Commerzbank AG, New York Branch
2 World Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
April 22, 1999
Homestead Village Incorporated
0000 Xxxxx Xxxx Xxxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Re: Credit Agreement dated as of May 6, 1997, among Homestead Village
Incorporated ("HOMESTEAD"), Commerzbank AG, Los Angeles Branch ("LA
BRANCH") and other lenders as set forth therein, and Commerzbank AG,
New York Branch ("NY BRANCH") (as heretofore, and as may hereafter be,
modified, amended and/or restated, from time to time, the "SUBURBAN
FACILITY");
Credit Agreement dated as of April 24, 1998, among Homestead, LA Branch
and other lenders as set forth therein, and NY branch (as heretofore,
and as may hereafter be, modified, amended and/or restated, from time
to time, together with the Suburban Facility, the "WORKING CAPITAL
FACILITIES"); and
Credit Agreement dated as of June 15, 1998, among Homestead, LA Branch
and other lenders as set forth therein, and NY Branch (as heretofore,
and as may hereafter be, modified, amended and/or restated, from time
to time, the "BRIDGE FACILITY" and, together with the Working Capital
Facilities, the "CREDIT FACILITIES")
Ladies and Gentleman:
Homestead, NY Branch and Xxxxx Fargo Bank, National Association
("XXXXX"), executed letters dated as of March 15, 1999 and March 31, 1999
(together, the "WAIVER"), pursuant to which certain provisions of the Credit
Facilities were waived or modified. This letter, if agreed to and accepted by
Homestead, shall (a) supercede and replace the Waiver in its entirety and (b)
modify and amend the Working Capital Facilities. Unless otherwise defined
herein, all capitalized terms used herein shall have the meanings assigned to
such terms in the Credit Facilities.
Notwithstanding anything to the contrary contained in the Credit
Facilities and the Waiver, the signatories hereto, in consideration of Ten
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby agree as follows:
1. The term "Expiry Date" as defined in Section 1.1 of the Bridge
Facility shall mean the earliest of (i) October 31, 1999, (ii) the date
of the merger of Homestead with any other Person, (iii) the date of the
sale, assignment, lease, transfer, conveyance, or other disposition (in
one transaction or a series of transactions) to any person or group (as
such term is used in Section 13(d)(3) of the Exchange Act of all or
substantially all of Homestead's assets, (iv) the date of the
acquisition by any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act), other than Realty or its Affiliates of
more than 50% of the voting power of the capital stock of Homestead by
way of purchase, merger, consolidation or otherwise or (v) the 45th day
following the later of (A) the termination of negotiations initiated in
April 1999 between Homestead and Party A on Schedule I, (B) the
termination of negotiations initiated in April 1999 between Homestead
and Party B on Schedule I, and (C) the termination of negotiations with
other potential merger partners commenced no later than May 15, 1999.
2. Homestead may incur unsecured, subordinated Indebtedness in the
aggregate principal amount of $25,000,000 (the "SCG Loan") to Security
Capital Group Incorporated ("Security Capital"). Homestead may not
create, incur, assume or suffer any other Indebtedness of any nature,
other than (a) the Loan under each Credit Facility, (b) as in effect on
March 19, 1999, the guaranty of the Sale-Leaseback Facility and (c) the
Indebtedness outstanding pursuant to the Funding Commitment Agreement,
dated as of October 17, 1996, among Homestead, PTR Homestead Village
Limited Partnership and Archstone Communities Trust in the maximum
principal amount of $221,333,620.00.
3. Homestead shall be permitted to effect one or more issuances of
common stock, provided:
(a) the first $200,000,000 or lesser amount raised of net
proceeds of such issuances are used solely to repay the Bridge Facility
(it being agreed that the Bridge Facility shall be repaid on or before
the Expiry Date even if such net proceeds are insufficient to effect
such repayment in full);
(b) any remaining net proceeds of such issuance are used (i)
to repay the Working Capital Facilities in proportion to the
outstanding principal balances thereof, (ii) to fund the construction
and development of the Mortgaged Properties (as defined in each of the
Working Capital Facilities), (iii) to repay the SCG Loan, or (iv) to
provide for working capital purposes and other general corporate
purposes,
(c) all payments due under such stock are subordinate to the
prior and full payment of the Working Capital Facilities; and
(d) Homestead is, and continues to be, in compliance with
the terms of both of the Working Capital Facilities.
4. If Homestead has not repaid all amounts outstanding under the Bridge
Facility by the Expiry Date Security Capital may fund its obligations
under the Subscription Agreement by purchasing convertible subordinated
debentures issued by Homestead, provided:
(a) the net proceeds of such debenture offering are used only
to repay the Bridge Facility, if not then repaid (but nothing in this
paragraph shall be construed as a consent to the extension of the
Bridge Facility's maturity or expiry date beyond the Expiry Date);
(b) the convertible debentures shall automatically, and
pursuant to their terms, be converted into common stock of Homestead
within 90 days of their issuance, but in no event later than January
29, 2000, unless the debentures were previously refinanced with the
proceeds of an equity offering consistent with the terms of such
debentures; and
(c) Homestead is, and continues to be, in compliance with the
terms of both of the Working Capital Facilities.
After the Expiry Date, Homestead may complete an offering of common stock and/or
convertible preferred securities, provided:
(w) the aggregate gross proceeds of an offering of convertible
preferred securities do not exceed $225,000,000;
(x) the net proceeds of the offering of common stock and/or
convertible preferred securities are first used to retire the convertible
debentures and repay the SCG Loan;
(y) any remaining net proceeds of such offering are used to
repay the Working Capital Facilities in proportion to the outstanding principal
balances thereof; and
(z) Homestead is, and continues to be, in compliance with the
terms of both of the Working Capital Facilities.
For purposes of the financial covenants in the Working Capital Facilities, the
convertible debentures issued to Security Capital Group Incorporated and
otherwise satisfying the conditions of this Section 4 shall, through January 29,
2000, be deemed equity, and payments made under the convertible debentures shall
be excluded from calculations made under such covenants.
5. For purposes of the financial covenants in the Working Capital
Facilities, until the Expiry Date, the principal amount of indebtedness
under the Bridge Facility Loan shall be deemed equity and payments made
under the Bridge Facility shall be excluded from calculations made
under such covenants.
6. Homestead shall provide at least 10 days prior notice of the
consummation of any transaction described in Section 1(a)(ii), (iii) or
(iv) of this letter, and shall provide prompt notice of the
termination, including the date of termination, of negotiations
described in Section 1(a)(v) of this Letter.
7. Homestead agrees to promptly initiate an offering of equity
securities in conformity with Section 3 of this letter upon the later
of the terminations described in Section 1(v) and agrees to use its
best efforts to consummate such offering within 45 days of initiation
or as soon as reasonably possible thereafter.
8. Until the Bridge Facility is repaid in full and terminated, if an
Event of Default under the Bridge Facility has occurred and is
continuing, Security Capital authorizes NY Branch, as agent for the
Banks under the Bridge Facility, to notify Xxxxx Fargo Bank, National
Association ("Xxxxx Fargo"), as agent for the Lenders under the Credit
Agreement, dated as of June 5, 1998, among Security Capital, Xxxxx
Fargo, as agent, and the financial institutions party thereto from time
to time (as amended from time to time, the "SCG Credit Agreement"), to
fund amounts to the lenders under the Bridge Facility to repay the
outstanding Indebtedness under the Bridge Facility, provided that NY
Branch shall not request a funding of greater than $200,000,000 under
the SCG Credit Facility. Upon any such funding, Homestead shall, as of
the date of such funding, issue convertible debentures under the
Subscription Agreement to Security Capital in the principal amount of
such funding. Until the Bridge Facility is repaid in full and
terminated, Security Capital shall keep at least $200,000,000 available
for borrowing under the SCG Facility and shall take all actions
necessary and appropriate to provide for any funding authorized by this
Section 8. Security Capital's obligations to purchase securities of
Homestead under the Subscription Agreement shall be reduced to the
extent of the principal amount of any funding requested by NY Branch
and funded from proceeds of the SCG Facility.
9. This letter shall constitute a Loan Document for all purposes under
each of the Credit Facilities.
10. Except as expressly modified herein, all provisions of the Credit
Facilities and of all other instruments, documents or agreements
delivered by Homestead in connection therewith, including all letter
agreements incorporated therein, shall remain in full force and effect.
11. Except as otherwise specifically set forth herein, the failure of
NY Branch and other lenders to insist upon strict compliance with any
terms or conditions of the Credit Facilities shall not be considered a
waiver or release of such terms or conditions nor limit the right of NY
Branch and other lenders to insist upon strict compliance with such
terms and conditions and any other terms and conditions of the Credit
Facilities and any other instruments, documents or agreements delivered
in connection therewith. No provision of the Credit Facilities may be
amended or modified, except by an instrument in writing signed by the
party to be charged.
If this letter correctly sets forth your understanding, please so
indicate by signing below.
Very truly yours,
with respect to all of the Credit Facilities:
Commerzbank AG, New York Branch
By:______________________________
Name:
Title:
And by: _________________________
Name:
Title:
Commerzbank AG, Los Angeles Branch
By:______________________________
Name:
Title:
And by: __________________________
Name:
Title:
with respect to the Suburban Working Capital Facility
and the Bridge Facility only:
Xxxxx Fargo Bank, National Association
By:______________________________
Name:
Title:
with respect to the Suburban Working Capital Facility only:
Chase Bank of Texas, N.A.
By:______________________________
Name:
Title:
BankBoston N.A.
By:________________________________
Name:
Title:
AGREED TO AND ACCEPTED
WITH RESPECT TO ALL OF THE CREDIT FACILITIES:
Homestead Village Incorporated
By:_______________________________
Name: Xxxxx X. Xxxxxxxx, Xx.
Title: Co-Chairman
AGREED TO AND ACCEPTED
WITH RESPECT TO ALL OF THE CREDIT FACILITIES:
Security Capital Group Incorporated
By:______________________
Xxxx X. Xxxxxx
Chief Financial Officer
