FIFTH AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
PARAGON GROUP L.P.
A DELAWARE LIMITED PARTNERSHIP,
AS BORROWER
▇▇▇▇▇ FARGO REALTY ADVISORS FUNDING, INCORPORATED,
NATIONSBANK OF TEXAS, N.A.,
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS,
TOGETHER WITH THOSE BANKS BECOMING PARTIES
HERETO PURSUANT TO SECTION 11.13,
AS LENDERS
AND
▇▇▇▇▇ FARGO REALTY ADVISORS FUNDING, INCORPORATED,
AS AGENT FOR LENDERS
DATED AS OF JULY 27,1996
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms........................................1
Section 1.2 Computation of Time Periods.................................24
Section 1.3 Terms.......................................................24
ARTICLE 2
LOANS
Section 2.1 Loan Advances and Repayment.................................24
Section 2.3 Lenders' Accounting.........................................27
Section 2.4 Interest on the Loans.......................................28
Section 2.5 Fees........................................................33
Section 2.6 Payments....................................................34
Section 2.7 Increased Capital...........................................35
Section 2.8 Notice of Increased Costs...................................35
ARTICLE 3
BORROWING BASE PROPERTIES
Section 3.1 Acceptance of Borrowing Base Properties.....................35
Section 3.2 Release of Borrowing Base Properties........................37
Section 3.3 Borrowing Base Determinations...............................38
Section 3.4 Covenants Relating to Borrowing Base Properties.............40
Section 3.5 Grant of Security Interest..................................41
ARTICLE 4
CONDITIONS TO LOANS
Section 4.1 Conditions to Initial Loans.................................42
Section 4.2 Conditions Precedent to Subsequent Loans....................46
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties as to Borrower...............48
Section 5.2 Representations and Warranties as to the REIT...............53
Section 5.3 Representations and Warranties as to Paragon GP Holdings....56
Section 5.4 Representations and Warranties as to Paragon LP Holdings....59
ARTICLE 6
REPORTING COVENANTS
Section 6.1 Financial Statements and Other Financial and Operating
Information........................................62
Section 6.2 Environmental Notices.......................................67
ARTICLE 7
AFFIRMATIVE COVENANTS
Section 7.1 Borrower's Affirmative Covenants............................68
Section 7.2 With respect to the REIT....................................70
Section 7.3 With respect to Paragon GP Holdings.........................72
i
Section 7.4 With respect to Paragon LP Holdings.........................74
ARTICLE 8
NEGATIVE COVENANTS
Section 8.1 With respect to Borrower....................................76
Section 8.2 With respect to the REIT....................................79
Section 8.3 With respect to Paragon GP Holdings.........................80
Section 8.4 With respect to Paragon LP Holdings.........................81
ARTICLE 9
FINANCIAL COVENANTS
ARTICLE 10
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
Section 10.1 Events of Default...........................................83
Section 10.2 Rights and Remedies.........................................87
ARTICLE 11
AGENCY PROVISIONS
Section 11.1 Appointment.................................................89
Section 11.2 Nature of Duties............................................89
Section 11.3 Loan Disbursements..........................................90
Section 11.4 Distribution and Apportionment of Payments..................91
Section 11.5 Rights, Exculpation, Etc....................................92
Section 11.6 Reliance....................................................93
Section 11.7 Indemnification.............................................93
Section 11.8 Agent and Lenders Individually..............................93
Section 11.9 Successor Agent; Resignation of Agent, Removal of Agent. ...93
Section 11.10 Consent and Approvals.......................................94
Section 11.11 Agency Provisions Relating to Collateral....................97
Section 11.12 Lender Actions Against Collateral...........................99
Section 11.13 Assignments and Participations..............................99
Section 11.14 Ratable Sharing............................................102
Section 11.15 Delivery of Documents......................................102
Section 11.16 Notice of Events of Default................................103
ARTICLE 12
MISCELLANEOUS
Section 12.1 Expenses...................................................103
Section 12.2 Indemnity..................................................104
Section 12.3 Change in Accounting Principles............................104
Section 12.4 Setoff.....................................................105
Section 12.5 Amendments and Waivers.....................................105
Section 12.6 Independence of Covenants..................................106
Section 12.7 Notices and Delivery.......................................107
Section 12.8 Survival of Warranties, Indemnities and Agreements.........107
Section 12.9 Failure or Indulgence Not Waiver; Remedies Cumulative......107
Section 12.10 Marshalling; Recourse to Security; Payments Set Aside......107
Section 12.11 Severability...............................................108
Section 12.12 Headings...................................................108
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Section 12.13 Governing Law..............................................108
Section 12.14 LIMITATION OF LIABILITY....................................109
Section 12.15 Successors and Assigns.....................................109
Section 12.16 Consent to Jurisdiction and Service of Process; Waiver of Jury
Trial.............................................109
Section 12.17 Counterparts; Effectiveness; Inconsistencies...............110
Section 12.18 Performance of Obligations.................................111
Section 12.19 Construction...............................................111
Section 12.20 Entire Agreement...........................................111
Section 12.21 Confidentiality............................................111
Section 12.22 Estoppel Certificates......................................111
Section 12.23 Limitation of Liability....................................112
iii
LIST OF DEFINED TERMS
Page No.
$..............................................................................8
Accommodation Obligation.......................................................1
Accountants....................................................................2
Affiliate......................................................................2
Agent ......................................................................2
Agreement......................................................................1
Appraisal......................................................................2
Appraised Value................................................................2
Assignment and Assumption......................................................2
Assignment of Leases and Rents.................................................3
Base Rate......................................................................3
Base Rate Loan.................................................................3
Benefit Plan...................................................................3
Borrower ......................................................................3
Borrower's Affidavit...........................................................3
Borrower's Share...............................................................3
Borrowing......................................................................3
Borrowing Base.................................................................3
Borrowing Base Certificate.....................................................3
Borrowing Base Development Properties..........................................4
Borrowing Base Properties......................................................4
Borrowing Base Stabilized Properties...........................................4
Borrowing Base Stabilized Property Statements.................................63
Breakeven......................................................................4
Business Day...................................................................4
Capital Expenditures................................................Addendum - 1
Capital Lease..................................................................5
Cash Equivalents...............................................................5
Closing Checklist..............................................................5
Closing Date...................................................................5
Co-Agent ......................................................................5
Collateral.....................................................................6
Commission.....................................................................6
Commitment.....................................................................6
Completion Cost................................................................6
Compliance Certificate.........................................................6
Confidential Information.......................................................6
Construction Budget............................................................6
Construction Contracts.........................................................6
Construction Project..........................................................41
iv
Construction Schedule..........................................................6
Contaminant....................................................................7
Contractual Obligation,........................................................7
Conversion Date................................................................7
Conversion Date Certificate....................................................7
Convertible Securities.........................................................7
Court Order....................................................................7
Debt Service........................................................Addendum - 1
Default Interest...............................................................7
Defaulting Lender..............................................................8
Development Loan Fee..........................................................33
Development Plans..............................................................8
Development Property...........................................................8
Development Property Status Report.............................................8
DOL ......................................................................8
Dollars ......................................................................8
EBITDA ...........................................................Addendum - 1
Eligible Maximum Loan Amount...................................................8
Environmental Laws.............................................................8
Environmental Lien.............................................................8
ERISA ......................................................................9
ERISA Affiliate................................................................9
Event of Default...............................................................9
Facility ......................................................................9
FDIC ......................................................................9
Federal Funds Rate.............................................................9
Federal Reserve Board.........................................................10
Financial Statements..........................................................63
FIRREA .....................................................................10
Fiscal Quarter................................................................10
Fiscal Year...................................................................10
Fixed Charges.................................................................10
Funding Date..................................................................10
Funding Lender................................................................90
Funds From Operations...............................................Addendum - 1
Funds Transfer Agreement......................................................10
GAAP .....................................................................10
General Partner...............................................................10
Governmental Authority........................................................10
Gross Asset Value...................................................Addendum - 1
Improvements..................................................................10
Indebtedness.......................... .......................................11
Indemnified Matters..........................................................104
Indemnitees..................................................................104
Independent Inspecting Architect..............................................11
v
Interest Expense....................................................Addendum - 2
Interest Period...............................................................11
Interim Period................................................................12
Internal Revenue Code.........................................................12
Investment....................................................................12
Investment Affiliate..........................................................12
Investment Mortgage...........................................................12
IRS .....................................................................12
Land .....................................................................12
Lease-Up Projections..........................................................12
Lender .....................................................................12
Lender Taxes..................................................................30
Liabilities and Costs.........................................................13
LIBOR .....................................................................13
LIBOR Loan....................................................................13
LIBOR Office..................................................................13
LIBOR Reserve Percentage......................................................13
Lien .....................................................................14
Loan .....................................................................14
Loan Availability.............................................................14
Loan Availability Certificate.................................................14
Loan Documents................................................................14
Loan Note.....................................................................14
Major Agreement...............................................................14
Management Company............................................................15
March 31, 1996 Financials.....................................................49
Material Adverse Effect.......................................................15
Maturity Date.................................................................15
Maximum Loan Amount...........................................................15
Maximum Rate.................................................................108
Mortgage .....................................................................15
Mortgage Document.............................................................15
Multiemployer Plan............................................................16
Net Income....................................................................16
Net Operating Income..........................................................16
Non Pro Rata Loan.............................................................16
Non-Funding Lender............................................................90
Nonrecourse Indebtedness......................................................16
Notice of Borrowing...........................................................16
Obligations...................................................................16
Officer's Certificate.........................................................17
operatives...................................................................112
Other Indebtedness............................................................17
Owner's Policy................................................................35
Paragon GP Holdings...........................................................17
vi
Paragon GP Holdings Affidavit.................................................17
Paragon LP Holdings...........................................................17
Paragon LP Holdings Affidavit.................................................17
Partnerships..................................................................17
PBGC .....................................................................17
Permanent Loan Estimate.......................................................17
Permit .....................................................................18
Permitted Investment..........................................................18
Permitted Lien................................................................18
Person .....................................................................19
Plan .....................................................................19
Pro Rata Share................................................................20
Proceedings...................................................................20
Project Budget................................................................20
Property .....................................................................20
Property Release..............................................................38
Protective Advance............................................................20
Regulation G..................................................................20
Regulation T..................................................................20
Regulation U..................................................................21
Regulation X..................................................................21
REIT .....................................................................21
REIT Affidavit................................................................21
Release .....................................................................21
Remedial Action...............................................................21
Reportable Event..............................................................21
Requirements of Law...........................................................21
Requisite Lenders.............................................................21
Restatement Date..............................................................22
Securities....................................................................22
Securities Act................................................................22
Securities Exchange Act.......................................................22
Senior Loans..................................................................91
Short Term Income.............................................................22
Solvent .....................................................................22
Stabilized Property/Development Property Borrowing Base Ratio.................22
Subsidiary....................................................................22
substantial employer..........................................................23
Supermajority Lenders.........................................................22
Taxes .....................................................................23
Termination Event.............................................................23
to the best of a Person's knowledge...........................................24
Total Liabilities...................................................Addendum - 2
Uniform Commercial Code.......................................................23
Units .....................................................................23
vii
Unmatured Event of Default....................................................23
Unused Amount.................................................................33
Unused Facility Fee...........................................................33
▇▇▇▇▇ Fargo....................................................................1
WFB .....................................................................24
Work in Process.....................................................Addendum - 2
work-out ....................................................................104
viii
FIFTH AMENDED AND
RESTATED CREDIT AGREEMENT
This Fifth Amended and Restated Credit Agreement (as amended,
supplemented or modified from time to time, the "Agreement") dated as of July
27, 1996, is made by and among PARAGON GROUP L.P., a Delaware limited
partnership ("Borrower"), the Lenders, as hereinafter defined, and ▇▇▇▇▇ FARGO
REALTY ADVISORS FUNDING, INCORPORATED, a Colorado corporation ("▇▇▇▇▇ Fargo"),
as Agent, and supersedes and takes the place of the Fourth Amended and Restated
Credit Agreement, dated as of February 29, 1996, made by and among the same
parties.
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms. The following terms shall have the
following meanings in this Agreement (such meanings to be applicable, except to
the extent otherwise indicated in a definition of a particular term, both to the
singular and the plural forms of the terms defined):
"Accommodation Obligation" as applied to any Person, means any contractual
obligation, contingent or otherwise, of that Person in respect of which
that person is liable for any Indebtedness or other obligation or liability
of another Person, including, without limitation, any such Indebtedness,
obligation or liability directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or
in respect of which that Person is otherwise directly or indirectly liable,
including, except as provided below, the recourse and nonrecourse
obligations of partnerships in which that Person has an ownership interest,
Contractual Obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or to provide funds for
the payment or discharge thereof (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise), or to maintain
solvency, assets, a level of income, or other financial condition, or to
make payment other than for value received. With respect to nonrecourse
obligations of partnerships in which a Person has an ownership interest, if
the financial results of a partnership in which a Person has an ownership
interest are not consolidated under GAAP with the financial results of that
Person on the consolidated financial statements of that Person, then only
an amount equal to the product of (a) the nonrecourse obligations of such
partnership, and (b) that Person's ownership interest in such partnership
expressed as a percentage of one, shall constitute an Accommodation
Obligation of that Person. With respect to recourse obligations of such
partnerships, 100% of such obligations shall constitute Accommodation
Obligations of a Person that has an ownership interest in such partnership.
1
"Accountants" means Ernst & Young ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Real Estate Group,
or any other firm of certified public accountants of national standing
selected by Borrower and reasonably acceptable to Agent.
"Affiliate" as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any Person, means (a) the possession,
directly or indirectly, of the power to vote 25% or more of the Securities
having voting power for the election of directors of such Person, or
otherwise to direct or cause the direction of the management and policies
of that Person, whether through the ownership of voting Securities or by
contract or otherwise; (b) the ownership of a general partnership interest;
(c) a limited partnership interest representing 25% or more of the
outstanding partnership interests of a Person.
"Agent" means ▇▇▇▇▇ Fargo in its capacity as Agent for the Lenders
under this Agreement, and shall include any successor to ▇▇▇▇▇ Fargo in
such capacity appointed pursuant hereto and shall be deemed to refer to
▇▇▇▇▇ Fargo in its individual capacity as a Lender where the context so
requires.
"Agreement" means this Credit Agreement as amended, supplemented or
modified from time to time.
"Appraisal" means a written appraisal prepared (a) by an independent
MAI appraiser acceptable to Agent in its reasonable business discretion;
(b) in accordance with Agent's customary independent appraisal
requirements; and (c) in compliance with all applicable regulatory
requirements, including FIRREA.
"Appraised Value" means (a) as to any Borrowing Base Stabilized
Property or Land, as the case may be, the "as is" market value of such
Borrowing Base Stabilized Property or Land, as the case may be, as
reflected in the most recent Appraisal of such Borrowing Base Stabilized
Property or Land, as the case may be, as the same may have been adjusted by
Agent based upon its internal review of such Appraisal, which review shall
be conducted prior to acceptance of such Appraisal by Agent and in any
event within 21 days after receipt by Agent of such Appraisal; and (b) as
to any Borrowing Base Development Property, the "as though stabilized"
market value of such Borrowing Base Development Property, as reflected in
the most recent Appraisal of such Borrowing Base Development Property, as
the same may be adjusted by Agent based upon its internal review of such
Appraisal, which review shall be conducted prior to acceptance of such
Appraisal by Agent and in any event within 21 days after receipt by Agent
of such Appraisal.
"Assignment and Assumption" means an Assignment and Assumption in the
form of Exhibit A hereto (with blanks appropriately filled in) delivered to
Agent
2
in connection with each assignment of a Lender's interest under this
Agreement pursuant to Section 11.13.
"Assignment of Leases and Rents" means an Assignment of Leases and
Rents, in form acceptable to Agent, delivered to Agent in connection with a
Borrowing Base Property and securing the Obligations.
"Base Rate" means, on any day, the higher of (a) the Prime Rate in
effect on such day, and (b) the Federal Funds Rate in effect on such day,
plus 1/2% per annum.
"Base Rate Loan" means a Loan bearing interest at the Base Rate.
"Benefit Plan" means any employee pension benefit plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which
a Person or an ERISA Affiliate is, or within the immediately preceding five
years was, an "employer" as defined in Section 3(5) of ERISA.
"Borrower" means Paragon Group L.P., a Delaware limited partnership.
"Borrower's Affidavit" means an affidavit subscribed and sworn to by
an authorized representative of the General Partner of Borrower as to the
matters set forth therein. Such representative need not be an officer of
the General Partner.
"Borrower's Equity Investment" means, with respect to any Borrowing
Base Development Property, the total project costs to be funded by Borrower
prior to any Loan relating to such Property. Such funded costs shall
aggregate not less than the greater of (a) the difference between (1) the
sum of (A) the total original Project Budget for such Property and (B) 100%
of any increases in the amount of the total Project Budget for such
Property after the initial Loan relating to the Property is disbursed, and
(2) the Maximum Loan Amount and (b) 30% of the amount described in (a)(1)
of this definition.
"Borrower's Share" means Borrower's share of the liabilities of an
Investment Affiliate based upon Borrower's percentage ownership of such
Investment Affiliate.
"Borrowing" means a borrowing under the Facility.
"Borrowing Base" means the sum from time to time of (a) the Borrowing
Base Values of the Borrowing Base Stabilized Properties and (b) the lesser
of (1) $50,000,000 or (2) the Borrowing Base Values of the Properties
accepted by Agent as Borrowing Base Development Properties pursuant to
Section 3.1 on or before September 30, 1996.
"Borrowing Base Certificate" means a report in the form of Exhibit B.
3
"Borrowing Base Development Properties" means the apartment Properties
which are under development and listed on Schedule 2, as such Schedule 2
may be amended from time to time to reflect the addition and deletion of
apartment Properties under development pursuant to Article 3 hereof.
"Borrowing Base Properties" means the Borrowing Base Development
Properties and the Borrowing Base Stabilized Properties.
"Borrowing Base Property Statements" has the meaning ascribed to such
term in Section 6.1(a).
"Borrowing Base Stabilized Properties" means the apartment Properties
listed on Schedule 1, as such Schedule 1 may be amended form time to time
to reflect the addition and deletion of apartment Properties pursuant to
Article 3 hereof.
"Borrowing Base Value" means, (a) as to any Borrowing Base Stabilized
Property at any time, the lower of:
(1) 70% of the Appraised Value of such Borrowing Base Stabilized
Property; and
(2) the Permanent Loan Estimate of such Borrowing Base Stabilized
Property; and
(b) as to any Borrowing Base Development Property at any time, its
Eligible Maximum Loan Amount.
"Breakeven" means, with respect to any Borrowing Base Development
Property, as calculated from time to time, when such Property generates Net
Operating Income (on an annualized basis) equal to or greater than the sum
of all payments of interest that would be required to annually service the
accrued interest only on a loan in the Maximum Loan Amount for such
Property with an interest rate equal to the sum of three month LIBOR on the
date Breakeven is calculated plus 3.00%.
"Business Day" means (a) with respect to any Borrowing, payment or
rate determination for a LIBOR Loan, a day, other than a Saturday or
Sunday, on which Agent is open for business in Dallas and San Francisco, on
which Co-Agent is open for business in Dallas and on which dealings in
Dollars are carried on in the London interbank market; and (b) for all
other purposes, any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the States of California and Texas or is a
day on which banking institutions located in California and Texas are
required or authorized by law or other governmental action to close.
4
"Capital Expenditures" has the meaning ascribed to such term in
Addendum I to this Agreement.
"Capital Lease" as applied to any Person, means any lease of any
Property (whether real, personal or mixed) by that Person, as lessee,
which, in conformity with GAAP, is or should be accounted for as a capital
lease on the balance sheet of that Person.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year after the date of acquisition
thereof; (b) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof, maturing within 90 days after the date
of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from any two of Standard & Poor's
Corporation, ▇▇▇▇▇'▇ Investors Services, Inc., Duff and ▇▇▇▇▇▇, or Fitch
Investors (or, if at any time no two of the foregoing shall be rating such
obligations, then from such other nationally recognized rating services
acceptable to Agent) and not listed for possible down-grade in Credit Watch
published by Standard & Poor's Corporation; (c) commercial paper, other
than commercial paper issued by Borrower or any of its Affiliates, maturing
no more than 90 days after the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 or P-1 from either Standard &
Poor's Corporation or Moody's Investor's Service, Inc. (or, if at any time
neither Standard & Poor's Corporation nor Moody's Investor's Service, Inc.
shall be rating such obligations, then the highest rating from such other
nationally recognized rating services acceptable to Agent); and (d)
domestic and Eurodollar certificates of deposit, time deposits and bankers'
acceptances which mature within 90 days after the date of acquisition
thereof; and (e) overnight securities repurchase agreements, or reverse
repurchase agreements secured by any of the foregoing types of Securities
or debt instruments issued, in each case, by (1) any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia or Canada having combined capital and
surplus of not less than $250,000,000 or (2) any Lender.
"Closing Checklist" means the Closing Checklist attached hereto as
Exhibit C, as the same may be amended by the parties.
"Closing Date" means the date upon which the initial public offering
of the REIT Securities was closed and funded, such date being July 27,
1994.
"Co-Agent" means NationsBank of Texas, N.A. in its capacity as
co-Agent for the Lenders under this Agreement, and shall be deemed to refer
to NationsBank of Texas, N.A. in its individual capacity as a Lender where
the context so requires.
5
"Collateral" means all Property and interests in Property now owned or
hereafter acquired by Borrower or the REIT, in or upon which a security
interest, pledge, Lien or Mortgage is granted or of which a collateral
assignment is made under this Agreement, the Mortgage Documents, or any
other Loan Documents.
"Commission" means the Securities and Exchange Commission.
"Commitment" means, with respect to any Lender, such Lender's Pro Rata
Share of the Facility, which amount shall not exceed the principal amount
set out under such Lender's name under the heading "Loan Commitment" on the
counterpart signature pages attached to this Agreement or as set forth on
an Agreement and Assumption executed by such Lender, as assignee, as such
amount may be adjusted pursuant to the terms of this Agreement.
"Completion Cost"means, with respect to any Borrowing Base Development
Property, the remaining cost of completing the Improvements and achieving
Breakeven, as determined monthly by Agent, in its sole discretion, with
consideration given to reports prepared by the Independent Inspecting
Architect.
"Compliance Certificate" means a certificate in the form of Exhibit D
hereto delivered to Agent by Borrower pursuant to Section 6.1(d) and
covering Borrower's compliance with the covenants contained in Articles 6,
7, 8 and 9 of this Agreement.
"Confidential Information" means all nonpublic information obtained by
Agent or any Lender.
"Construction Budget" means, with respect to any Development Property
that is not a Borrowing Base Development Property, the budget for the
construction and development of such Property.
"Construction Contracts" means, with respect to any Borrowing Base
Development Property, any and all material contracts and agreements,
written or oral between the Borrower and any original contractor, including
the architect for such Property, between any of the foregoing and any
subcontractor and between any of the foregoing and any other Person
relating in any way to the construction of the Improvements that are a part
of such Property including the performance of labor or the furnishing of
standards or specially fabricated materials.
"Construction Project" has the meaning ascribed to such term in
Section 3.4(d).
"Construction Schedule" means, with respect to any Borrowing Base
Development Property, the schedule established for completion of the
various stages of development of the Property.
6
"Contaminant" means any pollutant (as that term is defined in 42
U.S.C. 9601(33) or toxic pollutant (as that term is defined in 33 U.S.C.
1362(13)), hazardous substance (as that term is defined in 42 U.S.C.
9601(14)), hazardous chemical (as that term is defined by 29 CFR Section
1910.1200(c)), toxic substance, hazardous waste (as that term is defined in
42 U.S.C. 6903(5)), radioactive material, special waste, petroleum
(including crude oil or any petroleum-derived substance, waste, or
breakdown or decomposition product thereof, or any constituent of any such
substance or waste, including, but no limited to polychlorinated biphenyls
and asbestos).
"Contractual Obligation," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture,
mortgage, deed of trust, lease, contract, undertaking, document or
instrument to which that Person is a party or by which it or any of its
Properties is bound, or to which it or any of its Properties is subject
(including, without limitation, any restrictive covenant affecting such
Person or any of its Properties).
"Conversion Date means, as to any Borrowing Base Development Property,
the earlier of (a) the date that is 30 months after construction commences;
or (b) the date on which Borrower delivers a Conversion Date Certificate to
Agent pursuant to Section 6.1(y). Each Borrowing Base Development Property
that achieves (1) 90% occupancy for the average of three consecutive months
and (2) 90% for each of three consecutive months of appraised stabilized
gross revenue (on an annualized basis) prior to the Conversion Date, may
become a Borrowing Base Stabilized Property on or subsequent to the
Conversion Date upon written notice from Borrower to Agent.
"Conversion Date Certificate" means a report in the form of Exhibit I.
"Convertible Securities" means evidences of indebtedness, shares of
stock, limited or general partnership interests or other ownership
interests, warrants, options, or other rights or securities which are
convertible into or exchangeable for, with or without payment of additional
consideration, Units of the Borrower, either immediately or upon the
arrival of a specified date or the happening of a specified event.
"Court Order" means any judgment, writ, injunction, decree, rule or
regulation of any court or Governmental Authority binding upon or
applicable to the Person in question.
"Debt Service" has the meaning ascribed to such term in Addendum I to
this Agreement.
"Default Interest" has the meaning ascribed to such term in Section 2.4(d).
7
"Defaulting Lender" means any Lender that fails to perform its
obligations under this Agreement within the time period specified for
performance of such obligations, upon written notice of such failure from
Agent of such failure; provided, however, that any Lender that fails to
fund its Pro Rata Share of any Borrowing by 10:00 A.M. California Time on
the Funding Date for such Borrowing, shall, without written notice of such
failure from Agent, be deemed to be a Defaulting Lender; and any Lender
that fails to perform its obligations under this Agreement (if no time
period is specified for the performance of such obligation), which failure
continues for a period of two Business Days after written notice from Agent
of such failure to such Lender.
"Development Plans" means, with respect to any Borrowing Base
Development Property, the material plans, specifications, shop drawings and
other technical descriptions prepared for construction of the Improvements
on the Property.
"Development Property" means an income producing real estate project
for which both of the following statements are true: (a) at least 30 months
has not passed since construction was commenced and (b) (1) 90% occupancy
for the average of three consecutive months and (2) 90% of stabilized gross
revenues (on an annualized basis) for each of three consecutive months has
not been achieved.
"Development Property Status Report" means, with respect to any
Borrowing Base Development Property, the report delivered to Lender by
Borrower pursuant to Section 6.1(x) of this Agreement.
"DOL" means the United States Department of Labor and any successor
department of agency.
"Dollars" and "$" each mean the lawful money of the United States of
America.
"EBITDA" has the meaning ascribed to such term in Addendum I to this
Agreement.
"Eligible Maximum Loan Amount" means, with respect to any Borrowing
Base Development Property, an amount equal to (a) zero if Borrower's Equity
Investment has not been fully funded; and otherwise, (b) the Maximum Loan
Amount.
"Environmental Laws" means all environment, health and safety
Requirements of Law.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (a) any liability under Environmental Laws or regulations, or
8
(b) damages arising from, or costs incurred by such Governmental
Authority in response to, a Release or threatened Release of a Contaminant
into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means any (a) corporation which is, becomes, or is
deemed to be a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the Internal Revenue Code) as a Person;
(b) partnership, trade or business (whether or not incorporated) which is,
becomes, or is deemed to be under common control (within the meaning of
Section 414(c) of the Internal Revenue Code) with a Person; (c) a Person
which is, becomes, or is deemed to be a member of the same "affiliated
service group" (as defined in Section 414(m) of the Internal Revenue Code)
as a Person; or (d) any other organization or arrangement described in
Section 414(o) of the Internal Revenue Code which is, becomes, or is deemed
to be required to be aggregated pursuant to regulations issued under
Section 414(o) of the Internal Revenue Code with a Person pursuant to
Section 414(o) of the Internal Revenue Code.
"Event of Default" means any of the occurrences set forth in Article
10 after the expiration of any applicable grace period expressly provided
therein.
"Expended Project Costs" means, with respect to any Borrowing Base
Development Property, all sums expended to date for the development of the
Property, consistent with the Project Budget for such Property.
"Facility" means the loan facility of up to $150,000,000.00 described
in Section 2.1(a), which shall consist of (a) $85,000,000.00 of Commitments
from Lenders on the Restatement Date and (b) $65,000,000.00 of additional
Commitments, provided that (1) Borrower requests such additional
Commitments, which requests shall be in increments of not less than
$15,000,000.00, and (2) Agent receives additional Commitments from Lenders
equal to at least the sum of all such requested additional Commitments, not
to exceed $65,000,000.00.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereof.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members
of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
Agent from three Federal Funds brokers of recognized standing selected by
Agent.
9
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any governmental authority succeeding to its functions.
"Financial Statements" has the meaning ascribed to such term in
Section 6.1(b).
"FIRREA" means the Financial Institutions Recovery, Reform and
Enforcement Act of 1989, as amended from time to time.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Borrower which shall be the 12
month period ending on the last day of December in each calendar year.
"Fixed Charges" means the sum of Debt Service and Capital Expenditures.
"Funding Date" means, with respect to any Loan made after the Closing
Date, the date of the funding of such Loan.
"Funds From Operations" has the meaning ascribed to such term in
Addendum I to this Agreement.
"Funds Transfer Agreement" means the Agent's funds transfer agreement
in the form of Exhibit E hereto.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board, the
American Institute of Certified Public Accountants, and the Financial
Accounting Standards Board, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"General Partner" means Paragon GP Holdings.
"Governmental Authority" means any nation or government, any federal,
state, local, municipal or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Gross Asset Value" has the meaning ascribed to such term in Addendum
I to this Agreement.
"Improvements" means the improvements described in the Development
Plans for any Borrowing Base Development Property.
10
"Indebtedness" as applied to any Person (and without duplication),
means, in accordance with GAAP, (a) all indebtedness, obligations or other
liabilities of such Person for borrowed money; (b) all indebtedness,
obligations or other liabilities of such Person evidenced by Securities or
other similar instruments; (c) all reimbursement obligations and other
liabilities of such Person with respect to letters of credit or banker's
acceptances issued for such Person's account; (d) all obligations of such
Person to pay the deferred purchase price of Property or services; (e) all
obligations in respect of Capital Leases of such Person, (f) all
Accommodation Obligations of such Person; (g) all indebtedness, obligations
or other liabilities of such Person or others secured by a Lien on any
asset of such Person, whether or not such indebtedness, obligations or
liabilities are assumed by, or are a personal liability of, such Person,
all as of such time; (h) all indebtedness, obligations or other liabilities
(other than interest expense liability) in respect of interest rate
contracts and foreign currency exchange agreements; and (i) ERISA
obligations currently due and payable. Indebtedness shall not include
operating leases, and any liability specifically offset by cash or Cash
Equivalents held for the sole purpose of liquidating such liability.
"Independent Inspecting Architect" means, with respect to any
Borrowing Base Development Property, the Person selected and retained by
Agent, at Borrower's expense, to review construction of and inspect the
Improvements on behalf of the Lenders.
"Interest Expense" has the meaning ascribed to such term in Addendum I
to this Agreement.
"Interest Period" means, relative to any LIBOR Loans comprising part
of the same Borrowing, the period beginning on (and including) the date on
which such LIBOR Loans are made as, or converted into, LIBOR Loans, and
shall end on (but exclude) the day which numerically corresponds to such
date one, two, three or six months thereafter (or, if such month has no
numerically corresponding day, on the last Business Day of such month), in
either case as Borrower may select in its relevant Notice of Borrowing
pursuant to Section 2.1(b); provided, however, that:
(a) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day
is the first Business Day of a calendar month, in which case such
Interest Period shall end on the Business Day next preceding such
numerically corresponding day);
(b) no Interest Period may end later than the Termination Date; and
11
(c) pursuant to Section 11.10(d), any Interest Period of 12 months
shall require the consent of all Lenders.
"Interim Period" means the period commencing on March 31, 1996, and
ending on the Closing Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.
"Investment" means, as applied to any Person, (a) any direct or
indirect purchase or other acquisition by that Person of Securities, or of
a beneficial interest in Securities of any other Person, and (b) any direct
or indirect loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, advances to employees
and similar items made or incurred in the ordinary course of business and
extensions of credit in the ordinary course of business), or capital
contribution by such Person to any other Person which is not a current
asset or did not arise from a sale of goods or services to that Person in
the ordinary course of business. The amount of any Investment shall be
determined in conformity with GAAP.
"Investment Affiliate" means any Person in which Borrower has an
ownership interest, whose financial results are not consolidated under GAAP
with the financial results of Borrower on the consolidated financial
statements of the Borrower.
"Investment Mortgage" means any mortgage directly or indirectly owned
by Borrower which secures Indebtedness including certificates of interest
in real estate mortgage investment conduits.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"Land" means unimproved real estate purchased or to be purchased and
owned in fee by Borrower for the purpose of future development of
improvements.
"Lease-Up Projections" means, with respect to any Borrowing Base
Development Property, the projections prepared by Borrower for leasing
absorption, tenant occupancy, projected rental rates, construction period
discounts and any other rental concessions.
"Lender Taxes" has the meaning ascribed to such term in Section
2.4(g)(2)(A).
"Lender" means ▇▇▇▇▇ Fargo or any other bank, finance company,
insurance or other financial institution which is or becomes a party to
this Agreement by
12
execution of a counterpart signature page hereto or an Assignment and
Assumption, as assignee. At all times that there are no Lenders other
than ▇▇▇▇▇ Fargo, the terms "Lender" and "Lenders" mean ▇▇▇▇▇ Fargo in
its individual capacity. With respect to matters requiring the consent
or approval of Requisite Lenders, or all Lenders, any Defaulting
Lender will be disregarded and excluded, and, for voting purposes
only, "all Lenders" shall be deemed to mean "all Lenders other than
Defaulting Lenders."
"Liabilities and Costs" means all claims, judgments, liabilities,
obligations, responsibilities, losses, damages (including lost
profits), punitive or treble damages, costs, disbursements and
expenses (including, without limitation, reasonable attorneys',
experts' and consultants' fees, and costs of investigation and
feasibility studies), fines, penalties and monetary sanctions, and
interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future.
"LIBOR" means, relative to any Interest Period for any LIBOR Loan
included in any Borrowing, the rate of interest determined by Agent
(whose determination shall be conclusive absent manifest error, which
shall not include any lower determination by any other banks) equal to
the rates (rounded upwards, if necessary, to the nearest 1/16 of 1%)
per annum reported by WFB at which Dollar deposits in immediately
available funds are offered by WFB to leading banks in the Eurodollar
interbank market at or about 10:00 A.M. London time two Business Days
prior to the beginning of such Interest Period for delivery on the
first day of such Interest Period for a period approximately equal to
such Interest Period and in an amount equal or comparable to the LIBOR
Loan to which such Interest Period relates.
"LIBOR Loan" means a Loan bearing interest, at all times during
the Interest Period applicable to such Loan, at a fixed rate of
interest determined by reference to LIBOR.
"LIBOR Office" means, relative to any Lender, the office of such
Lender designated as such on the counterpart signature pages hereto or
such other office of a Lender as designated from time to time by
notice from such Lender to Agent, whether or not outside the United
States, which shall be making or maintaining LIBOR Loans of such
Lender.
"LIBOR Reserve Percentage" means, relative to any Interest Period
for LIBOR Loans made by any Lender, the reserve percentage (expressed
as a decimal) equal to the actual aggregate reserve requirements
(including all basic, emergency, supplemental, marginal and other
reserves and taking into account any transactional adjustments or
other scheduled changes in reserve requirements) applicable to such
Lender specified under regulations issued from time to time by the
Federal Reserve Board and then applicable to assets or liabilities
consisting of and including "Eurocurrency Liabilities" as currently
defined in Regulation D of the Federal Reserve Board.
13
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance
(including, but not limited to, easements, rights-of-way, zoning
restrictions and the like), lien (statutory or other), preference,
priority or other security agreement or preferential arrangement of
any kind or nature whatsoever, including without limitation, any
conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease, any financing lease having substantially
the same economic effect as any of the foregoing, and the filing of
any financing statement (other than a financing statement filed by a
"true" lessor pursuant to 9-408 of the Uniform Commercial Code) naming
the owner of the asset to which such Lien relates as debtor, under the
Uniform Commercial Code or other comparable law of any jurisdiction.
"Loan" means a loan made pursuant to the Facility.
"Loan Account" has the meaning ascribed to such term in Section 2.3.
"Loan Availability" means, as calculated monthly, an amount equal
to (a) the Borrowing Base less (b) the sum of (1) the aggregate
outstanding principal balance under the Loan Notes and (2) the
aggregate Completion Costs relating to the Borrowing Base Development
Properties.
"Loan Availability Certificate"means a report in the form of Exhibit K.
"Loan Availability Deficiency" has the meaning ascribed to such term in
Section 2.1(a)(2).
"Loan Documents" means this Agreement, the Mortgage Documents,
and all other agreements, instruments and documents (together with
amendments and supplements thereto and replacements thereof) now or
hereafter executed by the Borrower, or any other Person which either
(a) evidence, guaranty or secure the Obligations; or (b) relate
directly or indirectly to this Agreement.
"Loan Note" means a promissory note evidencing Loans executed by
Borrower in favor of Lenders, substantially in the form of Exhibit F.
"Major Agreement" means, at any time, any (a) material operating,
cross-easement, restrictions or similar agreement (excluding
Construction Contracts, residential leases, service contracts,
maintenance agreements, agreements with vendors providing goods and
services to a Borrowing Base Property and other similar agreements)
encumbering or affecting a Borrowing Base Property; (b)
management/leasing agreements or leasing agreements with respect to a
Borrowing Base Property; and (c) nonresidential leases which grant a
possessory interest in, or the right to use, any part of a Borrowing
Base Property.
14
"Management Company" means Paragon Residential Services, Inc., a
Delaware corporation, and the subsidiary of the Borrower through which
the Borrower will conduct its development, management, leasing, asset
management, and other property services businesses.
"March 31, 1996 Financials" has the meaning ascribed to such term
in Section 5.1(g).
"Material Adverse Effect" means, with respect to a Person, a
material adverse effect upon the condition (financial or otherwise),
operations, performance or properties of such Person. The phrase "has
a Material Adverse Effect" or "will result in a Material Adverse
Effect" or words substantially similar thereto shall, in all cases, be
intended to mean "has or will or could reasonably be anticipated to
result in a Material Adverse Effect," and the phrase "has no (or does
not have a) Material Adverse Effect" or "will not result in a Material
Adverse Effect," or words substantially similar thereto, shall, in all
cases, be intended to mean "does not or will not or could not
reasonably be anticipated to result in a Material Adverse Effect."
"Maturity Date" means July 27, 1998, unless the Maturity Date is
extended pursuant to Section 2.1(d), in which case the Maturity Date
shall be the date to which this Agreement is so extended.
"Maximum Loan Amount" means, with respect to any Borrowing Base
Development Property, an amount equal to the least of:
(a) 65% of the Appraised Value;
(b) 70% of the total amount of the Project Budget; or
(c) the Permanent Loan Estimate;
on the date such Property is accepted as a Borrowing Base Development
Property pursuant to Section 3.1.
"Mortgage Document" means any Mortgage, Assignment of Leases and
Rents, indemnity agreement, security agreement or other document
executed by Borrower, evidencing or creating Agent's Liens against a
Borrowing Base Property as security for the Obligations, as each of
the foregoing may be amended, supplemented or modified from time to
time.
"Mortgage" means the fee or leasehold mortgage, deed of trust or
trust deed relating to a Borrowing Base Property and securing the
Obligations.
15
"Multiemployer Plan" means an employee benefit plan defined in
Section 4001(a)(3) of ERISA which is, or within the immediately
preceding six years was, contributed to by a Person or an ERISA
Affiliate.
"Net Income" means, for any period, the net earnings (or loss) of
the Borrower, the REIT, and their respective Subsidiaries after (a)
Taxes and (b) adjustment for net earnings (or loss) attributable to
minority interests in Subsidiaries, for such period on a consolidated
basis, calculated in conformity with GAAP.
"Net Operating Income" means, with respect to a Borrowing Base
Property, the net operating income of such Borrowing Base Property
determined in accordance with sound accounting principles consistently
applied. For purposes of determining Net Operating Income, (a) income
shall not include security or other deposits, late fees, lease
termination or other similar charges, delinquent rent recoveries,
unless previously reflected in reserves, or any other items of a
non-recurring nature, except that, Net Operating Income may include
collected lease termination charges (amortized monthly over the
remaining term of the lease) and delinquent rent recoveries so long as
(1) any such charge or recovery does not relate to a date earlier than
12 months prior to the end of the period for which Net Operating
Income is determined, and (2) no such recovery shall be made for any
month during or after which the space to which such charge or recovery
relates has been released to another Person and such person has an
obligation to pay rent for such month(s); and (b) expenses shall
include reasonable allocations or adjustments for taxes and insurance
and maintenance and repairs made in the ordinary course, which are
acceptable to Agent, and (c) reasonable adjustments, which are
acceptable to Agent, shall be made for any casualty at such Borrowing
Base Property that is not fully covered by insurance, the condemnation
of any part of such Borrowing Base Property, and loss of tenants by
reason of any such casualty or condemnation.
"Net Worth" has the meaning ascribed to such term in Addendum I
to this Agreement.
"Non Pro Rata Loan" means a Loan with respect to which fewer than
all Lenders have funded their respective Pro Rata Shares of such Loan.
"Nonrecourse Indebtedness" means Indebtedness with respect to
which recourse for payment is limited to specific Property encumbered
by a Lien securing such Indebtedness.
"Notice of Borrowing" means a notice substantially in the form of
Exhibit G.
"Obligations" means, from time to time, all Indebtedness of
Borrower owing to Agent, any Lender, or any Person entitled to
indemnification pursuant to Section 12.2, or any of their respective
successors, transferees or assigns, of every
16
type and description, whether or not evidenced by any note, guaranty
or other instrument, arising under or in connection with this
Agreement or any other Loan Document, whether or not for the payment
of money, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now
existing or hereafter arising, and however acquired. The term
includes, without limitation, all Liabilities and Costs, interest,
charges, expenses, fees, reasonable attorneys' fees and disbursements
and any other sum now or hereinafter chargeable to Borrower under, or
in connection with, this Agreement or any other Loan Document.
"Officer's Certificate" means a certificate signed by a specified
representative, officer or general partner of a Person certifying as
to the matters set forth therein.
"Other Indebtedness" means all Indebtedness other than the Obligations.
"Paragon GP Holdings" means Paragon Group GP Holdings, Inc., a
Delaware corporation, wholly owned by the REIT, the sole general
partner of the Borrower, and which holds approximately 1% of the Units
of the Borrower.
"Paragon GP Holdings Affidavit" means the affidavit subscribed
and sworn to by an authorized representative of Paragon GP Holdings as
to the matters set forth therein.
"Paragon LP Holdings" means Paragon Group LP Holdings, Inc., a
Delaware corporation and wholly owned subsidiary of the REIT, which
holds approximately 72.9% of the Units of the Borrower.
"Paragon LP Holdings Affidavit" means the affidavit subscribed
and sworn to by an authorized representative of Paragon LP Holdings as
to the matters set forth therein.
"Partnerships" means partnerships or joint ventures engaged in
real estate development, ownership, management or investment
subpartnerships.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
"Permanent Loan Estimate" means, (a) as to any Borrowing Base
Stabilized Property, an amount equal to 80% of the Net Operating
Income of such Property for the annualized six month period
immediately preceding the date of determination, divided by the
constant annual percentage which would be applicable to a loan payable
in equal annual payments of principal and interest over 25 years
bearing interest at a fixed rate equal to the greater of (1) 2.25% in
excess of the yield on the date such Permanent Loan Estimate is
calculated for seven year United States
17
Treasury Notes, and (2) 8.00%; and (b) as to any Borrowing Base
Development Property, an amount equal to 80% of the Net Operating
Income of the Property, calculated using the first year of stabilized
Net Operating Income as projected in the Appraisal of such Property
(or as otherwise determined by the Supermajority Lenders), divided by
the constant annual percentage which would be applicable to a loan
payable in equal annual payments of principal and interest over 25
years at a fixed rate equal to the greater of (1) 2.25% in excess of
the yield on the date such Permanent Loan Estimate is calculated for
seven year United States Treasury Notes, and (2) 8.00%. Upon the
earlier of (A) 24 months after construction commences at a Borrowing
Base Development Property or (B) the Borrowing Base Development
Property attains a 50% level of occupancy, if the Property has not
achieved 90% of the stabilized gross revenues (before application of a
vacancy factor) projected for the first year in the Appraisal
(calculated on an annualized basis adjusted for a 50% level of
occupancy and excluding any construction period discounts disclosed in
the Lease-Up Projections), then the projected stabilized gross
revenues (before application of a vacancy factor) used to calculate
the Permanent Loan Estimate for the Property shall be adjusted
downward, by an amount determined by Agent; provided, however, that
the Maximum Loan Amount shall not be increased by application of this
provision.
"Permit" means any permit, approval, authorization, license,
variance or permission required from a Governmental Authority under an
applicable Requirement of Law.
"Permitted Delays" shall mean strikes, lockouts, labor trouble,
failure of power, riots, insurrection, war, acts of God, restrictive
laws or regulations that did not exist when construction commenced, or
other events beyond the control of Borrower which delay, hinder or
prevent construction of the Improvements. Any extension of time for a
Permitted Delay shall be conditioned upon Borrower delivering written
notice of the Permitted Delay to Agent within fifteen (15) days after
the event causing the Permitted Delay, and the period of time for
completion of construction of the Improvements shall be extended by
the period of time equivalent to the delay caused by the Permitted
Delay.
"Permitted Investment" means each of Land, Securities,
Partnerships and Investment Mortgages, to the extent permitted in
paragraph 7 of Addendum-I of this Agreement.
"Permitted Lien" means:
(a) a Lien (other than Environmental Liens and any Lien imposed under
ERISA) for taxes, assessments or charges of any Governmental
Authority or a claim which either is (1) not yet due or (b) being
contested in good faith by appropriate proceedings and with
respect to which adequate reserves are being maintained in
18
accordance with GAAP or other appropriate provisions approved by Agent
have been taken.
(b) a Lien (other than any Lien imposed under ERISA) incurred or a
deposit made in the ordinary course of business (including,
without limitation, any surety bond or appeal bond) in connection
with workers' compensation, unemployment insurance and other
types of social security benefits, or to secure the performance
of tenders, bids, leases, contracts (other than for the repayment
of Indebtedness), statutory obligations and other similar
obligations, or arising as a result of progress payments under
government contracts;
(c) an easement (including, without limitation, a reciprocal easement
agreement or a utility agreement), right-of-way, covenant,
consent, reservation, operating agreement, encroachment,
variation or other restriction, charge or encumbrance (whether or
not recorded) affecting the use of real property, which does not
materially and adversely affect the value of such Property or
impair the use thereof;
(d) any law, ordinance, Lien, easement, right-of-way, restriction,
exemption, reservation, condition, limitation, covenant, adverse
right or interest described as an exception on Schedule B of any
title insurance policy which is delivered to and accepted by
Agent in satisfaction of Section 4.1(e)(1)(E); and
(e) a Lien imposed by law, such as a carriers', warehousemen's or
mechanics' lien or other similar Lien arising in the ordinary
course of business, which secures payment of obligations not more
than 30 days past due, or which is being contested in good faith
by appropriate proceedings, diligently pursued, and for which
adequate reserves shall have been established in accordance with
GAAP.
"Person" means any natural person, employee, corporation, limited
partnership, general partnership, joint stock company, limited
liability company, joint venture, association, company, trust, bank,
trust company, land trust, business trust, Governmental Authority, or
other organization, whether or not a legal entity.
"Plan" means an employee benefit plan defined in Section 3(3) of
ERISA (other than a Multiemployer Plan) in respect of which Borrower
or an ERISA Affiliate, as applicable, is an "employer" as defined in
Section 3(5) of ERISA.
19
"Post-Foreclosure Plan" has the meaning ascribed to such term in
Section 11.11(e).
"Prime Rate" means the base rate of interest per annum
established from time to time by WFB, and designated as its prime
rate.
"Pro Rata Share" means, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the
amount of such Lender's Commitment and the denominator of which shall
be the aggregate amount of all of the Lenders' Commitments, as
adjusted from time to time in accordance with the provisions of this
Agreement.
"Proceedings" means, collectively, all actions, suits and
proceedings before, and investigations commenced or threatened by or
before, any court or Governmental Authority with respect to a Person.
"Project Budget" means, with respect to any Borrowing Base
Development Property, the budget for the development of the Property
approved by the Requisite Lenders which shall include a project budget
overview, a detailed AIA package, and a breakout of any retainage
required by applicable law or contract and be substantially in the
form of Exhibit J to this Agreement, as amended from time to time.
"Property" means any real or personal property, building,
facility, structure, equipment or unit, or other asset owned and
operated by Borrower.
"Property Release" has the meaning ascribed to such term in
Section 3.2.
"Protective Advance" means all sums expended as determined by
Agent to be necessary or appropriate to: (a) protect the priority,
validity and enforceability of the Liens on, and security interests
in, any Collateral and the instruments evidencing the Obligations; or
(b) (1) prevent the value of any Collateral from being materially
diminished (assuming the lack of such a payment within the necessary
time frame could potentially cause such Collateral to lose value), or
(2) protect any of the Collateral from being materially damaged,
impaired, mismanaged or taken, including, without limitation, any
amounts expended in accordance with Section 12.1.
"Regulation G" means Regulation G of the Federal Reserve Board as
in effect from time to time.
"Regulation T" means Regulation T of the Federal Reserve Board as
in effect from time to time.
20
"Regulation U" means Regulation U of the Federal Reserve Board as
in effect from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board as
in effect from time to time.
"REIT" means Paragon Group, Inc., a Maryland corporation.
"REIT Affidavit" means an affidavit subscribed and sworn to by an
authorized representative of the REIT as to the matters set forth
therein.
"Release" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or into or out of any
real Property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or real Property.
"Remedial Action" means any action required by applicable
Environmental Laws to (a) clean up, remove, treat or in any other way
address Contaminants in the indoor or outdoor environment; (b) prevent
the Release, threat of Release, or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor
environment; or (c) perform pre-remedial studies and investigations
and post-remedial monitoring and care.
"Reportable Event" means any of the events described in Section
4043(b) of ERISA, other than an event for which the 30 day notice
requirement is waived by regulations.
"Requirements of Law" means, as to any Person, the charter and
by-laws, partnership agreements or other organizational or governing
documents of such Person, and any law, rule or regulation, Permit, or
determination of an arbitrator, court, or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its Property or to which such Person or any of its Property is
subject, including without limitation, the Securities Act, the
Securities Exchange Act, Regulations G, T, U and X, FIRREA and any
certification of occupancy, zoning ordinance, building, environmental
or land use requirement or Permit or occupational safety or health
law, rule or regulation.
"Requisite Lenders" means, collectively, Lenders whose Pro Rata
Shares, in the aggregate, are at least sixty-six and two-third percent
(66 2/3%); provided, that in determining such percentage at any given
time, all then existing Defaulting Lenders will be disregarded and
excluded and the Pro Rata Shares of Lenders shall be redetermined, for
voting purposes only, to exclude the Pro Rata Shares of such
Defaulting Lenders.
21
"Restatement Date" means the date of this Agreement.
"Securities" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of Indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general
any instruments commonly known as "securities," or any certificates of
interest, shares, or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the Obligations.
"Securities Act" means the Securities Act of 1933, as amended to
the date hereof and from time to time hereafter, and any successor
statute.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended to the date hereof and from time to time hereafter,
and any successor statute.
"Senior Loans" has the meaning ascribed to such term in Section 11.4(b).
"Short Term Income" means income received by Borrower from Cash
Equivalents.
"Solvent" means as to any Person, at the time of determination,
that such Person (a) owns property the value of which (both at fair
valuation and at present fair saleable value) is greater than the
amount required to pay all of such Person's liabilities (including
contingent liabilities and debts); (b) is able to pay all of its debts
as such debts mature; and (c) has capital sufficient to carry on its
business and transactions and all business and transactions in which
it is about to engage.
"Stabilized Property/Development Property Borrowing Base Ratio"
means the ratio of the amount of the Borrowing Base derived from
Borrowing Base Stabilized Properties to the amount of the Borrowing
Base derived from Borrowing Base Development Properties.
"Subsidiary" of a Person means any corporation, partnership
(limited or general), trust or other entity of which a majority of the
stock (or equivalent ownership or controlling interest) having voting
power to elect a majority of the board of directors (if a corporation)
or to select the trustee or equivalent controlling interest, shall, at
the time such reference becomes operative, be directly or indirectly
owned or controlled by such Person or one or more of the other
subsidiaries of such Person or any combination thereof, and whose
financial statements are prepared on a consolidated basis with such
Person.
"Supermajority Lenders" means, collectively, Lenders whose Pro
Rata Shares, in the aggregate, are at least ninety percent (90%) of
the existing
22
Commitments, which total $85,000,000 on the Restatement Date;
provided, that, in determining such percentage at any given time, all
then existing Defaulting Lenders will be disregarded and excluded and
the Pro Rata Share of each Lender will be redetermined, for voting
purposes only, to exclude the Pro Rata Shares of the Defaulting
Lenders.
"Taxes" means all federal, state, local and foreign income and
gross receipts taxes.
"Termination Date" means the earlier to occur of (a) the Maturity
Date; and (b) the date on which the Loans are accelerated pursuant to
Section 10.2(a).
"Termination Event" means (a) any Reportable Event; (b) the
withdrawal of a Person, or an ERISA Affiliate from a Benefit Plan
during a plan year in which it was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA; (c) the occurrence of an obligation of
a Person or an ERISA Affiliate arising under Section 4041 of ERISA to
provide affected parties with a written notice of an intent to
terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (d) the institution by the PBGC of
proceedings to terminate any Benefit Plan under Section 4042 of ERISA;
(e) any event or condition which constitutes grounds under Section
4042 of ERISA for the appointment of a trustee to administer a Benefit
Plan; (f) the partial or complete withdrawal of a Person or any ERISA
Affiliate from a Multiemployer Plan; or (g) the adoption of an
amendment by any Person or any ERISA Affiliate to terminate any
Benefit Plan.
"Total Liabilities" has the meaning ascribed to such term in
Addendum I to this Agreement.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect on the date hereof in the State of Texas; provided; that, if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of any security interest in any
Collateral or the availability of any remedy hereunder is governed by
the Uniform Commercial Code as in effect on or after the date hereof
in any other jurisdiction, "Uniform Commercial Code" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection, or effect of
perfection or non-perfection, or availability of such remedy.
"Units" means units of partnership interest in the Borrower.
"Unmatured Event of Default" means an event which, with the
giving of notice or the lapse of time, or both, would constitute an
Event of Default.
"Unused Amount" has the meaning ascribed to such term in Section 2.5(a).
23
"Unused Facility Fee" has the meaning ascribed to such term in
Section 2.5(a).
"WFB" means ▇▇▇▇▇ Fargo Bank, N.A.
"Work in Process" has the meaning ascribed to such term in
Addendum I to this Agreement.
Section 1.2 Computation of Time Periods. In this Agreement,
in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"
and the words "to" and "until" each mean "to and including"
(except with respect to the calculation of Interest, where the
word "to" shall not mean "including"). Periods of days referred
to in this Agreement shall be counted in calendar days unless
Business Days are expressly prescribed.
Section 1.3 Terms.
(a) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily
given them in accordance with GAAP, provided that references
to the financial results of the "Borrower on a consolidated
basis" shall be deemed to mean, unless otherwise
specifically indicated, the consolidated financial results
of the REIT, Paragon GP Holdings, Paragon LP Holdings, the
Borrower, and the Management Company.
(b) Any time the phrase "to the best of a Person's knowledge" or
a phrase similar thereto is used herein, it means to the
actual knowledge of the executive officers or general
partners of that Person, after reasonable inquiry of any
Agents, employees or contractors of that Person, who could
reasonably be anticipated to have knowledge with respect to
the subject matter or circumstances in question and to be
able to review any documents or instruments which could
reasonably be anticipated to be relevant to the subject
matter or circumstances in question.
(c) In each case where the consent or approval of any of the
Agent, all Lenders or the Requisite Lenders is required, or
their non-obligatory action is requested by Borrower, such
consent, approval or action shall be in the sole and
absolute discretion of Agent and, as applicable, each
Lender, unless otherwise specifically indicated.
ARTICLE 2
LOANS
Section 2.1 Loan Advances and Repayment.
(a) Loan Availability.
(1) Subject to the terms and conditions set forth in this Agreement,
Lenders agree to make Loans to Borrower from time to time during the
24
period from the Closing Date to the Business Day next preceding the
Termination Date, in an aggregate amount which shall not exceed Loan
Availability. All Loans under this Agreement shall be made by Lenders
simultaneously and proportionately to their respective Pro Rata
Shares, it being understood that no Lender shall be responsible for
any failure by any other Lender to perform its obligation to make a
Loan hereunder and that the Commitment of any Lender shall not be
increased or decreased as a result of the failure by any other Lender
to perform its obligation to make a Loan.
(2) Loans may be voluntarily prepaid pursuant to
Section 2.6(a) and, subject to the provisions of this Agreement, any
amounts so prepaid may be reborrowed, up to the amount available under
Section 2.1(a)(1) at the time of such Borrowing, until the Business Day
next preceding the Termination Date. The principal balance of the Loans
shall be payable in full on the Termination Date. If during the term of
this Agreement the aggregate outstanding principal balance of the Loans
ever exceeds Loan Availability (a "Loan Availability Deficiency"), then
Borrower shall have 30 days after the earlier of (A) demand by Agent;
and (B) the date Borrower knew or with reasonable diligence should have
known of such deficiency; to submit a plan to either (i) reduce the
aggregate outstanding principal balance of the Loans to an amount that
is less than, or equal to, Loan Availability; or (ii) increase Loan
Availability by mortgaging additional Properties approved by the
Requisite Lenders pursuant to Section 3.1 so as to increase the
Borrowing Base. Borrower shall then have an additional 60 days
following expiration of such 30-day period in which to correct the Loan
Availability Deficiency, failing which, an Event of Default shall have
occurred without further notice or action on the part of Agent or the
Lenders. The existence of a Loan Availability Deficiency constitutes an
Unmatured Event of Default. Accordingly, no Loans shall be made under
this Agreement while a Loan Availability Deficiency exists.
(b) Notice of Borrowing. Whenever Borrower desires to borrow
under this Section 2.1, but in no event more than three times during
any one calendar month or more than 36 times in the aggregate during
any Fiscal Year, Borrower shall give Agent, at ▇▇▇▇▇ Fargo Real Estate
Group Disbursement Center, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to: ▇▇▇▇▇ Fargo Real Estate
Group, Inc., ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
Attention: Account Officer, or such other addresses as Agent shall
designate, an original or facsimile Notice of Borrowing no later than
10:00 A.M. (California time), not fewer than three nor more than five
Business Days prior to the proposed Funding Date of each Loan. Each
Notice of Borrowing shall specify (1) the proposed Funding Date (which
shall be a Business Day) for the Loan; (2) the amount of the proposed
Loan; provided, that, the aggregate amount of such proposed Loan shall
equal $1,000,000 or integral multiples of $100,000 in excess thereof;
(3) whether the Loan will be a Base Rate Loan or a LIBOR Loan and, if
a LIBOR Loan, the Interest Period; (4) to which account of Borrower
the funds are to be directed; and (5) that the use of the proceeds of
such Loan will be consistent with Section 7.1(h) of this Agreement.
Any Notice of Borrowing pursuant to this Section 2.1(b) shall be
irrevocable. Each such Notice of Borrowing shall be accompanied by all
reports or documents required to be delivered by Borrower to Agent
under this Agreement.
25
Borrower may elect (A) to convert Base Rate Loans, or any portion
thereof, into a LIBOR Loan; (B) to convert LIBOR Loans, or any portion
thereof, into a Base Rate Loan; or (C) to continue any LIBOR Loan, or
any portion thereof, for an additional Interest Period, provided,
however, that the aggregate amount of the LIBOR Loans being converted
shall, in the aggregate, equal $1,000,000, or an integral multiple of
$100,000 in excess thereof. The applicable Interest Period for the
continuation of any LIBOR Loan shall commence on the day on which the
next preceding Interest Period expires. Each such election shall be
made by giving Agent written notice thereof by 10:00 A.M. (California
time) on the date of a conversion to a Base Rate Loan, or by 10:00
A.M. (California time), not fewer than three nor more than five
Business Days prior to the date of a conversion to or continuation of
a LIBOR Loan, specifying, in each case (i) whether a conversion or
continuation is to occur; (ii) the amount of the conversion or
continuation; (iii) the Interest Period therefor, in the case of a
conversion to or continuation of a LIBOR Loan; and (iv) the date of
the conversion or continuation (which date shall be a Business Day).
Agent shall notify each Lender of each such Notice of Borrowing and
its contents within one (1) Business Day after Agent's receipt
thereof. Notwithstanding anything to the contrary contained herein and
subject to the Default Interest provisions contained in Section
2.4(d), if an Event of Default occurs and as a result thereof the
Commitments are terminated, all LIBOR Loans will convert to Base Rate
Loans upon the expiration of the applicable Interest Periods therefor
or the date all Loans become due, whichever occurs first. Except as
provided above, the conversion of a LIBOR Loan to a Base Rate Loan
shall occur only on the last Business Day of the Interest Period
relating to such LIBOR Loan.
(c) Making of Loans. Subject to Section 11.3, Agent shall make
the proceeds of Loans available to Borrower in El Segundo, California
on such Funding Date and shall disburse such funds in Dollars and in
immediately available funds not later than 12:00 P.M., California
Time, to Borrower's commercial demand account, which shall be
specified in the Notice of Borrowing.
(d) Terms; Principal Payment. The outstanding balance of the
Loans shall be payable in full on the Termination Date; provided,
however, that Borrower shall have the right to extend the Maturity
Date for one one year period, provided:
(1) (A) Borrower gives Agent notice of Borrower's
election to extend the Maturity Date (which election may be
made only for one extension period at a time) not later than
90 days prior to the then effective Maturity Date; and
(B) prior to the commencement of such extension period,
Agent receives current Appraisals with respect to each
Borrowing Base Property other than Borrowing Base Properties
for which Agent has received an Appraisal within twelve
months of the then effective Maturity Date; and
(2) each of the following conditions is satisfied when such extension
period commences:
(A) Borrower has paid to Agent an extension fee (for the
benefit of all Lenders) equal to .25% of the Facility;
26
(B) no Unmatured Event of Default or Event of Default
has occurred and is continuing;
(C) the aggregate principal outstanding balance of the
Loans does not exceed Loan Availability;
(D) the ratio of Total Liabilities to Gross Asset Value
is no greater than .525:1;
(E) the ratio of EBITDA to Interest Expense is no less
than 2.25:1;
(F) the ratio of EBITDA to Fixed Charges is no less
than 2:1; and
(G) distributions on account of Units shall constitute
no more than 95% of Funds from Operations.
Each of the performance measures described at (D) thru (G) above
shall be calculated from the Borrower's Financial Statements for the
Fiscal Quarter ending March 31, 1998.
Section 2.2 Authorization to Obtain Loans. Borrower shall provide
Agent with documentation satisfactory to Agent indicating the names of
those representatives of its General Partner that are authorized by
its General Partner to sign Borrowing Base Certificates and Notices of
Borrowing. Agent and Lenders shall be entitled to rely on such
documentation until notified in writing by Borrower of any change(s)
of the persons so authorized. Agent shall be entitled to act on the
instructions of anyone identifying himself as one of the Persons
authorized to request Loans, and Borrower shall be bound thereby in
the same manner as if such Person were actually so authorized.
Borrower agrees to indemnify, defend and hold Agent and Lender
harmless from and against any and all Liabilities and Costs which may
arise or be created by the acceptance of Notices of Borrowing, unless
caused by the gross negligence of the Person to be indemnified.
Section 2.3 Lenders' Accounting. Agent shall maintain a loan
account for the Borrower and each Lender on its books ("Loan
Account"). The Loan Account maintained for each Lender shall disclose
(a) such Lender's name, address and Commitment, and the principal
amounts of any Loans owing to such Lender from time to time, and (b)
all other appropriate debits and credits as provided in this
Agreement, including, without limitation, fees incurred and
disbursements made by Agent on behalf of such Lender. The Loan Account
maintained for the Borrower shall disclose (1) the principal amount
owing on any Loans; (2) all other appropriate debits and credits as
provided in this Agreement, including, without limitation, all
interest, fees (including reasonable attorneys' fees and
disbursements), expenses, charges and other Obligations; and (3) all
payments of Obligations made by Borrower or for Borrower's own
account. All entries in a Loan Account shall be made in accordance
with Agent's customary accounting practices as in effect from time to
time. From time to time as is customary with Agent's practice, or as
may be reasonably requested by Borrower or any Lender, Agent will
render a statement of a Loan Account to Borrower, or such Lender, as
the case may be. Upon reasonable request, Agent also shall furnish (i)
to Borrower a copy of the Loan Account of each Lender; and (ii) to any
Lender a copy of the Loan Account for
27
Borrower. Each Loan Account for Borrower shall be deemed final,
binding and conclusive upon Borrower in all respects as to all matters
reflected therein (absent manifest error), unless Borrower delivers to
Agent written notice of any objections which Borrower may have to any
such statement, within 30 days after the date such statement is
rendered, or within ten days after discovery by Borrower of an error
with respect to which Borrower had no knowledge and which could not
have been determined after reasonable inquiry during said 30 day
period. In that event, only those items expressly objected to in such
notice shall be deemed to be disputed by Borrower. In the event that
any such objection cannot be settled by Agent and Borrower within 30
Business Days after Agent receives notice thereof from Borrower, Agent
shall notify all Lenders of such objection. Notwithstanding the
foregoing, Agent's entries in the Loan Account evidencing Loans and
other financial accommodations made from time to time shall be final,
binding and conclusive upon Borrower (absent manifest error) as to the
existence and amount of the Obligations recorded in its Loan Account.
Section 2.4 Interest on the Loans.
(a) Base Rate Loans. Subject to Section 2.4(d), all Base Rate Loans
shall bear interest on the unpaid principal amount thereof from
the date made until paid in full at a fluctuating rate per annum
equal to the Base Rate.
(b) LIBOR Loans. Subject to Sections 2.4(d) and 2.4(i), all LIBOR
Loans shall bear interest on the unpaid principal amount thereof
during the Interest Period applicable thereto as set forth below:
(1) If the ratio of Total Liabilities to Gross Asset Value
is less than or equal to 0.55:1, then, irrespective of
the ratio of EBITDA to Fixed Charges, the interest rate
for LIBOR Loans shall be LIBOR plus 2.00%;
(2) If the ratio of Total Liabilities to Gross Asset Value
is greater than 0.55:1 and the ratio of EBITDA to Fixed
Charges is equal to or greater than 1.85:1, then the
interest rate for LIBOR Loans shall be LIBOR plus
2.125%; and
(3) If the ratio of Total Liabilities to Gross Asset Value
is greater than 0.55:1 and the ratio of EBITDA to Fixed
Charges is less than 1.85:1, then the interest rate for
LIBOR Loans shall be LIBOR plus 2.25%.
Total Liabilities/
Gross Asset Value EBITDA/Fixed Charges Pricing
Less than or equal .55:1 -- LIBOR + 2.00%
Greater than or equal .55:1 Greater than or equal 1.85:1 LIBOR + 2.125%
Greater than .55:1 Less than 1.85:1 LIBOR + 2.25%
28
Total Liabilities, Gross Asset Value, EBITDA and Fixed Charges
shall be calculated using information included in the most recent
Financial Statements delivered to Agent by Borrower pursuant to
Sections 6.1(b) and 6.1(c), if such Financial Statements were
delivered to Agent more than five Business Days prior to the date such
determination is made; otherwise, information from the Financial
Statements for the Fiscal Quarter immediately preceding the Fiscal
Quarter covered by the most recently delivered Financial Statements
may be used by Agent to make such calculations.
Upon receipt of a Notice of Borrowing requesting LIBOR Loans,
Agent shall determine LIBOR applicable to the Interest Period for such
LIBOR Loans, and shall give notice thereof to Borrower and Lenders;
provided, however, that failure to give such notice shall not affect
the validity of such rate. Subject to Section 2.4(i), each
determination by Agent of LIBOR shall be conclusive and binding upon
the parties hereto in the absence of demonstrable error. LIBOR Loans
shall be in tranches of $1,000,000 or $100,000 increments in excess
thereof. No more than six LIBOR Loan tranches shall be outstanding at
any one time.
(c) Interest Payments. Subject to Section 2.4(d), interest
accrued on all Loans shall be payable by Borrower in arrears on the
first Business Day of the first calendar month following the Closing
Date, and the first Business Day of each succeeding calendar month
thereafter, and on the Termination Date.
(d) Default Interest. Notwithstanding the rates of interest
specified in Sections 2.4(a) and 2.4(b) and the payment dates
specified in Section 2.4(c), effective immediately upon the occurrence
and during the continuance of any Event of Default, the principal
balances of all Loans then outstanding and, to the extent permitted by
applicable law, any interest payments on the Loans not paid when due
shall bear interest payable upon demand at a rate which is 4% per
annum in excess of the rate of interest otherwise payable under this
Agreement. All other amounts due Agent or Lenders (whether directly or
for reimbursement) under this Agreement or any of the other Loan
Documents, if not paid when due, or if no time period is expressed, if
not paid within 15 days after demand, shall bear interest from and
after demand at the rate set forth in this Section 2.4(d).
(e) Late Fee. Borrower acknowledges that late payment to Agent
will cause Lenders to incur costs not contemplated by this Agreement.
Such costs include, without limitation, processing and accounting
charges. Therefore, if Borrower fails timely to pay any sum due and
payable hereunder through the Termination Date, unless waived by the
Agent or the Requisite Lenders pursuant to Section 11.10(a)(9), a late
charge of $.04 for each dollar of any principal payment, interest or
other charge due and which is not paid within 10 days after such
payment is due, shall be paid by Borrower (for the benefit of Lenders)
for the purpose of defraying the expense incident to handling such
delinquent payment. Borrower and Agent agree that this late charge
represents a reasonable sum considering all of the circumstances
existing on the date hereof and represents a fair and reasonable
estimate of the costs that Lenders will incur by reason of late
payment. Borrower and Agent further agree that proof of actual damages
would be costly and inconvenient. Acceptance of any late charge shall
not constitute a waiver of the default with respect to the overdue
installment, and shall not prevent Agent from exercising any of the
other rights
29
available hereunder or under any other Loan Document. Such late
charge shall be paid without prejudice to any other rights of the
Lenders.
(f) Computation of Interest and Limitation on Rate. Interest and
fees shall be computed on the basis of the actual number of days
elapsed in the period during which interest or fees accrue and a year
of 360 days. In computing interest on any Loan, the date of the making
of the Loan shall be included and the date of payment shall be
excluded; provided, however, that if a Loan is repaid on the same day
on which it is made, one day's interest shall be paid on that Loan.
Notwithstanding subsections (a), (b), (d), (e), and (i) of this
Section 2.4, interest in respect of any Loan shall not exceed the
maximum rate permitted by applicable law.
(g) Changes; Legal Restrictions. In the event that after the
Closing Date (1) the adoption of or any change in any law, treaty,
rule, regulation, guideline or determination of a court or
Governmental Authority, or any change in the interpretation or
application thereof by a court or Governmental Authority; or (2)
compliance by Agent or any Lender with any request or directive made
or issued after the Closing Date (whether or not having the force of
law and whether or not the failure to comply therewith would be
unlawful) from any central bank or other Governmental Authority or
quasi-governmental authority:
(A) subjects Agent or any Lender to any tax, duty or other
charge of any kind with respect to the Facility, this Agreement
or any of the other Loan Documents, including the Mortgages, or
the Loans or changes the basis of taxation of payments to Agent
or such Lender of principal, fees, interest or any other amount
payable hereunder, except for net income, gross receipts, gross
profits, franchise or other similar taxes imposed by any
jurisdiction and not specifically based upon loan transactions
(all such non-excepted taxes, duties and other charges being
hereinafter referred to as "Lender Taxes");
(B) imposes, modifies or holds applicable, in the
determination of Agent or any Lender, any reserve, special
deposit, compulsory loan, FDIC insurance, capital allocation or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by,
Agent or any Lender or any applicable lending office (except to
the extent that the reserve and FDIC insurance requirements are
reflected in the "Base Rate" or separately dealt with in Section
2.4(i)); or
(C) imposes on Agent or any Lender any other condition
materially more burdensome in nature, extent or consequence than
those in existence as of the Closing Date;
and the result of any of the foregoing is to materially increase
the cost to Agent or any Lender of making, renewing, maintaining
or participating in the Loans or to reduce any amount receivable
thereunder; then, in any such case, Borrower shall promptly pay
to Agent or the affected Lenders, as applicable, upon demand,
such amount or amounts (based upon a reasonable allocation
thereof by Agent or such Lenders to the financing transactions
contemplated by this Agreement and affected
30
by this Section 2.4(g) as may be necessary to compensate Agent or
such Lenders for any such additional material cost incurred or
reduced amounts received); provided, however, that if the payment
of such compensation may not be legally made whether by
modification of the applicable interest rate or otherwise, then
Lenders shall have no further obligation to make Loans that cause
Agent or any Lender to incur such increased cost, and all
affected Loans shall become due and payable by Borrower 90 days
after Borrower's receipt of written notice thereof from Agent.
Agent or such Lender shall deliver to Borrower and in the case of
a delivery by Lender, such Lender shall also deliver to Agent, a
written statement of the claimed additional costs incurred or
reduced amounts received and the basis therefor as soon as
reasonably practicable after such Lender obtains knowledge
thereof. If Agent or any Lender subsequently recovers any amount
of Lender Taxes previously paid by Borrower pursuant to this
Section 2.4(g), whether before or after termination of this
Agreement, then, upon receipt of good funds with respect to such
recovery, Agent or such Lender will refund such amount to
Borrower if no Event of Default or monetary Unmatured Event of
Default then exists or, if an Event of Default or monetary
Unmatured Event of Default then exists, such amount will be
credited to the Obligations in the manner determined by Agent or
such Lender.
(h) Certain Provisions Regarding LIBOR Loans.
(1) LIBOR Loans Unlawful. If any Lender shall
determine (which determination shall, upon notice thereof to Borrower
and Agent, be conclusive and binding on the parties hereto) that the
introduction of or any change in, or in the interpretation of, any law
makes it unlawful, or any central bank or other Governmental Authority
asserts that it is unlawful, for such Lender to make or maintain any
Loan as a LIBOR Loan, (A) the obligations of such Lenders to make or
maintain any Loans as LIBOR Loans shall, upon the determination,
forthwith be suspended until such Lender shall notify Agent that the
circumstances causing such suspension no longer exist; and (B) if
required by such law or assertion, the LIBOR Loans of such Lender shall
convert automatically into Base Rate Loans.
(2) Deposits Unavailable. If Agent shall have
determined in good faith that adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBOR Loans,
then, upon notice from Agent to Borrower, the obligations of all
Lenders to make or maintain Loans as LIBOR Loans shall forthwith be
suspended until Agent shall notify Borrower that the circumstances
causing such suspension no longer exist. Agent will give such notice
when it determines, in good faith, that such circumstances no longer
exist; provided, however, that Agent shall not have any liability to
any Person with respect to any delay in giving such notice.
(3) Funding Losses. In the event any Lender shall
incur any loss or expense (including any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to make or maintain any portion of any Loan as
a LIBOR Loan) as a result of:
(A) any continuance, conversion, repayment or prepayment of
the principal amount of any LIBOR Loans for any reason whatsoever
on
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a date other than the scheduled last day of the Interest
Period applicable thereto; or
(B) any Loans not being made as LIBOR Loans
in accordance with the Notices of Borrowing therefor, other
than as a result of such Lender's breach of its obligation to
fund such Loans in accordance with the terms hereof;
then, upon the written notice of such Lender to Borrower with a
copy to Agent, Borrower shall reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in
reasonable detail) shall, in the absence of demonstrable error, be
conclusive and binding on the parties hereto.
(i) Additional Interest on LIBOR Loans. Borrower shall pay to
each Lender, so long as and to the extent such Lender shall be
required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities (as defined
in the definition of LIBOR Reserve Percentage) and such Lender's
performance under this Agreement shall have given rise to additional
reserve requirements for such Lender thereunder, additional interest
on the unpaid principal amount of each Loan constituting a LIBOR Loan
of such Lender made to Borrower, from the date of such Loan until such
principal amount is paid in full, at an interest rate per annum equal
at all times to the remainder obtained by subtracting (1) LIBOR for
the applicable Interest Period for such Loan, from (2) the rate
obtained by dividing LIBOR by a percentage equal to 100%, minus the
LIBOR Reserve Percentage as in effect from time to time during such
Interest Period, payable on each date on which interest is payable on
such LIBOR Loan. Such Lender shall, as soon as practicable, but not
later than the last day of the applicable Interest Period, provide
notice to Agent and Borrower of any such additional interest arising
in connection with such LIBOR Loan and the certification of such
Lender that the additional amount is due and that the additional
reserve requirement is applicable to such LIBOR Loans. Such additional
interest shall be payable directly to such Lender on the dates
specified for payment of interest for such LIBOR Loan in Section
2.4(c).
(j) Withholding Tax Exemption. At least five Business Days prior
to the first day on which interest or fees are payable hereunder for
the account of any Lender, each Lender that is not incorporated under
the laws of the United States of America, or a state thereof, agrees
that it will deliver to Agent and Borrower two duly completed copies
of United States Internal Revenue Service Form 1001 or Form 4224,
certifying in either case that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any
United States federal income taxes. Each Lender which so delivers a
Form 1001 or Form 4224 further undertakes to deliver to Agent and
Borrower two additional copies of such form (or any applicable
successor form) on or before the date that such form expires
(currently, three successive calendar years for Form 1001 and one
calendar year for Form 4224) or becomes obsolete or after the
occurrence of any event requiring a change in the most recent forms so
delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by Agent or Borrower, in each
case certifying that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States
federal income taxes, unless an event (including, without
32
limitation, any change in treaty, law or regulation) has occurred
prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form
with respect to it and such Lender advises Agent that it is not
capable of receiving payments without any deduction or withholding of
United States federal income taxes. If any Lender not incorporated
under the laws of the United States of America or a state thereof
cannot deliver such form, then Borrower may withhold from such
payments such amounts as are required by the Internal Revenue Code.
Section 2.5 Fees.
(a) Unused Facility Fee. Until the Obligations are paid in full
and this Agreement is terminated or, if sooner, the date the
Commitments terminate, Borrower shall pay to Agent, for the account of
each Lender, an "Unused Facility Fee", accruing at the rate set forth
below from and after the Closing Date, upon the amount during each
calendar quarter of (1) the average daily aggregate Commitments,
regardless of Loan Availability at such time, minus (2) the average
daily aggregate principal balance of all Loans then outstanding (the
"Unused Amount"). The Unused Facility Fee will be calculated and
accrue using the rates opposite the applicable Unused Amount set forth
below:
For any quarter commencing no fewer than six months
after the Closing Date, (i) .125% on a per annum basis of the average
daily Unused Amount during the applicable quarter, provided, that, the
average daily funded amount of the Facility during such quarter is at
least 50% of the Facility; and (ii) .25% on a per annum basis of the
average daily Unused Amount if the average daily funded amount of the
Facility during such quarter is less than 50% of the Facility. Subject
to Section 11.4(b), each Lender shall be entitled to receive a portion
of such Unused Facility Fee equal to the applicable rate set forth
above applied to the amount during each calendar quarter of the excess
of such Lender's Commitment over such Lender's Pro Rata Share of the
average daily amount of all Loans then outstanding. All such Unused
Facility Fees payable under this Section 2.5(a) shall be payable in
arrears on the first Business Day in each calendar quarter beginning
with the first calendar quarter after the Closing Date.
(b) Agency Fees. Borrower shall pay Agent such fees as are provided
for in the separate fee agreement between Borrower and Agent, dated July
27, 1996, as amended, supplemented or modified from time to time.
(c) Upfront Fee. Borrower shall pay to Agent an upfront fee of
$340,000, of which $170,000 shall be due and payable contemporaneously with
the execution of this Agreement and $170,000 shall be due and payable on
July 27, 1997. Subject to Section 11.4(b), each Lender shall be entitled to
receive its pro rata share of each payment of the upfront fee.
(d) Development Loan Fees. With respect to each Borrowing Base
Development Property, Borrower shall pay to Agent a "Development Loan Fee"
equal to .25% of
33
the Maximum Loan Amount for the Property on the date such Property is
accepted as a Borrowing Base Property.
(e) Payment of Fees. The fees described in Section 2.1(d) and this
Section 2.5 represent compensation for services rendered and to be
rendered separate and apart from the lending of money or the provision
of credit and do not constitute compensation for the use, detention or
forbearance of money, and the obligation of Borrower to pay the fees
described herein shall be in addition to, and not in lieu of, the
obligation of Borrower to pay interest, other fees and expenses
otherwise described in this Agreement. All fees shall be payable when
due in California in immediately available funds and shall be
non-refundable when paid. If Borrower fails to pay any fees or
expenses specified or referred to in this Agreement that become due to
Agent or Lenders, including, without limitation, those referred to in
this Section 2.5, in Section 12.1, or otherwise under this Agreement
or any separate fee agreement between Borrower and Agent or any Lender
relating to this Agreement, the amount due shall bear interest until
paid at the Base Rate and, after ten days, at the rate specified in
Section 2.4(d) (but not to exceed the maximum rate permitted by
applicable law), and shall constitute part of the Obligations, secured
by all of the Collateral. All fees described in this Section 2.5 which
are expressed as a per annum charge shall be calculated on the basis
of the actual number of days elapsed in a 360 day year.
Section 2.6 Payments.
(a) Voluntary Prepayments. Borrower may, upon not fewer than
three Business Days prior written notice, at any time and from time to
time, prepay any Loans in whole or in part. Any notice of prepayment
given to Agent under this Section 2.6(a) shall specify the date of
prepayment and the aggregate principal amount of the prepayment.
(b) Facility Reductions. Borrower may, by not fewer than two
Business Days prior notice to Agent, permanently reduce the amount of
the Facility, and by a percentage corresponding to the percentage
reduction of the Facility, each Commitment. In no event shall the
Facility or the Commitment be reduced below the outstanding amount of
the Loans, after giving effect to any voluntary prepayments.
(c) Manner and Time of Payment. All payments of principal,
interest and fees hereunder payable to Agent or the Lenders shall be
made without condition or reservation of right and free of set-off or
counterclaim, in Dollars and by wire transfer (pursuant to Agent's
written wire transfer instructions) of immediately available funds,
delivered to Agent not later than 11:00 A.M. (California time) on the
date due; and funds received by Agent after that time shall be deemed
to have been paid on the next succeeding Business Day.
(d) Payments on Non-Business Days. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is
not a Business Day, payments shall be made on the next succeeding
Business Day and such extension of time shall be included in the
computation (1) of the payment of interest hereunder, and (2) of any
of the fees specified in Section 2.5, as the case may be.
34
Section 2.7 Increased Capital. If either (a) the introduction of or
any change in or in the interpretation of any law or regulation; or (b)
compliance by Agent or any Lender with any guideline or request from any
central bank or other Governmental Authority (whether or not having the
force of law and whether or not the failure to comply therewith would be
unlawful) made or issued after the Closing Date affects or would affect the
amount of capital required or expected to be maintained by Agent or such
Lender or any corporation controlling Agent or such Lender, and Agent or
such Lender determines that the amount of such capital is increased by or
based upon the existence of Agent's obligations hereunder or such Lender's
Commitment, then, upon demand by Agent or such Lender; Borrower shall
immediately pay to Agent or such Lender, from time to time as specified by
Agent or such Lender, additional amounts sufficient to compensate Agent or
such Lender in light of such circumstances, to the extent that Agent or
such Lender determines such increase in capital to be allocable to the
existence of Agent's obligations hereunder or such Lender's Commitment. A
certificate as to such amounts submitted to Borrower by Agent or such
Lender shall, in the absence of indisputable and demonstrable error, be
conclusive and binding for all purposes.
Section 2.8 Notice of Increased Costs. Each Lender agrees that, as
promptly as reasonably practicable after it becomes aware of the occurrence
of an event or the existence of a condition which would cause it to be
affected by any of the events or conditions described in Sections 2.4(g),
2.4(h), 2.4(i) or 2.7, it will notify Borrower, and provide a copy of such
notice to Agent, of such event and the possible effects thereof, provided;
that the failure to provide such notice shall not affect the Lender's right
to reimbursement as provided for herein.
ARTICLE 3
BORROWING BASE PROPERTIES
Section 3.1 Acceptance of Borrowing Base Properties. (a) Subject to
compliance with the terms and conditions of Section 4.1, Agent has accepted
the Properties listed on Schedule 1 as Borrowing Base Stabilized Properties
and the Properties listed on Schedule 2 as Borrowing Base Development
Properties. Hereafter, if Borrower desires that Lenders accept a Property
as a Borrowing Base Property, Borrower shall so notify Agent in writing and
Agent shall deliver a copy of such notice to each Lender. No Property will
be evaluated by Lenders as a potential Borrowing Base Property unless
Borrower delivers to Agent the following in form and substance acceptable
to Agent:
(1) With respect to each proposed Borrowing Base Property:
(A) A copy of the most recent ALTA Owner's Policy of
Title Insurance (or equivalent) ("Owner's Policy") and a
commitment (not more than 90 days old) to issue an American
Land Title Association extended coverage Lender's policy of
title insurance (or equivalent) covering such Property and
disclosing the identity of the fee titleholder thereto, and
all matters of record;
35
(B) Copies of all documents of record reflected in
Schedule B of the Owner's Policy and a copy of the most
recent real estate tax ▇▇▇▇ and notice of assessment;
(C) A current or currently certified survey of such
Property certified by a surveyor licensed in the applicable
jurisdiction to have been prepared in accordance with the
then effective Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys (or equivalent);
(D) A "Phase I" environmental assessment of such
Property not more than 12 months old;
(E) A certificate from a licensed engineer or other
professional satisfactory to Agent that such Property is not
located in a Special Flood Hazard Area, as defined by the
Federal Insurance Administration; and
(F) Such other documents with respect to such Property
as Agent shall reasonably require.
(2) With respect to each proposed Borrowing Base Stabilized
Property:
(A) An operating statement for such Property audited or
certified by a representative of Borrower as being true and
correct in all material respects and prepared in accordance with
sound accounting principles for the previous two Fiscal Years,
provided, that, with respect to any period such Property was not
owned by Borrower, such information shall only be required to be
delivered to the extent reasonably available to Borrower and such
certification may be based upon the best of Borrower's knowledge;
(B) An engineering report for such Property not more than 12
months old;
(C) Copies of (i) the form or forms of tenant leases used at
such Property, and (ii) all Major Agreements affecting such
Property; and
(D) A current rent roll for such Property, certified by a
representative of Borrower as being true and correct in all
material respects and a three-year operating and occupancy
history of such Property in form satisfactory to Agent, and
certified by a representative of Borrower to be true and correct,
provided, that, with respect to any period such Property was not
owned by Borrower, such information shall only be required to be
delivered to the extent reasonably available to Borrower and such
certification may be based upon the best of Borrower's knowledge;
(3) With respect to each Borrowing Base Development
Property:
(A) the Lease-Up Projections;
(B) the Construction Contracts;
36
(C) the Construction Schedule;
(D) the Project Budget;
(E) Pro forma income and expense projections for the first
12 months of stabilized occupancy;
(F) Area, market and comparable property information;
(G) the Development Plans;
(H) background information about the architect; and
(I) background and financial information on the general
contractor.
(b) If, after receipt and review of the foregoing documents and
information, Agent is prepared to proceed with acceptance of such
Property as a Borrowing Base Property, Agent will so notify Borrower
and each Lender within 5 Business Days after receipt of all of the
information provided above, and Agent will obtain an Appraisal of such
Property in order to determine the Appraised Value thereof. After
obtaining such Appraisal, Agent will promptly submit the foregoing
documents and information, including the Appraisal, and the Appraised
Value to the Lenders, for approval by (1) the Supermajority Lenders if
such Property, upon acceptance, would be a Borrowing Base Stabilized
Property and (2) all Lenders if such Property, upon acceptance, would
be a Borrowing Base Development Property, within 15 Business Days
thereafter. Such Property shall become a Borrowing Base Property upon
approval of the Supermajority Lenders or all Lenders, as the case may
be, and upon execution and delivery to Agent of the documents and
items described in Section 4.1(a) and 4.1(e), and such other items or
documents as may be appropriate under the circumstances, including
updates of the documents described in Sections 3.1(a)(1)(D),
3.1(a)(2)(A), 3.1(a)(2)(D), 3.1(a)(2)(B) (if then more than 12 months
old), and 3.1(a)(2)(C), and satisfaction of all other closing
requirements imposed by Agent.
(c) No more than $50,000,000 of the Borrowing Base shall be
provided by the Borrowing Base Development Properties. The minimum
Stabilized Property/Development Property Borrowing Base Ratio shall be
as set forth below:
Subsequent to December 31, 1996: 0.70:1.0
Subsequent to March 31, 1997: 1.0:1.0
Subsequent to June 30, 1997: 1.25:1.0
No Development Properties will be accepted as Collateral after
September 30, 1996, unless all Lenders otherwise consent, which
consent shall be in their sole and absolute discretion.
Section 3.2 Release of Borrowing Base Properties. Upon repayment and
satisfaction in full of all Obligations and the termination of all
Commitments and this Agreement, Agent will release the Mortgage
Documents with respect to each of the Borrowing Base Properties.
37
From time to time Borrower may request, upon not less than 30 days
prior written notice, that a Borrowing Base Property or portion
thereof be released from the Liens created by the Mortgage Documents
applicable thereto, which release (the "Property Release") shall be
delivered by Agent if all of the following conditions are satisfied as
of the date of such Property Release:
(a) no Unmatured Event of Default or Event of Default has occurred
and is then continuing or will occur after giving effect to such
Property Release;
(b) the Termination Date has not occurred;
(c) Borrower shall have delivered to Agent a Borrowing Base
Certificate reflecting the Borrowing Base after giving effect to such
Property Release;
(d) Agent shall have determined that the outstanding principal balance
of the Loans will not exceed the Borrowing Base after giving effect to
such Property Release and any prepayment to be made and/or the
acceptance of any Property pursuant to Section 3.1 which is to be
given concurrently with such Property Release as additional or
replacement Borrowing Base Property;
(e) unless the Supermajority Lenders otherwise consent (which consent
shall not be withheld unreasonably), there will be at least three
remaining Borrowing Base Stabilized Properties which contribute not
less than $8,000,000 in value to the Borrowing Base; and
(f) the average year of completion of the remaining Borrowing Base
Properties shall not be prior to 1985 unless the Supermajority Lenders
otherwise consent (which consent shall not be withheld unreasonably).
If both (1) after giving effect to such Property Release the ratio of
the aggregate Borrowing Base Value of the Borrowing Base Development
Properties to the aggregate Borrowing Base Value of the Borrowing Base
Stabilized Properties exceeds 1.00:1.00, and (2) Agent determines, in
its sole and absolute discretion, that a material adverse change has
occurred in the status of any Borrowing Base Development Property,
then Agent may require that (A) such Property be reappraised, (B) the
Maximum Loan Amount for such Property be recalculated based on the new
Appraised Value, and (C) if the Maximum Loan Amount has decreased,
that the Borrowing Base be recalculated. If such recalculation
discloses that a Loan Availability Deficiency exists, then Borrower
shall have 30 days from the date on which the Borrowing Base is
recalculated, to reduce the outstanding aggregate principal balance of
the Loans to an amount equal to or less than the Loan Availability.
Section 3.3 Borrowing Base Determinations.
(a) Appraisals. The Appraised Value of a Borrowing Base
Property or Properties shall be determined or redetermined, as
applicable, under each of the following circumstances:
(1) Upon initial acceptance of a Property as a Borrowing
Base Property the Agent will determine the Appraised Value
thereof;
38
(2) The Appraised Value of all Borrowing Base Properties (based
upon preparation of current Appraisals) will be redetermined when and
if required under Section 2.1(d)(1)(B);
(3) From time to time a Borrowing Base Property may be
reappraised, at Borrower's request, upon notice by Borrower to Agent
to reappraise a Borrowing Base Property, in which event Agent shall
cause an Appraisal thereof to be made; and
(4) At any time and from time to time upon five Business Days'
prior written notice to Borrower, Agent may (and shall at the
direction of Requisite Lenders) redetermine the Appraised Value of a
Borrowing Base Property in any of the following circumstances:
(A) if a material adverse change occurs with
respect to a Borrowing Base Property, including, without
limitation, a material deterioration in the Net Operating
Income of such Borrowing Base Property, a major casualty at
such Borrowing Base Property that is not fully covered by
insurance, or a material condemnation of any part of such
Borrowing Base Property or a material change in the market
conditions affecting such Borrowing Base Property; or
(B) if necessary in order to comply with
Requirements of Law applicable to any Lender.
(b) Borrowing Base Adjustments. The Borrowing Base will be
adjusted downward as of the end of a Fiscal Quarter if (1) there has
been any reduction in the Borrowing Base Value of a Borrowing Base
Property during such Fiscal Quarter or (2) the Stabilized
Property/Development Property Borrowing Base Ratio is below the
minimum ratio set forth in Section 3.1(c). In the event there is any
increase in the Borrowing Base Value of any Borrowing Base Property
during a Fiscal Quarter for any reason other than the occurrence of
the Conversion Date, then such increase shall become effective as of
the first Business Day of the next succeeding Fiscal Quarter, provided
that prior to such date (A) either (i) the Requisite Lenders approve
the increase, if such increase is the result of an increase in the
Appraised Value of such Borrowing Base Property, or (ii) if such
increase is the result of an increase in the Permanent Loan Estimate
for such Borrowing Base Property, Borrower delivers a Borrowing Base
Certificate to Agent pursuant to Section 6.1(e) which substantiates
such increase, and (B) Borrower delivers to Agent an endorsement, if
available, to Agent's title insurance policy increasing the amount
thereof as related to such Borrowing Base Property to not less than
one hundred percent (100%) of the adjusted Borrowing Base Value for
such Borrowing Base Property. An increase in the Borrowing Base Value
of a Borrowing Base Property that results from the occurrence of the
Conversion Date shall become effective on the Conversion Date. If, by
the Conversion Date, a Borrowing Base Development Property does not
achieve 90% of the stabilized gross revenues (on an annualized basis)
projected for the first year in the Appraisal for each of three
consecutive months, then the Property shall be
39
removed from the Borrowing Base unless such Property is
reappraised and the Supermajority Lenders consent to the conversion of
such Property into a Borrowing Base Stabilized Property, in which case
the Maximum Loan Amount for such Property shall be reduced to the
lower of (A) 50% of its Appraised Value or (B) its Permanent Loan
Estimate, both calculated based on the new Appraisal.
Section 3.4 Covenants Relating to Borrowing Base Properties.
(a) Insurance, Casualty. Borrower shall maintain or cause to be
maintained insurance covering each Borrowing Base Property in such
amounts and covering such risks as are set forth in the Mortgages.
(b) Major Agreements. Unless otherwise consented to by Agent in
writing (which consent will not be unreasonably withheld), all Major
Agreements covering any portion of a Borrowing Base Property entered
into after the date of this Agreement shall (1) be with third parties
under market terms, (2) contain the provisions regarding insurance,
waiver of claims, damage and destruction, condemnation, notice to
mortgagee and subordination and attornment and other matters in form
approved by Agent, and (3) not include self-help remedies or provide
for Agent's or any subsequent mortgagee's non-disturbance of any
tenant's occupancy unless the tenant and Agent have each executed a
non-disturbance agreement in form satisfactory to Agent. Any
termination (other than by reason of material default) or modification
of any Major Agreement which does not comply with the requirements
described in the preceding sentence will be subject to Agent's
approval. Copies of all Major Agreements to be executed which are
inconsistent with the matters addressed in clauses (1) through (3)
above shall be furnished to Agent for approval no fewer than ten
Business Days before the proposed execution thereof by Borrower. Any
Major Agreement that has provisions which are inconsistent with clause
(1) above must be approved by the Agent and Requisite Lenders. Agent
and each of the Lenders will use reasonable efforts to respond within
a reasonable time (but no more than ten Business Days) to a request by
Borrower for approval of a Major Agreement that has provisions
inconsistent with clause (1) above and Agent will use its reasonable
efforts to respond within a reasonable time (but no more than ten
Business Days) to a request by Borrower for approval of a Major
Agreement that has provisions inconsistent with clauses (2) and (3)
above. The failure by either the Agent or the Requisite Lenders to
respond within said ten-day period shall be deemed to be Agent's
consent and/or the Requisite Lenders' consent, as the case may be, to
such modified provision.
(c) Management Agreements. Borrower shall not amend, modify in
any material manner, or terminate its management agreement with the
Management Company with respect to any Borrowing Base Property, if
such proposed amendment or modification limits or extinguishes
Borrower's absolute right to terminate the management agreement
without penalty upon 30 days notice, or might have a Material Adverse
Effect upon Borrower or its ability to perform its obligations under
the Loan Documents. Borrower shall not enter into a management
agreement with a manager other than the Management Company subsequent
to the Closing Date with respect to any Borrowing Base Property,
without the prior written consent of Requisite Lenders (which consent
shall not be unreasonably withheld).
40
(d) Major Construction. If Borrower intends to engage in any
construction, remodeling or demolition project or series of related
projects, with respect to a Borrowing Base Stabilized Property (each,
a "Construction Project"), other than in accordance with the casualty
and condemnation provisions specified in the Loan Documents, the
aggregate cost of which will exceed 20% of the "as is" market value of
such Borrowing Base Property, then Borrower shall first notify and
obtain approval, which approval shall not be unreasonably withheld,
from Requisite Lenders, of such Construction Project.
Section 3.5 Grant of Security Interest. As security for the
payment of all Loans now or hereafter made by Lenders to Borrower
hereunder, and as security for the payment or other satisfaction of
all other Obligations, Borrower hereby grants to Agent (for the
benefit of all Lenders) a security interest in and to the following
property of Borrower, whether now owned or existing, or hereafter
acquired or coming into existence, wherever now or hereafter located:
(a) All Accounts (as such term is defined in the Uniform
Commercial Code) solely relating to any Borrowing Base Property;
(b) All Equipment (as such term is defined in the Uniform
Commercial Code) solely relating to or used in connection with any
Borrowing Base Property;
(c) All Inventory (as such term is defined in the Uniform
Commercial Code) solely relating to or used in connection with any
Borrowing Base Property;
(d) All General Intangibles (as such term is defined in the
Uniform Commercial Code) solely relating to or used in connection with
any Borrowing Base Property, except that General Intangibles shall not
include the name "Paragon" and all derivatives, trademarks, trade
names, service marks and logos associated with such name;
(e) All plant fixtures, trade fixtures, business fixtures and
other fixtures, wherever located, relating to or solely used by or
used in connection with any Borrowing Base Property; and all additions
and accessions thereto and replacements therefor;
(f) All Documents (as defined in the Uniform Commercial Code)
solely relating to any Borrowing Base Property;
(g) All instruments, chattel paper, letters of credit and
certificated and uncertificated securities (as such terms are defined
in the Uniform Commercial Code) solely relating to any Borrowing Base
Property;
(h) All books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software
that at any time evidence or contain information solely relating to
any of the Property described in subsections (a) through (g) above or
are otherwise necessary or helpful in the collection thereof or
realization thereon; and
(i) Proceeds of any of the property described in subsections (a)
through (h) above.
41
ARTICLE 4
CONDITIONS TO LOANS
Section 4.1 Conditions to Initial Loans. The obligation of
Lenders to make the initial Loans shall be subject to satisfaction of
each of the following conditions precedent on or before the
Restatement Date:
(a) Borrower Loan Documents. Borrower shall have executed and/or
delivered to Agent each of the following, in form and substance
acceptable to Agent:
(1) this Agreement;
(2) the Loan Notes;
(3) the Borrower's Affidavit;
(4) a signature authorization form;
(5) opinions of counsel for Borrower satisfactory to Agent;
(6) Agent's form of Funds Transfer Agreement; and
(7) any other documents and information as Agent may reasonably
require.
(b) REIT Documents. The REIT shall have executed and/or delivered
to Agent each of the following, in form and substance acceptable to
Agent:
(1) the REIT Affidavit;
(2) opinions of counsel for the REIT satisfactory to Agent; and
(3) any other documents and information as Agent may reasonably
require.
(c) Paragon GP Holdings Documents. Paragon GP Holdings shall have
executed and/or delivered each of the following, in form and substance
acceptable to Agent:
(1) the Paragon GP Holdings Affidavit;
(2) opinions of counsel for Paragon GP Holdings satisfactory to
Agent; and
42
(3) any other documents and information as Agent may reasonably
require.
(d) Paragon LP Holdings Documents. Paragon LP Holdings shall have
executed and/or delivered each of the following, in form and substance
acceptable to Agent:
(1) the Paragon LP Holdings Affidavit;
(2) opinions of counsel for Paragon LP Holdings satisfactory to
Agent; and
(3) any other documents and information as Agent may
reasonably require.
(e) Borrowing Base Property Documents. Agent shall have received
the following documents in form and substance acceptable to Agent:
(1) with respect to each Borrowing Base Property:
(A) a Mortgage;
(B) an Assignment of Leases and Rents;
(C) Uniform Commercial Code Financing Statements;
(D) an Appraisal;
(E) an American Land Title Association extended coverage
Lender's policy of title insurance or a commitment to
issue such policy (or equivalent), from a title company
acceptable to Agent in the amount of the Borrowing Base
Value of such Borrowing Base Property, insuring the
Mortgage against such Borrowing Base Property as a
first mortgage subject only to Permitted Liens, with
all endorsements specified by Agent;
(F) a "Phase I" environmental assessment not more than 12
months old;
(G) evidence satisfactory to Agent that the Borrowing Base
Property is not located within the 100 year flood plain
or identified as a special flood hazard area as defined
by the Federal Insurance Administration;
(H) a survey in the form described in Section 3.1(a)(1)(C),
certified to Agent;
43
(I) such opinions of local counsel pertaining to such
Borrowing Base Property as Agent shall require;
(J) upon request by Agent, an ad valorem delinquency tax
service contract acceptable to Agent;
(K) a copy of the form of tenant lease to be used in
connection with the Leases;
(L) letters from local Governmental Authorities evidencing
compliance with applicable zoning, land use, and other
laws;
(M) the policies of insurance required by the Mortgage
Documents; and
(N) such other documents with respect to such Borrowing
Base Property as Agent shall reasonably require.
(2) With respect to each Borrowing Base Stabilized Property:
(A) a certified rent roll;
(B) an operating budget for the current Fiscal Year;
(C) upon request by Agent, a schedule of all personal
property, including intangible personal property owned
by Borrower, and used in connection with the
maintenance or operation of such Borrowing Base
Property; and
(D) an engineering report for the Borrowing Base Property
not more than 12 months old;
(3) With respect to each Borrowing Base Development Property:
(A) evidence satisfactory to Agent that Borrower has funded
project costs reflected on the Project Budget of not less than
the difference between the aggregate Project Budget and the
Maximum Loan Amount; and
(B) a third party analysis of the Development Plans.
(f) Corporate and Partnership Documents. Agent shall have received
the following corporate and partnership documents, together with
all amendments and modifications thereto:
(1) with respect to Borrower: a certified copy of
Borrower's limited partnership agreement, a certified
copy of Borrower's Certificate of Limited
44
Partnership; and good standing certificates for Borrower from the
State of Delaware and each state where it is qualified to do business;
(2) with respect to the REIT: certified copies of the REIT's
articles or certificate of incorporation and by-laws; and
good standing certificates from the State of Maryland and
each state where it is qualified to do business;.
(3) with respect to Paragon GP Holdings: certified copies of
Paragon GP Holdings' articles or certificate of
incorporation and by-laws; and good standing certificates
from the State of Delaware and each state where it is
qualified to do business; and
(4) with respect to Paragon LP Holdings: certified copies of
Paragon LP Holdings' articles or certificate of
incorporation and by-laws; and good standing certificates
from the State of Delaware and each state where it is
qualified to do business.
(g) Borrowing Base Certificate. Borrower shall have delivered to
Agent a Borrowing Base Certificate evidencing sufficient Loan
Availability to support the Loans being requested.
(h) Notice of Borrowing and Disbursement Authorization. Borrower
shall have delivered to Agent a Notice of Borrowing in compliance with
Section 2.1(b).
(i) Performance. Borrower, the REIT, Paragon GP Holdings and
Paragon LP Holdings shall have performed in all material respects all
agreements and covenants required by Agent to be performed by them as
a condition to funding the Loans.
(j) Solvency. Each of the Borrower, the REIT, Paragon GP Holdings
and Paragon LP Holdings shall be Solvent.
(k) Material Adverse Changes. No change, as determined by Agent
shall have occurred during the Interim Period, which (1) has had or
may have a Material Adverse Effect on the Borrower, the REIT, or any
Borrowing Base Property, and (2) will materially and adversely affect
the ability of Borrower or any other party to any of the Loan
Documents to perform its obligations thereunder.
(l) Litigation Proceedings. There shall not have been instituted
or threatened, during the Interim Period, any litigation in any court
or proceeding before any Governmental Authority (1) which has had or
may have a Material Adverse Effect on the Borrower, the REIT, or any
Borrowing Base Property, and (2) will materially and adversely affect
the ability of Borrower or any other party to any of the Loan
Documents to perform its obligations thereunder, as reasonably
determined by Agent.
45
(m) Perfection of Liens. All Mortgages and Financing Statements
shall have been recorded or filed, as applicable, and Agent shall have
a valid, perfected first priority lien on each Borrowing Base Property
and any other Collateral.
(n) Indefeasible Title. Borrower shall have good, indefeasible
and merchantable title to the Collateral, free and clear of all Liens
other than Permitted Liens.
(o) No Event of Default; Satisfaction of Financial Covenants. On
the Closing Date and after giving effect to the initial disbursements
of the Loans, no Event of Default or Unmatured Event of Default shall
exist and all of the covenants contained in Articles 6, 7, 8 and 9
shall be satisfied.
(p) No Material Non-Ordinary Transaction. Borrower shall not have
entered into any material commitment or material transaction during
the Interim Period which is not in the ordinary course of Borrower's
business, other than the sale of Paragon Group Property Services, Inc.
stock to Insignia Commercial Group, Inc. and related transactions.
(q) Consents and Approvals. All material licenses, permits,
consents, regulatory approvals and corporate action necessary to enter
into the financing transactions contemplated by this Agreement shall
have been obtained by Borrower, the REIT, Paragon GP Holdings and
Paragon LP Holdings.
(r) Due Diligence. Agent shall have completed such due diligence
investigations as Agent deems necessary, and such review and
investigations shall provide Agent with results and information which,
in Agent's determination, are satisfactory to permit Agent and the
Lenders to enter into this Agreement and fund the Loans.
(s) Representations and Warranties. All representations and
warranties contained in this Agreement and the other Loan Documents
shall be true and correct in all material respects.
(t) Fees. Agent shall have received all fees then due, and
Borrower shall have performed all of its other Obligations as set
forth in the Loan Documents to make payments to Agent on or before the
Closing Date and all expenses of Agent incurred prior to such Closing
Date (including without limitation all reasonable attorneys' and
appraisers' fees), shall have been paid by Borrower.
Section 4.2 Conditions Precedent to Subsequent Loans. The obligation
of each Lender to make any Loan requested to be made by it after the
Restatement Date is subject to Agent's receipt of the following
documents:
(a) with respect to each Borrowing Base Property, the
documents described in Section 4.1(e), to the extent not
previously delivered to Agent prior to the Funding Date;
(b) an original and duly executed Notice of Borrowing;
46
(c) no later than the date of delivery of the Notice of
Borrowing, a current Borrowing Base Certificate and if any
Loans have been made previously during the month such
Borrowing Base Certificate is delivered, then a current Loan
Availability Certificate, as well; and
(d) a Compliance Certificate confirming:
(1) All of the representations and warranties contained in
this Agreement and in any other Loan Documents shall be true
and correct in all material respects, as though made on and
as of such Funding Date;
(2) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing or would result from the making
of the requested Loan and all of the covenants contained in
Articles 6, 7, 8 and 9 shall be satisfied; and
(3) No event has occurred that has had or may have (i) a
Material Adverse Effect on the Borrower, the REIT, or any
Borrowing Base Property, and (ii) will materially and adversely
affect the ability of Borrower or any other party to any of the
Loan Documents to perform its obligations thereunder.
(4) With respect to each Borrowing Base Development
Property, all of the covenants contained in the Mortgage relating
to such Property have been satisfied and Agent shall have
received (A) an endorsement (if permitted or required by virtue
of the form thereof) to the loan title policy relating to such
Property increasing the coverage thereof to the full amount of
the sum advanced and notwithstanding section (e) of the
definition of Permitted Lien, reflecting no changes in the status
of title or the title insurance since the previous Loan related
to such Property, or, if such endorsement cannot be obtained, an
abstractor's certificate or other evidence satisfactory to Agent
from the title company reflecting that there have been no such
changes in the status of title or the title insurance, (B)
certification from the architect and, if Agent elects, the
Independent Supervising Architect that, in their opinion, the
construction of the Improvements theretofore performed has been
in substantial accordance with the Development Plans, (C) the
survey called for in Section 3.1(a)(1)(c) hereinabove and as may
be required by the title company to issue the endorsement, (D) at
the request of Agent, lien waivers or releases (in recordable
form) from all contractors, subcontractors, laborers and
materialmen employed or furnishing materials in connection with
the construction of the Improvements, and (E) such other
certifications or evidence of cost and completion as Agent may
request.
Each submission by Borrower to Agent of a Notice of Borrowing with
respect to a Loan and the acceptance by Borrower of the proceeds of
each such Loan made hereunder shall constitute a representation and
warranty by Borrower as of the Funding Date in respect of such Loans
that all the conditions contained in this Section 4.2 have been
satisfied.
47
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties as to Borrower. In order to
induce Lenders to make the Loans, Borrower hereby represents and
warrants to Lenders as follows:
(a) Organization; Partnership Powers. Borrower (1) is a limited
partnership duly organized, validly existing and in good standing
under the laws of the jurisdiction of its formation; (2) is duly
qualified to do business as a foreign limited partnership and in good
standing under the laws of each jurisdiction in which it owns or
leases real property, or in which the nature of its business requires
it to be so qualified, except for those jurisdictions where failure to
so quality and be in good standing would not have a Material Adverse
Effect on Borrower; and (3) has all requisite partnership power and
authority to own, operate and encumber its assets and to conduct its
business as presently conducted and as proposed to be conducted in
connection with, and following the consummation of, the Loans
contemplated by the Loan Documents.
(b) Authority. Borrower has the requisite partnership power and
authority to execute, deliver and perform each of the Loan Documents
to which it is or will be a party. The execution, delivery and
performance thereof, and the consummation of the transactions
contemplated thereby, have been duly approved by the General Partner
of Borrower, and no other partnership proceedings or authorizations on
the part of Borrower or its general or limited partners are necessary
to consummate such transactions. Each of the Loan Documents to which
Borrower is a party has been duly executed and delivered by Borrower
and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights generally.
(c) Ownership of Borrower. Except as set forth or referred to in
the limited partnership agreement of Borrower, no partnership interest
(or any Securities, instruments, warrants, option or purchase rights,
conversion or exchange rights, calls, commitments or claims of any
character convertible into or exercisable for partnership interests)
of Borrower is subject to issuance under any Security, instrument,
warrant, option or purchase rights, conversion or exchange rights,
call, commitment or claim of any right, title or interest therein or
thereto. All of the partnership interests in Borrower have been issued
in compliance with all applicable Requirements of Law.
(d) No Conflict. The execution, delivery and performance by
Borrower of the Loan Documents to which it is or will be a party, and
each of the transactions contemplated thereby, do not and will not (1)
conflict with or violate Borrower's limited partnership agreement or
Certificate of Limited Partnership, or any other organization
documents, as the case may be; or (2) conflict with, result in a
breach of, or constitute (with or without notice or lapse of time or
both) a default under, any Requirement of Law, Contractual Obligation
or Court Order that is binding upon Borrower, or require termination
of any Contractual Obligation, the consequences of which conflict,
breach, default or termination would have a Material Adverse Effect on
Borrower or the REIT, or otherwise result in or require the creation
or imposition of any Lien (other than Permitted Liens) whatsoever upon
any of the assets of Borrower that are subject to Agent's Liens.
48
(e) Consents and Authorizations. Borrower has obtained all
consents and authorizations required pursuant to its Contractual
Obligations with any other Person, the failure of which to obtain
would have a Material Adverse Effect on Borrower or the REIT, and
shall have obtained all consents and authorizations of, and effected
all notices to and filings with, any Governmental Authority, as may be
necessary to allow Borrower to lawfully execute, deliver and perform
its obligations under the Loan Documents to which Borrower is a party.
(f) Governmental Regulation. Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, the Investment Company
Act of 1940 or any other federal or state statute or regulation, such
that its ability to incur indebtedness is limited, or its ability to
consummate the transactions contemplated by the Loan Documents is
materially impaired.
(g) Prior Financials. The financial statements dated March 31,
1996 for the Borrower (the "March 31, 1996 Financials"), which it
delivered to Agent prior to the date hereof, were prepared in
accordance with GAAP and fairly present the assets, liabilities and
financial condition of the Borrower, on a consolidated basis, at such
date and the results of its operations and its cash flow, on a
consolidated basis, for the period then ended.
(h) Financial Statements; Projections and Forecasts. Each of the
Financial Statements to be delivered to Agent pursuant to Sections
6.1(a) and 6.1(b) (1) has been, or will be, as applicable, prepared in
accordance with the books and records of Borrower on a consolidated
basis; and (2) either fairly presents, or will fairly present, as
applicable, the financial condition of Borrower on a consolidated
basis, at the dates thereof (and, if applicable, subject to normal
year-end adjustments) and the results of its operations and cash
flows, on a consolidated basis, for the period then ended.
(i) No Material Adverse Change; Litigation and Other Events.
(1) There is no action, suit, proceeding,
governmental investigation or arbitration, at law or in equity, or
before or by any Governmental Authority pending or, to the best of
Borrower's knowledge, threatened against Borrower, the REIT, or any
Borrowing Base Property, which (A) will result in a Material Adverse
Effect on Borrower, the REIT, or any Borrowing Base Property, and (B)
will materially and adversely affect the ability of Borrower or any
other party to any of the Loan Documents to perform its obligations
thereunder; and
(2) Borrower is not (A) in violation of any
applicable law, which violation has had or may have a Material Adverse
Effect on Borrower, the REIT, or any Borrowing Base Property and which
will materially and adversely affect the ability of Borrower or any
other party to any of the Loan Documents to perform its obligations
thereunder; or (B) subject to, or in default with respect to, any Court
Order, which Court Order or a default thereunder has had or may have a
Material Adverse Effect on Borrower, the REIT, or any Borrowing Base
Property and which will materially and adversely affect the ability of
Borrower or any other party to any
49
of the Loan Documents to perform its obligations thereunder. There are
no material Proceedings pending or, to the best of Borrower's
knowledge, threatened against Borrower, the REIT, or any Borrowing Base
Property, which if adversely decided, would have a Material Adverse
Effect on Borrower, the REIT, or any Borrowing Base Property, which
will materially and adversely affect the ability of Borrower or any
other party to any of the Loan Documents to perform its obligations
thereunder; and
(3) Since March 31, 1996 to the best of Borrower's
knowledge, no event has occurred which has had or may have a Material
Adverse Effect on Borrower, the REIT, or any Borrowing Base Property,
and no material adverse change has occurred in Borrower's or the REIT's
ability to perform its Obligations under the Loan Documents or the
transactions contemplated thereby.
(j) Payment of Taxes. All tax returns and reports to be filed by
Borrower will be timely filed, and all taxes, assessments, fees and
other governmental charges shown on such returns will be paid prior to
delinquency and the assessment of any penalties or interest, except
such taxes, if any, as are reserved against, in accordance with GAAP,
such taxes as are being contested in good faith by appropriate
proceedings or such taxes, the failure to make payment of which when
due and payable will not have, in the aggregate, a Material Adverse
Effect on Borrower or the REIT. Borrower has no knowledge of any
proposed tax assessment against Borrower that will have a Material
Adverse Effect on Borrower or the REIT, which is not being actively
contested in good faith by Borrower.
(k) Material Adverse Agreements. No Contractual Obligation
contained in Borrower's limited partnership agreement, or similar
governing documents has had or may have a Material Adverse Effect on
Borrower or the REIT.
(l) Performance. Borrower is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations which
default may have or has had a Material Adverse Effect on Borrower on
the REIT or the Borrower, and no condition exists which, with the
giving of notice or the lapse of time, would constitute a default
under any of its Contractual Obligations and have a Material Adverse
Effect on Borrower or the REIT.
(m) Federal Reserve Regulations. No part of the proceeds of the
Loans hereunder will be used to purchase or carry any "margin
security" as defined in Regulation G or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or
carry any margin security or for any other purpose which might cause
this transaction to be a "purchase credit" within the meaning of
Regulation G. Borrower is not engaged primarily in the business of
extending credit for the purpose of purchasing or carrying any "margin
stock", as defined in Regulation U. No part of the proceeds of the
Loans hereunder will be used for any purpose that violates, or which
is inconsistent with, the provisions of Regulation X or any other
regulation of the Federal Reserve Board.
50
(n) Disclosure. The representations and warranties of Borrower
contained in the Loan Documents and all certificates, financial
statements and other documents delivered to Agent in connection
therewith, do not contain any untrue statement of a material fact or
omit to state a material fact required to make the statements
contained herein or therein, in light of the circumstances under which
they were made, not misleading. Borrower has not intentionally
withheld any material fact from Agent in regard to any matter raised
in the Loan Documents. Notwithstanding the foregoing, with respect to
projections of Borrower's future performance such representations and
warranties are made in good faith and Borrower's best judgment.
(o) Requirements of Law. Borrower is in compliance with all
Requirements of Law (including without limitation the Securities Act
and the Securities Exchange Act, and the applicable rules and
regulations thereunder, state securities law and "Blue Sky" laws)
applicable to it and its respective businesses, in each case, where
the failure to so comply would have a Material Adverse Effect on
Borrower.
(p) Patents, Trademarks, Permits, Etc. Borrower owns, is licensed
or otherwise has the lawful right to use, or have all permits and
other governmental approvals, patents, trademarks, trade names,
copyrights, technology, know-how and processes used in or necessary
for the conduct of Borrower's business as currently conducted, the
absence of which would have a Material Adverse Effect upon Borrower or
the REIT. The use of such permits and other governmental approvals,
patents, trademarks, trade names, copyrights, technology, know-how and
processes by Borrower does not infringe on the rights of any Person in
any way that has given or may give rise to any liability on the part
of Borrower which could have a Material Adverse Effect on Borrower or
the REIT.
(q) Environmental Matters. Except as set forth on Schedule
5.1(q), to the best of Borrower's knowledge, (1) the operations of
Borrower comply in all material respects with all applicable
Environmental Laws; (2) none of Borrower's present Property or
operations are subject to any Remedial Action or other Liabilities and
Costs arising from the Release or threatened Release of a Contaminant
into the environment in violation of any Environmental Laws, which
Remedial Action or other Liabilities and Costs could have a Material
Adverse Effect on Borrower or the REIT; (3) Borrower has not filed any
notice under applicable Environmental Laws reporting a Release of a
Contaminant into the environment in violation of any Environmental
Laws, except as the same may have been heretofore remedied; (4) there
is not now on or in any Property of Borrower (except in compliance in
all material respects with all applicable Environmental Laws): (A) any
underground storage tanks; (B) any asbestos-containing material; or
(C) any polychlorinated biphenyls used in hydraulic oils, electrical
transformers or other equipment owned or operated by Borrower; and (5)
Borrower has not received any notice or claim to the effect that it is
or may be liable to any Person as a result of the Release or
threatened Release of a Contaminant into the environment, which
Release could have a Material Adverse Effect on Borrower or the REIT.
(r) ERISA. Neither Borrower nor any ERISA Affiliate thereof has
in the past five years maintained or contributed to or currently
maintains or contributes to any Benefit Plan, other than the Internal
Revenue Code ss. 401(k) plan maintained by Paragon Residential
Services, Inc., a Delaware corporation, and to be continued by the
Borrower (the "401(k) Plan"). No
51
Investment Affiliate has or is likely to incur any liability with
respect to any Benefit Plan maintained or contributed to by such
Investment Affiliate or its ERISA Affiliates, which would have a
Material Adverse Effect on Borrower. Neither Borrower nor any ERISA
Affiliate thereof has in the past five years maintained or contributed
to or currently maintains or contributes to, any employee welfare
benefit plan within the meaning of Section 3(1) of ERISA which
provides benefits to retirees. Neither Borrower nor any ERISA
Affiliate thereof is now contributing nor has it ever contributed to
or been obligated to contribute to any Multiemployer Plan, no
employees or former employees of Borrower nor any ERISA Affiliate
thereof have been covered by any Multiemployer Plan in respect of
their employment by Borrower or any such ERISA Affiliate, and no ERISA
Affiliate of Borrower or Investment Affiliate has, or is likely to
incur, any withdrawal liability with respect to any Multiemployer Plan
which would have a Material Adverse Effect on Borrower or the REIT.
(s) Solvency. Borrower is and will be Solvent after giving effect
to the disbursements of the Loans and the payment and accrual of all
fees directly or indirectly then payable under any of the Loan
Documents.
(t) Title to Assets; No Liens. To the best of Borrower's
knowledge, Borrower has good, indefeasible and merchantable title to
the Collateral owned by it, including without limitation, each
Borrowing Base Property, and all of the Collateral is free and clear
of Liens, except Permitted Liens.
(u) Use of Proceeds. Borrower's uses of the proceeds of the Loans
are, and will continue to be, legal and proper uses (and to the extent
necessary, duly authorized by Borrower's General Partner) and such
uses are consistent with all Requirements of Law and Section 7.1(h).
(v) Operating Agreements; Management Agreements; Leases. With
respect to each Borrowing Base Property, Agent has received true,
complete and correct copies of each Major Agreement. Each Major
Agreement is in full force and effect and has not been and will not be
modified or terminated (except for modifications which comply with the
requirements of clauses (1) through (3) of Section 3.3(a) and
terminations by reason of a material default by another Person other
than Borrower), and no default or event of default (or event or
occurrence which, with the passage of time or the giving of notice, or
both, will constitute a default or event of default) exists or will
exist under such Major Agreement as a result of the consummation of
the transactions contemplated by the Loan Documents. Agent has
received the form Lease used for each Borrowing Base Property, and
such Leases, taken as a whole, do not and will not vary materially
from the requirements of Sections 3.4(b)(1) through 3.4(b)(3). Except
as reflected on the most current rent rolls delivered to Agent, all of
the Leases are in full force and effect and no default or event of
default (or event or occurrence which upon with the passage of time or
the giving of notice, or both, will constitute a default or event of
default) exists or will exist thereunder as a result of the
consummation of the transactions contemplated by the Loan Documents.
Except as set forth on Schedule 5.2(v)-2, there are no material
Contractual Obligations (other than Construction Contracts relating to
Borrowing Base Development Properties) relating to the maintenance,
occupancy, use or operation of any of the Borrowing Base Properties
which are not terminable by Borrower or a mortgagee-in-possession upon
30 days or fewer days notice.
52
Section 5.2 Representations and Warranties as to the REIT. In order to
induce Lenders to make the Loans, the REIT hereby represents and
warrants to Lenders as follows:
(a) Organization; Corporate Powers. The REIT (1) is a corporation
duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation; (2) is duly qualified to do
business as a foreign corporation and in good standing under the laws
of each jurisdiction in which it owns or leases real property, or in
which the nature of its business requires it to be so qualified,
except for those jurisdictions where failure to so qualify and be in
good standing will not have a Material Adverse Effect on the REIT or
the Borrower; and (3) has all requisite corporate power and authority
to own, operate and encumber its assets and to conduct its business as
presently conducted and as proposed to be conducted in connection
with, and following the consummation of the transactions contemplated
by the Loan Documents.
(b) Authority. The REIT has the requisite corporate power and
authority to execute, deliver and perform each of the Loan Documents
to which it is or will be a party. The execution, delivery and
performance thereof, and the consummation of the transactions
contemplated thereby, have been duly approved by the board of
directors of the REIT, and no other corporate proceedings on the part
of the REIT are necessary to consummate such transactions. Each of the
Loan Documents to which the REIT is a party has been duly executed and
delivered by the REIT and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency and other laws affecting creditors'
rights generally.
(c) No Conflict. The execution, delivery and performance by the
REIT of the Loan Documents to which it is party, and each of the
transactions contemplated thereby, do not and will not (1) conflict
with or violate its Articles or Certificate of Incorporation, by-laws,
or other organizational documents, as the case may be; (2) conflict
with, result in a breach of or constitute (with or without notice or
lapse of time or both) a default under any Requirement of Law,
Contractual Obligation or Court Order that is binding upon the REIT,
or require termination of any Contractual Obligation, the consequences
of which conflict, breach, default or termination would have a
Material Adverse Effect on the REIT or the Borrower, result in or
require the creation or imposition of any Lien whatsoever upon any of
the assets of the REIT (other than Liens in favor of Agent arising
pursuant to the Loan Documents or Permitted Liens); or (3) require any
approval of the stockholders of the REIT.
(d) Consents and Authorizations. The REIT has obtained all
consents and authorizations required pursuant to its Contractual
Obligations with any other Person, the failure of which to obtain
would have a Material Adverse Effect on the REIT or the Borrower, and
shall have obtained all consents and authorizations of, and effected
all notices to and filings with, any Governmental Authority, as may be
necessary to allow the REIT to lawfully execute, deliver and perform
its Obligations under the Loan Documents to which the REIT is a party.
(e) Governmental Regulation. The REIT is not subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, the Investment Company
Act of 1940 or any other federal or state statute or regulation such
that its
53
ability to incur indebtedness is limited, or its ability to consummate
the transactions contemplated by the Loan Documents is materially
impaired.
(f) Capitalization. All of the outstanding capital stock of the
REIT has been issued in compliance with all applicable
Requirements of Law.
(g) No Material Adverse Change; Litigation and Other Events.
(1) There is no action, suit, proceeding, governmental
investigation or arbitration, at law or in equity, or before or by any
Governmental Authority pending, or to best of the REIT's knowledge,
threatened against the REIT or the Borrower, which will (A) result in
a Material Adverse Effect on the REIT or the Borrower; or (B)
materially and adversely affect the ability of the REIT or any other
party to any of the Loan Documents to perform its obligations
thereunder;
(2) The REIT is not (A) in violation of any applicable law, which
violation has had or may have a Material Adverse Effect on the REIT or
the Borrower, or (B) subject to or in default with respect to any
Court Order which Court Order or a Default thereunder has had or may
have a Material Adverse Effect on the REIT or the Borrower. There are
no material Proceedings pending or, to the best of the REIT's
knowledge, threatened against the REIT or the Borrower, which, if
adversely decided, would have a Material Adverse Effect on the REIT or
the Borrower; and
(3) Since March 31, 1996, to the best of the REIT's knowledge, no
event has occurred which has had or may have a Material Adverse Effect
on the REIT or the Borrower, and no material adverse change has
occurred in the REIT's or the Borrower's ability to perform its
obligations under the Loan Documents or the transactions contemplated
thereby.
(h) Payment of Taxes. All tax returns and reports to be filed by
the REIT have been timely filed, and all taxes, assessments, fees and
other governmental charges shown on such returns will be paid prior to
delinquency and the assessment of any penalties or interest, except
such taxes, if any, as are reserved against, in accordance with GAAP,
such taxes as are being contested in good faith by appropriate
proceedings or such taxes, the failure to make payment of which when
due and payable will not have, in the aggregate, a Material Adverse
Effect on the REIT or the Borrower. The REIT has no knowledge of any
proposed tax assessment against the REIT that would have a Material
Adverse Effect on the REIT or the Borrower, which is not being
actively contested in good faith by the REIT.
(i) Material Adverse Agreements. No Contractual Obligation
contained in the REIT's charter, by-laws, or similar governing
documents has had or may have a Material Adverse Effect on the REIT or
the Borrower.
54
(j) Performance. The REIT is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations which
default may have or has had a Material Adverse Effect on the REIT or
the Borrower, and no condition exists which, with the giving of notice
or the lapse of time, would constitute a default under any of its
Contractual Obligations and have a Material Adverse Effect on the REIT
or the Borrower.
(k) Securities Activities. The REIT is not engaged principally in
the business of extending credit for the purpose of purchasing or
carrying any "margin stock", as defined in Regulation U.
(l) Disclosure. The representations and warranties of the REIT
contained in the Loan Documents, and all certificates, financial
statements and other documents delivered to Agent in connection
therewith, do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading. The REIT has not
intentionally withheld any material fact from Agent in regard to any
matter raised in the Loan Documents. Notwithstanding the foregoing,
with respect to projections of the REIT's future performance such
representations and warranties are made in good faith and the REIT's
best judgment.
(m) Requirements of Law. The REIT is in compliance with all
Requirements of Law (including without limitation the Securities Act
and the Securities Exchange Act, and the applicable rules and
regulations thereunder, state securities law and "Blue Sky" laws)
applicable to it and its respective businesses, in each case, where
the failure to so comply would have a Material Adverse Effect on the
REIT or the Borrower. The REIT has made all filings with and obtained
all consents of the Commission required under the Securities Act and
the Securities Exchange Act in connection with the execution, delivery
and performance by the REIT of the Loan Documents to which it is a
party.
(n) ERISA. Neither the REIT nor any ERISA Affiliate thereof has
in the past five years maintained or contributed to or currently
maintains or contributes to any Benefit Plan, other than the 401(k)
Plan. Neither the REIT nor any ERISA Affiliate thereof has during the
past five years maintained or contributed to, or currently maintains
or contributes to, any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA which provides benefits to retirees.
Neither the REIT nor any ERISA Affiliate thereof is now contributing
nor has it ever contributed to or been obligated to contribute to any
Multiemployer Plan, no employees or former employees of the REIT, or
any ERISA Affiliate thereof have been covered by any Multiemployer
Plan in respect of their employment by the REIT or any such ERISA
Affiliation and no ERISA Affiliate of the REIT has, or is likely to
incur, any withdrawal liability with respect to any Multiemployer Plan
which would have a Material Adverse Effect on the REIT or the
Borrower.
(o) Solvency. The REIT is and will be Solvent, after giving
effect to the disbursement of the Loans and the payment of all fees
directly or indirectly payable under any of the Loan Documents.
55
(p) Status as a REIT. The REIT (1) will make an election on its
1994 tax return to be taxed as a real estate investment trust as
defined in Section 856 of the Internal Revenue Code (or any successor
provision thereto); (2) will not revoke its election to be a real
estate investment trust; (3) has not engaged in any "prohibited
transactions" as defined in Section 856(b)(6)(iii) of the Internal
revenue Code (or any successor provision thereto); and (4) for its
current "tax year" (as defined in the Internal Revenue Code) is, and
for all prior tax years subsequent to its election to be a real estate
investment trust has been, entitled to a dividends paid deduction
which meets the requirements of Section 857 of the Internal Revenue
Code.
(q) Ownership. The sole assets of the REIT are (1) all of the
Securities of Paragon GP Holdings, and (2) all of the Securities of
Paragon LP Holdings.
(r) NYSE Listing. The common stock of the REIT is and will
continue to be listed for trading and traded on either the New York
Stock Exchange, the American Stock Exchange, or NASDAQ.
Section 5.3 Representations and Warranties as to Paragon GP Holdings.
In order to induce Lenders to make the Loans, Paragon GP Holdings
hereby represents and warrants to Lenders as follows:
(a) Organization; Corporate Powers. Paragon GP Holdings (1) is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; (2) is duly qualified to do
business as a foreign corporation and in good standing under the laws
of each jurisdiction in which it owns or leases Property, or in which
the nature of its business requires it to be so qualified, except for
those jurisdictions where failure to so qualify and be in good
standing will not have a Material Adverse Effect on Borrower or the
REIT; and (3) has all requisite corporate power and authority to own,
operate and encumber its assets and to conduct its business as
presently conducted and as proposed to be conducted in connection
with, and following the consummation of, the transactions contemplated
by the Loan Documents.
(b) Authority. Paragon GP Holdings has the requisite corporate
power and authority to execute, deliver and perform each of the Loan
Documents to which it is or will be a party. The execution, delivery
and performance thereof, and the consummation of the transactions
contemplated thereby, have been duly approved by the board of
directors of Paragon GP Holdings, and no other corporate proceedings
on the part of Paragon GP Holdings are necessary to consummate such
transactions. Each of the Loan Documents to which Paragon GP Holdings
is a party has been duly executed and delivered by Paragon GP Holdings
and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights generally.
(c) No Conflict. The execution, delivery and performance by
Paragon GP Holdings of the Loan Documents to which it is party, and
each of the transactions contemplated thereby, do not and will not (1)
conflict with or violate its Articles or Certificate of Incorporation,
by-laws, or any other organizational documents, as the case may be;
(2) conflict with, result in a breach of or constitute (with or
without notice or lapse of time or both) a default under any
56
Requirement of Law, Contractual Obligation or Court Order that is
binding upon Paragon GP Holdings, or require termination of any
Contractual Obligation, the consequences of which conflict, breach,
default or termination would have a Material Adverse Effect on
Borrower or the REIT, result in or require the creation or imposition
of any Lien whatsoever upon any of the assets of Paragon GP Holdings
(other than Liens in favor of Agent arising pursuant to the Loan
Documents or Permitted Liens); or (3) require any approval of the
stockholders of Paragon GP Holdings.
(d) Consents and Authorizations. Paragon GP Holdings has obtained
all consents and authorizations required pursuant to its Contractual
Obligations with any other Person, the failure of which to obtain
would have a Material Adverse Effect on Borrower or the REIT, and
shall have obtained all consents and authorizations of, and effected
all notices to and filings with, any Governmental Authority, as may be
necessary to allow Paragon GP Holdings to lawfully execute, deliver
and perform its obligations under the Loan Documents to which Paragon
GP Holdings is a party.
(e) Governmental Regulation. Paragon GP Holdings is not subject
to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940 or any other federal or state statute or
regulation such that its ability to incur indebtedness is limited, or
its ability to consummate the transactions contemplated by the Loan
Documents is materially impaired.
(f) Capitalization. All of the outstanding capital stock of
Paragon GP Holdings has been issued in compliance with all applicable
Requirements of Law.
(g) No Material Adverse Change; Litigation and Other Events.
(1) There is no action, suit, proceeding, governmental
investigation or arbitration, at law or in equity, or before or by any
Governmental Authority pending, or to best of Paragon GP Holdings'
knowledge, threatened against Paragon GP Holdings, which will (A)
result in a Material Adverse Effect on either the Borrower or the
REIT; or (B) materially and adversely affect the ability of Paragon GP
Holdings, or any other party to any of the Loan Documents to perform
its obligations thereunder;
(2) Paragon GP Holdings is not (A) in violation of any applicable
law, which violation has had or may have a Material Adverse Effect on
either the Borrower or the REIT; or (B) subject to or in default with
respect to any Court Order which Court Order or a Default thereunder
has had or may have a Material Adverse Effect on the Borrower or the
REIT. There are no material Proceedings pending or, to the best of
Paragon GP Holdings' knowledge, threatened against the Paragon GP
Holdings, which, if adversely decided, would have a Material Adverse
Effect on the Borrower or the REIT; and
(3) Since March 31, 1996, to the best of Paragon GP Holding's
knowledge, no event has occurred which has had or may have a Material
Adverse
57
Effect on the Borrower or the REIT, and no material adverse change has
occurred in the Borrower's or the REIT's ability to perform its
obligations under the Loan Documents or the transactions contemplated
thereby.
(h) Payment of Taxes. All tax returns and reports to be filed by
Paragon GP Holdings have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns
will be paid prior to delinquency and the assessment of any penalties
or interest, except such taxes, if any, as are reserved against, in
accordance with GAAP, such taxes as are being contested in good faith
by appropriate proceedings or such taxes, the failure to make payment
of which when due and payable will not have, in the aggregate, a
Material Adverse Effect on Borrower or the REIT. Paragon GP Holdings
has no knowledge of any proposed tax assessment against Paragon GP
Holdings that would have a Material Adverse Effect on Borrower or the
REIT, which is not being actively contested in good faith by Paragon
GP Holdings.
(i) Material Adverse Agreements. No Contractual Obligation
contained in Paragon GP Holdings' charter, by-laws, or similar
governing documents has had or may have a Material Adverse Effect on
Borrower or the REIT.
(j) Performance. Paragon GP Holdings is not in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any of its Contractual Obligation
which may have or has had a Material Adverse Effect on the Borrower or
the REIT, and no condition exists which, with the giving of notice or
the lapse of time, would constitute a default under any of its
Contractual Obligations and have a Material Adverse Effect on Borrower
or the REIT.
(k) Securities Activities. Paragon GP Holdings is not engaged
principally in the business of extending credit for the purpose of
purchasing or carrying any "margin stock", as defined in Regulation U.
(l) Disclosure. The representations and warranties of Paragon GP
Holdings contained in the Loan Documents, and all certificates,
financial statements and other documents delivered to Agent in
connection therewith, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. Paragon GP
Holdings has not intentionally withheld any material fact from Agent
in regard to any matter raised in the Loan Documents. Notwithstanding
the foregoing, with respect to projections of Paragon GP Holdings'
future performance such representations and warranties are made in
good faith and Paragon GP Holdings' best judgment.
(m) Requirements of Law. Paragon GP Holdings is in compliance
with all Requirements of Law (including without limitation the
Securities Act and the Securities Exchange Act, and the applicable
rules and regulations thereunder, state securities law and "Blue Sky"
laws) applicable to it and its respective businesses, in each case,
where the failure to so comply would have a Material Adverse Effect on
Borrower or the REIT. Paragon GP Holdings has made all filings with
and obtained all consents of the Commission required under the
Securities Act and the Securities
58
Exchange Act in connection with the execution, delivery and
performance by Paragon GP Holdings of the Loan Documents to which it
is a party.
(n) ERISA. Neither Paragon GP Holdings nor any ERISA
Affiliate thereof has in the past five years maintained or
contributed to or currently maintains or contributes to any
Benefit Plan, other than the 401(k) Plan. Neither Paragon GP
Holdings nor any ERISA Affiliate thereof has during the past five
years maintained or contributed to, or currently maintains or
contributes to, any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA which provides benefits to
retirees. Neither Paragon GP Holdings nor any ERISA Affiliate
thereof is now contributing nor has it ever contributed to or
been obligated to contribute to any Multiemployer Plan, no
employees or former employees of Paragon GP Holdings, or any
ERISA Affiliate thereof have been covered by any Multiemployer
Plan in respect of their employment by Paragon GP Holdings or any
such ERISA Affiliation and no ERISA Affiliate of Paragon GP
Holdings has, or is likely to incur, any withdrawal liability
with respect to any Multiemployer Plan which would have a
Material Adverse Effect on Borrower or the REIT.
(o) Solvency. Paragon GP Holdings is and will be Solvent,
after giving effect to the disbursement of the Loans and the
payment of all fees directly or indirectly payable under any of
the Loan Documents.
(p) Ownership. The sole material assets of Paragon GP
Holdings are (1) Units of Borrower, and (2) a one percent
partnership interest in certain Subsidiaries of the Borrower. The
current list of such interests is reflected on Schedule 5.3(p).
Section 5.4 Representations and Warranties as to Paragon LP Holdings.
In order to induce Lenders to make the Loans, Paragon LP Holdings
hereby represents and warrants to Lenders as follows:
(a) Organization; Corporate Powers. Paragon LP Holdings (1) is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; (2) is duly qualified to do
business as a foreign corporation and in good standing under the laws
of each jurisdiction in which it owns or leases real property, or in
which the nature of its business requires it to be so qualified,
except for those jurisdictions where failure to so qualify and be in
good standing will not have a Material Adverse Effect on Paragon GP
Holdings; and (3) has all requisite corporate power and authority to
own, operate and encumber its assets and to conduct its business as
presently conducted and as proposed to be conducted in connection
with, and following the consummation of, the transactions contemplated
by the Loan Documents.
(b) Authority. Paragon LP Holdings has the requisite corporate
power and authority to execute, deliver and perform each of the Loan
Documents to which it is or will be a party. The execution, delivery
and performance thereof, and the consummation of the transactions
contemplated thereby, have been duly approved by the board of
directors of Paragon LP Holdings, and no other corporate proceedings
on the part of Paragon LP Holdings are necessary to consummate such
transactions. Each of the Loan Documents to which Paragon LP Holdings
is a party has been duly executed and delivered by Paragon LP Holdings
and constitutes its legal, valid and binding
59
obligation, enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency and other laws affecting creditors'
rights generally.
(c) No Conflict. The execution, delivery and performance by
Paragon LP Holdings of the Loan Documents to which it is party, and
each of the transactions contemplated thereby, do not and will not (1)
conflict with or violate its Articles or Certificate of Incorporation,
by-laws, or any other organizational documents, as the case may be;
(2) conflict with, result in a breach of or constitute (with or
without notice or lapse of time or both) a default under any
Requirement of Law, Contractual Obligation or Court Order that is
binding upon Paragon LP Holdings, or require termination of any
Contractual Obligation, the consequences of which conflict, breach,
default or termination would have a Material Adverse Effect on
Borrower or the REIT, result in or require the creation or imposition
of any Lien whatsoever upon any of the assets of Paragon LP Holdings
(other than Liens in favor of Agent arising pursuant to the Loan
Documents or Permitted Liens); or (3) require any approval of the
stockholders of Paragon LP Holdings.
(d) Consents and Authorizations. Paragon LP Holdings has obtained
all consents and authorizations required pursuant to its Contractual
Obligations with any other Person, the failure of which to obtain
would have a Material Adverse Effect on Borrower or the REIT, and
shall have obtained all consents and authorizations of, and effected
all notices to and filings with, any Governmental Authority, as may be
necessary to allow Paragon LP Holdings to lawfully execute, deliver
and perform its Obligations under the Loan Documents to which Paragon
LP Holdings is a party.
(e) Governmental Regulation. Paragon LP Holdings is not subject
to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940 or any other federal or state statute or
regulation such that its ability to incur indebtedness is limited, or
its ability to consummate the transactions contemplated by the Loan
Documents is materially impaired.
(f) Capitalization. All of the outstanding capital stock of
Paragon LP Holdings has been issued in compliance with all applicable
Requirements of Law.
(g) No Material Adverse Change; Litigation and Other Events.
(1) There is no action, suit, proceeding, governmental
investigation or arbitration, at law or in equity, or before or by any
Governmental Authority pending, or to best of Paragon LP Holdings'
knowledge, threatened against Borrower or the REIT, which will (A)
result in a Material Adverse Effect on Borrower or the REIT; or (B)
materially and adversely affect the ability of Borrower or the REIT,
or any other party to any of the Loan Documents to perform its
obligations thereunder;
(2) Paragon LP Holdings is not (A) in violation of any applicable
law, which violation has had or may have a Material Adverse Effect on
Borrower or the REIT; or (B) subject to or in default with respect to
any Court Order which Court
60
Order or a Default thereunder has had or may have a Material Adverse
Effect on Borrower or the REIT. There are no material Proceedings
pending or, to the best of Paragon LP Holdings' knowledge, threatened
against Borrower or the REIT, which, if adversely decided, would have a
Material Adverse Effect on Borrower or the REIT; and
(3) Since March 31, 1996, to the best of Paragon LP
Holdings' knowledge, no event has occurred which has had or may have a
Material Adverse Effect on Borrower or the REIT, and no material
adverse change has occurred in the Borrower's or the REIT's ability to
perform its obligations under the Loan Documents or the transactions
contemplated thereby.
(h) Payment of Taxes. All tax returns and reports to be filed by
Paragon LP Holdings have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns
will be paid prior to delinquency and the assessment of penalties or
interest, except such taxes, if any, as are reserved against, in
accordance with GAAP, such taxes as are being contested in good faith
by appropriate proceedings or such taxes, the failure to make payment
of which when due and payable will not have, in the aggregate, a
Material Adverse Effect on Borrower or the REIT. Paragon LP Holdings
has no knowledge of any proposed tax assessment against Paragon LP
Holdings that would have a Material Adverse Effect on Borrower or the
REIT, which is not being actively contested in good faith by Paragon
LP Holdings.
(i) Material Adverse Agreements. No Contractual Obligation
contained in Paragon LP Holdings' charter, by-laws, or similar
governing documents has had or may have a Material Adverse Effect on
Borrower or the REIT.
(j) Performance. Paragon LP Holdings is not in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any of its Contractual
Obligations which default may have or has had a Material Adverse
Effect on the Borrower or the REIT, and no condition exists which,
with the giving of notice or the lapse of time, would constitute a
default under any of its Contractual Obligations and have a Material
Adverse Effect on Borrower or the REIT.
(k) Securities Activities. Paragon LP Holdings is not engaged
principally in the business of extending credit for the purpose of
purchasing or carrying any "margin stock", as defined in Regulation U.
(l) Disclosure. The representations and warranties of Paragon LP
Holdings contained in the Loan Documents, and all certificates,
financial statements and other documents delivered to Agent in
connection therewith, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. Paragon LP
Holdings has not intentionally withheld any material fact from Agent
in regard to any matter raised in the Loan Documents. Notwithstanding
the foregoing, with respect to projections of Paragon LP Holdings'
61
future performance such representations and warranties are made in
good faith and Paragon LP Holdings' best judgment.
(m) Requirements of Law. Paragon LP Holdings is in compliance
with all Requirements of Law (including without limitation the
Securities Act and the Securities Exchange Act, and the applicable
rules and regulations thereunder, state securities law and "Blue Sky"
laws) applicable to it and its respective businesses, in each case,
where the failure to so comply would have a Material Adverse Effect on
Borrower or the REIT. Paragon LP Holdings has made all filings with
and obtained all consents of the Commission required under the
Securities Act and the Securities Exchange Act in connection with the
execution, delivery and performance by Paragon LP Holdings of the Loan
Documents to which it is a party.
(n) ERISA. Neither Paragon LP Holdings nor any ERISA Affiliate
thereof has in the past five years maintained or contributed to or
currently maintains or contributes to any Benefit Plan, other than the
401(k) Plan. Neither Paragon LP Holdings nor any ERISA Affiliate
thereof has during the past five years maintained or contributed to,
or currently maintains or contributes to, any employee welfare benefit
plan within the meaning of Section 3(1) of ERISA which provides
benefits to retirees. Neither Paragon LP Holdings nor any ERISA
Affiliate thereof is now contributing nor has it ever contributed to
or been obligated to contribute to any Multiemployer Plan, no
employees or former employees of Paragon LP Holdings, or any ERISA
Affiliate thereof have been covered by any Multiemployer Plan in
respect of their employment by Paragon LP Holdings or any such ERISA
Affiliation and no ERISA Affiliate of Paragon LP Holdings has, or is
likely to incur, any withdrawal liability with respect to any
Multiemployer Plan which would have a Material Adverse Effect on
Borrower or the REIT.
(o) Solvency. Paragon LP Holdings is and will be Solvent, after
giving effect to the disbursement of the Loans and the payment of all
fees directly or indirectly payable under any of the Loan Documents.
(p) Ownership. The sole asset of Paragon LP Holdings is Units of
Borrower.
ARTICLE 6
REPORTING COVENANTS
Borrower covenants and agree that, on and after the date hereof,
until payment in full of all of the Obligations, the expiration of the
Commitments and termination of this Agreement:
Section 6.1 Financial Statements and Other Financial and
Operating Information. Borrower shall maintain or cause to be
maintained a system of accounting established and administered in
accordance with sound business practices to permit preparation of
quarterly and annual financial statements in conformity with GAAP on a
consolidated basis for the Borrower, the REIT, Paragon GP Holdings,
Paragon LP Holdings, and their respective Subsidiaries. Borrower shall
deliver or cause to be delivered to Agent:
62
(a) Quarterly Borrowing Base Stabilized Property Statements and
Operating Results. As soon as practicable, and in any event within 45
days after the end of each Fiscal Quarter hereafter, operating
statements, and rent roll summaries (each in the form customarily
generated by Borrower or the managing Agent of the Borrowing Base
Stabilized Properties) for each Borrowing Base Stabilized Property,
dated as of the last day of such Fiscal Quarter (the "Borrowing Base
Stabilized Property Statements"), in form and substance satisfactory
to Agent, and certified by an authorized representative of the
Borrower's General Partner.
(b) Quarterly Financial Statements. As soon as practicable, and
in any event within 45 days after the end of each Fiscal Quarter,
(except the last Fiscal Quarter of a Fiscal Year, or as is consistent
with the reporting requirements of the Commission) consolidated
balance sheets, and statements of income and retained earnings
("Financial Statements") for the Borrower, in the form provided to the
Commission on the REIT's Form 10Q and certified by an authorized
officer of the Borrower's General Partner.
(c) Annual Financial Statements. Within 120 days after the close
of each Fiscal Year, annual Financial Statements of the Borrower, on a
consolidated basis (in the form provided to the Commission on the
REIT's Form 10K), audited and certified without qualifications by the
Accountants, or if qualified, in scope and substance satisfactory to
Requisite Lenders, and accompanied by a statement that, in the course
of its audit (conducted in accordance with generally accepted auditing
standards), the Accountants obtained no knowledge that an Event of
Default or Unmatured Event of Default had occurred. It is contemplated
that the Form 10K filed with the Commission will contain a
consolidated balance sheet, statement of operations, statement of cash
flows and footnotes thereto for the Borrower, the REIT, Paragon GP
Holdings, Paragon LP Holdings, and the Management Company. To the
extent details or supporting information which Agent desires with
respect to any of Borrower, the REIT, Paragon GP Holdings, Paragon LP
Holdings, and the Management Company are not contained in the REIT's
Form 10K, Borrower shall provide Agent with such details or supporting
information as Agent requests which are reasonably available to
Borrower.
(d) General Partner's Certificate of Borrower. (1) Together with
each delivery of any Borrowing Base Property Statement or Financial
Statement pursuant to Sections 6.1(b) and 6.1(c), a General Partner's
Certificate stating that the representative of the General Partner who
is the signatory thereto, (i) is authorized to execute such General
Partner's Certificate; (ii) has reviewed, or caused under his
supervision to be reviewed, the terms of this Agreement and the other
principal Loan Documents; (iii) has made, or caused to be made under
his supervision, a review in reasonable detail of the transactions and
condition of Borrower and the REIT during the accounting period
covered by such Borrowing Base Property Statement or Financial
Statement, and that such review has not disclosed the existence during
or at the end of such accounting period, and that the signer does not
have knowledge of the existence as of the date of the General
Partner's Certificate, of any condition or event which constitutes an
Event of Default or an Unmatured Event of Default, or if, any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action has been taken, is being taken
and is proposed to be taken with respect thereto; and (2) together
with each delivery pursuant to Sections 6.1(b) and 6.1(c), a
Compliance Certificate demonstrating in reasonable detail (which
detail shall include actual
63
calculations) compliance during and at the end of such accounting
periods with the financial covenants contained in Article 9.
(e) Borrowing Base Certificates. As soon as practicable, and in
any event within 15 days after the end of each Fiscal Quarter (and
more often if required by Section 4.2(c) or so requested by Agent), a
Borrowing Base Certificate, certified as being true and correct by an
authorized representative of the General Partner of the Borrower;
provided that, unless an Event of Default has occurred and is then
continuing, Agent shall not request that a Borrowing Base Certificate
be furnished more often than monthly and with each Borrowing. Each
Borrowing Base Certificate shall set forth Borrowing Base calculations
since the date of the last prior Borrowing Base Certificate, and shall
reflect any material adverse changes in the Net Operating Income or
other condition of a Borrowing Base Property of which such officer has
knowledge and which is not reflected in the most recent Borrowing Base
Property Statement.
(f) Loan Availability Certificates. Not later than the last
Business Day of each calendar month, a Loan Availability Certificate,
certified as being true and correct by an authorized representative of
the General Partner of the Borrower.
(g) Budgets for Borrowing Base Properties. Not later than 15 days
prior to the beginning of each Fiscal Year, annual operating budgets
for each Borrowing Base Stabilized Property and each Borrowing Base
Development Property for which the final certificate of occupancy has
been issued for the immediately following Fiscal Year, prepared on an
annual basis, together with all supporting details reasonably
requested by Agent, and reported by an authorized representative of
the General Partner of the Borrower as being based upon information
available at the time and on the Borrower's reasonable good faith
estimates, upon information and assumptions at the time.
(h) Knowledge of Event of Default. Promptly upon Borrower
obtaining knowledge (1) of any condition or event which constitutes an
Event of Default or Unmatured Event of Default, or becoming aware that
any Lender has given notice or taken any other action with respect to
a claimed Event of Default or Unmatured Event of Default or (2) of any
condition or event which has a Material Adverse Effect on Borrower,
the REIT, or any Borrowing Base Property, a General Partner's
Certificate specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by
such Lender and the nature of such claimed Event of Default, Unmatured
Event of Default, event or condition, and what action Borrower has
taken, is taking and proposes to take with respect thereto.
(i) Litigation, Arbitration or Government Investigation. Promptly
upon Borrower obtaining knowledge of (1) the institution of, or threat
of, any material action, suit, proceeding, governmental investigation
or arbitration against or affecting, Borrower, the REIT, or any
Borrowing Base Property, as the case may be, or any of their Property
not previously disclosed in writing to Agent pursuant to this Section
6.1(i), including any eminent domain or other condemnation proceedings
affecting any Borrowing Base Property, or (2) any material development
in any action, suit, proceeding, governmental investigation or
arbitration already disclosed, which, had or may have a Material
Adverse Effect on Borrower, the REIT, or any Borrowing Base Property,
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a notice thereof to Agent and such other information as may be
reasonably available to Borrower to enable Agent, Lenders and their
counsel to evaluate such matters.
(j) ERISA Termination Event. As soon as possible, and in any
event within 30 days after Borrower or the REIT, or any ERISA
Affiliate of either of them knows or has reason to know that a
Termination Event has occurred, a written statement of an authorized
financial officer of the General Partner of the Borrower describing
such Termination Event and the action, if any, which Borrower, the
REIT, or any ERISA Affiliate of either of them, has taken, is taking
or proposes to take, with respect thereto, and, when known, any action
taken or threatened by the IRS, the DOL or the PBGC with respect
thereto.
(k) Prohibited ERISA Transaction. As soon as possible, and in any
event within 30 days, after Borrower, the REIT, or any ERISA Affiliate
of either of them, knows or has reason to know that a prohibited
transaction (defined in Section 406 of ERISA and Section 4975 of the
Internal Revenue Code) has occurred, a statement of the chief
executive officer or chief financial officer of the Borrower
describing such transaction.
(l) Benefit Plan Annual Report. Within ten days after the filing
thereof with the DOL, the IRS or the PGBC, copies of each annual
report, including Schedule B thereto, filed with respect to any
Benefit Plan of Borrower, the REIT, or any ERISA Affiliate of either
of them.
(m) Benefit Plan Funding Waiver Request. Within 30 days after the
filing thereof with the IRS, a copy of each funding waiver request
filed with respect to any Benefit Plan of Borrower, the REIT or any
ERISA Affiliate of either of them and all communications received by
Borrower, the REIT, or any ERISA Affiliate of either of them, with
respect to such request.
(n) Establishment of Benefit Plan and Increase in Contributions
to the Benefit Plan. Not fewer than ten days prior to the effective
date thereof, a notice to Agent of the establishment of a Benefit Plan
by Borrower, the REIT, or any ERISA Affiliate of either of them.
Within 30 days after the first to occur of (1) an amendment of any
existing Benefit Plan of Borrower, the REIT, or any ERISA Affiliate of
either of them, which will result in an increase in the benefits under
such Benefit Plan; (2) a notification of any such increase; (3) the
establishment of any new Benefit Plan by Borrower, the REIT, or any
ERISA Affiliate of either of them; or (4) the commencement of
contributions to any Benefit Plan to which Borrower, the REIT, or any
ERISA Affiliate of either of them was not previously contributing; a
copy of said amendment, notification or Benefit Plan.
(o) Special Reporting With Respect to ESOPs. As soon as possible,
and in any event within 30 days, after Borrower, the REIT, or either
ERISA Affiliate of any of them, knows or has reason to know of a
termination or partial termination of any employee stock ownership
plan, or of any transaction or circumstance which would cause an
employee stock ownership plan to cease to be a tax-qualified employee
stock ownership plan within the meaning of Section 4975(e)(7) of the
Internal Revenue Code.
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(p) Qualification of ERISA Plan. Promptly upon, and in any event
within 30 days after, receipt by Borrower, the REIT, or any ERISA
Affiliate of either of them, of an unfavorable determination letter
from the IRS regarding the qualification of a Plan under Section
402(a) of the Internal Revenue Code, a copy of said determination
letter, if such disqualification would have a Material Adverse Effect
on Borrower or the REIT.
(q) Multiemployer Plan Withdrawal Liability. Promptly upon, and
in any event within 30 days after receipt by Borrower, the REIT, or
any ERISA Affiliate of either of them, of a notice from a
Multiemployer Plan regarding the imposition of withdrawal liability, a
copy of said notice.
(r) Failure to Make Section 412 Payment. Promptly upon, and in
any event within 30 days after, Borrower, the REIT, or any ERISA
Affiliate of either of them, fails to make a required installment
under subsection (m) of Section 412 of the Internal Revenue Code or
any other payment required under Section 412 of the Internal Revenue
Code on or before the due date for such installment or payment, a
notification of such failure, if such failure could result in either
the imposition of a Lien under Section 412 of the Internal Revenue
Code or otherwise have, or could reasonably by anticipated to have, a
Material Adverse Effect on Borrower or the REIT.
(s) Failure of the REIT to Qualify as Real Estate Investment
Trust. Promptly after Borrower first has actual knowledge of (1) the
REIT failing to qualify as a real estate investment trust, as defined
in Section 856 of the Internal Revenue Code (or any successor
provision thereof); (2) any act by the REIT causing its election to be
taxed as a real estate investment trust to be terminated; (3) any act
causing the REIT to be subject to the taxes imposed by Section
857(b)(6) of the Internal Revenue Code (or any successor provision
thereto); or (4) the REIT failing to be entitled to a dividends paid
deduction which meets the requirements of Section 857 of the Internal
Revenue Code; a notice of any such occurrence or circumstance.
(t) Revocation of the REIT Status. At least 30 days prior to the
taking of any act by the REIT to revoke its election to be taxed as a
real estate investment trust, a notice of such intended action.
(u) Other Information. Such other information, reports,
contracts, schedules, lists, documents, agreements and instruments in
the possession of the Borrower with respect to (1) the Collateral; or
(2) Borrower's or the REIT's business, condition (financial or
otherwise), operations, performance, properties or prospects, as Agent
may, from time to time, reasonably request, including, without
limitation, any annual information with respect to cash flow
projections, budgets, operating statements (current year and
immediately preceding year), rent rolls, lease expiration reports,
note payable summaries, bullet note summaries, equity funding
requirements, contingent liability summaries, line of credit
summaries, line of credit collateral summaries, wrap note or note
receivable summaries, schedules of outstanding letters of credit,
summaries of cash and Cash Equivalents, projections of management and
leasing fees, and overhead budgets. Upon the occurrence and during the
continuance of an Unmatured Event of Default or Event of Default, if
Borrower fails to provide Agent with any such other information
reasonably requested from Borrower within the time periods provided
for herein, or if no time periods are provided for, within
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five Business Days after Agent requests such information, and provided
that Agent gives Borrower reasonable prior notice and an opportunity
to participate, Borrower hereby authorizes Agent to communicate with
the Accountants and authorizes the Accountants to disclose to Agent
any and all financial statements and other information of any kind,
including copies of any management letter or the substance of any oral
information, that the Accountants may have with respect to the
Collateral or Borrower's, the REIT's, Paragon GP Holdings', Paragon LP
Holdings', or the Management Company's condition (financial or
otherwise), operations, properties, performance and prospects.
Concurrently therewith, Agent will notify Borrower of any such
communication. At Agent's request, Borrower shall deliver a letter
addressed to the Accountants instructing them to disclose such
information in compliance with this Section 6.1(u).
(v) Press Releases; SEC Filings and Financial Statements. The
REIT and Borrower shall deliver to Agent, all reports and notices,
proxy statements, registration statements and prospectuses within ten
days after such materials are filed with the Commission. All materials
sent or made available generally by the REIT to the holders of its
publicly-held Securities, the Borrower to the holders of its Units, or
to a trustee under any indenture or filed with the Commission,
including all periodic reports required to be filed with the
Commission, shall be delivered to Agent within 10 days of when they
become available.
(w) Management Reports. Upon request of Agent, copies of any
management reports prepared by the Accountants.
(x) Development Property Status Reports. With respect to each
Borrowing Base Development Property, Borrower shall deliver to Agent a
Development Property Status Report, as soon as practicable, and in any
event within 15 days after the end of each calendar month. Each
Development Property Status Report shall include an updated Project
Budget, AIA Form No. , set forth the status of construction of the
Improvements, current information about occupancy and leasing
activities, and disclose any material deviations from the Development
Plans, the Construction Schedule, the terms of the Construction
Contracts, and the Project Budget.
(y) Conversion Date Certificates. With respect to each Borrowing
Base Development Property, Borrower shall deliver to Agent a
Conversion Date Certificate when the Property has achieved 90% average
occupancy and 90% of appraised stabilized gross revenue (on an
annualized basis) for each of three consecutive months.
Section 6.2 Environmental Notices. Borrower shall notify Agent, in
writing, as soon as practicable, and in any event within ten days
after Borrower learns of any: (a) with respect to any Borrowing Base
Property, (1) written notice or claim to the effect that Borrower is
or may be liable to any Person as a result of the Release or
threatened Release of any Contaminant into the environment; (2)
written notice that Borrower is subject to investigation by any
Governmental Authority evaluating whether any Remedial Action is
needed to respond to the Release or threatened Release of any
Contaminant into the environment; (3) written notice that such
Borrowing Base Property is subject to an Environmental Lien; or (4)
written notice of violation to Borrower or awareness of a condition
which might reasonably result in a notice of violation of any
Environmental Laws by Borrower, which would have a Material Adverse
Effect on Borrower or the REIT; and
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(b) (1) commencement or written threat of any judicial or
administrative proceeding alleging a violation of any Environmental
Laws which will be subject to disclosure in the REIT's Form 10Q or
Form 10K; (2) written notice from a Governmental Authority of any
changes to any existing Environmental Laws that will have a Material
Adverse Effect on the operations of Borrower; or (3) any proposed
action by Borrower that, to the best of Borrower's knowledge, could
subject Borrower to environmental, health or safety Liabilities and
Costs that could have a Material Adverse Effect on Borrower or the
REIT.
ARTICLE 7
AFFIRMATIVE COVENANTS
On and after the date hereof, until payment in full of all of the
Obligations, the expiration of the Commitments and termination of this
Agreement:
Section 7.1 Borrower's Affirmative Covenants. Borrower covenants and
agrees that:
(a) Existence. Borrower shall at all times maintain its existence
as a limited partnership.
(b) Qualification Name. Borrower shall qualify and remain
qualified to do business in each jurisdiction in which the nature of
its business requires it to be so qualified except for those
jurisdictions where failure to so qualify will not have a Material
Adverse Effect on Borrower. Except as set forth on Schedule 7.1(b),
Borrower will transact business solely in its own name or the name of
its Subsidiaries.
(c) Compliance with Laws, Etc. Borrower shall (1) comply with all
Requirements of Law, and all restrictive covenants in its Contractual
Obligations affecting its Properties, performance, prospects,
obligations, assets or operations, and (2) obtain, as needed, all
Permits necessary for its operations and maintain such in good
standing, except in each of the foregoing cases where the failure to
do will not have a Material Adverse Effect on Borrower.
(d) Payment of Taxes and Claims. Borrower shall pay (1) all
taxes, assessments and other governmental charges imposed upon it or
on any of its Properties or assets or in respect of any of its
business, income or Property before any penalty or interest accrues
thereon, the failure to make payment of which will have a Material
Adverse Effect on Borrower, and (2) all claims (including, without
limitation, claims for labor, services, materials and supplies) for
sums, material in the aggregate to Borrower, as the case may be, which
have become due and payable and which by law have or may become a Lien
other than a judgment Lien upon any of Borrower's Properties, prior to
the time when any penalty or fine shall be incurred with respect
thereto; provided, however, that no such taxes, assessments, and
governmental charges referred to in clause 1 above or claims referred
to in clause 2 above need to be paid if same are being contested in
good faith by appropriate proceedings promptly instituted and
diligently conducted, and if adequate reserves shall have been set
aside therefor in accordance with GAAP. Borrower also shall pay
promptly all taxes,
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assessments and other governmental charges for which the Lenders are
or become liable, including, without limitation, documentary and
intangibles taxes levied by any Governmental Authority in connection
with the Loans, and shall provide Agent with a receipt of payment from
the appropriate Governmental Authority prior to the date on which such
tax, assessment or charge will become past due.
(e) Inspection of Property; Books and Records; Discussion.
Borrower shall permit any authorized representative(s) designated by
Agent upon reasonable notice to Borrower (1) to visit and inspect any
of its Properties (provided that Borrower shall not reimburse Agent
for expenses incurred in connection with inspecting Properties that
are not, or proposed as Borrowing Base Properties), and (2) with
respect to Borrowing Base Properties, to inspect financial and
accounting records and leases, and to make copies and take extracts
therefrom, all at such times during normal business hours and as often
as Agent may reasonably request. In connection therewith, Borrower
shall pay all expenses of the types described in Section 12.1.
Borrower will keep proper books of record and account in which entries
in conformity with GAAP, as modified and as otherwise required by this
Agreement and applicable Requirements of Law, shall be made of all
dealings and transactions in relation to its businesses and activities
and as otherwise required under Section 6.1.
(f) Maintenance of Licenses, Permits, Etc. Borrower shall (1)
maintain in full force and effect all licenses, permits, governmental
approvals, franchises, patents, trademarks, trade names, copyrights,
authorizations or other rights necessary for the operation of its
business, except where the failure to maintain any of the foregoing
would not have a Material Adverse Effect on Borrower, and (2) shall
notify Agent in writing, promptly after learning thereof, of the
suspension, cancellation, revocation or discontinuance of and of any
pending or threatened action or proceedings seeking to suspend,
cancel, revoke or discontinue any material licenses, permit, patent,
trademark, trade name, copyright, governmental approval, franchise
authorization or right.
(g) Conduct of Business. Except for Permitted Investments and
Investments in cash and Cash Equivalents, Borrower shall engage only
in the business of developing, owning, operating and managing
apartment, retail and commercial properties, asset management and any
business activities incidental thereto.
(h) Use of Proceeds. Borrower shall use the proceeds of the Loans
only for predevelopment costs, development costs, acquisitions,
capital expenditures, working capital, equity Investments, repayment
of Indebtedness or scheduled amortization payments thereon.
(i) Project Budget Revisions. Borrower shall obtain the approval
of Agent of any increase in any line item in the Project Budget (1)
that involves more than the greater of (A) $50,000 or (B) 10% of such
line item, or (2) which increase, when added to all increases in line
items in the Project Budget shall cause the aggregate increase in the
Project Budget to exceed $250,000. Borrower shall not (i) reallocate
any part of any interest reserve or operating deficit that is a line
item in the Project Budget; or (ii) increase any fees payable to
Borrower or an Affiliate of Borrower.
(j) Borrowing Base Development Properties.
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The construction of the Improvements will be prosecuted by Borrower
with diligence and continuity to completion and will be completed by
Borrower in a good and workmanlike manner in substantial accordance
with the Development Plans and the other provisions of this Agreement,
on or before the completion date disclosed in the Construction
Schedule (subject to Permitted Delays) and free and clear from all
liens, or claims for liens, other than Permitted Liens. No changes of
a material nature will be made to the Development Plans by, or be
permitted to be made to them by Borrower without the prior written
approval therefor of all requisite Governmental Authorities, prior
compliance with all requisite Requirements of Law and prior acceptance
(if the Agent so elects) by the Agent and in instances where Agent
does accept any changes to the Development Plans, such acceptance
shall be deemed to be strictly limited to an acknowledgment of Agent's
consent to the Improvements being constructed in accordance therewith
and shall not, in any way, be deemed to imply any warranty,
representation or approval by Agent or the Lenders that such
Improvements, if so constructed, will be structurally sound, will
comply with all Requirements of Law, will be fit for any particular
purpose or will have a market value of any particular magnitude. At
all times during construction of the Improvements, Borrower will (1)
permit Agent, the Independent Supervising Architect and their
representatives, to enter upon the Land and into the Improvements, to
inspect the same and all materials to be used in the construction of
the Improvements and to examine the Development Plans, (2) comply
strictly with any and all Requirements of Law required to be complied
with incidental to such construction, (3) deliver to Agent, or its
representatives, immediately upon demand, counterparts and/or
conditional assignments of any and all Construction Contracts, bills
of sale, statements, conveyances, receipted vouchers or agreements of
any nature under which Borrower claims title to any materials or
supplies used or to be used in the construction of the Improvements,
(4) either cause each Construction Contract to contain a provision
specifically subordinating any lien right against such Borrowing Base
Development Property to the liens and security interests created by
the Loan Documents or cause the other party thereto to execute any and
all instruments, acceptable in form and substance to Agent, to
accomplish the same, (5) if requested by Agent, furnish to Agent,
immediately after the pouring of each concrete slab, street and
curbstone within the Land, the completion of each foundation of a
structure forming part of the Improvements and the completion of the
Improvements, a survey certified to by a licensed engineer acceptable
to Agent showing all of same and that the location thereof is entirely
within the property lines of the Land and does not encroach upon,
breach or violate any building line, easement or similar restriction,
(6) obtain and maintain, in full force and effect, an owner's and
contractor's liability insurance policy or policies (including
worker's compensation insurance) and a hazard insurance policy or
policies in builder's all risk form with loss payable endorsements
acceptable to Agent insuring the Improvements and all materials and
supplies purchased with advances hereunder against all risks and
losses, all such insurance policies to be issued by companies, in
amounts and on terms approved by Agent, (7) if Agent shall request,
furnish Agent with a current list of material original contractors,
subcontractors, materialmen, vendors, artisans and laborers performing
work on the Improvements and (8) upon demand of Agent or the
Independent Supervising Architect, correct any structural defect in
the Improvements or any material departure from the Development Plans
not accepted by Agent, it being understood and agreed that the advance
of any loan proceeds shall not constitute a waiver of Agent's right to
require compliance with this Section 7.1(j) with respect to any such
defects or departures.
Section 7.2 With respect to the REIT.
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(a) Corporate Existence. The REIT shall at all times
maintain its corporate existence.
(b) Qualification, Name. The REIT shall qualify and remain
qualified to do business in each jurisdiction in which the nature
of its business requires it to be so qualified except for those
jurisdictions where failure to so qualify will not have a
Material Adverse Effect on the REIT. The REIT will transact
business solely in its own name.
(c) Securities Law Compliance. The REIT shall comply in all
material respects with all rules and regulations of the
Commission and file all reports required by the Commission
relating to the REIT's publicly-held Securities.
(d) Continued Status as a REIT; Prohibited Transactions. The
REIT shall (1) make an election on its 1994 tax return to be
taxed as, and shall thereafter, continue to be, a real estate
investment trust as defined in Section 856 of the Internal
Revenue Code (or any successor provision thereof), (2) not revoke
its election to be a real estate investment trust, (3) not engage
in any "prohibited transactions" as defined in Section
856(b)(6)(iii) of the Internal Revenue Code (or any successor
provision thereto), and (4) continue to be entitled to a dividend
paid deduction meeting the requirements of Section 857 of the
Internal Revenue Code.
(e) NYSE Listed Company. The common stock of the REIT shall
at all times be listed for trading and be traded on the New York
Stock Exchange, the American Stock Exchange, or NASDAQ.
(f) Compliance with Laws, Etc. The REIT shall (1) comply
with all Requirements of Law, and all restrictive covenants
affecting the REIT and (2) obtain, as needed, all Permits
necessary for its operations and maintain such in good standing,
except in each of the foregoing cases where the failure to do so
will not have a Material Adverse Effect on the REIT.
(g) Payment of Taxes and Claims. The REIT shall pay (1) all
taxes, assessments and other governmental charges imposed upon it
or on any of its assets or in respect of any of its businesses
or, income before any penalty or interest accrues thereon, the
failure to make payment of which will have a Material Adverse
Effect on the REIT, and (2) all claims (including, without
limitation, claims for labor, services, materials and supplies)
for sums, material in the aggregate to the REIT, as the case may
be, which have become due and payable and which by law have or
may become a Lien, other than a judgment Lien, upon any of the
REIT's assets, prior to the time when any penalty or fine shall
be incurred with respect thereto; provided, however, that no such
taxes, assessments, and governmental charges referred to in
clause 1 above or claims referred to in clause 2 above need be
paid if same are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if
adequate reserves shall have been set aside therefor in
accordance with GAAP.
(h) Conduct of Business. The REIT's sole business purpose
shall be to own 100% of each of Paragon GP Holdings and Paragon
LP Holdings. The REIT shall use all net proceeds it receives from
the sale of its Securities solely to purchase Securities of
Paragon GP
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Holdings and Paragon LP Holdings and shall consummate such purchases
within five Business Days of the date on which it receives such net
proceeds.
(i) Subordination. The REIT subordinates all present and
future Indebtedness owing by Borrower to the REIT (other than the
reimbursement and indemnification obligations owing by Borrower
to the REIT identified on Schedule 7.2(i)) to the Obligations at
any time owing by Borrower to the Agent and the Lenders under the
Loan Documents. The REIT agrees to make no claim for such
Indebtedness until all Obligations of Borrower have been fully
discharged. The REIT further agrees not to assign all or any part
of such Indebtedness unless Agent is given prior written notice
and such assignment is expressly made subject to the terms of
this Section 7.2(i). If Agent so requests, (i) all instruments
evidencing such Indebtedness shall be duly endorsed and delivered
to Agent, (ii) all security for such Indebtedness shall be duly
assigned and delivered to Agent, (iii) such Indebtedness shall be
enforced, collected and held by the REIT as trustee for Agent and
the Lenders and shall be paid over to Agent on account of the
Obligations, and (iv) the REIT shall execute, file and record
such documents and instruments and take such other action as
Agent deems necessary or appropriate to perfect, preserve and
enforce the Agent's and Lenders' rights in and to such
Indebtedness and any security therefor. If the REIT fails to take
any such action, within ten days after written notice from Agent,
then Agent, as attorney-in-fact for the REIT, is hereby
authorized to do so in the name of the REIT. The foregoing power
of attorney is coupled with an interest and cannot be revoked.
(j) Bankruptcy of Borrower. In any bankruptcy or other
proceeding in which the filing of claims is required by law, the
REIT shall file all claims which the REIT may have against
Borrower relating to any Indebtedness of Borrower to the REIT and
shall assign to Agent all rights of the REIT thereunder. If the
REIT does not file any such claim, within ten days after written
notice from Agent, then Agent, as attorney-in-fact for the REIT,
is hereby authorized to do so in the name of the REIT or, in
Agent's discretion, to assign the claim to a nominee and to cause
a proof of claim to be filed in the name of Agent's nominee. The
foregoing power of attorney is coupled with an interest and
cannot be revoked. Agent or its nominee shall have the right, in
its reasonable discretion, to accept or reject any plan proposed
in such proceeding and to take any other action which a party
filing a claim is entitled to do. In all such cases, whether in
administration, bankruptcy or otherwise, the Person or Persons
authorized to pay such claim shall pay to Agent the amount
payable on such claim and, to the full extent necessary for that
purpose, the REIT hereby assigns to Agent all of the REIT's
rights to any such payments or distributions; provided, however,
the REIT's obligations hereunder shall not be satisfied except to
the extent that Agent receives cash by reason of any such payment
or distribution. The rights of Agent shall continue, with respect
to any amount at any time paid by Borrower on account of any of
the Obligations which Agent or any of the Lenders shall be
required to restore or return upon the bankruptcy, insolvency or
reorganization of Borrower or for any other reasons, all as
though such amount had not been paid. Section 7.3 With respect to
Paragon GP Holdings.
(a) Corporate Existence. Paragon GP Holdings shall at all
times maintain its corporate existence.
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(b) Qualification, Name. Paragon GP Holdings shall qualify and
remain qualified to do business in each jurisdiction in which the
nature of its business requires it to be so qualified except for those
jurisdictions where failure to so qualify will not have a Material
Adverse Effect on the Borrower or the REIT. Paragon GP Holdings will
transact business solely in its own name.
(c) Compliance with Laws, Etc. Paragon GP Holdings shall (1)
comply with all Requirements of Law, and all restrictive covenants
affecting Paragon GP Holdings, and (2) obtain, as needed, all Permits
necessary for its operations and maintain such in good standing,
except in each of the foregoing cases where the failure to do so will
not have a Material Adverse Effect on the Borrower or the REIT.
(d) Payment of Taxes and Claims. Paragon GP Holdings shall pay
(1) all taxes, assessments and other governmental charges imposed upon
it or on any of its assets or in respect of any of its businesses or,
income before any penalty or interest accrues thereon, the failure to
make payment of which will have a Material Adverse Effect on the
Borrower or the REIT, and (2) all claims (including, without
limitation, claims for labor, services, materials and supplies) for
sums, material in the aggregate to Paragon GP Holdings, as the case
may be, which have become due and payable and which by law have or may
become a Lien, other than a judgment Lien, upon any of Paragon GP
Holdings' assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided, however, that no such taxes,
assessments, and governmental charges referred to in clause 1 above or
claims referred to in clause 2 above need be paid if same are being
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and if adequate reserves shall have been set
aside therefor in accordance with GAAP.
(e) Material Contracts. Paragon GP Holdings shall perform all of
its obligations under any leases or agreements, except where the
failure to perform such obligations will not have a Material Adverse
Effect on the Borrower or the REIT.
(f) Conduct of Business. Paragon GP Holdings' sole business
purposes shall be to own Units of the Borrower, to function as the
General Partner of Borrower, and to own a one percent partnership
interest in certain Subsidiaries of the Borrower. Paragon GP Holdings
shall use all net proceeds it receives from the sale of its Securities
solely to purchase either Units of the Borrower or one percent
partnership interests in certain partnerships that will become
Subsidiaries of Borrower and shall consummate such purchases within
five Business Days of the date it receives such net proceeds.
(g) Subordination. Paragon GP Holdings subordinates all present
and future Indebtedness owing by Borrower to Paragon GP Holdings
(other than reimbursement and indemnification obligations owing by
Borrower to Paragon GP Holdings) to the Obligations at any time owing
by Borrower to the Agent and the Lenders under the Loan Documents.
Paragon GP Holdings agrees to make no claim for such Indebtedness
until all Obligations of Borrower have been fully discharged. Paragon
GP Holdings further agrees not to assign all or any part of such
Indebtedness unless Agent is given prior written notice and such
assignment is expressly made subject to the terms of this Section
7.3(g). If Agent so requests, (i) all instruments evidencing such
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Indebtedness shall be duly endorsed and delivered to Agent, (ii) all
security for such Indebtedness shall be duly assigned and delivered to
Agent, (iii) such Indebtedness shall be enforced, collected and held
by Paragon GP Holdings as trustee for Agent and the Lenders and shall
be paid over to Agent on account of the Obligations, and (iv) Paragon
GP Holdings shall execute, file and record such documents and
instruments and take such other action as Agent deems necessary or
appropriate to perfect, preserve and enforce the Agent's and Lenders'
rights in and to such Indebtedness and any security therefor. If
Paragon GP Holdings fails to take any such action within ten days
after written notice from Agent, then Agent, as attorney-in-fact for
Paragon GP Holdings, is hereby authorized to do so in the name of
Paragon GP Holdings. The foregoing power of attorney is coupled with
an interest and cannot be revoked.
(h) Bankruptcy of Borrower. In any bankruptcy or other proceeding
in which the filing of claims is required by law, Paragon GP Holdings
shall file all claims which Paragon GP Holdings may have against
Borrower relating to any Indebtedness of Borrower to Paragon GP
Holdings and shall assign to Agent all rights of Paragon GP Holdings
thereunder. If Paragon GP Holdings does not file any such claim within
ten days after written notice from Agent, then Agent, as
attorney-in-fact for Paragon GP Holdings, is hereby authorized to do
so in the name of Paragon GP Holdings or, in Agent's discretion, to
assign the claim to a nominee and to cause a proof of claim to be
filed in the name of Agent's nominee. The foregoing power of attorney
is coupled with an interest and cannot be revoked. Agent or its
nominee shall have the right, in its reasonable discretion, to accept
or reject any plan proposed in such proceeding and to take any other
action which a party filing a claim is entitled to do. In all such
cases, whether in administration, bankruptcy or otherwise, the Person
or Persons authorized to pay such claim shall pay to Agent the amount
payable on such claim and, to the full extent necessary for that
purpose, Paragon GP Holdings hereby assigns to Agent all of Paragon GP
Holdings' rights to any such payments or distributions; provided,
however, Paragon GP Holdings' obligations hereunder shall not be
satisfied except to the extent that Agent receives cash by reason of
any such payment or distribution. The rights of Agent shall continue,
with respect to any amount at any time paid by Borrower on account of
any of the Obligations which Agent or any of the Lenders shall be
required to restore or return upon the bankruptcy, insolvency or
reorganization of Borrower or for any other reasons, all as though
such amount had not been paid.
Section 7.4 With respect to Paragon LP Holdings.
(a) Corporate Existence. Paragon LP Holdings shall at all times
maintain its corporate existence.
(b) Qualification, Name. Paragon LP Holdings shall qualify and
remain qualified to do business in each jurisdiction in which the
nature of its business requires it to be so qualified except for those
jurisdictions where failure to so qualify will not have a Material
Adverse Effect on the Borrower or the REIT. Paragon LP Holdings will
transact business solely in its own name.
(c) Compliance with Laws, Etc. Paragon LP Holdings shall (1)
comply with all Requirements of Law, and all restrictive covenants
affecting Paragon LP Holdings, and
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(2) obtain, as needed, all Permits necessary for its operations and
maintain such in good standing, except in each of the foregoing cases
where the failure to do so will not have a Material Adverse Effect on
the Borrower or the REIT.
(d) Payment of Taxes and Claims. Paragon LP Holdings shall pay
(1) all taxes, assessments and other governmental charges imposed upon
it or on any of its assets or in respect of any of its businesses or,
income before any penalty or interest accrues thereon, the failure to
make payment of which will have a Material Adverse Effect on the
Borrower or the REIT; and (2) all claims (including, without
limitation, claims for labor, services, materials and supplies) for
sums, material in the aggregate to Paragon LP Holdings, as the case
may be, which have become due and payable and which by law have or may
become a Lien, other than a judgment Lien, upon any of Paragon LP
Holdings' assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided, however, that no such taxes,
assessments, and governmental charges referred to in clause 1 above or
claims referred to in clause 2 above need be paid if same are being
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and if adequate reserves shall have been set
aside therefor in accordance with GAAP.
(e) Material Contracts. Paragon LP Holdings shall perform all of
its obligations under any leases or agreements, except where the
failure to perform such obligations will not have a Material Adverse
Effect on the Borrower or the REIT.
(f) Conduct of Business. Paragon LP Holdings' sole business
purpose shall be to own Units of the Borrower and to function as a
limited partner of the Borrower. Paragon LP Holdings shall use all net
proceeds it receives from the sale of its Securities solely to
purchase Units of the Borrower and shall consummate such purchases
within five Business Days of the date it receives such net proceeds.
(g) Subordination. Paragon LP Holdings subordinates all present
and future Indebtedness owing by Borrower to Paragon LP Holdings
(other than reimbursement and indemnification obligations owing by
Borrower to Paragon LP Holdings) to the Obligations at any time owing
by Borrower to the Agent and the Lenders under the Loan Documents.
Paragon LP Holdings agrees to make no claim for such Indebtedness
until all Obligations of Borrower have been fully discharged. Paragon
LP Holdings further agrees not to assign all or any part of such
Indebtedness unless Agent is given prior written notice and such
assignment is expressly made subject to the terms of this Section
7.4(g). If Agent so requests, (i) all instruments evidencing such
Indebtedness shall be duly endorsed and delivered to Agent, (ii) all
security for such Indebtedness shall be duly assigned and delivered to
Agent, (iii) such Indebtedness shall be enforced, collected and held
by Paragon LP Holdings as trustee for Agent and the Lenders and shall
be paid over to Agent on account of the Obligations, and (iv) Paragon
LP Holdings shall execute, file and record such documents and
instruments and take such other action as Agent deems necessary or
appropriate to perfect, preserve and enforce the Agent's and Lenders'
rights in and to such Indebtedness and any security therefor. If
Paragon LP Holdings fails to take any such action, within ten days
after written notice from Agent, then Agent, as attorney-in-fact for
Paragon LP Holdings, is hereby authorized to do so in the name of
Paragon LP Holdings. The foregoing power of attorney is coupled with
an interest and cannot be revoked.
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(h) Bankruptcy of Borrower. In any bankruptcy or other proceeding
in which the filing of claims is required by law, Paragon LP Holdings
shall file all claims which Paragon LP Holdings may have against
Borrower relating to any indebtedness of Borrower to Paragon LP
Holdings and shall assign to Agent all rights of Paragon LP Holdings
thereunder. If Paragon LP Holdings does not file any such claim within
ten days after written notice from Agent, then Agent, as
attorney-in-fact for Paragon LP Holdings, is hereby authorized to do
so in the name of Paragon LP Holdings or, in Agent's discretion, to
assign the claim to a nominee and to cause a proof of claim to be
filed in the name of Agent's nominee. The foregoing power of attorney
is coupled with an interest and cannot be revoked. Agent or its
nominee shall have the right, in its reasonable discretion, to accept
or reject any plan proposed in such proceeding and to take any other
action which a party filing a claim is entitled to do. In all such
cases, whether in administration, bankruptcy or otherwise, the Person
or Persons authorized to pay such claim shall pay to Agent the amount
payable on such claim and, to the full extent necessary for that
purpose, Paragon LP Holdings hereby assigns to Agent all of Paragon LP
Holdings' rights to any such payments or distributions; provided,
however, Paragon LP Holdings' obligations hereunder shall not be
satisfied except to the extent that Agent receives cash by reason of
any such payment or distribution. The rights of Agent shall continue,
with respect to any amount at any time paid by Borrower on account of
any of the Obligations which Agent or any of the Lenders shall be
required to restore or return upon the bankruptcy, insolvency or
reorganization of Borrower or for any other reasons, all as though
such amount had not been paid.
ARTICLE 8
NEGATIVE COVENANTS
Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations, the expiration of the
Commitments and termination of this Agreement:
Section 8.1 With respect to Borrower:
(a) Indebtedness. Borrower shall not directly or indirectly
create, incur, assume or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness, if, after
giving effect thereto, there would be a breach of any of the
financial covenants contained in Article 9.
(b) Liens. Borrower shall not directly or indirectly create,
incur, assume or permit to exist any Lien on, or with respect to,
any Property subject to Agent's Liens, except:
(1) Permitted Liens; and
(2) Liens arising under Section 302(f) of ERISA or
Section 412(n) of the Internal Revenue Code where the delinquent
contribution which gave rise to the Lien is paid within 30 days of its
original due date.
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Additionally, Borrower shall not encumber real Property owned solely
by Borrower with Liens that will secure more than one non-prepayable
Indebtedness if, after giving effect to such Liens, the aggregate
number of real Properties so encumbered exceeds 75% of the aggregate
number of all real Properties owned solely by Borrower.
(c) Investments. Borrower shall not directly or indirectly make
or own any Investment except:
(1) Investments in cash and Cash Equivalents; and
(2) Permitted Investments described in paragraph 7 of Addendum- I
to this Agreement.
(d) Restrictions on Fundamental Changes.
(1) Borrower shall not enter into any merger or consolidation in
which Borrower is not the surviving entity or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution).
(2) Borrower shall remain a limited partnership with Paragon GP
Holdings as its sole general partner.
(3) Borrower shall not change its Fiscal Year.
(4) Except for Permitted Investments, Borrower shall not engage
in any line of business other than development, ownership,
operation and management of apartment, retail and commercial
properties, asset management and business activities incidental
thereto.
(e) ERISA. Borrower shall not, and shall not permit any ERISA
Affiliates to, do any of the following to the extent that such act or
failure to act would result in the aggregate, after taking into
account any other such acts or failure to act, in a Material Adverse
Effect on Borrower or the REIT:
(1) Engage, or knowingly permit an ERISA Affiliate to
engage, in any prohibited transaction described in Section 406 of the
ERISA or Section 4975 of the Internal Revenue Code which is not exempt
under Section 407 or 408 of ERISA or Section 4975(d) of the Internal
Revenue Code for which a class exemption is not available or a private
exemption has not been previously obtained from the DOL;
(2) Permit to exist any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Internal Revenue Code),
whether or not waived;
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(3) Fail, or permit an ERISA Affiliate to fail to pay timely
required contributions or annual installments due with respect to any
waived funding deficiency to any Plan if such failure could result in
the imposition of a Lien or otherwise have a Material Adverse Effect
on Borrower or the REIT;
(4) Terminate, or permit an ERISA Affiliate to terminate, any
Benefit Plan which would result in any liability of Borrower, the
REIT, or an ERISA Affiliate under Title IV of ERISA; or
(5) Fail, or permit any ERISA Affiliate to fail, to pay any
required installment under Section (m) of Section 412 of the Internal
Revenue Code or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment
or other payment, if such failure could result in the imposition of a
Lien or otherwise have a Material Adverse Effect on Borrower or the
REIT.
(f) Environmental Liabilities. Borrower shall not become subject
to any Liabilities and Costs which Agent reasonably deems to have a
Material Adverse Effect on any Borrowing Base Property arising out of
or related to (1) the Release or threatened Release of any Contaminant
into the environment, or any Remedial Action in response thereto; or
(2) any violation of any Environmental Laws; provided, however, that
this covenant shall not be violated so long as (A) Borrower shall have
notified Agent of the assertion of such liability or required
expenditures within ten days after receiving written notice of such
assertion; (B) Borrower shall have continued to furnish Agent with
such information concerning such asserted liability or required
expenditure as Agent shall have reasonably requested, or is otherwise
provided herein; and (C) Borrower shall be diligently pursuing
indemnification, contribution or other reimbursement for such
liability or required expenditures from any Person which has an
obligation to provide indemnification or may otherwise be obligated to
reimburse Borrower for such liability or required expenditures.
(g) Amendment of Constituent Documents. Borrower shall not amend
its limited partnership agreement, or certificate of limited
partnership, if such amendment will have a Material Adverse Effect
upon Borrower, or upon Borrower's ability to perform its Obligations
under the Loan Documents.
(h) Margin Regulations. No portion of the proceeds of any
Borrowings shall be used in any manner which might cause the extension
of credit or the application of such proceeds to violate Regulation G,
Regulation U or Regulation X or any other regulation of the Federal
Reserve Board or to violate the Securities Exchange Act or the
Securities Act, in each case as in effect on the date or dates of
Borrowings and such use of proceeds.
(i) Management of Borrower. During the original term of this
Agreement, as well as the extension period provided for in Section
2.1(d) of this Agreement, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall remain active in the
executive and operational management of Borrower and the REIT. If,
however, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ is not so active in the management of the
Borrower or the REIT during the initial term of this Agreement, or if
exercised, during the extension period provided for in Section
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2.1(d), then, either (1) no fewer than any two of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ must be active in the
management of Borrower and the REIT or serve on the board of directors
of the REIT, or (2) within 180 days thereof, the Borrower and the REIT
shall propose and appoint a management replacement for ▇▇. ▇▇▇▇▇▇ who
is acceptable to Agent and Requisite Lenders.
Section 8.2 With respect to the REIT:
(a) Restriction on Fundamental Changes.
(1) The REIT shall not enter into any merger or consolidation in which
the REIT is not the surviving entity or liquidate, wind-up or dissolve
(or suffer any liquidation or dissolution).
(2) The REIT shall not change its legal structure or Fiscal Year.
(3) The REIT shall not engage in any line of business other than
owning 100% of each of Paragon GP Holdings and Paragon LP Holdings.
(4) The REIT shall not have an Investment in any Person other than
Paragon GP Holdings and Paragon LP Holdings and its Investment in each
of Paragon GP Holdings and Paragon LP Holdings shall be limited solely
to the Securities of each of Paragon GP Holdings and Paragon LP
Holdings.
(b) ERISA. The REIT shall not, and shall not permit any ERISA
Affiliates to, do any of the following to the extent that such act or failure to
act would result in the aggregate, after taking into account any other such acts
or failure to act, in a Material Adverse Effect on the Borrower or the REIT;
(1) engage, or knowingly permit an ERISA Affiliate to
engage, in any prohibited transaction described in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code which is not
exempt under Section 407 or 408 of ERISA or Section 4975(d) of
the Internal Revenue Code for which a class exemption is not
available or a private exemption has not been previously obtained
from the DOL;
(2) Permit to exist any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the internal
Revenue Code), whether or not waived;
(3) Fail, or permit an ERISA Affiliate to fail, to pay
timely required contributions or annual installments due with
respect to any waived funding deficiency to any Plan if such
failure could result in the imposition of a Lien or otherwise
have a Material Adverse Effect on the Borrower or the REIT;
79
(4) Terminate, or permit an ERISA Affiliate to
terminate, any Benefit Plan which would result in any liability of the
REIT or an ERISA Affiliate under Title IV of ERISA; or
(5) Fail, or permit any ERISA Affiliate to fail, to
pay any required installment under section (m) of Section 412 of the
Internal Revenue Code or any other payment required under Section 412
of the Internal Revenue Code on or before the due date for such
installment or other payment, if such failure could result in the
imposition of a Lien or otherwise have a Material Adverse Effect on the
Borrower or the REIT.
(c) Amendment of Charter or By-Laws. The REIT shall not amend its
charter documents or by-laws, if such amendment will have a Material
Adverse Effect upon the Borrower or the REIT or the REIT's ability to
perform its obligations under the Loan Documents.
(d) Disposal of Ownership Interests. The REIT will not directly
or indirectly convey, sell, transfer, assign, pledge or otherwise
encumber or dispose of any of its 100% ownership interest in each of
Paragon GP Holdings and Paragon LP Holdings.
Section 8.3 With respect to Paragon GP Holdings:
(a) Restriction on Fundamental Changes.
(1) Paragon GP Holdings shall not enter into any merger or
consolidation in which the REIT or the Borrower is not the surviving
entity or liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution).
(2) Paragon GP Holdings shall not change its legal structure or Fiscal
Year.
(3) Paragon GP Holdings shall not engage in any line of business
inconsistent with Section 7.3(f).
(4) Paragon GP Holdings shall not have an Investment in any Person
other than the Borrower and Subsidiaries of Borrower and any such
Investment shall be limited solely to an equity interest of no more
than 1%.
(b) ERISA. Paragon GP Holdings shall not, and shall not permit any
ERISA Affiliates to, do any of the following to the extent that such
act or failure to act would result in the aggregate, after taking into
account any other such acts or failure to act, in a Material Adverse
Effect on the Borrower or the REIT;
(1) engage, or knowingly permit an ERISA Affiliate to
engage, in any prohibited transaction described in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code which is not exempt under
Section 407 or 408 of ERISA
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or Section 4975(d) of the Internal Revenue Code for which a class
exemption is not available or a private exemption has not been
previously obtained from the DOL;
(2) Permit to exist any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Internal Revenue Code),
whether or not waived;
(3) Fail, or permit an ERISA Affiliate to fail, to pay timely required
contributions or annual installments due with respect to any waived
funding deficiency to any Plan if such failure could result in the
imposition of a Lien or otherwise have a Material Adverse Effect on
the Borrower or the REIT;
(4) Terminate, or permit an ERISA Affiliate to terminate, any Benefit
Plan which would result in any liability of the REIT or an ERISA
Affiliate under Title IV of ERISA; or
(5) Fail, or permit any ERISA Affiliate to fail, to pay any required
installment under section (m) of Section 412 of the Internal Revenue
Code or any other payment required under Section 412 of the Internal
Revenue Code on or before the due date for such installment or other
payment, if such failure could result in the imposition of a Lien or
otherwise have a Material Adverse Effect on the Borrower or the REIT.
(c) Amendment of Charter or By-Laws. Paragon GP Holdings shall not
amend its charter documents or by-laws, if such amendment will have a
Material Adverse Effect upon the Borrower or the REIT or Paragon GP
Holdings' ability to perform its obligations under the Loan Documents.
(d) Disposal of Units. Paragon GP Holdings shall not directly or
indirectly convey, sell, transfer, assign, pledge or otherwise
encumber or dispose of any Units of the Borrower, except that Paragon
GP Holdings may sell, transfer or dispose of Units in connection with
any cancellation or repurchase of REIT Securities by the REIT.
Section 8.4 With respect to Paragon LP Holdings:
(a) Restriction on Fundamental Changes.
(1) Paragon LP Holdings shall not enter into any merger or
consolidation in which the REIT or the Borrower is not the surviving
entity or liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution).
(2) Paragon LP Holdings shall not change its legal structure or Fiscal
Year.
81
(3) Paragon LP Holdings shall not engage in any line of business other
than owning Units in the Borrower.
(4) Paragon LP Holdings shall not have an Investment in any Person
other than the Borrower and such Investment shall be limited solely to
Units.
(b) ERISA. Paragon LP Holdings shall not, and shall not permit any
ERISA Affiliates to, do any of the following to the extent that such
act or failure to act would result in the aggregate, after taking into
account any other such acts or failure to act, in a Material Adverse
Effect on the Borrower or the REIT;
(1) engage, or knowingly permit an ERISA Affiliate to engage, in
any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code which is not exempt under
Section 407 or 408 of ERISA or Section 4975(d) of the Internal Revenue
Code for which a class exemption is not available or a private
exemption has not been previously obtained from the DOL;
(2) Permit to exist any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Internal
Revenue Code), whether or not waived;
(3) Fail, or permit an ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any
waived funding deficiency to any Plan if such failure could result in
the imposition of a Lien or otherwise have a Material Adverse Effect
on the Borrower or the REIT;
(4) Terminate, or permit an ERISA Affiliate to terminate, any
Benefit Plan which would result in any liability of the REIT or an
ERISA Affiliate under Title IV of ERISA; or
(5) Fail, or permit any ERISA Affiliate to fail, to pay any
required installment under section (m) of Section 412 of the Internal
Revenue Code or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment
or other payment, if such failure could result in the imposition of a
Lien or otherwise have a Material Adverse Effect on the Borrower or
the REIT.
(c) Amendment of Charter or By-Laws. Paragon LP Holdings shall not
amend its charter documents or by-laws, if such amendment will have a
Material Adverse Effect upon the Borrower or the REIT or Paragon LP
Holdings' ability to perform its obligations under the Loan Documents.
(d) Disposal of Units. Paragon LP Holdings shall not directly or
indirectly convey, sell, transfer, assign, pledge or otherwise
encumber or dispose of any Units of the Borrower,
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except that Paragon LP Holdings may sell, transfer or dispose of Units
in connection with any cancellation or repurchase of REIT Securities
by the REIT.
ARTICLE 9
FINANCIAL COVENANTS
Borrower covenants and agrees to honor the financial covenants set
forth in Addendum I to this Agreement (as amended from time to time
with the consent of Borrower and all Lenders) on and after Restatement
Date until payment in full of all the Obligations, the expiration of
all Commitments and the termination of this Agreement.
ARTICLE 10
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
Section10.1 Events of Default. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. Borrower shall fail
to pay (1) any amount due on the Termination Date under the Loan
Documents; (2) any principal when due; (3) any interest on any
Loan within 15 days after the same becomes due; or (4) any fee or
other amount payable under any Loan Documents within 15 days
after written notice from Agent that the same has become due.
(b) Breach of Financial Covenants. Borrower shall fail to
satisfy any financial covenant set forth in Addendum I to this
Agreement and such failure shall continue for 60 days after the
earlier of the date of (1) Agent's receipt of notice thereof from
Borrower, and (2) notice thereof from Agent to Borrower.
(c) Other Defaults. Borrower, the REIT, Paragon GP Holdings,
or Paragon LP Holdings shall fail duly and punctually to perform
or observe any agreement, covenant or obligation binding on
Borrower, the REIT, Paragon GP Holdings, or Paragon LP Holdings
under this Agreement or under any of the other Loan Documents
(other than as described in Sections 10.1(a), 10.1(b), 10.1(c) or
10.1(e)), and with respect to agreements, covenants or
obligations for which no time period for performance is otherwise
provided, such failure shall continue for 15 days after Borrower,
the REIT, Paragon GP Holdings, or Paragon LP Holdings, knew of
such failure (or such lesser period of time as is mandated by
applicable Requirements of Law); provided, however, if such
failure is not capable of cure within such 15 day period, then if
Borrower promptly undertakes action to cure such failure and
thereafter diligently prosecutes such cure to completion within
45 days after Borrower, the REIT, Paragon GP Holdings, or Paragon
LP Holdings knew of such failure, then Borrower shall not be in
default hereunder.
(d) Breach of Representation or Warranty. Any representation
or warranty made or deemed made by Borrower, the REIT, Paragon GP
Holdings, or Paragon LP Holdings to
83
Agent or any Lender herein or in any of the other Loan Documents, or
in any statement, certificate or financial statements at any time
given by Borrower pursuant to any of the Loan Documents, shall be
false or misleading in any material respect on the date such
representation or warranty was made.
(e) Default as to Other Indebtedness. Borrower or the REIT shall
have (A) defaulted under any Other Indebtedness of such party (other
than Nonrecourse Indebtedness) and as a result thereof the holder(s)
of such Other Indebtedness shall have accelerated such Other
Indebtedness, if the aggregate amount of such accelerated Other
Indebtedness (other than Nonrecourse Indebtedness), together with the
aggregate amount of any Other Indebtedness (other than Nonrecourse
Indebtedness) of such party which has theretofore been accelerated, is
$5,000,000 or more; or (B) defaulted under Nonrecourse Indebtedness of
such party and as a result thereof the holder or holders of such
Nonrecourse Indebtedness shall have accelerated such Nonrecourse
Indebtedness, if the aggregate amount of such accelerated Nonrecourse
Indebtedness, together with the aggregate amount of any Nonrecourse
Indebtedness of such party which has been theretofore accelerated, is
$25,000,000.00 or more.
(f) Involuntary Bankruptcy; Appointment of Receiver, etc.
(1) An involuntary case shall be commenced against
Borrower, the REIT, Paragon GP Holdings, or Paragon LP Holdings and the
petition shall not be dismissed within 60 days after commencement of
the case, or a court having jurisdiction shall enter a decree or order
for relief in respect of the Borrower, the REIT, Paragon GP Holdings,
or Paragon LP Holdings as the case may be, in an involuntary case,
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect; or any other similar relief shall be granted under
any applicable federal, state or foreign law, or
(2) A decree or order of a court having jurisdiction
shall be entered for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers
over Borrower, the REIT, Paragon GP Holdings, or Paragon LP Holdings,
or over all or a substantial part of the Property of the Borrower, the
REIT, Paragon GP Holdings, or Paragon LP Holdings, or an interim
receiver, trustee or other custodian shall be appointed for the
Borrower, the REIT, Paragon GP Holdings, or Paragon LP Holdings, or of
all or a substantial part of the Property of the Borrower, the REIT,
Paragon GP Holdings, or Paragon LP Holdings, or a warrant of
attachment, execution or similar process against any substantial part
of the Property of the Borrower, the REIT, Paragon GP Holdings, or
Paragon LP Holdings, shall be issued and any such event shall not be
stayed, vacated, dismissed, bonded or discharged within 60 days of
entry, appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. (1) The
Borrower, the REIT, Paragon GP Holdings, or Paragon LP Holdings, shall
have an order for relief entered with respect to it or commence a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall consent to the entry
of an order for relief in an involuntary case, or to the conversion of
an involuntary case to a voluntary case, under any such law, or shall
consent to the appointment of or taking of possession by a receiver,
trustee or other custodian for all or a substantial part of its
Property; (2) the Borrower, the REIT, Paragon GP
84
Holdings, or Paragon LP Holdings, shall make any assignment for the
benefit of creditors or shall be unable or fail, or admit in writing
its inability, to pay its debts as such debts become due; or, (3) the
General Partner of Borrower, or the board of directors (or any
committee thereof) of any of the REIT, Paragon GP Holdings, or Paragon
LP Holdings, adopts any resolution or otherwise authorizes any action
to approve any of the foregoing.
(h) Judgments and Attachments. (1) Any money judgment (other than
a money judgment covered by insurance, but only if the insurer has
admitted liability with respect to such money judgment), writ or
warrant of attachment, or similar process involving in any case an
amount in excess of $1,000,000.00 shall be entered or filed against
the Borrower, the REIT, Paragon GP Holdings, or Paragon LP Holdings,
or their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of 30 days; or (2) any judgment or
order of any court or administrative agency awarding material damages
shall be entered against the Borrower, the REIT, Paragon GP Holdings,
or Paragon LP Holdings, in any action under the Federal securities
laws seeking rescission of the purchase or sale of, or for damages
arising from the purchase or sale of, any Securities, such judgment or
order shall have become final after exhaustion of all available
appellate remedies and, in Agent's judgment, the payment of such
judgment or order will have a Material Adverse Effect on the Borrower
or the REIT, as the case may be.
(i) Dissolution. Any order, judgment or decree shall be entered
against the Borrower, the REIT, Paragon GP Holdings or Paragon LP
Holdings, decreeing its involuntary dissolution or split up and such
order shall remain undischarged and unstayed for a period in excess of
30 days; or the Borrower, the REIT, Paragon GP Holdings or Paragon LP
Holdings shall otherwise dissolve or cease to exist.
(j) Loan Documents; Failure of Security or Subordination. Except
as provided in Section 3.2, if for any reason (1) any material
provision of a Loan Document shall cease to be in full force and
effect, or any Lien intended to be created by any Loan Document shall
cease to be or is not valid or perfected; (2) any Lien in favor of
Agent contemplated by this Agreement or any Loan Document shall, at
any time, be invalidated or otherwise cease to be in full force and
effect; or (3) any such Lien or any Obligation shall be subordinated
or shall not have the priority contemplated by this Agreement or the
Loan Documents for any reason; and such failure shall continue for
more than 15 days after Agent provides written notice thereof to
Borrower.
(k) ERISA Liabilities. Any Termination Event occurs which will or
is reasonably likely to subject Borrower, the REIT, Paragon GP
Holdings, or Paragon LP Holdings, or any ERISA Affiliate of any of
them, to a liability which Agent reasonably determines will have a
Material Adverse Effect on Borrower or the REIT, or any ERISA
Affiliate of any of them, the plan administrator of any Benefit Plan
applies for approval under Section 412(d) of the Internal Revenue Code
for a waiver of the minimum funding standards of Section 412(a) of the
Internal Revenue Code and Agent reasonably determines that the
business hardship upon which the Section 412(d) waiver was based will
or could reasonably be anticipated to subject Borrower, the REIT, or
any ERISA Affiliate of any of them, to a liability which Agent
determines will have a Material Adverse Effect on Borrower or the
REIT.
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(l) Solvency. Borrower, the REIT, Paragon GP Holdings, or Paragon
LP Holdings shall cease to be Solvent.
(m) Management. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall cease to be active in the
executive and operational management of Borrower and the REIT for any
reason whatsoever during the initial term of this Agreement, and if
exercised, during the extension period provided for in Section 2.1(d),
and either (1) Borrower and the REIT fail to propose and appoint a
management replacement for ▇▇. ▇▇▇▇▇▇ who is acceptable to Agent and
Requisite Lenders within 180 days of his death, incapacity,
resignation or termination, or (2) at least two of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, fail to remain active in
the management, or serve on the Board of Directors of the REIT.
(n) Loss of Public Services. The curtailment in availability to
any Borrowing Base Property of utilities or other public services
necessary for the full occupancy and use of such Borrowing Base
Property, or the prohibition, enjoining or interruption of Borrower's
right to occupy, use or lease such Borrowing Base Property for a
continuous period of more than 30 days.
(o) Unauthorized Dispositions. The sale, conveyance, transfer,
assignment, mortgage, hypothecation, encumbrance (other than Permitted
Liens) or pledge, whether voluntary, involuntary or by operation of
law (herein collectively called "Disposition"), of (1) any Borrowing
Base Property or any interest therein, (2) ownership of the general
partnership interest in Borrower, or (3) the ownership of any stock in
the general partner of Borrower, as the case may be (unless the
corporation is a corporation required to file reports under Sections
13 or 15(d) of the Securities Exchange Act of 1934), without the prior
written consent of Agent. It is expressly agreed that in connection
with determining whether to grant or withhold such consent, Agent may
(but is not obligated to), among other things, (A) consider the
creditworthiness of the party to whom such Disposition will be made
and its management ability with respect to such Borrowing Base
Property, (B) consider whether or not the security for the payment and
performance of the Obligations, or Agent's ability to enforce its
rights, remedies and recourses with respect to such security, will be
impaired in any way by the proposed Disposition, (C) require, as a
condition to granting such consent, an increase in the rate of
interest payable under the Loan Notes or any other change in the terms
and provisions of the Loan Notes, or any of the other Loan Documents,
(D) require that Agent be reimbursed for all costs and expenses
incurred by Agent in investigating the creditworthiness and management
ability of the party to whom such Disposition will be made and in
determining whether Agent's security will be impaired by the proposed
Disposition, (E) require the payment to Agent of a transfer fee to
cover the cost of documenting the Disposition in its records, (F)
require the payment of its reasonable attorneys' fees in connection
with Disposition, (G) require the express assumption of the payment
and performance of the Obligations by the party to whom such
Disposition will be made (with or without release of Borrower from
liability for such Obligations), (H) require the execution of
assumption agreements, modification agreements, supplemental security
documents, financing statements and such other documents or
instruments as Agent shall reasonably require, satisfactory in form
and substance to Agent, (I) require endorsements (to the extent
available under applicable law) to any existing mortgagee title
insurance policies insuring Agent's liens and security interests
covering such Borrowing Base Property, and (J) require additional
security for the payment and performance of the Obligations; or
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(p) Lien Priority. Any Mortgage shall at any time cease to be a
valid first lien upon a Borrowing Base Property for any reason.
(q) Unauthorized Distributions. For any Fiscal Quarter,
distributions by Borrower on account of Units exceeds the sum of (1)
the product of (A) the aggregate amount of any dividends declared
during such Fiscal Quarter and (B) the sum of (i) the number of
outstanding shares of common stock of the REIT and (ii) the number of
Units owned by Persons other than Paragon GP Holdings and Paragon LP
Holdings and (2) the aggregate amount of expenses allocable to and
payable by each of Paragon GP Holdings, Paragon LP Holdings and the
REIT during such Fiscal Quarter, as substantiated in supporting
documentation provided to Agent.
An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with Section 12.5.
Section10.2 Rights and Remedies.
(a) Acceleration and Other Remedies.
(1) Upon the occurrence of any Event of Default described in
the foregoing Sections 10.1(f) or 10.1(g) with respect to the
Borrower, or the REIT, the Commitments shall automatically and
immediately terminate and the unpaid principal amount of and any
and all accrued interest on the Loans shall automatically become
immediately due and payable, together with all additional
interest from time to time accrued thereon, and without
presentment, demand or protest or other requirements of any kind
(including without limitation valuation and appraisement,
diligence, presentment, notice of intent to demand or accelerate,
or notice of acceleration), all of which are hereby expressly
waived by Borrower, and the obligations of Lenders to make any
Loans hereunder shall thereupon terminate.
(2) Upon the occurrence and during the continuance of any
other Event of Default, Agent shall, at the request, or may, with
the consent, of Requisite Lenders, by written notice to Borrower,
(A) declare that the Commitments are terminated, whereupon the
Commitments and the obligation of Lenders to make any Loan
hereunder shall immediately terminate, and/or (B) declare the
unpaid principal amount of and any and all accrued and unpaid
interest on the Loans, and all of the other Obligations to be,
and the same shall thereupon be, immediately due and payable with
all additional interest from time to time accrued thereon, and
without presentment, demand, or protest or other requirements of
any kind (including without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand
or accelerate, or notice of acceleration), all of which are
hereby expressly waived by Borrower.
(3) After acceleration, upon the request of, or if consented
to by, the Requisite Lenders, Agent shall foreclose on the
Collateral.
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(4) Notwithstanding Section 10.2(a)(2) above, if 90 days
after the date of the written notice delivered by Agent to all
Lenders of the occurrence of an Event of Default under Section
10.1(a), fewer than the Requisite Lenders have requested, or have
been deemed to have consented to, (A) termination of the
Commitments, as provided in Section 10.2(a)(2)(A), and/or (B)
acceleration of the Loans and all other Obligations, as provided
in Section 10.2(a)(2)(B), and/or (C) any other course of action
recommended by Agent, then, provided that such Event of Default
is continuing and Lenders whose Pro Rata Shares represent at
least fifty-one percent (51%) of the aggregate Commitments, have
requested, or have been deemed to have consented to, termination
of the Commitment, as provided in Section 10.2(a)(2)(A), and/or
acceleration of the Loans and all other Obligations, as provided
in Section 10.2(a)(2)(B), and/or any other course of action
recommended by Agent, as the case may be, Agent shall take such
action, as shall have been requested or consented to.
(5) Notwithstanding Section 10.2(a)(3) above, if 90 days
after the acceleration of the Loans and all other Obligations, as
provided in Section 10.2(a)(2)(B) or Section 10.2(a)(4), fewer
than the Requisite Lenders but Lenders whose Pro Rata Shares
represent at least fifty-one percent (51%) of the aggregate
Commitments, have requested, or have been deemed to have
consented to, the foreclosure of the Collateral, as provided in
Section 10.2(a)(3), then Agent shall foreclose on the Collateral.
(b) Access to Information. If an Event of Default then exists,
Agent shall have, in addition to and not by way of a limitation of any
other rights and remedies contained in this Agreement or in the other
Loan Documents, the right within 48 hours after notice to Borrower to
obtain access to Borrower's data processing equipment, computer
hardware and software relating to the Borrowing Base Properties and
the other Collateral, and its accounting information relating to the
Borrowing Base Properties and the other Collateral, and to use all of
the foregoing and the information contained therein in any manner
Agent deems appropriate which is related to the preservation or
disposition of the Borrowing Base Properties and the other Collateral
or to the collection of the Obligations. Borrower hereby authorizes
any accountant or management Agent employed by Borrower to deliver
such items and information to Agent. Notwithstanding anything to the
contrary contained in the Loan Documents, upon the occurrence of and
during the continuance of an Event of Default, Agent shall be entitled
to request and receive, by or through Borrower or appropriate legal
process, any and all information concerning the Borrower, the REIT,
Paragon GP Holdings, Paragon LP Holdings, the Management Company, or
any Property of any of them, which is reasonably available or
obtainable.
(c) Use of Intangibles. To the extent Borrower has the power,
without violating the terms of any agreement existing as of the
Closing Date, to grant such a license, Agent (on behalf of all
Lenders) is hereby granted a license or other right to use, without
charge, Borrower's copyrights, rights of use of any name (other than
the name "Paragon," derivatives thereof and any trademarks, trade
names, service marks or logos, associated with the name Paragon),
trade secrets, trade names, tradestyles, trademarks, service marks and
advertising matter, or any property of a similar nature, as it
pertains to the Collateral, advertising for sale and selling any
Collateral.
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(d) IWaiver of Demand. Demand, presentment, protest and notice of
nonpayment are hereby waived by Borrower and the REIT. Borrower and
the REIT also waive, to the extent permitted by law, the benefit of
all valuation, appraisal and exemption laws.
(e) Waivers, Amendments and Remedies. No delay or omission of
Agent or Lenders to exercise any right under any Loan Document shall
impair such right or be construed to be a waiver of any Event of
Default or an acquiescence therein, and any single or partial exercise
of any such right shall not preclude other or further exercise thereof
or the exercise of any other right, and no waiver, amendment or other
variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in a writing signed by Agent after
obtaining written approval thereof or the signature thereon of those
Lenders required to approve such waiver, amendment or other variation,
and then only to the extent specifically set forth in such writing.
All remedies contained in the Loan Documents or by law afforded shall
be cumulative and available to Agent and Lenders until the Obligations
have been paid in full, the Commitments have expired or terminated and
this Agreement has been terminated.
ARTICLE 11
AGENCY PROVISIONS
Section11.1 Appointment.
(a) Each Lender hereby (i) designates and appoints ▇▇▇▇▇ Fargo as
Agent of such Lender under this Agreement and the Loan Documents, (ii)
authorizes and directs Agent to enter into the Loan Documents other
than this Agreement for the benefit of Lenders, and (iii) each Lender
hereby authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Loan Documents and to exercise
such powers as are set forth herein or therein, together with such
other powers as are reasonably incidental thereto, subject to the
limitations referred to in Sections 11.10(a), 11.10(b), 11.10(c) and
12.5. Agent agrees to act as Agent for the Lenders on the express
conditions contained in this Article 11.
(b) The provisions of this Article 11 are solely for the benefit
of Agent and Lenders, and Borrower shall not have any rights to rely
on or enforce any of the provisions hereof (other than as expressly
set forth in Sections 11.3, 11.9, or 11.13). In performing its
functions and duties under this Agreement, Agent shall act solely as
Agent of Lenders and does not assume and shall not be deemed to have
assumed any obligation toward, or relationship of agency or trusts
with or for, Borrower or any other Person.
Section11.2 Nature of Duties. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or
in the Loan Documents. The duties of Agent shall be administrative in
nature, consistent with its obligations hereunder. Subject to the
provisions of Sections 11.5 and 11.7, Agent shall administer the Loans
in the same manner as it administers its own loans. Agent shall not
have by reason of this Agreement or its designation as Agent a
fiduciary relationship in respect of any Lender. Promptly upon
execution by Borrower, Agent shall deliver to each Lender an original,
executed Loan Note in the original principal amount of such Lender's
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Commitment payable to the order of such Lender. All original, executed
Loan Documents other than the Loan Notes shall be retained by Agent.
Agent will deliver, however, to each Lender a true, complete and
correct copy of each Loan Document listed on the Closing Checklist.
Nothing in this Agreement or any of the Loan Documents, expressed or
implied, is intended or shall be construed to impose upon Agent any
obligation in respect of this Agreement or any of the Loan Documents
except as expressly set forth herein or therein. Agent shall not have
by reason of this Agreement a fiduciary relationship with any Lender.
Each Lender shall make its own independent investigation of the
financial condition and affairs of the Borrower, the REIT, Paragon GP
Holdings, Paragon LP Holdings and each Borrowing Base Property in
connection with the making and the continuance of the Loans hereunder
and shall make its own appraisal of the creditworthiness of the
Borrower, and, except as specifically provided herein, Agent shall not
have any duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information with
respect thereto, whether coming into its possession before the Closing
Date or at any time or times thereafter.
Section11.3 Loan Disbursements.
(a) Not later than the next Business Day following receipt of a
Notice of Borrowing, Agent shall send a copy thereof by facsimile to
each other Lender and shall otherwise notify each Lender of the
proposed Borrowing and the Funding Date. Each Lender shall make
available to Agent the amount of such Lender's Pro Rata Share of such
Borrowing in immediately available funds not later than the time
designated in Section 11.3(b). Unless Agent shall have been notified
by any Lender prior to such time for funding in respect of any
Borrowing that such Lender does not intend to make available to Agent
such Lender's Pro Rata Share of such Borrowing, Agent may assume that
such Lender has made such amount available to Agent. If a Lender (a
"Non-Funding Lender") does not make available to Agent such Lender's
Pro Rata Share of such Borrowing, any other Lender (a "Funding
Lender") in its sole discretion may, but shall not be obligated to,
fund to Borrower, all or any part of such Non-Funding Lender's Pro
Rata Share of such Borrowing. Such Non-Funding Lender shall pay to
such Funding Lender on demand the amount so funded by such Funding
Lender, together with interest thereon at the Federal Funds Rate. If
such Non-Funding Lender pays such Funding Lender the amount so funded
by such Funding Lender, then such amount shall constitute all or part
of such Non-Funding Lender's Pro Rata Share of such Borrowing. If,
however, the amount so funded by such Funding Lender is not made
available to such Funding Lender by the Non-Funding Lender, then
Borrower agrees to repay such Funding Lender such amount, together
with interest thereon at the Base Rate for each day from the date such
amount is made available to Borrower until the date such amount is
repaid to such Funding Lender. If both such Non-Funding Lender and
Borrower shall have paid and repaid, respectively, such corresponding
amount, such Funding Lender shall promptly return to Borrower the
refunded amount in same day funds, together with the interest thereon
that Borrower paid to such Funding Lender. Nothing in this Section
11.3(a) shall alter the respective rights and obligations of the
parties hereunder in respect of a Defaulting Lender or a Non-Pro Rata
Loan.
(b) Requests by Agent for funding by Lenders of Loans will be
made by telecopy. Each Lender shall make the amount of its Loan
available to Agent in Dollars and in immediately available funds, to
such bank and account, in El Segundo, California as Agent may
designate, not
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later than 10:00 A.M. California time, on the Funding Date designated
in the Notice of Borrowing with respect to such Loan, but in no event
earlier than two (2) Business Days following Lender's receipt of the
applicable Notice of Borrowing.
(c) Nothing in Section 11.3(a) shall be deemed to relieve any
Lender of its obligation hereunder to make its Pro Rata Share of Loans
on any Funding Date, nor shall any Lender be responsible for the
failure of any other Lender to perform its obligation to make any Loan
hereunder, and the Commitment of any Lender shall not be increased or
decreased as a result of the failure by any other Lender to perform
its obligation to make a Loan.
Section11.4 Distribution and Apportionment of Payments.
(a) Subject to Section 11.4(b), payments actually received by
Agent for the account of Lenders shall be paid to them promptly after
receipt thereof by Agent, but in any event within one Business Day.
Agent shall pay to such Lenders interest thereon, at the lesser of (1)
the Federal Funds Rate and (2) the rate of interest applicable to such
Loans, from the Business Day following receipt of such funds by Agent
until such funds are paid in immediately available funds to such
Lenders. Subject to Section 11.4(b), all payments of principal and
interest in respect of outstanding Loans, all payments of the fees
described in this Agreement, and all payments in respect of any other
Obligations shall be allocated among such of Lenders as are entitled
thereto, in proportion to their respective Pro Rata Shares or
otherwise as provided herein. Agent shall promptly distribute, but in
any event within one Business Day, to each Lender by wire transfer as
set forth on the appropriate counterpart signature page hereof, or on
the Assignment and Assumption, or as a Lender may request in writing,
such funds as it may be entitled to receive. Agent shall not be bound
to inquire into or determine the validity, scope or priority of any
interest or entitlement of any Lender and may suspend all payments and
seek appropriate relief (including, without limitation, instructions
from Requisite Lenders or all Lenders, as applicable, or an action in
the nature of interpleader) in the event of any doubt or dispute as to
any apportionment or distribution contemplated hereby. The order of
priority herein is set forth solely to determine the rights and
priorities of Lenders as amongst themselves and may at any time or
from time to time be changed by Lenders as they may elect, in writing
in accordance with Section 12.5, without necessity of notice to, or
consent of or approval by, Borrower or any other Person. All payments
or other sums received by Agent for the account of Lenders (including,
without limitation, principal and interest payments, the proceeds of
any and all insurance maintained with respect to any collateral, and
all proceeds from the condemnation of any Collateral) shall be held by
Agent, solely for the benefit of Lenders, consistent with the Loan
Documents, and shall not constitute assets of Agent.
(b) Notwithstanding any provision hereof to the contrary, until
such time as a Defaulting Lender has funded its Pro Rata Share which
was previously a Non Pro Rata Loan, or all other Lenders have received
payment in full (whether by repayment or prepayment) of the principal
and interest due in respect of such Non Pro Rata Loan, all of the
Obligations owing to such Defaulting Lender hereunder shall be
subordinated in right of payment, as provided in the following
sentence, to the prior payment in full of all principal, interest and
fees in respect of all Non Pro Rata Loans in which the Defaulting
Lender has not funded its Pro Rata Share (such principal, interest and
fees being referred to as "Senior Loans"). All amounts paid by
Borrower and otherwise due to be
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applied to the Obligations owing to the Defaulting Lender pursuant to
the terms hereof shall be distributed by Agent to the other Lenders in
accordance with their respective Pro Rata Shares (recalculated for
purposes hereof to exclude the Defaulting Lender's Commitment), until
all Senior Loans have been paid in full. This provision governs only
the relationship among Agent, each Defaulting Lender, and the other
Lenders. Nothing herein shall limit the obligation of Borrower to
repay all Loans in accordance with the terms of this Agreement. The
provisions of this Section 11.4(b) shall apply and be effective
regardless of whether an Event of Default occurs and is then
continuing, and notwithstanding (1) any other provision of this
Agreement to the contrary; (2) any instruction of Borrower as to its
desired application of payments; or (3) the suspension of such
Defaulting Lender's right to vote on matters which are subject to the
consent or approval of Requisite Lenders or all Lenders. No Unused
Facility Fee or any other fee shall accrue in favor of, or be payable
to, such Defaulting Lender from the date of any failure to fund Loans
or reimburse Agent for any Liabilities and Costs as herein provided
until such failure has been cured, and Agent shall be entitled to (A)
collect interest from such Defaulting Lender for the period from the
date on which the payment was due until the date on which the payment
is made at the Federal Funds Rate for each day during such period; (B)
withhold or setoff, and apply to the payment of the defaulted amount
and any related interest, any amounts to be paid to such Defaulting
Lender under this Agreement; and (C) bring an action or suit against
such Defaulting Lender in a court of competent jurisdiction to recover
the defaulted amount and any related interest. In addition, the
Defaulting Lender shall indemnify, defend and hold Agent and each of
the other Lenders harmless from and against any and all Liabilities
and Costs, plus interest thereon, at a rate which is 4% per annum
above the Base Rate, which they may sustain or incur by reason or as a
direct consequence of the Defaulting Lender's failure or refusal to
abide by its obligations under this Agreement.
Section11.5 Rights, Exculpation, Etc. None of Agent, any Affiliate of
Agent, nor any of their respective officers, directors, employees,
Agents, attorneys or consultants, shall be liable to any Lender for
any action taken or omitted by them hereunder or under any of the Loan
Documents, or in connection herewith or therewith, except that Agent
shall be liable for its gross negligence or willful misconduct (which
shall include fraud and bad faith) in the performance or
nonperformance of its express obligations hereunder. In the absence of
gross negligence or willful misconduct (which shall include fraud and
bad faith), Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith pursuant to Section
11.4, and if any such apportionment or distribution is subsequently
determined to have been made in error, the sole recourse of any Person
to whom payment was due, but not made, shall be to recover from the
recipients of such payments any payment in excess of the amount to
which they are determined to have been entitled. Agent shall not be
responsible to any Lender for any recitals, statements,
representations or warranties herein or for the execution,
effectiveness, genuineness, validity, enforceability, collectability
or sufficiency of this Agreement, any of the Mortgage Documents or any
of the other Loan Documents, or any of the transactions contemplated
hereby and thereby; or for the financial condition of the Borrower, or
the REIT, or any of their respective Subsidiaries or Affiliates. Agent
shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or
conditions of this Agreement or any of the Loan Documents or the
financial condition of the Borrower or the REIT, or any of their
Subsidiaries or Affiliates, or the existence or possible existence of
any Unmatured Event of Default or Event of Default.
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Section11.6 Reliance. Agent and each Lender shall be entitled to
rely upon any written notices, statements, certificates, orders or
other documents, telecopies or any telephone message believed by it in
good faith to be genuine and correct and to have been signed, sent or
made by the proper Person, and with respect to all matters pertaining
to this Agreement or any of the other Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including
counsel for Borrower), independent public accountants and other
experts selected by it.
Section11.7 Indemnification. To the extent that Agent is not
reimbursed and indemnified by Borrower, Lenders will reimburse, within
ten Business Days after notice from Agent, and indemnify and defend
Agent for and against any and all Liabilities and Costs which may be
imposed on, incurred by, or asserted against, it in any way relating
to or arising out of this Agreement, the Mortgage Documents or any of
the other Loan Documents or any action taken or omitted by Agent or
under this Agreement, the Mortgage Documents or any of the other Loan
Documents, in proportion to each Lender's Pro Rata Share. No Lender,
however, shall be liable for any portion of such Liabilities and Costs
resulting from Agent's gross negligence or willful misconduct (which
shall include fraud and bad faith). The obligations of Lenders under
this Section 11.7 shall survive the payment in full of all obligations
and the termination of this Agreement. In the event that after payment
and distribution of any amount by Agent to Lenders, any Lender or
third party, including Borrower, any creditor of Borrower, or a
trustee in bankruptcy, recovers from Agent any amount found to have
been wrongfully paid to Agent or disbursed by Agent to Lenders, then
Lenders, in proportion to their respective Pro Rata Shares, or
otherwise as may have been distributed to Lenders, shall reimburse
Agent for all such amounts. Notwithstanding the foregoing, Agent shall
not be obligated to advance Liabilities and Costs and may require the
deposit by each Lender of its Pro Rata Share of any material
Liabilities and Costs anticipated by Agent before they are incurred or
made payable.
Section11.8 Agent and Lenders Individually. With respect to its
Pro Rata Share of the Commitments hereunder and the Loans made by it,
Agent shall have and may exercise the same rights and powers hereunder
and is subject to the same obligations and liabilities as, and to the
extent set forth herein for, any other Lender. The terms "Lenders,"
"Requisite Lenders," "Supermajority Lenders" or any similar terms may
include Agent in its individual capacity as a Lender or one of the
Requisite Lenders or one of the Supermajority Lenders, but neither the
term "Requisite Lenders" nor the term "Supermajority Lenders" shall
include Agent solely in its capacity as Agent and need not necessarily
include Agent in its capacity as a Lender. Each Lender and the Agent
and their respective Affiliates may accept deposits from, lend money
to, and generally engage in any kind of banking, trust or other
business with Borrower or any of its Subsidiaries or Affiliates.
Section11.9 Successor Agent; Resignation of Agent, Removal of Agent.
(a) Agent may resign from the performance of all of its functions
and duties hereunder at any time by giving at least 30 Business Days
prior written notice to Lenders and Borrower. Agent shall
automatically cease to be Agent hereunder in the event the Federal
Deposit Insurance Corporation or any other Governmental Authority
shall assume control of Agent. For good cause, Requisite Lenders may
remove Agent at any time by giving at least 30 Business Days prior
written notice to Agent, Borrower and all other Lenders. Such
resignation or removal shall
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take effect upon the acceptance by a successor Agent of appointment
pursuant to clauses (b) and (c) below or as otherwise provided below.
Concurrently with the effectiveness of such appointment, (1) Borrower
shall pay to the retiring or removed Agent any accrued and unpaid
Agency Fee, or (2) Agent shall refund to Borrower any prepaid agency
fee; in each case prorated to the effective date of the appointment of
a successor Agent.
(b) Upon any such notice of resignation by or removal of Agent,
Requisite Lenders shall appoint a successor Agent with the consent of
Borrower and with the consent of the proposed successor Agent, which
shall not be unreasonably withheld or delayed. Any successor Agent
must be a bank (1) the senior debt obligations of which (or such
Bank's parent's unsecured senior debt obligations) are rated not less
than Baa-2 by ▇▇▇▇▇'▇ Investors Services, Inc. or a comparable rating
by a rating agency acceptable to Requisite Lenders; and (2) which has
total assets in excess of $10,000,000,000. Such successor Agent shall
separately confirm in writing with Borrower the fee to be paid to such
successor Agent.
(c) If a successor Agent shall not have been so appointed within
said 30 Business Day period, the retiring or removed Agent, with the
consent of Borrower (which may not be unreasonably withheld or
delayed), shall then appoint a successor Agent who shall meet the
requirements described in subsection (b) above and who shall serve as
Agent until such time, if any, as Requisite Lenders, with the consent
of Borrower, appoint a successor Agent as provided above.
Section11.10 Consent and Approvals.
(a) Each of the following shall require the approval or consent of
Requisite Lenders:
(1) Approval of an increase in the Borrowing Base Value of
any Borrowing Base Property if such increase is the result
of an increase in the Appraised Value of such Borrowing Base
Property (Section 3.3(b));
(2) Approval of a Construction Project on any Borrowing Base
Property (Section 3.4(d));
(3) Approval of changes in management of the Borrower and
the REIT pursuant to Section 8.1(i);
(4) Except as otherwise provided in Section 10.2(a)(4)),
acceleration following an Event of Default (Section
10.2(a));
(5) Except as otherwise provided in Section 10.2(a)(5),
approval of the exercise of rights and remedies under the
Loan Documents following an Event of Default (Section
10.2(a));
(6) Removal of Agent and appointment of a successor to Agent
(Section 11.9);
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(7) Approval of certain Protective Advances (Section
11.11(a));
(8) Except as otherwise provided in Section 11.11(e),
approval of a Post-Foreclosure Plan and related matters
(Section 11.11(e));
(9) Except as referred to in Section 11.10(b), 11.10(c)
below, approval of any amendment, modification or
termination of this Agreement or waiver of any provision
herein;
(10) Approval of any Major Agreement that has provisions
which are inconsistent with Section 3.4(b)(1); and
(11) Any material amendment to a Project Budget; provided,
however, that Agent may consent without the approval of the
Requisite Lenders to changes in the Development Plans and
increases in or reallocations of actual or projected costs
of the Improvements so long as such changes or increases (A)
do not involve a cost of more than the greater of $75,000
for any line item in the Project Budget or 15% of such line
item or (B) do not involve an aggregate increase in the
Project Budget of more than $400,000.
(b) Each of the following shall require the approval or consent
of Supermajority Lenders: (1) acceptance of each new Borrowing Base
Stabilized Property (Section 3.1); and(2) the conversion of a
Borrowing Base Development Property that does not achieve 90% of the
stabilized gross revenues (on an annualized basis) projected for the
first year in the Appraisal for each of three months by the Conversion
Date to a Borrowing Base Stabilized Property pursuant to (Section
3.3(b)); and (3) release of any Borrowing base Property if (a) there
will be only three or fewer Borrowing Base Stabilized Properties which
contribute less than $8,000,000 in value to the Borrowing Base or (b)
the average year of completion of the remaining Borrowing Base
Properties is prior to 1985; and (4) the encumbrance of more than 75%
of Borrower's wholly owned assets on a non-repayable,
cross-collateralized basis.
(c) Each amendment, modification or waiver specifically
enumerated in Section 12.5 shall require the consent of all
Lenders.
(d) Any Interest Period of 12 months shall require the consent of
all Lenders.
(e) In addition to the required consents or approvals referred to
in Sections 11.10(a) and (b) above, Agent may at any time request
instructions from Requisite Lenders with respect to any actions or
approvals which, by the terms of this Agreement or of any of the Loan
Documents, Agent is permitted or required to take or to grant without
instructions from any Lenders, and if such instructions are promptly
requested, Agent shall be absolutely entitled to refrain from taking
any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from taking any
action or withholding any approval under any of the Loan Documents
until it shall have received such instructions from Requisite Lenders.
Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent
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acting or refraining from acting under this Agreement, the Mortgage
Documents or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders or, where applicable, either
Supermajority Lenders or all Lenders. Agent shall promptly notify each
Lender at any time that the Requisite Lenders have instructed Agent to
act or refrain from acting pursuant hereto.
(f) Each Lender agrees that any action taken by Agent at the
direction or with the consent of (1) either the Requisite Lenders or
Supermajority Lenders in accordance with the provisions of this
Agreement or any Loan Document, or (2) Lenders whose Pro Rata Shares
represent at least fifty-one (51%) of the aggregate Commitments, in
accordance with Sections 10.2(a)(4), 10.2(a)(5), and 11.11(e), and the
exercise by Agent at the request or with the consent of (A) either the
Requisite Lenders or Supermajority Lenders of the powers set forth
herein or therein, or (B) Lenders whose Pro Rata Shares represent at
least fifty-one (51%) of the aggregate Commitments, in accordance with
Sections 10.2(a)(4), 10.2(a)(5), and 11.11(e), and together with such
other powers as are reasonably incidental thereto, shall be authorized
by and binding upon all Lenders, except for actions specifically
requiring the approval of all Lenders. All communications from Agent
to Lenders requesting Lenders' determination, consent, approval or
disapproval (i) shall be given in the form of a written notice to each
Lender; (ii) shall be accompanied by a description of the matter or
thing as to which such determination, approval, consent or disapproval
is requested, or shall advise each Lender where such matter or thing
may be inspected, or shall otherwise describe the matter or issue to
be resolved; (iii) shall include, if reasonably requested by a Lender
and to the extent not previously provided to such Lender, written
materials and a summary of all oral information provided to Agent by
Borrower in respect of the matter or issue to be resolved; and (iv)
shall include Agent's recommended course of action or determination in
respect thereof. Each Lender shall reply promptly, but in any event
within 15 Business Days (the "Lender Reply Period"). Unless a Lender
shall give written notice to Agent that it objects to the
recommendation or determination of Agent (together with a written
explanation of the reasons behind such objection) within the Lender
Reply Period, such Lender shall be deemed to have approved of or
consented to such recommendation or determination. With respect to
decisions requiring the approval of Requisite Lenders, Supermajority
Lenders, all Lenders, or Lenders whose Pro Rata Shares represent at
least fifty one percent (51%) of the aggregate Commitments, as
provided in Sections 10.2(a)(4), 10.2(a)(5), and 11.11(e), Agent shall
submit its recommendation or determination for approval of or consent
to such recommendation or determination to all Lenders, and upon
receiving the required approval or consent shall follow the course of
action or determination recommended to Lenders by Agent or such other
course of action recommended by Requisite Lenders, Supermajority
Lenders, all Lenders, or Lenders whose Pro Rata Shares represent at
least fifty-one percent (51%) of the aggregate Commitments, as
provided in Sections 10.2(a)(4), 10.2(a)(5), and 11.11(e), and each
nonresponding Lender shall be deemed to have concurred with such
recommended course of action.
(g) Acceptance of each new Borrowing Base Development Property shall
require the consent of all Lenders.
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Section11.11 Agency Provisions Relating to Collateral.
(a) Agent is hereby authorized, without the necessity of any
notice to or further consent from any Lender, prior to an Event of
Default, to take any action with respect to any Collateral or Loan
Document which may be necessary to perfect and maintain perfected
Liens upon the Collateral granted pursuant to the Loan Documents.
Agent may make, and shall be reimbursed by Lenders (in accordance with
their Pro Rata Shares) to the extent not reimbursed by Borrower for,
Protective Advance(s) during any one calendar year with respect to
each Borrowing Base Property up to the sum of (1) amounts expended to
pay real estate taxes, assessments and governmental charges or levies
imposed upon such Borrowing Base Property; (2) amounts expended to pay
insurance premiums for policies of insurance related to such Borrowing
Base Property; and (3) One Hundred Thousand Dollars ($100,000).
Protective Advances during any calendar year (A) for any Borrowing
Base Property in excess of said sum or (B) that will cause the
aggregate Protective Advances for all Borrowing Base Properties to
exceed Five Hundred Thousand Dollars ($500,000), shall require the
consent of Requisite Lenders. In addition, Agent is hereby authorized
on behalf of all Lenders, without the necessity of any notice to or
further consent from any Lender, to waive the imposition of the late
fees provided for in Section 2.4(e) up to a maximum of four times
during the term of this Agreement.
(b) Lenders hereby irrevocably authorize Agent, at its option and
in its discretion, to release any Lien granted to or held by Agent
upon any Collateral (1) upon termination of the Commitments and
repayment and satisfaction of all Obligations, and termination of this
Agreement, or (2) constituting property being released in compliance
with Section 3.2, or (3) if approved, authorized or ratified in
writing by Agent at the direction of all Lenders. Without limiting
Agent's authority to act without any specific or further authorization
or consent, upon request by Agent at any time, Requisite Lenders shall
confirm in writing Agent's authority to release the Mortgage Documents
with respect to any Borrowing Base Property pursuant to Section 3.2.
Agent shall not be required to execute any document to evidence the
release of the Liens granted to Agent for the benefit of Lenders
herein or pursuant hereto upon any Collateral if, in Agent's opinion,
such document would expose Agent to liability or create any obligation
or entail any consequence other than the release of such Liens without
recourse or warranty, and such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon any
property which shall continue to constitute part of the Collateral.
(c) Except as provided in this Agreement, Agent shall have no
obligation whatsoever to any Lender or to any other Person to assure
that the Collateral exists or is owned by Borrower or is cared for,
protected or insured or has been encumbered or that the Liens granted
to Agent herein or in any of the other Loan Documents or pursuant
hereto or thereto have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any
particular priority.
(d) If Agent (1) employs counsel for advice or other
representation (whether or not any suit has been or shall be filed)
with respect to any Collateral or any part thereof, or any of the Loan
Documents, or the attempt to enforce any security interest or Lien on
any of the Collateral, or (2) commences any proceeding or in any way
seeks to enforce its rights or remedies under the
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Loan Documents against any Person other than any of the Lenders,
irrespective of whether as a result thereof Agent shall acquire title
to any Collateral, either through foreclosure, deed in lieu of
foreclosure or otherwise, each Lender, upon demand therefor from time
to time, shall contribute its share (based on its Pro Rata Share) of
the reasonable costs and/or expenses of any such advice or other
representation, enforcement or acquisition, including, but not limited
to, fees of receivers or trustees, court costs, title company charges,
filing and recording fees, appraisers' fees and fees and expenses of
attorneys to the extent not otherwise reimbursed by Borrower. In the
event of any litigation between Agent and any Lender arising out of
this Agreement, the non-prevailing party in such litigation shall pay
the counsel fees and expenses of the prevailing party(ies) incurred in
such litigation. Any loss of principal and interest resulting from any
Event of Default shall be shared by Lenders in accordance with their
respective Pro Rata Shares. If Agent determines it is necessary to
engage counsel for Lenders from and after the occurrence of an Event
of Default, said counsel shall be selected by Agent and written notice
of such selection, together with a copy of such counsel's engagement
letter and fee estimate, shall be delivered to Lenders; provided,
however, that such engagement of counsel for Lenders by Agent shall
not preclude any Lender from obtaining its own counsel.
(e) If all or any portion of the Collateral is acquired by Agent
as the result of a foreclosure or the acceptance of a deed or
assignment in lieu of foreclosure, or is retained in satisfaction of
all or any part of Borrower's obligations, the title to any such
Collateral, or any portion thereof, shall be held in the name of Agent
or a nominee or Subsidiary of Agent, as Agent, for the ratable benefit
of all Lenders. Agent shall prepare a recommended course of action for
such Collateral (the "Post-Foreclosure Plan"), which shall be subject
to the approval of the Requisite Lenders. If Requisite Lenders do not
approve such Post-Foreclosure Plan, any Lender shall be permitted to
submit an alternative Post-Foreclosure Plan to Agent, and Agent shall
submit any and all such additional Post-Foreclosure Plans to the
Lenders for evaluation and the approval of Requisite Lenders. Any
Post-Foreclosure Plan that has been submitted to all Lenders and that
fewer than the Requisite Lenders but Lenders whose Pro Rata Shares
represent fifty-one percent (51%) of the aggregate Commitments
approve, or are deemed to have approved, shall be binding on all the
Lenders if the Requisite Lenders do not approve, or are not deemed to
have approved, a PostForeclosure Plan within 90 days after Agent
submits its first Post-Foreclosure Plan to all of the Lenders. In
accordance with the approved Post-Foreclosure Plan, Agent shall
manage, operate, repair, administer, complete, construct, restore or
otherwise deal with the Collateral acquired, and shall administer all
transactions relating thereto, including, without limitation,
employing a management Agent, leasing Agent and other Agents,
contractors and employees, including Agents of the sale of such
Collateral, and the collecting of rents and other sums from such
Collateral and paying the expenses of such Collateral. Actions taken
by Agent with respect to the Collateral, which are not provided for in
the approved Post-Foreclosure Plan or reasonably incidental thereto,
shall require the consent of Requisite Lenders by way of supplement to
such Post-Foreclosure Plan. Upon demand therefor from time to time,
each Lender will contribute its share (based on its Pro Rata Share) of
all reasonable costs and expenses incurred by Agent pursuant to the
approved Post-Foreclosure Plan in connection with the construction,
operation, management, maintenance, leasing and sale of such
Collateral. In addition, Agent shall render or cause to be rendered by
the managing Agent, to each of the Lenders, monthly, an income and
expense statement for such Collateral, and each of the Lenders shall
promptly contribute its Pro Rata Share of any operating loss
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for such Collateral, and such other expenses and operating reserves as
Agent shall deem reasonably necessary pursuant to and in accordance
with the approved Post-Foreclosure Plan. To the extent there is net
operating income from such Collateral, Agent shall, in accordance with
the approved Post-Foreclosure Plan, determine the amount and timing of
distributions to Lenders. All such distributions shall be made to
Lenders in accordance with their respective Pro Rata Shares. Lenders
acknowledge that if title to any Collateral is obtained by Agent or
its nominee, such Collateral will not be held as a permanent
investment but will be liquidated as soon as practicable. Agent shall
undertake to sell such Collateral, at such price and upon such terms
and conditions as the Requisite Lenders reasonably shall determine to
be most advantageous. Any purchase money mortgage or deed of trust
taken in connection with the disposition of such Collateral in
accordance with the immediately preceding sentence shall name Agent,
as Agent for Lenders, as the beneficiary or mortgagee. In such case,
Agent and Lenders shall enter into an agreement with respect to such
purchase money mortgage or deed of trust defining the rights of
Lenders in the same Pro Rata Shares as provided hereunder, which
agreement shall be in all material respects similar to this Article 11
insofar as the same is appropriate or applicable.
Section 11.12 Lender Actions Against Collateral. Each Lender
agrees that it will not take any action, nor institute any actions or
proceedings, against Borrower or the REIT under any of the Loan
Documents with respect to exercising claims against or rights in any
Collateral without the consent of Requisite Lenders.
Section 11.13 Assignments and Participations.
(a) After first obtaining the approval of Agent and Borrower,
which approvals will not be unreasonably withheld, each Lender may
assign to one or more banks or financial institutions, all or a
portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment and the Loans
owing to it) and the other Loan Documents; provided, however, that (1)
each such assignment shall be of a constant, and not a varying,
percentage of the assigning Lender's rights and obligations under this
Agreement and the other Loan Documents and the assignment shall cover
the same percentage of such Lender's Commitment and Loans; (2) unless
Agent and Borrower otherwise consent, the aggregate amount of the
Commitment of the assigning Lender being assigned pursuant to each
such assignment (determined as of the date of the Assignment and
Assumption with respect to such assignment) shall in no event be less
than $10,000,000 and shall be an integral multiple of $1,000,000; (3)
after giving effect to such assignment, the aggregate amount of the
Commitment, if any, retained by the assigning Lender shall in no event
be less than $10,000,000.00; (4) at all times prior to its resignation
or replacement, as Agent, ▇▇▇▇▇ Fargo's Commitment shall be equal to
or exceed the Commitment of each other Lender; (5) the parties of each
such assignment shall execute and deliver to Agent, for its approval
and acceptance, an Assignment and Assumption; and (6) Agent shall
receive from the assignor a processing fee of $3,000. Without
restricting the right of Borrower or Agent to reasonably object to any
bank or financial institution becoming an assignee of an interest of a
Lender hereunder, each proposed assignee must be an existing Lender or
a bank or financial institution which (A) has (or, in the case of a
bank which is a subsidiary, such bank's parent has) a rating of its
senior debt obligations of not less than Baa-2 by ▇▇▇▇▇'▇ Investors
Services, Inc. or a comparable rating by a rating agency acceptable to
Agent, and (B) has total assets in excess of
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$10,000,000,000. Each of Agent and Borrower shall give written notice
to the assigning Lender if it objects to the proposed assignment
(together with a written explanation of the reasons behind such
objection) within ten Business Days following receipt of the assigning
Lender's written request for approval of the proposed assignment. Upon
such execution, delivery, approval and acceptance, and upon the
effective date specified in the applicable Assignment and Assumption,
(i) the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Assumption, have the rights and
obligations of a Lender hereunder, and (ii) the Lender-assignor
thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Assumption,
relinquish its rights and be released from its obligations under this
Agreement.
(b) By executing and delivering an Assignment and Assumption, the
Lender-assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (1)
other than as provided in such Assignment and Assumption, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any
other Loan Document, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or
any other Loan Document, or any other instrument or document furnished
pursuant hereto; (2) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of Borrower or the REIT, or the performance or observance by
Borrower or the REIT, Paragon GP Holdings or Paragon LP Holdings, of
any of their respective obligations under any Loan Document or any
other instrument or document furnished pursuant hereto; (3) such
assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in
Article 5 or delivered pursuant to Article 6 to the date of such
assignment and such other Loan Documents and other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Assumption;
(4) such assignee will, independently and without reliance upon Agent,
such assigning Lender or any other Lender and based on such documents
and information as it shall deem appropriate at the time, make its own
credit decisions in taking or not taking action under this Agreement;
(5) such assignee appoints and authorizes Agent to take such action as
Agent on its behalf, and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to Agent by the terms
hereof and thereof, together with such powers as are reasonably
incidental thereto; and (6) such assignee agrees that it will perform
all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender in accordance with their
terms.
(c) Agent shall maintain at its address referred to on the
counterpart signature pages hereof, a copy of each Assignment and
Assumption delivered to and accepted by it, and shall record in the
Loan Account the names and addresses of each Lender and the Commitment
of, and principal amount of the Loans owing to, each Lender from time
to time. Borrower, Agent and Lenders may treat each Person whose name
is recorded in the Loan Account as a Lender hereunder for all purposes
of this Agreement.
(d) Upon its receipt of an Assignment and Assumption executed by
an assigning Lender and an assignee, Agent shall, if such Assignment
and Assumption has been properly
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completed and is in substantially the form of Exhibit A, (1) accept
such Assignment and Assumption; (2) record the information contained
therein in the Loan Account; and (3) give prompt notice thereof to
Borrower. Upon request, Borrower will execute and deliver to Agent an
appropriate replacement Loan Note or replacement Loan Notes in favor
of each assignee (and assignor, if such assignor is retaining a
portion of its Commitment and Loans) reflecting such assignee's (and
assignor's) Pro Rata Share(s) of the Facility. Upon execution and
delivery of such replacement Loan Notes the original Loan Note or Loan
Notes evidencing all or a portion of the Commitments and Loans being
assigned shall be canceled and returned to Borrower.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion
of its Commitment and the Loans owing to it) and the other Loan
Documents; provided, however, that (1) such Lender's obligations under
this Agreement (including, without limitation, its Commitment to
Borrower hereunder) and the other Loan Documents shall remain
unchanged; (2) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations; (3)
Borrower, Agent and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's rights
and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement; and (4) the holder of any
such participation shall not be entitled to voting rights under any
participation agreement except for voting rights with respect to (A)
increases in the Facility; (B) extensions of the Maturity Date, except
as provided in Section 2.1(d); (C) decreases in the interest rates
described in this Agreement; and (D) the release of all or
substantially all of the Collateral, except as specifically authorized
in Sections 3.2 and 11.11. No participant shall be entitled to vote on
any matter until the Lender with which such participant is
participating in the Facility and the Loans confirms such
participant's status as a participant hereunder.
(f) Borrower will use reasonable efforts to cooperate with Agent
and Lenders in connection with the assignment of interests under this
Agreement or the sale of participations herein.
(g) Borrower agrees that any Lender may disseminate to any such
potential purchaser, assignee or participant provided that such
prospective purchaser, assignee, or participant first agrees to be
bound by Section 12.21, all documents and information (including
without limitation all financial information) which have been or are
hereafter provided to or known to Lender with respect to: (1) any
Borrowing Base Property and its operation; (2) any party connected to
the Facility (including without limitation, the Borrower and the
REIT); and/or (3) any lending relationship other than the Facility
which any Lender may have with any party connected with the Facility.
(h) Anything in this Agreement to the contrary notwithstanding,
and without the need to comply with any of the formal or procedural
requirements of this Agreement, including Section 11.13, any Lender
may at any time and from time to time pledge and assign all or any
portion of its rights under all or any of the Loan Documents to a
Federal Reserve Bank. No such pledge or assignment shall release such
Lender from its obligations under the Loan Documents. To facilitate
any such pledge or assignment Agent shall, at the request of such
Lender, enter into a letter
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agreement with the Federal Reserve Bank substantially in the form of
the exhibit to Appendix C to the Federal Reserve Bank of New York
Operating Circular No. 12.
(i) Anything in this Agreement to the contrary notwithstanding,
any Lender may assign all or any portion of its rights and obligations
under this Agreement or the other Loan Documents to another branch
bank or Affiliate of such Lender without first obtaining the approval
of Agent and Borrower; provided that (1) at the time of such
assignment such Lender is not a Defaulting Lender; (2) such Lender
gives Agent and Borrower at least 15 days prior written notice of any
such assignment; (3) the parties to each such assignment execute and
deliver to Agent an Assignment and Assumption; and (4) Agent receives
from assignor a processing fee of $3,000.
(j) No Lender shall be permitted to assign or sell all or any
portion of its rights and obligations under this Agreement or the
other Loan Documents to Borrower or any Affiliate of Borrower.
Section11.14 Ratable Sharing. Subject to Sections 11.3 and 11.4,
Lenders agree among themselves that (a) with respect to all amounts
received by them which are applicable to the payment of the
Obligations, equitable adjustment will be made so that, in effect, all
such amounts will be shared among them ratably in accordance with
their Pro Rata Shares, whether received by voluntary payment, by the
exercise of a right of set-off or banker's lien, by counterclaim or
cross action, or by the enforcement of any or all of the Obligations
or the Loan Documents; and (b) if any of them shall by voluntary
payment or by the exercise of any right of counterclaim, set-off,
banker's lien or otherwise, receive payment of a proportion of the
aggregate amount of the Obligations held by it which is greater than
its Pro Rata Share of the payments on account of the Obligations, the
Lender receiving such excess payment shall purchase, without recourse
or warranty, an undivided interest and participation (which it shall
be deemed to have done simultaneously upon the receipt of such
payment) in such Obligations owed to the other Lenders so that all
such recoveries with respect to such Obligations shall be applied
ratably in accordance with their Pro Rata Shares; provided, that if
all or part of such excess payment received by the purchasing Lender
is thereafter recovered from it, those purchases shall be rescinded
and the purchase prices paid for such participations shall be returned
to that Lender to the extent necessary to adjust for such recovery,
but without interest except to the extent the purchasing Lender is
required to pay interest in connection with such recovery. Borrower
agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 11.14 may, to the fullest extent
permitted by law, exercise all of its rights of payment (including,
subject to Section 12.4, the right of set-off) with respect to such
participation, as fully as if such Lender were the direct creditor of
Borrower in the amount of such participation. No Lender shall exercise
any set-off, banker's lien, or other similar right, in respect of any
Obligations without the prior written approval of Agent.
Section11.15 Delivery of Documents. Agent shall as soon as
reasonably practicable distribute to each Lender at its primary
address set forth on the appropriate counterpart signature page
hereof, or at such other address as a Lender may request in writing,
copies of all documents that Agent receives from Borrower pursuant to
Sections 6.1 and 12.7, all documents that Agent receives or sends
pursuant to Article 2 (other than a Loan Account for Borrower or any
other Lender), and all documents, including notices, that Agent
receives from Borrower requesting any amendment,
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modification or waiver of a provision of this Agreement. In addition,
within 15 Business Days after receipt of a request in writing from a
Lender for written information or documents provided or prepared by
Borrower or for a statement of the Loan Account pursuant to Section
2.3, Agent shall deliver such written information or documents to such
requesting Lender if Agent has possession of such written information
or documents in its capacity as Agent or as a Lender.
Section11.16 Notice of Events of Default. Agent shall not be
deemed to have knowledge or notice of the occurrence of any Unmatured
Event of Default or Event of Default (other than nonpayment of
principal of or interest on the Loans) unless Agent has received
notice in writing from a Lender or Borrower referring to this
Agreement or any other Loan Documents, describing such event or
condition and expressly stating that such notice is a notice of an
Unmatured Event of Default or Event of Default. Should Agent receive
such notice of the occurrence of an Unmatured Event of Default or
Event of Default, or should Agent send Borrower a notice of Unmatured
Event of Default or Event of Default, Agent shall promptly deliver a
copy of the notice thereof to each Lender.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Expenses.
(a) Generally. Borrower agrees upon demand to pay, or reimburse
Agent for, all of Agent's external audit, legal, appraisal, valuation
and investigation expenses, and for all other reasonable out-of-pocket
costs and expenses of every type and nature (including, without
limitation, the reasonable fees, expenses and disbursements of Agent's
outside counsel, auditors, accountants, appraisers, investment
bankers, printers, insurance and environmental advisers, and other
consultants and Agents incurred by Agent at any time (whether prior
to, on or after the date of this Agreement) in connection with (1) its
own audit and investigation of Borrower and the Borrowing Base; (2)
the negotiation, preparation and execution of this Agreement
(including, without limitation, the satisfaction or attempted
satisfaction of any of the conditions set forth in Article 4), the
Mortgage Documents and the other Loan Documents and the making of the
Loans; (3) the review and, if applicable, acceptance of additional
Borrowing Base Properties, including appraisal fees, title charges,
recording fees and reasonable attorneys' fees and costs incurred in
connection therewith; (4) the creation, perfection or protection of
Agent's Liens on the Collateral (including, without limitation, any
reasonable fees and expenses for title and lien searches, local
counsel in various jurisdictions, filing and recording fees and taxes,
duplication costs and corporate search fees); (5) administration of
this Agreement, the other Loan Documents, the Loans and the
Collateral, including, without limitation, consultation with attorneys
in connection therewith and obtaining periodic Appraisals of the
Borrowing Base Properties; and (6) the protection, collection or
enforcement of any of the Obligations or the Collateral.
(b) After an Event of Default. Borrower further agrees to pay, or
reimburse Agent and Lenders, for all reasonable out-of-pocket costs
and expenses, including, without limitation, reasonable attorneys'
fees and disbursements incurred by Agent or Lenders after the
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occurrence of an Event of Default (1) in enforcing any Obligation or
in foreclosing against the Collateral or evaluating, exercising or
enforcing any other right or remedy available by reason of such Event
of Default; (2) in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement in the nature of
a "work-out" or in any insolvency or bankruptcy proceeding; (3) in
commencing, defending or intervening in any litigation or in filing a
petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to Borrower, the REIT, Paragon GP Holdings, or
Paragon LP Holdings, and related to or arising out of the transactions
contemplated hereby; (4) in taking any other action in or with respect
to any suit or proceeding (whether in bankruptcy or otherwise); (5) in
protecting, preserving, collecting, leasing, selling, taking
possession and/or liquidating any of the Collateral; or (6) attempting
to enforce or enforcing any Lien in any of the Collateral or any other
rights under the Mortgage Documents.
Section 12.2 Indemnity. Borrower further agrees to defend, protect,
indemnify and hold harmless Agent, each of the Lenders, each of their
respective Affiliates and participants, and each of the respective
officers, directors, employees, Agents, attorneys and consultants
(including, without limitation, those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set
forth in Article 4) of each of the foregoing (collectively, the
"Indemnitees") from and against any and all Liabilities and Costs,
imposed on, incurred by, or asserted against such Indemnitees (whether
based on any federal or state laws or other statutory regulations,
including, without limitation, securities and commercial laws and
regulations, under common law or at equitable cause, or on contract or
otherwise, including any Liabilities and Costs under federal, state or
local Environmental Laws, or arising as a result of a "prohibited
transaction" under ERISA) to the extent arising from, or in connection
with the past, present or future operations of the Borrower, the REIT,
or their respective predecessors in interest, or the past, present or
future environmental condition of any Borrowing Base Property, the
presence of asbestos-containing materials at any Borrowing Base
Property, the presence of Contaminants in groundwater at any Borrowing
Base Property, or the Release or threatened Release of any Contaminant
into the environment from any Borrowing Base Property), in any manner
relating to or arising out of this Agreement, the Mortgage Documents
or the other Loan Documents, or any act, event or transaction related
or attendant thereto, the making of and participation in the Loans and
the management of the Loans, or the use or intended use of the
proceeds of the Loans (collectively, the "Indemnified Matters");
provided, however, that Borrower shall have no obligation to any
Indemnitee hereunder with respect to (1) matters for which such
Indemnitee has been compensated pursuant to, or for which an exemption
is provided in, Sections 2.4(g), and 2.7 or any other provision of
this Agreement; and (2) Indemnified Matters caused by or resulting
from the willful misconduct, (which shall include fraud and bad faith)
or gross negligence, of that Indemnitee, as determined by a court of
competent jurisdiction. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence
may be unenforceable because it is violative of any law or public
policy, Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees.
Section 12.3 Change in Accounting Principles. Except as otherwise
provided herein, if any changes in accounting principles from those
used in the preparation of the most recent financial statements
delivered to Agent pursuant to the terms hereof are hereinafter
required or
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permitted by the rules, regulations, pronouncements and opinions of
the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with
similar functions) and are adopted by the Borrower, the REIT, Paragon
GP Holdings, Paragon LP Holdings, or the Management Company, with the
agreement of its independent certified public accountants and such
changes result in a change in the method of calculation of any of the
financial covenants, standards or terms found herein, the parties
hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes, with the desired
result that the criteria for evaluating the financial condition of
Borrower shall be the same after such changes as if such changes had
not been made; provided, however, that no change in GAAP that would
affect the method of calculation of any of the financial covenants,
standards or terms shall be given effect in such calculations until
such provisions are amended, in a manner satisfactory to Agent and all
Lenders, to so reflect such change in accounting principles.
Section 12.4 Setoff. In addition to any Liens granted to Agent and any
rights now or hereafter granted under applicable law, and not by way
of limitation of any such Liens or rights, upon the occurrence and
during the continuance of any Event of Default, Agent and each Lender,
upon approval of Agent, is hereby authorized by Borrower at any time
or from time to time, without notice to Borrower, or to any other
Person (any such notice being hereby expressly waived) to set off,
appropriate, and apply any and all deposits (general or special,
including, but not limited to, Indebtedness evidenced by certificates
of deposit, whether matured or unmatured but not including trust
accounts) and any other Indebtedness at any time held or owing by
Agent or such Lender to or for the credit or the account of Borrower
against, and on account of, the Obligations of Borrower to Agent or
such Lender, including but not limited to, all Loans and all claims of
any nature or description arising out of or connected with this
Agreement or any of the other Loan Documents, irrespective of whether
or not (1) Agent or such Lender shall have made any demand hereunder,
or (2) Agent shall have declared the principal of and interest on the
Loans and other amounts due hereunder to be due and payable as
permitted by Article 11 and although said Obligations and liabilities,
or any of them, may be contingent or unmatured. Agent shall provide
written notice to Borrower of the exercise of any right granted in
this Section 12.4 within three Business Days after such right is
exercised.
Section 12.5 Amendments and Waivers. No amendment or modification of
any provision of this Agreement shall be effective without the written
agreement of Requisite Lenders (after notice to all Lenders) and
Borrower (except for amendments to Section 11.4(a) which do not
require the consent of Borrower). No termination or waiver of any
provision of this Agreement (including, without limitation, any waiver
of an Event of Default which does not specifically require the consent
of all Lenders), or consent to any departure by Borrower therefrom,
shall in any event be effective without the written concurrence of
Requisite Lenders (after notice to all Lenders), which Requisite
Lenders shall have the right to grant or withhold at their sole
discretion. Notwithstanding the foregoing, (a) any provision that
requires consent or approval of the Supermajority Lenders or that
provides for funding or distributions based on Pro Rata Shares shall
not be amended, modified, or waived without the written agreement of
the Supermajority Lenders such that (1) the consent or approval of the
Supermajority Lenders is no longer required or (2) funding or
distributions are based on anything other than Pro Rata Shares, (b)
the written consent of the Supermajority Lenders shall be required to
amend, modify or waive any provision of Article 11, if such amendment,
modification
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or waiver would have a Material Adverse Effect on any Lender, and (c)
the following amendments, modifications or waivers shall require the
consent of all Lenders:
(1) Increasing the Commitments or a Lender's Commitments;
(2) Changing the principal amount or final maturity of the Loans,
except as provided in Section 2.1(d);
(3) Reducing, modifying or amending the interest rate provisions
applicable to the Loans;
(4) Reducing the rates on which fees payable pursuant hereto are
determined;
(5) Forgiving or delaying any amount payable or receivable under
Article 2 (other than late fees);
(6) Changing the definition of "Requisite Lenders," "Supermajority
Lenders," "Loan Availability," "Maximum Loan Amount," "Pro Rata
Shares" or "Borrowing Base Value;"
(7) Changing any provision contained in Section 3.1(b), Section
11.10(d), this Section 12.5 or Addendum I to this Agreement;
(8) Releasing any obligor under any Loan Document, unless such release
is otherwise required or permitted by the terms of this Agreement; and
(9) Consent to assignment by Borrower of all of its duties and
Obligations under the Loan Documents.
Without limitation of the foregoing, no amendment, modification,
termination or waiver of any provision of Article 11 or any other
provision referring to Agent shall be effective without the written
concurrence of Agent. Any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle
Borrower to any other further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or
consent effected in accordance with this Section 12.5 shall be binding
on each assignee, transferee or recipient of Agent's or any Lender's
Commitment under this Agreement or the Loans at the time outstanding.
Section 12.6 Independence of Covenants. All covenants hereunder
shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of an
Event of Default or Unmatured Event of Default if such action is taken
or condition exists, and if a particular action or condition is
expressly permitted under any covenant, unless expressly limited to
such covenant, the fact that it
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would not be permitted under the general provisions of another
covenant shall not constitute an Event of Default or Unmatured Event
of Default if such action is taken or condition exists.
Section 12.7 Notices and Delivery. Unless otherwise specifically
provided herein, any consent, notice or other communication herein
required or permitted to be given shall be in writing, and may be
personally served, telecopied or sent by courier service or United
States mail, and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of a telecopy, or four
Business Days after deposit in the United States mail (registered or
certified, with postage prepaid and properly addressed). Notices to
Agent pursuant to Article 2 shall not be effective until received by
Agent. For the purposes hereof, the addresses of the parties hereto
(until notice of a change thereof is delivered as provided in this
Section 12.7 shall be as set forth below each party's name on the
counter signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to all
of the other parties. All deliveries to be made to Agent for
distribution to the Lenders shall be made to Agent at the addresses
specified for notice on the counter signature pages hereto and in
addition, a sufficient number of copies of each such delivery shall be
delivered to Agent for delivery to each Lender at the address
specified for deliveries on the counter signature page hereto or such
other address as may be designated by Agent in a written notice.
Section 12.8 Survival of Warranties, Indemnities and Agreements.
All agreements, representations, warranties and Indemnities made or
given herein shall survive the execution and delivery of this
Agreement and the other Loan Documents and the making and repayment of
the Loans hereunder, and such Indemnities shall survive termination
hereof.
Section 12.9 Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of Agent or any Lender in
the exercise of any power, right or privilege under any of the Loan
Documents shall impair such power, right or privilege or be construed
to be a waiver of any Event of Default or Unmatured Event of Default
or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude further exercise thereof
or of any other right, power or privilege. All rights and remedies
existing under the Loan Documents are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
Section 12.10 Marshalling; Recourse to Security; Payments Set
Aside. Neither any Lender nor Agent shall be under any obligation to
▇▇▇▇▇▇▇▇ any assets in favor of Borrower or any other party or against
or in payment of any or all of the Obligations. Recourse to security
shall not be required at any time. To the extent that Borrower makes a
payment or payments to Agent or the Lenders, or Agent or the Lenders
enforce their Liens, or exercise their rights of setoff, and any such
payment, or the proceeds of such enforcement or setoff, or any part
thereof, are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such
recovery, the Obligation or part thereof originally intended to be
satisfied, and all Liens, rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
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Section 12.11 Severability. If any provision in or obligation under
this Agreement or the other Loan Documents shall be invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any
way be affected or impaired thereby; provided, however, that if the
rates of interest or any other amount payable hereunder, or the
collectability thereof, are declared to be or become invalid, illegal
or unenforceable, Lenders' obligations to make Loans shall not be
enforceable.
Section 12.12 Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given
any substantive effect.
Section 12.13 Governing Law. THIS AGREEMENT HAS BEEN EXECUTED UNDER,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS FROM TIME TO TIME IN EFFECT EXCEPT TO THE EXTENT
PREEMPTED BY UNITED STATES FEDERAL LAW. This Agreement and the other
Loan Documents are intended to be performed in accordance with, and
only to the extent permitted by, all applicable Legal Requirements. It
is expressly stipulated and agreed to be the intent of Borrower and
Lenders at all times to comply with the applicable Texas law governing
the maximum rate or amount of interest payable on the Obligations (or
applicable United States federal law to the extent that it permits
Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under Texas law). If the applicable law is
ever judicially interpreted so as to render usurious any amount called
for under the Loan Documents or contracted for, charged, taken,
reserved or received with respect to the Obligations, or if the
acceleration of the maturity of the Obligations or if any prepayment
by Borrower results in Borrower having paid any interest in excess of
that permitted by applicable law, then it is Borrower's and Lenders'
express intent that all excess amounts theretofore paid to Lenders be
credited on the principal balance of the Obligations (or, if the
Obligations have been or would thereby be paid in full, refunded to
Borrower), and the provisions of the Loan Documents immediately be
deemed reformed and the amounts thereafter collectible thereunder
reduced, without the necessity of the execution of any new documents,
so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and
thereunder. All sums paid or agreed to be paid to Lenders for the use,
forbearance or detention of the Obligations shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such Obligations until payment in
full so that the rate or amount of interest on account of such
Obligations does not exceed the usury ceiling from time to time in
effect and applicable to the Obligations for so long as the
Obligations are outstanding. To the extent that Lenders are relying on
Article 5069-1.04, as amended, of the Revised Civil Statutes of Texas
to determine the maximum rate ("Maximum Rate") payable on the
Obligations, Lender will utilize the indicated (weekly) rate ceiling
from time to time in effect as provided in Article 5069.04, as
amended. To the extent United States federal law permits Lenders to
contract for, charge or receive a greater amount of interest, Lenders
will rely on United States federal law instead of such Article
5069-1.04, as amended, for the purpose of determining the Maximum
Rate. Additionally, to the extent permitted by applicable law now in
effect, Lenders may, at their option and from time to time, implement
any other method of computing the Maximum Rate under such Article
5069-1.04, as amended, or under other applicable law by giving notice,
if
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required, to Borrower as provided by applicable law now or hereafter
in effect. In no event shall the provisions of Article 5069, chapter
15 of the Revised Civil Statutes of Texas (which regulates certain
revolving credit loan accounts and revolving triparty accounts) apply
to the Loans. Notwithstanding anything to the contrary contained in
this Agreement or in any of the other Loan Documents, it is not
Lenders' intention to accelerate the maturity of any interest that has
not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.
Section 12.14 LIMITATION OF LIABILITY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NO CLAIM MAY BE MADE BY BORROWER, THE REIT, PARAGON GP
HOLDINGS, OR PARAGON LP HOLDINGS, ANY Lender, OR ANY OTHER PERSON,
AGAINST Agent OR ANY Lender, OR THE AFFILIATES, DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS OR AGENTS OF ANY OF THEM, FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM
FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY OTHER THAN
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ARISING OUT OF OR RELATED TO
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION
OR EVENT OCCURRING IN CONNECTION THEREWITH; AND BORROWER, THE REIT,
PARAGON GP HOLDINGS, PARAGON LP HOLDINGS, AND EACH Lender HEREBY
WAIVE, RELEASE AND AGREE NOT TO ▇▇▇ UPON ANY CLAIM FOR ANY SUCH
DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED
TO EXIST IN ITS FAVOR; PROVIDED, THAT IF A Lender REFUSES TO FUND A
LOAN AND A COURT OF COMPETENT JURISDICTION FINDS THAT SUCH REFUSAL WAS
WITHOUT JUSTIFICATION AND IN BAD FAITH, SUCH Lender SHALL BE LIABLE TO
BORROWER FOR BORROWER'S REASONABLE AND FORESEEABLE DAMAGES RESULTING
FROM SUCH REFUSAL TO FUND.
Section 12.15 Successors and Assigns. This Agreement and the other
Loan Documents shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of
the parties hereto and the successors and permitted assigns of Agent
and Lenders. The terms and provisions of this Agreement shall inure to
the benefit of any assignee or transferee of the Loans and the
Commitments of Lenders under this Agreement, and in the event of such
transfer or assignment, the rights and privileges herein conferred
upon Agent and Lenders shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions
hereof. Borrower's rights or any interest therein hereunder, and
Borrower's duties and Obligations hereunder, shall not be assigned
without the consent of all Lenders.
Section 12.16 Consent to Jurisdiction and Service of Process; Waiver
of Jury Trial. EXCEPT WITH RESPECT TO FORECLOSURE PROCEEDINGS AGAINST
ANY COLLATERAL WHICH BY REQUIREMENT OF LAW MUST BE BROUGHT IN THE
JURISDICTION WHERE SUCH COLLATERAL IS LOCATED, ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST BORROWER, THE REIT, PARAGON GP HOLDINGS,
AND PARAGON LP HOLDINGS, WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE AND ALL JUDICIAL PROCEEDINGS BROUGHT BY ANY OF
BORROWER, THE REIT, PARAGON GP HOLDINGS AND PARAGON LP HOLDINGS WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
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BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION HAVING
SITUS WITHIN THE BOUNDARIES OF THE FEDERAL COURT DISTRICT OF THE
NORTHERN DISTRICT OF TEXAS, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF BORROWER, THE REIT, PARAGON GP HOLDINGS AND PARAGON
LP HOLDINGS ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT
RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE.
EACH OF BORROWER, THE REIT, PARAGON GP HOLDINGS AND PARAGON LP
HOLDINGS HEREBY DESIGNATES AND APPOINTS ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, A
PROFESSIONAL CORPORATION, TO RECEIVE ON ITS BEHALF SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING
HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE EFFECTIVE AND BINDING SERVICE
IN EVERY RESPECT. SUCH APPOINTMENT SHALL BE REVOCABLE ONLY WITH
Agent'S PRIOR WRITTEN APPROVAL. EACH OF BORROWER, THE REIT, PARAGON GP
HOLDINGS, AND PARAGON LP HOLDINGS IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED ON THE COUNTER
SIGNATURE PAGES HEREOF, SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS
AFTER SUCH MAILING. TO THE EXTENT PERMITTED BY LAW, EACH OF BORROWER,
THE REIT, PARAGON GP HOLDINGS, PARAGON LP HOLDINGS, AGENT AND THE
LENDERS IRREVOCABLY WAIVES (A) TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT;
AND (B) ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS)
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR SHALL LIMIT THE RIGHT OF Agent OR ANY Lender TO BRING PROCEEDINGS
AGAINST ANY OF THE BORROWER, THE REIT, PARAGON GP HOLDINGS AND PARAGON
LP HOLDINGS IN THE COURTS OF ANY OTHER JURISDICTION.
Section 12.17 Counterparts; Effectiveness; Inconsistencies. This
Agreement and any amendments, waivers, consents or supplements may be
executed in counterpart, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. This Agreement shall
become effective when Borrower, the REIT, Paragon GP Holdings, Paragon
LP Holdings, the initial Lenders and Agent have duly executed and
delivered counterpart execution pages of this Agreement to each other
(delivery by Borrower, the REIT, Paragon GP Holdings, and Paragon LP
Holdings, to Lenders and by any Lender to Borrower, the REIT, Paragon
GP Holdings, and Paragon LP Holdings, and any other Lender being
deemed to have been made by delivery to Agent). This Agreement and
each of the other Loan Documents shall be construed to the extent
reasonable to be consistent one with the other, but to the
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extent that the terms and conditions of this Agreement are actually
and directly inconsistent with the terms and conditions of any other
Loan Document, this Agreement shall govern.
Section 12.18 Performance of Obligations. Upon and during the
continuance of an Event of Default, Borrower agrees that Agent may,
but shall not have obligation to, make any payment or perform any act
required of Borrower or the REIT under any Loan Document or take any
other action which Agent in its discretion deems necessary or
desirable to protect or preserve the Collateral including, without
limitation, any action to (1) pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or threatened
against any Collateral; and (2) effect any repairs or obtain any
insurance called for by the terms of any of the Loan Documents, and to
pay all or any part of the premiums therefor and the costs thereof.
Section 12.19 Construction. The parties acknowledge that each party
and its counsel have reviewed and had an opportunity to revise this
Agreement and that the normal rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any
amendments or exhibits hereto.
Section 12.20 Entire Agreement. This Agreement, taken together with
all of the other Loan Documents and all certificates and other
documents delivered by Borrower to Agent, embodies the entire
agreement of the parties and supersedes all prior agreements, written
and oral, relating to the subject matter hereof.
Section 12.21 Confidentiality. Confidential Information obtained by
Agent or Lenders pursuant to this Agreement or in connection with the
Facility shall not be disseminated by Agent or any Lender and shall
not be disclosed to third parties other than (a) to regulators, taxing
authorities and other governmental agencies having jurisdiction over
Agent or any Lender; (b) in response to Requirements of Law; (c) to
their respective auditors and legal counsel; (d) in connection with
regulatory, administrative and judicial proceedings, including
enforcement proceedings relating to the Loan Documents; and (e) to any
prospective assignee of or participant in a Lender's interest under
the Agreement or any prospective purchaser of the assets or a
controlling interest in any Lender; provided that such prospective
assignee, participant or purchaser first agrees to be bound by the
provisions of this Section 12.21.
Section 12.22 Estoppel Certificates. If required by the underwriters
in connection with a public offering of securities of the REIT, Agent
shall provide an estoppel certificate certifying, as of such date,
that (a) to Agent's actual knowledge no Unmatured Event of Default or
Event of Default then exists (if such is the case, or if such is not
the case, specifying any Unmatured Event of Default or Event of
Default) and (b) the aggregate outstanding amount of the Loans. Such
certification shall not (1) prevent Agent or any Lender from later
making assertions or taking actions which are inconsistent with such
certification, if new facts or circumstances thereafter become known
to Agent or any Lender which would have a bearing thereon and which
were not known and could not reasonably have been known at the time
such estoppel certificate was delivered, and (2) shall not expose
Agent or any Lender to any liability or damages (direct or
consequential) for or by reason of any Person's reliance thereon.
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Section 12.23 Limitation of Liability. (a) None of Paragon GP
Holdings, Paragon LP Holdings, the REIT nor any officer, employee,
servant, controlling person, executive, director, Agent or authorized
representative of such Person (herein referred to as "operatives")
shall be liable personally for the Obligations. The sole recourse of
the Lenders and the Agent for satisfaction of the Obligations shall be
to the Borrower as an entity and the Borrower's assets, and not to any
assets of any of Paragon GP Holdings, Paragon LP Holdings, the REIT or
their respective operatives. In the event that an Event of Default
occurs in connection with the Obligations, no action shall be brought
against any of Paragon GP Holdings, Paragon LP Holdings, the REIT, or
their respective operatives. In the event of foreclosure or any other
sale or disposition of Property, no judgment for any deficiency
relating to the Obligations shall be obtainable by the Lenders or the
Agent against any of Paragon GP Holdings, Paragon LP Holdings, the
REIT, or their respective operatives.
(b) Notwithstanding anything in Section 12.23(a) above to the
contrary, (1) nothing herein shall limit or otherwise prejudice in any
way the right of the Agent or any Lender to proceed against Borrower
with respect to the enforcement of any Obligations or the liability of
Borrower for such Obligations, (2) nothing herein shall limit or
otherwise prejudice in any way the right of the Agent or any Lender to
proceed against each of Paragon GP Holdings, Paragon LP Holdings and
the REIT with respect to enforcement of its agreements to be bound by
certain provisions of this Agreement as expressly set forth in such
Person's counterpart signature page hereto or its liability for any
violation of such provisions, and (3) such limitations of liability
shall not apply to operatives if and to the extent that such Persons
commit fraud or willful misrepresentation.
This Section 12.23 shall be deemed incorporated in each Loan Document.
112
COUNTERPART EXECUTION PAGE
By execution of this Counterpart Execution Page to that certain Fifth
Amended and Restated Credit Agreement dated as of July 27, 1996, by and
among Paragon Group L.P. as Borrower, ▇▇▇▇▇ Fargo Realty Advisors Funding,
Incorporated, as Agent for certain Lenders, and the Lenders (as defined
therein) (the "Agreement"), the undersigned acknowledges that it is bound
by the terms and conditions of the Agreement. The undersigned acknowledges
that this Counterpart Execution Page shall become a part of the Agreement
and may be attached thereto. The undersigned further acknowledges its
receipt of a copy of the Agreement.
"BORROWER"
PARAGON GROUP L.P., a Delaware limited partnership
BY: Paragon Group GP Holdings, Inc., a Delaware
corporation, its General Partner
By: ______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice President
ADDRESS FOR NOTICE:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
113
COUNTERPART EXECUTION PAGE
By execution of this Counterpart Execution Page to that certain Fifth
Amended and Restated Credit Agreement dated as of July 27, 1996, by and
among Paragon Group L.P. as Borrower, ▇▇▇▇▇ Fargo Realty Advisors Funding,
Incorporated, as Agent for certain Lenders, and the Lenders (as defined
therein) (the "Agreement"), the undersigned acknowledges that it is bound
by the terms and conditions of the Agreement. The undersigned acknowledges
that this Counterpart Execution Page shall become a part of the Agreement
and may be attached thereto. The undersigned further acknowledges its
receipt of a copy of the Agreement.
"LENDER"
COMMITMENT $45,000,000.00 ▇▇▇▇▇ FARGO REALTY ADVISORS
FUNDING, INCORPORATED, a Colorado
corporation
By: ▇▇▇▇▇ Fargo Real Estate Group,
a California corporation, its agent
By: ______________________________
J. ▇▇▇▇ ▇▇▇▇▇▇
Vice President
By: ______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
ADDRESS FOR NOTICE:
c/o Wells Fargo Real Estate Group Disbursement
Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Manager, AU #5847, Loan #5914.ZMD
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇ Fargo Real Estate Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Account Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
114
COUNTERPART EXECUTION PAGE
By execution of this Counterpart Execution Page to that certain Fifth
Amended and Restated Credit Agreement dated as of July 27, 1996, by and
among Paragon Group L.P. as Borrower, ▇▇▇▇▇ Fargo Realty Advisors Funding,
Incorporated, as Agent for certain Lenders, and the Lenders (as defined
therein) (the "Agreement"), the undersigned acknowledges that it is bound
by the terms and conditions of the Agreement. The undersigned acknowledges
that this Counterpart Execution Page shall become a part of the Agreement
and may be attached thereto. The undersigned further acknowledges its
receipt of a copy of the Agreement.
"LENDER"
COMMITMENT: $30,000,000.00 NATIONSBANK OF TEXAS, N.A.,
a national banking association
By:________________________
Name:______________________
Title:_____________________
ADDRESS FOR NOTICE:
NationsBank of Texas, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
NationsBank of Texas, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
115
COUNTERPART EXECUTION PAGE
By execution of this Counterpart Execution Page to that certain Fifth
Amended and Restated Credit Agreement dated as of July 27, 1996, by and
among Paragon Group L.P. as Borrower, ▇▇▇▇▇ Fargo Realty Advisors Funding,
Incorporated, as Agent for certain Lenders, and the Lenders (as defined
therein) (the "Agreement"), the undersigned acknowledges that it is bound
by the terms and conditions of the Agreement. The undersigned acknowledges
that this Counterpart Execution Page shall become a part of the Agreement
and may be attached thereto. The undersigned further acknowledges its
receipt of a copy of the Agreement.
"LENDER"
COMMITMENT: $10,000,000.00 THE BOATMEN'S NATIONAL BANK OF ST.LOUIS,
a national banking association
By:________________________
Name:______________________
Title:_____________________
ADDRESS FOR NOTICE:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
116
COUNTERPART EXECUTION PAGE
By execution of this Counterpart Execution Page to that certain Fifth
Amended and Restated Credit Agreement dated as of July 27, 1996, by and among
Paragon Group L.P. as Borrower, ▇▇▇▇▇ Fargo Realty Advisors Funding,
Incorporated, as Agent for certain Lenders, and the Lenders (as defined therein)
(the "Agreement"), the undersigned acknowledges that it is bound by the terms
and conditions of the Agreement. The undersigned acknowledges that this
Counterpart Execution Page shall become a part of the Agreement and may be
attached thereto. The undersigned further acknowledges its receipt of a copy of
the Agreement.
"AGENT"
▇▇▇▇▇ FARGO REALTY ADVISORS FUNDING,
INCORPORATED, a Colorado corporation
By: ▇▇▇▇▇ Fargo Real Estate Group,
a California corporation, its agent
By: _______________
J. ▇▇▇▇ ▇▇▇▇▇▇
Vice President
By: ___________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
ADDRESS FOR NOTICE:
c/o Wells Fargo Real Estate Group Disbursement Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Manager, AU #5847, Loan #5914.ZMD
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇ Fargo Real Estate Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Account Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
117
LIBOR OFFICE:
c/o Wells Fargo Real Estate Group Disbursement Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Manager, AU ▇▇. ▇▇▇▇, ▇▇▇▇ ▇▇. ▇▇▇▇.▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
118
COUNTERPART EXECUTION PAGE
By execution of this Counterpart Execution Page to that certain Fifth
Amended and Restated Credit Agreement dated as of July 27, 1996, by and
among Paragon Group L.P. as Borrower, ▇▇▇▇▇ Fargo Realty Advisors Funding,
Incorporated, as Agent for certain Lenders, and the Lenders (as defined
therein) (the "Agreement"), the undersigned acknowledges that it is bound
by the terms and conditions of Sections 4.1(b), 4.1(f)(2), 5.2, 7.2, 8.2,
12.14 and 12.16 of the Agreement. The undersigned acknowledges that this
Counterpart Execution Page shall become a part of the Agreement and may be
attached thereto. The undersigned further acknowledges its receipt of a
copy of the Agreement.
"REIT"
PARAGON GROUP, INC., a Maryland corporation
By:_______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice President
ADDRESS FOR NOTICE:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
119
COUNTERPART EXECUTION PAGE
By execution of this Counterpart Execution Page to that certain Fifth
Amended and Restated Credit Agreement dated as of July 27, 1996, by and
among Paragon Group L.P. as Borrower, ▇▇▇▇▇ Fargo Realty Advisors Funding,
Incorporated, as Agent for certain Lenders, and the Lenders (as defined
therein) (the "Agreement"), the undersigned acknowledges that it is bound
by the terms and conditions of Sections 4.1(c), 4.1(f)(3), 5.3, 7.3, 8.3,
12.14, and 12.16 of the Agreement. The undersigned acknowledges that this
Counterpart Execution Page shall become a part of the Agreement and may be
attached thereto. The undersigned further acknowledges its receipt of a
copy of the Agreement.
"PARAGON GP HOLDINGS"
PARAGON GROUP GP HOLDINGS, INC., a Delaware
corporation
By:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice President
ADDRESS FOR NOTICE:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
120
COUNTERPART EXECUTION PAGE
By execution of this Counterpart Execution Page to that certain Fifth
Amended and Restated Credit Agreement dated as of July 27, 1996, by and
among Paragon Group L.P. as Borrower, ▇▇▇▇▇ Fargo Realty Advisors Funding,
Incorporated, as Agent for certain Lenders, and the Lenders (as defined
therein) (the "Agreement"), the undersigned acknowledges that it is bound
by the terms and conditions of Sections 4.1(d), 4.1(f)(4), 5.4, 7.4, 8.4,
12.14, and 12.16 of the Agreement. The undersigned acknowledges that this
Counterpart Execution Page shall become a part of the Agreement and may be
attached thereto. The undersigned further acknowledges its receipt of a
copy of the Agreement.
"PARAGON LP HOLDINGS"
PARAGON GROUP LP HOLDINGS, INC., a Delaware
corporation
By:______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice President
ADDRESS FOR NOTICE:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇▇ & Bromberg, P.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
121
ADDENDA, EXHIBITS AND SCHEDULES
Addenda:
Addendum I - Borrower's Financial Covenants
Exhibits:
A - Form of Assignment and Assumption
B - Form of Borrowing Base Certificate
C - Closing Checklist
D - Form of Compliance Certificate
E - Funds Transfer Agreement
F - Form of Loan Note
G - Form of Notice of Borrowing
H - Form of Notice of Borrowing Worksheet
I - Form of Conversion Date Certificate
J - Form of Project Budget
K - Form of Loan Availability Certificate
Schedules:
1 - List of Borrowing Base Stabilized Properties
2 - List of Borrowing Base Development Properties
5.1(q) - Borrower Environmental Matters
5.1(v) - Contractual Obligations Not Terminable in 30 Days
5.3(p) - Partner Interests of Paragon GP Holdings in Subsidiaries of
the Borrower
7.1(b) - Business Names Used by Borrower
7.2(i) - Reimbursement and Indemnification Obligations of the Borrower
to the REIT
7.3(g) - Reimbursement and Indemnification Obligations of the Borrower
to Paragon
GP Holdings
7.4(g) - Reimbursement and Indemnification Obligations of the Borrower
to Paragon LP Holdings
122
ADDENDUM I
Borrower's Financial Covenants
1. Defined Terms.
(a) "Capital Expenditures" means, on an annualized basis, with
respect to residential apartment properties for which the final
certificate of occupancy has been issued, Two Hundred ($200.00) per
dwelling unit and with respect to office properties and retail
properties, ($1.00) per square foot. With respect to the financial
covenants contained herein (1) Capital Expenditures shall be pro rated
on a quarterly basis and (2) Capital Expenditures with respect to
Investment Affiliates will be adjusted to reflect the Borrower's
ownership in such Investment Affiliates.
(b) "Debt Service" means for any period, Interest Expense for
such period plus scheduled principal amortization for such period on
all Indebtedness of the Borrower on a consolidated basis.
(c) "EBITDA" means, for any period (1) the sum of the amounts for
such period of (i) Net Income of Borrower, the REIT and their
respective Subsidiaries for such period (excluding equity in net
earnings or net loss of Investment Affiliates), (ii) depreciation and
amortization expense and other non-cash items deducted on the
Financial Statements in determining such Net Income for Borrower, the
REIT and their respective Subsidiaries for such period, (iii) interest
expense of Borrower, the REIT and their respective Subsidiaries, for
such period as reflected in such Person's financial statements, (iv)
Taxes of Borrower, the REIT and their respective Subsidiaries for such
period, and (v) cash dividends and distributions actually received by
Borrower from Investment Affiliates, minus (2) the extraordinary gains
(and plus the extraordinary losses) of Borrower, the REIT and their
respective Subsidiaries resulting from asset sales, write-ups, or
forgiveness of Indebtedness, determined in each case on a consolidated
basis in accordance with GAAP.
(d) "Funds From Operations" means, for any period, Borrower's Net
Income (or loss) for such period calculated on a GAAP basis excluding
gains (or losses) from debt restructuring and sales of property, plus
(i) real estate depreciation and amortization, (ii) adjustments for
Investment Affiliates, and (iii) adjustments for extraordinary or
unusual items, along with significant non-recurring items incurred
outside of the fundamental operations of the Borrower and as reflected
in Borrower's Form 10Q or 10K, as the case may be, filed with the SEC.
(e) "Gross Asset Value" means the sum of (1) annualized prior
Fiscal Quarter EBITDA (excluding (i) dividends and any other
distributions from Investment Affiliates, (ii) EBITDA attributable to
properties not owned by Borrower for the entire prior Fiscal Quarter
and (iii) any EBITDA from Development Properties valued as Work In
Process) capitalized at 9.25%, plus (2) the price paid for any
operating properties acquired during the prior Fiscal Quarter, plus
(3) cash and Cash Equivalents (excluding tenant deposits), plus (4)
100% of Work In Process , plus (5) Borrower's pro rata share of
annualized prior Fiscal Quarter Net Operating Income for Investment
Affiliate operating properties (excluding EBITDA attributable to
operating properties
Addendum - 1
not owned by such Investment Affiliates for the entire prior Fiscal
Quarter) capitalized at 9.25% for multifamily properties and 10% for
office and/or industrial properties, plus (6) Borrower's pro rata
share of the price paid for operating properties acquired by
Investment Affiliates during the prior Fiscal Quarter, plus (7)
Borrower's pro rata share of Work In Process relating to properties
owned by Investment Affiliates.
(f) "Interest Expense" means, for any period, all paid, accrued
or capitalized interest (but excluding (1) capitalized interest
covered by an interest reserve established under a loan facility,
including the Facility, (2) interest attributable to capital
expenditures of Borrower for accounting purposes and not resulting
from actual borrowings, and (3) any non-cash deferred loan cost
amortization resulting from interest rate buy down expenses incurred
prior to the Restatement Date, loan fees, loan closing costs, and
other debt issuance costs included in Borrower's reported interest
expense pursuant to GAAP on a consolidated basis). Interest Expense
also shall include Borrower's Share (disregarding the contribution
obligations of co-owners or partners) of accrued, paid or capitalized
interest (except as excluded under clauses (1), (2), and (3) above)
with respect to any Accommodation Obligation.
(g) "Net Worth" means, at any time, (1) the sum of (A) the total
shareholders' equity of the REIT; (B) the value of all Units owned by
Persons other than Paragon GP Holdings and Paragon LP Holdings; and
(C) depreciation and amortization of the REIT, the Borrower, and their
respective Subsidiaries after June 30, 1994; minus (2) the sum of (A)
all intangible assets of the REIT; and (B) any intangible assets of
Borrower relating to minority interests in Borrower, determined on a
consolidated basis in accordance with GAAP.
(g) "Total Liabilities" means all GAAP liabilities, plus (1)
Indebtedness and Accommodation Obligations of Borrower that are not
GAAP liabilities; (2) 100% of the recourse liabilities of Borrower as
a general partner of any partnership that are not GAAP liabilities;
and (3) Borrower's pro rata share of non-recourse debt of Investment
Affiliates that are not GAAP liabilities. Total Liabilities, however,
shall exclude up to $15,000,000 (in aggregate) of accounts payable,
accrued liabilities and tenant security deposits.
(h) "Work in Process" means the aggregate Expended Project Costs
as reviewed and approved by Agent (as of the certification date),
including the cost of Land for Borrowing Base Development Properties
and the pro rata share of Expended Project Costs for Development
Properties other than Borrowing Base Development Properties.
2. Minimum Net Worth. Borrower shall maintain a Net Worth of not less
than 90% of the Net Worth of the REIT as of March 31, 1996. The Net
Worth of the REIT as of March 31, 1996, was $173,445,000.00.
3. Total Liabilities to Gross Asset Value Ratio. The ratio of
Borrower's Total Liabilities to Gross Asset Value shall not exceed
0.575:1.
4. EBITDA to Interest Expense Ratio. The ratio of EBITDA to Interest
Expense shall not be less than 2.00:1.
Addendum - 2
5. EBITDA to Fixed Charges Ratio. The ratio of EBITDA to the sum of
Fixed Charges shall not be less than 1.75:1.
6. Distributions. Distributions by Borrower on account of Units shall
not exceed (a) 130% of Funds From Operations for the Fiscal Quarter
ending June 30, 1996; (b) 115% of Funds From Operations for the Fiscal
Quarter ending September 30, 1996; (c) 110% of Funds From Operations
for the Fiscal Quarters ending December 31, 1996, and March 31, 1997;
and (d) 105% of Funds From Operations for the Fiscal Quarter ending
June 30, 1997. Except as otherwise provided above, distributions by
Borrower on account of Units shall not exceed 95% of Funds From
Operations for any Fiscal Quarter. If a monetary Event of Default has
occurred and is continuing, then such distributions in any Fiscal Year
shall not exceed the minimum amount of taxable income that Borrower
must distribute in order to remain qualified as a real estate
investment trust, as defined in Section 856 of the Internal Revenue
Code, or any successor provision. Borrower's Funds From Operations for
the Fiscal Quarter immediately preceding the date on which any such
distribution is made shall be used to determine Borrower's compliance
with the distribution limitations set forth in this provision.
7. Permitted Investments. Borrower's primary business will be the
development, ownership, operation and management of apartment, retail
and commercial properties, asset management and business activities
and investments incidental thereto; provided, however, unimproved land
holdings, stock holdings (excluding short term equity investments
maintained for cash management purposes), investments in partnerships
and joint ventures which are Investment Affiliates, and Investment
Mortgages shall not exceed the following percentages of Gross Asset
Value.
Maximum Percentage
Permitted Investment of Gross Asset Value
Land: 2.5%
Securities of Persons other than the REIT, 5%
Paragon GP Holdings, Paragon LP Holdings,
and the Management Company:
Partnerships and joint ventures which are 22.5%
Investment Affiliates of either Borrower or the REIT:
Investment Mortgages: 5%
The value of Permitted Investments other than investments in partnerships
and joint ventures shall be calculated in conformity with GAAP. The value
of Permitted Investments in partnerships and joint ventures shall be
calculated in conformity with the calculation of Gross Asset Value. The
aggregate Permitted Investments of Borrower shall not exceed 25% of Gross
Asset Value.
Addendum - 3
Additionally, the aggregate amount of the Construction Budgets for
Development Properties in which Borrower either has a direct or indirect
ownership interest shall not exceed (a) $100,000,000 from July 27, 1996,
through December 31, 1996; (b) $80,000,000 from January 1, 1997, through
June 30, 1997; and (c) $60,000,000 thereafter. If a Development Property is
owned by an Investment Affiliate of Borrower, then the product of (1)
Borrower's ownership interest in such Investment Affiliate and (2) the
amount of the Construction Budget for the Development Property shall be
used in calculating such Investment limitation.
8. Calculation. Each of the foregoing ratios and financial requirements
shall be calculated as of the last day of each Fiscal Quarter and shall be
satisfied at all times.
Addendum - 4
EXHIBIT C
CLOSING CHECKLIST
1. Fifth Amended and Restated Credit Agreement
2. Loan Notes
(a) ▇▇▇▇▇ Fargo Realty Advisors Funding, Incorporated
(i) $5,600,000 Loan Note
(ii) $5,145,000 Loan Note
(iii) $34,255,000 Loan Note
(b) NationsBank of Texas, N.A.
(i) $3,733,333 Loan Note
(ii) $3,430,000 Loan Note
(iii) $22,836,667 Loan Note
(c) The Boatmen's National Bank of St. Louis
(i) $1,244,447 Loan Note
(ii) $1,143,333 Loan Note
(iii) $7,612,220 Loan Note
3. Borrower's Affidavit
4 REIT Affidavit
5. Paragon GP Holdings Affidavit
6. Paragon LP Holdings Affidavit
7. Borrower's Counsel Legal Opinion
8. Compliance Certificate
C-1
