1
EXHIBIT 10.10
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HOME ASSET MANAGEMENT CORP., as Issuer,
MDC REIT HOLDINGS, LLC, as Guarantor
and
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
$25,000,000 Principal Amount
of
12% Senior Secured Notes due February 11, 2002
Warrants to Purchase 666,667 Shares of Common Stock
and
Warrants to Purchase a Variable Number of Shares of Common Stock
SECURITIES PURCHASE AGREEMENT
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Dated as of February 11, 1997
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TABLE OF CONTENTS
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SECTION 1. PURCHASE AND SALE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Issue and Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase and Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Registration of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Delivery Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Issue Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Direct Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Lost, Etc. Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.9 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Other Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Legal Investment; Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . 10
2.3 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 Completion of Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.6 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 Proceedings Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.9 Consents and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.11 No Material Judgment or Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.12 Initial Escrow Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Authorization; Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 No Violation or Conflict; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 No Material Adverse Change; Financial Information . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 No Violation of Regulations of Board of Governors of Federal Reserve System . . . . . . . . . . . 16
3.8 Private Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 Governmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.10 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.11 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.17 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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3.19 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.20 Authorization; Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.21 No Violation or Conflict; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.22 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.1 Purchase for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4 Securities Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Payment of Notes; Satisfaction of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Financial Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5 Limitation on Incurrence of Additional Indebtedness and Issuance of Disqualified Stock . . . . . . 30
5.6 Limitation on Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.7 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.8 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.9 Limitation on Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.10 Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . 33
5.11 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.12 Minimum Consolidated Interest Expense Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 34
5.13 Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.14 Limitation on Ranking of Future Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.15 Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.16 Corporate Existence; Merger; Successor Corporation . . . . . . . . . . . . . . . . . . . . . . . . 35
5.17 Limitation on Reit's Business and Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.18 Limitation on the Businesses of the Issuer and Holdings . . . . . . . . . . . . . . . . . . . . . 36
5.19 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.20 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.21 Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.23 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.24 ERISA Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.25 Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.26 Compliance with Laws; Maintenance of Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.27 Inspection of Properties and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.28 Board of Director Observation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.29 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.30 Information to Prospective Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.31 Private Placement Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.32 Impairment of Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.33 Required Escrow Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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5.34 Maintenance of Letter of Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.35 Reit Leverage Ratio and Indebtedness of Reit . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.36 Distributions by Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.37 Investment, Hedging and Leverage Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6. REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.1 Optional and Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2 Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.3 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.4 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.5 Payment of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.2 Acceleration of Notes; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.3 Premium on Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.4 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.5 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.6 Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.7 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8. AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1 With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.2 Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.3 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.4 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10. GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.1 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.2 Execution and Delivery of each Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 71
10.3 Future Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.4 Certain Bankruptcy Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.5 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.9 Disclosure of Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
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ANNEX A-1 Form of Note
ANNEX A-2 Form of Guaranty
ANNEX B-1 Crescent Warrant Agreement
ANNEX B-2 Contingent Warrant Agreement
ANNEX C Stockholders Agreement
ANNEX D Registration Rights Agreement
ANNEX E Opinion of Counsel to the Issuer and Holding
ANNEX F Opinion of Counsel to Purchasers
ANNEX G Escrow Agreement
ANNEX H Holdings Pledge
ANNEX I Issuer Pledge
ANNEX J Letter of Credit
ANNEX K Letter of Credit Contribution Agreement
ANNEX L Management Agreement
SCHEDULES:
1.2
2.5(d)
3.1
3.4(c)
5.29
iv
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement dated as of February 11,
1997 (this "Agreement"), is entered into by and among Home Asset Management
Corp., a Delaware corporation (the "Issuer"), MDC Reit Holdings, LLC, a
Delaware limited liability company ("Holdings"), American Residential
Investment Trust, Inc., a Maryland corporation, and the purchasers listed on
the signature pages hereto (each a "Purchaser" and collectively, the
"Purchasers").
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in Section 9.1.
In consideration of the premises, mutual covenants and
agreements hereinafter contained and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Companies agree,
jointly and severally, and each of the Purchasers agrees, severally but not
jointly, as follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES.
1.1 Issue and Sale of Securities.
(a) On or before the Closing,
(1) The Issuer will have authorized
the issue and sale to the Purchasers, in the
respective amounts set forth on the signature
pages hereof, of $25,000,000 aggregate
principal amount of its 12% Senior Secured
Notes due February 11, 2002 (the "Notes"), to
be substantially in the form attached hereto
as Annex A-1.
(2) The Issuer will have authorized
the issue and sale to the Purchasers, in the
respective amounts set forth on the signature
pages hereof, of warrants (the "Crescent
Warrants") to purchase an aggregate of
666,667 shares of its Common Stock pursuant
to a Warrant Agreement in the form attached
hereto as Annex B-1 (the "Crescent Warrant
Agreement"). In addition, the Issuer will
have authorized the issue and sale to the
Purchasers of warrants (the "Contingent
Warrants") to purchase a variable number of
shares of Common Stock pursuant to a Warrant
Agreement in the form attached hereto as
Annex B-2 (the "Contingent Warrant
Agreement"). The Notes, the Crescent Warrants
and the Contingent Warrants shall
individually be referenced herein as a
"Security" and collectively referenced herein
as the "Securities."
(b) The Notes shall include such
notations, legends or endorsements set forth thereon or required by law. The
Notes will be in the principal amount of $1,000 (except in the case of any
redemption following which the aggregate principal amount remaining is less
than $1,000) or integral multiples of $1,000 in excess thereof. Each Note
shall be dated the date of its issuance. Subject to Section 1.7, the aggregate
principal amount of the Notes outstanding at any one time may not exceed
$25,000,000. The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Agreement and, to the extent
applicable, the Issuer and the Purchasers, by their execution and delivery of
this Agreement, expressly agree to such terms and provisions and to be bound
thereby.
7
(c) Each certificate
representing a Crescent Warrant or a Contingent Warrant shall be substantially
in the form attached as Exhibit A to the Crescent Warrant Agreement or Exhibit
A to the Contingent Warrant Agreement, respectively, and shall be dated the
date of its issuance. The Crescent Warrants will be exercisable, in the manner
provided in the Crescent Warrant Agreement and the Crescent Warrants, for a
number of shares of Common Stock as provided in the Crescent Warrant Agreement
(the "Crescent Warrant Shares"). The Contingent Warrants will be exercisable,
in the manner provided in the Contingent Warrant Agreement and the Contingent
Warrants, for a number of shares of Common Stock as provided in the Contingent
Warrant Agreement (the "Contingent Warrant Shares"). Each Holder of Crescent
Warrant Shares or Contingent Warrant Shares will have certain registration
rights with respect to such shares, as set forth in the Stockholders Agreement,
Irrevocable Proxy and Voting Agreement in the form attached hereto as Annex C
(the "Stockholders Agreement"). Upon any distribution of any Reit Common Stock
by Holdings, each member of Holdings shall have certain registration rights, as
set forth in a Registration Rights Agreement in the form attached hereto as
Annex D (the "Registration Rights Agreement"). The terms and provisions
contained in the Crescent Warrant Agreement, the Crescent Warrants, the
Contingent Warrant Agreement and the Contingent Warrants shall constitute, and
are hereby expressly made, a part of this Agreement and, to the extent
applicable, the Issuer and the Purchasers, by their execution and delivery of
this Agreement, expressly agree to such terms and provisions and to be bound
thereby.
1.2 Purchase and Sale of Securities.
(a) Purchase and Sale. The
Issuer agrees to sell and, subject to the terms and conditions set forth herein
and in reliance on the representations and warranties of the Companies
contained or incorporated herein, each of the Purchasers agrees, severally but
not jointly, to purchase the Securities set forth below such Purchaser's name
on the signature pages hereto at a purchase price of $994.56 per $1,000
principal amount of Notes, $0.20 per Crescent Warrant and $0.10 per Contingent
Warrant, which amounts are based on the relative fair market value of each such
Security at the time of issuance, for an aggregate purchase price of
$24,999,000 for the Notes, the Crescent Warrants and the Contingent Warrants.
In addition to such aggregate purchase price, the Purchasers agree to pay an
aggregate of $1,000 to the Issuer, and the Issuer agrees to contribute such
amount to Holdings, on behalf of the Purchasers, as capital contributions of
the Purchasers to Holdings, in respect of the LLC Interests. The Issuer and
the Purchasers hereby agree that all Tax Returns filed by the Issuer and the
Purchasers shall be consistent in all material respects with such allocation
(including for purposes of Section 1271 et seq. of the Code).
(b) Closing. The purchase and
sale of the Securities shall take place at a closing (the "Closing") at the
offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at
10:00 a.m. on February 11, 1997, or such other Business Day as may be agreed
upon by the Purchasers and the Issuer (the "Closing Date"). At the Closing,
the Issuer will deliver to each of the Purchasers certificates and Notes
representing the Securities to be purchased by such Purchaser (in such
permitted denomination or denominations and registered in such Purchaser's name
or the name of such nominee or nominees as such Purchaser may request), dated
the Closing Date, against payment of the purchase price therefor(and the $1,000
mentioned in Section 1.2(a)) by intra-bank or Federal funds bank wire transfer
of same day funds to such bank account which is identified on Schedule 1.2 or
such other account as the Issuer shall designate at least two Business Days
prior to the Closing.
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(c) Fees and Expenses.
Regardless of whether the Securities are sold, each of the Issuer and Holdings
agrees, jointly and severally, to pay or reimburse all reasonable expenses
relating to this Agreement, including but not limited to:
(1) each Purchaser's reasonable
expenses incurred in connection with the
transactions contemplated by any of the
Documents including, without limitation,
travel and lodging expenses and all out-of-
pocket costs incurred in connection with such
Purchaser's review of each of the business
and operations of each of the Companies;
(2) the reasonable fees and other
charges and expenses of the Purchasers'
counsel, Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, in connection with the Documents and the
transactions contemplated thereby;
(3) the cost of printing,
reproducing and delivering to each
Purchaser's home office or the office of such
Purchaser's designee, insured to such
Purchaser's satisfaction, each of the
Documents;
(4) any reasonable fees and expenses
(including the reasonable fees and expenses
of counsel) in connection with any
registration or qualification of the
Securities required in connection with the
offer and sale of the Securities pursuant to
this Agreement under the securities or "blue
sky" laws of any jurisdiction requiring such
registration or qualification or in
connection with obtaining any exemptions from
such requirements;
(5) each Purchaser's expenses
(including the reasonable fees and expenses
of counsel) relating to any amendment to, or
modification of, or any waiver or consent or
preservation of rights under, any of the
Documents; and
(6) all other expenses, including
without limitation counsel's fees,
accountants' fees and any rating agency fees
incurred by any of the Companies in
connection with the transactions contemplated
by any of the Documents.
The Issuer shall deliver to each of the Purchasers or to such
other persons as such Purchaser shall direct, concurrently with the Closing, by
intra-bank or Federal funds bank wire transfer of same day funds, the fee set
forth on such Purchaser's signature page and payment for any reasonable and
documented out-of-pocket expenses for which such Purchaser is entitled to
reimbursement pursuant to this Section 1.2(c), including, without limitation,
the reasonable and documented fees and expenses of such Purchaser's counsel,
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP.
(d) Other Purchasers. Each
Purchaser's obligations hereunder are subject to the execution and delivery of
this Agreement by the other Purchasers listed on the signature pages hereof.
The obligations of each Purchaser shall be several and not joint, and no
Purchaser shall be liable or responsible for the acts of any other Purchaser
under this Agreement.
1.3 Registration of Securities.
The Issuer shall cause to be kept at its principal office (a)
a register for the registration and transfer of the Notes (the "Note
Register"), (b) a register for the registration and
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transfer of the Crescent Warrants (the "Crescent Warrant Register"), (c) a
register for the registration and transfer of the Crescent Warrant Shares (the
"Crescent Warrant Shares Register"), (d) a register for the registration and
transfer of the Contingent Warrants (the "Contingent Warrant Register") and (e)
a register for the registration and transfer of the Contingent Warrant Shares
(the "Contingent Warrant Shares Register"). The names and addresses of the
Holders of Notes, the transfer of Notes and the names and addresses of the
transferees of the Notes shall be registered in the Note Register. The names
and addresses of the Holders of Crescent Warrants, the transfer of Crescent
Warrants and the names and addresses of the transferees of Crescent Warrants
shall be registered in the Crescent Warrant Register. The names and addresses
of the Holders of Crescent Warrant Shares, the transfer of Crescent Warrant
Shares and the names and addresses of the transferees of Crescent Warrant
Shares shall be registered in the Contingent Warrant Shares Register. The
names and addresses of the Holders of Contingent Warrants, the transfer of
Contingent Warrants and the names and addresses of the transferees of
Contingent Warrants shall be registered in the Contingent Warrant Register.
The names and addresses of the Holders of Contingent Warrant Shares, the
transfer of Contingent Warrant Shares and the names and addresses of the
transferees of Contingent Warrant Shares shall be registered in the Contingent
Warrant Shares Register.
The Person in whose name any registered Security shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes of this Agreement, and the Issuer shall not be affected by any notice
to the contrary, until due presentment of such Security for registration of
transfer so provided in this Section 1.3. Payment of or on account of the
principal, premium, if any, and interest on any registered Securities shall be
made to or upon the written order of such registered holder.
When Securities are presented to the Issuer, with a request to
register the transfer of such Securities or to exchange such Securities for an
equal amount of Securities of other authorized denominations, the Issuer shall
register the transfer or make the exchange as requested if its reasonable
requirements (including the requirements set forth in the Stockholders
Agreement with respect to the Crescent Warrants, the Crescent Warrant Shares,
the Contingent Warrants and the Contingent Warrant Shares) for such transaction
are met.
1.4 Delivery Expenses.
If a Holder surrenders any Security to the Issuer for any
reason, the Issuer shall pay the cost of delivering to such Holder's home
office or to the office of such Holder's designee from the Issuer insured to
such Holder's satisfaction, the surrendered Security and each Security issued
in substitution, replacement or exchange for, or upon conversion of, the
surrendered Security.
1.5 Issue Taxes.
The Issuer agrees to pay all Taxes (other than Taxes in the
nature of income, franchise or gift Taxes) and governmental fees in connection
with the issuance, sale, delivery or transfer by the Issuer to each Holder of a
Security and the execution and delivery of the other Documents and any
modification of any of such Security and Documents and will save such Holder
harmless without limitation as to time against any and all liabilities with
respect to all such Taxes and fees. The obligations of the Issuer under this
Section 1.5 shall survive the payment or prepayment of the Notes, at maturity,
upon redemption or otherwise, the exercise of the Crescent Warrants, the
exercise of the Contingent Warrants and the termination of this Agreement and
the other Documents.
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1.6 Direct Payment.
(a) The Issuer will pay or cause
to be paid all amounts payable with respect to any Note (without any
presentment of such Note and without any notation of such payment being made
thereon) by crediting (before 12:00 Noon, New York time), by Federal funds bank
wire transfer in same day funds to each Holder's account in any bank in the
United States of America as may be designated and specified in writing by such
Holder at least two Business Days prior thereto. Each Purchaser's initial bank
account name and number for this purpose is set forth on the signature pages
hereto.
(b) Notwithstanding anything to the contrary contained in
the Notes, if any principal amount payable with respect to a Note is payable,
at maturity, upon redemption or otherwise, on a Legal Holiday, then the Issuer
shall pay such amount on the next succeeding Business Day, and interest shall
accrue on such amount until the date on which such amount is paid and payment
of such accrued interest shall be made concurrently with the payment of such
amount; provided that the Issuer may elect to pay in full (but not in part) any
such amount on the last Business Day prior to the date such payment otherwise
would be due, and no such additional interest shall accrue on such amount.
Notwithstanding anything to the contrary contained in the Notes, if any
interest payable with respect to a Note is payable on a Legal Holiday, then the
Issuer shall pay such interest on the next succeeding Business Day, and such
extension of time shall be included in the computation of the interest payment;
provided that the Issuer may elect to pay in full (but not in part) any such
interest on the last Business Day prior to the date such payment otherwise
would be due, and such diminution in time shall be included in the computation
of the interest payment.
1.7 Lost, Etc. Securities.
If a mutilated Security is surrendered to the Issuer or if the
Holder of a Security claims and submits an affidavit or other evidence,
satisfactory to the Issuer to the effect that the Security has been lost,
destroyed or wrongfully taken, the Issuer shall issue a replacement Security if
the customary requirements relating to replacement securities are reasonably
satisfied. If required by the Issuer, such Holder must provide an indemnity
bond, or other form of indemnity, sufficient in the judgment of the Issuer to
protect the Issuer from any loss which it may suffer if a Security is replaced.
If any Purchaser or any other institutional Holder (or nominee thereof) is the
owner of any such lost, stolen or destroyed Security, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of the Security at the time of such loss,
theft or destruction shall be accepted as satisfactory evidence thereof, and no
further indemnity shall be required as a condition to the execution and
delivery of a new Security other than the unsecured written agreement of such
owner reasonably satisfactory to the Issuer to indemnify the Issuer or at the
option of the Purchaser, an indemnity bond in the amount of the Security
remaining outstanding.
Every replacement Security shall be an obligation of the
Issuer.
1.8 Indemnification.
In addition to all other sums due hereunder or provided for in
this Agreement or any of the other Documents and any and all obligations of any
of the Companies to indemnify any Purchaser hereunder or under any of the other
Documents, each of the Companies (each, an "Indemnifying Party") hereby agrees,
jointly and severally, without limitation as to time (except
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as set forth below with respect to Reit), to indemnify each Purchaser, each
Affiliate of a Purchaser and each director, officer, employee, counsel, agent
or representative of such Purchaser and its Affiliates (collectively, the
"Indemnified Parties") against, and hold it and them harmless from, to the
fullest extent lawful, all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and reasonable attorneys'
fees and disbursements) and expenses, including expenses of investigation
(collectively, "Losses"), incurred by it or them and arising out of or in
connection with this Agreement, the other Documents or the transactions
contemplated hereby or thereby (or any other document or instrument executed
herewith or pursuant hereto or thereto), regardless of whether the transactions
contemplated by this Agreement are consummated and regardless of whether any
Indemnified Party is a formal party to any proceeding; provided, however, that
the Indemnifying Parties shall not be liable to any Indemnified Party for any
Losses to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or review)
that such Losses arose from the gross negligence or willful misconduct of such
Indemnified Party, that (i) is independent of any wrongful act by the
Indemnifying Parties, their Affiliates or any of their respective
representatives and (ii) was not taken by such Indemnified Party in reliance
upon any of the representations, warranties, covenants or promises of any of
the Companies made herein (including, without limitation, those incorporated by
reference herein) or in the other Documents, including (without limitation) the
certificates delivered by any of the Companies pursuant hereto or thereto.
Each Indemnifying Party agrees, jointly and severally, to reimburse any
Indemnified Party promptly for all such Losses as they are incurred by such
Indemnified Party (regardless of whether it is or may be ultimately determined
that an Indemnified Party is not entitled to indemnification hereunder). Prior
to reimbursing any Indemnified Party for any Losses pursuant to this Section
1.8, the Indemnifying Party may require such Indemnified Party to provide a
written undertaking to reimburse such Indemnifying Party if it is finally
judicially determined by a court of competent jurisdiction (which determination
is not subject to appeal or review) that such Indemnified Party was not
entitled to indemnification pursuant to this Section 1.8 or otherwise. The
obligations of each Indemnifying Party to each Indemnified Party hereunder
shall be separate obligations, and the Indemnifying Party's liability to any
such Indemnified Party hereunder shall not be extinguished solely because any
other Indemnified Party is not entitled to indemnity hereunder. The
obligations of each Indemnifying Party under this Section 1.8 shall survive the
payment or prepayment of the Notes, at maturity, upon acceleration, redemption
or otherwise, the exercise of the Crescent Warrants or the Contingent Warrants
purchased by any Purchaser, the redemption or repurchase by the Issuer of the
Crescent Warrants or the Contingent Warrants purchased by any Purchaser, the
redemption or repurchase of any Crescent Warrant Shares or any Contingent
Warrant Shares, any transfer of the Securities by any Purchaser and the
termination of this Agreement or any of the other Documents.
In addition, the Companies, jointly and severally, shall,
without limitation as to time, indemnify, reimburse, defend and hold harmless
the Indemnified Parties for, from, and against all Losses resulting to, imposed
on, or incurred by any of the Indemnified Parties, directly or indirectly,
arising out of any of the following: (i) any pollution or threat to human
health or the environment that is related in any way to the management, use,
control, ownership or operation of the business or property in connection with
the business of any of the Companies, by such Company, or any Person for whom
any of the Companies is or may be responsible by law or contract, including,
without limitation, all on-site and off-site activities involving Materials of
Environmental Concern, and that occurred, existed, arises out of conditions or
circumstances that occurred or existed, or was caused, in whole or in part, on
or before the Closing Date; (ii) any Environmental Claim against any Person
whose liability for such Environmental Claim any of the Companies has assumed
or retained either contractually or by operation of law, including but not
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limited to any pollution or threat to human health or the environment, or any
Federal, state, local or foreign approvals; or (iii) the breach of any
environmental representation or warranty set forth or incorporated by reference
herein; provided, however, that the indemnification provided in this paragraph
is not intended to provide indemnification to the Indemnified Parties, as
holders of Crescent Warrants, Crescent Warrant Shares, Contingent Warrants or
Contingent Warrant Shares, for any diminution in value of such Crescent
Warrants, Crescent Warrant Shares, Contingent Warrants or Contingent Warrant
Shares, resulting from the incurrence by Reit or its Subsidiaries of costs
directly attributable to any of the matters described in clauses (i) or (ii)
above.
In case any action, claim or proceeding shall be brought
against any Indemnified Party with respect to which indemnity may be sought
against any Indemnifying Party hereunder, such Indemnified Party shall promptly
notify each Indemnifying Party in writing and such Indemnifying Party shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Party and payment of all fees and expenses
incurred in connection with the defense thereof. The failure to so notify such
Indemnifying Party shall not affect any obligation it may have to any
Indemnified Party under this Agreement or otherwise, except to the extent that
(as finally determined by a court of competent jurisdiction (which
determination is not subject to review or appeal)) such failure materially and
adversely prejudiced such Indemnifying Party. Each Indemnified Party shall
have the right to employ separate counsel in such action, claim or proceeding
and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of each Indemnified Party unless: (i) such
Indemnifying Party has agreed to pay such expenses; or (ii) such Indemnifying
Party has failed promptly to assume the defense and employ counsel reasonably
satisfactory to such Indemnified Party; or (iii) the named parties to any such
action, claim or proceeding (including any impleaded parties) include any
Indemnified Party and such Indemnifying Party or an Affiliate of such
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that either (x) there may be one or more legal defenses available to it
which are different from or in addition to those available to such Indemnifying
Party or such Affiliate or (y) a conflict of interest may exist if such counsel
represents such Indemnified Party and such Indemnifying Party or its Affiliate;
provided that, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel in the circumstances
described in clause (i), (ii) or (iii) above, such Indemnifying Party shall not
have the right to assume the defense thereof and such counsel shall be at the
expense of the Indemnifying Parties; provided, however, that such Indemnifying
Party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or circumstances,
be responsible hereunder for the fees and expenses of more than one such firm
of separate counsel (in addition to any local counsel), which counsel shall be
designated by such Indemnified Party. No Indemnifying Party shall be liable
for any settlement of any such action effected without its written consent
(which shall not be unreasonably withheld). Each Indemnifying Party agrees,
jointly and severally, that it will not, without the Indemnified Party's prior
written consent, consent to entry of any judgment or settle or compromise any
pending or threatened claim, action or proceeding in respect of which
indemnification or contribution may be sought hereunder unless the foregoing
contains an unconditional release, in form and substance reasonably
satisfactory to the Indemnified Parties, of the Indemnified Parties from all
liability and obligation arising therefrom.
If the indemnification provided for in this Section 1.8 is
unavailable to, or insufficient to hold harmless, any Indemnified Party in
respect of any Losses referred to therein, then each Indemnifying Party shall
have an obligation to contribute to the amount paid or payable by such Persons
as a result of such Losses in such proportion as is appropriate to reflect the
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relative fault, as finally judicially determined by a court of competent
jurisdiction (which determination is not subject to appeal or review), of each
Indemnifying Party, its subsidiaries and Affiliates, on the one hand, and such
Indemnified Party, on the other hand, in connection with the actions which
resulted in such Losses as well as any other relevant equitable considerations.
The amount paid or payable by any such Person as a result of the Losses
referred to above shall be deemed to include, subject to the limitations set
forth in this Section 1.8, any legal or other fees or expenses reasonably
incurred by such Person in connection with any investigation, lawsuit or legal
or administrative action or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 1.8 were determined by pro
rata allocation or solely by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who is not guilty of such fraudulent
misrepresentation, in each case, as finally judicially determined by a court of
competent jurisdiction (which determination is not subject to appeal or
review).
Notwithstanding the foregoing provisions of this Section 1.8,
the obligation of Reit under this Section 1.8 to indemnify any of the
Indemnified Parties shall terminate upon the closing of a Qualified Public
Equity Offering of Reit.
1.9 Further Actions.
During the period from the date hereof to the Closing Date,
each of the Companies shall (i) take all actions necessary or appropriate to
cause its representations and warranties contained in Section 3 to be true and
correct as of the Closing Date (unless stated to refer to another date), both
before and after giving effect to the transactions contemplated by this
Agreement and the other Documents, as if made on and as of such date, and (ii)
take, or cause to be taken, all action, and do, or cause to be done, all things
necessary, proper or advisable under applicable law and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, obtaining all consents and approvals of all
Persons and removing all injunctive or other impediments or delays, legal or
otherwise, which are necessary to the consummation of the transactions
contemplated by this Agreement and the other Documents.
1.10 Other Covenants.
(a) Each of the Companies
further covenants and agrees not to, and will ensure that no affiliate (as
defined in Rule 501(b) of the Securities Act) of any of the Companies will,
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in the Securities Act) that would be integrated
with the sale of the Securities in a manner that would require the registration
under the Securities Act of the sale to the Purchasers of the Securities or the
LLC Interests.
(b) Each of the Companies
further covenants and agrees that the Issuer shall be paid and shall receive
any and all amounts recovered or paid to any of the Companies or any of their
Affiliates in connection with the lawsuit styled MDC Reit Holdings, LLC v. The
Peregrine Real Estate Investment Trust originally brought in the Superior Court
of the State of California for the County of San Francisco and relating to the
Stock Purchase Agreement dated as of September
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18, 1996 between Holdings and The Peregrine Real Estate Trust, a California
business trust; provided, however, that the aggregate amount to be so paid to
and received by the Issuer shall be net of the sum of $50,000 plus the
aggregate amount of all legal expenses incurred by (and not reimbursed to) such
Company in connection with such lawsuit.
SECTION 2. CLOSING CONDITIONS.
The obligations of each Purchaser to purchase and pay for the
Securities to be delivered to such Purchaser at the Closing shall be subject to
the satisfaction of each of the following conditions on or before the Closing
Date:
2.1 Delivery of Documents.
The Companies shall have delivered to each Purchaser, in form
and substance satisfactory to such Purchaser, the following:
(a) The Notes being purchased by
such Purchaser, duly executed by the Issuer, in the aggregate principal amount
set forth below such Purchaser's name on the signature pages hereto; the
Crescent Warrants and the Contingent Warrants being purchased by such
Purchaser, duly executed by the Issuer, representing the number of Crescent
Warrants and the number of Contingent Warrants set forth below such Purchaser's
name on the signature pages hereto.
(b) The following legal
opinions:
(1) Opinion letters dated the Closing Date and
addressed to such Purchaser, from ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel
for the Companies, as to the matters set forth on Annex E.
(2) An opinion letter dated the Closing Date and
addressed to such Purchaser, from Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, counsel for the Purchasers, as to the matters set forth on Annex
F.
(3) Such other opinions of counsel covering matters
incidental to the transactions contemplated by this Agreement and the
other Documents as any Purchaser may reasonably request.
In rendering such opinions, each counsel may rely as to
factual matters upon certificates or other documents furnished by officers and
directors of the Companies (copies of which shall be delivered to such
Purchaser) and by government officials, and upon such other documents as such
counsel deem appropriate as a basis for their opinion. Such counsel shall
opine, as applicable, as to the Federal laws of the United States of America,
the General Corporation Law of the State of Delaware, the laws of the State of
New York, the laws of the state or states of incorporation or organization of
each of the Companies and the laws of the state or states governing each of the
Documents.
(c) Resolutions of the board of
directors of the Issuer, certified by the Secretary or Assistant Secretary of
the Issuer, to be duly adopted and in full force and effect on such date,
authorizing (i) the execution, delivery and performance of this Agreement, the
Notes, the Crescent Warrant Agreement, the Stockholders Agreement and the other
Documents to which the Issuer is a party and the consummation of the
transactions contemplated hereby and thereby, (ii) the
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issuance of the Notes, the Crescent Warrants, the Crescent Warrant Shares, the
Contingent Warrants and the Contingent Warrant Shares and (iii) specific
officers of the Issuer to execute and deliver this Agreement, the Notes, the
Crescent Warrant Agreement, the Crescent Warrants, the Contingent Warrant
Agreement, the Contingent Warrants, the Stockholders Agreement and any other
Documents to which the Issuer is a party.
(d) Resolutions of the board of
directors of the managing member of Holdings, certified by the Secretary or
Assistant Secretary of such managing member to be duly adopted and in full
force and effect on such date, authorizing (i) the execution, delivery and
performance by Holdings of this Agreement and the other Documents to which
Holdings is a party and the consummation of the transactions contemplated
hereby and thereby and (ii) specific officers of the managing member of
Holdings to execute and deliver on behalf of such managing member (acting on
behalf of Holdings) this Agreement and any other Documents to which Holdings is
a party.
(e) Resolutions of the board of
directors of Reit, certified by the Secretary or Assistant Secretary of Reit,
to be duly adopted and in full force and effect on such date, adopting an
Investment, Hedging and Leverage Policy (with a copy of such policy attached to
such resolutions) and authorizing (i) the execution, delivery and performance
of this Agreement, the Registration Rights Agreement and the other Documents to
which Reit is a party and the consummation of the transactions contemplated
hereby and thereby and (ii) specific officers of Reit to execute and deliver
this Agreement, the Registration Rights Agreement and any other Documents to
which Reit is a party.
(f) Certificates of the Chief
Executive Officer and Chief Financial Officer of each of the Companies, dated
the Closing Date, certifying that (i) all of the conditions set forth in
Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.9, 2.10 and 2.11 are satisfied on and as of
such date, (ii) all of the representations and warranties of the Companies
contained or incorporated by reference herein are true and correct on and as of
such date as though made on and as of such date (unless stated to relate to
another date), (after giving effect to the transactions contemplated by this
Agreement and the other Documents) and no event has occurred and is continuing,
or would result from the issuance of the Securities that constitutes or would
constitute a Default or an Event of Default, (iii) each of the Companies has
performed its obligations that are required to be performed on or before the
closing under each of the Documents to which it is a party, in accordance
therewith and with all applicable law and (v) as to such other matters as such
Purchaser may reasonably request.
(g) The unaudited consolidated
pro forma balance sheet of the Issuer and its Subsidiaries as of the Closing
Date ("Closing Date Balance Sheet") prepared giving effect to each of the
transactions contemplated hereby to occur on the Closing Date, in reasonable
detail and certified by the chief financial officer of the Issuer that such
balance sheet fairly presents the consolidated financial condition of the
Issuer and its Subsidiaries at such date.
(h) Governmental certificates,
dated the most recent practicable date prior to the Closing Date, showing that
each of the Companies is organized and in good standing in the jurisdiction of
its incorporation or other organization and is qualified as a foreign
corporation or other entity and in good standing in all other jurisdictions in
which it has executive offices or transacts business, except where the failure
to be so qualified could not reasonably be expected to have a Material Adverse
Effect.
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(i) Copies of each consent,
license and approval required in connection with the execution, delivery and
performance by the Companies of any of the Documents and the consummation of
the transactions contemplated thereby (including without limitation consents,
if any, required pursuant to the HSR Act).
(j) Copies of the Charter
Documents of each of the Issuer, Holdings and Reit, certified as of a recent
date by the Secretaries of State of the States of Delaware and Maryland, as
appropriate, and certified by the Secretary or Assistant Secretary or managing
member of each of the Issuer, Holdings and Reit, respectively, as true and
correct as of the Closing Date.
(k) Certificates of the
Secretary or an Assistant Secretary of each of the Companies as to the
incumbency and signatures of the officers or representatives of such entity
executing any of the Documents, together with evidence of the incumbency of
such Secretary or Assistant Secretary.
(l) True and correct copies of
the Escrow Agreement, Crescent Warrant Agreement, the Crescent Warrants,
Contingent Warrant Agreement, the Contingent Warrants, the Stockholders
Agreement, the Registration Rights Agreement, the Letter of Credit Documents,
the Holdings Pledge, the Issuer Pledge, the Management Agreement and each of
the other Documents.
(m) Such additional information
and materials as any Purchaser may reasonably request, including, without
limitation, copies of any debt agreements, security agreements and other
contracts to which any of the Companies is a party.
2.2 Legal Investment; Purchase Permitted by Applicable Laws.
Each Purchaser's acquisition of the Securities and the LLC
Interests (a) shall not be prohibited by any applicable law or governmental
regulation, release, interpretation or opinion (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System), (b) shall constitute a legal investment as of the Closing Date under
the laws and regulations and orders of each jurisdiction to which such
Purchaser may be subject (without resort to any "basket" or "leeway"
provision), and (c) shall not subject such Purchaser to any penalty or, in its
reasonable judgment, other onerous condition in or pursuant to any such law,
regulation or order; and such Purchaser shall have received such certificates
or other evidence as such Purchaser may reasonably request to establish
compliance with this condition.
2.3 Payment of Fees.
The Issuer shall have delivered to each of the Purchasers or
to such other persons as such Purchaser shall direct on the signature pages
hereto, at the Closing, by intra-bank or Federal funds bank wire transfer of
same day funds, payment for such Purchaser's fee of such percent of the
aggregate principal amount of the Notes being purchased by such Purchaser as is
set forth on such Purchaser's signature page hereto.
2.4 Compliance with Agreements.
Each of the Companies shall have performed and complied in all
material respects with all agreements, covenants and conditions contained
herein, in each of the other Documents
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and in any other document contemplated hereby or thereby which are required to
be performed or complied with by such party on or before the Closing Date.
2.5 Completion of Other Transactions.
Simultaneously with or prior to the sale to each Purchaser of
the Securities to be purchased by such Purchaser:
(a) Each of the Documents
(including, without limitation, the Limited Liability Company Agreement and the
initial Letter of Credit Documents) shall have been executed and delivered by
each of the parties thereto (other than such Purchaser) in form and substance
satisfactory to the Purchasers, and such parties shall have consummated the
transactions contemplated thereby in accordance with all applicable laws
(including without limitation, the Securities Act, all applicable state
securities laws and all related rules and regulations under such statutes and
other laws).
(b) All of the other Purchasers
listed in the signature pages hereof shall have consummated their purchase of
Securities pursuant to this Agreement.
(c) The Issuer shall own,
directly, 100% of the Preferred Interests in Holdings, and Holdings shall own
100% of the Equity Interests of Reit (other than the Management Reit
Interests).
(d) The board of directors of
Reit shall be comprised of the persons listed on Schedule 2.5(d).
(e) The Series A Purchasers
shall have purchased an aggregate of 20,000 shares of Series A Preferred Stock
for aggregate net proceeds in cash to the Issuer of at least $2,000,000,
pursuant to the terms and conditions set forth in the Series A Purchase
Agreement.
2.6 Representations and Warranties.
Unless stated to relate to another date, all of the
representations and warranties of each of the Companies contained or
incorporated by reference herein or in any of the other Documents shall be true
and correct on and as of the Closing Date, both before and after giving effect
to the transactions contemplated hereby and by the other Documents.
2.7 No Event of Default.
No event shall have occurred and be continuing, or would
result from the consummation of the transactions contemplated to be consummated
on or prior to the Closing Date by this Agreement or any of the other Documents
(including without limitation the purchase of the Securities and the LLC
Interests), that constitutes or would constitute a Default or an Event of
Default.
2.8 Proceedings Satisfactory.
All proceedings taken in connection with the sale of the
Securities and the LLC Interests, the transactions contemplated hereby and all
documents and papers relating thereto, shall be reasonably satisfactory to such
Purchaser. Such Purchaser and its counsel shall have
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received copies of such documents and papers as they may reasonably request in
connection therewith, or as a basis for the Closing opinions, all in form and
substance satisfactory to such Purchaser.
2.9 Consents and Permits.
The Companies shall have received all consents, permits,
approvals and authorizations and sent or made all notices, filings,
registrations and qualifications as may be required pursuant to any law,
statute, regulation or rule (Federal, state, local or foreign) or pursuant to
any other agreement, order or decree to which any of them is a party or to
which any of them is subject, in connection with the transactions to be
consummated on or prior to the Closing Date as contemplated by this Agreement
or any of the other Documents.
2.10 No Material Adverse Effect.
Since their respective dates of organization: (A) none of the
Companies shall have suffered any adverse change in its properties, business,
operations, assets, condition (financial or otherwise) or prospects that could
reasonably be expected to result in a Material Adverse Effect; and (B) (i)
there shall not have been any material change in the capital stock or long-term
debt, or material increase in short-term debt, of any of the Companies and (ii)
none of the Companies shall have incurred any liability or obligation, direct
or contingent, that is material to it, is required to be disclosed on a balance
sheet in accordance with GAAP and is not disclosed on the latest balance sheet
previously provided to the Purchasers.
2.11 No Material Judgment or Order.
There shall not be on the Closing Date any judgment or order
of a court of competent jurisdiction or any ruling of any agency of the
Federal, state or local government that, in the reasonable judgment of any
Purchaser or its counsel, would prohibit the sale or issuance of the Securities
hereunder or the issuance or purchase of the LLC Interests or subject any of
the Companies to any material penalty if the Securities were to be issued and
sold hereunder or the LLC Interests were to be issued or purchased as
contemplated hereby.
2.12 Initial Escrow Deposit.
The Issuer shall have deposited $3,000,000 in the Escrow
Account.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.
A. Representations and Warranties of the Issuer and Reit.
The Issuer and Reit, jointly and severally, represent and warrant on the date
hereof and as of the Closing, as follows:
3.1 Authorization; Capitalization.
Each of the Companies has taken all actions necessary to
authorize it (i) to execute, deliver and perform all of its obligations under
each of the Documents to which it is a party, and (ii) to consummate the
transactions contemplated thereby. Without limiting the generality of the
preceding sentence, the Issuer has taken all actions necessary to authorize it
to issue and perform all of its obligations under the Notes and the Crescent
Warrants. Each of the Documents to which any of the Companies is a party is a
legally valid and binding obligation of such Company,
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enforceable against it in accordance with its respective terms, except for (a)
the effect thereon of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the rights of creditors generally
and (b) limitations imposed by equitable principles upon the specific
enforceability of any of the remedies, covenants or other provisions thereof
and upon the availability of injunctive relief or other equitable remedies.
Holdings and Reit are the only Subsidiaries of the Issuer.
The total authorized Equity Interests of the Issuer consist of (a) 5,000,000
shares of Common Stock, of which 1,254,065 shares were issued and outstanding
on the date hereof prior to giving effect to the transactions contemplated
hereby and 1,254,065 shares will be issued and outstanding upon consummation of
the transactions contemplated hereby, and (b) 200,000 shares of preferred
stock, par value $.0001 per share, of which no shares were issued and
outstanding on the date hereof prior to giving effect to the transactions
contemplated hereby and 20,000 shares of Series A Preferred Stock and no shares
of Series B Preferred Stock will be issued and outstanding upon consummation of
the transactions contemplated hereby. The total authorized Equity Interests of
Holdings consists of the limited liability company interests held by the
members thereof as set forth in the Limited Liability Company Agreement on the
date hereof, which interests shall be held by such members as set forth in such
agreement upon the consummation of the transactions contemplated hereby. The
total authorized Equity Interests in Reit consist of (a) 3,000,000 shares of
Reit Common Stock, of which no shares were issued and outstanding on the date
hereof prior to giving effect to the transactions contemplated hereby and
2,017,500 shares will be issued and outstanding upon consummation of the
transactions contemplated hereby and (b) 1,000,000 shares of preferred stock,
par value $0.01 per share, of which no shares were issued and outstanding on
the date hereof prior to giving effect to the transactions contemplated hereby
and no shares will be issued and outstanding upon consummation of the
transactions contemplated hereby. The Issuer owns 100% of the Preferred
Interests of Holdings, and Holdings owns 100% of the outstanding Equity
Interests or other securities evidencing equity ownership of Reit (other than
the Management Reit Interests), in each case free and clear of any security
interest, mortgage, pledge, transfer restriction, defect, claim, lien,
limitation on voting rights, encumbrance, equity or adverse interest of any
nature (each, a "Lien"), except in the case of the Equity Interests in Reit,
the Lien in favor of the Holders. All of the outstanding Equity Interests of
the Issuer, Holdings and Reit have been duly authorized and validly issued, are
fully paid and nonassessable and were not issued in violation of, and are not
subject to, any preemptive or similar rights. Except for the Preferred
Interests, the Issuer does not own any Equity Interest in, or any other
securities of, any Person. Except for 2,000,000 shares of Reit Common Stock,
Holdings does not own any Equity Interest in, or any other securities of, any
Person. Reit does not own any Equity Interest in, or any other securities of,
any Person.
On the Closing Date, the Securities and the LLC Interests will
be duly authorized and validly issued, will be fully paid and nonassessable and
will not have been issued in violation of, nor will they be subject to, any
preemptive or similar rights. On the Closing Date, the Crescent Warrant Shares
and the Contingent Warrant Shares will be duly authorized, and upon exercise of
the Crescent Warrants and the Contingent Warrants, the Crescent Warrant Shares
and the Contingent Warrant Shares, respectively, will have been duly authorized
and validly issued, will have been fully paid and nonassessable and will not
have been issued in violation of, nor will they be subject to, any preemptive
or similar rights. Except for the Crescent Warrants, the Contingent Warrants,
the L/C Warrants, the Series A Warrants and the 1997 Stock Incentive Plan of
Reit, there are no outstanding (i) securities convertible into or exchangeable
for any Equity Interests of any of the Companies, (ii) options, warrants or
other rights to purchase or subscribe to Equity Interests of any of the
Companies or securities convertible into or exchangeable for Equity
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Interests of any of the Companies, (iii) contracts, commitments, agreements,
understandings, arrangements, calls or claims of any kind relating to the
issuance of any Equity Interests of any of the Companies, any such convertible
or exchangeable securities or any such options, warrants or rights or (iv)
voting trusts, agreements, contracts, commitments, understandings or
arrangements with respect to the voting of any of the Equity Interests of any
of the Companies.
Except for the Stockholders Agreement and the Registration
Rights Agreement, none of the Companies has entered into an agreement to
register its securities under the Securities Act. Except for this Agreement
and the agreements and stock incentive plan referenced in the immediately
preceding paragraph, none of the Companies has entered into any agreement to
issue, purchase or sell any of its securities.
There are no securities of the Issuer or Holdings registered
under the Exchange Act or listed on a national securities exchange registered
under Section 6 of the Exchange Act or quoted in an automated inter-dealer
quotation system.
Concurrently with the consummation of the transactions
contemplated hereby, (a) the Persons listed on Schedule 3.1 purchased an
aggregate of 20,000 shares of Series A Preferred Stock for the respective
amounts of consideration set forth on such Schedule and (b) each of such
Persons entered into a Letter of Credit Contribution Agreement relating to
Letters of Credit in the respective amounts set forth in such Schedule, the sum
of which shall be $4,000,000.
3.2 No Violation or Conflict; No Default.
(a) Neither the execution,
delivery or performance of this Agreement or any of the other Documents by any
of the Companies nor the compliance with their respective obligations hereunder
or thereunder, nor the consummation of the transactions contemplated hereby and
thereby, nor the issuance, sale or delivery of the Securities will:
(1) violate any provision of the
Charter Documents of any of the Companies;
(2) violate any statute, law, rule
or regulation or any judgment, decree, order,
regulation or rule of any court or
governmental authority or body to which any
of the Companies or any of their respective
properties may be subject;
(3) permit or cause the acceleration
of the maturity of any debt or obligation of
any of the Companies; or
(4) violate, or be in conflict with,
or constitute a default under, or permit the
termination of, or require the consent of any
Person under, or result in the creation or
imposition of any Lien (other than Permitted
Liens) upon any property of any of the
Companies under, any mortgage, indenture,
loan agreement, note, debenture, agreement
for borrowed money or any other agreement to
which any of the Companies is a party or by
which any of the Companies (or their
respective properties) may be bound, other
than such violations, conflicts, defaults,
terminations and Liens, or such failures to
obtain consents, which could not reasonably
be expected to result in a Material Adverse
Effect.
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(b) None of the Companies is in
default (without giving effect to any grace or cure period or notice
requirement) under its Charter Documents nor under any agreement for borrowed
money or under any agreement pursuant to which any of its securities were sold.
3.3 Use of Proceeds.
The net proceeds from the sale of the Securities hereunder
will be used solely to (a) make an equity contribution of $20,000,000 to
Holdings, which shall be used by Holdings to purchase all the issued and
outstanding shares of Reit Common Stock (other than the Management Reit
Interests) in connection with the initial capitalization of Reit, (b) pay
transactions costs in connection with the transactions contemplated hereby, (c)
make the initial deposit into the Escrow Account as required pursuant to
Section 2.12 and (d) fund working capital of the Issuer.
3.4 No Material Adverse Change; Financial Information.
(a) No Material Adverse Change.
Since the date of its formation, each of the Issuer and its Subsidiaries has
not suffered any material adverse change in its properties, business,
operations, assets, condition (financial or otherwise) or prospects which could
reasonably be expected to result in a Material Adverse Effect.
(b) Financial Statements. The
Closing Date Balance Sheet presents fairly the consolidated financial condition
of the Issuer and its Subsidiaries after giving effect to the transactions
contemplated hereby to occur on the Closing Date. Except as disclosed therein,
such balance sheet and related notes have been prepared in accordance with
GAAP. All financial statements concerning the Issuer and its Subsidiaries that
will hereafter be furnished by the Issuer and its Subsidiaries to the
Purchasers or any Holder pursuant to this Agreement will be prepared in
accordance with GAAP consistently applied (except as disclosed therein) and
will present fairly the financial condition of the entities covered thereby as
at the dates thereof and the results of their operations for the periods then
ended.
(c) Projections. True and
complete copies of (i) projections of the consolidated revenues, earnings
before depreciation, interest and taxes, operating margins, net income and
capital expenditures of each of the Issuer, Holdings and Reit for each of the
fiscal years ending December 31, 1997, 1998, 1999, 2000 and 2001, prepared by
senior management of the Issuer (assuming the consummation of the transactions
contemplated hereby and by the other Documents) and set forth in Schedule
3.4(c) (the "Projections") and (ii) the assumptions and supplemental data used
in preparing the Projections (collectively, the "Supplemental Data") have been
delivered by the Issuer to the Purchasers. The Projections were prepared on
the basis of the Supplemental Data, which represent a reasonable basis for such
preparation. The Projections and the Supplemental Data reflect the best
currently available estimates and judgment of the Issuer's senior management as
to the expected future financial performance of the Issuer and its
Subsidiaries; provided, however, that no representation or warranty is made
that actual results will meet such Projections.
3.5 Full Disclosure.
This Agreement (including without limitation the
representations and warranties incorporated herein by reference), the Closing
Date Balance Sheet, the Projections, the Supplemental Data, each of the
Documents and any other document, certificate or written
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statement furnished by or on behalf of any of the Companies to any Purchaser in
connection with the negotiation and sale of the Securities or the LLC
Interests, when taken as a whole, do not contain any untrue statement of a
material fact or omit or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made. There is no material fact known to
any of the Companies that has had or could reasonably be expected to have a
Material Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and written statements furnished to the Purchasers for
use in connection with the transactions contemplated hereby.
3.6 Third Party Consents.
Neither the nature of any of the Companies nor of any of their
businesses or properties, nor any relationship between any of the Companies and
any other Person, nor any circumstance in connection with the offer, issuance,
sale or delivery of the Securities at the Closing nor the performance by any of
the Companies of its obligations hereunder or under any other Document, or the
consummation of the transactions contemplated hereby or by any other Document,
as the case may be, is such as to require a consent, approval or authorization
of, or notice to, or filing, registration or qualification with, any
governmental authority or other Person on the part of any of the Companies as a
condition to the execution and delivery of this Agreement or any of the other
Documents or the offer, issuance, sale or delivery of the Securities at the
Closing other than such consents, approvals, authorizations, notices, filings,
registrations or qualifications which shall have been made or obtained on or
prior to the Closing Date (and copies of which will be delivered to the
Purchasers) and such filings under Federal and state securities laws which are
permitted to be made after the Closing Date and which the Issuer hereby agrees
to file within the time period prescribed by applicable law.
3.7 No Violation of Regulations of Board of Governors of Federal
Reserve System.
None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Securities) will violate or result in a violation of Section 7 of the Exchange
Act or any regulation issued pursuant thereto, including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System.
3.8 Private Offering.
Assuming the truth and correctness of the representations and
warranties set forth in Section 4, the sale of the Securities hereunder and the
issuance and sale of the LLC Interests contemplated hereby are exempt from the
registration and prospectus delivery requirements of the Securities Act. In
the case of each offer or sale of the Securities or the LLC Interests, no form
of general solicitation or general advertising was used by any of the Companies
or their respective representatives, including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
The Purchasers, the parties to the Contingent Warrant
Agreement (other than the Issuer) and the members of Holdings set forth in the
Limited Liability Company Agreement are the sole purchasers of the Securities
and the LLC Interests. No securities have been issued and sold by the Issuer
or Holdings within the six-month period immediately prior to the date hereof.
None
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of the securities issued within such six-month period could be integrated with
the issuance of the Securities or the LLC Interests as a single offering for
purposes of the Securities Act, and the Issuer and Holdings agree, jointly and
severally, that none of them, nor anyone acting on their behalf, will offer or
sell the Securities, or any portion of them, if such offer or sale might bring
the issuance and sale of the Securities or the LLC Interests to any Purchaser
hereunder within the provisions of Section 5 of the Securities Act nor offer
any similar securities for issuance or sale to, or solicit any offer to acquire
any of the same from, or otherwise approach or negotiate with respect thereto
with, anyone if the sale of the Securities or the LLC Interests and any such
securities could be integrated as a single offering for the purposes of the
Securities Act, including without limitation Regulation D thereunder. It is
not necessary, in connection with the transactions contemplated hereby, to
qualify an indenture under the Trust Indenture Act of 1939, as amended.
3.9 Governmental Regulations.
None of the Companies is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holdings Company
Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act,
the Commodity Exchange Act or to any Federal or state statute or regulation
limiting its ability to incur indebtedness for borrowed money or consummate the
transactions contemplated hereby and by the other Documents.
3.10 Brokers.
None of the Companies has dealt with any broker, finder,
commission agent or other such intermediary in connection with the sale of the
Securities and the transactions contemplated by this Agreement and the other
Documents, and none of the Companies is under any obligation to pay any
broker's or finder's fee or commission or similar payment in connection with
such transactions (other than $750,000 to PaineWebber Incorporated).
The Companies agree, jointly and severally, to indemnify and
hold the Holders harmless from and against any and all actions, suits, claims,
costs, expenses, losses, liabilities and/or obligations in connection with or
relating to any broker's or finder's fees or commission or similar payment in
connection with such transactions, except with respect to such fees or
commissions incurred by any Purchaser for its account, so long as the Issuer
receives notice of any such action, suit, claim, etc., reasonably promptly
after the Holders become aware thereof; provided that the failure to give such
notice as provided in this sentence shall not relieve any of the Companies of
its obligations under this sentence, except to the extent, and only to the
extent, that such Company is materially prejudiced by such failure to give
notice (as determined by a court of competent jurisdiction in a final
nonappealable judgment).
3.11 Solvency.
Immediately prior to and after giving effect to the issuance
of the Securities and the execution, delivery and performance of this
Agreement, the other Documents and any instrument governing Indebtedness of any
of the Companies incurred as of the Closing Date, each of the Companies is
Solvent.
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3.12 Representations and Warranties.
All representations and warranties (and the related schedules)
of each of the Companies contained in any of the Documents, each in the form as
in effect on the date hereof without amendment or waiver, shall be deemed to
constitute representations and warranties of the Issuer and Reit under this
Agreement with the same force and effect as the representations and warranties
expressly set forth herein. Such representations and warranties are true and
correct on the date hereof and will be true and correct as of the Closing Date
as if made at and as of such date and are hereby incorporated by reference
herein as if made hereby by the Issuer and Reit to the Purchasers. Unless
otherwise defined herein, for purposes of this Section 3.12, the definitions
contained in each of the Documents (insofar as they relate to the
representations and warranties incorporated herein) are hereby incorporated by
reference herein and made a part hereof.
3.13 Litigation.
(a) There is no action, claim,
suit, citation or proceeding (including, without limitation, an investigation
or partial proceeding, such as a deposition), whether commenced, or to the
knowledge of any of the Companies, threatened against or affecting any of the
Companies or any of their properties or assets ("Proceedings"), except for such
Proceedings that, if finally determined adversely to any of the Companies,
could not reasonably be expected to have a Material Adverse Effect, and there
is no Proceeding seeking to restrain, enjoin, prevent the consummation of or
otherwise challenge this Agreement or any of the other Documents or the
transactions contemplated hereby or thereby.
(b) None of the Companies is
subject to any judgment, order, decree, rule or regulation of any court,
governmental authority or arbitration board or tribunal that has had a Material
Adverse Effect or that could reasonably be expected to have a Material Adverse
Effect.
3.14 Labor Relations.
None of the Companies, nor any Person for whom any of the
Companies is or may be responsible by law or contract, is engaged in any unfair
labor practice that could reasonably be expected to have a Material Adverse
Effect. There is (a) no unfair labor practice charge or complaint pending or
threatened against any of the Companies, or any Person for whom any of the
Companies is or may be responsible by law or contract, before the National
Labor Relations Board or any corresponding state, local or foreign agency, and
no grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is so pending or threatened, (b) no strike, labor dispute,
slowdown or stoppage pending or threatened against any of the Companies, or any
Person for whom any of the Companies is or may be responsible by law or
contract and (c) no union representation claim or question existing with
respect to the employees of any of the Companies, or any Person for whom any of
the Companies is or may be responsible by law or contract, and no union
organizing activities taking place. None of the Companies, nor any Person for
whom any of the Companies is or may be responsible by law or contract, is a
party to any collective bargaining agreement.
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Except such as could not, singly or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, none of the
Companies nor any of their Subsidiaries has violated any applicable Federal,
state, provincial or foreign law relating to employment or employment practices
or the terms and conditions of employment, including, without limitation,
discrimination in the hiring, promotion or pay of employees, wages, hours of
work, plant closings and layoffs, collective bargaining, and occupational
safety and health, or any provisions of ERISA or the rules and regulations
promulgated thereunder or any other applicable law (whether foreign or
domestic) relating to or governing the operation or maintenance of any plan or
arrangement falling within the definition of an "employee benefit plan" (as
such term is defined in Section 3 of ERISA) or any other employee benefit plan
or arrangement.
3.15 Taxes.
All Tax Returns required to be filed by any of the Companies
have been timely filed and all such Tax Returns are true, complete and correct
in all material respects. All Taxes due or claimed to be due from any of the
Companies that are due and payable have been paid, other than (i) those being
contested in good faith and for which an adequate reserve or accrual has been
established in accordance with GAAP or (ii) those with respect to which payment
can be deferred without penalty or interest and for which an adequate reserve
or accrual has been established or extensions duly filed. None of the
Companies knows of (A) any actual or proposed material additional Tax
assessments or (B) any probable basis for the imposition of any material
additional Tax assessments for any fiscal period against any of the Companies.
Reit is organized, and has operated at all times since the date of its
formation, in a manner permitting it to be qualified, and will continue to
operate (i) and be qualified as a REIT under Section 856 et seq. of the Code
and (ii) in a manner that will cause it to be taxed on its income pursuant to
Section 857 of the Code.
3.16 Environmental Matters.
Except as could not reasonably be expected to have a Material
Adverse Effect:
(a) each of the Companies, and
any Person for whom any of the Companies is or may be responsible by law or
contract (which such Person is included in the definition of "Companies" for
purposes of this Section 3.16), is in full compliance with all Environmental
Laws, which compliance includes, but is not limited to, (1) compliance with all
standards, schedules and timetables therein, (2) the possession of all permits,
licenses, approvals and other authorizations required under the Environmental
Laws or with respect to the operation of the business, property and assets of
any of the Companies or any such Person, and compliance with the terms and
conditions thereof and (3) any Federal, state, local or foreign approvals
required pursuant to any Environmental Laws that pertain or relate to the
transactions contemplated by this Agreement;
(b) none of the Companies has
received any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that any of the
Companies is not in full compliance with any Environmental Law; none of the
Companies has any liability under any Environmental Law, and there are no past
or present actions, activities, circumstances, conditions, events or incidents
that may be expected to prevent or interfere with full compliance with
applicable Environmental Laws in the future;
(c) there is no Environmental
Claim pending or threatened against any of the Companies;
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(d) there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that could be expected to form the basis
of any Environmental Claim against any of the Companies;
(e) no real property or facility
owned, used, operated, leased, managed or controlled by any of the Companies,
or any predecessor in interest, is listed or proposed for listing on the
National Priorities List or the Comprehensive Environmental Response,
Compensation, and Liability Information System pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, or on any
other state or local list established pursuant to any Environmental Law;
(f) there have been no releases
(including, without limitation, any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping, on-site or off-site) of Materials of
Environmental Concern by any of the Companies, or any predecessor in interest,
at, on, under, from or into any facility or real property owned, operated,
leased, managed or controlled by any of the Companies, and none of the
Companies has incurred or expects to incur liability for contamination at, on,
under, from or into any on-site or off-site locations where any of the
Companies have stored, disposed or arranged for the disposal of Materials of
Environmental Concern;
(g) no underground storage tank
or other underground storage receptacle, or related piping, is located on a
facility or property currently owned, operated, leased, managed or controlled
by any of the Companies; and
(h) there is no asbestos
contained in or forming part of any building, building component, structure or
office space, and no polychlorinated biphenyls ("PCBs") or PCB-containing items
are used or stored at any property, owned, operated, leased, managed or
controlled, whether currently or in the past (for which such matters the
Companies could be liable), by any of the Companies.
3.17 ERISA.
Based upon the Purchasers' representation in Section 4.5, the
execution and delivery of this Agreement, the other Documents and the sale of
the Securities to be purchased by the Purchasers will not involve any
non-exempt "prohibited transaction." No condition exists or event or
transaction has occurred in connection with any "employee benefit plan"
maintained or contributed to by any of the Companies or any of their ERISA
Affiliates (any such plan being herein referred to as a "Company Plan") that
has resulted or is reasonably likely to result in any of the Companies or any
such ERISA Affiliate incurring any liability, fine or penalty except as could
not reasonably be expected to have a Material Adverse Effect. No Company Plan
is subject to Title IV of ERISA, and none of the Companies has any liability
under Title IV of ERISA, whether actual or contingent. No amounts payable
pursuant to any compensation or benefits plan, program, arrangement or
agreement will, in connection with the transactions contemplated under this
Agreement or the other Documents, fail to be deductible for Federal income tax
purposes by virtue of Section 280G of the Code. The terms "employee benefit
plan" and "party in interest" shall have the meanings assigned to such terms in
section 3 of ERISA, the term "disqualified person" shall have the meaning
assigned to such term in Section 4975 of the Code, the term "prohibited
transaction" shall have the meaning assigned to such term in Section 406 of
ERISA
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and Section 4975 of the Code, and the term "ERISA Affiliate" shall have the
meaning assigned to such term in Section 407 of ERISA.
3.18 Intellectual Property.
Each of the Companies owns or possesses adequate licenses or other
rights to use all trademarks, service marks, trade names, copyrights and
know-how necessary to conduct the business now conducted by it, and neither any
of the Companies nor any of their Subsidiaries has received any notice of
infringement of or conflict with (or knows or has known of such infringement of
or conflict with) asserted rights of others with respect to the use of
intellectual property, including without limitation, trademarks, service marks,
trade names, copyrights, or know-how that, individually or in the aggregate,
could reasonably be expected to result in any Material Adverse Effect. To the
best knowledge of the Issuer, all intellectual property material to the
business now conducted by the Issuer and its Subsidiaries or proposed to be
conducted is valid and enforceable, and each of the Issuer and its Subsidiaries
has performed all acts and has paid all required fees and taxes to maintain all
registrations and applications of such intellectual property in full force and
effect. The Companies and their Subsidiaries do not, in the conduct of their
business as now conducted and shall not in the conduct of their business as
proposed to be conducted, infringe or conflict with any right of any third
party where such infringement or conflict could reasonably be expected to
result in any Material Adverse Effect. To the best knowledge of the Issuer,
the Issuer and its Subsidiaries are not, nor will they be as a result of the
execution and delivery of this Agreement or the other Documents or the
performance of any obligations hereunder or thereunder, in breach of any
license or other agreement relating to any intellectual property.
3.19 Compliance with Laws.
Each of the Companies and each of their Subsidiaries has obtained and
has maintained in good standing any licenses, permits, consents and
authorizations required to be obtained by it under all laws or regulations
relating to its business (collectively, the "Laws"), the absence of which
(individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect, and any such licenses, permits, consents and
authorizations remain in full force and effect, except as to any of the
foregoing the absence of which (individually or in the aggregate) could not
reasonably be expected to have a Material Adverse Effect. Each of the
Companies and each of its Subsidiaries is in compliance with the Laws in all
material respects, and there is no pending or, to the knowledge of any of the
Companies or any of their Subsidiaries, threatened, action or proceeding
against any of the Companies or any of their Subsidiaries under any of the
Laws, other than any such actions or proceedings which, individually or in the
aggregate, if adversely determined, could not reasonably be expected to have a
Material Adverse Effect.
B. Representations and Warranties of Holdings. Holdings
represents and warrants on the date hereof and as of the Closing, as follows:
3.20 Authorization; Capitalization.
Holdings has taken all actions necessary to authorize it (i)
to execute, deliver and perform all of its obligations under each of the
Documents to which it is a party, and (ii) to consummate the transactions
contemplated thereby. Each of the Documents to which Holdings is a party is a
legally valid and binding obligation of Holdings, enforceable against it in
accordance with its respective terms, except for (a) the effect thereon of
bankruptcy, insolvency,
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reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally and (b) limitations imposed by equitable
principles upon the specific enforceability of any of the remedies, covenants
or other provisions thereof and upon the availability of injunctive relief or
other equitable remedies.
Reit is the only Subsidiary of Holdings. The total authorized
Equity Interests of Holdings consists of the limited liability company
interests held by the members thereof as set forth in the Limited Liability
Company Agreement on the date hereof, which interests shall be held by such
members as set forth in such agreement upon the consummation of the
transactions contemplated hereby. The Issuer owns 100% of the Preferred
Interests of Holdings, and Holdings owns 100% of the outstanding Equity
Interests or other securities evidencing equity ownership of Reit (other than
the Management Reit Interests), in each case free and clear of any security
interest, mortgage, pledge, transfer restriction, defect, claim, lien,
limitation on voting rights, encumbrance, equity or adverse interest of any
nature (each, a "Lien"), except in the case of the Equity Interests in Reit,
the Lien in favor of the Holders. All of the outstanding Equity Interests of
Holdings and Reit have been duly authorized and validly issued, are fully paid
and nonassessable and were not issued in violation of, and are not subject to,
any preemptive or similar rights. Except for the Reit Shares, Holdings does
not own any Equity Interest in, or any other securities of, any Person. Reit
does not own any Equity Interest in, or any other securities, of any Person.
On the Closing Date, the LLC Interests will be duly authorized
and validly issued, will be fully paid and nonassessable and will not have been
issued in violation of, nor will they be subject to, any preemptive or similar
rights. There are no outstanding (i) securities convertible into or
exchangeable for any Equity Interests of Holdings, (ii) options, warrants or
other rights to purchase or subscribe to Equity Interests of Holdings or
securities convertible into or exchangeable for Equity Interests of Holdings,
(iii) contracts, commitments, agreements, understandings, arrangements, calls
or claims of any kind relating to the issuance of any Equity Interests of
Holdings, any such convertible or exchangeable securities or any such options,
warrants or rights or (iv) voting trusts, agreements, contracts, commitments,
understandings or arrangements with respect to the voting of any of the Equity
Interests of Holdings.
Holdings has not entered into an agreement to register its
securities under the Securities Act or to issue, purchase or sell any of its
securities.
There are no securities of Holdings registered under the
Exchange Act or listed on a national securities exchange registered under
Section 6 of the Exchange Act or quoted in an automated inter-dealer quotation
system.
3.21 No Violation or Conflict; No Default.
(a) Neither the execution,
delivery or performance of this Agreement or any of the other Documents by
Holdings nor the compliance with its obligations hereunder or thereunder, nor
the consummation of the transactions contemplated hereby and thereby, nor the
issuance, sale or delivery of the Securities will:
(1) violate any provision of the
Charter Documents of Holdings;
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(2) violate any statute, law, rule
or regulation or any judgment, decree, order,
regulation or rule of any court or
governmental authority or body to which
Holdings or any of its properties may be
subject;
(3) permit or cause the acceleration
of the maturity of any debt or obligation of
Holdings; or
(4) violate, or be in conflict with,
or constitute a default under, or permit the
termination of, or require the consent of any
Person under, or result in the creation or
imposition of any Lien upon any property of
Holdings under, any mortgage, indenture, loan
agreement, note, debenture, agreement for
borrowed money or any other agreement to
which Holdings is a party or by which
Holdings (or its properties) may be bound,
other than such violations, conflicts,
defaults, terminations and Liens, or such
failures to obtain consents, which could not
reasonably be expected to result in a
Material Adverse Effect.
(b) Holdings is not in default
(without giving effect to any grace or cure period or notice requirement) under
its Charter Documents nor under any agreement for borrowed money or under any
agreement pursuant to which any of its securities were sold.
3.22 Third Party Consents.
Neither the nature of Holdings nor of any of its businesses or
properties, nor any relationship between Holdings and any other Person, nor any
circumstance in connection with the offer, issuance, sale or delivery of the
Securities at the Closing nor the performance by Holdings of its obligations
hereunder or under any other Document, or the consummation of the transactions
contemplated hereby or by any other Document, as the case may be, is such as to
require a consent, approval or authorization of, or notice to, or filing,
registration or qualification with, any governmental authority or other Person
on the part of Holdings as a condition to the execution and delivery of this
Agreement or any of the other Documents or the offer, issuance, sale or
delivery of the Securities at the Closing other than such consents, approvals,
authorizations, notices, filings, registrations or qualifications which shall
have been made or obtained on or prior to the Closing Date (and copies of which
will be delivered to the Purchasers) and such filings under Federal and state
securities laws which are permitted to be made after the Closing Date and which
the Holdings agrees to file within the time period prescribed by applicable
law.
C. Survival of Representations and Warranties. All of the
representations and warranties of the Companies hereunder and under the other
Documents shall survive the execution and delivery of the same, any
investigation by any Purchaser and the issuance of the Securities.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER.
Each Purchaser (as to itself only) and each Account Manager
(as to the managed accounts of Purchasers) represents and warrants to the
Companies that:
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4.1 Purchase for Own Account.
Such Purchaser or such Account Manager is purchasing the
Securities to be purchased by it solely for its own account (or in the case of
Account Managers, on behalf of managed accounts) and not as nominee or agent
for any other person (other than for such managed accounts, if applicable) and
not with a view to, or for offer or sale in connection with, any distribution
thereof (within the meaning of the Securities Act) that would be in violation
of the securities laws of the United States of America or any state thereof,
without prejudice, however, to its right at all times to sell or otherwise
dispose of all or any part of said Securities pursuant to a registration
statement under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act, and subject, nevertheless, to
the disposition of its property being at all times within its control.
4.2 Accredited Investor.
Such Purchaser or such Account Manager is knowledgeable,
sophisticated and experienced in business and financial matters; it has
previously invested in securities similar to the Securities and it acknowledges
that the Securities have not been registered under the Securities Act and
understands that the Securities must be held indefinitely unless they are
subsequently registered under the Securities Act or such sale is permitted
pursuant to an available exemption from such registration requirement; it (or,
in the case of an Account Manager, the managed account on behalf of which the
Account Manager is acting) is able to bear the economic risk of its investment
in the Securities and is presently able to afford the complete loss of such
investment; it (or, in the case of an Account Manager, the managed account on
behalf of which the Account Manager is acting) is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act; and it has been
afforded access to information about each of the Companies and their financial
condition and business sufficient to enable it to evaluate its investment in
the Securities.
4.3 Authorization.
Each Purchaser has taken all actions necessary to authorize it
(or, in the case of an Account Manager, such Account Manager is duly authorized
by the managed account for which it is acting) (i) to execute, deliver and
perform all of its obligations under this Agreement, (ii) to perform all of its
obligations under the Securities and (iii) to consummate the transactions
contemplated hereby and thereby. This Agreement is a legally valid and binding
obligation of each Purchaser enforceable against it in accordance with its
terms, except for (a) the effect thereon of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally and (b) limitations imposed by Federal or state
law or equitable principles upon the specific enforceability of any of the
remedies, covenants or other provisions thereof and upon the availability of
injunctive relief or other equitable remedies.
4.4 Securities Restricted.
No transfer or sale (including, without limitation, by pledge
or hypothecation) of Securities by any Holder which is otherwise permitted
hereunder, other than a transfer or sale to the Issuer, shall be effective
unless such transfer or sale is made (A) pursuant to an effective registration
statement under the Act and a valid qualification under applicable state
securities or "blue sky" laws or (B) without such registration or qualification
as a result of the availability of an exemption therefrom and, if reasonably
requested by the Issuer, counsel for such Holder shall
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have furnished the Issuer with an opinion, reasonably satisfactory in form and
substance to the Issuer, to the effect that no such registration is required
because of the availability of an exemption from the registration requirements
of the Securities Act; provided, however, that with respect to transfers by
Holders to their Affiliates, no such opinion shall be required. A transfer
made by a Holder which is a state-sponsored employee benefit plan to a
successor trust or fiduciary pursuant to a statutory reconstitution shall be
expressly permitted and no opinions of counsel shall be required in connection
therewith.
Notwithstanding anything to the contrary in this Section 4.4,
Crescent/MACH I Partners, L.P. ("MACH I") and TCW/Crescent Mezzanine Trust
("Crescent Trust") shall each be permitted to pledge the Notes held by it to a
trustee for the benefit of secured noteholders pursuant to documents relating
to the financing of MACH I and Crescent Trust, respectively.
4.5 ERISA.
Such Purchaser represents that either:
(a) it is not acquiring the
Securities for or on behalf of (i) any employee pension benefit plan or
employee welfare benefit plan (as defined in Section 3 of ERISA) or (ii) any
"plan" (as defined in Section 4975 of the Code) (each of (i) and (ii) hereafter
a "Plan"); or
(b) the assets used to acquire
the Securities are assets of an insurance company general account and the
purchase of the Notes and Crescent Warrants would be exempt under the
provisions of Prohibited Transaction Class Exemption 95-60; or
(c) it is a "venture capital
operating company" (as defined in 29 C.F.R. Section 2510.3-10); or
(d) if it is acquiring the
Securities on behalf of a Plan, either directly or through an investment fund
(such as a bank collective investment fund or insurance company pooled separate
account), then an exemption from the prohibited transaction rules applies such
that the use of such funds does not constitute a non-exempt prohibited
transaction in violation of Section 406 of ERISA or Section 4975 of the Code,
which could be subject to a civil penalty assessed pursuant to Section 502 of
ERISA or a tax imposed under Section 4975 of the Code.
SECTION 5. COVENANTS.
So long as any of the Notes remain unpaid and outstanding, the
Issuer and, as specified in this Section 5, Reit (only as to Reit and its
Subsidiaries), each covenant to the Holders of outstanding Securities as
follows:
5.1 Payment of Notes; Satisfaction of Obligations.
The Issuer shall pay the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided in the Notes. To
the extent lawful, the Issuer shall pay interest (including interest accruing
after the commencement of any proceeding under any Bankruptcy Law) on all
unpaid amounts outstanding under the Notes (including overdue installments of
principal or interest) at a rate equal to 14% per annum, compounded quarterly.
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5.2 Financial Statements and Reports.
(a) The Issuer and Reit shall
maintain, and each shall cause each of its Subsidiaries to maintain, a system
of accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with
GAAP. The Issuer shall deliver to each Holder the financial statements and
other reports described below:
(1) Monthly Financials.
(i) As soon as available and in any
event within thirty (30) days after the end
of each month ending after the Closing Date,
the Issuer will deliver: (A) the
consolidated balance sheets of the Issuer and
its Subsidiaries (other than Holdings, Reit
and the Subsidiaries of Reit) as at the end
of such month and the related consolidated
statements of income and stockholders' equity
and cash flows for such month and in each
case for the period from the beginning of the
then current fiscal year to the end of such
month, setting forth in each case in
comparative form the corresponding figures
for the corresponding periods of the previous
fiscal year and the corresponding figures
from the consolidated plan and financial
forecast for the current fiscal year
delivered pursuant to subsection
5.2(a)(4)(iv) of this Section 5.2, to the
extent prepared on a monthly basis, all in
reasonable detail and certified by the chief
financial officer of the Issuer that they
present fairly the consolidated financial
condition of the Issuer and its Subsidiaries
(other than Holdings, Reit and the
Subsidiaries of Reit) as at the dates
indicated and the results of their operations
and their cash flows for the periods
indicated, subject to changes resulting from
audit and normal year-end adjustments, and
(B) a schedule of the outstanding
Indebtedness for borrowed money of the Issuer
and its Subsidiaries (other than Holdings,
Reit and the Subsidiaries of Reit) describing
in reasonable detail each such debt issue or
loan outstanding and the principal amount
(excluding original issue discount) and
amount of accrued and unpaid interest with
respect to each such debt issue or loan;
(ii) As soon as available and in any
event within thirty (30) days after the end
of each month ending after the Closing Date,
the Issuer will deliver: (A) the
consolidated balance sheets of Holdings and
its Subsidiaries (other than Reit and its
Subsidiaries) as at the end of such month and
the related consolidated statements of income
and stockholders' equity and cash flows for
such month and in each case for the period
from the beginning of the then current fiscal
year to the end of such month, setting forth
in each case in comparative form the
corresponding figures for the corresponding
periods of the previous fiscal year (except
that such corresponding figures for the
corresponding periods of the previous fiscal
year need not be provided with respect to the
last twelve full calendar months preceding
the Closing Date) and the corresponding
figures from the consolidated plan and
financial forecast for the current fiscal
year delivered pursuant to subsection
5.2(a)(4)(iv) of this Section 5.2, to the
extent prepared on a monthly basis, all in
reasonable detail and certified by the chief
financial officer of the Issuer that they
present fairly the consolidated financial
condition of Holdings and its Subsidiaries
(other than Reit and its Subsidiaries) as at
the dates indicated and the results of their
operations and their cash flows for the
periods indicated, subject to changes
resulting from audit and normal quarterly and
year-end adjustments, and (B) a schedule of
the outstanding Indebtedness for borrowed
money of Holdings and its Subsidiaries (other
than Reit and its Subsidiaries) describing in
reasonable detail each such debt issue or
loan outstanding and the principal amount
(excluding original issue discount) and
amount of accrued and unpaid interest with
respect to each such debt issue or loan;
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(iii) As soon as available and in
any event within thirty (30) days after the
end of each month ending after the Closing
Date, the Issuer will deliver: (A) the
consolidated balance sheets of Reit and its
Subsidiaries as at the end of such month and
the related consolidated statements of
operations, shareholders' equity and cash
flows for such month and in each case for the
period from the beginning of the then current
fiscal year to the end of such month, setting
forth in each case in comparative form the
corresponding figures for the corresponding
periods of the previous fiscal year and the
corresponding figures from the consolidated
plan and financial forecast for the current
fiscal year delivered pursuant to subsection
5.2(a)(4)(iv) of this Section 5.2, to the
extent prepared on a monthly basis, all in
reasonable detail and certified by the chief
financial officer of the Issuer that they
present fairly the consolidated financial
condition of Reit and its Subsidiaries as at
the dates indicated and the results of their
operations and their cash flows for the
periods indicated, subject to changes
resulting from audit and normal year-end
adjustments, and (B) a schedule of the
outstanding Indebtedness for borrowed money
of Reit and its Subsidiaries describing in
reasonable detail each such debt issue or
loan outstanding and the principal amount
(excluding original issue discount) and
amount of accrued and unpaid interest with
respect to each such debt issue or loan;
(2) Quarterly Financials.
As soon as available and in any event within
forty-five (45) days after the end of each fiscal quarter (other than
the last quarter of any fiscal year), the Issuer shall deliver: (A)
the consolidated balance sheet of Reit and its Subsidiaries as at the
end of such fiscal quarter and the related consolidated statements of
operations, shareholders' equity and cash flows for such fiscal
quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter, setting forth in each
case in comparative form the corresponding figures for the
corresponding periods of the previous fiscal year and the
corresponding figures from the consolidated plan and financial
forecast for the current fiscal year delivered pursuant to subsection
5.2(a)(4)(iv) of this Section 5.2, all in reasonable detail and
certified by the chief financial officer of the Issuer that they
present fairly the consolidated financial condition of Reit and its
Subsidiaries as at the dates indicated and the results of their
operations, shareholders' equity and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, (B) a narrative report describing the operations of Reit
and its Subsidiaries in the form prepared for presentation to senior
management for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter, including a comparison to and discussion of any variances
from the corresponding periods of the previous fiscal year and from
the financial forecast for such fiscal period contained in the
forecast delivered pursuant to subsections 5.2(a)(v), 5.2(a)(viii) and
5.2(b) below and (C) a schedule of the outstanding Indebtedness for
borrowed money of Reit and its Subsidiaries describing in reasonable
detail each such debt issue or loan outstanding and the principal
amount (excluding original issue discount) and amount of accrued and
unpaid interest with respect to each such debt issue or loan;
provided, however, that so long as Reit is subject to the reporting
obligations of Section 13 or 15(d) of the Exchange Act, the
obligations set forth in this subsection 5.2(a)(2) may be satisfied by
delivery of Quarterly Reports on Form 10-Q filed by Reit with the SEC.
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(3) Year-End Financials.
(i) As soon as available and in any
event within ninety (90) days after the end
of each fiscal year, the Issuer shall
deliver: (A) the consolidated balance sheet
of the Issuer and its Subsidiaries (other
than Holdings, Reit and the Subsidiaries of
Reit) as at the end of such year and the
related consolidated statements of income,
shareholders' equity and cash flows of the
Issuer and its Subsidiaries (other than
Holdings, Reit and the Subsidiaries of Reit)
for such fiscal year, setting forth in each
case in comparative form the corresponding
figures for the previous fiscal year and the
corresponding figures from the consolidated
plan and financial forecast delivered
pursuant to subsection 5.2(a)(4)(iv) of this
Section 5.2 for the fiscal year covered by
such financial statements, all in reasonable
detail and certified by the chief financial
officer of the Issuer that they present
fairly the consolidated financial condition
of the Issuer and its Subsidiaries (other
than Holdings, Reit and the Subsidiaries of
Reit) as at the dates indicated and the
results of their operations and their cash
flows for the periods indicated, (B) a
narrative report describing the operations of
the Issuer and its Subsidiaries (other than
Holdings, Reit and the Subsidiaries of Reit)
in the form prepared for presentation to
senior management for such fiscal year, (C) a
schedule of the outstanding Indebtedness for
borrowed money of the Issuer and its
Subsidiaries (other than Holdings, Reit and
the Subsidiaries of Reit) describing in
reasonable detail each such debt issue or
loan outstanding and the principal amount
(excluding original issue discount) of
accrued and unpaid interest with respect to
each such debt issue or loan and (D) in the
case of such consolidated financial
statements, a report thereon of the
Independent Auditors, which report shall be
unqualified, shall express no doubts about
the ability of the Issuer and its
Subsidiaries (other than Holdings, Reit and
the Subsidiaries of Reit) to continue as a
going concern, and shall state that such
consolidated financial statements fairly
present the consolidated financial position
of the Issuer and its Subsidiaries (other
than Holdings, Reit and the Subsidiaries of
Reit) as of the dates indicated and the
results of their operations, shareholders'
equity and their cash flows for the periods
indicated in conformity with GAAP applied on
a basis consistent with prior years (except
as otherwise disclosed in such financial
statements) and that the examination by such
Independent Auditors in connection with such
consolidated financial statements has been
made in accordance with United States
generally accepted auditing standards;
(ii) As soon as available and in any
event within ninety (90) days after the end
of each fiscal year, the Issuer shall
deliver: (A) the consolidated balance sheet
of Holdings and its Subsidiaries (other than
Reit and its Subsidiaries) as at the end of
such year and the related consolidated
statements of income, shareholders' equity
and cash flows of Holdings and its
Subsidiaries (other than Reit and its
Subsidiaries) for such fiscal year, setting
forth in each case in comparative form the
corresponding figures for the previous fiscal
year and the corresponding figures from the
consolidated plan and financial forecast
delivered pursuant to subsection
5.2(a)(4)(iv) of this Section 5.2 for the
fiscal year covered by such financial
statements, all in reasonable detail and
certified by the chief financial officer of
the Issuer that they present fairly the
consolidated financial condition of Holdings
and its Subsidiaries (other than Reit and its
Subsidiaries) as at the dates indicated and
the results of their operations and their
cash flows for the periods indicated, (B) a
narrative report describing the operations of
Holdings and its Subsidiaries (other than
Reit and its Subsidiaries) in the form
prepared for presentation to senior
management for such fiscal year, (C) a
schedule of the outstanding Indebtedness for
borrowed money of Holdings and its
Subsidiaries (other than Reit and its
Subsidiaries) describing in reasonable
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detail each such debt issue or loan
outstanding and the principal amount
(excluding original issue discount) of
accrued and unpaid interest with respect to
each such debt issue or loan and (D) in the
case of such consolidated financial
statements, a report thereon of the
Independent Auditors, which report shall be
unqualified, shall express no doubts about
the ability of Holdings and its Subsidiaries
(other than Reit and its Subsidiaries) to
continue as a going concern, and shall state
that such consolidated financial statements
fairly present the consolidated financial
position of Holdings and its Subsidiaries
(other than Reit and its Subsidiaries) as of
the dates indicated and the results of their
operations, shareholders' equity and their
cash flows for the periods indicated in
conformity with GAAP applied on a basis
consistent with prior years (except as
otherwise disclosed in such financial
statements) and that the examination by such
Independent Auditors in connection with such
consolidated financial statements has been
made in accordance with United States
generally accepted auditing standards; and
(iii) As soon as available and in
any event within ninety (90) days after the
end of each fiscal year, the Issuer shall
deliver: (A) the consolidated balance sheet
of Reit and its Subsidiaries as at the end of
such year and the related consolidated
statements of operations, shareholders'
equity and cash flows of Reit and its
Subsidiaries for such fiscal year, setting
forth in each case in comparative form the
corresponding figures for the previous fiscal
year and the corresponding figures from the
consolidated plan and financial forecast
delivered pursuant to subsection
5.2(a)(4)(iv) of this Section 5.2 for the
fiscal year covered by such financial
statements, all in reasonable detail and
certified by the chief financial officer of
the Issuer that they present fairly the
consolidated financial condition of Reit and
its Subsidiaries as at the dates indicated
and the results of their operations and their
cash flows for the periods indicated, (B) a
narrative report describing the operations of
Reit and its Subsidiaries in the form
prepared for presentation to senior
management for such fiscal year, (C) a
schedule of the outstanding Indebtedness for
borrowed money of Reit and its Subsidiaries
describing in reasonable detail each such
debt issue or loan outstanding and the
principal amount (excluding original issue
discount) of accrued and unpaid interest with
respect to each such debt issue or loan and
(D) in the case of such consolidated
financial statements, a report thereon of the
Independent Auditors, which report shall be
unqualified, shall express no doubts about
the ability of Reit and its Subsidiaries to
continue as a going concern, and shall state
that such consolidated financial statements
fairly present the consolidated financial
position of Reit and its Subsidiaries as of
the dates indicated and the results of their
operations, shareholders' equity and their
cash flows for the periods indicated in
conformity with GAAP applied on a basis
consistent with prior years (except as
otherwise disclosed in such financial
statements) and that the examination by such
Independent Auditors in connection with such
consolidated financial statements has been
made in accordance with United States
generally accepted auditing standards;
provided, however, that so long as Reit is
subject to the reporting obligations of
Section 13 or 15(d) of the Exchange Act, the
obligations set forth in this subsection
5.2(a)(3)(iii) may be satisfied by delivery
of Annual Reports on Form 10-K filed by Reit
with the SEC together with any annual report
delivered to shareholders of Reit.
(4) Other Information.
(i) Promptly upon receipt thereof,
copies of all reports submitted to the
management of any of the Companies by
independent public accountants, whether in
connection with each annual, interim or
special audit of the consolidated financial
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statements of such Company made by such
accountants or otherwise, including the
management letter submitted by such
accountants to management in connection with
their annual audit;
(ii) Copies of all material reports,
letters and other correspondence from local,
state or Federal regulatory or other agencies
relating to business, licenses or operating
contracts of the Issuer or any of its
Subsidiaries;
(iii) Notice to each Holder of (i)
any violation of or noncompliance with any
Environmental Laws that could reasonably be
expected to have a Material Adverse Effect,
(ii) any communication (written or oral) or
Environmental Claim, whether from a
governmental authority, citizens group,
employee or otherwise, alleging that any of
the Companies is not in compliance with any
Environmental law or asserting liability of
any of the Companies for contamination from or
as a result (directly or indirectly) of any
Materials of Environmental Concern, which
noncompliance or liability could reasonably
be expected to have a Material Adverse Effect
or (iii) any releases or threatened releases
(including, without limitation, any
releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or
dumping, on-site or off-site) of any
Materials of Environmental Concern for which
any of the Companies could be held liable,
either in fact or by law, which releases
could reasonably be expected to have a
Material Adverse Effect;
(iv) A consolidated plan and
financial forecast for the Issuer and its
Subsidiaries to be delivered to the Holders
on or prior to December 1 of the year
preceding the year to which such consolidated
plan and financial forecast relates, in the
same form as such consolidated plan and
financial forecast is delivered to the
members of the board of directors of the
Issuer; and
(v) Copies of such other information
and data with respect to any of the Companies
or any of their respective Subsidiaries as
from time to time may be reasonably requested
by any Holder.
(b) Each financial statement
delivered pursuant to Section 5.2(a)(1) (Monthly Financials), Section 5.2(a)(2)
(Quarterly Financials) or Section 5.1(a)(3) (Year-End Financials) shall be in a
form reasonably acceptable to each Purchaser and, in the case of financial
statements delivered pursuant to Section 5.2(a)(2) or Section 5.1(a)(3), shall
be accompanied by a brief narrative description of business and financial
trends and developments material to the Persons included in such financial
statements and significant transactions that have occurred in the appropriate
period or periods covered thereby.
(c) The Issuer and Reit shall
cause each of the Independent Auditors who perform audits of the financial
statements of each Company, to provide a letter to each of the Holders,
reasonably satisfactory to each such Holder, stating that such Holder shall be
entitled to rely upon each certification by such Independent Auditors of the
consolidated financial statements of such Company. The Issuer and Reit shall
also provide each of such Independent Auditors with instructions that they may
communicate directly with each Holder.
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5.3 Compliance Certificate.
(a) The Issuer shall deliver to
the Holders, within thirty (30) days after the end of each calendar month, an
Officers' Certificate stating that a review of the activities of the Issuer and
its Subsidiaries during the preceding month, fiscal quarter or fiscal year, as
the case may be, has been made under the supervision of the signing Officers
with a view to determining whether the Issuer and its Subsidiaries have kept,
observed, performed and fulfilled their respective obligations under this
Agreement, and further stating, as to each such Officer signing such
certificate, that to his or her knowledge, the Issuer and its Subsidiaries each
has kept, observed, performed and fulfilled each and every covenant contained
in this Agreement (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge) and that to his or her knowledge, no event has occurred and remains
in existence by reason of which payments on account of the principal of or
premium or interest, if any, on the Securities are prohibited or if such event
has occurred, a description of the event. The Officers' Certificate shall set
forth all financial calculations for such month, fiscal quarter or fiscal year
necessary to demonstrate compliance with the covenants contained in this
Section 5.
(b) So long as not contrary to
the then current recommendations of the American Institute of Certified Public
Accountants, the financial statements delivered pursuant to Section 5.2(a)(3)
shall be accompanied by a written statement of the Independent Auditors that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Issuer or any of its Subsidiaries has violated any provisions of this Agreement
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such Independent Auditors shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Issuer shall deliver to
the Holders, forthwith upon becoming aware of (i) any Default or Event of
Default or (ii) any default or event of default under any other loan agreement,
mortgage, indenture or instrument referred to in Section 7.1(f), an Officers'
Certificate specifying in reasonable detail such Default, Event of Default or
default or event of default and the nature of any remedial or corrective action
the Issuer or its Subsidiaries propose to take with respect thereto.
5.4 Limitation on Restricted Payments.
(a) The Issuer and Reit shall
not, and each shall cause each of its Subsidiaries to not:
(i) declare or pay any dividends,
either in cash or property, on, or make any
distribution to the holders (as such) in
respect of, any class of Equity Interest in
the Issuer or any of its Subsidiaries, other
than (w) dividends or distributions payable
in Equity Interests (other than Disqualified
Stock) of the Issuer or its Subsidiaries, (x)
dividends or distributions payable to the
Issuer or (y) cash dividends paid by Reit to
its shareholders;
(ii) purchase, redeem or otherwise
acquire or retire for value any Equity
Interests of the Issuer or any of its
Subsidiaries or any other Affiliate of the
Issuer;
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(iii) purchase, redeem, defease or
otherwise acquire or retire for value any
Indebtedness (other than the Notes) that is
pari passu with or subordinated to the Notes;
or
(iv) make any Investment (all such
payments and other actions set forth in
clauses (i) through (iv) hereof being
collectively referred to as "Restricted
Payments").
(b) Notwithstanding the
provisions of the foregoing clause (a) of this Section 5.4, so long as no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence of such Restricted Payment, the foregoing provisions of
such clause (a) will not prohibit the following Restricted Payments:
(i) the defeasance, redemption or
repurchase of pari passu or subordinated
Indebtedness with the net proceeds from an
incurrence of unsecured Permitted Refinancing
Indebtedness;
(ii) the purchase or redemption by
the Issuer or Reit of all or any portion of
the Common Stock held by an executive officer
of the Issuer or Reit following the
termination of employment of such executive
officer, which such purchase or redemption is
approved by the board of directors of the
Issuer or Reit in good faith; provided, that
the aggregate purchase price for all such
shares of Common Stock so repurchased or
redeemed from such executive officers shall
not exceed $250,000 in any fiscal year;
(iii) Investments by Reit that are
Permitted Reit Investments;
(iv) dividends paid or distributed
by any Wholly Owned Subsidiary of the Issuer
to its direct parent;
(v) distributions to the holders of
the limited liability company interests in
Holdings pursuant to, and in an amount not in
excess of that permitted by, Section 5.6(b)
of the Limited Liability Company Agreement
(as in effect on the Closing Date); and
(vi) Investments by the Issuer in
any Wholly Owned Subsidiary of the Issuer.
5.5 Limitation on Incurrence of Additional Indebtedness and
Issuance of Disqualified Stock.
(a) The Issuer shall not, and
shall cause each of its Subsidiaries (including without limitation, upon the
creation or acquisition of such Subsidiary) other than Reit to not, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to (collectively, "incur") any
Indebtedness or issue any Disqualified Stock.
(b) The foregoing limitations of
Section 5.5(a) will not apply to:
(i) the incurrence by the Issuer and
each Guarantor of the Indebtedness
represented by the Notes and the Subsidiary
Guaranty, respectively; and
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(ii) the incurrence by the Issuer of
unsecured Permitted Refinancing Indebtedness
in exchange for, or the net proceeds of which
are used to extend, refinance, renew,
replace, defease or refund, any or all of the
Notes.
5.6 Limitation on Transactions With Affiliates.
(a) The Issuer and Reit shall
not, and each shall cause each of its Subsidiaries to not, sell, lease,
transfer or otherwise dispose of any of its properties or assets to or purchase
any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, an
Affiliate of such Company or any of its Subsidiaries (an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to such Company or such Subsidiary than those that could have
been obtained in a comparable transaction by such Company or such Subsidiary
from an unrelated person and (ii) with respect to any Affiliate Transaction (or
series of related Affiliate Transactions) involving or having a potential value
of more than $100,000, in addition to compliance with clause (i), such
Affiliate Transaction shall also be approved by a majority of the disinterested
members of the board of directors of the Issuer after determining, in their
reasonable good faith judgment, that (A) such transaction is in the best
interest of such Company or such Subsidiary based on full disclosure of all
relevant facts and circumstances and (B) such transaction is on fair and
reasonable terms competitive with those that could be obtained from an
unrelated third party (such approval and determination to be evidenced by a
resolution of such disinterested directors of the board of directors of the
Issuer), and (iii) with respect to any Affiliate Transaction (or series of
related Affiliate Transactions) involving or having a potential value of more
than $2,500,000, in addition to compliance with clauses (i) and (ii), the board
of directors of the Issuer shall have obtained an opinion of a nationally
recognized investment banking firm or appraiser to the effect that such
transaction is fair, from a financial point of view, to such Company or such
Subsidiary, as the case may be; provided, however, that the board of directors
of the Issuer need not obtain such an opinion in connection with immaterial
modifications of the Management Agreement.
(b) The Issuer and Reit shall
not, and each shall cause each of its Subsidiaries to not, pay any fees to MDC
or any of its Affiliates in respect of advisory services, if the aggregate
amount of such fees paid by the Issuer, Reit and all of their Subsidiaries
would exceed the amount of fees required to be paid pursuant to the Advisory
Services Agreement dated as of February 11, 1997, between the Issuer and MDC
Management Company II, L.P., a California limited partnership, as in effect on
the Closing Date. Furthermore, at any time during which an Event of Default
has occurred and is continuing, the Issuer and Reit shall not, and each shall
cause each of its Subsidiaries to not, pay any fees to MDC or any of its
Affiliates in respect of advisory services.
5.7 Limitation on Liens.
The Issuer shall not, and shall cause each of its Subsidiaries
(other than Reit and its Subsidiaries) to not, create or suffer to exist any
Liens upon any assets of the Issuer or any such Subsidiaries or any shares of
capital stock of such Subsidiaries, in each case now owned or hereafter
acquired; provided, however, that this Section 5.7 shall not prohibit the
creation or continuing existence of any Permitted Lien.
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5.8 Limitation on Sale of Assets.
The Issuer shall not, and shall cause each of its Subsidiaries
(other than Reit and its Subsidiaries) to not, make any Asset Sale unless: (i)
no Default or Event of Default exists and is continuing or is created by such
disposition and (ii) in the case of any Asset Sale involving (A) assets for Net
Proceeds in excess of $100,000 or with a fair market value in excess of
$100,000 or (B) assets for Net Proceeds or with a fair market value (when
aggregated with the Net Proceeds or fair market value of all other assets
subject to any Asset Sales during the same fiscal year) in excess of $250,000:
(1) the Issuer or such Subsidiary receives consideration
at the time of such Asset Sale at least equal to the fair market value
of such assets (as determined in good faith by the board of directors
of the Issuer or such Subsidiary and evidenced by a resolution set
forth in an Officers' Certificate);
(2) at least 85% of the consideration therefor received
by the Issuer or such Subsidiary, as the case may be, shall be in the
form of cash; provided, however, that for the purposes of this clause
(2), the following are deemed to be cash: (x) any liabilities (as
shown on the Issuer's or such Subsidiary's most recent balance sheet
or in the notes thereto) of the Issuer or such Subsidiary that are
assumed by the transferee in connection with the Asset Sale (other
than liabilities that are incurred in connection with or in
anticipation of such Asset Sale); and (y) securities received by the
Issuer or such Subsidiary from such transferee that are immediately
converted into cash at the face amount or fair market value thereof by
the Issuer or such Subsidiary; and
(3) upon the consummation of an Asset Sale, the Issuer or
such Subsidiary may apply the Net Proceeds (it being understood that
the entire Net Proceeds and not just the portion in excess of the
amounts set forth in subclauses (A) and (B) of clause (ii) above shall
be subject to this subsection (3)) of such Asset Sale prior to the
180th day after the consummation of an Asset Sale to reinvest in
Productive Assets to the extent not otherwise prohibited hereby. Any
Net Proceeds from an Asset Sale that are not so reinvested shall
constitute excess proceeds ("Excess Net Proceeds") and shall be held
in Cash or Cash Equivalents.
When the aggregate amount of Excess Net Proceeds exceeds
$250,000, the Issuer shall as promptly as possible apply the Excess Net
Proceeds to the redemption of the maximum principal amount of Notes that may be
redeemed in accordance with the provisions of Section 6. Upon completion of
such redemption of Notes, the amount of Excess Net Proceeds shall be reset at
zero.
Simultaneously with the mailing of the Notice of Redemption
relating to such redemption of Notes, the Issuer shall provide the Holders with
an Officers' Certificate setting forth the calculations used in determining the
amount of Excess Net Proceeds to be applied to the redemption of Notes.
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5.9 Limitation on Capital Expenditures.
(a) The Issuer shall not, and
shall cause each of its Subsidiaries (other than Holdings, Reit and the
Subsidiaries of Reit) to not, make or incur Capital Expenditures in any fiscal
year in an aggregate amount (for the Issuer and all such Subsidiaries) in
excess of $250,000.
(b) The Issuer shall cause Holdings to not make or incur any
Capital Expenditures at any time.
(c) Reit shall not, and shall cause each of its Subsidiaries to not,
make or incur Capital Expenditures in any fiscal year in an aggregate amount
(for Reit and all such Subsidiaries) in excess of $100,000.
5.10 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
The Issuer and Reit shall not, and each shall cause each of
its Subsidiaries to not, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
on the ability of any Subsidiary of the Issuer to (a) pay dividends or make any
other distributions on its Capital Stock, Equity Interest or any other interest
or participation in, or measured by, its profits owned by, or pay any
Indebtedness owed to, the Issuer, (b) make loans or advances to the Issuer or
(c) transfer any of its properties or assets to the Issuer, except for such
encumbrances or restrictions existing under or by reason of (i) any
restrictions existing under or contemplated by this Agreement; (ii) any
restrictions, with respect to a Subsidiary of the Issuer that is not a
Subsidiary of the Issuer on the date hereof, in existence at the time such
Person becomes a Subsidiary of the Issuer (so long as such restrictions are not
created in anticipation of such Person becoming a Subsidiary of the Issuer);
(iii) with respect to clause (c) above only, any restrictions existing under
Capital Lease Obligations (provided that, in each case, such prohibition shall
only relate to the assets which are subject to such Capital Lease Obligations);
or (iv) any restrictions existing under any agreement that refinances or
replaces the agreements containing the restrictions in the foregoing clauses
(i), (ii) and (iii); provided, that the terms and conditions of any such
restrictions are no more restrictive than those under or pursuant to the
agreement evidencing the obligation refinanced.
5.11 Change of Control.
(a) Change of Control. Upon the occurrence of a Change of Control,
the Issuer shall give each Holder prompt, and in any event within ten (10)
Business Days of the occurrence of the Change of Control (the "Change of Control
Date"), notice describing in reasonable detail the nature of the Change of
Control, offering to each Holder the right to require the Issuer to repurchase
all or any part of such Holder's Notes (the "Change of Control Offer") at a
purchase price equal to 101% of the aggregate principal amount thereof, together
with unpaid interest to the date of repurchase (the "Change of Control Offer
Price").
(b) Procedure. The notice of a Change of Control Offer shall state
a date not less than thirty (30) days nor more than sixty (60) days after the
date of mailing of such notice by the Issuer for repurchase of the Notes
pursuant to the Change of Control Offer (the "Change of Control Payment Date").
The notice, which shall govern the terms of the Change of Control Offer, shall
state:
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(1) that the Change of Control Offer is being
made pursuant to this Section 5.11;
(2) the Change of Control Offer Price and the
Change of Control Payment Date;
(3) that, unless the Issuer defaults in the
payment of the Change of Control Offer Price, all Notes accepted for
payment shall cease to accrue interest on and after the Change of
Control Payment Date;
(4) that Holders electing to require the Issuer
to repurchase any Notes will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
side of the Note completed and otherwise in proper form for transfer,
to the address specified in the notice prior to the close of business
on the Business Day preceding the Change of Control Payment Date;
(5) that the Holders will be entitled to withdraw
their election to require the Issuer to repurchase any Notes on the
terms and conditions set forth in such notice; and
(6) that the Holders electing to require the
Issuer to repurchase any Notes in part will be issued a new Note in a
principal amount equal to the unpurchased portion of the Notes
surrendered; provided, however, that any portion of a Note repurchased
by the Issuer and any new Note issued to the Holder in respect of the
unpurchased portion thereof shall be in the principal amount of $1,000
or an integral multiple thereof.
(c) Acceptance of Notes. On a Change of Control Payment Date, the
Issuer shall (i) accept for payment all Notes or portions thereof validly
tendered pursuant to the Change of Control Offer and (ii) promptly thereafter
mail or deliver to each Holder of Notes accepted for repurchase payment in the
amount equal to the aggregate Change of Control Offer Price for such Notes, and
the Issuer shall execute and mail or deliver to such Holders a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered. As soon
as practicable, the Issuer will notify the Holders of the results of the Change
of Control Offer on the Change of Control Payment Date.
5.12 Minimum Consolidated Interest Expense Coverage Ratio.
The Issuer shall not permit its Consolidated Interest Expense
Coverage Ratio for the four-fiscal quarter period ending on the last day of the
fiscal quarter ending on or about the date set forth below to be less than the
amount set forth below opposite the date shown (provided that for the fiscal
quarters ending on or about June 30, 1997 and September 30, 1997, the Issuer's
Consolidated Interest Expense Coverage Ratio shall be calculated for the two-
and three-fiscal quarter periods (respectively) then ending, rather than for
the four-fiscal quarter period then ending):
Date Consolidated Interest Expense Coverage Ratio
---- --------------------------------------------
September 30, 1997 0.22
December 31, 1997 0.30
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March 31, 1998 0.35
June 30, 1998 0.45
September 30, 1998 0.50
December 31, 1998 0.55
March 31, 1999 0.65
June 30, 1999 0.80
September 30, 1999 0.85
December 31, 1999 1.10
March 31, 2000 1.30
June 30, 2000 1.60
September 30, 2000 1.85
December 31, 2000 and thereafter 2.10
5.13 Fiscal Years.
At all times, the Issuer and Reit shall maintain, and each
shall cause each of its Subsidiaries to maintain, its fiscal year ending on
December 31st.
5.14 Limitation on Ranking of Future Indebtedness.
The Issuer shall not, and shall cause each of its Subsidiaries
(other than Reit and its Subsidiaries) to not, directly or indirectly, incur,
create, or suffer to exist any Indebtedness unless, by its terms or by the
terms of the instrument creating or evidencing it, such Indebtedness (A) has a
maturity and Weighted Average Life to Maturity longer than the Notes and (B) is
subordinate or junior in right of payment to the Notes (or in the case of a
Guarantor, to the Subsidiary Guaranty).
5.15 Stay, Extension and Usury Laws.
Each of the Companies covenants and agrees (to the extent that
it may lawfully do so) that it will not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, and will use
its best efforts to resist any attempts to claim or take the benefit of, any
stay, extension or usury law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of its obligations
under this Agreement or the Notes; and each of the Companies (to the extent it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Holders, but
will suffer and permit the execution of every such power as though no such law
has been enacted.
5.16 Corporate Existence; Merger; Successor Corporation.
(a) The Issuer and Reit shall do or cause to be done all things
necessary to preserve and keep in full force and effect the corporate or other
existence of such Company and
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each of its Subsidiaries in accordance with the organizational documents and
the corporate or other rights (charter and statutory), licenses and franchises
of such Company and each of its Subsidiaries; provided, however, that such
Company and its Subsidiaries shall not be required to preserve any such right,
license or franchise, or corporate or other existence, if the board of
directors of the Issuer shall determine in good faith that the preservation
thereof is no longer desirable in the conduct of the business of the Issuer and
its Subsidiaries and that the loss thereof is not adverse in any material
respect to any Holder.
(b) None of the Companies shall in a single transaction or through a
series of related transactions, (i) consolidate with or merge with or into any
other person, or transfer (by lease, assignment, sale or otherwise) all or
substantially all of its properties and assets as an entirety or substantially
as an entirety to another person or group of affiliated persons or (ii) adopt a
Plan of Liquidation.
5.17 Limitation on Reit's Business and Tax Status.
(a) Reit and the Subsidiaries of Reit shall not engage in any
business or activity other than the business of investing in and disposing of
Permitted Reit Investments.
(b) Prior to the consummation of a Qualified Public Equity Offering
or a Qualified Private Equity Placement, Reit and its Subsidiaries shall not
invest in or hold any B/C Mortgages, unless the aggregate fair market value of
the Investments by Reit and its Subsidiaries in B/C Mortgages does not exceed
20% of the aggregate fair market value of all the assets of Reit and its
Subsidiaries. For purposes of this Agreement, such fair market value shall be
determined at any time for each type of asset by the parties (other than Reit)
to Reit's Reverse Repurchase Agreements or, if such determination is not readily
available, by such methods as shall be approved from time to time by Reit's
Unaffiliated Directors (as defined in the Management Agreement).
(c) At all times, Reit shall operate and qualify as a REIT under
Section 856 et seq. of the Code, the income of which is taxed pursuant to
Section 857 of the Code. Upon demand of any Purchaser, Issuer shall provide the
Holders with an opinion of a law firm, selected by Reit and reasonable
acceptable to the Majority Holders, that Reit has operated and qualifies as a
REIT under Section 856 et. seq. of the Code, the income of which is taxed
pursuant to Section 857 of the Code; provided that such opinion shall be
substantially similar in form and substance to the opinion of ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, regarding such operation and qualification, delivered to the
Purchasers on the Closing Date.
5.18 Limitation on the Businesses of the Issuer and Holdings.
(a) The Issuer shall not engage in any business or activity other
than (i) the business of providing to Reit the services described in Section 2
of the Management Agreement and (ii) the business of providing substantially
similar services to other Persons that engage solely in the business of
investing in and disposing of Permitted Reit Investments and that qualify as a
REIT under Section 856 et seq. of the Code, the income of which is taxed
pursuant to Section 857 of the Code.
(b) Holdings shall not conduct or operate any business, perform any
obligations, hold any assets nor make any investments; provided, however, that
Holdings may own Equity Interests in Reit; provided, further, however, that
Holdings may (i) enter into, and perform its
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obligations under, each of the Documents to which it is a party, (ii) pay its
Taxes and (iii) otherwise maintain its existence. At all times, Holdings shall
own directly all the Reit Shares and shall not distribute, sell, convey,
transfer or otherwise dispose of any of the Reit Shares.
5.19 Taxes.
The Issuer and Reit shall, and each shall cause each of its
Subsidiaries to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all Taxes levied or imposed upon such Company
or such Subsidiary, as the case may be, or upon the income, profits or property
of such Company or such Subsidiary, as the case may be, and (ii) all lawful
claims, whether for labor, materials, supplies, services or anything else,
which, if unpaid, would or may by law become a Lien, upon the property of such
Company or such Subsidiary, as the case may be; provided, however, that none of
such Company nor any of its Subsidiaries shall be required to pay or discharge
or cause to be paid or discharged any such Tax, the applicability or validity
of which is being contested in good faith by appropriate proceedings which will
prevent the forfeiture or sale of any property of such Company or such
Subsidiary, as the case may be, and for which disputed amounts reserves have
been established in accordance with GAAP, in an amount which the Issuer
believes in good faith is adequate.
5.20 Investment Company Act.
The Issuer and Reit shall not, and each shall cause each of
its Subsidiaries to not, become an investment company subject to registration
under the Investment Company Act of 1940, as amended.
5.21 Ownership of Subsidiaries.
(a) At all times, the Issuer
shall own 100% of the Preferred Interests of Holdings outstanding at any time
free and clear of any Lien.
(b) The Issuer and Reit shall
not, and each shall cause each of its Subsidiaries to not, cause or permit any
Affiliate of MDC (other than Holdings and the members of the management of
Reit) to own any Equity Interests of Reit, except to the extent necessary to
allow compliance with the ownership requirements of Section 856 of the Code.
(c) The Issuer shall not create
or cause or permit to exist any Subsidiary of the Issuer other than Holdings,
Reit and Permitted Reit Subsidiaries.
5.22 Insurance.
The Issuer and Reit shall, and each shall cause each of its
Subsidiaries to, maintain liability, casualty and other insurance with a
reputable insurer or insurers in such amounts and against such risks as is
carried by responsible companies engaged in similar businesses and owning
similar assets.
5.23 Employee Plans.
The Issuer and Reit shall not, and each shall cause each of
its Subsidiaries to not, directly or indirectly, (i) terminate any employee
pension benefit plan subject to Title IV of ERISA if as a result of such
termination the Issuer and its Subsidiaries, collectively, would incur a
liability
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with respect to such plan in excess of $1,000,000 in the aggregate, or (ii)
make a complete or partial withdrawal (within the meaning of Section 4201 of
ERISA) from any multiemployer plan if as a result of such withdrawal (within
the meaning of Section 4201 of ERISA), the Issuer and its Subsidiaries,
collectively, would incur a liability with respect to such plan in excess of
$1,000,000 in the aggregate.
As used in this Section 5.23, the terms "employee pension
benefit plan" and "multiemployer plan" shall have the meanings assigned to such
terms in Section 3 of ERISA.
5.24 ERISA Notices.
Promptly, but in any event within fifteen (15) days
thereafter, the Issuer shall deliver to the Purchasers (or, if no Purchaser
continues to be a Holder, such Person as the Majority Holders shall designate),
if and when the Issuer or any of its Subsidiaries (i) gives or is required to
give notice to the Pension Benefit Guaranty Corporation (the "PBGC") of any
"reportable event" (as defined in Section 4043 of ERISA) with respect to any
employee pension benefit plan maintained by the Issuer or any of its
Subsidiaries or, to the best knowledge of the officers or directors of the
Issuer, any entity which is a member of the same controlled group as the
Issuer, which "reportable event" might reasonably constitute grounds for a
termination of such plan under Title IV of ERISA or the imposition of a tax
under section 4971 of the Code, or knows that the plan administrator of any
such plan has given or is required to give notice of any such reportable event,
a copy of the notice of such reportable event given or required to be given to
the PBGC, (ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any multiemployer plan to which the
Issuer or any of its Subsidiaries or, to the best knowledge of the officers or
directors of the Issuer, any entity which is a member of the same controlled
group as the Issuer contributes or is obligated to contribute is in
reorganization or has been terminated, a copy of such notice, (iii) receives
notice from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer any employee pension benefit plan maintained by
the Issuer or any of its Subsidiaries or, to the best knowledge of the officers
or directors of the Issuer, any entity which is a member of the same controlled
group as the Issuer, a copy of such notice, (iv) applies for a waiver of the
minimum funding standard under section 412 of the Code, a copy of such
application, (v) gives notice of intent to terminate any employee pension
benefit plan maintained by the Issuer or any of its Subsidiaries or, to the
best knowledge of the officers or directors of the Issuer, any entity which is
a member of the same controlled group as the Issuer under Title IV of ERISA, a
copy of such notice and other information filed with the PBGC, (vi) fails to
make any payment or contribution to any employee pension benefit plan (or
multiemployer plan or in respect of any benefit arrangement) or makes any
amendment to any employee benefit plan or benefit arrangement which could
reasonably result in the imposition of a lien or the posting of a bond or other
security, a certificate of the Chief Executive Officer of the Issuer setting
forth details as to such occurrence and action, if any, which the Issuer or any
of its Subsidiaries is required or proposes to take, (vii) adopts, establishes,
maintains or enters into any obligation to make contributions that are material
with respect to the Issuer or any of its Subsidiaries to any new employee
benefit plan or multiemployer plan, a certificate of the Chief Executive
Officer of the Issuer setting forth details as to such obligation, (viii)
modifies in any material respect any existing employee benefit plan maintained
by the Issuer or any of its Subsidiaries or, to the best knowledge of the
officers or directors of the Issuer, any entity which is a member of the same
controlled group as the Issuer (other than any modification to medical, dental
or other employee welfare benefit plans in the ordinary course of business) so
as to increase its obligations thereunder, a certificate of the Chief Executive
Officer of the Issuer setting forth details as to such modification or (ix)
materially increases a contribution obligation to any
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multiemployer plan contributed to or required to be contributed to by the
Issuer or any of its Subsidiaries or, to the best knowledge of the officers or
directors of the Issuer, any entity which is a member of the same controlled
group as the Issuer, a certificate of the Chief Executive Officer of the Issuer
setting forth details as to such increase.
As used in this Section 5.24, the terms "employee pension
benefit plan," "employee welfare benefit plan," "multiemployer plan" and
"employee benefit plan" shall have the meanings assigned to such terms in
Section 3 of ERISA and the term "controlled group" shall have the meaning
assigned to such term in section 414 of the Code.
5.25 Inconsistent Agreements.
The Issuer and Reit shall not, and each shall cause each of
its Subsidiaries to not, (i) enter into any agreement or arrangement that is
inconsistent with, or would impair the ability of the Issuer or any of its
Subsidiaries to fulfill the obligations of the Issuer or any of its
Subsidiaries under, this Agreement, or (ii) supplement, amend or otherwise
modify the terms of their respective Charter Documents, if the effect thereof
would be materially adverse to the Holders.
5.26 Compliance with Laws; Maintenance of Licenses.
The Issuer and Reit shall, and each shall cause each of its
Subsidiaries to, comply with all statutes, ordinances, governmental rules and
regulations, judgments, orders and decrees (including all Environmental Laws)
to which any of them is subject, and maintain, obtain and keep in effect all
licenses, permits, franchises and other governmental authorizations necessary
to the ownership or operation of their respective properties or the conduct of
their respective businesses, except to the extent that the failure to so comply
or maintain, obtain and keep in effect could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
5.27 Inspection of Properties and Records.
The Issuer and Reit shall allow, and each shall cause each of
its Subsidiaries to allow, each Purchaser and each Holder of at least
$5,000,000 in aggregate principal amount of the Notes or, in the event there is
no Holder of at least $5,000,000 in aggregate principal amount of the Notes,
each Purchaser and the Holder who holds the greatest aggregate principal amount
of the Notes (and so long as a Default or an Event of Default has occurred and
is continuing, each Purchaser and Holder) (or, in each case, such Persons as
any of them may designate) (individually and collectively, "Inspectors"),
subject to appropriate agreements as to confidentiality, (i) to visit and
inspect any of the properties of such Company or any of its Subsidiaries, (ii)
to examine all their books of account, records, reports and other papers and to
make copies and extracts therefrom, (iii) to discuss their respective affairs,
finances and accounts with their respective officers and employees and (iv) to
discuss the financial condition of such Company and its Subsidiaries with their
independent accountants upon reasonable notice to such Company of its intention
to do so and so long as such Company shall be given the reasonable opportunity
to participate in such discussions (and by this provision such Company
authorizes said accountants to have such discussions with the Inspectors). All
such visits, examinations and discussions set forth in the preceding sentence
shall be at such reasonable times and as often as may be reasonably requested;
provided that unless a Default or an Event of Default shall have occurred and
be continuing such visits shall be limited to one per calendar quarter. If a
Default or an Event of Default shall have occurred and be continuing, the
Issuer shall pay or reimburse all Inspectors
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for expenses that such Inspectors may reasonably incur in connection with any
such visitations or inspections.
5.28 Board of Director Observation Rights.
Each of the Purchasers shall have the right to have one
representative present (whether in person or by telephone) at all meetings of
the boards of directors (and committees thereof) of the Issuer and Reit;
provided that such representative shall not be entitled to vote at such
meetings. The Issuer and Reit shall send to each such representative all of
the notices, information and other materials that are distributed to the
members of the board of directors of the Issuer and Reit, respectively, and
shall provide the Purchasers with a notice and agenda of each meeting of the
board of directors (and committees thereof) of the Issuer or Reit,
respectively, at the same time as delivered to the members of such board of
directors; provided, however, that upon the request of any such representative,
the Issuer or Reit, as the case may be, shall refrain from sending such
notices, information and other materials for so long as such representative
shall request. Such Purchasers shall provide notice to the Issuer and Reit of
the identity and address of, or any change with respect to the identity or
address of, such representative. The Issuer or Reit shall reimburse the
Purchasers for the reasonable out-of-pocket expenses of one such representative
incurred in connection with the attendance at such meetings.
5.29 Maintenance of Office or Agency.
The Issuer shall maintain (i) an office or agency in the
Borough of Manhattan, The City of New York where the Notes may be presented for
payment; (ii) an office or agency where the Notes may be presented for
registration and transfer and for exchange as provided in this Agreement; and
(iii) an office or agency where notices and demands to or upon the Issuer in
respect of the Notes may be served. The location of such office or agency
initially shall be as set forth on Schedule 5.29. The Issuer shall give to
each Holder written notice of any change of location thereof.
5.30 Information to Prospective Purchasers.
The Issuer shall, upon the request of any Purchaser or
subsequent Holder, deliver to such Purchaser or such Holder and any prospective
purchaser designated by such Purchaser or such Holder promptly following the
request of such Purchaser or such Holder or such prospective purchaser such
information which such Purchaser or such Holder or such prospective purchaser
may reasonably request in order to comply with the information requirements of
Rule 144A.
5.31 Private Placement Number.
The Companies consent to the filing of copies of this
Agreement with Standard & Poor's Corporation to obtain a private placement
number and with the National Association of Insurance Commissioners.
5.32 Impairment of Security Interests.
The Issuer and Reit shall not, and each shall cause each of
its Subsidiaries to not, take any action that would have the result of
impairing the security interests created pursuant to any of the Pledge
Agreements, unless such action is permitted thereby.
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5.33 Required Escrow Deposit.
On each Mandatory Redemption Date, if Excess Cash Flow for the
12-month period ended on the last day of the immediately preceding calendar
year is positive, the Issuer shall deposit into the Escrow Account cash in an
amount (the "Required Escrow Deposit") that is equal to the lesser of (a) such
amount of Excess Cash Flow and (b) the amount (not less than zero) that is
sufficient to cause the balance in the Escrow Account on such Mandatory
Redemption Date to be $1,500,000.
5.34 Maintenance of Letter of Credit Facility.
For so long as any Notes are outstanding or any amounts are
owing in respect of the Notes or this Agreement (including, without limitation,
any amounts owing in respect of any indemnification obligations hereunder), the
Issuer shall maintain the Letter of Credit Documents in full force and effect
in accordance with the following provisions:
(a) Except as contemplated
pursuant to Section 5.34(c), the Letter of Credit Documents shall not be
amended, restated, supplemented or modified in any form whatsoever.
(b) Upon the occurrence of a
Letter of Credit Triggering Event of Default, the Collateral Agent or the
Majority Holders may draw all or less than all of the maximum amount that may
be drawn on each Letter of Credit, in accordance with the terms and provisions
thereof, without any notice to, or demand upon, the Issuer or any Guarantor;
provided, however, that, if the Collateral Agent or the Majority Holders elect
to draw less than the entire amount available to be drawn, then the amount so
drawn on each Letter of Credit shall be equal to (i) the maximum amount that
may be drawn on such Letter of Credit divided by (ii) the sum of the maximum
amounts that may be drawn on all the Letters of Credit times (iii) the total
amount elected at such time by the Collateral Agent or the Majority Holders to
be drawn on all the Letters of Credit; provided, further, that the sum of (x)
such total amount referred to in this clause (iii) plus (y) the aggregate
amount previously drawn on the Letters of Credit, shall not exceed the Letter
of Credit Limit (as defined below in Section 5.34(c)).
(c) The aggregate amount of the
Letters of Credit (the "Letter of Credit Limit") shall be $4,000,000; provided,
however, that on any date after April 1, 1998, the Letter of Credit Documents
may be amended to reduce the Letter of Credit Limit to (i) $3,000,000, if the
Consolidated Interest Expense Coverage Ratio of the Issuer and its Subsidiaries
(other than Holdings, Reit and the Subsidiaries of Reit) shall have been at
least 1.60 to 1 for the 12-month period ended on the last day of the
immediately preceding calendar month or (ii) $2,000,000, if the Consolidated
Interest Expense Coverage Ratio of the Issuer and its Subsidiaries (other than
Holdings, Reit and the Subsidiaries of Reit) shall have been at least 2.00 to 1
for the 12-month period ended on the last day of the immediately preceding
calendar month; provided, further, however, that the Letter of Credit Documents
shall be terminated on any date after April 1, 1998, if the Consolidated
Interest Expense Coverage Ratio of the Issuer and its Subsidiaries (other than
Holdings, Reit and the Subsidiaries of Reit) shall have been at least 2.25 to 1
for the 12-month period ended on the last day of the immediately preceding
calendar month. Notwithstanding the foregoing, the Letter of Credit Documents
may not be amended, as contemplated in the foregoing provisions of this clause
(c), on any date, unless at all times during the period (x) beginning on the
first day of the 12-month period ended on the last day of the immediately
preceding calendar month and (y) ending on such date, no Default or Event of
Default shall have occurred.
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(d) Other than the interest,
fees and other charges expressly set forth in the Letter of Credit Documents,
no interest or other charges shall be paid with respect thereto, and all
amounts owing by the Issuer to any Guarantor or to any issuer of a Letter of
Credit shall be subordinate to the obligations of the Issuer to the Holders
hereunder and under the Notes.
5.35 Reit Leverage Ratio and Indebtedness of Reit.
(a) During each calendar month,
Reit shall cause the average of the fifteen Reit Leverage Ratios calculated on
each of the last fifteen days of such calendar month, respectively, to be less
than or equal to the Reit Leverage Ratio Limit. As used in this Section 5.35,
"Reit Leverage Ratio Limit" means (i) 0.925 during all calendar months other
than the calendar months described in clauses (ii) and (iii) of this
definition, (ii) 0.935 during the sixty (60) days immediately preceding the
anticipated closing date of a Qualified Public Equity Offering of Reit (such
anticipated closing date being determined in advance in good faith by the board
of directors of the Issuer) and (iii) 0.935 during the first sixty (60) days
following such anticipated closing date, if any such anticipated Qualified
Public Equity Offering of Reit is not consummated on or prior to such
anticipated closing date.
(b) Reit and its Subsidiaries
shall not, directly or indirectly, incur any Indebtedness other than Permitted
Reit Indebtedness.
5.36 Distributions by Holdings.
Holdings shall distribute to the Issuer, in respect of the
Preferred Interests, all cash received by Holdings, within thirty (30) days of
its receipt thereof; provided, however, that Holdings may make the
distributions permitted pursuant to Section 5.4(b)(v).
5.37 Investment, Hedging and Leverage Policy.
(a) At least once during each
fiscal year, the board of directors of Reit shall adopt a statement of policy
(an "Investment, Hedging and Leverage Policy") regarding investment of the
assets of Reit, the duration of Reit's assets and liabilities, hedging
activities to be conducted by Reit, the range of leverage ratios to be
maintained by Reit and the types of indebtedness that may be incurred by Reit,
which statement of policy shall be at least as detailed as the similar
statement of policy adopted at or before the Closing and delivered to the
Purchasers pursuant to Section 2.1(e); provided, however, that any material
difference between any Investment, Hedging and Leverage Policy to be so adopted
and the then most recently adopted Investment, Hedging and Leverage Policy must
be approved by the Majority Holders.
(b) At least once during each
fiscal year, the Issuer shall engage a professional services firm, which is not
an Affiliate of any of the Companies, to issue a report (a "Reit Compliance
Report") addressed to each of the Issuer, Holdings, Reit and the Holders
stating whether Reit has complied in all material respects during the period
since the later of the Closing Date or the then most recently issued Reit
Compliance Report, with the then most recently adopted Investment, Hedging and
Leverage Policy.
(c) Reit shall not permit to
exist, on a general portfolio average basis, a repricing differential between
Reit's assets and liabilities of greater than 180 days.
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SECTION 6. REDEMPTION.
6.1 Optional and Mandatory Redemption.
(a) The Issuer may redeem the
Notes, or a portion thereof, in accordance with the terms and conditions
provided herein and in Section 4 of the Notes.
(b) On each Mandatory Redemption
Date, the Issuer shall redeem the Applicable Amount of Notes, in accordance
with the terms and conditions provided herein and in Section 4 of the Notes.
The redemption price for Notes that the Issuer is required to redeem pursuant
to this Section 6.1(b) shall be equal to 100% of the principal amount thereof
plus accrued and unpaid interest thereon to such Mandatory Redemption Date.
(c) Within two Business Days
after each date on which the Issuer or any of its Subsidiaries (other than
Reit) consummates a Public Equity Offering, the Issuer shall redeem the maximum
principal amount of the Notes that may be redeemed out of an amount equal to
the aggregate net proceeds of such Public Equity Offering, in accordance with
the terms and conditions provided herein and in Section 4 of the Notes.
(d) The Issuer shall redeem
Notes at the time and in the aggregate principal amount required pursuant to
the provisions of Section 5.8. The redemption price for Notes that the Issuer
is required to redeem pursuant to this Section 6.1(d) shall be equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
redemption date.
6.2 Selection of Notes to Be Redeemed.
If fewer than all of the Notes are to be redeemed, the Issuer
shall redeem the Notes pro rata, in such manner as complies with applicable
legal requirements, if any. Notes in denominations of $1,000 may be redeemed
only in whole. The Issuer may select for redemption portions (equal to $1,000
or any integral multiple thereof) of the principal of Notes that have
denominations larger than $1,000. Provisions of this Agreement that apply to
Notes called for redemption also apply to portions of Notes called for
redemption.
6.3 Notice of Redemption.
At least thirty (30) days but not more than sixty (60) days
before a Redemption Date, the Issuer shall mail a notice of redemption ("Notice
of Redemption") by first-class mail to each Holder whose Notes are to be
redeemed at such Holder's registered address; provided, however, that in the
case of a redemption of Notes required pursuant to Section 6.1(b), the Issuer
shall not be required to mail the relevant Notice of Redemption prior to ten
(10) days before the relevant Redemption Date; provided, further, however, that
in the case of a redemption of Notes required pursuant to Section 6.1(c), the
Issuer shall not be required to mail the relevant Notice of Redemption prior to
two (2) days before the relevant Redemption Date. Each Notice of Redemption
shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) the name and address of the
Issuer;
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(d) that Notes called for
redemption must be surrendered to the Issuer to collect the Redemption Price;
(e) that, unless the Issuer
defaults in making the Redemption Price, interest on Notes called for
redemption ceases to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Notes is to receive payment of the
Redemption Price upon surrender to the Issuer of the Notes redeemed;
(f) if any Note is being
redeemed in part, the portion of the principal amount of such Note to be
redeemed and that, after the Redemption Date, and upon surrender of such Note,
a new Note or Notes in aggregate principal amount equal to the unredeemed
portion thereof will be issued;
(g) if fewer than all the Notes
are to be redeemed, the identification of the particular Notes (or portion(s)
thereof) to be redeemed, as well as the aggregate principal amount of Notes to
be redeemed and the aggregate principal amount of Note(s) to be outstanding
after such partial redemption; and
(h) the paragraph of the Notes
pursuant to which the Notes are to be redeemed.
6.4 Effect of Notice of Redemption.
Once Notice of Redemption is mailed in accordance with Section
6.3 above, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price. Upon surrender to the Issuer, such Notes
called for redemption shall be paid at the Redemption Price.
6.5 Payment of Redemption Price.
On presentation and surrender of any Notes with respect to
which a notice of redemption has been given, at a place of payment specified in
such notice, such Notes or specified portions thereof shall be paid and
redeemed by the Issuer at the applicable Redemption Price.
If, on or prior to the Redemption Date, the Issuer deposits in
a segregated account or otherwise sets aside funds sufficient to pay the
Redemption Price of the Notes called for redemption, then, unless the Issuer
defaults in the payment of such Redemption Price, interest on the Notes to be
redeemed will cease to accrue on and after the applicable Redemption Date,
regardless of whether such Notes are presented for payment.
SECTION 7. DEFAULTS AND REMEDIES.
7.1 Events of Default.
An "Event of Default" occurs if:
(a) the Issuer defaults in the
payment of the principal of or premium, if any, on any Note when the same
becomes due and payable at maturity, upon redemption or otherwise;
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(b) the Issuer defaults in the
payment of interest on any Note or any other amount payable hereunder when the
same becomes due and payable and the Default continues for a period of five (5)
days;
(c) the Issuer, Holdings or any
other Guarantor fails to comply with any of the agreements, covenants, or
provisions of this Agreement, the Notes or any Subsidiary Guaranty and the
Default continues for the period and after the notice specified below;
(d) if any of the
representations or warranties of the Issuer or Holdings made in this Agreement
(including those representations and warranties incorporated by reference
herein) are untrue in any respect, the result of which could reasonably be
expected to have a Material Adverse Effect;
(e) if the Issuer transfers or
disposes of any Equity Interests of Holdings or if Holdings transfers or
disposes of any Equity Interests in Reit;
(f) if (i) the Issuer or any of
its Subsidiaries defaults in the payment of principal or interest payments
under any loan agreement, note, mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any other
Indebtedness of the Issuer or any of its Subsidiaries for borrowed money (or
the payment of which is guaranteed by the Issuer or any of its Subsidiaries),
whether such indebtedness or guarantee now exists or shall be created
hereafter, and the principal amount of such indebtedness, together with the
principal amount of any other such indebtedness for which there is a default in
the payment of interest, premium, if any, or principal, aggregates $1,000,000
or more, or (ii) an event of default occurs under any loan agreement, note,
mortgage, indenture or instrument which shall represent a default in payment
upon final maturity or otherwise result in the acceleration of such
indebtedness prior to its expressed maturity and the principal amount of such
indebtedness, together with the principal amount of any other such indebtedness
with respect to which there has been a default in payment upon final maturity
or the maturity of which has been so accelerated and has not been paid,
aggregates $1,000,000 or more;
(g) a final judgment or final
judgments for the payment of money are entered by a court or courts of
competent jurisdiction against the Issuer or any Subsidiary of the Issuer and
such remains undischarged for a period (during which execution shall not be
effectively stayed) of thirty (30) days, provided that the aggregate of all
such judgments exceeds $1,000,000;
(h) the filing by the Issuer or
any of its Subsidiaries (any such person, a "Debtor") of a petition commencing
a voluntary case under section 301 of title 11 of the United States Code, or
the commencement by a Debtor of a case or proceeding under any other Bankruptcy
Law seeking the adjustment, restructuring, or discharge of the debts of such
Debtor, or the liquidation of such Debtor, including without limitation the
making by a Debtor of an assignment for the benefit of creditors; or the taking
of any corporate action by a Debtor in furtherance of or to facilitate,
conditionally or otherwise, any of the foregoing;
(i) the filing against a Debtor
of a petition commencing an involuntary case under section 303 of title 11 of
the United States Code, with respect to which case (a) such Debtor consents or
fails to timely object to the entry of, or fails to seek the stay and dismissal
of, an order of relief, (b) an order for relief is entered and is pending and
unstayed on the 60th day after the filing of the petition commencing such case,
or if stayed, such stay is subsequently
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lifted so that such order for relief is given full force and effect, or (c) no
order for relief is entered, but the court in which such petition was filed has
not entered an order dismissing such petition by the 60th day after the filing
thereof; or the commencement under any other Bankruptcy Law of a case or
proceeding against a Debtor seeking the adjustment, restructuring, or discharge
of the debts of such Debtor, or the liquidation of such Debtor, which case or
proceeding is pending without having been dismissed on the 60th day after the
commencement thereof;
(j) the entry by a court of
competent jurisdiction of a judgment, decree or order appointing a receiver,
liquidator, trustee, custodian or assignee of a Debtor or of the property of a
Debtor, or directing the winding up or liquidation of the affairs or property
of a Debtor, and (a) such Debtor consents or fails to timely object to the
entry of, or fails to seek the stay and dismissal of, such judgment, decree, or
order, or (b) such judgment, decree or order is in full force and effect and is
not stayed on the 60th day after the entry thereof, or, if stayed, such stay is
thereafter lifted so that such judgment, decree or order is given full force
and effect;
(k) any member of the controlled
group of which the Issuer is a member shall, directly or indirectly, (i)
terminate any employee pension benefit plan subject to Title IV of ERISA and as
a result of such termination the Issuer and its Subsidiaries, collectively,
would incur any liability or (ii) make a complete or partial withdrawal (within
the meaning of Section 4201 of ERISA) from any multiemployer plan if as a
result of such withdrawal (within the meaning of Section 4201 of ERISA) the
Issuer and its Subsidiaries, collectively, would incur any liability;
(l) except, with respect to the
Letter of Credit Documents, as expressly permitted in Section 5.34, any
Subsidiary Guaranty, the Holdings Pledge, the Issuer Pledge, the Limited
Liability Company Agreement or any of the Letter of Credit Documents shall be
amended, modified or supplemented or shall for any reason cease to be, or be
asserted in writing by any responsible officer of the Issuer or any of its
Subsidiaries (or, in the case of any of the Letter of Credit Documents, any
party thereto) not to be, in full force and effect or enforceable in accordance
with its terms or shall cease to give, directly or indirectly, the Collateral
Agent or the Holders the benefits, liens, rights, powers and privileges
purported to be created thereby, including, without limitation, a perfected
security interest in the Pledged Stock (as defined in the Holdings Pledge) and
a perfected security interest in the Pledged Collateral (as defined in the
Issuer Pledge) in accordance with the terms thereof;
(m) any issuer of a Letter of
Credit shall fail to pay any of its obligations under any of the Letter of
Credit Documents;
(n) the Management Agreement
shall be amended, modified or supplemented in any material respect or shall be
terminated or shall expire or not be renewed or shall for any reason cease to
be, or be asserted in writing by any responsible officer of the Issuer or any
of its Subsidiaries not to be, in full force and effect or enforceable in
accordance with its terms, without the written consent of the Majority Holders;
(o) the terms of the Preferred
Interests shall be amended, modified or supplemented, without the written
consent of the Majority Holders;
(p) there shall occur a default
by Reit with respect to any of its payment obligations under the Management
Agreement;
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(q) Reit shall at any time fail
to operate, or otherwise fail to be qualified, as a REIT under Section 856 et
seq. of the Code or the Issuer shall be unable, at any time, to provide the
Holders with the opinion of a nationally recognized law firm required pursuant
to the provisions of Section 5.17(c); and
(r) Reit shall fail to pay cash
dividends on the Reit Common Stock during any two consecutive fiscal quarters
beginning on or after October 1, 1997.
The term "Bankruptcy Law" means title 11, U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
A Default under clause (c) of this Section 7.1 shall be an
Event of Default without any notice or passage of time, except that such a
Default that results from a breach of Section 5.1, 5.2, 5.3, 5.15, 5.20, 5.22,
5.24, 5.25, 5.26, 5.27, 5.28, 5.29, 5.30 or 5.31 shall not be an Event of
Default until the Majority Holders notify the Issuer of the Default and the
Issuer does not cure the Default within 30 days after receipt of the notice. A
Default under clause (f) of this Section 7.1 (other than a Default resulting
from the acceleration of any indebtedness described therein, which Default
shall be an Event of Default without the notice specified in this paragraph)
shall not be an Event of Default until the Majority Holders notify the Issuer
of the Default. Each notice referred to in this paragraph must specify the
Default, demand that it be remedied and state that the notice is a "Notice of
Default."
7.2 Acceleration of Notes; Remedies.
Subject to the following paragraph, if an Event of Default
(other than an Event of Default specified in clause (h), (i) or (j) of Section
7.1) occurs and is continuing, the Majority Holders, by notice to the Issuer,
may declare the unpaid principal of and any accrued interest on all the Notes
to be due and payable, and immediately upon such declaration, the principal,
premium, if any, and interest shall be due and payable. If an Event of Default
specified in clause (h), (i) or (j) of Section 7.1 occurs, such an amount shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of any Holder.
The Majority Holders, by notice to the Issuer, may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration.
7.3 Premium on Acceleration.
In the event of an acceleration of the Notes upon an Event of
Default occurring by reason of any willful action (or deliberate inaction)
taken (or not taken) by or on behalf of the Issuer with the intention of
avoiding payment of the premium that the Issuer would have had to pay if the
Issuer had elected to redeem the Notes and such acceleration is not rescinded
or annulled, the Holders shall be entitled to receive, in addition to any other
payments to which they may be entitled, a premium equal to the percentages of
principal set forth below if the declaration date of the acceleration occurs
during the twelve month period commencing on February 11 of the year set forth
below:
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Year % of Principal Amount
---- ---------------------
1997 112%
1998 109%
1999 106%
2000 103%
2001 100%
7.4 Other Remedies.
If an Event of Default occurs and is continuing, Holders of
the Notes may pursue any available remedy to collect the payment of principal
or interest on the Notes or to enforce the performance of any provision of the
Notes, this Agreement or any other Documents.
A delay or omission by any Holder of any Notes in exercising
any right or remedy accruing upon an Event of Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in the Event of
Default. All remedies are cumulative to the extent permitted by law.
7.5 Waiver of Past Defaults.
The Majority Holders, by notice to the Issuer, may waive an
existing Default or Event of Default and its consequences except a continuing
Default or Event of Default in the payment of the principal of or interest on
any Notes.
7.6 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Agreement, the
right of any Holder of a Note to receive payment of principal and interest on
the Note, on or after the respective due dates expressed in the Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
7.7 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Agreement, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
SECTION 8. AMENDMENTS AND WAIVERS.
8.1 With Consent of Holders.
The Issuer and, to the extent the obligations of Holdings or
Reit are affected thereby, Holdings and Reit, when authorized by, as
applicable, a resolution of the board of directors of the Issuer and Reit and
the managing member of Holdings, with the written consent of the Majority
Holders, may amend this Agreement or the Notes, provided that each Holder shall
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have received prior notice of such proposed amendment. The Majority Holders
may waive compliance by the Issuer or Holdings with any provision of this
Agreement or the Notes, provided that each Holder shall have received prior
notice of such proposed amendment. Without the consent of each Holder
affected, however, no amendment or waiver may (with respect to any Notes held
by a nonconsenting Holder of Notes):
(a) reduce the principal amount
of Notes whose Holders must consent to an amendment or waiver of any provision
of this Agreement or the Notes;
(b) reduce the principal of or
change the fixed maturity of any Note or alter the provisions with respect to
the redemption of Notes, reduce the purchase price payable in connection with
repurchases of the Notes pursuant to Section 5.11 or reduce the premium payable
pursuant to Section 7.3;
(c) reduce the rate of or change
the time for payment of interest on any Note;
(d) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes or that resulted from a failure to comply with Section 5.11 (except a
rescission of acceleration of the Notes by the Majority Holders and a waiver of
the payment default that resulted from such acceleration);
(e) make the principal of,
premium, if any, or the interest on, any Note payable in any manner other than
that stated in this Agreement and the Notes;
(f) make any change in the
provisions of this Agreement relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of, premium (if any) or
interest on the Notes;
(g) waive a redemption payment
with respect to any Note; or
(h) make any change in the
foregoing amendment and waiver provisions.
It shall not be necessary for the consent of the Holders under
this Section 8 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment or waiver under this Section 8 becomes
effective, the Issuer shall mail to the Holders affected thereby a notice
briefly describing the amendment or waiver. Any failure of the Issuer to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such amendment or waiver.
In connection with any amendment under this Section 8, the
Issuer may offer, but shall not be obligated to offer, to any Holder who
consents to such amendment or waiver, consideration for such Holder's consent.
8.2 Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not
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made on any Note. However, any such Holder or subsequent Holder may revoke the
consent as to his Note or portion of his Note by notice to the Issuer received
before the date on which the Majority Holders have consented (and not
theretofore revoked such consent) to the amendment or waiver.
The Issuer may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment or waiver, which record date shall be at least thirty (30) days prior
to the first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to revoke any consent
previously given, regardless of whether such persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than ninety (90) days after such record date.
After an amendment or waiver becomes effective, it shall bind
every Holder, unless it makes a change described in any of clauses (a) through
(h) of Section 8.1, in which case, the amendment or waiver shall bind only each
Holder of a Note who has consented to it and every subsequent Holder of a Note
or portion of a Note that evidences the same debt as the consenting Holder's
Note; provided that any such waiver shall not impair or affect the right of any
Holder to receive payment of principal of, premium (if any) and interest on a
Note, on or after the respective due dates expressed in such Note, or to bring
suit for the enforcement of any such payment on or after such respective dates
without the consent of such Holder.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver, consent or amendment,
Notes owned by the Issuer or any Affiliate of the Issuer shall be considered as
though not outstanding.
8.3 Notation on or Exchange of Notes.
If an amendment or waiver changes the terms of a Note, the
Issuer may require the Holder of the Note to deliver it to the Issuer so that
it may place an appropriate notation on the Note about the changed terms and
return it to the Holder.
8.4 Payment of Expenses.
The Issuer and Holdings, jointly and severally, agree to pay
or reimburse each Purchaser's out-of-pocket expenses (including the reasonable
fees and expenses of counsel) relating to any amendment or modification of, or
any waiver or consent under, this Agreement, the Securities and any other
Documents.
SECTION SECTION 9. DEFINITIONS.
9.1 Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"Account Manager" means each Purchaser, if any, duly
authorized to act as attorney in-fact on behalf of any Person in purchasing, in
the name of and using funds provided by such Person, Securities hereunder.
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"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary of the Issuer or assumed
in connection with the acquisition by the Issuer or any of its Subsidiaries of
assets from such Person, which Indebtedness was not incurred in connection with
or in anticipation of such acquisition.
"Affiliate" means, with respect to any referenced Person, a
Person (i) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such referenced
Person, (ii) that directly or indirectly through one or more intermediaries
beneficially owns or holds 10% or more of the combined voting power of the
total Voting Securities of such referenced Person or (iii) of which 10% or more
of the combined voting power of the total Voting Securities directly or
indirectly through one or more intermediaries is beneficially owned or held by
such referenced Person or a Subsidiary of such referenced Person. For purposes
of this definition, "control" when used with respect to any person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of Voting Securities, by agreement or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing. Notwithstanding the foregoing, for purposes of this Agreement,
Trust Company of the West and its Affiliates and any other Purchaser and its
Affiliates shall not be considered Affiliates of the Issuer or any of its
Subsidiaries. For all purposes of this Agreement, MDC shall be deemed an
Affiliate of the Issuer, Holdings and Reit.
"Affiliate Transaction" has the meaning given to such term in
Section 5.6.
"Agreement" means this Securities Purchase Agreement dated as
of February 11, 1997, by and among the Issuer, Holdings, Reit and the
Purchasers.
"Applicable Amount of Notes" means, with respect to each
Mandatory Redemption Date, Notes having an aggregate principal amount equal to
the greatest multiple of $1,000 that is less than or equal to the amount of
Mandatory Redemption Funds on such Mandatory Redemption Date.
"Applicable Percentage" means 75%, unless a greater percentage
is selected by the Issuer.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of assets (including by way of a sale-and-leaseback) of the Issuer
or any of its Subsidiaries (other than Reit and its Subsidiaries), other than
sales of inventory in the ordinary course of business consistent with past
practice or (ii) the issuance or sale of Equity Interests of any of the
Subsidiaries of the Issuer (other than Reit and its Subsidiaries) to any Person
other than the Issuer, in the case of either clause (i) or (ii) above, whether
in a single transaction or a series of related transactions.
"Bankruptcy Law" has the meaning given to such term in Section
7.1.
"B/C Mortgages" means adjustable rate residential mortgage
loans that are classified, by virtue of a credit underwriting analysis, as
below prime (ie. below "A" or "A-") and are not eligible for sale as conforming
loans to Federal National Mortgage Association, Federal Home Loan Mortgage
Corporation or Government National Mortgage Association, pursuant to their
respective prime mortgage purchase programs.
"Business Day" means any day which is not a Legal Holiday.
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"Capital Expenditures" means, without duplication, for any
Person for any period, the aggregate of all expenditures including deposits
(whether paid in cash or property or accrued as liabilities and including the
aggregate amount of all principal payments due for the entire term of all
Capital Leases that are required to be capitalized on the balance sheet) made
by such Person that, in conformity with GAAP, are required to be included in
the property, plant, equipment, or similar fixed asset account; provided,
however, there shall be excluded from the calculation of Capital Expenditures
permitted under Section 5.9 hereof that portion of all such expenditures the
Issuer is permitted to reinvest or use for replacement or restoration of assets
through the use of insurance proceeds, awards of compensation arising from
condemnation or eminent domain proceedings or from Net Proceeds of Asset Sales.
"Capital Lease" means any lease of any property (whether real,
personal or mixed) that, in conformity with GAAP, should be accounted for as a
capital lease.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock,
including without limitation all common stock and preferred stock.
"Capitalized Lease Obligation" means, with respect to any
Person for any period, any obligation of such Person to pay rent or other
amounts under a Capital Lease; the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Cash" means U.S. Legal Tender or U.S. Government Obligations
having a maturity of one year or less from the date of issuance thereof.
"Cash Balance" of any Person at any date means the amount (but
not less than zero) of the balance of Cash and Cash Equivalents as reflected on
the unconsolidated balance sheet of such Person at such date.
"Cash Equivalents" means (i) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States of America, in each case maturing within one year from the date of
acquisition thereof; (ii) commercial paper maturing within one year from the
date issued and, at the time of acquisition, having a rating of at least A-1
from Standard & Poor's Corporation or at least P1 from ▇▇▇▇▇'▇ Investors
Service, Inc.; (iii) certificates of deposit or bankers' acceptances maturing
within one year from the date of issuance thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia having combined capital and surplus of not less
than $500,000,000 and not subject to setoff rights in favor of such bank; (iv)
time deposits maturing no more than thirty (30) days from the date of creation
thereof with commercial banks having membership in the Federal Deposit
Insurance Corporation in amounts not exceeding the lesser of $100,000 or the
maximum amount of insurance applicable to the aggregate amount of the Issuer's
deposits at such institution; (v) repurchase obligations with a term of not
more than seven (7) days for underlying securities of the types described in
clauses (i), (ii) and (iii) above entered into with any commercial bank meeting
the qualifications specified in clause (iii) above; (vi) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state of the United States of America or the District of
Columbia, or by any political subdivision or taxing authority of any such state
or the District of Columbia, the securities of which state, the District of
Columbia, political subdivision or taxing authority (as the case may be) are
rated at least AAA by Standard and Poor's Corporation or Aaa by ▇▇▇▇▇'▇
Investors Services, Inc.; and
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(vii) shares of money market mutual or similar funds having assets in excess of
$100,000,000 and that invest exclusively in assets satisfying the requirements
of clauses (i) through (vi) above.
"Change of Control" means (i) any sale, transfer, or other
conveyance, whether direct or indirect, of all or substantially all of the
assets of the Issuer or Holdings, to any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, regardless
of whether applicable), whether in a single transaction or a series of related
transactions, (ii) the liquidation or dissolution of the Issuer or Holdings,
(iii) any transaction, event or circumstance pursuant to which any "person" or
"group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, regardless of whether applicable) (other than MDC) is or becomes
the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, regardless of whether applicable, except that a person shall be
deemed to be the "beneficial owner" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the total
voting power of the then outstanding Voting Securities of the Issuer or of
Holdings, (iv) any transaction, event or circumstance pursuant to which any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, regardless of whether applicable) (other than MDC)
is or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and
13d-5 under the Exchange Act, regardless of whether applicable, except that a
person shall be deemed to be the "beneficial owner" of all shares that any such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of a percentage of
the total voting power of the then outstanding Voting Securities of Reit or the
Issuer that is greater than the percentage of the total voting power of the
then outstanding Voting Securities of Reit or the Issuer, as the case may be,
then owned by Holdings or MDC, as the case may be, or (v) any transaction that
results in MDC owning less than 30% of the total voting power of the then
outstanding Voting Securities of the Issuer or of Holdings.
"Change of Control Date" has the meaning given to such term in
Section 5.11.
"Change of Control Offer" has the meaning given to such term
in Section 5.11.
"Change of Control Offer Price" has the meaning given to such
term in Section 5.11.
"Change of Control Payment Date" has the meaning given to such
term in Section 5.11.
"Charter Documents" means the articles of organization,
articles of incorporation, certificate of incorporation, bylaws, declaration of
trust, trust agreement, certificate of formation, limited liability company
agreement, certificate of limited partnership, limited partnership agreement
and any other organizational document, each as amended or restated (or both) to
date, of any of the Companies, or any of their respective Subsidiaries, as
applicable.
"Closing" has the meaning given to such term in Section
1.2(b).
"Closing Date" has the meaning given to such term in Section
1.2(b).
"Closing Date Balance Sheet" has the meaning given to such
term in Section 2.1(g).
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"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute or law thereto.
"Collateral Agency Agreement" means the Collateral Agency
Agreement dated as of February 11, 1997 by and among the Issuer, Holdings, the
Purchasers, as beneficiaries, and Bankers Trust Company, a New York banking
corporation, as collateral agent.
"Collateral Agent" means the collateral agent under the
Collateral Agency Agreement.
"Commercial Mortgage Assets" means Commercial Mortgage Loans
and Commercial Mortgage Securities.
"Commercial Mortgage Loans" means Mortgage Loans secured
primarily by commercial real property.
"Commercial Mortgage Securities" means mortgage securities
representing an interest in, or secured primarily by, Commercial Mortgage
Loans.
"Common Stock" means the Common Stock, $.0001 par value, of
the Issuer.
"Companies" means, collectively, the Issuer, Holdings, and
Reit.
"Consolidated" or "consolidated," when used with reference to
any accounting term, means the amount described by such accounting term,
determined on a consolidated basis in accordance with GAAP, after elimination
of intercompany items.
"Consolidated Capital Expenditures" means, for the Issuer and
its Subsidiaries (other than Holdings, Reit and the Subsidiaries of Reit), for
any period, without duplication, the aggregate of all expenditures including
deposits (whether paid in cash or property or accrued as liabilities and
including the aggregate amount of all principal payments due for the entire
term of all Capital Leases that are required to be capitalized on the
consolidated balance sheet) made by the Issuer and its Subsidiaries (other than
Holdings, Reit and the Subsidiaries of Reit) that, in conformity with GAAP, are
required to be included in the property, plant, equipment, or similar fixed
asset account.
"Consolidated EBITDA" means, with respect to the Issuer and
its Subsidiaries (other than Holdings, Reit and the Subsidiaries of Reit) for
any period, the following, each calculated for such period, without
duplication: (a) Consolidated Net Income of the Issuer and its Subsidiaries
(other than Holdings, Reit and the Subsidiaries of Reit); plus (b) any
provision for (or less any benefit from) income or franchise taxes to the
extent included in the determination of Consolidated Net Income; plus (c)
Consolidated Interest Expense of the Issuer and its Subsidiaries (other than
Holdings, Reit and the Subsidiaries of Reit) (whether paid or accrued and
including without limitation amortization of original issue discount) to the
extent deducted in the determination of Consolidated Net Income; plus (d)
amortization and depreciation to the extent deducted in the determination of
Consolidated Net Income of the Issuer and its Subsidiaries (other than
Holdings, Reit and the Subsidiaries of Reit); minus (e) gains from Asset Sales
or other non-cash items included in the determination of Consolidated Net
Income of the Issuer and its Subsidiaries (other than Holdings, Reit and the
Subsidiaries of Reit); minus (f) after tax
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extraordinary gains of the Issuer and its Subsidiaries (other than Holdings,
Reit and the Subsidiaries of Reit) (in each case as defined under GAAP).
"Consolidated Interest Expense" means, with respect to the
Issuer and its Subsidiaries (other than Holdings, Reit and the Subsidiaries of
Reit), for any period, without duplication, (i) the aggregate of all interest
paid or accrued by the Issuer and its Subsidiaries (other than Holdings, Reit
and the Subsidiaries of Reit) in respect of consolidated Indebtedness of the
Issuer and its Subsidiaries (other than Holdings, Reit and the Subsidiaries of
Reit), including all interest, fees and costs payable with respect to the
obligations related to such Indebtedness (other than fees and costs which may
be capitalized as transaction costs in accordance with GAAP and, without
duplication, other than the amortization of any original issue discount
attributable to the issuance of Notes under this Agreement) and the interest
component of Capitalized Lease Obligations, all as determined in accordance
with GAAP, and (ii) an amount equal to the product of (A) the amount of all
dividend payments on any Disqualified Stock of the Issuer and its Subsidiaries
(other than Holdings, Reit and the Subsidiaries of Reit) (including dividends
for such period which are accrued and unpaid) times (B) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated Federal, state and local tax rate of the Issuer
and its Subsidiaries (other than Holdings, Reit and the Subsidiaries of Reit),
expressed as a decimal.
"Consolidated Interest Expense Coverage Ratio" means, with
respect to the Issuer and its Subsidiaries (other than Holdings, Reit and the
Subsidiaries of Reit), the ratio of:
(i) the aggregate amount of
Consolidated EBITDA of the Issuer and its
Subsidiaries (other than Holdings, Reit and
the Subsidiaries of Reit) attributable to
continuing operations and businesses
(exclusive of amounts attributable to
operations and businesses permanently
discontinued or disposed of) for the four
full fiscal quarters for which financial
information in respect thereof is available
immediately prior to the date of the event
(the "Event") giving rise to the need to
calculate the Consolidated Interest Expense
Coverage Ratio (the "Event Date") minus
Consolidated Capital Expenditures and
Consolidated Other Capitalized Costs for the
Issuer and its Subsidiaries (other than
Holdings, Reit and the Subsidiaries of Reit)
for such Period, to
(ii) the sum of the aggregate
Consolidated Interest Expense of the Issuer
and its Subsidiaries (other than Holdings,
Reit and the Subsidiaries of Reit) during
such period (exclusive of amounts
attributable to operations and businesses
permanently discontinued or disposed of, but
only to the extent that the obligations
giving rise to such Consolidated Interest
Expense would no longer be obligations
contributing to Consolidated Interest Expense
of the Issuer and its Subsidiaries (other
than Holdings, Reit and the Subsidiaries of
Reit) subsequent to the Event Date);
provided, however, that for the periods ending June 30, 1997 and September 30,
1997, Consolidated EBITDA and Consolidated Interest Expense of the Issuer and
its Subsidiaries (other than Holdings, Reit and the Subsidiaries of Reit) shall
be calculated for the two- and three-quarter periods (respectively) then
ending, rather than for the four-quarter periods then ending; provided,
further, that if any such calculation includes any period prior to the Closing
Date, such calculation for such period shall be made on a pro forma basis
giving effect to the issuance of the Notes, the proceeds therefrom and the
consummation of the transactions contemplated hereby, as if the same had
occurred at the beginning of such period.
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In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Interest
Expense" for the one, two, three or four full fiscal quarters, as applicable,
for which financial information in respect thereof is available immediately
prior to the Event Date shall be calculated (without duplication) after giving
effect on a pro forma basis for the period of such calculation (as if each of
the following, if applicable, occurred at the beginning of the first of such
one, two, three or four fiscal quarters, as applicable) to:
(i) the incurrence of any
Indebtedness (including, without limitation,
if applicable, Acquired Indebtedness and
other Indebtedness incurred, or Disqualified
Stock issued, with respect to the Event)
during the period commencing at the beginning
of such one, two, three or four fiscal
quarters, as applicable, and ending on the
Event Date (the "Reference Period"),
(ii) the permanent repayment of any
Indebtedness of such Person or Subsidiary
(other than Holdings, Reit and the
Subsidiaries of Reit) of such Person during
the Reference Period with the proceeds of any
Indebtedness referred to in the immediately
preceding clause (i) or with the proceeds
from the Asset Sale referred to in clause
(iv) below (so long as the Asset Sale is also
given pro forma effect),
(iii) the acquisition by such Person
or any Subsidiary (other than Holdings, Reit
and the Subsidiaries of Reit) of such Person
during the Reference Period of (a) the Equity
Interests of any other Person which, as a
result of such acquisition, becomes a
Subsidiary of such Person (provided that such
pro forma calculation shall include the
aggregate amount of Consolidated EBITDA of
such acquired Subsidiary for the one, two,
three or four (as the case may be) full
fiscal quarters of such acquired Subsidiary
for which financial information is available
immediately preceding the Event Date;
provided, that, to the extent the Net Income
of such acquired Subsidiary is subject to
restrictions, direct or indirect, on the
payment of dividends or the making of
distributions, the Net Income of such
acquired Subsidiary shall be excluded from
Consolidated EBITDA to the extent of such
restrictions) or (b) assets from any Person
which constitutes substantially all of the
operating unit or business of such Person
(provided that such pro forma calculation
shall include the Consolidated EBITDA
attributable to the assets acquired in such
transaction for the one, two, three or four
(as the case may be) full fiscal quarters for
which financial information is available
immediately preceding the Event Date), and
(iv) any Asset Sales (other than by
Reit or its Subsidiaries) occurring during
the Reference Period (including the effect,
if any, on the Issuer's or Holdings's
earnings for the Reference Period resulting
from the disposition of assets in such Asset
Sale).
Furthermore, in calculating "Consolidated Interest Expense"
(A) interest on Indebtedness determined on a fluctuating basis as of the Event
Date and which will continue to be so determined thereafter shall be deemed to
have accrued during the Reference Period at a fixed rate per annum equal to the
average rate in effect from the beginning of the Reference Period to the Event
Date and (B) if interest on any Indebtedness incurred on the Event Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a Eurocurrency interbank offered rate, or other rates, then the
interest rate shall be deemed to be the lowest of such interest rates on the
Event Date which are actually available as options to the borrower of such
Indebtedness and (C) the principal amount of Indebtedness under a revolving
credit or similar arrangement that was in effect prior to the Event Date and
that will continue to
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be in effect following the Event shall be equal to the average principal amount
of Indebtedness outstanding during the Reference Period.
"Consolidated Net Income" means, with respect to the Issuer
and its Subsidiaries (other than Holdings, Reit and the Subsidiaries of Reit),
for any period, the aggregate of the Net Income of the Issuer and its
Subsidiaries (other than Holdings, Reit and the Subsidiaries of Reit) for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income of any Person that is not a Subsidiary of the Issuer or
is accounted for by the Issuer by the equity method of accounting shall be
included in Consolidated Net Income only to the extent of the amount of
dividends or distributions actually paid by such Person to the Issuer or a
Subsidiary of the Issuer (other than Holdings, Reit and the Subsidiaries of
Reit), (ii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded from Consolidated Net Income and (iii) the Net Income of any
Subsidiary of the Issuer that is subject to restrictions, direct or indirect,
on the payment of dividends or the making of distributions to the Issuer shall
be excluded from Consolidated Net Income to the extent of such restrictions.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that
by its terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year of
such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, plus, to the extent
excluded, the respective amounts reported on such Person's balance sheet as of
such date with respect to the Series A Preferred Stock, less (to the extent
otherwise included in (i) and (ii) above) (w) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of
tangible assets of a going concern business made within 12 months after the
acquisition of such business) subsequent to the Closing Date in the book value
of any asset owned by such Person or a consolidated Subsidiary of such Person,
(x) all amounts attributable to interests in Subsidiaries of such Person held
by Persons other than such Person or its Subsidiaries, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries, and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Consolidated Other Capitalized Costs" means, for the Issuer
and its Subsidiaries (other than Holdings, Reit and the Subsidiaries of Reit),
for any fiscal period, without duplication, the gross amount capitalized for
long term assets (net of cash received in respect of long term assets) of the
Issuer and its Subsidiaries (other than Holdings, Reit and the Subsidiaries of
Reit), other than (a) Consolidated Capital Expenditures of the Issuer and its
Subsidiaries (other than Holdings, Reit and the Subsidiaries of Reit) and (b)
any fees and expenses capitalized by the Issuer and its Subsidiaries (other
than Holdings, Reit and the Subsidiaries of Reit) with respect to the Related
Transactions, all in accordance with GAAP.
"Contingent Warrant Agreement" has the meaning given to such
term in Section 1.1.
"Contingent Warrant Register" has the meaning given to such
term in Section 1.3.
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"Contingent Warrants" has the meaning given to such term in
Section 1.1.
"Contingent Warrant Shares" has the meaning given to such term
in Section 1.1.
"Contingent Warrant Shares Register" has the meaning given to
such term in Section 1.3.
"Crescent Warrant Agreement" has the meaning given to such
term in Section 1.1.
"Crescent Warrant Register" has the meaning given to such term
in Section 1.3.
"Crescent Warrants" has the meaning given to such term in
Section 1.1.
"Crescent Warrant Shares" has the meaning given to such term
in Section 1.1.
"Crescent Warrant Shares Register" has the meaning given to
such term in Section 1.3.
"Custodian" has the meaning given to such term in Section 7.1.
"Default" means any event which is, or after notice or passage
of time would be, an Event of Default.
"Derivative Mortgage Securities" means mortgage securities
that provide for the holder to receive interest only, principal only, or
interest and principal in amounts that are disproportionate to those payable on
the underlying mortgage loans.
"Disqualified Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part, on
or prior to the Maturity Date.
"Documents" means this Agreement, the Notes, the Escrow
Agreement, the Crescent Warrant Agreement, the Contingent Warrant Agreement,
the Series A Purchase Agreement, the Series A Purchasers Warrant Agreement, the
L/C Contributors Warrant Agreement, the Crescent Warrants, the Continent
Warrants, the Series A Warrants, the L/C Warrants, the Stockholders Agreement,
the Limited Liability Company Agreement, the Registration Rights Agreement, the
Letter of Credit Documents, the Pledge Agreements, the Collateral Agency
Agreement and the Management Agreement, collectively, or each of such documents
singularly, and any documents or instruments contemplated by or executed in
connection with any of them or any of the transactions contemplated hereby or
thereby.
"EBITDA" means, without duplication and with respect to any
Person for any period, the following, each calculated for such Person and such
period: (a) Net Income plus (b) any provision for (or less any benefit from)
income or franchise taxes to the extent included in the determination of Net
Income plus (c) Interest Expense (whether paid or accrued and including without
limitation amortization of original issue discount) to the extent deducted in
the determination of Net Income plus (d) amortization and depreciation to the
extent deducted in the determination of Net Income plus (e) losses from (or
less gains from) Asset Sales or other non-
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cash items included in the determination of Net Income plus (f) after tax
extraordinary losses (in each case as defined under GAAP); provided, however,
that if such Person is the Issuer, its EBITDA shall be calculated as if an
amount equal to the Cash Balance of Holdings at the last day of such period had
been distributed to the Issuer on such day.
"Environmental Claim" means any claim, action, cause of
action, investigation of which the Companies, including any of their employees,
are aware, or notice (written or oral) by any Person alleging potential
liability (including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) arising out of, based on or
resulting from (a) the presence, or release into the environment, of any
Material of Environmental Concern at any location, regardless of whether owned
or operated by any of the Companies, or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all Federal, state, local and
foreign laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), including, without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
"Equity Interest" means (i) with respect to a corporation, any
and all Capital Stock or warrants, options or other rights to acquire Capital
Stock (but excluding any debt security which is convertible into, or
exchangeable or exercisable for, Capital Stock) and (ii) with respect to a
partnership, limited liability company or similar Person, any and all units,
interests, rights to purchase, warrants, options or other equivalents of, or
other ownership interests in any such Person.
"ERISA" means The Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute or law thereto.
"Escrow Account" means the escrow account established with the
Escrow Agent pursuant to the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of
February 11, 1997 between the Issuer and Bankers Trust Company, as escrow
agent, in the form attached hereto as Annex G.
"Event of Default" has the meaning given to such term in
Section 7.1.
"Excess Cash Flow" means, for any period, EBITDA of the Issuer
for such period minus the total amount of interest paid in cash by the Issuer,
in respect of Indebtedness of the Issuer, during such period minus the total
amount of Taxes paid in cash by the Issuer during such period minus the total
amount of Capital Expenditures of the Issuer during such period.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, from time to time, and any successor statute or law thereto.
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"Fixed Rate Mortgage Asset" means an asset bearing an interest
rate that is fixed for greater than one year.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such on the Closing Date by the American
Institute of Certified Public Accountants acting through its Accounting
Principles Board or by the Financial Accounting Standards Board or through
other appropriate boards or committees thereof and which are consistently
applied for all periods after the date hereof so as to properly reflect the
financial conditions, and the results of operations, shareholders' equity and
cash flows, of the Issuer, Holdings and their consolidated subsidiaries. In
the event that any Accounting Change (as defined below) shall occur and such
change would result in a change in the method of calculation of financial
covenants, standards or terms in this Agreement, then the Issuer and the
Holders shall enter into negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such Accounting Change with the desired
result that after such amendment has been executed and delivered the criteria
for the Issuer's compliance with this Agreement shall be as nearly as
practicable the same after such Accounting Change as they were prior to such
Accounting Change having been made. Until such time as such an amendment shall
have been executed and delivered by the Issuer and the Majority Holders, all
financial covenants, standards and terms in this Agreement shall continue to be
calculated and construed as if such Accounting Change had not occurred.
"Accounting Change" means any change in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the SEC (or successors thereto or agencies with
similar functions). That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing.
"Government Body" means any Federal, state, local or foreign
governmental authority or regulatory body, any subdivision, agency, commission
or authority thereof or any quasi-governmental or private body exercising any
governmental regulatory authority thereunder and any Person directly or
indirectly owned by and subject to the control of any of the foregoing, or any
court, arbitrator or other judicial or quasi-judicial tribunal.
"Guarantor" means Holdings and each other Subsidiary of the
Issuer (other than Reit and its Subsidiaries).
"guaranty" means, with respect to any Person, any contract,
agreement or understanding of such Person pursuant to which such Person
guarantees, or in effect guarantees, any Indebtedness of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including
without limitation:
(a) agreements to purchase such
Indebtedness or any property constituting security therefor;
(b) agreements to advance or
supply funds (i) for the purchase or payment of such Indebtedness, or (ii) to
maintain working capital, equity capital or other balance sheet conditions;
(c) agreements to purchase
property, securities or services primarily for the purpose of assuring the
holder of such Indebtedness of the ability of the primary obligor to make
payment of the Indebtedness;
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(d) letters or agreements
commonly known as "comfort" or "keepwell" letters or agreements; or
(e) any other agreements to
assure the holder of the Indebtedness of the primary obligor against loss in
respect thereof;
except that "guaranty" shall not include (i) the endorsement by a Person in the
ordinary course of business of negotiable instruments or documents for deposit
or collection, or (ii) indemnities given by the Issuer, Holdings or their
respective Subsidiaries in brokerage, management and other agreements in the
ordinary course of business substantially consistent with past practices.
"Hedging Assets" means interest rate swap agreements, interest
rate cap agreements, interest rate floor agreements and interest rate collar
agreements, in each case, designed to hedge variable rate Indebtedness only.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, in each case, designed
to protect such Person against fluctuations in interest rates and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" or "Holders" means each Purchaser (so long as it
holds any Securities) and any other holder of any of the Securities.
"Holdings" has the meaning given to such term in the preamble
hereof.
"Holdings Pledge" means the Pledge Agreement (By MDC Reit
Holdings, LLC) dated as of February 11, 1997 between Holdings, as pledgor, and
the Collateral Agent, as pledgee, in the form attached hereto as Annex H.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated pursuant
thereto.
"Indebtedness" means, with respect to any Person, the
aggregate amount of, without duplication, the following:
(a) all obligations for borrowed money;
(b) all obligations evidenced by bonds, debentures, notes
or other similar instruments;
(c) all obligations to pay the deferred purchase price of
property or services (except Trade Payables, accrued commissions and other
similar accrued current liabilities in respect of such obligations, in any
case, not overdue, arising in the ordinary course of business);
(d) all Capitalized Lease Obligations;
(e) all obligations or liabilities of others secured by a
lien on any asset owned by such Person or Persons regardless of whether such
obligation or liability is assumed;
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(f) all obligations of such Person or Persons, contingent
or otherwise, in respect of any letters of credit or bankers' acceptances;
(g) all Hedging Obligations; and
(h) all guaranties.
"Independent Auditors" means Deloitte & Touche or other
independent certified public accountants of recognized national standing
selected by the Issuer.
"Inspectors" has the meaning given to such term in Section
5.27.
"Interest Expense" means, when used with reference to any
Person for any period, without duplication, (i) the aggregate of all interest
paid or accrued by such Person in respect of Indebtedness of such Person,
including all interest, fees and costs payable with respect to the obligations
related to such Indebtedness (other than fees and costs which may be
capitalized as transaction costs in accordance with GAAP) and the interest
component of Capitalized Lease Obligations, all as determined in accordance
with GAAP, and (ii) an amount equal to the product of (A) the amount of all
dividend payments on any Disqualified Stock of such Person (including dividends
for such period which are accrued and unpaid) times (B) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated Federal, state and local tax rate of such
Person, expressed as a decimal.
"Investment" means, with respect to any Person, any direct,
indirect or beneficial investment by such Person, whether by means of share
purchase, loan, advance, extension of credit (other than accounts receivable
and trade credits arising in the ordinary course of business), capital
contribution or otherwise, in or to any other Person, the guaranty by such
Person of any Indebtedness of any other Person or the subordination of any
claim against any other Person to other Indebtedness of such other Person.
"Investment, Hedging and Leverage Policy" has the meaning given to such term
in Section 5.37.
"Issuer" has the meaning given to such term in the preamble
hereof.
"Issuer Pledge" means the Pledge Agreement (By Home Asset
Management Corp.) dated as of February 11, 1997 between the Issuer, as pledgor,
and the Collateral Agent, as pledgee, in the form attached hereto as Annex I.
"L/C Contributors Warrant Agreement" means the Warrant
Agreement dated as of February 11, 1997 by and among the Issuer and the
contributors of Letters of Credit listed on the signature pages thereto.
"L/C Warrants" has the meaning given to such term in the L/C
Contributors Warrant Agreement.
"Legal Holiday" means a Saturday, Sunday or day on which banks
and trust companies in the principal place of business of the Issuer or in New
York are not required to be open.
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"Letter of Credit Contribution Agreements" means,
collectively, the Letter of Credit Contribution Agreements dated as of February
11, 1997 by and between the Issuer an each of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 1991 Family
Trust, the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 1994 Family Trust, the ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 1990
Family Trust, PK Partners, the ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust, the ▇▇▇▇▇▇
1991 Trust, ▇▇▇▇▇▇▇ Partners, PLF Partners, Saw Island Partners and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, in connection with the Letters of Credit, in the form attached
hereto as Annex K or any successor or replacement agreement or agreements;
provided, however, that such successor or replacement agreement or agreements
shall be entered into by parties and on terms and conditions as shall be
acceptable to the Majority Holders on the date of such agreement or agreements.
"Letter of Credit Documents" means, collectively, the Letters
of Credit and the Letter of Credit Contribution Agreements.
"Letter of Credit Triggering Event of Default" means, (i) with
respect to the occurrence of an Event of Default under Sections 7.1(a), (b),
(h), (i), (j), (m) and (q), immediately upon the occurrence of such Event of
Default; (ii) with respect to the occurrence of an Event of Default under
Sections 7.1(c), (d), (e), (f), (g), (k), (l), (n), (o), (p) and (r), 60 days
after the occurrence of such Event of Default if not cured or waived during
such period; and (iii) with respect to any Event of Default under Section 7.1
which results in acceleration of the Notes pursuant to Section 7.2, immediately
upon the declaration that the Notes are due and payable (irrespective of the
waiting periods referred to in clause (ii) above).
"Letters of Credit" means, collectively, the Irrevocable
Standby Letters of Credit dated February 11, 1997 issued by various banks for
the account of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 1991 Family Trust, the
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 1994 Family Trust, the ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 1990 Family Trust, PK
Partners, the ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust, the ▇▇▇▇▇▇ 1991 Trust, ▇▇▇▇▇▇▇
Partners, PLF Partners, and Saw Island Partners to the Collateral Agent for the
benefit of the Holders, as beneficiaries thereof, in the form attached hereto
as Annex J or any successor or replacement irrevocable standby letter or
letters of credit; provided, however, that such successor or replacement letter
or letters of credit shall be issued by a bank and on terms and conditions as
shall be acceptable to the Majority Holders on the date of issuance of such
letter or letters of credit.
"Lien" means any mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in a charge against real or
personal property, or security interest of any kind (including, without
limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell and any filing of
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Limited Liability Company Agreement" means the Amended and
Restated Limited Liability Company Agreement of Holdings dated as of February
11, 1997 among the Issuer, ▇▇▇▇▇▇ De Leeuw & Co. II, L.P., ▇▇▇▇▇▇ De Leeuw
Associates, L.P., ▇▇▇▇▇▇ De Leeuw & Co. Offshore (Europe), L.P., ▇▇▇▇▇▇ De
Leeuw & Co. Offshore (Asia), L.P., the Purchasers and each of the ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ 1991 Family Trust, the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 1994 Family Trust, the ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ 1990 Family Trust, PK Partners, the ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust,
the ▇▇▇▇▇▇ 1991 Trust, ▇▇▇▇▇▇▇ Partners, PLF Partners, Saw Island Partners and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"LLC Interests" means the limited liability company interests
in Holdings to be acquired by the Purchasers currently herewith and issued
pursuant to the Limited Liability Company Agreement.
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"Majority Holders" means, at any time, the Holder or Holders
of at least a majority in aggregate principal amount of the then outstanding
Notes.
"Management Agreement" means the Management Agreement dated as
of February 11, 1997 between Reit and the Issuer, in the form attached hereto
as Annex L.
"Management Reit Interests" means (a) an aggregate of up to
17,500 shares of Reit Common Stock sold to ▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇., and (b) options, stock appreciation rights and underlying Common Stock
issuable under the 1997 Stock Incentive Plan of Reit covering an aggregate of
660,000 shares of Reit Common Stock.
"Mandatory Redemption Date" means each of April 15, 1998,
April 15, 1999, April 15, 2000 and April 15, 2001.
"Mandatory Redemption Funds" means, on any Mandatory
Redemption Date, the amount equal to the Applicable Percentage of the excess,
if any, of (a) Excess Cash Flow for the 12-month period ended on the last day
of the immediately preceding calendar year over (b) the sum of (i) the Required
Escrow Deposit on such Mandatory Redemption Date and (ii) $1,000,000.
"Material Adverse Effect" means (a) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of any of the Companies or (b) a material adverse
effect on the ability of any of the Companies to perform its obligations under
this Agreement or any of the other Documents or of any Purchaser or Holder to
enforce or collect any of the obligations hereunder or thereunder. In
determining whether any individual event could reasonably be expected to result
in a Material Adverse Effect, notwithstanding that such event does not of
itself have such effect, a Material Adverse Effect shall be deemed to have
occurred if the cumulative effect of such event and all other then existing
events could reasonably be expected to result in a Material Adverse Effect.
"Materials of Environmental Concern" means chemicals,
pollutants, contaminants, industrial, toxic or hazardous wastes, substances or
constituents, petroleum and petroleum products (or any by-product or
constituent thereof), asbestos or asbestos-containing materials, or PCBs.
"Maturity Date" means February 11, 2002.
"MDC" means, collectively, ▇▇▇▇▇▇ De Leeuw & Co., II, L.P., a
California limited partnership, ▇▇▇▇▇▇ De Leeuw Associates, L.P., a California
limited partnership, ▇▇▇▇▇▇ De Leeuw & Co. Offshore (Europe), L.P., a Bermuda
limited partnership, ▇▇▇▇▇▇ De Leeuw & Co. Offshore (Asia), L.P., a Bermuda
partnership, MDC Management Company II, L.P., a California limited partnership,
MDC Management Company IIE, L.P., a California limited partnership, and MDC
Management Company IIA, L.P, a California limited partnership.
"Mortgage Assets" means (i) Single-Family Mortgage Assets,
(ii) Multifamily Mortgage Assets, and (iii) Commercial Mortgage Assets.
"Mortgage Loans" means loans secured by a mortgage or deed of
trust or other security instrument creating a first lien in the fee simple or
ground lease estate of the related borrower in one or more parcels of real
estate and the buildings and improvements located thereon.
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"Multifamily Mortgage Assets" means Multifamily Mortgage Loans
and Multifamily Mortgage Securities.
"Multifamily Mortgage Loans" means Mortgage Loans secured
primarily by multifamily (in excess of four units) residential real property.
"Multifamily Mortgage Securities" means mortgage securities
representing an interest in, or secured primarily by, Multifamily Mortgage
Loans.
"Net Income" of any Person means the net income (loss) of such
Person, determined in accordance with GAAP, excluding, however, any gain (but
not loss) realized upon the sale or other disposition (including, without
limitation, dispositions pursuant to sale and leaseback transactions) of any
real property or equipment of such Person which is not sold or otherwise
disposed of in the ordinary course of business and any gain (but not loss)
realized upon the sale or other disposition of any capital stock of such
Person.
"Net Proceeds" means, with respect to any sale or other
disposition of any assets, (i) cash received by the Issuer or any of its
Subsidiaries from such sale or other disposition and (ii) promissory notes
received by the Issuer or any of its Subsidiaries from such sale or other
disposition upon the liquidation or conversion of such notes into cash, in each
case after (a) provision for all Taxes measured by or resulting from such sale
or other disposition, (b) payment of all brokerage commissions and other fees
and expenses related to such sale or other disposition, and (c) amounts applied
to repayment of Indebtedness secured by a Lien on the asset sold or disposed.
"Note Register" has the meaning given to such term in Section
1.3.
"Notes" has the meaning given to such term in Section 1.1.
"Notice of Redemption" has the meaning given to such term in
Section 6.3.
"Obligations" means, with reference to any Indebtedness, any
principal of, premium, interest, penalties, fees and other liabilities payable
from time to time and obligations performable under the documentation governing
such Indebtedness.
"Officer" of a Person mean its Chairman of the Board, Chief
Executive Officer, President, Treasurer, any Vice President, Secretary or any
Assistant Secretary.
"Officers' Certificate" means a certificate signed by any two
Officers, one of whom must be the Chairman of the Board, the Chief Executive
Officer, the President, the Treasurer or a Vice President of the Issuer.
"Operating Lease" means any lease other than a Capital Lease.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to each of the Purchasers. Unless
otherwise required by any of the Purchasers, the legal counsel may be an
employee of or counsel to the Issuer or Holdings. For purposes of Section 4.4,
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Issuer and who may be an employee of or counsel to
any Purchaser or Holder.
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"Payment Notice" has the meaning given to such term in Section
8.2(b).
"PCBs" has the meaning given to such term in Section 3.16.
"Permitted Liens" means with respect to any Person: (i) Liens
incurred or deposits made by such Person under worker's compensation laws,
unemployment insurance laws or similar legislation, or Liens incurred or good
faith deposits made in connection with bids, tenders, contracts (other than for
the payment of Indebtedness) or leases to which such Person is a party, or
Liens incurred or deposits made to secure public or statutory obligations of
such Person or deposits of cash or United States Government bonds made to
secure the performance of statutory obligations, surety, stay, customs and
appeal bonds to which such Person is a party, or deposits made as security for
contested taxes or import duties or for the payment of rent, in each case in
the ordinary course of business; (ii) Liens imposed by law, such as carriers',
warehousemen's, materialmen's and mechanics' Liens or Liens arising out of
judgments or awards against such Person with respect to which such Person shall
then be prosecuting appeal or other proceedings for review and which do not
constitute an Event of Default under Section 7.1(g); provided that, in each
case, such appeal or other proceeding is being made in good faith and with
respect to which reserves or other appropriate provisions are being made in
accordance with GAAP; (iii) Liens securing the payment of Taxes which are not
yet subject to penalties for non-payment or which are being contested in good
faith and by appropriate proceedings, with respect to which reserves or other
appropriate provisions are being maintained in accordance with GAAP; (iv) Liens
in favor of issuers of surety bonds or letters of credit issued pursuant to the
request of and for the account of such Person in the ordinary course of its
business; (v) minor survey exceptions, encumbrances, easements or reservations
of, or rights of others for, rights of way, sewers, electric lines, telegraph
and telephone lines and other similar purposes, or zoning or other restrictions
as to the use of real properties or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties which were not
incurred in connection with Indebtedness or other extensions of credit and
which do not in the aggregate materially adversely affect the value of said
properties or materially impair their use in the operation of the business of
such Person; (vi) purchase money Liens upon or in any real or personal property
(including fixture and other equipment) acquired or held by the Issuer or any
of its Subsidiaries in the ordinary course of business to secure the purchase
price of such property or to secure Indebtedness permitted hereunder and
incurred solely for the purpose of financing the acquisition of such property,
or Liens existing on such property at the time of its acquisition (other than
any such Lien created in contemplation of such acquisition), provided that (A)
no such Lien shall extend to or cover any property other than the property
being acquired and (B) any such Indebtedness would be permitted to be incurred
under this Agreement; and (vii) any Liens created pursuant to any of the Pledge
Agreements.
"Permitted Refinancing Indebtedness" means, with respect to
any Person, any Indebtedness (denominated in Dollars of the United States of
America) of such Person issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of such Person; provided that: (1) the principal amount of such
Indebtedness does not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded or, in the case
of Indebtedness being refinanced that was issued with an original issue
discount, the accreted value thereof (as determined in accordance with GAAP) at
the time of such refinancing, renewal, replacement, defeasance or refunding
(plus the amount of reasonable expenses incurred in connection therewith); (2)
such Indebtedness has a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced,
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defeased or refunded; (3) such Indebtedness is subordinated in right of payment
to the Notes on terms at least as favorable to the holders of Notes as those,
if any, contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (4) the annual
interest rate with respect to such Indebtedness is less than or equal to, and
is payable no more frequently than, that of the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (5) such Indebtedness
is incurred by such Person who is an obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Permitted Reit Indebtedness" means any and all forms of
obligations of Reit accounted for as liabilities under GAAP, including without
limitation notes, bonds and Reverse Repurchase Agreements; provided that such
obligations are denominated in Dollars of the United States of America, have a
maturity of greater than thirty (30) days and either (x) bear a variable
interest rate that resets at least once every six months or (y) bear a fixed
rate of interest and have a maturity of not more than one year; provided,
further that either:
(a) (i) under the agreement pursuant to which any
such obligation is incurred, such obligation is secured primarily by
Permitted Reit Investments and the amount of such obligation may not
exceed the fair market value of the collateral as determined under
such agreement or
(ii) such obligations are REMIC regular interests
or other forms of structured securities (x) that, in any case, are
obligations with recourse limited solely to the collateral securing
such obligations and (y) as to which the fair market value of Reit's
equity interest in the entity issuing such security does not exceed
five percent (5%) of the fair market value of the collateral securing
such obligations on the date of incurrence of such obligations. For
purposes of this Agreement, such fair market value shall be determined
at any time for each type of asset by the parties (other than Reit) to
Reit's Reverse Repurchase Agreements or, if such determination is not
readily available, by such methods as shall be approved from time to
time by Reit's Unaffiliated Directors (as defined in the Management
Agreement).
(b) the obligations constitute one of the following:
(i) trade debt incurred in the ordinary course of
business, paid within thirty (30) days after the same has become due
and payable or which is being contested in good faith, provided
provision is made for the eventual payment thereof in the event it is
found that such contested trade debt is payable by Reit;
(ii) Indebtedness secured by Permitted Reit Liens;
(iii) Capitalized Lease Obligations in an aggregate
amount not to exceed at any one time outstanding $500,000; or
(iv) Indebtedness of Reit in an amount not
exceeding $1,000,000 at any time outstanding incurred solely for the
purchase or financing of fixed or capital assets acquired by Reit
after the Closing Date; provided, that (w) (1) such Indebtedness is
secured by purchase money Liens on such assets and (2) such Liens do
not extend to or cover any other assets of Reit or any of its
Subsidiaries, (x) such Liens secure only the obligation to pay the
purchase price of such asset and interest thereon, (y) such
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Indebtedness is incurred within nine (9) months after the acquisition
of such assets (with recourse only against such assets) and (z) the
fair market value (as determined in good faith by the board of
directors of the Issuer) of the assets on which such Liens are placed
is at least equal to the amount of the Indebtedness secured thereby
(the Indebtedness described in this clause (iv) being referenced
herein as "Purchase Money Indebtedness."
"Permitted Reit Investments" of a Person means Investments by
such Person that are Single-Family Mortgage Assets, Multifamily Mortgage
Assets, Commercial Mortgage Assets, Hedging Assets, Derivative Mortgage
Securities (to the extent purchased expressly for hedging purposes), Fixed Rate
Mortgage Assets, REMIC residual interests and Investments in Permitted Reit
Subsidiaries, in each case, relating to real property located in the United
States of America; provided, however, that any Multifamily Mortgage Assets,
Commercial Mortgage Assets, Derivative Mortgage Securities, Fixed Rate Mortgage
Assets and REMIC residual interests to be acquired by such Person, together
with any Investments to be made by such Person in Permitted Reit Subsidiaries,
will not constitute Permitted Reit Investments to the extent that the aggregate
fair market value thereof on any date, when aggregated with the aggregate fair
market value of all other Multifamily Mortgage Assets, Commercial Mortgage
Assets, Derivative Mortgage Securities, Fixed Rate Mortgage Assets, REMIC
residual interests and Investments in Permitted Reit Subsidiaries held by such
Person on such date, would exceed 5% of the total fair market value on such
date of the Mortgage Assets then held by such Person; provided further that,
notwithstanding the foregoing, any asset, the investment in which could cause
such investing Person to fail to operate or qualify as a REIT pursuant to
Section 856 et. seq. of the Code, will not constitute a Permitted Reit
Investment. For purposes of this Agreement, such fair market value shall be
determined at any time for each type of asset by the parties (other than Reit)
to Reit's Reverse Repurchase Agreements or, if such determination is not
readily available, by such methods as shall be approved from time to time by
Reit's Unaffiliated Directors (as defined in the Management Agreement).
"Permitted Reit Liens" means (i) Liens or charges for current
taxes, assessments or other governmental charges which are not delinquent or
which remain payable without penalty, or the validity of which are being
contested in good faith by appropriate proceedings upon stay of execution of
the enforcement thereof, provided Reit shall have set aside on its books and
shall maintain adequate reserves for the payment of same in conformity with
GAAP; (ii) Liens, deposits or pledges made to secure statutory obligations,
surety or appeal bond, or bonds for the release of attachments or for stay of
execution, or to secure the performance of bids, tenders, contracts (other than
for the payment of borrowed money), leases or for purposes of like general
nature in the ordinary course of Reit's business; and (iii) Liens securing
Purchase Money Indebtedness.
"Permitted Reit Subsidiaries" means Qualified REIT
Subsidiaries of Reit and Preferred Stock Subsidiaries of Reit, in each case,
Reit's interest in which could not cause Reit to fail to operate and qualify as
a REIT under Section 856 et seq. of the Code, the income of which is taxed
pursuant to Section 857 of the Code.
"Person" means an individual, partnership, corporation,
limited liability company, trust or unincorporated organization or a government
or agency or political subdivision thereof.
"Plan of Liquidation" means, with respect to any Person, a
plan that provides for, contemplates or the effectuation of which is preceded
or accompanied by (regardless of whether substantially contemporaneously, in
phases or otherwise) (i) the sale, lease, conveyance or other disposition of
all or substantially all of the assets of such Person otherwise than as an
entirety or
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substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and
all or substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
"Pledge Agreements" means the Issuer Pledge and the Holdings
Pledge.
"Preferred Interests" means the limited liability company
interests in Holdings that entitle the holder thereof to distributions pursuant
to Section 5.6(a) of the Limited Liability Company Agreement.
"Preferred Stock Subsidiary of Reit" means a corporation (a)
that has issued two and only two classes of Capital Stock, one of which being
common stock and the other of which being preferred stock; (b) all of the
preferred stock of which is non-voting, owned by Reit and at all times
represents at least 90% of the economic value of all the Capital Stock of such
corporation; (c) in which Reit owns no common stock; and (d) the ownership of
which could not cause Reit to fail to operate or qualify as a REIT under
Section 856 et seq. of the Code.
"Principal" of any Note includes premium, if any.
"Pro Forma" means the unaudited consolidated balance sheets of
the Issuer and its Subsidiaries as of the date hereof after giving effect to
the Documents and the transactions contemplated thereby. Notwithstanding any
other term contained in this Agreement, should the application of purchase or
other accounting principles permit the Issuer or Holdings, in accordance with
GAAP, to characterize certain expenditures as capital items rather than
expense, then such expenditures shall be treated as expense in the period such
expenditures were incurred or paid for all purposes under this Agreement unless
such expenditure was identified and capitalized in the Pro Forma.
"Productive Assets" means assets used in the same type of
business engaged in by the Issuer on the Closing Date.
"Projections" has the meaning given to such term in Section
3.4(c).
"Property" or "property" means any assets or property of any
kind or nature whatsoever, real, personal or mixed (including fixtures),
whether tangible or intangible, provided that the terms "Property" or
"property," when used with respect to any Person, shall not include securities
issued by such.
"Public Equity Offering" of any Person, means a sale by such
Person of Equity Interests of such Person in an underwritten (firm commitment)
public offering registered under the Securities Act.
"Purchase Money Indebtedness" has the meaning given to such
term in the definition of the term Permitted Reit Indebtedness.
"Purchasers" means the purchasers on the signature pages
hereto.
"Qualified Private Equity Placement" of any Person, means a
private placement of Equity Interest of such Person (not registered under the
Securities Act), pursuant to which such Person receives net proceeds of at
least $20,000,000.
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"Qualified Public Equity Offering" of any Person, means a
Public Equity Offering of such Person resulting in the listing of such Equity
Interest on a nationally recognized stock exchange or the NASDAQ National
Market System, pursuant to which such Person receives net proceeds of at least
$20,000,000.
"Qualified REIT Subsidiary of Reit" means any corporation 100%
of the Capital Stock of which is held by Reit at all times during the existence
of such corporation (within the meaning of Section 856 (i)(2) of the Code).
"Redemption Date" means, when used with respect to any Note to
be redeemed, the date fixed for such redemption pursuant to this Agreement and
the Notes.
"Redemption Price" means, when used with respect to any Note
to be redeemed, the price fixed for such redemption pursuant to this Agreement
and the Notes.
"Registration Rights Agreement" has the meaning given to such
term in Section 1.1.
"Reit" means American Residential Investment Trust, Inc., a
Maryland corporation, and any successor thereto.
"Reit Common Stock" means the common stock par value $0.01 per
share, of Reit.
"Reit Leverage Ratio" means, on any date, the ratio of (a) the
total consolidated Indebtedness of Reit and its Subsidiaries on such date
(other than any Permitted Reit Indebtedness described in clause (a)(ii) of the
definition of Permitted Reit Indebtedness) to (b) the fair market value (as
determined in good faith by the board of directors of Reit) of all the assets
of Reit on such date (other than any such assets upon which there is a Lien
that secures any such Permitted Reit Indebtedness).
"Reit Shares" means the 2,000,000 shares of Reit Common Stock
owned on the Closing Date by Holdings.
"Related Transactions" means the execution and delivery of the
Documents, the funding of the Notes on the Closing Date and the payment of all
fees, costs and expenses associated with all of the foregoing.
"REMIC" means Real Estate Mortgage Investment Conduit.
"Required Escrow Deposit" has the meaning given to such term
in Section 5.33.
"Restricted Payments" has the meaning given to such term in
Section 5.4.
"Reverse Repurchase Agreement" means a borrowing device
evidenced by an agreement to sell securities or other assets to a third party
and a simultaneous agreement to repurchase them at a specified future date and
price, the price difference constituting the interest on the borrowing.
"Rule 144" means Rule 144 as promulgated by the SEC under the
Securities Act, as amended from time to time, and any successor rule or
regulation thereto.
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"Rule 144A" means Rule 144A as promulgated by the SEC under
the Securities Act, as amended from time to time, and any successor rule or
regulation thereto.
"SEC" means the Securities and Exchange Commission and any
successor thereto.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and any successor statute or law thereto.
"Security" or "Securities" has the meaning given to such term
in Section 1.1.
"Series A Preferred Stock" means the preferred stock of the
Issuer designated as Series A Non-Voting Cumulative Preferred Stock, par value
$.0001 per share, pursuant to the Issuer's Amended and Restated Certificate of
Incorporation, as in effect on the Closing Date.
"Series A Purchase Agreement" means the Series A Preferred
Stock Purchase Agreement dated as of February 11, 1997 by and among the Issuer
and the purchasers named in Exhibit A thereto.
"Series A Purchasers" means the purchasers of Series A
Preferred Stock named in Exhibit A to the Series A Purchase Agreement.
"Series A Purchasers Warrant Agreement" means the Warrant
Agreement dated as of February 11, 1997 by and among the Issuer and the
purchasers of Series A Preferred Stock listed on the signature pages thereto.
"Series A Warrants" has the meaning given to such term in the
Series A Purchasers Warrant Agreement.
"Series B Preferred Stock" means the preferred stock of the
Issuer designated as Series B Non-Voting Cumulative Preferred Stock, par value
$.0001 per share, pursuant to the Issuer's Amended and Restated Certificate of
Incorporation, as in effect on the Closing Date.
"Single-Family Mortgage Assets" means Single-Family Mortgage
Loans and Single-Family Mortgage Securities.
"Single-Family Mortgage Loans" means adjustable rate Mortgage
Loans secured primarily by single-family (one-to four-units) residential real
property.
"Single-Family Mortgage Securities" means adjustable rate
mortgage securities representing an interest in, or secured primarily by,
Single-Family Mortgage Loans.
"Solvent" means, with respect to any Person on a particular
date, that on such date, (a) the fair saleable value of the assets of such
Person exceeds its probable liability on its debts as they become absolute and
mature; (b) all of such Person's assets, at a fair valuation, exceed the sum of
such Person's debts; (c) such Person is able to pay its debts or liabilities as
such debts and liabilities mature; and (d) such Person is not engaged in a
business or transaction, and is not about to engage in a business or
transaction, for which such Person's assets would constitute an unreasonably
small capital.
"Stockholders Agreement" has the meaning given to such term in
Section 1.1.
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"Subsidiary" means, with respect to any Person, (i) a
corporation a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is, at the date of determination, directly or
indirectly, owned by such Person, by one or more Subsidiaries of such Person or
by such Person and one or more Subsidiaries of such Person or (ii) a
partnership in which such Person or a Subsidiary of such Person is, at the date
of determination, a general or limited partner of such partnership, but, in the
case of a limited partner, only if such Person or its Subsidiary is entitled to
receive more than 50% of the assets of such partnership upon its dissolution or
(iii) any limited liability company or any other Person (other than a
corporation or a partnership) in which such Person, a Subsidiary of such Person
or such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination, has (a) at least a majority ownership
interest or (b) the power to elect or direct the election of a majority of the
directors or other governing body of such Person. Notwithstanding any
provision hereof to the contrary, Holdings and Reit and their Subsidiaries
shall be considered to be Subsidiaries of the Issuer at all times.
"Subsidiary Guaranty" means the irrevocable and unconditional
guaranty made by Holdings and any other Guarantor in Section 10.
"Supplemental Data" has the meaning given to such term in
Section 3.4(c).
"Taxes" means all Federal, state, local and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"Tax Returns" means all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns (and any amendments to any of the foregoing) relating to Taxes.
"TCW Group Member" means any Affiliate of Trust Company of the
West or any Holder for whom Trust Company of the West or any Affiliate of Trust
Company of the West acts as an Account Manager.
"Trade Payables" means, with respect to any Person, accounts
payable and other similar accrued current liabilities in respect of obligations
or indebtedness to trade creditors created, assumed or guaranteed by such
Person or any of its Subsidiaries in the ordinary course of business in
connection with the obtaining of property or services.
"U.S. Government Obligations" means direct obligations of, or
obligations guaranteed as to timely payment by, the United States of America
for the payment (with respect to interest as well as principal) of which
obligation or guarantee the fill faith and credit of the United States of
America is pledged.
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Voting Securities" means any class of Equity Interests of a
Person pursuant to which the holders thereof have, at the time of
determination, the general voting power under ordinary circumstances to vote
for the election of directors, managers, trustees or general partners of such
Person (irrespective of regardless of whether at the time any other class or
classes will
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have or might have voting power by reason of the happening of any contingency),
and shall include, without limitation, all the limited liability company
interests in Holdings.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking find, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" means, with respect to any Person,
at any time, a Subsidiary of such Person, all of the Equity Interests of which
(except director's qualifying shares) are at the time owned directly or
indirectly by such Person.
9.2 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words
in the plural include the singular;
(d) provisions apply to successive events and
transactions;
(e) "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision; and
(e) any reference to a "Section," "Annex" or "Schedule"
refers to a Section of, an Annex to, or a Schedule to this Agreement,
respectively.
SECTION SECTION 10. GUARANTY.
10.1 Guaranty.
(a) In consideration of good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each of the Guarantors hereby irrevocably and unconditionally
guarantees (each a "Subsidiary Guaranty") to each Holder of a Note,
irrespective of the validity and enforceability of this Agreement, the Notes or
the obligations of the Issuer under this Agreement or the Notes, that: (w) the
principal and premium (if any) of and interest on the Notes will be paid in
full when due, whether at the maturity or interest payment date, by
acceleration, call for redemption, upon a Change of Control or otherwise; (x)
all other obligations of the Issuer to the Holders under this Agreement or the
Notes will be promptly paid in full or performed, all in accordance with the
terms of this Agreement and the Notes; and (y) in case of any extension of time
of payment or renewal of any Notes or any of such other obligations, they will
be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration, call for
redemption, upon a Change of Control or
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otherwise. Failing payment when due of any amount so guaranteed for whatever
reason, each Guarantor shall be obligated to pay the same before failure so to
pay becomes an Event of Default.
(b) Each of the Guarantors
hereby agrees that its obligations with regard to this Subsidiary Guaranty
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Agreement, the absence of any action to
enforce the same, any delays in obtaining or realizing upon or failures to
obtain or realize upon collateral, the recovery of any judgment against the
Issuer, any action to enforce the same or any other circumstances that might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each of the Guarantors hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy of the
Issuer, any right to require a proceeding first against the Issuer or right to
require the prior disposition of the assets of the Issuer to meet its
obligations, protest, notice and all demands whatsoever and covenants that this
Subsidiary Guaranty will not be discharged except by complete performance of
the obligations contained in the Notes and this Agreement.
(c) If any Holder is required by
any court or otherwise to return to either the Issuer or any Guarantor, or any
custodian, trustee, or similar official acting in relation to either the Issuer
or such Guarantor, any amount paid by either the Issuer or such Guarantor to or
such Holder, the Subsidiary Guaranty, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each of the Guarantors agrees
that it will not be entitled to any right of subrogation in relation to the
Holders in respect of any obligations guaranteed hereby until payment in full
of all obligations guaranteed hereby. Each Guarantor further agrees that, as
between such Guarantor, on the one hand, and the Holders, on the other hand,
(i) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Section 7.2 for the purposes of this Subsidiary Guaranty,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration as to the Issuer of the obligations guaranteed hereby, and (ii) in
the event of any declaration of acceleration of those obligations as provided
in Section 7.2, those obligations (whether or not due and payable) will
forthwith become due and payable by each of the Guarantors for the purpose of
this Subsidiary Guaranty.
(d) It is the intention of each
Guarantor and the Issuer that the obligations of each Guarantor hereunder shall
be in, but not in excess of, the maximum amount permitted by applicable law.
Accordingly, if the obligations in respect of the Subsidiary Guaranty would be
annulled, avoided or subordinated to the creditors of any Guarantor by a court
of competent jurisdiction in a proceeding actually pending before such court as
a result of a determination both that such Subsidiary Guaranty was made without
fair consideration and that, at the time thereof, immediately after giving
effect thereto, or at the time that any demand is made thereupon such Guarantor
was insolvent or unable to pay its debts as they mature or left with an
unreasonably small capital, then the obligations of such Guarantor under such
Subsidiary Guaranty shall be reduced by such an amount, if any, that would
result in the avoidance of such annulment, avoidance or subordination;
provided, however, that any reduction pursuant to this paragraph shall be made
in the smallest amount as is necessary to reach such result. For purposes of
this paragraph, "fair consideration," "insolvency," "unable to pay its debts as
they mature," "unreasonably small capital" and the effective times of
reductions, if any, required by this paragraph shall be determined in
accordance with applicable law.
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10.2 Execution and Delivery of each Subsidiary Guaranty.
To evidence its Subsidiary Guaranty set forth in Section 11.1,
each Guarantor agrees that a notation of such Subsidiary Guaranty substantially
in the form annexed hereto as Annex A-1 shall be endorsed on each Note and that
this Agreement shall be executed on behalf of such Guarantor by two Officers or
by one Officer with an attestation by another Officer, by manual or facsimile
signature.
Each Guarantor agrees that its Subsidiary Guaranty set forth
in Section 11.1 shall remain in full force and effect and apply to all the
Notes notwithstanding any failure to endorse on each Note a notation of such
Guaranty. If an Officer whose signature is on a Note no longer holds that
office at the time the Note on which a Subsidiary Guaranty is endorsed and
issued, the Subsidiary Guaranty shall be valid nevertheless.
The delivery of any Note by the Issuer shall constitute due
delivery of the Subsidiary Guaranty set forth in this Agreement on behalf of
each Guarantor.
10.3 Future Subsidiary Guarantors.
The Issuer shall cause each person that is or becomes a
Subsidiary of the Issuer after the Closing Date (other than Reit) to execute a
Subsidiary Guaranty in the form of Annex A-1 hereto and shall cause such
Subsidiary to execute an amendment to this Agreement for the purpose of adding
such Subsidiary as a Guarantor hereunder.
10.4 Certain Bankruptcy Events.
Each Guarantor hereby covenants and agrees that in the event
of the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Issuer, such Guarantor shall not file (or join in any filing of), or
otherwise seek to participate in the filing of, any motion or request seeking
to stay or to prohibit (even temporarily) execution on the Subsidiary Guaranty
and hereby waives and agrees not to take the benefit of any such stay of
execution, whether under Section 362 or 105 of the United States Bankruptcy
Code or otherwise.
SECTION SECTION 11. MISCELLANEOUS.
11.1 Notices.
All notices and other communications provided for or permitted
hereunder shall be made by hand-delivery, first-class mail, telex, telecopier,
or overnight air courier guaranteeing next day delivery:
(a) if to any Purchaser or Holder, at the address or
telecopy number set forth on the signature pages hereto (or, in the case of a
Holder other than a Purchaser, at the address or telecopy number provided in
writing by such Holder to the Issuer), with a copy to Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇; and
(b) if to any of the Companies, to such party, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇,
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ De Leeuw & Co., ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇,
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Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇, and to ▇▇▇▇▇▇, ▇▇▇▇
& ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back if telexed; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery. The parties may change
the addresses to which notices are to be given by giving five days' prior
notice of such change in accordance herewith.
11.2 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
11.3 Counterparts.
This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
11.4 Headings.
The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.5 Governing Law; Submission to Jurisdiction.
THIS AGREEMENT, THE NOTES AND ALL ISSUES HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF
LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, EACH OF THE
ISSUER, HOLDINGS, REIT AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND THE NOTES, AND IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUER, HOLDINGS, REIT AND
EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO
SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEEDING
AGAINST THE ISSUER, HOLDINGS, REIT OR ANY GUARANTOR IN ANY OTHER JURISDICTION.
79
85
11.6 Entire Agreement.
This Agreement, together with the Securities and the other
Documents (and any agreement between the Issuer and any Holder relating to
transfers), is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. This Agreement, together with the Securities and the other
Documents supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
11.7 Severability.
In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that each Purchaser's rights and privileges shall be enforceable
to the fullest extent permitted by law.
11.8 Further Assurances.
The Issuer shall, and shall cause each of its Subsidiaries to,
at its cost and expense, upon request of any Purchaser or Holder, duly execute
and deliver, or cause to be duly executed and delivered, to such Purchaser or
Holder such further instruments and do or cause to be done such further acts as
may be necessary or proper in the reasonable opinion of such Purchaser or
Holder to carry out more effectually the provisions and purposes of this
Agreement and the other Documents.
11.9 Disclosure of Financial Information.
Each Holder is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business,
operations or financial condition of the Issuer and each of its Subsidiaries
which may be furnished to it hereunder or otherwise, to any other Holder, any
court, Governmental Body claiming to have jurisdiction over such Holder, to the
National Association of Insurance Commissioners or similar organizations, as
may be required or appropriate in response to any summons or subpoena in
connection with any litigation, to the extent necessary to comply with any law,
order, regulation or ruling applicable to such Holder, to any rating agency, in
order to protect its investment hereunder, or to any Person which shall, or
shall have any right or obligation to, succeed to all or any part of such
Holder's interest in any of the Securities and this Agreement or to any actual
or prospective purchaser or assignee thereof.
[Signature pages follow]
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86
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties set forth below as of the date first written above.
HOME ASSET MANAGEMENT CORP.
By: _____________________________________
▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇
President
MDC REIT HOLDINGS, LLC
By: HOME ASSET MANAGEMENT CORP.,
its Managing Member
By: _____________________________________
▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇
President
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
By: _____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Chairman of the Board and
Chief Executive Officer
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87
TCW/CRESCENT MEZZANINE PARTNERS, L.P.
TCW/CRESCENT MEZZANINE TRUST
TCW/CRESCENT MEZZANINE INVESTMENT PARTNERS, L.P.
By: TCW/CRESCENT MEZZANINE, L.L.C.,
its general partner or managing owner
By: ____________________________________________
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Managing Director
By: ____________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President
Principal amount of Notes to be purchased:
------------------------------------------
$16,520,114 by TCW/Crescent Mezzanine Partners, L.P.
$5,028,462 by TCW/Crescent Mezzanine Trust
$451,424 by TCW/Crescent Mezzanine Investment Partners, L.P.
Number of Crescent Warrants and number of Contingent Warrants to be purchased:
------------------------------------------------------------------------------
440,537 Crescent Warrants and 11,332 Contingent Warrants by TCW/Crescent
Mezzanine Partners, L.P.
134,092 Crescent Warrants and 3,449 Contingent Warrants by TCW/Crescent
Mezzanine Trust
12,038 Crescent Warrants and 310 Contingent Warrants by TCW/Crescent Mezzanine
Investment Partners, L.P.
Aggregate purchase price of Notes, Crescent Warrants and Contingent Warrants to
be purchased: $21,999,120
Fee: 2.0% of such aggregate purchase price, payable to TCW/Crescent Mezzanine,
LLC by wire transfer to Bank of America, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ABA No.: ▇▇▇-▇▇▇-▇▇▇, Account Name: TCW/Crescent Mezzanine,
LLC, Account No.: ▇▇▇▇-▇-▇▇▇▇▇
Initial Bank Account and Wire Instructions: Address for Notices:
------------------------------------------ -------------------
State Street Bank and Trust (Boston) TCW/Crescent Mezzanine, LLC
Corporate Trust Department 11100 Santa ▇▇▇▇▇▇ Boulevard
Two International Place Suite 2000
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA: ▇▇▇▇▇▇▇▇▇ Attn: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
DDA: ▇▇▇▇-▇▇▇-▇ Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Account No. Ref.:
with a copy to:
EW0620 TCW/Crescent Mezzanine Partners,
L.P. State Street Bank and Trust Company
EW0621 TCW/Crescent Mezzanine Trust Securities Processing Department
EW0622 TCW/Crescent Mezzanine Investment P.O. Box 2136
Partners, L.P. ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇ Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
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88
CRESCENT/MACH I PARTNERS, L.P.
By: TCW ASSET MANAGEMENT COMPANY,
as investment manager and attorney-in-fact
By: ___________________________________________
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Managing Director
By: ___________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President
Principal amount of Notes to be purchased: $2,500,000
Number of Crescent Warrants to be purchased: 66,667
Number of Contingent Warrants to be purchased: 1,715
Aggregate purchase price of Notes, Crescent Warrants and Contingent Warrants to
be purchased: $2,499,900
Fee: 2.0% of such aggregate purchase price, payable to Crescent/Mach I
Partners, L.P. by wire transfer to the bank account described below.
Initial Bank Account and Wire Instructions:
-------------------------------------------
State Street Bank and Trust (Boston)
Corporate Trust Department
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA: ▇▇▇▇▇▇▇▇▇
Account No Ref.: ▇▇▇▇▇▇▇▇
Ref: Crescent/MACH I
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Address for Notices:
--------------------
Trust Company of the West
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Trust Company of the West
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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89
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW INVESTMENT MANAGEMENT
COMPANY, its investment advisor
By: ____________________________________
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Managing Director
By: ____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President
Principal amount of Notes to be purchased: $500,000
Number of Crescent Warrants to be purchased: 13,333
Number of Contingent Warrants to be purchased: 343
Aggregate purchase price of Notes, Crescent Warrants and Contingent Warrants to
be purchased: $499,980
Fee: 2.0% of such aggregate purchase price, payable to TCW Shared Opportunity
Fund II, L.P. by wire transfer to the bank account described below.
Initial Bank Account and Wire Instructions:
-------------------------------------------
Citibank/NYC/Bear ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇
ABA: ▇▇▇▇▇▇▇▇▇
A/C: Bear ▇▇▇▇▇▇▇/0925-3186
Account No. Ref.: 102-02730
FBO: TCW Shared Opportunity Fund II, L.P.
Address for Notices:
--------------------
Trust Company of the West
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
84
90
ANNEX A-1
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM UNDER THE ACT,
THE RULES AND REGULATIONS THEREUNDER AND APPLICABLE STATE LAWS. THE TRANSFER
OF THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECURITIES PURCHASE
AGREEMENT DATED AS OF FEBRUARY 11, 1997 BY AND AMONG HOME ASSET MANAGEMENT
CORP., MDC REIT HOLDINGS, LLC, AMERICAN RESIDENTIAL INVESTMENT TRUST, INC. AND
THE PURCHASERS PARTY THERETO.
12% Senior Secured Note due February 11, 2002
No.____ $_________
HOME ASSET MANAGEMENT CORP.
promises to pay to [NAME OF PURCHASER] or registered assigns, the principal sum
of __________ Dollars ($_________) on February 11, 2002 plus accrued and unpaid
interest as provided below.
Interest Payment Dates: January 31, April 30, July 31 and October 31 of each
year; provided, that the first Interest Payment Date shall be July 31, 1997.
Record Dates: 15th day of each calendar month during which each Interest
Payment Date occurs.
Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement (as defined below) unless otherwise indicated.
1. INTEREST. Home Asset Management Corp., a Delaware corporation
(the "Issuer"), promises to pay interest on the principal amount of this Note
at 12% per annum from February 11, 1997 until maturity. The Issuer will pay
interest quarterly on January 31, April 30, July 31 and October 31 of each
year, or if any such day is not a Business Day, on the next succeeding Business
Day (each an "Interest Payment Date"). Interest on the Notes will accrue from
the most recent date on which interest has been paid or, if no interest has
been paid, from the date of issuance; provided, that the first Interest Payment
Date shall be July 31, 1997. The Issuer shall pay interest (including post-
petition interest in any proceeding under Bankruptcy Law) on all due and unpaid
amounts outstanding under the Notes (including overdue installments of
principal, premium, if any, or interest), from time to time on demand at a rate
equal to 14% per annum, compounded quarterly, to the extent lawful. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Issuer will pay interest on the Notes
to the Persons who are registered Holders of Notes at the close of business on
the January 15, April 15, July 15, or October 15, next preceding the Interest
Payment Date, even if such Notes are cancelled after such record date and on or
before such Interest Payment Date. The Notes will be payable both as to
principal and interest by Federal funds wire transfer of U.S. Legal Tender to
each Holder's account in any bank in the United States of America as may be
designated and specified in writing by such Holder at least two Business Days
prior thereto.
3. SECURITIES PURCHASE AGREEMENT. The Issuer issued the Notes
under the Securities Purchase Agreement dated as of February 11, 1997 (the
"Agreement") by and among the Issuer, MDC Reit
A-1-1
91
Holdings, LLC, a Delaware limited liability company ("Holdings"), American
Residential Investment Trust, Inc., a Maryland corporation ("Reit"), and the
purchasers party thereto (the "Purchasers"). The Notes are subject to, and
qualified by, all such terms, certain of which are summarized herein, and
Holders of Notes are referred to the Agreement for a statement of such terms.
The Notes are general senior obligations of the Issuer. The Notes are limited
to $25,000,000 in aggregate principal amount.
4. REDEMPTION.
(a) The Issuer may redeem all or any of the Notes, in whole or in
part, at any time, at a redemption price equal to the percentages of the
principal amount thereof set forth below, plus accrued and unpaid interest to
the redemption date, if redeemed during the 12-month period beginning February
11 of the years indicated below.
Year Redemption Prices
---- -----------------
1997 112%
1998 109%
1999 106%
2000 103%
2001 100%
(b) On each Mandatory Redemption Date, the Issuer shall redeem the
Applicable Amount of Notes, in accordance with the terms and conditions
provided herein and in the Agreement. The redemption price for Notes that the
Issuer is required to redeem pursuant to the preceding sentence shall be equal
to 100% of the principal amount thereof plus accrued and unpaid interest
thereon to such Mandatory Redemption Date.
(c) Within two Business Days after each date on which the Issuer
or any of its Subsidiaries (other than Reit) consummates a Public Equity
Offering, the Issuer shall redeem the maximum principal amount of the Notes
that may be redeemed out of an amount equal to the aggregate net proceeds of
such Public Equity Offering, in accordance with the terms and conditions
provided herein and in the Agreement. The redemption price for Notes that the
Issuer is required to redeem pursuant to the preceding sentence shall be equal
to the applicable percentage of the principal amount thereof set forth in
Section 4(a) above, plus accrued and unpaid interest to the redemption date.
(d) Following the occurrence of an Asset Sale, the Issuer will be
required to apply the Excess Net Proceeds therefrom to the redemption of Notes
upon the terms set forth in the Agreement. The redemption price for Notes that
the Issuer is required to redeem pursuant to this Section 4(d) shall be equal
to 100% of the principal amount thereof plus accrued and unpaid interest
thereon to the redemption date.
5. OFFERS TO REPURCHASE. Following the occurrence of any Change
of Control, the Issuer will be required to offer to purchase all outstanding
Notes upon the terms set forth in the Agreement.
6. NOTICE OF REDEMPTION. Notice of redemption pursuant to
Section 4 hereof shall be mailed at least thirty (30) days (in the case of
redemption pursuant to Section 4(a) hereof) or ten (10) days (in the case of
redemption pursuant to Section 4(b) hereof) or two (2) days (in the case of
redemption pursuant to Section 4(c) hereof) but, in any such case, not more
than sixty (60) days before a Redemption Date, by first class mail to each
Holder whose Notes are to be redeemed at such Holder's registered address.
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. If, on or prior to the Redemption Date, the Issuer deposits in a
segregated account or otherwise sets aside funds sufficient to pay the
Redemption Price of the Notes called for redemption, then, on and after the
Redemption Date, interest ceases to accrue on Notes or portions thereof called
for redemption, unless the Issuer defaults in paying the redemption price.
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92
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are without
coupons in the principal amount of $1,000 or integral multiples of $1,000 in
excess thereof. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Agreement. The Issuer may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents, and
the Issuer may require a Holder to pay any taxes and fees required by law or
permitted by the Agreement. The Issuer need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Issuer
need not exchange or register the transfer of any Notes for a period of fifteen
(15) days before a selection of Notes to be redeemed or during the period
between a record date and the corresponding Interest Payment Date.
8. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
9. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Agreement and the Notes may be amended or supplemented and any existing Default
under, or compliance with any provision of, the Agreement may be waived with
the written consent of the Majority Holders.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of the Agreement (and the obligation of the
Issuer to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of
record of any Notes with respect to which such consent is required or sought as
of a date identified by the Issuer in a notice furnished to Holders in
accordance with the terms of this Agreement.
10. DEFAULTS AND REMEDIES. An Event of Default is, in general:
default in the payment of the principal or premium, if any, of any Note;
default in the payment of interest on any Note for a period of five days;
failure by the Issuer for 30 days after notice to it to comply with provisions
of the Agreement or the Notes or, in the case of the failure to comply with
certain specified covenants, without such notice; if any of the representations
or warranties of the Issuer or Holdings made in or in connection with the
Agreement (including those representations and warranties incorporated by
reference therein) are untrue in any respect, the result of which could
reasonably be expected to have a Material Adverse Effect; if the Issuer
transfers or disposes of any Equity Interests of Holdings or if Holdings
transfers or disposes of any Equity Interests in Reit; certain defaults under
and/or acceleration prior to maturity of certain other indebtedness of the
Issuer; certain final judgments which remain undischarged after notice; or
certain events of bankruptcy or insolvency; certain events relating to
termination of or withdrawals from employee benefit plans; except, with respect
to the Letter of Credit Documents, as expressly permitted in Section 5.34 of
the Agreement, if the Subsidiary Guaranty, the Holdings Pledge, the Issuer
Pledge, the Limited Liability Company Agreement or any of the Letter of Credit
Documents shall be amended or shall for any reason cease to be, or be asserted
in writing by any responsible officer of the Issuer or any of its Subsidiaries
(or, in the case of any of the Letter of Credit Documents, any party thereto)
not to be, in full force and effect or enforceable in accordance with its terms
or shall cease to give, directly or indirectly, the Collateral Agent or the
Holders the benefits, liens, rights, powers and privileges purported to be
created thereby, including, without limitation, a perfected security interest
in the Pledged Stock (as defined in the Holdings Pledge) and a perfected
security interest in the Pledged Collateral (as defined in the Issuer Pledge)
in accordance with the terms thereof; if any issuer of a Letter of Credit shall
fail to pay any of its obligations under any of the Letter of Credit Documents;
if the Management Agreement shall be amended, modified or supplemented in any
material respect or shall be terminated or shall expire or not be renewed or
shall for any reason cease to be, or be asserted in writing by any responsible
officer of the Issuer or any of its Subsidiaries not to be, in full force and
effect or enforceable in accordance with its terms, without the written consent
of the Majority Holders; if the terms of the Preferred Interests shall be
amended, modified or supplemented, without the written consent of the Majority
Holders; if there shall occur a default by Reit with respect to any of its
payment obligations under the Management Agreement; if Reit shall at any time
fail to operate, or otherwise fail to be qualified, as a REIT under Section 856
et seq. of the Code or the Issuer shall be unable, at any time, to provide the
Holders with the opinion of a nationally recognized law firm required pursuant
to the provisions of Section 5.17(c) of the Agreement; and if Reit shall fail
to pay cash dividends
A-1-3
93
on the Reit Common Stock during any two consecutive fiscal quarters beginning
on or after October 1, 1997. If an Event of Default occurs and is continuing,
the Majority Holders may declare all the Notes to be due and payable
immediately. The Issuer is obligated to furnish a monthly compliance
certificate to the Holders.
11. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder of the Issuer or Holdings, as such, shall not have any liability
for any obligations of the Issuer under the Notes or the Agreement or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
12. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
14. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATION LAW. TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, EACH OF THE ISSUER, HOLDINGS, REIT AND
EACH GUARANTOR HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK
STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN
RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE NOTES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. EACH OF THE ISSUER, HOLDINGS, REIT AND EACH GUARANTOR IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY
HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEEDING AGAINST THE ISSUER,
HOLDINGS, REIT OR ANY GUARANTOR IN ANY OTHER JURISDICTION.
The Issuer will furnish to any Holder upon written request and without
charge a copy of the Agreement. Requests may be made to Home Asset Management
Corp., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy No.:
(▇▇▇) ▇▇▇-▇▇▇▇, Attention: President
HOME ASSET MANAGEMENT CORP.
By: ___________________________________
Name: _________________________________
Title: _________________________________
Date: February 11, 1997
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94
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to __________________________________________________________
--------------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or tax I.D. no.)
--------------------------------------------------------------------------------
------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Issuer. The agent may substitute
another to act for him.
Date: _______________________
Your Signature: ________________________
(Sign exactly as your
name appears on the face
of this Note)
Signature Guarantee
A-1-5
95
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer
pursuant to Section 5.11 of the Agreement (Change of Control Offer), state the
amount you elect to have purchased: $_____________.
Date:______________________
Your Signature:_________________________
(Sign exactly as your
name appears on the Note)
Tax Identification No.:______________
Signature Guarantee
By:_______________________________________________________________________
(Bank or trust company having an office or correspondent in the United
States of America or a broker or dealer which is a member of a
registered securities exchange or the National Association of
Securities Dealers, Inc.)
A-1-6
96
ANNEX A-2
FORM OF GUARANTY
This Guaranty is issued pursuant to the Securities Purchase
Agreement dated as of February 11, 1997 (the "Agreement") by and among the
Issuer, MDC Reit Holdings, LLC, a Delaware limited liability company
("Holdings"), American Residential Investment Trust, Inc., a Maryland
corporation ("Reit"), and the purchasers party thereto. For value received,
[Name of Subsidiary] hereby unconditionally guarantees to the Holder of the
Note upon which this Guaranty is endorsed (a) the due and punctual payment, as
set forth in the Agreement pursuant to which such Note and this Guaranty were
issued, of the principal of, premium (if any) and interest on such Note when
and as the same shall become due and payable for any reason according to the
terms of such Note and Section 10 of the Agreement, and (b) that all other
obligations of the Issuer under the Agreement or the Notes will be promptly
paid in full or performed in accordance with the terms of the Agreement and the
Notes.
[NAME OF SUBSIDIARY]
By: ___________________________________
Name: _________________________________
Title: _________________________________
Attest: _________________________
▇-▇-▇
▇▇
▇▇▇▇▇ ▇-▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AGREEMENT
B-1-1
98
ANNEX B-2
CONTINGENT WARRANT AGREEMENT
B-2-1
99
ANNEX C
REGISTRATION RIGHTS AGREEMENT
C-1
100
ANNEX D
STOCKHOLDERS AGREEMENT
D-1
101
ANNEX E
OPINION OF COUNSEL TO THE ISSUER AND HOLDING
E-1
102
ANNEX F
OPINION OF COUNSEL TO PURCHASERS
F-1
103
ANNEX G
ESCROW AGREEMENT
G-1
▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇-▇
105
ANNEX I
ISSUER PLEDGE
I-1
106
ANNEX J
LETTER OF CREDIT
J-1
107
ANNEX K
LETTER OF CREDIT CONTRIBUTION AGREEMENT
K-1
108
ANNEX L
MANAGEMENT AGREEMENT
L-1