<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 4)
Homestead Village Incorporated
(Name of Issuer)
Common Stock, Par Value $.01 Per Share
Warrants to Purchase Shares of Common Stock
(Title of Class of Securities)
437851 10 8
437851 11 6
(CUSIP Number of Class of Securities)
Jeffrey A. Klopf, Secretary
Security Capital Group Incorporated
125 Lincoln Avenue
Santa Fe, New Mexico 87501
(505) 982-9292
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
================================================================================
<PAGE>
CUSIP NOS.: 437851 10 8; 437851 11 6
(1) NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Security Capital Pacific Trust
74-6056896
- ------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [_]
(B) [_]
- ------------------------------------------------------------------------------
(3) SEC USE ONLY
- ------------------------------------------------------------------------------
(4) SOURCE OF FUNDS
WC, BK, OO
- ------------------------------------------------------------------------------
(5) CHECK BOX OF DISCLOSURE IF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [_]
- ------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
STATE OF MARYLAND
===============================================================================
(7) SOLE VOTING POWER -0-
NUMBER OF
SHARES -----------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER 19,246,402 (consisting
of Shares issuable upon
OWNED BY conversion of convertible
notes)
-----------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON
-----------------------------------------------------------
WITH (10) SHARED DISPOSITIVE POWER 19,246,402 (consisting
of Shares issuable upon
conversion of convertible
notes)
===============================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(11)
19,246,402 Shares (consisting of Shares issuable upon conversion of
convertible notes)
- ------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(12)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
(13)
48.2%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
(14)
CO
===============================================================================
<PAGE>
CUSIP NOS: 437851 10 8; 437851 11 6
NAME OF REPORTING PERSONS
(1) S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Security Capital Atlantic Incorporated
85-0415503
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(2) (A) [_]
(B) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
(3)
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
(4)
WC, BK, OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [_]
(5)
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
(6)
STATE OF MARYLAND
===============================================================================
NUMBER OF (7) SOLE VOTING POWER -0-
SHARES -----------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
8,524,215 (consisting of Shares issuable upon
conversion of convertible notes)
OWNED BY
-----------------------------------------------------------
EACH
(9) SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON -----------------------------------------------------------
(10) SHARED DISPOSITIVE POWER
WITH 8,524,215 (consisting of Shares issuable upon
conversion of convertible notes)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(11)
8,524,215 Shares (consisting of Shares issuable upon conversion of
convertible notes)
- ------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(12)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
(13)
29.2%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
(14)
CO
- ------------------------------------------------------------------------------
<PAGE>
- -----------------------------------
CUSIP NOS. 437851 10 8; 437851 11 6
- -----------------------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Security Capital Group Incorporated
36-3692698
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
WC, BK, OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
STATE OF MARYLAND
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 15,876,823 (includes 3,232,422 Shares that may be
acquired upon exercise of Warrants)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
27,770,617 (consisting of Shares issuable upon
OWNED BY conversion of convertible notes)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 15,876,824 (includes 3,232,422 Shares that may be
acquired upon exercise of Warrants)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
27,770,617 (consisting of Shares issuable upon
conversion of convertible notes)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
43,647,440 Shares (includes 3,232,422 Shares that may be acquired upon
exercise of Warrants and 27,770,617 Shares issuable upon conversion of
convertible notes)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
84.4%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
CO
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
Item 1. Security and Issuer
Shares of Common Stock, par value $.01 per share (the "Shares"), of
Homestead Village Incorporated ("Homestead"), and warrants to purchase Shares
("Warrants"), 2030 Powers Ferry Road, Suite 222, Atlanta, Georgia 30339.
Item 2. Identity and Background
The persons listed in Numbers 1 and 16 below are added as persons filing
this statement. A copy of their written agreement relating to the filing of this
joint statement is filed as Exhibit A hereto. William D. Sanders ("Sanders") is
hereby removed as a person filing this statement as he does not share voting or
dispositive power with respect to the Shares owned by SCG.
1. (a) Name and Organization: Security Capital Pacific Trust, a Maryland real
estate investment trust ("PTR");
(b) Principal Business: Real estate ownership, operation and development;
(c) Principal Office: 7777 Market Center Avenue, El Paso, Texas 79912;
(d) PTR has not been convicted in a criminal proceeding during the last
five years;
(e) PTR has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years.
2. (a) Name: C. Ronald Blankenship;
(b) Business Address: 125 Lincoln Avenue, Santa Fe, New Mexico 87501;
(c) Principal Employment: Chairman of PTR and Managing Director of
Security Capital Group Incorporated;
(d) Mr. Blankenship has not been convicted in a criminal proceeding during
the last five years;
(e) Mr. Blankenship has not been subject to a judgment, decree or final
order enjoining future violation of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violations with respect to such laws during the last five years;
(f) Citizenship: United States.
3. (a) Name: Calvin K. Kessler;
(b) Business Address: 8600 Gateway Boulevard East, El Paso, Texas 79907;
(c) Principal Employment: President of Kessler Industries, Inc.;
(d) Mr. Kessler has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Kessler has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
4. (a) Name: James H. Polk, III;
(b) Business Address: 125 Lincoln Avenue, Santa Fe, New Mexico 87501;
(c) Principal Employment: Managing Director of Security Capital Markets
Group Incorporated;
(d) Mr. Polk has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Polk has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
<PAGE>
5. (a) Name: John C. Schweitzer;
(b) Business Address: 100 Congress Avenue, Suite 930, Austin, Texas 78701;
(c) Principal Employment: Managing Partner of Continental Properties
Company;
(d) Mr. Schweitzer has not been convicted in a criminal proceeding during
the last five years;
(e) Mr. Schweitzer has not been subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws during the last five years;
(f) Citizenship: United States.
6. (a) Name: James A. Cardwell;
(b) Business Address: 6080 Surety Drive, El Paso, Texas 79912;
(c) Principal Employment: Chairman and Chief Executive Officer of Petro
Stopping Centers, L.P.;
(d) Mr. Cardwell has not been convicted in a criminal proceeding during
the last five years;
(e) Mr. Cardwell has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
7. (a) Name: John T. Kelley, III;
(b) Business Address: 7777 Market Center Avenue, El Paso, Texas 79912;
(c) Principal Employment: Managing Member of J. Edwards Jewelry
Distributing Company, L.L.C.;
(d) Mr. Kelley has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Kelley has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
8. (a) Name: William G. Myers;
(b) Business Address: 1114 State Street, Suite 232, Santa Barbara,
California 93101;
(c) Principal Employment: Chief Executive Officer of Ojai Ranch and
Investment Company, Inc.;
(d) Mr. Myers has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Myers has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
9. (a) Name: R. Scot Sellers;
(b) Business Address: 7777 Market Center Avenue, El Paso, Texas 79912;
(c) Principal Employment: Managing Director of PTR and Director and
Managing Director of Security Capital Pacific Incorporated (the "PTR
REIT Manager");
(d) Mr. Sellers has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Sellers has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
10. (a) Name: Patrick R. Whelan;
(b) Business Address: 7777 Market Center Avenue, El Paso, Texas 79912;
(c) Principal Employment: Managing Director of PTR and the PTR REIT
Manager;
(d) Mr. Whelan has not been convicted in a criminal proceeding during the
last five years;
<PAGE>
(e) Mr. Whelan has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
11. (a) Name: John H. Gardner;
(b) Business Address: 7777 Market Center Avenue, El Paso, Texas 79912;
(c) Principal Employment: Senior Vice President of PTR and Director and
Senior Vice President of the PTR REIT Manager;
(d) Mr. Gardner has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Gardner has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
12. (a) Name: Jeffrey B. Allen;
(b) Business Address: 7777 Market Center Avenue, El Paso, Texas 79912;
(c) Principal Employment: Senior Vice President of PTR and the PTR REIT
Manager;
(d) Mr. Allen has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Allen has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
13. (a) Name: Jeffrey A. Klopf;
(b) Business Address: 125 Lincoln Avenue, Santa Fe, New Mexico 87501;
(c) Principal Employment: Senior Vice President and Secretary of PTR, the
PTR REIT Manager, Security Capital (Atlantic) Incorporated (the
"Atlantic REIT Manager") and SCG;
(d) Mr. Klopf has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Klopf has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
14. (a) Name: Jay S. Jacobson;
(b) Business Address: 7777 Market Center Avenue, El Paso, Texas 79912;
(c) Principal Employment: Senior Vice President of PTR and the PTR REIT
Manager; and SCG;
(d) Mr. Jacobson has not been convicted in a criminal proceeding during
the last five years;
(e) Mr. Jacobson has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
<PAGE>
15. (a) Name: Mark N. Tennisson;
(b) Business Address: 7777 Market Center Avenue, El Paso, Texas 79912;
(c) Principal Employment: Senior Vice President of PTR and the PTR REIT
Manager;
(d) Mr. Tennisson has not been convicted in a criminal proceeding during
the last five years;
(e) Mr. Tennisson has not been subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws during the last five years;
(f) Citizenship: United States.
16. (a) Name and Organization: Security Capital Atlantic Incorporated, a
Maryland corporation ("Atlantic");
(b) Principal Business: Real estate investment and management;
(c) Principal Office: Six Piedmont Center, Atlanta, Georgia 30305;
(d) Atlantic has not been convicted in a criminal proceeding during the
last five years;
(e) Atlantic has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years.
17. (a) Name: Manuel A. Garcia, III;
(b) Business Address: P.O. Box 2066, Winter Park, Florida 32790;
(c) Principal Employment: Chief Executive Officer of Davgar Restaurants,
Inc.;
(d) Mr. Garcia has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Garcia has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
18. (a) Name: Ned S. Holmes;
(b) Business Address: 55 Waugh Drive, Houston, Texas 77007;
(c) Principal Employment: President and Chief Executive Officer of Laing
Properties, Inc. and Chairman and President of Parkway
Investments/Texas Inc.
(d) Mr. Holmes has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Holmes has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
19. (a) Name: Constance B. Moore;
(b) Business Address: Six Piedmont Center, Atlanta, Georgia 30305;
(c) Principal Employment: Co-Chairman and Chief Operating Officer of
Atlantic;
(d) Ms. Moore has not been convicted in a criminal proceeding during the
last five years;
(e) Ms. Moore has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
20. (a) Name: James C. Potts;
(b) Business Address: Six Piedmont Center, Atlanta, Georgia 30305;
(c) Principal Employment: Co-Chairman and Chief Investment Officer of
Atlantic;
(d) Mr. Potts has not been convicted in a criminal proceeding during the
last five years;
<PAGE>
(e) Mr. Potts has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
21. (a) Name: John M. Richman;
(b) Business Address: 227 West Monroe Street, Suite 4825, Chicago,
Illinois 60606;
(c) Principal Employment: Counsel to Wachtell, Lipton, Rosen & Katz;
(d) Mr. Richman has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Richman has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
22. (a) Name: J. Lindsay Freeman;
(b) Business Address: Six Piedmont Center, Atlanta, Georgia 30305;
(c) Principal Employment: Senior Vice President of Atlantic and the
Atlantic REIT Manager;
(d) Mr. Freeman has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Freeman has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
23. (a) Name: Robert J. Hildebrand;
(b) Business Address: Six Piedmont Center, Atlanta, Georgia 30305;
(c) Principal Employment: Senior Vice President of Atlantic and the
Atlantic REIT Manager and Director of the Atlantic REIT Manager;
(d) Mr. Hildebrand has not been convicted in a criminal proceeding during
the last five years;
(e) Mr. Hildebrand has not been subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws during the last five years;
(f) Citizenship: United States.
24. (a) Name: Bradley C. Miller;
(b) Business Address: Six Piedmont Center, Atlanta, Georgia 30305;
(c) Principal Employment: Senior Vice President of Atlantic and the
Atlantic REIT Manager;
(d) Mr. Miller has not been convicted in a criminal proceeding during the
last five years;
(e) Mr. Miller has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the last five years;
(f) Citizenship: United States.
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration
Pursuant to Funding Commitment Agreements, each dated as of October 17,
1996 (the "Funding Commitment Agreements"), entered into in connection with the
formation of Homestead, PTR is obligated to provide secured financing to
Homestead and receive up to $221,333,620 of convertible mortgage notes (the
"Convertible Notes") and Atlantic is obligated to provide secured financing to
Homestead and receive up to $98,028,473 of Convertible Notes. Interest on the
Convertible Notes accrues at the rate of 9% on the unpaid principal balance
payable every six months. The Convertible Notes are scheduled to mature on
October 31, 2006. Homestead has pledged those assets that have been or will be
funded by PTR or Atlantic under the Funding Commitment Agreement as collateral
for the Convertible Notes. PTR and Atlantic have the right, beginning on or
after March 31, 1997, to convert all of the outstanding principal amount of
Convertible Notes into Shares on the basis of one Share for each $11.50
aggregate principal amount outstanding on the Convertible Notes being converted.
To finance any fundings under the Funding Commitment Agreements, PTR intends to
use working capital or funds borrowed under a $350 million revolving line of
credit facility with a syndicate of banks agented by Texas Commerce Bank
National Association and Atlantic intends to use working capital or funds
borrowed under a $350 million revolving line of credit facility with a syndicate
of banks agented by Morgan Guaranty Trust Company of New York. Copies of the
Funding Commitment Agreements, and the Convertible Notes are filed as Exhibits B
and C and Exhibit D through H, respectively.
Item 4. Purpose of Transaction
PTR and Atlantic have acquired the Convertible Notes to provide Homestead
with capital to develop the extended-stay lodging facilities contributed by PTR
and Atlantic to Homestead at formation. Except as otherwise noted below, neither
PTR nor Atlantic has any plans or proposals that relate to or would result in
the following:
(a) The acquisition of additional securities of Homestead or the
disposition of securities of Homestead, except that PTR and Atlantic
may dispose of Shares to comply with the REIT requirements of the
Internal Revenue Code of 1986;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving Homestead or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of Homestead or any
of its subsidiaries;
(d) Any change in the present board of directors or management of
Homestead, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend policy
of Homestead;
(f) Any other material change in Homestead's business or corporate
structure;
(g) Changes in Homestead's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of Homestead by any person;
(h) Causing the Shares or the Warrants, other than pursuant to the terms
of the Warrants, to be delisted from the American Stock Exchange;
(i) A class of equity securities of Homestead becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934; or
<PAGE>
(j) Any action similar to any of those enumerated above.
SCG intends to play a major role in the direction of Homestead for the
purpose of maximizing the value of Homestead. Any influence of Sanders on the
direction of Homestead will be in his capacity as Chairman and Chief Executive
Officer of SCG, and not personally. Therefore, the reference to Sanders
intending to play a major role in the direction of Homestead for the purpose of
maximizing the value of Homestead is hereby deleted.
Item 5. Interest in Securities of the Issuer
(a), (b) The following table sets forth the beneficial ownership of Shares
for each person named in Item 2. Unless otherwise indicated in the footnotes,
each such person has sole power to vote or to direct the vote and sole power to
dispose or direct the disposition of such Shares. The information previously
filed which reported Sanders as a beneficial owner of the Shares owned by SCG
and indicated that Sanders may be deemed to beneficially own the Shares owned by
SCG, is hereby amended to provide that Sanders does not beneficially own the
Shares owned by SCG. Therefore, Sanders currently beneficially owns 127,565
Shares (0.6% of all Shares), with respect to which he has sole voting and
dispositive power, and may be deemed to beneficially own an additional 104,921
Shares (0.5% of all Shares). Any reference to Sanders intending to play a major
role in the direction of SCI for the purpose of maximizing the value of SCI is
hereby deleted as described in Item 4.
<TABLE>
<CAPTION>
Number of Shares Percent of
Person Beneficially Owned (1) All Shares (2)
- ------ ---------------------- --------------
<S> <C> <C>
Security Capital Pacific Trust.......... 19,246,402 48.2%
C. Ronald Blankenship................... 7,311 *
Calvin K. Kessler....................... 4,680 *
James H. Polk, III...................... 10,500 *
John C. Schweitzer...................... 3,264 *
James A. Cardwell....................... 4,780 *
John T. Kelley, III..................... 2,739 *
William G. Myers........................ 20,490 *
R. Scot Sellers......................... 4,410 *
Patrick R. Whelan....................... 476 *
John H. Gardner......................... 0 *
Jeffrey B. Allen........................ 983 *
Jeffrey A. Klopf........................ 0 *
Jay S. Jacobson......................... 0 *
Mark N. Tennisson....................... 108 *
Security Capital Atlantic Incorporated.. 8,524,215 29.2
Manuel A. Garcia, III................... 764,608 *
Ned S. Holmes........................... 2,242 *
Constance B. Moore...................... 5,597 *
James C. Potts.......................... 3,572 *
John M. Richman......................... 1,851 *
J. Lindsay Freeman...................... 0 *
Robert J. Hildebrand.................... 0 *
Bradley C. Miller....................... 0 *
Security Capital Group Incorporated..... 43,647,440(3) 84.4
William D. Sanders...................... 232,486(4) 1.1
Samuel W. Bodman........................ 0 *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percent of
Person Beneficially Owned(1) All Shares(2)
- ------ --------------------- -------------
<S> <C> <C>
John P. Frazee, Jr...................... 2,758 *
Cyrus F. Freidheim, Jr.................. 1,102 *
H. Laurance Fuller...................... 216 *
Ray L. Hunt............................. 109,929 *
Peter S. Willmott....................... 3,448 *
Michael Simmons......................... 215 *
Thomas G. Wattles....................... 1,837 *
</TABLE>
* Less than 1%
(1) Includes, for PTR and Atlantic, all Shares that may be issued upon
conversion of all Convertible Notes that may be outstanding upon full
funding under the Funding Commitment Agreements. Includes, for Messrs.
Blankenship, Kessler, Polk, Schweitzer, Cardwell, Kelley, Myers, Sellers,
Whelan, Gardner, Allen, Klopf, Jacobson and Tennisson, 2,935, 1,879, 4,216,
1,310, 1,919, 1,100, 8,225, 1,732, 191, 0, 33, 0, 0 and 43 Shares,
respectively, that may be acquired upon exercise of outstanding Warrants.
Includes, for Messrs. Sanders, Bodman, Frazee, Freidheim, Fuller, Hunt,
Willmott, Simmons and Wattles, 197,183, 0, 1,107, 442, 62, 44,133, 1,384,
86 and 737 Shares, respectively, that may be acquired upon exercise of
Warrants. Includes, for Ms. Moore and Messrs. Garcia, Holmes, Potts,
Richman, Freeman, Hildebrand and Miller, 2,246 and 743,000, 898, 1,428,
743, 0, 0, and 0 Shares, respectively, that may be acquired upon exercise
of outstanding Warrants.
(2) Assumes (i) in the case of PTR and Atlantic, that PTR or Atlantic, as
applicable, has converted all Convertible Notes that may be outstanding
upon full funding under its Funding Commitment Agreement and that no other
person has converted any outstanding convertible securities and (ii) in the
case of SCG, that each of PTR and Atlantic have converted all Convertible
Notes that may be outstanding upon full funding under the Funding
Commitment Agreements, that SCG has exercised all of its outstanding
Warrants and that no other person has converted any outstanding convertible
securities.
(3) Includes 19,246,402 Shares beneficially owned by PTR and 8,524,215 Shares
beneficially owned by Atlantic. As a result of its ownership of 37.9% of
PTR's outstanding common shares and 56.9% of Atlantic's outstanding common
stock and SCG's contractual arrangements with PTR and Atlantic, SCG may be
deemed to beneficially own all Shares owned by PTR and Atlantic. Also
includes 3,232,422 Shares that may be acquired upon exercise of Warrants.
12,644,401 Shares and Warrants to acquire 3,232,422 Shares are, or will be,
owned of record by SC Realty Incorporated, a wholly owned subsidiary of
SCG, and are, or will be, pledged to secure a $300 million revolving line
of credit facility with a syndicate of banks. As of December 31, 1996,
there were $34 million of borrowings outstanding under the line of credit.
The line of credit is also secured by securities owned indirectly by SCG of
PTR, Atlantic, Security Capital Industrial Trust and Security Capital U.S.
Realty, an entity based in Luxembourg that is affiliated with SCG and which
invests in real estate operating companies in the United States. SCG
estimates that the aggregate market value of the pledged securities
exceeded $2.0 billion as of December 31, 1996. SCG was in compliance with
all covenants under the line of credit as of December 31, 1996.
(4) 127,565 Shares are, or will be, owned by Mr. Sanders directly. Mr. Sanders
may be deemed to beneficially own 101,421 Shares which are, or will be,
owned by Sanders Partners Incorporated and CAMPR Partners Limited, family
entities with respect to which Mr. Sanders shares voting and dispositive
power, and 3,500 Shares which are, or will be owned by a foundation of
which Mr. Sanders is a director.
(c) No transactions in Shares or Warrants were effected in the past sixty
days by the persons listed in the above table, except: on February 5, 1997, SCG
exercised 500,000 Warrants at $10.00 per Warrant; on January 22, 1997, SCG
purchased 10,000 at $8.875 per Warrant; on January 28, 1997, SCG purchased
18,000 Warrants at $9.375 per Warrant; on January 29, 1997, SCG purchased 22,400
Warrants at $9.25 per Warrant; on January 30, 1997, SCG purchased 28,000
Warrants at $9.125 per Warrant; on January 31, 1997, SCG purchased 10,600 at an
average purchase price of $9.1179 per Warrant; on February 3, 1997, SCG
purchased 19,000 Warrants at $8.75 per Warrant; on February 5, 1997, SCG
purchased 10,000 Warrants at $8.75 per Warrant; on February 6, 1997, SCG
purchased 3,800 Warrants at $8.50 per Warrant; on February 7, 1997, SCG
purchased 113,600 Warrants at an average purchase price of $8.49 per Warrant; on
February 10, 1997, SCG purchased 4,700 Warrants at $8.375 per Warrant; on
February 11, 1997, SCG purchased 6,000 Warrants at $8.375 per Warrant; on
February 12, 1997, SCG purchased 47,300 at an average purchase price of $8.48
per Warrant; on February 13, 1997, SCG purchased 900 Warrants at $8.25 per
Warrant; and on February 14, 1997, SCG purchased 6,100 Warrants at $8.1127 per
Warrant.
<PAGE>
(d) No other person is known to have the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
Shares owned by the persons listed in the above table.
(e) As described above, Sanders has ceased to be a beneficial owner of more
than five percent of the Shares and is therefore being removed as a person
filing this statement. No other person filing this statement has ceased to be a
beneficial owner of more than five percent of the Shares.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer
PTR and Atlantic are each parties to an Investor and Registration Rights
Agreement with Homestead, dated as of October 17, 1996 (the "PTR Investor
Agreement" and the "Atlantic Investor Agreement"), pursuant to which PTR and
Atlantic are each entitled to designate one person for nomination to Homestead's
board of directors, and Homestead will use its best efforts to cause the
election of such nominee(s) until March 31, 1998 and for so long thereafter as
PTR or Atlantic has the right to convert in excess of $20 million principal
amount of loans made pursuant to the Funding Commitment Agreements. Such
nominee(s) may, but need not, include the same person(s) nominated by SCG
pursuant to its Investor Agreement with Homestead. In addition, Homestead has
granted to each of PTR and Atlantic registration rights with respect to the
distribution of all of the Shares issuable upon conversion of the Convertible
Notes. Prior to the one-year anniversary of the date the Shares are registered
under the Securities Exchange Act of 1934, each of PTR and Atlantic may request
one registration of those Shares which are issued upon conversion of any or all
of the Convertible Notes during such one-year period and which it intends to
distribute to its shareholders. After such one-year anniversary, each of PTR and
Atlantic may request three additional registrations pursuant to Rule 415
promulgated under the Securities Act of 1933 of all Shares issued or issuable
upon conversion of the Convertible Notes. Such registration, except for the fees
and disbursements of counsel to PTR or Atlantic, shall be at the expense of
Homestead. A copy of the Investor Agreement is filed as Exhibits I and J hereto.
Item 7. Material to Be Filed as Exhibits
The following are filed as exhibits: a written agreement relating to the
filing of the joint acquisition statement, a copy of the Funding Commitment
Agreements, a copy of the Convertible Notes, a copy of the PTR Investor
Agreement and a copy of the Atlantic Investor Agreement.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Date: February 18, 1997 SECURITY CAPITAL PACIFIC TRUST
By:
------------------------------
Name: Jeffrey A. Klopf
Title: Secretary
SECURITY CAPITAL ATLANTIC INCORPORATED
By:
------------------------------
Name: Jeffrey A. Klopf
Title: Secretary
SECURITY CAPITAL GROUP INCORPORATED
By:
------------------------------
Name: Jeffrey A. Klopf
Title: Secretary
WILLIAM D. SANDERS
By:
------------------------------
Name: Jeffrey A. Klopf
Title: Attorney-in-fact
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT A Agreement relating to filing of joint acquisition statement.
EXHIBIT B Funding Commitment Agreement, dated as of October 17, 1996,
between Homestead and PTR.
EXHIBIT C Funding Commitment Agreement, dated as of October 17, 1996,
between Homestead and Atlantic.
EXHIBIT D $79,290,895 Amended and Restated Promissory Note, dated May 28,
1996, by PTR Homestead Village Limited Partnership in favor of
PTR.
EXHIBIT E $142,042,725 Amended and Restated Promissory Note, dated May 28,
1996, by PTR Homestead Village Incorporated in favor of PTR.
EXHIBIT F $17,955,354 Amended and Restated Promissory Note, dated May 28,
1996, by Atlantic Homestead Village Limited Partnership in favor
of Atlantic.
EXHIBIT G $18,041,687 Additional Corporate Promissory Note, dated May 28,
1996, by Atlantic Homestead Village Incorporated in favor of
Atlantic.
EXHIBIT H $80,073,117 Consolidated Amended and Restated Promissory Note,
dated May 28, 1996, by Atlantic Homestead Village Incorporated in
favor of Atlantic.
EXHIBIT I Investor and Registration Rights Agreement, dated as of October
17, 1996, between Homestead and PTR.
EXHIBIT J Investor and Registration Rights Agreement, dated as of October
17, 1996, between Homestead and Atlantic.
<PAGE>
EXHIBIT A
This Agreement is entered into by and between Security Capital Pacific
Trust, a Maryland real estate investment trust, Security Capital Group
Incorporated, a Maryland corporation, and Security Capital Atlantic
Incorporated, a Maryland corporation.
Each of the persons named above hereby agrees that the Schedule 13D of even
date herewith and to which the Agreement is attached as an exhibit, which is to
be filed with the Securities and Exchange Commission, is to be filed on behalf
of each such person.
This Agreement may be executed in multiple counterparts, each of which
shall constitute an original.
IN WITNESS HEREOF, each of the undersigned has executed this Agreement or
caused this Agreement to be executed on its behalf this 18th day of February,
1997.
SECURITY CAPITAL PACIFIC TRUST
By:
------------------------------
Jeffrey A. Klopf
Secretary
SECURITY CAPITAL GROUP INCORPORATED
By:
------------------------------
Jeffrey A. Klopf
Secretary
SECURITY CAPITAL ATLANTIC INCORPORATED
By:
------------------------------
Jeffrey A. Klopf
Secretary
<PAGE>
EXHIBIT B
FUNDING COMMITMENT AGREEMENT
By and Between
SECURITY CAPITAL PACIFIC TRUST
"PTR"
AND
HOMESTEAD VILLAGE INCORPORATED
"Homestead"
PTR HOMESTEAD VILLAGE LIMITED PARTNERSHIP
"Partnership Borrower"
Dated: October 17, 1996
<PAGE>
|| TABLE OF CONTENTS
-----------------
Page
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ARTICLE 1. DEFINITIONS................................................... 3
Section 1.1. Certain Defined Terms.................................. 3
Section 1.2. Other Definitional Provisions.......................... 10
ARTICLE 2. THE LOANS..................................................... 11
Section 2.1. The Homestead Loan..................................... 11
Section 2.2. The Partnership Loan................................... 11
Section 2.3. Future Projects........................................ 11
Section 2.4. Subsidiary Loans....................................... 12
Section 2.5. Duration of Funding Commitment......................... 13
Section 2.6. Project Specific Funding Commitment.................... 13
Section 2.7. Replacement Projects................................... 14
Section 2.8. Release of Security Documents.......................... 15
ARTICLE 3. REPRESENTATIONS AND WARRANTIES................................ 15
Section 3.1. Existence and Power.................................... 15
Section 3.2. Authorization and Binding Obligations.................. 15
Section 3.3. No Legal Bar or Resultant Lien......................... 16
Section 3.4. No Consent............................................. 16
Section 3.5. Compliance with Laws................................... 16
Section 3.6. Litigation............................................. 16
Section 3.7. Defaults............................................... 17
Section 3.8. Status of Property..................................... 17
Section 3.9. Use of Proceeds........................................ 17
Section 3.10. Real Property Environmental Matters.................... 17
Section 3.11. Financial Condition.................................... 17
Section 3.12. No Condemnation........................................ 18
Section 3.13. No Actions............................................. 18
Section 3.14. No Adverse Conditions.................................. 18
ARTICLE 4. COVENANTS..................................................... 18
Section 4.1. Construction of Improvements........................... 18
Section 4.2. Plans; Project Budgets; Project Schedules and
Material Changes..................................... 19
Section 4.3. Inspection and Examination.............................. 19
Section 4.4. Permits and Approvals................................... 19
Section 4.5. Governmental Requirements............................... 19
Section 4.6. Books and Records....................................... 19
Section 4.7. Title to Property and Improvements...................... 20
Section 4.8. Costs and Expenses...................................... 20
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
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<S> <C> <C>
Section 4.9 Use of Advances............................................... 20
Section 4.10. Insurance..................................................... 20
Section 4.11. Environmental Matters......................................... 20
Section 4.12. Selection of Architects; Contractors; Inspecting A/E's........ 21
Section 4.13. Further Assurances............................................ 21
Section 4.14. Quarterly Statements.......................................... 21
Section 4.15. Continued Existence........................................... 21
Section 4.16. Defaults Under Other Loans.................................... 22
ARTICLE 5. ADVANCE CONDITIONS.................................................... 22
Section 5.1. Conditions Precedent to First Advance under this Agreement.... 22
Section 5.2. Conditions Precedent to First Advance for New Project......... 24
Section 5.3. Initial Improvement Advance Conditions........................ 25
Section 5.4. Additional Improvement Advance Conditions..................... 26
Section 5.5. Final-Advance Conditions...................................... 26
ARTICLE 6. PROCEDURE FOR ADVANCES; RESERVES...................................... 27
Section 6.1. General....................................................... 27
Section 6.2. Payments to PTR............................................... 28
Section 6.3. Retainage and Contractor's Fee Holdback....................... 28
Section 6.4. Interest Reserve.............................................. 29
Section 6.5. Owner's Contingency........................................... 29
Section 6.6. Cost Overruns and Savings; Change Order Reserve............... 29
ARTICLE 7. EVENTS OF DEFAULT..................................................... 30
Section 7.1. Failure to Pay................................................ 30
Section 7.2. Other Loan Document Defaults.................................. 30
Section 7.3. Judgment or Attachment........................................ 31
Section 7.4. Violation of Governmental Requirements........................ 31
Section 7.5. Insolvency, etc............................................... 31
Section 7.6. Unapproved Transfer........................................... 32
ARTICLE 8. REMEDIES.............................................................. 32
Section 8.1. General....................................................... 32
Section 8.2. Remedies Cumulative........................................... 34
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
Page
----
<S> <C> <C>
ARTICLE 9. MISCELLANEOUS............................................................. 34
Section 9.1. Survival of Representations, Warranties and Covenants............. 34
Section 9.2. Successors and Assigns............................................ 34
Section 9.3. Notices........................................................... 35
Section 9.4. Waiver............................................................ 35
Section 9.5. Amendment......................................................... 35
Section 9.6. Severability...................................................... 35
Section 9.7. Entire Agreement.................................................. 36
Section 9.8. Expenses.......................................................... 36
Section 9.9. Captions.......................................................... 36
Section 9.10. Governing Law..................................................... 36
Section 9.11. No Joint Venture or Partnership................................... 36
Section 9.12. No Third Party Beneficiary Rights Created......................... 36
Section 9.13. Incorporation by Reference........................................ 36
Section 9.14. Counterparts...................................................... 37
Section 9.15. Scope of Review of Plans.......................................... 37
Section 9.16. Governmental Regulation........................................... 37
Section 9.17. Subordination..................................................... 37
Section 9.18. Indemnity......................................................... 37
Section 9.19. Limitation of Liability........................................... 37
||
</TABLE>
-iii-
<PAGE>
FUNDING COMMITMENT AGREEMENT
THIS FUNDING COMMITMENT AGREEMENT (this "Agreement"), is entered into as of
October 17, 1996, among HOMESTEAD VILLAGE INCORPORATED, a Maryland corporation
("Homestead"), PTR HOMESTEAD VILLAGE LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Partnership Borrower") and SECURITY CAPITAL PACIFIC TRUST, a
Maryland real estate investment trust ("PTR").
RECITALS
A. Prior to the date hereof, PTR agreed to make to PTR Homestead Village
Incorporated (the "Prior Corporate Borrower") a loan (the "Corporate Loan"), of
up to a maximum amount of $127,602,594 (the "Maximum Corporate Loan Amount") to
fund, among other things, acquisition and construction costs and expenses
incurred in connection with the acquisition and development of Homestead Village
extended stay lodging facilities. In connection with agreeing to make the
Corporate Loan, PTR and the Prior Corporate Borrower agreed that the Prior
Corporate Borrower's repayment obligation for funds advanced in respect of the
Corporate Loan would be adjusted by a premium factor of 1.113164866782 (the
"Premium Factor"). To evidence the Prior Corporate Borrower's obligation to
repay the Corporate Loan, at the adjusted rate, the Prior Corporate Borrower has
delivered to PTR an Amended and Restated Promissory Note (the "Corporate Note"),
dated May 28, 1996, in the face amount of $142,042,725 (i.e., the Maximum
Corporate Loan Amount as adjusted by the Premium Factor) (which note amended and
restated a prior promissory note dated January 24, 1996, and delivered by the
Prior Corporate Borrower to PTR to evidence the Corporate Loan), and to secure
the payment obligations under the Corporate Note and the Partnership Note (as
defined below), the Prior Corporate Borrower has, prior to the date hereof,
delivered to PTR deeds of trust and mortgages (the "Existing Corporate Security
Documents"), creating liens on the existing Homestead Village Projects listed in
Exhibit A hereto which are owned by the Prior Corporate Borrower (the "Existing
Corporate Projects"). (The Corporate Note, the Existing Corporate Security
Documents and all other instruments heretofore delivered by the Prior Corporate
Borrower in connection therewith to secure the payment of the Corporate Note and
the Partnership Note are herein called the "Existing Corporate Loan Documents".)
B. Prior to the date hereof, PTR agreed to make to the Partnership
Borrower a loan (the "Partnership Loan") of up to a maximum amount of
$71,230,145 (the "Maximum Partnership Loan Amount") to fund, among other things,
acquisition and construction costs and expenses incurred in connection with the
acquisition and development of Homestead Village extended stay lodging
facilities. In connection with agreeing to make the Partnership Loan, PTR and
the Partnership agreed that the Partnership Borrower's repayment obligation for
funds advanced in respect of the Partnership Loan would be adjusted by the
Premium Factor. To evidence the Partnership Borrower's obligation to repay the
Partnership Loan, at the adjusted
<PAGE>
rate, the Partnership Borrower has delivered to PTR an Amended and Restated
Promissory Note (the "Partnership Note"), dated May 28, 1996, in the face amount
of $79,290,895 (i.e., the Maximum Partnership Loan Amount as adjusted by the
Premium Factor) (which note amended and restated a prior promissory note dated
January 24, 1996, and delivered by the Partnership Borrower to PTR to evidence
the Partnership Loan), and to secure the payment obligations under the Corporate
Note and the Partnership Note, the Partnership Borrower has, prior to the date
hereof, delivered to PTR those certain deeds of trust and mortgages listed in
Part II of Exhibit A hereto (the "Existing Partnership Security Documents"),
creating liens on the existing Homestead Village Projects listed in Exhibit A
hereto which are owned by the Partnership Borrower (the "Existing Partnership
Projects"). (The Partnership Note, the Existing Partnership Security Documents
and all other instruments heretofore delivered by the Partnership Borrower in
connection therewith to secure the payment of the Corporate Note and the
Partnership Note are herein called the "Existing Partnership Loan Documents";
and the Existing Corporate Loan Documents and Existing Partnership Loan
Documents are collectively referred to herein as the "Existing Loan Documents".)
C. On the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Security Capital Atlantic Incorporated
("Atlantic"), PTR, Security Capital Group Incorporated ("SCG") and Homestead
(the "Merger Agreement"), pursuant to which, among other things, Homestead is,
contemporaneously herewith, acquiring all of the stock of PTR's subsidiaries
which own, operate or develop PTR's Homestead Village extended-stay lodging
facilities. As a consequence of the mergers contemplated under the Merger
Agreement, the Prior Corporate Borrower has been merged into Homestead and in
connection therewith Homestead has succeeded to and assumed all of the Prior
Corporate Borrower's obligations and liabilities, including those under the
Corporate Note and the Existing Corporate Loan Documents.
D. Upon and subject to the provisions of this Agreement, Homestead, the
Partnership Borrower and PTR desire to continue the funding provided for under
the Existing Loan Documents, and in consideration of the issuance, pursuant to
that certain Warrant Purchase Agreement, dated as of May 21, 1996 among
Atlantic, PTR, SCG and Homestead, to PTR by Homestead of warrants to purchase
shares of common stock, $0.01 par value per share, of Homestead ("Homestead
Common Stock"), PTR is willing to provide funds to Homestead and the Partnership
Borrower for the costs incurred in connection with performing due diligence
investigations, securing required development approvals and otherwise completing
the acquisition and development of the proposed future Homestead Village
projects listed in Exhibit A (which projects, and any replacement projects
approved by PTR pursuant to the provisions of this Agreement, are herein called
the "Future Projects").
E. The execution of this Agreement is a condition to the consummation of
the transactions contemplated by the Merger Agreement.
2
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"Agreement" shall mean this Funding Commitment Agreement.
"Acquisition Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Architect" means the architect retained by a Borrower to provide
architectural services for a Project.
"Architect's Agreement" means the agreement for architectural services
executed by a Borrower and an Architect in connection with the design of a
Project, and all exhibits, attachments, riders and addenda thereto.
"Architect's Certificate" means a Certificate from the Architect for a
Project, in form and substance reasonably acceptable to PTR, wherein the
Architect acknowledges the collateral assignment of the Architect's Agreement
and the Plans prepared by such Architect from Borrower to PTR pursuant to this
Agreement and agrees to perform all of its obligations under the Architect's
Agreement in the event PTR takes possession of the subject Project in connection
with the exercise of its remedies hereunder or under the Security Documents
after an Event of Default.
"Atlantic" has the meaning set forth in the Preamble to this Agreement.
"Borrower" means Homestead, in its capacity as maker under the Corporate
Note, the Partnership Borrower or any Subsidiary, whichever entity is the owner
of the subject Project.
"Business Day" means any day other than Saturday, Sunday, or any other day
on which commercial banks in New Mexico are not required to be open for
business.
"Change Order" means a written order executed by a Borrower authorizing a
Contractor to proceed with a change in the work as provided for in the original
Plans for a Project, which change has been made in accordance with the
applicable provisions of this Agreement.
3
<PAGE>
"Completion and Payment Guaranty" means that certain Guaranty of Completion
and Payment of even date herewith from Homestead to PTR in the form attached as
Exhibit B.
"Construction Contract" means the contract for construction executed by a
Borrower and the Contractor in connection with the construction of a Project,
and all exhibits, attachments, riders and addenda thereto.
"Consultant" means any civil engineer or other material consultant, other
than the Architect, retained directly by a Borrower to provide design or
engineering services for a Project.
"Consultant's Agreement" means the agreement for engineering or other
consultant services executed by a Borrower and a Consultant in connection with a
Project, and all exhibits, attachments, riders and addenda thereto.
"Consultant's Certificate" means a Certificate from a Consultant for a
Project, in form and substance reasonably acceptable to PTR, wherein the
Consultant acknowledges the collateral assignment of the Consultant's Agreement
and the Plans prepared by such Consultant from Borrower to PTR pursuant to this
Agreement and agrees to perform all of its obligations under the Consultant's
Agreement in the event PTR takes possession of the subject Project in connection
with the exercise of its remedies hereunder or under the Security Documents
after an Event of Default.
"Contractor" means the general contractor retained by a Borrower to provide
construction services for a Project.
"Contractor's Certificate" means a Certificate from the Contractor for a
Project, in form and substance reasonably acceptable to PTR, wherein the
Contractor acknowledges the collateral assignment of the Construction Contract
from Borrower to PTR pursuant to this Agreement and agrees to perform all of its
obligations under the Construction Contract in the event PTR takes possession of
the subject Project in connection with the exercise of its remedies hereunder or
under the Security Documents after an Event of Default.
"Corporate Loan" has the meaning set forth in Recital A to this Agreement.
"Corporate Note" has the meaning set forth in Recital A to this Agreement.
"Default" means any condition or event that constitutes an Event of Default
or that with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"Development Budget" has the meaning set forth in Section 2.3 of this
Agreement.
4
<PAGE>
"Development Schedule" has the meaning set forth in Section 2.3 of this
Agreement.
"Environmental Laws" means any and all laws, statutes, ordinances, rules,
regulations, orders, or determinations of any governmental authority pertaining
to health or the environment applicable to a Borrower, or a Property owned by
such Borrower, in effect in the jurisdiction in which such Property is located,
or where any hazardous substances generated by or disposed of by a Borrower in
connection with such Property are located, including but not limited to the
Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended by the Superfund Amendments
and Reauthorization Act of 1986, as amended ("CERCLA"), the Federal Water
Pollution Control Act, as amended, the Resource Conservation and Recovery Act of
1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal
Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984, as
amended ("RCRA"), the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Hazardous Materials Transportation Act, as amended
any analogous state law of the state in which the Property is located and other
environmental conservation or protection laws. The terms "hazardous substance,"
"release," and "threatened release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposal" (or "disposed") shall have the
meanings specified in RCRA; provided, however, that (i) in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and (ii) to the extent the laws of the state in which the
Property is located establish a meaning for "hazardous substance," "release,"
"threatened release," "solid waste," or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply.
"Event of Default" means the occurrence of any of the events specified in
Article 7 hereof.
"Existing Corporate Projects" has the meaning set forth in Recital A to
this Agreement.
"Existing Corporate Security Documents" has the meaning set forth in
Recital A to this Agreement.
"Existing Loan Documents" has the meaning set forth in Recital B to this
Agreement.
"Existing Partnership Loan Documents" has the meaning set forth in Recital
B to this Agreement.
"Existing Partnership Projects" has the meaning set forth in Recital B to
this Agreement.
"Existing Partnership Security Documents" has the meaning set forth in
Recital B to this Agreement.
5
<PAGE>
"Existing Projects" means the Existing Corporate Projects and the Existing
Partnership Projects.
"Expiration Date" has the meaning set forth in Section 2.5 of this
Agreement.
"Final Advance" means the final advance of Loan proceeds to a Borrower for
construction of a Project in accordance with the applicable provisions of this
Agreement.
"Final Completion" means that the requirements of Section 5.5 have been
fully satisfied for a Project.
"Final CO" means a final unconditional certificate of occupancy for a
Project issued by the applicable Governmental Authority.
"Force Majeure" means, with respect to any Project, an event entitling a
Contractor to an extension of time in constructing the Improvements as
established in the Construction Contract and any act of God, war, riots,
unusually severe weather, shortages of labor or materials (but not a shortage of
funds), strikes, lock-outs, explosions, the order of any court or governmental
authority or unavailability of or delay in issuance of any Permits despite a
Borrower's reasonable diligence in securing same, which results in any delay in
whole or in part in the design, engineering or construction of a Project, or the
duration of any inspection, testing, or remediation related to any environmental
condition or aspect of a Project.
"Funding Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Future Project" has the meaning set forth in Recital D to this Agreement.
"Geographic Area" means the States of Arizona, California, Colorado, Idaho,
Kansas, Missouri, Nevada, New Mexico, Oklahoma, Oregon, Texas, Utah and
Washington.
"Governmental Authority" means any Federal, state, county, municipal or
other governmental or quasi-governmental department, commission, board, court,
agency or other instrumentality having jurisdiction over a Borrower and any
Project.
"Governmental Requirement" means any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including, without
limitation, any of the foregoing that relate to environmental standards or
controls, energy regulations and occupational safety and health standards or
controls) of any Governmental Authority.
"Homestead" has the meaning set forth in the Preamble to this Agreement.
"Homestead Common Stock" has the meaning set forth in Recital D to this
Agreement.
6
<PAGE>
"Homestead Affiliate" means (a) an entity that directly or indirectly
controls, is controlled by or is under common control with Homestead or (b) an
entity at least a majority of whose economic interest is owned by Homestead; and
the term "control" means the power to direct the management of such entity
through voting rights, ownership or contractual obligations; provided, however,
in no event shall PTR, Atlantic, SCG or any wholly-owned subsidiary of any of
the foregoing be deemed a Homestead affiliate.
"Homestead Security Documents" means the deeds of trust, deeds to secure
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
C hereto, to be delivered to PTR by Homestead in connection with the funding of
any Project acquired by Homestead after the date of this Agreement, as security
for the Corporate Note, the Partnership Note and any Subsidiary Note executed
and delivered after the date hereof, and any other security instruments
delivered by Homestead from time to time as security for the Corporate Note, the
Partnership Note and any such Subsidiary Note.
"Improvements" means the buildings, structures, and other improvements to
be constructed on the Land as described on the Plans for the subject Project.
"Inspecting A/E" means the inspecting architect or engineer retained by a
Borrower to inspect, monitor and administer the progress of construction of a
Project.
"Land" means the parcel or parcels of land on which a Project is or is to
be located, together with all easements, rights of way and other appurtenances
thereto.
"Lien Waivers" means a waiver of all liens relating to a Project executed
by any and all contractors, subcontractors and/or suppliers of a Borrower who
have provided any goods or services relating to Improvements.
"Loan" means the Corporate Loan, the Partnership Loan, or any Subsidiary
Loan made after the date hereof, as the context may require; and "Loans" means
the Corporate Loan, the Partnership Loan, and any Subsidiary Loans made after
the date hereof, collectively.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
the Completion and Payment Guaranty and any and all other agreements or
instruments now or hereafter executed and delivered by a Borrower, Homestead or
any other person in connection with, or as security for, the payment or
performance of the Notes.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Homestead and its Subsidiaries, taken as a
whole.
"Material Change" means any change to the Plans or to a Project which would
result in a material increase or decrease in the number of lodging units in such
Project from the number
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contained in a Prototypical Project, a material increase or decrease in the
overall cost of completing a Project above the costs contemplated in the
Prototypical Project Budget, or would otherwise result in such Project
materially deviating from the product and/or investment concept of a
Prototypical Project as set forth in the Prototypical Plans.
"Maximum Corporate Loan Amount" has the meaning set forth in Recital A to
this Agreement.
"Maximum Loan Amount" means the aggregate of the Maximum Corporate Loan
Amount and the Maximum Partnership Loan Amount.
"Maximum Partnership Loan Amount" has the meaning set forth in Recital B to
this Agreement.
"Note" means the Corporate Note, the Partnership Note, or any Subsidiary
Note executed and delivered after the date hereof, as the context may require,
and "Notes" means the Corporate Note, the Partnership Note, and any Subsidiary
Notes executed and delivered after the date hereof, collectively.
"Partnership Borrower" has the meaning set forth in the Preamble to this
Agreement.
"Partnership Loan" has the meaning set forth in Recital B to this
Agreement.
"Partnership Note" has the meaning set forth in Recital B to this
Agreement.
"Partnership Security Documents" means the deeds of trust, deeds to secure
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
D hereto, to be delivered to PTR by the Partnership Borrower in connection with
the funding of any Project acquired by the Partnership after the date of this
Agreement, as security for the Partnership Note, the Corporate Note and any
Subsidiary Note executed and delivered after the date hereof, and any other
security instruments delivered by the Partnership Borrower from time to time as
security for the Corporate Note, the Partnership Note and any such Subsidiary
Note.
"Permits" shall mean all permits, licenses, registrations, certificates,
authorizations and approvals now or hereafter issued or required to be issued by
any governmental or quasi-Governmental Authority for the lawful ownership,
construction, use and operation of a Project.
"Personalty" means all items of tangible or intangible personal property
owned by a Borrower, or in which a Borrower has any interest, to the extent of
such interest, that now are or hereafter may be purchased, prepared, constructed
or placed for, upon or in a Project owned by such Borrower.
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"Plans" means the final plans and specifications for the construction of
the Improvements comprising a Project, together with any modifications or
additions to the same subsequently permitted under the terms of this Agreement
or, to the extent required hereunder, approved by PTR in accordance with the
provisions of this Agreement.
"Project" means each Existing Project and each Future Project for which an
Acquisition Notice has been delivered to PTR prior to the Expiration Date.
"Project Budget" means the budget for a Project delivered by a Borrower to
PTR.
"Project Schedule" means the schedule for the design and construction of
the Improvements encompassed within a Project delivered by a Borrower to PTR.
"Property" means any property from time to time subject to any of the
Security Documents, including the Land and all Improvements now or hereafter
located thereon and all Personalty associated therewith.
"Proposed Substitute Future Project" has the meaning set forth in Section
2.7 of this Agreement.
"Prototypical Project Budget" means the due diligence, development
approval, land acquisition, design and construction budget for a Prototypical
Project heretofore delivered to, and approved by, PTR.
"Prototypical Project Schedule" means the due diligence, development
approval, design and construction schedule for a Prototypical Project heretofore
delivered to, and approved by, PTR.
"Prototypical Plans" means the standard plans and specifications for a
Homestead Village extended-stay lodging facility heretofore delivered to, and
approved by, PTR.
"Prototypical Project" means a Homestead Village extended-stay lodging
facility designed and constructed in substantial accordance with the
Prototypical Plans.
"PTR" has the meaning set forth in the Preamble to this Agreement.
"Pursuit Costs" has the meaning set forth in Section 2.3 of this Agreement.
"Quarterly Statement" has the meaning set forth in Section 4.14 of this
Agreement.
"Rejected Project" has the meaning set forth in Section 2.7 of this
Agreement.
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"Security Documents" means the Homestead Security Documents, the Existing
Corporate Security Documents, the Existing Partnership Security Documents, the
Partnership Security Documents, and any Subsidiary Security Documents,
collectively.
"Subcontractor" means all persons performing labor or services, or
providing materials, equipment or furnishings in connection with the
construction of Improvements, other than Contractor.
"Subsidiary" means any entity now or hereafter in existence including the
Partnership Borrower, all of the outstanding equity securities of which are
owned by Homestead.
"Subsidiary Loan" means any portion of the Corporate Loan or Partnership
Loan which Homestead may direct PTR to advance to a Subsidiary instead of to
Homestead or the Partnership Borrower in accordance with the provisions of this
Agreement.
"Subsidiary Note" means any promissory note, substantially in the form of
the Partnership Note, which a Subsidiary executes and delivers to PTR after the
date hereof to evidence a Subsidiary Loan made by PTR to such Subsidiary.
"Subsidiary Security Documents" means the deed of trust or mortgage
instrument to be delivered to PTR by a Subsidiary, substantially in the form of
the Homestead Security Documents, in connection with the funding of any Future
Project owned by Subsidiary as security for the Corporate Note, the Partnership
Note and any Subsidiary Note executed and delivered after the date hereof, and
any other security instruments delivered by such Subsidiary from time to time as
security for the Corporate Note, the Partnership Note and any such Subsidiary
Note.
"Title Insurer" means Chicago Title Insurance Company or any other
nationally recognized title insurance company issuing a Title Policy.
"Title Policy" means the lender's policy of title insurance for a Property
issued by the Title Insurer for the benefit of PTR and all endorsements thereto,
which insures the lien priority of the Security Documents applicable to such
Property.
"UCC" means the Uniform Commercial Code as in force in the state in which a
Project is located.
Section 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) Except as otherwise specified herein, all references herein (i) to any
person or entity shall be deemed to include such person's or entity's heirs,
legal representatives, successors and assigns, as appropriate, (ii) to any
Governmental Requirement defined or referred to herein shall be deemed
references to such Governmental Requirement as the same may have been or
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may be amended or supplemented from time to time and (iii) to any Loan Document
or other agreement defined or referred to herein shall be deemed references to
such Loan Document or agreement (and, in the case of the Notes or other
instruments, any instrument issued in substitution therefor) as the terms
thereof may have been or may be amended, supplemented, waived or otherwise
modified from time to time in writing.
(b) Whenever the context so requires, the neuter gender includes the
masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
ARTICLE 2.
THE LOANS
Section 2.1. THE HOMESTEAD LOAN. Subject to the limitations set forth in
Sections 2.5, 2.6 and 2.7 below, PTR hereby agrees, upon the terms and
conditions set forth herein and in the other applicable Loan Documents, to
advance to Homestead (or, as Homestead may direct, to any Subsidiary) up to the
amount of the Maximum Corporate Loan Amount for the purpose of paying the costs
and expenses incurred by Homestead (or by any such Subsidiary, as the case may
be) in completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of, such of the Future Projects hereafter pursued by Homestead
or any such Subsidiary as may be funded under the provisions of this Agreement.
Principal and accrued interest on the Corporate Note shall be due and payable in
accordance with the terms and conditions set forth therein and herein.
Section 2.2. THE PARTNERSHIP LOAN. Subject to the limitations set forth
in Sections 2.5, 2.6 and 2.7 below, PTR hereby agrees, upon the terms and
conditions set forth herein and in the other applicable Loan Documents, to
advance to the Partnership Borrower (or, as Homestead may direct, to Homestead
or any Subsidiary) up to the amount of the Maximum Partnership Loan Amount for
the purpose of paying the costs and expenses incurred by the Partnership
Borrower (or by Homestead or any such Subsidiary, as the case may be) in
completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of the Future Projects hereafter pursued by Homestead, the
Partnership Borrower or any other Subsidiary as may be funded under the
provisions of this Agreement. Principal and accrued interest on the Partnership
Note shall be due and payable in accordance with the terms and conditions set
forth therein and herein.
Section 2.3. FUTURE PROJECTS. The parties acknowledge and agree that the
Future Projects identified in Exhibit A hereto are in differing stages of
consideration by Homestead and that, at any point in the process of its due
diligence review, the negotiation of definitive
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acquisition and related documents and its efforts to obtain all Permits required
for development of any such Future Project, Homestead may determine, in its sole
and absolute discretion, either to proceed with the acquisition of the land for,
and development of, any such Future Project or to discontinue its efforts in
respect of any such Future Project. Requests for advances of Loan proceeds
hereunder may include amounts required to reimburse Homestead for the costs and
expenses incurred by Homestead in its due diligence review of any such Future
Project, as well as all costs incurred in connection with its efforts to secure
the Permits required for development of any such Future Project. Whenever such
pursuit costs ("Pursuit Costs") are to be funded with Loan proceeds, prior to
the first advance in respect of a Future Project, Homestead will provided PTR
with a notice (a "Funding Notice") identifying the Future Project, together with
a development budget (a "Development Budget") indicating the anticipated costs
that are likely to be incurred prior to the acquisition of such Future Project
by Homestead or a Subsidiary, the amount of such costs to be funded by Loan
proceeds, which amount shall in no event exceed $100,000 per Future Project, and
a schedule setting forth the anticipated time-frames for completing the due
diligence review and obtaining required Permits (a "Development Schedule").
If Homestead elects to proceed with a Future Project, then Homestead shall
provide PTR at least 10 Business Days' prior written notice (an "Acquisition
Notice") of the anticipated closing date for the acquisition of the subject
Land, the identity of the Borrower for such transaction, and the estimated
amount of Loan proceeds that will need to be advanced at such closing. From and
after delivery of an Acquisition Notice to PTR, the subject project shall, for
all purposes under this Agreement, be deemed a "Project". Notwithstanding
anything to the contrary in the foregoing, funding of the first advance of Loan
proceeds in respect of any such Project shall require the recordation of
Security Documents adding such Project as security for the Loan and the
satisfaction of the other conditions set forth in Section 5.2 as to such
Project.
In the event, however, that Homestead determines from time to time that any
Future Project is unacceptable to it and that Homestead will not expend further
efforts with respect to such Future Project, Homestead shall provide written
notice to PTR identifying any such Future Project. In such event, any Pursuit
Costs theretofore funded with Loan proceeds, together with accrued and unpaid
interest thereon due under the terms of the Corporate Note, shall be repaid by
Homestead to PTR within 30 days after delivery of such notice to PTR.
Section 2.4. SUBSIDIARY LOANS. With respect to any Future Project for
which an Acquisition Notice is delivered to PTR in accordance with Section 2.3
above, Homestead shall have the right to determine, in its sole and absolute
discretion, that a Subsidiary acquire the subject Project, in which event, the
subject Subsidiary shall, at such time as it acquires the subject Future
Project, execute and deliver to PTR Subsidiary Security Documents in connection
therewith together with an agreement in form and substance satisfactory to PTR
pursuant to which such Subsidiary agrees to be bound by the terms of this
Agreement as to such Project. In addition, at the election of Homestead, the
subject Subsidiary shall execute a Subsidiary Note in the amount of the Loan
determined by Homestead to be allocable to such Project and the Maximum
Corporate Loan Amount and/or the Maximum Partnership Loan Amount (as
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Homestead may elect) shall be decreased by the amount of any such Subsidiary
Note. Alternatively, Homestead may elect to have funds advanced with respect to
such Project under the Corporate Loan or Partnership Loan and either loan or
contribute, or cause the Partnership Borrower to loan or contribute, the funds
so advanced to the subject Subsidiary. In the event any Subsidiary executes a
Subsidiary Note and/or any Subsidiary Security Documents as contemplated under
this Section 2.4, the parties shall, contemporaneously therewith, execute,
deliver, and, if appropriate, record, such amendments to the Loan Documents as
may reasonably be necessary or appropriate to properly document any resulting
changes in the Maximum Corporate Loan Amount and/or the Maximum Partnership Loan
Amount.
Section 2.5. DURATION OF FUNDING COMMITMENT. The obligation of PTR to
advance Loan proceeds in respect of Future Projects for which an Acquisition
Notice has not yet been delivered to PTR shall expire on March 31, 1998 (the
"Expiration Date"). Notwithstanding anything to the contrary in the foregoing,
PTR shall continue to be obligated, subject to and upon the terms and conditions
set forth herein and in the other Loan Documents, to continue to make advances
of Loan proceeds after such date for each Project for which an Acquisition
Notice has theretofore been delivered to PTR under the terms of this Agreement,
but shall not have any obligation to make further advances in respect of Pursuit
Costs for any Future Project for which only a Funding Notice has been delivered
to PTR. On or before April 30, 1998, Homestead shall repay, or cause to be
repaid, to PTR any advances of Loan proceeds in respect of Pursuit Costs
(together with accrued and unpaid interest thereon) that have not been repaid
pursuant to Section 2.3 hereof as of the Expiration Date.
SECTION 2.6. PROJECT SPECIFIC FUNDING COMMITMENT. PTR's obligation under
this Agreement to make advances of Loan proceeds in respect of a designated
Project shall not exceed the lesser of (i) the actual aggregate hard and soft
costs incurred by the applicable Borrower in connection with the acquisition,
development, design and construction of such Project, or (ii), except as
provided in Section 6.6, the amount allocated to such Project in Exhibit A
hereto, and all costs in respect of a Project in excess of the Loan amount
allocated to such Project shall, except as provided in such Section 6.6, be
funded by Homestead as and when needed. In addition, PTR's obligation to make
advances in respect of a designated Project shall expire on the second
anniversary of the date on which the subject Land was acquired by Homestead or
the applicable Subsidiary. In the event Final Completion of such Project has
not been achieved by such date, PTR shall have no obligation to make any further
advances of Loan proceeds in connection with such Project and all costs required
to complete such Project shall be funded by Homestead as and when required in
order to assure that such Project is completed and placed in operation as soon
as is reasonably practicable. If, however, Final Completion of such Project has
not been achieved by the date which is 30 months after the date of acquisition
of the subject Land, then, at the election of PTR, exercised by delivering
written notice to Homestead, Homestead shall repay, or cause the applicable
Subsidiary to repay, within 30 days after receipt of such notice the amount of
Loan proceeds advanced in respect of such Project
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(together with accrued and unpaid interest on such amount), and upon receipt of
such payment, this Agreement, solely as it relates to such Project, shall
terminate and PTR shall cause to be released the Security Documents recorded or
filed against such Project.
Section 2.7. REPLACEMENT PROJECTS. Homestead agrees that for each Future
Project rejected by Homestead pursuant to Section 2.3 (a "Rejected Project"),
Homestead will propose to PTR in writing a proposed substitute future project (a
"Proposed Substitute Future Project") to take the place of such Rejected
Project. Any such Proposed Substitute Future Project shall be located within
the Geographic Area and, except as specifically noted in writing by Homestead,
shall conform, to Homestead's then current knowledge, to the Prototypical
Project requirements. Homestead may select a Proposed Substitute Future Project
from its then contemplated Homestead Village projects which Homestead is
considering pursuing or, if all such contemplated projects are then already
included within the list of Future Projects under this Agreement, then Homestead
may delay in identifying a Proposed Substitute Future Project until, in the
ordinary course of its business, a new site for a contemplated Homestead Village
project is identified within the Geographic Area. Homestead shall not, however,
be obligated to identify a new potential Homestead Village site solely for the
purposes of presenting to PTR a Proposed Substitute Future Project.
PTR shall have a period of 20 Business Days after receipt of any such
Proposed Substitute Project to approve or reject, in its sole and absolute
discretion, any such proposal, and failure of PTR to provide Homestead with
written notice within such 20-Business Day period shall be deemed a rejection by
PTR of the subject Proposed Substitute Future Project. If PTR timely approves a
Proposed Substitute Future Project, then such project shall be substituted in
the place and stead of the Rejected Project in Exhibit A hereto, and shall for
all purposes under this Agreement thereafter be deemed a Future Project. The
maximum amount of Loan proceeds that will be available to fund such Future
Project (if Homestead thereafter delivers an Acquisition Notice for such
Project) shall be equal to the Loan amount originally allocated to the
applicable Rejected Project in Exhibit A.
In the event that any Proposed Substitute Future Project is rejected or
deemed rejected by PTR, Homestead shall be free to pursue the Proposed
Substitute Future Project on its own. For each Rejected Project, Homestead
shall be required (subject to the limitations set forth above) to propose to PTR
up to a maximum of three (3) Proposed Substitute Future Projects. If PTR
rejects all three (3) Proposed Substitute Future Projects submitted by Homestead
in respect of a particular Rejected Project, then the Maximum Loan Amount, and
PTR's funding commitment hereunder, shall be reduced by the amount allocated to
the Rejected Project in Exhibit A hereto. The obligation of Homestead to
propose to PTR Proposed Substitute Future Projects shall in any event terminate
on the Expiration Date.
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Section 2.8. RELEASE OF SECURITY DOCUMENTS. The parties acknowledge and
agree that the Notes are convertible, in whole or in part, into shares of
Homestead Common Stock up to the maximum amount of the unpaid principal amount
of such Notes outstanding from time to time and otherwise pursuant and subject
to the terms and conditions of such Notes. Any such conversion shall reduce the
amount of the debt evidenced by the Notes and secured by the Security Documents
by the amount determined in accordance with the conversion provisions of the
Notes. In connection with any partial conversion of the Notes, Homestead may
request that, in lieu of or in addition to reducing the amount secured by the
Security Documents, PTR release any one or more of the Projects then subject to
the Security Documents and having a value equivalent to or less than the amount
of the debt reduction resulting from such conversion. The release of any
Projects from the lien of the Security Documents shall, however, be subject to
the approval of PTR, which approval shall not to be unreasonably withheld or
delayed.
At such time as all amounts owing to PTR under or in respect of any of the
Loan Documents have been paid in accordance with the provisions of the Loan
Documents or if not paid then, to the extent permitted under the Notes,
converted into Homestead Common Stock, and when PTR has no further obligation to
make any advance, disbursement or payment of any kind or to extend credit under
or with respect to any of the Loan Documents, then this Agreement shall
terminate and upon receipt of demand therefor from Homestead, PTR shall execute
and deliver to Homestead appropriate instruments of release or reconveyance of
any Security Documents then in effect.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
To induce PTR to enter into this Agreement, Homestead and each Borrower
represents and warrants to PTR (each representation and warranty herein being
given as of the date of this Agreement and deemed repeated and reaffirmed on the
date of each advance of funds by PTR) as follows:
Section 3.1. EXISTENCE AND POWER. Homestead and each Borrower is duly
organized, validly existing and in good standing under the laws of the State of
its organization and to the extent required is qualified to do business in and
is in good standing in each jurisdiction in which it owns property; has full
power and authority to own its assets, to conduct the activities in which it is
engaged, and to own and develop each Project which it owns.
Section 3.2. AUTHORIZATION AND BINDING OBLIGATIONS. The borrowing
evidenced by the Notes and the execution, delivery and performance of this
Agreement and all other Loan Documents by Homestead and each Borrower (i) are
within the power of the subject entity and
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(ii) have been duly authorized. Each of the Loan Documents executed by
Homestead and/or any Borrower, when executed and delivered, will constitute the
legal, valid and binding obligations of such entity and are enforceable against
such entity in accordance with its respective terms, subject to bankruptcy and
insolvency laws, equitable principles, and laws affecting creditors rights
generally.
Section 3.3. NO LEGAL BAR OR RESULTANT LIEN. None of the (i) execution
and delivery of, (ii) fulfillment of the terms and conditions of, or (iii) the
consummation of the transactions contemplated by the Loan Documents to which
Homestead and/or any Borrower is a party (a) violate any provisions of the
articles or certificate of incorporation, bylaws or partnership agreement of
such entity, (b) violate or constitute a default under any contract, agreement
or instrument, or any law, ordinance, rule or regulation of any Governmental
Authority, to which such entity is subject, (c) to such entity's knowledge,
violate or constitute a default under any Governmental Requirement so as to
create a Material Adverse Effect or (d) to such entity's knowledge, result in
the creation or imposition of any lien upon any property of such entity, other
than those permitted by this Agreement.
Section 3.4. NO CONSENT. The execution, delivery and performance of the
Loan Documents to which Homestead and/or each Borrower is a party does not
require the consent or approval of any other person, including, without
limitation, any financial institution or other creditor of such entity, any
trustee, conservator, receiver or administrator, or any regulatory authority or
governmental body of the United States of America or any state thereof or any
Governmental Authority.
Section 3.5. COMPLIANCE WITH LAWS. All Plans, Projects, Properties,
Improvements and their intended use presently comply, and throughout the term of
this Agreement will continue to comply, in all material respects with all
Governmental Requirements and all public and private restrictions or other
agreements affecting each such Property, including, without limitation, building
codes, special use permits, zoning codes, Environmental Laws, applicable
requirements of fire underwriters, restrictive covenants, easements and other
agreements affecting the Property. All Permits currently required by
Governmental Requirements to be obtained for the Projects now subject to this
Agreement have been obtained, and neither Homestead nor any Borrower has any
reason to believe that any Permits that subsequently may be required to enable
it to construct, occupy, operate, use or sell any of the Property will not be
obtained in due course.
Section 3.6. LITIGATION. Except as disclosed to PTR in writing, at the
date of this Agreement there is no litigation, legal, administrative, or
arbitral proceeding, investigation or other action of any nature pending or, to
the knowledge of Homestead or any Borrower, threatened against or affecting any
Borrower or Homestead that involves the possibility of any judgment or liability
(not fully covered by insurance) that would have a Material Adverse Effect.
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Section 3.7. DEFAULTS. To the knowledge of Homestead and each Borrower,
neither Homestead nor any Borrower is in default, and no event or circumstance
has occurred that, but for the passage of time or the giving of notice, or both,
would constitute a default, in any respect under any agreement of instrument
that may have a Material Adverse Effect. No Event Default has occurred
hereunder.
Section 3.8. STATUS OF PROPERTY. The Borrower delivering any Security
Documents to PTR is the fee simple owner of the subject Property free and clear
of all restrictions, covenants, easements, liens and encumbrances, including,
without limitation, mechanics', materialmen's and suppliers' liens (except liens
securing PTR and matters reflected in the Title Policy). To Homestead and each
Borrower's knowledge: each Property is a legal lot under applicable laws,
statutes, ordinances and regulations of the governing jurisdiction; each
Property is carried, or is in the process of being changed so as to be carried,
on the tax rolls of the governing jurisdiction as a separate, subdivided parcel;
each Property has, or will have upon completion of construction, full access to
the public highways and to the services of all utilities, including water, storm
sewer, sanitary sewer, electricity and telephone, required to serve the intended
use of the Property; each Property under construction or completed is zoned
under applicable zoning laws and ordinances so as to permit the construction and
development of the Project planned for such Property and the use and occupancy
of the Property as contemplated under this Agreement; and each Property under
construction or completed currently complies in all material respects with such
laws and ordinances and with all private restrictions applicable thereto and any
special use permit, variance, exception, or other special zoning authorization
applicable thereto; each Property currently complies in all material respects
with all Governmental Requirements applicable thereto. To Borrower's knowledge,
the liens of the Security Documents executed by it are valid liens covering the
subject Properties.
Section 3.9. USE OF PROCEEDS. None of the proceeds of the Loans has been
or shall be used to purchase or carry, or to reduce or retire or refinance any
credit incurred to purchase or carry, any margin stock (within the meaning of
Regulations G and U of the Board of Governors of the Federal Reserve System) or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.
Section 3.10. REAL PROPERTY ENVIRONMENTAL MATTERS. To the actual
knowledge of Homestead and each Borrower, except as disclosed in the
environmental audits prepared for Homestead and/or any such Borrower and
delivered to PTR, no hazardous substances or solid waste are located at or on or
have been disposed of or otherwise released on or to any of the Properties in
violation of any Environmental Laws.
Section 3.11. FINANCIAL CONDITION. All financial statements delivered to
PTR concerning Homestead and each Borrower fairly and accurately present the
financial condition of such entities as of the date of such statements and have
been prepared in accordance with
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generally accepted accounting principles applied on a consistent basis, and
there are no contingent liabilities not disclosed thereby which would have a
Material Adverse Effect. Since the close of the period covered by the latest
financial statements delivered to PTR with respect to Homestead's and each
Borrower's assets, liabilities, or financial condition, no event has occurred
(including, without limitation, any litigation or administrative proceedings)
and no change in such entities' financial condition exists or, to the knowledge
of Homestead or any Borrower, is threatened, which (i) materially adversely
affects a Borrower's ability to perform its obligations under the Loan
Documents, (ii) constitutes or which after notice or lapse of time, or both,
would constitute a Default hereunder, or (iii) materially adversely affects the
validity or priority of the lien of the Security Documents on any Borrower's
Property or the financial condition of Homestead or any Borrower.
Section 3.12. NO CONDEMNATION. No taking of any Property or any material
part thereof, through eminent domain, conveyance in lieu thereof, condemnation
or similar proceeding is pending or, to the best of Homestead's and each
Borrower's knowledge, threatened by any governmental agency.
Section 3.13. NO ACTIONS. There is no action, proceeding or investigation
pending or, to the best of Homestead's and each Borrower's knowledge, threatened
(or any basis therefor) which questions, directly or indirectly, the validity of
this Agreement, the Notes, the Security Documents, or any other Loan Document or
any action taken or to be taken pursuant hereto or thereto.
Section 3.14. NO ADVERSE CONDITIONS. To the best of Homestead's and each
Borrower's knowledge, there are no existing, pending or threatened events which
could materially adversely affect any of the Properties or the operation
thereof.
ARTICLE 4.
COVENANTS
Each Borrower will, at all times, comply with the covenants contained in
this Article 4 from the date hereof and for so long as any part of the Loans is
outstanding.
Section 4.1. CONSTRUCTION OF IMPROVEMENTS. Each Borrower will proceed
with the design, engineering and construction of its Improvements with
reasonable diligence and continuity and will endeavor in good faith to complete
the design, engineering and construction of its Improvements substantially in
accordance with the applicable Project Schedule, subject to Force Majeure, and
substantially in accordance with the Plans for such Improvement and applicable
Governmental Requirements.
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Section 4.2. PLANS; PROJECT BUDGETS; PROJECT SCHEDULES AND MATERIAL
CHANGES. Prior to the date hereof, Homestead has delivered to PTR and PTR has
approved Homestead's Prototypical Plans, Prototypical Project Budget and
Prototypical Project Schedule. So long as the Plans and Project Budget
(including the Development Budget which is a part of the overall Project Budget)
for a given Project do not contain any Material Change and the Project Schedule
does not deviate in any material respect from the Prototypical Schedule, no
further approval by PTR of the Plans, Project Schedule or Project Budget for a
Project shall be required. Borrower shall not, however, make any Material
Change in the Plans for any of its Projects or construct any Improvements which
are not substantially in accordance with the Prototypical Plans or make any
change to any Plans or install any material or equipment which would constitute
a Material Change, without Homestead's obtaining in each instance PTR's prior
written consent, which consent shall not be unreasonably withheld or delayed.
Homestead shall promptly notify PTR in writing of any Material Change desired by
a Borrower, which notice shall be accompanied by such plans or other information
as may reasonably be necessary for PTR to evaluate the proposed Material Change.
PTR shall deliver written notice to Homestead within 10 Business Days after
receipt of the requested Material Change stating whether such Material Change
has been approved or disapproved by PTR.
Section 4.3. INSPECTION AND EXAMINATION. Borrower will permit
representatives and agents of PTR to enter each Property owned by such Borrower
at all reasonable times to inspect the progress of the construction of the
subject Improvements and all materials to be used therein and to examine all
detailed plans and shop drawings which are or may be kept at the construction
site, and such Borrower will use reasonable efforts to cause the Contractor and
all Subcontractors to cooperate with PTR or its representatives in such
inspections or examinations. Homestead and each other Borrower shall also
permit representatives and agents of PTR to examine their respective books,
records and accounting data applicable to the Loans and the subject Projects
(and to make extracts therefrom or copies thereof) and, to the extent Homestead
or such Borrower has such right, all Contractor's and Subcontractors' books,
records and accounting data applicable to the subject Project.
Section 4.4. PERMITS AND APPROVALS. Borrower will comply in all material
respects with, and keep in full force and effect, all Permits necessary for
ownership, development and operation of the Projects owned or operated by it.
Section 4.5. GOVERNMENTAL REQUIREMENTS. Borrower will cause all
Governmental Requirements and all restrictive covenants affecting its Projects
to be complied with in all material respects (except matters contested in good
faith by appropriate proceedings).
Section 4.6. BOOKS AND RECORDS. Borrower will implement and maintain
payment and accounting systems which will assure accurate and complete records
of all amounts owed and paid in connection with the completion of each Project.
Borrower shall require each Contractor
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and each Subcontractor having a subcontract in excess of $100,000 to deliver
lien waivers or releases as a condition to receiving payments. Contractor lien
waivers shall cover the amount paid to the Contractor under its application for
payment for the month or other payment period just ending; Subcontractor lien
waivers shall cover the amount paid to such Subcontractor pursuant to the
Contractor's application for payment for the immediately preceding month or
other payment period.
Section 4.7. TITLE TO PROPERTY AND IMPROVEMENTS. Neither the legal or
beneficial title and ownership of a Borrower in the Property(ies) and
Improvements or any portion thereof owned by it will be conveyed, pledged or
encumbered in any way other than to Homestead or a Homestead Affiliate without
the consent of PTR, which may be granted or denied in PTR's sole and absolute
discretion. Borrower will promptly pay and discharge prior to the date when any
interest or penalties shall accrue thereon, all taxes, levies, charges,
impositions, water and sewer rents, and assessments of every kind or nature,
whether foreseen or unforeseen and whether general or special, which are now or
shall hereafter be charged or assessed against the Property(ies) or the
Improvements owned by it, or any part thereof, or which may become a lien
thereon (except matters contested in good faith by appropriate proceedings and
for which adequate reserves have been provided).
Section 4.8. COSTS AND EXPENSES. Borrower shall pay any out-of-pocket
expenses reasonably incurred by PTR in the enforcement or collection of the
Loans, including without limitation, attorneys' fees and expenses, records
searches, documentary stamps, transfer taxes and recording taxes and court
costs.
Section 4.9. USE OF ADVANCES. Borrower shall not apply any advances of
Loan proceeds to costs other than those incurred in connection with the subject
Future Project or Project for which the advance has been made. Borrower shall
not apply such advances to the cost of acquiring any additional real property
other than a Project. Borrower shall not receive or apply advances of Loan
proceeds except to the purposes for which such proceeds have been advanced by
PTR, and in accordance with the provisions of the Loan Documents generally.
Section 4.10. INSURANCE. Borrower shall keep in full force and effect at
all times the policies of insurance applicable to the Property owned by it and
required by the Security Documents, and Borrower shall provide PTR with evidence
of such insurance upon receipt or request therefor.
Section 4.11. ENVIRONMENTAL MATTERS. Borrower shall not, by any act or
omission, cause or permit any hazardous substances, solid wastes or other
pollutants to exist on or about any Project in violation of Environmental Laws.
In the event of a breach of the foregoing provision, Homestead and the subject
Borrower shall remove the same (or if removal is prohibited by law, take
whatever action is required by law) promptly upon discovery at
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Homestead's and such Borrower's sole expense. Homestead will promptly notify
PTR in writing of any existing, pending or threatened action, investigation or
inquiry by any Governmental Authority of which it has knowledge relating to any
Property in connection with any Environmental Laws.
Section 4.12. SELECTION OF ARCHITECTS; CONTRACTORS; INSPECTING A/E'S.
Prior to the date hereof, Homestead has delivered to PTR and PTR has approved, a
list of potential Contractors, Architects, Consultants and Inspecting A/E's that
Homestead, or any of its Subsidiaries, has or may retain in connection with any
Project funded, or to be funded, under this Agreement. Homestead may, from time
to time, subject to the prior written approval of PTR, add Contractor,
Architect, Consultant and Inspecting A/E names to such list. So long as any
Contractor, Architect, Consultant and Inspecting A/E retained by Homestead or a
Subsidiary in connection with a Project is on such pre-approved list, no further
approval of such hiring by PTR shall be required. If Homestead or any
Subsidiary desires to retain a Contractor, Architect, Consultant or Inspecting
A/E not on the current pre-approved list, then prior to retaining such
individual or entity, Homestead shall be required to obtain the prior written
approval of PTR, such approval not to be unreasonably withheld or delayed, and
such approval shall be deemed given if PTR does not deliver written notice of
objection to Homestead within 10 Business Days after receipt by PTR of a request
for approval from Homestead.
Section 4.13. FURTHER ASSURANCES. Homestead and each Borrower shall
execute such further documents, agreements and instruments, and take all other
actions, as may reasonably be necessary to carry out the purposes of the Loan
Documents or to protect and enforce the validity and priority of the Security
Documents.
Section 4.14. QUARTERLY STATEMENTS. Within 20 Business Days after the
expiration of each calendar quarter, Homestead shall deliver to PTR a written
summary (each, a "Quarterly Statement") containing a status report for each
Future Project or Project then being funded pursuant to this Agreement,
indicating whether and to what extent each such Future Project or Project is
proceeding substantially on schedule and on budget or, if not, the amount of any
overrun and/or schedule slippage and setting forth in reasonable detail any
efforts being undertaken to remedy any noted material problems. Each Quarterly
Statement shall also include any pertinent information in respect of Future
Projects and the anticipated timing of when any such Future Projects may be
acquired and construction commenced and such other information as Homestead may
deem appropriate, or PTR may reasonably request, to keep PTR reasonably apprised
of the status of the Future Projects.
Section 4.15. CONTINUED EXISTENCE. Homestead and each Borrower shall at
all times preserve and keep in full force and effect its existence and rights
and franchises material to its business and rights and franchises material to
its business and properties.
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Section 4.16. DEFAULTS UNDER OTHER LOANS. Borrower shall notify PTR in
writing within fifteen (15) days following Borrower's receipt of notice of a
default under any document or instrument governing, evidencing, securing, or
otherwise relating to any loan (other than the Loan) made to Borrower.
ARTICLE 5.
ADVANCE CONDITIONS
Section 5.1. CONDITIONS PRECEDENT TO FIRST ADVANCE UNDER THIS AGREEMENT.
PTR shall not be obligated to advance funds pursuant to this Agreement until
each of the following conditions is fulfilled:
(a) Receipt by PTR of each of the following:
(i) a fully executed copy of this Agreement;
(ii) duly executed copies of each of the Notes from any Subsidiaries
owning Projects for which a Funding Notice or Acquisition
Notice has been delivered to PTR and Security Documents for any
Land then owned or to be acquired with such initial funding by
Homestead or any Subsidiary for which the subject Project is to
be financed with Loan proceeds, the Completion and Payment
Guaranty and all other Loan Documents PTR may reasonably
require to be executed and delivered in connection with the
first advance hereunder;
(iii) Title Policies for all Properties then subject to Security
Documents or to be made subject to Security Documents
contemporaneously with the first advance of Loan proceeds (or
an irrevocable commitment to issue each such Title Policy),
effective as of the date of the Notes, in form and substance
satisfactory to PTR in its reasonable judgment, confirming the
first priority status and validity of the lien of the Security
Documents on the Property to secure the obligations under the
Notes, the Security Documents and the other Loan Documents;
(iv) for each Project then subject to this Agreement, a survey of
the subject Land, and a geotechnical report and environmental
audit, satisfactory to PTR, in its reasonable judgment;
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(v) opinions of counsel reasonably satisfactory to PTR addressing
the following matters:
(A) each Borrower then executing and delivering any Loan
Documents is duly organized and validly existing, and in
good standing and authorized to do business in each state
in which it owns a Project, with power and authority to
own its Projects and to perform its obligations under the
Loan Documents to which it is a party and to carry on its
business as it is now being conducted;
(B) the execution, delivery and performance of the Loan
Documents delivered by each such Borrower have been duly
and validly authorized by all necessary action of such
Borrower; and
(C) the Loan Documents executed by each such Borrower
constitute valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their
respective terms, except as such enforcement may be
limited by applicable bankruptcy laws and other customary
exceptions;
(vi) for each Project then under construction or completed,
certificates of insurance confirming the existence of all
insurance required by Section 4.9 hereof;
(vii) Copies of the Plans, Project Budget and Project Schedule for
each Project then under construction or then being added to
this Agreement; and
(viii) Certification from Homestead that any Property(ies) then being
added to this Agreement either contain no Material Changes or
any Material Changes have previously been approved by PTR.
(b) The Title Insurer shall have been paid all title insurance premiums,
filing fees, recording fees and taxes required for proper recording of the
Security Documents to be recorded at such time and any other Loan Document to be
filed or recorded at such time.
(c) There shall not have occurred and be continuing any Default.
(d) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising any Property then subject to any of the Security
Documents.
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(e) Neither Homestead nor any Borrower shall be the subject of any
bankruptcy or similar proceeding.
(f) There shall not have occurred and be continuing beyond any applicable
cure or grace period any default under any of the Prior Loan Documents.
(g) The representations and warranties set forth in Article 3 hereof shall
be true and correct in all material respects with respect to each Project then
subject to the Security Documents.
Section 5.2. CONDITIONS PRECEDENT TO FIRST ADVANCE FOR NEW PROJECT. PTR
shall not be obligated to advance funds in respect of a new Future Project for
which Pursuit Costs are to be funded or for any Project to be acquired by
Homestead or any Subsidiary until each of the following conditions is fulfilled:
(a) The conditions precedent set forth in Section 5.1 shall remain
satisfied.
(b) Receipt by PTR of each of the following for each Future Project for
which Pursuit Costs are to be funded:
(i) a Funding Notice for the subject Future Project;
(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Future
Project whereby such Subsidiary agrees to be bound by the terms
of this Agreement with respect to the subject Future Project;
and
(iii) a Development Budget and Development Schedule for the subject
Future Project.
(c) Receipt by PTR of each of the following for each Project:
(i) an Acquisition Notice for the subject Project;
(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Project
whereby such Subsidiary agrees to be bound by the terms of this
Agreement with respect to the subject Project;
(iii) duly executed copies of any Homestead Security Documents,
Partnership Security Documents or Subsidiary Security
Documents, any Subsidiary
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Note, and any other Loan Documents which PTR may reasonably
require to be executed and delivered in connection with such
Project;
(iv) an opinion of counsel addressing, as to the subject Borrower
and the Loan Documents then being executed by such Borrower,
the matters set forth in Section 5.1(a)(viii) above;
(v) the Title Policy for the subject Property (or irrevocable
commitment to issue such Title Policy), effective as of the
date of the first advance in respect of such Project, in form
and substance satisfactory to PTR in its reasonable judgment,
confirming the first priority status and validity of the lien
of the Security Documents on the Property to secure the
obligations under the Notes, the Security Documents and the
other Loan Documents;
(vi) a survey of the subject Land, and a soils report, geotechnical
report and environmental audit of the Land, satisfactory to
PTR, in its reasonable judgment; and
(vii) Copies of the Plans, Project Budget and Project Schedule for
the subject Project.
(d) With respect to each Project, the Title Insurer shall have been paid
all title insurance premiums, filing fees, recording fees and taxes required for
proper recording of the Security Documents to be recorded at such time and any
other Loan Document to be filed or recorded at such time.
(e) There shall not have occurred and be continuing any Default.
(f) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising the Property.
(g) The Completion and Payment Guaranty shall be in full force and effect.
Section 5.3. INITIAL IMPROVEMENT ADVANCE CONDITIONS. PTR's initial
obligation to advance any of the Loan proceeds to a Borrower for construction of
Improvements is conditioned upon the conditions precedent set forth in Sections
5.1 and 5.2 remaining satisfied and, if requested by PTR, receipt of the
following:
(a) Evidence of the issuance of all Permits required by any Governmental
Authority as a condition to the commencement of construction of the subject
Improvements.
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(b) A copy of the Construction Contract, Architect's Agreement and any
Consultants' Agreements for the subject Project.
(c) Certificates of insurance and other certificates or information in
form and substance reasonably satisfactory to PTR confirming the existence of
all insurance required by Section 4.9 hereof.
(d) An executed Contractor's Certificate, Architect's Certificate and
Consultants' Certificates from the Contractor, Architect and Consultants
performing services to the subject Project.
(e) Such further financing statements and security agreements, executed
and acknowledged by the subject Borrower, relating to construction materials for
the subject Project as PTR may reasonably require.
(f) Evidence of the availability of utilities and access to and from the
subject Project sufficient for its intended use.
Section 5.4. ADDITIONAL IMPROVEMENT ADVANCE CONDITIONS. After the initial
advance, additional advances made for the purpose of constructing any subject
Improvements shall be subject to the following conditions:
(a) The conditions precedent set forth in Sections 5.1, 5.2 and 5.3 shall
remain satisfied.
(b) All Permits required under Governmental Requirements for construction
of the subject Improvements shall be legally valid and in force and effect.
(c) The subject Property and Improvements shall not have suffered any
damage or deterioration without provision for arrangements satisfactory to PTR
for the restoration and replacement of the damage or deterioration to such
Property or Improvements.
Section 5.5. FINAL-ADVANCE CONDITIONS. PTR's obligation to advance any of
the Loan proceeds to a Borrower for the Final Advance for the Improvements
comprising a Project is conditioned upon the following and, if requested by PTR,
receipt by PTR of evidence reasonably satisfactory to PTR that such conditions
have been satisfied:
(a) The completion of all Improvements in substantial accordance with the
Plans.
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(b) Receipt by the Borrower of all Final CO's issued by the appropriate
Governmental Authorities for the Improvements and all other Permits necessary
for use of the subject Improvements and Property.
(c) The Inspecting A/E for the Project shall have executed a certificate
of final completion with respect to all of the Improvements required under the
applicable Construction Contract.
(d) The Contractor, all Subcontractors and other parties (including
Architects and Consultants, if applicable) who performed work for the subject
Project have been paid (or with the application of the final advance of Loan
proceeds for such Project, will have been paid) in full, except for amounts
which the Borrower in good faith disputes and/or amounts which Homestead and/or
the subject Borrower intends to pay with its own funds provided any liens filed
against the Project have been released or bonded over.
(e) Receipt by Borrower of an as-built survey showing the location of all
Improvements, including parking areas, streets and the location of all utilities
and other easements, encroachments and building set back lines, if any, together
with delivery to PTR of an endorsement to the Title Policy removing any
exception for matters of survey.
(f) All remaining punchlist items have been completed by the Contractor
and approved by the Borrower.
(g) All conditions precedent to the "Final Payment" required under the
Construction Contract shall have been satisfied.
(h) The Project is otherwise ready for immediate occupancy by guests.
ARTICLE 6.
PROCEDURE FOR ADVANCES; RESERVES
Section 6.1. GENERAL. PTR will disburse the proceeds of the Loans on a
monthly basis for the cost categories set forth in the applicable Development
Budgets and Project Budgets. Homestead shall submit a written request for
advance in a form approved by PTR by the 25th day of each month and, provided
PTR determines that all conditions precedent to the advance have been satisfied,
disbursements will be made by the 1st day of the immediately following month.
Each request for advance shall set forth, on a Project-by-Project basis,
Homestead's reasonable estimate of the hard and soft costs and expenses incurred
during the month just ending and for which reimbursement is being sought. With
each request for advance after the
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first, Homestead shall also provide a reconciliation indicating the amount by
which the immediately preceding advance made by PTR exceeded the actual hard and
soft costs for the period covered by such advance and the amount by which the
request for advance for the month just ending has been adjusted on account of
any over- or underpayment by PTR for the preceding month. With respect to the
final advance of Loan proceeds in respect of a Project, if the final
reconciliation submitted in the month following such advance reflects that Loan
proceeds in excess of actual costs were advanced, such overpayment (together
with accrued and unpaid interest thereon) shall be repaid by Borrower to PTR
within 15 days after such reconciliation is delivered to PTR. Any additional
Loan proceeds owing to Borrower on the basis of such final reconciliation shall
be advanced by PTR with the balance of the monthly advance made by PTR under
this Section 6.1.
All disbursements with respect to any request for an advance submitted
other than on the 25th day of a month will be made within ten (10) business days
after the later of (i) receipt by PTR of a written request for an advance from
Homestead in a form approved by PTR and (ii) PTR's determination that all
conditions precedent to the advance have been satisfied.
All disbursements shall be made in accordance with any instructions
contained in the Homestead request for advance.
Section 6.2. PAYMENTS TO PTR. Notwithstanding any other provisions of this
Agreement, PTR may, at it's option and without notice or authorization by
Homestead or any Borrower, use any Loan proceeds to pay, as and when due, any
interest on the Loans. The parties acknowledge that the Loans provide for
interest reserves in amounts sufficient to pay all interest due and payable in
respect of each Project through completion of same, and Homestead and each
Borrower specifically authorizes PTR to advance portions of such interest
reserves to pay interest on the Loans as and when the same comes due.
Section 6.3. RETAINAGE AND CONTRACTOR'S FEE HOLDBACK. The parties
acknowledge that PTR shall retain, and Homestead shall not request disbursement,
of any retainages provided for under any Construction Contract, which amounts
shall be retained by PTR to secure full and complete performance of all
construction obligations hereunder (hereinafter, the "Retainage Holdback").
Provided no Default exists hereunder, PTR shall disburse the Retainage Holdback
in accordance with the provisions of the applicable Construction Contract as
requested by Homestead in its requests for advances. Upon the occurrence of a
Default hereunder, PTR shall have no obligation to make further disbursements
from the Retainage Holdback, and no Borrower shall be entitled to any such
disbursements, until such Default is cured. Upon the occurrence of an Event of
Default hereunder, PTR may apply the Retainage Holdback against any of the
obligations secured by the Security Documents as PTR sees fit or, in PTR's
discretion, to the completion of any incomplete Improvements. Subject to the
foregoing terms
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and provisions, to the extent not theretofore disbursed, PTR will disburse the
amounts in the Retainage Holdback in respect of a Project concurrently with the
Final Advance for such Project.
Section 6.4. INTEREST RESERVE. PTR shall, on the date hereof, withhold
from the proceeds of the Loans available for distribution the amount of Seven
Million, Nine Hundred Five Thousand, Four Hundred Sixty-Six Dollars ($7,905,466)
(the "Interest Reserve"). Provided no Default exists hereunder, the Interest
Reserve shall be disbursed for the payment of interest on the Loans as such
interest becomes due and payable. Upon the occurrence of a Default hereunder,
PTR shall have no obligation to make further disbursements from the Interest
Reserve, and no Borrower shall be entitled to any such disbursements, until such
Default is cured. Should interest payable on the Loans exceed the amount of the
Interest Reserve, the Borrowers shall promptly pay such amounts. Upon the
occurrence of an Event of Default, PTR may apply any undisbursed portion of the
foregoing reserve against any of the obligations secured by the Security
Documents as it sees fit or, at PTR's discretion, to the completion of and
incomplete Improvements.
Section 6.5. OWNER'S CONTINGENCY. The parties acknowledge that each
Project Budget shall contain an owner's contingency (an "Owner's Contingency")
equal to no less than 2% of Project hard and soft costs contained within the
Project Budget. Provided no Default exists hereunder, the Owner's Contingency
for a Project shall be disbursed by PTR to the subject Borrower to cover
unanticipated Project costs, costs associated with change orders and hard and
soft cost overruns (before such Borrower or Homestead, as guarantor under the
Completion and Payment Guaranty, shall be required to cover such additional
costs pursuant to the provisions of Section 6.6 hereinbelow or the Completion
and Payment Guaranty) as and when such payments are due and payable. Requests
for disbursement of portions of the Owner's Contingency shall be made with
Homestead's monthly requests for advance of Loan proceeds. Upon the occurrence
of a Default hereunder, PTR shall have no obligation to advance any portion of
the Owner's Contingency until such Default is cured. Upon the occurrence of an
Event of Default, PTR may apply the Owner's Contingency against any of the
obligations secured by the Security Documents as PTR sees fit, or at PTR's
option, to the completion of any incomplete Improvements.
Section 6.6. COST OVERRUNS AND SAVINGS; CHANGE ORDER RESERVE. In the
event that the costs to acquire and complete any Project in its entirety,
including, without limitation, the furnishing thereof, exceed the amount of Loan
proceeds available for the subject Project (including the applicable Owner's
Contingency), then the subject Borrower shall with its own funds pay all costs
and expenses which may be required to complete the subject Project as and when
such costs and expenses become due and payable. In the event the costs to
acquire and complete any Project are less than the amount of Loan proceeds
allocated to the subject Project, then the unapplied portion of the Loan
proceeds (including any unexpended portion of the applicable Owner's Contingency
and amounts required to be refunded by Borrower under
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Section 6.1 for any overpayments of Loan proceeds made in the final advance for
a Project) shall be retained by PTR as a reserve for Change Orders on other
Projects which are made in accordance with the requirements of this Agreement
(the "Change Order Reserve"). Provided no Default exists hereunder, the Change
Order Reserve shall be disbursed by PTR to any Borrower from time to time to
cover the costs of Change Orders to the extent any such Change Order results in
Project costs exceeding the Project Budget, including the Owner's Contingency,
for such Project (before such Borrower or Homestead, as guarantor under the
Completion and Payment Guaranty, shall be required to cover such additional
costs pursuant to the provisions of this Section 6.6 or the Completion and
Payment Guaranty). Requests for disbursement of portions of the Change Order
Reserve shall be made with Homestead's monthly requests for advance of Loan
proceeds. Upon the occurrence of a Default hereunder, PTR shall have no
obligation to advance any portion of the Change Order Reserve until such Default
is cured. Upon the occurrence of an Event of Default, PTR may apply the Change
Order Reserve against any of the obligations secured by the Security Documents
as PTR sees fit or, at PTR's option, to the completion of any incomplete
Improvements.
ARTICLE 7.
EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
Event of Default under this Agreement:
Section 7.1. FAILURE TO PAY. The failure by a Borrower to pay when due
any sums required to be paid under the Notes, the Security Documents, this
Agreement or any other Loan Documents, and such failure is not cured within 10
days after receipt of written notice from PTR.
Section 7.2. OTHER LOAN DOCUMENT DEFAULTS. To the extent any such
failure, breach or inaccuracy has, or would have, a Material Adverse Effect, the
failure by a Borrower or Homestead to perform or observe, as and when required,
any covenant, agreement, obligation or condition required to be performed or
observed under this Agreement or under any of the other Loan Documents other
than as set forth elsewhere in this Article 7 (for which no additional grace or
cure period is given by this Section 7.2, or the existence of any breach or
inaccuracy in any of the representations, covenants or warranties set forth in
this Agreement or in any of the other Loan Documents, provided, however, that
(i) no Event of Default shall exist hereunder on account of a breach of any
representation, warranty or covenant set forth in any of the other Loan
Documents (other than this Agreement) until Homestead or such Borrower, as
applicable, shall have failed to cure such breach within any applicable notice
and cure period therein provided; and (ii) no Event of Default shall exist
hereunder on account of a breach of any
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representation, warranty or covenant contained herein unless and until PTR shall
provide written notice of such breach to Homestead or such Borrower and such
entity shall fail to cure the same within 30 days after receipt of such notice,
provided if such breach is of such a nature that it cannot be cured within such
30 day period, it shall not constitute an Event of Default hereunder so long as
Homestead or such Borrower, as applicable, commences its cure of such breach
within such 30 day period and thereafter diligently and continuously proceeds
with the curing of same within a reasonable period of time not to exceed 180
days.
Section 7.3. JUDGMENT OR ATTACHMENT. The entry by any court of a final
judgment in excess of $500,000 against Homestead or a Borrower that is not
satisfactorily stayed or discharged within 30 days from the date thereof, or any
attachment of any of the Properties or any of the proceeds of the Loans that
shall not be released, stayed or otherwise provided for to PTR's satisfaction
within 30 days after the occurrence thereof; provided that in the case of a
stay, Homestead or the subject Borrower, as applicable, shall have reserved for
the full amount thereof.
Section 7.4. VIOLATION OF GOVERNMENTAL REQUIREMENTS. The institution of
any judicial or administrative proceeding alleging that any of the Improvements
violate any Governmental Requirements if such violation gives rise to a Material
Adverse Effect and the failure to have such proceeding dismissed or such
violation corrected within 30 days after the institution thereof, except that
Homestead or the applicable Borrower shall have the right to contest any such
proceeding beyond such 30 day period, provided that PTR is satisfied that the
prosecution of such proceeding will neither have any Material Adverse Effect nor
materially impair PTR's security.
Section 7.5. INSOLVENCY, ETC. The occurrence of any of the following:
(a) Homestead or any Borrower shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors;
(b) Homestead or any Borrower shall commence any case, proceeding or other
action seeking reorganization, arrangement, adjustment, liquidation, dissolution
or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property;
(c) Homestead or any Borrower shall take any corporate action to authorize
any of the actions set forth above in paragraphs (a) or (b); or
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(d) Any case, proceeding or other action against Homestead or any Borrower
shall be commenced seeking to have an order for relief entered against it as
debtor, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding or
other action (i) results in the entry of an order for relief against it which is
not fully stayed within 15 Business Days after the entry thereof or (ii) remains
undismissed for a period of 60 days.
Section 7.6. UNAPPROVED TRANSFER. Any sale, conveyance, transfer,
disposition, alienation, hypothecation, leasing (except in the ordinary course
of business) or further encumbrancing of a Project, or any portion thereof or
any interest therein, by any Borrower, other than any conveyance of a portion of
the unimproved land associated with such Project which is in excess of what is
needed for such Project (which conveyance is permitted), or a sale, conveyance,
transfer, disposition, alienation, hypothecation or encumbrancing of any legal
or equitable interest in a Borrower or Homestead in violation of the Loan
Documents shall be an Event of Default as of the date of such transfer, without
any right to cure. In the case of a permitted conveyance of excess land, as
hereinbefore provided, Lender shall, upon request of Homestead, execute a
partial release, releasing the lien of any Security Documents applicable to such
excess land.
ARTICLE 8.
REMEDIES
Section 8.1. GENERAL. Upon the occurrence of any Event of Default an
defined in Article 7 of this Agreement, PTR, at its option, shall have the
following rights and remedies:
(a) PTR may declare any one or more of the Notes to be immediately due and
payable, whereupon the Notes shall become forthwith due and payable without
presentment, demand, protest or further notice of any kind.
(b) PTR may bring a foreclosure action with respect to the Security
Documents, take possession of any one or more of the Properties or exercise any
other remedy provided for in the Security Documents.
(c) PTR shall be entitled to proceed simultaneously, or selectively and
successively, to enforce its rights and remedies under the Notes, the Security
Documents, the Completion and Payment Guaranty or this Agreement, and to
exercise any or all other rights and remedies available to PTR at law or in
equity.
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(d) In the event PTR shall elect to enforce its rights selectively under
any one or more of the Loan Documents, such action shall not be deemed a waiver
or discharge of any lien or encumbrance securing payment of the Notes until such
time as PTR shall have been paid in full all sums due under the Notes or secured
by the Security Documents, including any sums advanced or disbursed pursuant to
this Agreement. The foreclosure of any lien provided pursuant to this Agreement
or the Security Documents, without the simultaneous foreclosure of all such
liens, shall not merge the liens granted which are not foreclosed with any
interest which PTR might obtain as a result of such selective and successive
foreclosure.
(e) PTR shall have the right, but not the obligation, to take possession of
any one or more of the Properties and proceed to complete the Improvements
thereto according to the applicable Plans. For this purpose, each Borrower
hereby conditionally assigns to PTR as additional security for the repayment of
the Loans all of each such Borrower's rights to the Plans for the Projects owned
by it, any contracts pertaining to the Project owned by such Borrower, whether
for construction, sale or otherwise, and any Permits pertaining to the subject
Property(ies); provided, PTR shall, upon occurrence of an Event of Default, have
the option to exercise this assignment, but shall not be obligated to accept
this assignment or to assume any liability of any Borrower under any such Plans,
contracts or Permits. Furthermore, each Borrower hereby constitutes and appoints
PTR as its true and lawful attorney-in-fact with full power of substitution to
complete, or cause to be completed, the Improvements owned by such Borrower in
the name of such Borrower and hereby empowers said attorney or attorneys as
follows: (i) to use any funds of Borrower, including any balance that may be
held in escrow and any funds which may remain unadvanced hereunder, for the
purpose of completing the Improvements being built by such Borrower; (ii) to
make such additional changes and corrections in the Plans for such Improvements
as may reasonably be necessary or desirable to complete such Improvements in
substantially the manner contemplated by the Plans for such Improvements and in
a good and workmanlike manner; (iii) to employ such contractors, subcontractors,
agents, architects and inspectors as shall be required for said purposes; (iv)
to pay, settle or compromise all existing bills and claims that are or may
become liens against the subject Property(ies) or any part thereof or may be
necessary or desirable for the completion of the subject Improvements or the
clearance of title; (v) to execute all applications and certificates in the name
of Borrower which may be required by law or by any contract relating to the
subject Improvements; and (vi) to do any and every act with respect to the
applicable Property(ies) which such Borrower may do in its own behalf. It is
understood and agreed that this power of attorney shall be deemed to be a power
coupled with an interest which cannot be revoked. PTR, as attorney-in-fact,
shall also have the power to defend, to the extent PTR reasonably deems
necessary, at such Borrower's cost, all actions or proceedings in connection
with the subject Improvements and Property(ies). At the time PTR takes
possession of a Property(ies), or any part thereof, all materials on such
Property owned by Borrower shall become the property of PTR for the purpose of
completing the subject Improvements. In addition, any materials or equipment
paid for with the proceeds of the Notes but stored at a location other than the
subject
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Property(ies) shall become the property of PTR when it takes possession of the
subject Property(ies). Such Borrower shall pay PTR the cost of completion. Each
Borrower hereby authorizes PTR to add such costs to the indebtedness of the
Borrowers to PTR, which costs shall be secured by the Security Documents. Any of
the foregoing actions by PTR shall not relieve the Borrowers of their
responsibility to repay the Notes. The foregoing provision shall not be
construed as creating any third party beneficiary contract and nothing in the
foregoing shall be construed as giving or conferring any rights or benefits
whatsoever to or upon any other person or entities other than the parties to
this Agreement. Homestead shall indemnify, defend and hold harmless PTR from and
against any and all claims, liabilities, loss, damages, suits, actions, expenses
(including reasonable attorneys' fees) and costs arising from any actions taken
by PTR in accordance with the power of attorney herein granted except to the
extent attributable to the gross negligence or willful misconduct of PTR.
(f) PTR shall not have any obligation to make any advances under the Notes
pursuant to this Agreement after the occurrence and during the continuance of an
Event of Default and at any time during such period, may unilaterally elect to
terminate any obligation of PTR to make any future advances under the Notes
pursuant to this Agreement.
Section 8.2. REMEDIES CUMULATIVE. No failure or delay by PTR in the
exercise of any rights or remedies available to it under the Loan Documents or
at law or in equity shall operate as a waiver thereof, nor shall any single or
partial exercise by PTR of any such right or remedy preclude any further
exercise thereof or of any other right or remedy. The remedies provided in the
Loan Documents or available at law or in equity are cumulative and not
alternative.
ARTICLE 9.
MISCELLANEOUS
Section 9.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants contained herein shall survive the
execution of this Agreement, the making of the Loans and the delivery of the
Notes and other Loan Documents and the release of any portion of the liens of
the Security Documents, and shall remain in full force and effect until the
termination of this Agreement in accordance with Section 2.8 hereof.
Section 9.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective heirs,
personal representatives, successors, assigns and affiliates, but shall not be
assignable by any party hereto without the prior written consent of the other
party hereto; provided that Homestead and/or the Partnership Borrower may assign
its rights hereunder in whole or in part to a Homestead Affiliate or Subsidiary.
Other than to a Homestead Affiliate or Subsidiary, no Borrower shall, without
the
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prior written consent of PTR, which consent PTR may withhold in its sole
discretion, directly or indirectly assign, transfer or convey (i) this Agreement
or any of the other Loan Documents, (ii) any of Borrower's rights or obligations
under any of the Loan Documents, (iii) any portion of the proceeds of the Notes,
(iv) any legal or equitable interest in the Property or (v) any legal or
equitable interest in such Borrower.
Section 9.3. NOTICES. Any notice or other communication provided for herein
or given hereunder to a party hereto shall be in writing and shall be given by
delivery, by telex, telecopier or by mail (registered or certified mail, postage
prepaid, return receipt requested) to the respective parties as follows:
If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
If to PTR:
Security Capital Pacific Trust
7777 Market Center Avenue
El Paso, Texas 79912
Attention: C. Ronald Blankenship
Facsimile: (915) 877-3301
or to such other address with respect to a party as such party shall notify the
other in writing.
Section 9.4. WAIVER. No party may waive any of the terms or conditions of
this Agreement, except by a duly executed writing referring to the specific
provision to be waived.
Section 9.5. AMENDMENT. This Agreement may be amended only by a writing
duly executed by both Homestead and PTR.
Section 9.6. SEVERABILITY. Insofar as is possible, each provision of this
Agreement shall be interpreted so as to render it valid and enforceable under
applicable law and severable from the remainder of this Agreement. A finding
that any such provision is invalid or unenforceable in any jurisdiction shall
not affect the validity or enforceability of any other provision or the validity
or enforceability of such provision under the laws of any other jurisdiction.
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Section 9.7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, among the parties hereto and their affiliates, with respect to
the subject matter hereof. The provisions of this Agreement supersede any
provisions set forth in the Existing Loan Documents relating to the disbursement
of Loan proceeds for the Projects.
Section 9.8. EXPENSES. Except as otherwise expressly contemplated herein to
the contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
Section 9.9. CAPTIONS. The Article, Section and Paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
Section 9.10. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New Mexico.
Section 9.11. NO JOINT VENTURE OR PARTNERSHIP. Nothing contained in this
Agreement or in any of the other Loan Documents and no other aspect of the
relationship between Homestead or any Borrower and PTR shall be construed as
creating a partnership, joint venture, or other relationship of or between
Homestead or any Borrower and PTR other than the lending relationship of lender
and borrower. All rights and obligations granted to or undertaken by either of
the parties hereto shall be construed as incidents of such lending relationship.
Section 9.12. NO THIRD PARTY BENEFICIARY RIGHTS CREATED. The parties hereto
expressly declare that it is their joint and mutual intention that this
Agreement and the transactions contemplated hereby shall not be construed as
creating a third party beneficiary contract, and neither this Agreement nor any
of the other Loan Documents shall be construed as giving or conferring any
rights or benefits whatsoever to or upon any other persons or entities other
than Homestead, any Borrower and PTR.
Section 9.13. INCORPORATION BY REFERENCE. This Agreement, the Notes and the
Security Documents are intended to be construed as part of the same transaction,
and all of the covenants, agreements, conditions, terms and provisions contained
in any one of the Loan Documents shall be deemed to be included in each of the
other Loan Documents with the same force and effect as though set forth in full
therein. In the event any of the provisions of this Agreement are in conflict
with or inconsistent with the provisions of the Security Documents, this
Agreement shall govern and control.
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Section 9.14. COUNTERPARTS. This Agreement may be executed in counterpart
copies, each of which shall constitute an original, and all of which together
shall constitute one and the same document.
Section 9.15. SCOPE OF REVIEW OF PLANS. Neither the approval of the Plans
nor any subsequent inspections or approvals of the Improvements during
construction shall constitute a warranty or representation by PTR or any of its
agents, representatives or designees as to the technical or legal sufficiency,
adequacy or safety of the structures or any of their component parts, including
without limitation fixtures, equipment or furnishings, nor shall such approvals
or inspections constitute such a warranty or representation as to the subsoil
conditions involved in the Property or any other physical condition or feature
pertaining to the Property. All acts, including any failure to act, relating to
the Property by any agents, representatives or designees of PTR are performed
solely for the benefit of PTR to assure repayment of the Loans and are not for
the benefit of Borrower or any other person, including without limitation
purchasers, guests or other occupants.
Section 9.16. GOVERNMENTAL REGULATION. Anything contained in this Agreement
to the contrary notwithstanding, PTR shall not be obligated to extend credit to
Borrower in an amount in violation of any limitation or prohibition provided by
any applicable governmental statute or regulation.
Section 9.17. SUBORDINATION. Each Borrower hereby subordinates all rights,
liens and claims for any of the proceeds and advances under the Notes to the
liens, operation and effect of the Security Documents.
Section 9.18. INDEMNITY. Homestead and each Borrower agree to indemnify,
defend and hold PTR harmless from and against any and all claims, injuries,
damages and liabilities that may be asserted or claimed against PTR by any
person as a result or by reason of, or that may be incurred or suffered by PTR
as a result or by reason of, the construction contemplated herein or the
operation of the ownership or Encumbered Property or any part thereof.
Section 9.19. Limitation of Liability. Any obligation or liability
whatsoever of PTR which may arise at any time under this Funding Commitment
Agreement or any obligation or liability which may be incurred by it pursuant to
any other instrument, transaction or undertaking contemplated hereby shall be
satisfied, if at all, out of PTR's assets only. No such obligation or liability
shall be personally binding upon, nor shall resort for the enforcement thereof
be had to, the property of any of its shareholders, trustees, officers,
employees or agents, regardless of whether such obligation or liability is in
the nature of contract, tort or otherwise.
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
-------------------------
C. Ronald Blankenship
Chairman
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EXHIBIT C
FUNDING COMMITMENT AGREEMENT
By and Between
SECURITY CAPITAL ATLANTIC INCORPORATED
"ATLANTIC"
AND
HOMESTEAD VILLAGE INCORPORATED
"Homestead"
ATLANTIC HOMESTEAD VILLAGE LIMITED PARTNERSHIP
"Partnership Borrower"
Dated: October 17, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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<S> <C> <C>
ARTICLE 1. DEFINITIONS........................................................... 3
Section 1.1. Certain Defined Terms......................................... 3
Section 1.2. Other Definitional Provisions................................. 10
ARTICLE 2. THE LOANS............................................................. 11
Section 2.1. The Homestead Loan............................................ 11
Section 2.2. The Partnership Loan.......................................... 11
Section 2.3. Future Projects............................................... 11
Section 2.4. Subsidiary Loans.............................................. 12
Section 2.5. Duration of Funding Commitment................................ 13
Section 2.6. Project Specific Funding Commitment........................... 13
Section 2.7. Replacement Projects.......................................... 14
Section 2.8. Release of Security Documents................................. 15
ARTICLE 3. REPRESENTATIONS AND WARRANTIES........................................ 15
Section 3.1. Existence and Power........................................... 15
Section 3.2. Authorization and Binding Obligations......................... 15
Section 3.3. No Legal Bar or Resultant Lien................................ 16
Section 3.4. No Consent.................................................... 16
Section 3.5. Compliance with Laws.......................................... 16
Section 3.6. Litigation.................................................... 16
Section 3.7. Defaults...................................................... 17
Section 3.8. Status of Property............................................ 17
Section 3.9. Use of Proceeds............................................... 17
Section 3.10. Real Property Environmental Matters........................... 17
Section 3.11. Financial Condition........................................... 18
Section 3.12. No Condemnation............................................... 18
Section 3.13. No Actions.................................................... 18
Section 3.14. No Adverse Conditions......................................... 18
ARTICLE 4. COVENANTS............................................................. 18
Section 4.1. Construction of Improvements.................................. 18
Section 4.2. Plans; Project Budgets; Project Schedules and Material Changes 19
Section 4.3. Inspection and Examination.................................... 19
Section 4.4. Permits and Approvals......................................... 19
Section 4.5. Governmental Requirements..................................... 19
Section 4.6. Books and Records............................................. 20
</TABLE>
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<CAPTION>
TABLE OF CONTENTS
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<S> <C> <C>
Section 4.7. Title to Property and Improvements............................ 20
Section 4.8. Costs and Expenses............................................ 20
Section 4.9. Use of Advances............................................... 20
Section 4.10. Insurance..................................................... 20
Section 4.11. Environmental Matters......................................... 20
Section 4.12. Selection of Architects; Contractors; Inspecting A/E's........ 21
Section 4.13. Further Assurances............................................ 21
Section 4.14. Quarterly Statements.......................................... 21
Section 4.15. Continued Existence........................................... 22
Section 4.16. Defaults Under Other Loans.................................... 22
ARTICLE 5. ADVANCE CONDITIONS.................................................... 22
Section 5.1. Conditions Precedent to First Advance under this Agreement.... 22
Section 5.2. Conditions Precedent to First Advance for New Project......... 24
Section 5.3. Initial Improvement Advance Conditions........................ 26
Section 5.4. Additional Improvement Advance Conditions..................... 26
Section 5.5. Final-Advance Conditions...................................... 27
ARTICLE 6. PROCEDURE FOR ADVANCES; RESERVES...................................... 28
Section 6.1. General....................................................... 28
Section 6.2. Payments to Atlantic.......................................... 28
Section 6.3. Retainage and Contractor's Fee Holdback....................... 29
Section 6.4. Interest Reserve.............................................. 29
Section 6.5. Owner's Contingency........................................... 29
Section 6.6. Cost Overruns and Savings; Change Order Reserve............... 30
ARTICLE 7. EVENTS OF DEFAULT..................................................... 30
Section 7.1. Failure to Pay................................................ 30
Section 7.2. Other Loan Document Defaults.................................. 31
Section 7.3. Judgment or Attachment........................................ 31
Section 7.4. Violation of Governmental Requirements........................ 31
Section 7.5. Insolvency, etc............................................... 31
Section 7.6. Unapproved Transfer........................................... 32
ARTICLE 8. REMEDIES.............................................................. 33
Section 8.1. General....................................................... 33
Section 8.2. Remedies Cumulative........................................... 34
</TABLE>
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<CAPTION>
TABLE OF CONTENTS
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Page
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<S> <C> <C>
ARTICLE 9. MISCELLANEOUS................................................. 35
Section 9.1. Survival of Representations, Warranties and Covenants. 35
Section 9.2. Successors and Assigns................................ 35
Section 9.3. Notices............................................... 35
Section 9.4. Waiver................................................ 36
Section 9.5. Amendment............................................. 36
Section 9.6. Severability.......................................... 36
Section 9.7. Entire Agreement...................................... 36
Section 9.8. Expenses.............................................. 36
Section 9.9. Captions.............................................. 36
Section 9.10. Governing Law......................................... 36
Section 9.11. No Joint Venture or Partnership....................... 37
Section 9.12. No Third Party Beneficiary Rights Created............. 37
Section 9.13. Incorporation by Reference............................ 37
Section 9.14. Counterparts.......................................... 37
Section 9.15. Scope of Review of Plans.............................. 37
Section 9.16. Governmental Regulation............................... 37
Section 9.17. Subordination......................................... 38
Section 9.18. Indemnity............................................. 38
</TABLE>
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<PAGE>
FUNDING COMMITMENT AGREEMENT
THIS FUNDING COMMITMENT AGREEMENT (this "Agreement"), is entered into as of
October 17, 1996, among HOMESTEAD VILLAGE INCORPORATED, a Maryland corporation
("Homestead"), ATLANTIC HOMESTEAD VILLAGE LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Partnership Borrower") and SECURITY CAPITAL ATLANTIC
INCORPORATED, a Maryland corporation ("Atlantic").
RECITALS
9.20. Prior to the date hereof, Atlantic agreed to make to Atlantic
Homestead Village Incorporated (the "Prior Corporate Borrower") a loan (the
"Corporate Loan") of up to a maximum amount of $90,765,665 (the "Maximum
Corporate Loan Amount") to fund, among other things, acquisition and
construction costs and expenses incurred in connection with the acquisition and
development of Homestead Village extended stay lodging facilities. In
connection with agreeing to make the Corporate Loan, Atlantic agreed that the
Prior Corporate Borrower's repayment obligation for funds advanced in respect of
the Corporate Loan would be adjusted by a discount factor of .8821961120 (the
"Discount Factor"). To evidence the Prior Corporate Borrower's obligation to
repay the Corporate Loan, at the discounted rate, the Prior Corporate Borrower
has delivered to Atlantic an Amended and Restated Promissory Note (the
"Corporate Note"), dated May 28, 1996, in the face amount of $80,073,117 (i.e.,
the Maximum Corporate Loan Amount as adjusted by the Discount Factor) (which
note amended and restated a prior promissory note dated January 24, 1996, and
delivered by the Prior Corporate Borrower to Atlantic to evidence the Corporate
Loan), and to secure the payment obligations under the Corporate Note and the
Partnership Note (as defined below), the Prior Corporate Borrower has, prior to
the date hereof, delivered to Atlantic deeds to secure debt, deeds of trust and
mortgages (the "Existing Corporate Security Documents"), creating liens on the
existing Homestead Village Projects listed in Exhibit A hereto which are owned
by the Prior Corporate Borrower (the "Existing Corporate Projects"). (The
Corporate Note, the Existing Corporate Security Documents and all other
instruments heretofore delivered by the Prior Corporate Borrower in connection
therewith to secure the payment of the Corporate Note and the Partnership Note
are herein called the "Existing Corporate Loan Documents".)
9.21. Prior to the date hereof, Atlantic agreed to make to the Partnership
Borrower a loan (the "Partnership Loan") of up to a maximum amount of
$20,353,019 (the "Maximum Partnership Loan Amount") to fund, among other things,
acquisition and construction costs and expenses incurred in connection with the
acquisition and development of Homestead Village extended stay lodging
facilities. In connection with agreeing to make the Corporate Loan, Atlantic
agreed that the Partnership Borrower's repayment obligation for funds advanced
in respect of the Partnership Loan would be adjusted by the Discount Factor. To
evidence the Partnership Borrower's obligation to repay the Partnership Loan, at
the discounted rate, the
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Partnership Borrower has delivered to Atlantic an Amended and Restated
Promissory Note (the "Partnership Note"), dated May 28, 1996, in the face amount
of $17,955,354 (the Maximum Partnership Loan Amount as adjusted by the Discount
Factor) (which note amended and restated a prior promissory note dated January
24, 1996, and delivered by the Partnership Borrower to Atlantic to evidence the
Partnership Loan), and to secure the payment obligations under the Corporate
Note and the Partnership Note, the Partnership Borrower has, prior to the date
hereof, delivered to Atlantic deeds to secure debt, deeds of trust and mortgages
(the "Existing Partnership Security Documents"), creating liens on the existing
Homestead Village Projects listed in Exhibit A hereto which are owned by the
Partnership Borrower (the "Existing Partnership Projects"). (The Partnership
Note, the Existing Partnership Security Documents and all other instruments
heretofore delivered by the Partnership Borrower in connection therewith to
secure the payment of the Corporate Note and the Partnership Note are herein
called the "Existing Partnership Loan Documents"; and the Existing Corporate
Loan Documents and Existing Partnership Loan Documents are collectively referred
to herein as the "Existing Loan Documents".)
9.22. On the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Atlantic, Security Capital Pacific Trust
("PTR"), Security Capital Group Incorporated ("SCG") and Homestead (the "Merger
Agreement"), pursuant to which, among other things, Homestead is,
contemporaneously herewith, acquiring all of the stock of Atlantic's
subsidiaries which own, operate or develop Atlantic's Homestead Village
extended-stay lodging facilities. As a consequence of the mergers contemplated
under the Merger Agreement, the Prior Corporate Borrower has been merged into
Homestead and in connection therewith Homestead has succeeded to and assumed all
of the Prior Corporate Borrower's obligations and liabilities, including those
under the Corporate Note and the Existing Corporate Loan Documents.
9.23. Upon and subject to the provisions of this Agreement, Homestead, the
Partnership Borrower and Atlantic desire to continue the funding provided for
under the Existing Loan Documents, and in consideration of the issuance,
pursuant to that certain Warrant Purchase Agreement, dated as of May 21, 1996
among Atlantic, PTR, SCG and Homestead, to Atlantic by Homestead of warrants to
purchase shares of common stock, $0.01 par value per share, of Homestead
("Homestead Common Stock"), Atlantic is willing to provide funds to Homestead
and the Partnership Borrower for the costs incurred in connection with
performing due diligence investigations, securing required development approvals
and otherwise completing the acquisition and development of the proposed future
Homestead Village projects listed in Exhibit A (which projects, and any
replacement projects approved by Atlantic pursuant to the provisions of this
Agreement, are herein called the "Future Projects").
9.24. The execution of this Agreement is a condition to the consummation
of the transactions contemplated by the Merger Agreement.
2
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NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"Agreement" shall mean this Funding Commitment Agreement.
"Acquisition Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Architect" means the architect retained by a Borrower to provide
architectural services for a Project.
"Architect's Agreement" means the agreement for architectural services
executed by a Borrower and an Architect in connection with the design of a
Project, and all exhibits, attachments, riders and addenda thereto.
"Architect's Certificate" means a Certificate from the Architect for a
Project, in form and substance reasonably acceptable to Atlantic, wherein the
Architect acknowledges the collateral assignment of the Architect's Agreement
and the Plans prepared by such Architect from Borrower to Atlantic pursuant to
this Agreement and agrees to perform all of its obligations under the
Architect's Agreement in the event Atlantic takes possession of the subject
Project in connection with the exercise of its remedies hereunder or under the
Security Documents after an Event of Default.
"Atlantic" has the meaning set forth in the Preamble to this Agreement.
"Borrower" means Homestead, in its capacity as maker under the Corporate
Note, the Partnership Borrower or any Subsidiary, whichever entity is the owner
of the subject Project.
"Business Day" means any day other than Saturday, Sunday, or any other day
on which commercial banks in New Mexico are not required to be open for
business.
"Change Order" means a written order executed by a Borrower authorizing a
Contractor to proceed with a change in the work as provided for in the original
Plans for a Project, which change has been made in accordance with the
applicable provisions of this Agreement.
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"Completion and Payment Guaranty" means that certain Guaranty of Completion
and Payment of even date herewith from Homestead to Atlantic in the form
attached as Exhibit B.
"Construction Contract" means the contract for construction executed by a
Borrower and the Contractor in connection with the construction of a Project,
and all exhibits, attachments, riders and addenda thereto.
"Consultant" means any civil engineer or other material consultant, other
than the Architect, retained directly by a Borrower to provide design or
engineering services for a Project.
"Consultant's Agreement" means the agreement for engineering or other
consultant services executed by a Borrower and a Consultant in connection with a
Project, and all exhibits, attachments, riders and addenda thereto.
"Consultant's Certificate" means a Certificate from a Consultant for a
Project, in form and substance reasonably acceptable to Atlantic, wherein the
Consultant acknowledges the collateral assignment of the Consultant's Agreement
and the Plans prepared by such Consultant from Borrower to Atlantic pursuant to
this Agreement and agrees to perform all of its obligations under the
Consultant's Agreement in the event Atlantic takes possession of the subject
Project in connection with the exercise of its remedies hereunder or under the
Security Documents after an Event of Default.
"Contractor" means the general contractor retained by a Borrower to provide
construction services for a Project.
"Contractor's Certificate" means a Certificate from the Contractor for a
Project, in form and substance reasonably acceptable to Atlantic, wherein the
Contractor acknowledges the collateral assignment of the Construction Contract
from Borrower to Atlantic pursuant to this Agreement and agrees to perform all
of its obligations under the Construction Contract in the event Atlantic takes
possession of the subject Project in connection with the exercise of its
remedies hereunder or under the Security Documents after an Event of Default.
"Corporate Loan" has the meaning set forth in Recital A to this Agreement.
"Corporate Note" has the meaning set forth in Recital A to this Agreement.
"Default" means any condition or event that constitutes an Event of Default
or that with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"Development Budget" has the meaning set forth in Section 2.3 of this
Agreement.
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"Development Schedule" has the meaning set forth in Section 2.3 of this
Agreement.
"Environmental Laws" means any and all laws, statutes, ordinances, rules,
regulations, orders, or determinations of any governmental authority pertaining
to health or the environment applicable to a Borrower, or a Property owned by
such Borrower, in effect in the jurisdiction in which such Property is located,
or where any hazardous substances generated by or disposed of by a Borrower in
connection with such Property are located, including but not limited to the
Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended by the Superfund Amendments
and Reauthorization Act of 1986, as amended ("CERCLA"), the Federal Water
Pollution Control Act, as amended, the Resource Conservation and Recovery Act of
1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal
Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984, as
amended ("RCRA"), the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Hazardous Materials Transportation Act, as amended
any analogous state law of the state in which the Property is located and other
environmental conservation or protection laws. The terms "hazardous substance,"
"release," and "threatened release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposal" (or "disposed") shall have the
meanings specified in RCRA; provided, however, that (i) in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and (ii) to the extent the laws of the state in which the
Property is located establish a meaning for "hazardous substance," "release,"
"threatened release," "solid waste," or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply.
"Event of Default" means the occurrence of any of the events specified in
Article 7 hereof.
"Existing Corporate Projects" has the meaning set forth in Recital A to
this Agreement.
"Existing Corporate Security Documents" has the meaning set forth in
Recital A to this Agreement.
"Existing Loan Documents" has the meaning set forth in Recital B to this
Agreement.
"Existing Partnership Loan Documents" has the meaning set forth in Recital
B to this Agreement.
"Existing Partnership Projects" has the meaning set forth in Recital B to
this Agreement.
"Existing Partnership Security Documents" has the meaning set forth in
Recital B to this Agreement.
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"Existing Projects" means the Existing Corporate Projects and the Existing
Partnership Projects.
"Expiration Date" has the meaning set forth in Section 2.5 of this
Agreement.
"Final Advance" means the final advance of Loan proceeds to a Borrower for
construction of a Project in accordance with the applicable provisions of this
Agreement.
"Final Completion" means that the requirements of Section 5.5 have been
fully satisfied for a Project.
"Final CO" means a final unconditional certificate of occupancy for a
Project issued by the applicable Governmental Authority.
"Force Majeure" means, with respect to any Project, an event entitling a
Contractor to an extension of time in constructing the Improvements as
established in the Construction Contract and any act of God, war, riots,
unusually severe weather, shortages of labor or materials (but not a shortage of
funds), strikes, lock-outs, explosions, the order of any court or governmental
authority or unavailability of or delay in issuance of any Permits despite a
Borrower's reasonable diligence in securing same, which results in any delay in
whole or in part in the design, engineering or construction of a Project, or the
duration of any inspection, testing, or remediation related to any environmental
condition or aspect of a Project.
"Funding Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Future Project" has the meaning set forth in Recital D to this Agreement.
"Geographic Area" means the States of Alabama, Florida, Georgia, North
Carolina, Tennessee, Maryland and Virginia and the District of Columbia.
"Governmental Authority" means any Federal, state, county, municipal or
other governmental or quasi-governmental department, commission, board, court,
agency or other instrumentality having jurisdiction over a Borrower and any
Project.
"Governmental Requirement" means any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including, without
limitation, any of the foregoing that relate to environmental standards or
controls, energy regulations and occupational safety and health standards or
controls) of any Governmental Authority.
"Homestead" has the meaning set forth in the Preamble to this Agreement.
"Homestead Common Stock" has the meaning set forth in Recital D to this
Agreement.
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"Homestead Affiliate" means (a) an entity that directly or indirectly
controls, is controlled by or is under common control with Homestead or (b) an
entity at least a majority of whose economic interest is owned by Homestead; and
the term "control" means the power to direct the management of such entity
through voting rights, ownership or contractual obligations; provided, however,
in no event shall PTR, Atlantic, SCG or any wholly-owned subsidiary of any of
the foregoing be deemed a Homestead affiliate.
"Homestead Security Documents" means the deeds of trust, deeds to secured
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
C hereto, to be delivered to Atlantic by Homestead in connection with the
funding of any Project acquired by Homestead after the date of this Agreement,
as security for the Corporate Note, the Partnership Note and any Subsidiary Note
executed and delivered after the date hereof, and any other security instruments
delivered by Homestead from time to time as security for the Corporate Note, the
Partnership Note and any such Subsidiary Note.
"Improvements" means the buildings, structures, and other improvements to
be constructed on the Land as described on the Plans for the subject Project.
"Inspecting A/E" means the inspecting architect or engineer retained by a
Borrower to inspect, monitor and administer the progress of construction of a
Project.
"Land" means the parcel or parcels of land on which a Project is or is to
be located, together with all easements, rights of way and other appurtenances
thereto.
"Lien Waivers" means a waiver of all liens relating to a Project executed
by any and all contractors, subcontractors and/or suppliers of a Borrower who
have provided any goods or services relating to Improvements.
"Loan" means the Corporate Loan, the Partnership Loan, or any Subsidiary
Loan made after the date hereof, as the context may require; and "Loans" means
the Corporate Loan, the Partnership Loan, and any Subsidiary Loans made after
the date hereof, collectively.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
the Completion and Payment Guaranty and any and all other agreements or
instruments now or hereafter executed and delivered by a Borrower, Homestead or
any other person in connection with, or as security for, the payment or
performance of the Notes.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Homestead and its Subsidiaries, taken as a
whole.
"Material Change" means any change to the Plans or to a Project which would
result in a material increase or decrease in the number of lodging units in such
Project from the number
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contained in a Prototypical Project, a material increase or decrease in the
overall cost of completing a Project above the costs contemplated in the
Prototypical Project Budget, or would otherwise result in such Project
materially deviating from the product and/or investment concept of a
Prototypical Project as set forth in the Prototypical Plans.
"Maximum Corporate Loan Amount" has the meaning set forth in Recital A to
this Agreement.
"Maximum Loan Amount" means the aggregate of the Maximum Corporate Loan
Amount and the Maximum Partnership Loan Amount.
"Maximum Partnership Loan Amount" has the meaning set forth in Recital B to
this Agreement.
"Note" means the Corporate Note, the Partnership Note, or any Subsidiary
Note executed and delivered after the date hereof, as the context may require,
and "Notes" means the Corporate Note, the Partnership Note, and any Subsidiary
Notes executed and delivered after the date hereof, collectively.
"Partnership Borrower" has the meaning set forth in the Preamble to this
Agreement.
"Partnership Loan" has the meaning set forth in Recital B to this
Agreement.
"Partnership Note" has the meaning set forth in Recital B to this
Agreement.
"Partnership Security Documents" means the deeds of trust, deeds to secure
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
D hereto, to be delivered to Atlantic by the Partnership Borrower in connection
with the funding of any Project acquired by the Partnership after the date of
this Agreement, as security for the Partnership Note, the Corporate Note and any
Subsidiary Note executed and delivered after the date hereof, and any other
security instruments delivered by the Partnership Borrower from time to time as
security for the Corporate Note, the Partnership Note and any such Subsidiary
Note.
"Permits" shall mean all permits, licenses, registrations, certificates,
authorizations and approvals now or hereafter issued or required to be issued by
any governmental or quasi-Governmental Authority for the lawful ownership,
construction, use and operation of a Project.
"Personalty" means all items of tangible or intangible personal property
owned by a Borrower, or in which a Borrower has any interest, to the extent of
such interest, that now are or hereafter may be purchased, prepared, constructed
or placed for, upon or in a Project owned by such Borrower.
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"Plans" means the final plans and specifications for the construction of
the Improvements comprising a Project, together with any modifications or
additions to the same subsequently permitted under the terms of this Agreement
or, to the extent required hereunder, approved by Atlantic in accordance with
the provisions of this Agreement.
"Project" means each Existing Project and each Future Project for which an
Acquisition Notice has been delivered to Atlantic prior to the Expiration Date.
"Project Budget" means the budget for a Project delivered by a Borrower to
Atlantic.
"Project Schedule" means the schedule for the design and construction of
the Improvements encompassed within a Project delivered by a Borrower to
Atlantic.
"Property" means any property from time to time subject to any of the
Security Documents, including the Land and all Improvements now or hereafter
located thereon and all Personalty associated therewith.
"Proposed Substitute Future Project" has the meaning set forth in Section
2.7 of this Agreement.
"Prototypical Project Budget" means the due diligence, development
approval, land acquisition, design and construction budget for a Prototypical
Project heretofore delivered to, and approved by, Atlantic.
"Prototypical Project Schedule" means the due diligence, development
approval, design and construction schedule for a Prototypical Project heretofore
delivered to, and approved by, Atlantic.
"Prototypical Plans" means the standard plans and specifications for a
Homestead Village extended-stay lodging facility heretofore delivered to, and
approved by, Atlantic.
"Prototypical Project" means a Homestead Village extended-stay lodging
facility designed and constructed in substantial accordance with the
Prototypical Plans.
"PTR" has the meaning set forth in the Preamble to this Agreement.
"Pursuit Costs" has the meaning set forth in Section 2.3 of this Agreement.
"Quarterly Statement" has the meaning set forth in Section 4.14 of this
Agreement.
"Rejected Project" has the meaning set forth in Section 2.7 of this
Agreement.
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"Security Documents" means the Homestead Security Documents, the Existing
Corporate Security Documents, the Existing Partnership Security Documents, the
Partnership Security Documents, and any Subsidiary Security Documents,
collectively.
"Subcontractor" means all persons performing labor or services, or
providing materials, equipment or furnishings in connection with the
construction of Improvements, other than Contractor.
"Subsidiary" means any entity now or hereafter in existence including the
Partnership Borrower, all of the outstanding equity securities of which are
owned by Homestead.
"Subsidiary Loan" means any portion of the Corporate Loan or Partnership
Loan which Homestead may direct Atlantic to advance to a Subsidiary instead of
to Homestead or the Partnership Borrower in accordance with the provisions of
this Agreement.
"Subsidiary Note" means any promissory note, substantially in the form of
the Partnership Note, which a Subsidiary executes and delivers to Atlantic after
the date hereof to evidence a Subsidiary Loan made by Atlantic to such
Subsidiary.
"Subsidiary Security Documents" means the deed of trust or mortgage
instrument to be delivered to Atlantic by a Subsidiary, substantially in the
form of the Homestead Security Documents, in connection with the funding of any
Future Project owned by Subsidiary as security for the Corporate Note, the
Partnership Note and any Subsidiary Note executed and delivered after the date
hereof, and any other security instruments delivered by such Subsidiary from
time to time as security for the Corporate Note, the Partnership Note and any
such Subsidiary Note.
"Title Insurer" means Chicago Title Insurance Company or any other
nationally recognized title insurance company issuing a Title Policy.
"Title Policy" means the lender's policy of title insurance for a Property
issued by the Title Insurer for the benefit of Atlantic and all endorsements
thereto, which insures the lien priority of the Security Documents applicable to
such Property.
"UCC" means the Uniform Commercial Code as in force in the state in which a
Project is located.
Section 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) Except as otherwise specified herein, all references herein (i) to any
person or entity shall be deemed to include such person's or entity's heirs,
legal representatives, successors and assigns, as appropriate, (ii) to any
Governmental Requirement defined or referred to herein shall be deemed
references to such Governmental Requirement as the same may have been or
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may be amended or supplemented from time to time and (iii) to any Loan Document
or other agreement defined or referred to herein shall be deemed references to
such Loan Document or agreement (and, in the case of the Notes or other
instruments, any instrument issued in substitution therefor) as the terms
thereof may have been or may be amended, supplemented, waived or otherwise
modified from time to time in writing.
(b) Whenever the context so requires, the neuter gender includes the
masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
ARTICLE 2.
THE LOANS
Section 2.1. THE HOMESTEAD LOAN. Subject to the limitations set forth in
Sections 2.5, 2.6 and 2.7 below, Atlantic hereby agrees, upon the terms and
conditions set forth herein and in the other applicable Loan Documents, to
advance to Homestead (or, as Homestead may direct, to any Subsidiary) up to the
amount of the Maximum Corporate Loan Amount for the purpose of paying the costs
and expenses incurred by Homestead (or by any such Subsidiary, as the case may
be) in completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of, such of the Future Projects hereafter pursued by Homestead
or any such Subsidiary as may be funded under the provisions of this Agreement.
Principal and accrued interest on the Corporate Note shall be due and payable in
accordance with the terms and conditions set forth therein and herein.
Section 2.2. THE PARTNERSHIP LOAN. Subject to the limitations set forth in
Sections 2.5, 2.6 and 2.7 below, Atlantic hereby agrees, upon the terms and
conditions set forth herein and in the other applicable Loan Documents, to
advance to the Partnership Borrower (or, as Homestead may direct, to Homestead
or any Subsidiary) up to the amount of the Maximum Partnership Loan Amount for
the purpose of paying the costs and expenses incurred by the Partnership
Borrower (or by Homestead or any such Subsidiary, as the case may be) in
completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of the Future Projects hereafter pursued by Homestead, the
Partnership Borrower or any other Subsidiary as may be funded under the
provisions of this Agreement. Principal and accrued interest on the Partnership
Note shall be due and payable in accordance with the terms and conditions set
forth therein and herein.
Section 2.3. FUTURE PROJECTS. The parties acknowledge and agree that the
Future Projects identified in Exhibit A hereto are in differing stages of
consideration by Homestead and that, at any point in the process of its due
diligence review, the negotiation of definitive
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acquisition and related documents and its efforts to obtain all Permits required
for development of any such Future Project, Homestead may determine, in its sole
and absolute discretion, either to proceed with the acquisition of the land for,
and development of, any such Future Project or to discontinue its efforts in
respect of any such Future Project. Requests for advances of Loan proceeds
hereunder may include amounts required to reimburse Homestead for the costs and
expenses incurred by Homestead in its due diligence review of any such Future
Project, as well as all costs incurred in connection with its efforts to secure
the Permits required for development of any such Future Project. Whenever such
pursuit costs ("Pursuit Costs") are to be funded with Loan proceeds, prior to
the first advance in respect of a Future Project, Homestead will provided
Atlantic with a notice (a "Funding Notice") identifying the Future Project,
together with a development budget (a "Development Budget") indicating the
anticipated costs that are likely to be incurred prior to the acquisition of
such Future Project by Homestead or a Subsidiary, the amount of such costs to be
funded by Loan proceeds, which amount shall in no event exceed $100,000 per
Future Project, and a schedule setting forth the anticipated time-frames for
completing the due diligence review and obtaining required Permits (a
"Development Schedule").
If Homestead elects to proceed with a Future Project, then Homestead shall
provide Atlantic at least 10 Business Days' prior written notice (an
"Acquisition Notice") of the anticipated closing date for the acquisition of the
subject Land, the identity of the Borrower for such transaction, and the
estimated amount of Loan proceeds that will need to be advanced at such closing.
From and after delivery of an Acquisition Notice to Atlantic, the subject
project shall, for all purposes under this Agreement, be deemed a "Project".
Notwithstanding anything to the contrary in the foregoing, funding of the first
advance of Loan proceeds in respect of any such Project shall require the
recordation of Security Documents adding such Project as security for the Loan
and the satisfaction of the other conditions set forth in Section 5.2 as to such
Project.
In the event, however, that Homestead determines from time to time that any
Future Project is unacceptable to it and that Homestead will not expend further
efforts with respect to such Future Project, Homestead shall provide written
notice to Atlantic identifying any such Future Project. In such event, any
Pursuit Costs theretofore funded with Loan proceeds, together with accrued and
unpaid interest thereon due under the terms of the Corporate Note, shall be
repaid by Homestead to Atlantic within 30 days after delivery of such notice to
Atlantic.
Section 2.4. SUBSIDIARY LOANS. With respect to any Future Project for
which an Acquisition Notice is delivered to Atlantic in accordance with Section
2.3 above, Homestead shall have the right to determine, in its sole and absolute
discretion, that a Subsidiary acquire the subject Project, in which event, the
subject Subsidiary shall, at such time as it acquires the subject Future
Project, execute and deliver to Atlantic Subsidiary Security Documents in
connection therewith together with an agreement in form and substance
satisfactory to Atlantic pursuant to which such Subsidiary agrees to be bound by
the terms of this Agreement as to such Project. In addition, at the election of
Homestead, the subject Subsidiary shall execute a Subsidiary Note in the amount
of the Loan determined by Homestead to be allocable to such
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Project and the Maximum Corporate Loan Amount and/or the Maximum Partnership
Loan Amount (as Homestead may elect) shall be decreased by the amount of any
such Subsidiary Note. Alternatively, Homestead may elect to have funds advanced
with respect to such Project under the Corporate Loan or Partnership Loan and
either loan or contribute, or cause the Partnership Borrower to loan or
contribute, the funds so advanced to the subject Subsidiary. In the event any
Subsidiary executes a Subsidiary Note and/or any Subsidiary Security Documents
as contemplated under this Section 2.4, the parties shall, contemporaneously
therewith, execute, deliver, and, if appropriate, record, such amendments to the
Loan Documents as may reasonably be necessary or appropriate to properly
document any resulting changes in the Maximum Corporate Loan Amount and/or the
Maximum Partnership Loan Amount.
Section 2.5. DURATION OF FUNDING COMMITMENT. The obligation of Atlantic to
advance Loan proceeds in respect of Future Projects for which an Acquisition
Notice has not yet been delivered to Atlantic shall expire on March 31, 1998
(the "Expiration Date"). Notwithstanding anything to the contrary in the
foregoing, Atlantic shall continue to be obligated, subject to and upon the
terms and conditions set forth herein and in the other Loan Documents, to
continue to make advances of Loan proceeds after such date for each Project for
which an Acquisition Notice has theretofore been delivered to Atlantic under the
terms of this Agreement, but shall not have any obligation to make further
advances in respect of Pursuit Costs for any Future Project for which only a
Funding Notice has been delivered to Atlantic. On or before April 30, 1998,
Homestead shall repay, or cause to be repaid, to Atlantic any advances of Loan
proceeds in respect of Pursuit Costs (together with accrued and unpaid interest
thereon) that have not been repaid pursuant to Section 2.3 hereof as of the
Expiration Date.
Section 2.6. PROJECT SPECIFIC FUNDING COMMITMENT. Atlantic's obligation
under this Agreement to make advances of Loan proceeds in respect of a
designated Project shall not exceed the lesser of (i) the actual aggregate hard
and soft costs incurred by the applicable Borrower in connection with the
acquisition, development, design and construction of such Project, or (ii),
except as provided in Section 6.6, the amount allocated to such Project in
Exhibit A hereto, and all costs in respect of a Project in excess of the Loan
amount allocated to such Project shall, except as provided in such Section 6.6,
be funded by Homestead as and when needed. In addition, Atlantic's obligation to
make advances in respect of a designated Project shall expire on the second
anniversary of the date on which the subject Land was acquired by Homestead or
the applicable Subsidiary. In the event Final Completion of such Project has not
been achieved by such date, Atlantic shall have no obligation to make any
further advances of Loan proceeds in connection with such Project and all costs
required to complete such Project shall be funded by Homestead as and when
required in order to assure that such Project is completed and placed in
operation as soon as is reasonably practicable. If, however, Final Completion of
such Project has not been achieved by the date which is 30 months after the date
of acquisition of the subject Land, then, at the election of Atlantic, exercised
by delivering written notice to Homestead, Homestead shall repay, or cause the
applicable
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Subsidiary to repay, within 30 days after receipt of such notice the amount of
Loan proceeds advanced in respect of such Project (together with accrued and
unpaid interest on such amount), and upon receipt of such payment, this
Agreement, solely as it relates to such Project, shall terminate and Atlantic
shall cause to be released the Security Documents recorded or filed against such
Project.
Section 2.7. REPLACEMENT PROJECTS. Homestead agrees that for each Future
Project rejected by Homestead pursuant to Section 2.3 (a "Rejected Project"),
Homestead will propose to Atlantic in writing a proposed substitute future
project (a "Proposed Substitute Future Project") to take the place of such
Rejected Project. Any such Proposed Substitute Future Project shall be located
within the Geographic Area and, except as specifically noted in writing by
Homestead, shall conform, to Homestead's then current knowledge, to the
Prototypical Project requirements. Homestead may select a Proposed Substitute
Future Project from its then contemplated Homestead Village projects which
Homestead is considering pursuing or, if all such contemplated projects are then
already included within the list of Future Projects under this Agreement, then
Homestead may delay in identifying a Proposed Substitute Future Project until,
in the ordinary course of its business, a new site for a contemplated Homestead
Village project is identified within the Geographic Area. Homestead shall not,
however, be obligated to identify a new potential Homestead Village site solely
for the purposes of presenting to Atlantic a Proposed Substitute Future Project.
Atlantic shall have a period of 20 Business Days after receipt of any such
Proposed Substitute Project to approve or reject, in its sole and absolute
discretion, any such proposal, and failure of Atlantic to provide Homestead with
written notice within such 20-Business Day period shall be deemed a rejection by
Atlantic of the subject Proposed Substitute Future Project. If Atlantic timely
approves a Proposed Substitute Future Project, then such project shall be
substituted in the place and stead of the Rejected Project in Exhibit A hereto,
and shall for all purposes under this Agreement thereafter be deemed a Future
Project. The maximum amount of Loan proceeds that will be available to fund such
Future Project (if Homestead thereafter delivers an Acquisition Notice for such
Project) shall be equal to the Loan amount originally allocated to the
applicable Rejected Project in Exhibit A.
In the event that any Proposed Substitute Future Project is rejected or
deemed rejected by Atlantic, Homestead shall be free to pursue the Proposed
Substitute Future Project on its own. For each Rejected Project, Homestead shall
be required (subject to the limitations set forth above) to propose to Atlantic
up to a maximum of three (3) Proposed Substitute Future Projects. If Atlantic
rejects all three (3) Proposed Substitute Future Projects submitted by Homestead
in respect of a particular Rejected Project, then the Maximum Loan Amount, and
Atlantic's funding commitment hereunder, shall be reduced by the amount
allocated to the Rejected Project in Exhibit A hereto. The obligation of
Homestead to propose to Atlantic Proposed Substitute Future Projects shall in
any event terminate on the Expiration Date.
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Section 2.8. RELEASE OF SECURITY DOCUMENTS. The parties acknowledge and
agree that the Notes are convertible, in whole or in part, into shares of
Homestead Common Stock up to the maximum amount of the unpaid principal amount
of such Notes outstanding from time to time and otherwise pursuant and subject
to the terms and conditions of such Notes. Any such conversion shall reduce the
amount of the debt evidenced by the Notes and secured by the Security Documents
by the amount determined in accordance with the conversion provisions of the
Notes. In connection with any partial conversion of the Notes, Homestead may
request that, in lieu of or in addition to reducing the amount secured by the
Security Documents, Atlantic release any one or more of the Projects then
subject to the Security Documents and having a value equivalent to or less than
the amount of the debt reduction resulting from such conversion. The release of
any Projects from the lien of the Security Documents shall, however, be subject
to the approval of Atlantic, which approval shall not to be unreasonably
withheld or delayed.
At such time as all amounts owing to Atlantic under or in respect of any of
the Loan Documents have been paid in accordance with the provisions of the Loan
Documents or if not paid then, to the extent permitted under the Notes,
converted into Homestead Common Stock, and when Atlantic has no further
obligation to make any advance, disbursement or payment of any kind or to extend
credit under or with respect to any of the Loan Documents, then this Agreement
shall terminate and upon receipt of demand therefor from Homestead, Atlantic
shall execute and deliver to Homestead appropriate instruments of release or
reconveyance of any Security Documents then in effect.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
To induce Atlantic to enter into this Agreement, Homestead and each
Borrower represents and warrants to Atlantic (each representation and warranty
herein being given as of the date of this Agreement and deemed repeated and
reaffirmed on the date of each advance of funds by Atlantic) as follows:
Section 3.1. EXISTENCE AND POWER. Homestead and each Borrower is duly
organized, validly existing and in good standing under the laws of the State of
its organization and to the extent required is qualified to do business in and
is in good standing in each jurisdiction in which it owns property; has full
power and authority to own its assets, to conduct the activities in which it is
engaged, and to own and develop each Project which it owns.
Section 3.2. AUTHORIZATION AND BINDING OBLIGATIONS. The borrowing evidenced
by the Notes and the execution, delivery and performance of this Agreement and
all other Loan
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Documents by Homestead and each Borrower (i) are within the power of the subject
entity and (ii) have been duly authorized. Each of the Loan Documents executed
by Homestead and/or any Borrower, when executed and delivered, will constitute
the legal, valid and binding obligations of such entity and are enforceable
against such entity in accordance with its respective terms, subject to
bankruptcy and insolvency laws, equitable principles, and laws affecting
creditors rights generally.
Section 3.3. NO LEGAL BAR OR RESULTANT LIEN. None of the (i) execution and
delivery of, (ii) fulfillment of the terms and conditions of, or (iii) the
consummation of the transactions contemplated by the Loan Documents to which
Homestead and/or any Borrower is a party (a) violate any provisions of the
articles or certificate of incorporation, bylaws or partnership agreement of
such entity, (b) violate or constitute a default under any contract, agreement
or instrument, or any law, ordinance, rule or regulation of any Governmental
Authority, to which such entity is subject, (c) to such entity's knowledge,
violate or constitute a default under any Governmental Requirement so as to
create a Material Adverse Effect or (d) to such entity's knowledge, result in
the creation or imposition of any lien upon any property of such entity, other
than those permitted by this Agreement.
Section 3.4. NO CONSENT. The execution, delivery and performance of the
Loan Documents to which Homestead and/or each Borrower is a party does not
require the consent or approval of any other person, including, without
limitation, any financial institution or other creditor of such entity, any
trustee, conservator, receiver or administrator, or any regulatory authority or
governmental body of the United States of America or any state thereof or any
Governmental Authority.
Section 3.5. COMPLIANCE WITH LAWS. All Plans, Projects, Properties,
Improvements and their intended use presently comply, and throughout the term of
this Agreement will continue to comply, in all material respects with all
Governmental Requirements and all public and private restrictions or other
agreements affecting each such Property, including, without limitation, building
codes, special use permits, zoning codes, Environmental Laws, applicable
requirements of fire underwriters, restrictive covenants, easements and other
agreements affecting the Property. All Permits currently required by
Governmental Requirements to be obtained for the Projects now subject to this
Agreement have been obtained, and neither Homestead nor any Borrower has any
reason to believe that any Permits that subsequently may be required to enable
it to construct, occupy, operate, use or sell any of the Property will not be
obtained in due course.
Section 3.6. LITIGATION. Except as disclosed to Atlantic in writing, at the
date of this Agreement there is no litigation, legal, administrative, or
arbitral proceeding, investigation or other action of any nature pending or, to
the knowledge of Homestead or any Borrower,
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threatened against or affecting any Borrower or Homestead that involves the
possibility of any judgment or liability (not fully covered by insurance) that
would have a Material Adverse Effect.
Section 3.7. DEFAULTS. To the knowledge of Homestead and each Borrower,
neither Homestead nor any Borrower is in default, and no event or circumstance
has occurred that, but for the passage of time or the giving of notice, or both,
would constitute a default, in any respect under any agreement of instrument
that may have a Material Adverse Effect. No Event Default has occurred
hereunder.
Section 3.8. STATUS OF PROPERTY. The Borrower delivering any Security
Documents to Atlantic is the fee simple owner of the subject Property free and
clear of all restrictions, covenants, easements, liens and encumbrances,
including, without limitation, mechanics', materialmen's and suppliers' liens
(except liens securing Atlantic and matters reflected in the Title Policy). To
Homestead and each Borrower's knowledge: each Property is a legal lot under
applicable laws, statutes, ordinances and regulations of the governing
jurisdiction; each Property is carried, or is in the process of being changed so
as to be carried, on the tax rolls of the governing jurisdiction as a separate,
subdivided parcel; each Property has, or will have upon completion of
construction, full access to the public highways and to the services of all
utilities, including water, storm sewer, sanitary sewer, electricity and
telephone, required to serve the intended use of the Property; each Property
under construction or completed is zoned under applicable zoning laws and
ordinances so as to permit the construction and development of the Project
planned for such Property and the use and occupancy of the Property as
contemplated under this Agreement; and each Property under construction or
completed currently complies in all material respects with such laws and
ordinances and with all private restrictions applicable thereto and any special
use permit, variance, exception, or other special zoning authorization
applicable thereto; each Property currently complies in all material respects
with all Governmental Requirements applicable thereto. To Borrower's knowledge,
the liens of the Security Documents executed by it are valid liens covering the
subject Properties.
Section 3.9. USE OF PROCEEDS. None of the proceeds of the Loans has been or
shall be used to purchase or carry, or to reduce or retire or refinance any
credit incurred to purchase or carry, any margin stock (within the meaning of
Regulations G and U of the Board of Governors of the Federal Reserve System) or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.
Section 3.10. REAL PROPERTY ENVIRONMENTAL MATTERS. To the actual knowledge
of Homestead and each Borrower, except as disclosed in the environmental audits
prepared for Homestead and/or any such Borrower and delivered to Atlantic, no
hazardous substances or solid waste are located at or on or have been disposed
of or otherwise released on or to any of the Properties in violation of any
Environmental Laws.
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Section 3.11. FINANCIAL CONDITION. All financial statements delivered to
Atlantic concerning Homestead and each Borrower fairly and accurately present
the financial condition of such entities as of the date of such statements and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, and there are no contingent liabilities not
disclosed thereby which would have a Material Adverse Effect. Since the close of
the period covered by the latest financial statements delivered to Atlantic with
respect to Homestead's and each Borrower's assets, liabilities, or financial
condition, no event has occurred (including, without limitation, any litigation
or administrative proceedings) and no change in such entities' financial
condition exists or, to the knowledge of Homestead or any Borrower, is
threatened, which (i) materially adversely affects a Borrower's ability to
perform its obligations under the Loan Documents, (ii) constitutes or which
after notice or lapse of time, or both, would constitute a Default hereunder, or
(iii) materially adversely affects the validity or priority of the lien of the
Security Documents on any Borrower's Property or the financial condition of
Homestead or any Borrower.
Section 3.12. NO CONDEMNATION. No taking of any Property or any material
part thereof, through eminent domain, conveyance in lieu thereof, condemnation
or similar proceeding is pending or, to the best of Homestead's and each
Borrower's knowledge, threatened by any governmental agency.
Section 3.13. NO ACTIONS. There is no action, proceeding or investigation
pending or, to the best of Homestead's and each Borrower's knowledge, threatened
(or any basis therefor) which questions, directly or indirectly, the validity of
this Agreement, the Notes, the Security Documents, or any other Loan Document or
any action taken or to be taken pursuant hereto or thereto.
Section 3.14. NO ADVERSE CONDITIONS. To the best of Homestead's and each
Borrower's knowledge, there are no existing, pending or threatened events which
could materially adversely affect any of the Properties or the operation
thereof.
ARTICLE 4.
COVENANTS
Each Borrower will, at all times, comply with the covenants contained in
this Article 4 from the date hereof and for so long as any part of the Loans is
outstanding.
Section 4.1. CONSTRUCTION OF IMPROVEMENTS. Each Borrower will proceed with
the design, engineering and construction of its Improvements with reasonable
diligence and continuity and will endeavor in good faith to complete the design,
engineering and construction
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of its Improvements substantially in accordance with the applicable Project
Schedule, subject to Force Majeure, and substantially in accordance with the
Plans for such Improvement and applicable Governmental Requirements.
Section 4.2. PLANS; PROJECT BUDGETS; PROJECT SCHEDULES AND MATERIAL
CHANGES. Prior to the date hereof, Homestead has delivered to Atlantic and
Atlantic has approved Homestead's Prototypical Plans, Prototypical Project
Budget and Prototypical Project Schedule. So long as the Plans and Project
Budget (including the Development Budget which is a part of the overall Project
Budget) for a given Project do not contain any Material Change and the Project
Schedule does not deviate in any material respect from the Prototypical
Schedule, no further approval by Atlantic of the Plans, Project Schedule or
Project Budget for a Project shall be required. Borrower shall not, however,
make any Material Change in the Plans for any of its Projects or construct any
Improvements which are not substantially in accordance with the Prototypical
Plans or make any change to any Plans or install any material or equipment which
would constitute a Material Change, without Homestead's obtaining in each
instance Atlantic's prior written consent, which consent shall not be
unreasonably withheld or delayed. Homestead shall promptly notify Atlantic in
writing of any Material Change desired by a Borrower, which notice shall be
accompanied by such plans or other information as may reasonably be necessary
for Atlantic to evaluate the proposed Material Change. Atlantic shall deliver
written notice to Homestead within 10 Business Days after receipt of the
requested Material Change stating whether such Material Change has been approved
or disapproved by Atlantic.
Section 4.3. INSPECTION AND EXAMINATION. Borrower will permit
representatives and agents of Atlantic to enter each Property owned by such
Borrower at all reasonable times to inspect the progress of the construction of
the subject Improvements and all materials to be used therein and to examine all
detailed plans and shop drawings which are or may be kept at the construction
site, and such Borrower will use reasonable efforts to cause the Contractor and
all Subcontractors to cooperate with Atlantic or its representatives in such
inspections or examinations. Homestead and each other Borrower shall also
permit representatives and agents of Atlantic to examine their respective books,
records and accounting data applicable to the Loans and the subject Projects
(and to make extracts therefrom or copies thereof) and, to the extent Homestead
or such Borrower has such right, all Contractor's and Subcontractors' books,
records and accounting data applicable to the subject Project.
Section 4.4. PERMITS AND APPROVALS. Borrower will comply in all material
respects with, and keep in full force and effect, all Permits necessary for
ownership, development and operation of the Projects owned or operated by it.
Section 4.5. GOVERNMENTAL REQUIREMENTS. Borrower will cause all
Governmental Requirements and all restrictive covenants affecting its Projects
to be complied with in all material respects (except matters contested in good
faith by appropriate proceedings).
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Section 4.6. BOOKS AND RECORDS. Borrower will implement and maintain
payment and accounting systems which will assure accurate and complete records
of all amounts owed and paid in connection with the completion of each Project.
Borrower shall require each Contractor and each Subcontractor having a
subcontract in excess of $100,000 to deliver lien waivers or releases as a
condition to receiving payments. Contractor lien waivers shall cover the amount
paid to the Contractor under its application for payment for the month or other
payment period just ending; Subcontractor lien waivers shall cover the amount
paid to such Subcontractor pursuant to the Contractor's application for payment
for the immediately preceding month or other payment period.
Section 4.7. TITLE TO PROPERTY AND IMPROVEMENTS. Neither the legal or
beneficial title and ownership of a Borrower in the Property(ies) and
Improvements or any portion thereof owned by it will be conveyed, pledged or
encumbered in any way other than to Homestead or a Homestead Affiliate without
the consent of Atlantic, which may be granted or denied in Atlantic's sole and
absolute discretion. Borrower will promptly pay and discharge prior to the date
when any interest or penalties shall accrue thereon, all taxes, levies, charges,
impositions, water and sewer rents, and assessments of every kind or nature,
whether foreseen or unforeseen and whether general or special, which are now or
shall hereafter be charged or assessed against the Property(ies) or the
Improvements owned by it, or any part thereof, or which may become a lien
thereon (except matters contested in good faith by appropriate proceedings and
for which adequate reserves have been provided).
Section 4.8. COSTS AND EXPENSES. Borrower shall pay any out-of-pocket
expenses reasonably incurred by Atlantic in the enforcement or collection of the
Loans, including without limitation, attorneys' fees and expenses, records
searches, documentary stamps, transfer taxes and recording taxes and court
costs.
Section 4.9. USE OF ADVANCES. Borrower shall not apply any advances of Loan
proceeds to costs other than those incurred in connection with the subject
Future Project or Project for which the advance has been made. Borrower shall
not apply such advances to the cost of acquiring any additional real property
other than a Project. Borrower shall not receive or apply advances of Loan
proceeds except to the purposes for which such proceeds have been advanced by
Atlantic, and in accordance with the provisions of the Loan Documents generally.
Section 4.10. INSURANCE. Borrower shall keep in full force and effect at
all times the policies of insurance applicable to the Property owned by it and
required by the Security Documents, and Borrower shall provide Atlantic with
evidence of such insurance upon receipt or request therefor.
Section 4.11. ENVIRONMENTAL MATTERS. Borrower shall not, by any act or
omission, cause or permit any hazardous substances, solid wastes or other
pollutants to exist on or about
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any Project in violation of Environmental Laws. In the event of a breach of the
foregoing provision, Homestead and the subject Borrower shall remove the same
(or if removal is prohibited by law, take whatever action is required by law)
promptly upon discovery at Homestead's and such Borrower's sole expense.
Homestead will promptly notify Atlantic in writing of any existing, pending or
threatened action, investigation or inquiry by any Governmental Authority of
which it has knowledge relating to any Property in connection with any
Environmental Laws.
Section 4.12. SELECTION OF ARCHITECTS; CONTRACTORS; INSPECTING A/E'S. Prior
to the date hereof, Homestead has delivered to Atlantic and Atlantic has
approved, a list of potential Contractors, Architects, Consultants and
Inspecting A/E's that Homestead, or any of its Subsidiaries, has or may retain
in connection with any Project funded, or to be funded, under this Agreement.
Homestead may, from time to time, subject to the prior written approval of
Atlantic, add Contractor, Architect, Consultant and Inspecting A/E names to such
list. So long as any Contractor, Architect, Consultant and Inspecting A/E
retained by Homestead or a Subsidiary in connection with a Project is on such
pre-approved list, no further approval of such hiring by Atlantic shall be
required. If Homestead or any Subsidiary desires to retain a Contractor,
Architect, Consultant or Inspecting A/E not on the current pre-approved list,
then prior to retaining such individual or entity, Homestead shall be required
to obtain the prior written approval of Atlantic, such approval not to be
unreasonably withheld or delayed, and such approval shall be deemed given if
Atlantic does not deliver written notice of objection to Homestead within 10
Business Days after receipt by Atlantic of a request for approval from
Homestead.
Section 4.13. FURTHER ASSURANCES. Homestead and each Borrower shall execute
such further documents, agreements and instruments, and take all other actions,
as may reasonably be necessary to carry out the purposes of the Loan Documents
or to protect and enforce the validity and priority of the Security Documents.
Section 4.14. QUARTERLY STATEMENTS. Within 20 Business Days after the
expiration of each calendar quarter, Homestead shall deliver to Atlantic a
written summary (each, a "Quarterly Statement") containing a status report for
each Future Project or Project then being funded pursuant to this Agreement,
indicating whether and to what extent each such Future Project or Project is
proceeding substantially on schedule and on budget or, if not, the amount of any
overrun and/or schedule slippage and setting forth in reasonable detail any
efforts being undertaken to remedy any noted material problems. Each Quarterly
Statement shall also include any pertinent information in respect of Future
Projects and the anticipated timing of when any such Future Projects may be
acquired and construction commenced and such other information as Homestead may
deem appropriate, or Atlantic may reasonably request, to keep Atlantic
reasonably apprised of the status of the Future Projects.
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Section 4.15. CONTINUED EXISTENCE. Homestead and each Borrower shall at all
times preserve and keep in full force and effect its existence and rights and
franchises material to its business and rights and franchises material to its
business and properties.
Section 4.16. DEFAULTS UNDER OTHER LOANS. Borrower shall notify Atlantic in
writing within fifteen (15) days following Borrower's receipt of notice of a
default under any document or instrument governing, evidencing, securing, or
otherwise relating to any loan (other than the Loan) made to Borrower.
ARTICLE 5.
ADVANCE CONDITIONS
Section 5.1. CONDITIONS PRECEDENT TO FIRST ADVANCE UNDER THIS AGREEMENT.
Atlantic shall not be obligated to advance funds pursuant to this Agreement
until each of the following conditions is fulfilled:
(a) Receipt by Atlantic of each of the following:
(i) evidence reasonably satisfactory to Atlantic that Homestead,
either directly or through one or more of its Subsidiaries, has
expended at least $16,824,509 of its own funds in developing
and placing in operation Homestead Village projects in the
Geographic Area (the "Equity Projects");
(ii) duly executed Security Documents creating first and prior liens
on all of the Equity Projects;
(iii) a fully executed copy of this Agreement;
(iv) duly executed copies of each of the Notes from any Subsidiaries
owning Projects for which a Funding Notice or Acquisition
Notice has been delivered to Atlantic and Security Documents
for any Land then owned or to be acquired with such initial
funding by Homestead or any Subsidiary for which the subject
Project is to be financed with Loan proceeds, the Completion
and Payment Guaranty and all other Loan Documents Atlantic may
reasonably require to be executed and delivered in connection
with the first advance hereunder;
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(v) Title Policies for all Properties then subject to Security
Documents or to be made subject to Security Documents
contemporaneously with the first advance of Loan proceeds (or
an irrevocable commitment to issue each such Title Policy),
effective as of the date of the Notes, in form and substance
satisfactory to Atlantic in its reasonable judgment, confirming
the first priority status and validity of the lien of the
Security Documents on the Property to secure the obligations
under the Notes, the Security Documents and the other Loan
Documents;
(vi) for each Project then subject to this Agreement, a survey of
the subject Land, and a geotechnical report and environmental
audit, satisfactory to Atlantic, in its reasonable judgment;
(vii) opinions of counsel reasonably satisfactory to Atlantic
addressing the following matters:
(A) each Borrower then executing and delivering any Loan
Documents is duly organized and validly existing, and in
good standing and authorized to do business in each state
in which it owns a Project, with power and authority to
own its Projects and to perform its obligations under the
Loan Documents to which it is a party and to carry on its
business as it is now being conducted;
(B) the execution, delivery and performance of the Loan
Documents delivered by each such Borrower have been duly
and validly authorized by all necessary action of such
Borrower; and
(C) the Loan Documents executed by each such Borrower
constitute valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their
respective terms, except as such enforcement may be
limited by applicable bankruptcy laws and other customary
exceptions;
(viii) for each Project then under construction or completed,
certificates of insurance confirming the existence of all
insurance required by Section 4.9 hereof;
(ix) Copies of the Plans, Project Budget and Project Schedule for
each Project then under construction or then being added to
this Agreement; and
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(x) Certification from Homestead that any Property(ies) then being
added to this Agreement either contain no Material Changes or
any Material Changes have previously been approved by Atlantic.
(b) The Title Insurer shall have been paid all title insurance premiums,
filing fees, recording fees and taxes required for proper recording of the
Security Documents to be recorded at such time and any other Loan Document to be
filed or recorded at such time.
(c) There shall not have occurred and be continuing any Default.
(d) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising any Property then subject to any of the Security
Documents.
(e) Neither Homestead nor any Borrower shall be the subject of any
bankruptcy or similar proceeding.
(f) There shall not have occurred and be continuing beyond any applicable
cure or grace period any default under any of the Prior Loan Documents.
(g) The representations and warranties set forth in Article 3 hereof shall
be true and correct in all material respects with respect to each Project then
subject to the Security Documents.
Section 5.2. CONDITIONS PRECEDENT TO FIRST ADVANCE FOR NEW PROJECT.
Atlantic shall not be obligated to advance funds in respect of a new Future
Project for which Pursuit Costs are to be funded or for any Project to be
acquired by Homestead or any Subsidiary until each of the following conditions
is fulfilled:
(a) The conditions precedent set forth in Section 5.1 shall remain
satisfied.
(b) Receipt by Atlantic of each of the following for each Future Project
for which Pursuit Costs are to be funded:
(i) a Funding Notice for the subject Future Project;
(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Future
Project whereby such Subsidiary agrees to be bound by the terms
of this Agreement with respect to the subject Future Project;
and
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(iii) a Development Budget and Development Schedule for the subject
Future Project.
(c) Receipt by Atlantic of each of the following for each Project:
(i) an Acquisition Notice for the subject Project;
(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Project
whereby such Subsidiary agrees to be bound by the terms of this
Agreement with respect to the subject Project;
(iii) duly executed copies of any Homestead Security Documents,
Partnership Security Documents or Subsidiary Security
Documents, any Subsidiary Note, and any other Loan Documents
which Atlantic may reasonably require to be executed and
delivered in connection with such Project;
(iv) an opinion of counsel addressing, as to the subject Borrower
and the Loan Documents then being executed by such Borrower,
the matters set forth in Section 5.1(a)(viii) above;
(v) the Title Policy for the subject Property (or irrevocable
commitment to issue such Title Policy), effective as of the
date of the first advance in respect of such Project, in form
and substance satisfactory to Atlantic in its reasonable
judgment, confirming the first priority status and validity of
the lien of the Security Documents on the Property to secure
the obligations under the Notes, the Security Documents and the
other Loan Documents;
(vi) a survey of the subject Land, and a soils report, geotechnical
report and environmental audit of the Land, satisfactory to
Atlantic, in its reasonable judgment; and
(vii) Copies of the Plans, Project Budget and Project Schedule for
the subject Project.
(d) With respect to each Project, the Title Insurer shall have been paid
all title insurance premiums, filing fees, recording fees and taxes required for
proper recording of the Security Documents to be recorded at such time and any
other Loan Document to be filed or recorded at such time.
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(e) There shall not have occurred and be continuing any Default.
(f) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising the Property.
(g) The Completion and Payment Guaranty shall be in full force and effect.
Section 5.3. INITIAL IMPROVEMENT ADVANCE CONDITIONS. Atlantic's initial
obligation to advance any of the Loan proceeds to a Borrower for construction of
Improvements is conditioned upon the conditions precedent set forth in Sections
5.1 and 5.2 remaining satisfied and, if requested by Atlantic, receipt of the
following:
(a) Evidence of the issuance of all Permits required by any Governmental
Authority as a condition to the commencement of construction of the subject
Improvements.
(b) A copy of the Construction Contract, Architect's Agreement and any
Consultants' Agreements for the subject Project.
(c) Certificates of insurance and other certificates or information in
form and substance reasonably satisfactory to Atlantic confirming the existence
of all insurance required by Section 4.9 hereof.
(d) An executed Contractor's Certificate, Architect's Certificate and
Consultants' Certificates from the Contractor, Architect and Consultants
performing services to the subject Project.
(e) Such further financing statements and security agreements, executed
and acknowledged by the subject Borrower, relating to construction materials for
the subject Project as Atlantic may reasonably require.
(f) Evidence of the availability of utilities and access to and from the
subject Project sufficient for its intended use.
Section 5.4. ADDITIONAL IMPROVEMENT ADVANCE CONDITIONS. After the initial
advance, additional advances made for the purpose of constructing any subject
Improvements shall be subject to the following conditions:
(a) The conditions precedent set forth in Sections 5.1, 5.2 and 5.3 shall
remain satisfied.
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(b) All Permits required under Governmental Requirements for construction
of the subject Improvements shall be legally valid and in force and effect.
(c) The subject Property and Improvements shall not have suffered any
damage or deterioration without provision for arrangements satisfactory to
Atlantic for the restoration and replacement of the damage or deterioration to
such Property or Improvements.
Section 5.5. FINAL-ADVANCE CONDITIONS. Atlantic's obligation to advance
any of the Loan proceeds to a Borrower for the Final Advance for the
Improvements comprising a Project is conditioned upon the following and, if
requested by Atlantic, receipt by Atlantic of evidence reasonably satisfactory
to Atlantic that such conditions have been satisfied:
(a) The completion of all Improvements in substantial accordance with the
Plans.
(b) Receipt by the Borrower of all Final CO's issued by the appropriate
Governmental Authorities for the Improvements and all other Permits necessary
for use of the subject Improvements and Property.
(c) The Inspecting A/E for the Project shall have executed a certificate
of final completion with respect to all of the Improvements required under the
applicable Construction Contract.
(d) The Contractor, all Subcontractors and other parties (including
Architects and Consultants, if applicable) who performed work for the subject
Project have been paid (or with the application of the final advance of Loan
proceeds for such Project, will have been paid) in full, except for amounts
which the Borrower in good faith disputes and/or amounts which Homestead and/or
the subject Borrower intends to pay with its own funds provided any liens filed
against the Project have been released or bonded over.
(e) Receipt by Borrower of an as-built survey showing the location of all
Improvements, including parking areas, streets and the location of all utilities
and other easements, encroachments and building set back lines, if any, together
with delivery to Atlantic of an endorsement to the Title Policy removing any
exception for matters of survey.
(f) All remaining punchlist items have been completed by the Contractor
and approved by the Borrower.
(g) All conditions precedent to the "Final Payment" required under the
Construction Contract shall have been satisfied.
(h) The Project is otherwise ready for immediate occupancy by guests.
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ARTICLE 6.
PROCEDURE FOR ADVANCES; RESERVES
Section 6.1. GENERAL. Atlantic will disburse the proceeds of the Loans on a
monthly basis for the cost categories set forth in the applicable Development
Budgets and Project Budgets. Homestead shall submit a written request for
advance in a form approved by Atlantic by the 25th day of each month and,
provided Atlantic determines that all conditions precedent to the advance have
been satisfied, disbursements will be made by the 1st day of the immediately
following month. Each request for advance shall set forth, on a Project-by-
Project basis, Homestead's reasonable estimate of the hard and soft costs and
expenses incurred during the month just ending and for which reimbursement is
being sought. With each request for advance after the first, Homestead shall
also provide a reconciliation indicating the amount by which the immediately
preceding advance made by Atlantic exceeded the actual hard and soft costs for
the period covered by such advance and the amount by which the request for
advance for the month just ending has been adjusted on account of any over- or
underpayment by Atlantic for the preceding month. With respect to the final
advance of Loan proceeds in respect of a Project, if the final reconciliation
submitted in the month following such advance reflects that Loan proceeds in
excess of actual costs were advanced, such overpayment (together with accrued
and unpaid interest thereon) shall be repaid by Borrower to Atlantic within 15
days after such reconciliation is delivered to Atlantic. Any additional Loan
proceeds owing to Borrower on the basis of such final reconciliation shall be
advanced by Atlantic with the balance of the monthly advance made by Atlantic
under this Section 6.1.
All disbursements with respect to any request for an advance submitted
other than on the 25th day of a month will be made within ten (10) business days
after the later of (i) receipt by Atlantic of a written request for an advance
from Homestead in a form approved by Atlantic and (ii) Atlantic's determination
that all conditions precedent to the advance have been satisfied.
All disbursements shall be made in accordance with any instructions
contained in the Homestead request for advance.
Section 6.2. PAYMENTS TO ATLANTIC. Notwithstanding any other provisions of
this Agreement, Atlantic may, at it's option and without notice or authorization
by Homestead or any Borrower, use any Loan proceeds to pay, as and when due, any
interest on the Loans. The parties acknowledge that the Loans provide for
interest reserves in amounts sufficient to pay all interest due and payable in
respect of each Project through completion of same, and Homestead and each
Borrower specifically authorizes Atlantic to advance portions of such interest
reserves to pay interest on the Loans as and when the same comes due.
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Section 6.3. RETAINAGE AND CONTRACTOR'S FEE HOLDBACK. The parties
acknowledge that Atlantic shall retain, and Homestead shall not request
disbursement, of any retainages provided for under any Construction Contract,
which amounts shall be retained by Atlantic to secure full and complete
performance of all construction obligations hereunder (hereinafter, the
"Retainage Holdback"). Provided no Default exists hereunder, Atlantic shall
disburse the Retainage Holdback in accordance with the provisions of the
applicable Construction Contract as requested by Homestead in its requests for
advances. Upon the occurrence of a Default hereunder, Atlantic shall have no
obligation to make further disbursements from the Retainage Holdback, and no
Borrower shall be entitled to any such disbursements, until such Default is
cured. Upon the occurrence of an Event of Default hereunder, Atlantic may apply
the Retainage Holdback against any of the obligations secured by the Security
Documents as Atlantic sees fit or, in Atlantic's discretion, to the completion
of any incomplete Improvements. Subject to the foregoing terms and provisions,
to the extent not theretofore disbursed, Atlantic will disburse the amounts in
the Retainage Holdback in respect of a Project concurrently with the Final
Advance for such Project.
Section 6.4. INTEREST RESERVE. Atlantic shall, on the date hereof, withhold
from the proceeds of the Loans available for distribution the amount of Six
Million, Eight Hundred Thirty-Five Thousand, Seven Hundred Thirty-Six Dollars
($6,835,736) (the "Interest Reserve"). Provided no Default exists hereunder, the
Interest Reserve shall be disbursed for the payment of interest on the Loans as
such interest becomes due and payable. Upon the occurrence of a Default
hereunder, Atlantic shall have no obligation to make further disbursements from
the Interest Reserve, and no Borrower shall be entitled to any such
disbursements, until such Default is cured. Should interest payable on the Loans
exceed the amount of the Interest Reserve, the Borrowers shall promptly pay such
amounts. Upon the occurrence of an Event of Default, Atlantic may apply any
undisbursed portion of the foregoing reserve against any of the obligations
secured by the Security Documents as it sees fit or, at Atlantic's discretion,
to the completion of and incomplete Improvements.
Section 6.5. OWNER'S CONTINGENCY. The parties acknowledge that each Project
Budget shall contain an owner's contingency (an "Owner's Contingency") equal to
no less than 2% of Project hard and soft costs contained within the Project
Budget. Provided no Default exists hereunder, the Owner's Contingency for a
Project shall be disbursed by Atlantic to the subject Borrower to cover
unanticipated Project costs, costs associated with change orders and hard and
soft cost overruns (before such Borrower or Homestead, as guarantor under the
Completion and Payment Guaranty, shall be required to cover such additional
costs pursuant to the provisions of Section 6.6 hereinbelow or the Completion
and Payment Guaranty) as and when such payments are due and payable. Requests
for disbursement of portions of the Owner's Contingency shall be made with
Homestead's monthly requests for advance of Loan proceeds. Upon the occurrence
of a Default hereunder, Atlantic shall have no obligation to advance any portion
of the Owner's Contingency until such Default is cured. Upon the occurrence of
an
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Event of Default, Atlantic may apply the Owner's Contingency against any of the
obligations secured by the Security Documents as Atlantic sees fit, or at
Atlantic's option, to the completion of any incomplete Improvements.
Section 6.6. COST OVERRUNS AND SAVINGS; CHANGE ORDER RESERVE. In the event
that the costs to acquire and complete any Project in its entirety, including,
without limitation, the furnishing thereof, exceed the amount of Loan proceeds
available for the subject Project (including the applicable Owner's
Contingency), then the subject Borrower shall with its own funds pay all costs
and expenses which may be required to complete the subject Project as and when
such costs and expenses become due and payable. In the event the costs to
acquire and complete any Project are less than the amount of Loan proceeds
allocated to the subject Project, then the unapplied portion of the Loan
proceeds (including any unexpended portion of the applicable Owner's Contingency
and amounts required to be refunded by Borrower under Section 6.1 for any
overpayments of Loan proceeds made in the final advance for a Project) shall be
retained by Atlantic as a reserve for Change Orders on other Projects which are
made in accordance with the requirements of this Agreement (the "Change Order
Reserve"). Provided no Default exists hereunder, the Change Order Reserve shall
be disbursed by Atlantic to any Borrower from time to time to cover the costs of
Change Orders to the extent any such Change Order results in Project costs
exceeding the Project Budget, including the Owner's Contingency, for such
Project (before such Borrower or Homestead, as guarantor under the Completion
and Payment Guaranty, shall be required to cover such additional costs pursuant
to the provisions of this Section 6.6 or the Completion and Payment Guaranty).
Requests for disbursement of portions of the Change Order Reserve shall be made
with Homestead's monthly requests for advance of Loan proceeds. Upon the
occurrence of a Default hereunder, Atlantic shall have no obligation to advance
any portion of the Change Order Reserve until such Default is cured. Upon the
occurrence of an Event of Default, Atlantic may apply the Change Order Reserve
against any of the obligations secured by the Security Documents as Atlantic
sees fit or, at Atlantic's option, to the completion of any incomplete
Improvements.
ARTICLE 7.
EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
Event of Default under this Agreement:
Section 7.1. FAILURE TO PAY. The failure by a Borrower to pay when due any
sums required to be paid under the Notes, the Security Documents, this Agreement
or any other Loan Documents, and such failure is not cured within 10 days after
receipt of written notice from Atlantic.
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Section 7.2. OTHER LOAN DOCUMENT DEFAULTS. To the extent any such failure,
breach or inaccuracy has, or would have, a Material Adverse Effect, the failure
by a Borrower or Homestead to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Agreement or under any of the other Loan Documents other
than as set forth elsewhere in this Article 7 (for which no additional grace or
cure period is given by this Section 7.2, or the existence of any breach or
inaccuracy in any of the representations, covenants or warranties set forth in
this Agreement or in any of the other Loan Documents, provided, however, that
(i) no Event of Default shall exist hereunder on account of a breach of any
representation, warranty or covenant set forth in any of the other Loan
Documents (other than this Agreement) until Homestead or such Borrower, as
applicable, shall have failed to cure such breach within any applicable notice
and cure period therein provided; and (ii) no Event of Default shall exist
hereunder on account of a breach of any representation, warranty or covenant
contained herein unless and until Atlantic shall provide written notice of such
breach to Homestead or such Borrower and such entity shall fail to cure the same
within 30 days after receipt of such notice, provided if such breach is of such
a nature that it cannot be cured within such 30 day period, it shall not
constitute an Event of Default hereunder so long as Homestead or such Borrower,
as applicable, commences its cure of such breach within such 30 day period and
thereafter diligently and continuously proceeds with the curing of same within a
reasonable period of time not to exceed 180 days.
Section 7.3. JUDGMENT OR ATTACHMENT. The entry by any court of a final
judgment in excess of $500,000 against Homestead or a Borrower that is not
satisfactorily stayed or discharged within 30 days from the date thereof, or any
attachment of any of the Properties or any of the proceeds of the Loans that
shall not be released, stayed or otherwise provided for to Atlantic's
satisfaction within 30 days after the occurrence thereof; provided that in the
case of a stay, Homestead or the subject Borrower, as applicable, shall have
reserved for the full amount thereof.
Section 7.4. VIOLATION OF GOVERNMENTAL REQUIREMENTS. The institution of any
judicial or administrative proceeding alleging that any of the Improvements
violate any Governmental Requirements if such violation gives rise to a Material
Adverse Effect and the failure to have such proceeding dismissed or such
violation corrected within 30 days after the institution thereof, except that
Homestead or the applicable Borrower shall have the right to contest any such
proceeding beyond such 30 day period, provided that Atlantic is satisfied that
the prosecution of such proceeding will neither have any Material Adverse Effect
nor materially impair Atlantic's security.
Section 7.5. INSOLVENCY, ETC. The occurrence of any of the following:
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(a) Homestead or any Borrower shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors;
(b) Homestead or any Borrower shall commence any case, proceeding or other
action seeking reorganization, arrangement, adjustment, liquidation, dissolution
or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property;
(c) Homestead or any Borrower shall take any corporate action to authorize
any of the actions set forth above in paragraphs (a) or (b); or
(d) Any case, proceeding or other action against Homestead or any Borrower
shall be commenced seeking to have an order for relief entered against it as
debtor, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding or
other action (i) results in the entry of an order for relief against it which is
not fully stayed within 15 Business Days after the entry thereof or (ii) remains
undismissed for a period of 60 days.
Section 7.6. UNAPPROVED TRANSFER. Any sale, conveyance, transfer,
disposition, alienation, hypothecation, leasing (except in the ordinary course
of business) or further encumbrancing of a Project, or any portion thereof or
any interest therein, by any Borrower, other than any conveyance of a portion of
the unimproved land associated with such Project which is in excess of what is
needed for such Project (which conveyance is permitted), or a sale, conveyance,
transfer, disposition, alienation, hypothecation or encumbrancing of any legal
or equitable interest in a Borrower or Homestead in violation of the Loan
Documents shall be an Event of Default as of the date of such transfer, without
any right to cure. In the case of a permitted conveyance of excess land, as
hereinbefore provided, Lender shall, upon request of Homestead, execute a
partial release, releasing the lien of any Security Documents applicable to such
excess land.
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ARTICLE 8.
REMEDIES
Section 8.1. GENERAL. Upon the occurrence of any Event of Default an
defined in Article 7 of this Agreement, Atlantic, at its option, shall have the
following rights and remedies:
(a) Atlantic may declare any one or more of the Notes to be
immediately due and payable, whereupon the Notes shall become forthwith due and
payable without presentment, demand, protest or further notice of any kind.
(b) Atlantic may bring a foreclosure action with respect to the
Security Documents, take possession of any one or more of the Properties or
exercise any other remedy provided for in the Security Documents.
(c) Atlantic shall be entitled to proceed simultaneously, or
selectively and successively, to enforce its rights and remedies under the
Notes, the Security Documents, the Completion and Payment Guaranty or this
Agreement, and to exercise any or all other rights and remedies available to
Atlantic at law or in equity.
(d) In the event Atlantic shall elect to enforce its rights
selectively under any one or more of the Loan Documents, such action shall not
be deemed a waiver or discharge of any lien or encumbrance securing payment of
the Notes until such time as Atlantic shall have been paid in full all sums due
under the Notes or secured by the Security Documents, including any sums
advanced or disbursed pursuant to this Agreement. The foreclosure of any lien
provided pursuant to this Agreement or the Security Documents, without the
simultaneous foreclosure of all such liens, shall not merge the liens granted
which are not foreclosed with any interest which Atlantic might obtain as a
result of such selective and successive foreclosure.
(e) Atlantic shall have the right, but not the obligation, to take
possession of any one or more of the Properties and proceed to complete the
Improvements thereto according to the applicable Plans. For this purpose, each
Borrower hereby conditionally assigns to Atlantic as additional security for the
repayment of the Loans all of each such Borrower's rights to the Plans for the
Projects owned by it, any contracts pertaining to the Project owned by such
Borrower, whether for construction, sale or otherwise, and any Permits
pertaining to the subject Property(ies); provided, Atlantic shall, upon
occurrence of an Event of Default, have the option to exercise this assignment,
but shall not be obligated to accept this assignment or to assume any liability
of any Borrower under any such Plans, contracts or Permits. Furthermore, each
Borrower hereby constitutes and appoints Atlantic as its true and lawful
attorney-in-fact with full power of substitution to complete, or cause to be
completed, the Improvements owned by such Borrower in the name of such Borrower
and hereby empowers said attorney or attorneys as
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follows: (i) to use any funds of Borrower, including any balance that may be
held in escrow and any funds which may remain unadvanced hereunder, for the
purpose of completing the Improvements being built by such Borrower; (ii) to
make such additional changes and corrections in the Plans for such Improvements
as may reasonably be necessary or desirable to complete such Improvements in
substantially the manner contemplated by the Plans for such Improvements and in
a good and workmanlike manner; (iii) to employ such contractors, subcontractors,
agents, architects and inspectors as shall be required for said purposes; (iv)
to pay, settle or compromise all existing bills and claims that are or may
become liens against the subject Property(ies) or any part thereof or may be
necessary or desirable for the completion of the subject Improvements or the
clearance of title; (v) to execute all applications and certificates in the name
of Borrower which may be required by law or by any contract relating to the
subject Improvements; and (vi) to do any and every act with respect to the
applicable Property(ies) which such Borrower may do in its own behalf. It is
understood and agreed that this power of attorney shall be deemed to be a power
coupled with an interest which cannot be revoked. Atlantic, as attorney-in-fact,
shall also have the power to defend, to the extent Atlantic reasonably deems
necessary, at such Borrower's cost, all actions or proceedings in connection
with the subject Improvements and Property(ies). At the time Atlantic takes
possession of a Property(ies), or any part thereof, all materials on such
Property owned by Borrower shall become the property of Atlantic for the purpose
of completing the subject Improvements. In addition, any materials or equipment
paid for with the proceeds of the Notes but stored at a location other than the
subject Property(ies) shall become the property of Atlantic when it takes
possession of the subject Property(ies). Such Borrower shall pay Atlantic the
cost of completion. Each Borrower hereby authorizes Atlantic to add such costs
to the indebtedness of the Borrowers to Atlantic, which costs shall be secured
by the Security Documents. Any of the foregoing actions by Atlantic shall not
relieve the Borrowers of their responsibility to repay the Notes. The foregoing
provision shall not be construed as creating any third party beneficiary
contract and nothing in the foregoing shall be construed as giving or conferring
any rights or benefits whatsoever to or upon any other person or entities other
than the parties to this Agreement. Homestead shall indemnify, defend and hold
harmless Atlantic from and against any and all claims, liabilities, loss,
damages, suits, actions, expenses (including reasonable attorneys' fees) and
costs arising from any actions taken by Atlantic in accordance with the power of
attorney herein granted except to the extent attributable to the gross
negligence or willful misconduct of Atlantic.
(f) Atlantic shall not have any obligation to make any advances under
the Notes pursuant to this Agreement after the occurrence and during the
continuance of an Event of Default and at any time during such period, may
unilaterally elect to terminate any obligation of Atlantic to make any future
advances under the Notes pursuant to this Agreement.
Section 8.2. REMEDIES CUMULATIVE. No failure or delay by Atlantic in
the exercise of any rights or remedies available to it under the Loan Documents
or at law or in equity shall
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operate as a waiver thereof, nor shall any single or partial exercise by
Atlantic of any such right or remedy preclude any further exercise thereof or of
any other right or remedy. The remedies provided in the Loan Documents or
available at law or in equity are cumulative and not alternative.
ARTICLE 9.
MISCELLANEOUS
Section 9.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties and covenants contained herein shall survive the
execution of this Agreement, the making of the Loans and the delivery of the
Notes and other Loan Documents and the release of any portion of the liens of
the Security Documents, and shall remain in full force and effect until the
termination of this Agreement in accordance with Section 2.8 hereof.
Section 9.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, personal representatives, successors, assigns and affiliates, but shall
not be assignable by any party hereto without the prior written consent of the
other party hereto; provided that Homestead and/or the Partnership Borrower may
assign its rights hereunder in whole or in part to a Homestead Affiliate or
Subsidiary. Other than to a Homestead Affiliate or Subsidiary, no Borrower
shall, without the prior written consent of Atlantic, which consent Atlantic may
withhold in its sole discretion, directly or indirectly assign, transfer or
convey (i) this Agreement or any of the other Loan Documents, (ii) any of
Borrower's rights or obligations under any of the Loan Documents, (iii) any
portion of the proceeds of the Notes, (iv) any legal or equitable interest in
the Property or (v) any legal or equitable interest in such Borrower.
Section 9.3. NOTICES. Any notice or other communication provided for
herein or given hereunder to a party hereto shall be in writing and shall be
given by delivery, by telex, telecopier or by mail (registered or certified
mail, postage prepaid, return receipt requested) to the respective parties as
follows:
If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
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If to Atlantic:
Security Capital Atlantic Incorporated
7777 Market Center Avenue
El Paso, Texas 79912
Attention: James C. Potts
Facsimile: (915) 877-3301
or to such other address with respect to a party as such party shall notify the
other in writing.
Section 9.4. WAIVER. No party may waive any of the terms or conditions
of this Agreement, except by a duly executed writing referring to the specific
provision to be waived.
Section 9.5. AMENDMENT. This Agreement may be amended only by a
writing duly executed by both Homestead and Atlantic.
Section 9.6. SEVERABILITY. Insofar as is possible, each provision of
this Agreement shall be interpreted so as to render it valid and enforceable
under applicable law and severable from the remainder of this Agreement. A
finding that any such provision is invalid or unenforceable in any jurisdiction
shall not affect the validity or enforceability of any other provision or the
validity or enforceability of such provision under the laws of any other
jurisdiction.
Section 9.7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, among the parties hereto and their affiliates, with respect to
the subject matter hereof. The provisions of this Agreement supersede any
provisions set forth in the Existing Loan Documents relating to the disbursement
of Loan proceeds for the Projects.
Section 9.8. EXPENSES. Except as otherwise expressly contemplated
herein to the contrary, regardless of whether the transactions contemplated
hereby are consummated, each party hereto shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
Section 9.9. CAPTIONS. The Article, Section and Paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
Section 9.10. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New Mexico.
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Section 9.11. NO JOINT VENTURE OR PARTNERSHIP. Nothing contained in
this Agreement or in any of the other Loan Documents and no other aspect of the
relationship between Homestead or any Borrower and Atlantic shall be construed
as creating a partnership, joint venture, or other relationship of or between
Homestead or any Borrower and Atlantic other than the lending relationship of
lender and borrower. All rights and obligations granted to or undertaken by
either of the parties hereto shall be construed as incidents of such lending
relationship.
Section 9.12. NO THIRD PARTY BENEFICIARY RIGHTS CREATED. The parties
hereto expressly declare that it is their joint and mutual intention that this
Agreement and the transactions contemplated hereby shall not be construed as
creating a third party beneficiary contract, and neither this Agreement nor any
of the other Loan Documents shall be construed as giving or conferring any
rights or benefits whatsoever to or upon any other persons or entities other
than Homestead, any Borrower and Atlantic.
Section 9.13. INCORPORATION BY REFERENCE. This Agreement, the Notes
and the Security Documents are intended to be construed as part of the same
transaction, and all of the covenants, agreements, conditions, terms and
provisions contained in any one of the Loan Documents shall be deemed to be
included in each of the other Loan Documents with the same force and effect as
though set forth in full therein. In the event any of the provisions of this
Agreement are in conflict with or inconsistent with the provisions of the
Security Documents, this Agreement shall govern and control.
Section 9.14. COUNTERPARTS. This Agreement may be executed in
counterpart copies, each of which shall constitute an original, and all of which
together shall constitute one and the same document.
Section 9.15. SCOPE OF REVIEW OF PLANS. Neither the approval of the
Plans nor any subsequent inspections or approvals of the Improvements during
construction shall constitute a warranty or representation by Atlantic or any of
its agents, representatives or designees as to the technical or legal
sufficiency, adequacy or safety of the structures or any of their component
parts, including without limitation fixtures, equipment or furnishings, nor
shall such approvals or inspections constitute such a warranty or representation
as to the subsoil conditions involved in the Property or any other physical
condition or feature pertaining to the Property. All acts, including any failure
to act, relating to the Property by any agents, representatives or designees of
Atlantic are performed solely for the benefit of Atlantic to assure repayment of
the Loans and are not for the benefit of Borrower or any other person, including
without limitation purchasers, guests or other occupants.
Section 9.16. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, Atlantic shall not be obligated to
extend credit to Borrower in an
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amount in violation of any limitation or prohibition provided by any applicable
governmental statute or regulation.
Section 9.17. SUBORDINATION. Each Borrower hereby subordinates all
rights, liens and claims for any of the proceeds and advances under the Notes to
the liens, operation and effect of the Security Documents.
Section 9.18. INDEMNITY. Homestead and each Borrower agree to
indemnify, defend and hold Atlantic harmless from and against any and all
claims, injuries, damages and liabilities that may be asserted or claimed
against Atlantic by any person as a result or by reason of, or that may be
incurred or suffered by Atlantic as a result or by reason of, the construction
contemplated herein or the operation of the ownership or Encumbered Property or
any part thereof.
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IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL ATLANTIC INCORPORATED
By: /s/ James C. Potts
------------------
James C. Potts
Co-Chairman
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EXHIBIT D
AMENDED AND RESTATED PROMISSORY NOTE
$79,290,895 May 28, 1996
This Amended and Restated Promissory Note (this "Note") is made and
delivered as of May 28, 1996, to Security Capital Pacific Trust, a Maryland real
estate investment trust ("Lender"), by PTR Homestead Village Limited
Partnership, a Delaware limited partnership ("Borrower"), under the following
circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the "Partnership
Loan") to Borrower, to fund, among other matters, acquisition and construction
costs and expenses incurred by the Partnership in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith Borrower delivered to Lender that certain promissory note (the "Prior
Partnership Note") dated January 24, 1996, in the original principal amount of
$63,314,441, and various deeds of trust and mortgages (the "Prior Partnership
Security Documents"), to secure payment of the Prior Corporate Note (as defined
below) and the Prior Partnership Note. (The Prior Partnership Note, the Prior
Partnership Security Documents and all other instruments delivered by the
Partnership in connection therewith to secure the Prior Partnership Note and the
Prior Corporate Note are herein called the "Prior Partnership Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to PTR Homestead Village Partnership Incorporated (the "Corporate
Borrower"), to fund, among other matters, acquisition and construction costs and
expenses incurred by the Corporate Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Corporate Borrower delivered to Lender that certain promissory
note (the "Prior Corporate Note") dated January 24, 1996, in the original
principal amount of $84,850,391, and various deeds of trust and mortgages (the
"Prior Corporate Security Documents"), to secure payment of the Prior Corporate
Note and the Prior Partnership Note. (The Prior Corporate Note, the Prior
Corporate Security Documents and all other instruments delivered by the
Corporate Borrower in connection therewith to secure the Prior Corporate Note
and the Prior Partnership Note are herein called the "Prior Corporate Loan
Documents"; the Prior Corporate Loan Documents and Prior Partnership Loan
Documents are collectively referred to herein as the "Prior Loan Documents".)
<PAGE>
C. Borrower, the Corporate Borrower and Lender desire to continue the
funding provided for under the Prior Loan Documents, to provide funds to
Borrower and the Corporate Borrower for the costs incurred in connection with
the acquisition and development of Homestead Village projects. In furtherance of
the foregoing, Borrower, the Corporate Borrower and Lender have agreed that (i)
the maximum amount of the Corporate Loan shall be $127,602,594 (the "Maximum
Corporate Loan Amount"); (ii) the Corporate Borrower's repayment obligation for
funds advanced in respect of the Corporate Loan, as evidenced by that certain
Amended and Restated Promissory Note, of even date herewith (the "Corporate
Note"), shall be adjusted by a premium factor of 1.113164866782 (the "Premium
Factor"), thus providing for the maximum face amount of the Corporate Note of
$142,042,725 (i.e., the Maximum Corporate Loan Amount as adjusted by the Premium
Factor); (iii) the maximum amount of the Partnership Loan shall be $71,230,145
(the "Maximum Partnership Loan Amount"); (ii) the Partnership's repayment
obligation for funds advanced in respect of the Partnership Loan shall be
adjusted by the Premium Factor, thus providing for the maximum face amount this
Note of $79,290,895 (i.e., the Maximum Partnership Loan Amount as adjusted by
the Premium Factor); and (iv) in connection therewith, the Prior Loan Documents
shall be amended and restated in conformity with the foregoing and as otherwise
agreed by the parties. (The Corporate Loan and the Partnership Loan are herein
collectively called the "Loans". The amended and restated Prior Loan Documents
being executed and delivered contemporaneously herewith, and any and all other
agreements or instruments now or hereafter executed by Borrower, the Corporate
Borrower or any other person or entity to evidence, or in connection with, or as
security for the payment of this Note and/or the Corporate Note are herein
collectively, with such notes, referred to as the "Loan Documents".)
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree to amend and restate the Prior
Partnership Note as follows:
1. Promise to Pay.
--------------
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) SEVENTY NINE MILLION TWO HUNDRED NINETY
THOUSAND EIGHT HUNDRED NINETY FIVE DOLLARS ($79,290,895) and (B) the aggregate
unpaid principal amount of all advances made by Lender to Borrower in respect of
the Partnership Loan, multiplied by the Premium Factor (the amount so determined
being herein called the "Adjusted Principal Amount"), together with interest on
the Adjusted Principal Amount at a rate equal to 9.0% (the "Interest Rate").
Interest shall be calculated on the basis of a 360-day year and shall be
computed on the actual number of days elapsed.
2. Payments.
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Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period. Borrower shall make a payment of the
total Adjusted Principal Amount then outstanding, together with accrued and
unpaid interest to such date, on the Due Date. Borrower shall have no obligation
to pay the Adjusted Principal Amount, or any portion thereof, until the Due Date
or such earlier date upon which the loan is accelerated. Borrower shall make
each payment hereunder not later than 11:00 a.m. (Mountain Standard Time) on the
day when due in U.S. dollars at Lender's office at 7777 Market Center Avenue, El
Paso, Texas 79912. Each payment shall first be applied to late charges, costs of
collection or enforcement and other similar amounts due, if any, under this
Note, then to interest due and payable hereunder and the remainder to the
Adjusted Principal Amount due and payable hereunder. The aggregate unpaid
Adjusted Principal Amount shown on the records of Lender shall be rebuttable
presumptive evidence of the Adjusted Principal Amount owing and unpaid on this
Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997 (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the Adjusted Principal Amount outstanding on this Note, on the basis
of one fully paid, registered and nonassessable share of common stock $0.01 par
value per share (the "Common Stock"), of the Corporate Borrower, for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on the Corporate Borrower's Common
Stock to holders of such Common Stock of record as of a date prior to the
Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New York, New York time, on a Business Day and the
conversion of this Note will be effective as of such Exercise Date. If any
items referred to in subsection (a) are received
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after 2:00 p.m., New York, New York time, on a Business Day, the conversion
of this Note will be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of a conversion of this Note on
the Expiration Date, if all of the items referred to in the preceding
paragraph are received by Borrower at or prior to 5:00 p.m. New York, New
York time, on such Expiration Date, the conversion of this Note will be
effective on the Expiration Date.
(d) Upon the conversion of this Note in accordance with the terms
hereof the Corporate Borrower shall issue and cause to be delivered with
all reasonable dispatch to or upon the written order of the holder of this
Note, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by the Corporate Borrower as
described in Section 3(h)(x) hereof, or a tender offer or an exchange offer
for shares of Common Stock of the Corporate Borrower shall be made, upon
such surrender of this Note as aforesaid, the Corporate Borrower shall, as
soon as possible, but in any event not later than two Business Days
thereafter, issue and cause to be delivered the full number of shares of
Common Stock issuable upon the conversion of this Note in the manner
described in this sentence together with cash as provided in Section 3(i)
hereof. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become a holder of record or such shares of Common Stock as of the
date of the surrender of this Note. No fractional shares shall be issued
upon conversion of this Note in accordance with Section 3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of this Note; provided, however, that Borrower shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
4
<PAGE>
(f) The Corporate Borrower will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock, for the purpose of enabling
it to satisfy any obligation to issue shares of Common Stock upon
conversion of this Note, the maximum number of shares of Common Stock which
may then be deliverable upon the conversion of this Note. The Corporate
Borrower or the transfer agent for the Common Stock (the "Transfer Agent")
and every subsequent transfer agent for any shares of the Corporate
Borrower's capital stock issuable upon the exercise of any of the
conversion rights aforesaid will be irrevocably authorized and directed at
all times to reserve such number of authorized shares as shall be required
for such purpose. Before taking any action which would cause an adjustment
pursuant to this Section 3 to reduce the Exercise Price below the then par
value (if any) of the shares issuable upon conversion of this Note, the
Corporate Borrower will take any corporate action which may, in the opinion
of its counsel (which may be counsel employed by the Corporate Borrower),
be necessary in order that the Corporate Borrower may validly and legally
issue fully paid and nonassessable shares of Common Stock at the Exercise
Price as so adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, the
Corporate Borrower will, at its expense, obtain promptly and maintain the
approval for listing or quotation on each such exchange or inter-dealer
quotation system, upon official notice of issuance after notice of
conversion of this Note, the shares of Common Stock issuable hereunder and
maintain the listing or quotation of such shares after their issuance; and
the Corporate Borrower will also, upon official notice of issuance after
notice of conversion of this Note, list or quote on such national
securities exchange, will register under the Securities Exchange Act of
1934, as amended, and will maintain such listing or quotation of, any Other
Securities (as defined below) that at any time are issuable upon conversion
of this Note, if and at the time that any securities of the same class
shall be listed or quoted on such national securities exchange or inter-
dealer quotation system by the Corporate Borrower.
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of the Corporate Borrower, however designated, issuable upon
conversion of this Note.
(i) Adjustment for Change in Capital Stock. If the Corporate
Borrower:
a. pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
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<PAGE>
b. subdivides its outstanding shares of Common Stock into a
greater number of shares;
c. combines its outstanding shares of Common Stock into a
smaller number of shares;
d. makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any shares
of its capital stock,
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
the Corporate Borrower which such holder would have owned immediately
following such action if this Note had been exercised immediately
prior to such action or immediately prior to the record date
applicable thereto, if any.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion,
may receive shares of two or more classes of capital stock of the
Corporate Borrower, the Exercise Rate of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 3(h).
Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If the Corporate Borrower (i) distributes any
rights, warrants or options to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock at
a price per share less than 94% (100% if a stand-by underwriter is
used and charges the Corporate Borrower a commission) of the Current
Market Value at the Time of Determination (each as defined in Section
4) or (ii) sells any Common Stock or any securities convertible into
or exchangeable or exercisable for the Common Stock (other than
pursuant to (1) the exercise of this Note (or any other note issued by
the Corporate
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<PAGE>
Borrower or one of its subsidiaries pursuant to or in connection with
that certain Merger and Distribution Agreement dated of even date
herewith among Lender Security Capital Atlantic Incorporated
("Atlantic"), Security Capital Group Incorporated ("SCG") and
Homestead Village Properties Incorporated ("Homestead") or (2) upon
exercise of outstanding warrants to acquire shares of Common Stock,
which warrants were issued pursuant to a Warrant Agreement executed in
connection with that certain Warrant Purchase Agreement of even date
herewith among Lender, Atlantic, SCG and Homestead or (3) any security
convertible into, or exchangeable or exercisable for, the Common Stock
as to which the issuance thereof has previously been the subject of
any required adjustment (whether or not actually made) pursuant to
this Section 3(h)) at a price per share less than the Current Market
Value, the Exercise Rate shall be adjusted in accordance with the
formula:
E' = E x (O + N)
-----------------
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (ii) is being
applied or on the date of sale of Common Stock at a price per
share less than the Current Market Value to which this subsection
(ii) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or
the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share of the additional shares of Common
Stock upon the exercise of any such rights, options or warrants
so distributed or pursuant to any such convertible, exchangeable
or exercisable securities so sold or the sale price of the shares
so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be.
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<PAGE>
The adjustment shall be made successively whenever any such
rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If
at the end of the period during which such rights, warrants or options
are exercisable, not all rights, warrants or options shall have been
exercised, the Exercise Rate shall be immediately readjusted to what
it would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E' that is lower than the value of E.
(iii) Adjustment for Other Distributions. If the Corporate
Borrower distributes to all holders of its Common Stock any of its
assets or debt securities or any rights, warrants or options to
purchase any of its debt securities or assets, the Exercise Rate shall
be adjusted in accordance with the formula:
E'= E x M
---
M-F
where:
E = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the
distribution to which this subsection (iii) applies) of the
assets, securities, rights, warrants or options to be
distributed in respect of each share of Common Stock in the
distribution to which this subsection (iii) is being applied
(including, in the case of cash dividends or other cash
distributions giving rise to an adjustment, all such cash
distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
8
<PAGE>
immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on
the books of the Corporate Borrower prepared in accordance with
generally accepted accounting principles other than any Extraordinary
Cash Dividend (as defined below). An "Extraordinary Cash Dividend"
shall be that portion, if any, of the aggregate amount of all cash
dividends paid in any fiscal year which exceeds the sum of (A) the
Corporate Borrower's cumulative undistributed earnings on the date of
this Agreement, plus (B) the cumulative amount of earnings, as
determined by the Board of Directors, after such date, minus (C) the
cumulative amount of dividends accrued or paid in respect of the
Common Stock. In all cases, Borrower shall give the holder of this
Note advance notice of a record date for any dividend payment on the
Common Stock which notice is delivered on a date at least as early as
the date of notice to the holders of Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of
Section 3(h), the following shall apply:
a. in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the
Corporate Borrower for any underwriting of the issue or otherwise
in connection therewith;
b. in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the records of the Corporate
Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by the Corporate Borrower for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Corporate Borrower upon the conversion or
exchange thereof (the consideration in each case to be
9
<PAGE>
determined in the same manner as provided in clauses (1) and (2)
of this subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment in
the Exercise Rate need be made unless the adjustment would require an
increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 3(h) shall be made to the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made for
a transaction referred to in subsections (i), (ii) or (iii) of this
Section 3(h) if the holder of this Note is offered the opportunity to
participate in the transaction on a basis and with notice that the
Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in
the transaction. To the extent this Note becomes convertible into
cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is
adjusted, the Corporate Borrower shall provide the notices required by
Section 3(j) hereof.
(viii) Voluntary Adjustment. The Corporate Borrower from time to
time may, as the Board of Directors deems appropriate, increase the
Exercise Rate by any amount for any period of time if the period is at
least 20 days and if the increase is irrevocable during the period.
Whenever the Exercise Rate is increased, the Corporate Borrower shall
mail to the holder of this Note a notice of the increase. The
Corporate Borrower shall mail the notice at least 15 days before the
date the increased Exercise Rate takes effect. The notice shall state
the increased Exercise Rate and the period it will be in effect. An
increase of the Exercise Rate pursuant to this Section 3(h)(viii),
other than an increase which the Corporate Borrower has irrevocably
committed will be in effect for so long as any this Note is
outstanding, does not change or adjust the Exercise Rate otherwise in
effect for purposes of subsections (i), (ii) or (iii) of this Section
3(h).
(ix) Notice of Certain Transactions. If:
------------------------------
a. The Corporate Borrower takes any action that would
require an adjustment in the Exercise Rate pursuant to
subsections (i), (i) or (iii) of this Section 3(h) and if the
Corporate Borrower does not arrange for the holder of this Note
to participate pursuant to Section 3(h)(vi); or
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<PAGE>
b. there is a liquidation or dissolution of the Corporate
Borrower,
The Corporate Borrower shall mail to the holder of this Note a notice
stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease, liquidation
or dissolution. The Corporate Borrower shall mail the notice at least
15 days before such date. Failure to mail the notice or any defect in
it shall not affect the validity of the transaction.
(x) Reorganization of the Corporate Borrower. If the Corporate
Borrower consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any Person, upon consummation
of such transaction this Note shall automatically become exercisable
for the kind and amount of securities, cash or other assets which the
holder of this Note would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised
this Note immediately before the effective date of the transaction.
Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if
other than the Corporate Borrower, or the Person to which such sale or
conveyance shall have been made (any such Person, the "Successor
Guarantor"), shall enter into a supplemental Note so providing and
further providing for adjustments which shall be as nearly equivalent
as may be practical to the adjustments provided for in this Section
3(h). The Successor Guarantor shall mail to the holder of this Note a
notice describing the supplemental Note. If the issuer of securities
deliverable upon conversion of this Note under the supplemental Note
is an Affiliate of the formed, surviving, transferee or lessee
corporation, that issuer shall join in the supplemental Note. If this
subsection (x) applies, subsections (i), (ii) or (iii) of this Section
3(h) do not apply.
(xi) Corporate Borrower Determination Final. Any determination
that the Corporate Borrower or the Board of Directors must make
pursuant to subsection (i), (ii), (iii), (iv) or (vii) of this Section
3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, the Corporate Borrower may elect to defer until the occurrence
of such event (i) issuing to the holder of this Note exercised after
such record date the shares of Common Stock and other capital stock of
the Corporate Borrower, if any, issuable upon such conversion over and
above the shares of Common Stock and other capital stock of the
11
<PAGE>
Corporate Borrower, if any, issuable upon such conversion on the basis
of the Exercise Rate and (ii) paying to such holder any amount in cash
in lieu of a fractional share pursuant to Section 3(i) hereof;
provided, however, that the Corporate Borrower shall deliver to such
holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares of Common Stock,
other capital stock and cash upon the occurrence of the event
requiring such adjustment.
(xiii) Adjustments to Par Value. The Corporate Borrower shall
from time to time make such adjustments to the par value of the Common
Stock as may be necessary so that at all times, upon conversion of
this Note, the shares of Common Stock will be fully paid and
nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i)(4), (ii) or (iii), and the record dates for the distributions
giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. The Corporate Borrower
shall not be required to issue fractional shares on the conversion of this
Note. If any fraction of a share would, except for the provisions of this
Section 3(i), be issuable on the conversion of this Note, the Corporate
Borrower shall pay to the holder an amount in cash equal to the product of
(i) such fraction of a share and (ii) the Current Market Value of a share
of Common Stock as of the date of conversion of this Note. Upon any
conversion of all or any portion of the Adjusted Principal Amount in
accordance with the terms hereof, Borrower shall pay to the holder in cash
all accrued but unpaid interest to the effective date of conversion with
respect to the portion of the Adjusted Principal Amount of this Note being
converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, the Corporate Borrower shall promptly
thereafter (i) cause to be prepared a certificate of a firm of independent
public accountants of recognized standing selected by the Corporate
Borrower (who may be the regular auditors of the Corporate Borrower)
setting forth the Exercise Rate after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations
12
<PAGE>
are based and setting forth the number of shares (or portion thereof)
issuable after such adjustment in the Exercise Rate, upon conversion of
this Note, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to
the holder of this Note at such holder's address appearing on the Note
register written notice of such adjustments by first-class mail, postage
prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 3(j).
In the event:
(i) The Corporate Borrower shall authorize the issuance to all
holders of shares of Common Stock of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of any other
subscription rights or warrants (other than rights, options or
warrants issued to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
not less than 94% (100% if a stand-by underwriter is used and charges
the Corporate Borrower commission) of the Current Market Value); or
(ii) The Corporate Borrower shall authorize the distribution to
all holders of shares of Common Stock of evidences of its indebtedness
or assets (other than cash dividends or cash distributions payable out
of consolidated earnings or earned surplus or dividends payable in
shares of Common Stock or distributions referred to in subsection (i)
of Section 3(h) hereof); or
(iii) of any consolidation or merger to which the Corporate
Borrower is a party or of the conveyance or transfer of the properties
and assets of the Corporate Borrower substantially as an entirety, or
of any reclassification or change of Common Stock issuable upon
conversion of this Note (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporate Borrower; or
(v) The Corporate Borrower proposes to take any action (other
than actions of the character described in Section 3(h)(i) which would
require an adjustment of the Exercise Rate pursuant to Section 3(h);
then the Corporate Borrower shall cause to be given to the registered
holder of this Note at its address appearing on the Note register, at least
20 days (or 15 days in any case
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<PAGE>
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is
no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the initial expiration date set
forth in any tender offer or exchange offer for shares of Common Stock, or
(iii) the date on which any such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective or consummated, and the date as of which it is expected
that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice
required by this Section 3(j) or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of the Corporate Borrower or any other matter, or any rights
whatsoever as shareholders of the Corporate Borrower.
4. Definitions. For purposes of this Note, the following terms shall have
the meanings indicated:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of the Corporate
Borrower.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for
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<PAGE>
each such trading day shall be: (i) the last reported sales price, regular
way on such day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices on such day, regular way, in either
case as reported on the New York Stock Exchange ("NYSE") or, (ii) if such
security is not listed or admitted for trading on the NYSE, on the
principal national securities exchange on which such security is listed or
admitted for trading or, (iii) if not listed or admitted for trading on any
national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or, (iv) if such security is not quoted on such National Market
System, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, (v) if bid and asked
prices for such security on such day shall not have been reported through
NASDAQ, the average of the bid and asked prices on such day as furnished by
any NYSE member firm regularly making a market in such security selected
for such purpose by the Chairman of the Board or the Board of Directors or,
(vi) if such bid and asked prices are not so furnished, then the fair
market value of the security as established by the Board of Directors
acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Corporate Borrower or any other Person (corporate or
otherwise) which the holder of this Note at any time shall be entitled to
receive, or shall have received, upon the conversion of this Note, in lieu
of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock
or Other Securities pursuant to Section 3(h) hereof or otherwise.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option. Except as expressly set forth in this Section 5, Borrower
is prohibited from making any voluntary prepayment of this Note and shall not
have any right to cause the holder to convert any portion of the Adjusted
Principal Amount outstanding from time to time. From and after the fifth
anniversary of the date of this Note and on or prior to the Due Date, Borrower
shall have the right (the "Call Option") to repay the Adjusted Principal Amount
then outstanding, in whole but not in part, without premium or penalty (other
than the
15
<PAGE>
imposition, if applicable, of the Default Rate or "late charge" as provided
herein). Borrower may exercise the Call Option by giving the holder of this Note
at any time upon ninety (90) days' prior written notice of Borrower's intention
to exercise the Call Option, which notice shall state the date on which the Call
Option is to be consummated, the then current Adjusted Principal Amount and all
accrued interest and unpaid interest thereon, together with any other sums
evidenced by this Note, to be paid on such date. Upon the receipt of any such
notice, the holder shall have the right at any time prior to the date proposed
for such repurchase to convert any or all of the Adjusted Principal Amount of
this Note in accordance with the provisions of Section 3.
6. Default.
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Corporate Borrower, as applicable, shall fail to
pay when due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Corporate Borrower to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any representation,
covenant or warranty set forth in the Loan Documents (other than this Note)
until either Borrower or the Corporate Borrower, as applicable, shall have
failed to cure such breach within any applicable notice and cure period
therein provided; and (ii) no default shall exist hereunder on account of a
breach of any representation, covenant or warranty set forth herein unless
and until Lender shall provide written notice of such breach to Borrower,
and Borrower shall fail to cure the same within 30 days after receipt of
such notice, provided if such breach is of such a nature that it cannot be
cured within such 30 day period, it shall not constitute a default
hereunder so long as Borrower commences its cure of such breach within such
30 day period and thereafter diligently and continuously proceeds with the
curing of same within a reasonable period of time not to exceed 180 days.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Borrower and its affiliates,
subsidiaries and any parent entity, taken as a whole.
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<PAGE>
7. Default Rate; Late Charge.
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of (x) 2.0%, plus the Interest Rate, on the then outstanding past-due
Adjusted Principal Amount, until such amount is paid in full. In addition, a
late charge of four percent (4%) of the amount of any installment or the amount
due on the Due Date which is not paid when due shall be due and payable to the
holder of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the Lender.
8. Security; Governing Law.
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions. The provisions in this Section 9 shall
govern and control over any irreconcilably inconsistent provision contained in
this Note or any of the other Loan Documents or any other instrument
contemplated hereunder or thereunder. In no event shall the aggregate of all
interest paid or payable by Borrower to Lender ever exceed the maximum rate of
interest which may lawfully be charged to (or payable by) Borrower under
applicable law on the Adjusted Principal Amount of this Note from time to time
remaining unpaid. In this connection, it is expressly stipulated and agreed that
it is the intent of Lender and Borrower in the execution and delivery of this
Note to contract in strict compliance with any applicable usury laws. In
furtherance of the foregoing, none of the terms of this Note, the Loan Documents
(other than this Note) or any such other instruments contemplated hereunder or
thereunder shall ever be construed to create a contract to charge or pay for
interest in excess of the maximum interest rate permitted to be contracted for,
charged to, or payable by Borrower under applicable law. Borrower and any
guarantors, endorsers or other parties now or hereafter becoming liable for
payment of this Note shall never be liable for interest in excess of the maximum
interest that may be lawfully charged under applicable law, and the provisions
of this Section 9 shall govern over all other provisions of the Loan Documents,
and any other instruments evidencing or securing the Loan, should such
provisions be in apparent conflict herewith.
17
<PAGE>
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the Adjusted Principal Amount
of this Note, prior to the due date for payment thereof, resulting
from acceleration of maturity of this Note, if the aggregate amounts
of interest accruing hereunder prior to such payment plus the amount
of any interest accruing after such maturity up to the date of payment
and plus any other amounts paid or accrued in connection with the
other Loan Documents, including, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note and any adjustment to the principal amount outstanding hereunder
from time to time pursuant to Section 1, which by law are deemed
interest under such Loan Documents and which aggregate amounts paid or
accrued (if calculated in accordance with the provisions of this Note
other than pursuant to this Section 9) would exceed the maximum lawful
rate of interest which could be charged on the principal balance of
this Note from the date hereof to the date of final payment thereof,
then in such event the amount of such excess shall be credited, as of
the date paid, toward the payment of principal of this Note so as to
reduce the amount of the final payments of Adjusted Principal Amount
due on this Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
amount which could lawfully have been collected and retained) upon the
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
18
<PAGE>
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
10. Invalidity.
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby waives
and renounces for itself, its successors and assigns, all rights to the
benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption,
appraisement, or exemption now provided, or which may hereafter be
provided, by the Constitution and laws of the United States and of any
state thereof, both as to itself and in and to all of its property, real
and personal against the enforcement and collection of the obligations
evidenced by this Note.
(b) In the event that the holder hereof shall institute any action for
the enforcement of the collection of this Note, there shall be immediately
due from Borrower in addition to the unpaid interest and the Adjusted
Principal Amount, all costs and expenses of such action, including but not
limited to attorneys' fees and expenses.
19
<PAGE>
12. Miscellaneous.
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject to
any applicable grace or cure period expressly provided herein or the in the
Loan Documents; provided, however, that unless otherwise stated, whenever
any payment to be made under this Note shall be stated to be due on a day
other than a Business Day, such payment may be made on the immediately
preceding Business Day.
(c) All notices, demands or requests relating to any matters set forth
herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
20
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
PTR HOMESTEAD VILLAGE LIMITED PARTNERSHIP
By: PTR Homestead Village (1) Incorporated, its
sole general partner
By: /s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
For purposes of Sections 3 and 4 only:
PTR HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
21
<PAGE>
EXHIBIT E
AMENDED AND RESTATED PROMISSORY NOTE
$142,042,725 May 28, 1996
This Amended and Restated Promissory Note (this "Note") is made and
delivered as of May 28, 1996, to Security Capital Pacific Trust a Maryland real
estate investment trust ("Lender"), by PTR Homestead Village Incorporated, a
Maryland corporation ("Borrower"), under the following circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to Borrower, to fund, among other matters, acquisition and construction
costs and expenses incurred by Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith Borrower delivered to Lender that certain promissory note (the "Prior
Corporate Note") dated January 24, 1996, in the original principal amount of
$84,850,391, and various deeds of trust and mortgages (the "Prior Corporate
Security Documents"), to secure payment of the Prior Corporate Note and the
Prior Partnership Note (as defined below). (The Prior Corporate Note, the Prior
Corporate Security Documents and all other instruments delivered by Borrower in
connection therewith to secure the Prior Corporate Note and the Prior
Partnership Note are herein called the "Prior Corporate Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the "Partnership
Loan") to Atlantic Homestead Village Limited Partnership (the "Partnership"), to
fund, among other matters, acquisition and construction costs and expenses
incurred by the Partnership in connection with acquiring and developing various
real properties as Homestead Village projects. In connection therewith the
Partnership delivered to Lender that certain promissory note (the "Prior
Partnership Note") dated January 24, 1996, in the original principal amount of
$63,314,441, and various deeds of trust and mortgages (the "Prior Partnership
Security Documents"), to secure payment of the Prior Corporate Note and the
Prior Partnership Note. (The Prior Partnership Note, the Prior Partnership
Security Documents and all other instruments delivered by the Partnership in
connection therewith to secure the Prior Partnership Note and the Prior
Corporate Note are herein called the "Prior Partnership Loan Documents"; the
Prior Corporate Loan Documents and Prior Partnership Loan Documents are
collectively referred to herein as the "Prior Loan Documents"; the Corporate
Loan and the Partnership Loan are herein collectively called the "Loans".)
<PAGE>
C. Borrower, the Partnership and Lender desire to continue the funding
provided for under the Prior Loan Documents, to provide funds to Borrower and
the Partnership for the costs incurred in connection with the acquisition and
development of Homestead Village projects. In furtherance of the foregoing,
Borrower, the Partnership and Lender have agreed that (i) the maximum amount of
the Corporate Loan shall be $127,602,594 (the "Maximum Corporate Loan Amount");
(ii) Borrower's repayment obligation for funds advanced in respect of the
Corporate Loan shall be adjusted by a premium factor of 1.113164866782 (the
"Premium Factor"), thus providing for the maximum face amount of this Note of
$142,042,725 (i.e., the Maximum Corporate Loan Amount as adjusted by the Premium
Factor); (iii) the maximum amount of the Partnership Loan shall be $71,230,145
(the "Maximum Partnership Loan Amount"); (ii) the Partnership's repayment
obligation for funds advanced in respect of the Partnership Loan, as evidenced
by that certain Amended and Restated Promissory Note, of even date herewith (the
"Partnership Note"), shall be adjusted by the Premium Factor, thus providing for
the maximum face amount of the Partnership Note of $79,290,895 (i.e., the
Maximum Partnership Loan Amount as adjusted by the Premium Factor); and (iv) in
connection therewith, the Prior Loan Documents shall be amended and restated in
conformity with the foregoing and as otherwise agreed by the parties. (The
Partnership Note and this Note and the amended and restated Prior Loan Documents
being executed and delivered contemporaneously herewith, and any and all other
agreements or instruments now or hereafter executed by Borrower, the Partnership
or any other person or entity to evidence the Loans, or any portion thereof, or
in connection with, or as security for the payment or performance of, this Note
or the Partnership Note and/or any other note(s) delivered from time to time to
Lender to evidence the Loans or any portion thereof, are, together with such
notes, herein collectively referred to as the "Loan Documents".)
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree to amend and restate the Prior Corporate
Note as follows:
1. Promise to Pay.
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) ONE HUNDRED FORTY TWO MILLION FORTY TWO
THOUSAND SEVEN HUNDRED TWENTY FIVE DOLLARS ($142,042,725) and (B) the aggregate
unpaid principal amount of all advances made by Lender to Borrower in respect of
the Corporate Loan, multiplied by the Premium Factor (the amount so determined
being herein called the "Adjusted Principal Amount"), together with interest on
the Adjusted Principal Amount at a rate equal to 9.0% (the "Interest Rate").
Interest shall be calculated on the basis of a 360-day year and shall be
computed on the actual number of days elapsed.
2. Payments.
2
<PAGE>
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period. Borrower shall make a payment of the
total Adjusted Principal Amount of advances then outstanding, together with
accrued and unpaid interest to such date, on the Due Date. Borrower shall have
no obligation to pay the Adjusted Principal Amount, or any portion thereof,
until the Due Date or such earlier date upon which the loan is accelerated.
Borrower shall make each payment hereunder not later than 11:00 a.m. (Mountain
Standard Time) on the day when due in U.S. dollars at Lender's office at 7777
Market Center Avenue, El Paso, Texas 79912. Each payment shall first be applied
to late charges, costs of collection or enforcement and other similar amounts
due, if any, under this Note, then to interest due and payable hereunder and the
remainder to the Adjusted Principal Amount due and payable hereunder. The
aggregate unpaid Adjusted Principal Amount shown on the records of Lender shall
be rebuttable presumptive evidence of the Adjusted Principal Amount owing and
unpaid on this Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997, (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the principal amount outstanding on this Note, on the basis of one
fully paid, registered and nonassessable share of Common Stock for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on Borrower's Common Stock to holders
of such Common Stock of record as of a date prior to the Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New York, New York time, on a Business Day and the
conversion of this Note will be effective as of such Exercise Date. If any
items referred to in subsection (a) are received after 2:00 p.m., New York,
New York time, on a Business Day, the conversion of this
3
<PAGE>
Note will be effective on the next succeeding Business Day. Notwithstanding
the foregoing, in the case of a conversion of this Note on the Expiration
Date, if all of the items referred to in the preceding subsection are
received by Borrower at or prior to 5:00 p.m. New York, New York time, on
such Expiration Date, the conversion of this Note will be effective on the
Expiration Date.
(d) Upon the conversion of this Note in accordance with the terms
hereof Borrower shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the holder of this Note, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by Borrower as described in
Section 3(h)(x) hereof, or a tender offer or an exchange offer for shares
of Common Stock of Borrower shall be made, upon such surrender of this Note
as aforesaid, Borrower shall, as soon as possible, but in any event not
later than two Business Days thereafter, issue and cause to be delivered
the full number of shares of Common Stock issuable upon the conversion of
this Note in the manner described in this sentence together with cash as
provided in Section 3(i) hereof. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record or such shares of Common
Stock as of the date of the surrender of this Note. No fractional shares
shall be issued upon conversion of this Note in accordance with Section
3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of this Note; provided, however, that Borrower shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
(f) Borrower will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligation to issue shares of Common
4
<PAGE>
Stock upon conversion of this Note, the maximum number of shares of Common
Stock which may then be deliverable upon the conversion of this Note.
Borrower or the transfer agent for the Common Stock (the "Transfer Agent")
and every subsequent transfer agent for any shares of Borrower's capital
stock issuable upon the exercise of any of the conversion rights aforesaid
will be irrevocably authorized and directed at all times to reserve such
number of authorized shares as shall be required for such purpose. Before
taking any action which would cause an adjustment pursuant to this Section
3 to reduce the Exercise Price below the then par value (if any) of the
shares issuable upon conversion of this Note, Borrower will take any
corporate action which may, in the opinion of its counsel (which may be
counsel employed by Borrower), be necessary in order that Borrower may
validly and legally issue fully paid and nonassessable shares of Common
Stock at the Exercise Price as so adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, Borrower
will, at its expense, obtain promptly and maintain the approval for listing
or quotation on each such exchange or inter-dealer quotation system, upon
official notice of issuance after notice of conversion of this Note, the
shares of Common Stock issuable hereunder and maintain the listing or
quotation of such shares after their issuance; and Borrower will also, upon
official notice of issuance after notice of conversion of this Note, list
or quote on such national securities exchange, will register under the
Securities Exchange Act of 1934, as amended, and will maintain such listing
or quotation of, any Other Securities (as defined below) that at any time
are issuable upon conversion of this Note, if and at the time that any
securities of the same class shall be listed or quoted on such national
securities exchange or inter-dealer quotation system by Borrower.
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of Borrower, however designated, issuable upon conversion of this
Note.
(i) Adjustment for Change in Capital Stock. If Borrower:
a. pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
b. subdivides its outstanding shares of Common Stock into a
greater number of shares;
c. combines its outstanding shares of Common Stock into a
smaller number of shares;
5
<PAGE>
d. makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any
shares of its capital stock,
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
Borrower which such holder would have owned immediately following such
action if this Note had been exercised immediately prior to such
action or immediately prior to the record date applicable thereto, if
any.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion,
may receive shares of two or more classes of capital stock of
Borrower, the Exercise Rate of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 3(h).
Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If Borrower (i) distributes any rights, warrants
or options to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
less than 94% (100% if a stand-by underwriter is used and charges
Borrower a commission) of the Current Market Value at the Time of
Determination (each as defined in Section 4) or (ii) sells any Common
Stock or any securities convertible into or exchangeable or
exercisable for the Common Stock (other than pursuant to (1) the
exercise of this Note (or any other note issued by Borrower pursuant
to or in connection with that certain Merger and Distribution
Agreement dated of even date herewith among Lender Security Capital
Atlantic Incorporated ("Atlantic"), Security Capital Group
Incorporated ("SCG") and Homestead Village Properties Incorporated
("Homestead") or (2) upon exercise of outstanding warrants to acquire
shares of Common Stock, which warrants were issued pursuant to a
Warrant Agreement executed in connection with that certain Warrant
Purchase Agreement of even date herewith among Lender, Atlantic, SCG
and Homestead or (3) any security
6
<PAGE>
convertible into, or exchangeable or exercisable for, the Common Stock
as to which the issuance thereof has previously been the subject of
any required adjustment (whether or not actually made) pursuant to
this Section 3(h)) at a price per share less than the Current Market
Value, the Exercise Rate shall be adjusted in accordance with the
formula:
E' = E x (O + N)
------------------
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (ii) is being
applied or on the date of sale of Common Stock at a price per
share less than the Current Market Value to which this subsection
(ii) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or
the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share of the additional shares of Common
Stock upon the exercise of any such rights, options or warrants
so distributed or pursuant to any such convertible, exchangeable
or exercisable securities so sold or the sale price of the shares
so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be.
The adjustment shall be made successively whenever any such
rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If
at the end of the period during which such rights, warrants or options
are exercisable, not all rights, warrants or options shall have been
exercised, the Exercise Rate shall be immediately readjusted to what
it
7
<PAGE>
would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E' that is lower than the value of E.
(iii) Adjustment for Other Distributions. If Borrower
distributes to all holders of its Common Stock any of its assets or
debt securities or any rights, warrants or options to purchase any of
its debt securities or assets, the Exercise Rate shall be adjusted in
accordance with the formula:
E' = E x M
-----
M-F
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the
distribution to which this subsection (iii) applies) of
the assets, securities, rights, warrants or options to be
distributed in respect of each share of Common Stock in
the distribution to which this subsection (iii) is being
applied (including, in the case of cash dividends or other
cash distributions giving rise to an adjustment, all such
cash distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on
the books of Borrower prepared in accordance with generally accepted
accounting principles other than
8
<PAGE>
any Extraordinary Cash Dividend (as defined below). An "Extraordinary
Cash Dividend" shall be that portion, if any, of the aggregate amount
of all cash dividends paid in any fiscal year which exceeds the sum of
(A) Borrower cumulative undistributed earnings on the date of this
Agreement, plus (B) the cumulative amount of earnings, as determined
by the Board of Directors, after such date, minus (C) the cumulative
amount of dividends accrued or paid in respect of the Common Stock. In
all cases, Borrower shall give the holder of this Note advance notice
of a record date for any dividend payment on the Common Stock which
notice is delivered on a date at least as early as the date of notice
to the holders of Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of
Section 3(h), the following shall apply:
a. in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by Borrower for
any underwriting of the issue or otherwise in connection
therewith;
b. in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the records of Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by Borrower for the issuance of such securities plus the
additional minimum consideration, if any, to be received by
Borrower upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment in
the Exercise Rate need be made unless the adjustment would require an
increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into
account in any subsequent
9
<PAGE>
adjustment. All calculations under this Section 3(h) shall be made to
the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made
for a transaction referred to in subsections (i), (ii) or (iii) of
this Section 3(h) if the holder of this Note is offered the
opportunity to participate in the transaction on a basis and with
notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of
Common Stock participate in the transaction. To the extent this Note
becomes convertible into cash, no adjustment need be made thereafter
as to the cash. Interest will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is
adjusted, Borrower shall provide the notices required by Section 3(j)
hereof.
(viii) Voluntary Adjustment. Borrower from time to time may, as
the Board of Directors deems appropriate, increase the Exercise Rate
by any amount for any period of time if the period is at least 20 days
and if the increase is irrevocable during the period. Whenever the
Exercise Rate is increased, Borrower shall mail to the holder of this
Note a notice of the increase. Borrower shall mail the notice at least
15 days before the date the increased Exercise Rate takes effect. The
notice shall state the increased Exercise Rate and the period it will
be in effect. An increase of the Exercise Rate pursuant to this
Section 3(h)(viii), other than an increase which Borrower has
irrevocably committed will be in effect for so long as this Note is
outstanding, does not change or adjust the Exercise Rate otherwise in
effect for purposes of subsections (i), (ii) or (iii) of this Section
3(h).
(ix) Notice of Certain Transactions. If:
a. Borrower takes any action that would require an
adjustment in the Exercise Rate pursuant to subsections (i), (ii)
or (iii) of this Section 3(h) and if Borrower does not arrange
for the holder of this Note to participate pursuant to Section
3(h)(vi); or
b. there is a liquidation or dissolution of Borrower,
Borrower shall mail to the holder of this Note a notice stating the
proposed record date for a dividend or distribution or the proposed
effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution.
Borrower shall mail the notice at least 15 days before such date.
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Failure to mail the notice or any defect in it shall not affect the
validity of the transaction.
(x) Reorganization of Borrower. If Borrower consolidates or
merges with or into, or transfers or leases all or substantially all
its assets to, any Person, upon consummation of such transaction this
Note shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Note would
have owned immediately after the consolidation, merger, transfer or
lease if the holder had exercised this Note immediately before the
effective date of the transaction. Concurrently with the consummation
of such transaction, the corporation formed by or surviving any such
consolidation or merger if other than Borrower, or the Person to which
such sale or conveyance shall have been made (any such Person, the
"Successor Guarantor"), shall enter into a supplemental Note so
providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for
in this Section 3(h). The Successor Guarantor shall mail to the holder
of this Note a notice describing the supplemental Note. If the issuer
of securities deliverable upon conversion of this Note under the
supplemental Note is an Affiliate of the formed, surviving, transferee
or lessee corporation, that issuer shall join in the supplemental
Note. If this subsection (x) applies, subsections (i), (ii) or (iii)
of this Section 3(h) do not apply.
(xi) Borrower Determination Final. Any determination that
Borrower or the Board of Directors must make pursuant to subsection
(i), (ii), (iii), (iv) or (vii) of this Section 3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, Borrower may elect to defer until the occurrence of such event
(i) issuing to the holder of this Note exercised after such record
date the shares of Common Stock and other capital stock of Borrower,
if any, issuable upon such conversion over and above the shares of
Common Stock and other capital stock of Borrower, if any, issuable
upon such conversion on the basis of the Exercise Rate and (ii) paying
to such holder any amount in cash in lieu of a fractional share
pursuant to Section 3(i) hereof; provided, however, that Borrower
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
shares of Common Stock, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
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(xiii) Adjustments to Par Value. Borrower shall from time to
time make such adjustments to the par value of the Common Stock as may
be necessary so that at all times, upon conversion of this Note, the
shares of Common Stock will be fully paid and nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i), (ii) or (iii), and the record dates for the distributions giving
rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. Borrower shall not be
required to issue fractional shares on the conversion of this Note. If any
fraction of a share would, except for the provisions of this Section 3(i),
be issuable on the conversion of this Note, Borrower shall pay to the
holder an amount in cash equal to the product of (i) such fraction of a
share and (ii) the Current Market Value of a share of Common Stock as of
the date of conversion of this Note. Upon any conversion of all or any
portion of the Adjusted Principal Amount in accordance with the terms
hereof, Borrower shall pay to the holder in cash all accrued but unpaid
interest to the effective date of conversion with respect to the portion of
the Adjusted Principal Amount of this Note being converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, Borrower shall promptly thereafter (i)
cause to be prepared a certificate of a firm of independent public
accountants of recognized standing selected by Borrower (who may be the
regular auditors of Borrower) setting forth the Exercise Rate after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based and setting forth the
number of shares (or portion thereof) issuable after such adjustment in the
Exercise Rate, upon conversion of this Note, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein,
and (ii) cause to be given to the holder of this Note at such holder's
address appearing on the Note register written notice of such adjustments
by first-class mail, postage prepaid. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be mailed
under the other provisions of this Section 3(j).
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In the event:
(i) Borrower shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants (other than rights, options or warrants issued to all
holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share not less than 94%
(100% if a stand-by underwriter is used and charges Borrower
commission) of the Current Market Value); or
(ii) Borrower shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in subsection (i) of
Section 3(h) hereof); or
(iii) of any consolidation or merger to which Borrower is a party
or of the conveyance or transfer of the properties and assets of
Borrower substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon conversion of this Note (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of Borrower; or
(v) Borrower proposes to take any action (other than actions of
the character described in Section 3(h)(i) which would require an
adjustment of the Exercise Rate pursuant to Section 3(h);
then Borrower shall cause to be given to the registered holder of this Note
at its address appearing on the Note register, at least 20 days (or 15 days
in any case specified in clauses (i) or (ii) above) prior to the applicable
record date hereinafter specified, or promptly in the case of events for
which there is no record date, by first-class mail, postage prepaid, a
written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial
expiration date set forth in any tender offer or exchange offer for shares
of Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as
of which
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it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the
notice required by this Section 3(j) or any defect therein shall not affect
the legality or validity of any distribution, right, option, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of Borrower or any other matter, or any rights whatsoever as
shareholders of Borrower.
4. Definitions. For purposes of Section 3 of this Note, the following
terms shall have the meanings indicated:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of Borrower.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for each such trading day shall be:
(i) the last reported sales price, regular way on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the New York
Stock Exchange ("NYSE") or, (ii) if such security is not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such security is listed or admitted for trading or, (iii) if not
listed or admitted for trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, (iv) if such security is
not
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<PAGE>
quoted on such National Market System, the average of the closing bid and
asked prices on such day in the over-the-counter market as reported by
NASDAQ or, (v) if bid and asked prices for such security on such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Chairman of the
Board or the Board of Directors or, (vi) if such bid and asked prices are
not so furnished, then the fair market value of the security as established
by the Board of Directors acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of Borrower or any other Person (corporate or otherwise) which
the holder of this Note at any time shall be entitled to receive, or shall
have received, upon the conversion of this Note, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3(h) hereof or otherwise.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option.
Except as expressly set forth in this Section 5, Borrower is prohibited
from making any voluntary prepayment of this Note and shall not have any right
to cause the holder to convert any portion of the Adjusted Principal Amount
outstanding from time to time. From and after the fifth anniversary of the date
of this Note and on or prior to the Due Date, Borrower shall have the right (the
"Call Option") to repay the Adjusted Principal Amount then outstanding, in whole
but not in part, without premium or penalty (other than the imposition, if
applicable, of the Default Rate or "late charge" as provided herein). Borrower
may exercise the Call Option by giving the holder of this Note at any time upon
ninety (90) days' prior written notice of Borrower's intention to exercise the
Call Option, which notice shall state the date on which the Call Option is to be
consummated, the then current Adjusted Principal Amount and all accrued interest
and unpaid interest thereon, together with any other sums evidenced by this
Note, to be paid on such date. Upon the receipt of any such notice, the holder
shall have the right at any
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time prior to the date proposed for such repurchase to convert any or all of the
Adjusted Principal Amount of this Note in accordance with the provisions of
Section 3.
6. Default.
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Partnership, as applicable, shall fail to pay when
due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Partnership to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any representation,
covenant or warranty set forth in the Loan Documents (other than this Note)
until either Borrower or Partnership, as applicable, shall have failed to
cure such breach within any applicable notice and cure period therein
provided; and (ii) no default shall exist hereunder on account of a breach
of any representation, covenant or warranty set forth herein unless and
until Lender shall provide written notice of such breach to Borrower, and
Borrower shall fail to cure the same within 30 days after receipt of such
notice, provided if such breach is of such a nature that it cannot be cured
within such 30 day period, it shall not constitute a default hereunder so
long as Borrower commences its cure of such breach within such 30 day
period and thereafter diligently and continuously proceeds with the curing
of same within a reasonable period of time not to exceed 180 days.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Borrower and its affiliates,
subsidiaries and any parent entity, taken as a whole.
7. Default Rate; Late Charge.
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of 2.0%, plus the Interest Rate, on the then outstanding past-due
amount of principal, until such amount is paid in full. In addition, a late
charge of four percent (4%) of the amount of any installment or the amount due
on the Due Date which is not paid when due shall be due and payable to the
holder
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of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the
Lender.
8. Security; Governing Law.
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions.
The provisions in this Section 9 shall govern and control over any
irreconcilably inconsistent provision, the Loan Documents or any other
instrument contemplated hereunder or thereunder. In no event shall the aggregate
of all interest paid or payable by Borrower to Lender ever exceed the maximum
rate of interest which may lawfully be charged to (or payable by) Borrower under
applicable law on the Adjusted Principal Amount of this Note from time to time
remaining unpaid. In this connection, it is expressly stipulated and agreed that
it is the intent of Lender and Borrower in the execution and delivery of this
Note to contract in strict compliance with any applicable usury laws. In
furtherance of the foregoing, none of the terms of the Loan Documents or any
such other instruments contemplated hereunder or thereunder shall ever be
construed to create a contract to charge or pay for interest in excess of the
maximum interest rate permitted to be contracted for, charged to, or payable by
Borrower under applicable law. Borrower and any guarantors, endorsers or other
parties now or hereafter becoming liable for payment of this Note shall never be
liable for interest in excess of the maximum interest that may be lawfully
charged under applicable law, and the provisions of this Section 9 shall govern
over all other provisions of the Loan Documents, and any other instruments
evidencing or securing the Loan, should such provisions be in apparent conflict
herewith.
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the principal of the Adjusted
Principal Amount of this Note, prior to the due date for payment
thereof, resulting from acceleration of maturity of this Note, if the
aggregate amounts of
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interest accruing hereunder prior to such payment plus the amount of
any interest accruing after such maturity up to the date of payment
and plus any other amounts paid or accrued in connection with the Loan
Documents, including, if applicable, all or any portion of the value
of any Common Stock issued to Lender under Section 3 of this Note, and
any adjustment to the principal amount outstanding hereunder from time
to time pursuant to Section 1, which by law are deemed interest under
such Loan Documents and which aggregate amounts paid or accrued (if
calculated in accordance with the provisions of this Note other than
pursuant to this Section 9) would exceed the maximum lawful rate of
interest which could be charged on the principal balance of this Note
from the date hereof to the date of final payment thereof, then in
such event the amount of such excess shall be credited, as of the date
paid, toward the payment of principal of this Note so as to reduce the
amount of the final payments of Adjusted Principal Amount due on this
Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
amount which could lawfully have been collected and retained) upon the
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious
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rate allowed by applicable law or (2) seventeen percent (17%) per annum on a
compounded basis.
10. Invalidity.
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby waives
and renounces for itself, its successors and assigns, all rights to the
benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption,
appraisement, or exemption now provided, or which may hereafter be
provided, by the Constitution and laws of the United States and of any
state thereof, both as to itself and in and to all of its property, real
and personal against the enforcement and collection of the obligations
evidenced by this Note.
(b) In the event that the holder hereof shall institute any action for
the enforcement of the collection of this Note, there shall be immediately
due from Borrower in addition to the unpaid interest and principal, all
costs and expenses of such action, including but not limited to attorneys'
fees and expenses.
12. Miscellaneous.
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(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject to
any applicable grace or cure period expressly provided herein or the in the
Loan Documents; provided, however, that unless otherwise stated, whenever
any payment to be made under this Note shall be stated to be due on a day
other than a business day, such payment may be made on the immediately
preceding business day. For purposes of this Note, a business day shall be
any day that is not a Saturday, Sunday or national bank holiday.
(c) All notices, demands or requests relating to any matters set forth
herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
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<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
PTR HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
---------------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
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EXHIBIT F
AMENDED AND RESTATED PROMISSORY NOTE
$17,955,354 May 28, 1996
This Amended and Restated Promissory Note (this "Note") is made and
delivered as of May 28, 1996, to Security Capital Atlantic Incorporated, a
Maryland corporation ("Lender"), by Atlantic Homestead Village Limited
Partnership, a Delaware limited partnership ("Borrower"), under the following
circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the "Partnership
Loan") to Borrower, to fund, among other matters, acquisition and construction
costs and expenses incurred by the Partnership in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith Borrower delivered to Lender that certain promissory note (the "Prior
Partnership Note") dated January 24, 1996, in the original principal amount of
$19,213,476, and various deeds to secure debt, deeds of trust and mortgages (the
"Prior Partnership Security Documents"), to secure payment of the Prior
Corporate Note (as defined below) and the Prior Partnership Note. (The Prior
Partnership Note, the Prior Partnership Security Documents and all other
instruments delivered by the Partnership in connection therewith to secure the
Prior Partnership Note and the Prior Corporate Note are herein called the "Prior
Partnership Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to Atlantic Homestead Village Partnership Incorporated (the "Corporate
Borrower"), to fund, among other matters, acquisition and construction costs and
expenses incurred by the Corporate Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Corporate Borrower delivered to Lender that certain promissory
note (the "Prior Corporate Note") dated January 24, 1996, in the original
principal amount of $62,031,430, and various deeds to secure debt, deeds of
trust and mortgages (the "Prior Corporate Security Documents"), to secure
payment of the Prior Corporate Note and the Prior Partnership Note. (The Prior
Corporate Note, the Prior Corporate Security Documents and all other instruments
delivered by the Corporate Borrower in connection therewith to secure the Prior
Corporate Note and the Prior Partnership Note are herein called the "Prior
Corporate Loan Documents"; the Prior Corporate Loan Documents and Prior
Partnership Loan Documents are collectively referred to herein as the "Prior
Loan Documents".)
<PAGE>
C. Borrower, the Corporate Borrower and Lender desire to continue the
funding provided for under the Prior Loan Documents, to provide funds to
Borrower and the Corporate Borrower for the costs incurred in connection with
the acquisition and development of Homestead Village projects. In furtherance of
the foregoing, Borrower, the Corporate Borrower and Lender have agreed that (i)
the maximum amount of the Corporate Loan shall be $90,765,665 (the "Maximum
Corporate Loan Amount"); (ii) the Corporate Borrower's repayment obligation for
funds advanced in respect of the Corporate Loan, as evidenced by that certain
Consolidated Amended and Restated Promissory Note, of even date herewith (the
"Corporate Note"), shall be adjusted by a discount factor of .882196112 (the
"Discount Factor"), thus providing for the maximum face amount of the Corporate
Note of $80,073,117 (i.e., the Maximum Corporate Loan Amount as adjusted by the
Discount Factor); (iii) the maximum amount of the Partnership Loan shall be
$20,353,019 (the "Maximum Partnership Loan Amount"); (ii) the Partnership's
repayment obligation for funds advanced in respect of the Partnership Loan shall
be adjusted by the Discount Factor, thus providing for the maximum face amount
this Note of $17,955,354 (i.e., the Maximum Partnership Loan Amount as adjusted
by the Discount Factor); and (iv) in connection therewith, the Prior Loan
Documents shall be amended and restated in conformity with the foregoing and as
otherwise agreed by the parties. (The Corporate Loan and the Partnership Loan
are herein collectively called the "Loans". The amended and restated Prior Loan
Documents being executed and delivered contemporaneously herewith, and any and
all other agreements or instruments now or hereafter executed by Borrower, the
Corporate Borrower or any other person or entity to evidence, or in connection
with, or as security for the payment of this Note and/or the Corporate Note are
herein collectively, with such notes, referred to as the "Loan Documents".)
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree to amend and restate the Prior
Partnership Note as follows:
1. Promise to Pay.
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) SEVENTEEN MILLION NINE HUNDRED FIFTY FIVE
THOUSAND THREE HUNDRED FIFTY FOUR DOLLARS ($17,955,354) and (B) the aggregate
unpaid principal amount of all advances made by Lender to Borrower in respect of
the Partnership Loan, multiplied by the Discount Factor (the amount so
determined being herein called the "Adjusted Principal Amount"), together with
interest on the Adjusted Principal Amount at a rate equal to 9.0% per annum (the
"Interest Rate"). Interest shall be calculated on the basis of a 360-day year
and shall be computed on the actual number of days elapsed.
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2. Payments.
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period. Borrower shall make a payment of the
total Adjusted Principal Amount then outstanding, together with accrued and
unpaid interest to such date, on the Due Date. Borrower shall have no obligation
to pay the Adjusted Principal Amount, or any portion thereof, until the Due Date
or such earlier date upon which the loan is accelerated. Borrower shall make
each payment hereunder not later than 11:00 a.m. (Mountain Standard Time) on the
day when due in U.S. dollars at Lender's office at 7777 Market Center Avenue, El
Paso, Texas 79912. Each payment shall first be applied to late charges, costs of
collection or enforcement and other similar amounts due, if any, under this
Note, then to interest due and payable hereunder and the remainder to the
Adjusted Principal Amount due and payable hereunder. The aggregate unpaid
Adjusted Principal Amount shown on the records of Lender shall be rebuttable
presumptive evidence of the Adjusted Principal Amount owing and unpaid on this
Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997 (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the Adjusted Principal Amount outstanding on this Note, on the basis
of one fully paid, registered and nonassessable share of common stock $0.01 par
value per share (the "Common Stock"), of the Corporate Borrower, for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on the Corporate Borrower's Common
Stock to holders of such Common Stock of record as of a date prior to the
Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New
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<PAGE>
York, New York time, on a Business Day and the conversion of this Note will
be effective as of such Exercise Date. If any items referred to in
subsection (a) are received after 2:00 p.m., New York, New York time, on a
Business Day, the conversion of this Note will be effective on the next
succeeding Business Day. Notwithstanding the foregoing, in the case of a
conversion of this Note on the Expiration Date, if all of the items
referred to in the preceding paragraph are received by Borrower at or prior
to 5:00 p.m. New York, New York time, on such Expiration Date, the
conversion of this Note will be effective on the Expiration Date.
(d) Upon the conversion of this Note in accordance with the terms
hereof the Corporate Borrower shall issue and cause to be delivered with
all reasonable dispatch to or upon the written order of the holder of this
Note, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by the Corporate Borrower as
described in Section 3(h)(x) hereof, or a tender offer or an exchange offer
for shares of Common Stock of the Corporate Borrower shall be made, upon
such surrender of this Note as aforesaid, the Corporate Borrower shall, as
soon as possible, but in any event not later than two Business Days
thereafter, issue and cause to be delivered the full number of shares of
Common Stock issuable upon the conversion of this Note in the manner
described in this sentence together with cash as provided in Section 3(i)
hereof. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become a holder of record or such shares of Common Stock as of the
date of the surrender of this Note. No fractional shares shall be issued
upon conversion of this Note in accordance with Section 3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of this Note; provided, however, that Borrower shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
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<PAGE>
(f) The Corporate Borrower will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued shares of Common Stock, for the purpose of enabling it to satisfy
any obligation to issue shares of Common Stock upon conversion of this
Note, the maximum number of shares of Common Stock which may then be
deliverable upon the conversion of this Note. The Corporate Borrower or the
transfer agent for the Common Stock (the "Transfer Agent") and every
subsequent transfer agent for any shares of the Corporate Borrower's
capital stock issuable upon the exercise of any of the conversion rights
aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such
purpose. Before taking any action which would cause an adjustment pursuant
to this Section 3 to reduce the Exercise Price below the then par value (if
any) of the shares issuable upon conversion of this Note, the Corporate
Borrower will take any corporate action which may, in the opinion of its
counsel (which may be counsel employed by the Corporate Borrower), be
necessary in order that the Corporate Borrower may validly and legally
issue fully paid and nonassessable shares of Common Stock at the Exercise
Price as so adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, the
Corporate Borrower will, at its expense, obtain promptly and maintain the
approval for listing or quotation on each such exchange or inter-dealer
quotation system, upon official notice of issuance after notice of
conversion of this Note, the shares of Common Stock issuable hereunder and
maintain the listing or quotation of such shares after their issuance; and
the Corporate Borrower will also, upon official notice of issuance after
notice of conversion of this Note, list or quote on such national
securities exchange, will register under the Securities Exchange Act of
1934, as amended, and will maintain such listing or quotation of, any Other
Securities (as defined below) that at any time are issuable upon conversion
of this Note, if and at the time that any securities of the same class
shall be listed or quoted on such national securities exchange or inter-
dealer quotation system by the Corporate Borrower.
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of the Corporate Borrower, however designated, issuable upon
conversion of this Note.
(i) Adjustment for Change in Capital Stock. If the Corporate
Borrower:
a. pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
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<PAGE>
b. subdivides its outstanding shares of Common Stock into a
greater number of shares;
c. combines its outstanding shares of Common Stock into a
smaller number of shares;
d. makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any shares
of its capital stock,
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
the Corporate Borrower which such holder would have owned immediately
following such action if this Note had been exercised immediately
prior to such action or immediately prior to the record date
applicable thereto, if any.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion,
may receive shares of two or more classes of capital stock of the
Corporate Borrower, the Exercise Rate of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 3(h).
Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If the Corporate Borrower (i) distributes any
rights, warrants or options to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock at
a price per share less than 94% (100% if a stand-by underwriter is
used and charges the Corporate Borrower a commission) of the Current
Market Value at the Time of Determination (each as defined in Section
4) or (ii) sells any Common Stock or any securities convertible into
or exchangeable or exercisable for the Common Stock (other than
pursuant to (1) the exercise of this Note (or any other note issued by
the Corporate
6
<PAGE>
Borrower or one of its subsidiaries pursuant to or in connection with
that certain Merger and Distribution Agreement dated of even date
herewith among Lender, Security Capital Pacific Trust ("PTR"),
Security Capital Group Incorporated ("SCG") and Homestead Village
Properties Incorporated ("Homestead") or (2) upon exercise of
outstanding warrants to acquire shares of Common Stock, which warrants
were issued pursuant to a Warrant Agreement executed in connection
with that certain Warrant Purchase Agreement of even date herewith
among Lender, PTR, SCG and Homestead or (3) any security convertible
into, or exchangeable or exercisable for, the Common Stock as to which
the issuance thereof has previously been the subject of any required
adjustment (whether or not actually made) pursuant to this Section
3(h)) at a price per share less than the Current Market Value, the
Exercise Rate shall be adjusted in accordance with the formula:
E' = E x (O + N)
---------------
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (ii) is being
applied or on the date of sale of Common Stock at a price per
share less than the Current Market Value to which this subsection
(ii) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or
the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share of the additional shares of Common
Stock upon the exercise of any such rights, options or warrants
so distributed or pursuant to any such convertible, exchangeable
or exercisable securities so sold or the sale price of the shares
so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be.
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<PAGE>
The adjustment shall be made successively whenever any such
rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If
at the end of the period during which such rights, warrants or options
are exercisable, not all rights, warrants or options shall have been
exercised, the Exercise Rate shall be immediately readjusted to what
it would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E' that is lower than the value of E.
(iii) Adjustment for Other Distributions. If the Corporate
Borrower distributes to all holders of its Common Stock any of its
assets or debt securities or any rights, warrants or options to
purchase any of its debt securities or assets, the Exercise Rate shall
be adjusted in accordance with the formula:
E' = E x M
---
M-F
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the
distribution to which this subsection (iii) applies) of the
assets, securities, rights, warrants or options to be
distributed in respect of each share of Common Stock in the
distribution to which this subsection (iii) is being applied
(including, in the case of cash dividends or other cash
distributions giving rise to an adjustment, all such cash
distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
8
<PAGE>
immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on
the books of the Corporate Borrower prepared in accordance with
generally accepted accounting principles other than any Extraordinary
Cash Dividend (as defined below). An "Extraordinary Cash Dividend"
shall be that portion, if any, of the aggregate amount of all cash
dividends paid in any fiscal year which exceeds the sum of (A) the
Corporate Borrower's cumulative undistributed earnings on the date of
this Agreement, plus (B) the cumulative amount of earnings, as
determined by the Board of Directors, after such date, minus (C) the
cumulative amount of dividends accrued or paid in respect of the
Common Stock. In all cases, Borrower shall give the holder of this
Note advance notice of a record date for any dividend payment on the
Common Stock which notice is delivered on a date at least as early as
the date of notice to the holders of Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of
Section 3(h), the following shall apply:
a. in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the
Corporate Borrower for any underwriting of the issue or otherwise
in connection therewith;
b. in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the records of the Corporate
Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by the Corporate Borrower for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Corporate Borrower upon the conversion or
exchange thereof (the consideration in each case to be
9
<PAGE>
determined in the same manner as provided in clauses (1) and (2)
of this subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment in
the Exercise Rate need be made unless the adjustment would require an
increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 3(h) shall be made to the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made for
a transaction referred to in subsections (i), (ii) or (iii) of this
Section 3(h) if the holder of this Note is offered the opportunity to
participate in the transaction on a basis and with notice that the
Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in
the transaction. To the extent this Note becomes convertible into
cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is
adjusted, the Corporate Borrower shall provide the notices required by
Section 3(j) hereof.
(viii) Voluntary Adjustment. The Corporate Borrower from time to
time may, as the Board of Directors deems appropriate, increase the
Exercise Rate by any amount for any period of time if the period is at
least 20 days and if the increase is irrevocable during the period.
Whenever the Exercise Rate is increased, the Corporate Borrower shall
mail to the holder of this Note a notice of the increase. The
Corporate Borrower shall mail the notice at least 15 days before the
date the increased Exercise Rate takes effect. The notice shall state
the increased Exercise Rate and the period it will be in effect. An
increase of the Exercise Rate pursuant to this Section 3(h)(viii),
other than an increase which the Corporate Borrower has irrevocably
committed will be in effect for so long as any this Note is
outstanding, does not change or adjust the Exercise Rate otherwise in
effect for purposes of subsections (i), (ii) or (iii) of this Section
3(h).
(ix) Notice of Certain Transactions. If:
------------------------------
a. The Corporate Borrower takes any action that would
require an adjustment in the Exercise Rate pursuant to
subsections (i), (i) or (iii) of this Section 3(h) and if the
Corporate Borrower does not arrange for the holder of this Note
to participate pursuant to Section 3(h)(vi); or
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<PAGE>
b. there is a liquidation or dissolution of the Corporate
Borrower,
The Corporate Borrower shall mail to the holder of this Note a notice
stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease, liquidation
or dissolution. The Corporate Borrower shall mail the notice at least
15 days before such date. Failure to mail the notice or any defect in
it shall not affect the validity of the transaction.
(x) Reorganization of the Corporate Borrower. If the Corporate
Borrower consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any Person, upon consummation
of such transaction this Note shall automatically become exercisable
for the kind and amount of securities, cash or other assets which the
holder of this Note would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised
this Note immediately before the effective date of the transaction.
Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if
other than the Corporate Borrower, or the Person to which such sale or
conveyance shall have been made (any such Person, the "Successor
Guarantor"), shall enter into a supplemental Note so providing and
further providing for adjustments which shall be as nearly equivalent
as may be practical to the adjustments provided for in this Section
3(h). The Successor Guarantor shall mail to the holder of this Note a
notice describing the supplemental Note. If the issuer of securities
deliverable upon conversion of this Note under the supplemental Note
is an Affiliate of the formed, surviving, transferee or lessee
corporation, that issuer shall join in the supplemental Note. If this
subsection (x) applies, subsections (i), (ii) or (iii) of this Section
3(h) do not apply.
(xi) Corporate Borrower Determination Final. Any determination
that the Corporate Borrower or the Board of Directors must make
pursuant to subsection (i), (ii), (iii), (iv) or (vii) of this Section
3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, the Corporate Borrower may elect to defer until the occurrence
of such event (i) issuing to the holder of this Note exercised after
such record date the shares of Common Stock and other capital stock of
the Corporate Borrower, if any, issuable upon such conversion over and
above the shares of Common Stock and other capital stock of the
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<PAGE>
Corporate Borrower, if any, issuable upon such conversion on the basis
of the Exercise Rate and (ii) paying to such holder any amount in cash
in lieu of a fractional share pursuant to Section 3(i) hereof;
provided, however, that the Corporate Borrower shall deliver to such
holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares of Common Stock,
other capital stock and cash upon the occurrence of the event
requiring such adjustment.
(xiii) Adjustments to Par Value. The Corporate Borrower shall
from time to time make such adjustments to the par value of the Common
Stock as may be necessary so that at all times, upon conversion of
this Note, the shares of Common Stock will be fully paid and
nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i)(4), (ii) or (iii), and the record dates for the distributions
giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. The Corporate Borrower
shall not be required to issue fractional shares on the conversion of this
Note. If any fraction of a share would, except for the provisions of this
Section 3(i), be issuable on the conversion of this Note, the Corporate
Borrower shall pay to the holder an amount in cash equal to the product of
(i) such fraction of a share and (ii) the Current Market Value of a share
of Common Stock as of the date of conversion of this Note. Upon any
conversion of all or any portion of the Adjusted Principal Amount in
accordance with the terms hereof, Borrower shall pay to the holder in cash
all accrued but unpaid interest to the effective date of conversion with
respect to the portion of the Adjusted Principal Amount of this Note being
converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, the Corporate Borrower shall promptly
thereafter (i) cause to be prepared a certificate of a firm of independent
public accountants of recognized standing selected by the Corporate
Borrower (who may be the regular auditors of the Corporate Borrower)
setting forth the Exercise Rate after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations
12
<PAGE>
are based and setting forth the number of shares (or portion thereof)
issuable after such adjustment in the Exercise Rate, upon conversion of
this Note, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to
the holder of this Note at such holder's address appearing on the Note
register written notice of such adjustments by first-class mail, postage
prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 3(j).
In the event:
(i) The Corporate Borrower shall authorize the issuance to all
holders of shares of Common Stock of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of any other
subscription rights or warrants (other than rights, options or
warrants issued to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
not less than 94% (100% if a stand-by underwriter is used and charges
the Corporate Borrower commission) of the Current Market Value); or
(ii) The Corporate Borrower shall authorize the distribution to
all holders of shares of Common Stock of evidences of its indebtedness
or assets (other than cash dividends or cash distributions payable out
of consolidated earnings or earned surplus or dividends payable in
shares of Common Stock or distributions referred to in subsection (i)
of Section 3(h) hereof); or
(iii) of any consolidation or merger to which the Corporate
Borrower is a party or of the conveyance or transfer of the properties
and assets of the Corporate Borrower substantially as an entirety, or
of any reclassification or change of Common Stock issuable upon
conversion of this Note (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporate Borrower; or
(v) The Corporate Borrower proposes to take any action (other
than actions of the character described in Section 3(h)(i) which would
require an adjustment of the Exercise Rate pursuant to Section 3(h);
then the Corporate Borrower shall cause to be given to the registered
holder of this Note at its address appearing on the Note register, at least
20 days (or 15 days in any case
13
<PAGE>
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is
no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the initial expiration date set
forth in any tender offer or exchange offer for shares of Common Stock, or
(iii) the date on which any such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective or consummated, and the date as of which it is expected
that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice
required by this Section 3(j) or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of the Corporate Borrower or any other matter, or any rights
whatsoever as shareholders of the Corporate Borrower.
4. Definitions. For purposes of this Note, the following terms shall have
the meanings indicated:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of the Corporate
Borrower.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for
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<PAGE>
each such trading day shall be: (i) the last reported sales price, regular
way on such day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices on such day, regular way, in either
case as reported on the New York Stock Exchange ("NYSE") or, (ii) if such
security is not listed or admitted for trading on the NYSE, on the
principal national securities exchange on which such security is listed or
admitted for trading or, (iii) if not listed or admitted for trading on any
national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or, (iv) if such security is not quoted on such National Market
System, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, (v) if bid and asked
prices for such security on such day shall not have been reported through
NASDAQ, the average of the bid and asked prices on such day as furnished by
any NYSE member firm regularly making a market in such security selected
for such purpose by the Chairman of the Board or the Board of Directors or,
(vi) if such bid and asked prices are not so furnished, then the fair
market value of the security as established by the Board of Directors
acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Corporate Borrower or any other Person (corporate or
otherwise) which the holder of this Note at any time shall be entitled to
receive, or shall have received, upon the conversion of this Note, in lieu
of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock
or Other Securities pursuant to Section 3(h) hereof or otherwise.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option. Except as expressly set forth in this Section 5,
Borrower is prohibited from making any voluntary prepayment of this Note and
shall not have any right to cause the holder to convert any portion of the
Adjusted Principal Amount outstanding from time to time. From and after the
fifth anniversary of the date of this Note and on or prior to the Due Date,
Borrower shall have the right (the "Call Option") to repay the Adjusted
Principal Amount then outstanding, in whole but not in part, without premium or
penalty (other than the
15
<PAGE>
imposition, if applicable, of the Default Rate or "late charge" as provided
herein). Borrower may exercise the Call Option by giving the holder of this Note
at any time upon ninety (90) days' prior written notice of Borrower's intention
to exercise the Call Option, which notice shall state the date on which the Call
Option is to be consummated, the then current Adjusted Principal Amount and all
accrued interest and unpaid interest thereon, together with any other sums
evidenced by this Note, to be paid on such date. Upon the receipt of any such
notice, the holder shall have the right at any time prior to the date proposed
for such repurchase to convert any or all of the Adjusted Principal Amount of
this Note in accordance with the provisions of Section 3.
6. Default.
-------
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Corporate Borrower, as applicable, shall fail to
pay when due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Corporate Borrower to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any representation,
covenant or warranty set forth in the Loan Documents (other than this Note)
until either Borrower or the Corporate Borrower, as applicable, shall have
failed to cure such breach within any applicable notice and cure period
therein provided; and (ii) no default shall exist hereunder on account of a
breach of any representation, covenant or warranty set forth herein unless
and until Lender shall provide written notice of such breach to Borrower,
and Borrower shall fail to cure the same within 30 days after receipt of
such notice, provided if such breach is of such a nature that it cannot be
cured within such 30 day period, it shall not constitute a default
hereunder so long as Borrower commences its cure of such breach within such
30 day period and thereafter diligently and continuously proceeds with the
curing of same within a reasonable period of time not to exceed 180 days.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Borrower and its affiliates,
subsidiaries and any parent entity, taken as a whole.
16
<PAGE>
7. Default Rate; Late Charge.
-------------------------
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of (x) 2.0%, plus the Interest Rate, on the then outstanding past-due
Adjusted Principal Amount, until such amount is paid in full. In addition, a
late charge of four percent (4%) of the amount of any installment or the amount
due on the Due Date which is not paid when due shall be due and payable to the
holder of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the Lender.
8. Security; Governing Law.
-----------------------
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions. The provisions in this Section 9 shall
govern and control over any irreconcilably inconsistent provision contained in
this Note or any of the other Loan Documents or any other instrument
contemplated hereunder or thereunder. In no event shall the aggregate of all
interest paid or payable by Borrower to Lender ever exceed the maximum rate of
interest which may lawfully be charged to (or payable by) Borrower under
applicable law on the Adjusted Principal Amount of this Note from time to time
remaining unpaid. In this connection, it is expressly stipulated and agreed that
it is the intent of Lender and Borrower in the execution and delivery of this
Note to contract in strict compliance with any applicable usury laws. In
furtherance of the foregoing, none of the terms of this Note, the Loan Documents
(other than this Note) or any such other instruments contemplated hereunder or
thereunder shall ever be construed to create a contract to charge or pay for
interest in excess of the maximum interest rate permitted to be contracted for,
charged to, or payable by Borrower under applicable law. Borrower and any
guarantors, endorsers or other parties now or hereafter becoming liable for
payment of this Note shall never be liable for interest in excess of the maximum
interest that may be lawfully charged under applicable law, and the provisions
of this Section 9 shall govern over all other provisions of the Loan Documents,
and any other instruments evidencing or securing the Loan, should such
provisions be in apparent conflict herewith.
17
<PAGE>
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the Adjusted Principal Amount
of this Note, prior to the due date for payment thereof, resulting
from acceleration of maturity of this Note, if the aggregate amounts
of interest accruing hereunder prior to such payment plus the amount
of any interest accruing after such maturity up to the date of payment
and plus any other amounts paid or accrued in connection with the
other Loan Documents, including, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, which by law are deemed interest under such Loan Documents and
which aggregate amounts paid or accrued (if calculated in accordance
with the provisions of this Note other than pursuant to this Section
9) would exceed the maximum lawful rate of interest which could be
charged on the principal balance of this Note from the date hereof to
the date of final payment thereof, then in such event the amount of
such excess shall be credited, as of the date paid, toward the payment
of principal of this Note so as to reduce the amount of the final
payments of Adjusted Principal Amount due on this Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
amount which could lawfully have been collected and retained) upon the
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
18
<PAGE>
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
10. Invalidity.
----------
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
----------------
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby waives
and renounces for itself, its successors and assigns, all rights to the
benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption,
appraisement, or exemption now provided, or which may hereafter be
provided, by the Constitution and laws of the United States and of any
state thereof, both as to itself and in and to all of its property, real
and personal against the enforcement and collection of the obligations
evidenced by this Note.
(b) In the event that the holder hereof shall institute any action for
the enforcement of the collection of this Note, there shall be immediately
due from Borrower in addition to the unpaid interest and the Adjusted
Principal Amount, all costs and expenses of such action, including but not
limited to attorneys' fees and expenses.
12. Miscellaneous.
-------------
19
<PAGE>
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject to
any applicable grace or cure period expressly provided herein or the in the
Loan Documents; provided, however, that unless otherwise stated, whenever
any payment to be made under this Note shall be stated to be due on a day
other than a Business Day, such payment may be made on the immediately
preceding Business Day.
(c) All notices, demands or requests relating to any matters set forth
herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
20
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
ATLANTIC HOMESTEAD VILLAGE LIMITED PARTNERSHIP
By: Atlantic Homestead Village (1) Incorporated,
its sole general partner
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
For purposes of Sections 3 and 4 only:
---------- -
ATLANTIC HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
21
<PAGE>
EXHIBIT G
ADDITIONAL CORPORATE PROMISSORY NOTE
$18,041,687 May 28, 1996
This Additional Corporate Promissory Note (this "Note") is made and
delivered as of May 28, 1996, to Security Capital Atlantic Incorporated, a
Maryland corporation ("Lender"), by Atlantic Homestead Village Incorporated, a
Maryland corporation ("Borrower"), under the following circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to Borrower, to fund, among other matters, acquisition and construction
costs and expenses incurred by Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith Borrower delivered to Lender that certain promissory note (the "Prior
Corporate Note") dated January 24, 1996, in the original principal amount of
$62,031,430, and various deeds to secure debt, deeds of trust and mortgages (the
"Prior Corporate Security Documents"), to secure payment of the Prior Corporate
Note and the Prior Partnership Note (as defined below). (The Prior Corporate
Note, the Prior Corporate Security Documents and all other instruments delivered
by Borrower in connection therewith to secure the Prior Corporate Note and the
Prior Partnership Note are herein called the "Prior Corporate Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the
"Partnership Loan") to Atlantic Homestead Village Limited Partnership (the
"Partnership"), to fund, among other matters, acquisition and construction costs
and expenses incurred by the Partnership in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Partnership delivered to Lender that certain promissory note (the
"Prior Partnership Note") dated January 24, 1996, in the original principal
amount of $19,213,476, and various deeds to secure debt, deeds of trust and
mortgages (the "Prior Partnership Security Documents"), to secure payment of the
Prior Corporate Note and the Prior Partnership Note. (The Prior Partnership
Note, the Prior Partnership Security Documents and all other instruments
delivered by the Partnership in connection therewith to secure the Prior
Partnership Note and the Prior Corporate Note are herein called the "Prior
Partnership Loan Documents"; the Prior Corporate Loan Documents and Prior
Partnership Loan Documents are collectively referred to herein as the "Prior
Loan Documents"; the Corporate Loan and the Partnership Loan are herein
collectively called the "Loans".)
<PAGE>
C. Borrower, the Partnership and Lender desire to continue the funding
provided for under the Prior Loan Documents, to provide funds to Borrower and
the Partnership for the costs incurred in connection with the acquisition and
development of Homestead Village projects. In furtherance of the foregoing,
Borrower, the Partnership and Lender have agreed that (i) the maximum amount of
the Corporate Loan shall be $90,765,665 (the "Maximum Corporate Loan Amount");
(ii) Borrower's repayment obligation for funds advanced in respect of the
Corporate Loan shall be adjusted by a discount factor of .882196112 (the
"Discount Factor"), thus providing for the maximum face amount of this Note of
$80,073,117 (i.e., the Maximum Corporate Loan Amount as adjusted by the Discount
Factor); (iii) the maximum amount of the Partnership Loan shall be $20,353,019
(the "Maximum Partnership Loan Amount"); (ii) the Partnership's repayment
obligation for funds advanced in respect of the Partnership Loan, as evidenced
by that certain Amended and Restated Promissory Note, of even date herewith (the
"Partnership Note"), shall be adjusted by the Discount Factor, thus providing
for the maximum face amount of the Partnership Note of $17,955,354 (i.e., the
Maximum Partnership Loan Amount as adjusted by the Discount Factor); and (iv) in
connection therewith, the Prior Loan Documents shall be amended and restated in
conformity with the foregoing and as otherwise agreed by the parties. This Note
is being delivered by Borrower to Lender to evidence the increase in the amount
of the Corporate Loan, as adjusted by the Discount Factor. The amended and
restated Prior Loan Documents being executed and delivered contemporaneously
herewith, and any and all other agreements or instruments now or hereafter
executed by Borrower, the Partnership or any other person or entity to evidence,
or in connection with, or as security for the payment of this Note and/or the
Partnership Note are herein collectively, with such notes, referred to as the
"Loan Documents".
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree as follows:
1. Promise to Pay.
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) EIGHTEEN MILLION FORTY ONE THOUSAND SIX
HUNDRED EIGHTY SEVEN DOLLARS ($18,041,687) and (B) the aggregate unpaid
principal amount of all advances made by Lender to Borrower in respect of the
Corporate Loan, multiplied by the Discount Factor (the amount so determined
being herein called the "Adjusted Principal Amount"), together with interest on
the Adjusted Principal Amount at a rate equal to 9.0% peer annum (the "Interest
Rate"). Interest shall be calculated on the basis of a 360-day year and shall be
computed on the actual number of days elapsed.
2. Payments.
2
<PAGE>
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period. Borrower shall make a payment of the
total Adjusted Principal Amount of advances then outstanding, together with
accrued and unpaid interest to such date, on the Due Date. Borrower shall have
no obligation to pay the Adjusted Principal Amount, or any portion thereof,
until the Due Date or such earlier date upon which the loan is accelerated.
Borrower shall make each payment hereunder not later than 11:00 a.m. (Mountain
Standard Time) on the day when due in U.S. dollars at Lender's office at 7777
Market Center Avenue, El Paso, Texas 79912. Each payment shall first be applied
to late charges, costs of collection or enforcement and other similar amounts
due, if any, under this Note, then to interest due and payable hereunder and the
remainder to the Adjusted Principal Amount due and payable hereunder. The
aggregate unpaid Adjusted Principal Amount shown on the records of Lender shall
be rebuttable presumptive evidence of the Adjusted Principal Amount owing and
unpaid on this Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997, (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the principal amount outstanding on this Note, on the basis of one
fully paid, registered and nonassessable share of Common Stock for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment
shall be made on Common Stock issuable upon conversion of this Note on
account of any dividend or distribution declared on Borrower's Common Stock
to holders of such Common Stock of record as of a date prior to the
Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New York, New York time, on a Business Day and the
conversion of this Note will be effective as of such Exercise Date. If any
items referred to in subsection (a) are received after 2:00 p.m., New York,
New York time, on a Business Day, the conversion of this
3
<PAGE>
Note will be effective on the next succeeding Business Day. Notwithstanding
the foregoing, in the case of a conversion of this Note on the Expiration
Date, if all of the items referred to in the preceding subsection are
received by Borrower at or prior to 5:00 p.m. New York, New York time, on
such Expiration Date, the conversion of this Note will be effective on the
Expiration Date.
(d) Upon the conversion of this Note in accordance with the terms
hereof Borrower shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the holder of this Note, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by Borrower as described in
Section 3(h)(x) hereof, or a tender offer or an exchange offer for shares
of Common Stock of Borrower shall be made, upon such surrender of this Note
as aforesaid, Borrower shall, as soon as possible, but in any event not
later than two Business Days thereafter, issue and cause to be delivered
the full number of shares of Common Stock issuable upon the conversion of
this Note in the manner described in this sentence together with cash as
provided in Section 3(i) hereof. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record or such shares of Common
Stock as of the date of the surrender of this Note. No fractional shares
shall be issued upon conversion of this Note in accordance with Section
3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to
the initial issuance of this Note and the issuance of shares of Common
Stock upon conversion of this Note; provided, however, that Borrower shall
not be required to pay any tax or taxes which may be payable in respect of
any transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
(f) Borrower will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligation to issue shares of Common
4
<PAGE>
Stock upon conversion of this Note, the maximum number of shares of Common
Stock which may then be deliverable upon the conversion of this Note.
Borrower or the transfer agent for the Common Stock (the "Transfer Agent")
and every subsequent transfer agent for any shares of Borrower's capital
stock issuable upon the exercise of any of the conversion rights aforesaid
will be irrevocably authorized and directed at all times to reserve such
number of authorized shares as shall be required for such purpose. Before
taking any action which would cause an adjustment pursuant to this Section
3 to reduce the Exercise Price below the then par value (if any) of the
shares issuable upon conversion of this Note, Borrower will take any
corporate action which may, in the opinion of its counsel (which may be
counsel employed by Borrower), be necessary in order that Borrower may
validly and legally issue fully paid and nonassessable shares of Common
Stock at the Exercise Price as so adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, Borrower
will, at its expense, obtain promptly and maintain the approval for listing
or quotation on each such exchange or inter-dealer quotation system, upon
official notice of issuance after notice of conversion of this Note, the
shares of Common Stock issuable hereunder and maintain the listing or
quotation of such shares after their issuance; and Borrower will also, upon
official notice of issuance after notice of conversion of this Note, list
or quote on such national securities exchange, will register under the
Securities Exchange Act of 1934, as amended, and will maintain such listing
or quotation of, any Other Securities (as defined below) that at any time
are issuable upon conversion of this Note, if and at the time that any
securities of the same class shall be listed or quoted on such national
securities exchange or inter-dealer quotation system by Borrower.
(h) The Exercise Rate is subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 3(h). For
purposes of this Section 3(h), "Common Stock" means the Common Stock and
any other stock of Borrower, however designated, issuable upon conversion
of this Note.
(i) Adjustment for Change in Capital Stock. If Borrower:
a. pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
b. subdivides its outstanding shares of Common Stock
into a greater number of shares;
c. combines its outstanding shares of Common Stock into
a smaller number of shares;
5
<PAGE>
d. makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any
shares of its capital stock,
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
Borrower which such holder would have owned immediately following such
action if this Note had been exercised immediately prior to such
action or immediately prior to the record date applicable thereto, if
any.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon
conversion, may receive shares of two or more classes of capital stock
of Borrower, the Exercise Rate of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 3(h).
Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If Borrower (i) distributes any rights, warrants
or options to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
less than 94% (100% if a stand-by underwriter is used and charges
Borrower a commission) of the Current Market Value at the Time of
Determination (each as defined in Section 4) or (ii) sells any Common
Stock or any securities convertible into or exchangeable or
exercisable for the Common Stock (other than pursuant to (1) the
exercise of this Note (or any other note issued by Borrower pursuant
to or in connection with that certain Merger and Distribution
Agreement dated of even date herewith among Lender Security Capital
Pacific Trust ("PTR"), Security Capital Group Incorporated ("SCG") and
Homestead Village Properties Incorporated ("Homestead") or (2) upon
exercise of outstanding warrants to acquire shares of Common Stock,
which warrants were issued pursuant to a Warrant Agreement executed in
connection with that certain Warrant Purchase Agreement of even date
herewith among Lender, PTR, SCG and Homestead or (3) any security
convertible into, or
6
<PAGE>
exchangeable or exercisable for, the Common Stock as to which the
issuance thereof has previously been the subject of any required
adjustment (whether or not actually made) pursuant to this Section
3(h)) at a price per share less than the Current Market Value, the
Exercise Rate shall be adjusted in accordance with the formula:
E' = E x (O + N)
---------------
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (ii) is being
applied or on the date of sale of Common Stock at a price per
share less than the Current Market Value to which this subsection
(ii) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or
the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share of the additional shares of Common
Stock upon the exercise of any such rights, options or warrants
so distributed or pursuant to any such convertible, exchangeable
or exercisable securities so sold or the sale price of the shares
so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be.
The adjustment shall be made successively whenever any such
rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If
at the end of the period during which such rights, warrants or options
are exercisable, not all rights, warrants or options shall have been
exercised, the Exercise Rate shall be immediately readjusted to what
it
7
<PAGE>
would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E'that is lower than the value of E.
(iii) Adjustment for Other Distributions. If Borrower distributes
to all holders of its Common Stock any of its assets or debt
securities or any rights, warrants or options to purchase any of its
debt securities or assets, the Exercise Rate shall be adjusted in
accordance with the formula:
E' = E x M
---
M-F
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the distribution
to which this subsection (iii) applies) of the assets,
securities, rights, warrants or options to be distributed in
respect of each share of Common Stock in the distribution to
which this subsection (iii) is being applied (including, in the
case of cash dividends or other cash distributions giving rise
to an adjustment, all such cash distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on
the books of Borrower prepared in accordance with generally accepted
accounting principles other than
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any Extraordinary Cash Dividend (as defined below). An "Extraordinary
Cash Dividend" shall be that portion, if any, of the aggregate amount
of all cash dividends paid in any fiscal year which exceeds the sum of
(A) Borrower cumulative undistributed earnings on the date of this
Agreement, plus (B) the cumulative amount of earnings, as determined
by the Board of Directors, after such date, minus (C) the cumulative
amount of dividends accrued or paid in respect of the Common Stock. In
all cases, Borrower shall give the holder of this Note advance notice
of a record date for any dividend payment on the Common Stock which
notice is delivered on a date at least as early as the date of notice
to the holders of Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of
Section 3(h), the following shall apply:
a. in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by Borrower for
any underwriting of the issue or otherwise in connection
therewith;
b. in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the records of Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by Borrower for the issuance of such securities plus the
additional minimum consideration, if any, to be received by
Borrower upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment
in the Exercise Rate need be made unless the adjustment would require
an increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into
account in any subsequent
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<PAGE>
adjustment. All calculations under this Section 3(h) shall be made to
the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made
for a transaction referred to in subsections (i), (ii) or (iii) of
this Section 3(h) if the holder of this Note is offered the
opportunity to participate in the transaction on a basis and with
notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of
Common Stock participate in the transaction. To the extent this Note
becomes convertible into cash, no adjustment need be made thereafter
as to the cash. Interest will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is
adjusted, Borrower shall provide the notices required by Section 3(j)
hereof.
(viii) Voluntary Adjustment. Borrower from time to time may, as
the Board of Directors deems appropriate, increase the Exercise Rate
by any amount for any period of time if the period is at least 20 days
and if the increase is irrevocable during the period. Whenever the
Exercise Rate is increased, Borrower shall mail to the holder of this
Note a notice of the increase. Borrower shall mail the notice at least
15 days before the date the increased Exercise Rate takes effect. The
notice shall state the increased Exercise Rate and the period it will
be in effect. An increase of the Exercise Rate pursuant to this
Section 3(h)(viii), other than an increase which Borrower has
irrevocably committed will be in effect for so long as this Note is
outstanding, does not change or adjust the Exercise Rate otherwise in
effect for purposes of subsections (i), (ii) or (iii) of this Section
3(h).
(ix) Notice of Certain Transactions. If:
a. Borrower takes any action that would require an
adjustment in the Exercise Rate pursuant to subsections (i), (ii)
or (iii) of this Section 3(h) and if Borrower does not arrange
for the holder of this Note to participate pursuant to Section
3(h)(vi); or
b. there is a liquidation or dissolution of Borrower,
Borrower shall mail to the holder of this Note a notice stating
the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. Borrower shall mail the notice at
least
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15 days before such date. Failure to mail the notice or any
defect in it shall not affect the validity of the transaction.
(x) Reorganization of Borrower. If Borrower consolidates or
merges with or into, or transfers or leases all or substantially all
its assets to, any Person, upon consummation of such transaction this
Note shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Note would
have owned immediately after the consolidation, merger, transfer or
lease if the holder had exercised this Note immediately before the
effective date of the transaction. Concurrently with the consummation
of such transaction, the corporation formed by or surviving any such
consolidation or merger if other than Borrower, or the Person to which
such sale or conveyance shall have been made (any such Person, the
"Successor Guarantor"), shall enter into a supplemental Note so
providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for
in this Section 3(h). The Successor Guarantor shall mail to the holder
of this Note a notice describing the supplemental Note. If the issuer
of securities deliverable upon conversion of this Note under the
supplemental Note is an Affiliate of the formed, surviving, transferee
or lessee corporation, that issuer shall join in the supplemental
Note. If this subsection (x) applies, subsections (i), (ii) or (iii)
of this Section 3(h) do not apply.
(xi) Borrower Determination Final. Any determination that
Borrower or the Board of Directors must make pursuant to subsection
(i), (ii), (iii), (iv) or (vii) of this Section 3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, Borrower may elect to defer until the occurrence of such event
(i) issuing to the holder of this Note exercised after such record
date the shares of Common Stock and other capital stock of Borrower,
if any, issuable upon such conversion over and above the shares of
Common Stock and other capital stock of Borrower, if any, issuable
upon such conversion on the basis of the Exercise Rate and (ii) paying
to such holder any amount in cash in lieu of a fractional share
pursuant to Section 3(i) hereof; provided, however, that Borrower
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
shares of Common Stock, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
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(xiii) Adjustments to Par Value. Borrower shall from time to
time make such adjustments to the par value of the Common Stock as may
be necessary so that at all times, upon conversion of this Note, the
shares of Common Stock will be fully paid and nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i), (ii) or (iii), and the record dates for the distributions giving
rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. Borrower shall not be
required to issue fractional shares on the conversion of this Note. If any
fraction of a share would, except for the provisions of this Section 3(i),
be issuable on the conversion of this Note, Borrower shall pay to the
holder an amount in cash equal to the product of (i) such fraction of a
share and (ii) the Current Market Value of a share of Common Stock as of
the date of conversion of this Note. Upon any conversion of all or any
portion of the Adjusted Principal Amount in accordance with the terms
hereof, Borrower shall pay to the holder in cash all accrued but unpaid
interest to the effective date of conversion with respect to the portion of
the Adjusted Principal Amount of this Note being converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, Borrower shall promptly thereafter (i)
cause to be prepared a certificate of a firm of independent public
accountants of recognized standing selected by Borrower (who may be the
regular auditors of Borrower) setting forth the Exercise Rate after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based and setting forth the
number of shares (or portion thereof) issuable after such adjustment in the
Exercise Rate, upon conversion of this Note, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein,
and (ii) cause to be given to the holder of this Note at such holder's
address appearing on the Note register written notice of such adjustments
by first-class mail, postage prepaid. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be mailed
under the other provisions of this Section 3(j).
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In the event:
(i) Borrower shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants (other than rights, options or warrants issued to all
holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share not less than 94%
(100% if a stand-by underwriter is used and charges Borrower
commission) of the Current Market Value); or
(ii) Borrower shall authorize the distribution to all holders
of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in subsection (i) of
Section 3(h) hereof); or
(iii) of any consolidation or merger to which Borrower is a
party or of the conveyance or transfer of the properties and assets of
Borrower substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon conversion of this Note (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of Borrower; or
(v) Borrower proposes to take any action (other than actions
of the character described in Section 3(h)(i) which would require an
adjustment of the Exercise Rate pursuant to Section 3(h);
then Borrower shall cause to be given to the registered holder of this Note
at its address appearing on the Note register, at least 20 days (or 15 days
in any case specified in clauses (i) or (ii) above) prior to the applicable
record date hereinafter specified, or promptly in the case of events for
which there is no record date, by first-class mail, postage prepaid, a
written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial
expiration date set forth in any tender offer or exchange offer for shares
of Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as
of which
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<PAGE>
it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the
notice required by this Section 3(j) or any defect therein shall not affect
the legality or validity of any distribution, right, option, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of Borrower or any other matter, or any rights whatsoever as
shareholders of Borrower.
4. Definitions. For purposes of Section 3 of this Note, the following
terms shall have the meanings indicated:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of Borrower.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for each such trading day shall be:
(i) the last reported sales price, regular way on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the New York
Stock Exchange ("NYSE") or, (ii) if such security is not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such security is listed or admitted for trading or, (iii) if not
listed or admitted for trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, (iv) if such security is
not
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<PAGE>
quoted on such National Market System, the average of the closing bid and
asked prices on such day in the over-the-counter market as reported by
NASDAQ or, (v) if bid and asked prices for such security on such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Chairman of the
Board or the Board of Directors or, (vi) if such bid and asked prices are
not so furnished, then the fair market value of the security as established
by the Board of Directors acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of Borrower or any other Person (corporate or otherwise) which
the holder of this Note at any time shall be entitled to receive, or shall
have received, upon the conversion of this Note, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3(h) hereof or otherwise.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option.
Except as expressly set forth in this Section 5, Borrower is prohibited
from making any voluntary prepayment of this Note and shall not have any right
to cause the holder to convert any portion of the Adjusted Principal Amount
outstanding from time to time. From and after the fifth anniversary of the date
of this Note and on or prior to the Due Date, Borrower shall have the right (the
"Call Option") to repay the Adjusted Principal Amount then outstanding, in whole
but not in part, without premium or penalty (other than the imposition, if
applicable, of the Default Rate or "late charge" as provided herein). Borrower
may exercise the Call Option by giving the holder of this Note at any time upon
ninety (90) days' prior written notice of Borrower's intention to exercise the
Call Option, which notice shall state the date on which the Call Option is to be
consummated, the then current Adjusted Principal Amount and all accrued interest
and unpaid interest thereon, together with any other sums evidenced by this
Note, to be paid on such date. Upon the receipt of any such notice, the holder
shall have the right at any
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time prior to the date proposed for such repurchase to convert any or all of the
Adjusted Principal Amount of this Note in accordance with the provisions of
Section 3.
6. Default.
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Partnership, as applicable, shall fail to pay when
due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Partnership to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any representation,
covenant or warranty set forth in the Loan Documents (other than this Note)
until either Borrower or Partnership, as applicable, shall have failed to
cure such breach within any applicable notice and cure period therein
provided; and (ii) no default shall exist hereunder on account of a breach
of any representation, covenant or warranty set forth herein unless and
until Lender shall provide written notice of such breach to Borrower, and
Borrower shall fail to cure the same within 30 days after receipt of such
notice, provided if such breach is of such a nature that it cannot be cured
within such 30 day period, it shall not constitute a default hereunder so
long as Borrower commences its cure of such breach within such 30 day
period and thereafter diligently and continuously proceeds with the curing
of same within a reasonable period of time not to exceed 180 days.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Borrower and its affiliates,
subsidiaries and any parent entity, taken as a whole.
7. Default Rate; Late Charge.
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of 2.0%, plus the Interest Rate, on the then outstanding past-due
amount of principal, until such amount is paid in full. In addition, a late
charge of four percent (4%) of the amount of any installment or the amount due
on the Due Date which is not paid when due shall be due and payable to the
holder
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of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the
Lender.
8. Security; Governing Law.
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions.
The provisions in this Section 9 shall govern and control over any
irreconcilably inconsistent provision, the Loan Documents or any other
instrument contemplated hereunder or thereunder. In no event shall the
aggregate of all interest paid or payable by Borrower to Lender ever exceed the
maximum rate of interest which may lawfully be charged to (or payable by)
Borrower under applicable law on the Adjusted Principal Amount of this Note from
time to time remaining unpaid. In this connection, it is expressly stipulated
and agreed that it is the intent of Lender and Borrower in the execution and
delivery of this Note to contract in strict compliance with any applicable usury
laws. In furtherance of the foregoing, none of the terms of the Loan Documents
or any such other instruments contemplated hereunder or thereunder shall ever be
construed to create a contract to charge or pay for interest in excess of the
maximum interest rate permitted to be contracted for, charged to, or payable by
Borrower under applicable law. Borrower and any guarantors, endorsers or other
parties now or hereafter becoming liable for payment of this Note shall never be
liable for interest in excess of the maximum interest that may be lawfully
charged under applicable law, and the provisions of this Section 9 shall govern
over all other provisions of the Loan Documents, and any other instruments
evidencing or securing the Loans, should such provisions be in apparent conflict
herewith.
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the principal of the Adjusted
Principal Amount of this Note, prior to the due date for payment
thereof, resulting from acceleration of maturity of this Note, if the
aggregate amounts of
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<PAGE>
interest accruing hereunder prior to such payment plus the amount of
any interest accruing after such maturity up to the date of payment
and plus any other amounts paid or accrued in connection with the Loan
Documents, including, if applicable, all or any portion of the value
of any Common Stock issued to Lender under Section 3 of this Note,
which by law are deemed interest under such Loan Documents and which
aggregate amounts paid or accrued (if calculated in accordance with
the provisions of this Note other than pursuant to this Section 9)
would exceed the maximum lawful rate of interest which could be
charged on the principal balance of this Note from the date hereof to
the date of final payment thereof, then in such event the amount of
such excess shall be credited, as of the date paid, toward the payment
of principal of this Note so as to reduce the amount of the final
payments of Adjusted Principal Amount due on this Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
amount which could lawfully have been collected and retained) upon the
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
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10. Invalidity.
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby
waives and renounces for itself, its successors and assigns, all rights to
the benefits of any statute of limitations and any moratorium,
reinstatement, marshalling, forbearance, valuation, stay, extension,
redemption, appraisement, or exemption now provided, or which may hereafter
be provided, by the Constitution and laws of the United States and of any
state thereof, both as to itself and in and to all of its property, real
and personal against the enforcement and collection of the obligations
evidenced by this Note.
(b) In the event that the holder hereof shall institute any action for
the enforcement of the collection of this Note, there shall be immediately
due from Borrower in addition to the unpaid interest and principal, all
costs and expenses of such action, including but not limited to attorneys'
fees and expenses.
12. Miscellaneous.
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
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(b) Time is of the essence as to all dates set forth herein subject to
any applicable grace or cure period expressly provided herein or the in the
Loan Documents; provided, however, that unless otherwise stated, whenever
any payment to be made under this Note shall be stated to be due on a day
other than a business day, such payment may be made on the immediately
preceding business day. For purposes of this Note, a business day shall be
any day that is not a Saturday, Sunday or national bank holiday.
(c) All notices, demands or requests relating to any matters set forth
herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
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IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
ATLANTIC HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
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EXHIBIT H
CONSOLIDATED AMENDED AND RESTATED PROMISSORY NOTE
$80,073,117 May 28, 1996
This Consolidated Amended and Restated Promissory Note (this "Note") is
made and delivered as of May 28, 1996, to Security Capital Atlantic
Incorporated, a Maryland corporation ("Lender"), by Atlantic Homestead Village
Incorporated, a Maryland corporation ("Borrower"), under the following
circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to Borrower, to fund, among other matters, acquisition and construction
costs and expenses incurred by Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith Borrower delivered to Lender that certain promissory note (the "Prior
Corporate Note") dated January 24, 1996, in the original principal amount of
$62,031,430, and various deeds to secure debt, deeds of trust and mortgages (the
"Prior Corporate Security Documents"), to secure payment of the Prior Corporate
Note and the Prior Partnership Note (as defined below). (The Prior Corporate
Note, the Prior Corporate Security Documents and all other instruments delivered
by Borrower in connection therewith to secure the Prior Corporate Note and the
Prior Partnership Note are herein called the "Prior Corporate Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the
"Partnership Loan") to Atlantic Homestead Village Limited Partnership (the
"Partnership"), to fund, among other matters, acquisition and construction costs
and expenses incurred by the Partnership in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Partnership delivered to Lender that certain promissory note (the
"Prior Partnership Note") dated January 24, 1996, in the original principal
amount of $19,213,476, and various deeds to secure debt, deeds of trust and
mortgages (the "Prior Partnership Security Documents"), to secure payment of the
Prior Corporate Note and the Prior Partnership Note. (The Prior Partnership
Note, the Prior Partnership Security Documents and all other instruments
delivered by the Partnership in connection therewith to secure the Prior
Partnership Note and the Prior Corporate Note are herein called the "Prior
Partnership Loan Documents"; the Prior Corporate Loan Documents and Prior
Partnership Loan Documents are collectively referred to herein as the "Prior
Loan Documents"; the Corporate Loan and the Partnership Loan are herein
collectively called the "Loans".)
<PAGE>
C. Borrower, the Partnership and Lender desire to continue the funding
provided for under the Prior Loan Documents, to provide funds to Borrower and
the Partnership for the costs incurred in connection with the acquisition and
development of Homestead Village projects. In furtherance of the foregoing,
Borrower, the Partnership and Lender have agreed that (i) the maximum amount of
the Corporate Loan shall be $90,765,665 (the "Maximum Corporate Loan Amount");
(ii) Borrower's repayment obligation for funds advanced in respect of the
Corporate Loan shall be adjusted by a discount factor of .882196112 (the
"Discount Factor"), thus providing for the maximum face amount of this Note of
$80,073,117 (i.e., the Maximum Corporate Loan Amount as adjusted by the Discount
Factor); (iii) the maximum amount of the Partnership Loan shall be $20,353,019
(the "Maximum Partnership Loan Amount"); (ii) the Partnership's repayment
obligation for funds advanced in respect of the Partnership Loan, as evidenced
by that certain Amended and Restated Promissory Note, of even date herewith (the
"Partnership Note"), shall be adjusted by the Discount Factor, thus providing
for the maximum face amount of the Partnership Note of $17,955,354 (i.e., the
Maximum Partnership Loan Amount as adjusted by the Discount Factor); and (iv) in
connection therewith, the Prior Loan Documents shall be amended and restated in
conformity with the foregoing and as otherwise agreed by the parties. In
connection with such amendment and restatement of the Prior Loan Documents,
prior to the execution and delivery of this Note to Lender, Borrower executed
and delivered to Lender that certain promissory note in the amount of
$18,041,687 (the "Additional Corporate Note"). This Note only renews and
consolidates the outstanding principal balance plus the amounts not yet
disbursed under (a) the Additional Corporate Note; and (b) the Prior Corporate
Note. Florida documentary stamp and intangible tax on the Prior Corporate Note
is affixed to the instrument recorded in ORB 8027, Page 484, Hillsborough County
Public Records, the instrument recorded in ORB 24449, Page 598, Broward County
Public Records, and the instrument recorded in ORB 17194 Page 179, Dade County
Public Records. Any Florida documentary stamp and intangible tax due on account
of the Additional Corporate Note is affixed to the Amended and Restated
Mortgages dated this date, from Borrower to Lender, being recorded in the Public
Records of Hillsborough County, Broward County and Dade County.
D. The Partnership Note and this Note and the amended and restated Prior
Loan Documents being executed and delivered contemporaneously herewith, and any
and all other agreements or instruments now or hereafter executed by Borrower,
the Partnership or any other person or entity to evidence the Loans, or any
portion thereof, or in connection with, or as security for the payment or
performance of, this Note or the Partnership Note and/or any other note(s)
delivered from time to time to Lender to evidence the Loans or any portion
thereof, are, together with such notes, herein collectively referred to as the
"Loan Documents".
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and
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<PAGE>
Lender agree to consolidate, amend and restate the Additional Corporate Note and
the Prior Corporate Note as follows:
1. Promise to Pay.
--------------
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) EIGHTY MILLION SEVENTY THREE THOUSAND ONE
HUNDRED SEVENTEEN DOLLARS ($80,073,117) and (B) the aggregate unpaid principal
amount of all advances made by Lender to Borrower in respect of the Corporate
Loan, multiplied by the Discount Factor (the amount so determined being herein
called the "Adjusted Principal Amount"), together with interest on the Adjusted
Principal Amount at a rate equal to 9.0% per annum (the "Interest Rate").
Interest shall be calculated on the basis of a 360-day year and shall be
computed on the actual number of days elapsed.
2. Payments.
--------
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period. Borrower shall make a payment of the
total Adjusted Principal Amount of advances then outstanding, together with
accrued and unpaid interest to such date, on the Due Date. Borrower shall have
no obligation to pay the Adjusted Principal Amount, or any portion thereof,
until the Due Date or such earlier date upon which the loan is accelerated.
Borrower shall make each payment hereunder not later than 11:00 a.m. (Mountain
Standard Time) on the day when due in U.S. dollars at Lender's office at 7777
Market Center Avenue, El Paso, Texas 79912. Each payment shall first be applied
to late charges, costs of collection or enforcement and other similar amounts
due, if any, under this Note, then to interest due and payable hereunder and the
remainder to the Adjusted Principal Amount due and payable hereunder. The
aggregate unpaid Adjusted Principal Amount shown on the records of Lender shall
be rebuttable presumptive evidence of the Adjusted Principal Amount owing and
unpaid on this Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997, (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the principal amount outstanding on this Note, on the basis of one
fully paid, registered and nonassessable share of Common Stock for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
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<PAGE>
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on Borrower's Common Stock to holders
of such Common Stock of record as of a date prior to the Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New York, New York time, on a Business Day and the
conversion of this Note will be effective as of such Exercise Date. If any
items referred to in subsection (a) are received after 2:00 p.m., New York,
New York time, on a Business Day, the conversion of this Note will be
effective on the next succeeding Business Day. Notwithstanding the
foregoing, in the case of a conversion of this Note on the Expiration Date,
if all of the items referred to in the preceding subsection are received by
Borrower at or prior to 5:00 p.m. New York, New York time, on such
Expiration Date, the conversion of this Note will be effective on the
Expiration Date.
(d) Upon the conversion of this Note in accordance with the terms
hereof Borrower shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the holder of this Note, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by Borrower as described in
Section 3(h)(x) hereof, or a tender offer or an exchange offer for shares
of Common Stock of Borrower shall be made, upon such surrender of this Note
as aforesaid, Borrower shall, as soon as possible, but in any event not
later than two Business Days thereafter, issue and cause to be delivered
the full number of shares of Common Stock issuable upon the conversion of
this Note in the manner described in this sentence together with cash as
provided in Section 3(i) hereof. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record or such shares of Common
Stock as of the
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<PAGE>
date of the surrender of this Note. No fractional shares shall be issued
upon conversion of this Note in accordance with Section 3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of this Note; provided, however, that Borrower shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
(f) Borrower will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligation to issue shares of Common Stock upon conversion of this Note,
the maximum number of shares of Common Stock which may then be deliverable
upon the conversion of this Note. Borrower or the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for
any shares of Borrower's capital stock issuable upon the exercise of any of
the conversion rights aforesaid will be irrevocably authorized and directed
at all times to reserve such number of authorized shares as shall be
required for such purpose. Before taking any action which would cause an
adjustment pursuant to this Section 3 to reduce the Exercise Price below
the then par value (if any) of the shares issuable upon conversion of this
Note, Borrower will take any corporate action which may, in the opinion of
its counsel (which may be counsel employed by Borrower), be necessary in
order that Borrower may validly and legally issue fully paid and
nonassessable shares of Common Stock at the Exercise Price as so adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, Borrower
will, at its expense, obtain promptly and maintain the approval for listing
or quotation on each such exchange or inter-dealer quotation system, upon
official notice of issuance after notice of conversion of this Note, the
shares of Common Stock issuable hereunder and maintain the listing or
quotation of such shares after their issuance; and Borrower will also, upon
official notice of issuance after notice of conversion of this Note, list
or quote on such national securities exchange, will register under the
Securities Exchange Act of 1934, as amended, and will maintain such listing
or quotation of, any Other Securities (as defined below) that at any time
are issuable upon conversion of this Note, if and at the time that any
securities of the same class shall be listed or quoted on such national
securities exchange or inter-dealer quotation system by Borrower.
5
<PAGE>
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of Borrower, however designated, issuable upon conversion of this
Note.
(i) Adjustment for Change in Capital Stock. If Borrower:
a. pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
b. subdivides its outstanding shares of Common Stock into a
greater number of shares;
c. combines its outstanding shares of Common Stock into a
smaller number of shares;
d. makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any
shares of its capital stock,
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
Borrower which such holder would have owned immediately following such
action if this Note had been exercised immediately prior to such
action or immediately prior to the record date applicable thereto, if
any.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion,
may receive shares of two or more classes of capital stock of
Borrower, the Exercise Rate of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 3(h).
Such adjustment shall be made successively whenever any event
listed above shall occur.
6
<PAGE>
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If Borrower (i) distributes any rights, warrants
or options to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
less than 94% (100% if a stand-by underwriter is used and charges
Borrower a commission) of the Current Market Value at the Time of
Determination (each as defined in Section 4) or (ii) sells any Common
Stock or any securities convertible into or exchangeable or
exercisable for the Common Stock (other than pursuant to (1) the
exercise of this Note (or any other note issued by Borrower pursuant
to or in connection with that certain Merger and Distribution
Agreement dated of even date herewith among Lender Security Capital
Pacific Trust ("PTR"), Security Capital Group Incorporated ("SCG") and
Homestead Village Properties Incorporated ("Homestead") or (2) upon
exercise of outstanding warrants to acquire shares of Common Stock,
which warrants were issued pursuant to a Warrant Agreement executed in
connection with that certain Warrant Purchase Agreement of even date
herewith among Lender, PTR, SCG and Homestead or (3) any security
convertible into, or exchangeable or exercisable for, the Common Stock
as to which the issuance thereof has previously been the subject of
any required adjustment (whether or not actually made) pursuant to
this Section 3(h)) at a price per share less than the Current Market
Value, the Exercise Rate shall be adjusted in accordance with the
formula:
E' = E x (O + N)
------------------
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (ii) is being
applied or on the date of sale of Common Stock at a price per
share less than the Current Market Value to which this subsection
(ii) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or
the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
7
<PAGE>
P = the offering price per share of the additional shares of Common
Stock upon the exercise of any such rights, options or warrants
so distributed or pursuant to any such convertible, exchangeable
or exercisable securities so sold or the sale price of the shares
so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be.
The adjustment shall be made successively whenever any such
rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If
at the end of the period during which such rights, warrants or options
are exercisable, not all rights, warrants or options shall have been
exercised, the Exercise Rate shall be immediately readjusted to what
it would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E' that is lower than the value of E.
(iii) Adjustment for Other Distributions. If Borrower distributes
to all holders of its Common Stock any of its assets or debt
securities or any rights, warrants or options to purchase any of its
debt securities or assets, the Exercise Rate shall be adjusted in
accordance with the formula:
E' = E x M
---
M-F
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the distribution to
which this subsection (iii) applies) of the assets, securities,
rights, warrants or options to be distributed in respect of each
share of Common Stock in the distribution to which this
subsection (iii) is being applied (including, in the case of cash
dividends or other
8
<PAGE>
cash distributions giving rise to an adjustment, all such
cash distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on
the books of Borrower prepared in accordance with generally accepted
accounting principles other than any Extraordinary Cash Dividend (as
defined below). An "Extraordinary Cash Dividend" shall be that
portion, if any, of the aggregate amount of all cash dividends paid in
any fiscal year which exceeds the sum of (A) Borrower cumulative
undistributed earnings on the date of this Agreement, plus (B) the
cumulative amount of earnings, as determined by the Board of
Directors, after such date, minus (C) the cumulative amount of
dividends accrued or paid in respect of the Common Stock. In all
cases, Borrower shall give the holder of this Note advance notice of a
record date for any dividend payment on the Common Stock which notice
is delivered on a date at least as early as the date of notice to the
holders of Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of
Section 3(h), the following shall apply:
a. in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by Borrower for
any underwriting of the issue or otherwise in connection
therewith;
b. in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive,
9
<PAGE>
and described in a Board resolution which shall be filed with the
records of Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by Borrower for the issuance of such securities plus the
additional minimum consideration, if any, to be received by
Borrower upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment
in the Exercise Rate need be made unless the adjustment would require
an increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 3(h) shall be made to the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made
for a transaction referred to in subsections (i), (ii) or (iii) of
this Section 3(h) if the holder of this Note is offered the
opportunity to participate in the transaction on a basis and with
notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of
Common Stock participate in the transaction. To the extent this Note
becomes convertible into cash, no adjustment need be made thereafter
as to the cash. Interest will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is
adjusted, Borrower shall provide the notices required by Section 3(j)
hereof.
(viii) Voluntary Adjustment. Borrower from time to time may, as
the Board of Directors deems appropriate, increase the Exercise Rate
by any amount for any period of time if the period is at least 20 days
and if the increase is irrevocable during the period. Whenever the
Exercise Rate is increased, Borrower shall mail to the holder of this
Note a notice of the increase. Borrower shall mail the notice at least
15 days before the date the increased Exercise Rate takes effect. The
notice shall state the increased Exercise Rate and the period it will
be in effect. An increase of the Exercise Rate pursuant to this
Section 3(h)(viii), other than an increase which Borrower has
irrevocably committed will be in effect for so long as this Note is
outstanding, does not change or adjust the
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<PAGE>
Exercise Rate otherwise in effect for purposes of subsections (i),
(ii) or (iii) of this Section 3(h).
(ix) Notice of Certain Transactions. If:
a. Borrower takes any action that would require an
adjustment in the Exercise Rate pursuant to subsections (i), (ii)
or (iii) of this Section 3(h) and if Borrower does not arrange
for the holder of this Note to participate pursuant to Section
3(h)(vi); or
b. there is a liquidation or dissolution of Borrower,
Borrower shall mail to the holder of this Note a notice stating the
proposed record date for a dividend or distribution or the proposed
effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution.
Borrower shall mail the notice at least 15 days before such date.
Failure to mail the notice or any defect in it shall not affect the
validity of the transaction.
(x) Reorganization of Borrower. If Borrower consolidates or
merges with or into, or transfers or leases all or substantially all
its assets to, any Person, upon consummation of such transaction this
Note shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Note would
have owned immediately after the consolidation, merger, transfer or
lease if the holder had exercised this Note immediately before the
effective date of the transaction. Concurrently with the consummation
of such transaction, the corporation formed by or surviving any such
consolidation or merger if other than Borrower, or the Person to which
such sale or conveyance shall have been made (any such Person, the
"Successor Guarantor"), shall enter into a supplemental Note so
providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for
in this Section 3(h). The Successor Guarantor shall mail to the holder
of this Note a notice describing the supplemental Note. If the issuer
of securities deliverable upon conversion of this Note under the
supplemental Note is an Affiliate of the formed, surviving, transferee
or lessee corporation, that issuer shall join in the supplemental
Note. If this subsection (x) applies, subsections (i), (ii) or (iii)
of this Section 3(h) do not apply.
(xi) Borrower Determination Final. Any determination that
Borrower or the Board of Directors must make pursuant to subsection
(i), (ii), (iii), (iv) or (vii) of this Section 3(h) is conclusive.
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<PAGE>
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, Borrower may elect to defer until the occurrence of such event
(i) issuing to the holder of this Note exercised after such record
date the shares of Common Stock and other capital stock of Borrower,
if any, issuable upon such conversion over and above the shares of
Common Stock and other capital stock of Borrower, if any, issuable
upon such conversion on the basis of the Exercise Rate and (ii) paying
to such holder any amount in cash in lieu of a fractional share
pursuant to Section 3(i) hereof; provided, however, that Borrower
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
shares of Common Stock, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(xiii) Adjustments to Par Value. Borrower shall from time to time
make such adjustments to the par value of the Common Stock as may be
necessary so that at all times, upon conversion of this Note, the
shares of Common Stock will be fully paid and nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i), (ii) or (iii), and the record dates for the distributions giving
rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. Borrower shall not be
required to issue fractional shares on the conversion of this Note. If any
fraction of a share would, except for the provisions of this Section 3(i),
be issuable on the conversion of this Note, Borrower shall pay to the
holder an amount in cash equal to the product of (i) such fraction of a
share and (ii) the Current Market Value of a share of Common Stock as of
the date of conversion of this Note. Upon any conversion of all or any
portion of the Adjusted Principal Amount in accordance with the terms
hereof, Borrower shall pay to the holder in cash all accrued but unpaid
interest to the effective date of conversion with respect to the portion of
the Adjusted Principal Amount of this Note being converted.
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<PAGE>
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, Borrower shall promptly thereafter (i)
cause to be prepared a certificate of a firm of independent public
accountants of recognized standing selected by Borrower (who may be the
regular auditors of Borrower) setting forth the Exercise Rate after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based and setting forth the
number of shares (or portion thereof) issuable after such adjustment in the
Exercise Rate, upon conversion of this Note, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein,
and (ii) cause to be given to the holder of this Note at such holder's
address appearing on the Note register written notice of such adjustments
by first-class mail, postage prepaid. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be mailed
under the other provisions of this Section 3(j).
In the event:
(i) Borrower shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants (other than rights, options or warrants issued to all
holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share not less than 94%
(100% if a stand-by underwriter is used and charges Borrower
commission) of the Current Market Value); or
(ii) Borrower shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in subsection (i) of
Section 3(h) hereof); or
(iii) of any consolidation or merger to which Borrower is a party
or of the conveyance or transfer of the properties and assets of
Borrower substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon conversion of this Note (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of Borrower; or
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<PAGE>
(v) Borrower proposes to take any action (other than actions of
the character described in Section 3(h)(i) which would require an
adjustment of the Exercise Rate pursuant to Section 3(h);
then Borrower shall cause to be given to the registered holder of this Note
at its address appearing on the Note register, at least 20 days (or 15 days
in any case specified in clauses (i) or (ii) above) prior to the applicable
record date hereinafter specified, or promptly in the case of events for
which there is no record date, by first-class mail, postage prepaid, a
written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial
expiration date set forth in any tender offer or exchange offer for shares
of Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as
of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange such shares for securities or other property,
if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The failure
to give the notice required by this Section 3(j) or any defect therein
shall not affect the legality or validity of any distribution, right,
option, warrant, reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any
action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of Borrower or any other matter, or any rights whatsoever as
shareholders of Borrower.
4. Definitions. For purposes of Section 3 of this Note, the following terms
shall have the meanings indicated:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of Borrower.
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"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for each such trading day shall be:
(i) the last reported sales price, regular way on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the New York
Stock Exchange ("NYSE") or, (ii) if such security is not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such security is listed or admitted for trading or, (iii) if not
listed or admitted for trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, (iv) if such security is
not quoted on such National Market System, the average of the closing bid
and asked prices on such day in the over-the-counter market as reported by
NASDAQ or, (v) if bid and asked prices for such security on such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Chairman of the
Board or the Board of Directors or, (vi) if such bid and asked prices are
not so furnished, then the fair market value of the security as established
by the Board of Directors acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of Borrower or any other Person (corporate or otherwise) which
the holder of this Note at any time shall be entitled to receive, or shall
have received, upon the conversion of this Note, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3(h) hereof or otherwise.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
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5. Call Option.
Except as expressly set forth in this Section 5, Borrower is prohibited
from making any voluntary prepayment of this Note and shall not have any right
to cause the holder to convert any portion of the Adjusted Principal Amount
outstanding from time to time. From and after the fifth anniversary of the date
of this Note and on or prior to the Due Date, Borrower shall have the right (the
"Call Option") to repay the Adjusted Principal Amount then outstanding, in whole
but not in part, without premium or penalty (other than the imposition, if
applicable, of the Default Rate or "late charge" as provided herein). Borrower
may exercise the Call Option by giving the holder of this Note at any time upon
ninety (90) days' prior written notice of Borrower's intention to exercise the
Call Option, which notice shall state the date on which the Call Option is to be
consummated, the then current Adjusted Principal Amount and all accrued interest
and unpaid interest thereon, together with any other sums evidenced by this
Note, to be paid on such date. Upon the receipt of any such notice, the holder
shall have the right at any time prior to the date proposed for such repurchase
to convert any or all of the Adjusted Principal Amount of this Note in
accordance with the provisions of Section 3.
6. Default.
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Partnership, as applicable, shall fail to pay when
due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Partnership to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any representation,
covenant or warranty set forth in the Loan Documents (other than this Note)
until either Borrower or Partnership, as applicable, shall have failed to
cure such breach within any applicable notice and cure period therein
provided; and (ii) no default shall exist hereunder on account of a breach
of any representation, covenant or warranty set forth herein unless and
until Lender shall provide written notice of such breach to Borrower, and
Borrower shall fail to cure the same within 30 days after receipt of such
notice, provided if such breach is of such a nature that it cannot be cured
within such 30 day period, it shall not constitute a default hereunder so
long as Borrower commences its cure of such breach
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<PAGE>
within such 30 day period and thereafter diligently and continuously
proceeds with the curing of same within a reasonable period of time not to
exceed 180 days. "Material Adverse Effect" means any material and adverse
effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of Borrower and
its affiliates, subsidiaries and any parent entity, taken as a whole.
7. Default Rate; Late Charge.
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of 2.0%, plus the Interest Rate, on the then outstanding past-due
amount of principal, until such amount is paid in full. In addition, a late
charge of four percent (4%) of the amount of any installment or the amount due
on the Due Date which is not paid when due shall be due and payable to the
holder of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the Lender.
8. Security; Governing Law.
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions.
The provisions in this Section 9 shall govern and control over any
irreconcilably inconsistent provision, the Loan Documents or any other
instrument contemplated hereunder or thereunder. In no event shall the aggregate
of all interest paid or payable by Borrower to Lender ever exceed the maximum
rate of interest which may lawfully be charged to (or payable by) Borrower under
applicable law on the Adjusted Principal Amount of this Note from time to time
remaining unpaid. In this connection, it is expressly stipulated and agreed that
it is the intent of Lender and Borrower in the execution and delivery of this
Note to contract in strict compliance with any applicable usury laws. In
furtherance of the foregoing, none of the terms of the Loan Documents or any
such other instruments contemplated hereunder or thereunder shall ever be
construed to create a contract to charge or pay for interest in excess of the
maximum interest rate permitted to be contracted for, charged to, or payable by
Borrower under
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<PAGE>
applicable law. Borrower and any guarantors, endorsers or other parties now or
hereafter becoming liable for payment of this Note shall never be liable for
interest in excess of the maximum interest that may be lawfully charged under
applicable law, and the provisions of this Section 9 shall govern over all other
provisions of the Loan Documents, and any other instruments evidencing or
securing the Loan, should such provisions be in apparent conflict herewith.
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the principal of the Adjusted
Principal Amount of this Note, prior to the due date for payment
thereof, resulting from acceleration of maturity of this Note, if the
aggregate amounts of interest accruing hereunder prior to such payment
plus the amount of any interest accruing after such maturity up to the
date of payment and plus any other amounts paid or accrued in
connection with the Loan Documents, including, if applicable, all or
any portion of the value of any Common Stock issued to Lender under
Section 3 of this Note, which by law are deemed interest under such
Loan Documents and which aggregate amounts paid or accrued (if
calculated in accordance with the provisions of this Note other than
pursuant to this Section 9) would exceed the maximum lawful rate of
interest which could be charged on the principal balance of this Note
from the date hereof to the date of final payment thereof, then in
such event the amount of such excess shall be credited, as of the date
paid, toward the payment of principal of this Note so as to reduce the
amount of the final payments of Adjusted Principal Amount due on this
Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
amount which could lawfully have been collected and retained) upon the
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
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(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
10. Invalidity.
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby
waives and renounces for itself, its successors and assigns, all rights to
the benefits of any statute of limitations and any moratorium,
reinstatement, marshalling, forbearance, valuation, stay, extension,
redemption, appraisement, or exemption now provided, or which may hereafter
be provided, by the Constitution and laws of the United States and of any
state thereof, both as to itself and in and to all of
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<PAGE>
its property, real and personal against the enforcement and collection of
the obligations evidenced by this Note.
(b) In the event that the holder hereof shall institute any action for
the enforcement of the collection of this Note, there shall be immediately
due from Borrower in addition to the unpaid interest and principal, all
costs and expenses of such action, including but not limited to attorneys'
fees and expenses.
12. Miscellaneous.
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject to
any applicable grace or cure period expressly provided herein or the in the
Loan Documents; provided, however, that unless otherwise stated, whenever
any payment to be made under this Note shall be stated to be due on a day
other than a business day, such payment may be made on the immediately
preceding business day. For purposes of this Note, a business day shall be
any day that is not a Saturday, Sunday or national bank holiday.
(c) All notices, demands or requests relating to any matters set forth
herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
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IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
ATLANTIC HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
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EXHIBIT I
INVESTOR AND REGISTRATION RIGHTS AGREEMENT
THIS INVESTOR AND REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is
entered into as of October 17, 1996, between Homestead Village Incorporated, a
Maryland corporation ("Homestead"), and Security Capital Pacific Trust, a
Maryland real estate investment trust ("PTR").
WHEREAS, on the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Security Capital Atlantic Incorporated
("Atlantic"), PTR, Security Capital Group Incorporated ("SCG") and Homestead
(the "Merger Agreement"), pursuant to which, among other things, Homestead will
acquire all of PTR's assets relating to its operation of extended-stay lodging
facilities;
WHEREAS, pursuant to the Merger Agreement, PTR and Homestead are entering
to a Funding Commitment Agreement (the "Funding Commitment Agreement"), pursuant
to which PTR will agree to make certain loans to Homestead, which loans will be
secured by mortgages, and the notes evidencing such loans will be convertible
into shares of Common Stock, $0.01 par value per share ("Common Stock"), of
Homestead on the terms and conditions described therein;
WHEREAS, pursuant to a Warrant Purchase Agreement (the "Warrant Purchase
Agreement"), dated as of May 21, 1996, among Homestead, SCG, Atlantic and PTR,
Homestead has agreed to issue to PTR warrants to acquire Common Stock; and
WHEREAS, the execution of this Agreement is a condition to the consummation
of the transactions contemplated by the Merger Agreement, the Funding Commitment
Agreement and the Warrant Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
Section 1. Board Representation. Until March 31, 1998 and for so long
thereafter as PTR shall continue to have the right to convert in excess of $20
million in principal amount of loans made pursuant to the Funding Commitment
Agreement, Homestead shall not increase the number of members of its Board of
Directors to more than seven (7) members and PTR shall be entitled to designate
one person for nomination to the Homestead Board of Directors (such person, a
"Nominee") and Homestead will use its best efforts to cause the election of such
Nominee. The Nominee of PTR may, but need not, include the same person or
persons nominated by SCG pursuant to the Investor Agreement of even date
herewith between SCG and
<PAGE>
Homestead or the person nominated by Atlantic pursuant to the Investor and
Registration Rights Agreement of even date herewith between Atlantic and
Homestead.
Section 2. Inspection. Until March 31, 1998 and for so long thereafter as
PTR shall continue to have the right to convert any principal amount of loans
made, pursuant to the Funding Commitment Agreement, at any time during regular
business hours and as often as reasonably requested of Homestead's officers,
Homestead shall permit PTR or any authorized employee, agent or representative
of PTR to examine and make copies and abstracts from the records and books of
account of, and to visit the properties of, Homestead and to discuss the
affairs, finances, and accounts of Homestead with any of its officers or
directors; provided, that all costs and expenses of such inspection shall be
borne by PTR.
Section 3. Registration Rights.
(a) Demand. At any time prior to the first anniversary of the date on
which the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act of 1934, as amended (the "Exchange Act"), PTR may request one
registration of all or any part of its Registrable Securities (as defined
in sub-section (h) below) under the Securities Act of 1933, as amended (the
"Securities Act"), by delivering written notice (which notice shall state
that PTR intends to dispose of such securities through a public
distribution thereof) to Homestead specifying the number of Registrable
Securities that PTR desires to distribute and Homestead shall use its
reasonable efforts to effect the registration of such Registrable
Securities under the Securities Act in accordance with the further
provisions of this Section 3.
(b) Shelf Registration. At any time after the first anniversary of
the date on which the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, PTR may request, on up to three separate
occasions, registration of all or any part of its Registrable Securities
pursuant to Rule 415 under the Securities Act by delivering written notice
(which notice shall state that PTR intends to dispose of such securities
through a public distribution thereof) to Homestead and Homestead shall use
its reasonable efforts to effect the registration of such Registrable
Securities under the Securities Act in accordance with the further
provisions of this Section 3.
(c) Registration Procedures. If and whenever Homestead is required by
any of the provisions of this Section 3 to use its reasonable efforts to
effect the registration of any of the Registrable Securities under the
Securities Act, Homestead shall:
(i) prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to such
securities and use its reasonable efforts to cause such registration
statement to become effective and
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remain effective for as long as shall be necessary to complete the
distribution of the Registrable Securities so registered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for so long as shall be necessary to complete the
distribution of the Registrable Securities so registered and to comply
with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration
statement whenever PTR shall desire to sell or otherwise dispose of
the same within such period;
(iii) furnish to PTR such numbers of copies of such registration
statement, each amendment and supplement thereto, the prospectus
included in such registration statement, including any preliminary
prospectus, and any amendment or supplement thereto, and such other
documents, as PTR may reasonably request in order to facilitate the
sale or other disposition of the Registrable Securities;
(iv) use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as PTR shall
reasonably request, and do any and all other acts and things
reasonably requested by PTR to assist it to consummate the public sale
or other disposition in such jurisdictions of the securities owned by
PTR, except that Homestead shall not for any such purpose be required
to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified or to file therein any general consent
to service of process;
(v) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months,
beginning with the first fiscal quarter beginning after the effective
date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(vi) use its reasonable efforts to list such securities on any
securities exchange or quotation system on which any securities of
Homestead are then listed, if the listing of such securities is then
permitted under the rules of such exchange or quotation system; and
(vii) notify PTR, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the
Securities Act, of the happening
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of any event of which it has knowledge as a result of which the
prospectus included in such registration statement, as then in effect,
contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
(d) Homestead's Ability to Postpone. Homestead shall have the right
to postpone the filing of a registration statement under this Section 3 for
a reasonable period of time (not exceeding 60 days) if Homestead furnishes
PTR with a certificate signed by the Chairman of the Board or the President
of Homestead stating that, in its good faith judgment, Homestead's Board of
Directors has determined that effecting the registration at such time would
adversely affect a material financing, acquisition, disposition of assets
or stock, merger or other comparable transaction or would require Homestead
to make public disclosure of information the public disclosure of that
would have a material adverse effect upon Homestead.
(e) Expenses. All expenses incurred in the registration of
Registrable Securities under this Agreement shall be paid by Homestead.
The expenses shall include, without limitation, the expenses of preparing
the registration statement and the prospectus used in connection therewith
and any amendment or supplement thereto, printing and photocopying
expenses, all registration and filing fees under Federal and state
securities laws, and expenses of complying with the securities or blue sky
laws of any jurisdictions, provided, however, that PTR shall be responsible
for the fees and disbursements of its own counsel.
(f) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 3:
(i) Indemnity by Homestead. Without limitation of any other
indemnity provided to PTR, to the extent permitted by law, Homestead
will indemnify and hold harmless PTR and its officers, trustees and
any individual, partnership, corporation, trust, unincorporated
organization or other entity (a "Person") if any, who controls PTR
(within the meaning of the Securities Act or the Exchange Act),
against any losses, claims, damages, liabilities and expenses (joint
or several) to which they may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, liabilities and expenses (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement (including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto),
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(ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or (iii) any violation or alleged violation by Homestead
of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the
Exchange Act or any state securities law, and Homestead will reimburse
PTR and its officers, trustees and any controlling person thereof for
any reasonable legal or other expenses incurred by them in connection
with investigating or defending any such loss, claim, damage,
liability, expense or action; provided, however, that Homestead shall
not be liable in any such case for any such loss, claim, damage,
liability, expense or action to the extent that it arises out of or is
based upon a Violation that occurs in reliance upon and in conformity
with written information furnished expressly for use in connection
with such registration by PTR or any officer, trustee or controlling
person thereof.
(ii) Indemnity by PTR. In connection with any registration
statement in which PTR is participating, PTR will furnish to Homestead
in writing such information and affidavits as Homestead reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify
Homestead, its directors and officers and each Person who controls
Homestead (within the meaning of the Securities Act or Exchange Act)
against any losses, claims, damages, liabilities and expenses
resulting from any Violation, but only to the extent that such
Violation is contained in any information or affidavit so furnished in
writing by PTR; provided, that the obligation to indemnify will be
several and not joint and several with any other Person and will be
limited to the net amount received by PTR from the sale of Registrable
Securities pursuant to such registration statement.
(iii) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section 3(f) of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 3(f), deliver to the
indemnifying party a written notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and, if
the indemnifying party agrees in writing that it will be responsible
for any costs, expenses, judgments, damages and losses incurred by the
indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying
party, if the
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indemnified party reasonably believes that representation of such
indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of
any such action shall relieve such indemnifying party of any liability
to the indemnified party under this Section 3(f) only if and to the
extent that such failure is prejudicial to its ability to defend such
action, and the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may
have to any indemnified party other than under this Section 3(f).
(iv) Contribution. If the indemnification provided for in this
Section 3(f) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage
or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other hand in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The
relevant fault of the indemnifying party and the indemnified party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. Notwithstanding the
foregoing, the amount PTR shall be obligated to contribute pursuant to
this Section 3(f)(iv) shall be limited to an amount equal to the
aggregate value of the Registrable Securities distributed by PTR
pursuant to the registration statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages
which PTR has otherwise been required to pay in respect of such loss,
claim, damage, liability or action or any substantially similar loss,
claim, damage, liability or action arising from the distribution of
such Registrable Securities).
(v) Survival of Indemnity. The indemnification provided by this
Section 3(f) shall be a continuing right to indemnification and shall
survive the registration and sale of any securities by any Person
entitled to indemnification hereunder and the expiration or
termination of this Agreement.
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(g) Limitations on Registration Rights.
(i) Homestead shall not, without the prior written consent of
PTR, include in any registration in which PTR has a right to
participate pursuant to this Agreement any securities of any Person
other than Atlantic and PTR.
(ii) PTR shall not, without the prior written consent of
Homestead, effect any public sale or distribution (including sales
pursuant to Rule 144 under the Securities Act) of securities of
Homestead during any period commencing 30 days prior to and ending 60
days after the effective date any registration statement filed by
Homestead on behalf of any Person (including Homestead), other than a
registration statement on Form S-8 or any successor form.
(h) Registrable Security. The term Registrable Security means (i) any
shares of Common Stock issuable to PTR pursuant to the conversion of notes
issuable pursuant to the terms of the Funding Commitment Agreement or
otherwise held by PTR, (ii) any other shares of Common Stock owned by PTR
and (iii) any shares of Common Stock or other securities that may
subsequently be issued with respect to such shares of Common Stock as a
result of a stock split or dividend or any sale, transfer, assignment or
other transaction by Homestead involving the shares of Common Stock and any
securities into which the shares of Common Stock may thereafter be changed
as a result of merger, consolidation, recapitalization or otherwise. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act. All
Registrable Securities shall cease to be Registrable Securities when all
such securities may be sold in any three-month period pursuant to Rule 144,
or any successor to such rule, under the Securities Act.
Section 4. File Reports. For so long as PTR owns any Registrable
Securities, Homestead shall file on a timely basis all annual, quarterly and
other reports required to be filed by it under Section 13 and 15(d) of the
Exchange Act, and the rules and regulations of the Commission thereunder, as
amended from time to time.
Section 5. Miscellaneous.
(a) Survival of Covenants. All covenants contained herein shall survive
the execution of this Agreement and shall remain in full force and effect until
terminated in accordance with this Agreement.
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(b) Successors and Assigns. This Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, assigns and affiliates.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent via a recognized
overnight courier with delivery confirmed in writing or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
If to PTR:
Security Capital Pacific Trust
7777 Market Center Avenue
El Paso, Texas 79912
Attention: C. Ronald Blankenship
Facsimile: (915) 877-3301
(d) Waiver. No party may waive any of the terms or conditions of this
Agreement, except by a duly executed writing referring to the specific provision
to be waived.
(e) Amendment. This Agreement may be amended only by a writing duly
executed by both Homestead and PTR.
(f) Severability. Insofar as is possible, each provision of this Agreement
shall be interpreted so as to render it valid and enforceable under applicable
law and severable from the remainder of this Agreement. A finding that any such
provision is invalid or unenforceable in any jurisdiction shall not affect the
validity or enforceability of any other provision or the validity or
enforceability of such provision under the laws of any other jurisdiction.
(g) Entire Agreement. This Agreement constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
between the parties hereto and their affiliates, with respect to the subject
matter hereof.
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(h) Expenses. Except as otherwise expressly contemplated herein to the
contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(k) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland.
(l) Limitation of Liability. Any obligation or liability whatsoever of
PTR which may arise at any time under this Agreement or any obligation or
liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of PTR's assets only. No such obligation or liability shall be personally
binding upon, nor shall resort for the enforcement thereof be had to, the
property of any of its shareholders, trustees, officers, employees or agents,
regardless of whether such obligation or liability is in the nature of contract,
tort or otherwise.
* * * * *
9
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
-------------------------
C. Ronald Blankenship
Chairman
10
<PAGE>
EXHIBIT J
INVESTOR AND REGISTRATION RIGHTS AGREEMENT
THIS INVESTOR AND REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is
entered into as of October 17, 1996, between Homestead Village Incorporated, a
Maryland corporation ("Homestead"), and Security Capital Atlantic Incorporated,
a Maryland corporation ("Atlantic").
WHEREAS, on the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Atlantic, Security Capital Pacific Trust
("PTR"), Security Capital Group Incorporated ("SCG") and Homestead (the "Merger
Agreement"), pursuant to which, among other things, Homestead will acquire all
of Atlantic's assets relating to its operation of extended-stay lodging
facilities;
WHEREAS, pursuant to the Merger Agreement, Atlantic and Homestead are
entering into a Funding Commitment Agreement (the "Funding Commitment
Agreement"), pursuant to which Atlantic will agree to make certain loans to
Homestead, which loans will be secured by mortgages, and the notes evidencing
such loans will be convertible into shares of Common Stock, $0.01 par value per
share ("Common Stock"), of Homestead on the terms and conditions described
therein;
WHEREAS, pursuant to a Warrant Purchase Agreement (the "Warrant Purchase
Agreement"), dated as of May 21, 1996, among Homestead, SCG, Atlantic and PTR,
Homestead has agreed to issue to Atlantic warrants to acquire Common Stock; and
WHEREAS, the execution of this Agreement is a condition to the consummation
of the transactions contemplated by the Merger Agreement, the Funding Commitment
Agreement and the Warrant Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
Section 1. Board Representation. Until March 31, 1998 and for so long
thereafter as Atlantic shall continue to have the right to convert in excess of
$20 million in principal amount of loans made pursuant to the Funding Commitment
Agreement, Homestead shall not increase the number of members of its Board of
Directors to more than seven (7) members and Atlantic shall be entitled to
designate one person for nomination to the Homestead Board of Directors (such
person, a "Nominee") and Homestead will use its best efforts to cause the
election of such Nominee. The Nominee of Atlantic may, but need not, include the
same person or persons nominated by SCG pursuant to the Investor Agreement of
even date herewith between
<PAGE>
SCG and Homestead or the person nominated by PTR pursuant to the Investor and
Registration Rights Agreement of even date herewith between PTR and Homestead.
Section 2. Inspection. Until March 31, 1998 and for so long thereafter as
Atlantic shall continue to have the right to convert any principal amount of
loans made, pursuant to the Funding Commitment Agreement, at any time during
regular business hours and as often as reasonably requested of Homestead's
officers, Homestead shall permit Atlantic or any authorized employee, agent or
representative of Atlantic to examine and make copies and abstracts from the
records and books of account of, and to visit the properties of, Homestead and
to discuss the affairs, finances, and accounts of Homestead with any of its
officers of directors; provided, that all costs and expenses of such inspection
shall be borne by Atlantic.
Section 3. Registration Rights.
(a) Demand. At any time prior to the first anniversary of the date on
which the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act of 1934, as amended (the "Exchange Act"), Atlantic may request
one registration of all or any part of its Registrable Securities (as
defined in sub-section (h) below) under the Securities Act of 1933, as
amended (the "Securities Act"), by delivering written notice (which notice
shall state that Atlantic intends to dispose of such securities through a
public distribution thereof) to Homestead specifying the number of
Registrable Securities that Atlantic desires to distribute and Homestead
shall use its reasonable efforts to effect the registration of such
Registrable Securities under the Securities Act in accordance with the
further provisions of this Section 3.
(b) Shelf Registration. At any time after the first anniversary of the
date on which the Common Stock is registered under Section 12(b) or 12(g)
of the Exchange Act, Atlantic may request, on up to three separate
occasions, registration of all or any part of its Registrable Securities
pursuant to Rule 415 under the Securities Act by delivering written notice
(which notice shall state that Atlantic intends to dispose of such
securities through a public distribution thereof) to Homestead and
Homestead shall use its reasonable efforts to effect the registration of
such Registrable Securities under the Securities Act in accordance with the
further provisions of this Section 3.
(c) Registration Procedures. If and whenever Homestead is required by
any of the provisions of this Section 3 to use its reasonable efforts to
effect the registration of any of the Registrable Securities under the
Securities Act, Homestead shall:
(i) prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to such
securities and use its reasonable efforts to cause such registration
statement to become effective and
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remain effective for as long as shall be necessary to complete the
distribution of the Registrable Securities so registered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for so long as shall be necessary to complete the
distribution of the Registrable Securities so registered and to comply
with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration
statement whenever Atlantic shall desire to sell or otherwise dispose
of the same within such period;
(iii) furnish to Atlantic such numbers of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement, including any
preliminary prospectus, and any amendment or supplement thereto, and
such other documents, as Atlantic may reasonably request in order to
facilitate the sale or other disposition of the Registrable
Securities;
(iv) use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as Atlantic shall
reasonably request, and do any and all other acts and things
reasonably requested by Atlantic to assist it to consummate the public
sale or other disposition in such jurisdictions of the securities
owned by Atlantic, except that Homestead shall not for any such
purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified or to file therein
any general consent to service of process;
(v) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months,
beginning with the first fiscal quarter beginning after the effective
date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(vi) use its reasonable efforts to list such securities on any
securities exchange or quotation system on which any securities of
Homestead are then listed, if the listing of such securities is then
permitted under the rules of such exchange or quotation system; and
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<PAGE>
(vii) notify Atlantic, at any time when a prospectus relating to
the Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event of which it has
knowledge as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
(d) Homestead's Ability to Postpone. Homestead shall have the right to
postpone the filing of a registration statement under this Section 3 for a
reasonable period of time (not exceeding 60 days) if Homestead furnishes
Atlantic with a certificate signed by the Chairman of the Board or the
President of Homestead stating that, in its good faith judgment,
Homestead's Board of Directors has determined that effecting the
registration at such time would adversely affect a material financing,
acquisition, disposition of assets or stock, merger or other comparable
transaction or would require Homestead to make public disclosure of
information the public disclosure of that would have a material adverse
effect upon Homestead.
(e) Expenses. All expenses incurred in the registration of Registrable
Securities under this Agreement shall be paid by Homestead. The expenses
shall include, without limitation, the expenses of preparing the
registration statement and the prospectus used in connection therewith and
any amendment or supplement thereto, printing and photocopying expenses,
all registration and filing fees under Federal and state securities laws,
and expenses of complying with the securities or blue sky laws of any
jurisdictions, provided, however, that Atlantic shall be responsible for
the fees and disbursements of its own counsel.
(f) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 3:
(i) Indemnity by Homestead. Without limitation of any other
indemnity provided to Atlantic, to the extent permitted by law,
Homestead will indemnify and hold harmless Atlantic and its officers,
directors and any individual, partnership, corporation, trust,
unincorporated organization or other entity (a "Person") if any, who
controls Atlantic (within the meaning of the Securities Act or the
Exchange Act), against any losses, claims, damages, liabilities and
expenses (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue
4
<PAGE>
statement of a material fact contained in any registration statement
(including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto), (ii) the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, or
(iii) any violation or alleged violation by Homestead of the
Securities Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law, and Homestead will reimburse Atlantic and
its officers, directors and any controlling person thereof for any
reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability,
expense or action; provided, however, that Homestead shall not be
liable in any such case for any such loss, claim, damage, liability,
expense or action to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with
such registration by Atlantic or any officer, director or controlling
person thereof.
(ii) Indemnity by Atlantic. In connection with any registration
statement in which Atlantic is participating, Atlantic will furnish to
Homestead in writing such information and affidavits as Homestead
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will
indemnify Homestead, its directors and officers and each Person who
controls Homestead (within the meaning of the Securities Act or
Exchange Act) against any losses, claims, damages, liabilities and
expenses resulting from any Violation, but only to the extent that
such Violation is contained in any information or affidavit so
furnished in writing by Atlantic; provided, that the obligation to
indemnify will be several and not joint and several with any other
Person and will be limited to the net amount received by Atlantic from
the sale of Registrable Securities pursuant to such registration
statement.
(iii) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section 3(f) of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 3(f), deliver to the
indemnifying party a written notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and, if
the indemnifying party agrees in writing that it will be responsible
for any costs, expenses, judgments, damages and losses incurred by the
indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties;
5
<PAGE>
provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if the indemnified party reasonably believes that
representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party
under this Section 3(f) only if and to the extent that such failure is
prejudicial to its ability to defend such action, and the omission so
to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party other
than under this Section 3(f).
(iv) Contribution. If the indemnification provided for in this
Section 3(f) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage
or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other hand in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The
relevant fault of the indemnifying party and the indemnified party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. Notwithstanding the
foregoing, the amount Atlantic shall be obligated to contribute
pursuant to this Section 3(f)(iv) shall be limited to an amount equal
to the aggregate value of the Registrable Securities distributed by
Atlantic pursuant to the registration statement which gives rise to
such obligation to contribute (less the aggregate amount of any
damages which Atlantic has otherwise been required to pay in respect
of such loss, claim, damage, liability or action or any substantially
similar loss, claim, damage, liability or action arising from the
distribution of such Registrable Securities).
(v) Survival of Indemnity. The indemnification provided by this
Section 3(f) shall be a continuing right to indemnification and shall
survive the
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registration and sale of any securities by any Person entitled to
indemnification hereunder and the expiration or termination of this
Agreement.
(g) Limitations on Registration Rights.
(i) Homestead shall not, without the prior written consent of
Atlantic, include in any registration in which Atlantic has a right to
participate pursuant to this Agreement any securities of any Person
other than Atlantic and PTR.
(ii) Atlantic shall not, without the prior written consent of
Homestead, effect any public sale or distribution (including sales
pursuant to Rule 144 under the Securities Act) of securities of
Homestead during any period commencing 30 days prior to and ending 60
days after the effective date any registration statement filed by
Homestead on behalf of any Person (including Homestead), other than a
registration statement on Form S-8 or any successor form.
(h) Registrable Security. The term Registerable Security means (i)
any shares of Common Stock issuable to Atlantic pursuant to the conversion
of notes issuable pursuant to the terms of the Funding Commitment Agreement
or otherwise held by Atlantic, (ii) any other shares of Common Stock owned
by Atlantic and (iii) any shares of Common Stock or other securities that
may subsequently be issued with respect to such shares of Common Stock as a
result of a stock split or dividend or any sale, transfer, assignment or
other transaction by Homestead involving the shares of Common Stock and any
securities into which the shares of Common Stock may thereafter be changed
as a result of merger, consolidation, recapitalization or otherwise. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act. All
Registrable Securities shall cease to be Registrable Securities when all
such securities may be sold in any three-month period pursuant to Rule 144,
or any successor to such rule, under the Securities Act.
Section 4. File Reports. For so long as Atlantic owns any Registrable
Securities, Homestead shall file on a timely basis all annual, quarterly and
other reports required to be filed by it under Section 13 and 15(d) of the
Exchange Act, and the rules and regulations of the Commission thereunder, as
amended from time to time.
Section 5. Miscellaneous.
(a) Survival of Covenants. All covenants contained herein shall survive
the execution of this Agreement and shall remain in full force and effect until
terminated in accordance with this Agreement.
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(b) Successors and Assigns. This Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, assigns and affiliates.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent via a recognized
overnight courier with delivery confirmed in writing or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
If to Atlantic:
Security Capital Atlantic Incorporated
Six Piedmont Center, Sixth Floor
Atlanta, Georgia 30385
Attention: James C. Potts
Facsimile: (404) 233-2379
(d) Waiver. No party may waive any of the terms or conditions of this
Agreement, except by a duly executed writing referring to the specific provision
to be waived.
(e) Amendment. This Agreement may be amended only by a writing duly
executed by both Homestead and Atlantic.
(f) Severability. Insofar as is possible, each provision of this Agreement
shall be interpreted so as to render it valid and enforceable under applicable
law and severable from the remainder of this Agreement. A finding that any such
provision is invalid or unenforceable in any jurisdiction shall not affect the
validity or enforceability of any other provision or the validity or
enforceability of such provision under the laws of any other jurisdiction.
(g) Entire Agreement. This Agreement constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
between the parties hereto and their affiliates, with respect to the subject
matter hereof.
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<PAGE>
(h) Expenses. Except as otherwise expressly contemplated herein to the
contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for convenience
of reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions hereof.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(k) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland.
* * * * *
9
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL ATLANTIC INCORPORATED
By: /s/ James C. Potts
------------------
James C. Potts
Chairman
10
