EXHIBIT F
AMENDED AND RESTATED PROMISSORY NOTE
$17,955,354 May 28, 1996
This Amended and Restated Promissory Note (this "Note") is made and
delivered as of May 28, 1996, to Security Capital Atlantic Incorporated, a
Maryland corporation ("Lender"), by Atlantic Homestead Village Limited
Partnership, a Delaware limited partnership ("Borrower"), under the following
circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the "Partnership
Loan") to Borrower, to fund, among other matters, acquisition and construction
costs and expenses incurred by the Partnership in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith Borrower delivered to Lender that certain promissory note (the "Prior
Partnership Note") dated January 24, 1996, in the original principal amount of
$19,213,476, and various deeds to secure debt, deeds of trust and mortgages (the
"Prior Partnership Security Documents"), to secure payment of the Prior
Corporate Note (as defined below) and the Prior Partnership Note. (The Prior
Partnership Note, the Prior Partnership Security Documents and all other
instruments delivered by the Partnership in connection therewith to secure the
Prior Partnership Note and the Prior Corporate Note are herein called the "Prior
Partnership Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to Atlantic Homestead Village Partnership Incorporated (the "Corporate
Borrower"), to fund, among other matters, acquisition and construction costs and
expenses incurred by the Corporate Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Corporate Borrower delivered to Lender that certain promissory
note (the "Prior Corporate Note") dated January 24, 1996, in the original
principal amount of $62,031,430, and various deeds to secure debt, deeds of
trust and mortgages (the "Prior Corporate Security Documents"), to secure
payment of the Prior Corporate Note and the Prior Partnership Note. (The Prior
Corporate Note, the Prior Corporate Security Documents and all other instruments
delivered by the Corporate Borrower in connection therewith to secure the Prior
Corporate Note and the Prior Partnership Note are herein called the "Prior
Corporate Loan Documents"; the Prior Corporate Loan Documents and Prior
Partnership Loan Documents are collectively referred to herein as the "Prior
Loan Documents".)
C. Borrower, the Corporate Borrower and Lender desire to continue the
funding provided for under the Prior Loan Documents, to provide funds to
Borrower and the Corporate Borrower for the costs incurred in connection with
the acquisition and development of Homestead Village projects. In furtherance of
the foregoing, Borrower, the Corporate Borrower and Lender have agreed that (i)
the maximum amount of the Corporate Loan shall be $90,765,665 (the "Maximum
Corporate Loan Amount"); (ii) the Corporate Borrower's repayment obligation for
funds advanced in respect of the Corporate Loan, as evidenced by that certain
Consolidated Amended and Restated Promissory Note, of even date herewith (the
"Corporate Note"), shall be adjusted by a discount factor of .882196112 (the
"Discount Factor"), thus providing for the maximum face amount of the Corporate
Note of $80,073,117 (i.e., the Maximum Corporate Loan Amount as adjusted by the
Discount Factor); (iii) the maximum amount of the Partnership Loan shall be
$20,353,019 (the "Maximum Partnership Loan Amount"); (ii) the Partnership's
repayment obligation for funds advanced in respect of the Partnership Loan shall
be adjusted by the Discount Factor, thus providing for the maximum face amount
this Note of $17,955,354 (i.e., the Maximum Partnership Loan Amount as adjusted
by the Discount Factor); and (iv) in connection therewith, the Prior Loan
Documents shall be amended and restated in conformity with the foregoing and as
otherwise agreed by the parties. (The Corporate Loan and the Partnership Loan
are herein collectively called the "Loans". The amended and restated Prior Loan
Documents being executed and delivered contemporaneously herewith, and any and
all other agreements or instruments now or hereafter executed by Borrower, the
Corporate Borrower or any other person or entity to evidence, or in connection
with, or as security for the payment of this Note and/or the Corporate Note are
herein collectively, with such notes, referred to as the "Loan Documents".)
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree to amend and restate the Prior
Partnership Note as follows:
1. Promise to Pay.
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) SEVENTEEN MILLION NINE HUNDRED FIFTY FIVE
THOUSAND THREE HUNDRED FIFTY FOUR DOLLARS ($17,955,354) and (B) the aggregate
unpaid principal amount of all advances made by Lender to Borrower in respect of
the Partnership Loan, multiplied by the Discount Factor (the amount so
determined being herein called the "Adjusted Principal Amount"), together with
interest on the Adjusted Principal Amount at a rate equal to 9.0% per annum (the
"Interest Rate"). Interest shall be calculated on the basis of a 360-day year
and shall be computed on the actual number of days elapsed.
2
2. Payments.
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period. Borrower shall make a payment of the
total Adjusted Principal Amount then outstanding, together with accrued and
unpaid interest to such date, on the Due Date. Borrower shall have no obligation
to pay the Adjusted Principal Amount, or any portion thereof, until the Due Date
or such earlier date upon which the loan is accelerated. Borrower shall make
each payment hereunder not later than 11:00 a.m. (Mountain Standard Time) on the
day when due in U.S. dollars at Lender's office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. Each payment shall first be applied to late charges, costs of
collection or enforcement and other similar amounts due, if any, under this
Note, then to interest due and payable hereunder and the remainder to the
Adjusted Principal Amount due and payable hereunder. The aggregate unpaid
Adjusted Principal Amount shown on the records of Lender shall be rebuttable
presumptive evidence of the Adjusted Principal Amount owing and unpaid on this
Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997 (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the Adjusted Principal Amount outstanding on this Note, on the basis
of one fully paid, registered and nonassessable share of common stock $0.01 par
value per share (the "Common Stock"), of the Corporate Borrower, for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on the Corporate Borrower's Common
Stock to holders of such Common Stock of record as of a date prior to the
Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New
3
York, New York time, on a Business Day and the conversion of this Note will
be effective as of such Exercise Date. If any items referred to in
subsection (a) are received after 2:00 p.m., New York, New York time, on a
Business Day, the conversion of this Note will be effective on the next
succeeding Business Day. Notwithstanding the foregoing, in the case of a
conversion of this Note on the Expiration Date, if all of the items
referred to in the preceding paragraph are received by Borrower at or prior
to 5:00 p.m. New York, New York time, on such Expiration Date, the
conversion of this Note will be effective on the Expiration Date.
(d) Upon the conversion of this Note in accordance with the terms
hereof the Corporate Borrower shall issue and cause to be delivered with
all reasonable dispatch to or upon the written order of the holder of this
Note, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by the Corporate Borrower as
described in Section 3(h)(x) hereof, or a tender offer or an exchange offer
for shares of Common Stock of the Corporate Borrower shall be made, upon
such surrender of this Note as aforesaid, the Corporate Borrower shall, as
soon as possible, but in any event not later than two Business Days
thereafter, issue and cause to be delivered the full number of shares of
Common Stock issuable upon the conversion of this Note in the manner
described in this sentence together with cash as provided in Section 3(i)
hereof. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become a holder of record or such shares of Common Stock as of the
date of the surrender of this Note. No fractional shares shall be issued
upon conversion of this Note in accordance with Section 3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of this Note; provided, however, that Borrower shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
4
(f) The Corporate Borrower will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued shares of Common Stock, for the purpose of enabling it to satisfy
any obligation to issue shares of Common Stock upon conversion of this
Note, the maximum number of shares of Common Stock which may then be
deliverable upon the conversion of this Note. The Corporate Borrower or the
transfer agent for the Common Stock (the "Transfer Agent") and every
subsequent transfer agent for any shares of the Corporate Borrower's
capital stock issuable upon the exercise of any of the conversion rights
aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such
purpose. Before taking any action which would cause an adjustment pursuant
to this Section 3 to reduce the Exercise Price below the then par value (if
any) of the shares issuable upon conversion of this Note, the Corporate
Borrower will take any corporate action which may, in the opinion of its
counsel (which may be counsel employed by the Corporate Borrower), be
necessary in order that the Corporate Borrower may validly and legally
issue fully paid and nonassessable shares of Common Stock at the Exercise
Price as so adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, the
Corporate Borrower will, at its expense, obtain promptly and maintain the
approval for listing or quotation on each such exchange or inter-dealer
quotation system, upon official notice of issuance after notice of
conversion of this Note, the shares of Common Stock issuable hereunder and
maintain the listing or quotation of such shares after their issuance; and
the Corporate Borrower will also, upon official notice of issuance after
notice of conversion of this Note, list or quote on such national
securities exchange, will register under the Securities Exchange Act of
1934, as amended, and will maintain such listing or quotation of, any Other
Securities (as defined below) that at any time are issuable upon conversion
of this Note, if and at the time that any securities of the same class
shall be listed or quoted on such national securities exchange or inter-
dealer quotation system by the Corporate Borrower.
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of the Corporate Borrower, however designated, issuable upon
conversion of this Note.
(i) Adjustment for Change in Capital Stock. If the Corporate
Borrower:
a. pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
5
b. subdivides its outstanding shares of Common Stock into a
greater number of shares;
c. combines its outstanding shares of Common Stock into a
smaller number of shares;
d. makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any shares
of its capital stock,
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
the Corporate Borrower which such holder would have owned immediately
following such action if this Note had been exercised immediately
prior to such action or immediately prior to the record date
applicable thereto, if any.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion,
may receive shares of two or more classes of capital stock of the
Corporate Borrower, the Exercise Rate of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 3(h).
Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If the Corporate Borrower (i) distributes any
rights, warrants or options to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock at
a price per share less than 94% (100% if a stand-by underwriter is
used and charges the Corporate Borrower a commission) of the Current
Market Value at the Time of Determination (each as defined in Section
4) or (ii) sells any Common Stock or any securities convertible into
or exchangeable or exercisable for the Common Stock (other than
pursuant to (1) the exercise of this Note (or any other note issued by
the Corporate
6
Borrower or one of its subsidiaries pursuant to or in connection with
that certain Merger and Distribution Agreement dated of even date
herewith among Lender, Security Capital Pacific Trust ("PTR"),
Security Capital Group Incorporated ("SCG") and Homestead Village
Properties Incorporated ("Homestead") or (2) upon exercise of
outstanding warrants to acquire shares of Common Stock, which warrants
were issued pursuant to a Warrant Agreement executed in connection
with that certain Warrant Purchase Agreement of even date herewith
among Lender, PTR, SCG and Homestead or (3) any security convertible
into, or exchangeable or exercisable for, the Common Stock as to which
the issuance thereof has previously been the subject of any required
adjustment (whether or not actually made) pursuant to this Section
3(h)) at a price per share less than the Current Market Value, the
Exercise Rate shall be adjusted in accordance with the formula:
E' = E x (O + N)
---------------
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (ii) is being
applied or on the date of sale of Common Stock at a price per
share less than the Current Market Value to which this subsection
(ii) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or
the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share of the additional shares of Common
Stock upon the exercise of any such rights, options or warrants
so distributed or pursuant to any such convertible, exchangeable
or exercisable securities so sold or the sale price of the shares
so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be.
7
The adjustment shall be made successively whenever any such
rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If
at the end of the period during which such rights, warrants or options
are exercisable, not all rights, warrants or options shall have been
exercised, the Exercise Rate shall be immediately readjusted to what
it would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E' that is lower than the value of E.
(iii) Adjustment for Other Distributions. If the Corporate
Borrower distributes to all holders of its Common Stock any of its
assets or debt securities or any rights, warrants or options to
purchase any of its debt securities or assets, the Exercise Rate shall
be adjusted in accordance with the formula:
E' = E x M
---
M-F
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the
distribution to which this subsection (iii) applies) of the
assets, securities, rights, warrants or options to be
distributed in respect of each share of Common Stock in the
distribution to which this subsection (iii) is being applied
(including, in the case of cash dividends or other cash
distributions giving rise to an adjustment, all such cash
distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
8
immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on
the books of the Corporate Borrower prepared in accordance with
generally accepted accounting principles other than any Extraordinary
Cash Dividend (as defined below). An "Extraordinary Cash Dividend"
shall be that portion, if any, of the aggregate amount of all cash
dividends paid in any fiscal year which exceeds the sum of (A) the
Corporate Borrower's cumulative undistributed earnings on the date of
this Agreement, plus (B) the cumulative amount of earnings, as
determined by the Board of Directors, after such date, minus (C) the
cumulative amount of dividends accrued or paid in respect of the
Common Stock. In all cases, Borrower shall give the holder of this
Note advance notice of a record date for any dividend payment on the
Common Stock which notice is delivered on a date at least as early as
the date of notice to the holders of Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of
Section 3(h), the following shall apply:
a. in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the
Corporate Borrower for any underwriting of the issue or otherwise
in connection therewith;
b. in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the records of the Corporate
Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by the Corporate Borrower for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Corporate Borrower upon the conversion or
exchange thereof (the consideration in each case to be
9
determined in the same manner as provided in clauses (1) and (2)
of this subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment in
the Exercise Rate need be made unless the adjustment would require an
increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 3(h) shall be made to the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made for
a transaction referred to in subsections (i), (ii) or (iii) of this
Section 3(h) if the holder of this Note is offered the opportunity to
participate in the transaction on a basis and with notice that the
Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in
the transaction. To the extent this Note becomes convertible into
cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is
adjusted, the Corporate Borrower shall provide the notices required by
Section 3(j) hereof.
(viii) Voluntary Adjustment. The Corporate Borrower from time to
time may, as the Board of Directors deems appropriate, increase the
Exercise Rate by any amount for any period of time if the period is at
least 20 days and if the increase is irrevocable during the period.
Whenever the Exercise Rate is increased, the Corporate Borrower shall
mail to the holder of this Note a notice of the increase. The
Corporate Borrower shall mail the notice at least 15 days before the
date the increased Exercise Rate takes effect. The notice shall state
the increased Exercise Rate and the period it will be in effect. An
increase of the Exercise Rate pursuant to this Section 3(h)(viii),
other than an increase which the Corporate Borrower has irrevocably
committed will be in effect for so long as any this Note is
outstanding, does not change or adjust the Exercise Rate otherwise in
effect for purposes of subsections (i), (ii) or (iii) of this Section
3(h).
(ix) Notice of Certain Transactions. If:
------------------------------
a. The Corporate Borrower takes any action that would
require an adjustment in the Exercise Rate pursuant to
subsections (i), (i) or (iii) of this Section 3(h) and if the
Corporate Borrower does not arrange for the holder of this Note
to participate pursuant to Section 3(h)(vi); or
10
b. there is a liquidation or dissolution of the Corporate
Borrower,
The Corporate Borrower shall mail to the holder of this Note a notice
stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease, liquidation
or dissolution. The Corporate Borrower shall mail the notice at least
15 days before such date. Failure to mail the notice or any defect in
it shall not affect the validity of the transaction.
(x) Reorganization of the Corporate Borrower. If the Corporate
Borrower consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any Person, upon consummation
of such transaction this Note shall automatically become exercisable
for the kind and amount of securities, cash or other assets which the
holder of this Note would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised
this Note immediately before the effective date of the transaction.
Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if
other than the Corporate Borrower, or the Person to which such sale or
conveyance shall have been made (any such Person, the "Successor
Guarantor"), shall enter into a supplemental Note so providing and
further providing for adjustments which shall be as nearly equivalent
as may be practical to the adjustments provided for in this Section
3(h). The Successor Guarantor shall mail to the holder of this Note a
notice describing the supplemental Note. If the issuer of securities
deliverable upon conversion of this Note under the supplemental Note
is an Affiliate of the formed, surviving, transferee or lessee
corporation, that issuer shall join in the supplemental Note. If this
subsection (x) applies, subsections (i), (ii) or (iii) of this Section
3(h) do not apply.
(xi) Corporate Borrower Determination Final. Any determination
that the Corporate Borrower or the Board of Directors must make
pursuant to subsection (i), (ii), (iii), (iv) or (vii) of this Section
3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, the Corporate Borrower may elect to defer until the occurrence
of such event (i) issuing to the holder of this Note exercised after
such record date the shares of Common Stock and other capital stock of
the Corporate Borrower, if any, issuable upon such conversion over and
above the shares of Common Stock and other capital stock of the
11
Corporate Borrower, if any, issuable upon such conversion on the basis
of the Exercise Rate and (ii) paying to such holder any amount in cash
in lieu of a fractional share pursuant to Section 3(i) hereof;
provided, however, that the Corporate Borrower shall deliver to such
holder a due ▇▇▇▇ or other appropriate instrument evidencing such
holder's right to receive such additional shares of Common Stock,
other capital stock and cash upon the occurrence of the event
requiring such adjustment.
(xiii) Adjustments to Par Value. The Corporate Borrower shall
from time to time make such adjustments to the par value of the Common
Stock as may be necessary so that at all times, upon conversion of
this Note, the shares of Common Stock will be fully paid and
nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i)(4), (ii) or (iii), and the record dates for the distributions
giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. The Corporate Borrower
shall not be required to issue fractional shares on the conversion of this
Note. If any fraction of a share would, except for the provisions of this
Section 3(i), be issuable on the conversion of this Note, the Corporate
Borrower shall pay to the holder an amount in cash equal to the product of
(i) such fraction of a share and (ii) the Current Market Value of a share
of Common Stock as of the date of conversion of this Note. Upon any
conversion of all or any portion of the Adjusted Principal Amount in
accordance with the terms hereof, Borrower shall pay to the holder in cash
all accrued but unpaid interest to the effective date of conversion with
respect to the portion of the Adjusted Principal Amount of this Note being
converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, the Corporate Borrower shall promptly
thereafter (i) cause to be prepared a certificate of a firm of independent
public accountants of recognized standing selected by the Corporate
Borrower (who may be the regular auditors of the Corporate Borrower)
setting forth the Exercise Rate after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations
12
are based and setting forth the number of shares (or portion thereof)
issuable after such adjustment in the Exercise Rate, upon conversion of
this Note, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to
the holder of this Note at such holder's address appearing on the Note
register written notice of such adjustments by first-class mail, postage
prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 3(j).
In the event:
(i) The Corporate Borrower shall authorize the issuance to all
holders of shares of Common Stock of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of any other
subscription rights or warrants (other than rights, options or
warrants issued to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
not less than 94% (100% if a stand-by underwriter is used and charges
the Corporate Borrower commission) of the Current Market Value); or
(ii) The Corporate Borrower shall authorize the distribution to
all holders of shares of Common Stock of evidences of its indebtedness
or assets (other than cash dividends or cash distributions payable out
of consolidated earnings or earned surplus or dividends payable in
shares of Common Stock or distributions referred to in subsection (i)
of Section 3(h) hereof); or
(iii) of any consolidation or merger to which the Corporate
Borrower is a party or of the conveyance or transfer of the properties
and assets of the Corporate Borrower substantially as an entirety, or
of any reclassification or change of Common Stock issuable upon
conversion of this Note (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporate Borrower; or
(v) The Corporate Borrower proposes to take any action (other
than actions of the character described in Section 3(h)(i) which would
require an adjustment of the Exercise Rate pursuant to Section 3(h);
then the Corporate Borrower shall cause to be given to the registered
holder of this Note at its address appearing on the Note register, at least
20 days (or 15 days in any case
13
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is
no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the initial expiration date set
forth in any tender offer or exchange offer for shares of Common Stock, or
(iii) the date on which any such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective or consummated, and the date as of which it is expected
that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice
required by this Section 3(j) or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of the Corporate Borrower or any other matter, or any rights
whatsoever as shareholders of the Corporate Borrower.
4. Definitions. For purposes of this Note, the following terms shall have
the meanings indicated:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of the Corporate
Borrower.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for
14
each such trading day shall be: (i) the last reported sales price, regular
way on such day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices on such day, regular way, in either
case as reported on the New York Stock Exchange ("NYSE") or, (ii) if such
security is not listed or admitted for trading on the NYSE, on the
principal national securities exchange on which such security is listed or
admitted for trading or, (iii) if not listed or admitted for trading on any
national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or, (iv) if such security is not quoted on such National Market
System, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, (v) if bid and asked
prices for such security on such day shall not have been reported through
NASDAQ, the average of the bid and asked prices on such day as furnished by
any NYSE member firm regularly making a market in such security selected
for such purpose by the Chairman of the Board or the Board of Directors or,
(vi) if such bid and asked prices are not so furnished, then the fair
market value of the security as established by the Board of Directors
acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Corporate Borrower or any other Person (corporate or
otherwise) which the holder of this Note at any time shall be entitled to
receive, or shall have received, upon the conversion of this Note, in lieu
of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock
or Other Securities pursuant to Section 3(h) hereof or otherwise.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option. Except as expressly set forth in this Section 5,
Borrower is prohibited from making any voluntary prepayment of this Note and
shall not have any right to cause the holder to convert any portion of the
Adjusted Principal Amount outstanding from time to time. From and after the
fifth anniversary of the date of this Note and on or prior to the Due Date,
Borrower shall have the right (the "Call Option") to repay the Adjusted
Principal Amount then outstanding, in whole but not in part, without premium or
penalty (other than the
15
imposition, if applicable, of the Default Rate or "late charge" as provided
herein). Borrower may exercise the Call Option by giving the holder of this Note
at any time upon ninety (90) days' prior written notice of Borrower's intention
to exercise the Call Option, which notice shall state the date on which the Call
Option is to be consummated, the then current Adjusted Principal Amount and all
accrued interest and unpaid interest thereon, together with any other sums
evidenced by this Note, to be paid on such date. Upon the receipt of any such
notice, the holder shall have the right at any time prior to the date proposed
for such repurchase to convert any or all of the Adjusted Principal Amount of
this Note in accordance with the provisions of Section 3.
6. Default.
-------
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Corporate Borrower, as applicable, shall fail to
pay when due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Corporate Borrower to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any representation,
covenant or warranty set forth in the Loan Documents (other than this Note)
until either Borrower or the Corporate Borrower, as applicable, shall have
failed to cure such breach within any applicable notice and cure period
therein provided; and (ii) no default shall exist hereunder on account of a
breach of any representation, covenant or warranty set forth herein unless
and until Lender shall provide written notice of such breach to Borrower,
and Borrower shall fail to cure the same within 30 days after receipt of
such notice, provided if such breach is of such a nature that it cannot be
cured within such 30 day period, it shall not constitute a default
hereunder so long as Borrower commences its cure of such breach within such
30 day period and thereafter diligently and continuously proceeds with the
curing of same within a reasonable period of time not to exceed 180 days.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Borrower and its affiliates,
subsidiaries and any parent entity, taken as a whole.
16
7. Default Rate; Late Charge.
-------------------------
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of (x) 2.0%, plus the Interest Rate, on the then outstanding past-due
Adjusted Principal Amount, until such amount is paid in full. In addition, a
late charge of four percent (4%) of the amount of any installment or the amount
due on the Due Date which is not paid when due shall be due and payable to the
holder of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the Lender.
8. Security; Governing Law.
-----------------------
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions. The provisions in this Section 9 shall
govern and control over any irreconcilably inconsistent provision contained in
this Note or any of the other Loan Documents or any other instrument
contemplated hereunder or thereunder. In no event shall the aggregate of all
interest paid or payable by Borrower to Lender ever exceed the maximum rate of
interest which may lawfully be charged to (or payable by) Borrower under
applicable law on the Adjusted Principal Amount of this Note from time to time
remaining unpaid. In this connection, it is expressly stipulated and agreed that
it is the intent of Lender and Borrower in the execution and delivery of this
Note to contract in strict compliance with any applicable usury laws. In
furtherance of the foregoing, none of the terms of this Note, the Loan Documents
(other than this Note) or any such other instruments contemplated hereunder or
thereunder shall ever be construed to create a contract to charge or pay for
interest in excess of the maximum interest rate permitted to be contracted for,
charged to, or payable by Borrower under applicable law. Borrower and any
guarantors, endorsers or other parties now or hereafter becoming liable for
payment of this Note shall never be liable for interest in excess of the maximum
interest that may be lawfully charged under applicable law, and the provisions
of this Section 9 shall govern over all other provisions of the Loan Documents,
and any other instruments evidencing or securing the Loan, should such
provisions be in apparent conflict herewith.
17
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the Adjusted Principal Amount
of this Note, prior to the due date for payment thereof, resulting
from acceleration of maturity of this Note, if the aggregate amounts
of interest accruing hereunder prior to such payment plus the amount
of any interest accruing after such maturity up to the date of payment
and plus any other amounts paid or accrued in connection with the
other Loan Documents, including, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, which by law are deemed interest under such Loan Documents and
which aggregate amounts paid or accrued (if calculated in accordance
with the provisions of this Note other than pursuant to this Section
9) would exceed the maximum lawful rate of interest which could be
charged on the principal balance of this Note from the date hereof to
the date of final payment thereof, then in such event the amount of
such excess shall be credited, as of the date paid, toward the payment
of principal of this Note so as to reduce the amount of the final
payments of Adjusted Principal Amount due on this Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
amount which could lawfully have been collected and retained) upon the
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
18
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
10. Invalidity.
----------
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
----------------
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby waives
and renounces for itself, its successors and assigns, all rights to the
benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption,
appraisement, or exemption now provided, or which may hereafter be
provided, by the Constitution and laws of the United States and of any
state thereof, both as to itself and in and to all of its property, real
and personal against the enforcement and collection of the obligations
evidenced by this Note.
(b) In the event that the holder hereof shall institute any action for
the enforcement of the collection of this Note, there shall be immediately
due from Borrower in addition to the unpaid interest and the Adjusted
Principal Amount, all costs and expenses of such action, including but not
limited to attorneys' fees and expenses.
12. Miscellaneous.
-------------
19
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject to
any applicable grace or cure period expressly provided herein or the in the
Loan Documents; provided, however, that unless otherwise stated, whenever
any payment to be made under this Note shall be stated to be due on a day
other than a Business Day, such payment may be made on the immediately
preceding Business Day.
(c) All notices, demands or requests relating to any matters set forth
herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
20
IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
ATLANTIC HOMESTEAD VILLAGE LIMITED PARTNERSHIP
By: Atlantic Homestead Village (1) Incorporated,
its sole general partner
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Managing Director
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
For purposes of Sections 3 and 4 only:
---------- -
ATLANTIC HOMESTEAD VILLAGE INCORPORATED
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Managing Director
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
21