785,427 6,916,434 16,085,368 7,325,543
Effect of dilutive stock options 165,708 119,726 143,144 123,017
---------- --------- ---------- ---------
Diluted weighted average number
of shares outstanding
12,951,135 7,036,160 16,228,512 7,448,560
========== ========= ========== =========
</TABLE>
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. Pro Forma Financial Information
<TABLE>
<CAPTION>
Pro Forma Combined Statement of Operations
For the Nine Months Ended September 30, 1998
--------------------------------------------
Home
Properties ProForma Company
Historical Adjustment ProForma
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Rental income $ 94,196 $32,311 $126,507
Property other income 2,497 1,297 3,794
Interest income 3,623 - 3,623
Other income 1,927 - 1,927
-------- ------- --------
Total Revenues 102,243 33,608 135,851
-------- ------- --------
Expenses:
Operating and Maintenance 43,479 14,723 58,202
General and administrative 4,527 1,008 5,535
Interest 16,347 10,498 26,845
Depreciation and amortization 14,949 4,587 19,536
-------- ------- --------
Total Expenses 79,302 30,816 110,118
-------- ------- --------
Income before minority interest and
extraordinary item $ 22,941 $ 2,792 25,733
======== =======
Minority Interest 11,321
--------
Income before extraordinary item 14,412
Extraordinary item, net (266)
--------
Net income $ 14,146
========
Net income per common share - Basic $1.10
=====
- Diluted $1.09
=====
Weighted average number of
shares outstanding - Basic 12,827,574
==========
- Diluted 12,993,282
==========
</TABLE>
The pro forma information was prepared as if the transactions
related to the acquisition of Candlewood Apartments (on
January 9, 1998, 310 units for $13,350), Cedar Glen Apartments
(on March 2, 1998, 110 units for $2,600), Park Shirlington
Apartments and Braddock Lee Apartments (on March 13, 1998, 548
units for $26,401), Apple Hill Apartments (on March 27,
1998, 498 units for $23,500), Siegel Portfolio (on April 30,
1998, 1,589 units for $53,700), Colonies Apartments (on
June 24, 1998, 672 units for $23,000), Racquet Club Apartments
(on July 7, 1998, 467 units for $24,550), Kaplen Portfolio
(Acquisition Properties on July 7, 1998, 4,002 units for
$155,000), Sherry Lake Apartments (on July 23, 1998, 298 units
for $18,000), Coventry Village Apartments (on July 31, 1998,
98 units for $3,100), Rolling Park Apartments (on September
15, 1998, 144 units for $6,000), three communities in
Dearborn, Michigan (on September 29, 1998, 648 units for
$24,100) and The Pines of Perinton (on September 29, 1998, 508
units for $8,200) had occurred on January 1, 1998.
Adjustments to the pro forma combined statements of operations
for the nine months ended September 30, 1998, consist
principally of providing net property operating activity and
recording interest, depreciation and amortization from January
1, 1998 to the acquisition date.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion is based primarily on the consolidated
financial statements of Home Properties of New York, Inc. as of
September 30, 1998 and 1997 and for the nine-month and three-
month periods then ended. This information should be read in
conjunction with the accompanying consolidated financial
statements and notes thereto.
Forward-Looking Statements
This discussion contains forward-looking statements. Although
the Company believes expectations reflected in such forward-
looking statements are based on reasonable assumptions, it can
give no assurance that its expectations will be achieved.
Factors that may cause actual results to differ include general
economic and local real estate conditions, other conditions that
might affect operating expenses, the timely completion of
repositioning and current development activities within
anticipated budgets, the actual pace of future acquisitions and
developments and continued access to capital to fund growth.
Liquidity and Capital Resources
The Company's principal liquidity demands are expected to be
distributions to stockholders, capital improvements and repairs
and maintenance for the communities, acquisition of additional
communities, property development and scheduled debt maturities.
The Company intends to meet its short-term liquidity requirements
through net cash flows provided by operating activities and its
unsecured line of credit. The Company considers its ability to
generate cash to continue to be adequate to meet all operating
requirements and make distributions to its stockholders in
accordance with the provisions of the Internal Revenue Code, as
amended, to enable the Company to qualify as a REIT.
The Company has an unsecured line of credit from Chase Manhattan
Bank of $50 million and a $50 million supplemental unsecured
revolving credit facility with M&T Bank, with $83.7 million
available at September 30, 1998. Borrowings under the line of
credit bear interest at 1.25% over the one-month LIBOR rate.
Accordingly, increases in interest rates will increase the
Company's interest expense and as a result will effect the
Company's results of operations and financial condition. The
unsecured lines of credit expire on September 4, 1999, with a one
year extension at the Company's option.
To the extent that the Company does not satisfy its long-term
liquidity requirements through net cash flows provided by
operating activities and its unsecured lines of credit, it
intends to satisfy such requirements through the issuance of
UPREIT units, proceeds from the Dividend Reinvestment Plan
("DRIP"), long term secured or unsecured indebtedness, or the
issuance of additional equity securities. As of September 30,
1998, the Company owned twenty-four properties with 4,851
apartment units, which were unencumbered by debt.
At December 31, 1997, $59 million remained available under the
Company's existing Form S-3 Registration Statement. On May 14,
1998, the Company filed a Form S-3 Registration Statement
relating to the issuance of up to $400 million of unsecured debt,
preferred stock or other equity securities. During the first
nine months of 1998, additional shares of common stock were
issued
<PAGE>
under the shelf registrations as follows: $10.5 million during
March from participating in a Unit Investment Trust; $35 million
in April in a direct placement to a major institutional investor;
$27 million in May from participating in a Unit Investment Trust;
and $52.6 million in June and July from the Company's first
public offering since its initial public offering in 1994. The
net proceeds from these transactions were used by the Company to
fund acquisitions, to repay borrowings outstanding under its
lines of credit and for general corporate purposes.
The issuance of UPREIT Units for property acquisitions continues
to be a significant source of capital. During 1997, 5,636
apartment units in four separate transactions were acquired for a
total cost of $195 million using UPREIT Units valued in excess of
$106 million, with the balance paid in cash or assumed debt.
During 1998, 4,512 apartment units in eight separate transactions
were acquired for a total cost of $175 million using UPREIT Units
valued in excess of $70 million, with the balance paid in cash or
assumed debt.
In addition, over $36 million was raised during 1997 through the
Company's DRIP, including over $4.5 million from officers and
directors financed partially by a Company loan of $2.3 million.
An additional $48.5 million has been raised through the DRIP
program during the first nine months of 1998, in addition to $6
million loaned to purchased stock pursuant to the Company's
Director, Officer and Employee Stock Purchase and Loan Program.
The Company's Board of Directors approved a stock repurchase
program under which the Company may repurchase up to one million
shares of its outstanding common stock. The Board's action did
not establish a target price or a specific timetable for
repurchase. During June 1997, the Company repurchased 20,000
shares at a cost of $.426 million. During September, 1998, the
Company repurchased an additional 59,600 shares at a cost of $1.4
million.
As of September 30, 1998, the weighted average rate of interest
on mortgage debt is 7.4% with staggered maturities averaging
nearly ten years. Most of the debt is fixed rate, with only 4%
variable rate debt. This limits the exposure to changes in
interest rates, minimizing the affect on results of operations
and financial condition.
<PAGE>
The following table sets forth information regarding the mortgage
indebtedness at September 30, 1998.
<TABLE>
<CAPTION>
Principal
Interest Balance as of
Rate as of Maturity Sept. 30, 1998
Communities Location Sept. 30, 1998 Date (000's)
- ----------- -------- -------------- -------- --------------
<S> <C> <C> <C> <C>
Fixed Rate
Williamstowne Village Buffalo, NY 2.50% 12/13/99 12
Westminster Syracuse, NY 7.22% 09/01/00 3,199
Perinton and Riverton Rochester, NY 6.75% (1) 09/01/00 11,900
Executive House Philadelphia, PA 8.50% 06/01/01 2,527
Harmark Village Square Philadelphia, PA 8.50% 06/01/01 2,843
Springwood Philadelphia, PA 8.50% 11/01/01 1,490
Valley View Philadelphia, PA 8.50% 11/01/01 3,378
Royal Gardens Piscataway, NJ 7.66% 08/01/02 11,706
Williamstowne Village Buffalo, NY 7.37% (2) 10/27/02 9,778
Brook Hill Rochester, NY 7.75% 11/01/02 4,882
Garden Village Buffalo, NY 7.75% 11/01/02 4,594
1600 Elmwood Rochester, NY 7.75% 11/01/02 5,360
Village Green Syracuse, NY 7.75% 11/01/02 4,786
Chesterfield Philadelphia, PA 8.25% 01/01/03 6,748
Curren Terrace Philadelphia, PA 8.355% 11/01/03 9,631
Racquet Club Philadelphia, PA 7.625% 11/01/03 12,176
Rolling Park Baltimore, MD 7.875% 11/01/03 2,881
Sherry Lake Philadelphia, PA 7.875% 01/01/04 6,665
Glen Manor Philadelphia, PA 8.125% 05/01/04 3,714
Colonies Chicago, IL 8.875% 05/01/04 12,589
Springcreek/Meadows Rochester, NY 7.63% (4) 08/01/04 3,172
Idylwood Buffalo, NY 8.625% 11/01/05 9,327
Carriage Hill Detroit, MI 7.36% 01/01/06 3,932
Carriage Park Detroit, MI 7.48% 01/01/06 5,662
Cherry Hill Detroit, MI 7.99% 01/01/06 4,539
Mid Island Estates Bay Shore, NY 7.25% (5) 05/01/06 6,675
Newcastle Rochester, NY 6.00% (6) 07/31/06 6,150
Country Village Baltimore, MD 8.385% 08/01/06 6,685
Raintree Island Buffalo, NY 8.50% 11/01/06 6,424
Woodgate Place Rochester, NY 7.865% 01/01/07 3,449
Strawberry Hill Baltimore, MD 8.255% 05/01/07 2,077
Valley Park South Bethlehem, PA 6.93% 01/01/08 10,106
Hamlet Court Rochester, NY 7.11% 02/01/08 1,798
Candlewood South Bend, ID 7.02% 03/01/08 7,940
Ten Communities Detroit, MI 7.51% 06/01/08 49,475
Conifer Village Syracuse, NY 7.20% 06/01/10 2,765
Morningside/Carriage Hill Baltimore, MD 6.99% 05/01/13 20,497
Multi-property Various 6.475% 08/31/13 100,000
Harborside Manor Syracuse, NY 8.92% 04/01/14 3,322
Pines of Perinton Rochester, NY 8.50% 05/01/18 8,906
Village Green
(Fairways) Syracuse, NY 8.23% 10/01/19 4,456
Raintree Island Buffalo, NY 8.50% 05/01/20 1,186
-------
389,402
Interest Balanceasof
Rate as of Maturity Sept.30,1998
Communities Location Sept. 30, 1998 Date (000's)
- ----------- -------- -------------- -------- ------------
Line of Credit
Unsecured N/A 30 day LIBOR+1.25% On Demand 16,300
--------
$405,702
========
</TABLE>
(1) Fixed through August 4, 1999, then prime +.5% until maturity.
(2) Fixed through November 1, 2000, then prime +.5% until maturity.
(3) Fixed through April 30, 2000, then prime +.5% until maturity.
(4) Fixed through July 31, 2000, then prime +.5% until maturity.
(5) 7.5% April 1, 1998 through March 31, 2001; then 7.75% until maturity.
(6) Fixed through July 31, 1999, then variable.
Results of Operations
Comparison of nine months ended September 30, 1998 to the same
period in 1997
The Company had 27 apartment communities with 6,552 units and one
small ancillary convenience shopping area which were owned during
both of the nine and three month periods being presented (the
"Core Properties"). The Company has acquired an additional 69
apartment communities with 17,128 units during 1997 and 1998 (the
"Acquired Communities"). The inclusion of these Acquired
Communities generally accounted for the significant changes in
operating results for the nine and three months ended September
30, 1998.
A summary of the Core Property net operating income is as
follows:
<TABLE>
<CAPTION>
NineMonths ThreeMonths
----------- -----------
1998 1997 %Change 1998 1997 %Change
---- ---- ------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Rent $34,697,000 $33,948,000 2.2% $11,684,000 $11,481,000 1.8%
Property other
income 1,182,000 1,039,000 13.8% 397,000 369,000 7.6%
----------- ----------- ----- ----------- -----------
Total income 35,879,000 34,987,000 2.5% 12,081,000 11,850,000 1.9%
Operating and
Maintenance (16,895,000) (17,293,000) 2.3% (5,635,000) (5,479,000) (2.8%)
----------- ----------- ----- ----------- -----------
Net operating
income $18,984,000 $17,694,000 7.3% $6,446,000 $ 6,371,000 1.2%
=========== =========== ===== =========== ===========
</TABLE>
Of the $52,710,000 increase in rental income, $51,961,000 is
attributable to the Acquired Communities. The balance of this
increase, which is from the Core Properties, was the result of an
increase of 2.8% in weighted average rental rates, offset by a
decrease in occupancy from 94.4% to 93.9%.
Of the $1,274,000 increase in property other income, $1,356,000
is attributable to the Acquired Communities, with $143,000
representing a 13.8% increase for the Core Properties. This
increase reflects bringing more laundry "in-house" versus
contracting out. The balance, a $225,000 decrease, is from the
Company's share of income/loss from various general partnership
interests.
Interest income increased $2,353,000, primarily attributable to
an increase in construction loans and advances made to affiliated
tax credit development partnerships.
<PAGE>
Other income increased by $799,000 due primarily to the
acquisition of additional management contracts and a higher pace
of development fee activity.
Of the $22,787,000 increase in operating and maintenance
expenses, $23,185,000 is attributable to the Acquired
Communities. The balance for the Core Properties represents a
2.3% decrease over 1997. The major area of decrease in the Core
Properties occurred in utility costs. Our extreme mild 1998
weather, combined with normal gas rates (compared to very high
rates in 1997) resulted in a positive variance in utilities of
$612,000, or 20.5%.
General and administrative expense increased in 1998 by
$3,221,000, or 247% during a period when the Company more than
doubled the number of owned apartment units. General and
administrative expenses as a percentage of total revenues
increased from 2.9% in 1997 to 4.4% in 1998. The biggest reason
for this percentage growth is a result of the Company's incentive
compensation plan which rewards exceptional FFO growth per share.
The extraordinary growth during the first nine months of 1998
resulted in a $734,000 bonus accrual this year compared to a
$98,000 bonus accrual in the first nine months of 1997. In
addition, the Company recorded $105,000 relating to doing
business in various new states.
Comparison of three months ended September 30, 1998 to the same
period in 1997
Of the $24,353,000 increase in rental income, $24,150,000 is
attributable to the Acquired Communities. The balance of this
increase, which is from the Core Properties, was the result of an
increase of 2.8% in weighted average rental rates, offset by a
decrease in occupancy from 95.2% to 94.2%.
Of the $723,000 increase in property other income, $676,000 is
attributable to the Acquired Communities. In addition, the Core
Properties increased 8%, or $28,000 reflecting bringing more
laundry "in-house" versus contracting out.
Other income increased by $494,000, due primarily to the
acquisition of additional management contracts and a higher pace
of development fee activity.
Of the $10,663,000 increase in operating and maintenance
expenses, $10,507,000 is attributable to the Acquired
Communities. The balance for the Core Properties represents a
2.8% increase over 1997, primarily as a result of increased
personnel expenses.
Funds From Operations
Management considers funds from operations to be an appropriate
measure of performance of an equity REIT. The National
Association of Real Estate Investment Trusts ("NAREIT") revised
White Paper definition of funds from operations is income (loss)
before gains (losses) from the sale of property and extraordinary
items, before minority interest in the Operating Partnership,
plus real estate depreciation. Management believes that in order
to facilitate a clear understanding of the combined historical
operating results of the Company, funds from operations should be
considered in conjunction with net income as presented in the
consolidated financial statements included elsewhere herein.
Funds from operations does not represent cash generated from
operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash
available to fund cash needs. Funds from operations should not
be considered as an alternative to net income as an indication of
the Company's performance or to cash flow as a measure of
liquidity.
<PAGE>
The calculation of funds from operations for the previous six
quarters are presented below:
<TABLE>
<CAPTION>
Sept.30 June30 March31 Dec.31 Sept.30 June30
1998 1998 1998 1997 1997 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 6,141 $ 4,384 $2,775 $2,417 $828 $1,876
Minority interest 3,726 3,297 2,172 2,451 423 802
Extraordinary item 156 290 - 1,037 - -
Non-recurring interest
amortization 294 - - - - -
Depreciation from real
property 5,991 4,770 4,038 3,715 2,654 2,389
Depreciation from real
property from
unconsolidated entities 72 72 196 168 76 76
(Gain) Loss from sale of
property - - - (872) 2,155 -
------- ------- ------ ------ ------ ------
FFO $16,380 $12,813 $9,181 $8,916 $6,136 $5,143
======= ======= ====== ====== ====== ======
Weighted average common
shares/units outstanding:
- Basic 25,603.7 21,312.3 17,303.6 15,215.0 10,827.1 10,139.1
======= ======= ======= ======= ======= =======
- Diluted 25,746.9 21,500.9 17,501.1 15,417.7 10,950.1 10,229.5
======= ======= ======= ======= ======= =======
</TABLE>
All REITs may not be using the strict White Paper definition for
new FFO. Accordingly, the above presentation may not be
comparable to other similarly titled measures of FFO of other
REITs.
Impact of the Year-2000 on System Processing
The Year 2000 ("Y2K") problem concerns the inability of information systems to
properly recognize and process date-sensitive information beyond January 1,
2000. As a result, the Y2K problem can affect any system that uses date data,
including mainframes, PCs, and embedded microprocessors that control security
systems, call-processing systems, building climate systems, elevators, office
equipment and even fire alarms.
THE COMPANY'S STATE OF READINESS
The Company began addressing the Y2K issue in September 1997. As such it
divided its review into two segments: business critical and mission critical
systems. Business critical systems are those with the potential to affect the
financial and operational infrastructure of the Company. Mission critical are
those systems with a potential to affect the delivery of electricity and
natural gas to our residents, commercial tenants and employees and the safety
of residents, commercial tenants and employees.
Recognizing that the mission critical systems rely heavily on public service
vendors, the Company's focus to date has been on business critical systems
under the assumption that market forces and regulatory agencies would encourage
and monitor the compliance of the telecommunications, utilities and emergency
service industries. The Company will survey all mission critical service
providers in March 1999 and develop contingency plans, possibly in coordination
with industry organizations, as needed, to minimize the possiblity that
the Y2K problem would disrupt the lives of its residents, commercial tenants
and employees.
The Company relies exclusively on micro computers (PC's). PC's exist in the
corporate office, regional offices and at our communities. The Company is 85%
complete with its review and modification of corporate office systems towards
Y2K compliance. Outstanding projects include: upgrading the voicemail system,
upgrading workstations and installing Y2K compliant modules of our property
management and accounting software. Specifically, the software vendor has
advised the Company that the property management and payroll software
is compliant; the accounts payable and general ledger software
are expected to be compliant by December 1998. The Company will continue a
dialog with all software service providers so that upgrades can be completed as
necessary.
The Company is 35% complete with its review and modification of regional office
systems and 20% complete with its review and modification of community based
systems. The Company has a full-time employee dedicated to upgrading regional
offices and community based systems. Additional information systems employees
will assist as needed. Employees participation in this effort is not
expected to significantly impact the department's ongoing activities.
The Company anticipates its regional office systems will be tested for
compliance by April 1999 and that its community based systems will be
tested for compliance by June 1999.
Once all hardware and software components are believed to be Y2K ready, the
Company plans to periodically match its systems' inventory against hardware and
software component manufacturer upgrade releases to assure that its systems
have the most current Y2K upgrades (including any properties acquired).
The ability of the Company to successfully transact monetary exchanges is key
to continued successful operation. For this reason, all financial institutions
which the Company has a relationship will be identified and queried for Y2K
readiness status during the first quarter of 1999. The Company's significant
relationships are with regional and national financial institutions which
are also subject to the oversight of various federal regulatory agencies
for their Y2K compliance.
Delivery of goods and services (i.e., building and elevator access, security
systems, HVAC, life safety, etc.) to the Company's communities and offices
must continue to be provided without interruption. Beginning January 1999,
the Company will survey critical suppliers to determine their Y2K readiness
CONTINGENCY PLANS
Testing will begin in March 1999 to determine the Company's business critical
system readiness. Based on testing results, contingency plans may be put in
place.
RISKS
Since the Company's major source of income is rental payments under term leases
at communities located in different municipalities, the failure of business
critical systems at any one community is not expected to have a material
adverse effect on the Company's financial condition, results of operations and
liquidity. Given the complexity and general uncertainty of the Y2K issues in
the gas, electric, telecommunications, banking and related industries, even the
most comprehensive program, however, cannot assure that unforeseen problems
will not occur. The Company therefore is unable at this time to determine
whether any unforeseen impacts could have a material effect on the Company's
financial condition. The Company believes that upon the implementation of our
upgraded business systems and assuming the Y2K compliance of our public
service vendors, the possibility of significant interruptions of normal
operations should not be material.
COSTS
The total cost of the Company's Y2K activities, which is estimated at $675,000,
is not expected to have a material effect on the Company's financial position.
Approximately $200,000 has been expended as of September 30, 1998. The
remaining expenditures to be incurred will be funded from operations. A
majority of these costs are an acceleration of the amounts the Company would
anticipate incurring to upgrade business systems, regardless of the Y2K
problem considering the evolution of technology and the system's requirements
for running newly acquired and improved system applications.
<PAGE>
Inflation
Substantially all of the leases at the communities are for a term
of one year or less, which enables the Company to seek increased
rents upon renewal of existing leases or commencement of new
leases. These short-term leases minimize the potential adverse
effect of inflation on rental income, although residents may
leave without penalty at the end of their lease terms and may do
so if rents are increased significantly.
Declaration of Dividend
On October 27, 1998, the Board of Directors approved a dividend
of $.48 per share for the period from July 1, 1998 to September
30, 1998. This is the equivalent of an annual distribution of
$1.92 per share. The dividend is payable November 24, 1998 to
shareholders of record on November 16, 1998.
<PAGE>
Other Income
Other income for the nine and three months ended September 30,
1998 and 1997 is summarized as follows:
Nine Months Three Months
----------- ------------
1998 1997 1998 1997
---- ---- ---- ----
Management fees $ 991 $ 375 $386 $127
Development fees 504 645 117 39
Other 206 114 105 43
Management Companies 226 (6) 205 110
------ ------ ---- ----
$1,927 $1,128 $813 $319
Certain property management, leasing and development activities
are performed by Home Properties Management, Inc. and Conifer
Realty Corporation (the "Management Companies"). The Operating
Partnership owns non-voting common stock in the Management
Companies which entitles the Operating Partnership to receive 99%
of the economic interest in the Management Companies. The
Company's share of income from the Management Companies for the
nine and three months ended September 30, 1998 and 1997 is
summarized as follows:
NineMonths Three Months
---------- ------------
1998 1997 1998 1997
---- ---- ---- ----
Management fees $2,576 $2,180 $988 $748
Development fees 3,427 1,854 1,258 930
Miscellaneous 62 83 13 39
General and administrative (5,150) (3,779) (1,808) (1,475)
Interest expense ( 485) ( 215) ( 188) ( 83)
Other expenses ( 202) ( 129) ( 56) ( 48)
------ ------ ------ ------
Net income $ 228 ($ 6) $ 207 $ 111
======= ======= ====== ======
Company's share $ 226 ($ 6) $ 205 $ 110
======= ======= ====== ======
<PAGE>
PART II - OTHER INFORMATION
HOME PROPERTIES OF NEW YORK, INC.
Item 6. Exhibits and Reports or Form 8-K
(a) Exhibits:
Exhibit Description
10.1 Master Credit Facility Agreement by and
among Home Properties of New York, Inc., Home
Properties of New York, L.P., Home Properties WMF
I, LLC and Home Properties of New York, L.P. and P-
K Partnership doing business as Patricia Court and
Karen Court and WMF Washington Mortgage Corp.,
dated as of August 28, 1998.
(b) Reports or Form 8-K:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HOME PROPERTIES OF NEW YORK, INC.
(Registrant)
Date: November 13, 1998
--------------------------
By: /s/ David P. Gardner
--------------------------
David P. Gardner
Vice President
Chief Financial Officer and Treasurer
Date: November 13, 1998
---------------------------
By: /s/ Norman Leenhouts
---------------------------
Norman Leenhouts
Chairman and Co-Chief Executive Officer
MASTER CREDIT FACILITY AGREEMENT
by and among
HOME PROPERTIES OF NEW YORK, INC.,
HOME PROPERTIES OF NEW YORK, L.P.
HOME PROPERTIES WMF I, LLC
and
HOME PROPERTIES OF NEW YORK, L.P. AND P-K PARTNERSHIP DOING BUSINESS AS
PATRICIA COURT AND KAREN COURT,
collectively, as Borrower Parties,
and
WMF WASHINGTON MORTGAGE CORP.,
as Lender
Dated as of
August 28, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 2
ARTICLE II THE CREDIT FACILITY 23
SECTION 2.01. The Credit Facility 23
SECTION 2.02. Limitations on Commitment to Make Advances 23
SECTION 2.03. Determination and Confirmation of Interest
Rate and Other Terms of Each Advance 24
ARTICLE III INITIAL ADVANCE 26
SECTION 3.01. Request 26
SECTION 3.02. Conditions Precedent to Initial Advance. 26
ARTICLE IV FUTURE ADVANCES 27
ARTICLE V ADDITION OF REVOLVING CREDIT FACILITY 27
ARTICLE VI ADDITIONS OF COLLATERAL 27
SECTION 6.01. Right to Add Collateral 27
SECTION 6.02. Procedure for Adding Collateral 27
SECTION 6.03. Conditions Precedent to Addition of an
Additional Mortgaged Property to the
Collateral Pool 29
ARTICLE VII RELEASES OF COLLATERAL 30
SECTION 7.01. Right to Obtain Releases of Collateral 30
SECTION 7.02. Procedure for Obtaining Releases of
Collateral 30
SECTION 7.03. Conditions Precedent to Release of
Collateral Release Property from the
Collateral Pool 33
SECTION 7.04. Substitutions 35
ARTICLE VIII EXPANSION OF CREDIT FACILITY 35
SECTION 8.01. Right to Increase Base Facility Credit
Commitment 35
SECTION 8.02. Procedure for Obtaining Increases in
Base Facility Credit Commitment 36
SECTION 8.03. Limitations on Right to Increase Base
Facility Credit Commitment 36
SECTION 8.04. Conditions Precedent to Increase in Base
Facility Credit Commitment 36
SECTION 8.05. Interest Rate of Advances After Increase
in Base Facility Credit Commitment 38
ARTICLE IX DEFEASANCE AND SUPPLEMENTAL PROVISIONS;
TERMINATION OF CREDIT FACILITY 38
SECTION 9.01. Defeasance and Supplemental Provisions;
Termination of Credit Facility 38
ARTICLE X GENERAL CONDITIONS PRECEDENT TO ALL REQUESTS 38
ARTICLE XI REPRESENTATIONS, WARRANTIES AND COVENANTS OF LENDER 41
SECTION 11.01 Representations and Warranties of the Lender 41
SECTION 11.02. Covenants of the Lender 41
ARTICLE XII REPRESENTATIONS AND WARRANTIES OF THE BORROWER
PARTIES 42
SECTION 12.01. Representations and Warranties of the
Borrower Parties 42
SECTION 12.02. Representations and Warranties of the
Owners 48
ARTICLE XIII COVENANTS OF THE BORROWER PARTIES 51
SECTION 13.01. Affirmative Covenants of the Borrower
Parties 51
SECTION 13.02 Negative Covenants of the Borrower Parties 66
SECTION 13.03. Financial Covenants 68
ARTICLE XIV FEES 71
SECTION 14.01. Origination Fees. 71
SECTION 14.02. Due Diligence Fees 72
SECTION 14.03. Legal Fees and Expenses 72
SECTION 14.04. MBS-Related Costs 73
SECTION 14.05. Other Fees 73
ARTICLE XV CASH MANAGEMENT 73
ARTICLE XVI EVENTS OF DEFAULT 74
SECTION 16.01. Events of Default 74
ARTICLE XVII REMEDIES 77
SECTION 17.01. Remedies; Waivers 77
SECTION 17.02. No Remedy Exclusive 78
SECTION 17.03. No Waiver 78
SECTION 17.04. No Notice 78
SECTION 17.05. Application of Payments 78
ARTICLE XVIII RIGHTS OF FANNIE MAE 78
SECTION 18.01. Special Pool Purchase Contract 78
SECTION 18.02. Assignment of Rights 79
SECTION 18.03. Release of Collateral 79
SECTION 18.04. Replacement of Lender 79
SECTION 18.05. Fannie Mae and Lender Fees and Expenses 79
SECTION 18.06. Third-Party Beneficiary 79
ARTICLE XIX INSURANCE, TAXES AND REPLACEMENT RESERVES 80
SECTION 19.01. Insurance and Taxes 80
SECTION 19.02. Replacement Reserves 84
ARTICLE XX LIMITS ON PERSONAL LIABILITY 84
SECTION 20.01 Limits on Personal Liability 84
ARTICLE XXI MISCELLANEOUS PROVISIONS 86
SECTION 21.01. Counterparts 86
SECTION 21.02. Amendments, Changes and Modifications 86
SECTION 21.03. Payment of Costs, Fees and Expenses 86
SECTION 21.04. Payment Procedure 87
SECTION 21.05. Payments on Business Days 87
SECTION 21.06. Choice of Law; Consent to Jurisdiction;
Waiver of Jury Trial 87
SECTION 21.07. Severability 88
SECTION 21.08. Notices 88
SECTION 21.09. Further Assurances and Corrective
Instruments 89
SECTION 21.10. Term of this Agreement 90
SECTION 21.11. Assignments; Third-Party Rights 90
SECTION 21.12. Headings 90
SECTION 21.13. General Interpretive Principles 90
SECTION 21.14. Interpretation 90
SECTION 21.15. Standards for Decisions, Etc. 91
SECTION 21.16. Decisions in Writing 91
SECTION 21.17 Joint and Several Liability. 91
<PAGE>
EXHIBITS
EXHIBIT A - Schedule of Owners
EXHIBIT B - Base Facility Note
EXHIBIT C - Cash Management Agreement
EXHIBIT D - Compliance Certificate
EXHIBIT E - Sample Facility Debt Service Calculation
EXHIBIT F - Operating Partnership's Guaranty
EXHIBIT G - Organizational Certificate
EXHIBIT H - Replacement Reserve Agreement
EXHIBIT I - Security Instrument for Operating Partnership or Subsidiary
Owner
EXHIBIT J - Security Instrument for Borrower
EXHIBIT K - Subsidiary Owner Guaranty
EXHIBIT L - Tie-In Endorsement
EXHIBIT M - Rate Setting Form
EXHIBIT N - Rate Confirmation Form
EXHIBIT O - Revolving Facility Request
EXHIBIT P - Collateral Addition Request
EXHIBIT Q - Collateral Addition Description Package
EXHIBIT R - Collateral Addition Supporting Documents
EXHIBIT S - Collateral Release Request
EXHIBIT T - Confirmation of Obligations
EXHIBIT U - Credit Facility Expansion Request
EXHIBIT V - Credit Facility Termination Request
EXHIBIT W - Schedule of Approved Property Management Agreements
EXHIBIT X - Independent Unit Encumbrances
EXHIBIT Y - Repairs Plan
EXHIBIT Z - Defeasance and Supplemental Provisions
<PAGE>
MASTER CREDIT FACILITY AGREEMENT
THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 28th day of
August, 1998, by and among (i) (a) HOME PROPERTIES OF NEW YORK, INC., a
Maryland corporation (the "REIT"), (b) HOME PROPERTIES OF NEW YORK, L.P., a
New York limited partnership (the "OPERATING PARTNERSHIP"), (c) HOME
PROPERTIES WMF I, LLC a New York limited liability company (the "BORROWER")
and (d) HOME PROPERTIES OF NEW YORK, L.P. AND P-K PARTNERSHIP DOING
BUSINESS AS PATRICIA COURT AND KAREN COURT, a Pennsylvania general
partnership (the "SUBSIDIARY OWNER") (the Operating Partnership, the
Borrower and the Subsidiary Owner being collectively referred to as the
"OWNERS", and the REIT, the Operating Partnership, the Borrower and the
Subsidiary Owner being collectively referred to as the "BORROWER PARTIES")
and (ii) WMF WASHINGTON MORTGAGE CORP., a Delaware corporation, formerly
known as Washington Mortgage Financial Group, Ltd. (the "LENDER").
RECITALS
A. The REIT is the sole general partner of the Operating
Partnership.
B. The Operating Partnership is the sole member of the Borrower.
C. The Operating Partnership, the Borrower and the Subsidiary Owner
own one or more Multifamily Residential Properties (capitalized terms used
but not defined shall have the meanings ascribed to such terms in Article I
of this Agreement) as more particularly described in EXHIBIT A to this
Agreement opposite the name of the Operating Partnership, the Borrower and
the Subsidiary Owner.
D. The Borrower has requested that the Lender establish a
$100,000,000 Credit Facility in favor of the Borrower.
E. To secure the obligations of the Borrower Parties under this
Agreement and the other Loan Documents issued in connection with the Credit
Facility, the Borrower Parties shall create a Collateral Pool in favor of
the Lender. The Collateral Pool shall initially be comprised of (i)
Security Instruments on all of the Multifamily Residential Properties owned
by the Borrower or the Subsidiary Owner, (ii) Security Instruments on the
Multifamily Residential Properties owned by the Operating Partnership which
are set forth on EXHIBIT A to this Agreement and (iii) any other Security
Documents executed by any other Borrower Party pursuant to this Agreement
or any other Loan Documents.
F. Each of the Security Documents shall be cross-defaulted (i.e., a
default under any Security Document, or under this Agreement, shall
constitute a default under each Security Document, and this Agreement) and
cross-collateralized (i.e., each Security Document shall secure some or all
of the Borrower Parties' obligations under this Agreement and the other
Loan Documents issued in connection with the Credit Facility).
<PAGE>
G. Subject to the terms, conditions and limitations of this
Agreement, the Lender has agreed to establish the Credit Facility.
NOW, THEREFORE, the Borrower Parties and the Lender, in consideration
of the mutual promises and agreements contained in this Agreement, hereby
agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
"ADDITIONAL MORTGAGED PROPERTY" means each Multifamily
Residential Property owned by an Owner (either in fee simple or as
tenant under a ground lease meeting all of the requirements of the DUS
Guide) and added to the Collateral Pool after the Initial Closing Date
pursuant to Article VI.
"ADVANCE" means a loan made by the Lender to the Borrower under
the Credit Facility pursuant to this Agreement.
"AFFILIATE" or "AFFILIATED" means, when used with reference to a
specified Person, (i) any Person that, directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under
common control with, the specified Person, (ii) any Person that is an
officer of, partner in or trustee of, or serves in a similar capacity
with respect to, the specified Person or of which the specified Person
is an officer, partner or trustee, or with respect to which the
specified Person serves in a similar capacity, (iii) any Person that,
directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of, or otherwise has a substantial
beneficial interest in, the specified Person or of which the specified
Person is, directly or indirectly, the owner of 10% or more of any
class of equity securities or in which the specified Person has a
substantial beneficial interest, and (iv) any Family Member of the
specified Person.
2
<PAGE>
"AGGREGATE DEBT SERVICE COVERAGE RATIO FOR THE TRAILING 12 MONTH
PERIOD" means, for any specified date, the ratio (expressed as a
percentage) of--
(a) the aggregate of the Net Operating Income for the Trailing 12
Month Period for the Mortgaged Properties
TO
(b) the Facility Debt Service on the specified date.
"AGGREGATE DEBT SERVICE COVERAGE RATIO FOR THE TRAILING THREE
MONTH PERIOD" means, for any specified date, the ratio (expressed as a
percentage) of--
(a) the product obtained by multiplying--
(i) the aggregate of the Net Operating Income for the
Trailing Three Month Period for the Mortgaged
Properties, by
(ii) four
TO
(b) the Facility Debt Service on the specified date.
"AGGREGATE DEBT SERVICE COVERAGE RATIOS" means, as of any
specified date, the Aggregate Debt Service Coverage Ratio for the
Trailing 12 Month Period as of the specified date and the Aggregate
Debt Service Coverage Ratio for the Trailing Three Month Period as of
the specified date. "AGGREGATE DEBT SERVICE COVERAGE RATIO" means, as
of any specified date, either the Aggregate Debt Service Coverage
Ratio for the Trailing 12 Month Period as of the specified date or the
Aggregate Debt Service Coverage Ratio for the Trailing Three Month
Period as of the specified date.
"AGGREGATE LOAN TO VALUE RATIO FOR THE TRAILING 12 MONTH PERIOD"
means, for any specified date, the ratio (expressed as a percentage)
of--
(a) the Advances Outstanding on the specified date,
TO
(b) the aggregate of the Valuations most recently obtained prior
to the specified date for all of the Mortgaged Properties.
3
<PAGE>
"AGREEMENT" means this Master Credit Facility Agreement, as it
may be amended, supplemented or otherwise modified from time to time,
including all Recitals and Exhibits to this Agreement, each of which
is hereby incorporated into this Agreement by this reference.
"ALTERATION" shall have the meaning set forth in Section
13.01(o).
"APPLICABLE LAW" means (a) all applicable provisions of all
constitutions, statutes, rules, regulations and orders of all
governmental bodies, all Governmental Approvals and all orders,
judgments and decrees of all courts and arbitrators, (b) all zoning,
building, environmental and other laws, ordinances, rules, regulations
and restrictions of any Governmental Authority affecting the
ownership, management, use, operation, maintenance or repair of any
Mortgaged Property, including the Americans with Disabilities Act (if
applicable), the Fair Housing Amendment Act of 1988 and Hazardous
Materials Laws, (c) any building permits or any conditions, easements,
rights-of-way, covenants, restrictions of record or any recorded or
unrecorded agreement affecting or concerning any Mortgaged Property
including planned development permits, condominium declarations, and
reciprocal easement and regulatory agreements with any Governmental
Authority, (d) all laws, ordinances, rules and regulations, whether in
the form of rent control, rent stabilization or otherwise, that limit
or impose conditions on the amount of rent that may be collected from
the units of any Mortgaged Property, and (e) requirements of insurance
companies or similar organizations, affecting the operation or use of
any Mortgaged Property or the consummation of the transactions to be
effected by this Agreement or any of the other Loan Documents.
"APPRAISAL" means an appraisal of a Multifamily Residential
Property or Multifamily Residential Properties conforming to the
requirements of Chapter 5 of Part III of the DUS Guide, and accepted
by the Lender.
"APPRAISED VALUE" means the value set forth in an Appraisal.
"BASE FACILITY" means the agreement of the Lender to make
Advances to the Borrower pursuant to Section 2.01(b)(2).
"BASE FACILITY ADVANCE" shall have the meaning set forth in
Section 2.01(b)(2).
"BASE FACILITY AVAILABILITY PERIOD" means the period beginning on
the Initial Closing Date and ending on the last day of the tenth Loan
Year.
"BASE FACILITY CREDIT COMMITMENT" means an amount equal to
$100,000,000, or such greater amount, not to exceed the $200,000,000,
as the Borrower may elect in accordance with, and subject to, the
provisions of Article VIII.
4
<PAGE>
"BASE FACILITY FEE" means, with respect to a Base Facility
Advance, the number of basis points for a Base Facility Advance
determined under Sections 2.03(d)(1)(ii) or (d)(2)(ii).
"BASE FACILITY NOTE" means a promissory note, in the form
attached as EXHIBIT B to this Agreement, which will be issued by the
Borrower to the Lender, concurrently with the funding of each Base
Facility Advance, to evidence the Borrower's obligation to repay the
Base Facility Advance. On the Closing Date, two Base Facility Notes
shall be issued, an Amended and Restated Base Facility Note in the
amount of $12,515,000 and a Base Facility Note in the amount of
$87,485,000.
"BASE FACILITY TERMINATION DATE" means the last day of the
fifteenth Loan Year (or any date on which this Agreement is sooner
terminated in accordance with its terms).
"BLENDED RATE" means, as of a specified date, a blended interest
rate reflecting the weighted average, based on the respective actual
Advances Outstanding on the specified date, of the different interest
rates per annum of each actual Advance Outstanding on the specified
date.
"BORROWER" means Home Properties WMF I, LLC, a New York limited
liability company.
"BORROWER PARTIES" means the REIT, the Operating Partnership, the
Borrower and the Subsidiary Owner.
"BUSINESS DAY" means a day on which Fannie Mae is open for
business.
"CAP RATE" means, for each Mortgaged Property, a capitalization
rate selected by the Lender in accordance with Section 11.02 for use
in determining the Valuations.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or
directive of any central lender or other Governmental Authority having
jurisdiction over (or any other law, rule or regulation, whether or
not having the force of law, regarding capital adequacy of) any lender
(including the Lender) or Fannie Mae.
"CASH MANAGEMENT AGREEMENT" means each Cash Management Security,
Pledge and Assignment Agreement between an Owner and the Lender in the
form attached as EXHIBIT C to this Agreement.
"CLOSING DATE" means the Initial Closing Date and each date after
the Initial Closing Date on which the funding or other transaction
requested in a Request is required to take place.
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"COLLATERAL" means the Mortgaged Properties and other collateral
from time to time or at any time encumbered by the Security
Instruments, or any other property securing any of the Borrower
Parties' obligations under the Loan Documents.
"COLLATERAL ADDITION FEE" means, with respect to a Multifamily
Residential Property added to the Collateral Pool in accordance with
Article VI, the product obtained by multiplying--
(i) 25 basis points, by
(ii) 56.5% of the Initial Valuation of the Multifamily
Residential Property, as determined by the Lender.
"COLLATERAL ADDITION LOAN DOCUMENTS" means the Security
Instrument covering an Additional Mortgaged Property and any other
documents, instruments or certificates required by the Lender in
connection with the addition of the Additional Mortgaged Property to
the Collateral Pool pursuant to Article VI.
"COLLATERAL ADDITION REQUEST" shall have the meaning set forth in
Section 6.02(a).
"COLLATERAL POOL" means the aggregate total of the Collateral.
"COLLATERAL RELEASE REQUEST" shall have the meaning set forth in
Section 7.02(a).
"COLLATERAL RELEASE PROPERTY" shall have the meaning set forth in
Section 7.02(a).
"COMPLETION/REPAIR AGREEMENT" means a Completion/Repair and
Security Agreement, on the standard form required by the DUS Guide.
"COMPLIANCE CERTIFICATE" means a certificate of the Borrower
Parties in the form attached as EXHIBIT D to this Agreement.
"CONTINGENT OBLIGATION" means, as to any Person (the
"GUARANTEEING PERSON"), any obligation of (a) the guaranteeing person
or (b) another Person (including any bank under any letter of credit)
to induce the creation of a primary obligation (as defined below) with
respect to which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing,
or in effect guaranteeing, any indebtedness, lease, dividend or other
obligation (the "PRIMARY OBLIGATIONS") of any third person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not
contingent, to (1) purchase any such primary obligation or any
property constituting direct or indirect security therefor,
(2) advance or supply funds for the purchase or payment of any such
primary obligation or to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net
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<PAGE>
worth or solvency of the primary obligor, (3) purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (4) otherwise assure or
hold harmless the owner of any such primary obligation against loss in
respect of the primary obligation; provided, however, that the term
"Contingent Obligation" shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of
any Contingent Obligation of any guaranteeing person shall be deemed to be
the lesser of (a) an amount equal to the stated or determinable amount
of the primary obligation in respect of which such Contingent
Obligation is made or (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Contingent Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount
of such Contingent Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
determined by the guaranteeing person in good faith.
"COUPON RATE" means, with respect to an Advance, the interest
rate for the Advance determined by the Lender pursuant to Section
2.03.
"CREDIT FACILITY" means the Base Facility.
"CREDIT FACILITY EXPANSION" means an increase in the Base
Facility Credit Commitment made in accordance with Article VIII.
"CREDIT FACILITY EXPANSION LOAN DOCUMENTS" means amendments to
the Security Instruments, increasing the amount secured to the amount
of the Base Facility Credit Commitment.
"CREDIT FACILITY EXPANSION REQUEST" shall have the meaning set
forth in Section 8.02(a).
"CREDIT FACILITY TERMINATION REQUEST" shall have the meaning set
forth in Section 9.03(a).
"DUS GUIDE" means the Fannie Mae Multifamily Delegated
Underwriting and Servicing (DUS) Guide, as such Guide may be amended
from time to time, including exhibits to the DUS Guide and amendments
in the form of Lender Memos, Guide Updates and Guide Announcements
(and, if such Guide is no longer used by Fannie Mae, the term "DUS
Guide" as used in this Agreement means the Fannie Mae Multifamily
Negotiated Transactions Guide, as such Guide may be amended from time
to time, including amendments in the form of Lender Memos, Guide
Updates and Guide Announcements). All references to specific articles
and sections of, and exhibits to, the DUS Guide shall be deemed
references to such articles, sections and exhibits as they may be
amended, modified, updated, superseded, supplemented or replaced from
time to time.
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"DUS UNDERWRITING REQUIREMENTS" means the overall underwriting
requirements for Multifamily Residential Properties as set forth in
the DUS Guide.
"ENVIRONMENTAL CLAIM" means any notice of violation, claim,
demand, abatement, order or other order or direction (conditional or
otherwise) by any Person for any damage, including personal injury
(including sickness, disease or death), tangible or intangible
property damage, contribution, indemnity, indirect or consequential
damages, damage to the environment, pollution, contamination or other
adverse effects on the environment, removal, cleanup or remedial
action or for fines, penalties or restrictions, resulting from or
based upon (a) the existence or occurrence, or the alleged existence
or occurrence, of a Hazardous Substance Activity or (b) the violation,
or alleged violation, of any Hazardous Materials Laws in connection
with any Mortgaged Property.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"EVENT OF DEFAULT" means any event defined to be an "Event of
Default" under Article XVI.
"EVIDENCE OF COMPLIANCE WITH PROPERTY LAWS" means evidence
satisfactory to the Lender of compliance with Section 205 and 206 of
Part III of the DUS Guide.
"FACILITY DEBT SERVICE" means, as of any specified date, the
amount of interest and principal amortization, during the 12 month
period immediately succeeding the specified date, with respect to the
Advances Outstanding on the specified date, except that, for these
purposes, each Base Facility Advance shall be deemed to require level
monthly payments of principal and interest (at the Coupon Rate for the
Base Facility Advance) in an amount necessary to fully amortize the
original principal amount of the Base Facility Advance over a 25 year
period, with such amortization deemed to commence on the first day of
the 12 month period. Notwithstanding the foregoing, at such times as
Cash Collateral is held by the Lender, the Facility Debt Service for a
specified date shall be calculated by (i) subtracting the amount of
Cash Collateral from the amount of actual Advances Outstanding on the
specified date and (ii) calculating the Facility Debt Service on the
remaining Advances Outstanding using a Coupon Rate equal to the
Blended Rate. EXHIBIT E to this Agreement contains an example of the
determination of the Facility Debt Service.
"FAMILY MEMBER" means, when used with reference to a specified
individual, the individual's spouse, issue, parents, siblings and a
trust for the benefit of the individual's spouse or issue, or both.
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"FANNIE MAE" means the federally-chartered and stockholder-owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act, 12 U.S.C. <section> 1716 ET SEQ.
"FINANCIAL COVENANTS" means the covenants set forth in Section
13.03.
"FINANCING LEASE" means any lease of property, real or personal,
the obligations of the lessee in respect of which are required by GAAP
to be capitalized on a balance sheet of the lessee or to be otherwise
disclosed as such in a note to such balance sheet.
"FUTURE ADVANCE" means an Advance made after the Initial Closing
Date.
"GAAP" means generally accepted accounting principles in the
United States in effect from time to time, consistently applied.
"GENERAL CONDITIONS" shall have the meaning set forth in Article
X.
"GEOGRAPHICAL DIVERSIFICATION REQUIREMENTS" means, prior to the
occurrence of an increase in the Base Facility Credit Commitment
pursuant to Article VIII, a requirement that the Collateral Pool
consist of at least eight Mortgaged Properties located in at least
four states and, upon the occurrence of any increase in the Base
Facility Credit Commitment pursuant to Article VIII, such
requirements as to the geographical diversity of the Collateral Pool
as the Lender may reasonably determine and notify Borrower of at the
time of the increase.
"GOVERNMENTAL ACTION" means any pending or, to the actual
knowledge of a Borrower Party, threatened suit, proceeding, order, or
governmental inquiry or opinion involving any Mortgaged Property that
alleges the violation of any Hazardous Materials Law.
"GOVERNMENTAL APPROVAL" means an authorization, permit, consent,
approval, license, registration or exemption from registration or
filing with, or report to, any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any court, board, agency,
commission, office or authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city
or otherwise) whether now or hereafter in existence.
"GOVERNMENT OBLIGATIONS" means direct obligations of, and
obligations on which the full and timely payment of principal and
interest is unconditionally guaranteed by, the full faith and credit
of the United States of America.
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<PAGE>
"GROSS REVENUES" means, for any specified period, with respect to
any Multifamily Residential Property, all income in respect of the
Multifamily Residential Property, as determined by the Lender in
accordance with the method described in paragraph 3 of Section 302.02
of Part V of the DUS Guide, except that for these purposes the
financial statements to be used need not be audited and paragraph (b)
of such paragraph 3 shall be taken into account in the Lender's
discretion.
"HAZARDOUS MATERIALS", with respect to any Mortgaged Property,
shall have the meaning given that term in the Security Instrument
encumbering the Mortgaged Property.
"HAZARDOUS MATERIALS LAW", with respect to any Mortgaged
Property, shall have the meaning given that term in the Security
Instrument encumbering the Mortgaged Property.
"HAZARDOUS SUBSTANCE ACTIVITY" means any storage, holding,
existence, release, spill, leaking, pumping, pouring, injection,
escaping, deposit, disposal, dispersal, leaching, migration, use,
treatment, emission, discharge, generation, processing, abatement,
removal, disposition, handling or transportation of any Hazardous
Materials from, under, into or on any Mortgaged Property in violation
of Hazardous Materials Laws, including the discharge of any Hazardous
Materials emanating from any Mortgaged Property in violation of
Hazardous Materials Laws through the air, soil, surface water,
groundwater or property and also including the abandonment or disposal
of any barrels, containers and other receptacles containing any
Hazardous Materials from or on any Mortgaged Property in violation of
Hazardous Materials Laws, in each case whether sudden or nonsudden,
accidental or nonaccidental.
"HIGHEST RATING CATEGORY" means an S&P rating category of "A-1+"
for instruments having a term of one year or less and "AAA" for
instruments having a term greater than one year, and a Moody's rating
category of "P-1" for instruments having a term of one year or less
and "Aaa" for instruments having a term greater than one year.
"IMPOSITIONS" means, with respect to any Mortgaged Property, (1)
any water and sewer charges which, if not paid, may result in a lien
on all or any part of the Mortgaged Property, (2) the premiums for
fire and other hazard insurance, rent loss insurance and such other
insurance as Lender may require under Section 19 of the Security
Instrument encumbering the Mortgaged Property, (3) Taxes, and (4)
amounts for other charges and expenses which Lender at any time
reasonably deems necessary to protect the Mortgaged Property, to
prevent the imposition of liens on the Mortgaged Property, or
otherwise to protect Lender's interests.
"INDEBTEDNESS" means, with respect to any Person, as of any
specified date, without duplication, all (a) indebtedness of such
Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with
customary practices), (b) other indebtedness of such Person which is
evidenced by a note, bond, debenture or similar instrument, (c)
obligations of such Person under Financing Leases, (d) obligations of
such Person in respect of acceptances (as defined in Article 3 of the
Uniform Commercial Code of the State of New York) issued or created
for the account of such Person, (e) liabilities secured by any Lien on
any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment of such liabilities
and (f) Contingent Obligations.
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<PAGE>
"INITIAL ADVANCE" means, collectively, the two initial Base
Facility Advances made on the Initial Closing Date in the aggregate
amount of $100,000,000, comprised of a Base Facility Advance in the
amount of $12,515,000 and a Base Facility Advance in the amount of
$87,485,000.
"INITIAL ADVANCE REQUEST" shall have the meaning set forth in
Section 3.01.
"INITIAL CLOSING DATE" means the date of this Agreement.
"INITIAL MORTGAGED PROPERTIES" means the Multifamily Residential
Properties described on Exhibit A to this Agreement and which
represent the Multifamily Residential Properties which are made part
of the Collateral Pool on the Initial Closing Date.
"INITIAL SECURITY INSTRUMENTS" means the Security Instruments
covering the Initial Mortgaged Properties.
"INITIAL VALUATION" means, when used with reference to specified
Collateral, the Valuation initially performed for the Collateral as of
the date on which the Collateral was added to the Collateral Pool.
The Initial Valuation for each of the Initial Mortgaged Properties is
as set forth in Exhibit A to this Agreement.
"INSURANCE POLICY" means, with respect to a Mortgaged Property,
the insurance coverage and insurance certificates evidencing such
insurance required to be maintained pursuant to the Security
Instrument encumbering the Mortgaged Property.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended.
"LEASE" means any lease, any sublease or subsublease, license,
concession or other agreement (whether written or oral and whether now
or hereafter in effect) pursuant to which any Person is granted a
possessory interest in, or right to use or occupy all or any portion
of any space in any Mortgaged Property, and every modification,
amendment or other agreement relating to such lease, sublease,
subsublease or other agreement entered into in connection with such
lease, sublease, subsublease or other agreement, and every guarantee
of the performance and observance of the covenants, conditions and
agreements to be performed and observed by the other party thereto.
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<PAGE>
"LENDER" shall have the meaning set forth in the first paragraph
of this Agreement, but shall refer to any replacement Lender if the
initial Lender is replaced pursuant to the terms of Section 18.04.
"LIEN" means any mortgage, deed of trust, deed to secure debt,
security interest or other lien or encumbrance (including both
consensual and non-consensual liens and encumbrances).
"LOAN DOCUMENTS" means this Agreement, the Notes, the Operating
Partnership's Guaranty, the Subsidiary Owner Guaranty, the Security
Documents, all documents executed by the Borrower Parties pursuant to
the General Conditions set forth in Article X of this Agreement and
any other documents executed by a Borrower Party from time to time in
connection with this Agreement or the transactions contemplated by
this Agreement.
"LOAN YEAR" means the period from the Initial Closing Date to and
including the last day of the calendar month in which the first
anniversary of the Initial Closing Date occurs, and each 12-month
period thereafter.
"MATERIAL ADVERSE EFFECT" means, with respect to any
circumstance, act, condition or event of whatever nature (including
any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singly or in
conjunction with any other event or events, act or acts, condition or
conditions, or circumstance or circumstances, whether or not related,
a material adverse change in or a materially adverse effect upon any
of (a) the business, operations, property or condition (financial or
otherwise) of any Borrower Party, (b) the present or future ability of
any Borrower Party to perform the Obligations for which it is liable,
(c) the validity, priority, perfection or enforceability of this
Agreement or any other Loan Document or the rights or remedies of the
Lender under any Loan Document, or (d) the value of, or the Lender's
ability to have recourse against, any Mortgaged Property.
"MAXIMUM AGGREGATE LOAN TO VALUE RATIO FOR THE TRAILING 12 MONTH
PERIOD" means an Aggregate Loan to Value Ratio for the Trailing 12
Month Period equal to 56.5%.
"MBS" means mortgage-backed securities. A MBS which is "backed"
by an Advance means that it is backed by an interest in the Notes and
the Collateral Pool securing the Notes, which interest permits the
holder of the MBS to participate in the Notes and the Collateral Pool
to the extent of the Advance.
"MBS ISSUE DATE" means the date on which a Fannie Mae MBS is
issued by Fannie Mae.
"MBS DELIVERY DATE" means the date on which a Fannie Mae MBS is
delivered by Fannie Mae.
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<PAGE>
"MBS PASS-THROUGH RATE" shall have the meaning set forth in
Section 2.03(c).
"MINIMUM AGGREGATE DEBT SERVICE COVERAGE RATIO FOR THE TRAILING
12 MONTH PERIOD" means an Aggregate Debt Service Coverage Ratio for
the Trailing 12 Month Period of 155%.
"MINIMUM AGGREGATE DEBT SERVICE COVERAGE RATIO FOR THE TRAILING
THREE MONTH PERIOD" means an Aggregate Debt Service Coverage Ratio for
the Trailing Three Month Period of 145%.
"MOODY'S" means Moody's Investors Service, Inc., a Delaware
corporation, and its successors and assigns.
"MORTGAGED PROPERTIES" means, collectively, the Additional
Mortgaged Properties and the Initial Mortgaged Properties, but
excluding each Collateral Release Property from and after the date of
the release of the Collateral Release Property from the Collateral
Pool.
"MULTIFAMILY RESIDENTIAL PROPERTY" means a residential property,
located in the United States, containing five or more dwelling units
in which not more than twenty percent (20%) of the net rentable area
is or will be rented to non-residential tenants, and conforming to the
requirements of Sections 201 and 203 of Part III of the DUS Guide.
"NET OPERATING INCOME" means, for any specified period, with
respect to any Multifamily Residential Property owned by an Owner, the
aggregate net income during such period equal to Gross Revenues during
such period less the aggregate Operating Expenses during such period.
If a Mortgaged Property is not owned by the Owner for the entire
specified period, the Net Operating Income for the Mortgaged Property
for the time within the specified period during which the Mortgaged
Property was not owned by the Owner shall be the Mortgaged Property's
underwritten net operating income determined by the Lender in
accordance with the underwriting procedures set forth in Part III of
the DUS Guide.
"NOTE" means any Base Facility Note.
"NOTICE ADDRESS" means
(a) as to any Borrower Party:
c/o Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Mr. Jerry Korn
Telecopy No.: (716) 546-5433
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<PAGE>
with copies to:
c/o Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Ms. Amy L. Tait
Executive Vice President and Director
Telecopy No.: (716) 546-5433
and
c/o Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Ann M. McCormick, Esq.
Vice President and General Counsel
Telecopy No.: (716) 232-3147
(b) as to the Lender:
WMF Washington Mortgage Corp.
1593 Spring Hill Road
Suite 400
Vienna, Virginia 22182
Attention: Ms. Leslie Dixon-Cook
Telecopy No.: (703) 610-1422
with a copy to:
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036-5869
Attention: Gary S. Smuckler, Esq.
Telecopy No.: (202) 467-7176
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<PAGE>
(c) as to Fannie Mae:
Fannie Mae
3939 Wisconsin Avenue, N.W.
Washington, D.C. 20016-2899
Attention:Vice President for
Multifamily Asset Management
Telecopy No.: (202) 752-5016
with a copy to:
Arent Fox Kintner Plotkin & Kahn, PLLC
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Attention: Gerald L. Mitchell, Esq.
Telecopy No.: (202) 857-6395
"OBLIGATIONS" means the aggregate of the obligations of each of
the Borrower Parties under this Agreement and the other Loan
Documents.
"OPERATING EXPENSES" means, for any period, with respect to any
Multifamily Residential Property, all expenses in respect of the
Multifamily Residential Property, as determined by the Lender in
accordance with the method described in paragraph 3 of Section 302.02
of Part V of the DUS Guide, including replacement reserves under the
Replacement Reserve Agreements for the Mortgaged Properties.
"OPERATING PARTNERSHIP" means Home Properties of New York, L.P.,
a New York limited partnership.
"OPERATING PARTNERSHIP'S GUARANTY" means that certain Guaranty
executed by the Operating Partnership and attached as EXHIBIT F to
this Agreement.
"ORGANIZATIONAL CERTIFICATE" means a certificate of the Borrower
Parties in the form attached as EXHIBIT G to this Agreement.
"ORGANIZATIONAL DOCUMENTS" means all certificates, instruments
and other documents pursuant to which an organization is organized or
operates, including, (i) with respect to a corporation, its articles
of incorporation and bylaws, (ii) with respect to a limited
partnership, its limited partnership certificate and partnership
agreement, (iii) with respect to a general partnership or joint
venture, its partnership or joint venture agreement and (iv) with
respect to a limited liability company, its articles of organization
and operating agreement.
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<PAGE>
"OUTSTANDING" means, when used in connection with promissory
notes, other debt instruments or Advances, for a specified date,
promissory notes or other debt instruments which have been issued, or
Advances which have been made, but have not been repaid in full as of
the specified date.
"OWNER" means the owner (either in fee simple or as tenant under
a ground lease meeting all of the requirements of the DUS Guide) of a
Mortgaged Property. As of the date of this Agreement, the Borrower,
the Operating Partnership and the Subsidiary Owner are the sole
Owners.
"OWNERSHIP INTERESTS" means, with respect to any entity, any
ownership interests in the entity and any economic rights (such as a
right to distributions, net cash flow or net income) to which the
owner of such ownership interests is entitled.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITS" means all permits, or similar licenses or approvals
issued and/or required by an applicable Governmental Authority or any
Applicable Law in connection with the ownership, use, occupancy,
leasing, management, operation, repair, maintenance or rehabilitation
of any Mortgaged Property or any Borrower Party's business.
"PERMITTED INVESTMENTS" means:
(i) Government Obligations;
(ii) direct obligations of, and obligations on which the full and
timely payment of principal and interest is unconditionally guaranteed
by, any agency or instrumentality of the United States of America
(other than the Federal Home Loan Mortgage Corporation) or direct
obligations of the World Bank, provided that such obligations are
assigned a credit rating by S&P and Moody's in the Highest Rating
Category of S&P and of Moody's;
(iii) obligations of any state or territory of the United States
of America, or obligations of any agency, instrumentality, authority
or political subdivision of such state or territory, or obligations of
any public benefit or municipal corporation the principal of and
interest on which are guaranteed by such state or political
subdivision and the interest on which is payable on a current basis,
and which obligations are rated in the Highest Rating Category of S&P
and of Moody's;
(iv) any written repurchase agreement entered into with a
Qualified Financial Institution whose unsecured short-term obligations
are rated in the Highest Rating Category of S&P and of Moody's;
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<PAGE>
(v) commercial paper rated in the Highest Rating Category of S&P
and of Moody's;
(vi) (a) interest-bearing negotiable certificates of deposit,
interest-bearing time deposits, interest-bearing savings accounts or
bankers' acceptances, issued by a Qualified Financial Institution
whose unsecured short-term obligations are rated in the Highest Rating
Category of S&P and of Moody's, or (b) interest-bearing negotiable
certificates of deposit, interest-bearing time deposits or
interest-bearing savings accounts, issued by a Qualified Financial
Institution, if such deposits or accounts are fully insured by the
Federal Deposit Insurance Corporation;
(vii) money market mutual funds registered under the Investment
Company Act of 1940 that have been rated "AAAm-G" or "AAAm" by S&P and
"Aaa" by Moody's, provided that the portfolio of such money market
mutual fund is limited to obligations described in (x) paragraph (i)
above and to agreements to repurchase such obligations or
(y) paragraphs (ii) or (iii) above and approved in writing by Fannie
Mae; and
(viii) any other investment authorized by the laws of any state
if such investments are approved in writing by Fannie Mae;
provided that Permitted Investments shall not include the following:
(1) any investments with a final maturity or any agreements with a
term greater than 365 days from the date of the investment (except
(a) obligations that provide for the optional or mandatory tender, at
par, by the holder of such obligations at least once within 365 days
of the date of purchase and (b) agreements or investments listed in
paragraphs (vii) and (viii) above), (2) any obligation (other than
obligations described in paragraphs (i) and (ii) above) with a
purchase price greater or less than the par value of such obligation,
(3) mortgage-backed securities, real estate mortgage investment
conduits or collateralized mortgage obligations, (4) interest-only or
principal-only stripped securities, (5) obligations bearing interest
at inverse floating rates, (6) any investment which may be prepaid or
called at a price less than their purchase price prior to stated
maturity, (7) any investment described in paragraph (iv) above with a
Qualified Financial Institution (as defined in clause (d) of the
definition of "Qualified Financial Institution") if the Qualified
Financial Institution does not agree to submit to jurisdiction, venue
and service of process in the United States of America in the
repurchase agreement and (8) any investment the interest rate on which
is variable, and is established other than by reference to a single
interest rate index plus a single fixed spread, if any, and which
interest rate moves proportionately with that index; provided further
that if any such investment described in paragraphs (i) through (viii)
above is required to be rated, such rating requirement will not be
satisfied if an "r" highlighter or a "t" highlighter is affixed to its
rating or is otherwise applicable.
"PERMITTED LIENS" means, with respect to a Mortgaged Property,
(i) the exceptions to title to the Mortgaged Property set forth in the
Title Insurance Policy for the Mortgaged Property approved by the
Lender, (ii) the Security Instrument encumbering the Mortgaged
Property, and (iii) any other Liens approved by the Lender.
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<PAGE>
"PERSON" means an individual, an estate, a trust, a corporation,
a partnership, a limited liability company or any other organization
or entity (whether governmental or private).
"POTENTIAL EVENT OF DEFAULT" means any event which, with the
giving of notice or the passage of time, or both, would constitute an
Event of Default.
"PRICE" means, with respect to an Advance or to an MBS backed by
an Advance, the proceeds of the sale of the MBS backed by the Advance.
"PROHIBITED ACTIVITIES OR CONDITIONS", with respect to a
Mortgaged Property, shall have the meaning given that term in the
Security Instrument encumbering the Mortgaged Property.
"PROPERTY" means any estate or interest in any kind of property
or asset, whether real, personal or mixed, and whether tangible or
intangible.
"QUALIFIED FINANCIAL INSTITUTION" means any of the following
having a senior unsecured debt rating in the Highest Rating Category
of S&P and Moody's, and approved by Fannie Mae: a (a) bank or trust
company organized under the laws of any state of the United States of
America, (b) national banking association, (c) savings bank, a savings
and loan association, or an insurance company or association chartered
or organized under the laws of any state of the United States of
America, (d) federal branch or agency pursuant to the International
Banking Act of 1978 or any successor provisions of law or a domestic
branch or agency of a foreign bank which branch or agency is duly
licensed or authorized to do business under the laws of any state or
territory of the United States of America, (e) government bond dealer
reporting to, trading with, and recognized as a primary dealer by the
Federal Reserve Bank of New York, and (f) securities dealer approved
in writing by Fannie Mae the liquidation of which is subject to the
Securities Investors Protection Corporation or other similar
corporation.
"RATE CONFIRMATION FORM" shall have the meaning set forth in
Section 2.03(c).
"RATE SETTING FORM" shall have the meaning set forth in Section
2.03(b).
"REAL ESTATE ASSETS" shall have the meaning set forth in Section
856(c)(6)(B) of the Internal Revenue Code and the regulations
thereunder.
"REIT" means Home Properties of New York, Inc., a Maryland
corporation.
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"RELEASE FEE" means, with respect to each Mortgaged Property
released from the Collateral Pool pursuant to Article VII, a fee equal
to $15,000.
"RELEASE PRICE" shall have the meaning set forth in Section
7.02(c).
"RENT ROLL" means, with respect to any Multifamily Residential
Property, a rent roll prepared and certified by the owner of the
Multifamily Residential Property, on Fannie Mae Form 4243, as set
forth in Exhibit III-3 of the DUS Guide, or on another form approved
by the Lender and containing substantially the same information as
Form 4243 requires.
"REPLACEMENT RESERVE AGREEMENT" means a Replacement Reserve and
Security Agreement, in the form attached as EXHIBIT H to this
Agreement, and completed in accordance with the requirements of the
DUS Guide.
"REQUEST" means a Collateral Addition Request, a Collateral
Release Request, a Credit Facility Expansion Request, a Credit
Facility Termination Request, an Initial Advance Request or a
Revolving Facility Request.
"REQUIREMENT OF LAW" means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to
or binding upon the Person or any of its Property or to which the
Person or any of its Property is subject.
"REVOLVING FACILITY REQUEST" shall have the meaning set forth in
Article V.
"S&P" means Standard & Poor's Ratings Group and its successors
and assigns.
"SECURITY DOCUMENTS" means the Security Instruments, the Cash
Management Agreements, the Replacement Reserve Agreements and any
other documents executed by a Borrower Party from time to time to
secure any of the Borrower Parties' obligations under the Loan
Documents.
"SECURITY INSTRUMENT" means, for each Mortgaged Property, a
separate Multifamily Mortgage, Deed of Trust or Deed to Secure Debt,
Assignment of Leases and Rents and Security Agreement given by an
Owner to or for the benefit of the Lender to secure the obligations of
the Borrower Parties under the Loan Documents. With respect to each
Mortgaged Property owned by the Operating Partnership or the
Subsidiary Owner, the Security Instrument shall be in the form
attached as EXHIBIT I to this Agreement, and with respect to each
Mortgaged Property owned by the Borrower, shall be in the form
attached as EXHIBIT J to this Agreement, each with changes, to the
extent applicable, to conform the Exhibit to the form Security
Instrument prescribed by Fannie Mae from time to time for use in the
State in which the Mortgaged Property is located. The amount secured
by the Security Instrument shall be equal to the Base Facility Credit
Commitment in effect from time to time, except that the Security
Instrument encumbering Initial Mortgaged Properties located in the
State of New York shall secure a principal amount of $16,436,250.
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"SINGLE-PURPOSE" means, with respect to a Person which is any
form of partnership or corporation or limited liability company, that
such Person at all times since its formation:
(i) has been a duly formed and existing partnership, corporation
or limited liability company, as the case may be;
(ii) has been duly qualified in each jurisdiction in which such
qualification was at such time necessary for the conduct of
its business;
(iii)has complied with the provisions of its organizational
documents and the laws of its jurisdiction of formation in
all respects;
(iv) has observed all customary formalities regarding its
partnership or corporate existence, as the case may be;
(v) has accurately maintained its financial statements,
accounting records and other partnership or corporate
documents separate from those of any other Person subject to
appropriate consolidation (for accounting purposes) with
those of other Affiliates in accordance with GAAP (provided,
however, that all consolidated financial statements prepared
with respect to any Affiliate of the Borrower or Subsidiary
Owner will include footnote references to indicate that the
Mortgaged Properties owned by the Borrower or the Subsidiary
Owner are owned by an entity the equity interests in which
are owned, in the case of the Borrower, wholly by the
Operating Partnership or, in the case of the Subsidiary
Owner, wholly by the Operating Partnership and a limited
partnership owned wholly by the Operating Partnership and
Home Properties Trust, a Maryland trust, a wholly-owned
Subsidiary of the REIT);
(vi) has not commingled its assets or funds with those of any
other Person;
(vii)has accurately maintained its own bank accounts, payroll and
books and accounts separate from those of any other Person;
(viii)has paid its own liabilities from its own separate assets;
(ix) has identified itself in all dealings with the public under
its own name (which may include the word "Home") and as a
separate and distinct entity;
(x) has not identified itself as being a division or a part of
any other Person;
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(xi) has not identified any other Person as being a division or a
part of such Person;
(xii)has been adequately capitalized in light of its contemplated
business operations;
(xiii)has not assumed, guaranteed or become obligated for the
liabilities of any other Person (except in connection with
the Credit Facility or the endorsement of negotiable
instruments in the ordinary course of business) or held out
its credit as being available to satisfy the obligations of
any other Person, except as otherwise permitted herein and
so long as such other Person is not an Affiliate of such
Single-Purpose Person;
(xiv)has not made loans or advances to (or pledged its assets
for) any other Person (except loans, advances or pledges
expressly permitted hereunder and made in the ordinary
course of business, and provided that payments collected in
arrears shall not by virtue of such fact alone be considered
loans);
(xv) has not entered into and was not a party to any transaction
with any Affiliate of such Person, except in the ordinary
course of business and on terms which are no less favorable
to such Person than would be obtained in a comparable
arm's-length transaction with an unrelated third party,
except as otherwise approved by the Lender in writing;
(xvi)has conducted its own business in its own name;
(xvii)has paid the salaries of its own employees, if any, and
maintained a sufficient number of employees in light of its
contemplated business operations;
(xviii)has allocated fairly and reasonably any overhead for
shared office space;
(xix)has used stationery, invoices and checks separate from those
of any other Person;
(xx) has not engaged in a non-exempt prohibited transaction
described in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code;
(xxi)has not acquired obligations or securities of its partners
or Affiliates; and
(xxii)has corrected any known misunderstanding regarding its
separate identity.
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Notwithstanding the foregoing, the Borrower or the Subsidiary Owner
shall not fail to be a Single-Purpose entity solely because of (a)
business dealings with its management agent that are conducted in
accordance with the terms of its management agreements, (b)
distributions it may make to its constituents or (c) non-material
deviations from the requirements of any of the matters set forth in
clauses (i) through (xxii) of this definition.
"SPECIAL POOL PURCHASE CONTRACT" shall have the meaning set forth
in Section 18.01.
"SUBSIDIARY" means, when used with reference to a specified
Person, (i) any Person that, directly or indirectly, through one or
more intermediaries, is controlled by the specified Person, (ii) any
Person of which the specified Person is, directly or indirectly, the
owner of more than 50% of any voting class of Ownership Interests or
(iii) any Person (A) which is a partnership and (B) of which the
specified Person is a general partner and owns more than 50% of the
partnership interests.
"SUBSIDIARY OWNER" means Home Properties of New York, L.P. and P-
K Partnership doing business as Patricia Court and Karen Court, a
Pennsylvania general partnership, but only during such times as it
owns a Mortgaged Property.
"SUBSIDIARY OWNER GUARANTY" means that certain Guaranty executed
by the Subsidiary Owner and attached as EXHIBIT K to this Agreement.
"SURVEYS" means the as-built surveys of the Mortgaged Properties
prepared in accordance with the requirements of Section 113 of the DUS
Guide, or otherwise approved by the Lender.
"TAXES" means all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all
assessments for schools, public betterments and general or local
improvements, which are levied, assessed or imposed by any public
authority or quasi-public authority, and which, if not paid, will
become a lien on the Land or the Improvements.
"TERM OF THIS AGREEMENT" shall be determined as provided in
Section 21.10 to this Agreement.
"TIE-IN ENDORSEMENT" means an endorsement to a Title Insurance
Policy which contains substantially the same coverages, and is subject
to substantially the same or fewer exceptions (or such other
exceptions as the Lender may approve), as the form attached as EXHIBIT
L to this Agreement.
"TITLE COMPANY" means Lawyers Title Insurance Corporation, 2150
Post Road, Fairfield, Connecticut 06430, Attention: Sandra
Fitzpatrick.
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"TITLE INSURANCE POLICIES" means the mortgagee's policies of
title insurance issued by the Title Company from time to time relating
to each of the Security Instruments, conforming to the requirements of
Section 111 of the DUS Guide, together with such endorsements,
coinsurance, reinsurance and direct access agreements with respect to
such policies as the Lender may, from time to time, consider necessary
or appropriate, whether or not required by the DUS Guide, including
Tie-In Endorsements, if available, and with a limit of liability under
the policy (subject to the limitations contained in Sections 6(a)(i)
and 6(a)(iii) of the Stipulations and Conditions of the policy) equal
to the following:
(1) For all policies for which a Tie-In Endorsement is
available, an amount equal to 56.5% of the aggregate Initial
Valuations of all Mortgaged Properties tied-in by the Tie-In
Endorsement;
(2) For each policy for which a Tie-In Endorsement is not
available, an amount equal to 75% of the Initial Valuation of the
Mortgaged Property; and
(3) Notwithstanding the foregoing, the title insurance for
Mortgaged Properties located in the States of Florida, New York,
Pennsylvania or Texas and added to the Collateral Pool on the
same date shall be issued on the same policy (or with a Tie-In
Endorsement which ties in all such Mortgaged Properties), in an
amount equal to 56.5% of the aggregate Initial Valuations of the
Mortgaged Properties.
"TRAILING 12 MONTH PERIOD" means, for any specified date, the 12
month period ending with the last day of the most recent calendar
quarter for which property statements have been delivered by the REIT
to the Lender pursuant to Section 13.01(d)(3) or (4).
"TRAILING THREE MONTH PERIOD" means, for any specified date, the
three month period ending with the last day of the most recent
calendar quarter for which property statements have been delivered by
the REIT to the Lender pursuant to Section 13.01(d)(3) or (4).
"TRANSFER" shall have the meaning set forth in Section 13.01(x).
"UNIMPROVED REAL PROPERTY" means real property which is not
improved by one or more buildings leased, or held out for lease, to
third parties.
"VALUATION" means, for any specified date, with respect to a
Multifamily Residential Property, (a) if an Appraisal of the
Multifamily Residential Property was more recently obtained than a Cap
Rate for the Multifamily Residential Property, the Appraised Value of
such Multifamily Residential Property, or (b) if a Cap Rate for the
Multifamily Residential Property was more recently obtained than an
Appraisal of the Multifamily Residential Property, the value derived
by dividing--
(i) the Net Operating Income of such Multifamily Residential
Property for the Trailing 12 Month Period, by
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(ii) the most recent Cap Rate determined pursuant to Section
11.02.
Notwithstanding the foregoing, any Valuation for a Multifamily
Residential Property calculated for a date occurring before the first
anniversary of the date on which the Multifamily Residential Property
becomes a part of the Collateral Pool shall equal the Appraised Value
of such Multifamily Residential Property, unless the Lender determines
that changed market or property conditions warrant that the value be
determined as set forth in the preceding sentence.
ARTICLE II
THE CREDIT FACILITY
SECTION 2.01. THE CREDIT FACILITY.
SECTION 2.01(a) ESTABLISHMENT OF THE CREDIT FACILITY. The Lender
hereby establishes the Credit Facility, which shall be comprised of
the Base Facility.
SECTION 2.01(b) ESTABLISHMENT OF THE BASE FACILITY.
SECTION 2.01(b)(1) ESTABLISHMENT. The Lender hereby
establishes the Base Facility, upon all of the terms of this
Agreement.
SECTION 2.01(b)(2) BASE FACILITY CREDIT COMMITMENT.
Subject to the terms, conditions and limitations of this
Agreement, the Lender agrees to make Advances to the Borrower in
the aggregate amount of the Base Facility Credit Commitment.
Each Advance made to the Borrower pursuant to this subsection
(b)(2) shall be referred to as a "BASE FACILITY ADVANCE." The
Borrower may not re-borrow any part of the Base Facility Advance
which it has previously borrowed and repaid.
SECTION 2.02. LIMITATIONS ON COMMITMENT TO MAKE ADVANCES.
SECTION 2.02(a) LIMITATIONS ON BASE FACILITY CREDIT COMMITMENT.
The Lender's obligations to make Base Facility Advances pursuant to
Section 2.01(b)(2) are subject to the following limitations:
SECTION 2.02(a)(1) TERM. The Lender shall not be obligated
to make any Base Facility Advances at any time after the
expiration of the Base Facility Availability Period.
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SECTION 2.02(a)(2) BASE FACILITY CREDIT COMMITMENT. The sum
of the aggregate unpaid principal balance of Base Facility
Advances Outstanding at any time shall not exceed the Base
Facility Credit Commitment.
SECTION 2.02(a)(3) MATURITY DATE OF BASE FACILITY ADVANCES.
The maturity date of the Initial Advance and any Future Advance
shall be the Base Facility Termination Date.
SECTION 2.02(a)(4) NO AMORTIZATION. There shall be no
amortization payments of principal scheduled to be due under the
Base Facility Advance prior to the maturity date of the Base
Facility Advance, unless the payment of principal is accelerated
in accordance with the terms of the Base Facility Note evidencing
the Base Facility Advance.
SECTION 2.02(b) LIMITATIONS ON ANY ADVANCE. The Lender's
obligations to make any Advance are subject to the following
additional limitation:
SECTION 2.02(b)(1) MINIMUM REQUEST. Each Future Advance
shall be in the minimum amount of $10,000,000.
SECTION 2.03. DETERMINATION AND CONFIRMATION OF INTEREST RATE AND
OTHER TERMS OF EACH ADVANCE. The interest rate applicable to each Base
Facility Advance (the "COUPON RATE") and the other terms of the Advance
shall be (i) with respect to the Initial Advance, as set forth in Section
2.03(d)(1) and the other provisions of this Agreement and the Base Facility
Notes evidencing the Initial Advance, (ii) with respect to each Future
Advance to be sold to Fannie Mae in exchange for cash from Fannie Mae, in
accordance with such procedures the Lender may determine at the time of the
Future Advance and (iii) with respect to each Future Advance which will be
sold to Fannie Mae in exchange for a Fannie Mae MBS, determined in
accordance with the following procedure:
SECTION 2.03(a) QUOTE. From time to time, at the Borrower's
request, with respect to a proposed Advance, the Lender shall quote to
the Borrower an estimate of the MBS Pass-Through Rate (for a proposed
Base Facility Advance) for a Fannie Mae MBS backed by the proposed
Advance. The Lender's quote shall be based on (i) a solicitation of
bids from institutional investors selected by the Lender and (ii) the
proposed terms and amount of the Advance selected by the Borrower.
The quote shall not be binding upon the Lender.
SECTION 2.03(b) RATE SETTING. If the Borrower satisfies all of
the conditions to the Lender's obligation to make the Advance
requested in the Request for the Advance delivered to the Lender, then
the Borrower may propose a MBS Pass-Through Rate by submitting to the
Lender by facsimile transmission a completed and executed document, in
the form attached as EXHIBIT M to this Agreement (the "RATE SETTING
FORM"), before 1:00 p.m. Washington, D.C. time on any Business Day
(the "RATE SETTING DATE"). The Rate
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Setting Form (i) contains various factual certifications required by
the Lender and (ii) specifies the amount, term, MBS Issue Date, MBS
Delivery Date, Base Facility Fee, proposed maximum Coupon Rate (the
"MAXIMUM ANNUAL COUPON RATE"), Price (which will be in a range between
99-1/2 and 100-1/2), Yield Maintenance Period and Closing Date for the
Advance.
SECTION 2.03(c) RATE CONFIRMATION. Within one Business Day after
receipt of the completed and executed Rate Setting Form, the Lender
shall solicit bids from institutional investors selected by the Lender
based on the information in the Rate Setting Form and, provided the
actual Coupon Rate (if the low bid were accepted) would be at or below
the Maximum Annual Coupon Rate, shall obtain a commitment (the "MBS
COMMITMENT") for the purchase of a Fannie Mae MBS having the bid terms
described in the related Rate Setting Form, and shall immediately
deliver to the Borrower by facsimile transmission a completed
document, in the form attached as EXHIBIT N to this Agreement (the
"RATE CONFIRMATION FORM") confirming the amount, term, MBS Issue Date,
MBS Delivery Date, MBS Pass-Through Rate, Base Facility Fee, Coupon
Rate, Price, Yield Maintenance Period, Specified U.S. Treasury
Security and Closing Date for the Advance. The term "MBS PASS-THROUGH
RATE" means, for a specified Fannie Mae MBS backed by a Base Facility
Advance, the interest rate (rounded to three places) which the Fannie
Mae MBS will bear based on the MBS Commitment, as determined by the
Lender. In the event that the Lender obtains an MBS Commitment and
the Lender fails to fulfill the MBS Commitment because the Advance is
not made (for a reason other than the default of the Lender to make
the Advance), the Borrower shall pay all breakage and other costs,
fees and damages incurred by the Lender in connection with its failure
to fulfill the MBS Commitment.
SECTION 2.03(d) COUPON RATE.
SECTION 2.03(d)(1) INITIAL ADVANCE. The Coupon Rate for
each Advance comprising the Initial Advance shall be 6.475%
(which is the sum of (i) the MBS Pass-Through Rate for the Base
Facility Advance of 6.255%, and (ii) 22 basis points).
SECTION 2.03(d)(2) FUTURE ADVANCES. Except as otherwise
provided in paragraph (3), the Coupon Rate for any Base Facility
Advance other than the Initial Advance shall equal the sum of (i)
the MBS Pass-Through Rate, and (ii) the following:
(A) if the Base Facility Advance is made before
the end of the first Loan Year, a number of
basis points determined by the Lender at the
time of the increase in the Base Facility
Credit Commitment, but in no event more than
25 basis points; and
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(B) if the Base Facility Advance is made after
the end of the first Loan Year, a number of
basis points determined by the Lender at the
time the Lender issues the Rate Confirmation
Form for the Base Facility Advance.
SECTION 2.03(d)(3) PARTIAL MONTH INTEREST. Notwithstanding
anything to the contrary in this Agreement, if an Advance is not
made on the first day of a calendar month, and the MBS Issue
Date for the MBS backed by the Advance is the first day of the
month following the month in which the Advance is made, the
Coupon Rate for the Advance for the partial month period
commencing on the Closing Date for the Advance and ending on the
last day of the calendar month in which the Closing Date occurs
shall be the greater of (i) the Coupon Rate for the Advance which
will be in effect for the period after the partial month period
or (ii) a rate determined by the Lender, based on the Lender's
cost of funds, and approved in advance, in writing, by the
Borrower, pursuant to procedures mutually agreed upon by the
Borrower and the Lender.
ARTICLE III
INITIAL ADVANCE
SECTION 3.01. REQUEST. The Borrower may make a request (the
"INITIAL ADVANCE REQUEST") for the Lender to make the Initial Advance. If
all conditions contained in Section 3.02 are satisfied on or before the
Closing Date for the Initial Advance, the Lender shall make the Initial
Advance on the Initial Closing Date or on another date selected by the
Borrower and approved by the Lender.
SECTION 3.02. CONDITIONS PRECEDENT TO INITIAL ADVANCE. The
obligation of the Lender to make the Initial Advance is subject to the
following conditions precedent:
(a) The delivery to the Title Company (with fully executed
instructions directing the Title Company to file and/or record in all
applicable jurisdictions) of all applicable Loan Documents required by
the Lender, including duly executed and delivered original copies of
the Base Facility Notes, the Operating Partnership's Guaranty, the
Initial Security Instruments covering the Initial Mortgaged Properties
and UCC-1 Financing Statements covering the portion of the Collateral
comprised of personal property, and other appropriate instruments, in
form and substance satisfactory to the Lender and in form proper for
recordation, as may be necessary in the opinion of the Lender to
perfect the Liens created by the applicable Security Instruments and
any other Loan Documents creating a Lien in favor of the Lender, and
the payment of all taxes, fees and other charges payable in connection
with such execution, delivery, recording and filing; and
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(b) The satisfaction of all applicable General Conditions set
forth in Article X.
ARTICLE IV
FUTURE ADVANCES
The Borrower may obtain Future Advances only in conjunction with a
Credit Facility Expansion under Article VIII.
ARTICLE V
ADDITION OF REVOLVING CREDIT FACILITY
The Borrower may make a request that Fannie Mae provide a revolving credit
facility, to be added to, and become a part of, the Credit Facility (a
"REVOLVING FACILITY REQUEST"). Any Revolving Facility Request shall be in
writing to the Lender, in the form attached as EXHIBIT O to this Agreement.
Neither the Lender nor Fannie Mae shall be obligated to provide the
revolving credit facility, but, if it elects to do so, the revolving credit
facility shall be provided upon such terms and conditions, including
pricing, as the Lender may determine. In no event shall the maximum loan
to value ratio applicable to the revolving credit facility be greater than
65% and in no event shall the minimum debt service coverage ratio
applicable to the revolving credit facility be lower than 135%.
ARTICLE VI
ADDITIONS OF COLLATERAL
SECTION 6.01. RIGHT TO ADD COLLATERAL. Subject to the terms and
conditions of this Article, the Borrower shall have the right, from time to
time during the Term of this Agreement, to add Multifamily Residential
Properties to the Collateral Pool in accordance with the provisions of this
Article.
SECTION 6.02. PROCEDURE FOR ADDING COLLATERAL.
SECTION 6.02(a) REQUEST. In order to add a Multifamily
Residential Property to the Collateral Pool, the Borrower may, not
more than once each calendar quarter, deliver a written request (the
"COLLATERAL ADDITION REQUEST") to the Lender, in the form attached as
EXHIBIT P to this Agreement, to add an Additional Mortgaged Property
to the Collateral Pool. Each Collateral Addition Request shall be
accompanied by (and no Collateral Addition Request shall be effective
unless it is accompanied by) the following:
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(i) The information relating to the proposed Additional
Mortgaged Property required by the form attached as EXHIBIT Q to this
Agreement (the "COLLATERAL ADDITION DESCRIPTION PACKAGE"), as amended
from time to time to include information required under the DUS Guide;
and
(ii) The payment of all Additional Collateral Due Diligence Fees
pursuant to Section 14.02(b).
SECTION 6.02(b) ADDITIONAL INFORMATION. The Borrower shall
promptly deliver to the Lender any additional information concerning
the proposed Additional Mortgaged Property that the Lender may from
time to time reasonably request.
SECTION 6.02(c) UNDERWRITING. The Lender shall evaluate the
proposed Additional Mortgaged Property, and shall make underwriting
determinations as to the Aggregate Debt Service Coverage Ratios and
the Aggregate Loan to Value Ratio for the Trailing 12 Month Period
applicable to the Collateral Pool, on the basis of a Valuation made
with respect to the proposed Additional Mortgaged Property (but, in
the case of an Additional Mortgaged Property acquired less than one
year before the date on which the Lender performs such underwriting
determinations, the underwriting determinations shall be on the basis
of the lesser of (i) the amount of such Valuation or (ii) the sum of
(x) the acquisition price of the proposed Additional Mortgaged
Property, (y) the cost of all capital improvements made by the owner
of the Additional Mortgaged Property after the date of acquisition
and (z) allocable transaction costs), and otherwise in accordance
with Fannie Mae's DUS Underwriting Requirements. Within 30 days
after receipt of (i) the Collateral Addition Request for the
Additional Mortgaged Property and (ii) all reports, certificates and
documents set forth on EXHIBIT R to this Agreement, including a
zoning analysis undertaken in accordance with Section 206 of the DUS
Guide, the Lender shall notify the Borrower whether or not it shall
consent to the addition of the proposed Additional Mortgaged Property
to the Collateral Pool and, if it shall so consent, shall set forth
the Aggregate Debt Service Coverage Ratios and the Aggregate Loan to
Value Ratio for the Trailing 12 Month Period which it estimates shall
result from the addition of the proposed Additional Mortgaged
Property to the Collateral Pool. If the Lender declines to consent
to the addition of the proposed Additional Mortgaged Property to the
Collateral Pool, the Lender shall include, in its notice, a brief
statement of the reasons for doing so. Within five Business Days
after receipt of the Lender's notice that it shall consent to the
addition of the proposed Additional Mortgaged Property to the
Collateral Pool, the Borrower shall notify the Lender whether or not
it elects to cause the proposed Additional Mortgaged Property to be
added to the Collateral Pool. If the Borrower fails to respond
within the period of five Business Days, it shall be conclusively
deemed to have elected not to cause the proposed Additional Mortgaged
Property to be added to the Collateral Pool.
SECTION 6.02(d) CLOSING. If, pursuant to subsection (c), the
Lender consents to the addition of the proposed Additional Mortgaged
Property to
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the Collateral Pool, the Borrower timely elects to cause
the proposed Additional Mortgaged Property to be added to the
Collateral Pool and all conditions contained in Section 6.03 are
satisfied, the Lender shall permit the proposed Additional Mortgaged
Property to be added to the Collateral Pool, at a closing to be held
at offices designated by the Lender on a Closing Date selected by the
Lender, and occurring within five Business Days after the Lender's
receipt of the Borrower's election (or on such other date to which
the Borrower and the Lender may agree).
SECTION 6.03. CONDITIONS PRECEDENT TO ADDITION OF AN ADDITIONAL
MORTGAGED PROPERTY TO THE COLLATERAL POOL. The right of the Borrower to
add an Additional Mortgaged Property to the Collateral Pool on the Closing
Date applicable to the Additional Mortgaged Property is subject to the
satisfaction of the following conditions precedent on or before the Closing
Date:
(a) On the Closing Date for the addition of the Additional
Mortgaged Property to the Collateral Pool:
(i) the Aggregate Debt Service Coverage Ratio for the
Trailing 12 Month Period is not less than the
Minimum Aggregate Debt Service Coverage Ratio for
the Trailing 12 Month Period;
(ii) the Aggregate Debt Service Coverage Ratio for the
Trailing Three Month Period is not less than the
Minimum Aggregate Debt Service Coverage Ratio for
the Trailing Three Month Period; and
(iii) the Aggregate Loan to Value Ratio for the Trailing
12 Month Period is not greater than the Maximum
Aggregate Loan to Value Ratio for the Trailing 12
Month Period.
(b) The payment by the Borrower of the Collateral Addition Fee;
(c) The delivery to the Title Company (with fully executed
instructions directing the Title Company to file and/or record in all
applicable jurisdictions) of all applicable Collateral Addition Loan
Documents required by the Lender, including duly executed and
delivered original copies of any Security Instruments and any UCC-1
Financing Statements covering the portion of the Additional Mortgaged
Property comprised of personal property, and other appropriate
documents, in form and substance satisfactory to the Lender and in
form proper for recordation, as may be necessary in the opinion of
the Lender to perfect the Lien created by the applicable additional
Security Instrument, and any other Collateral Addition Loan Document
creating a Lien in favor of the Lender, and the payment of all taxes,
fees and other charges payable in connection with such execution,
delivery, recording and filing;
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(d) If required by the Lender, amendments to the Notes and the
Security Instruments, reflecting the addition of the Additional
Mortgaged Property to the Collateral Pool and, as to any Security
Instrument so amended, the receipt by the Lender of an endorsement to
the Title Insurance Policy insuring the Security Instrument, amending
the effective date of the Title Insurance Policy to the Closing Date
and showing no additional exceptions to coverage other than the
exceptions shown on the Initial Closing Date and other exceptions
approved by the Lender;
(e) If the Title Insurance Policy for the Additional Mortgaged
Property contains a Tie-In Endorsement, an endorsement to each other
Title Insurance Policy containing a Tie-In Endorsement, adding a
reference to the Additional Mortgaged Property;
(f) the Owner of the Additional Mortgaged Property shall be the
Borrower, except that the Owner of the Additional Mortgaged Property
may be the Operating Partnership if, after giving effect to the
addition of the Additional Mortgaged Property to the Collateral
Pool, the Valuations (as of the Closing Date for the Collateral
Addition Request) of all Mortgaged Properties owned by the Operating
Partnership shall not exceed 25% of the Valuations (as of the Closing
Date for the Collateral Addition Request) of all Mortgaged Properties
in the Collateral Pool; and
(g) The satisfaction of all applicable General Conditions set
forth in Article X.
ARTICLE VII
RELEASES OF COLLATERAL
SECTION 7.01. RIGHT TO OBTAIN RELEASES OF COLLATERAL. Subject to
the terms and conditions of this Article, the Borrower shall have the right
to obtain a release of Collateral from the Collateral Pool in accordance
with the provisions of this Article.
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SECTION 7.02. PROCEDURE FOR OBTAINING RELEASES OF COLLATERAL.
SECTION 7.02(a) REQUEST. In order to obtain a release of
Collateral from the Collateral Pool, the Borrower may, not more than
once each calendar quarter, deliver a written request for the release
of the Collateral from the Collateral Pool (the "COLLATERAL RELEASE
REQUEST") to the Lender, in the form attached as EXHIBIT S to this
Agreement. The Collateral Release Request shall not result in a
termination of all or any part of the Credit Facility. The Borrower
may only terminate all or any part of the Credit Facility by
delivering a Credit Facility Termination Request pursuant to Article
IX. The Collateral Release Request shall be accompanied by (and the
Collateral Release Request shall not be effective unless it is
accompanied by) the name, address and location of the Mortgaged
Property to be released from the Collateral Pool (the "COLLATERAL
RELEASE PROPERTY").
SECTION 7.02(b) CLOSING. If all conditions contained in
Section 7.03 are satisfied, the Lender shall cause the Collateral
Release Property to be released from the Collateral Pool, at a
closing to be held at offices designated by the Lender on a Closing
Date selected by the Lender, and occurring within 30 days after the
Lender's receipt of the Collateral Release Request (or on such other
date to which the Borrower and the Lender may agree), by executing
and delivering, and causing all applicable parties to execute and
deliver, all at the sole cost and expense of the Borrower,
instruments, in the form customarily used by the Lender for releases
in the jurisdiction governing the perfection of the security interest
being released, releasing the applicable Security Instrument as a
Lien on the Collateral Release Property (but the Security Instrument
itself will not be fully released, but only partially released, if it
also encumbers other Mortgaged Properties not then being released),
and UCC-3 Termination Statements terminating the UCC-1 Financing
Statements perfecting a Lien on the portion of the Collateral Release
Property comprised of personal property (but the UCC-1 Statement
itself will not be fully terminated, but only partially terminated,
if it also describes personal property relating to other Mortgaged
Properties not then being released) and such other documents and
instruments as the Borrower may reasonably request evidencing the
release of the applicable Collateral from any lien securing the
Obligations (including a termination of any restriction on the use of
any accounts relating to the Collateral Release Property) and the
release and return to the applicable Owner of any and all escrowed
amounts relating thereto. The instruments referred to in the
preceding sentence are referred to in this Article as the "COLLATERAL
RELEASE DOCUMENTS."
SECTION 7.02(c) The term "RELEASE PRICE" means an amount
determined by the Lender for each Mortgaged Property on the Closing
Date and on or before September 1 of each year thereafter during the
term of this Agreement. The Release Prices in effect on the Initial
Closing Date shall be as set forth in Exhibit A. Upon each
determination of the Release Price for each Mortgaged Property by the
Lender, the Release Price for each Mortgaged Property shall be
promptly disclosed in writing by the Lender to the Owner and shall
remain in effect until the next determination, except that the Lender
shall have the
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right to adjust such amounts on the date on which (i)
a Material Adverse Effect occurs, (ii) an Additional Mortgaged
Property is added to the Collateral Pool, (iii) a Mortgaged Property
is released from the Collateral Pool or (iv) the Borrower receives a
Future Advance. The date on which Release Prices are annually
determined, or are otherwise adjusted, shall be referred to as a
"DETERMINATION DATE." The sum of all Release Prices determined on a
Determination Date shall equal the aggregate amount of Advances
Outstanding on the Determination Date. The Borrower shall pay the
Release Price by (i) delivering to the Lender Cash Collateral and/or
(ii) adding one or more Additional Mortgaged Properties to the
Collateral Pool (subject to and in accordance with the terms of
Article VI), with an aggregate Collateral Value equal to, or
exceeding, the Release Price. For these purposes,
"COLLATERAL VALUE" means the value of the substitute
Collateral, determined as follows:
(1) Cash Collateral shall have a Collateral Value equal
to 100% of the principal amount of the Cash
Collateral; and
(2) an Additional Mortgaged Property shall have a
Collateral Value equal to the maximum principal
amount of debt (the "SUPPORTABLE DEBT") which if it
were secured by a Security Instrument which
encumbered the Additional Mortgaged Property, would
result in a Loan to Value Ratio for the Additional
Mortgaged Property equal to or less than the Loan
to Value Ratio for the Collateral Release Property
and a Debt Service Coverage Ratio for the
Additional Mortgaged Property equal to or greater
than the Debt Service Coverage Ratio for the
Collateral Release Property; where
(A) the "LOAN TO VALUE RATIO FOR THE ADDITIONAL
MORTGAGED PROPERTY" means the ratio
(expressed as a percentage) of -- (x) the
Supportable Debt to (y) the Initial Valuation
of the Additional Mortgaged Property;
(B) the "LOAN TO VALUE RATIO OF THE COLLATERAL
RELEASE PROPERTY" means the ratio (expressed
as a percentage) of -- (x) the Release Price
for the Collateral Release Property to (y)
the Valuation of the Collateral Release
Property in effect on the Determination Date
establishing the Release Price for the
Collateral Release Property;
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(C) the "DEBT SERVICE COVERAGE RATIO FOR THE
ADDITIONAL MORTGAGED PROPERTY" means the
ratio (expressed as a percentage) of -- (x)
the Net Operating Income for the Trailing 12
Month Period allocable to the Additional
Mortgaged Property to (y) the Facility Debt
Service, computed with respect to the
Supportable Debt (rather than the Advances
Outstanding), bearing interest at the Blended
Rate;
(D) the "DEBT SERVICE COVERAGE RATIO FOR THE
COLLATERAL RELEASE PROPERTY" means the ratio
(expressed as a percentage) of -- (x) the Net
Operating Income of the Trailing 12 Month
Period allocable to the Collateral Release
Property to (y) the Facility Debt Service,
computed with respect to debt equal to the
Release Price, such debt bearing interest at
the Blended Rate; and
(E) "CASH COLLATERAL" means (i) cash or other
assets in the form of Permitted Investments
or (ii) a letter of credit complying with the
requirements of the DUS Guide for letters of
credit.
SECTION 7.02(d) CASH COLLATERAL. All Cash Collateral shall be
held by the Lender (or its appointed custodian or collateral agent)
as substituted Collateral ("CASH COLLATERAL"), in accordance with a
security agreement and other documents in form and substance
acceptable to the Lender (or, at the Borrower's option, may be
applied against the prepayment of Base Facility Advances, so long as
the prepayment is permitted under the Base Facility Note for the Base
Facility Advance). All Cash Collateral shall be invested in
Permitted Investments. Cash Collateral may be released (i) by adding
an Additional Mortgaged Property to the Collateral Pool (subject to
and in accordance with the terms of Article VI), with a Collateral
Value at least equal to the amount of Cash Collateral to be released
and (ii) provided all General Conditions have been satisfied. For
these purposes, the "Collateral Value" of an Additional Mortgaged
Property shall be calculated by using 56.5% in lieu of the "Loan to
Value Ratio of the Collateral Release Property", and by using 155% in
lieu of the "Debt Service Coverage Ratio for the Collateral Release
Property". Provided no Event of Default shall have occurred and be
continuing, Borrower shall be entitled to periodic payments of all
interest accruing on the Cash Collateral, in accordance with
provisions to be agreed to by the Borrower and Lender.
SECTION 7.03. CONDITIONS PRECEDENT TO RELEASE OF COLLATERAL RELEASE
PROPERTY FROM THE COLLATERAL POOL. The right of the Borrower to obtain a
release of a Collateral Release Property from the Collateral Pool and the
obligation of the Lender to release a Collateral Release Property from the
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Collateral Pool by executing and delivering the Collateral Release
Documents on the Closing Date, are subject to the satisfaction of the
following conditions precedent on or before the Closing Date:
(a) Immediately before and immediately after giving effect to
the requested release:
(i) the Aggregate Debt Service Coverage Ratio for the
Trailing 12 Month Period is not less than the
Minimum Aggregate Debt Service Coverage Ratio for
the Trailing 12 Month Period;
(ii) the Aggregate Debt Service Coverage Ratio for the
Trailing Three Month Period is not less than the
Minimum Aggregate Debt Service Coverage Ratio for
the Trailing Three Month Period; and
(iii) the Aggregate Loan to Value Ratio for the Trailing
12 Month Period is not greater than the Maximum
Aggregate Loan to Value Ratio for the Trailing 12
Month Period.
(b) Payment of the Release Price for the Collateral Release
Property;
(c) Payment of the Release Fee for the Collateral Release
Property;
(d) Receipt by the Lender of one or more counterparts of each
Collateral Release Document, dated as of the Closing Date, signed by
each of the parties (other than the Lender) who is a party to such
Collateral Release Document;
(e) If required by the Lender, amendments to the Notes and the
Security Instruments, reflecting the release of the Collateral
Release Property from the Collateral Pool and, as to any Security
Instrument so amended, the receipt by the Lender of an endorsement to
the Title Insurance Policy insuring the Security Instrument, amending
the effective date of the Title Insurance Policy to the Closing Date
and showing no additional exceptions to coverage other than the
exceptions shown on the Initial Closing Date and other exceptions
approved by the Lender;
(f) Receipt by the Lender of endorsements to the Tie-In
Endorsements of the Title Insurance Policies, if deemed necessary by
the Lender, to reflect the release;
(g) With respect to the release of a Collateral Release
Property where the Security Instrument encumbering the Collateral
Release Property also encumbers other Mortgaged Properties not being
released on the Closing Date for the release of the Collateral
Release Property, the receipt by the Lender of an endorsement to the
Title Insurance Policy insuring the Security Instrument, changing the
description of the property encumbered by the insured Security
Instrument, amending the effective date of the Title
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Insurance Policy to the Closing Date and showing no additional
exceptions to coverage other than the exceptions shown on the Initial
Closing Date and other exceptions approved by the Lender;
(h) If the Lender determines the Collateral Release Property to
be one phase of a project, and one or more other phases of the
project are Mortgaged Properties which will remain in the Collateral
Pool (the "REMAINING MORTGAGED PROPERTIES")--
(i) the Lender's receipt of separate statements of
income and expense, in the form required under
Section 13.01(d)(3), for the Collateral Release
Property and the Remaining Mortgaged Properties,
covering the quarterly and 12 month periods ending
with the most recent quarter for which statements
of income and expense for the Mortgaged Properties
are required to be delivered pursuant to Section
13.01(d)(3); and
(ii) the Lender's determination that the Remaining
Mortgaged Properties can be operated separately
from the Collateral Release Property and any other
phases of the project which are not Mortgaged
Properties. In making this determination, the
Lender shall evaluate whether the Remaining
Mortgaged Properties comply with the terms of
Sections 203 and 208 of the DUS Guide, which, as of
the date of this Agreement, require, among other
things, that a phase which constitutes collateral
for a loan made in accordance with the terms of the
DUS Guide (i) have adequate ingress and egress to
existing public roadways, either by location of the
phase on a dedicated, all-weather road or by access
to such a road by means of a satisfactory easement,
(ii) have access which is sufficiently attractive
and direct from major thoroughfares to be conducive
to continued good marketing, (iii) have a location
which is not (A) inferior to other phases, (B) such
that inadequate maintenance of other phases would
have a significant negative impact on the phase,
and (C) such that the phase is visible only after
passing through the other phases of the project and
(iv) comply with such other issues as are dictated
by prudent practice;
(i) Receipt by the Lender of a writing, dated as of the Closing
Date, signed by the Borrower Parties, in the form attached as EXHIBIT
T to this Agreement, pursuant to which the Borrower Parties confirm
that their obligations under the Loan Documents are not adversely
affected by the release of the Collateral Release Property from the
Collateral;
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(j) The remaining Mortgaged Properties in the Collateral Pool
shall satisfy the then-existing Geographical Diversification
Requirements; and
(k) The satisfaction of all applicable General Conditions set
forth in Article X.
SECTION 7.04. SUBSTITUTIONS. Subject to the terms, conditions and
limitations of Articles VI and VII, the Borrower may simultaneously add a
Multifamily Residential Property to the Collateral Pool and release a
Mortgaged Property from the Collateral Pool, thereby effecting a
substitution of Collateral.
ARTICLE VIII
EXPANSION OF CREDIT FACILITY
SECTION 8.01. RIGHT TO INCREASE BASE FACILITY CREDIT COMMITMENT.
Subject to the terms, conditions and limitations of this Article, the
Borrower shall have the right, at any time or from time to time during the
Base Facility Availability Period, to increase the Base Facility Credit
Commitment and to obtain a Future Advance in the amount of the increase.
SECTION 8.02. PROCEDURE FOR OBTAINING INCREASES IN BASE FACILITY
CREDIT COMMITMENT.
SECTION 8.02(a) REQUEST. In order to obtain an increase in the
Base Facility Credit Commitment and a Future Advance in the amount of
the increase, the Borrower may from time to time deliver a written
request for an increase (a "CREDIT FACILITY EXPANSION REQUEST") to
the Lender, in the form attached as EXHIBIT U to this Agreement.
Each Credit Facility Expansion Request shall be accompanied by (and
no Credit Facility Expansion Request shall be effective unless it is
accompanied by) the following:
(i) A designation of the amount of the proposed
increase;
(ii) A request that the Lender inform the Borrower of
any change in the Geographical Diversification
Requirements.
SECTION 8.02(b) CLOSING. If none of the limitations contained in
Section 8.03 is violated, and all conditions contained in Section 8.04
are satisfied, the Lender shall permit the requested increase in the
Base Facility Credit Commitment, and shall make the Future Advance, at
a closing to be held at offices designated by the Lender on a Closing
Date selected by the Lender, and occurring within 15 Business Days
after the Lender's receipt of the Credit Facility Expansion Request
(or on such other date to which the Borrower and the Lender may
agree).
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SECTION 8.03. LIMITATIONS ON RIGHT TO INCREASE BASE FACILITY CREDIT
COMMITMENT. The Borrower's right to increase the Base Facility Credit
Commitment is subject to the following limitations:
SECTION 8.03(1) BASE FACILITY CREDIT COMMITMENT. After
giving effect to the proposed increase, the Base Facility Credit
Commitment shall not exceed $200,000,000.
SECTION 8.03(2) MINIMUM REQUEST. Each Request for an
increase in the Base Facility Credit Commitment shall be in the
minimum amount of $10,000,000.
SECTION 8.03(3) FUTURE ADVANCE. The Borrower must obtain a
Future Advance in the amount of the increase in the Base
Facility Credit Commitment.
SECTION 8.04. CONDITIONS PRECEDENT TO INCREASE IN BASE FACILITY
CREDIT COMMITMENT. The right of the Borrower to increase the Base Facility
Credit Commitment is subject to the satisfaction of the following
conditions precedent on or before the Closing Date:
(a) (1) the Borrower has added one or more Additional Mortgaged
Properties to the Collateral Pool, subject to
compliance with all of the terms and conditions of
Article VI;
(2) the Debt Service Coverage Ratio for the Trailing 12
Month Period for the aggregate of such Additional
Mortgaged Properties is not less than the Minimum
Aggregate Debt Service Coverage Ratio for the Trailing
12 Month Period and the Debt Service Coverage Ratio for
the Trailing Three Month Period for the aggregate of
such Additional Mortgaged Properties is not less than
the Minimum Aggregate Debt Service Coverage Ratio for
the Trailing Three Month Period; and
(3) the increase in the Base Facility Credit Commitment is
not greater than the product obtained by multiplying
(A) the Maximum Aggregate Loan to Value Ratio for the
Trailing 12 Month Period by (b) the aggregate of the
Initial Valuations of such Additional Mortgaged
Properties.
For these purposes, the term "DEBT SERVICE COVERAGE RATIO" means,
with respect to such Additional Mortgaged Properties, for any
specified date, the Aggregate Debt Service Coverage Ratio,
computed with the following modifications:
(i) Net Operating Income shall be computed for such
Additional Mortgaged Properties only; and
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(ii) the Facility Debt Service shall be computed with
respect to the Future Advance being made in
connection with the increase in the Base Facility
Credit Commitment only.
(b) After giving effect to the requested increase--
(1) the Aggregate Debt Service Coverage Ratio for the
Trailing 12 Month Period is not less than the Minimum Aggregate
Debt Service Coverage Ratio for the Trailing 12 Month Period;
(2) the Aggregate Debt Service Coverage Ratio for the
Trailing Three Month Period is not less than the Minimum
Aggregate Debt Service Coverage Ratio for the Trailing Three
Month Period; and
(3) the Aggregate Loan to Value Ratio for the Trailing 12
Month Period is not greater than the Maximum Aggregate Loan to
Value Ratio for the Trailing 12 Month Period;
(c) The delivery of a Base Facility Note, duly executed by the
Borrower, in the amount of the Advance, reflecting all of the terms of
the Future Advance;
(d) The receipt by the Lender of an endorsement to each Title
Insurance Policy, amending the effective date of the Title Insurance
Policy to the Closing Date, increasing the limits of liability to the
Base Facility Credit Commitment, as increased under this Article,
showing no additional exceptions to coverage other than the exceptions
shown on the Initial Closing Date and other exceptions approved by the
Lender, together with any reinsurance agreements required by the
Lender;
(e) The receipt by the Lender of fully executed original copies
of all Credit Facility Expansion Loan Documents, each of which shall
be in full force and effect, and in form and substance satisfactory to
the Lender in all respects;
(f) If determined necessary by the Lender, the Borrower's
agreement to such geographical diversification requirements as the
Lender may determine; and
(g) The satisfaction of all applicable General Conditions set
forth in Article X.
SECTION 8.05. INTEREST RATE OF ADVANCES AFTER INCREASE IN BASE
FACILITY CREDIT COMMITMENT. In the event the Base Facility Credit
Commitment increases pursuant to an increase in the Base Facility Credit
Commitment under this Article, the Coupon Rate for any Base Facility
Advance which is allocable to the increase shall equal the rate set forth
in Section 2.03(d)(2) or (3), as applicable.
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ARTICLE IX
DEFEASANCE AND SUPPLEMENTAL PROVISIONS;
TERMINATION OF CREDIT FACILITY
SECTION 9.01. DEFEASANCE AND SUPPLEMENTAL PROVISIONS; TERMINATION
OF CREDIT FACILITY. All of the terms of EXHIBIT Z to this Agreement are
incorporated into this Agreement to the fullest extent as if the text of
the Exhibit were set forth in its entirety herein.
ARTICLE X
GENERAL CONDITIONS PRECEDENT TO ALL REQUESTS
The obligation of the Lender to close the transaction requested in a
Request shall be subject to the following conditions precedent (the
"GENERAL CONDITIONS") in addition to any other conditions precedent set
forth in this Agreement:
(a) PAYMENT OF EXPENSES. The payment by the Borrower of the
Lender's fees and expenses payable in accordance with this Agreement
for which the Lender has presented an invoice on or before the Closing
Date for the Request;
(b) NO MATERIAL ADVERSE CHANGE. There has been no material
adverse change in the financial condition, business or prospects of
the Borrower Parties or in the physical condition, operating
performance or value of any of the Mortgaged Properties since the
Initial Closing Date (or, with respect to the conditions precedent to
the Initial Advance, from the condition, business or prospects
reflected in the financial statements, reports and other information
obtained by the Lender during its review of the Borrower Parties and
the Initial Mortgaged Properties);
(c) NO DEFAULT. There shall exist no Event of Default or
Potential Event of Default on the Closing Date for the Request and,
after giving effect to the transaction requested in the Request, no
Event of Default or Potential Event of Default shall have occurred;
(d) NO INSOLVENCY. Receipt by the Lender on the Closing Date for
the Request of evidence satisfactory to the Lender that no Borrower
Party is insolvent (within the meaning of any applicable federal or
state laws relating to bankruptcy or fraudulent transfers) or will be
rendered insolvent by the transactions contemplated by the Loan
Documents, including the making of a Future Advance, or, after giving
effect to such transactions, will be left with an unreasonably small
capital with which to engage in its business or undertakings, or will
have intended to incur, or believe that it has incurred, debts beyond
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its ability to pay such debts as they mature or will have intended to
hinder, delay or defraud any existing or future creditor;
(e) NO UNTRUE STATEMENTS. The Loan Documents shall not contain
any untrue or misleading statement of a material fact and shall not
fail to state a material fact necessary in order to make the
information contained therein not misleading;
(f) REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by any Borrower Party in the Loan Documents shall be
true and correct in all material respects on the Closing Date for the
Request with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date for the
Request;
(g) NO CONDEMNATION OR CASUALTY. There shall not be pending or
threatened any condemnation or other taking, whether direct or
indirect, against any Mortgaged Property and there shall not have
occurred any casualty to any improvements located on any Mortgaged
Property if the condemnation or casualty will have a Material Adverse
Effect;
(h) DELIVERY OF CLOSING DOCUMENTS. The receipt by the Lender of
the following, each dated as of the Closing Date for the Request, in
form and substance satisfactory to the Lender in all respects:
(1) A Compliance Certificate;
(2) An Organizational Certificate; and
(3) Such other documents, instruments, approvals (and, if
requested by the Lender, certified duplicates of executed copies
thereof) and opinions as the Lender may request;
(i) DELIVERY OF CLOSING DOCUMENTS RELATING TO INITIAL ADVANCE
REQUEST, COLLATERAL ADDITION REQUEST OR CREDIT FACILITY EXPANSION
REQUEST. With respect to the closing of the Initial Advance Request,
a Collateral Addition Request, or a Credit Facility Expansion Request,
the receipt by the Lender of the following, each dated as of the
Closing Date for the Request, in form and substance satisfactory to
the Lender in all respects:
(1) Fully executed original copies of each Loan Document
required to be executed in connection with the Request, duly
executed and delivered by the parties thereto (other than the
Lender), each of which shall be in full force and effect; and
(2) Favorable opinions of counsel to the Borrower Parties,
as to the due organization and qualification of the Borrower
Parties, the due authorization, execution, delivery and
enforceability of each Loan Document executed in connection with
the Request and such other matters as the Lender may require.
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(j) DELIVERY OF PROPERTY-RELATED DOCUMENTS. With respect to
each of the Mortgaged Properties to be made part of the Collateral
Pool on the Closing Date for the Initial Advance Request or a
Collateral Addition Request, the receipt by the Lender of the
following, each dated as of the Closing Date for the Initial Advance
Request or Collateral Addition Request, as the case may be, in form
and substance satisfactory to the Lender in all respects:
(1) A favorable opinion of local counsel to the Borrower
Parties or the Lender as to the enforceability of the Security
Instrument, and any other Loan Documents, executed in connection
with the Request;
(2) A commitment for the Title Insurance Policy applicable
to the Mortgaged Property and a pro forma Title Insurance Policy
based on the Commitment;
(3) The Insurance Policy (or a certified copy of the
Insurance Policy) applicable to the Mortgaged Property;
(4) The Survey applicable to the Mortgaged Property;
(5) Evidence of Compliance with Property Laws applicable to
the Mortgaged Property;
(6) An Appraisal of the Mortgaged Property;
(7) A Replacement Reserve Agreement (or an amendment to an
existing Replacement Reserve Agreement), providing for the
establishment of a replacement reserve account, to be pledged to
the Lender, in which the Owner shall (unless waived by the
Lender) periodically deposit amounts for replacements for
improvements at the Mortgaged Property and as additional security
for the Borrower Parties' obligations under the Loan Documents;
(8) A Completion/Repair Agreement (or an amendment to an
existing Completion/Repair Agreement), if the Lender determines
one to be necessary or desirable;
(9) An Assignment of Management Agreement, on the standard
form required by the DUS Guide; and
(10) An Assignment of Leases and Rents, if the Lender
determines one to be necessary or desirable, provided that the
provisions of any such assignment shall be substantively
identical to those in the Security Instrument covering the
Collateral, with such modifications as may be necessitated by
applicable state or local law.
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ARTICLE XI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF LENDER
SECTION 11.01. REPRESENTATIONS AND WARRANTIES OF THE LENDER. The
Lender hereby represents and warrants to the Borrower Parties as follows:
SECTION 11.01(a) DUE ORGANIZATION. The Lender is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.
SECTION 11.01(b) POWER AND AUTHORITY. The Lender has the
requisite power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement.
SECTION 11.01(c) DUE AUTHORIZATION. The execution and delivery
by the Lender of this Agreement, and the consummation by it of the
transactions contemplated thereby, and the performance by it of its
obligations thereunder, have been duly and validly authorized by all
necessary action and proceedings by it or on its behalf.
SECTION 11.02. COVENANTS OF THE LENDER.
SECTION 11.02(a) CAP RATES. The Lender shall determine Cap Rates
for the Mortgaged Properties approximately once each year. The Lender
shall determine the Cap Rates in its sole and absolute discretion, on
the basis of its internal survey and analysis of cap rates for
comparable sales in the vicinity of the Mortgaged Property, with such
adjustments as the Lender deems appropriate in its sole and absolute
discretion and shall not be obligated to rely on any information
provided by the Borrower Parties. The Lender shall have the right to
select additional Cap Rates during the year at any time the Lender
determines that changed market or property conditions warrant such
action.
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SECTION 11.02(b) VALUATIONS.
The Lender shall perform a Valuation for each of the Mortgaged
Properties, and a determination of the Aggregate Debt Service Coverage
Ratios and Aggregate Loan to Value Ratio for the Trailing 12 Month
Period (all of which Valuations and determinations shall be binding
and conclusive on the Borrower Parties) once each calendar quarter,
within 20 Business Days after the Borrower Parties have delivered to
the Lender the reports required in Sections 13.01(d)(3) and (4).
The Net Operating Income used in the Valuations shall be based on the
property statements furnished by the Borrower pursuant to Sections
13.01(d)(3) and (4). The Lender shall have the right to perform
additional Valuations and determinations at other times during the
year (i) in connection with a Request, or (ii) at any time the Lender
determines that changed market or property conditions warrant such
action. The Lender shall deliver to the Borrower a notice showing the
Valuation for each Mortgaged Property, promptly after it is completed.
ARTICLE XII
REPRESENTATIONS AND WARRANTIES OF THE BORROWER PARTIES
SECTION 12.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER
PARTIES. Each Borrower Party hereby represents and warrants to the Lender,
with respect to itself, as follows:
SECTION 12.01(a) DUE ORGANIZATION; QUALIFICATION.
(1) The REIT is a corporation duly organized, validly
existing in good standing in the State of Maryland.
Each other Borrower Party is a general partnership,
limited partnership or limited liability company, as
the case may be, duly organized, validly existing and
in good standing in the State in which it is organized
and in each other jurisdiction in which such
qualification and/or standing is necessary to the
conduct of its business and where the failure to be so
qualified would adversely affect the validity of, the
enforceability of, or the ability of the Borrower Party
to perform, the Obligations under this Agreement and
the other Loan Documents. Each Owner is qualified to
transact business and is in good standing in each State
in which it owns a Mortgaged Property.
(2) The Borrower Party's principal place of business,
principal office and office where it keeps its books
and records as to the Collateral is located at its
Notice Address.
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SECTION 12.01(b) POWER AND AUTHORITY. The Borrower Party has the
requisite power and authority (i) to own its properties and to carry
on its business as now conducted and as contemplated to be conducted
in connection with the performance of the Obligations hereunder and
under the other Loan Documents and (ii) to execute and deliver this
Agreement and the other Loan Documents and to carry out the
transactions contemplated by this Agreement and the other Loan
Documents.
SECTION 12.01(c) DUE AUTHORIZATION. The execution, delivery and
performance of this Agreement and the other Loan Documents have been
duly authorized by all necessary action and proceedings by or on
behalf of the Borrower Party, and no further approvals or filings of
any kind, including any approval of or filing with any Governmental
Authority, are required by or on behalf of the Borrower Party as a
condition to the valid execution, delivery and performance by the
Borrower Party of this Agreement or any of the other Loan Documents.
SECTION 12.01(d) VALID AND BINDING OBLIGATIONS. This Agreement
and the other Loan Documents have been duly authorized, executed and
delivered by the Borrower Party and constitute the legal, valid and
binding obligations of the Borrower Party, enforceable against the
Borrower Party in accordance with their respective terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles affecting the enforcement of creditors' rights generally or
by equitable principles or by the exercise of discretion by any court.
SECTION 12.01(e) NON-CONTRAVENTION; NO LIENS. Neither the
execution and delivery of this Agreement and the other Loan Documents,
nor the fulfillment of or compliance with the terms and conditions of
this Agreement and the other Loan Documents nor the payment of the
Obligations:
(1) does or will conflict with or result in any breach or
violation of any Applicable Law, rule or regulation
enacted or issued by any Governmental Authority or
other agency having jurisdiction over the Borrower
Party, any of the Mortgaged Properties or any other
portion of the Collateral or other assets of the
Borrower Party, or any judgment or order applicable to
the Borrower Party or to which the Borrower Party, any
of the Mortgaged Properties or other assets of the
Borrower Party are subject;
(2) does or will conflict with or result in any material
breach or violation of, or constitute a default under,
any of the terms, conditions or provisions of the
Borrower Party's Organizational Documents, any
indenture, existing agreement or other instrument to
which the Borrower Party is a party or to which the
Borrower Party, any of the
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Mortgaged Properties or any other portion of the
Collateral or other assets of the Borrower Party
are subject;
(3) does or will result in or require the creation of any
Lien on all or any portion of the Collateral or any of
the Mortgaged Properties, except for the Permitted
Liens; or
(4) does or will require the consent or approval of any
creditor of the Borrower Party, any Governmental
Authority or any other Person except such consents or
approvals which have already been obtained.
SECTION 12.01(f) PENDING LITIGATION OR OTHER PROCEEDINGS. There
is no pending or, to the best knowledge of the Borrower Party,
threatened action, suit, proceeding or investigation, at law or in
equity, before any court, board, body or official of any Governmental
Authority or arbitrator against or affecting any Mortgaged Property or
any other portion of the Collateral or other assets of the Borrower
Party, which, if decided adversely to the Borrower Party, would have,
or may reasonably be expected to have, a Material Adverse Effect. The
Borrower Party is not in default with respect to any order of any
Governmental Authority.
SECTION 12.01(g) SOLVENCY. The Borrower Party is not insolvent
and will not be rendered insolvent by the transactions contemplated by
this Agreement or the other Loan Documents and after giving effect to
such transactions, the Borrower Party will not be left with an
unreasonably small amount of capital with which to engage in its
business or undertakings, nor will the Borrower Party have incurred,
have intended to incur, or believe that it has incurred, debts beyond
its ability to pay such debts as they mature. The Borrower Party did
not receive less than a reasonably equivalent value in exchange for
incurrence of the Obligations. There (i) is no contemplated, pending
or, to the best of the Borrower Party's knowledge, threatened
bankruptcy, reorganization, receivership, insolvency or like
proceeding, whether voluntary or involuntary, affecting the Borrower
Party or any of the Mortgaged Properties and (ii) has been no
assertion or exercise of jurisdiction over the Borrower Party or any
of the Mortgaged Properties by any court empowered to exercise
bankruptcy powers.
SECTION 12.01(h) NO CONTRACTUAL DEFAULTS. There are no defaults
by the Borrower Party or, to the knowledge of the Borrower Party, by
any other Person under any contract to which the Borrower Party is a
party relating to any Mortgaged Property, including any management,
rental, service, supply, security, maintenance or similar contract,
other than defaults which do not permit the non-defaulting party to
terminate the contract and which do not have, and are not reasonably
expected to have, a Material Adverse Effect. Neither the Borrower
Party nor, to the knowledge of the Borrower Party, any other Person,
has received notice or has any knowledge of any existing circumstances
in respect of which it could receive any notice of default or breach
in respect of any contracts affecting or concerning any
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Mortgaged Property other than defaults which do not permit the
non-defaulting party to terminate the contract and which do not have,
and are not reasonably expected to have, a Material Adverse Effect.
SECTION 12.01(i) COMPLIANCE WITH THE LOAN DOCUMENTS. The
Borrower Party is in compliance with all provisions of the Loan
Documents to which it is a party or by which it is bound. The
representations and warranties made by the Borrower Party in the Loan
Documents are true, complete and correct as of the Closing Date and do
not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under
which they were made, not misleading.
SECTION 12.01(j) ERISA. The Borrower Party is in compliance in
all material respects with all applicable provisions of ERISA and has
not incurred any liability to the PBGC on a Plan under Title IV of
ERISA. None of the assets of the Borrower Party constitute plan
assets (within the meaning of Department of Labor Regulation
Section 2510.3-101) of any employee benefit plan subject to Title I
of ERISA.
SECTION 12.01(k) FINANCIAL INFORMATION. The financial
projections relating to the Borrower Party and delivered to the Lender
on or prior to the date hereof, if any, were prepared on the basis of
assumptions believed by the Borrower Party, in good faith at the time
of preparation, to be reasonable and the Borrower Party is not aware
of any fact or information that would lead it to believe that such
assumptions are incorrect or misleading in any material respect;
provided, however, that no representation or warranty is made that any
result set forth in such financial projections shall be achieved. The
financial statements of the Borrower Party which have been furnished
to the Lender are complete and accurate in all material respects and
present fairly the financial condition of the Borrower Party, as of
its date in accordance with GAAP, applied on a consistent basis, and
since the date of the most recent of such financial statements no
event has occurred which would have, or may reasonably be expected to
have a Material Adverse Effect, and there has not been any material
transaction entered into by the Borrower Party other than transactions
in the ordinary course of business or transactions which have been
disclosed by the Borrower Party to the Lender in writing. The
Borrower Party has no material Contingent Obligations which are not
otherwise disclosed in its most recent financial statements.
SECTION 12.01(l) ACCURACY OF INFORMATION. No information,
statement or report furnished in writing to the Lender by the Borrower
Party in connection with this Agreement or any other Loan Document or
in connection with the consummation of the transactions contemplated
hereby and thereby contains any material misstatement of fact or omits
to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading; and the representations and warranties of the Borrower
Party and the statements, information and descriptions contained in
the Borrower Party's closing certificates, as of the Closing Date, are
true, correct and
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complete in all material respects, do not contain
any untrue statement or misleading statement of a material fact, and
do not omit to state a material fact required to be stated therein or
necessary to make the certifications, representations, warranties,
statements, information and descriptions contained therein, in light
of the circumstances under which they were made, not misleading; and
the estimates and the assumptions contained herein and in any
certificate of the Borrower Party delivered as of the Closing Date are
reasonable and based on the best information available to the Borrower
Party.
SECTION 12.01(m) NO CONFLICTS OF INTEREST. To the best knowledge
of the Borrower Party, no member, officer, agent or employee of the
Lender has been or is in any manner interested, directly or
indirectly, in that Person's own name, or in the name of any other
Person, in the Loan Documents, the Borrower Party or any Mortgaged
Property, in any contract for property or materials to be furnished or
used in connection with such Mortgaged Property or in any aspect of
the transactions contemplated by the Loan Documents.
SECTION 12.01(n) GOVERNMENTAL APPROVALS. No Governmental
Approval not already obtained or made is required for the execution
and delivery or approval, as the case may be, of this Agreement or any
other Loan Document or the performance of the terms and provisions
hereof or thereof by the Borrower Party.
SECTION 12.01(o) GOVERNMENTAL ORDERS. The Borrower Party is not
presently under any cease or desist order or other orders of a similar
nature, temporary or permanent, of any Governmental Authority which
would have the effect of preventing or hindering performance of its
duties hereunder, nor are there any proceedings presently in progress
or to its knowledge contemplated which would, if successful, lead to
the issuance of any such order.
SECTION 12.01(p) NO RELIANCE. The Borrower Party acknowledges,
represents and warrants that it understands the nature and structure
of the transactions contemplated by this Agreement and the other Loan
Documents, that it is familiar with the provisions of all of the
documents and instruments relating to such transactions; that it
understands the risks inherent in such transactions, including the
risk of loss of all or any of the Mortgaged Properties; and that it
has not relied on the Lender or Fannie Mae for any guidance or
expertise in analyzing the financial or other consequences of the
transactions contemplated by this Agreement or any other Loan Document
or otherwise relied on the Lender or Fannie Mae in any manner in
connection with interpreting, entering into or otherwise in connection
with this Agreement, any other Loan Document or any of the matters
contemplated hereby or thereby.
SECTION 12.01(q) COMPLIANCE WITH APPLICABLE LAW. The Borrower
Party is in compliance with Applicable Law, including all Governmental
Approvals, if any, except for such items of noncompliance that, singly
or in the aggregate, have not had, and are not reasonably expected to
cause, a Material Adverse Effect.
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SECTION 12.01(r) CONTRACTS WITH AFFILIATES. Except as otherwise
approved in writing by the Lender, the Borrower Party has not entered
into and is not a party to any contract, lease or other agreement with
any Affiliate of the Borrower Party for the provision of any service,
materials or supplies to any Mortgaged Property (including any
contract, lease or agreement for the provision of property management
services, cable television services or equipment, gas, electric or
other utilities, security services or equipment, laundry services or
equipment or telephone services or equipment). The Lender hereby
approves the property management agreements set forth on EXHIBIT W to
this Agreement.
SECTION 12.01(s) LINES OF BUSINESS. The Borrower is not engaged
(and each other Borrower Party is not principally engaged) in any
businesses other than the acquisition, ownership, development,
construction, leasing, financing or management of Multifamily
Residential Properties, and the conduct of these businesses does not
violate the Organizational Documents pursuant to which it is formed.
SECTION 12.01(t) STATUS AS A REAL ESTATE INVESTMENT TRUST.
During the Term of this Agreement, the REIT will qualify, and be taxed
as, a real estate investment trust under Subchapter M of the Internal
Revenue Code, and will not be engaged in any activities which would
jeopardize such qualification and tax treatment.
SECTION 12.01(u) YEAR 2000 COMPLIANCE. The Borrower Party has
conducted a comprehensive review and assessment of its computer
systems and applications and made inquiry of the Borrower Party's key
suppliers and vendors with respect to the so-called "year 2000
problem" (the risk that computer applications may not be able to
properly perform date-sensitive functions after December 31, 1999)
and, based on that review and inquiry, the Borrower Party does not
believe that the "year 2000 problem" will result in a material adverse
change in the ability of the Borrower Party and its Subsidiaries to
manage and operate their properties and pay and perform their
obligations hereunder. For these purposes, the term "KEY SUPPLIERS
AND VENDORS" means those suppliers and vendors whose failure to
perform their obligations to the Operating Partnership would have, or
may reasonably be expected to have, a Material Adverse Effect.
SECTION 12.01(v) AMENDED AND RESTATED BASE FACILITY NOTE.
Borrower acknowledges that, at Borrower's request, the Lender is
receiving the assignment of two notes and mortgages from Manufacturers
and Traders Trust Company (the "ASSIGNING LENDER") and consolidating
the two notes, together with an additional "gap" note, into the
Amended and Restated Note, and the two mortgages, together with an
additional "gap" mortgage, into the Amended and Restated Security
Instrument covering the Initial Mortgaged Properties located in New
York, all as set forth in that certain Consolidation, Extension,
Spreader and Modification Agreement, dated the same date as this
Agreement (the "CONSOLIDATION AGREEMENT"), by and between the Borrower
and the Lender (such notes and mortgages being assigned being referred
to as the "ASSIGNED LOAN DOCUMENTS"). The
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Consolidation Agreement contains a true, correct and complete description
of the Assigned Loan Documents and there have been no amendments to the
Assigned Loan Documents, except as set forth in the Consolidation
Agreement. There are no defaults on the part of the borrower under the
Assigned Loan Documents and the unpaid principal balance of the Assigned
Loan Documents is as set forth in the pay-off letter from the Assigning
Lender delivered previously to the Lender. The borrower under the
Assigned Loan Documents has no defense, offset or counterclaim against
enforcement under the Assigned Loan Documents, and such borrower has
not made any assertion thereof. The Assigning Lender owns the
Assigned Loan Documents and neither the Assigning Lender nor any other
Person has Transferred any of its interest in the Assigned Loan
Documents, except to the Lender.
SECTION 12.02. REPRESENTATIONS AND WARRANTIES OF THE OWNERS. Each
Owner hereby represents and warrants to the Lender as follows:
SECTION 12.02(a) TITLE. Each Owner has good, valid, marketable
and indefeasible title to each Mortgaged Property (either in fee
simple or as tenant under a ground lease meeting all of the
requirements of the DUS Guide), free and clear of all Liens whatsoever
except the Permitted Liens. The Subsidiary Owner holds record title
to the Mortgaged Properties identified on Exhibit A as Patricia Court
and Karen Court under a different name, but the Subsidiary Owner and
the record title holders of such Mortgaged Properties are one and the
same Person. Each Security Instrument, if and when properly recorded
in the appropriate records, together with any Uniform Commercial Code
financing statements required to be filed in connection therewith,
will create a valid, perfected first lien on the Mortgaged Property
intended to be encumbered thereby (including the Leases of such
Mortgaged Property and the rents and all rights to collect rents under
such Leases), subject only to Permitted Liens. Except for any
Permitted Liens, there are no Liens or claims for work, labor or
materials affecting any Mortgaged Property which are or may be prior
to, subordinate to, or of equal priority with, the Liens created by
the Loan Documents. The Permitted Liens do not have, and may not
reasonably be expected to have, a Material Adverse Effect.
SECTION 12.02(b) IMPOSITIONS. Each Owner has filed all property
and similar tax returns required to have been filed by it with respect
to each Mortgaged Property and has paid and discharged, or caused to
be paid and discharged, all installments for the payment of all Taxes
due to date, and all other material Impositions imposed against,
affecting or relating to each Mortgaged Property other than those
which have not become due, together with any fine, penalty, interest
or cost for nonpayment pursuant to such returns or pursuant to any
assessment received by it. Each Owner has no knowledge of any new
proposed Tax, levy or other governmental or private assessment or
charge in respect of any Mortgaged Property which has not been
disclosed in writing to the Lender.
SECTION 12.02(c) ZONING. Each Mortgaged Property complies in all
material respects with all Applicable Laws affecting such Mortgaged
Property. Without limiting the
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foregoing, all material Permits, including certificates of occupancy,
have been issued and are in full force and effect. Neither the Owner
nor, to the knowledge of the Owner, any former owner of any Mortgaged
Property, has received any written notification or threat of any actions
or proceedings regarding the noncompliance or nonconformity of any
Mortgaged Property with any Applicable Laws or Permits (other than
notices of noncompliance which have been cured), nor is the Owner
otherwise aware of any such pending actions or proceedings.
SECTION 12.02(d) LEASES. Each Owner has delivered to the Lender
a true and correct copy of its form apartment lease for each Mortgaged
Property (and, with respect to leases executed prior to the date on
which the Owner first owned the Mortgaged Property, the form apartment
lease used for such leases), and each Lease with respect to such
Mortgaged Property is in the form thereof, with no material
modifications thereto, except as previously disclosed in writing to
the Lender. Except as set forth in a Rent Roll, no Lease for any unit
in any Mortgaged Property (i) is for a term in excess of two years,
including any renewal or extension period unless such renewal or
extension period is subject to termination by the Owner upon not more
than 30 days' written notice, (ii) provides for prepayment of more
than one month's rent, or (iii) was entered into in other than the
ordinary course of business.
SECTION 12.02(e) RENT ROLL. Each Owner has executed and
delivered to the Lender a Rent Roll for each Mortgaged Property, each
dated as of and delivered within 30 days prior to the Closing Date.
Each Rent Roll sets forth each and every unit subject to a Lease which
is in full force and effect as of the date of such Rent Roll. The
information set forth on each Rent Roll is true, correct and complete
in all material respects as of its date and there has occurred no
material adverse change in the information shown on any Rent Roll from
the date of each such Rent Roll to the Closing Date. Except as
disclosed in the Rent Roll with respect to each Mortgaged Property or
otherwise previously disclosed in writing to the Lender, no Lease is
in effect as of the date of the Rent Roll with respect to such
Mortgaged Property. Notwithstanding the foregoing, any representation
in this subsection (e) made with respect to a time period occurring
prior to the date on which the Owner owned the Mortgaged Property is
made to the best of the Owner's knowledge.
SECTION 12.02(f) STATUS OF LANDLORD UNDER LEASES. Except for any
assignment of leases and rents which is a Permitted Lien or which is
to be released in connection with the consummation of the transactions
contemplated by this Agreement, each Owner is the owner and holder of
the landlord's interest under each of the Leases of units in each
Mortgaged Property and there are no prior outstanding assignments of
any such Lease, or any portion of the rents, additional rents,
charges, issues or profits due and payable or to become due and
payable thereunder.
SECTION 12.02(g) ENFORCEABILITY OF LEASES. Each Lease
constitutes the legal, valid and binding obligation of the Owner and,
to the knowledge of the Owner, of each of
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the other parties thereto, enforceable in accordance with its terms,
subject only to bankruptcy, insolvency, reorganization or other similar
laws relating to creditors' rights generally, and equitable principles,
and except as disclosed in writing to the Lender, no notice of any
default by the Owner which remains uncured has been sent by any tenant
under any such Lease, other than defaults which do not have, and are not
reasonably expected to have, a Material Adverse Effect.
SECTION 12.02(h) NO LEASE OPTIONS. All premises demised to
tenants under Leases are occupied by such tenants as tenants only. No
Lease contains any option or right to purchase, right of first refusal
or any other similar provisions. No option or right to purchase,
right of first refusal, purchase contract or similar right exists with
respect to any Mortgaged Property.
SECTION 12.02(i) INSURANCE. Each Owner has delivered to the
Lender true and correct certified copies of all Insurance Policies
currently in effect as of the date of this Agreement with respect to
the Mortgaged Property which it owns. Each such Insurance Policy
complies in all material respects with the requirements set forth in
the Loan Documents.
SECTION 12.02(j) TAX PARCELS. Each Mortgaged Property is on one
or more separate tax parcels, and each such parcel (or parcels) is (or
are) separate and apart from any other property.
SECTION 12.02(k) ENCROACHMENTS. Except as disclosed on the
Survey with respect to each Mortgaged Property, none of the
improvements located on any Mortgaged Property encroaches upon the
property of any other Person or upon any easement encumbering the
Mortgaged Property, nor lies outside of the boundaries and building
restriction lines of such Mortgaged Property and no improvement
located on property adjoining such Mortgaged Property lies within the
boundaries of or in any way encroaches upon such Mortgaged Property.
SECTION 12.02(l) INDEPENDENT UNIT. Except for Permitted Liens
and as disclosed on EXHIBIT X to this Agreement, or as disclosed in a
Title Insurance Policy or Survey for the Mortgaged Property, each
Mortgaged Property is an independent unit which does not rely on any
drainage, sewer, access, parking, structural or other facilities
located on any Property not included either in such Mortgaged Property
or on public or utility easements for the (i) fulfillment of any
zoning, building code or other requirement of any Governmental
Authority that has jurisdiction over such Mortgaged Property, (ii)
structural support, or (iii) fulfillment of the requirements of any
Lease or other agreement affecting such Mortgaged Property. Each
Owner, directly or indirectly, has the right to use all amenities,
easements, public or private utilities, parking, access routes or
other items necessary or currently used for the operation of each
Mortgaged Property. All public utilities are installed and operating
at each Mortgaged Property and all billed installation and connection
charges have been paid
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in full. Each Mortgaged Property is contiguous
to (or benefits from an irrevocable unsubordinated easement permitting
access from such Mortgaged Property to) a physically open, dedicated
public street, and has all necessary permits for ingress and egress
and is adequately serviced by public water, sewer systems and
utilities. No building or other improvement not located on a
Mortgaged Property relies on any part of the Mortgaged Property to
fulfill any zoning requirements, building code or other requirement of
any Governmental Authority that has jurisdiction over the Mortgaged
Property, for structural support or to furnish to such building or
improvement any essential building systems or utilities.
SECTION 12.02(m) CONDITION OF THE MORTGAGED PROPERTIES. Except
as disclosed in any third party report delivered to the Lender prior
to the date on which the Owner's Mortgaged Property is added to the
Collateral Pool, or otherwise disclosed in writing by the Owner to the
Lender prior to such date, each Mortgaged Property is in good
condition, order and repair, there exist no structural or other
material defects in such Mortgaged Property (whether patent or, to the
best knowledge of the Owner, latent or otherwise) and the Owner has
not received notice from any insurance company or bonding company of
(i) any defects or inadequacies in such Mortgaged Property, or any
part of it, which would adversely affect the insurability of such
Mortgaged Property or cause the imposition of extraordinary premiums
or charges for insurance or (ii) any termination or threatened
termination of any policy of insurance or bond. No claims have been
made against any contractor, architect or other party with respect to
the condition of any Mortgaged Property or the existence of any
structural or other material defect therein. No Mortgaged Property
has been materially damaged by casualty which has not been fully
repaired or for which insurance proceeds have not been received or are
not expected to be received except as previously disclosed in writing
to the Lender. There are no proceedings pending for partial or total
condemnation of any Mortgaged Property except as disclosed in writing
to the Lender.
ARTICLE XIII
COVENANTS OF THE BORROWER PARTIES
SECTION 13.01. AFFIRMATIVE COVENANTS OF THE BORROWER PARTIES. Each
Borrower Party agrees and covenants with the Lender, with respect to
itself, that, at all times during the Term of this Agreement:
SECTION 13.01(a) COMPLIANCE WITH AGREEMENTS; NO AMENDMENTS. The
Borrower Party shall comply with all the terms and conditions of each
Loan Document to which it is a party or by which it is bound;
provided, however, that the Borrower Party's failure to comply with
such terms and conditions shall not be an Event of Default until the
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expiration of the applicable notice and cure periods, if any,
specified in the applicable Loan Document.
SECTION 13.01(b) MAINTENANCE OF EXISTENCE. The Borrower Party
shall maintain its existence and continue to be a limited partnership,
limited liability company or corporation, as the case may be,
organized under the laws of the state of its organization, duly
qualified to do business in each jurisdiction in which such
qualification is necessary to the conduct of its business and where
the failure to be so qualified would adversely affect the validity of,
the enforceability of, or the ability to perform, its obligations
under this Agreement or any other Loan Document.
SECTION 13.01(c) MAINTENANCE OF REIT STATUS. The REIT shall
qualify and be taxed as a real estate investment trust under
Subchapter M of the Internal Revenue Code.
SECTION 13.01(d) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS;
OTHER INFORMATION. The Borrower Party shall keep and
maintain at all times complete and accurate books of accounts and records
in sufficient detail to correctly reflect (x) all of
the Borrower Party's financial transactions and assets and (y) the
results of the operation of each Mortgaged Property and
copies of all written contracts, Leases and other instruments which
affect each Mortgaged Property (including all bills,
invoices and contracts for electrical service, gas service, water and
sewer service waste management service, telephone service and management
services). In addition, the Borrower Parties shall furnish, or cause to
be furnished, to the Lender:
SECTION 13.01(d)(1) ANNUAL FINANCIAL STATEMENTS. As soon
as available, and in any event within 90 days after the
close of its fiscal year during the Term of this Agreement,
the audited balance sheet of the REIT and its Subsidiaries as
of the end of such fiscal year, the audited statement of income,
owners' equity and retained earnings of the REIT and its
Subsidiaries for such fiscal year and the audited statement of
cash flows of the REIT and its Subsidiaries for such fiscal
year, all in reasonable detail and stating in comparative form
the respective figures for the corresponding date and
period in the prior fiscal year, prepared in accordance with
GAAP, consistently applied, and accompanied by a certificate
of the REIT's independent certified public accountants to the
effect that such financial statements have been prepared in
accordance with GAAP, consistently applied, and that such
financial statements fairly present the results of its
operations and financial condition for the periods and dates
indicated, with such certification to be free of exceptions
and qualifications as to the scope of the audit or as to the
going concern nature of the business; provided, however, that
the REIT shall not be obligated to deliver any of the financial
statements or opinions described in this paragraph (1) for
any specified year if the REIT has delivered to the Lender its
Form 10-K for the specified year
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pursuant to Section 13.01(d)(7) and the Form 10-K contains
the financial statements and opinions requested in this
paragraph.
SECTION 13.01(d)(2) QUARTERLY FINANCIAL STATEMENTS. As soon
as available, and in any event within 45 days after the
close of each of the first three fiscal quarters of each fiscal
year during the Term of this Agreement, the unaudited
balance sheet of the REIT and its Subsidiaries as of the end of such
fiscal quarter, the unaudited statement of income and
retained earnings of the REIT and its Subsidiaries and the unaudited
statement of cash flows of the REIT and its Subsidiaries for the
portion of the fiscal year ended with the last day of such quarter,
all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the
previous fiscal year, accompanied by a certificate of the Chief
Financial Officer of the REIT to the effect that such financial
statements have been prepared in accordance with GAAP, consistently
applied, and that such financial statements fairly present the results
of its operations and financial condition for the periods and
dates indicated subject to year end adjustments in
accordance with GAAP; provided, however, that the REIT shall not
be obligated to deliver any of the financial statements
or certificates for any specified period if the REIT has delivered to
the Lender its Form 10-Q for the specified period pursuant to
Section 13.01(d)(7) and the Form 10-Q contains the financial
statements and certificates requested in this paragraph.
SECTION 13.01(d)(3) QUARTERLY PROPERTY STATEMENTS. As soon as
available, and in any event within 30 days after the
close of each of the first three fiscal quarters of each fiscal
year during the Term of this Agreement (or, upon the Lender's
request, on a monthly basis, within 30 days of the close of the
prior month), a statement of net operating income
of each Mortgaged Property for such fiscal quarter (or month, as
the case may be) and calendar "year to date" period
ending as of the close of such fiscal quarter (or month, as the
case may be), accompanied by a certificate of the Chief
Financial Officer of the REIT to the effect that each such statement
of net operating income fairly, accurately and
completely presents the operations of each such Mortgaged Property
for the period indicated. Notwithstanding the
foregoing, the Borrower shall not be required to provide any
statement of net operating income to the extent such income
or expenses are allocable to any period occurring prior to the date
on which the applicable Owner acquired the Mortgaged
Property.
SECTION 13.01(d)(4) ANNUAL PROPERTY STATEMENTS. As soon as
available, and in any event within 45 days after the end
of the fiscal year, an annual statement of net operating income
of each Mortgaged Property for such fiscal year,
accompanied by a certificate of the Chief Financial Officer of the
REIT to the effect that each such statement of net
operating income fairly, accurately and completely presents the
operations of each such Mortgaged Property for the period indicated.
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Notwithstanding the foregoing, the Borrower shall not be required
to provide any statement of net operating income to the extent such
income or expenses are allocable to any period occurring prior
to the date on which the applicable Owner acquired the Mortgaged
Property.
SECTION 13.01(d)(5) UPDATED RENT ROLLS. Upon the Lender's
reasonable request, a current Rent Roll for each Mortgaged
Property, showing the name of each tenant, and for each tenant,
the space occupied, the lease expiration date, the rent
payable, the rent paid and any other information requested
by the Lender and in the form required by the Lender and
accompanied by a certificate of the Chief Financial Officer of the
Borrower or the REIT to the effect that each such Rent
Roll fairly, accurately and completely presents the information
required therein.
SECTION 13.01(d)(6) SECURITY DEPOSIT INFORMATION. Upon the
Lender's reasonable request, an accounting of all
security deposits held in connection with any lease of any part of
any Mortgaged Property, including the name and
identification number of the accounts in which such security deposits
are held, the name and address of the financial institutions in
which such security deposits are held and the name of the person to
contact at such financial institution, along with any authority or
release necessary for the Lender to access information regarding
such accounts.
SECTION 13.01(d)(7) SECURITIES LAW REPORTING INFORMATION.
So long as the REIT is a reporting company under the
Securities and Exchange Act of 1934, promptly upon their becoming
available, (a) copies of all financial statements,
reports and proxy statements sent or made available generally by
the REIT or any other Borrower Party, or any of their
Affiliates, to their respective security holders, (b) all regular
and periodic reports and all registration statements
(other than the exhibits thereto and any registration statements
on Form S-8 or a similar form) and prospectuses, if any,
filed by the REIT or any other Borrower Party, or any of their
Affiliates, with the Securities and Exchange Commission or
other Governmental Authorities, including without limitation all
reports on Form 10-K, 10-Q and 8-K, and (c) all press
releases and other statements made available generally by the REIT
or any Borrower Party, or any of their Affiliates, to
the public concerning material developments in the business of the
REIT or other party (and such press releases and other
statements shall be sent to Fannie Mae and to the Lender).
SECTION 13.01(d)(8) ACCOUNTANTS' REPORTS. Promptly upon
receipt thereof, copies of any reports or management letters
submitted to the Borrower Party by its independent certified public
accountants in connection with the examination of its
financial statements made by such accountants (except for reports
otherwise provided pursuant to subsection (d)(1) above);
provided, however, that the Borrower
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Party shall only be required to deliver such reports and
management letters to the extent that they relate to any Borrower
Party or any Mortgaged Property.
SECTION 13.01(d)(9) ANNUAL BUDGETS. Promptly, and in any event
within 60 days after the start of its fiscal year, an
annual budget for each Mortgaged Property for such fiscal year,
setting forth an estimate of all of the costs and
expenses, including a capital improvements budget, of maintaining
and operating each Mortgaged Property.
SECTION 13.01(d)(10) OPERATING PARTNERSHIP'S PLANS AND
PROJECTIONS. Within 90 days after the beginning of each fiscal
year, copies of the Operating Partnership's "trend reports" for
the current and succeeding fiscal years, in substantially the
form previously submitted to the Lender, certified as true and
correct by the Chief Financial Officer of the REIT.
SECTION 13.01(d)(11) ANNUAL RENTAL AND SALES COMPARABLE
ANALYSIS. If produced by any Borrower Party, a rental and sales
comparable analysis of the local real estate market in which each
Mortgaged Property is located, in the form customarily used by
the Borrower Party.
SECTION 13.01(d)(12) OTHER REPORTS. Promptly upon receipt
thereof, all schedules, financial statements or other similar
reports delivered by the Borrower Party pursuant to the Loan
Documents reasonably requested by the Lender with respect to the
Borrower Party's business affairs or condition (financial or
otherwise) or any of the Mortgaged Properties.
If, after written request from the Lender, any Borrower Party
fails to provide in a timely manner the statements, schedules and
reports required by this Section 13.01(d), the Lender shall have the
right to have the Borrower Party's books and records audited, at the
Borrower Party*s expense, by independent certified public accountants
selected by the Lender in order to obtain such statements, schedules
and reports, and all related costs and expenses of the Lender shall
become immediately due and payable and shall become an additional part
of the Obligations. If an Event of Default has occurred and is
continuing, each Borrower Party shall provide immediate access to the
Lender upon written demand all books and records relating to the
Mortgaged Property or its operation. Each Borrower Party authorizes
Lender to obtain a credit report on any Borrower Party at any time.
SECTION 13.01(e) CERTIFICATE OF COMPLIANCE. The Borrower Party
shall deliver to the Lender concurrently with the delivery of the
financial statements and/or reports required to be delivered pursuant
to paragraphs (d)(1) and (d)(2) above a certificate signed by the
Chief Financial Officer of the Borrower or the REIT stating that, to
the best of the knowledge of such individual following reasonable
inquiry, no Event of Default or Potential
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Event of Default has occurred, or if an Event of Default or Potential
Event of Default has occurred, specifying the nature thereof.
SECTION 13.01(f) MAINTAIN LICENSES. The Borrower Party shall
procure and maintain in full force and effect all licenses, Permits,
charters and registrations which are material to the conduct of its
business and shall abide by and satisfy all terms and conditions of
all such licenses, Permits, charters and registrations.
SECTION 13.01(g) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND
ACCOUNTANTS. To the extent permitted by law and in addition to the
applicable requirements of the Security Instruments, the Borrower
Party shall permit the Lender:
(1) to inspect, make copies and abstracts of, and have
reviewed or audited, such of the Borrower Party's books
and records as may relate to the Obligations or any
Mortgaged Property;
(2) to discuss the Borrower Party's affairs, finances and
accounts with any of the Borrower Party's officers,
partners and employees;
(3) to discuss the Borrower Party's affairs, finances and
accounts with its independent public accountants,
provided that the Chief Financial Officer of the
Borrower Party has been given the opportunity by the
Lender to be a party to such discussions; and
(4) to receive any other information that the Lender deems
necessary or relevant in connection with any Advance,
any Loan Document or the Obligations.
Notwithstanding the foregoing, prior to an Event of Default or
Potential Event of Default, all inspections shall be conducted at
reasonable times during normal business hours.
SECTION 13.01(h) INFORM THE LENDER OF MATERIAL EVENTS. The
Borrower Party shall promptly inform the Lender in writing of any of
the following (and shall deliver to the Lender copies of any related
written communications, complaints, orders, judgments and other
documents relating to the following) of which the Borrower Party has
or obtains actual knowledge:
(1) DEFAULTS. The occurrence of any Event of Default or
any Potential Event of Default under this Agreement or
any other Loan Document;
(2) REGULATORY PROCEEDINGS. The commencement of any
rulemaking or disciplinary proceeding or the
promulgation of any proposed or final rule which would
have, or may reasonably be expected to have, a Material
Adverse Effect;
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(3) LEGAL PROCEEDINGS. The commencement or threat of, or
amendment to, any proceedings by or against the
Borrower Party in any Federal, state or local court or
before any Governmental Authority, or before any
arbitrator, which, if adversely determined, would have,
or at the time of determination may reasonably be
expected to have, a Material Adverse Effect;
(4) BANKRUPTCY PROCEEDINGS. The commencement of any
proceedings by or against the Borrower Party under any
applicable bankruptcy, reorganization, liquidation,
insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver,
liquidator, trustee or other similar official is sought
to be appointed for it;
(5) REGULATORY SUPERVISION OR PENALTY. The receipt of
notice from any Governmental Authority having
jurisdiction over the Borrower Party that (A) the
Borrower Party is being placed under regulatory
supervision, (B) any license, Permit, charter,
membership or registration material to the conduct of
the Borrower Party's business or the Mortgaged
Properties is to be suspended or revoked or (C) the
Borrower Party is to cease and desist any practice,
procedure or policy employed by the Borrower Party, as
the case may be, in the conduct of its business, and
such cessation would have, or may reasonably be
expected to have, a Material Adverse Effect;
(6) ENVIRONMENTAL CLAIM. The receipt of notice from any
Governmental Authority or other Person relating to any
Environmental Claim involving the Borrower Party or any
of their respective assets, including the Mortgaged
Properties;
(7) MATERIAL ADVERSE EFFECTS. The occurrence of any act,
omission, change or event which has a Material Adverse
Effect, subsequent to the date of the most recent
audited financial statements of the Borrower delivered
to the Lender pursuant to Section 13.01(d); and
(8) ACCOUNTING CHANGES. Any material change in any
Borrower Party's accounting policies or financial
reporting practices.
SECTION 13.01(i) SINGLE-PURPOSE ENTITY. The Borrower and the
Subsidiary Owner shall each at all times maintain and conduct itself
as a Single-Purpose entity and each shall own only Mortgaged
Properties.
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SECTION 13.01(j) INSPECTION. Each Owner shall permit any Person
designated by the Lender (i) to make entries upon and inspections of
the Mortgaged Properties; and (ii) to otherwise verify, examine and
inspect the amount, quantity, quality, value and/or condition of, or
any other matter relating to, any Mortgaged Property; provided,
however, that prior to an Event of Default or Potential Event of
Default, all such entries, examinations and inspections shall be
conducted at reasonable times during normal business hours.
SECTION 13.01(k) COMPLIANCE WITH APPLICABLE LAWS. The Borrower
Party shall comply in all material respects with all Applicable Laws
now or hereafter affecting any Mortgaged Property or any part of any
Mortgaged Property or requiring any alterations, repairs or
improvements to any Mortgaged Property. The Borrower Party shall
procure and continuously maintain in full force and effect, and shall
abide by and satisfy all material terms and conditions of, all
Permits.
SECTION 13.01(l) WARRANTY OF TITLE. Each Owner shall warrant and
defend (a) the title to each Mortgaged Property and every part of each
Mortgaged Property, subject only to Permitted Liens, and (b) the
validity and priority of the lien of the applicable Loan Documents,
subject only to Permitted Liens, in each case against the claims of
all Persons whatsoever. Each Owner shall reimburse the Lender for any
losses, costs, damages or expenses (including reasonable attorneys'
fees and court costs) incurred by the Lender if an interest in any
Mortgaged Property, other than with respect to a Permitted Lien, is
claimed by others.
SECTION 13.01(m) DEFENSE OF ACTIONS. The Borrower Party shall
appear in and defend any action or proceeding purporting to affect the
security for this Agreement or the rights or power of the Lender
hereunder, and shall pay all costs and expenses, including the cost of
evidence of title and reasonable attorneys' fees, in any such action
or proceeding in which the Lender may appear. If the Borrower Party
fails to perform any of the covenants or agreements contained in this
Agreement, or if any action or proceeding is commenced that is not
diligently defended by the Borrower Party which affects in any
material respect the Lender's interest in any Mortgaged Property or
any part thereof, including eminent domain, code enforcement or
proceedings of any nature whatsoever under any Applicable Law, whether
now existing or hereafter enacted or amended, then the Lender may, but
without obligation to do so and without notice to or demand upon the
Borrower Party and without releasing the Borrower Party from any
Obligation, make such appearances, disburse such sums and take such
action as the Lender deems necessary or appropriate to protect the
Lender's interest, including disbursement of attorneys' fees, entry
upon such Mortgaged Property to make repairs or take other action to
protect the security of said Mortgaged Property, and payment,
purchase, contest or compromise of any encumbrance, charge or lien
which in the judgment of the Lender appears to be prior or superior to
the Loan Documents. In the event (i) that any Security Instrument is
foreclosed in whole or in part or that any Loan Document is put into
the hands of an attorney for collection, suit, action or foreclosure,
or (ii) of the foreclosure of any mortgage, deed to secure debt, deed
of trust or other security
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instrument prior to or subsequent to any Security Instrument or any Loan
Document in which proceeding the Lender is made a party or (iii) of the
bankruptcy of the Borrower Party or an assignment by the Borrower Party
for the benefit of their respective creditors, the Borrower Party shall
be chargeable with and agrees to pay all costs of collection and defense,
including actual attorneys' fees in connection therewith and in connection
with any appellate proceeding or post-judgment action involved therein,
which shall be due and payable together with all required service or use
taxes.
SECTION 13.01(n) PROPERTY MANAGEMENT; MAINTENANCE OF PROPERTIES.
Each Owner shall observe all of the covenants in Section 17 of the
Security Instrument and all other covenants in the Loan Documents
relating to the management and maintenance of the Mortgaged
Properties.
SECTION 13.01(o) ADDITIONS TO THE MORTGAGED PROPERTIES. Except
as otherwise provided in the Loan Documents, each Owner shall have the
right to undertake any alteration, improvement, demolition, removal or
construction (an "ALTERATION") to the Mortgaged Property which it owns
without the prior consent of the Lender; provided, however, that in
any case, no such Alteration shall be made to any Mortgaged Property
without the prior written consent of the Lender (which consent shall
not be unreasonably withheld, delayed or conditioned) if (i) such
Alteration could reasonably be expected to adversely affect the value
of such Mortgaged Property or its operation as a multifamily housing
facility in substantially the same manner in which it is being
operated on the date of this Agreement, (ii) the construction of such
Alteration could reasonably be expected to result in interference to
the occupancy of tenants of such Mortgaged Property such that tenants
in occupancy with respect to five percent (5%) or more of the Leases
would be permitted to terminate their Leases or to abate the payment
of all or any portion of their rent, or (iii) such Alteration will be
completed in more than 12 months from the date of commencement or in
the last year of the Term of this Agreement. Notwithstanding the
foregoing, the Owner must obtain the Lender's prior written consent to
construct any Alteration with respect to the Mortgaged Property
costing in excess of the product obtained by multiplying (a) the
Valuation of the Mortgaged Property in effect on the date on which the
Alteration is scheduled to commence, by (b) the Applicable Percentage,
and the Owner shall give prior written notice to the Lender of its
intent to construct any Alteration with respect to such Mortgaged
Property costing in excess of the product obtained by multiplying (x)
the Valuation of the Mortgaged Property in effect on the date on which
the Alteration is scheduled to commence, by (y) five percent (5%);
provided, however, that the preceding requirements shall not be
applicable to any Alteration (i) made, conducted or undertaken by the
Owner as part of the Owner's routine maintenance and repair of the
Mortgaged Properties as required by Section 13.01(n), (ii) otherwise
required by the Loan Documents or (iii) contemplated by the capital
improvements budget submitted as part of the annual budget under
Section 13.01(d)(9), but only if the capital improvements budget has
been approved by the Lender. The term "APPLICABLE PERCENTAGE" means
(i) if Lender has approved the capital improvements budget for the
year in which the Alteration is scheduled to commence,
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five percent (5%) or (ii) if Lender has not approved the capital
improvements budget for the year in which the Alteration is scheduled
to commence, ten percent (10%).
SECTION 13.01(p) ERISA. The Borrower Party shall at all times
remain in compliance in all material respects with all applicable
provisions of ERISA and similar requirements of the PBGC.
SECTION 13.01(q) LOAN DOCUMENT TAXES. If any tax, assessment or
Imposition (other than a franchise tax imposed on, or measured by, the
net income or capital (including branch profits tax) of the Lender (or
any transferee or assignee thereof, including a participation holder))
("LOAN DOCUMENT TAXES") is levied, assessed or charged by the United
States, or any State in the United States, or any political
subdivision or taxing authority thereof or therein, upon any of the
Loan Documents or the obligations secured thereby, the interest of the
Lender in the Mortgaged Properties, or the Lender by reason of or as
holder of the Loan Documents, the Borrower Party shall pay all such
Loan Document Taxes to, for, or on account of the Lender (or provide
funds to the Lender for such payment, as the case may be) as they
become due and payable and shall promptly furnish proof of such
payment to the Lender, as applicable. In the event of passage of any
law or regulation permitting, authorizing or requiring such Loan
Document Taxes to be levied, assessed or charged, which law or
regulation in the opinion of counsel to the Lender may prohibit the
Borrower Party from paying the Loan Document Taxes to or for the
Lender, the Borrower Party shall enter into such further instruments
as may be permitted by law to obligate the Borrower Party to pay such
Loan Document Taxes.
SECTION 13.01(r) FURTHER ASSURANCES. The Borrower Party, at the
request of the Lender, shall execute and deliver and, if necessary,
file or record such statements, documents, agreements, UCC financing
and continuation statements and such other instruments and take such
further action as the Lender from time to time may request as
reasonably necessary, desirable or proper to carry out more
effectively the purposes of this Agreement or any of the other Loan
Documents or to subject the Collateral to the lien and security
interests of the Loan Documents or to evidence, perfect or otherwise
implement or assure the lien and security interests intended by the
terms of the Loan Documents or in order to exercise or enforce its
rights under the Loan Documents.
SECTION 13.01(s) MONITORING COMPLIANCE. Upon the request of the
Lender, from time to time, the Borrower Party shall promptly provide
to the Lender such documents, certificates and other information as
may be deemed necessary to enable the Lender to perform its functions
under the Servicing Agreement.
SECTION 13.01(t) LEASES. Each unit in each Mortgaged Property
will be leased pursuant to the form lease delivered to, and acceptable
to, the Lender, with no material modifications to such approved form
lease, except as disclosed in writing to the Lender.
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SECTION 13.01(u) APPRAISALS. At the time of the addition of a
Mortgaged Property to the Collateral Pool, and at any time and from
time to time thereafter, the Lender shall be entitled to obtain an
Appraisal of any Mortgaged Property. The Borrower shall pay all of
the Lender's costs of obtaining the Appraisal, except that the
Borrower shall not be required to pay for any Appraisal of a Mortgaged
Property unless there has been, in the Lender's judgment, a
deterioration of the Collateral Pool not otherwise adequately
accounted for.
SECTION 13.01(v) EXPENSES.
(1) The Borrower shall pay, or reimburse the Lender for,
all costs and expenses incurred by the Lender, including the
legal fees and expenses of the Lender's outside legal counsel, in
connection with the preparation, review and negotiation of all
documents, instruments and certificates to be executed and
delivered in connection with a Request, the performance by the
Lender of any of its obligations with respect to the Request, the
satisfaction of all conditions precedent to the Borrower's rights
or the Lender's obligations with respect to the Request and all
transactions related to any of the foregoing. The obligations of
the Borrower under this subsection shall be absolute and
unconditional, regardless of whether the transaction requested in
the Request actually occurs.
(2) The Borrower shall pay, or reimburse the Lender for,
all costs and expenses, other than those costs and expenses
described in paragraph (1), in connection with a Request, the
performance by the Lender of any of its obligations with respect
to the Request, the satisfaction of all conditions precedent to
the Borrower's rights or the Lender's obligations with respect to
the Request and all transactions related to any of the foregoing,
including the cost of title insurance premiums and applicable
recordation and transfer taxes and charges. The obligations of
the Borrower under this subsection shall be absolute and
unconditional, regardless of whether the transaction requested in
the Request actually occurs.
(3) The foregoing expenses shall be in addition to all fees
required under Article XIV payable by the Borrower in connection
with a Request.
SECTION 13.01(w) OWNERSHIP.
(1) The REIT shall be the sole general partner of, and shall
own at least 35% of the Ownership Interests in, the Operating
Partnership, free and clear of any Liens, and shall have the sole
power to manage all aspects of the Operating Partnership's business.
(2) The Operating Partnership shall be the sole member of, and
shall own 100% of the Ownership Interests in, the Borrower, free and
clear of any Liens.
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(3) P-K Partnership, a Pennsylvania limited partnership, and
the Operating Partnership shall be the sole partners in the
Subsidiary Owner, and the Operating Partnership and Home Properties
Trust, a Maryland trust, a wholly-owned Subsidiary of the REIT, shall
be the sole partners in P-K Partnership.
SECTION 13.01(x) LIMITATIONS ON TRANSFERS.
(1) DEFINITIONS. The following terms have the respective
meanings set forth below:
(a) The term "TRANSFER" (a) as to real property and
other assets means a sale, assignment, pledge,
transfer or other disposition (whether voluntary or
by operation of law) of, or the granting or
creating of a lien, encumbrance or security
interest in, any estate, rights, title or interest
in such real property and/or assets, or any portion
thereof, and (b) as to any Person means (i) a sale,
assignment, pledge, transfer or other disposition
of any direct or indirect Ownership Interest in
such Person, or (ii) the issuance or other creation
of any new direct or indirect Ownership Interest in
such Person, or (iii) a merger or consolidation of
such Person into another entity or of another
entity into such Person, or (iv) the reconstitution
of such Person from one type of entity to another
type of entity.
(b) A "CHANGE OF CONTROL" shall mean the earliest to
occur of: (a) the date an Acquiring Person becomes
(by acquisition, consolidation, merger or
otherwise), directly or indirectly, the beneficial
owner of more than 40% of the total Voting Equity
Capital of the REIT then outstanding, or (b) the
date on which the REIT shall cease for any reason
to own 35% of the Ownership Interests in the
Operating Partnership, or (c) the replacement
(other than solely by reason of retirement at age
sixty-five or older, death or disability) of more
than 50% (or such lesser percentage as is required
for decision-making by the board of directors or
trustees, if applicable) of the members of the
board of directors (or trustees, if applicable) of
the REIT over a one-year period where such
replacement shall not have been approved by a vote
of at least a majority of the board of directors
(or trustees, if applicable) of the REIT then still
in office who either were members of such board of
directors (or trustees, if applicable) at the
beginning of such one-year period or whose election
as members of the board of directors (or trustees,
if applicable) was previously so approved.
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(c) An "ACQUIRING PERSON" shall mean a "person" or
"group of persons" within the meaning of Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended; provided, HOWEVER, that
notwithstanding the foregoing, "ACQUIRING PERSON"
shall not be deemed to include any member of the
Borrower Control Group unless such member has,
directly or indirectly, disposed of, sold or
otherwise transferred to, or encumbered or
restricted (whether by means of voting trust
agreement or otherwise) for the benefit of an
Acquiring Person all or any portion of the Voting
Equity Capital of the REIT which is directly or
indirectly owned or controlled by such member or
such member directly or indirectly votes all or any
portion of the Voting Equity Capital of the REIT,
directly or indirectly, owned or controlled by such
member for the taking of any action which, directly
or indirectly, constitutes or would result in a
Change of Control, in which event such member of
the Borrower Control Group shall be deemed to
constitute an Acquiring Person to the extent of the
Voting Equity Capital of the REIT owned or
controlled by such member.
(d) "BORROWER CONTROL GROUP" shall mean each of Richard
J. Crossed, Nelson B. Leenhouts, Norman Leenhouts,
Amy L. Tait and any Person owned or controlled by
one or more of the foregoing individuals.
(e) "SECURITY" shall have the same meaning as in
Section 2(1) of the Securities Act of 1933, as
amended.
(f) "VOTING EQUITY CAPITAL" shall mean Securities of
any class or classes, the holders of which are
ordinarily, in the absence of contingencies,
entitled to elect a majority of the board of
directors (or Persons performing similar functions).
(2) ACCELERATION OF THE LOAN UPON TRANSFERS OF A MORTGAGED
PROPERTY OR SIGNIFICANT INTERESTS. Subject to paragraph
(3) hereof, the Lender may, at Lender's option, declare
an Event of Default if, without Lender's prior written
consent, any of the following shall occur:
(a) a Transfer of all or any part of any Mortgaged
Property or any interest in the Mortgaged Property;
(b) a Transfer of any Ownership Interest in the
Borrower or in the Subsidiary Owner; or
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(c) a Change of Control.
The Lender shall not be required to demonstrate any actual impairment of
its security or any increased risk of default in order to exercise any of
its remedies with respect to an Event of Default under this
Section 13.01(x).
(3) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY
CERTAIN EVENTS. The occurrence of any of the following
events shall not constitute an Event of Default under
this Instrument, notwithstanding any provision of this
Section to the contrary:
(a) a Transfer to which Lender has consented;
(b) a Transfer that occurs by devise, descent, or by
operation of law upon the death of a natural
person;
(c) the grant of a leasehold interest in an individual
dwelling unit for a term of two years or less not
containing an option to purchase;
(d) a Transfer of obsolete or worn out Personalty or
Fixtures (as those terms are defined in the
Security Instruments) that are contemporaneously
replaced by items of equal or better function and
quality, which are free of liens, encumbrances and
security interests other than those created by the
Loan Documents or consented to by the Lender;
(e) the grant of an easement, if before the grant
Lender determines that the easement will not
materially affect the operation or value of the
Mortgaged Property or Lender's interest in the
Mortgaged Property, and Borrower pays to the
Lender, upon demand, all costs and expenses
incurred by the Lender in connection with reviewing
Borrower's request; and
(f) the creation of a tax lien or a mechanic's,
materialman's or judgment lien against the
Mortgaged Property which is bonded off, released of
record or otherwise remedied to the Lender's
satisfaction within 30 days of the date of
creation.
SECTION 13.01(y) INCREASED COSTS AND REDUCTION OF RETURN.
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(1) If the Lender or Fannie Mae shall determine that,
due to either (i) the introduction of or any change in or in
the interpretation of any Requirement of Law or (ii) the
compliance with any guideline or request from any central bank
or other Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost to the
Lender or Fannie Mae of agreeing to make or of making, funding
or maintaining any Advance hereunder (other than the increase
in costs based on an increase in any tax measured by the income
or capital of the Lender or Fannie Mae), then the Borrower
shall be liable for, and shall from time to time, upon written
demand therefor by the Lender or Fannie Mae, which demand shall
set forth the basis of such increased cost in reasonable
detail, pay to the Lender or Fannie Mae, as applicable, such
additional amounts as are sufficient to compensate the Lender
or Fannie Mae for such increased costs.
(2) If the Lender or Fannie Mae shall have reasonably
determined that (i) the introduction of any Capital Adequacy
Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or
administration thereof, or (iv) compliance with any Capital
Adequacy Regulation by the Lender or Fannie Mae, effects or
would effect an increase in the amount of capital required or
expected to be maintained by the Lender or Fannie Mae (taking
into consideration the Lender's or Fannie Mae's policies with
respect to capital adequacy and the Lender's or Fannie Mae's
desired return on capital), then, upon written demand of the
Lender or Fannie Mae, which demand shall set forth in
reasonable detail the basis for any such increase in required
capital, the Borrower shall immediately pay to the Lender or
Fannie Mae, as applicable, from time to time as specified by
the Lender or Fannie Mae, additional amounts sufficient to
compensate the Lender or Fannie Mae for such increase.
(3) If the Lender or Fannie Mae shall have determined
that any of the events described in subsections (a) or (b)
effects or would effect an increase in cost or reduction of
return resulting in additional Obligations hereunder, the
Lender or Fannie Mae, as applicable, shall, with reasonable
promptness, notify the Borrower of such determination, provided
that no failure to do so shall relieve the Borrower or any
other Borrower Party of any Obligation hereunder.
SECTION 13.01(z) COVENANT TO CLOSE ON ANY REQUEST. If the
Borrower makes any Request, and fails to close on the Request for any
reason other than the default by the Lender, then the Borrower shall
pay to the Lender all damages incurred by the Lender in connection
with the failure to close.
SECTION 13.01(aa) GEOGRAPHICAL DIVERSIFICATION. The Borrower
shall comply with all Geographical Diversification Requirements in
effect from time to time.
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SECTION 13.01(bb) REPAIRS PLAN.
(1) The Owners shall complete and pay for the repairs to
the Mortgaged Properties specified in the plan attached as
EXHIBIT Y to this Agreement (the "REPAIRS PLAN") in the manner
prescribed by the Repairs Plan.
(2) The Owners shall provide quarterly certificates to
the Lender detailing the progress of the Repairs Plan and the
Lender shall have the right to inspect such progress. The
Owners shall pay all reasonable expenses of (a) any engineer
retained by the Lender to make such inspections and (b) any
engineer retained by the Lender to review the quarterly
certificates. The certificates shall certify to the Lender (i)
the aggregate cost incurred in connection with the completion
of the Repairs Plan; and (ii) the status of the Repairs Plan,
including the portion of the Repairs Plan which has been
completed, the portion that is in progress (and the stage of
such progress) and the portion that has not yet been commenced.
If requested by the Lender in writing, the certificates shall
be accompanied by copies of all invoices, receipts and other
documentation necessary, in the Lender's opinion, to verify the
statements made in the certificate. The Owners shall pay all
reasonable, out-of-pocket expenses incurred by the Lender in
connection with the inspections (including the expenses of the
engineer described above).
(3) Any amounts incurred by the Owners in connection with
the completion of the Repairs Plan shall be in addition to, and
not in replacement of, any replacement reserves for the
Mortgaged Properties established in accordance with the
Replacement Reserve Agreement(s) for the Mortgaged Properties.
(4) If the Owners (i) fail to complete and pay for all of
the repairs specified in the Repairs Plan by December 31, 1999,
or (ii) fail to diligently pursue the completion of all of such
repairs (as determined by the Lender in its reasonable
discretion after inspection of the progress of the repairs) in
such a manner that all of the repairs can reasonably be
completed on or before December 31, 1999, the Owners shall
deposit with the Lender a deposit under the Completion/Repair
Agreement(s) for the Mortgaged Properties representing 150% of
the Lender's estimate of the cost to complete the unfinished
repairs in the Repairs Plan. The Owners shall make such
deposit within 30 days after the Lender gives the Owners a
notice specifying the amount of the deposit. Once deposited,
the Owners shall comply with the terms of the Completion/Repair
Agreement concerning the completion of the repairs and the
disbursement of the deposit held under the Completion/Repair
Agreement.
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SECTION 13.02 NEGATIVE COVENANTS OF THE BORROWER PARTIES. Each
Borrower Party enters into the covenants and agreements with the Lender set
forth in this Section. Each covenant and agreement shall apply
continuously during the Term of this Agreement:
SECTION 13.02(a) OTHER ACTIVITIES. No Borrower Party shall:
(1) amend its Organizational Documents in any manner
which would have a Material Adverse Effect, or
relates to the management of the Borrower Party,
without the prior written consent of the Lender;
(2) dissolve or liquidate in whole or in part;
(3) merge or consolidate with any Person if the
Borrower Party is not the survivor; or
(4) use, or permit to be used, any Mortgaged Property
for any uses or purposes other than as a
Multifamily Residential Property.
SECTION 13.02(b) NO AMENDMENTS TO LOAN DOCUMENTS. Unless the
Lender shall otherwise consent in writing, the Borrower Party shall
not agree to any amendment of, supplement to, or waiver,
modification, or termination of, any of the terms or provisions of
any Loan Document. The Borrower Party shall promptly give written
notice to the Lender of any such amendment, supplement, waiver,
modification or termination.
SECTION 13.02(c) [Intentionally Omitted]
SECTION 13.02(d) VALUE OF SECURITY. The Borrower Party shall
not take any action which could reasonably be expected to have any
Material Adverse Effect.
SECTION 13.02(e) ZONING. The Borrower Party shall not initiate
or consent to any zoning reclassification of any Mortgaged Property
or seek any variance under any zoning ordinance or use or permit the
use of any Mortgaged Property in any manner that could result in the
use becoming a nonconforming use under any zoning ordinance or any
other applicable land use law, rule or regulation.
SECTION 13.02(f) LIENS. The Borrower Party shall not create,
incur, assume or suffer to exist any Lien on any Mortgaged Property
or any part of any Mortgaged Property, except the Permitted Liens.
The Borrower Party shall not create, incur, assume or suffer to exist
any Lien on any Ownership Interests, if a Transfer of such Ownership
Interests to the holder of the Lien would result in a breach of
Section 13.01(w).
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SECTION 13.02(g) [INTENTIONALLY OMITTED.]
SECTION 13.02(h) INDEBTEDNESS. The Borrower shall not incur or
be obligated at any time with respect to aggregate Indebtedness
(other than Advances) in excess of $100,000.
SECTION 13.02(i) SINGLE-PURPOSE ENTITY. Neither the Borrower
nor the Subsidiary Owner shall cease at any time during the term
hereof to be a Single-Purpose entity.
SECTION 13.02(j) PRINCIPAL PLACE OF BUSINESS. The Borrower
Party shall not change its principal place of business or the
location of its books and records, each as set forth in Section
12.01(a), without first giving 30 days' prior written notice to the
Lender.
SECTION 13.02(k) FREQUENCY OF REQUESTS. The Borrower shall
make all Requests in any calendar quarter on the same day in the
calendar quarter. Accordingly, once the Borrower makes one or more
Requests in a calendar quarter, it shall not make any further
Requests in the calendar quarter.
SECTION 13.02(l) CHANGE IN PROPERTY MANAGEMENT. There shall
not be a change in the management agent for any Mortgaged Property
except to a management agent which the Lender determines is qualified
in accordance with the criteria set forth in Chapter 7 of Part III of
the DUS Guide.
SECTION 13.02(m) SHELF CONDOMINIUMS. None of the Mortgaged
Properties shall be submitted to a condominium regime during the Term
of this Agreement.
SECTION 13.02(n) RESTRICTIONS ON OWNERSHIP DISTRIBUTIONS. The
Borrower Party shall not make any distributions of any nature or kind
whatsoever to the owners of its Ownership Interests as such if, at
the time of such distribution, (i) a Potential Event of Default or an
Event of Default has occurred and (ii) there are outstanding amounts
for which the Borrower Parties are personally liable under the
provisions of Section 20.01(b).
SECTION 13.02(o) STATUS AS A REAL ESTATE INVESTMENT TRUST.
During the Term of this Agreement, the REIT shall not take or permit
any actions which will cause it not to qualify, and be taxed, as a
real estate investment trust under Subchapter M of the Internal
Revenue Code, or which will jeopardize such qualification or tax
treatment.
SECTION 13.02(p) LINES OF BUSINESS. The Borrower shall not be
engaged (and each other Borrower Party shall not be principally
engaged) in any businesses other than the acquisition, ownership,
development, construction, leasing, financing or management, directly
or through Affiliates, of Multifamily Residential Properties, and the
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conduct of these businesses shall not violate the Organizational
Documents pursuant to which it is formed.
SECTION 13.02(q) NO ENCUMBRANCE OF COLLATERAL RELEASE PROPERTY.
Unless the Borrower sells a Collateral Release Property to a Person
who is not an Affiliate of a Borrower Party substantially
simultaneously with the release of the Collateral Release Property
from the Collateral Pool, the Borrower shall not encumber the
Collateral Release Property for a period of 120 days following the
release of the Collateral Release Property from the Collateral Pool.
SECTION 13.03. FINANCIAL COVENANTS OF THE OPERATING PARTNERSHIP.
The Borrower Parties each agree and covenant with the Lender that, at all
times during the Term of this Agreement:
SECTION 13.03(a) FINANCIAL DEFINITIONS. For all purposes of
this Agreement, the following terms shall have the respective
meanings set forth below:
"CAPITAL EXPENDITURE RESERVE AMOUNT" means, for any period, an
amount equal to (i) $350 multiplied by the number of apartment units
contained in all Projects multiplied by (ii) a fraction, the
numerator of which is equal to the number of days in such period and
the denominator of which is equal to 365.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations
of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases on a balance sheet
of such Person under GAAP, and the amount of such obligations shall
be the capitalized amount thereof determined in accordance with GAAP.
"CONSOLIDATED BUSINESSES" means the REIT, the Operating
Partnership and their wholly-owned Subsidiaries.
"FIXED CHARGES" means, with respect to any fiscal period, the
sum of (a) Total Interest Expense and (b) the aggregate of all
scheduled principal payments on Indebtedness made or required to be
made during such fiscal period for the Consolidated Businesses (but
excluding balloon payments of principal due upon the stated maturity
of an Indebtedness if Borrower can demonstrate to the Lender's
reasonable satisfaction that it is able to refinance the indebtedness
for which the balloon payment is due) and (c) the aggregate of all
dividends declared and payable on the REIT's, the Operating
Partnership's or any of their Subsidiaries' preferred stock or
preferred partnership units, as the case may be (including the
distributions payable on the currently outstanding Class A Limited
Partnership Interests of the Operating Partnership).
"LOW INCOME HOUSING CREDIT PROGRAM GUARANTEES" means the
assurance by the Operating Partnership to limited partners of certain
Affiliates of the Operating Partnership,
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of which the Operating Partnership or a Subsidiary of the Operating
Partnership is the general partner, that the real properties developed
and operated by such Affiliates under the Low Income Housing Tax Credit
program established under the Internal Revenue Code will be kept in
compliance with applicable requirements to avoid loss of, or
recapture of, low income housing tax credits.
"NET OFFERING PROCEEDS" means all cash received by the REIT as
a result of the sale of common shares, preferred shares, partnership
interests, limited liability REIT interests, convertible securities
or other ownership or equity interests in the REIT, less customary
costs and discounts of issuance paid by the REIT.
"NOI" means, for any specified period, the aggregate net income
during such period equal to aggregate Gross Revenues derived from all
Projects during such period less the aggregate Operating Expenses
derived from all Projects during such period.
"PROJECT" means any residential housing building, related group
of buildings or community owned 100%, directly or indirectly, by any
of the Consolidated Businesses.
"TOTAL INTEREST EXPENSE" means, for any period, the sum of (i)
interest expense of the Consolidated Businesses paid during such
period and (ii) interest expense of the Consolidated Businesses
accrued and/or capitalized for such period in each case including
participating interest expense, the amortization of loan fees,
original issue discount, non-cash interest payments, the interest
component of Capital Lease Obligations and hedging costs but
excluding extraordinary interest expense, and net of amortization of
deferred costs associated with new financings or refinancings of
existing Indebtedness.
"TOTAL MARKET CAPITALIZATION" means, as of any specified
valuation date, Total Outstanding Indebtedness, plus the market value
of all Common Shares of Beneficial Interest included in Shareholders'
Equity (as defined by GAAP) as determined by multiplying the total
number of Common Shares of Beneficial Interest in Shareholders'
Equity and the total number of limited partnership units included in
Minority Interests by the average share price over the five days
preceding the specified valuation date, as published in THE WALL
STREET JOURNAL. In calculating the total number of Common Shares of
Beneficial Interest, only issued and outstanding shares will be
included, as reduced by shares held as Treasury stock, and excluding
shares to be issued under terms of options, warrants and future
issuances. Included in limited partnership units will be existing
Class A Limited Partnership Interests.
"TOTAL OUTSTANDING INDEBTEDNESS" means, as of any date, the sum
of (i) all Indebtedness of the Consolidated Businesses and (ii)
without duplication, all Contingent Obligations of the Consolidated
Businesses which are recourse to the Operating Partnership. "Total
Outstanding Indebtedness" shall not be deemed to include (a)
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completion guarantees of construction loans or (b) Low Income Housing
Tax Credit Program Guarantees.
SECTION 13.03 (b) MAXIMUM TOTAL INDEBTEDNESS. Neither the Operating
Partnership nor any of its Subsidiaries shall directly or indirectly
create, incur, assume or otherwise become or remain directly or indirectly
liable with respect to any Indebtedness, except that the Operating
Partnership and/or its Subsidiaries may create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to any
Indebtedness to the extent that Total Outstanding Indebtedness would not
exceed 55% of Total Market Capitalization.
SECTION 13.03 (c) MINIMUM EQUITY VALUE. The sum of (i) the
Shareholders' Equity plus Minority Interests, as determined in accordance
with GAAP, and (ii) an amount equal to 85% of all Net Offering Proceeds
received by the REIT after the date hereof, shall at no time be less than
$450,000,000.
SECTION 13.03(d) MINIMUM FIXED CHARGE COVERAGE RATIO. As of
the first day of each calendar quarter for the immediately preceding four
consecutive calendar quarters, the ratio of NOI to Fixed Charges shall not
be less than 1.45 to 1.0.
SECTION 13.03(e) LIMITATION ON UNIMPROVED REAL PROPERTY AND NEW
CONSTRUCTION. The Operating Partnership shall not permit the sum of (i)
the value of its Unimproved Real Property and (ii) the value of its Real
Estate Assets which are under construction or subject to substantial
rehabilitation to exceed 10% of the value of all of its Real Estate Assets.
Each of the foregoing values shall be determined by the Lender.
SECTION 13.03(f) SPECIAL CURE RIGHT. The failure to comply
with any of the Financial Covenants shall not constitute an Event of
Default if, within 30 days thereafter, (i) the Operating Partnership
conveys fee simple ownership to each of the Mortgaged Properties which it
owns to the Borrower (or the Borrower adds Additional Mortgaged Properties
to the Collateral Pool in accordance with Article VI, releases all of the
Mortgaged Properties owned by the Operating Partnership in accordance with
Article VII and, after giving effect to transactions, each Aggregate Debt
Service Coverage Ratio is not decreased below the Aggregate Debt Service
Coverage Ratio in effect prior to the additions and releases and the
Aggregate Loan to Value Ratio for the Trailing 12 Month Period is not
increased above the Aggregate Loan to Value Ratio for the Trailing 12 Month
Period in effect prior to the additions and releases), (ii) in connection
with such conveyance, the Borrower executes such documents as the Lender
may request (including all Security Instruments, title insurance, opinions
and other documents that it would request in connection with the addition
of an Additional Mortgaged Property to the Collateral Pool), (iii) the
Borrower delivers to the Lender, in form and substance satisfactory to the
Lender in all respects, a favorable opinion of Borrower Parties' counsel
that, in the event of the bankruptcy of the Operating Partnership or the
REIT, there shall occur no substantive consolidation of the assets of the
Borrower (including the Mortgaged Properties conveyed to the Borrower) with
the assets of the Operating Partnership or the REIT, (iv) the Borrower
delivers to the Lender such information and opinions establishing or
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supporting the solvency of the Operating Partnership and the Borrower as
may be required by the Lender, (v) the Borrower shall pay all expenses in
connection with such conveyance, including transfer and recordation taxes
for any deed or Security Instrument recorded in connection with the
conveyance, all title insurance required to be obtained and all fees and
expenses of Lender in connection with the conveyance and the transactions
described herein and (vi) the Borrower shall agree to provide, on a
quarterly basis, a certificate executed by the chief financial officer of
the REIT, in form and substance satisfactory to the Lender, to the effect
that such officer (i) has reviewed the requirements of Sections 13.01(i)
and 13.02(i) and the definition of "Single-Purpose", (ii) is familiar with
the operations of the Borrower and (iii) certifies that the Borrower is in
compliance, in all material respects, with Sections 13.01(i) and 13.02(i).
ARTICLE XIV
FEES
SECTION 14.01. ORIGINATION FEES.
SECTION 14.01(a) INITIAL ORIGINATION FEE. The Borrower shall
pay to the Lender an origination fee (the "INITIAL ORIGINATION FEE")
equal to $250,000 (which is equal to the product obtained by
multiplying (i) the Base Facility Credit Commitment as of the date of
this Agreement ($100,000,000), by (ii) 25 basis points). The
Borrower shall pay the Initial Origination Fee on the date of this
Agreement.
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SECTION 14.02. DUE DILIGENCE FEES.
SECTION 14.02(a) INITIAL DUE DILIGENCE FEES. The Borrower
shall pay to the Lender due diligence fees (the "INITIAL DUE
DILIGENCE FEES") with respect to the Initial Mortgaged Properties
equal to the lesser of -
(1) the actual out-of-pocket expenses incurred by the
Lender in connection with all due diligence
activities which the Lender deems necessary in
connection with the addition of the Initial
Mortgaged Properties to the Collateral Pool
(including a fee to Fannie Mae for due diligence
activities performed by Fannie Mae equal to the
product obtained by multiplying (i) $1,500, by (ii)
the number of Initial Mortgaged Properties); or
(2) the product obtained by multiplying -
(1) $16,000, by
(2) the number of Initial Mortgaged
Properties.
The Borrower has previously paid to the Lender a portion of the
Initial Due Diligence Fees and shall pay the remainder of the Initial
Due Diligence Fees to the Lender on the Initial Closing Date.
SECTION 14.02(b) ADDITIONAL DUE DILIGENCE FEES FOR ADDITIONAL
COLLATERAL. The Borrower shall pay to the Lender additional due
diligence fees (the "ADDITIONAL COLLATERAL DUE DILIGENCE FEES") with
respect to each Additional Mortgaged Property equal to the actual
out-of-pocket expenses incurred by the Lender in connection with all
due diligence activities which the Lender deems necessary in
connection with the addition of the Additional Mortgaged Property to
the Collateral Pool (including a fee to Fannie Mae for due diligence
activities performed by Fannie Mae equal to $1,500). The Borrower
shall pay Additional Collateral Due Diligence Fees for the Additional
Mortgaged Property to the Lender on the date on which it submits the
Collateral Addition Request for the addition of the Additional
Mortgaged Property to the Collateral Pool (or at such later time to
which the Borrower and the Lender may agree).
SECTION 14.03. LEGAL FEES AND EXPENSES.
SECTION 14.03(a) INITIAL LEGAL FEES. The Borrower shall pay to
the Lender all actual out-of-pocket legal fees and expenses incurred
by the Lender and by Fannie Mae in connection with the preparation
and negotiation of this Agreement and any other Loan Documents
executed on the date of this Agreement. The Borrower shall pay all
unpaid legal fees and expenses to the Lender on the date of this
Agreement.
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SECTION 14.03(b) ADDITIONAL LEGAL FEES AND EXPENSES FOR
ADDITIONAL COLLATERAL. The Borrower shall pay to the Lender, with
respect to the Initial Advance, each Future Advance, each Initial
Mortgaged Property and each Additional Mortgaged Property, the
actual out-of-pocket legal fees and expenses incurred by the Lender
and by Fannie Mae in connection with the preparation and negotiation
of the Loan Documents executed on the Closing Date for the Initial
Advance, each Future Advance, the addition of each Initial Mortgaged
Property to the Collateral Pool and the addition of each Additional
Mortgaged Property to the Collateral Pool. The Borrower shall pay
the legal fees and expenses to the Lender on the Closing Date for the
Initial Advance, the Future Advance, the addition of the Initial
Mortgaged Property to the Collateral Pool or the addition of the
Additional Mortgaged Property to the Collateral Pool, as the case may
be.
SECTION 14.04. MBS-RELATED COSTS. The Borrower shall pay to the
Lender, within 30 days after demand, all fees and expenses incurred by the
Lender or Fannie Mae in connection with the issuance of any MBS backed by
an Advance, including the fees charged by Depository Trust Company and
State Street Bank or any successor fiscal agent or custodian. The current
fees, which are subject to change, shall be $750 as a one-time setup fee
and $1,000 per Advance.
SECTION 14.05. OTHER FEES. The Borrower shall pay the following
additional fees and payments, if and when required pursuant to the terms of
this Agreement:
(a) The Collateral Addition Fee, pursuant to Section 6.03(b),
in connection with the addition of an Additional Mortgaged Property
to the Collateral Pool pursuant to Article VI;
(b) The Release Price, pursuant to Section 7.03(b), in
connection with the release of a Mortgaged Property from the
Collateral Pool pursuant to Article VII; and
(c) The Release Fee, pursuant to Section 7.03(c), in connection
with the release of a Mortgaged Property from the Collateral Pool
pursuant to Article VII.
ARTICLE XV
CASH MANAGEMENT
Each Owner and the Lender shall execute a Cash Management Agreement
on the Initial Closing Date.
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ARTICLE XVI
EVENTS OF DEFAULT
SECTION 16.01. EVENTS OF DEFAULT. Each of the following events
shall constitute an "Event of Default" under this Agreement, whatever the
reason for such event and whether it shall be voluntary or involuntary, or
within or without the control of a Borrower Party, or be effected by
operation of law or pursuant to any judgment or order of any court or any
order, rule or regulation of any Governmental Authority:
SECTION 16.01(a) with respect to any default under any Loan
Document expressly specifying a cure period for such default, the
occurrence of such a default beyond the specified cure period; or
SECTION 16.01(b) the failure by the Borrower Party to pay when
due any amount payable by the Borrower Party under any Note, any
Security Instrument, this Agreement or any other Loan Document,
including any fees, costs or expenses; or
SECTION 16.01(c) the failure by any Borrower Party to perform
or observe any covenant set forth in Sections 13.01(a), (b), (c),
(f), (h), (o), (p), (t), (w) or (x) or Sections 13.02 (a) through (h)
inclusive, (l) through (o) inclusive or (q); or
SECTION 16.01(d) the failure by any Borrower Party to perform
or observe any covenant set forth in Sections 13.01(d), (e), (g),
(j), (k), (l), (m), (r) or (s), or Sections 13.02(k) or (p) within 10
days after receipt of notice from the Lender; or
SECTION 16.01(e) [Intentionally Omitted]; or
SECTION 16.01(f) the failure by the Borrower to perform or
observe any covenant set forth in Section 13.01(i) or Section
13.02(i) within 30 days after the date of such failure;
SECTION 16.01(g) any warranty, representation or other written
statement made by or on behalf of a Borrower Party contained in this
Agreement, any other Loan Document or in any instrument furnished in
compliance with or in reference to any of the foregoing, is false or
misleading in any material respect on any date when made or deemed
made; or
SECTION 16.01(h) any other Indebtedness in an aggregate amount
in excess of $100,000 of the Borrower (or any other Indebtedness in
an aggregate amount in excess of $1,000,000 of any other Borrower
Party) (i) is not paid when due nor within any applicable grace
period in any agreement or instrument relating to such Indebtedness
or (ii) becomes due and payable before its normal maturity by reason
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of a default or event of default, however described, or any other
event of default shall occur and continue after the applicable grace
period, if any, specified in the agreement or instrument relating to
such Indebtedness; or
SECTION 16.01(i) (i) a Borrower Party shall (A) commence a
voluntary case under the Federal bankruptcy laws (as now or hereafter
in effect), (B) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, debt adjustment, winding up or composition or
adjustment of debts, (C) consent to or fail to contest in a timely
and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (D) apply
for or consent to, or fail to contest in a timely and appropriate
manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of a
substantial part of its property, domestic or foreign, (E) admit in
writing its inability to pay, or generally not be paying, its debts
as they become due, (F) make a general assignment for the benefit of
creditors, (G) assert that the Borrower Party has no liability or
obligations under this Agreement or any other Loan Document to which
it is a party; or (H) take any action for the purpose of effecting
any of the foregoing; or (ii) a case or other proceeding shall be
commenced against a Borrower Party in any court of competent
jurisdiction seeking (A) relief under the Federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, or (B) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower
Party, or of all or a substantial part of the property, domestic or
foreign, of the Borrower Party and any such case or proceeding shall
continue undismissed or unstayed for a period of 60 consecutive
calendar days, or any order granting the relief requested in any such
case or proceeding against the Borrower Party (including an order for
relief under such Federal bankruptcy laws) shall be entered; or
SECTION 16.01(j) if any provision of this Agreement or any
other Loan Document or the lien and security interest purported to be
created hereunder or under any Loan Document shall at any time for
any reason cease to be valid and binding in accordance with its terms
on any Borrower Party, or shall be declared to be null and void, or
the validity or enforceability hereof or thereof or the validity or
priority of the lien and security interest created hereunder or under
any other Loan Document shall be contested by any Borrower Party
seeking to establish the invalidity or unenforceability hereof or
thereof, or any Borrower Party shall deny that it has any further
liability or obligation hereunder or thereunder; or
SECTION 16.01(k) (x) the execution by an Owner of a chattel
mortgage or other security agreement on any materials, fixtures or
articles used in the construction or operation of the improvements
located on any Mortgaged Property or on articles of personal property
located therein, or (y) if any such materials, fixtures or articles
are purchased pursuant to any conditional sales contract or other
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security agreement or otherwise so that the ownership thereof will
not vest unconditionally in the Owner free from encumbrances, or (z)
if the Owner does not furnish to the Lender upon request the
contracts, bills of sale, statements, receipted vouchers and
agreements, or any of them, under which the Owner claims title to
such materials, fixtures, or articles; or
SECTION 16.01(l) the failure, upon request, to furnish to the
Lender the results of official searches made by any Governmental
Authority, or the failure by any Borrower Party to comply with any
requirement of any Governmental Authority within 30 days after
written notice of such requirement shall have been given to the
Borrower Party by such Governmental Authority; provided that, if
action is commenced and diligently pursued by the Borrower Party
within such 30 days, then the Borrower Party shall have an additional
30 days to comply with such requirement; or
SECTION 16.01(m) a dissolution or liquidation for any reason
(whether voluntary or involuntary) of any Borrower Party; or
SECTION 16.01(n) if the REIT shall fail to qualify as a real
estate investment trust under Subchapter M of the Internal Revenue
Code; or
SECTION 16.01(o) any judgment against any Borrower Party, or
any attachment or other levy against any portion of any Borrower
Party's assets with respect to a claim, in an amount in excess of
$50,000 individually and/or $500,000 in the aggregate remains unpaid,
unstayed on appeal undischarged, unbonded, not fully insured or
undismissed for a period of 60 days; or
SECTION 16.01(p) the failure by an Owner to maintain insurance
with respect to each Mortgaged Property in accordance with the terms
of the Security Instrument with respect to each such Mortgaged
Property; or
SECTION 16.01(q) the failure by an Owner to perform or observe
the covenants with respect to Hazardous Materials or Hazardous
Materials Laws set forth in any Security Instruments or in any other
Loan Document including, the covenants set forth in Section 18 of
each Security Instrument; or
SECTION 16.01(r) the failure by an Owner to cause the Gross
Revenues with respect to any Mortgaged Property to be deposited into
the applicable Pledgee Account in accordance with the requirements of
the Owner's Cash Management Agreement; or
SECTION 16.01(s) except as otherwise provided in Section
13.03(f), the failure of the Borrower Party to perform or observe any
of the Financial Covenants, which failure shall continue for a period
of 30 days after the date on which the Borrower Party receives a
notice from the Lender specifying the failure; or
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SECTION 16.01(t) the failure by any Borrower Party to perform
or observe any term, covenant, condition or agreement hereunder,
other than as set forth in subsections (a) through (s) above, or in
any other Loan Document, within 30 days after receipt of notice from
the Lender identifying such failure.
ARTICLE XVII
REMEDIES
SECTION 17.01. REMEDIES; WAIVERS.
SECTION 17.01(a) Upon the occurrence of an Event of Default,
the Lender shall have the right to pursue any remedies available to
it under any of the Loan Documents.
SECTION 17.01(b) Upon the occurrence of an Event of Default,
the Lender shall have the right to pursue all remedies available to
it at law or in equity, including obtaining specific performance and
injunctive relief.
SECTION 17.01(c) The Lender shall have the right, to be
exercised in its complete discretion, to waive any breach hereunder
(including the occurrence of an Event of Default), by a writing
setting forth the terms, conditions, and extent of such waiver signed
by the Lender and delivered to the Borrower Parties. Unless such
writing expressly provides to the contrary, any waiver so granted
shall extend only to the specific event or occurrence which gave rise
to the waiver and not to any other similar event or occurrence which
occurs subsequent to the date of such waiver.
SECTION 17.01(d) The Borrower shall pay all fees, costs,
charges and expenses (including the reasonable fees and expenses of
attorneys', accountants and other experts) incurred by the Lender in
connection with the administration or enforcement of, or preservation
of rights or remedies under, this Agreement or any other Loan
Documents or in connection with the foreclosure upon, sale of or
other disposition of any Collateral granted pursuant to the Loan
Documents.
SECTION 17.01(e) If any Borrower Party fails to perform the
covenants and agreements contained in this Agreement or any of the
other Loan Documents, then the Lender at the Lender's option may make
such appearances, disburse such sums and take such action as the
Lender deems necessary, in its sole discretion, to protect the
Lender's interest, including (i) disbursement of attorneys' fees,
(ii) entry upon the Mortgaged Property to make repairs and
replacements, (iii) procurement of satisfactory insurance as provided
in paragraph 19 of the Security Instrument encumbering the Mortgaged
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Property, and (iv) if the Security Instrument is on a leasehold,
exercise of any option to renew or extend the ground lease on behalf
of the Owner and the curing of any default of the Owner in the terms
and conditions of the ground lease. Any amounts disbursed by the
Lender pursuant to this paragraph (e), with interest thereon, shall
become additional indebtedness of the Borrower secured by the Loan
Documents. Unless the Borrower and the Lender agree to other terms
of payment, such amounts shall be immediately due and payable and
shall bear interest from the date of disbursement at the weighted
average, as determined by the Lender, of the interest rates in effect
from time to time for each Advance Outstanding unless collection from
the Borrower of interest at such rate would be contrary to applicable
law, in which event such amounts shall bear interest at the highest
rate which may be collected from the Borrower under applicable law.
Nothing contained in this paragraph (e) shall require the Lender to
incur any expense or take any action hereunder.
SECTION 17.02. NO REMEDY EXCLUSIVE. Unless otherwise expressly
provided, no remedy herein conferred upon or reserved is intended to be
exclusive of any other available remedy, but each remedy shall be
cumulative and shall be in addition to other remedies given under the Loan
Documents or existing at law or in equity.
SECTION 17.03. NO WAIVER. No delay or omission to exercise any
right or power accruing under any Loan Document upon the happening of any
Event of Default or Potential Event of Default shall impair any such right
or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient.
SECTION 17.04. NO NOTICE. In order to entitle the Lender to
exercise any remedy reserved to the Lender in this Article, it shall not be
necessary to give any notice, other than such notice as may be required
under the applicable provisions of this Agreement or any of the other Loan
Documents.
SECTION 17.05. APPLICATION OF PAYMENTS. Except as otherwise
expressly provided in the Loan Documents, and unless applicable law
provides otherwise, (i) all payments received by the Lender from any of the
Borrower Parties under the Loan Documents shall be applied by the Lender
against any amounts then due and payable under the Loan Documents by any of
the Borrower Parties, in any order of priority that the Lender may
determine and (ii) the Borrower shall have no right to determine the order
of priority or the allocation of any payment it makes to the Lender.
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ARTICLE XVIII
RIGHTS OF FANNIE MAE
SECTION 18.01. SPECIAL POOL PURCHASE CONTRACT. The Borrower
Parties acknowledge that Fannie Mae is entering into an agreement with the
Lender (the "SPECIAL POOL PURCHASE CONTRACT"), pursuant to which, INTER
ALIA, (i) the Lender shall agree to assign all of its rights under this
Agreement to Fannie Mae, (ii) Fannie Mae shall agree to accept the
assignment of the rights, (iii) subject to the terms, limitations and
conditions set forth in the Special Pool Purchase Contract, Fannie Mae
shall agree to purchase each Advance issued under this Agreement by issuing
to the Lender a Fannie Mae MBS, in the amount and for a term equal to the
Advance purchased and backed by an interest in the Base Facility Note
evidencing the Advance and the Collateral Pool securing the Base Facility
Note, (iv) the Lender shall agree to assign to Fannie Mae all of the
Lender's interest in the Notes and Collateral Pool securing the Notes, and
(v) the Lender shall agree to service the loans evidenced by the Notes.
SECTION 18.02. ASSIGNMENT OF RIGHTS. The Borrower Parties
acknowledge and consent to the assignment to Fannie Mae of all of the
rights of the Lender under this Agreement and all other Loan Documents,
including the right and power to make all designations, determinations,
selections, estimates, actions or decisions, and grant or withhold all
approvals, on the part of the Lender to be made under this Agreement and
the other Loan Documents, but Fannie Mae, by virtue of this assignment,
shall not be obligated to perform the obligations of the Lender under this
Agreement or the other Loan Documents.
SECTION 18.03. RELEASE OF COLLATERAL. The Borrower Parties hereby
acknowledge that, after the assignment of Loan Documents contemplated in
Section 18.02, the Lender shall not have the right or power to effect a
release of any Collateral pursuant to Articles VII or IX. The Borrower
Parties acknowledge that the Security Instruments provide for the release
of the Collateral under Articles VII and IX. Accordingly, the Borrower
Parties shall not look to the Lender for performance of any obligations set
forth in Articles VII and IX, but shall look solely to the party secured by
the Collateral to be released for such performance. The Lender represents
and warrants to the Borrower Parties that the party secured by the
Collateral shall be subject to the release provisions contained in Articles
VII and IX by virtue of the release provisions in each Security Instrument.
SECTION 18.04. REPLACEMENT OF LENDER. At the request of Fannie
Mae, the Borrower Parties and the Lender shall agree to the assumption by
another lender designated by Fannie Mae of all of the obligations of the
Lender under this Agreement and the other Loan Documents, and/or any
related servicing obligations, and, at Fannie Mae's option, the concurrent
release of the Lender from its obligations under this Agreement and the
other Loan Documents, and/or any related servicing obligations, and shall
execute all releases, modifications and other documents which Fannie Mae
determines are necessary or desirable to effect such assumption.
SECTION 18.05. FANNIE MAE AND LENDER FEES AND EXPENSES. The
Borrower Parties agree that any provision providing for the payment of
fees, costs or expenses incurred or charged by the Lender pursuant to this
Agreement shall be deemed to provide for the applicable Borrower Party's
payment of all fees, costs and expenses incurred or charged by the Lender
or Fannie Mae in connection with the matter for which fees, costs or
expenses are payable.
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SECTION 18.06. THIRD-PARTY BENEFICIARY. The Borrower Parties
hereby acknowledge and agree that Fannie Mae is a third party beneficiary
of all of the representations, warranties and covenants made by any
Borrower Parties to, and all rights under this Agreement conferred upon,
the Lender, and, by virtue of its status as third-party beneficiary and/or
assignee of the Lender's rights under this Agreement, Fannie Mae shall have
the right to enforce all of the provisions of this Agreement against the
Borrower Parties.
ARTICLE XIX
INSURANCE, TAXES AND REPLACEMENT RESERVES
SECTION 19.01. INSURANCE AND TAXES.
SECTION 19.01(a) GENERAL. Each Owner shall establish funds for
taxes, insurance premiums and certain other charges for each
Mortgaged Property in accordance with Section 7(a) of the
Security Instrument for each Mortgaged Property.
Notwithstanding the foregoing, except during the continuance of
an Event of Default, no fund for Insurance Premiums (an
"INSURANCE ESCROW FUND") shall be required to be established
with the Lender under the Loan Documents, provided that, in the
event the insurance deductible(s) of, or required in, any
Insurance Policy exceeds $100,000, the Lender reserves the
right to require the Owners to establish with the Lender, as
additional security for the Notes, an Insurance Escrow Fund
equal to the aggregate amount of the insurance deductible(s) on
the Insurance Policy, as reasonably determined by the Lender.
If the Lender shall require an Insurance Escrow Fund, it shall
establish the Insurance Escrow Fund in a deposit account with a
financial institution selected by the Lender. Unless
applicable law requires, the Lender shall not be required to
pay Borrower any interest, earnings or profits on the amounts
in the Insurance Escrow Fund.
SECTION 19.01(b) DELIVERY OF LETTER OF CREDIT. Provided that
no Event of Default has occurred and is then continuing,
at any time during the Term of this Agreement during which
escrow funds for Taxes (each, a "TAX ESCROW FUND") is held by
the Lender with respect to each Mortgaged Property, the Owners
may, upon notice to the Lender, elect to substitute for the Tax
Escrow Funds a single Letter of Credit (as defined below) in
accordance with this subsection, in which event the Lender shall
return the Tax Escrow Funds to the Owners within 30 days after
the Owners deliver the Letter of Credit to the Lender. Provided
that no Event of Default has occurred and is then continuing, at
any time during the Term of this Agreement during which a
Letter of Credit for Taxes is held by the Lender, the Owners may,
upon notice to the Lender, elect to substitute for the
Letter of Credit the Tax Escrow Funds, in which event the Owners
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shall deliver to the Lender, in cash, the amount of the Tax
Escrow Funds which would have been required at the time of the
substitution if the Owners had not elected to furnish the
Letter of Credit and the Lender shall return the Letter of Credit
to the Owners within 30 days after its receipt of the cash
for the Tax Escrow Funds. Notwithstanding the foregoing, the
Owners may not exercise their right to substitute a Letter of
Credit for the Tax Escrow Funds or the Tax Escrow Funds for the
Letter of Credit if the Owners have made a prior substitution
under this Section during the 36 months preceding the proposed
substitution. Any Letter of Credit delivered to the Lender in
accordance with this subsection shall be a clean, irrevocable
Letter of Credit, naming the Lender as beneficiary, in an amount
equal to the maximum aggregate amount which, at any point in time
during the 12 month period immediately succeeding the date
on which the Letter of Credit is delivered, would have been
required to have been on deposit in the Tax Escrow Funds (the
"MAXIMUM ESCROW AMOUNT"), if Tax Escrow Funds had been
maintained, as such amount is determined by the Lender. The Letter
of Credit must be issued by an issuer (the "ISSUER") that meets
the Lender's requirements for ratings of issuers of acceptable
Letters of Credit as set forth in the DUS Guide, must comply
with all other requirements for letters of credit contained in
the DUS Guide and must be a so-called "evergreen" letter of
credit which does not expire unless the Issuer gives the Lender
at least 30 days' advance written notice of the expiration.
(The term "LETTER OF CREDIT" shall mean the letter of
credit delivered to the Lender pursuant to this paragraph (b),
any replacement letter of credit, and any amendment or renewal
of the letter of credit or the replacement letter of credit.)
If the Owners at any time provide a confirming letter of credit,
a replacement confirming letter of credit or an amendment or
renewal of the confirming letter of credit or the replacement
confirming letter of credit, then the term "Letter of Credit"
shall also mean the confirming letter of credit as so amended,
renewed or replaced.)
SECTION 19.01(c) LETTER OF CREDIT AS ADDITIONAL COLLATERAL.
The Borrower Parties agree that the Letter of Credit
provides collateral for the Notes in addition to the lien
of the Security Instruments on the Mortgaged Properties and,
during the continuance of any Event of Default, the Lender shall
be entitled to take any action permitted under this Agreement, in
addition to pursuing any other remedy the Lender may have with
respect to any other Collateral or secured property, including
the Mortgaged Properties.
SECTION 19.01(d) CONDITIONS FOR PROVIDING AND HOLDING LETTER
OF CREDIT.
SECTION 19.01(d)(1) PERIOD DURING WHICH THE OWNERS MUST PROVIDE
LETTER OF CREDIT. Until the earliest of (i) payment in full of all
sums secured by the Security Instruments and release by the Lender of
the liens of the Security Instruments, or (ii) the date that the
Lender fully draws on the Letter of Credit as permitted by this
Agreement, the Owners shall renew, amend or replace the Letter of
Credit in accordance with the terms of this Agreement, to ensure that
the Letter of Credit remains in effect and does not expire.
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SECTION 19.01(d)(2) RETURN OF THE LETTER OF CREDIT OR THE
PROCEEDS THEREOF. The Lender shall return the Letter of Credit, or
the proceeds of any draws on such Letter of Credit (less all amounts
which have been applied by the Lender pursuant to the terms of this
Article XIX) to the Owners 10 days after the date on which the Lender
releases the lien of all of the Security Instruments following
payment in full of all amounts secured by the Security Instruments.
SECTION 19.01(d)(3) APPLICATION FOR PREPAYMENT. If the
proceeds of the Letter of Credit are applied to payment of a portion
of the principal amount of the Notes, a prepayment premium
attributable to such prepaid principal amount shall be due to the
Lender to the extent, if any, provided in the Notes.
SECTION 19.01(d)(4) ADJUSTMENT OF THE LETTER OF CREDIT. The
Owners shall deliver to the Lender copies of the paid bills and
notices of assessments for Taxes for the Mortgaged Properties within
15 days after the date on which the Taxes are due and payable.
Promptly upon the Owners' receipt of each yearly bill of Taxes, the
Owners shall deliver to the Lender an amendment or replacement of the
Letter of Credit. In addition, not more than two times each calendar
year, the Owners shall, promptly after receipt of notice from the
Lender, deliver to the Lender an amendment or replacement of the
Letter of Credit in the Maximum Escrow Amount for the then-current
calendar year, as such yearly amount is reasonably estimated by the
Lender on the basis of assessments and bills and reasonable estimates
thereof.
SECTION 19.01(e) RENEWAL OR REPLACEMENT OF LETTER OF CREDIT.
SECTION 19.01(e)(1) RENEWAL OR REPLACEMENT. At least 30
days prior to the expiration date of the Letter of Credit, the
Owners shall either (i) cause the Letter of Credit to be
amended to extend its expiration date, or (ii) furnish a
replacement Letter of Credit. In either case, the amended
Letter of Credit or the replacement Letter of Credit must (A)
be in compliance with the requirements for letters of credit
under the DUS Guide, and be from an Issuer which meets the
Lender's requirements for ratings of issuers of acceptable
letters of credit as set forth in the DUS Guide, (B) have a
term not less than one (1) year (unless a shorter term is
approved in writing by the Lender), and (C) be in the amount of
the outstanding Letter of Credit, amended to the extent
required pursuant to paragraph (d)(4) above. The foregoing
shall not affect the requirement that, notwithstanding the
expiration date of the Letter of Credit, it will not expire
until the Issuer has given the Lender at least 30 days' advance
written notice.
SECTION 19.01(e)(2) REVIEW OF RATING OF ISSUER;
REPLACEMENT OF LETTER OF CREDIT. From time to time, the Lender
shall review the rating of the Issuer of the then outstanding
Letter of Credit. If the Lender notifies the Owners that at
the time of any such review the issuing bank does not meet the
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Lender's requirements for ratings of issuers of acceptable
letters of credit as set forth in the DUS Guide, the Owners
shall replace the outstanding Letter of Credit with a Letter of
Credit that complies with all of the requirements set forth in
the DUS Guide, no later than 30 days after the Lender's notice
to the Owners, unless the outstanding Letter of Credit would
expire prior to such 30-day period, in which case the Owners
shall provide the replacement Letter of Credit no later than
five business days prior to the expiration date of the
outstanding Letter of Credit.
SECTION 19.01(e)(3) DRAW ON LETTER OF CREDIT. If the
Owners do not provide an amendment to, or replacement of, the
Letter of Credit when required pursuant to paragraph (1) or (2)
above, as the case may be, which amended or replacement Letter
of Credit satisfies all of the requirements of paragraphs (1)
and (2) above, the Lender shall draw the full amount of the
Letter of Credit and hold and apply the proceeds as permitted
hereunder and, in such event, no Event of Default shall be
deemed to exist by virtue of the Borrower's failure to comply
with said paragraphs (1) and (2).
SECTION 19.01(f) DEFAULT UNDER THE LOAN DOCUMENTS.
SECTION 19.01(f)(1) REMEDIES. During the continuance of
an Event of Default, the Lender shall be entitled, in its sole
discretion, to:
(i) Draw on the Letter of Credit and hold the
proceeds of the Letter of Credit as additional cash
Collateral;
(ii) Draw on the Letter of Credit and apply all or
any portion of the proceeds of the Letter of Credit to
payment of the unpaid principal amount of the Notes and
the prepayment premium, if any (calculated as provided in
the Notes) on the principal amount prepaid; provided,
however, that such application of proceeds shall not cure
or be deemed to cure any default;
(iii) Draw on the Letter of Credit and apply all or
any portion of the proceeds of the Letter of Credit to
reimburse the Lender for any losses or expenses
(including legal fees) suffered or incurred by the Lender
as a result of such default; and/or
(iv) Exercise all rights and remedies available to
the Lender at law or in equity or under any of the Loan
Documents (including this Section).
SECTION 19.01(f)(2) NO OBLIGATION TO APPLY PROCEEDS; NO CURE.
Nothing in this Section shall obligate the Lender to apply all or
any portion of the proceeds of the Letter of Credit to cure any
default under the Loan Documents or to reduce the indebtedness
evidenced by the Notes. No application of proceeds of the Letter
of Credit by the Lender shall be deemed to cure any default.
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SECTION 19.01(g) PROCEEDS OF THE LETTER OF CREDIT.
SECTION 19.01(g)(1) PROVIDING REPLACEMENT LETTER OF CREDIT
AFTER A DRAW. Provided that the Owners are not otherwise in default
under any of the Loan Documents (including the Security Instruments),
after the Lender has drawn on the Letter of Credit, but prior to
application of proceeds, the Lender may, but is not obligated to,
permit the Owners to provide a replacement Letter of Credit that
complies with all the requirements set forth in the DUS Guide, in
which case the Lender shall return the proceeds of the draw to the
Owners, less the Lender's costs and expenses (including attorneys'
fees and expenses and allocable costs for time spent by officers,
employees, contractors and agents of the Lender).
SECTION 19.01(g)(2) PROCEEDS HELD IN TAX ESCROW FUNDS
ACCOUNT(S). If the Lender draws on the Letter of Credit and holds
the proceeds under the Security Instruments, such funds shall be held
by the Lender in the Tax Escrow Funds account(s).
SECTION 19.01(g)(3) NO OBLIGATION TO DRAW OR TO APPLY PROCEEDS.
The Lender shall not be obligated to draw on the Letter of Credit
upon any default under any of the Loan Documents or apply the
proceeds of any draw on the Letter of Credit to cure a default under
the Loan Documents. The Lender may hold the Letter of Credit or the
proceeds of any Letter of Credit until the date for return as
determined pursuant to paragraph (d)(2), or apply all or any portion
of the proceeds as permitted by this Agreement or any of the Loan
Documents and hold any remaining proceeds until the date for return
determined under paragraph (d)(2).
SECTION 19.02. REPLACEMENT RESERVES. Each Owner shall execute a
Replacement Reserve Agreement for the Mortgaged Properties which it owns
and shall (unless waived by the Lender) make all deposits for replacement
reserves in accordance with the terms of the Replacement Reserve Agreement.
ARTICLE XX
LIMITS ON PERSONAL LIABILITY
SECTION 20.01 LIMITS ON PERSONAL LIABILITY.
SECTION 20.01(a) LIMITS ON PERSONAL LIABILITY. Except as
otherwise provided in this Article, no Borrower Party shall have any
personal liability under this Agreement, the Notes, the Security
Instrument or any other Loan Document for the performance of any
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Obligations of any Borrower Party under the Loan Documents, and the
Lender's only recourse for the payment and performance of the
Obligations shall be the Lender's exercise of its rights and remedies
with respect to the Mortgaged Properties and any other Collateral
held by the Lender as security for the Obligations. This limitation
on the Borrower Parties' liability shall not limit or impair the
Lender's enforcement of its rights against any guarantor of all or
part of the Obligations, but, if such guarantor is a Borrower Party,
such guarantor's liability shall also be limited to the extent set
forth in this Article. Notwithstanding anything to the contrary in
the foregoing, the Borrower shall be liable for all of the
Obligations to the full extent of all of Borrower's assets, and the
Lender shall be entitled to obtain a deficiency judgment against the
Borrower in the full amount of the Obligations outstanding under the
Credit Facility, and to foreclose the judgment lien for such judgment
against all of the Borrower's assets.
SECTION 20.01(b) EXCEPTIONS TO LIMITS ON PERSONAL LIABILITY.
The Borrower Parties shall be personally liable to the Lender on a
joint and several basis for the repayment of a portion of the
Advances and other amounts due under the Loan Documents equal to any
loss or damage suffered by the Lender as a result of (1) failure of
any Owner of a Mortgaged Property to pay to the Lender upon demand
after an Event of Default, all Rents to which the Lender is entitled
under Section 3(a) of the Security Instrument encumbering the
Mortgaged Property and the amount of all security deposits collected
by the Owner from tenants then in residence; (2) failure of any Owner
of a Mortgaged Property to apply all insurance proceeds and
condemnation proceeds as required by the Security Instrument
encumbering the Mortgaged Property; (3) failure of the Owner of a
Mortgaged Property to comply with the last paragraph of Section
13.01(d) relating to the delivery of books and records, statements,
schedules and reports, if an Event of Default has occurred under
Section 16.01(d) as a result of such failure; (4) fraud or written
material misrepresentation by any Borrower Party or any officer,
director, partner, member or employee of any Borrower Party in
connection with the application for or creation of the Obligations or
any request for any action or consent by the Lender; (5) failure to
apply Rents, first, to the payment of reasonable operating expenses
and then to amounts ("DEBT SERVICE AMOUNTS") payable under the Loan
Documents (except that the Borrower Party will not be personally
liable (i) to the extent that the Borrower Party lacks the legal
right to direct the disbursement of such sums because of a
bankruptcy, receivership or similar judicial proceeding, or (ii) with
respect to Rents of a Mortgaged Property that are distributed in any
calendar year if the Owner of the Mortgaged Property has paid all
operating expenses and Debt Service Amounts for that calendar year);
(6) any Owner's failure to deposit all Gross Revenues into a Pledgee
Account (as defined in the Cash Management Agreement) in accordance
with the Cash Management Agreement or (7) a breach of any of the
Borrower's representations set forth in Section 12.01(v).
SECTION 20.01(c) FULL RECOURSE. The Borrower Parties shall
become personally liable to the Lender for the payment and
performance of all Obligations upon the occurrence of any of the
following Events of Default: (1) an Event of Default under Section
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16.01(f) that occurs as a result of Borrower's or the Subsidiary
Owner's (a) acquisition of any real or personal property other than
the Mortgaged Properties and personal property related to the
operation and maintenance of the Mortgaged Properties; (b) operation
of any business other than the management and operation of the
Mortgaged Properties; or (c) maintenance of its assets in a way
difficult to segregate and identify; or (2) a Transfer that is an
Event of Default under Section 21 of the Security Instrument or
Article XVI of this Agreement.
SECTION 20.01(d) PERMITTED TRANSFER NOT RELEASE. No Transfer
by any Borrower Party of its Ownership Interests in any other
Borrower Party shall release the Borrower Party from liability under
this Article, this Agreement or any other Loan Document, unless the
Lender shall have approved the Transfer and shall have expressly
released the Borrower Party in connection with the Transfer.
SECTION 20.01(e) MISCELLANEOUS. To the extent that a Borrower
Party has personal liability under this Section, the Lender may
exercise its rights against the Borrower Party personally without
regard to whether the Lender has exercised any rights against the
Mortgaged Properties or any other security, or pursued any rights
against any guarantor, or pursued any other rights available to the
Lender under the Loan Documents or applicable law. For purposes of
this Article, the term "MORTGAGED PROPERTIES" shall not include any
funds that (1) have been applied by any Borrower Party as required or
permitted by the Loan Documents prior to the occurrence of an Event
of Default, or (2) are owned by a Borrower Party and which the
Borrower Party was unable to apply as required or permitted by the
Loan Documents because of a bankruptcy, receivership, or similar
judicial proceeding.
ARTICLE XXI
MISCELLANEOUS PROVISIONS
SECTION 21.01. COUNTERPARTS. To facilitate execution, this
Agreement may be executed in any number of counterparts. It shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart, but it shall be sufficient that the signature of, or on behalf
of, each party, appear on one or more counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in
making proof of this Agreement to produce or account for more than the
number of counterparts containing the respective signatures of, or on
behalf of, all of the parties hereto.
SECTION 21.02. AMENDMENTS, CHANGES AND MODIFICATIONS. This
Agreement may be amended, changed, modified, altered or terminated only by
written instrument or written instruments signed by all of the parties
hereto.
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SECTION 21.03. PAYMENT OF COSTS, FEES AND EXPENSES.
(a) The Borrower shall pay on demand all costs, expenses and
fees of the Lender pursuant to this Agreement and any of the Loan
Documents, including the fees and expenses of counsel to the Lender
with respect to defending or participating in any litigation arising
from the administration or enforcement of this Agreement or any of
the Loan Documents. Any such fees and expenses of counsel incurred
in enforcing a judgment under this Agreement shall be recoverable
separately from and in addition to any other amount included in such
judgment, and such counsels' fees and expenses obligation is intended
to be severable from the other provisions of this Agreement and to
survive and not be merged into any such judgment.
(b) The Borrower shall pay on demand all expenses incurred by
the Lender in connection with the preparation and review of this
Agreement, the REIT's Registration Statement, or similar disclosure
documents, any tax or governmental charge imposed in connection with
the issuance of the Notes and the fees and expenses of the Lender's
counsel and accountants in connection with any of the foregoing. The
foregoing shall also include fees and expenses relating to any (i)
amendments, consents or waivers to this Agreement or any of the Loan
Documents (whether or not any such amendments, consents or waivers
are entered into) or (ii) requests to evaluate any substitute or
additional Collateral or the release of any Collateral.
SECTION 21.04. PAYMENT PROCEDURE. All payments to be made to the
Lender pursuant to this Agreement or any of the Loan Documents shall be
made in lawful currency of the United States of America and in immediately
available funds by wire transfer to an account designated by the Lender
before 1:00 p.m. (Washington, D.C. time) on the date when due.
SECTION 21.05. PAYMENTS ON BUSINESS DAYS. In any case in which the
date of payment to the Lender or the expiration of any time period
hereunder occurs on a day which is not a Business Day, then such payment or
expiration of such time period need not occur on such date but may be made
on the next succeeding Business Day with the same force and effect as if
made on the day of maturity or expiration of such period, except that
interest shall continue to accrue for the period after such date to the
next Business Day.
SECTION 21.06. CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL. NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS
OR ANY OF THE OTHER LOAN DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND
PROVISIONS OF, AND RIGHTS AND OBLIGATIONS OF EACH BORROWER PARTY UNDER, THE
NOTES AND THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY, INTERPRETED,
CONSTRUED AND ENFORCED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE
STATE OF VIRGINIA (EXCLUDING THE LAW APPLICABLE TO CONFLICTS OR CHOICE OF
90
<PAGE>
LAW) EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING
ONLY TO (1) THE CREATION, PERFECTION AND FORECLOSURE OF LIENS AND SECURITY
INTERESTS, AND ENFORCEMENT OF THE RIGHTS AND REMEDIES, AGAINST THE
MORTGAGED PROPERTIES, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE
JURISDICTION IN WHICH THE MORTGAGED PROPERTY IS LOCATED, (2) THE
PERFECTION, THE EFFECT OF PERFECTION AND NON-PERFECTION AND FORECLOSURE OF
SECURITY INTERESTS IN PERSONAL PROPERTY (OTHER THAN DEPOSIT ACCOUNTS),
WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION DETERMINED
BY THE CHOICE OF LAW PROVISIONS OF THE VIRGINIA UNIFORM COMMERCIAL CODE AND
(3) THE PERFECTION, THE EFFECT OF PERFECTION AND NON-PERFECTION AND
FORECLOSURE OF SECURITY INTERESTS IN DEPOSIT ACCOUNTS, WHICH MATTERS SHALL
BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE DEPOSIT ACCOUNT IS
LOCATED. THE BORROWER PARTIES AGREE THAT ANY CONTROVERSY ARISING UNDER OR
IN RELATION TO THE NOTES, THE SECURITY DOCUMENTS OR ANY OTHER LOAN DOCUMENT
SHALL BE, EXCEPT AS OTHERWISE PROVIDED HEREIN, LITIGATED IN VIRGINIA. THE
LOCAL AND FEDERAL COURTS AND AUTHORITIES WITH JURISDICTION IN VIRGINIA
SHALL, EXCEPT AS OTHERWISE PROVIDED HEREIN, HAVE JURISDICTION OVER ALL
CONTROVERSIES WHICH MAY ARISE UNDER OR IN RELATION TO THE LOAN DOCUMENTS,
INCLUDING THOSE CONTROVERSIES RELATING TO THE EXECUTION, JURISDICTION,
BREACH, ENFORCEMENT OR COMPLIANCE WITH THE NOTES, THE SECURITY DOCUMENTS OR
ANY OTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH ANY OF
THE LOAN DOCUMENTS. EACH BORROWER PARTY IRREVOCABLY CONSENTS TO SERVICE,
JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THE
NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND
WAIVES ANY OTHER VENUE TO WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE,
HABITUAL RESIDENCE OR OTHERWISE. NOTHING CONTAINED HEREIN, HOWEVER, SHALL
PREVENT THE LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR
EXERCISING ANY RIGHTS AGAINST THE BORROWER PARTIES, AND AGAINST THE
COLLATERAL, IN ANY OTHER JURISDICTION. INITIATING SUCH SUIT, ACTION OR
PROCEEDING OR TAKING SUCH ACTION IN ANY OTHER JURISDICTION SHALL IN NO
EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS
OF VIRGINIA SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF THE BORROWER PARTIES
AND THE LENDER AS PROVIDED HEREIN OR THE SUBMISSION HEREIN BY THE BORROWER
PARTIES TO PERSONAL JURISDICTION WITHIN VIRGINIA. EACH BORROWER PARTY (I)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING UNDER ANY OF THE LOAN DOCUMENTS TRIABLE BY A JURY AND (II) WAIVES
ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST. THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD
OTHERWISE ACCRUE. FURTHER, EACH BORROWER PARTY HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF LENDER (INCLUDING, BUT NOT LIMITED TO, THE
LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO THE BORROWER
PARTY THAT THE LENDER WILL NOT SEEK TO ENFORCE THE PROVISIONS OF THIS
SECTION. THE FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLY AND VOLUNTARILY
AGREED TO BY THE BORROWER PARTIES UPON CONSULTATION WITH INDEPENDENT LEGAL
COUNSEL SELECTED BY THE BORROWER PARTIES' FREE WILL.
91
<PAGE>
SECTION 21.07. SEVERABILITY. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
SECTION 21.08. NOTICES.
SECTION 21.08(a) MANNER OF GIVING NOTICE. Each notice,
direction, certificate or other communication hereunder (hereafter in
this Section referred to collectively as "notices" and referred to
singly as a "notice") which any party is required or permitted to
give to the other party pursuant to this Agreement shall be in
writing and shall be deemed to have been duly and sufficiently given
if
(1) personally delivered with proof of delivery thereof
(any notice so delivered shall be deemed to have been received
at the time so delivered),
(2) sent by Federal Express (or other similar overnight
courier) designating morning delivery (any notice so delivered
shall be deemed to have been received on the Business Day it is
delivered by the courier),
(3) sent by United States registered or certified mail,
return receipt requested, postage prepaid, at a post office
regularly maintained by the United States Postal Service (any
notice so sent shall be deemed to have been received on the
Business Day it is delivered), or
(4) sent by telecopier or facsimile machine which
automatically generates a transmission report that states the
date and time of the transmission, the length of the document
transmitted, and the telephone number of the recipient's
telecopier or facsimile machine (to be confirmed with a copy
thereof sent in accordance with paragraphs (1), (2) or (3)
above within two Business Days) (any notice so delivered shall
be deemed to have been received (i) on the date of
transmission, if so transmitted before 5:00 p.m. (local time of
the recipient) on a Business Day, or (ii) on the next Business
Day, if so transmitted on or after 5:00 p.m. (local time of the
recipient) on a Business Day or if transmitted on a day other
than a Business Day),
addressed to the parties at their respective Notice Addresses.
92
<PAGE>
SECTION 21.08(b) CHANGE OF NOTICE ADDRESS. Any party may, by
notice given pursuant to this Section, change the person or persons
and/or address or addresses, or designate an additional person or
persons or an additional address or addresses, for its notices, but
notice of a change of address shall only be effective upon receipt.
Each party agrees that it shall not refuse or reject delivery of any
notice given hereunder, that it shall acknowledge, in writing,
receipt of the same upon request by the other party and that any
notice rejected or refused by it shall be deemed for all purposes of
this Agreement to have been received by the rejecting party on the
date so refused or rejected, as conclusively established by the
records of the U.S. Postal Service, the courier service or telecopier
or facsimile machine.
SECTION 21.09. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS.
SECTION 21.09(a) FURTHER ASSURANCES. To the extent permitted
by law, the parties hereto agree that they shall, from time to time,
execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further
instruments as the Lender or the Borrower Parties may request and as
may be required in the opinion of the Lender or its counsel to
effectuate the intention of or facilitate the performance of this
Agreement or any Loan Document.
SECTION 21.09(b) FURTHER DOCUMENTATION. Without limiting the
generality of subsection (a), in the event any further documentation
or information is required by the Lender to correct patent mistakes
in the Loan Documents, materials relating to the Title Insurance
Policies or the funding of the Advances, the Borrower Parties shall
provide, or cause to be provided to the Lender, at their cost and
expense, such documentation or information. The Borrower Parties
shall execute and deliver to the Lender such documentation, including
any amendments, corrections, deletions or additions to the Notes, the
Security Instruments or the other Loan Documents as is required by
the Lender.
SECTION 21.09(c) COMPLIANCE WITH INVESTOR REQUIREMENTS.
Without limiting the generality of subsection (a), the Borrower
Parties shall do anything necessary to comply with the requirements
of the Lender in order to enable the Lender to sell the MBS backed by
an Advance.
SECTION 21.10. TERM OF THIS AGREEMENT. This Agreement shall
continue in effect until the Base Facility Termination Date.
SECTION 21.11. ASSIGNMENTS; THIRD-PARTY RIGHTS. No Borrower Party
shall assign this Agreement, or delegate any of its obligations hereunder,
without the prior written consent of the Lender. The Lender may assign its
rights and obligations under this Agreement separately or together, without
the Borrower Parties' consent, only to Fannie Mae, but may not delegate its
obligations under this Agreement unless required to do so pursuant to
Section 18.04.
93
<PAGE>
SECTION 21.12. HEADINGS. Article and Section headings used herein
are for convenience of reference only, are not part of this Agreement and
are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 21.13. GENERAL INTERPRETIVE PRINCIPLES. For purposes of
this Agreement, except as otherwise expressly provided or unless the
context otherwise requires, (i) the terms defined in Article I, Section
13.03 and elsewhere in this Agreement have the meanings assigned to them in
this Agreement and include the plural as well as the singular, and the use
of any gender herein shall be deemed to include the other genders; (ii)
accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with GAAP; (iii) references herein to "Articles,"
"Sections," "subsections," "paragraphs" and other subdivisions without
reference to a document are to designated Articles, Sections, subsections,
paragraphs and other subdivisions of this Agreement; (iv) a reference to a
subsection without further reference to a Section is a reference to such
subsection as contained in the same Section in which the reference appears,
and this rule shall also apply to paragraphs and other subdivisions; (v) a
reference to an Exhibit or a Schedule without a further reference to the
document to which the Exhibit or Schedule is attached is a reference to an
Exhibit or Schedule to this Agreement; (vi) the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular provision; and (vii) the word "including"
means "including, but not limited to."
SECTION 21.14. INTERPRETATION. The parties hereto acknowledge that
each party and their respective counsel have participated in the drafting
and revision of this Agreement and the Loan Documents. Accordingly, the
parties agree that any rule of construction which disfavors the drafting
party shall not apply in the interpretation of this Agreement and the Loan
Documents or any amendment or supplement or exhibit hereto or thereto.
SECTION 21.15. STANDARDS FOR DECISIONS, ETC. If the Lender's
approval is required for any matter hereunder, such approval may be granted
or withheld in the Lender's sole and absolute discretion. If the Lender's
designation, determination, selection, estimate, action or decision is
required, permitted or contemplated hereunder, such designation,
determination, selection, estimate, action or decision shall be made in the
Lender's sole and absolute discretion.
SECTION 21.16. DECISIONS IN WRITING. Any approval, designation,
determination, selection, action or decision of the Lender must be in
writing to be effective.
SECTION 21.17 JOINT AND SEVERAL LIABILITY. Each Borrower Party
shall be jointly and severally liable for the payment and performance of
each obligation of any Borrower Party arising under any of the Loan
Documents, subject, however, to the limitations set forth in Article XX.
94
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]
95
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BORROWER PARTIES
THE REIT:
HOME PROPERTIES OF NEW YORK, INC., a Maryland
corporation
By: /s/ Ann M. McCormick
-----------------------
Ann M. McCormick
Vice President
THE OPERATING PARTNERSHIP:
HOME PROPERTIES OF NEW YORK, L.P., a New York
limited partnership
By: Home Properties of New York, Inc., a Maryland
corporation, its sole General Partner
By: /s/ Ann M. McCormick
--------------------------
Ann M. McCormick
Vice President
THE BORROWER:
HOME PROPERTIES WMF I, LLC, a New York limited
liability company
By: Home Properties of New York, L.P., a New York
limited partnership, its sole Member
By: Home Properties of New York, Inc.,
a Maryland corporation,
its sole General Partner
By: /s/ Ann M. McCormick
---------------------
Ann M. McCormick
Vice President
THE SUBSIDIARY OWNER:
HOME PROPERTIES OF NEW YORK, L.P. AND P-K
PARTNERSHIP DOING BUSINESS AS PATRICIA COURT AND
KAREN COURT, a Pennsylvania general partnership
By: Home Properties of New York, L.P., a New York
limited partnership, a General Partner
By: Home Properties of New York, Inc.,
a Maryland corporation,
its sole General Partner
By: /s/ Ann M. McCormick
---------------------
Ann M. McCormick
Vice President
[Signatures continued on following page]
<PAGE>
[Signatures continued from preceding page]
LENDER
WMF WASHINGTON MORTGAGE CORP., A DELAWARE
CORPORATION, FORMERLY KNOWN AS WASHINGTON MORTGAGE
FINANCIAL GROUP, LTD.
By:/s/ G. Scott Carter
-------------------
G. Scott Carter
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
HOME PROPERTIES OF NEW YORK, INC.'S FINANCIAL STATEMENTS CONTAINED IN ITS
SEPTEMBER 30, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 6,949
<SECURITIES> 0
<RECEIVABLES> 5,176
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 928,236
<DEPRECIATION> 61,390
<TOTAL-ASSETS> 977,669
<CURRENT-LIABILITIES> 0
<BONDS> 405,702
0
0
<COMMON> 166
<OTHER-SE> 340,768
<TOTAL-LIABILITY-AND-EQUITY> 977,669
<SALES> 0
<TOTAL-REVENUES> 102,243
<CGS> 0
<TOTAL-COSTS> 62,955
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,347
<INCOME-PRETAX> 22,941
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,746
<DISCONTINUED> 0
<EXTRAORDINARY> (446)
<CHANGES> 0
<NET-INCOME> 13,300
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.03
</TABLE>
