UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 000-56274
VineBrook Homes Trust, Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 83-1268857 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) | |
| 300 Crescent Court, Suite 700, Dallas, Texas | 75201 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (214) 276-6300
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | |
| Non-Accelerated Filer | ☒ | Smaller reporting company | ☒ | |
| Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 11, 2022, the registrant had 24,761,177 shares of its Class A Common Stock, par value $0.01 per share, and no shares of its Class I Common Stock, par value $0.01 per share, outstanding.
Form 10-Q
Quarter Ended September 30, 2022
INDEX
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) of VineBrook Homes Trust, Inc. (“we”, “us”, “our”, or the “Company”) other than historical facts may be considered forward-looking statements. In particular, statements relating to our business and investment strategies, plans or intentions, acquisitions, the Internalization (as defined below), including the expected timing of the transaction, our liquidity and capital resources, our performance and results of operations contain forward-looking statements. Furthermore, all statements regarding future financial performance (including market conditions) are forward-looking statements. We caution investors that any forward-looking statements presented in this Form 10-Q are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “would,” “result,” the negative version of these words and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements.
Forward-looking statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you against relying on any of these forward-looking statements.
Some of the risks and uncertainties that may cause our actual results, performance, liquidity or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
| • |
risks associated with the COVID-19 pandemic, including unpredictable variants and future outbreak of other highly infectious or contagious diseases; |
| • |
risks associated with our limited operating history and the possibility that we may not replicate the historical results achieved by other entities managed or sponsored by affiliates of NexPoint Real Estate Advisors V, L.P. (our “Adviser”), members of VineBrook Homes, LLC’s (our “Manager”) management team or their affiliates; |
| • |
our dependence on our Adviser, Manager and their affiliates and personnel to conduct our day-to-day operations and potential conflicts of interest with our Adviser, Manager and their affiliates and personnel; |
| • |
risks associated with the Manager’s ability to terminate the Management Agreements (as defined below) and risks associated with any potential internalization of our management functions; |
| • |
loss of key personnel of our Adviser and our Manager; |
| • |
risks associated with the fluctuation in the net asset value (“NAV”) per share amounts; |
| • |
unfavorable changes in economic conditions and their effects on the real estate industry generally and our operations and financial condition, including our ability to access funding and generate returns for stockholders; |
| • |
the risk we make significant changes to our strategies in a market downturn, or fail to do so; |
| • |
the risk of rising interest rates and our ability to mitigate the related risks through long-term fixed interest rate loans and interest rate hedges; |
| • |
risks associated with ownership of real estate, including properties in transition, subjectivity of valuation, environmental matters and lack of liquidity in our assets; |
| • |
risks related to increasing property taxes, homeowner’s associations (“HOAs”) fees and insurance costs may negatively affect our financial results; |
| • |
risks associated with acquisitions, including the risk of expanding our scale of operations and acquisitions, which could adversely impact anticipated yields; |
| • |
risks associated with leasing real estate, including the risks that rents do not increase sufficiently to keep pace with rising costs of operations and competitive pressures from other types of properties or market conditions that incentivize tenants to purchase their residences; |
| • |
risks related to tenant relief laws, including laws regulating evictions, rent control laws, executive orders, administrative orders and other regulations that may impact our rental income and profitability; |
| • |
risks related to governmental laws, regulations and rules applicable to our properties or that may be passed in the future; |
| • |
risks relating to the timing and costs of the renovation of properties which has the potential to adversely affect our operating results and ability to make distributions; |
| • |
risks related to our ability to change our major policies, operations and targeted investments without stockholder consent; |
| • |
risks related to climate change and natural disasters; |
| • |
risks related to failure to maintain our status as a real estate investment trust (“REIT”); |
| • |
risks related to failure of our OP (defined below) to be taxable as a partnership for U.S. federal income tax purposes, possibly causing us to fail to qualify for or to maintain REIT status; |
| • |
risks related to compliance with REIT requirements, which may limit our ability to hedge our liabilities effectively and cause us to forgo otherwise attractive opportunities, liquidate certain of our investments or incur tax liabilities; |
| • |
the risk that the Internal Revenue Service (“IRS”) may consider certain sales of properties to be prohibited transactions, resulting in a 100% penalty tax on any taxable gain; |
| • |
the ineligibility of dividends payable by REITs for the reduced tax rates available for some dividends; |
| • |
risks associated with the stock ownership restrictions of the Internal Revenue Code of 1986, as amended (the “Code”) for REITs and the stock ownership limit imposed by our amended and restated charter; |
| • |
recent and potential legislative or regulatory tax changes or other actions affecting REITs; |
| • |
failure to generate sufficient cash flows to service our outstanding indebtedness or pay distributions at expected levels; |
| • |
risks associated with purchasing single-family rental (“SFR”) properties through the foreclosure auction process; |
| • |
damage associated with SFR properties sold through short sales or foreclosure sales may require extensive renovation; |
| • |
risks associated with the Highland Capital Management, L.P. (“Highland”) bankruptcy, including related litigation and potential conflicts of interest; and |
| • |
any of the other risks included under Item 1A, “Risk Factors,” in our Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 23, 2022 (our “Annual Report”). |
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. They are based on estimates and assumptions only as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by law.
VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| September 30, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Operating real estate investments | ||||||||
| Land | $ | 652,218 | $ | 334,191 | ||||
| Buildings and improvements | 2,946,479 | 1,391,786 | ||||||
| Intangible lease assets | 2,606 | 971 | ||||||
| Total gross operating real estate investments | 3,601,303 | 1,726,948 | ||||||
| Accumulated depreciation and amortization | (141,109 | ) | (76,789 | ) | ||||
| Total net operating real estate investments | 3,460,194 | 1,650,159 | ||||||
| Real estate held for sale, net | 2,888 | 81 | ||||||
| Total net real estate investments | 3,463,082 | 1,650,240 | ||||||
| Investments, at fair value | 2,500 | 2,500 | ||||||
| Cash | 92,566 | 54,104 | ||||||
| Restricted cash | 30,681 | 20,893 | ||||||
| Accounts and other receivables | 18,896 | 8,327 | ||||||
| Due from Manager (see Note 13) | 1,076 | 2,909 | ||||||
| Prepaid and other assets | 68,925 | 19,352 | ||||||
| Interest rate derivatives, at fair value | 73,731 | — | ||||||
| TOTAL ASSETS | $ | 3,751,457 | $ | 1,758,325 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Liabilities: | ||||||||
| Notes payable, net | $ | 948,220 | $ | 376,842 | ||||
| Credit facilities, net | 1,503,155 | 391,703 | ||||||
| Accounts payable and other accrued liabilities | 71,776 | 47,208 | ||||||
| Accrued real estate taxes payable | 36,070 | 19,450 | ||||||
| Accrued interest payable | 15,136 | 1,690 | ||||||
| Security deposit liability | 25,970 | 14,295 | ||||||
| Prepaid rents | 6,189 | 3,341 | ||||||
| Interest rate derivatives, at fair value | — | 3,590 | ||||||
| Total Liabilities | 2,606,516 | 858,119 | ||||||
| Redeemable Series A preferred stock, $ par value: shares authorized; and shares issued and outstanding, respectively | 121,456 | 120,896 | ||||||
| Redeemable noncontrolling interests in the OP | 239,541 | 196,362 | ||||||
| Redeemable noncontrolling interests in consolidated VIEs | 108,499 | — | ||||||
| Stockholders' Equity: | ||||||||
| Class A Common stock, $ par value: shares authorized; and shares issued and outstanding, respectively | 248 | 219 | ||||||
| Additional paid-in capital | 761,691 | 651,531 | ||||||
| Distributions in excess of retained earnings | (135,062 | ) | (68,011 | ) | ||||
| Accumulated other comprehensive income/(loss) | 45,726 | (791 | ) | |||||
| Total Stockholders' Equity | 672,603 | 582,948 | ||||||
| Noncontrolling interests in consolidated VIEs | 2,842 | — | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 3,751,457 | $ | 1,758,325 | ||||
See Accompanying Notes to Consolidated Financial Statements
VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | ||||||||||||||||
| Rental income | $ | 71,594 | $ | 40,823 | $ | 182,016 | $ | 110,071 | ||||||||
| Other income | 2,044 | 1,064 | 6,243 | 2,265 | ||||||||||||
| Total revenues | 73,638 | 41,887 | 188,259 | 112,336 | ||||||||||||
| Expenses | ||||||||||||||||
| Property operating expenses | 12,592 | 8,282 | 33,636 | 19,442 | ||||||||||||
| Real estate taxes and insurance | 12,260 | 8,157 | 32,716 | 22,095 | ||||||||||||
| Property management fees | 3,844 | 1,756 | 10,363 | 6,316 | ||||||||||||
| Advisory fees | 4,313 | 2,337 | 11,243 | 5,638 | ||||||||||||
| Corporate general and administrative expenses | 2,701 | 1,992 | 7,341 | 5,310 | ||||||||||||
| Property general and administrative expenses | 4,373 | 1,505 | 11,871 | 4,160 | ||||||||||||
| Depreciation and amortization | 28,693 | 14,881 | 68,856 | 35,432 | ||||||||||||
| Interest expense | 16,875 | 7,752 | 37,650 | 20,566 | ||||||||||||
| Loss on extinguishment of debt | 2,468 | — | 3,469 | — | ||||||||||||
| Total expenses | 88,119 | 46,662 | 217,145 | 118,959 | ||||||||||||
| Loss on sales of real estate | (224 | ) | (175 | ) | (8 | ) | (373 | ) | ||||||||
| Casualty gain/(loss), net of insurance proceeds | 84 | 151 | (78 | ) | 49 | |||||||||||
| Net loss | (14,621 | ) | (4,799 | ) | (28,972 | ) | (6,947 | ) | ||||||||
| Dividends on and accretion to redemption value of Redeemable Series A preferred stock | 2,226 | 2,206 | 6,654 | 6,619 | ||||||||||||
| Net loss attributable to redeemable noncontrolling interests in the OP | (1,782 | ) | (823 | ) | (3,976 | ) | (1,324 | ) | ||||||||
| Net loss attributable to redeemable noncontrolling interests in consolidated VIEs | (3,112 | ) | — | (4,303 | ) | — | ||||||||||
| Net loss attributable to noncontrolling interests in consolidated VIEs | (113 | ) | — | (113 | ) | — | ||||||||||
| Net loss attributable to common stockholders | $ | (11,840 | ) | $ | (6,182 | ) | $ | (27,234 | ) | $ | (12,242 | ) | ||||
| Other comprehensive income | ||||||||||||||||
| Unrealized gain on interest rate hedges | 29,356 | 1,076 | 54,866 | 7,382 | ||||||||||||
| Total comprehensive income/(loss) | 14,735 | (3,723 | ) | 25,894 | 435 | |||||||||||
| Dividends on and accretion to redemption value of Redeemable Series A preferred stock | 2,226 | 2,206 | 6,654 | 6,619 | ||||||||||||
| Comprehensive income/(loss) attributable to redeemable noncontrolling interests in the OP | 2,621 | (639 | ) | 4,373 | 425 | |||||||||||
| Comprehensive loss attributable to redeemable noncontrolling interests in consolidated VIEs | (3,112 | ) | — | (4,303 | ) | — | ||||||||||
| Comprehensive loss attributable to noncontrolling interests in consolidated VIEs | (113 | ) | — | (113 | ) | — | ||||||||||
| Comprehensive income/(loss) attributable to common stockholders | $ | 13,113 | $ | (5,290 | ) | $ | 19,283 | $ | (6,609 | ) | ||||||
| Weighted average common shares outstanding - basic | 25,124 | 17,230 | 24,545 | 13,511 | ||||||||||||
| Weighted average common shares outstanding - diluted | 25,124 | 17,230 | 24,545 | 13,511 | ||||||||||||
| Loss per share - basic | $ | (0.47 | ) | $ | (0.36 | ) | $ | (1.11 | ) | $ | (0.91 | ) | ||||
| Loss per share - diluted | $ | (0.47 | ) | $ | (0.36 | ) | $ | (1.11 | ) | $ | (0.91 | ) | ||||
See Accompanying Notes to Consolidated Financial Statements
VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except share and per share amounts)
(Unaudited)
| Class A Common Stock | ||||||||||||||||||||||||
| Three Months Ended September 30, 2022 | Number of Shares | Par Value | Additional Paid-in Capital | Distributions in Excess of Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||
| Balances, June 30, 2022 | 24,960,485 | $ | 250 | $ | 780,111 | $ | (109,628 | ) | $ | 20,773 | $ | 691,506 | ||||||||||||
| Net loss attributable to common stockholders | — | (11,840 | ) | — | (11,840 | ) | ||||||||||||||||||
| Issuance of Class A common stock | 475,440 | 5 | 27,904 | — | — | 27,909 | ||||||||||||||||||
| Redemptions of Class A common stock | (674,891 | ) | (7 | ) | (42,343 | ) | — | — | (42,350 | ) | ||||||||||||||
| Offering costs | (1,565 | ) | — | — | (1,565 | ) | ||||||||||||||||||
| Equity-based compensation | 143 | — | 920 | — | — | 920 | ||||||||||||||||||
| Common stock dividends declared ($ per share) | — | (13,594 | ) | — | (13,594 | ) | ||||||||||||||||||
| Other comprehensive income attributable to common stockholders | — | — | 24,953 | 24,953 | ||||||||||||||||||||
| Adjustments to reflect redemption value of redeemable noncontrolling interests in the OP | (224 | ) | — | — | (224 | ) | ||||||||||||||||||
| Adjustment to reflect redemption value of redeemable noncontrolling interests in consolidated VIEs | (3,112 | ) | — | — | (3,112 | ) | ||||||||||||||||||
| Balances, September 30, 2022 | 24,761,177 | $ | 248 | $ | 761,691 | $ | (135,062 | ) | $ | 45,726 | $ | 672,603 | ||||||||||||
| Class A Common Stock | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Number of Shares | Par Value | Additional Paid-in Capital | Distributions in Excess of Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||
| Balances, December 31, 2021 | 21,814,248 | $ | 219 | $ | 651,531 | $ | (68,011 | ) | $ | (791 | ) | $ | 582,948 | |||||||||||
| Net loss attributable to common stockholders | — | (27,234 | ) | — | (27,234 | ) | ||||||||||||||||||
| Issuance of Class A common stock | 4,064,923 | 41 | 220,562 | — | — | 220,603 | ||||||||||||||||||
| Redemptions of Class A common stock | (1,167,653 | ) | (12 | ) | (71,604 | ) | — | — | (71,616 | ) | ||||||||||||||
| Offering costs | (3,058 | ) | — | — | (3,058 | ) | ||||||||||||||||||
| Equity-based compensation | 49,659 | — | 2,595 | — | — | 2,595 | ||||||||||||||||||
| Common stock dividends declared ($ per share) | — | (39,817 | ) | — | (39,817 | ) | ||||||||||||||||||
| Other comprehensive income attributable to common stockholders | — | — | 46,517 | 46,517 | ||||||||||||||||||||
| Adjustments to reflect redemption value of redeemable noncontrolling interests in the OP | (34,032 | ) | — | — | (34,032 | ) | ||||||||||||||||||
| Adjustment to reflect redemption value of redeemable noncontrolling interests in consolidated VIEs | (4,303 | ) | — | — | (4,303 | ) | ||||||||||||||||||
| Balances, September 30, 2022 | 24,761,177 | $ | 248 | $ | 761,691 | $ | (135,062 | ) | $ | 45,726 | $ | 672,603 | ||||||||||||
See Accompanying Notes to Consolidated Financial Statements
VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except share and per share amounts)
(Unaudited)
| Class A Common Stock | ||||||||||||||||||||||||
| Three Months Ended September 30, 2021 | Number of Shares | Par Value | Additional Paid-in Capital | Distributions in Excess of Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||
| Balances, June 30, 2021 | 13,891,715 | $ | 139 | $ | 362,165 | $ | (44,801 | ) | $ | (5,409 | ) | $ | 312,094 | |||||||||||
| Net loss attributable to common stockholders | — | (6,182 | ) | — | (6,182 | ) | ||||||||||||||||||
| Issuance of Class A common stock | 5,574,829 | 56 | 228,495 | — | — | 228,551 | ||||||||||||||||||
| Redemptions of Class A common stock | (23,920 | ) | — | (1,105 | ) | — | — | (1,105 | ) | |||||||||||||||
| Offering costs | (1,264 | ) | — | — | (1,264 | ) | ||||||||||||||||||
| Equity-based compensation | — | — | 598 | — | — | 598 | ||||||||||||||||||
| Common stock dividends declared ($0.5301 per share) | — | (9,362 | ) | — | (9,362 | ) | ||||||||||||||||||
| Other comprehensive income attributable to common stockholders | — | — | 892 | 892 | ||||||||||||||||||||
| Adjustment to reflect redemption value of redeemable noncontrolling interests in the OP | (26,940 | ) | — | — | (26,940 | ) | ||||||||||||||||||
| Balances, September 30, 2021 | 19,442,624 | $ | 195 | $ | 561,949 | $ | (60,345 | ) | $ | (4,517 | ) | $ | 497,282 | |||||||||||
| Class A Common Stock | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2021 | Number of Shares | Par Value | Additional Paid-in Capital | Distributions in Excess of Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||
| Balances, December 31, 2020 | 9,260,795 | $ | 93 | $ | 210,381 | $ | (26,002 | ) | $ | (10,150 | ) | $ | 174,322 | |||||||||||
| Net loss attributable to common stockholders | — | (12,242 | ) | — | (12,242 | ) | ||||||||||||||||||
| Issuance of Class A common stock | 10,315,837 | 103 | 402,614 | — | — | 402,717 | ||||||||||||||||||
| Redemptions of Class A common stock | (160,650 | ) | (1 | ) | (6,386 | ) | — | — | (6,387 | ) | ||||||||||||||
| Offering costs | (2,504 | ) | — | — | (2,504 | ) | ||||||||||||||||||
| Equity-based compensation | 26,642 | — | 1,738 | — | — | 1,738 | ||||||||||||||||||
| Common stock dividends declared ($1.5903 per share) | — | (22,101 | ) | — | (22,101 | ) | ||||||||||||||||||
| Other comprehensive income attributable to common stockholders | — | — | 5,633 | 5,633 | ||||||||||||||||||||
| Adjustments to reflect redemption value of redeemable noncontrolling interests in the OP | (43,894 | ) | — | — | (43,894 | ) | ||||||||||||||||||
| Balances, September 30, 2021 | 19,442,624 | $ | 195 | $ | 561,949 | $ | (60,345 | ) | $ | (4,517 | ) | $ | 497,282 | |||||||||||
See Accompanying Notes to Consolidated Financial Statements
VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (28,972 | ) | $ | (6,947 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
| Loss on sales of real estate | 8 | 373 | ||||||
| Depreciation and amortization | 68,856 | 35,432 | ||||||
| Non-cash interest amortization | 5,577 | 2,666 | ||||||
| Change in fair value of interest rate derivatives included in interest expense | (9,765 | ) | 2,843 | |||||
| Net cash paid on derivative settlements | (3,203 | ) | (3,202 | ) | ||||
| Loss on extinguishment of debt | 3,469 | — | ||||||
| Equity-based compensation | 4,704 | 3,384 | ||||||
| Casualty loss/(gain), net of insurance proceeds | 78 | (49 | ) | |||||
| Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||
| Operating assets | (6,992 | ) | (2,473 | ) | ||||
| Operating liabilities | 49,954 | 13,148 | ||||||
| Net cash provided by operating activities | 83,714 | 45,175 | ||||||
| Cash flows from investing activities | ||||||||
| Investment in unconsolidated entity | (100,819 | ) | — | |||||
| Redemption of investment in unconsolidated entity | 100,819 | — | ||||||
| Acquisition of NexPoint Homes through VIE consolidation, net of cash received | (47,022 | ) | — | |||||
| Net proceeds from sales of real estate | 7,931 | 1,405 | ||||||
| Prepaid acquisition deposits | (41,685 | ) | (1,336 | ) | ||||
| Insurance proceeds received | 707 | 496 | ||||||
| Acquisitions of real estate investments | (1,360,466 | ) | (751,042 | ) | ||||
| Additions to real estate investments | (147,095 | ) | (58,179 | ) | ||||
| Net cash used in investing activities | (1,587,630 | ) | (808,656 | ) | ||||
| Cash flows from financing activities | ||||||||
| Notes payable proceeds received | 288,512 | 125,000 | ||||||
| Notes payable payments | (7,892 | ) | (9,562 | ) | ||||
| Credit facilities proceeds received | 1,115,000 | 405,000 | ||||||
| Credit facilities principal payments | — | (115,000 | ) | |||||
| Bridge facilities proceeds received | 350,000 | — | ||||||
| Bridge facilities principal payments | (350,000 | ) | — | |||||
| NREO Note repayment | — | (1,250 | ) | |||||
| Financing costs paid | (13,383 | ) | (7,902 | ) | ||||
| Interest rate cap premium paid | (12,673 | ) | — | |||||
| Proceeds from issuance of Class A common stock | 174,085 | 391,225 | ||||||
| Redemptions of Class A common stock paid | (35,544 | ) | (5,282 | ) | ||||
| Offering costs paid | (3,315 | ) | (2,325 | ) | ||||
| Dividends paid to common stockholders | (18,537 | ) | (10,614 | ) | ||||
| Payments for taxes related to net share settlement of stock-based compensation | (555 | ) | (46 | ) | ||||
| Proceeds from issuance of redeemable Series A preferred stock, net of offering costs | — | 35,167 | ||||||
| Preferred stock dividends paid | (6,094 | ) | (4,988 | ) | ||||
| Contributions from redeemable noncontrolling interests in the OP | 8,789 | 5,014 | ||||||
| Distributions to redeemable noncontrolling interests in the OP | (4,835 | ) | (4,774 | ) | ||||
| Contributions from redeemable noncontrolling interests in consolidated VIEs | 65,653 | — | ||||||
| Contributions from noncontrolling interests in consolidated VIEs | 2,955 | — | ||||||
| Net cash provided by financing activities | 1,552,166 | 799,663 | ||||||
| Change in cash and restricted cash | 48,250 | 36,182 | ||||||
| Cash and restricted cash, beginning of period | 74,997 | 37,096 | ||||||
| Cash and restricted cash, end of period | $ | 123,247 | $ | 73,278 | ||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Interest paid, net of amount capitalized | $ | 18,119 | $ | 10,927 | ||||
| Cash paid for income and franchise taxes | 262 | 167 | ||||||
| Supplemental Disclosure of Noncash Activities | ||||||||
| Assumed liabilities in asset acquisitions | 3,829 | 5,027 | ||||||
| Accrued dividends payable to common stockholders | 748 | 567 | ||||||
| Accrued distributions payable to redeemable noncontrolling interests in the OP | 939 | 313 | ||||||
| Accrued dividends payable to preferred stockholders | 6,094 | 2,031 | ||||||
| Accrued redemptions payable to common stockholders | 42,350 | 1,105 | ||||||
| Accrued capital expenditures | 3,263 | — | ||||||
| Accretion to redemption value of Redeemable Series A preferred stock | 560 | 525 | ||||||
| Fair market value adjustment on assumed debt | 89 | — | ||||||
| Assumed debt on acquisitions | 13,582 | — | ||||||
| Offering costs accrued | 84 | 284 | ||||||
| Issuance of Class A common stock related to DRIP dividends | 21,173 | 10,920 | ||||||
| DRIP dividends to common stockholders | (21,173 | ) | (10,920 | ) | ||||
| Contributions from redeemable noncontrolling interests in the OP related to DRIP distributions | 1,487 | 1,191 | ||||||
| DRIP distributions to redeemable noncontrolling interests in the OP | (1,487 | ) | (1,191 | ) | ||||
| Real estate investments assumed in acquisition of NexPoint Homes through VIE consolidation | 326,432 | — | ||||||
| Earnest money deposits assumed in acquisition of NexPoint Homes through VIE consolidation | 36,838 | — | ||||||
| Other assets assumed in acquisition of NexPoint Homes through VIE consolidation | 8,729 | — | ||||||
| Notes payable assumed in acquisition of NexPoint Homes through VIE consolidation | 278,530 | — | ||||||
| Other liabilities assumed in acquisition of NexPoint Homes through VIE consolidation | 4,607 | — | ||||||
| Noncontrolling interests assumed in acquisition of NexPoint Homes through VIE consolidation | 41,150 | — | ||||||
See Accompanying Notes to Consolidated Financial Statements
VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Organization and Description of Business
VineBrook Homes Trust, Inc. (the “Company”, “we”, “us,” “our”) was incorporated in Maryland on July 18, 2018 and has elected to be taxed as a real estate investment trust (“REIT”). The Company is focused on acquiring, renovating, leasing, maintaining and otherwise managing single family rental (“SFR”) home investments primarily located in large to medium size cities and suburbs located in the midwestern, heartland and southeastern United States. Substantially all of the Company’s business is conducted through VineBrook Homes Operating Partnership, L.P. (the “OP”), the Company’s operating partnership, as the Company owns its properties indirectly through the OP. VineBrook Homes OP GP, LLC (the “OP GP”), is the general partner of the OP. As of September 30, 2022, there were a combined 25,346,922 Class A, Class B and Class C units of the OP (collectively, “OP Units”), of which 21,542,876 Class A OP Units, or 85.0%, were owned by the Company, 2,691,330 Class B OP Units, or 10.6%, were owned by NexPoint Real Estate Opportunities, LLC (“NREO”), 89,037 Class C OP Units, or 0.4%, were owned by NRESF REIT Sub, LLC (“NRESF”), 140,509 Class C OP Units, or 0.6%, were owned by GAF REIT, LLC (“GAF REIT”) and 883,170 Class C OP Units, or 3.4%, were owned by limited partners that were sellers in the Formation Transaction (defined below) (and in certain instances affiliated with the equity holders of the Manager) (the “VineBrook Contributors”) or other Company insiders. NREO, NRESF and GAF REIT are noncontrolling limited partners unaffiliated with the Company but are affiliates of the Adviser (defined below). The Second Amended and Restated Limited Partnership Agreement of the OP (the “OP LPA”) generally provides that Class A OP Units and Class B OP Units each have 50.0% of the voting power of the OP Units, including with respect to the election of directors to the Partnership Board (defined below in Note 10), and the Class C OP Units have no voting power. Each Class A OP Unit, Class B OP Unit and Class C OP Unit otherwise represents substantially the same economic interest in the OP.
The Company began operations on November 1, 2018 as a result of the acquisition of various partnerships and limited liability companies owned and operated by the VineBrook Contributors and other third parties, which owned 4,129 SFR assets located in Ohio, Kentucky and Indiana (the “Initial Portfolio”) for a total purchase price of approximately $330.2 million, including closing and financing costs of $6.0 million (the “Formation Transaction”). On November 1, 2018, the Company accepted subscriptions for 1,097,367 shares of its Class A common stock, par value $0.01 (“Shares”), for gross proceeds of approximately $27.4 million in connection with the Formation Transaction. The proceeds from the issuance of Shares were used to acquire OP Units. The OP used the capital contribution from the Company to fund a portion of the purchase price for the Initial Portfolio. The remaining purchase price and closing costs were funded by a capital contribution totaling $70.7 million from NREO, $8.6 million of equity rolled over from VineBrook Contributors, and $241.4 million from a Federal Home Loan Mortgage Corporation (“Freddie Mac”) mortgage (the “Initial Mortgage”) provided by KeyBank N.A. (“KeyBank”). On May 1, 2019 (the “Release Date”), approximately $1.4 million worth of OP Units were released to various VineBrook Contributors from an indemnity reserve escrow that was established at the time the Initial Portfolio was acquired. From the time the escrow reserve was established until the Release Date, no indemnity claims were made against said escrow.
Between November 1, 2018 and September 30, 2022, the Company, through the SPEs (as defined in Note 3) owned by the OP, purchased 20,220 additional homes and sold 196 homes within the VineBrook reportable segment (see Note 15), and through the OP’s consolidated investment in NexPoint Homes (as defined in Note 2) purchased 2,544 additional homes. Together with the Initial Portfolio, the Company, through the OP’s SPEs and its consolidation of NexPoint Homes, indirectly owned an interest in 26,697 homes (the “Portfolio”) in 20 states as of September 30, 2022. The acquisitions of the additional homes in the VineBrook reportable segment were funded by loans (see Note 7), proceeds from the sale of Shares and Preferred Shares (defined below) and excess cash generated from operations.
The Company is externally managed by NexPoint Real Estate Advisors V, L.P. (the “Adviser”), through an agreement dated November 1, 2018, subsequently amended and restated on May 4, 2020, renewed on November 1, 2021 and amended on October 25, 2022 (the “Advisory Agreement”). The Advisory Agreement will automatically renew on the anniversary of the renewal date for -year terms hereafter, unless otherwise terminated. The Adviser provides asset management services to the Company. The OP caused the SPEs to retain VineBrook Homes LLC (the “Manager”), an affiliate of certain VineBrook Contributors, to renovate, lease, maintain, and operate the VineBrook properties under management agreements (as amended, the “Management Agreements”) that generally have an initial -year term with -year automatic renewals, unless otherwise terminated. The Management Agreements are supplemented by a side letter (as amended and restated, the “Side Letter”) by and among the Company, the OP, the OP GP, the Manager and certain of its affiliates. Certain SPEs from time to time may have property management agreements with independent third parties that are not the Manager. These are typically the result of maintaining legacy property managers after an acquisition to help transition the properties to the Manager or, in the case of a future sale, to manage the properties until they are sold. All of the Company’s investment decisions are made by employees of the Adviser and the Manager, subject to general oversight by the OP’s investment committee and the Company’s board of directors (the “Board”). Because the equity holders of the Manager own OP Units, the Manager is considered an affiliate for financial reporting disclosure purposes.
The Company’s investment objectives are to maximize the cash flow and value of properties owned, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for its stockholders through targeted management and a renovation program for the homes acquired.
On August 28, 2018, the Company commenced the offering of 40,000,000 Shares through a continuous private placement (the “Private Offering”), under regulation D of the Securities Act of 1933, as amended (the “Securities Act”) (and various state securities law provisions) for a maximum of $1.0 billion of its Shares. The Private Offering closed on September 14, 2022. The initial offering price for Shares sold through the Private Offering was $25.00 per Share. The Company conducted periodic closings and sold Shares at the prior net asset value (“NAV”) per share as determined using the valuation methodology recommended by the Adviser and approved by the pricing committee (the “Pricing Committee”) of the Board (the “Valuation Methodology”), plus applicable fees and commissions. The NAV per share is calculated on a fully diluted basis. NAV may differ from the values of our real estate assets as calculated in accordance with accounting principles generally accepted in the United States (“GAAP”).
NexPoint Securities, Inc. (the “Dealer Manager”), an entity under common ownership with the Adviser, served as the sole dealer manager for the Private Offering and Raymond James & Associates, Inc. (“Raymond James”) and other unaffiliated broker-dealers served as placement agents (the “Placement Agents”) through selling agreements (“Selling Agreements”) between each Placement Agent and the Company.
The Company has adopted a Long-Term Incentive Plan (the “2018 LTIP”) whereby the Board, or a committee thereof, may grant awards of restricted stock units of the Company (“RSUs”) or profits interest units in the OP (“PI Units”) to certain employees of the Adviser and the Manager, or others at the discretion of the Board (including the directors and officers of the Company or other service providers of the Company or the OP). Under the terms of the 2018 LTIP, 426,307 Shares were initially reserved, subject to automatic increase on January 1st of each year beginning with January 1, 2019 by a number equal to 10% of the total number of OP Units and vested PI Units outstanding on December 31st of the preceding year, provided that the Board may act prior to each such January 1st to determine that there will be no increase for such year or that the increase will be less than the number of shares by which the Share Reserve would otherwise increase (the “Share Reserve”). In addition, the Shares available under the 2018 LTIP may not exceed in the aggregate 10% of the number of OP Units and vested PI Units outstanding at the time of measurement (the “Share Maximum”). Grants may be made annually by the Board, or more or less frequently in the Board’s sole discretion. Vesting of grants made under the 2018 LTIP will occur over a period of time as determined by the Board and may include the achievement of performance metrics, also as determined by the Board in its sole discretion.
2. Summary of Significant Accounting Policies
Basis of Accounting and Use of Estimates
The accompanying unaudited consolidated financial statements are presented in accordance with GAAP and the rules and regulations of the SEC. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. There have been no significant changes to the Company’s significant accounting policies during the nine months ended September 30, 2022.
The accompanying unaudited consolidated financial statements have been prepared according to the rules and regulations of the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. References to number of properties are unaudited.
In the opinion of management, all adjustments and eliminations necessary for the fair presentation of the Company’s financial position as of September 30, 2022 and December 31, 2021 and results of operations for the three and nine months ended September 30, 2022 and 2021 have been included. The unaudited information included in these interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2021 and 2020 included in our Annual Report. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any other future period.
Principles of Consolidation
The Company accounts for subsidiary partnerships, limited liability companies, joint ventures and other similar entities in which it holds an ownership interest in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. The Company first evaluates whether each entity is a variable interest entity (“VIE”). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. If the Company determines the entity is not a VIE, it evaluates whether the entity should be consolidated under the voting model. The Company consolidates an entity when it controls the entity through ownership of a majority voting interest. As of September 30, 2022, the Company has determined it must consolidate the OP, its subsidiaries and the OP’s investment in NexPoint Homes Trust, Inc. (“NexPoint Homes”) (see Note 5) under the VIE model as it was determined the Company both controls the direct activities of the OP and its investments, including NexPoint Homes, and has the right to receive benefits that could potentially be significant to the OP, its subsidiaries and its investment in NexPoint Homes. The Company has control to direct the activities of the OP and its subsidiaries because the OP GP must generally receive approval of the Board to take any actions. The Company has control to direct the activities of NexPoint Homes because the OP owns approximately 96% of the outstanding equity of NexPoint Homes and the parties that beneficially own over 99% of the operating partnership of NexPoint Homes are related parties to the Company as of September 30, 2022. The consolidated financial statements include the accounts of the Company and its subsidiaries, including the OP, its subsidiaries and NexPoint Homes. All significant intercompany accounts and transactions have been eliminated in consolidation. OP Units and equity interests in consolidated VIEs that are not owned by the Company are presented as noncontrolling interests in the consolidated financial statements, and income or loss generated is allocated between the Company and the noncontrolling interests based upon their relative ownership percentages. In these consolidated financial statements, redeemable noncontrolling interests in the OP are exclusive of any interests in NexPoint Homes and its SFR OP (as defined in Note 5). Noncontrolling interests in consolidated VIEs are representative of interests in NexPoint Homes and redeemable noncontrolling interests in consolidated VIEs are representative of interests in the SFR OP (as defined in Note 5).
Real Estate Investments
Upon acquisition, we evaluate our acquired SFR properties for purposes of determining whether a transaction should be accounted for as an asset acquisition or business combination. Since substantially all of the fair value of our acquired properties is concentrated in a single identifiable asset or group of similar identifiable assets and the acquisitions do not include a substantive process, our purchases of homes or portfolios of homes qualify as asset acquisitions. Accordingly, upon acquisition of a property, the purchase price and related acquisition costs (“Total Consideration”) are allocated to land, buildings, improvements, fixtures, and intangible lease assets based upon their relative fair values.
The allocation of Total Consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement (“ASC 820”) (see Note 8), is based on an independent third-party valuation firm’s estimate of the fair value of the tangible and intangible assets and liabilities acquired or management's internal analysis based on market knowledge obtained from historical transactions. The valuation methodology utilizes market comparable information, depreciated replacement cost and other estimates in allocating value to the tangible assets. The allocation of the Total Consideration to intangible lease assets represents the value associated with the in-place leases, as one month’s worth of effective gross income (rental revenue, less credit loss allowance, plus other income) as the average downtime of the assets in the portfolio is approximately one month and the assets in the portfolio are leased on a gross rental structure. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized or accreted as interest expense over the life of the debt assumed.
Real estate assets, including land, buildings, improvements, fixtures, and intangible lease assets are stated at historical cost less accumulated depreciation and amortization. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred. Expenditures for improvements, renovations, and replacements are capitalized at cost. The Company also incurs indirect costs to prepare acquired properties for rental. These costs are capitalized to the cost of the property during the period the property is undergoing activities to prepare it for its intended use. We capitalize interest, real estate taxes, insurance, utilities and other indirect costs as costs of the property only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided that expenditures for the asset have been made and the costs have been incurred. Upon completion of the renovation of our properties, all costs of operations, including repairs and maintenance, are expensed as incurred, unless the renovation meets the Company’s capitalization criteria. Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table:
| Land | Not depreciated | |||
| Buildings | years | |||
| Improvements and other assets | - years | |||
| Acquired improvements and fixtures | - years | |||
| Intangible lease assets | months | |||
As of September 30, 2022, the gross balance and accumulated amortization related to the intangible lease assets was $2.6 million and $0.9 million, respectively. As of December 31, 2021, the gross balance and accumulated amortization related to the intangible lease assets was $1.0 million and $0.5 million, respectively. For the three months ended September 30, 2022 and 2021, the Company recognized approximately $1.7 million and $2.1 million, respectively, of amortization expense related to the intangible lease assets. For the nine months ended September 30, 2022 and 2021, the Company recognized approximately $4.7 million and $5.8 million, respectively, of amortization expense related to the intangible lease assets.
Real estate assets are reviewed for impairment quarterly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Significant indicators of impairment may include, but are not limited to, declines in home values, rental rates or occupancy percentages, as well as significant changes in the economy. In such cases, the Company will evaluate the recoverability of the assets by comparing the estimated future cash flows expected to result from the use and eventual disposition of each asset to its carrying amount and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount. If impaired, the real estate asset will be written down to its estimated fair value. The process whereby we assess our SFR homes for impairment requires significant judgment and assessment of factors that are, at times, subject to significant uncertainty. No significant impairments on operating properties were recorded during the three and nine months ended September 30, 2022 and 2021.
Cash and restricted cash
The Company maintains cash at multiple financial institutions and, at times, these balances exceed federally insurable limits. As a result, there is a concentration of credit risk related to amounts on deposit. We believe any risks are mitigated through the size of the financial institutions at which our cash balances are held.
Restricted cash represents cash deposited in accounts related to security deposits, property taxes, insurance premiums and deductibles and other lender-required escrows. Amounts deposited in the reserve accounts associated with the loans can only be used as provided for in the respective loan agreements, and security deposits held pursuant to lease agreements are required to be segregated.
The following table provides a reconciliation of cash and restricted cash reported on the consolidated balance sheets that sum to the total of such amount shown in the consolidated statements of cash flows (in thousands):
| September 30, | ||||||||||||
| 2022 | 2021 | December 31, 2021 | ||||||||||
| Cash | $ | 92,566 | $ | 54,786 | $ | 54,104 | ||||||
| Restricted cash | 30,681 | 18,492 | 20,893 | |||||||||
| Total cash and restricted cash | $ | 123,247 | $ | 73,278 | $ | 74,997 | ||||||
Revenue Recognition
The Company’s primary operations consist of rental income earned from its residents under lease agreements typically with terms of one year or less. As a result of the adoption of ASC 842, Leases, on January 1, 2019, the Company classifies the SFR property leases as operating leases and elects to not separate the lease component, comprised of rents from SFR properties, from the associated non-lease component, comprised of fees from SFR properties and tenant charge-backs. The combined component is accounted for under the new lease accounting standard while certain resident reimbursements are accounted for as variable payments under the revenue accounting guidance. Rental income is recognized when earned. This policy effectively results in income recognition on a straight-line basis over the related terms of the leases. Resident reimbursements and other income consist of charges billed to residents for utilities, resident-caused damages, pets, and administrative, application and other fees and are recognized when earned. Historically, the Company has used a direct write-off method for uncollectable rents; wherein uncollectible rents are netted against rental income. In response to the COVID-19 pandemic, the Company additionally has established a reserve for any accounts receivable that are not expected to be collectible, which are netted against rental income. For the three months ended September 30, 2022 and 2021, rental income includes $3.0 million and $2.1 million of variable lease payments, respectively. For the nine months ended September 30, 2022 and 2021, rental income includes $7.6 million and $4.5 million of variable lease payments, respectively.
Gains or losses on sales of properties are recognized pursuant to the provisions included in ASC 610-20, Other Income. We recognize a full gain or loss on sale, which is presented in loss on sales of real estate on the consolidated statements of operations and comprehensive income (loss), when the derecognition criteria under ASC 610-20 have been met.
In April 2020, the FASB issued a Staff Q&A on accounting for leases during the COVID-19 pandemic, focused on the application of lease guidance in ASC 842. The Q&A states that some lease contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. Therefore, entities would need to perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to lease concessions. The FASB determined it would be acceptable for entities to not perform a lease-by-lease analysis regarding rent concessions resulting from COVID-19, and to instead make a policy election regarding rent concessions, which would give entities the option to account or not to account for these rent concessions as lease modifications if the total payments required by the modified contract are substantially the same or less than the total payments required by the original contract. Entities making the election to account for these rent concessions as lease modifications would recognize the effects of rent abatements and rent deferrals on a prospective straight-line basis over the remainder of the modified contract. We have made the election to not perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to payment plans. By electing the FASB relief, we have also made an accounting policy election to not account for rent deferrals provided to lessees due to the COVID-19 pandemic as lease modifications. Lessees are required to pay the full outstanding balance of the rent deferred over the period of the payment plan.
Redeemable Securities
Included in the Company’s consolidated balance sheets are redeemable noncontrolling interests in the OP, redeemable noncontrolling interests in consolidated VIEs and 6.50% Series A Cumulative Redeemable Preferred Stock (the “Preferred Shares”). These interests are presented in the “mezzanine” section of the consolidated balance sheets because they do not meet the functional definition of a liability or equity under current accounting literature. The Company accounts for these under the provisions of ASC Topic 480-10-S99-3A, paragraph 15(b).
In accordance with ASC Topic 480-10-S99, since the redeemable noncontrolling interests in the OP and redeemable noncontrolling interests in consolidated VIEs have a redemption feature, they are measured at their redemption value if such value exceeds the carrying value of interests. The redemption value is based on the NAV per unit at the measurement date. The offset to the adjustment to the carrying amount of the redeemable noncontrolling interests in the OP and redeemable noncontrolling interests in consolidated VIEs is reflected in the Company’s additional paid-in capital on the consolidated balance sheets. In accordance with ASC Topic 480-10-S99, the Preferred Shares are measured at their carrying value plus the accretion to their future redemption value on the balance sheet. The accretion is reflected in the Company’s dividends on and accretion to redemption value of Series A redeemable preferred stock on the consolidated statements of operations and comprehensive income (loss).
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of the Company’s common stock outstanding, which excludes any unvested RSUs and PI Units issued pursuant to the 2018 LTIP. Diluted earnings (loss) per share is computed by adjusting basic earnings (loss) per share for the dilutive effects of the assumed vesting of RSUs and PI Units and the conversion of OP Units and vested PI Units to Shares. During periods of net loss, the assumed vesting of RSUs and PI Units and the conversion of OP Units and vested PI Units to Shares is anti-dilutive and is not included in the calculation of earnings (loss) per share. The following table sets forth the computation of basic and diluted earnings (loss) per share for the periods presented (in thousands, except per share amounts):
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Numerator for loss per share: | ||||||||||||||||
| Net loss | $ | (14,621 | ) | $ | (4,799 | ) | $ | (28,972 | ) | $ | (6,947 | ) | ||||
| Less: | ||||||||||||||||
| Dividends on and accretion to redemption value of Redeemable Series A preferred stock | 2,226 | 2,206 | 6,654 | 6,619 | ||||||||||||
| Net loss attributable to redeemable noncontrolling interests in the OP | (1,782 | ) | (823 | ) | (3,976 | ) | (1,324 | ) | ||||||||
| Net loss attributable to redeemable noncontrolling interests in consolidated VIEs | (3,112 | ) | — | (4,303 | ) | — | ||||||||||
| Net loss attributable to noncontrolling interests in consolidated VIEs | (113 | ) | — | (113 | ) | — | ||||||||||
| Net loss attributable to common stockholders | $ | (11,840 | ) | $ | (6,182 | ) | $ | (27,234 | ) | $ | (12,242 | ) | ||||
| Denominator for earnings (loss) per share: | ||||||||||||||||
| Weighted average common shares outstanding - basic | 25,124 | 17,230 | 24,545 | 13,511 | ||||||||||||
| Weighted average unvested RSUs, PI Units, and OP Units (1) | — | — | — | — | ||||||||||||
| Weighted average common shares outstanding - diluted | 25,124 | 17,230 | 24,545 | 13,511 | ||||||||||||
| Earnings (loss) per weighted average common share: | ||||||||||||||||
| Basic | $ | (0.47 | ) | $ | (0.36 | ) | $ | (1.11 | ) | $ | (0.91 | ) | ||||
| Diluted | $ | (0.47 | ) | $ | (0.36 | ) | $ | (1.11 | ) | $ | (0.91 | ) | ||||
| (1) | For the three months ended September 30, 2022 and 2021, excludes approximately 4,375,000 shares and 4,135,000 shares, respectively, related to the assumed vesting of RSUs and PI Units and the conversion of OP Units and vested PI Units to Shares, as the effect would have been anti-dilutive. For the nine months ended September 30, 2022 and 2021, excludes approximately 4,325,000 shares and 4,030,000 shares, respectively, related to the assumed vesting of RSUs and PI Units and the conversion of OP Units and vested PI Units to Shares, as the effect would have been anti-dilutive. |
Segment Reporting
Under the provision of ASC 280, Segment Reporting, the Company has determined that it has two reportable segments, VineBrook and NexPoint Homes. Both reportable segments involve activities related to acquiring, renovating, developing, leasing and operating SFR homes as rental properties. The Company’s management allocates resources and evaluates operating performance across the two segments. The VineBrook reportable segment is the legacy reportable segment and represents the majority of the Company’s operations and generally purchases homes to implement a value-add strategy. The NexPoint Homes reportable segment was formed June 8, 2022 and represents a supplemental reportable segment that generally purchases newer homes that require less rehabilitation compared to the VineBrook reportable segment. Within the VineBrook reportable segment, the Company had a geographic market concentration in one market (Cincinnati) that represents more than 10% of the total gross book value of SFR homes as of September 30, 2022.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the nine months ended September 30, 2022, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company has elected practical expedients within FASB ASC 848 related to replacing the source of hedged transactions and continues evaluating the impact the adoption of this ASU will have on the Company's consolidated financial statements.
3. Investments in Subsidiaries
In connection with its indirect investments in real estate assets acquired, the Company, through its ownership of the OP, indirectly holds a proportional ownership interest in the Portfolio, through the OP’s beneficial ownership of all of the issued and outstanding membership interests in the special purpose limited liability companies (“SPEs”) that directly or indirectly own the Portfolio. All of the properties in the Portfolio are consolidated in the Company’s consolidated financial statements. The assets of each entity can only be used to settle obligations of that particular entity, and the creditors of each entity have no recourse to the assets of other entities or the Company, except as discussed below. Under the terms of the notes payable, except as discussed below, the lender has a mortgage interest in each real estate asset in the SPE to which the loan is made.
As of September 30, 2022, the Company, through the OP and its SPE subsidiaries, owned the Portfolio, which consisted of 24,153 properties in the VineBrook reportable segment and 2,544 properties in the NexPoint Homes reportable segment, through 12 SPEs and their various subsidiaries and through the consolidated investment in NexPoint Homes. The following table presents the ownership structure of each SPE group that directly or indirectly owns the title to each real estate asset as of September 30, 2022, the number of assets held, the cost of those assets, the resulting debt allocated to each SPE and whether the debt is a mortgage loan. The mortgage loan may be settled from the assets of the below entity or entities to which the loan is made. Loans from the Warehouse Facility (as defined in Note 7) can only be settled from the assets owned by VB One, LLC (dollars in thousands):
| VIE Name | Homes | Cost Basis | OP Beneficial Ownership % | Encumbered by Mortgage (1) | Debt Allocated | |||||||||||||||
| NREA VB I, LLC | 66 | $ | 6,048 | 100 | % | Yes | $ | 5,048 | ||||||||||||
| NREA VB II, LLC | 167 | 16,568 | 100 | % | Yes | 10,742 | ||||||||||||||
| NREA VB III, LLC | 1,322 | 121,675 | 100 | % | Yes | 71,115 | ||||||||||||||
| NREA VB IV, LLC | 385 | 37,438 | 100 | % | Yes | 24,283 | ||||||||||||||
| NREA VB V, LLC | 1,829 | 127,264 | 100 | % | Yes | 108,384 | ||||||||||||||
| NREA VB VI, LLC | 298 | 28,059 | 100 | % | Yes | 18,324 | ||||||||||||||
| NREA VB VII, LLC | 36 | 3,081 | 100 | % | Yes | 2,989 | ||||||||||||||
| True FM2017-1, LLC | 211 | 19,072 | 100 | % | Yes | 10,168 | ||||||||||||||
| VB One, LLC | 13,926 | 1,766,912 | 100 | % | No | 1,195,000 | ||||||||||||||
| VB Two, LLC | 1,853 | 170,377 | 100 | % | No | 124,462 | ||||||||||||||
| VB Three, LLC | 3,890 | 545,477 | 100 | % | No | 320,000 | ||||||||||||||
| VB Five, LLC | 170 | 18,348 | 100 | % | Yes | 8,824 | ||||||||||||||
| NexPoint Homes | 2,544 | 743,872 | 96 | % | No | 467,254 | ||||||||||||||
| 26,697 | $ | 3,604,191 | $ | 2,366,593 | (2) | |||||||||||||||
| (1) | Assets held, directly or indirectly, by VB One, LLC, VB Two, LLC and VB Three, LLC are not encumbered by a mortgage. Instead, the lender has an equity pledge in certain assets of the respective SPEs and an equity pledge in the equity of the respective SPEs. |
| (2) | In addition to the debt allocated to the SPEs noted above, as of September 30, 2022, NexPoint Homes had approximately $100.1 million of debt (excluding amounts owed to the OP from NexPoint Homes., as these are eliminated in consolidation) not collateralized directly by homes which reflects the amount outstanding on the SFR OP Convertible Notes (as defined in Note 13) as of September 30, 2022. |
4. Real Estate Assets
As of September 30, 2022, the Company, through the OP and its SPE subsidiaries, owned 26,697 homes, including 24,153 homes in the VineBrook reportable segment and 2,544 homes in the NexPoint Homes reportable segment. As of December 31, 2021, the Company only had one reportable segment, VineBrook, and through the OP and its SPE subsidiaries, owned 16,891 homes. The components of the Company’s real estate investments in homes were as follows (in thousands):
| Land | Buildings and improvements (1) | Intangible lease assets | Real estate held for sale, net | Total | |||||||||||||||||
| Gross Real Estate, December 31, 2021 | $ | 334,191 | $ | 1,391,786 | $ | 971 | $ | 81 | $ | 1,727,029 | |||||||||||
| Additions | 318,027 | 1,554,693 | (2) | 5,908 | 10,797 | 1,889,425 | |||||||||||||||
| Write-offs | — | — | (4,273 | ) | — | (4,273 | ) | ||||||||||||||
| Dispositions | — | — | — | (7,990 | ) | (7,990 | ) | ||||||||||||||
| Gross Real Estate, September 30, 2022 | 652,218 | 2,946,479 | 2,606 | 2,888 | 3,604,191 | ||||||||||||||||
| Accumulated depreciation and amortization | — | (140,250 | ) | (859 | ) | — | (141,109 | ) | |||||||||||||
| Net Real Estate, September 30, 2022 | $ | 652,218 | $ | 2,806,229 | $ | 1,747 | $ | 2,888 | $ | 3,463,082 | |||||||||||
| (1) | Includes capitalized interest, real estate taxes, insurance and other costs incurred during rehabilitation of the properties. |
| (2) | Includes capitalized interest of approximately $7.5 million and other capitalizable costs outlined in (1) above of approximately $6.5 million. |
During the three months ended September 30, 2022 and 2021, the Company recognized depreciation expense of approximately $27.0 million and $12.8 million, respectively. During the nine months ended September 30, 2022 and 2021, the Company recognized depreciation expense of approximately $64.2 million and $29.7 million, respectively.
Acquisitions and dispositions
During the nine months ended September 30, 2022, the Company, through the OP, acquired 7,348 homes, including the homes in the portfolios discussed below, and disposed of 86 homes within the VineBrook reportable segment. On June 8, 2022, the Company, through its consolidated investment in NexPoint Homes, assumed 1,242 homes, and NexPoint Homes subsequently acquired 1,302 homes. As of September 30, 2022, NexPoint Homes owns 2,544 homes. See Note 5 for additional information about NexPoint Homes.
On February 8, 2022, the Company, through the OP, purchased 2,842 homes, located across eight states, with the largest concentration in the southeastern United States (the “Prager Portfolio”). The gross purchase price was approximately $352.7 million, in addition to approximately $31.4 million in debt extinguishment costs and $3.7 million in other closing costs. See the table below for more information about the Prager Portfolio as of the acquisition date:
| Market | State | # of Homes | ||||||
| Memphis | TN, MS | 743 | ||||||
| Atlanta | GA | 741 | ||||||
| Saint Louis | MO | 308 | ||||||
| Pensacola | FL | 300 | ||||||
| Raeford | NC | 250 | ||||||
| Kansas City | MO | 230 | ||||||
| Portales | NM | 150 | ||||||
| Augusta | GA, SC | 67 | ||||||
| Jacksonville | FL | 53 | ||||||
| Total | 2,842 | |||||||
On March 18, 2022, the Company, through the OP, purchased 170 homes located in Memphis, Tennessee for approximately $17.1 million (the “CrestCore Portfolio”).
On August 25, 2022, the Company, through the OP, purchased a portfolio of approximately 1,030 homes located across 10 states, with the largest concentration in the midwestern and southern United States (the “Global Atlantic Portfolio”) for approximately $217.0 million. See the table below for more information about the Global Atlantic Portfolio as of the acquisition date:
| Market | State | # of Homes | ||||
| Birmingham | AL | 147 | ||||
| Columbia | SC | 145 | ||||
| Kansas City | MO, KS | 143 | ||||
| Jackson | MS | 122 | ||||
| St. Louis | MO | 87 | ||||
| Cincinnati | OH, KY | 71 | ||||
| Montgomery | AL | 68 | ||||
| Huntsville | AL | 58 | ||||
| Indianapolis | IN | 44 | ||||
| Triad | NC | 41 | ||||
| Charleston | SC | 33 | ||||
| Augusta | GA, SC | 32 | ||||
| Columbus | OH | 20 | ||||
| Dayton | OH | 12 | ||||
| Greenville | SC | 7 | ||||
| Total | 1,030 | |||||
Held for sale properties
The Company periodically classifies real estate assets as held for sale when certain criteria are met, in accordance with GAAP. Once the Company begins marketing an asset or determines that it will pursue marketing an asset, the asset becomes classified as held for sale. At that time, the Company presents the net real estate assets separately in its consolidated balance sheet, and the Company ceases recording depreciation and amortization expense related to that property. Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell. As of September 30, 2022, there are 35 properties that are classified as held for sale. These held for sale properties have a carrying amount of approximately $2.9 million.
5. NexPoint Homes Investment
During the nine months ended September 30, 2022, the Company, through its taxable REIT subsidiary (“the TRS”), invested approximately $100.8 million in Ensign Peak Realty, LLC (“Ensign”), an owner and operator of SFR homes. This investment was redeemed in full on June 8, 2022 in connection with the formation of NexPoint Homes, described below.
Formation of NexPoint Homes - Contribution Agreements
On June 8, 2022, the Company, through the OP, entered into a contribution agreement (the “Contribution Agreement”) with NexPoint Homes, which is externally advised by an affiliate of our Adviser. In accordance with the Contribution Agreement, the OP contributed $50.0 million to NexPoint Homes in exchange for 2,000,000 shares of Class A common stock, par value $0.01 per share of NexPoint Homes (the “NexPoint Homes Class A Shares”). The NexPoint Homes Class A Shares were issued and valued at $25.00 per share.
Following the contribution by the OP to NexPoint Homes, NexPoint Homes entered into a contribution agreement (the “SFR OP Contribution Agreement”) with NexPoint SFR Operating Partnership, L.P. (the “SFR OP”), the operating partnership of NexPoint Homes, certain funds managed by affiliates of our Adviser and certain individuals (the “Principals”) affiliated with HomeSource Operations, LLC, the external manager of the SFR OP. In accordance with the SFR OP Contribution Agreement, NexPoint Homes contributed $50.0 million to the SFR OP in exchange for 2,000,000 limited partnership units of the Operating Partnership (“SFR OP Units”).
On June 8, 2022, the OP loaned $50.0 million to NexPoint Homes in exchange for $50.0 million of 7.50% convertible notes of NexPoint Homes (the “NexPoint Homes Convertible Notes”). The NexPoint Homes Convertible Notes bear interest at 7.50%, are interest only during the term of the NexPoint Homes Convertible Note and mature on June 30, 2027. From August 1, 2022 through March 31, 2027, the NexPoint Homes Convertible Notes are convertible into NexPoint Homes Class A Shares at the election of the OP at the then-current net asset value of NexPoint Homes, subject to certain limitations.
On June 8, 2022, in connection with the formation of NexPoint Homes, the Company consolidated a note with Metropolitan Life Insurance Company (the “NexPoint Homes MetLife Note 1”). The NexPoint Homes MetLife Note 1 is guaranteed by the OP and bears interest at a fixed rate of 3.72% on the tranche collateralized by stabilized properties and 4.47% on the tranche collateralized by non-stabilized properties. The NexPoint Homes MetLife Note 1 is interest-only and matures and is due in full on March 3, 2027. As of September 30, 2022, the NexPoint Homes MetLife Note 1 had an outstanding principal balance of $233.6 million which is included, net of unamortized deferred financing costs, in notes payable on the consolidated balance sheets.
See Note 7 for more information on the Company’s consolidated debt related to its investment in NexPoint Homes.
Consolidation of NexPoint Homes
Under ASC 810, Consolidation, the Company has determined that NexPoint Homes represents a variable interest entity. Under the VIE model, the Company concluded that the Company both controls and directs the activities of NexPoint Homes and has the right to receive benefits that could potentially be significant to its investment in NexPoint Homes. The Company has control to direct the activities of NexPoint Homes as the OP owns approximately 96% of the outstanding equity of NexPoint Homes as of September 30, 2022 and the parties that beneficially own over 99% of the SFR OP are related parties to the Company. As such, the Company determined it is appropriate to consolidate NexPoint Homes. All significant intercompany accounts and transactions have been eliminated in consolidation. As NexPoint Homes continues to raise additional capital, the Company will continue to evaluate whether the entity is a VIE and if the Company is the primary beneficiary of the VIE and should consolidate the entity.
6. Investments, at Fair Value
On November 22, 2021, the Company, through the TRS, invested $2.5 million in Vesta Ventures Fund I, LP (the “Vesta Fund”). The Vesta Fund is a closed-end fund with an initial seven-year term beginning on February 24, 2021, subject to certain extension provisions, that invests in early and growth stage technology companies that provide solutions to the SFR real estate sector. Vesta Ventures GP, LLC (the “Vesta GP”) is the general partner and managing member of the Vesta Fund and accordingly has the exclusive right to manage and control the Vesta Fund. The TRS is a limited partner in the Vesta Fund with a minority interest and accordingly has no control or influence over the Vesta Fund.
Investments in privately held entities that report NAV, such as our privately held equity investments, are presented at fair value using NAV as a practical expedient, with changes in fair value recognized in net income. We use NAV reported by limited partnerships generally without adjustment, unless we are aware of information indicating that the NAV reported by a limited partnership does not accurately reflect the fair value of the investment at our reporting date. We disclose the timing of liquidation of an investee’s assets and the date when redemption restrictions will lapse (or indicate if this timing is unknown) if the investee has communicated this information to us or has announced it publicly. We recognize both realized and unrealized gains and losses in our consolidated statements of operations. Unrealized gains and losses represent changes in NAV as a practical expedient to estimate fair value for investments in privately held entities that report NAV. Realized gains and losses on our investments represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost. At September 30, 2022, the Company had material unrealized or realized gains or losses related to the investment.
7. Debt
On September 20, 2019, the OP (as guarantor) and VB One, LLC (as borrower) entered into a credit facility (the “Warehouse Facility”) with KeyBank. The Warehouse Facility is secured by an equity pledge in certain assets of VB One, LLC and an equity pledge in the equity of VB One, LLC. On November 3, 2021, the Company (as guarantor), the OP (as parent borrower), and each of (i) VB OP Holdings, LLC and (ii) VB One, LLC and certain of its subsidiaries (as subsidiary borrowers), entered into an amended and restated credit agreement to recast the Warehouse Facility, which was subsequently amended on December 9, 2021, April 8, 2022 and May 20, 2022. The amended recast Warehouse Facility is a full-term, interest-only facility with an initial 36-month term ending November 3, 2024, has one 12-month extension option, and bears interest at a variable rate equal to the forward-looking term rate based on the Secured Overnight Financing Rate (“SOFR”) for the applicable interest period (“one-month term SOFR”), or daily SOFR for the applicable interest period, plus a margin of 0.1% plus an applicable rate ranging from 1.6% to 2.45% depending on the Company’s consolidated total leverage ratio. Under the amended recast Warehouse Facility, the OP has the right to increase the total commitments available for borrowing, which may take the form of an increase in revolving commitments or one or more tranches of term loan commitments, up to $1.2 billion.
On September 13, 2022, the Company received increased commitments of $200.0 million on the Warehouse Facility, incurring $3.3 million of deferred financing costs, and then drew $200.0 million on the Warehouse Facility. As of September 30, 2022, approximately $1.2 billion was drawn on the Warehouse Facility. The balance of the Warehouse Facility, net of unamortized deferred financing costs, is included in credit facilities on the consolidated balance sheets.
On December 28, 2020, in connection with the acquisition of a 45-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $2.4 million mortgage loan assumed by a subsidiary of the OP (the “CoreVest Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of SMP Homes 5B, LLC. The CoreVest Note is secured by the properties in SMP Homes 5B, LLC and an equity pledge in SMP Homes 5B, LLC and bears interest at a fixed rate equal to 6.12%. The CoreVest Note matures and is due in full on January 9, 2023 and requires monthly principal and interest payments. On July 11, 2022, the OP repaid the full balance of the CoreVest Note, which extinguished the CoreVest Note.
On March 1, 2021, the Company entered into a non-recourse carveout guaranty and certain wholly owned subsidiaries of VB Three, LLC (as borrowers) entered into a $500.0 million credit agreement with JP Morgan (the “JPM Facility”). The JPM Facility is secured by equity pledges in VB Three, LLC and its wholly owned subsidiaries and bears interest at a variable rate equal to one-month LIBOR plus 2.75%. The JPM Facility is interest-only and matures and is due in full on March 1, 2023. On March 10, 2022, the Company entered into Amendment No. 1 to the JPM Facility, wherein each advance under the JPM Facility will bear interest at a daily SOFR plus 2.85%. As of September 30, 2022, the JPM Facility has $180.0 million of available capacity. The balance of the JPM Facility, net of unamortized deferred financing costs, is included in credit facilities on the consolidated balance sheets. The JPM Facility currently matures on March 1, 2023. Management is in the process of extending or refinancing the facility with the existing lender. If the Company is not able to complete an extension or refinancing with the existing lender, management believes it has sufficient access to other potential sources of capital, including through raising equity, securing new debt or selling a portion of the portfolio to repay the debt upon maturity.
On January 13, 2022, in connection with the acquisition of a 98-home portfolio, the OP (as guarantor) assumed an approximately $4.6 million Freddie Mac mortgage loan (the “Hatchway Broadmoor Mortgage”) with Arbor Agency Lending, LLC as a result of the OP’s acquisition of Hatchway Broadmoor, LLC. The Hatchway Broadmoor Mortgage is secured by properties in Hatchway Broadmoor, LLC and an equity pledge in Hatchway Broadmoor, LLC and bears interest at a fixed rate equal to 5.35%. The Hatchway Broadmoor Mortgage matures and is due in full on February 1, 2029 and requires monthly principal and interest payments. On August 19, 2022, the OP incurred a prepayment penalty of approximately $0.6 million and repaid the full balance of the Hatchway Broadmoor Mortgage which extinguished the Hatchway Broadmoor Mortgage.
On February 8, 2022, in connection with the acquisition of the Prager Portfolio, the Company entered into a bridge credit agreement through the OP with KeyBank National Association, and borrowed $150.0 million (the “Bridge Facility”). On April 8, 2022, the Company repaid the outstanding principal balance on the Bridge Facility, which extinguished the Bridge Facility. In connection with the extinguishment of the Bridge Facility, the Company incurred a loss on extinguishment of debt of approximately $1.0 million, which is presented on the consolidated statements of operations and comprehensive income (loss).
On March 18, 2022, in connection with the acquisition of an 88-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $4.7 million mortgage loan assumed by a subsidiary of the OP (the “Crestcore II Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of Crestcore II, LLC. The Crestcore II Note is secured by the properties in Crestcore II, LLC and an equity pledge in Crestcore II, LLC and bears interest at a fixed rate equal to 5.12%. The Crestcore II Note matures and is due in full on July 9, 2029 and requires monthly principal and interest payments. The balance of the Crestcore II Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.
On March 18, 2022, in connection with the acquisition of an 82-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $4.2 million mortgage loan assumed by a subsidiary of the OP (the “Crestcore IV Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of Crestcore IV, LLC. The Crestcore IV Note is secured by the properties in Crestcore IV, LLC and an equity pledge in Crestcore IV, LLC and bears interest at a fixed rate equal to 5.12%. The Crestcore IV Note matures and is due in full on July 9, 2029 and requires monthly principal and interest payments. The balance of the Crestcore IV Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.
On August 25, 2022, in connection with the acquisition of the Global Atlantic Portfolio, the Company entered into a bridge credit agreement through the OP with KeyBank National Association, and borrowed $165.0 million (the “Bridge Facility II”). The Bridge Facility II accrued interest at one-month term SOFR plus a margin of 2.6%. On September 2, 2022, the Company drew an additional $35.0 million on the Bridge Facility II. On September 13, 2022, the Company repaid the outstanding principal balance on the Bridge Facility II, which extinguished the Bridge Facility II. In connection with the extinguishment of the Bridge Facility II, the Company incurred a loss on extinguishment of debt of approximately $1.8 million, which is presented on the consolidated statements of operations and comprehensive income (loss).
In addition to the debt agreements discussed above for the VineBrook reportable segment, as of September 30, 2022, the NexPoint Homes reportable segment had $567.4 million of debt outstanding included in notes payable on the consolidated balance sheets, which is comprised of the NexPoint Homes MetLife Note 1, the NexPoint Homes Metlife Note 2 (as defined below), NexPoint Homes KeyBank Facility and the SFR OP Convertible Notes (as defined in Note 13). See the summary table below for further information on the debt of the NexPoint Homes Reportable Segment.
On August 12, 2022, a subsidiary of SFR OP as borrower closed a $200 million delayed draw facility with Metropolitan Life Insurance Company, as lender (the “NexPoint Homes MetLife Note 2”). The NexPoint Homes MetLife Note 2 matures on August 12, 2027 and bears interest at a fixed rate of 5.44%. As of September 30, 2022, approximately $171.2 million has been drawn on the NexPoint Homes MetLife Note 2.
On August 12, 2022, a subsidiary of SFR OP as borrower closed a $75 million revolver facility with KeyBank, as lender (the “NexPoint Homes KeyBank Facility”). The NexPoint Homes KeyBank Facility on August 12, 2025 and bears interest at a floating rate of 185 to 260 basis points depending on the borrower’s leverage ratio over the SOFR. As of September 30, 2022, approximately $62.5 million has been drawn on the NexPoint Homes KeyBank Facility.
As of September 30, 2022, the Company is in compliance with all debt covenants in all of its debt agreements.
The weighted average interest rate of the Company’s debt was 4.9333% as of September 30, 2022 and 2.3707% as of December 31, 2021. As of September 30, 2022 and December 31, 2021, the adjusted weighted average interest rate of the Company’s debt, including the effect of derivative financial instruments, was 4.3747% and 2.9171%, respectively. For purposes of calculating the adjusted weighted average interest rate of the Company’s debt as of September 30, 2022, including the effect of derivative financial instruments, the Company has included the weighted average fixed rate of 1.9508% on its combined $1.3 billion notional amount of interest rate swap and cap agreements, representing a weighted average fixed rate for one-month LIBOR, daily SOFR and one-month term SOFR, which effectively fixes the interest rate on $1.3 billion of the Company’s floating rate indebtedness (see Note 8).
For full descriptions of the debt arrangements not included in this Form 10-Q, please see Note 6 to the consolidated financial statements in our Annual Report.
The following table contains summary information concerning the Company’s debt as of September 30, 2022 and December 31, 2021 (dollars in thousands):
| Outstanding Principal as of | |||||||||||||||
| Type | September 30, 2022 | December 31, 2021 | Interest Rate (1) | Maturity | |||||||||||
| Initial Mortgage | Floating | $ | 240,885 | $ | 241,269 | 4.69 | % | 12/1/2025 | |||||||
| Warehouse Facility | Floating | 1,195,000 | 160,000 | 4.84 | % | 11/3/2024 | (2) | ||||||||
| JPM Facility | Floating | 320,000 | 240,000 | 5.83 | % | 3/1/2023 | |||||||||
| MetLife Note | Fixed | 124,462 | 124,689 | 3.25 | % | 1/31/2026 | |||||||||
| TrueLane Mortgage | Fixed | 10,168 | 10,387 | 5.35 | % | 2/1/2028 | |||||||||
| CoreVest Note | Fixed | — | 2,338 | 6.12 | % | 1/9/2023 | |||||||||
| Crestcore II Note | Fixed | 4,671 | — | 5.12 | % | 7/9/2029 | |||||||||
| Crestcore IV Note | Fixed | 4,153 | — | 5.12 | % | 7/9/2029 | |||||||||
| NexPoint Homes MetLife Note 1 | Fixed | 233,545 | — | 3.76 | % | 3/3/2027 | |||||||||
| NexPoint Homes MetLife Note 2 | Fixed | 171,209 | — | 5.44 | % | 8/12/2027 | |||||||||
| NexPoint Homes KeyBank Facility | Floating | 62,500 | — | 5.24 | % | 8/12/2025 | |||||||||
| SFR OP Convertible Notes (3) | Fixed | 100,100 | — | 7.50 | % | 6/30/2027 | |||||||||
| $ | 2,466,693 | $ | 778,683 | ||||||||||||
| Debt premium, net (4) | 396 | 416 | |||||||||||||
| Deferred financing costs, net of accumulated amortization of $ and $, respectively | (15,714 | ) | (10,554 | ) | |||||||||||
| $ | 2,451,375 | $ | 768,545 | ||||||||||||
| (1) | Represents the interest rate as of September 30, 2022. Except for fixed rate debt, the interest rate is one-month LIBOR, daily SOFR or one-month term SOFR, plus an applicable margin. One-month LIBOR as of September 30, 2022 was 3.1427%, daily SOFR as of September 30, 2022 was 2.9800% and one-month term SOFR as of September 30, 2022 was 3.0421%. |
| (2) | This is the stated maturity for the Warehouse Facility, but it is subject to a 12-month extension option. |
| (3) | The SFR OP Convertible Notes exclude the amounts owed to NexPoint Homes by the SFR OP, as these are eliminated in consolidation. |
| (4) | The Company reflected valuation adjustments on its assumed fixed rate debt to adjust it to fair market value on the dates of acquisition for the difference between the fair value and the assumed principal amount of debt. The difference is amortized into interest expense over the remaining terms of the debt. |
Schedule of Debt Maturities
The aggregate scheduled maturities, including amortizing principal payments, of total debt for the next five calendar years subsequent to September 30, 2022 are as follows (in thousands):
| Total | |||||
| 2022 | $ | 586 | |||
| 2023 | 323,541 | ||||
| 2024 | 3,699 | ||||
| 2025 | 1,491,700 | (1) | |||
| 2026 | 124,867 | ||||
| Thereafter | 522,300 | ||||
| Total | $ | 2,466,693 | |||
| (1) | Assumes the Company exercises the 12-month extension option on the Warehouse Facility. |
Deferred Financing Costs
The Company defers costs incurred in obtaining financing and amortizes the costs over the term of the related debt using the straight-line method, which approximates the effective interest method. Deferred financing costs, net of amortization, are recorded as a reduction from the related debt on the Company’s consolidated balance sheets. Upon repayment of, or in conjunction with, a material change in the terms of the underlying debt agreement, any unamortized costs are charged to loss on extinguishment of debt. For the three months ended September 30, 2022 and 2021, amortization of deferred financing costs of approximately $2.3 million and $1.1 million, respectively, are included in interest expense on the consolidated statements of operations and comprehensive income (loss). For the nine months ended September 30, 2022 and 2021, amortization of deferred financing costs of approximately $5.6 million and $2.7 million, respectively, are included in interest expense on the consolidated statements of operations and comprehensive income (loss).
Loss on Extinguishment of Debt
Loss on extinguishment of debt includes prepayment penalties and defeasance costs incurred on the early repayment of debt and other costs incurred in a debt extinguishment. Upon repayment of or in conjunction with a material change in the terms of the underlying debt agreement, any unamortized costs are charged to loss on extinguishment of debt. For the nine months ended September 30, 2022 and 2021, the Company wrote-off deferred financing costs of approximately $3.5 million and $0.0 million, respectively, which is included in loss on extinguishment of debt on the consolidated statements of operations and comprehensive income (loss).
8. Fair Value of Derivatives and Financial Instruments
Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy):
| ● | Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. |
| ● | Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. |
| ● | Level 3 inputs are the unobservable inputs for the asset or liability, which are typically based on an entity’s own assumption, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on input from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. |
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company utilizes independent third parties to perform the allocation of value analysis for each property acquisition and to perform the market valuations on its derivative financial instruments and has established policies, as described above, processes and procedures intended to ensure that the valuation methodologies for investments and derivative financial instruments are fair and consistent as of the measurement date.
Derivative Financial Instruments and Hedging Activities
The Company manages interest rate risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company has entered into an interest rate cap and interest rate swaps to manage exposures that arise from changes in interest rates. The Company’s derivative financial instruments are used to manage the Company’s risk of increased cash outflows from the floating rate loans that may result from rising interest rates, in particular the reference rate for the loans, which include one-month LIBOR, daily SOFR and one-month term SOFR. In order to minimize counterparty credit risk, the Company has entered into and expects to enter in the future into hedging arrangements and intends to only transact with major financial institutions that have high credit ratings.
The Company utilizes an independent third party to perform the market valuations on its derivative financial instruments. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair value of the interest rate cap is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the cap. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.
To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of the Company’s derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company’s derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the Company’s derivatives held as of September 30, 2022 and December 31, 2021 were classified as Level 2 of the fair value hierarchy.
The changes in the fair value of derivative financial instruments that are designated as cash flow hedges are recorded in other comprehensive income (loss) and are subsequently reclassified into net income (loss) in the period that the hedged forecasted transaction affects earnings. Amounts reported in other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s floating rate debt. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but either do not meet the strict requirements to apply hedge accounting in accordance with FASB ASC 815, Derivatives and Hedging, or the Company has elected not to designate such derivatives as hedges. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in net income (loss) as interest expense.
In order to fix a portion of, and mitigate the risk associated with, the Company’s floating rate indebtedness, the Company, through the OP, has entered into 12 interest rate swap transactions with KeyBank and Mizuho Capital Markets LLC (“Mizuho”) with a combined notional amount of $970.0 million. The interest rate swaps the Company has entered into effectively replace the floating interest rate (one-month LIBOR or daily SOFR) with respect to those amounts with a weighted average fixed rate of 2.0902%. The Company has designated these interest rate swaps as cash flow hedges of interest rate risk.
As of September 30, 2022, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk (dollars in thousands):
| Effective Date | Expiration Date | Counterparty | Index (1) | Notional | Fixed Rate | ||||||||||
| 7/1/2019 |
| KeyBank | One-Month LIBOR | $ | 100,000 | 1.6290 | % | ||||||||
| 9/1/2019 |
| KeyBank | One-Month LIBOR | 100,000 | 1.4180 | % | |||||||||
| 9/1/2019 |
| KeyBank | One-Month LIBOR | 50,000 | 1.4190 | % | |||||||||
| 2/3/2020 |
| KeyBank | One-Month LIBOR | 50,000 | 1.2790 | % | |||||||||
| 3/2/2020 |
| KeyBank | One-Month LIBOR | 20,000 | 0.9140 | % | |||||||||
| $ | 320,000 | 1.4309 | % | (2) | |||||||||||
| Effective Date | Expiration Date | Counterparty | Index (1) | Notional | Fixed Rate | ||||||||||
| 3/31/2022 |
| KeyBank | Daily SOFR | $ | 100,000 | 1.5110 | % | ||||||||
| 3/31/2022 |
| KeyBank | Daily SOFR | 100,000 | 1.9190 | % | |||||||||
| 3/31/2022 |
| KeyBank | Daily SOFR | 50,000 | 2.4410 | % | |||||||||
| 6/1/2022 |
| Mizuho | Daily SOFR | 100,000 | 2.6284 | % | |||||||||
| 6/1/2022 |
| Mizuho | Daily SOFR | 100,000 | 2.9413 | % | |||||||||
| 6/1/2022 |
| Mizuho | Daily SOFR | 100,000 | 2.7900 | % | |||||||||
| 7/1/2022 | 11/1/2025 | Mizuho | Daily SOFR | 100,000 | 2.6860 | % | |||||||||
| $ | 650,000 | 2.4148 | % | (2) | |||||||||||
| (1) | As of September 30, 2022, one-month LIBOR was 3.1427% and daily SOFR was 2.9800%. |
| (2) | Represents the weighted average fixed rate of the interest rate swaps for one-month LIBOR interest rate swaps and daily SOFR interest rate swaps, respectively, which have a combined weighted average fixed rate of 2.0902%. |
For the three months ended September 30, 2022 and 2021, on the consolidated statements of operations and comprehensive income (loss), the Company recognized approximately $29.4 million and $1.1 million of unrealized gain, respectively, related to the change in fair value of the interest rate hedges. For the nine months ended September 30, 2022 and 2021, on the consolidated statements of operations and comprehensive income (loss), the Company recognized approximately $54.9 million and $7.4 million of unrealized gain, respectively, related to the change in fair value of the interest rate hedges.
Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. On April 13, 2022, the Company, through the OP, paid a premium of approximately $12.7 million and entered into an interest rate cap transaction with Goldman Sachs Bank USA (“Goldman”) with a notional amount of $300.0 million. The interest rate cap effectively caps one-month term SOFR at 1.50% on $300.0 million of floating rate debt. The interest rate cap expires on November 1, 2025.
As of September 30, 2022, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):
| Derivative | Notional | Hedged Floating Rate Debt | Index | Index as of September 30, 2022 | Strike Rate | ||||||||||
| Interest Rate Cap | $ | 300,000 | Warehouse Facility | One-Month Term SOFR | 3.0421 | % | 1.50 | % | |||||||
For the three and nine months ended September 30, 2022, on the consolidated statements of operations and comprehensive income (loss), the Company recognized an $8.2 million and $10.3 million reduction in interest expense, respectively, related to the change in fair value of the interest rate cap.
The table below presents the fair value of the Company’s derivative financial instruments, which are presented on the consolidated balance sheets as of September 30, 2022 and December 31, 2021 (in thousands):
| Asset Derivatives | Liability Derivatives | |||||||||||||||||
| Balance Sheet Location | September 30, 2022 | December 31, 2021 | September 30, 2022 | December 31, 2021 | ||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||
| Interest rate swaps | Interest rate derivatives, at fair value | $ | 51,277 | $ | — | $ | — | $ | 3,590 | |||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||||||
| Interest rate caps | Interest rate derivatives, at fair value | 22,454 | — | — | — | |||||||||||||
| Total | $ | 73,731 | $ | — | $ | — | $ | 3,590 | ||||||||||
Financial assets and liabilities for which the carrying values approximate their fair values include cash, restricted cash, accounts receivable, accounts payable, and security deposits. Generally, these assets and liabilities are short‑term in duration and are recorded at fair value on the consolidated balance sheets. The Company believes the carrying value of each outstanding loan approximates fair value based on the nature, term and interest rate of each loan.
9. Stockholders’ Equity
The Company issued Shares under the Private Offering and issues shares under the Company’s distribution reinvestment program (the “DRIP”). Shares issued under the DRIP are issued at a 3% discount to the then-current NAV per share. During the nine months ended September 30, 2022, the Company issued approximately 4,065,000 Shares under the Private Offering and DRIP for proceeds of approximately $220.1 million.
Long-Term Incentive Plan
The Company adopted the 2018 LTIP whereby the Board, or a committee thereof, may grant RSUs or PI Units to certain employees of the Adviser and the Manager, or others at the discretion of the Board (including the directors and officers of the Company or other service providers of the Company or the OP). The 2018 LTIP provides for the Share Reserve and the Share Maximum for issuance of RSUs or PI Units. Grants may be made annually by the Board or more or less frequently in the Board’s sole discretion. Vesting of grants made under the 2018 LTIP will occur ratably over a period of time as determined by the Board and may include the achievement of performance metrics also as determined by the Board in its sole discretion.
RSU Grants Under the 2018 LTIP
On December 10, 2019, a total of 73,700 RSUs were granted to certain employees of the Adviser and officers of the Company. On May 11, 2020, a total of 179,858 RSUs were granted to certain employees of the Adviser, officers of the Company and independent Board members. On February 15, 2021, a total of 191,506 RSUs were granted to certain employees of the Adviser, officers of the Company and independent Board members. On February 17, 2022, a total of 185,111 RSUs were granted to certain employees of the Adviser, officers of the Company and independent Board members. The RSUs granted to certain employees of the Adviser and officers of the Company on December 10, 2019 and May 11, 2020 vest over a -year period. The RSUs granted to certain employees of the Adviser and officers of the Company on February 17, 2022, February 15, 2021 and May 11, 2020 vest 50% ratably over years and 50% at the successful completion of an initial public offering. The RSUs granted to independent Board members fully vest on the anniversary of the grant date. Any unvested RSU is forfeited, except in limited circumstances, as determined by the compensation committee of the Board, when the recipient is no longer employed by the Adviser. RSUs are valued at fair value (which is the NAV per share in effect) on the date of grant, with compensation expense recorded in accordance with the applicable vesting schedule that approximates a straight-line basis. Beginning on the date of grant, RSUs accrue dividends that are payable in cash on the vesting date. Once vested, the RSUs convert on a one-for-one basis into Shares.
As of September 30, 2022, the number of RSUs granted that are outstanding was as follows (dollars in thousands):
| Dates | Number of RSUs | Value (1) | ||||||
| Outstanding December 31, 2021 | 377,704 | $ | 12,405 | |||||
| Granted | 185,111 | 10,022 | ||||||
| Vested | (54,028 | ) | (2) | (1,854 | ) | |||
| Forfeited | (2,036 | ) | (80 | ) | ||||
| Outstanding September 30, 2022 | 506,751 | $ | 20,493 | |||||
| (1) | Value is based on the number of RSUs granted multiplied by the most recent NAV per share on the date of grant, which was $54.14 for the February 17, 2022 grant, $36.56 for the February 15, 2021 grant, $30.82 for the May 11, 2020 grant, and $29.85 for the December 10, 2019 grant. |
| (2) | Certain grantees elected to net the taxes owed upon vesting against the Shares issued resulting in 49,659 Shares being issued as shown on the consolidated statements of stockholders' equity. |
The vesting schedule for the outstanding RSUs is as follows:
| Vest Date | RSUs Vesting | |||
| December 10, 2022 | 18,425 | |||
| February 15, 2023 | 22,591 | |||
| February 17, 2023 | 30,331 | |||
| May 11, 2023 | 21,217 | |||
| December 10, 2023 | 18,426 | |||
| February 15, 2024 | 22,591 | |||
| February 17, 2024 | 22,019 | |||
| May 11, 2024 | 21,217 | |||
| February 14, 2025 | 22,591 | |||
| February 17, 2025 | 22,019 | |||
| February 17, 2026 | 22,019 | |||
| Upon successful completion of IPO | 263,305 | |||
| 506,751 | ||||
For the three months ended September 30, 2022 and 2021, the Company recognized approximately $0.9 million and $0.6 million, respectively, of non-cash compensation expense related to the RSUs, which is included in corporate general and administrative expenses on the consolidated statements of operations and comprehensive income (loss). For the nine months ended September 30, 2022 and 2021, the Company recognized approximately $2.6 million and $1.7 million, respectively, of non-cash compensation expense related to the RSUs, which is included in corporate general and administrative expenses on the consolidated statements of operations and comprehensive income (loss).
10. Noncontrolling Interests
Redeemable Noncontrolling Interests in the OP
Other than PI Units and 6.50% Series A Cumulative Redeemable Preferred Units of the OP (“OP Preferred Units”), partnership interests in the OP are represented by OP Units. Net income (loss) is allocated pro rata to holders of OP Units and PI Units based upon net income (loss) attributable to the OP and the respective members’ OP Units and PI Units held during the period. Capital contributions, distributions, and profits and losses are allocated to PI Units and OP Units not held by the Company (the “noncontrolling interests”).
The following table presents the redeemable noncontrolling interests in the OP (in thousands):
| Balances | ||||
| Redeemable noncontrolling interests in the OP, December 31, 2021 | $ | 196,362 | ||
| Net loss attributable to redeemable noncontrolling interests in the OP | (3,976 | ) | ||
| Contributions by redeemable noncontrolling interests in the OP | 10,276 | |||
| Distributions to redeemable noncontrolling interests in the OP | (7,261 | ) | ||
| Redemptions by redeemable noncontrolling interests in the OP | (350 | ) | ||
| Equity-based compensation | 2,109 | |||
| Other comprehensive income attributable to redeemable noncontrolling interests in the OP | 8,349 | |||
| Adjustment to reflect redemption value of redeemable noncontrolling interests in the OP | 34,032 | |||
| Redeemable noncontrolling interests in the OP, September 30, 2022 | $ | 239,541 | ||
As of September 30, 2022, the Company held 21,542,876 Class A OP Units, NREO held 2,691,330 Class B OP Units, NRESF held 89,037 Class C OP Units, GAF REIT held 140,509 Class C OP Units and the VineBrook Contributors and other Company insiders held 883,170 Class C OP Units.
On September 7, 2021, the general partner of the OP executed the OP LPA for the purposes of creating a board of directors of the OP (the “Partnership Board”) and subdividing and reclassifying the outstanding common partnership units of the OP into Class A, Class B and Class C OP Units. The OP LPA generally provides that the newly created Class A OP Units and Class B OP Units each have 50.0% of the voting power of the OP Units, including with respect to the election of directors to and removal of directors from the Partnership Board, and that the Class C OP Units have no voting power. The reclassification of the OP Units did not have a material effect on the economic interests of the holders of OP Units. In connection with the OP LPA, the OP Units held by the Company were reclassified into Class A OP Units, the OP Units held by NREO were reclassified into Class B OP Units and the remaining OP Units were reclassified into Class C OP Units. In addition, the OP LPA provides that holders of PI Units will receive Class C OP Units upon conversion of vested PI Units into OP Units.
The Partnership Board of the OP has exclusive authority to select, remove and replace the general partner of the OP and no other authority. The Partnership Board may replace the general partner of the OP at any time. Pursuant to the terms of the OP LPA, the Company appointed Brian Mitts as the sole initial director of the Partnership Board. The number of directors on the Partnership Board is initially one but may be increased by following the affirmative vote or consent of the majority of the voting power of the OP Units (the “Requisite Approval”). The election of directors to and removal of directors from the Partnership Board also requires the Requisite Approval.
Upon execution of the OP LPA, the Company reconsidered whether it was still the primary beneficiary of the OP. Upon reconsideration, the Company determined that it is the member of the related party group most closely associated with the OP and has the power to direct the activities that are most significant to the OP as any actions taken by the OP GP are subject to the authority and approval of the Company’s Board. Accordingly, the Company determined that it should continue to consolidate the OP.
PI Unit Grants Under the 2018 LTIP
In connection with the 2018 LTIP, PI Units have been issued to key personnel, senior management and executives of the Manager. On April 19, 2019, a total of 40,000 PI Units were granted; on November 21, 2019, a total of 80,399 PI Units were granted; on May 11, 2020, a total of 219,826 PI Units were granted; on November 30, 2020, a total of 11,764 PI Units were granted; on May 31, 2021, a total of 246,169 PI Units were granted; and on August 10, 2022, a total of 27,849 PI Units were granted. The PI Units are a special class of partnership interests in the OP with certain restrictions, which are convertible into Class C OP Units, subject to satisfying vesting and other conditions. PI Unit holders are entitled to receive the same distributions as holders of our OP Units (only if we declare and pay such distributions). The PI Units granted in 2019 generally fully vest over a period of to years. The PI Units granted on May 11, 2020 and May 31, 2021 vest 50% ratably over years and 50% at the successful completion of an initial public offering and the PI Units granted on November 30, 2020 vest 100% ratably over years or alternatively 100% on the successful completion of an initial public offering. The PIU Units granted on August 10, 2022 generally vest ratably over five years. Once vested and converted into Class C OP Units in accordance with the OP LPA, the PI Units will then be fully recognized as Class C OP Units, which are subject to a one year lock up period before they can be converted to Shares. Any unvested PI Unit granted to an employee of the Manager is forfeited, except in limited circumstances, as determined by the compensation committee of the Board, when the recipient is no longer employed by the Manager. PI Units are valued at fair value on the date of grant, with compensation expense recorded in accordance with the applicable vesting schedule over the periods in which the restrictions lapse, that approximates a straight-line basis. We valued the PI Units at a per-unit value equivalent to the per-share offering price of our OP Units less a discount for lack of marketability and other discounts estimated by a third-party consultant. Beginning on the date of grant, PI Units accrue dividends that are payable in cash quarterly (if we declare and pay distributions to holders of our OP Units).
As of September 30, 2022, the number of PI Units granted that are outstanding and unvested was as follows (dollars in thousands):
| Dates | Number of PI Units | Value (1) | ||||||
| Outstanding December 31, 2021 | 498,590 | $ | 16,965 | |||||
| Granted | 27,849 | 1,719 | ||||||
| Vested | (57,309 | ) | (1,964 | ) | ||||
| Forfeited | (11,933 | ) | (434 | ) | ||||
| Outstanding September 30, 2022 | 457,197 | $ | 16,286 |
| (1) | Value is based on the number of PI Units granted multiplied by the estimated per unit fair value on the date of grant, which was $27.88 for the April 19, 2019 grant, $29.12 for the November 21, 2019 grant, $30.16 for the May 11, 2020 grant, $33.45 for the November 30, 2020 grant, $38.29 for the May 31, 2021 grant and $61.74 for the August 10, 2022 grant. |
The vesting schedule for the PI Units is as follows:
| Vest Date | PI Units Vesting | |||
| November 1, 2022 | 7,200 | |||
| November 21, 2022 | 18,425 | |||
| November 30, 2022 | 1,470 | |||
| March 30, 2023 | 29,831 | |||
| May 11, 2023 | 27,478 | |||
| August 10, 2023 | 5,570 | |||
| November 1, 2023 | 7,200 | |||
| November 21, 2023 | 18,425 | |||
| November 30, 2023 | 1,470 | |||
| March 30, 2024 | 29,831 | |||
| April 25, 2024 | 5,171 | |||
| May 11, 2024 | 27,478 | |||
| May 27, 2024 | 398 | |||
| November 30, 2024 | 1,470 | |||
| March 30, 2025 | 29,831 | |||
| April 25, 2025 | 5,171 | |||
| May 27, 2025 | 398 | |||
| April 25, 2026 | 5,171 | |||
| May 27, 2026 | 398 | |||
| April 25, 2027 | 5,171 | |||
| May 27, 2027 | 398 | |||
| Upon successful completion of IPO* | 229,242 | |||
| 457,197 | ||||
*Upon successful completion of an IPO, an additional 11,764 PI Units will vest immediately instead of vesting ratably according to the schedule above on each of November 30, 2022, November 30, 2023 and November 30, 2024.
For the three months ended September 30, 2022 and 2021, the OP recognized approximately $0.7 million and $0.7 million, respectively, of non-cash compensation expense related to the PI Units, which is included in corporate general and administrative expenses on the Company’s consolidated statements of operations and comprehensive income (loss). For the nine months ended September 30, 2022 and 2021, the OP recognized approximately $2.1 million and $1.7 million, respectively, of non-cash compensation expense related to the PI Units, which is included in corporate general and administrative expenses on the Company’s consolidated statements of operations and comprehensive income (loss).
The table below presents the consolidated Shares and OP Units outstanding held by the noncontrolling interests (“NCI”), as the OP Units held by the Company are eliminated in consolidation:
| Period End | Shares Outstanding | OP Units Held by NCI | Consolidated Shares and NCI OP Units Outstanding | |||||||||
| March 31, 2022 | 24,696,441 | 3,725,832 | 28,422,273 | |||||||||
| June 30, 2022 | 24,960,485 | 3,740,441 | 28,700,926 | |||||||||
| September 30, 2022 | 24,761,177 | 3,804,046 | 28,565,223 | |||||||||
Redeemable Noncontrolling Interests in Consolidated VIEs
Partnership interests in the SFR OP are represented by SFR OP Units. Net income (loss) is allocated pro rata to holders of SFR OP Units and is based upon net income (loss) attributable to the SFR OP and the respective members’ SFR OP Units held during the period. Capital contributions, distributions, and profits and losses are allocated to SFR OP Units not held by the Company (the “redeemable noncontrolling interests in consolidated VIEs”). During the nine months ended September 30, 2022, redeemable noncontrolling interests in consolidated VIEs contributed approximately $108.5 million and had a net loss attributable to redeemable noncontrolling interests in consolidated VIEs of approximately $4.3 million. As of September 30, 2022, an adjustment to reflect the redemption value of the redeemable noncontrolling interests in consolidated VIEs of approximately $4.3 million was recognized. As of September 30, 2022, the redeemable noncontrolling interests in consolidated VIEs was approximately $108.5 million on the consolidated balance sheets.
Noncontrolling Interests in Consolidated VIEs
NexPoint Homes has issued NexPoint Homes Class A Shares and NexPoint Homes Class I common stock, par value $0.01 (the “NexPoint Homes Class I Shares,” collectively with NexPoint Homes Class A Shares, the “NexPoint Homes Shares”). Interests in NexPoint Homes are represented by NexPoint Homes Shares. Both classes of NexPoint Homes Shares have the same rights and value.
Capital contributions, distributions, and profits and losses are allocated to NexPoint Homes Shares not held by the Company (the “noncontrolling interests in consolidated VIEs”). During the nine months ended September 30, 2022, noncontrolling interests in consolidated VIEs contributed approximately $3.0 million and had a net loss attributable to noncontrolling interests in consolidated VIEs of approximately $0.1 million. As of September 30, 2022, the noncontrolling interests in consolidated VIEs was approximately $2.8 million on the consolidated balance sheets.
11. Redeemable Series A Preferred Stock
The Company has issued 5,000,000 Preferred Shares as of September 30, 2022. The Preferred Shares have a redemption value of $25.00 per share and are mandatorily redeemable on October 7, 2027, subject to certain extensions.
The following table presents the redeemable Series A preferred stock (dollars in thousands):
| Preferred Shares | Balances | |||||||
| Redeemable Series A preferred stock, December 31, 2021 | 5,000,000 | $ | 120,896 | |||||
| Issuance of Redeemable Series A preferred stock | — | — | ||||||
| Issuance costs related to Redeemable Series A preferred stock | — | — | ||||||
| Net income attributable to Redeemable Series A preferred stockholders | — | 6,094 | ||||||
| Dividends declared to Redeemable Series A preferred stockholders ($1.21875) | — | (6,094 | ) | |||||
| Accretion to redemption value | — | 560 | ||||||
| Redeemable Series A preferred stock, September 30, 2022 | 5,000,000 | $ | 121,456 | |||||
12. Income Taxes
The Company has made the election and intends to be taxed as a REIT under Sections 856 through 860 of the Code and expects to continue to qualify as a REIT. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute annually at least 90% of its “REIT taxable income,” as defined by the Code, to its stockholders in order for its distributed earnings to not be subject to corporate income tax. Additionally, the Company will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions it pays with respect to any calendar year are less than the sum of (1) 85% of its ordinary income, (2) 95% of its capital gain net income and (3) 100% of its undistributed income from prior years. The Company intends to operate in such a manner so as to qualify as a REIT, but no assurance can be given that the Company will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. The Company had no significant taxes associated with its TRS for the nine months ended September 30, 2022 or 2021.
If the Company fails to meet these requirements, it could be subject to U.S. federal income tax on all of the Company’s taxable income at regular corporate rates for that year. The Company would not be able to deduct distributions paid to stockholders in any year in which it fails to qualify as a REIT. Additionally, the Company will also be disqualified from electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions. As of September 30, 2022, the Company believes it is in compliance with all applicable REIT requirements. The Company is still subject to state and local income taxes and to federal income and excise tax on its undistributed income, however those taxes are not material to the financial statements.
The Company evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Company’s management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The Company has no examinations in progress and none are expected at this time. The tax years subject to examination are 2021, 2020 and
The Company had no material unrecognized federal or state tax benefit or expense, accrued interest or penalties as of September 30, 2022. When applicable, the Company recognizes interest and/or penalties related to uncertain tax positions on its consolidated statements of operations and comprehensive income (loss).
13. Related Party Transactions
Advisory Fee
Pursuant to the Advisory Agreement, the Company will pay the Adviser, on a monthly basis in arrears, an advisory fee at an annualized rate of 0.75% of the gross asset value of the Company on a consolidated basis (excluding the value of the OP’s assets but inclusive of the Company’s pro rata share of the debt held at the OP and its SPEs). The Adviser will manage the Company’s business including, among other duties, advising the Board to issue distributions, preparing our quarterly and annual consolidated financial statements prepared under GAAP, development and maintenance of internal accounting controls, management and conduct of maintaining our REIT status, calculation of our NAV and recommending the appropriate NAV to be set by the Board, processing of sales of Shares through the Private Offering, reporting to holders of Shares, our tax filings, and other responsibilities customary for an external advisor to a business similar to ours. With certain specified exceptions, the advisory fee together with reimbursement of operating and offering expenses may not exceed 1.5% of average total assets of the Company and the OP, as determined in accordance with GAAP on a consolidated basis, at the end of each month (or partial month) (i) for which any advisory fee is calculated or (ii) during the year for which any expense reimbursement is calculated.
For the three months ended September 30, 2022 and 2021, the Company incurred advisory fees of approximately $4.3 million and $2.3 million, respectively, which is included in advisory fees on the consolidated statements of operations and comprehensive income (loss). For the nine months ended September 30, 2022 and 2021, the Company incurred advisory fees of approximately $11.2 million and $5.6 million, respectively, which is included in advisory fees on the consolidated statements of operations and comprehensive income (loss).
Management Fee
The equity holders of the Manager are holders of noncontrolling interests in the OP and comprise a portion of the VineBrook Contributors. Through this noncontrolling ownership, the Manager is deemed to be a related party. Pursuant to the Management Agreements, the OP will pay the Manager (i) an acquisition fee equal to 1.0% of the purchase price paid for any new property acquired during the month, (ii) a construction fee monthly in arrears that shall not exceed the greater of 10% of construction costs or $1,000, whichever is higher, in connection with the repair, renovation, improvement or development of any newly acquired property, and (iii) a property management fee monthly in arrears equal to a percentage of collected rental revenues for all properties during the month as follows:
| ● | 8.0% of collected rental revenue up to and including $45 million on an annualized basis; |
| ● | 7.0% of the incremental collected rental revenue above $45 million but below and including $65 million on an annualized basis; |
| ● | 6.0% of the incremental collected rental revenue above $65 million but below and including $85 million on an annualized basis; and |
| ● | 5.0% of the incremental collected rental revenue above $85 million on an annualized basis. |
Under the Management Agreements and the Side Letter, the aggregate fees that the Manager can earn in any fiscal year are capped such that the Manager’s EBITDA (as defined in the Management Agreements) derived from these fees may not exceed the greater of $1.0 million or 0.5% of the combined equity value of the Company and the OP on a consolidated basis, calculated on the first day of each fiscal year based on the aggregate NAV of the outstanding Shares and OP Units held other than by the Company on the last business day of the prior fiscal year (the “Manager Cap”). The aggregate fees up to the Manager Cap are payable (1) in cash in an amount equal to the tax obligations of the Manager’s equity holders resulting from the aggregate management fees earned in such fiscal year up to a maximum rate of 25% (the “Manager Cash Cap”) and (2) with respect to the remaining portion of the aggregate fees, in Class C OP Units, at a price per OP Unit equal to the Cash Amount (as defined in the OP LPA). The aggregate fees paid in cash that exceed the Manager Cash Cap are rebated back to the OP. For the nine months ended September 30, 2022 and September 30, 2021, $0.4 million and $0.8 million, respectively, was recorded as a Manager Cap rebate as reductions to property management fees on the consolidated statements of operations.
The Manager is responsible for the day-to-day management of the properties, acquisition of new properties, disposition of existing properties (with acquisition and disposition decisions made under the approval of the investment committee and the Board), leasing the properties, managing tenant issues and requests, collecting rents, paying operating expenses, managing maintenance issues, accounting for each property using GAAP, and other responsibilities customary for the management of SFR properties.
Property management fees are included in property management fees on the consolidated statements of operations and comprehensive income (loss) and acquisition and construction fees are capitalized into each home and are included in buildings and improvements on the consolidated balance sheet and are depreciated over the useful life of each property.
The following table is a summary of fees that the OP incurred to the Manager and its affiliates, as well as reimbursements paid to the Manager and its affiliates for various operating expenses the Manager paid on the OP’s behalf, of which approximately $6.2 million and $2.6 million is due to the Manager and included in accounts payable and other accrued liabilities on the consolidated balance sheets as of September 30, 2022 and 2021, respectively, under the terms of Management Agreements and Side Letter, for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||
| Location on Financial Statements | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Fees Incurred | |||||||||||||||||
| Property management fees | Statement of Operations | $ | 3,249 | $ | 1,756 | $ | 9,691 | $ | 5,810 | ||||||||
| Acquisition fees | Balance Sheet | 3,650 | 1,126 | 9,705 | 8,072 | ||||||||||||
| Construction supervision fees | Balance Sheet | 4,562 | 1,667 | 12,182 | 4,681 | ||||||||||||
| Reimbursements | |||||||||||||||||
| Payroll and benefits | Balance Sheet and Statement of Operations | 6,997 | 4,165 | 19,465 | 10,953 | ||||||||||||
| Other reimbursements | Balance Sheet and Statement of Operations | 515 | 229 | 1,282 | 566 | ||||||||||||
| Totals | $ | 18,973 | $ | 8,943 | $ | 52,325 | $ | 30,082 | |||||||||
Internalization of the Adviser or the Manager
The Company may acquire all of the outstanding equity interests of the Adviser, the Manager or both (an “Internalization”) under certain provisions (a “Purchase Provision”) of the Advisory Agreement or the Side Letter to effect an Internalization upon the payment of a certain fee (an “Internalization Fee”). If the Company determines to acquire the equity interests of the Adviser, the applicable Purchase Provision of the Advisory Agreement provides that the Adviser must first agree to such acquisition and that the Company will pay the Adviser an Internalization Fee equal to three times the total of the prior 12 months’ advisory fee, payable only in capital stock of the Company. If the Company determines to acquire the equity interests of Manager, the applicable Purchase Provision of the Side Letter provides the Company has a right to do so and that the Company will pay the Manager an Internalization Fee equal to $6.5 million plus 50% of the subtraction of $6.5 million from times the total of the prior 12 months’ property management fee, payable in cash, Shares or Class C OP Units. The OP may also acquire the equity interests of the Manager on the same terms under the applicable Purchase Provision.
In accordance with the Side Letter, on June 28, 2022, the OP notified the Manager that it elected to exercise its Purchase Provision of the Manager. As of September 30, 2022, the Internalization of the Manager has not closed. The Company expects to close the Internalization of the Manager in the fourth quarter of 2022, following which the services previously provided by the Manager will be internally managed, although there can be no assurance that the transaction will close on this timeline or at all. Certain additional conditions and limitations apply to the Internalizations, including but not limited to caps on the Internalization Fees. The Company expects any equity issued in satisfaction of an Internalization Fee to be valued at the NAV per share in effect on May 31, 2022, the date used to calculate the Internalization Fee under the Purchase Provision.
Termination Fees Payable to the Adviser or Manager
If the Advisory Agreement or any one of the Management Agreements is terminated without cause by the Company or the SPE, as applicable, or is otherwise terminated under certain conditions, the Adviser or the Manager, as applicable, will be entitled to a termination fee (a “Termination Fee”) in the amount of times the prior 12 months’ advisory fee, in the case of a termination of the Advisory Agreement, or times the prior 12 months’ property management fee, in the case of the applicable Management Agreement. In addition to termination by the Company without cause, the Adviser will be entitled to the Termination Fee if the Adviser terminates the Advisory Agreement without cause or terminates the agreement due to the occurrence of certain specified breaches of the Advisory Agreement by the Company. The Advisory Agreement may be terminated without cause by the Company or the Adviser with 180 days’ notice prior to the expiration of the then-current term. In addition to termination by the SPE without cause, the Manager will be entitled to the Termination Fee if the SPE sells or otherwise disposes of all or substantially all of the properties subject to the applicable Management Agreement. The Management Agreements may be terminated by the SPE with 90 days’ notice without cause. Termination Fees are payable in cash.
Advance Acquisition and Construction Fee Advances Paid to the Manager
Pursuant to the Side Letter, the Manager may request from the OP from time-to-time an advance on acquisition and construction fees (the “Fee Advances”) to fund the performance of its obligations under the Management Agreements. Each Fee Advance is repaid from future acquisition and construction fees earned by and owed to the Manager. Fee Advances are included in the line item due from Manager on the consolidated balance sheets. As of September 30, 2022 and December 31, 2021, the Company recorded receivable for Fee Advances.
Backstop Loans to the Manager
Pursuant to the Side Letter, in the event the Manager does not have sufficient cash flow from operations to meet its budgeted obligations under the Management Agreements, the Manager may from time to time request from the Company a temporary loan (the “Backstop Loan”) to satisfy the shortfall. Backstop Loans are interest free, may be prepaid at any time and may not exceed a principal amount that is in the aggregate equal to the lesser of the Internalization Fee or Termination Fee under the applicable Management Agreement. Unless otherwise repaid, each Backstop Loan is payable upon termination of the applicable Management Agreement. Backstop Loans are included in the line item due from Manager on the consolidated balance sheets. As of September 30, 2022 and December 31, 2021, the Company recorded a receivable for Backstop Loans made to the manager of approximately $0.7 million and approximately $0.7 million, respectively.
Dealer Manager Fees
Investors may be charged a dealer manager fee of between 0.50% and 3.00% of gross investor equity by the Dealer Manager for sales of Shares pursuant to the Private Offering, subject to certain breakpoints and various terms of the Dealer Manager Agreements. At the sole discretion of the Dealer Manager, the dealer manager fee may be partially or fully waived. The dealer manager fee is paid to an affiliate of the Adviser.
Organization and Private Offering Expenses
Offering and organizational expenses (“O&O Expenses”) may be incurred in connection with sales in the Private Offering at the discretion of the Company and are borne by investors through a fee of up to 0.50% of gross investor equity for sales through Raymond James and up to 1.00% of gross investor equity for other sales. O&O Expenses are intended to reimburse the Company, Adviser and Placement Agents for the costs of maintaining the Private Offering and selling costs incurred in raising equity under the Private Offering. Payments for bona fide expenses and reimbursements are O&O Expenses which are recorded as a reduction to equity.
NexBank
The Company and the OP maintain bank accounts with an affiliate of the Adviser, NexBank N.A. (“NexBank”). NexBank charges no recurring maintenance fees on the accounts. As of September 30, 2022, the REIT and OP have approximately $0.9 million and $42.4 million, respectively, in cash at NexBank.
NexPoint Homes Transactions
In connection with the Company’s consolidated investment in NexPoint Homes, the Company consolidated non-controlling interests in NexPoint Homes that were contributed by affiliates of the Adviser. As of September 30, 2022, these affiliates had contributed approximately $109.8 million of equity to NexPoint Homes. Additionally, the Company consolidated five SFR OP convertible notes that are loans from affiliates of the Adviser to the SFR OP that bear interest at 7.50% and mature on June 30, 2027 (the “SFR OP Convertible Notes”). As of September 30, 2022, the total principal outstanding on the SFR OP Convertible Notes was approximately $100.1 million which is included in notes payable on the consolidated balance sheets.
The Company consolidates an approximately $4.8 million loan from the SFR OP to HomeSource Operations, LLC (the “HomeSource Note”). The HomeSource Note bears interest at daily SOFR plus 2.00% and matures on February 1, 2027. In connection with the HomeSource Note, the SFR OP received a 9.99% non-voting interest in the HomeSource Operations LLC (the “HomeSource Investment”). The HomeSource Note and the HomeSource Investment are included in prepaid and other assets on the consolidated balance sheet.
On June 8, 2022, NexPoint Homes entered into an advisory agreement (the “NexPoint Homes Advisory Agreement”) with NexPoint Real Estate Advisors XI, LP (the “NexPoint Homes Adviser”), an affiliate of the Adviser. Under the terms of the NexPoint Homes Advisory Agreement, the NexPoint Homes Adviser manages the day-to-day affairs of NexPoint Homes for a fee equal to 0.75% of the consolidated enterprise value of NexPoint Homes. fees were collected by the NexPoint Homes Adviser in connection with the NexPoint Homes Advisory Agreement during the nine months ended September 30, 2022.
The NexPoint Homes portfolio is generally managed by HomeSource Operations, LLC, a Delaware limited liability company (the “NexPoint Homes Manager”), pursuant to the terms of a management agreement, dated June 8, 2022 (the “NexPoint Homes Management Agreement”), among the NexPoint Homes Manager and the SFR OP. The NexPoint Homes Manager is responsible for the day-to-day management of the NexPoint Homes portfolio, paying operating expenses, managing maintenance issues, accounting for each property using GAAP, overseeing third-party property managers and other responsibilities customary for the management of SFR properties. The NexPoint Homes Manager is entitled to an acquisition fee, a construction fee and an asset management fee. The acquisition fee is paid at closing of homes and the construction fee and asset management fee are paid monthly in arrears. Approximately $0.1 million in fees were earned by the NexPoint Homes Manager in connection with the NexPoint Homes Management Agreement during the nine months ended September 30, 2022.
14. Commitments and Contingencies
Commitments
In the normal course of business, the Company enters into various construction related purchase commitments with parties that provide these goods and services. In the event the Company were to terminate construction services prior to the completion of projects, the Company could potentially be committed to satisfy outstanding or uncompleted purchase orders with such parties. As of September 30, 2022, management does not anticipate any material deviations from schedule or budget related to rehabilitation projects currently in process.
Contingencies
In the normal course of business, the Company is subject to claims, lawsuits, and legal proceedings. While it is not possible to ascertain the ultimate outcome of all such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated balance sheets or consolidated statements of operations and comprehensive income (loss) of the Company. The Company is not involved in any material litigation nor, to management’s knowledge, is any material litigation currently threatened against the Company or its properties or subsidiaries.
The Company is not aware of any environmental liability with respect to the properties it owns that could have a material adverse effect on the Company’s business, assets, or results of operations. However, there can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Company’s results of operations and cash flows.
An entity purchased by the OP as a part of the Formation Transaction, the Huber Transaction Sub, LLC (“Huber”), had potential liability exposure to a legacy environmental issue related to a 1988 petroleum release from an underground storage tank located on a property subsequently not purchased by Huber. The owner of the property prior to Huber has assumed the defense of alleged environmental violations and is proceeding with the required regulatory investigation and remediation of the underground storage tank release clean up. Huber received an indemnification, and the Company and the OP in turn received an indemnification, which was evidenced by approximately $2.6 million of proceeds in an escrow account (the “Indemnification Escrow”) that is for the benefit of the Company and the OP in the event the prior owner fails to perform their obligations in regard to any required remediation of the issue. On January 27, 2021, the Indemnification Escrow was released and this matter was fully resolved.
15. Segment Information
Reportable Segments
Following the formation of NexPoint Homes, the Company has two reportable segments. For the three and nine months ended September 30, 2022, the majority of the Company’s operations are included within the Company’s primary reportable segment, VineBrook, as the NexPoint Homes reportable segment was recently formed on June 8, 2022. For the three and nine months ended September 30, 2021, the Company had one reportable segment, VineBrook. All corporate related costs are included in the VineBrook segment to align with how financial information is presented to the chief operating decision maker. The following presents select operational results for the reportable segments (in thousands):
| For the Three Months Ended September 30, | ||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||
| Revenues | Expenses | Net loss | Revenues | Expenses | Net loss | |||||||||||||||||||
| VineBrook | $ | 64,587 | $ | 74,900 | $ | (10,453 | ) | $ | 41,887 | $ | 46,662 | $ | (4,799 | ) | ||||||||||
| NexPoint Homes | 9,051 | 13,219 | (4,168 | ) | — | — | — | |||||||||||||||||
| Total Company | $ | 73,638 | $ | 88,119 | $ | (14,621 | ) | $ | 41,887 | $ | 46,662 | $ | (4,799 | ) | ||||||||||
| For the Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||
| Revenues | Expenses | Net loss | Revenues | Expenses | Net loss | |||||||||||||||||||
| VineBrook | $ | 177,962 | $ | 199,686 | $ | (21,810 | ) | $ | 112,336 | $ | 118,959 | $ | (6,947 | ) | ||||||||||
| NexPoint Homes | 10,297 | 17,459 | (7,162 | ) | — | — | — | |||||||||||||||||
| Total Company | $ | 188,259 | $ | 217,145 | $ | (28,972 | ) | $ | 112,336 | $ | 118,959 | $ | (6,947 | ) | ||||||||||
The following presents select balance sheet data for the reportable segments (in thousands):
| As of September 30, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
| VineBrook | NexPoint Homes | Total Company | VineBrook | NexPoint Homes | Total Company | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Gross operating real estate investments | $ | 2,857,431 | $ | 743,872 | $ | 3,601,303 | $ | 1,726,948 | $ | — | $ | 1,726,948 | ||||||||||||
| Accumulated depreciation and amortization | (135,262 | ) | (5,847 | ) | (141,109 | ) | (76,789 | ) | — | (76,789 | ) | |||||||||||||
| Net operating real estate investments | 2,722,169 | 738,025 | 3,460,194 | 1,650,159 | — | 1,650,159 | ||||||||||||||||||
| Real estate held for sale, net | 2,888 | — | 2,888 | 81 | — | 81 | ||||||||||||||||||
| Net real estate investments | 2,725,057 | 738,025 | 3,463,082 | 1,650,240 | — | 1,650,240 | ||||||||||||||||||
| Other assets | 220,816 | 67,559 | 288,375 | 108,085 | — | 108,085 | ||||||||||||||||||
| Total assets | $ | 2,945,873 | $ | 805,584 | $ | 3,751,457 | $ | 1,758,325 | $ | — | $ | 1,758,325 | ||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Debt payable, net | $ | 1,886,042 | $ | 565,333 | $ | 2,451,375 | $ | 768,545 | $ | — | $ | 768,545 | ||||||||||||
| Other liabilities | 139,904 | 15,237 | 155,141 | 89,574 | — | 89,574 | ||||||||||||||||||
| Total liabilities | $ | 2,025,946 | $ | 580,570 | $ | 2,606,516 | $ | 858,119 | $ | — | $ | 858,119 | ||||||||||||
16. Subsequent Events
The Company evaluated subsequent events through the date the consolidated financial statements were issued, to determine if any significant events occurred subsequent to the balance sheet date that would have a material impact on these consolidated financial statements and determined the following events were material:
Acquisitions
Subsequent to September 30, 2022, the Company acquired 432 homes in the VineBrook reportable segment for a purchase price of approximately $52.9 million.
Fourth Quarter 2022 Dividends
On October 14, 2022, the Company approved a common stock dividend of $0.1767 per Share for shareholders of record as of that will be paid on . On October 24, 2022, the Company approved a common stock dividend of $0.1767 per Share for shareholders of record as of that will be paid on . On October 24, 2022, the Company approved a preferred stock dividend of $0.40625 per share for holder of record of Preferred Shares as of December 23, 2022, which will be paid on January 10, 2023. On October 24, 2022, the Company approved a preferred stock dividend of $0.40625 per share for holder of record of Preferred Shares as of December 23, 2022, which will be paid on January 10, 2023.
NAV Determination
In accordance with the Valuation Methodology, on October 31, 2022, the Company determined that its NAV per share calculated on a fully diluted basis was $62.97 as of September 30, 2022. In accordance with provisions in the OP LPA, the value of the OP Units per OP Unit was also increased to $62.97. Shares and OP Units issued under the respective DRIPs will be issued a 3% discount to the NAV per share in effect.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion and analysis of our financial condition and our historical results of operations. The following should be read in conjunction with our financial statements and accompanying notes included herein and with our annual report on Form 10-K (our “Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2022. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this Form 10-Q. See “Cautionary Note Regarding Forward-Looking Statements” in this report and the information under the heading “Risk Factors” in Part I, Item IA, “Risk Factors” of our Annual Report. Our management believes the assumptions underlying the Company’s financial statements and accompanying notes are reasonable. However, the Company’s financial statements and accompanying notes may not be an indication of our financial condition and results of operations in the future.
Overview
The Company is an owner and operator of SFR homes for lease. The Company has two reportable segments, VineBrook and NexPoint Homes. VineBrook represents the Company’s primary reportable segment and represents a significant majority of the Company’s consolidated portfolio (the “VineBrook Portfolio”). The NexPoint Homes reportable segment represents a minority of the Company’s consolidated portfolio (the “NexPoint Homes Portfolio”) and operations.
As of September 30, 2022, our VineBrook Portfolio consisted of 24,153 SFR homes primarily located in the midwestern, heartland and southeastern United States. As of September 30, 2022, the VineBrook Portfolio had occupancy of approximately 81.9% with a weighted average monthly effective rent of $1,142 per occupied home. As of September 30, 2022, the VineBrook Portfolio had a stabilized occupancy of approximately 94.3% with a weighted average monthly stabilized effective rent of $1,160 per occupied home and 51.5% of homes in our VineBrook Portfolio were excluded from being stabilized either because the homes were in rehabilitation or were purchased with tenants in place. Substantially all of the Company’s business is conducted through the OP, as the Company owns its homes indirectly through the OP. VineBrook Homes OP GP, LLC, is the OP GP. As of September 30, 2022, there were 25,346,922 OP Units outstanding, of which 21,542,876 Class A OP Units, or 85.0% of the OP Units outstanding, were owned by the Company. Please see the notes to the financial statements for the breakdown of the non-controlling ownership of our OP.
As of December 31, 2021, our VineBrook Portfolio consisted of 16,891 SFR homes primarily located in the midwestern, heartland and southeastern United States. As of December 31, 2021, the VineBrook Portfolio had occupancy of approximately 81.9% with a weighted average monthly effective rent of $1,067 per occupied home. As of December 31, 2021, the VineBrook Portfolio had a stabilized occupancy of approximately 95.2% with a weighted average monthly effective rent of $1,074 per occupied stabilized home and 49.7% of homes in our VineBrook Portfolio were excluded from being stabilized either because the homes were in rehabilitation or were purchased with tenants in place. As of December 31, 2021, there were 22,300,100 OP Units outstanding, of which 18,673,164, or 83.7%, were owned by the Company.
We are primarily focused on acquiring, renovating, leasing, maintaining and otherwise managing SFR home investments primarily located in large to medium size cities and suburbs located in the midwestern, heartland and southeastern United States. We intend to employ targeted management and a value-add program at a majority of our homes in an attempt to improve rental rates and the net operating income (“NOI”) at our homes, maximize cash flow, provide quarterly cash distributions and achieve long-term capital appreciation for our stockholders. We are externally managed by the Adviser through the Advisory Agreement, which was renewed on November 1, 2021 and will automatically renew on the anniversary of the renewal date for one-year terms thereafter, unless otherwise terminated.
We began operations on November 1, 2018 as a result of the acquisition of various partnerships and limited liability companies owned and operated by the VineBrook Contributors and other third parties, which owned the Initial Portfolio of approximately 4,129 SFR assets located in Ohio, Kentucky and Indiana for a total purchase price of approximately $330.2 million, including closing and financing costs of approximately $6.0 million. On November 1, 2018, the Company accepted subscriptions for 1,097,367 Shares for gross proceeds of approximately $27.4 million in connection with the Formation Transaction. The proceeds from the issuance of such Shares were used to acquire OP Units. The OP used the capital contribution from the Company to fund a portion of the purchase price for the Initial Portfolio. The remaining purchase price and closing costs were funded by a capital contribution totaling $70.7 million from NREO, $8.6 million of equity rolled over from VineBrook Contributors, and $241.4 million from the Initial Mortgage.
On August 28, 2018, the Company commenced the offering of 40,000,000 Shares through the Private Offering under Regulation D of the Securities Act (and various state securities law provisions) for a maximum of $1.0 billion of its Shares. The Private Offering closed on September 14, 2022. The initial offering price for Shares sold through the Private Offering was $25.00 per share. The Company sold Shares in periodic closings at a purchase price generally equal to the NAV per share as determined using the Valuation Methodology and as recommended by the Adviser and approved by the Pricing Committee, plus applicable fees and commissions. The NAV per share is calculated on a fully diluted basis. For sales through Raymond James, the purchaser subscribed for a gross amount based on NAV per share and separately paid the applicable fees upfront from the purchaser’s account with Raymond James. For sales through a broker-dealer other than Raymond James, the purchaser subscribed for a gross amount based on a public offering price (“POP”), which includes the applicable upfront fees and commissions. NAV may differ from the values of our real estate assets as calculated in accordance with GAAP.
On October 15, 2021, a lawsuit (the “Bankruptcy Trust Lawsuit”) was filed by a trust formed in connection with the Highland bankruptcy (the “Highland Bankruptcy”) in the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”). The Bankruptcy Trust Lawsuit makes claims against a number of entities, including NexPoint Advisors, L.P. (“NexPoint”), the parent of our Adviser, and James Dondero, a director and former officer of the Company. The Bankruptcy Trust Lawsuit does not include claims related to our business or our assets or operations. NexPoint and Mr. Dondero have informed us that they believe the Bankruptcy Trust Lawsuit has no merit and they intend to vigorously defend against the claims. We do not expect that the Bankruptcy Trust Lawsuit will have a material effect on our business, results of operations or financial condition.
The Internalization
Most of the VineBrook Portfolio is managed by the Manager pursuant to the terms of the Management Agreements, the Manager and various wholly owned subsidiaries of the OP that own the SPEs. The Manager is responsible for the day-to-day management of the properties, leasing the properties, managing tenant situations, collecting rents, paying operating expenses, managing maintenance issues, accounting for each property using GAAP and other responsibilities customary for the management of SFR properties. In addition, the Manager is generally responsible for the identification of potential SFR properties and the acquisition and disposition of SFR properties approved by the Investment Committee or pursuant to authority delegated to the Manager by the Investment Committee.
The Management Agreements are supplemented by the Side Letter, under the terms of which the Company and the OP have the right and option (but not the obligation) to purchase all of the equity interests of the Manager (the “Internalization”) at a price calculated by a formula specified in the Side Letter (the “Call Right”). The purpose of the Call Right is to provide the Company and the OP with the ability to internally perform the responsibilities and obligations of the Manager under the Management Agreements. On June 28, 2022, the Company sent a notice (the “Call Right Notice”) to the Manager notifying the Manager of its intention to exercise its Call Right and internalize the Manager. As a result of sending the Call Right Notice, the price the Company will pay the Internalization Fee to acquire the Manager of $20.3 million which was fixed based on May 30, 2022 data. The Internalization Fee will be paid in a combination of common stock, OP Units and/or cash.
The Internalization process is being overseen by an independent special committee of the Board, comprised of all the members of the Board except Dana Sprong. The Company expects to close the Internalization in the fourth quarter of 2022, following which the services previously provided by the Manager will be internally managed, although there can be no assurance that the transaction will close on this timeline or at all. The Company also expects to make one-time equity grants under the LTIP to the employees who the Company hires in connection with the Internalization.
Following the Internalization, the Manager’s internalized employees will continue to be responsible for the day-to-day management of the properties, the identification of potential SFR properties and the acquisition and disposition of SFR properties. The Adviser’s duties will not change as a result of the Internalization. Certain SPEs from time to time may have property management agreements with independent third parties that are not the Manager. These are typically the result of maintaining legacy property managers after an acquisition to help transition the properties to the Manager or, in the case of a future sale, to manage the properties until they are sold. This may continue to be the case even after the Internalization is complete.
Tusk and Siete Portfolio Acquisitions
On August 3, 2022, VB Five, LLC (“Buyer”), an indirect subsidiary of the Company, entered into a purchase agreement under which the Buyer agreed to acquire a portfolio of approximately 1,610 SFR homes located in Arizona, Florida, Georgia, Ohio and Texas (the “Tusk Portfolio”). Also on August 3, 2022, the Buyer entered into a purchase agreement under which the Buyer agreed to acquire a portfolio of approximately 1,289 SFR homes located in Arizona, Florida, Georgia, North Carolina, Ohio and Texas (the “Siete Portfolio”). The Company does not expect to close the acquisitions of the Tusk Portfolio or the Siete Portfolio in 2022.
Our VineBrook Portfolio
Since our formation, we have significantly grown our VineBrook Portfolio, which only includes homes in the VineBrook reportable segment. When the Company began operations on November 1, 2018, the Initial Portfolio consisted of 4,129 homes located in Ohio, Kentucky and Indiana. As of September 30, 2022 and 2021, the VineBrook Portfolio consisted of 24,153 and 15,787 homes, respectively, in 18 and 16 states, respectively. As of September 30, 2022 and 2021, the VineBrook Portfolio had an occupancy of 81.9% and 82.6%, respectively, and a weighted average monthly effective rent of $1,142 and $1,059, respectively, per occupied home. As of September 30, 2022 and 2021, the occupancy of stabilized homes in our VineBrook Portfolio was 94.3% and 94.8%, respectively, and the weighted average monthly effective rent of occupied stabilized homes was $1,160 and $1,051, respectively. As of September 30, 2022 and 2021, 51.5% and 51.1%, respectively, of homes in our VineBrook Portfolio were excluded from being stabilized either because the homes were in rehabilitation or were purchased with tenants in place. The table below provides summary information regarding our VineBrook Portfolio as of September 30, 2022.
| Market |
State |
# of Homes |
Portfolio Occupancy |
Average Effective Rent |
# of Stabilized Homes |
Stabilized Occupancy |
Stabilized Average Monthly Rent |
|||||||||||||||||||
| Cincinnati |
OH, KY |
3,326 | 90.9 | % | $ | 1,199 | 2,374 | 95.5 | % | $ | 1,217 | |||||||||||||||
| Dayton |
OH |
2,889 | 88.8 | % | 1,100 | 2,388 | 96.0 | % | 1,092 | |||||||||||||||||
| Columbus |
OH |
1,644 | 92.2 | % | 1,170 | 1,357 | 96.8 | % | 1,173 | |||||||||||||||||
| St. Louis |
MO |
2,419 | 72.2 | % | 1,066 | 812 | 87.1 | % | 1,072 | |||||||||||||||||
| Indianapolis |
IN |
1,465 | 89.1 | % | 1,155 | 800 | 94.8 | % | 1,185 | |||||||||||||||||
| Birmingham |
AL |
1,093 | 89.8 | % | 1,197 | 328 | 92.7 | % | 1,196 | |||||||||||||||||
| Columbia |
SC |
1,046 | 85.2 | % | 1,252 | 289 | 94.8 | % | 1,293 | |||||||||||||||||
| Kansas City |
MO, KS |
1,175 | 90.0 | % | 1,172 | 574 | 95.3 | % | 1,152 | |||||||||||||||||
| Jackson |
MS |
1,275 | 60.1 | % | 1,138 | 423 | 93.4 | % | 1,171 | |||||||||||||||||
| Memphis |
TN, MS |
1,778 | 70.9 | % | 967 | 605 | 92.4 | % | 999 | |||||||||||||||||
| Augusta |
GA, SC |
827 | 71.3 | % | 1,056 | 227 | 93.4 | % | 1,209 | |||||||||||||||||
| Milwaukee |
WI |
1,008 | 68.6 | % | 1,129 | 333 | 89.8 | % | 1,255 | |||||||||||||||||
| Atlanta |
GA |
784 | 86.6 | % | 1,282 | 29 | 79.3 | % | 1,705 | |||||||||||||||||
| Pittsburgh |
PA |
490 | 60.2 | % | 1,037 | 171 | 94.2 | % | 1,133 | |||||||||||||||||
| Pensacola |
FL |
300 | 96.3 | % | 1,324 | 63 | 90.5 | % | 1,426 | |||||||||||||||||
| Greenville |
SC |
381 | 86.6 | % | 1,207 | 149 | 91.3 | % | 1,376 | |||||||||||||||||
| Little Rock |
AR |
390 | 50.5 | % | 978 | 166 | 88.0 | % | 1,007 | |||||||||||||||||
| Huntsville |
AL |
299 | 78.9 | % | 1,261 | 104 | 91.3 | % | 1,293 | |||||||||||||||||
| Raeford |
NC |
250 | 97.2 | % | 1,014 | 45 | 97.8 | % | 1,156 | |||||||||||||||||
| Portales |
NM |
350 | 95.7 | % | 1,066 | 36 | 100.0 | % | 1,093 | |||||||||||||||||
| Omaha |
NE, IA |
295 | 83.4 | % | 1,176 | 185 | 96.2 | % | 1,193 | |||||||||||||||||
| Triad |
NC |
265 | 83.0 | % | 1,196 | 106 | 98.1 | % | 1,250 | |||||||||||||||||
| Montgomery |
AL |
336 | 79.8 | % | 1,176 | 155 | 92.3 | % | 1,162 | |||||||||||||||||
| Charleston |
SC |
33 | 87.9 | % | 1,351 | — | n/a | n/a | ||||||||||||||||||
| Sub-Total/Average |
24,118 | 81.9 | % | $ | 1,142 | 11,719 | 94.3 | % | $ | 1,160 | ||||||||||||||||
| Held for Sale |
35 | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||
| Total/Average |
24,153 | 81.9 | % | $ | 1,142 | 11,719 | 94.3 | % | $ | 1,160 | ||||||||||||||||
As of December 31, 2021, the Company, through the OP’s SPEs, indirectly owned an interest in 16,891 homes in 16 states. As of December 31, 2021, the Portfolio had occupancy of 81.9%, and a weighted average monthly effective rent of $1,067 per occupied home. As of December 31, 2021, the occupancy of stabilized homes in our Portfolio was 95.2%, and the weighted average monthly effective rent of stabilized occupied homes was $1,074. As of December 31, 2021, 49.7% of homes in our Portfolio were excluded from being stabilized either because the homes were in rehabilitation or were purchased with tenants in place. The table below provides summary information regarding our Portfolio as of December 31, 2021:
| Market |
State |
# of Homes |
Portfolio Occupancy |
Average Effective Rent |
# of Stabilized Homes |
Stabilized Occupancy |
Stabilized Average Monthly Rent |
|||||||||||||||||||
| Cincinnati |
OH, KY |
3,031 | 90.7 | % | $ | 1,117 | 2,083 | 96.8 | % | $ | 1,127 | |||||||||||||||
| Dayton |
OH |
2,742 | 90.1 | % | 1,019 | 2,244 | 97.3 | % | 1,007 | |||||||||||||||||
| Columbus |
OH |
1,499 | 93.1 | % | 1,108 | 1,203 | 97.4 | % | 1,115 | |||||||||||||||||
| St. Louis |
MO |
1,696 | 79.9 | % | 1,010 | 596 | 92.1 | % | 991 | |||||||||||||||||
| Indianapolis |
IN |
1,308 | 83.0 | % | 1,081 | 571 | 88.6 | % | 1,104 | |||||||||||||||||
| Birmingham |
AL |
814 | 79.0 | % | 1,128 | 92 | 85.9 | % | 1,244 | |||||||||||||||||
| Columbia |
SC |
784 | 82.7 | % | 1,195 | 107 | 89.7 | % | 1,259 | |||||||||||||||||
| Kansas City |
MO, KS |
742 | 77.4 | % | 1,071 | 345 | 91.0 | % | 1,030 | |||||||||||||||||
| Jackson |
MS |
789 | 57.8 | % | 1,046 | 185 | 93.0 | % | 1,160 | |||||||||||||||||
| Memphis |
TN, MS |
626 | 84.0 | % | 911 | 385 | 93.0 | % | 927 | |||||||||||||||||
| Augusta |
GA, SC |
555 | 73.5 | % | 973 | 69 | 94.2 | % | 1,130 | |||||||||||||||||
| Milwaukee |
WI |
655 | 72.1 | % | 1,073 | 212 | 90.6 | % | 1,195 | |||||||||||||||||
| Pittsburgh |
PA |
401 | 59.1 | % | 951 | 86 | 97.7 | % | 1,071 | |||||||||||||||||
| Greenville |
SC |
253 | 77.5 | % | 1,177 | 39 | 92.3 | % | 1,346 | |||||||||||||||||
| Little Rock |
AR |
286 | 44.4 | % | 900 | 85 | 97.6 | % | 930 | |||||||||||||||||
| Huntsville |
AL |
180 | 75.0 | % | 1,146 | 34 | 79.4 | % | 1,261 | |||||||||||||||||
| Omaha |
NE, IA |
206 | 60.2 | % | 1,167 | 74 | 100.0 | % | 1,169 | |||||||||||||||||
| Triad |
NC |
161 | 83.2 | % | 1,083 | 46 | 97.8 | % | 1,152 | |||||||||||||||||
| Montgomery |
AL |
161 | 56.5 | % | 1,033 | 35 | 94.3 | % | 1,146 | |||||||||||||||||
| Sub-Total/Average |
16,889 | 81.9 | % | $ | 1,067 | 8,491 | 95.2 | % | $ | 1,074 | ||||||||||||||||
| Held for Sale |
2 | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||
| Total/Average |
16,891 | 81.9 | % | $ | 1,067 | 8,491 | 95.2 | % | $ | 1,074 | ||||||||||||||||
NexPoint Homes is an owner and operator of SFR homes for lease. As of September 30, 2022, the NexPoint Homes portfolio consisted of 2,544 SFR homes primarily located in the midwestern and southeastern United States. As of September 30, 2022, NexPoint Homes had occupancy of approximately 89.3% with a weighted average monthly effective rent of $1,769 per occupied home. NexPoint Homes’ activities include acquiring, renovating, developing, leasing and operating SFR homes as rental properties. See Note 5, NexPoint Homes Investment, for additional details on the formation of NexPoint Homes.
The table below provides summary information regarding the NexPoint Homes portfolio as of September 30, 2022.
| Market |
State |
# of Homes |
Portfolio Occupancy |
Average Effective Rent |
||||||||||
| Fayetteville |
AR |
440 | 94.1 | % | $ | 1,487 | ||||||||
| Little Rock |
AR |
211 | 88.2 | % | 1,325 | |||||||||
| Oklahoma City |
OK |
518 | 80.5 | % | 1,509 | |||||||||
| Tulsa |
OK |
172 | 89.0 | % | 1,522 | |||||||||
| Atlanta |
GA |
211 | 97.6 | % | 1,986 | |||||||||
| San Antonio |
TX |
199 | 95.0 | % | 1,587 | |||||||||
| Dallas/Fort Worth |
TX |
51 | 94.1 | % | 2,169 | |||||||||
| Memphis |
TN, MS |
158 | 93.7 | % | 1,399 | |||||||||
| Kansas City |
MO, KS |
146 | 95.9 | % | 1,780 | |||||||||
| Birmingham |
AL |
133 | 94.0 | % | 1,483 | |||||||||
| Huntsville |
AL |
71 | 90.1 | % | 1,875 | |||||||||
| Charlotte |
NC |
61 | 88.5 | % | 1,858 | |||||||||
| Triad |
NC |
50 | 82.0 | % | 1,660 | |||||||||
| Other (1) |
KS, AL, FL, TX |
123 | 68.2 | % | 1,778 | |||||||||
| Sub-Total/Average |
2,544 | 89.3 | % | $ | 1,769 | |||||||||
| Held for Sale |
— | n/a | n/a | |||||||||||
| Total/Average |
2,544 | 89.3 | % | $ | 1,769 | |||||||||
(1) Contains markets that have less than 50 homes which include Orlando, Tampa, Jacksonville, Austin, Houston, Mobile and Wichita.
The following table sets forth a summary of operating results for the NexPoint Homes reportable segment for the three and nine months ended September 30, 2022 (in thousands):
| For the Three Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2022 | |||||||
| Total revenues |
$ | 9,051 | $ | 10,297 | ||||
| Total expenses |
13,219 | 17,459 | ||||||
| Net loss |
$ | (4,168 | ) | $ | (7,162 | ) | ||
The NexPoint Homes reportable segment began operations on June 8, 2022 and currently does not contribute significantly to the Company’s consolidated operations. The Company anticipates revenues from the NexPoint Homes reportable segment to increase as more homes become stabilized and the reportable segment’s operations begin to scale. As NexPoint Homes continues to raise additional capital, the Company’s direct ownership interest in NexPoint Homes will decrease which may eventually result in deconsolidation of NexPoint Homes. The Company will continue to evaluate whether the entity is a VIE and if the Company is the primary beneficiary of the VIE and should consolidate the entity.
Components of Revenues and Expenses
The following is a description of the components of our revenues and expenses.
Revenues
Rental Income. Our revenues are derived primarily from rental revenue, net of any concessions and uncollectible amounts, collected from residents of our SFR homes under lease agreements which typically have a term of one year. Also included are utility reimbursements, late fees, pet fees, and other rental fees charged to tenants.
Other income. Other income includes ancillary income earned from tenants such as non-refundable fees, application fees, move-out fees, and other miscellaneous fees charged to tenants.
Expenses
Property operating expenses. Property operating expenses include property maintenance costs, turn costs (costs incurred in making a home ready for the next resident after the prior resident vacates the home), leasing costs and the associated salary and employee benefit costs, utilities, vehicle leases and HOA fees. Certain property operating costs are capitalized in accordance with our capitalization policy. Certain turn costs are capitalized to buildings and improvements if they improve the condition of the home or return it to its original condition and exceed $1,500 in cost. Upon being occupied, expenditures up to $1,500 for ordinary repairs and maintenance thereafter are expensed as incurred, and we capitalize expenditures that improve the condition of the home in excess of $1,500.
Real estate taxes and insurance. Real estate taxes include the property taxes assessed by local and state authorities depending on the location of each home. Insurance includes the cost of property, general liability, and other needed insurance for each property. Certain real estate taxes and insurance costs are capitalized in accordance with our capitalization policy.
Property management fees. Property management fees include fees paid to the Manager for managing each property, presented net of fee rebates related to the Manager Cap (see Note 13 to our consolidated financial statements).
Advisory fees. Advisory fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 13 to our consolidated financial statements).
Corporate general and administrative expenses. Corporate general and administrative expenses include, but are not limited to, audit fees, legal fees, tax preparation fees, Board fees, equity-based compensation expense and corporate payroll.
Property general and administrative expenses. Property general and administrative expenses include the costs of marketing, professional fees, legal fees, general office supplies, and other administrative related costs incurred in operating the properties.
Depreciation and amortization. Depreciation and amortization costs primarily include depreciation of our homes and amortization of acquired in-place leases, recognized over their respective useful lives.
Interest expense. Interest expense primarily includes the cost of interest expense on debt, payments and receipts related to our interest rate derivatives, the change in fair value of interest rate derivatives not designated as hedges and the amortization of deferred financing costs. Certain interest costs are capitalized in accordance with our capitalization policy.
Loss on extinguishment of debt. Loss on extinguishment of debt includes prepayment penalties and defeasance costs, the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the early repayment of debt and other costs incurred in a debt extinguishment.
Gain/(loss) on sales of real estate. Gain/(loss) on sales of real estate includes the gain or loss recognized upon sales of homes. Gain/(loss) on sales of real estate is calculated by deducting the carrying value of the real estate and costs incurred to sell the properties from the sales prices of the homes.
Casualty gain/(loss). Casualty gain/(loss) includes the gain or loss incurred on homes, net of insurance proceeds received, that experience an unexpected and unusual event such as a natural disaster or fire.
Consolidated Results of Operations for the Three Months Ended September 30, 2022 and 2021
The three months ended September 30, 2022 compared to the three months ended September 30, 2021
The following table sets forth a summary of our consolidated operating results for the three months ended September 30, 2022 and 2021 (in thousands):
| For the Three Months Ended September 30, |
||||||||||||
| 2022 |
2021 |
$ Change |
||||||||||
| Total revenues |
$ | 73,638 | $ | 41,887 | $ | 31,751 | ||||||
| Total expenses |
(88,119 | ) | (46,662 | ) | (41,457 | ) | ||||||
| Loss on sales of real estate |
(224 | ) | (175 | ) | (49 | ) | ||||||
| Casualty gain, net of insurance proceeds |
84 | 151 | (67 | ) | ||||||||
| Net loss |
(14,621 | ) | (4,799 | ) | (9,822 | ) | ||||||
| Dividends on and accretion to redemption value of Redeemable Series A preferred stock |
2,226 | 2,206 | 20 | |||||||||
| Net loss attributable to redeemable noncontrolling interests in the OP |
(1,782 | ) | (823 | ) | (959 | ) | ||||||
| Net loss attributable to redeemable noncontrolling interests in consolidated VIEs |
(3,112 | ) | — | (3,112 | ) | |||||||
| Net loss attributable to noncontrolling interests in consolidated VIEs |
(113 | ) | — | (113 | ) | |||||||
| Net loss attributable to common stockholders |
$ | (11,840 | ) | $ | (6,182 | ) | $ | (5,658 | ) | |||
The change in our net loss between the periods primarily relates to increases in property operating expenses, real estate taxes and insurance costs, advisory fees, property general and administrative expenses, depreciation and amortization, interest expense, and loss on extinguishment of debt, partially offset by an increase in rental income.
Revenues
Rental income. Rental income was $71.6 million for the three months ended September 30, 2022 compared to $40.8 million for the three months ended September 30, 2021, which was an increase of $30.8 million. The increase between the periods was primarily due to our acquisition activity and increases in rental rates over the past year.
Other income. Other income was $2.0 million for the three months ended September 30, 2022 compared to $1.1 million for the three months ended September 30, 2021, which was an increase of $0.9 million. The increase between the periods was primarily due to our acquisition activity over the past year.
Expenses
Property operating expenses. Property operating expenses were $12.6 million for the three months ended September 30, 2022 compared to $8.3 million for the three months ended September 30, 2021, which was an increase of $4.3 million. The increase between the periods was primarily due to our acquisition activity in 2022. For the three months ended September 30, 2022 and 2021, turn costs represented approximately 15% and 13%, respectively, of our property operating expenses.
Real estate taxes and insurance. Real estate taxes and insurance were $12.3 million for the three months ended September 30, 2022 compared to $8.2 million for the three months ended September 30, 2021, which was an increase of $4.1 million. The increase between the periods was primarily due to our acquisition activity in 2022 as well as increases in our real estate taxes as a result of increases in property valuations.
Property management fees. Property management fees were $3.8 million for the three months ended September 30, 2022 compared to $1.8 million for the three months ended September 30, 2021, which was an increase of $2.0 million. The increase between the periods was primarily due to our acquisition activity and increases in rental rates over the past year.
Advisory fees. Advisory fees were $4.3 million for the three months ended September 30, 2022 compared to $2.3 million for the three months ended September 30, 2021, which was an increase of $2.0 million. The increase between the periods was primarily due to our equity raising activity in 2022 and increases in total debt principal outstanding.
Corporate general and administrative expenses. Corporate general and administrative expenses were $2.7 million for the three months ended September 30, 2022 compared to $2.0 million for the three months ended September 30, 2021, which was an increase of $0.7 million. The increase between the periods was primarily due to increases in equity-based compensation expense and other corporate expenses as our operations continued to gain scale.
Property general and administrative expenses. Property general and administrative expenses were $4.4 million for the three months ended September 30, 2022 compared to $1.5 million for the three months ended September 30, 2021, which was an increase of $2.9 million. The increase between the periods was primarily due to our acquisition activity in 2022.
Depreciation and amortization. Depreciation and amortization costs were $28.7 million for the three months ended September 30, 2022 compared to $14.9 million for the three months ended September 30, 2021, which was an increase of $13.8 million. The increase between the periods was primarily due to our acquisition activity in 2022.
Interest expense. Interest expense was $16.9 million for the three months ended September 30, 2022 compared to $7.8 million for the three months ended September 30, 2021, which was an increase of $9.1 million. The increase between the periods was primarily due to an increase in interest on debt and amortization of deferred financing costs, as we increased our total debt principal outstanding and witnessed an increase in our weighted average interest rate during 2022, partially offset by the change in fair value of interest rate derivatives included in interest expense. The following table details the various costs included in interest expense for the three months ended September 30, 2022 and 2021 (in thousands):
| For the Three Months Ended September 30, |
||||||||||||
| 2022 |
2021 |
$ Change |
||||||||||
| Gross interest cost |
$ | 19,521 | $ | 9,027 | $ | 10,494 | ||||||
| Capitalized interest |
(2,646 | ) | (1,275 | ) | (1,371 | ) | ||||||
| Total |
$ | 16,875 | $ | 7,752 | $ | 9,123 | ||||||
Loss on extinguishment of debt. Loss on extinguishment of debt was $2.5 million for the three months ended September 30, 2022 compared to no loss on extinguishment of debt for the three months ended September 30, 2021, which was an increase of $2.5 million. The increase between the periods was due to the extinguishment of the Bridge Facility II and the Hatchway Broadmoor Mortgage which occurred during the three months ended September 30, 2022.
Gain/(loss) on sales of real estate. Loss on sales of real estate was $0.2 million for the three months ended September 30, 2022 and 2021.
Casualty gain/(loss), net of insurance proceeds. Casualty gain, net of insurance proceeds, was $0.1 million for the three months ended September 30, 2022 and $0.2 million for the three months ended September 30, 2021, which was a decrease of $0.1 million. The decrease between the periods was primarily due to a slight decrease in net insurance proceeds received in 2022.
Consolidated Results of Operations for the Nine Months Ended September 30, 2022 and 2021
The nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
The following table sets forth a summary of our consolidated operating results for the nine months ended September 30, 2022 and 2021 (in thousands):
| For the Nine Months Ended September 30, |
||||||||||||
| 2022 |
2021 |
$ Change |
||||||||||
| Total revenues |
$ | 188,259 | $ | 112,336 | $ | 75,923 | ||||||
| Total expenses |
(217,145 | ) | (118,959 | ) | (98,186 | ) | ||||||
| Loss on sales of real estate |
(8 | ) | (373 | ) | 365 | |||||||
| Casualty (loss)/gain, net of insurance proceeds |
(78 | ) | 49 | (127 | ) | |||||||
| Net loss |
(28,972 | ) | (6,947 | ) | (22,025 | ) | ||||||
| Dividends on and accretion to redemption value of Redeemable Series A preferred stock |
6,654 | 6,619 | 35 | |||||||||
| Net loss attributable to redeemable noncontrolling interests in the OP |
(3,976 | ) | (1,324 | ) | (2,652 | ) | ||||||
| Net loss attributable to redeemable noncontrolling interests in consolidated VIEs |
(4,303 | ) | — | (4,303 | ) | |||||||
| Net loss attributable to noncontrolling interests in consolidated VIEs |
(113 | ) | — | (113 | ) | |||||||
| Net loss attributable to common stockholders |
$ | (27,234 | ) | $ | (12,242 | ) | $ | (14,992 | ) | |||
The change in our net loss between the periods primarily relates to increases in property operating expenses, real estate taxes and insurance costs, property management fees, advisory fees, property general and administrative expenses, depreciation and amortization and interest expense, partially offset by an increase in rental income.
Revenues
Rental income. Rental income was $182.0 million for the nine months ended September 30, 2022 compared to $110.1 million for the nine months ended September 30, 2021, which was an increase of $71.9 million. The increase between the periods was primarily due to our acquisition activity and increases in rental rates over the past year.
Other income. Other income was $6.2 million for the nine months ended September 30, 2022 compared to $2.3 million for the nine months ended September 30, 2021, which was an increase of $3.9 million. The increase between the periods was primarily due to our acquisition activity over the past year.
Expenses
Property operating expenses. Property operating expenses were $33.6 million for the nine months ended September 30, 2022 compared to $19.4 million for the nine months ended September 30, 2021, which was an increase of $14.2 million. The increase between the periods was primarily due to our acquisition activity in 2022. For the nine months ended September 30, 2022 and 2021, turn costs represented approximately 14% and 14%, respectively, of our property operating expenses.
Real estate taxes and insurance. Real estate taxes and insurance were $32.7 million for the nine months ended September 30, 2022 compared to $22.1 million for the nine months ended September 30, 2021, which was an increase of $10.6 million. The increase between the periods was primarily due to our acquisition activity in 2022 as well as increases in our real estate taxes as a result of increases in property valuations.
Property management fees. Property management fees were $10.4 million for the nine months ended September 30, 2022 compared to $6.3 million for the nine months ended September 30, 2021, which was an increase of $4.1 million. The increase between the periods was primarily due to our acquisition activity and increases in rental rates over the past year.
Advisory fees. Advisory fees were $11.2 million for the nine months ended September 30, 2022 compared to $5.6 million for the nine months ended September 30, 2021, which was an increase of $5.6 million. The increase between the periods was primarily due to our equity raising activity in 2022 and increases in total debt principal outstanding.
Corporate general and administrative expenses. Corporate general and administrative expenses were $7.3 million for the nine months ended September 30, 2022 compared to $5.3 million for the nine months ended September 30, 2021, which was an increase of $2.0 million. The increase between the periods was primarily due to increases in equity-based compensation expense and other corporate expenses as our operations continued to gain scale.
Property general and administrative expenses. Property general and administrative expenses were $11.9 million for the nine months ended September 30, 2022 compared to $4.2 million for the nine months ended September 30, 2021, which was an increase of $7.7 million. The increase between the periods was primarily due to our acquisition activity in 2022.
Depreciation and amortization. Depreciation and amortization costs were $68.9 million for the nine months ended September 30, 2022 compared to $35.4 million for the nine months ended September 30, 2021, which was an increase of $33.5 million. The increase between the periods was primarily due to our acquisition activity in 2022.
Interest expense. Interest expense was $37.7 million for the nine months ended September 30, 2022 compared to $20.6 million for the nine months ended September 30, 2021, which was an increase of $17.1 million. The increase between the periods was primarily due to an increase in interest on debt and amortization of deferred financing costs, as we increased our total debt principal outstanding and witnessed an increase in our weighted average interest rate during 2022, partially offset by the change in fair value of interest rate derivatives included in interest expense. The following table details the various costs included in interest expense for the nine months ended September 30, 2022 and 2021 (in thousands):
| For the Nine Months Ended September 30, |
||||||||||||
| 2022 |
2021 |
$ Change |
||||||||||
| Gross interest cost |
$ | 45,170 | $ | 23,360 | $ | 21,810 | ||||||
| Capitalized interest |
(7,520 | ) | (2,794 | ) | (4,726 | ) | ||||||
| Total |
$ | 37,650 | $ | 20,566 | $ | 17,084 | ||||||
Loss on extinguishment of debt. Loss on extinguishment of debt was $3.5 million for the nine months ended September 30, 2022 compared to no loss on extinguishment of debt for the nine months ended September 30, 2021, which was an increase of $3.5 million. The increase between the periods was due to the extinguishment of the Bridge Facility, the Bridge Facility II and the Hatchway Broadmoor Mortgage which occurred during the nine months ended September 30, 2022.
Gain/(loss) on sales of real estate. Loss on sales of real estate was less than $0.1 million for the nine months ended September 30, 2022, and loss on sales of real estate was $0.4 million for the nine months ended September 30, 2021, which was a decrease of approximately $0.4 million. There were more instances of bulk dispositions for the nine months ended September 30, 2022 than there were during the nine months ended September 30, 2021, resulting in gains on sales of real estate included in current period activity, which partially offset total loss on sales of real estate in 2022.
Casualty gain/(loss), net of insurance proceeds. Casualty loss, net of insurance proceeds, was $0.1 million for the nine months ended September 30, 2022, and casualty gain, net of insurance proceeds, was less than $0.1 million for the nine months ended September 30, 2021, which was a decrease of approximately $0.1 million. The decrease between the periods was primarily due to a slight increase in casualty events in 2022.
Non-GAAP Measurements
Net Operating Income
NOI is a non-GAAP financial measure of performance. NOI is used by our management to evaluate and compare the performance of our properties to other comparable properties, to determine trends in earnings and to compute the fair value of our properties as NOI is not affected by (1) interest expense, (2) advisory fees, (3) the impact of depreciation and amortization expenses, (4) gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (5) corporate general and administrative expenses, (6) property general and administrative expenses, (7) casualty gains or losses and (8) other gains and losses that are specific to us, including loss on extinguishment of debt.
The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital, or in the case of assumed debt, decisions made by others, which may have changed or may change in the future. Advisory fees are eliminated because they do not reflect continuing operating costs of the property owner. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our homes that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale, which will usually change from period to period. Corporate general and administrative expenses are eliminated because they do not reflect the ongoing operating activity performed at the properties. Property general and administrative expenses are eliminated because they represent expenses such as legal, professional, centralized leasing, technology support, and accounting functions. Casualty gains or losses are excluded because of the infrequent and unusual nature of the sustained damages, they do not reflect continuing operating costs of the property owner and typically the economic impact, aside from deductible or risk retention, is covered by insurance. Losses on extinguished debt are excluded because they do not reflect continuing operating costs of the property owner. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales or sustained damage at similar times. We believe that eliminating these items from net income is useful because the resulting measure captures the actual ongoing revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.
However, the usefulness of NOI is limited because it excludes corporate general and administrative expenses, property general and administrative expense, interest expense, casualty gains or losses, advisory fees, depreciation and amortization expense, gains or losses from the sale of properties, and other gains and losses as determined under GAAP, and the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income, which further limits its usefulness.
NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.
The following table, which has not been adjusted for the effects of noncontrolling interests (“NCI”), reconciles our NOI for the three and nine months ended September 30, 2022 and 2021 to net loss, the most directly comparable GAAP financial measure on a consolidated basis (in thousands):
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net loss |
$ | (14,621 | ) | $ | (4,799 | ) | $ | (28,972 | ) | $ | (6,947 | ) | ||||
| Adjustments to reconcile net loss to NOI: |
||||||||||||||||
| Advisory fees |
4,313 | 2,337 | 11,243 | 5,638 | ||||||||||||
| Corporate general and administrative expenses |
2,701 | 1,992 | 7,341 | 5,310 | ||||||||||||
| Property general and administrative expenses |
4,373 | 1,505 | 11,871 | 4,160 | ||||||||||||
| Depreciation and amortization |
28,693 | 14,881 | 68,856 | 35,432 | ||||||||||||
| Interest expense |
16,875 | 7,752 | 37,650 | 20,566 | ||||||||||||
| Loss on extinguishment of debt |
2,468 | — | 3,469 | — | ||||||||||||
| Loss on sales of real estate |
224 | 175 | 8 | 373 | ||||||||||||
| Casualty (gain)/loss, net of insurance proceeds |
(84 | ) | (151 | ) | 78 | (49 | ) | |||||||||
| NOI |
$ | 44,942 | $ | 23,692 | $ | 111,544 | $ | 64,483 | ||||||||
The following table, which has not been adjusted for the effects of NCI, reconciles our NOI for the three and nine months ended September 30, 2022 to net loss, the most directly comparable GAAP financial measure by reportable segment (in thousands):
| For the Three Months Ended September 30, 2022 |
For the Nine Months Ended September 30, 2022 |
|||||||||||||||||||||||
| VineBrook |
NexPoint Homes |
Total |
VineBrook |
NexPoint Homes |
Total |
|||||||||||||||||||
| Net loss |
$ | (10,453 | ) | $ | (4,168 | ) | $ | (14,621 | ) | $ | (21,810 | ) | $ | (7,162 | ) | $ | (28,972 | ) | ||||||
| Adjustments to reconcile net loss to NOI: |
||||||||||||||||||||||||
| Advisory fees |
4,313 | — | 4,313 | 11,243 | — | 11,243 | ||||||||||||||||||
| Corporate general and administrative expenses |
2,526 | 175 | 2,701 | 7,162 | 179 | 7,341 | ||||||||||||||||||
| Property general and administrative expenses |
3,900 | 473 | 4,373 | 10,310 | 1,561 | 11,871 | ||||||||||||||||||
| Depreciation and amortization |
23,641 | 5,052 | 28,693 | 63,009 | 5,847 | 68,856 | ||||||||||||||||||
| Interest expense |
11,199 | 5,676 | 16,875 | 30,976 | 6,674 | 37,650 | ||||||||||||||||||
| Loss on extinguishment of debt |
2,468 | — | 2,468 | 3,469 | — | 3,469 | ||||||||||||||||||
| Loss on sales of real estate |
224 | — | 224 | 8 | — | 8 | ||||||||||||||||||
| Casualty (gain)/loss, net of insurance proceeds |
(84 | ) | — | (84 | ) | 78 | — | 78 | ||||||||||||||||
| NOI |
$ | 37,734 | $ | 7,208 | $ | 44,942 | $ | 104,445 | $ | 7,099 | $ | 111,544 | ||||||||||||
Net Operating Income for Our Same Home and Non-Same Home Properties for the Three Months Ended September 30, 2022 and 2021
There are 5,442 homes in our 2022 same home pool (our “Same Home” properties). To be included as a “Same Home,” homes must be in the VineBrook reportable segment and must have been stabilized for at least 90 days in advance of the first day of the previous fiscal year and be held through the current reporting period-end. Same Home properties for the period ended September 30, 2022 and September 30, 2021 were stabilized by October 1, 2020 and held through September 30, 2022. Same Home properties do not include homes held for sale. Homes that are stabilized are included as Same Home properties, whether occupied or vacant. See Item 1. “Business—Our Portfolio” in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 23, 2022 for a discussion of the definition of stabilized. We view Same Home NOI as an important measure of the operating performance of our homes because it allows us to compare operating results of homes owned for the entirety of the current and comparable periods and therefore eliminate variations caused by acquisitions or dispositions during the periods.
The following table reflects the revenues, property operating expenses and NOI for the three months ended September 30, 2022 and 2021 for our Same Home and Non-Same Home properties (dollars in thousands):
| For the Three Months Ended September 30, |
||||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Revenues |
||||||||||||||||
| Same Home |
||||||||||||||||
| Rental income (1) |
$ | 17,325 | $ | 16,409 | $ | 916 | 5.6 | % | ||||||||
| Other income (1) |
47 | 38 | 9 | 23.7 | % | |||||||||||
| Same Home revenues |
17,372 | 16,447 | 925 | 5.6 | % | |||||||||||
| Non-Same Home |
||||||||||||||||
| Rental income (1) |
54,750 | 24,529 | 30,221 | 123.2 | % | |||||||||||
| Other income (1) |
505 | 61 | 444 | 727.9 | % | |||||||||||
| Non-Same Home revenues |
55,255 | 24,590 | 30,665 | 124.7 | % | |||||||||||
| Total revenues |
72,627 | 41,037 | 31,590 | 77.0 | % | |||||||||||
| Operating expenses |
||||||||||||||||
| Same Home |
||||||||||||||||
| Property operating expenses (1) |
3,382 | 2,733 | 649 | 23.7 | % | |||||||||||
| Real estate taxes and insurance |
2,717 | 2,909 | (192 | ) | -6.6 | % | ||||||||||
| Property management fees (2) |
919 | 695 | 224 | 32.2 | % | |||||||||||
| Same Home operating expenses |
7,018 | 6,337 | 681 | 10.7 | % | |||||||||||
| Non-Same Home |
||||||||||||||||
| Property operating expenses (1) |
8,199 | 4,699 | 3,500 | 74.5 | % | |||||||||||
| Real estate taxes and insurance |
9,543 | 5,248 | 4,295 | 81.8 | % | |||||||||||
| Property management fees (2) |
2,925 | 1,061 | 1,864 | 175.7 | % | |||||||||||
| Non-Same Home operating expenses |
20,667 | 11,008 | 9,659 | 87.7 | % | |||||||||||
| Total operating expenses |
27,685 | 17,345 | 10,340 | 59.6 | % | |||||||||||
| NOI |
||||||||||||||||
| Same Home |
10,354 | 10,110 | 244 | 2.4 | % | |||||||||||
| Non-Same Home |
34,588 | 13,582 | 21,006 | 154.7 | % | |||||||||||
| Total NOI |
$ | 44,942 | $ | 23,692 | $ | 21,250 | 89.7 | % | ||||||||
| (1) |
Presented net of tenant chargebacks. |
|
| (2) | Fees incurred to the Manager. |
See reconciliation of net income (loss) to NOI above under “—Net Operating Income.”
Same Home Results of Operations for the Three Months Ended September 30, 2022 and 2021
As of September 30, 2022, our Same Home properties were approximately 95.7% occupied with a weighted average monthly effective rent per occupied home of $1,110. As of September 30, 2021, our Same Home properties were approximately 95.4% occupied with a weighted average monthly effective rent per occupied home of $1,032. For our Same Home properties, we recorded the following operating results for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021:
Revenues
Rental income. Rental income was $17.3 million for the three months ended September 30, 2022 compared to $16.4 million for the three months ended September 30, 2021, which was an increase of approximately $0.9 million, or 5.6%. The increase is related to a 7.6% increase in the weighted average monthly effective rent per occupied home and by a 0.3% increase in occupancy.
Other income. Other income remained flat at less than $0.1 million for the three months ended September 30, 2022 and 2021.
Expenses
Property operating expenses. Property operating expenses were $3.4 million for the three months ended September 30, 2022 compared to $2.7 million for the three months ended September 30, 2021, which was an increase of approximately $0.7 million, or 23.7%. The majority of the increase is related to an increase in general turnover costs of approximately $0.2 million, an increase in repairs and maintenance supply costs of approximately $0.2 million, an increase in third party maintenance costs of approximately $0.1 million and an increase in landscaping costs of approximately $0.1 million.
Real estate taxes and insurance. Real estate taxes and insurance costs were $2.7 million for the three months ended September 30, 2022 compared to $2.9 million for the three months ended September 30, 2021, which was a decrease of approximately $0.2 million, or 6.6%. The majority of the decrease is related to a decrease in property insurance costs of approximately $0.3 million, partially offset by an increase in real estate taxes of approximately $0.1 million.
Property management fees. Property management fees were $0.9 million for the three months ended September 30, 2022 compared to $0.7 million for the three months ended September 30, 2021, which was an increase of approximately $0.2 million or 32.2%. The majority of the increase is related to an approximately $0.2 million decrease in the fee rebate allocated to Same Home properties related to the Manager Cap.
Net Operating Income for Our Same Home and Non-Same Home Properties for the Nine Months Ended September 30, 2022 and 2021
The following table reflects the revenues, property operating expenses and NOI for the nine months ended September 30, 2022 and 2021 for our Same Home and Non-Same Home properties (dollars in thousands):
| For the Nine Months Ended September 30, |
||||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Revenues |
||||||||||||||||
| Same Home |
||||||||||||||||
| Rental income (1) |
$ | 51,194 | $ | 48,908 | $ | 2,286 | 4.7 | % | ||||||||
| Other income (1) |
122 | 102 | 20 | 19.6 | % | |||||||||||
| Same Home revenues |
51,316 | 49,010 | 2,306 | 4.7 | % | |||||||||||
| Non-Same Home |
||||||||||||||||
| Rental income (1) |
131,541 | 61,365 | 70,176 | 114.4 | % | |||||||||||
| Other income (1) |
2,099 | 198 | 1,901 | 960.1 | % | |||||||||||
| Non-Same Home revenues |
133,640 | 61,563 | 72,077 | 117.1 | % | |||||||||||
| Total revenues |
184,956 | 110,573 | 74,383 | 67.3 | % | |||||||||||
| Operating expenses |
||||||||||||||||
| Same Home |
||||||||||||||||
| Property operating expenses (1) |
8,445 | 6,721 | 1,724 | 25.7 | % | |||||||||||
| Real estate taxes and insurance |
8,389 | 8,916 | (527 | ) | -5.9 | % | ||||||||||
| Property management fees (2) |
2,890 | 2,718 | 172 | 6.3 | % | |||||||||||
| Same Home operating expenses |
19,724 | 18,355 | 1,369 | 7.5 | % | |||||||||||
| Non-Same Home |
||||||||||||||||
| Property operating expenses (1) |
21,888 | 10,958 | 10,930 | 99.7 | % | |||||||||||
| Real estate taxes and insurance |
24,327 | 13,179 | 11,148 | 84.6 | % | |||||||||||
| Property management fees (2) |
7,473 | 3,598 | 3,875 | 107.7 | % | |||||||||||
| Non-Same Home operating expenses |
53,688 | 27,735 | 25,953 | 93.6 | % | |||||||||||
| Total operating expenses |
73,412 | 46,090 | 27,322 | 59.3 | % | |||||||||||
| NOI |
||||||||||||||||
| Same Home |
31,592 | 30,655 | 937 | 3.1 | % | |||||||||||
| Non-Same Home |
79,952 | 33,828 | 46,124 | 136.3 | % | |||||||||||
| Total NOI |
$ | 111,544 | $ | 64,483 | $ | 47,061 | 73.0 | % | ||||||||
| (1) |
Presented net of tenant chargebacks. |
|
| (2) | Fees incurred to the Manager. |
See reconciliation of net income (loss) to NOI above under “—Net Operating Income.”
Same Home Results of Operations for the Nine Months Ended September 30, 2022 and 2021
As of September 30, 2022, our Same Home properties were approximately 95.7% occupied with a weighted average monthly effective rent per occupied home of $1,110. As of September 30, 2021, our Same Home properties were approximately 95.4% occupied with a weighted average monthly effective rent per occupied home of $1,032. For our Same Home properties, we recorded the following operating results for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021:
Revenues
Rental income. Rental income was $51.2 million for the nine months ended September 30, 2022 compared to $48.9 million for the nine months ended September 30, 2021, which was an increase of approximately $2.3 million, or 4.7%. The increase is related to a 7.6% increase in the weighted average monthly effective rent per occupied home and by a 0.3% increase in occupancy.
Other income. Other income remained flat at $0.1 million for the nine months ended September 30, 2022 and 2021.
Expenses
Property operating expenses. Property operating expenses were $8.4 million for the nine months ended September 30, 2022 compared to $6.7 million for the nine months ended September 30, 2021, which was an increase of approximately $1.7 million, or 25.7%. The majority of the increase is related to an increase in general turnover costs of approximately $0.8 million, an increase in repairs and maintenance supply costs of approximately $0.3 million, an increase in third party maintenance costs of approximately $0.3 million and an increase in water and sewer costs of approximately $0.2 million.
Real estate taxes and insurance. Real estate taxes and insurance costs were $8.4 million for the nine months ended September 30, 2022 compared to $8.9 million for the nine months ended September 30, 2021, which was a decrease of approximately $0.5 million, or 5.9%. The majority of the decrease is related to a decrease in property insurance costs of approximately $0.4 million and a decrease in real estate taxes of approximately $0.1 million.
Property management fees. Property management fees were $2.9 million for the nine months ended September 30, 2022 compared to $2.7 million for the nine months ended September 30, 2021, which was an increase of approximately $0.2 million, or 6.3%. The majority of the increase is related to an approximately $0.2 million decrease in the fee rebate allocated to Same Home properties related to the Manager Cap.
The following table reflects a reconciliation of Same Home and Non-Same Home revenues and operating expenses to total revenues and operating expenses, including tenant chargebacks, for the three months ended September 30, 2022 and 2021 (dollars in thousands):
| For the Three Months Ended September 30, |
||||||||
| 2022 |
2021 |
|||||||
| Same Home revenues |
$ | 17,372 | $ | 16,447 | ||||
| Non-Same Home revenues |
55,255 | 24,590 | ||||||
| Chargebacks |
1,011 | 850 | ||||||
| Total revenues |
73,638 | 41,887 | ||||||
| Same Home operating expenses |
7,018 | 6,337 | ||||||
| Non-Same Home operating expenses |
20,667 | 11,008 | ||||||
| Chargebacks |
1,011 | 850 | ||||||
| Total operating expenses |
$ | 28,696 | $ | 18,195 | ||||
The following table reflects a reconciliation of Same Home and Non-Same Home revenues and operating expenses to total revenues and operating expenses, including tenant chargebacks, for the nine months ended September 30, 2022 and 2021 (dollars in thousands):
| For the Nine Months Ended September 30, |
||||||||
| 2022 |
2021 |
|||||||
| Same Home revenues |
$ | 51,316 | $ | 49,010 | ||||
| Non-Same Home revenues |
133,640 | 61,563 | ||||||
| Chargebacks |
3,303 | 1,763 | ||||||
| Total revenues |
188,259 | 112,336 | ||||||
| Same Home operating expenses |
19,724 | 18,355 | ||||||
| Non-Same Home operating expenses |
53,688 | 27,735 | ||||||
| Chargebacks |
3,303 | 1,763 | ||||||
| Total operating expenses |
$ | 76,715 | $ | 47,853 | ||||
We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measure. We also believe that funds from operations (“FFO”) as defined by the National Association of Real Estate Investments Trusts (“NAREIT”), core funds from operations (“Core FFO”) and adjusted funds from operations (“AFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.
Since the historical cost accounting convention used for real estate assets requires depreciation except on land, such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income (loss), as defined by GAAP. FFO is defined by NAREIT as net income (loss) computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization. We compute FFO for the VineBrook reportable segment in accordance with NAREIT’s definition. We excluded the NexPoint Homes reportable segment operations from the FFO calculation due to the timing of the acquisition of the portfolio as it was not deemed meaningful to the calculation. Our presentation differs slightly in that we begin with net income (loss) attributable to common stockholders and add net income (loss) attributable to NCI in the OP and then make the adjustments to arrive at FFO.
Core FFO for the VineBrook reportable segment makes certain adjustments to FFO for the VineBrook reportable segment, which relate to items that are either not likely to occur on a regular basis or are otherwise not representative of the ongoing operating performance of our Portfolio. Core FFO adjusts FFO to remove items such as gains or losses on extinguishment of debt, casualty gains or losses, changes in fair value on interest rate derivatives included in interest expense, the amortization of deferred financing costs and equity-based compensation expense. We believe Core FFO is useful as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs.
AFFO for the VineBrook reportable segment makes certain adjustments to Core FFO for the VineBrook reportable segment in order to arrive at a more refined measure of the operating performance of our Portfolio. There is no industry standard definition of AFFO and the method of calculating AFFO is divergent across the industry. AFFO adjusts Core FFO to remove recurring capital expenditures, which are costs necessary to help preserve the value and maintain functionality of our homes. We believe AFFO is useful as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs.
Basic and diluted weighted average shares in our FFO table includes both our Shares and OP Units. NexPoint Homes Shares and SFR OP Units are not part of this count as the metrics in the FFO table only pertain to the VineBrook reportable segment.
We believe that the use of FFO, Core FFO and AFFO, combined with the required GAAP presentations, improves the understanding of operating results of REITs and makes comparisons of operating results among such companies more meaningful. While FFO, Core FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income (loss) as defined by GAAP and should not be considered as an alternative or substitute to those measures in evaluating our liquidity or operating performance. FFO, Core FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. Further, our computation of FFO, Core FFO and AFFO may not be comparable to FFO, Core FFO and AFFO reported by other REITs.
The FFO, Core FFO and AFFO results discussed further below are for the VineBrook reportable segment, and reconcile to net loss for the VineBrook reportable segment. See below for a reconciliation of VineBrook net loss to consolidated net loss:
| For the Three Months Ended September 30, 2022 |
For the Nine Months Ended September 30, 2022 |
|||||||||||||||||||||||
| VineBrook |
NexPoint Homes |
Total |
VineBrook |
NexPoint Homes |
Total |
|||||||||||||||||||
| Net loss attributable to common stockholders |
$ | (10,821 | ) | $ | (1,019 | ) | $ | (11,840 | ) | $ | (24,900 | ) | $ | (2,334 | ) | $ | (27,234 | ) | ||||||
| Net (loss)/income attributable to redeemable NCI in the OP |
(1,858 | ) | 76 | (1,782 | ) | (3,564 | ) | (412 | ) | (3,976 | ) | |||||||||||||
| Net loss attributable to redeemable NCI in consolidated VIEs |
— | (3,112 | ) | (3,112 | ) | — | (4,303 | ) | (4,303 | ) | ||||||||||||||
| Net loss attributable to NCI in consolidated VIEs |
— | (113 | ) | (113 | ) | — | (113 | ) | (113 | ) | ||||||||||||||
The three months ended September 30, 2022 as compared to the three months ended September 30, 2021
The following table reconciles our calculations of VineBrook FFO, Core FFO and AFFO to VineBrook net loss, which is reconciled to consolidated net loss above, the most directly comparable GAAP financial measure, for the three months ended September 30, 2022 and 2021 (in thousands, except per share amounts):
| For the Three Months Ended September 30, |
||||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Net loss attributable to common stockholders |
$ | (10,821 | ) | $ | (6,182 | ) | $ | (4,639 | ) | 75.0 | % | |||||
| Net loss attributable to redeemable NCI in the OP |
(1,858 | ) | (823 | ) | (1,035 | ) | 125.8 | % | ||||||||
| Depreciation and amortization |
23,641 | 14,881 | 8,760 | 58.9 | % | |||||||||||
| Loss on sales of real estate |
224 | 175 | 49 | 28.0 | % | |||||||||||
| FFO |
11,186 | 8,051 | 3,135 | 38.9 | % | |||||||||||
| FFO per share - basic |
$ | 0.39 | $ | 0.39 | $ | — | 0.0 | % | ||||||||
| FFO per share - diluted |
$ | 0.38 | $ | 0.38 | $ | — | 0.0 | % | ||||||||
| Casualty gain, net of insurance proceeds |
(84 | ) | (151 | ) | 67 | -44.4 | % | |||||||||
| Amortization of deferred financing costs |
2,136 | 1,077 | 1,059 | 98.3 | % | |||||||||||
| Loss on extinguishment of debt |
2,468 | — | 2,468 | 100.0 | % | |||||||||||
| Change in fair value of interest rate derivatives included in interest expense |
(7,694 | ) | — | (7,694 | ) | -100.0 | % | |||||||||
| Equity-based compensation expense |
1,632 | 1,310 | 322 | 24.6 | % | |||||||||||
| Core FFO |
9,644 | 10,287 | (643 | ) | -6.3 | % | ||||||||||
| Core FFO per share - basic |
$ | 0.33 | $ | 0.49 | $ | (0.16 | ) | -32.7 | % | |||||||
| Core FFO per share - diluted |
$ | 0.33 | $ | 0.48 | $ | (0.15 | ) | -31.3 | % | |||||||
| Recurring capital expenditures |
(3,201 | ) | (1,682 | ) | (1,519 | ) | 90.3 | % | ||||||||
| AFFO |
6,443 | 8,605 | (2,162 | ) | -25.1 | % | ||||||||||
| AFFO per share - basic |
$ | 0.22 | $ | 0.41 | $ | (0.19 | ) | -46.3 | % | |||||||
| AFFO per share - diluted |
$ | 0.22 | $ | 0.40 | $ | (0.18 | ) | -45.0 | % | |||||||
| Weighted average shares outstanding - basic |
29,039 | 20,849 | ||||||||||||||
| Weighted average shares outstanding - diluted (1) |
29,499 | 21,365 | ||||||||||||||
| Dividends declared per share |
$ | 0.5301 | $ | 0.5301 | ||||||||||||
| FFO Coverage - diluted (2) |
0.72x |
0.71x |
||||||||||||||
| Core FFO Coverage - diluted (2) |
0.62x |
0.91x |
||||||||||||||
| AFFO Coverage - diluted (2) |
0.42x |
0.76x |
||||||||||||||
| (1) |
For the three months ended September 30, 2022 and 2021, includes approximately 460,000 shares and 516,000 shares, respectively, related to the assumed vesting of RSUs and PI Units not contingent upon an IPO. |
| (2) |
Indicates coverage ratio of FFO/Core FFO/AFFO per common share (diluted) over dividends declared per common share during the period. |
FFO was $11.2 million for the three months ended September 30, 2022 compared to $8.1 million for the three months ended September 30, 2021, which was an increase of approximately $3.1 million. The change in our FFO between the periods primarily relates to an increase in VineBrook rental income of $22.1 million, partially offset by increases in VineBrook total property operating expenses of $8.7 million, VineBrook advisory fees of $2.0 million, VineBrook property general and administrative expenses of $2.4 million, VineBrook interest expense of $3.5 million and VineBrook loss on extinguishment of debt of $2.5 million. The changes in diluted Core FFO per share and AFFO per share were primarily related to a 38.0% increase in the diluted weighted average shares outstanding as of September 30, 2022 compared to September 30, 2021 as a result of significant equity raise activity. The entirety of the proceeds from these equity issuances have not been deployed immediately into the acquisition of cash flow yielding homes as a portion of the homes purchased during the period are currently in rehabilitation. The increase in the weighted average shares outstanding in the current period without a significant and immediate corresponding increase in Core FFO and AFFO resulted in the period over period decline. Also, the weighted average interest rate of debt increased from 2.4715% as of September 30, 2021 to 4.8865% as of September 30, 2022 for the VineBrook reportable segment, which has contributed to the decline in our Core FFO and AFFO per share results. On a longer time horizon, these irregularities are expected to diminish and we expect our results to normalize and comparatively improve on a per share basis as a larger amount of the acquired homes become stabilized, resulting in increases in diluted Core FFO per share and AFFO per share. Additionally, the Company has entered into eight additional interest rate derivative agreements in 2022 with a combined notional amount of $950.0 million in order to partially offset the impact of increasing interest rates.
Core FFO was $9.6 million for the three months ended September 30, 2022 compared to $10.3 million for the three months ended September 30, 2021, which was a decrease of approximately $0.7 million. The change in our Core FFO between the periods primarily relates to an increase in VineBrook interest expense and the change in fair value of interest rate derivatives included in VineBrook interest expense, which is subtracted to arrive at Core FFO given it is a non-cash item.
AFFO was $6.4 million for the three months ended September 30, 2022 compared to $8.6 million for the three months ended September 30, 2021, which was a decrease of approximately $2.2 million. The change in our AFFO between the periods primarily relates to a decrease in Core FFO and an increase in VineBrook recurring capital expenditures of $1.5 million.
The nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021
The following table reconciles our calculations of VineBrook FFO, Core FFO and AFFO to VineBrook net loss, which is reconciled to consolidated net loss above, the most directly comparable GAAP financial measure, for the nine months ended September 30, 2022 and 2021 (in thousands, except per share amounts):
| For the Nine Months Ended September 30, |
||||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Net loss attributable to common stockholders |
$ | (24,900 | ) | $ | (12,242 | ) | $ | (12,658 | ) | 103.4 | % | |||||
| Net loss attributable to NCI in the OP |
(3,564 | ) | (1,324 | ) | (2,240 | ) | 169.2 | % | ||||||||
| Depreciation and amortization |
63,009 | 35,432 | 27,577 | 77.8 | % | |||||||||||
| Loss on sales of real estate |
8 | 373 | (365 | ) | -97.9 | % | ||||||||||
| FFO |
34,553 | 22,239 | 12,314 | 55.4 | % | |||||||||||
| FFO per share - basic |
$ | 1.22 | $ | 1.30 | $ | (0.08 | ) | -6.2 | % | |||||||
| FFO per share - diluted |
$ | 1.20 | $ | 1.27 | $ | (0.07 | ) | -5.5 | % | |||||||
| Casualty loss/(gain), net of insurance proceeds |
78 | (49 | ) | 127 | -259.2 | % | ||||||||||
| Amortization of deferred financing costs |
5,455 | 2,691 | 2,764 | 102.7 | % | |||||||||||
| Loss on extinguishment of debt |
3,469 | — | 3,469 | 100.0 | % | |||||||||||
| Change in fair value of interest rate derivatives included in interest expense |
(9,765 | ) | — | (9,765 | ) | -100.0 | % | |||||||||
| Equity-based compensation expense |
4,704 | 3,384 | 1,320 | 39.0 | % | |||||||||||
| Core FFO |
38,494 | 28,265 | 10,229 | 36.2 | % | |||||||||||
| Core FFO per share - basic |
$ | 1.36 | $ | 1.65 | $ | (0.29 | ) | -17.6 | % | |||||||
| Core FFO per share - diluted |
$ | 1.33 | $ | 1.61 | $ | (0.28 | ) | -17.4 | % | |||||||
| Recurring capital expenditures |
(8,384 | ) | (3,935 | ) | (4,449 | ) | 113.1 | % | ||||||||
| AFFO |
30,110 | 24,330 | 5,780 | 23.8 | % | |||||||||||
| AFFO per share - basic |
$ | 1.06 | $ | 1.42 | $ | (0.36 | ) | -25.4 | % | |||||||
| AFFO per share - diluted |
$ | 1.04 | $ | 1.39 | $ | (0.35 | ) | -25.2 | % | |||||||
| Weighted average shares outstanding - basic |
28,390 | 17,082 | ||||||||||||||
| Weighted average shares outstanding - diluted (1) |
28,870 | 17,541 | ||||||||||||||
| Dividends declared per share |
$ | 1.5903 | $ | 1.5903 | ||||||||||||
| FFO Coverage - diluted (2) |
0.75x |
0.80x |
||||||||||||||
| Core FFO Coverage - diluted (2) |
0.84x |
1.01x |
||||||||||||||
| AFFO Coverage - diluted (2) |
0.65x |
0.87x |
||||||||||||||
| (1) |
For the nine months ended September 30, 2022 and 2021, includes approximately 480,000 shares and 459,000 shares, respectively, related to the assumed vesting of RSUs and PI Units not contingent upon an IPO. |
| (2) |
Indicates coverage ratio of FFO/Core FFO/AFFO per common share (diluted) over dividends declared per common share during the period. |
FFO was $34.6 million for the nine months ended September 30, 2022 compared to $22.2 million for the nine months ended September 30, 2021, which was an increase of approximately $12.4 million. The change in our FFO between the periods primarily relates to an increase in VineBrook rental income of $62.0 million, partially offset by increases in VineBrook total property operating expenses of $25.7 million, VineBrook advisory fees of $5.6 million, VineBrook corporate general and administrative expenses of $1.9 million, VineBrook property general and administrative expenses of $6.2 million and VineBrook interest expense of $10.4 million. The changes in diluted FFO per share, Core FFO per share and AFFO per share were primarily related to an 64.6% increase in the diluted weighted average shares outstanding as of September 30, 2022 compared to September 30, 2021 as a result of significant equity raise activity. The entirety of the proceeds from these equity issuances have not been deployed immediately into the acquisition of cash flow yielding homes as a portion of the homes purchased during the period are currently in rehabilitation. This significant increase in the weighted average shares outstanding in the current period without a significant and immediate corresponding increase in FFO resulted in the period over period decline. Also, the weighted average interest rate of debt increased from 2.4715% as of September 30, 2021 to 4.8865% as of September 30, 2022 for the VineBrook reportable segment, which has contributed to the decline in our FFO per share results. On a longer time horizon, these irregularities are expected to diminish and we expect our results to normalize and comparatively improve on a per share basis as a larger amount of the acquired homes become stabilized, resulting in increases in diluted FFO per share, Core FFO per share and AFFO per share. Additionally, the Company has entered into eight additional interest rate derivative agreements in 2022 with a combined notional amount of $950.0 million in order to partially offset the impact of increasing interest rates.
Core FFO was $38.5 million for the nine months ended September 30, 2022 compared to $28.3 million for the nine months ended September 30, 2021, which was an increase of approximately $10.2 million. The change in our Core FFO between the periods primarily relates to an increase in FFO partially offset by the change in fair value in interest rate derivatives included in interest expense, which is subtracted to arrive at Core FFO given it is a non-cash item.
AFFO was $30.1 million for the nine months ended September 30, 2022 compared to $24.3 million for the nine months ended September 30, 2021, which was an increase of approximately $5.8 million. The change in our AFFO between the periods primarily relates to an increase in Core FFO and an increase in VineBrook recurring capital expenditures of $4.5 million.
The sale price of the Shares sold in the Private Offering as well as the sale price of OP Units was equal to the most recent NAV per share in effect at the time a subscription agreement or funds were received, plus applicable fees and commissions. The purchase price at which Shares may be repurchased in accordance with the terms of the Share Repurchase Plan (defined below) is generally based on the most recent NAV per share in effect at the time of repurchase, and Shares or OP Units issued under the applicable DRIP generally reflect a 3% discount to the then-current NAV per share.
Effective for valuations beginning on July 31, 2021, the Company implemented an amended and restated Valuation Methodology as approved by our Board. Under the Valuation Methodology, Green Street Advisors (“Green Street”) calculates a preliminary NAV by valuing the portfolio in accordance with the Valuation Methodology. Green Street then recommends the preliminary NAV to the Adviser. Based on this recommendation, the Adviser then calculates transaction costs and makes any other adjustments, including costs of internalization, determined necessary to finalize NAV. The finalized NAV is then approved by the pricing committee of the Board.
On and before March 31, 2020, NAV was determined as of the end of each quarter. Beginning April 30, 2020, NAV was determined as of the end of each month. Effective for NAV determined on and after December 31, 2021, NAV has been determined as of the end of each quarter. NAV per share is calculated on a fully diluted basis. The table below illustrates the changes in NAV since inception:
| Date |
NAV per share |
|||
| November 1, 2018 |
$ | 25.00 | ||
| December 31, 2018 |
28.27 | |||
| March 31, 2019 |
28.75 | |||
| June 30, 2019 |
28.88 | |||
| September 30, 2019 |
29.85 | |||
| December 31, 2019 |
30.58 | |||
| March 31, 2020 |
30.59 | |||
| April 30, 2020 |
30.82 | |||
| May 31, 2020 |
31.08 | |||
| June 30, 2020 |
31.24 | |||
| July 31, 2020 |
31.47 | |||
| August 31, 2020 |
32.91 | |||
| September 30, 2020 |
34.00 | |||
| October 31, 2020 |
34.18 | |||
| November 30, 2020 |
34.38 | |||
| December 31, 2020 |
36.56 | |||
| January 31, 2021 |
36.56 | |||
| February 28, 2021 |
36.68 | |||
| March 31, 2021 |
36.82 | |||
| April 30, 2021 |
37.85 | |||
| May 31, 2021 |
38.68 | |||
| June 30, 2021 |
40.82 | |||
| July 31, 2021 |
43.76 | |||
| August 31, 2021 |
46.19 | |||
| September 30, 2021 |
47.90 | |||
| October 31, 2021 |
49.09 | |||
| November 30, 2021 |
51.38 | |||
| December 31, 2021 |
54.14 | |||
| March 31, 2022 |
59.85 | |||
| June 30, 2022 |
62.75 | |||
| September 30, 2022 |
62.97 | |||
Fees and Commissions paid to Placement Agents and Dealer Manager
Subject to certain exceptions, investors that purchased Shares through the Private Offering generally paid the Placement Agents in the Private Offering placement fees or commissions, in addition to the NAV sales price. For sales through Placement Agents other than Raymond James, the placement fees or commissions were generally between 1% to 5.5% of gross investor equity, subject to certain breakpoints and various terms of each specific Selling Agreement. A placement fee equal to 3% and an advisory fee equal to 2% of gross proceeds invested, which is also in addition to the NAV sales price, was paid to Raymond James for all Shares sold by Raymond James on behalf of the Company in the Private Offering. With the consent of the applicable Placement Agent, some or all of the applicable fees and commissions may have been waived. Other Selling Agreements may have had specific fees that differ from the Raymond James fees related to selling Shares to their clients. In addition, the Dealer Manager generally received a fee of 0.5% on sales in the Private Offering through Raymond James and 3% on sales through other Placement Agents, a portion of which may be reallowed to those Placement Agents. Placement Agent compensation was subject to a reasonable carve-out for sales of Shares directly by the Company or for sales to employees of our Adviser, Manager and affiliates thereof. For sales through registered investment advisors (“RIAs”), the Dealer Manager received a fee of up to 2% of gross investor equity. With respect to sales through RIAs or Placement Agents other than Raymond James who in each case were first introduced to the Company by Raymond James, Raymond James could receive a participating placement fee equal to 1% of gross investor equity. The Private Offering was terminated on September 14, 2022.
Liquidity and Capital Resources
Our short-term liquidity requirements consist primarily of funds necessary to pay for debt maturities, operating expenses and other expenditures directly associated with our homes, including:
| • |
recurring maintenance necessary to maintain our homes; |
| • |
interest expense and scheduled principal payments on outstanding indebtedness; |
| • |
distributions necessary to qualify for taxation as a REIT; |
| • |
advisory fees payable to our Adviser; |
| • |
general and administrative expenses; |
| • |
capital expenditures related to upcoming acquisitions and rehabilitation of owned homes; |
| • |
offering expenses related to raising equity; and |
| • |
property management fees payable to the Manager. |
We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances and debt financing. Additionally, as of September 30, 2022, we had access to credit through our credit facilities. The Warehouse Facility has an additional $5.0 million of capacity.
Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional homes, renovations and other capital expenditures to improve our homes and scheduled debt payments and distributions. We expect to meet our long-term liquidity requirements through various sources of capital, which may include public or private issuances of common equity, preferred equity or debt, draws on our revolving credit facilities, existing working capital, net cash provided by operations, long-term mortgage indebtedness and may include other secured and unsecured borrowings. However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, including the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating performance and liquidity, market perceptions about us and restrictions on sales of properties under the Code. Additionally, the Company continues to monitor the impact of COVID-19 and its impact on future rent collections, valuation of real estate investments, impact on cash flow and ability to refinance or repay debt. The success of our business strategy will depend, in part, on our ability to access these various capital sources.
As disclosed in Note 16 to our consolidated financial statements, so far in the fourth quarter of 2022 we have acquired 432 homes for an aggregate purchase price of approximately $52.9 million. In addition, we expect to complete the Internalization of the Manager in the fourth quarter of 2022, which we expect will be paid in a mix of cash and equity.
Our homes will require periodic capital expenditures and renovation to remain competitive. Also, acquisitions of new homes will require significant capital outlays. Long-term, we may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our ability to fund capital expenditures and acquisitions through retained earnings long-term is limited. Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations, and prospects could be materially and adversely affected.
We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, acquisitions, anticipated scheduled debt service payments and dividend requirements for the twelve-month period following September 30, 2022, except as would not be expected to have a material adverse effect. We believe that the various sources of long-term capital, which may include public or private issuances of common equity, preferred equity or debt, draws on our revolving credit facilities, existing working capital, net cash provided by operations, long-term mortgage indebtedness and other secured and unsecured borrowings will provide sufficient funds for our operations, acquisitions, anticipated scheduled debt service payments and dividend requirements in the long-term, except as would not be expected to have a material adverse effect.
The nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021
The following table presents selected data from our consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 (in thousands):
| For the Nine Months Ended September 30, |
||||||||||||
| 2022 |
2021 |
$ Change |
||||||||||
| Net cash provided by operating activities |
$ | 83,714 | $ | 45,175 | $ | 38,539 | ||||||
| Net cash used in investing activities |
(1,587,630 | ) | (808,656 | ) | (778,974 | ) | ||||||
| Net cash provided by financing activities |
1,552,166 | 799,663 | 752,503 | |||||||||
| Change in cash and restricted cash |
48,250 | 36,182 | 12,068 | |||||||||
| Cash and restricted cash, beginning of period |
74,997 | 37,096 | 37,901 | |||||||||
| Cash and restricted cash, end of period |
$ | 123,247 | $ | 73,278 | $ | 49,969 | ||||||
Cash flows from operating activities. During the nine months ended September 30, 2022, net cash provided by operating activities was $83.7 million compared to net cash provided by operating activities of $45.2 million for the nine months ended September 30, 2021. The change in cash flows from operating activities was mainly due to an increase in net operating income during the period.
Cash flows from investing activities. During the nine months ended September 30, 2022, net cash used in investing activities was $1.6 billion compared to net cash used in investing activities of $808.7 million for the nine months ended September 30, 2021. The change in cash flows from investing activities was mainly due to the acquisition of NexPoint Homes through VIE consolidation, net of cash received, during the period, as well as an increase in acquisitions of real estate investments and an increase in additions to real estate investments during the period.
Cash flows from financing activities. During the nine months ended September 30, 2022, net cash provided by financing activities was $1.6 billion compared to net cash provided by financing activities of $799.7 million for the nine months ended September 30, 2021. The change in cash flows from financing activities was mainly due to an increase in proceeds received from notes payable, an increase in proceeds received from credit facilities and an increase in contributions from redeemable noncontrolling interests in consolidated VIEs, which was partially offset by a decrease in proceeds received from issuance of Class A common stock during the period.
Debt, Derivatives and Hedging Activity
Debt
As of September 30, 2022, the VineBrook reportable segment had aggregate debt outstanding to third parties of approximately $1.9 billion at a weighted average interest rate of 4.8865% and an adjusted weighted average interest rate of 4.1611%. For purposes of calculating the adjusted weighted average interest rate of our debt outstanding, we have included the weighted average fixed rate of 1.9508%, representing a weighted average fixed rate for one-month LIBOR, daily SOFR and one-month term SOFR, on our combined $1.3 billion notional amount of interest rate swap agreements and interest rate cap agreement, which effectively fixes the interest rate on $1.3 billion of our floating rate debt. See Notes 7 and 8 to our consolidated financial statements for additional information.
The following table sets forth a summary of our mortgage loan indebtedness for the VineBrook reportable segment as of September 30, 2022:
| Outstanding Principal as of |
|||||||||||
| Type |
September 30, 2022 |
Interest Rate (1) |
Maturity |
||||||||
| Initial Mortgage |
Floating |
$ | 240,885 | 4.69 | % | 12/1/2025 |
|||||
| Warehouse Facility |
Floating |
1,195,000 | 4.84 | % | 11/3/2024 |
(2) |
|||||
| JPM Facility |
Floating |
320,000 | 5.83 | % | 3/1/2023 |
||||||
| MetLife Note |
Fixed |
124,462 | 3.25 | % | 1/31/2026 |
||||||
| TrueLane Mortgage |
Fixed |
10,168 | 5.35 | % | 2/1/2028 |
||||||
| Crestcore II Note |
Fixed |
4,671 | 5.12 | % | 7/9/2029 |
||||||
| Crestcore IV Note |
Fixed |
4,153 | 5.12 | % | 7/9/2029 |
||||||
| Total Outstanding Principal |
$ | 1,899,339 | |||||||||
| (1) |
Represents the interest rate as of September 30, 2022. Except for fixed rate debt, the interest rate is one-month LIBOR, daily SOFR or one-month term SOFR, plus an applicable margin. One-month LIBOR as of September 30, 2022 was 3.1427%, daily SOFR as of September 30, 2022 was 2.9800% and one-month term SOFR as of September 30, 2022 was 3.0421%. |
| (2) |
This is the stated maturity for the Warehouse Facility, but it is subject to a 12-month extension option. |
In addition to the mortgage loan indebtedness for the VineBrook reportable segment presented above and described below, the NexPoint Homes reportable segment had $567.4 million of debt outstanding at September 30, 2022 (excluding amounts owed to the OP by NexPoint Homes, as these are eliminated in consolidation). See Notes 5, 7 and 13 to the unaudited consolidated financial statements.
On September 20, 2019, the OP, as guarantor, and VB One, LLC, as borrower, entered into a credit facility (the “Warehouse Facility”) with KeyBank. The Warehouse Facility is secured by an equity pledge in certain assets of VB One, LLC and an equity pledge in the equity of VB One, LLC. On November 3, 2021, the Company, as guarantor, the OP, as parent borrower, and each of (i) VB OP Holdings, LLC and (ii) VB One, LLC and certain of its subsidiaries, as subsidiary borrowers, entered into an amended and restated credit agreement to recast the Warehouse Facility, which was subsequently amended on December 9, 2021, April 8, 2022 and May 20, 2022. The amended recast Warehouse Facility is a full-term, interest-only facility with an initial 36-month term ending November 3, 2024, has one 12-month extension option, and bears interest at a variable rate equal to the forward-looking term rate based on SOFR for the applicable interest period (one-month term SOFR), or daily SOFR for the applicable interest period, plus a margin of 0.1% plus an applicable rate ranging from 1.6% to 2.45% depending on the Company’s consolidated total leverage ratio. Under the amended recast Warehouse Facility, the OP has the right to increase the total commitments available for borrowing, which may take the form of an increase in revolving commitments or one or more tranches of term loan commitments, up to $1.2 billion. On September 13, 2022, the Company received increased commitments of $200.0 million on the Warehouse Facility, incurring $3.3 million of deferred financing costs, and then drew $200.0 million on the Warehouse Facility. As of September 30, 2022, $1.2 billion was drawn on the Warehouse Facility. The balance of the Warehouse Facility, net of unamortized deferred financing costs, is included in credit facilities on the consolidated balance sheets.
On December 28, 2020, in connection with the acquisition of a 45-home portfolio, the OP provided a non-recourse carveout guaranty related to the approximately $2.4 million CoreVest Note assumed by a subsidiary of the OP as a result of the OP’s acquisition of SMP Homes 5B, LLC. The CoreVest Note is secured by the properties in SMP Homes 5B, LLC and an equity pledge in SMP Homes 5B, LLC and bears interest at a fixed rate equal to 6.12%. The CoreVest Note matures and is due in full on January 9, 2023 and requires monthly principal and interest payments. On July 11, 2022, the OP repaid the full balance of the CoreVest Note, which extinguished the CoreVest Note.
On March 1, 2021, the Company entered into a non-recourse carveout guaranty and certain wholly owned subsidiaries of VB Three, LLC, as borrowers, entered into a $500.0 million credit agreement with JP Morgan (the “JPM Facility”). The JPM Facility is secured by equity pledges in VB Three, LLC and its wholly owned subsidiaries and bears interest at a variable rate equal to one-month LIBOR plus 2.75%. The JPM Facility is interest-only and matures and is due in full on March 1, 2023. On March 10, 2022, the Company entered into Amendment No. 1 to the JPM Facility, wherein each advance under the JPM Facility will bear interest at a daily SOFR plus 2.85%. As of September 30, 2022, the outstanding balance of the JPM Facility was $320.0 million and had $180.0 million of available capacity. The balance of the JPM Facility, net of unamortized deferred financing costs, is included in credit facilities on the consolidated balance sheets. The JPM Facility currently matures on March 1, 2023. Management is in the process of extending or refinancing the facility with the existing lender. If the Company is not able to complete an extension or refinancing with the existing lender, management believes it has sufficient access to other potential sources of capital, including through raising equity, securing new debt or selling a portion of the portfolio to repay the debt upon maturity.
On January 13, 2022, in connection with the acquisition of a 98-home portfolio, the OP, as guarantor, assumed an approximately $4.6 million Freddie Mac mortgage loan (the “Hatchway Broadmoor Mortgage”) with Arbor Agency Lending, LLC as a result of the OP’s acquisition of Hatchway Broadmoor, LLC. The Hatchway Broadmoor Mortgage is secured by properties in Hatchway Broadmoor, LLC and an equity pledge in Hatchway Broadmoor, LLC and bears interest at a fixed rate equal to 5.35%. The Hatchway Broadmoor Mortgage matures and is due in full on February 1, 2029 and requires monthly principal and interest payments. On August 19, 2022, the OP repaid the full balance of the Hatchway Broadmoor Mortgage, which extinguished the Hatchway Broadmoor Mortgage.
On February 8, 2022, in connection with the acquisition of the Prager Portfolio, the Company entered into a bridge credit agreement through the OP with KeyBank National Association, and borrowed $150.0 million (the “Bridge Facility”). On April 8, 2022, the Company repaid the outstanding principal balance on the Bridge Facility, which extinguished the Bridge Facility. In connection with the extinguishment of the Bridge Facility, the Company incurred a loss on extinguishment of debt of approximately $1.0 million, which is presented on the consolidated statements of operations and comprehensive income (loss).
On March 18, 2022, in connection with the acquisition of an 88-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $4.7 million mortgage loan assumed by a subsidiary of the OP (the “Crestcore II Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of Crestcore II, LLC. The Crestcore II Note is secured by the properties in Crestcore II, LLC and an equity pledge in Crestcore II, LLC and bears interest at a fixed rate equal to 5.12%. The Crestcore II Note matures and is due in full on July 9, 2029 and requires monthly principal and interest payments. The balance of the Crestcore II Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.
On March 18, 2022, in connection with the acquisition of an 82-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $4.2 million mortgage loan assumed by a subsidiary of the OP (the “Crestcore IV Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of Crestcore IV, LLC. The Crestcore IV Note is secured by the properties in Crestcore IV, LLC and an equity pledge in Crestcore IV, LLC and bears interest at a fixed rate equal to 5.12%. The Crestcore IV Note matures and is due in full on July 9, 2029 and requires monthly principal and interest payments. The balance of the Crestcore IV Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.
On August 25, 2022, in connection with the acquisition of the Global Atlantic Portfolio, the Company entered into a bridge credit agreement through the OP with KeyBank National Association, and borrowed $165.0 million (the “Bridge Facility II”). The Bridge Facility II accrued interest at one-month term SOFR plus a margin of 2.6%. On September 2, 2022, the Company drew an additional $35.0 million on the Bridge Facility II. On September 13, 2022, the Company repaid the outstanding principal balance on the Bridge Facility II, which extinguished the Bridge Facility II. In connection with the extinguishment of the Bridge Facility II, the Company incurred a loss on extinguishment of debt of approximately $1.8 million, which is presented on the consolidated statements of operations and comprehensive income (loss).
As of September 30, 2022, the Company was in compliance with the debt covenants in each of its debt agreements.
We intend to invest in additional homes as suitable opportunities arise and adequate sources of equity and debt financing are available. We expect that future investments in properties, including any improvements or renovations of current or newly acquired properties, will depend on and will be financed by, in whole or in part, our existing cash, future borrowings and the proceeds from additional issuances of Shares, Preferred Shares or other securities or property dispositions.
Although we expect to be subject to restrictions on our ability to incur indebtedness, we expect that we will be able to refinance existing indebtedness or incur additional indebtedness for acquisitions or other purposes, if needed. However, there can be no assurance that we will be able to refinance our indebtedness, incur additional indebtedness or access additional sources of capital, such as by issuing Shares, Preferred Shares or other debt or equity securities, on terms that are acceptable to us or at all.
Furthermore, following the completion of our renovations and depending on the interest rate environment at the applicable time, we may seek to refinance our floating rate debt into longer-term fixed rate debt at lower leverage levels.
For full descriptions of the debt arrangements not included in this Form 10-Q, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Debt, Derivatives and Hedging Activity” in our Annual Report.
Interest Rate Derivative Agreements
We have entered into and expect to continue to enter into interest rate swap and cap agreements with various third parties to fix or cap the floating interest rates on a majority of our floating rate mortgage debt outstanding. The interest rate swap agreements generally have a term of approximately three to six years and effectively establish a fixed interest rate on debt on the underlying notional amounts. In order to fix a portion of, and mitigate the risk associated with, our floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), we, through the OP, have entered into 12 interest rate swap transactions with KeyBank and Mizuho with a combined notional amount of $970.0 million. As of September 30, 2022, the interest rate swaps we have entered into effectively replace the floating interest rate (one-month LIBOR or daily SOFR) with respect to $970.0 million of our floating rate mortgage debt outstanding with a weighted average fixed rate of 2.0902%. As of September 30, 2022, interest rate swap agreements effectively covered $970.0 million, or 55.2%, of our $1.8 billion of floating rate debt outstanding for the VineBrook reportable segment. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 2.0902%, on a weighted average basis, on the notional amounts, while KeyBank and Mizuho are obligated to make monthly floating rate payments based on one-month LIBOR or daily SOFR to us referencing the same notional amounts. For purposes of hedge accounting under ASC 815, Derivatives and Hedging, we have designated these interest rate swaps as cash flow hedges of interest rate risk. See Notes 7 and 8 to our consolidated financial statements for additional information.
On April 13, 2022, we paid a premium of approximately $12.7 million and entered into an interest rate cap transaction with Goldman Sachs Bank USA with a notional amount of $300.0 million. The interest rate cap effectively caps one-month term SOFR on $300.0 million of our floating rate debt at 1.50%. The interest rate cap expires on November 1, 2025.
Reference Rate Reform
On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that one-month LIBOR will either cease to be provided by any administrator or no longer be representative immediately after June 30, 2023. This announcement has several implications, including setting the spread that may be used to convert the index rates in our debt and hedging contracts from LIBOR to an alternative rate, such as the Secured Overnight Financing Rate.
The Company anticipates that one-month LIBOR will continue to be available at least until June 30, 2023. Any changes adopted by the FCA or other governing bodies in the method used for determining one-month LIBOR may result in a sudden or prolonged increase or decrease in reported one-month LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if one-month LIBOR were to remain available in its current form.
The Company has contracts that are indexed to one-month LIBOR and it is monitoring and evaluating the related risks, which include interest on loans and amounts received/paid on derivative instruments. These risks arise in connection with transitioning contracts to an alternative rate, including any resulting value transfer that may occur. Transitions and alternative rates are likely to vary by contract. The value of loans, securities, or derivative instruments tied to one-month LIBOR, as well as interest rates on our current or future indebtedness, may also be impacted if one-month LIBOR is unrepresentative or discontinued. For some instruments the method of transitioning to an alternative reference rate may be challenging, especially if we cannot agree with the respective counterparty about how to make the transition or upon which alternative rate is appropriate.
While we expect one-month LIBOR to be available in substantially its current form until at least June 30, 2023, it is possible that one-month LIBOR will become unavailable prior to that point. This could result, for example, if a sufficient number of banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.
Alternative rates and other market changes related to the replacement of one-month LIBOR, including the introduction of financial products and changes in market practices, may lead to risk modeling and valuation challenges, such as adjusting interest rate accrual calculations and building a term structure for an alternative rate.
The introduction of an alternative rate also may create additional basis risk and increased volatility as alternative rates are phased in and utilized in parallel with one-month LIBOR.
Adjustments to systems and mathematical models to properly process and account for alternative rates will be required, which may strain the model risk management and information technology functions and result in substantial incremental costs for the Company.
REIT Tax Election and Income Taxes
We have elected to be taxed as a REIT under Sections 856 through 860 of the Code and expect to continue to qualify as a REIT. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our “REIT taxable income,” as defined by the Code, to our stockholders. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable U.S. federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the three and nine months ended September 30, 2022 and 2021. We believe we qualify for taxation as a REIT under the Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify as a REIT. NexPoint Homes has elected to be taxed as a REIT under Sections 856 through 860 of the Code and expects to continue to qualify as a REIT.
We anticipate that we will continue to qualify to be taxed as a REIT for U.S. federal income tax purposes, and we intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders. As a REIT, we will be subject to U.S. federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years.
If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular corporate income tax rates, and dividends paid to our stockholders would not be deductible by us in computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely affect our net income and net cash available for distribution to stockholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT.
We evaluate the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Our management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. We have no examinations in progress and none are expected at this time.
We recognize our tax positions and evaluate them using a two-step process. First, we determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, we will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.
We had no material unrecognized tax benefit or expense, accrued interest or penalties as of September 30, 2022. We and our subsidiaries are subject to U.S. federal income tax as well as income tax of various state and local jurisdictions. The 2021, 2020 and 2019 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject. When applicable, we recognize interest and/or penalties related to uncertain tax positions on our consolidated statements of operations and comprehensive income (loss).
Dividends
We intend to make regular quarterly dividend payments to holders of our Shares. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains. As a REIT, we will be subject to U.S. federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. We intend to make regular quarterly dividend payments of all or substantially all of our taxable income to holders of our Shares out of assets legally available for this purpose, if and to the extent authorized by our Board. Before we make any dividend payments, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets, borrow funds or raise additional capital to make cash dividends or we may make a portion of the required dividend in the form of a taxable distribution of stock or debt securities.
We will make dividend payments based on our estimate of taxable earnings per share of common stock, but not earnings calculated pursuant to GAAP. Our dividends and taxable income and GAAP earnings will typically differ due to items such as depreciation and amortization, fair value adjustments, differences in premium amortization and discount accretion, and non-deductible general and administrative expenses. Our dividends per share may be substantially different than our taxable earnings and GAAP earnings per share.
Inflation
The real estate market has not been affected significantly by inflation in the past several years due to increases in rents nationwide. The majority of our lease terms are for a period of one year or less and reset to market if renewed. The majority of our leases also contain protection provisions applicable to reimbursement billings for utilities. Due to the short-term nature of our leases, we do not believe our results will be materially affected.
Inflation may also affect the overall cost of debt, as the implied cost of capital increases. The Federal Reserve, in response to or in anticipation of continued inflation concerns, could continue to raise interest rates. We intend to mitigate these risks through long-term fixed interest rate loans and interest rate derivatives, which to date have included interest rate cap and interest rate swap agreements.
Seasonality
We believe that our business and related operating results will be impacted by seasonal factors throughout the year. We experience higher levels of tenant move-outs and move-ins during the late spring and summer months, which impacts both our rental revenues and related turnover costs. Furthermore, our property operating costs are seasonally impacted in certain markets for expenses such as repairs to heating, ventilation and air conditioning systems, turn costs and landscaping expenses during the summer season. Additionally, our SFR properties are at greater risk in certain markets for adverse weather conditions such as extreme cold weather in winter months and hurricanes in late summer months.
Off-Balance Sheet Arrangements
As of September 30, 2022 and December 31, 2021, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts. These estimates are based on management’s historical industry experience and on various other judgments and assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these judgments, assumptions and estimates. Below is a discussion of the accounting policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is required. A discussion of recently issued accounting pronouncements and our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in this report.
Real Estate Investments
Upon acquisition, we evaluate our acquired SFR properties for purposes of determining whether a transaction should be accounted for as an asset acquisition or business combination. Since substantially all of the fair value of our acquired properties is concentrated in a single identifiable asset or group of similar identifiable assets and the acquisitions do not include a substantive process, our purchases of homes or portfolios of homes qualify as asset acquisitions. Accordingly, upon acquisition of a property, the purchase price and related acquisition costs (the “Total Consideration”) are allocated to land, buildings, improvements, fixtures, and intangible lease assets based upon their relative fair values.
The allocation of Total Consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement (“ASC 820”) (see Note 8 to our consolidated financial statements), is based on an independent third-party valuation firm’s estimate of the fair value of the tangible and intangible assets and liabilities acquired, or management's internal analysis based on market knowledge obtained from historical transactions. The valuation methodology utilizes market comparable information, depreciated replacement cost and other estimates in allocating value to the tangible assets. The allocation of the Total Consideration to intangible lease assets represents the value associated with the in-place leases, as one month’s worth of effective gross income (rental revenue, less credit loss allowance, plus other income) as the average downtime of the assets in the portfolio is approximately one month and the assets in the portfolio are leased on a gross rental structure. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized or accreted as interest expense over the life of the debt assumed.
The allocation of Total Consideration to the various components of properties acquired during the year can have an effect on our net loss due to the useful depreciable and amortizable lives applicable to each component and the recognition of the related depreciation and amortization expense. For example, if a greater portion of the Total Consideration is allocated to land, which does not depreciate, our net income would be higher. Typically, we allocate between 10% to 30% of the Total Consideration to land.
Real estate assets, including land, buildings, improvements, fixtures, and intangible lease assets are stated at historical cost less accumulated depreciation and amortization. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred. Expenditures for improvements, renovations, and replacements are capitalized at cost. The Company also incurs costs to prepare acquired properties for rental. These costs are capitalized to the cost of the property during the period the property is undergoing activities to prepare it for its intended use. We capitalize interest costs as a cost of the property only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided that expenditures for the asset have been made and interest costs have been incurred. Upon completion of the renovation of our properties, all costs of operations, including repairs and maintenance, are expensed as incurred, unless the renovation meets the Company’s capitalization criteria.
Impairment
Real estate assets are reviewed for impairment quarterly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Significant indicators of impairment may include, but are not limited to, declines in home values, rental rates or occupancy percentages, as well as significant changes in the economy. In such cases, the Company will evaluate the recoverability of the assets by comparing the estimated future cash flows expected to result from the use and eventual disposition of each asset to its carrying amount and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount. If impaired, the real estate asset will be written down to its estimated fair value. The process whereby we assess our SFR homes for impairment requires significant judgment and assessment of factors that are, at times, subject to significant uncertainty. No significant impairments on operating properties were recorded during the years ended December 31, 2021 and 2020 or the three and nine months ended September 30, 2022 and 2021.
Implications of being an Emerging Growth Company and Smaller Reporting Company
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”) and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to take advantage of this extended transition period. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. We may elect to comply with public company effective dates at any time, and such election would be irrevocable pursuant to Section 107(b) of the JOBS Act.
We could remain an “emerging growth company” until the earliest of (1) the end of the fiscal year following the fifth anniversary of the date of the first sale of shares of our common stock pursuant to an effective registration statement, (2) the last day of the fiscal year in which our annual gross revenues exceed $1.07 billion, (3) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (4) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
We are also a “smaller reporting company” as defined in the Exchange Act, and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies. We may be a smaller reporting company even after we are no longer an “emerging growth company.”
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, our management, including our Interim President and Chief Financial Officer, evaluated, as of September 30, 2022, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our Interim President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022, to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the Interim President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.
Changes in Internal Control over Financial Reporting
There has been no change in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15-d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.
Except as noted below, there have been no material changes to the risk factors previously disclosed under Item 1A, “Risk Factors,” of our Annual Report.
Macroeconomic trends including inflation and rising interest rates may adversely affect our financial condition and results of operations.
Macroeconomic trends, including increases in inflation and rising interest rates, may adversely impact our business, financial condition and results of operations. Inflation in the United States has recently accelerated and is currently expected to continue at an elevated level in the near-term. Rising inflation could have an adverse impact on our operating expenses and our floating rate mortgages and credit facilities, as these costs could increase at a rate higher than our rental and other revenue. There is no guarantee we will be able to mitigate the impact of rising inflation. The Federal Reserve has recently started raising interest rates to combat inflation and restore price stability and it is expected that rates will continue to rise throughout the remainder of 2022. In addition, to the extent our exposure to increases in interest rates on any of our debt is not eliminated through interest rate swaps and interest rate protection agreements, such increases will result in higher debt service costs which will adversely affect our cash flows. We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. Such future constraints could increase our borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments, which could slow or deter future growth.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Sales of Shares
The following table presents information regarding the sale of Shares in the Continuous Offering and the DRIP that have not been previously disclosed in Current Reports on Form 8-K.
| Common Stock Private Offering |
Common Stock DRIP |
|||||||||||||||||||||||||||
| Date |
Shares Sold |
Sale Price (1) |
Gross Proceeds |
Shares Reinvested |
Sale Price (2) |
Gross Proceeds (3) |
Total Gross Proceeds |
|||||||||||||||||||||
| September 14, 2022 |
176,274 | $ | 59.85 | $ | 10,550 | — | $ | — | $ | — | $ | 10,550 | ||||||||||||||||
| September 30, 2022 |
— | — | — | 114,288 | 60.87 | 6,991 | 6,991 | |||||||||||||||||||||
| 176,274 | $ | 10,550 | 114,288 | $ | 6,991 | $ | 17,541 | |||||||||||||||||||||
| (1) |
Sale price is the per share weighted average for the sale date which includes upfront selling costs. |
| (2) |
Shares issued under DRIP are generally issued at a 3% discount to the Company’s then-current NAV. |
| (3) |
For Shares issued under the DRIP, we do not receive any cash proceeds from the transaction as the shareholder receives shares in lieu of the cash dividend. Refer to Note 9 for further discussion. |
An aggregate of approximately $0.8 million in selling commissions and fees were paid in connection with sales of Shares in the Continuous Offering in the above transactions. No underwriting discount or commission is applicable to sales pursuant to the DRIP.
The Company issued the Shares noted above to accredited investors in reliance upon the exemptions from registration under the Securities Act Securities Act provided by Rule 506(b) under Regulation D promulgated under the Securities Act and Section 4(a)(2) of the Securities Act.
Repurchase of Shares
The Company has adopted a share repurchase plan (the “Share Repurchase Plan”) pursuant to which investors may request on a quarterly basis that the Company repurchase all or a portion of their Shares, subject to certain terms and conditions. Under the Share Repurchase Plan, shares will be repurchased at the most recent NAV per share in effect, which will generally be equal to our prior quarter’s or month’s NAV per share. The Share Repurchase Plan began on November 1, 2019. The total amount of aggregate repurchases of Shares is limited to no more than 5% of the Company’s aggregate NAV per calendar quarter. For additional discussion and information, see “Exhibit 4.1. Description of Registrant’s Securities to be Registered—Share Repurchase Plan” in our Annual Report. The table below contains information regarding the repurchases of Shares by the Company pursuant to the Share Repurchase Plan during the three months ended September 30, 2022.
| Period |
Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs (in thousands) | ||||||||||||
| July 1 - July 31 |
— | $ | — | — | $ | — | ||||||||||
| August 1 - August 31 |
— | — | — | — | ||||||||||||
| September 1 - September 30 |
674,891 | 62.75 | 674,891 | 55,969 | ||||||||||||
| Total |
674,891 | $ | 62.75 | 674,891 | $ | 55,969 | ||||||||||
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
EXHIBIT INDEX
| Exhibit Number |
Description |
| 2.1* |
|
| 2.2* |
|
| 10.1* |
|
| 31.1* |
|
| 32.1+ |
|
| 101.INS* |
Inline XBRL Instance Document |
| 101.SCH* |
Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104* |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
+ Furnished herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VineBrook Homes Trust, Inc.
| Signature |
Title |
Date |
||
| /s/ Brian Mitts |
|
November 14, 2022 | ||
| Brian Mitts |
Interim President, Chief Financial Officer, Treasurer and Assistant Secretary |
|||
| (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
Exhibit 2.1
EXECUTION VERSION
INTEREST PURCHASE AGREEMENT
by and among
SOF-XI TERM HOLDINGS, L.P.
and
SOF-XI TERM PARENT HOLDINGS, L.P.
and
VB FIVE, LLC
Dated: August 3, 2022
TABLE OF CONTENTS
Page
|
ARTICLE I Definitions and Rules of Construction |
2 | |
|
1.1. |
Definitions |
2 |
|
1.2. |
Rules of Construction |
16 |
|
ARTICLE II Purchase and Sale |
16 | |
|
2.1. |
Purchase and Sale |
16 |
|
2.2. |
Closing |
16 |
|
2.3. |
Payments at the Closing |
17 |
|
2.4. |
Deposit |
21 |
|
2.5. |
Title Matters |
22 |
|
2.6. |
Transfer Taxes |
23 |
|
2.7. |
Due Diligence Period |
23 |
|
2.8. |
Title Defect Excluded Properties |
24 |
|
2.9. |
Treatment of Excluded Properties |
25 |
|
ARTICLE III Representations and Warranties of Seller |
26 | |
|
3.1. |
Organization and Power |
26 |
|
3.2. |
Authorization and Enforceability |
26 |
|
3.3. |
Capitalization |
27 |
|
3.4. |
No Violation |
28 |
|
3.5. |
Consents |
29 |
|
3.6. |
Financial Statements |
29 |
|
3.7. |
Real Property |
30 |
|
3.8. |
Leases |
30 |
|
3.9. |
Contracts |
31 |
|
3.10. |
Compliance with Laws |
31 |
|
3.11. |
Environmental Matters |
31 |
|
3.12. |
Litigation |
32 |
|
3.13. |
Labor and Employment Matters |
32 |
|
3.14. |
Tax Matters |
32 |
|
3.15. |
Bank Accounts |
33 |
|
3.16. |
No Brokers |
33 |
|
3.17. |
ERISA |
33 |
|
3.18. |
Real Property Matters |
33 |
|
3.19. |
Authority and Association Payments |
34 |
|
3.20. |
Bankruptcy. |
34 |
|
3.21. |
Relationship with Affiliates |
34 |
|
3.22. |
Special Purpose Entities |
35 |
|
3.23. |
Insurance |
35 |
|
3.24. |
Restricted Persons |
35 |
|
3.25. |
Seller’s Designated Representative |
35 |
|
3.26. |
Disclaimer |
35 |
|
3.27. |
Limitation with respect to Seller’s Representations |
35 |
|
ARTICLE IV Representations and Warranties of Buyer |
36 | |
|
4.1. |
Organization and Power |
36 |
|
4.2. |
Authorization |
36 |
|
4.3. |
Enforceability |
36 |
|
4.4. |
No Violation |
36 |
|
4.5. |
Consents |
37 |
|
4.6. |
Financial Capacity |
37 |
|
4.7. |
Litigation |
37 |
|
4.8. |
No Brokers |
37 |
|
4.9. |
Investment Intent |
37 |
|
4.10. |
Qualified Transferee |
37 |
|
4.11. |
Restricted Persons |
37 |
|
4.12. |
ERISA |
37 |
|
ARTICLE V Covenants |
38 | |
|
5.1. |
Conduct of the Acquired Entities |
38 |
|
5.2. |
Access to Information Prior to the Closing |
41 |
|
5.3. |
Efforts |
41 |
|
5.4. |
Certain Tax Matters |
42 |
|
5.5. |
Exculpation |
44 |
|
5.6. |
Confidentiality |
45 |
|
5.7. |
Public Announcements |
45 |
|
5.8. |
Commercially Reasonable Efforts |
45 |
|
5.9. |
Casualty and Condemnation |
46 |
|
5.10. |
Condition of Properties |
47 |
|
5.11. |
Transitional Matters |
47 |
|
5.12. |
Rule 3-14 Audit |
47 |
|
5.13. |
Exclusivity |
48 |
|
5.14. |
Termination of Property Management Agreements |
48 |
|
5.15. |
Texas Qualifications |
48 |
|
ARTICLE VI Conditions to Closing |
49 | |
|
6.1. |
Conditions to All Parties’ Obligations |
49 |
|
6.2. |
Conditions to Seller’s Obligations |
49 |
|
6.3. |
Conditions to Buyer’s Obligations |
49 |
|
ARTICLE VII Deliveries by Seller at Closing |
51 | |
|
7.1. |
Officer’s Certificate |
51 |
|
7.2. |
Assignment of Purchased Interests |
51 |
|
7.3. |
W-9 |
51 |
|
7.4. |
Title Affidavit |
51 |
|
7.5. |
Existing Loan Assumption Approval |
51 |
|
7.6. |
FIRPTA Certificate |
51 |
|
7.7. |
Termination of Property Management Agreements and Tiber Lease |
52 |
|
7.8. |
Association Estoppels |
52 |
|
7.9. |
. Association Estoppels received by Seller (if any) |
52 |
|
7.10. |
Guarantor Joinder |
52 |
|
7.11. |
Texas Qualification |
52 |
|
ARTICLE VIII Deliveries by Buyer at Closing |
52 | |
|
8.1. |
Officer’s Certificate |
52 |
|
8.2. |
Closing Consideration Amount |
52 |
|
8.3. |
Assignment Agreement |
52 |
|
8.4. |
Existing Loan Assumption Approval |
52 |
|
ARTICLE IX Survival; R&W Insurance Policy |
52 | |
|
9.1. |
No Post-Closing Liability |
52 |
|
9.2. |
Sole Remedy |
53 |
|
9.3. |
Covenant |
53 |
|
9.4. |
No Seller Responsibility |
54 |
|
9.5. |
Replacement R&W Insurance Policy |
54 |
|
ARTICLE X Termination |
55 | |
|
10.1. |
Termination |
55 |
|
10.2. |
Effect of Termination |
56 |
|
ARTICLE XI Miscellaneous |
57 | |
|
11.1. |
Expenses |
57 |
|
11.2. |
Notices |
57 |
|
11.3. |
Governing Law |
58 |
|
11.4. |
Entire Agreement |
58 |
|
11.5. |
Severability |
59 |
|
11.6. |
Amendment |
59 |
|
11.7. |
Effect of Waiver or Consent |
59 |
|
11.8. |
Parties in Interest; Limitation on Rights of Others |
59 |
|
11.9. |
Assignability |
59 |
|
11.10. |
Jurisdiction; Court Proceedings; Waiver of Jury Trial |
60 |
|
11.11. |
No Other Duties |
60 |
|
11.12. |
Reliance on Counsel and Other Advisors |
60 |
|
11.13. |
Sole Remedies |
60 |
|
11.14. |
Counterparts |
60 |
|
11.15. |
Further Assurance |
60 |
|
11.16. |
Legal Representation |
60 |
|
11.17. |
Attorneys’ Fees |
61 |
|
11.18. |
Release |
61 |
|
11.19. |
Third-Party Beneficiary |
62 |
|
11.20. |
State-Specific Provisions |
62 |
|
11.21. |
Jointly and Severally |
62 |
|
11.22. |
Closing; Dates. |
63 |
Exhibit A Allocated Purchase Prices
Exhibit B Form of Escrow Agreement
Exhibit C Mandatory Removal Exceptions
Exhibit D Form of Assignment Agreement
Exhibit E Title Affidavit
Exhibit F R&W Insurance Policy Non-Binding Indicative Terms
Exhibit G Post-Closing Liability Terms and Provisions
Exhibit H Form of Guarantor Joinder
INTEREST PURCHASE AGREEMENT
INTEREST PURCHASE AGREEMENT, dated as of August 3, 2022 (the “Effective Date”), by and among SOF-XI TERM HOLDINGS, L.P., a Delaware limited partnership (“Term Holdings Seller”), SOF-XI TERM PARENT HOLDINGS, L.P., a Delaware limited partnership (“Depositor Seller”; Term Holdings Seller and Depositor Seller are referred to herein individually and/or collectively, as the context may require, as “Seller”), and VB FIVE, LLC, a Delaware limited liability company (“Buyer”).
RECITALS
WHEREAS, Term Holdings Seller is the owner of all of the rights, title and interests in and to all of the limited liability company interests (the “Seller GP Interests”) in STAR 2021-SFR1 Equity Owner GP, L.L.C., a Delaware limited liability company (the “General Partner”);
WHEREAS, the General Partner is the sole general partner of, and the owner of all of the rights, title and interests in and to a 0.1% general partnership interest (the “General Partner Interest”) in, STAR 2021-SFR1 Equity Owner, L.P., a Delaware limited partnership (the “Partnership”);
WHEREAS, the Term Holdings Seller is the sole limited partner of, and the owner of all of the rights, title and interests in and to a 99.9% limited partnership interests in the Partnership (the “Seller LP Interests”; the Seller GP Interests and the Seller LP Interests are referred to herein collectively as the “Term Holdings Purchased Interests”);
WHEREAS, the Partnership is the owner of all of the rights, title and interests in and to all of the limited liability company interests (the “Property Owner GP Interests”) in STAR 2021- SFR1 Borrower GP, L.L.C., a Delaware limited liability company (the “Property Owner General Partner”);
WHEREAS, the Property Owner General Partner is the sole general partner of, and the owner of all of the rights, title and interests in and to a 0.1% general partnership interests (“Property Owner General Partner Interest”) in, STAR 2021-SFR 1 Borrower, L.P., a Delaware limited partnership (the “Property Owner”);
WHEREAS, the Partnership is the sole limited partner of, and the owner of all of the rights, title and interests in and to a 99.9% limited partnership interests in the Property Owner (the “Property Owner LP Interests”; the Property Owner GP Interests and the Property Owner LP Interests are referred to herein collectively as the “Property Owner Interests”);
WHEREAS, Depositor Seller is the owner of all of the rights, title and interests in and to all of the limited liability company interests (the “Depositor GP Interests”) in STAR SFR Depositor GP, L.L.C., a Delaware limited liability company (the “Depositor General Partner”);
WHEREAS, the Depositor General Partner is the sole general partner of, and the owner of all of the rights, title and interests in and to a 0.1% general partnership interest (the “Depositor General Partner Interest”) in, STAR SFR Depositor, L.P., a Delaware limited partnership (the “Depositor”);
WHEREAS, the Depositor Seller is the sole limited partner of, and the owner of all of the rights, title and interests in and to a 99.9% limited partnership interests in the Depositor (the “Depositor LP Interests”; the Depositor GP Interests and the Depositor LP Interests are referred to herein collectively as the “Depositor Purchased Interests”; the Term Holdings Purchased Interests and the Depositor Purchased Interests are referred to herein collectively as the “Purchased Interests”; the Purchased Interests, the General Partner Interest, the Property Owner GP Interests, the Property Owner LP Interests and the Depositor General Partner Interest are referred to herein collectively as the “Interests”; and the General Partner, the Partnership, the Property Owner General Partner, the Property Owner, the Depositor General Partner and the Depositor are referred to herein collectively as the “Acquired Entities”);
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell, all of Seller’s right, title and interest in and to the Purchased Interests, upon the terms and subject to the conditions hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
Definitions and Rules of Construction
1.1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
“Access Agreement” means, that certain Access Agreement with respect to the Properties, dated June 24, 2022, between Buyer and Seller.
“Acquired Entities” has the meaning set forth in the Recitals.
“Acquired Entity Leases” means any Lease to which an Acquired Entity is a party. “Action” means any litigation, arbitration, suit, claim, action, order, decree, proceeding, hearing, petition, investigation, grievance or complaint before any Governmental Authority or arbitrator.
“Additional Deposit” has the meaning set forth in Section 2.4(a). “Additional Transfer Taxes” has the meaning set forth in Section 2.6.
“Adjustment Time” means 11:59 p.m. on the day immediately preceding the Closing Date.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
“Agreement” means this Interest Purchase Agreement, as it may be amended from time to time.
“Allocated Purchase Prices” has the meaning set forth in Section 2.3(a).
“Ancillary Documents” means the documents being executed and delivered in connection with this Agreement and the transactions contemplated hereby.
“Approval Notice” has the meaning set forth in Section 2.7.
“Assignment Agreement” has the meaning set forth in Section 7.2.
“Association(s)” means any condominium association, any homeowner’s association or any other association or non-governmental entity under any Declaration and Covenants.
“Association Approval” means the Association approvals required with respect to the Contemplated Transaction.
“Association Estoppels” has the meaning set forth in Section 5.3(d).
“Authority Payments” has the meaning set forth in Section 3.19.
“Balance Sheet Date” has the meaning set forth in Section 3.6(a).
“Business Day” means any day other than a Saturday, Sunday or day on which banks are closed in New York, New York. If any period expires on a day which is not a Business Day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is not a Business Day, such period shall expire or such event or condition shall occur or be fulfilled, as the case may be, on the next succeeding Business Day.
“Buyer” has the meaning set forth in the Preamble.
“Buyer Condition to Closing” has the meaning set forth in Section 6.3.
“Buyer Condition to Closing Excluded Property Designation Date” has the meaning set forth in Section 6.3.
“Buyer Exculpated Parties” has the meaning set forth in Section 5.5(b).
“Casualty” has the meaning set forth in Section 5.9(b).
“Closing” has the meaning set forth in Section 2.2.
“Closing Consideration Amount” has the meaning set forth in Section 2.3(a).
“Closing Date” has the meaning set forth in Section 2.2.
“Closing Date Indebtedness” means the Indebtedness of the Property Owner as of the Adjustment Time (without duplication of any amounts included in the calculation of the Proration Items); provided that, for the avoidance of doubt, Closing Date Indebtedness shall not include any amounts payable with respect such Indebtedness that are repaid at, or prior to, Closing (including, without limitation, in connection with the Excluded Properties).
“Closing Date Statement” has the meaning set forth in Section 2.3(b).
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or corresponding provisions of subsequent superseding federal revenue Laws.
“Company Disclosure Schedule” means the disclosure schedule of even date herewith delivered by Seller to Buyer in connection with the execution and delivery of this Agreement.
“Condemnation” has the meaning set forth in Section 5.9. “Contested Liens” has the meaning set forth in Section 2.3(f)(7).
“Confidentiality Agreement” means that certain Principal Confidentiality Agreement, dated as of April 26, 2022, made by Vinebrook Homes Operating Partnership, L.P. in favor of SCG Global Holdings, L.L.C. and its affiliates and Eastdil Secured, with respect to Project Tusk.
“Consents” has the meaning set forth in Section 3.5.
“Contemplated Transactions” means the transactions contemplated by this Agreement and the Ancillary Documents.
“Consultants” has the meaning set forth in the Access Agreement.
“Contract” means any written agreement, contract, arrangement, understanding, obligation or commitment to which a party is bound.
“Data Room Information” means any written information, documents or materials made available to Buyer in the Data Room Website, which may be updated by (or on behalf of) Seller at any time until 5:00 pm EST on the date that is two (2) Business Days’ prior to the expiration of the Due Diligence Period.
“Data Room Website” has the meaning set forth in the Access Agreement.
“Declarations and Covenants” means, collectively, any homeowner or condominium declarations, reciprocal easement agreements, covenants, conditions and restrictions agreements or other similar agreements of record and affecting or encumbering any of the Properties.
“Deposit” has the meaning set forth in Section 2.4(a).
“Depositor” has the meaning set forth in the Recitals.
“Depositor General Partner” has the meaning set forth in the Recitals.
“Depositor General Partner Interest” has the meaning set forth in the Recitals.
“Depositor GP Interests” has the meaning set forth in the Recitals.
“Depositor LP Interests” has the meaning set forth in the Recitals.
“Depositor Purchased Interests” has the meaning set forth in the Recitals.
“Depositor Seller” has the meaning set forth in the Preamble.
“Due Diligence Period” means, notwithstanding anything contained in the Access Agreement to the contrary, the period commencing on June 24, 2022 and ending at 5:00 p.m. (Eastern Time) on August 3, 2022.
“Effective Date” has the meaning set forth in the Preamble.
“Environmental Laws” means any applicable foreign, federal, state or local law, statute, ordinance, rule or regulation governing Environmental Matters, in each case as in effect at the Closing Date.
“Environmental Matter” means any matters arising out of or relating to pollution or protection of the environment or natural resources, including any of the foregoing relating to the use, generation, transport, treatment, storage or disposal of any material defined as a “hazardous substance” or “hazardous waste” under any Environmental Law.
“Equity Securities” of any Person means any and all shares of capital stock, limited liability company interests, partnership interests, warrants or options to acquire capital stock, limited liability company interests or partnership interests of such Person, and all securities exchangeable for, or convertible or exercisable into, any of the foregoing.
“Escrow Account” has the meaning set forth in Section 2.4.
“Escrow Agent” means Fidelity National Title Insurance Company, 1050 Wilshire Drive, Suite 310, Troy, Michigan 48084, Attn: Maxine J. Lievois, Esq., Phone: (248) 816-3850, Email: Maxine.lievois@fnf.com.
“Escrow Agreement” means that certain Escrow Agreement to be entered into promptly following the date hereof in connection with the establishment of the Escrow Account, by and between Buyer, Seller and Escrow Agent substantially in the form attached hereto as Exhibit B.
“Essex” means Essex Title.
“Estimated Transfer Taxes” means the Title Company’s good faith determination of the estimated amount of Transfer Taxes to be paid in connection with the Contemplated Transaction, as reasonably approved by Buyer and Seller.
“Excluded Property” means each Property that is deemed an “Excluded Property” pursuant to the terms hereof.
“Excluded Property Purchase Price Reduction” has the meaning set forth in Section 2.9(a).
“Excluded Property Designation Date” means, individually or collectively as the context may permit or require (i) a Title Defect Excluded Property Designation Date, (ii) a Significant Casualty/Condemnation Excluded Property Designation Date and/or (iii) a Buyer Condition to Closing Excluded Property Designation Date.
“Excluded Property Disposition” has the meaning set forth in Section 2.9(a).
“Existing Construction Projects” has the meaning set forth in Section 3.18(c).
“Existing Guarantor” means SOF-XI U.S. NRE Holdings, L.P., a Delaware limited partnership.
“Existing Lender” means any lender under the Existing Loan.
“Existing Lender Consent” has the meaning set forth in Section 5.3(c).
“Existing Loan” means the Indebtedness evidenced by the Existing Loan Documents.
“Existing Loan Agreement” has the meaning set forth in Section 3.6(c)(i) of the Company Disclosure Schedules.
“Existing Loan Assumption Approval” has the meaning set forth in Section 5.3(c).
“Existing Loan Assumption Approval Conditions” has the meaning set forth in Section 5.3(c).
“Existing Loan Assumption Fees” has the meaning set forth in Section 5.3(c).
“Existing Loan Assumption Requirements” means, collectively, (1) the satisfaction of all reasonable requests, searches, requirements, deliveries (including, without limitation, documents, instruments, certificates and opinions) and conditions of the Existing Lender (including, without limitation, the requests, searches, requirements, deliveries and conditions set forth in Section 4.2.14(d)(vii) of the Existing Loan Agreement) in connection with the Contemplated Transactions (including, if applicable, with respect to any Excluded Properties and Excluded Property Disposition), (2) intentionally omitted, (3) the delivery of any information and materials reasonably required by the Existing Lender with respect to the Contemplated Transactions, including, without limitation, any information and materials such that the Existing Lender can perform the searches and other due diligence contemplated by Section 4.2.14(d)(vii) of the Existing Loan Agreement, in each case with respect to Buyer, its Affiliates and their respective businesses, (4) the delivery of releases to the Existing Lender that are required by the Existing Loan Documents or which are reasonably requested by the Existing Lender, (5) the delivery of an Additional Insolvency Opinion (as such term is defined in the Existing Loan Documents) to the existing Lender, (6) the satisfaction of the Guaranty Assumption Requirements, (7) Existing Lender’s receipt of any applicable rating agency confirmations required pursuant to the Existing Loan Agreement with respect to the Contemplated Transactions and (8) the satisfaction of any other reasonable requirements and conditions of the Existing Lender in connection with the Contemplated Transactions.
“Existing Loan Documents” has the meaning set forth in Section 3.6(c).
“Existing Manager” means (a) with respect to the Properties currently managed by Tiber Capital Group LLC (or its affiliates, delegees or subcontractors (if any)), Tiber Capital Group LLC and (b) with respect to the Properties currently managed by Roofstock, Inc. (or its affiliates, delegees or subcontractors (if any)), Roofstock, Inc.
“Financial Statements” has the meaning set forth in Section 3.6(a).
“Fundamental Representations” means the representations and warranties of (i) Seller set forth in Section 3.1 (Organization and Power), Section 3.2 (Authorization and Enforceability), Section 3.3 (Capitalization) and Section 3.14 (Tax Matters) and (ii) Buyer set forth in Section 4.1 (Organization and Power), Section 4.2 (Authorization), and Section 4.3 (Enforceability).
“GAAP” means generally accepted accounting principles as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession in the United States.
“General Partner” has the meaning set forth in the Recitals. “General Partner Interest” has the meaning set forth in the Recitals.
“Governmental Authority” means any nation or government, any foreign or domestic federal, state, county, municipal or other political instrumentality or subdivision thereof and any foreign or domestic entity or body exercising executive, legislative, judicial, regulatory, administrative or taxing functions of or pertaining to government, including any court.
“Guarantor Joinder” has the meaning set forth in Section 7.10.
“Guaranty Assumption Requirements” means, collectively, (1) either the execution by a Qualified Transferee (as defined in the Existing Loan Agreement) of a replacement guaranty with respect to the Sponsor Guaranty or the execution by a Qualified Transferee (as defined in the Existing Loan Agreement) of an assumption of the obligations of Existing Guarantor under the Sponsor Guaranty, in either case pursuant to Section 4.2.14(e)of the Existing Loan Agreement and (2) the execution by a Qualified Transferee (as defined in the Existing Loan Agreement) of a replacement guaranty with respect to the Repurchase Guaranty and the execution by a Qualified Transferee (as defined in the Existing Loan Agreement) of an assumption of the obligations of Existing Guarantor under the Repurchase Guaranty, in each case pursuant to Section 10 of the Repurchase Guaranty.
“Housing Authority” has the meaning set forth in Section 3.19.
“Indebtedness” means all obligations and indebtedness of the Acquired Entities (a) for borrowed money (other than trade debt and other similar liabilities incurred in the ordinary course of business), (b) evidenced by a note, bond, debenture, or similar instrument, but excluding letters of credit to the extent not drawn upon, (c) drawn under letters of credit, banker’s acceptances or similar credit transactions, (d) for any other Person’s obligation or indebtedness of the same type as any of the foregoing, whether as obligor, guarantor or otherwise, (e) created or arising under any capital lease, conditional sale, earn out or other arrangement for the deferral of purchase price of any Property; and/or (f) for accrued but unpaid interest (including default interest) and penalties on any of the foregoing; provided, that Indebtedness shall not include (i) accounts payable to trade creditors and deferred revenues arising in the ordinary course of business, (ii) the endorsement of negotiable instruments for collection in the ordinary course of business, and (iii) Indebtedness owing from any Acquired Entity to any wholly owned Subsidiaries thereof or from any such wholly-owned Subsidiaries to any Acquired Entity.
“Indemnified Individuals” has the meaning set forth in Section 5.5(c).
“Independent Consideration” means a portion of the Deposit equal to one hundred dollars ($100.00).
“Initial Deposit” has the meaning set forth in Section 2.4(a).
“Kirkland” has the meaning set forth in Section 11.16.
“Knowledge of Buyer” (and correlative uses thereof) means the actual knowledge (and not imputed or constructive knowledge), without any duty of inquiry or investigation, of Dana Sprong and Kyle Bodmer. There shall be no personal liability on the part of the foregoing named individuals arising out of any of the representations or warranties of Buyer under this Agreement.
“Knowledge of Seller” means the actual knowledge (and not imputed or constructive knowledge), without any duty of inquiry or investigation, of Sam Caven and Nick Haechler (collectively, “Seller’s Designated Representatives”). There shall be no personal liability on the part of the foregoing named individuals arising out of any of the representations or warranties of Seller under this Agreement.
“Laws” means all laws, Orders, statutes, codes, regulations, ordinances, orders, decrees, rules or other requirements with similar effect of any Governmental Authority.
“Leases” means all leases, subleases, licenses or other agreements that permit the use or occupancy of a Property and use of related improvements, or portion thereof and guaranties relating thereto.
“Liability” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person.
“Lien” means any lien, statutory or otherwise, security interest, mortgage, deed to secure debt, deed of trust, security instrument, financing statement, priority, pledge, charge, right of first offer, right of first refusal, option or other encumbrance or similar right of others, or any agreement to give any of the foregoing.
“Litigation” has the meaning set forth in Section 3.12.
“Loss” or “Losses” means any and all claims, losses, Taxes, Liabilities, damages, deficiencies, interest and penalties, costs and expenses, including losses resulting from the defense, settlement and/or compromise of a claim and/or demand and/or assessment, reasonable attorneys’, accountants’ and expert witnesses’ fees, costs and expenses of investigation, and the costs and expenses of enforcing any indemnification provided hereunder.
“Mandatory Removal Exceptions” means (i) any Liens voluntarily recorded by any Acquired Entity or arising from the voluntary action (or failure to take required action) of any Acquired Entity (in each case, as opposed to any tenant or other party), in each case but other than with the prior written approval of Buyer, (ii) all matters set forth on Exhibit C hereto, and (iii) any other Lien granted by any Acquired Entity which secures indebtedness for borrowed money (other than the Lien created by the Existing Loan Documents).
“Material Contracts” has the meaning set forth in Section 3.9(a).
“Material Title Matter” means any Lien, encumbrance or other title matter with respect to any Property, in each case which has a material and adverse effect on the value, use or operation of such Property as a single family rental property and which is not a Permitted Lien or a Mandatory Removal Exception.
“New Construction Projects” has the meaning set forth in Section 5.3(e). “Non-Terminating Party” has the meaning set forth in Section 2.2.
“Orders” means all judgments, orders, writs, injunctions, decisions, rulings, decrees and awards of any Governmental Authority.
“Other Agreement” means that certain Interest Purchase Agreement among Buyer, Term Holdings Seller, SOF-XI RS Holdings, L.P., a Delaware limited partnership, and SFR Master Holdings, L.P., a Delaware limited partnership, dated as of the Effective Date.
“Other Agreement Access Agreement” has the meaning ascribed to the term “Access Agreement” in the Other Agreement.
“Other Agreement Buyer” has the meaning ascribed to the term “Buyer” in the Other Agreement.
“Other Agreement Closing” has the meaning ascribed to the term “Closing” in the Other Agreement.
“Other Agreement Closing Date” has the meaning ascribed to the term “Closing Date” in the Other Agreement.
“Other Agreement Excluded Properties” has the meaning ascribed to the term “Excluded Properties” in the Other Agreement.
“Other Agreement Fundamental Representations” has the meaning ascribed to the term “Fundamental Representations” in the Other Agreement.
“Other Agreement Losses” has the meaning ascribed to the term “Losses” in the Other Agreement.
“Other Agreement Outside Closing Date” has the meaning ascribed to the term “Outside Closing Date” in the Other Agreement.
“Other Agreement Properties” has the meaning ascribed to the term “Properties” in the Other Agreement.
“Other Agreement Property Representations” has the meaning ascribed to the term “Property Representations” in the Other Agreement.
“Other Agreement Purchase Price” has the meaning ascribed to the term “Purchase Price” in the Other Agreement.
“Other Agreement Seller” has the meaning ascribed to the term “Seller” in the Other Agreement.
“Other Agreement Seller Termination Event” has the meaning ascribed to the term “Seller Termination Event” in the Other Agreement.
“Outside Closing Date” has the meaning set forth in Section 2.2.
“Partnership” has the meaning set forth in the Recitals.
“Permitted Entity Liens” means restrictions under applicable state and federal securities laws or under the applicable Organizational Documents and/or Liens and restrictions under the terms of the Existing Loan Documents.
“Permitted Liens” means: (i) statutory Liens for current Taxes, assessments or other governmental charges not yet due and payable or being contested in good faith by appropriate proceedings; (ii) all water, sewer, utility, trash and other similar charges that are or may become or give rise to a Lien on all or any portion of such Property, in each case that are not yet due and payable and delinquent as of the Closing Date or that are being contested in good faith (it being understood that such items shall be subject to apportionment or adjustment at the Closing as provided herein); (iii) the rights of the tenants pursuant to the applicable Leases; (iv) Liens securing Indebtedness under the Existing Loan Documents or other obligations secured by the Existing Loan Documents; (v) any Liens and/or title exceptions disclosed in any title commitment provided to Buyer (other than any Material Title Matters for which Buyer has timely delivered a Title Defect Notice in accordance with the terms hereof); (vi) all Laws, including all environmental, building and zoning restrictions affecting such Property or the ownership, use or operation thereof adopted by any Governmental Authority having jurisdiction over such Property or the ownership, use or operation thereof, and all amendments or additions thereto now in effect or which may be in force and effect after the date hereof with respect to such Property but excluding judgments against any Seller or Affiliate thereof, provided that none of the foregoing materially restrict use of the Properties as single family rental properties (vii) all matters created or caused by or on behalf of, or with the written consent of, Buyer; (viii) the state of facts disclosed on any surveys provided to Buyer (other than those items set forth on Exhibit C attached hereto), and any further state of facts as a current survey or inspection of the applicable Property would disclose, possible encroachments and/or projections of stoop areas, roof cornices, window trims, vent pipes, cellar doors, steps, columns and column bases, flue pipes, signs, piers, lintels, window sills, fire escapes, satellite dishes, protective netting, sidewalk sheds, ledges, fences, coping walls (including retaining walls and yard walls), air conditioners and the like, if any, on, under or above any street or highway, the Property or any adjoining property; (ix) such matters as the Escrow Agent shall be willing, at no material cost to Buyer, to omit as exceptions to coverage or affirmatively insure over with respect to a new title insurance policy (other than any Material Title Matters for which Buyer has timely delivered a Title Defect Notice in accordance with the terms hereof); (x) the standard printed exclusions from coverage contained in the ALTA form of owner’s title policy currently in use and in the state where a Property is located; (xi) all covenants, restrictions and utility company rights, easements and franchises relating to electricity, water, steam, gas, telephone, sewer or other service or the right to use and maintain poles, lines, wires, cables, pipes, boxes and other fixtures and facilities in, over, under and upon the Property; (xii) mechanic’s, materialmen’s, carriers’, repairers’ and other Liens arising or incurred in the ordinary course of business for amounts that are not yet delinquent or are being contested in good faith, including, without limitation, any such Liens with respect to the Existing Construction Projects or the New Construction Projects for which Buyer receives a credit at Closing; (xiii) Liens (other than Liens securing indebtedness for borrowed money), defects or irregularities in title, easements, rights-of- way, covenants, restrictions and other similar matters that would not reasonably be expected to, individually or in the aggregate, materially impair the value or continued use and operation of the applicable individual Property, in each case other than any Material Title Matters for which Buyer has timely delivered a Title Defect Notice in accordance with the terms hereof; (xiv) Liens securing obligations for which Seller, in its sole discretion, causes to be removed or provides a credit to Buyer at Closing together with the fees associated with such removal; or (xv) Contested Liens. In no event shall any “Permitted Lien” include any Mandatory Removal Exception.
“Person” means any individual, person, entity, general partnership, limited partnership, limited liability partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association, foreign trust or foreign business organization and the heirs, executors, administrators, legal representatives, successors and assigns of the “Person” when the context so permits.
“Post-Closing Date Statement” has the meaning set forth in Section 2.3(e).
“Post-Closing Liability Trigger” has the meaning set forth in Section 6.3(e).
“Properties” has the meaning set forth in Section 3.7(a).
“Property Representations” means the representations and warranties of Seller set forth in this Agreement other than the Fundamental Representations.
“Proration Items” has the meaning set forth in Section 2.3(f).
“Purchase Price” has the meaning set forth in Section 2.3(a).
“Purchased Interests” has the meaning set forth in the Recitals.
“Purchaser Investigations” has the meaning set forth in the Access Agreement.
“Property Management Agreement” has the meaning set forth in Section 5.14.
“Proprietary Information” shall mean (i) information and materials that are legally privileged, constitute attorney work product or are subject to a third-party confidentiality agreement prohibiting Seller and/or its Affiliates from providing such information and materials and/or (ii) information and materials that constitute confidential internal forecast, projection and/or strategy assessments, reports, studies, analyses, memoranda, notes and related correspondence prepared by or on behalf of any officer or employee of Seller or any of its affiliates.
“R&W Insurance Policy” has the meaning set forth in Section 9.2.
“R&W Insurance Policy Binding Premium” has the meaning set forth in Section 9.3.
“R&W Insurance Policy Buyer Condition to Closing” has the meaning set forth in Section 6.3(e).
“R&W Insurance Policy Insurer” has the meaning set forth in Section 9.3.
“R&W Insurance Policy Non-Binding Indicative Terms” has the meaning set forth in Section 9.2.
“Required Association Approval” means any Association Approval identified by Buyer to Seller in writing no later than twelve (12) Business Days prior to the Closing Date.
“Released Claims” has the meaning set forth in Section 11.18.
“Rent” has the meaning set forth in Section 2.3(f)(i).
“Rent Roll” has the meaning set forth in Section 3.8.
“Replacement R&W Insurance Policy” means a buyer side representations and warranties policy that is (i) procured by Seller for the benefit of Buyer in connection with the Contemplated Transactions and (ii) issued by the Replacement R&W Insurer on the R&W Insurance Policy Non-Binding Indicative Terms.
“Replacement R&W Insurance Policy Insurer” means any reputable insurance company regularly engaged in the issuance of representation and warranty insurance policies.
“Representatives” has the meaning set forth in Section 9.1.
“Repurchase Guaranty” means that certain Repurchase Guarantor for Material Document Defects, executed by Existing Guarantor in favor of Existing Lender.
“Restricted Person” means any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, or other entity which (i) is included on the List of Specially Designated Nationals and Blocked Persons maintained by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”), (ii) resides or has a place of business in a country or territory named on an OFAC list or which is designated as a Non-Cooperative Jurisdiction by the Financial Action Task Force on Money Laundering or transfers its funds from or through such a jurisdiction, (iii) resides in or is organized under the laws of a jurisdiction designated by the Secretary of the Treasury of the United States as warranting special measures due to money laundering concerns, (iv) is a senior foreign political figure, member of a senior foreign political figure’s immediate family or close associate of a senior foreign political figure (as each is defined below), or (v) is a foreign shell bank (as defined below). For purposes of this definition, senior foreign political figure means a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a senior foreign political figure includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure. The immediate family of a senior foreign political figure includes the senior foreign political figure’s parents, siblings, spouse, children and in-laws. A close associate of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure. For purposes of this definition, “foreign shell bank” means a foreign bank that does not have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision.
“Rule 3-14 Financials” has the meaning set forth in Section 5.12.
“Security Deposits” has the meaning set forth in Section 3.8.
“Seller” has the meaning set forth in the Preamble.
“Seller Exculpated Parties” has the meaning set forth in Section 5.5(a).
“Seller GP Interests” has the meaning set forth in the Recitals.
“Seller Group” has the meaning set forth in Section 11.16.
“Seller LP Interests” has the meaning set forth in the Recitals.
“Seller Termination Event” shall occur each time the sum of (a) the number of Excluded Properties plus (b) the number of Other Agreement Excluded Properties, is more than two percent (2%) of the sum of (x) the total number of Properties subject to this Agreement as of the Effective Date plus (y) the total number of Other Agreement Properties subject to the Other Agreement as of the Effective Date.
“Seller’s Representations” means the Fundamental Representations and the Property Representations.
“Significant Casualty” means, if any individual Property (or portions thereof) is damaged by a fire or other casualty and the cost to repair and restore such Property is expected to cost more than $50,000.00.
“Significant Casualty/Condemnation Excluded Property Designation Date” has the meaning set forth in Section 5.9(c).
“Significant Condemnation” means, if a taking occurs with respect to all or a portion of any Property as a result of a condemnation or eminent domain proceeding, such taking will result in the loss of a Property or portions thereof valued in an aggregate amount of more than $50,000.00.
“Sponsor Guaranty” means that certain Sponsor Guaranty, dated as of March 10, 2021, executed by Existing Guarantor in favor of Existing Lender.
“Straddle Period” means any Tax period beginning on or before and ending after the Closing Date.
“Subsidiary” means, with respect to any Person, any Person controlled by such Person, directly or indirectly, through one or more intermediaries, and includes any entity in respect of which such Person, directly or indirectly, beneficially owns 50% or more of the voting securities or equity.
“Surviving Provisions” has the meaning set forth in Section 10.2(a).
“Tax” or “Taxes” (including, with correlative meaning, the term “Taxable”) means all U.S. federal, state, local and non-U.S. foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise production, value added, occupancy, Transfer Taxes, and other taxes, duties or assessments of any nature whatsoever imposed by a Governmental Authority, together with all interest, penalties or additions to tax attributable to such taxes.
“Tax Contest” shall mean any audit, hearing, proposed adjustment, arbitration, deficiency, assessment, suit, dispute, claim, or similar proceeding commenced, filed or otherwise initiated or convened to investigate or resolve the existence and extent of a Liability for Taxes.
“Tax Return” means any report, return, statement, or similar form (including elections, declarations, disclosures, schedules, estimates and information returns) filed with a Taxing Authority in connection with any Taxes.
“Taxing Authority” shall mean any government or any subdivision, agency, commission or authority thereof, or any quasi-governmental or private body, having jurisdiction over the assessment, determination, collection or other imposition of Taxes.
“Tenant” means any person or entity entitled to occupy any portion of the Properties under a Lease.
“Term Holdings Purchased Interests” has the meaning set forth in the Recitals.
“Term Holdings Seller” has the meaning set forth in the Preamble.
“Terminating Notice” has the meaning set forth in Section 2.2.
“Terminating Party” has the meaning set forth in Section 2.2.
“Tiber Lease” has the meaning set forth in Section 5.1(c).
“Title Company” means Fidelity National Title Insurance Company, 1050 Wilshire Drive, Suite 310, Troy, Michigan 48084, Attn: Maxine J. Lievois, Esq., Phone: (248) 816-3850, Email: Maxine.lievois@fnf.com, through its agent, Essex.
“Title Defect Excluded Property Designation Date” has the meaning set forth in Section 2.8(b).
“Title Defect List” has the meaning set forth in Section 2.8(a).
“Title Defect Notice” has the meaning set forth in Section 2.8(a).
“Title Policies” has the meaning set forth in Section 2.5.
“Total Consideration” has the meaning set forth in Section 2.3(a).
“Transaction Documents” has the meaning set forth in Section 9.1.
“Transfer Taxes” means all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees (including any penalties and interest) incurred in connection with the Contemplated Transactions.
“Treasury Regulations” means the regulations promulgated under the Code, as amended from time to time (including any successor regulations).
“Utilities” has the meaning set forth in Section 2.3(f)(iii).
1.2. Rules of Construction.
Unless the context otherwise requires:
(a) A capitalized term has the meaning assigned to it;
(b) An accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(c) References in the singular or to “him,” “her,” “it,” “itself,” or other like references, and references in the plural or the feminine or masculine reference, as the case may be, shall also, when the context so requires, be deemed to include the plural or singular, or the masculine or feminine reference, as the case may be;
(d) References to Articles, Sections and Exhibits shall refer to articles, sections and exhibits of this Agreement, unless otherwise specified;
(e) The headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof;
(f) This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party that drafted and caused this Agreement to be drafted;
(g) All monetary figures shall be in U.S. dollars unless otherwise specified;
(h) References to “including” in this Agreement shall mean “including, without limitation,” whether or not so specified; and
(i) The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other theory extends and such phrase shall not mean “if.”
ARTICLE II
Purchase and Sale
2.1. Purchase and Sale.
Subject to the terms and conditions set forth in this Agreement, at the Closing, Buyer shall purchase from Seller, and Seller shall sell, transfer and assign to Buyer, free and clear of all Liens other than Permitted Liens, all of the Purchased Interests.
2.2. Closing.
The closing of the Contemplated Transactions (the “Closing”) shall take place on the date that is fifteen (15) days after the later to occur of (a) the expiration of the Due Diligence Period and (b) the receipt of the Existing Loan Assumption Approval (the “Closing Date”), through an escrow with Escrow Agent and pursuant to escrow instructions consistent with the terms of this Agreement and otherwise reasonably satisfactory to Seller and Buyer, subject in each case to the satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions); provided, however, to the extent the Existing Loan Assumption Approval has not been received by the date which is one hundred twenty (120) days after the Effective Date (the “Outside Closing Date”), then Seller or Buyer shall have the right in its sole discretion to notify the other party in writing (such written notice, a “Termination Notice”; the party delivering a Termination Notice shall be referred to herein as a “Terminating Party” and the other party will be referred to hereinafter as a “Non-Terminating Party”) that the Terminating Party elects to terminate this Agreement as of the date of such Termination Notice, whereupon neither party shall have any further rights or obligations under this Agreement except for those that expressly survive the termination of this Agreement and the Deposit (less fifty percent (50%) of any outstanding Existing Loan Assumption Fees) shall be promptly returned to Buyer; provided further, however, (a) notwithstanding the immediately preceding proviso, upon receipt of the Termination Notice from the Terminating Party, the Non-Terminating Party shall have a one-time right, by delivering written notice to the Terminating Party within two (2) Business Days of the Terminating Party’s receipt of such Termination Notice, to extend the Outside Closing Date by thirty (30) days, provided that the effectiveness of such extension shall be conditioned upon Buyer and Seller in good faith reasonably agreeing in writing that substantial progress has been made with respect to obtaining the Existing Loan Assumption Approval and (b) to the extent the Existing Loan Assumption Approval has not been received by the Outside Closing Date (as extended pursuant to the immediately preceding clause (a)), then Buyer and Seller shall be deemed to have mutually agreed to terminate this Agreement as of such extended Outside Closing Date, whereupon neither party shall have any further rights or obligations under this Agreement except for those that expressly survive the termination of this Agreement and the Deposit (less fifty percent (50%) of any outstanding Existing Loan Assumption Fees) shall be promptly returned to Buyer. Notwithstanding the foregoing or anything contained herein to the contrary, (i) if the Other Agreement is terminated in accordance with Section 2.2 of the Other Agreement, then this Agreement shall automatically terminate pursuant to this Section 2.2 simultaneously with such termination of the Other Agreement, (ii) a Terminating Party shall only have the right to terminate this Agreement pursuant to this Section 2.2 if such Terminating Party (or its Affiliate) is simultaneously terminating the Other Agreement pursuant to Section 2.2 of the Other Agreement, and (iii) a Non-Terminating Party shall only have the right to extend the Outside Closing Date pursuant to this Section 2.2 if such Non-Terminating Party (or its Affiliate) is extending the Other Agreement Outside Closing Date pursuant to Section 2.2 of the Other Agreement.
2.3. Payments at the Closing.
(a) Subject to adjustments made under this Section 2.3 and Section 2.6, (i) the amount to be paid by Buyer to Seller for the Purchased Interests shall be (A) $466,467,065.87, as reduced by all Excluded Property Purchase Price Reductions pursuant to Section 2.9(a) (the “Total Consideration”) less (B) the Closing Date Indebtedness (the “Purchase Price”), and (ii) the amount to be paid by Buyer to Seller at the Closing shall be (A) the Purchase Price less (B) the amount of the Deposit (which will be released to Seller from the Escrow Account at Closing) (the “Closing Consideration Amount”). Buyer and Seller acknowledge and agree that the Total Consideration has been allocated to the Properties as set forth on Exhibit A attached hereto (the “Allocated Purchase Prices”). The Allocated Purchase Prices, the Purchase Price and the Total Consideration shall not be modified for purposes of this Agreement without the prior written consent of both Seller and Buyer (which consent may be withheld in the sole discretion of either party); provided that the Allocated Purchase Prices (other than with respect to any Excluded Properties) shall be subject to adjustment among the Properties (other than the Excluded Properties) at least three (3) Business Days prior to the expiration of the Due Diligence Period (upon written notice thereof from Buyer to Seller) by Buyer (but not by more than 2% without Seller’s approval in Seller’s sole and absolute discretion), and in all events so long as the total Allocated Purchase Prices continue to equal the Total Consideration.
(b) Not fewer than five (5) Business Days prior to the Closing, Seller shall deliver to Buyer its good faith determination of the Closing Date Indebtedness, the Estimated Transfer Taxes and the Proration Items. Buyer shall have the opportunity to review all materials and information used by Seller or the Acquired Entities in preparing such determination, as reasonably requested by Buyer. Such determination, as it may be adjusted as mutually agreed by Buyer and Seller, is referred to as the “Closing Date Statement”.
(c) The net amount of credits to Buyer and/or Seller for the Proration Items as reflected on the Closing Date Statement shall result in an increase or decrease to the Closing Consideration Amount.
(d) At the Closing, Buyer shall pay Seller in consideration for the Purchased Interests an amount equal to the Closing Consideration Amount, and Buyer and Seller shall each deliver to the Escrow Agent (subject to Section 5.4(a)) an amount equal to fifty percent (50%) of the Estimated Transfer Taxes, in each case, by wire transfer of immediately available funds to the Escrow Agent.
(e) If the cost or amount of any item which is to be adjusted pursuant to Section 2.3(f) or with respect to Closing Date Indebtedness, the Estimated Transfer Taxes or the Contested Liens cannot be finally determined on the Closing Date, then an initial adjustment for such item shall be made on the Closing Date, such amount to be estimated by Seller, acting reasonably, as of the Closing Date on the basis of the best information available at the Closing as to what the final cost or amount of such item will be. Not later than one hundred eighty (180) days following the Closing Date, Seller shall deliver to Buyer its good faith final determination of the adjustments and prorations provided for herein and setting forth any items which are not capable of being determined at such time (and the manner and timing in which such items shall be determined and paid). Buyer shall have the opportunity to review all materials and information used by Seller or the Acquired Entities in preparing such final determination, as reasonably requested by Buyer. Such determination, as it may be adjusted as mutually agreed by Buyer and Seller, is referred to as the “Post-Closing Date Statement”. If by reason of adjustments to the Closing Date Statement, as shown in the Post-Closing Date Statement, any such prorated amounts shall be adjusted post- closing, then the net amount allocable to (i) Seller shall be paid by Buyer to Seller, and (ii) Buyer shall be paid by Seller to Buyer. This Section 2.3(e) shall survive Closing. To secure Seller’s obligations under this Section 2.3(e), Seller shall collectively maintain an aggregate net worth in an amount not less than $5,000,000.00 from and after the Closing until all net amounts due to Buyer pursuant to the Post Closing Date Statement are paid to Buyer.
(f) Prorations. All prorations and other adjustments described in this Section 2.3(f) shall be made at the Closing based on the Closing Date Statement prepared in accordance with Section 2.3(b) above. All prorations and other adjustments made pursuant to this Section 2.3(f) shall be made without duplication whatsoever. Except as otherwise set forth herein, all items to be prorated and other adjustments to be made pursuant to this Section 2.3(f) (the “Proration Items”) shall be prorated as of the Adjustment Time and the net amount allocable thereof shall be allocated to Seller and Buyer by increasing or reducing the Closing Consideration Amount to be delivered by Buyer at the Closing pursuant to Section 2.3(c). Buyer shall be treated as the owner of the Properties for purposes of prorations of income and expenses on and after the Adjustment Time. The Proration Items shall be calculated before the calculation of Closing Date Indebtedness and the calculation of Closing Date Indebtedness shall exclude any items taken into account in the determination of the Proration Items with the intent of the parties hereto being to avoid double counting Proration Items in any adjustments to the Closing Consideration Amount. Buyer and Seller acknowledge that, except as otherwise expressly provided herein, the purpose and intent as to prorations and other adjustments pursuant to this Section 2.3(f) is that (i) Seller shall bear one hundred percent (100%) of all expenses of ownership and operation of the Properties, and shall receive the benefit of one hundred percent (100%) of all income therefrom, in each case accruing until the Adjustment Time, and (ii) Buyer shall bear one hundred percent (100%) of all expenses of ownership and operation of the Properties, and shall receive the benefit of one hundred percent (100%) of all income therefrom, in each case accruing from and after the Adjustment Time. Notwithstanding anything herein to the contrary, but subject to the last sentence of Section 2.3(f)(ii), all prorations shall be made on the basis of the actual number of days of the applicable time period which shall have elapsed prior to the Adjustment Time and based upon the actual number of days in the applicable time period and a three hundred sixty five (365) day year.
(i) Rent. All rents and other amounts (excluding Security Deposits) (“Rent”) paid by the tenants under the Acquired Entity Leases shall be prorated as of the Adjustment Time. At Closing, Buyer shall receive a credit for any advance or prepaid Rent applicable to the period after the Closing actually received by Seller. Without duplication of the immediately preceding, if the Closing occurs on a day other than the first day of a calendar month, then Buyer will receive a credit at the Closing for the portion of the Rent actually received by Seller for the month of the Closing relating to the period of time from and after the Closing Date. From and after the Closing Date, all Rent paid by the tenants under the Acquired Entity Leases shall be the sole and exclusive property of and for the account of Buyer. After the Closing, Seller may not commence any action to collect delinquent Rent with respect to the Properties.
(ii) Real Property Taxes. Seller (through the Partnership) shall pay (or shall cause the Property Owner to pay), at or prior to the Closing, all real property taxes to the extent due and payable with respect to periods prior to the Adjustment Time. Buyer shall bear all real property taxes to the extent due and payable with respect to periods from and after the Adjustment Time. If any real property taxes relate to periods both prior to and after the Closing Date, such real property taxes shall be prorated as of the Adjustment Time between Seller and Buyer as otherwise provided in the last sentence of the first paragraph of Section 2.3(f), which proration shall be determined by apportioning such real property taxes ratably over the taxable year on a daily basis. The proration of real property taxes or installments of assessments shall be based upon the assessed valuation and tax rate figures (assuming payment at the earliest time to allow for the maximum possible discount) for the year or the state real estate tax payment period (solely with respect to the Properties located in the State of Arizona) in which the Closing occurs to the extent the same are available; provided, however, that in the event that actual figures (whether for the assessed value of such Property or for the tax rate) for the year or the state real estate tax payment period (solely with respect to the Properties located in the State of Arizona) of Closing are not available at the Closing Date, the proration shall be made using figures from the preceding year or the preceding state real estate tax payment period (solely with respect to the Properties located in the State of Arizona).
(iii) Utilities. Charges for all water, vault and sewer charges and rents, electricity, steam, gas and other utility services (collectively, “Utilities”) shall be borne by Seller or the Acquired Entities up to the Adjustment Time and, from and after the Adjustment Time, all Utilities shall be borne by Buyer. If any apportionment is not based on an actual current reading, such utility charges shall be prorated as of the Adjustment Time between Seller and Buyer as provided in the last sentence of the first paragraph of Section 2.3(f). Any deposits held by all Utility companies for the benefit of Acquired Entities which remains in the name of the Acquired Entities after the Closing shall be credited to Seller at the Closing.
(iv) Service Contracts. Amounts payable by any Acquired Entity under service Contracts for services received prior to the Adjustment Time shall be borne by Seller, and amounts payable by any Acquired Entity under such Contracts for services to be performed following the Adjustment Time shall be borne by Buyer. Amounts prepaid by any Acquired Entity under service Contracts for services to be performed following the Adjustment Time shall be for the account of Seller.
(v) Other Revenues and Expenses. All revenues of any Acquired Entity (including cash on hand (other than any such cash that represents the unapplied portion of any tenant security deposits under the Acquired Entity Leases) and any and all deposits, reserves and escrows or amounts in lockbox or other accounts or sub-accounts being held by the Existing Lender or its servicers) relating to the period prior to the Adjustment Time shall be for the account of Seller and all revenues of any Acquired Entity relating to the period following the Adjustment Time shall be for the account of Buyer; provided that, notwithstanding anything to the contrary set forth herein, any “door fees” or other non- recurring payments due under any Acquired Entity Leases shall not be prorated, and under no circumstances shall Buyer be entitled to receive a credit for any portion of such fees received prior to the Closing Date. Subject to Section 11.1, all expenses incurred by any Acquired Entity during the period prior to the Adjustment Time shall be borne by Seller and, from and after the Adjustment Time, all expenses incurred by any Acquired Entity shall be borne by the Buyer. All such cash on hand may be distributed by the Acquired Entities to the direct or indirect owners of the Acquired Entities at or prior to Closing.
(vi) Security Deposits. At Closing, Buyer shall receive a credit against the Closing Consideration Amount in an amount (the “Tenant Security Deposit Balance”) equal to the received and unapplied balance of all cash (or cash equivalent) Security Deposits, including, but not limited to, refundable security, damage, pet or other refundable deposits paid by any of the Tenants to secure their respective obligations under the Acquired Entity Leases, together, in all cases, with any interest payable to the Tenants thereunder as may be required by their respective Acquired Entity Lease or state law, provided that the Partnership has properly notified (or has caused the Property Owner to properly notify) the Tenant pursuant to their respective Acquired Entity Lease. Any cash (or cash equivalents) held by Seller which constitutes the Tenant Security Deposit Balance shall be retained by Seller in exchange for the foregoing credit against the Closing Consideration Amount and shall not be transferred by Seller pursuant to this Agreement (or any of the documents delivered at Closing), but the obligation with respect to the Tenant Security Deposit Balance nonetheless shall be assumed by Buyer. The Tenant Security Deposit Balance shall not include any non-refundable fees or other amounts paid by Tenants to Seller or any Acquired Entity for periods prior to the Adjustment Time, either pursuant to the Acquired Entity Leases or otherwise.
(vii) Contested Liens. At Closing, Buyer shall receive a credit against the Closing Consideration Amount in an amount equal to the full amount of (i) any statutory Liens for current Taxes, assessments or other governmental charges, (ii) all water, sewer, utility, trash and other similar charges that are or may become or give rise to a Lien on all or any portion of such Property, and (iii) mechanic’s, materialmen’s, carriers’, repairers’ and other Liens arising or incurred in the ordinary course of business that, in each case, have not been paid and are being contested in good faith by appropriate proceedings (collectively, the “Contested Liens”).
(viii) Construction Projects. At Closing, Buyer shall receive a credit against the Closing Consideration Amount in an amount equal to the full amount of any costs and expenses with respect to the Existing Construction Projects and the New Construction Projects (x) that are then unpaid and/or (y) which are necessary to complete such Existing Construction Projects and/or New Construction Projects following Closing (in each case, as reasonably determined by Seller and Buyer).
(ix) Survival. This Section 2.3(f) shall survive Closing.
2.4. Deposit.
(a) Within two (2) Business Days following the execution of this Agreement by Buyer and Seller, Buyer shall deliver to the Escrow Agent by wire transfer of immediately available funds to the account designated and administered by the Escrow Agent pursuant to the Escrow Agreement (the “Escrow Account”) the amount of $11,661,676.65 (such deposit which is made pursuant to this Section 2.4, together with all interest earned thereon, the “Initial Deposit”), which Initial Deposit shall be non-refundable to Buyer except as otherwise expressly set forth herein. If Buyer elects to proceed to Closing by notice to Seller prior to the expiration of the Due Diligence Period, Buyer shall, within two (2) Business Days following the expiration of the Due Diligence Period, deliver to the Escrow Agent by wire transfer of immediately available funds an additional deposit in the amount of $11,661,676.65 (the “Additional Deposit”; the Initial Deposit, and together with the Additional Deposit when required to be made pursuant to the terms and provisions of this Agreement, collectively, the “Deposit”). The Additional Deposit shall be non-refundable to Buyer except as otherwise expressly set forth herein. The Escrow Agreement shall provide, among other things, that:
(i) The Deposit (including all accrued interest) shall be released to Seller at the Closing;
(ii) The Deposit shall be delivered to Seller following receipt by Escrow Agent of written demand therefor from Seller stating that this Agreement was terminated under circumstances entitling Seller to the Deposit and specifying the Section of this Agreement which entitles Seller to the Deposit, in each case provided Buyer shall not have given written notice of objection in accordance with the provisions set forth in the Escrow Agreement;
(iii) The Deposit shall be delivered to Buyer following receipt by Escrow Agent of written demand therefor from Buyer stating that this Agreement was terminated under circumstances entitling Buyer to the return of the Deposit and specifying the Section of this Agreement which entitles Buyer to the return of the Deposit, in each case provided Seller shall not have given written notice of objection in accordance with the provisions set forth in the Escrow Agreement; or
(iv) The Deposit shall be delivered to Buyer or Seller as directed by joint written instructions of Seller and Buyer (other than as provided in subsections (i)-(iii) above) or an order by a court of competent jurisdiction.
(b) Interest earned on the Deposit shall accrue for the benefit of the party who is entitled to receive the Deposit under this Agreement and shall be paid to such party either at the Closing or concurrently with the release of the Deposit to such party. Buyer shall report all interest earned on the Deposit as its income for all applicable Tax purposes.
2.5. Title Matters. Seller agrees to reasonably cooperate with Buyer, at Buyer’s sole cost and expense, in connection with, and shall, if requested by Buyer, provide to the Title Company a title affidavit substantially in the form attached hereto as Exhibit E in order to assist Buyer in obtaining new title policies from the Title Company (or date-down endorsements to Acquired Entities’ existing title insurance policies to the Closing Date) for each Property (collectively, the “Title Policies”). Buyer shall pay any and all premiums with respect to (x) the Title Policies (and all date-down endorsements thereto) and/or (y) any date-down endorsements to any Acquired Entities existing title insurance policies. All other costs and expenses associated with the procurement of the Title Policies or charged by the Title Company or Essex, including, without limitation, policy review, search fees, tax certificates, closing fees, Association and lien diligence shall be paid fifty percent (50%) by Buyer and fifty percent (50%) by Seller (it being acknowledged and agreed that any legal fees with respect to the Properties, the Title Policies and/or title commitments incurred by Buyer shall be the sole responsibility of Buyer). Notwithstanding anything to the contrary contained herein, Seller shall, at Closing, either (i) pay in full or cause to be canceled and discharged, bonded, removed of record, or, (ii) if the Property Owner obtains a new owner’s title insurance policy (or a date-down endorsement to Acquired Entities’ existing title insurance policies to the Closing Date), cause the Title Company to insure over or otherwise cure, or (iii) credit to Buyer the cost to cure (other than with respect to the items set forth in Exhibit C attached hereto and identified as “Mandatory”), all Mandatory Removal Exceptions of which it has received written notice from Buyer, Title Company or Essex prior to the Closing; provided, however, that if any notice of any such Mandatory Removal Exception is not so provided to Seller prior to Closing, and, as a result thereof, such Mandatory Removal Exception remains in effect following Closing, then the cost to remove, satisfy, discharge or cure such Mandatory Removal Exception shall constitute a Proration Item and shall be subject to post-closing adjustment under Section 2.3(e).
2.6. Transfer Taxes. If any Transfer Taxes are payable in connection with the Contemplated Transactions in excess of the Estimated Transfer Taxes paid at Closing (“Additional Transfer Taxes”), then Buyer and Seller shall each pay fifty percent (50%) of all such Additional Transfer Taxes, and each party shall indemnify and hold harmless the other party and its Representatives from and against any Losses incurred by such other party as a result of such party’s failure to pay such Additional Transfer Taxes.
2.7. Due Diligence Period. Subject to (i) the terms of the Access Agreement (which are hereby incorporated herein and made a part hereof by this reference) and (ii) the rights of Tenants under the Leases, Buyer, and its Consultants shall, at no cost or expense to Seller, have the right to conduct Purchaser Investigations in accordance with the terms, provisions and conditions of the Access Agreement for so long as this Agreement remains in effect. Notwithstanding anything to the contrary set forth in this Agreement, if Buyer, in Buyer’s sole and absolute discretion, determines during the Due Diligence Period that Buyer wishes to proceed with the Contemplated Transaction, then Buyer shall provide written notice to Seller prior to the expiration of the Due Diligence Period (an “Approval Notice”). If Buyer, for any reason or no reason, in Buyer’s sole and absolute discretion, determines during the Due Diligence Period that Buyer does not wish to proceed with the Contemplated Transaction, Buyer shall have the right to not provide an Approval Notice. If Buyer does not provide an Approval Notice prior to the expiration of the Due Diligence Period, then this Agreement shall immediately terminate, the Deposit, less the Independent Consideration, shall be returned to Buyer, the Independent Consideration shall be paid to Seller, and neither Buyer nor Seller shall have any further rights or obligations under this Agreement other than those that are to survive any termination hereof as provided in Section 10.2(a). In the event that Buyer delivers an Approval Notice prior to the expiration of the Due Diligence Period, then Buyer shall have no further right to terminate this Agreement pursuant to this Section 2.7, the Deposit shall be become non-refundable (except as otherwise expressly set forth herein to the contrary) to Buyer and Buyer’s obligation to consummate the Contemplated Transaction shall be conditional only to the extent as specifically provided in this Agreement. In the event that Buyer delivers an Approval Notice prior to the expiration of the Due Diligence Period, Buyer shall have the right to enter into and inspect the inside of any Properties from the expiration of the Due Diligence Period through the Closing Date; provided that interior inspections of any Property occupied by a tenant shall be conducted in accordance with Section 2(b)(i) of the Access Agreement. Notwithstanding anything to the contrary set forth in this Agreement, (i) if the Other Agreement is terminated in accordance with Section 2.7 of the Other Agreement, then this Agreement shall automatically terminate pursuant to this Section 2.7 simultaneously with such termination of the Other Agreement, (ii) Buyer shall only have the right to terminate this Agreement pursuant to this Section 2.7 if Buyer simultaneously terminates the Other Agreement pursuant to Section 2.7 of the Other Agreement and (iii) if the Other Agreement is not timely terminated pursuant to Section 2.7 of the Other Agreement, then Buyer shall not have the right to terminate this Agreement pursuant to this Section 2.7. Notwithstanding the foregoing or anything contained herein to the contrary, (1) the Due Diligence Period has expired and Buyer has completed its due diligence review of the Acquired Entities and the Properties, (2) Buyer’s execution and delivery of this Agreement to Seller shall constitute Buyer’s Approval Notice for all purposes of this Agreement and (3) Buyer shall have no further right to terminate this Agreement pursuant to this Section 2.7.
2.8. Title Defect Excluded Properties.
(a) On or prior to the date that is five (5) Business Days following Buyer’s receipt from the Title Company or Essex of a complete list of underlying defect items for all Properties (a “Title Defect List”), Buyer shall have the right to give irrevocable notice to Seller of any Material Title Matters (a “Title Defect Notice”) with respect to any Property. Seller may elect (but shall not be obligated) to remove, or cause to be removed, eliminate or cause to be insured over, at the expense of Seller, any Material Title Matters set forth in the Title Defect Notice, which removal will be deemed effected if the Title Company agrees to issue a title policy that will eliminate or insure over such Material Title Matter in a manner acceptable to Buyer in its sole discretion.
(b) If Seller does not elect pursuant to Section 2.8(a) to (x) insure over any Material Title Matters affecting a Property in a manner acceptable to Buyer in its sole discretion or (y) remove, cause to be removed or eliminate such Material Title Matter, then, as its sole and exclusive remedy with respect to such Material Title Matter(s) affecting the applicable Property, Buyer may (i) terminate this Agreement with respect to such affected Property by giving irrevocable written notice to Seller and the Escrow Agent (the time and date of such notice from Buyer in accordance with this Section 2.8, the “Title Defect Excluded Property Designation Date”), in which event such Property shall be deemed to be an “Excluded Property” and the provisions of Section 2.9 of this Agreement shall apply to such “Excluded Property”, and thereafter, the Parties will have no further rights or obligations hereunder with respect to such Excluded Property except for those obligations expressly set forth herein with respect to such Excluded Property and those obligations which expressly survive the termination of this Agreement with respect to such Excluded Property or (ii) waive such Title Policy, in which event the Closing with respect to such Property will occur as herein provided without any reduction of or credit against the Total Consideration.
(c) In the event that (i) any update to a title commitment, title search, title report, or other list of title matters, in each case received by Buyer prior to the Closing Date reveals a Material Title Matter first arising on or after the date that Buyer received the Title Defect List, (ii) a Material Title Matter is first disclosed in an Association Estoppel received by Buyer following the Effective Date and which was not disclosed in the Title Defect List, or (iii) for Properties located in the State of Florida, a Material Title Matter is disclosed on a municipal lien search with respect to any such Property located in the State of Florida, then Buyer may give irrevocable notice to Seller of any such Material Title Matter not later than three (3) Business Days prior to the Closing Date (a “Title Update Defect Notice”). If Buyer delivers a Title Update Defect Notice to Seller with respect to a Property at least twelve (12) Business Days prior to the Closing Date, then Seller and Buyer shall make their respective elections with respect to such Property pursuant to Section 2.8(b). If Buyer delivers a Title Update Defect Notice with respect to a Property between twelve (12) Business Days prior to the Closing Date and three (3) Business Days prior to the Closing Date, Buyer will close on such Property (notwithstanding such Material Title Matters) and Seller will provide Buyer a credit at Closing in the amount reasonably necessary to cure, remove, or eliminate such Material Title Defect, as reasonably determined by Buyer and Seller. Buyer shall not be entitled to deliver a Title Update Defect Notice fewer than three (3) Business Days prior to the Closing Date.
2.9. Treatment of Excluded Properties; Seller Termination Event.
(a) If any Property is deemed to be an “Excluded Property” pursuant to the terms hereof, then from and after the Excluded Property Designation Date with respect to such Excluded Property: (1) such Excluded Property shall be eliminated from the Contemplated Transaction for all purposes hereof and the Total Consideration shall be reduced by the Allocated Purchase Price for such Excluded Property (the Allocated Purchase Price with respect to any such Excluded Property is referred to herein as the “Excluded Property Purchase Price Reduction”) and (2) (a) such Excluded Property shall not constitute (or be deemed to constitute) a “Property” for any purposes under this Agreement, (b) until Closing on the Closing Date, Seller shall be obligated to, or to cause the Property Owner to, effectuate the conveyance, assignment or other transfer of such Excluded Property (each, an “Excluded Property Disposition”), including, without limitation, to any Affiliates of Seller and/or bona fide third party purchasers, (c) none of the representations, warranties or covenants of Seller contained in this Agreement, including, without limitation, any representations or warranties contained in Article III, shall apply to such Excluded Property and/or such Excluded Property Disposition and it shall not be a breach of any of the representations, or covenants warranties contained in this Agreement upon any Excluded Property ceasing to be owned by the Property Owner, (d) none of Article V shall apply to such Excluded Property and it shall not be a breach of any of the provisions contained in Article V upon such Excluded Property ceasing to be owned by the Property Owner, (e) this Agreement shall not apply to such Excluded Property and/or such Excluded Property Disposition, (f) Seller shall not be liable, or be obligated in any way, to Buyer in respect of such Excluded Property and/or such Excluded Property Disposition other than effectuating such Excluded Property Disposition on or prior to the Closing Date, (g) such Excluded Property shall not be included in the transactions contemplated by this Agreement, (h) there shall be no reduction of, offset to, or increase of, the Total Consideration in connection with any Excluded Property Disposition other than the Excluded Property Purchase Price Reduction applicable thereto, (i) Buyer shall not be entitled to any credit in respect of any Excluded Property and/or such Excluded Property Disposition, except for the Excluded Property Purchase Price Reduction applicable thereto, and (j) with respect to each Excluded Property, the Total Consideration shall be reduced by the amount of the Excluded Property Purchase Price Reduction applicable thereto. Buyer shall, at no cost or expense to Buyer (other than to a de minimis extent) and with no liability to Buyer, reasonably cooperate with Seller and the Existing Lender in connection with any Excluded Property and the Excluded Property Disposition with respect thereto.
(b) Notwithstanding anything in this Agreement to the contrary, if a Seller Termination Event or an Other Agreement Seller Termination Event occurs on or prior to the Closing Date, then, subject to the immediately following sentence, Seller shall have the right, in its sole discretion, to terminate this Agreement, whereupon neither party shall have any further rights or obligations under this Agreement except for those that expressly survive the termination of this Agreement and the Deposit (less fifty percent (50%) of any outstanding Existing Loan Assumption Fees) shall be promptly returned to Buyer. Seller shall only have the right to terminate this Agreement pursuant to this Section 2.9(b) if Other Agreement Seller is simultaneously terminating the Other Agreement pursuant to Section 2.9(b) of the Other Agreement.
ARTICLE III
Representations and Warranties of Seller
Except as set forth in the Company Disclosure Schedules (it being agreed that any matter disclosed in the Company Disclosure Schedules with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other section to the extent the applicability thereto is reasonably apparent), Seller represents and warrants to Buyer as of the date hereof and on and as of the Closing Date (except to the extent such representation or warranty is expressly made as of a date as set forth herein, and then only as of such express date) as follows, but solely as to such Seller and the Acquired Entities, Purchased Interests, Interests and Properties directly or indirectly owned by such Seller:
3.1. Organization and Power.
(a) Seller. Seller is a legal entity duly incorporated or organized, validly existing and in good standing under the Laws of its jurisdiction of organization. Seller has full power and authority or legal capacity, as applicable, to execute, deliver and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the Contemplated Transactions. Seller has all power (corporate or otherwise) and authority to own or lease and to operate its properties and assets and carry on its business as it is now being conducted.
(b) The Acquired Entities. Each Acquired Entity is a legal entity duly incorporated or organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization. Each Acquired Entity has full power and authority to execute, deliver and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the Contemplated Transactions. Each Acquired Entity is duly qualified to do business and is in good standing in each jurisdiction in which the Properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary. The Acquired Entities have all power (corporate or otherwise) and authority to own or lease and to operate its properties and assets and carry on its business as it is now being conducted.
3.2. Authorization and Enforceability. The execution and delivery of this Agreement and the Ancillary Documents to which Seller is a party and the performance by Seller of the Contemplated Transactions that are required to be performed by Seller have been duly authorized by Seller in accordance with applicable Law and organizational documents of Seller, and no other corporate proceedings on the part of Seller are necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents to which Seller is a party or the consummation of the Contemplated Transactions that are required to be performed by Seller. This Agreement and each of the Ancillary Documents to be executed and delivered at the Closing by Seller will be, at the Closing, duly authorized, executed and delivered by Seller, and constitute, or as of the Closing Date will constitute, a valid and legally binding agreement of Seller, as the case may be, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by equitable principles and by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other Laws of general applicability relating to or affecting the rights of creditors generally (whether applied in a proceeding at law or in equity).
3.3. Capitalization. The Term Holdings Purchased Interests are owned beneficially and of record by Term Holdings Seller, free and clear of any Lien other than Permitted Entity Liens, and the General Partner Interest is owned beneficially and of record by the General Partner, free and clear of any Lien other than Permitted Entity Liens. The Depositor Purchased Interests are owned beneficially and of record by Depositor Seller, free and clear of any Lien other than Permitted Entity Liens, and the Depositor General Partner Interest is owned beneficially and of record by the Depositor General Partner, free and clear of any Lien other than Permitted Entity Liens. Upon delivery to Buyer of the Purchased Interests at the Closing and Buyer’s payment of the Purchase Price in accordance herewith, Buyer shall acquire the Purchased Interests, free and clear of any Lien other than Permitted Entity Liens and other Liens created by Buyer. The Purchased Interests (i) are duly authorized, validly issued, fully paid and nonassessable, (ii) have been issued in compliance with all applicable Laws and the organizational or constituent documents of each applicable Acquired Entity, and (iii) have been issued without violation of any preemptive or similar rights. The General Partner Interest (i) is duly authorized, validly issued, fully paid and nonassessable, (ii) has been issued in compliance with all applicable Laws and the organizational or constituent documents of the Partnership, and (iii) have been issued without violation of any preemptive or similar rights. The General Partner Interest and the Seller LP Interests collectively constitute all of the issued and outstanding Equity Securities of the Partnership. The Seller GP Interests constitute all of the issued and outstanding Equity Securities of the General Partner. There are no outstanding obligations of the Partnership to repurchase, redeem or otherwise acquire any Equity Security of the Partnership. The Partnership does not own any Equity Securities in any Person other than the Property Owner General Partner and the Property Owner. There are no outstanding obligations of the General Partner to repurchase, redeem or otherwise acquire any Equity Security of the General Partner. The General Partner does not own any Equity Securities in any Person other than the Partnership. The Property Owner Interests are owned beneficially and of record by the Partnership, free and clear of any Lien other than Permitted Entity Liens, and the Property Owner General Partner Interest is owned beneficially and of record by the Property Owner General Partner, free and clear of any Lien other than Permitted Entity Liens. Upon delivery to Buyer of the Term Holdings Purchased Interests at the Closing and Buyer’s payment of the Purchase Price in accordance herewith, Buyer shall indirectly acquire the Property Owner Interests, free and clear of any Lien other than Permitted Entity Liens and other Liens created by Buyer. The Property Owner Interests (i) are duly authorized, validly issued, fully paid and nonassessable, (ii) have been issued in compliance with all applicable Laws and the organizational or constituent documents of each applicable Acquired Entity, and (iii) have been issued without violation of any preemptive or similar rights. The Property Owner General Partner Interest (i) is duly authorized, validly issued, fully paid and nonassessable, (ii) has been issued in compliance with all applicable Laws and the organizational or constituent documents of the Property Owner, and (iii) have been issued without violation of any preemptive or similar rights. The Property Owner General Partner Interest and the Property Owner LP Interests collectively constitute all of the issued and outstanding Equity Securities of the Property Owner. The Property Owner GP Interests constitute all of the issued and outstanding Equity Securities of the Property Owner General Partner. There are no outstanding obligations of the Property Owner to repurchase, redeem or otherwise acquire any Equity Security of the Property Owner. The Property Owner does not own any Equity Securities in any Person. There are no outstanding obligations of the Property Owner General Partner to repurchase, redeem or otherwise acquire any Equity Security of the Property Owner General Partner. The Property Owner General Partner does not own any Equity Securities in any Person other than the Property Owner. Upon delivery to Buyer of the Depositor Purchased Interests at the Closing and Buyer’s payment of the Purchase Price in accordance herewith, Buyer shall acquire the Depositor GP Interests and the Depositor LP Interests, free and clear of any Lien other than Permitted Entity Liens and other Liens created by Buyer. The Depositor Purchased Interests (i) are duly authorized, validly issued, fully paid and nonassessable, (ii) have been issued in compliance with all applicable Laws and the organizational or constituent documents of each applicable Acquired Entity, and (iii) have been issued without violation of any preemptive or similar rights. The Depositor General Partner Interest (i) is duly authorized, validly issued, fully paid and nonassessable, (ii) has been issued in compliance with all applicable Laws and the organizational or constituent documents of the Depositor, and (iii) have been issued without violation of any preemptive or similar rights. The Depositor General Partner Interest and the Depositor LP Interests collectively constitute all of the issued and outstanding Equity Securities of the Depositor. The Depositor GP Interests constitute all of the issued and outstanding Equity Securities of the Depositor General Partner. There are no outstanding obligations of the Depositor to repurchase, redeem or otherwise acquire any Equity Security of the Depositor. The Depositor does not own any Equity Securities in any Person. There are no outstanding obligations of the Depositor General Partner to repurchase, redeem or otherwise acquire any Equity Security of the Depositor General Partner. The Depositor General Partner does not own any Equity Securities in any Person other than the Depositor. No Acquired Entity has any outstanding securities convertible into or exchangeable or exercisable for its Equity Securities or any rights to subscribe for or to purchase, or any agreements providing for the issuance (contingent or otherwise) of, or any calls against, commitments by or claims against it of any character relating to, any of its Equity Securities, subject to the Permitted Entity Liens. Other than the Equity Securities and Organizational Documents for each Acquired Entity (a true and correct copy of which has been provided by Seller to Buyer) and subject to the Permitted Entity Liens, no Acquired Entity will be a party immediately after the Closing to any contract, agreement, right of first refusal, right of first offer, proxy, voting agreement, voting trust, registration rights agreement or shareholders or members agreement, whether or not any Acquired Entity is a party thereto, with respect to the purchase, sale or voting of any Equity Securities of any Acquired Entity or any securities convertible into or exchangeable or exercisable for any Equity Securities of any Acquired Entity. No certificates were issued in conjunction with any Equity Securities of any Acquired Entity, except for certificates issued in connection with the Existing Loan.
3.4. No Violation. Subject to obtaining the Existing Lender Consent, the execution and delivery by Seller of this Agreement and the Ancillary Documents to which Seller is a party, consummation of the Contemplated Transactions that are required to be performed by Seller and compliance with the terms of this Agreement and the Ancillary Documents to which Seller is a party will not (a) conflict with or violate any provision of the certificate of formation, operating agreement, certificate of limited partnership, partnership agreement, certificate of incorporation, bylaws or similar organizational documents of any Acquired Entity, (b) conflict with or violate in any material respect any Law applicable to any Acquired Entity or Seller or by which any of their respective properties are bound or affected, (c) result in the creation of, or require the creation of, any material Lien upon any limited liability company interest, partnership interest, other equity interest or any Property of any Acquired Entity, or (d) conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel, any contract to which such Acquired Entity or Seller is a party or by which such Acquired Entity or Seller is bound or to which any of their respective properties and assets are subject.
3.5. Consents. No consents, licenses, approvals or authorizations of, or registrations, declarations or filings with, or notice to any party, including any Governmental Authority (“Consents”) are required to be obtained or made by Seller in connection with the execution, delivery, performance, validity and enforceability of this Agreement or any Ancillary Documents to which Seller is, or is to be, a party or the consummation by Seller of the Contemplated Transactions, except for the Existing Lender Consent and the Association Approvals.
3.6. Financial Statements.
(a) In General. Section 3.6(a) of the Company Disclosure Schedules sets forth the unaudited financial statements of the Acquired Entities as of December 31, 2021, based on the period from March 10, 2021 to December 31, 2021, as well as the unaudited consolidated balance sheet of the Acquired Entities as of June 30, 2022 (the “Balance Sheet Date”) and the profit and loss statement for the period then ended (collectively, the “Financial Statements”). Except as set forth in Section 3.6(a) of the Company Disclosure Schedules, each of the Financial Statements (i) has been prepared in accordance with GAAP, (ii) fairly presents in all material respects the consolidated financial condition of the Acquired Entities as of its respective date (subject to, in the case of unaudited statements, normal year-end adjustments), and (iii) has been prepared in all material respects in accordance with the books and records of the Acquired Entities. The books and records of Seller and each Acquired Entity delivered to Buyer are accurate, correct and complete in all material respects as of their respective date and fairly present in all material respects the financial condition of Seller and the Acquired Entities as of their respective date. Since the date of the most recent Financial Statements, each of the Acquired Entities has conducted its business in the ordinary course and in a manner consistent with past practice as a special purpose entity whose, other than with respect to the Depositor, sole business is the direct or indirect ownership, operation, management and leasing of the applicable Properties.
(b) No Undisclosed Liabilities. Except as reflected or adequately reserved against in the Financial Statements, as set forth in Section 3.6(b) of the Company Disclosure Schedules, there are no Liabilities (including, without limitation, Indebtedness) of the Acquired Entities that would be required to be set forth on the Financial Statements in accordance with GAAP other than, in each case, any such Liabilities (i) that may have arisen in the ordinary course of business consistent with past practice which is not material to the value of the applicable Property, (ii) arising out of or relating to adjustments and prorations covered by Section 2.3, (iii) arising out of or relating to casualty or condemnation, (iv) arising out of or relating to compliance of the Properties with any or all past, present or future federal, state or local laws pertaining to building, fire or zoning ordinances, codes or other similar laws, or whether the Improvements were built, in whole or in part, in compliance applicable building codes or zoning ordinances, (v) arising under or pursuant to this Agreement or the documents to be executed in connection with the consummation of the Contemplated Transaction, (vi) relating to any environmental matter, structural matter, defect, physical condition or other matters related to the Property or (vii) under the Existing Loan Documents.
(c) Existing Loan. Section 3.6(c)(i) of the Company Disclosure Schedules sets forth the outstanding principal balance of all Indebtedness for borrowed money of the Acquired Entities as of August 1, 2022, and the balances of all escrow and/or reserve accounts, late charges and default interest as of August 1, 2022 under the documents, agreements or instruments evidencing, guaranteeing and/or securing such Indebtedness (collectively, the “Existing Loan Documents”). Section 3.6(c)(ii) of the Company Disclosure Schedules sets forth a true, accurate and complete list of all Existing Loan Documents and true, correct and complete copies the Existing Loan Documents have been made available to Buyer for review. The Existing Loan Documents are in full force and effect and (i) neither the Acquired Entities, nor the other parties to the Existing Loan Documents, are in monetary or material non-monetary default thereunder, (ii) to Seller’s Knowledge, neither the Acquired Entities, nor the other parties to the Existing Loan Documents, are in non-material non-monetary default thereunder and (iii) Seller has not received or delivered any written notice of a default or written notice of any events that could materialize into a default following expiration of any notice and/or cure periods under the Existing Loan Documents.
3.7. Real Property.
(a) Section 3.7(a) of the Company Disclosure Schedules sets forth a true and complete list of the real estate properties owned by the Acquired Entities (the “Properties”).
(b) Except as otherwise set forth in Section 3.7(b)(i) of the Company Disclosure Schedules, there are no unexpired option agreements, right of first refusals, right of first offers or the equivalent with respect to the purchase of a Property or any portion thereof. Except as otherwise set forth in Section 3.7(b)(ii) of the Company Disclosure Schedules, none of Seller or any Acquired Entity has entered into any Contract for the sale, ground lease or letter of intent to sell or ground lease any Property (in each case, other than an Excluded Property).
(c) The Property Owner has good, marketable and insurable indefeasible fee simple title to the Properties, free and clear of Liens except for Permitted Liens, instruments securing the Existing Loan and any liens, claims and security interests that will be released at or prior to the Closing.
3.8. Leases. Section 3.8(a)(i) of the Company Disclosure Schedules sets forth a rent roll (the “Rent Roll”) that is used by Seller in the ordinary course of business for all of the Properties (including a list of (x) all security, pet and other deposits (whether in the form of cash, letter of credit or otherwise) under the Acquired Entity Leases being held by Seller or any Acquired Entity (collectively, the “Security Deposits”) and (y) tenants, free rent and concessions under the Acquired Entity Leases, in each case with respect to the Properties) as of the date set forth thereon. To the Knowledge of Seller, solely as of the Effective Date, (1) the Rent Roll is true, accurate and complete in all material respects as of the date of the Rent Roll and (2) the Rent Roll describes, in all material respects, the amounts of any Security Deposits held by Seller or any Acquired Entity. The Acquired Entity Leases are enforceable and freely assignable to Buyer without receiving any approvals or consents. Seller has delivered or made available to Buyer true, complete, and correct copies of all Acquired Entity Leases and all amendments, addenda, or other material modifications thereto. No tenant under any Acquired Entity Lease is or will be entitled to any rebates, rents, concessions or free rent (other than as reflected in the Rent Roll and/or in the applicable Lease). The Rent Roll will be updated by Seller as of the 15th and 30th of each calendar month (or reasonably promptly thereafter when Seller is in receipt of the applicable information to update the Rent Roll). Except as set forth on Section 3.8(a)(ii) of the Company Disclosure Schedules or on the Rent Roll, neither Seller nor the Property Owner has (a) sent to any tenant under any Acquired Entity Lease any written notice asserting a material default by the tenant under such Acquired Entity Lease or (b) received from any tenant any written notice asserting a material default by the applicable Acquired Entity under such Acquired Entity Lease that remains uncured. Except as set forth on Section 3.8(a)(iii) of the Company Disclosure Schedules, there are no leasing commission agreements entered into by Seller or by any Acquired Entity or affecting all or any portion of the Property. To the Knowledge of Seller, there are no Leases other than the Acquired Entity Leases.
3.9. Contracts.
(a) Contracts. Section 3.9(a) of the Company Disclosure Schedules is a true and complete list of all of the Contracts (other than Leases and the Existing Loan Documents) to which any Acquired Entity is a party involving payments to or from any Acquired Entity in excess of $25,000 per annum (other than any such Contracts that may be terminated upon thirty (30) days’ notice without any termination fee or other penalty) (each such Contract, excluding each Property Management Agreement, a “Material Contract”).
(b) Status of Contracts. A true and complete copy of each Material Contract has been made available to Buyer. Except as disclosed in Section 3.9(b) of the Company Disclosure Schedules, to Seller’s Knowledge, all Material Contracts are valid, binding and in full force and effect and enforceable by any Acquired Entity, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles. As to each Material Contract, neither Seller nor the applicable Acquired Entity has received any written notice of any material default by Seller or the applicable Acquired Entity that remains uncured under any of the Material Contracts.
3.10. Compliance with Laws. Except as set forth in Section 3.10 of the Company Disclosure Schedules, Seller has received no written notice from a governmental agency or tenant under any Lease that any of the Properties or the Acquired Entities are not in material compliance with the Laws to which they are subject and such material noncompliance has not been cured.
3.11. Environmental Matters. None of the Acquired Entities has received a written notice alleging or stating that (i) any Property is not in compliance with all applicable Environmental Law in any material respect, (ii) that any “hazardous substance” or “hazardous waste” under any Environmental Law exist on, under, or about any Property in violation of Environmental Law, or (iii) that such party proposes to carry out an environmental inspection, audit or other investigation of any Property (other than any potential environmental inspection, audit or other investigation by Buyer in connection with this Agreement). Notwithstanding any other provision to the contrary contained in this Agreement, this Section 3.11 contains the exclusive representation of Seller concerning Environmental Matters..
3.12. Litigation. Except as set forth in Section 3.12 of the Company Disclosure Schedules or for matters that are fully covered by any Acquired Entity’s insurance policies (and without any deductible unless such deductible is paid by Seller or any Acquired Entity prior to Closing) to which Buyer or the Acquired Entity may access from and after Closing,, there are no claims, actions, suits, audits, inquiries, proceedings or governmental investigations (including, without limitation, condemnation, eminent domain, or similar proceedings) (“Litigation”) pending or, to the knowledge of Seller, threatened in writing, against any Acquired Entity, at Law or in equity or before any Governmental Authority which will materially and adversely affect any Property following Closing. Except as set forth in Section 3.12 of the Company Disclosure Schedules, none of the Acquired Entities is subject to any material Order arising from any Litigation against any Acquired Entity before any Governmental Authority which will materially and adversely affect any Property following Closing.
3.13. Labor and Employment Matters. None of Acquired Entities has any employees and no Acquired Entity is (i) bound by any collective bargaining agreement or other similar agreement with any union or other labor organization or (ii) is obligated by, or subject to, any order of the National Labor Relations Board or other labor board or administration, or any unfair labor practice decision.
3.14. Tax Matters.
(a) Each Acquired Entity has, since the date of its formation, been treated as an entity that is disregarded as separate from its owner for U.S. federal income tax purposes. No entity classification election pursuant to Treasury Regulations Section 301.7701-3 has been filed by or with respect to any Acquired Entity.
(b) There are no material Liens for Taxes on any of the interests in any Acquired Entity or on any Property, other than, in either case, statutory Liens for current Taxes, assessments or other governmental charges not yet due and payable.
(c) Seller has not been notified in writing of any material audit, inquiry or investigation with respect to any Acquired Entity’s Tax Returns by any Taxing Authority in the past three (3) years, and, to the knowledge of Seller, no Taxing Authority has undertaken any such audit, inquiry or investigation. No material Tax audits or other administrative or judicial proceedings with respect to Taxes are being conducted or are pending with respect to any Acquired Entity or any Property.
(d) Neither Seller nor Seller’s regarded parent entity is a “foreign person” within the meaning of Sections 1445 or 7701 of the Code.
(e) Each of the material Tax Returns required to be filed by the Seller and each Acquired Entity with any Taxing Authority on or before the Closing Date: (i) has been filed on or before the applicable due date (including any valid and timely extensions of such due date); and (ii) has been prepared in compliance with applicable laws, and is otherwise true, correct and complete in all material respects. All Taxes, whether or not shown as due on such Tax Returns, owed by Seller or the Acquired Entities have been or will at Closing be paid in full to the proper Taxing Authority, to the extent such Taxes (in the aggregate) exceed $10,000. There are no material liens for Taxes on the assets of the Seller or any Acquired Entity or interests therein, other than material liens for Taxes that are not yet due or payable. All Taxes that the Seller or any Acquired Entity have been required to collect or withhold have been duly collected or withheld and have been duly and timely paid or will be paid at Closing to the proper Taxing Authority, to the extent such Taxes (in the aggregate) exceed $10,000.
(f) There has not been any audit, inquiry or investigation of the Seller or any Acquired Entity’s Tax Returns by any Taxing Authority in the past three (3) years. None of such Seller, or any Acquired Entity has been notified in writing that any such audit is contemplated or pending.
(g) Each of the Seller and each Acquired Entity has at all times been treated as a “disregarded entity” within the meaning of Treasury Regulation 301.7701-3 (and none such entity has made any election to be treated as an association Taxable as a corporation for U.S. federal income Tax purposes).
(h) This Section 3.14 contains the sole and exclusive representations and warranties of the Acquired Entities with respect to Taxes.
3.15. Bank Accounts. Section 3.15 of the Company Disclosure Schedules sets forth a true and complete list as of the date of this Agreement of all banks accounts or safe deposit boxes under the control or for the benefit of any Acquired Entities.
3.16. No Brokers. Except for Eastdil, none of Seller or any Acquired Entity has employed or incurred any Liability to any broker, finder or agent for any brokerage fees, finder’s fees, commissions or other amounts with respect to this Agreement, the Ancillary Documents or the Contemplated Transactions.
3.17. ERISA. None of Seller nor any Acquired Entity is (i) an “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that is subject to the provisions of Title I of ERISA, (ii) a “plan” that is subject to the prohibited transaction provisions of Section 4975 of the Code or (iii) an entity whose assets are treated as “plan assets” under the Department of Labor Regulation located at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, by reason of an employee benefit plan’s or plan’s investment in such entity.
3.18. Real Property Matters.
(a) Except as set forth in Section 3.18(iii) of the Company Disclosure Schedules, to the Knowledge of Seller, (i) neither Seller, the Acquired Entities, nor any of their respective affiliates has received written notice that any of Seller, the Acquired Entities or any of their respective affiliates have violated any covenants, conditions or restrictions affecting any Property; (ii) none of the Properties are subject to material property damage, and no fire or other casualty has occurred with respect to any Property which has not been restored; (iii) other than the Leases, the Permitted Liens, the Existing Loan Documents or as permitted by this Agreement, neither Seller nor any of its Affiliates nor any Acquired Entity has entered into an agreement which would restrict the current use and occupation of any Property after the Closing; or (iv) no Property is on a septic, cistern, or well system, and no Property is located in a flood zone.
(b) Section 3.18(i) of the Company Disclosure Schedules contains a list of outstanding or pending claims against any existing title insurance policies for the Properties.
(c) Solely as of the Effective Date, Section 3.18(ii) of the Company Disclosure Schedules details ongoing construction, renovation, repair or development projects with respect to any Property with costs or expenses in excess of $15,000 in the aggregate with respect to such Property (the "Existing Construction Projects"). Except as set forth in Section 3.18(ii) of the Company Disclosure Schedules, none of Seller nor any Acquired Entity has received or given written notice of a material default of any obligation with respect to the Existing Construction Projects which remains uncured as of the Effective Date.
(d) Other than Leases, the Permitted Liens and the Existing Loan Documents, neither Seller nor any Acquired Entity has entered into an agreement which would restrict the current use and occupation of any Property after the Closing. Neither Seller nor any Acquired Entity has entered into any agreement containing, and to Seller’s Knowledge there are no agreements, containing any restriction on the use of the Property as a rental property.
(e) Section 3.18(i) of the Company Disclosure Schedules contains a list, to the Knowledge of Seller, of outstanding or pending claims against any existing title insurance policies for the Properties.
3.19. Authority and Association Payments. Other than as set forth on Section 3.19(i) of the Company Disclosure Schedules, to Seller’s Knowledge, there are no material homeowner association fees or amounts (the “Authority Payments”) payable from a federal, state, county or city housing authority (each, a “Housing Authority”) or material fees payable to an Association relating to the Properties due and payable and outstanding with respect to the Property (in each of the foregoing cases, except for those which will be paid in the ordinary course or which will be prorated in accordance with the terms of this Agreement). To the Knowledge of Seller, none of the Properties consist of housing cooperatives or manufactured housing.
3.20. Bankruptcy. No Seller or Acquired Entity has: (A) commenced a voluntary case, or had entered against it a petition, for relief under the federal bankruptcy code or any similar petition, order or decree under any federal or state law or statute relative to bankruptcy, insolvency or other relief for debtors, (B) caused, suffered or consented to the appointment of a receiver, trustee, administrator, conservator, liquidator or similar official in any federal, state or foreign judicial or non-judicial proceedings, to hold, administer and/or liquidate all or substantially all of its property, or (C) made an assignment for the benefit of creditors.
3.21. Relationship with Affiliates. Except as set forth on Section 3.21 of the Company Disclosure Schedules, none of Seller or any of its Affiliates (nor any officer or director of any of the foregoing) is a party to any Contract with any Acquired Entity, including with respect to compensation or remuneration to be paid to Seller or any of its Affiliates (nor any officer or director of any of the foregoing) in connection with this Agreement or the transactions contemplated herein, which Contract will not be terminated at or prior to Closing.
3.22. Special Purpose Entities. Other than the ownership, leasing, financing, management and operation of the respective Properties and other single family residential properties that have previously been sold or conveyed by the applicable Acquired Companies, if any by the applicable Acquired Entities, no Acquired Entity (x) has owned, developed, leased, managed or operated any material asset or material property unrelated to the business of owning, leasing, financing, managing, operating and disposing of single-family rental homes, or (y) has engaged in any material business not related to the activities described in the foregoing clause (x).
3.23. Insurance. Seller has delivered or made available to Buyer true and correct in all material respects copies of the insurance maintained by Seller and/or its Affiliates with respect to the Properties as of the Effective Date.
3.24. Restricted Persons. None of Seller or any Acquired Entity (other than the holder of any publicly traded interest in any publicly traded company) is a Restricted Person.
3.25. Seller’s Designated Representative. Seller’s Designated Representatives have reviewed with the Existing Manager the representations made by Seller under this Article III that are qualified by the Knowledge of Seller.
3.26. Disclaimer. Notwithstanding anything to the contrary contained in this Agreement, none of Seller, any Acquired Entity, their Affiliates or their respective officers, directors, employees, shareholders, members, partners, agents, representatives, successors and assigns has made, or shall be deemed to have made, to Buyer or any other Person any representation or warranty on behalf of Seller other than those expressly made by Seller in this Article III or any Ancillary Document, and Buyer is not relying on any statement, representation or warranty, oral or written, legal or contractual, express or implied, made by Seller, any Acquired Entity, their Affiliates or their respective officers, directors, employees, shareholders, members, partners, agents, representatives, successors and assigns other than those expressly made by Seller in this Article III or any Ancillary Document and Seller hereby disclaims any other express or implied representations or warranties. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent (or any other representation or warranty referred to in Section 2-312 of the Uniform Commercial Code of any applicable jurisdiction or in Section 2.312 of the Texas Business and Commerce Code with respect to any such assets located in Texas), (ii) with respect to any projections, forecasts, business plans, estimates or budgets delivered to or made available to Buyer or any other Person or (iii) with respect to any other information or documents made available at any time to Buyer or any other Person.
3.27. Limitation with respect to Seller’s Representations. The representations and warranties of Seller are subject to the following limitations:
(a) Except to the extent that any breach results from any actions or omissions of Seller in breach of this Agreement, Seller does not represent or warrant that any particular Contract, Lease or other service contract, maintenance contract or management contract will be in force or effect as of the Closing or that the parties thereunder (other than the Acquired Entities), as applicable, will not be in default thereunder; and
(b) Solely with respect to the determination of whether the Buyer Condition to Closing set forth in Section 6.3(a) is satisfied, the representations and warranties of Seller in this Agreement shall be deemed modified in all respects to reflect any facts, circumstances or information (1) that is set forth in the Company Disclosure Schedules, (2) that constitutes Data Room Information that has been uploaded to the Data Room Website, in each case, no later than 5:00 pm EST on the date that is two (2) Business Days prior to the Effective Date (in each case other than Data Room Information which, pursuant to the terms of this Agreement, is required to be included in the Company Disclosure Schedules), and/or (3) of which Buyer has actual Knowledge as of the Effective Date.
ARTICLE IV
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as of the date hereof and on and as of the Closing Date (except to the extent such representation or warranty is expressly made as of a date as set forth herein, and then only as of such express date) as follows:
4.1. Organization and Power. Buyer is a limited liability company duly incorporated, organized or formed, validly existing and in good standing under the Laws of the state of Delaware and has full power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the Contemplated Transactions.
4.2. Authorization. Buyer has duly authorized the execution and delivery of this Agreement and the Ancillary Documents to which it is a party and the performance of its obligations hereunder and thereunder and no other corporate proceedings on the part of Buyer (including any shareholder, member or manager vote or approval) are necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents to which Buyer is a party or the consummation of the Contemplated Transactions that are required to be performed by Buyer.
4.3. Enforceability. This Agreement and each of the Ancillary Documents constitute, or when executed and delivered will constitute, the valid and legally binding obligation of Buyer, enforceable in accordance with its terms, except as such enforceability may be limited by equitable principles and by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or similar Laws relating to or affecting the rights of creditors generally.
4.4. No Violation. The execution, delivery and performance of this Agreement and the Ancillary Documents executed or to be executed by Buyer pursuant to this Agreement and the consummation of the Contemplated Transactions and compliance with the terms of this Agreement and the Ancillary Documents to which Buyer is a party will not (i) conflict with or violate any provision of the certificate of formation, operating agreement, certificate of incorporation, bylaws or similar organizational documents of Buyer, or (ii) conflict with or violate in any material respect any provisions of any Law applicable to Buyer or by which Buyer or its properties are bound or affected. Neither Buyer nor its Affiliates are subject to any Contract that would impair or delay Buyer’s ability to consummate the Contemplated Transactions.
4.5. Consents. Except for the Existing Lender Consent, no Consents are required to be obtained or made by Buyer in connection with the execution, delivery, performance, validity and enforceability of this Agreement or any Ancillary Documents to which it is a party or the consummation by Buyer of the Contemplated Transactions.
4.6. Financial Capacity. Buyer has, or will have at closing, access to capital in an amount that is sufficient to pay the Closing Consideration Amount (together with any fees and expenses incurred in connection with this Agreement) as required by and in accordance with this Agreement.
4.7. Litigation. There is no Litigation pending or, to the Knowledge of Buyer, threatened against or involving Buyer which questions the validity of this Agreement or any of the Ancillary Documents to which it is a party or seeks to prohibit, enjoin or otherwise challenge Buyer’s ability to consummate the Contemplated Transactions.
4.8. No Brokers. None of Buyer or any of its Affiliates has employed or incurred any Liability to any broker, finder or agent for any brokerage fees, finder’s fees, commissions or other amounts with respect to this Agreement, the Ancillary Documents or the Contemplated Transactions.
4.9. Investment Intent. Buyer is acquiring the Purchased Interests for its own account for investment, without a view to resale or distribution thereof in violation of U.S. federal or state securities Laws and with no present intention of distributing or reselling any part thereof.
4.10. Qualified Transferee. Buyer, or an affiliate of Buyer which controls Buyer, will be, at Closing, a Qualified Transferee (as defined in the Existing Loan Agreement), in each case, assuming clause (D) of the definition of Qualified Transferee (as defined in the Existing Loan Agreement) is satisfied,
4.11. Restricted Persons. Buyer (other than the holder of any publicly traded interest in any publicly traded company) is not a Restricted Person.
4.12. ERISA. Buyer is not, and no portion of the Closing Consideration Amount shall include the assets of, (i) an “employee benefit plan” (within the meaning of Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a “plan” that is subject to the prohibited transaction provisions of Section 4975 of the Code or (iii) an entity whose assets are treated as “plan asset” under the Department of Labor regulation located at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, by reason of an employee benefit plan’s or plan’s investment in such entity.
ARTICLE V
Covenants
5.1. Conduct of the Acquired Entities.
(a) Except (i) to the extent compelled or required by applicable Law, (ii) as otherwise permitted by this Agreement, (iii) as set forth in Section 5.1 of the Company Disclosure Schedules, or (iv) as consented to in writing by Buyer, which consent shall not be unreasonably conditioned, withheld or delayed, Seller shall cause each Acquired Entity directly or indirectly owned by such Seller (1) to conduct its business and operations in all material respects in the ordinary course, consistent with past practice, and in a commercially reasonable manner, and (2) to the extent consistent therewith (x) use commercially reasonable efforts to maintain the Properties in all material respects (in each case, reasonable wear and tear excepted) and in compliance with applicable law in all material respects, and (y) perform in all material respects all of its material obligations under the Contracts and the Acquired Entity Leases, and (3) to maintain its books and records in the usual, regular and ordinary manner, on a basis consistent with past practice.
(b) Without limiting the generality of the foregoing, except (w) to the extent compelled or required by applicable Law, (x) as otherwise permitted by this Agreement, (y) as set forth in Section 5.1 of the Company Disclosure Schedules, or (z) as consented to in writing by Buyer, (I) which consent shall not be unreasonably conditioned, withheld or delayed prior to the expiration of the Due Diligence Period and (II) which consent may be withheld in Buyer’s sole and absolute discretion from and after the expiration of the Due Diligence Period, during the period from the date hereof to the Closing Date, Seller shall cause each Acquired Entity not to:
(i) modify or amend the terms of the organizational documents of any Acquired Entity, except in connection with obtaining the Existing Lender Consent, provided such modification or amendment shall not have an adverse effect on Buyer or any Acquired Entity after the Closing Date, except to a de minimis extent;
(ii) issue, or authorize the issuance of, any Equity Securities of any Acquired Entity;
(iii) except as otherwise set forth in Section 5.1(b)(iii) of the Company Disclosure Schedules, split, combine, redeem or reclassify, or purchase or otherwise acquire any Equity Securities of any Acquired Entity, as applicable;
(iv) incur any Indebtedness except (A) for such Indebtedness that is repaid at or prior to Closing or prorated in accordance with the terms hereof or (B) pursuant to the Existing Loan Documents;
(v) enter into any Material Contract that would be binding on the Buyer or any Acquired Entity after Closing or modify or amend in any material respect, or terminate (unless such termination results from a default by the counterparty thereto), any Material Contract;
(vi) acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, any corporation, limited liability company, partnership, joint venture, association or other business organization or division thereof;
(vii) divest, sell or otherwise dispose of, or encumber any asset of any Acquired Entity, other than the sales of products or services in the ordinary course of business, in accordance with the terms of this Agreement, immaterial personal property assets in the ordinary course of business and Permitted Liens;
(viii) initiate or consent to any material zoning reclassification of any Property;
(ix) adopt a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other material reorganization of any Acquired Entity;
(x) hire any employees to be employed by any Acquired Entity;
(xi) file or cause to be filed any U.S. federal entity classification election or any material amended Tax Return, or agree to extend the statute of limitations (other than any extension resulting from a timely and valid extension for the filing of a Tax Return) in respect of any material amount of Taxes;
(xii) materially modify or materially amend, or terminate, any insurance policies with respect to the Acquired Entities and the Properties;
(xiii) make any change in accounting methods, principles or practices, except as may be required by a change in standard accounting principles, GAAP or applicable law with respect to the Acquired Entities and the Properties;
(xiv) maintain in full force and effect the insurance policies currently in effect with respect to the Acquired Entities and the Properties (unless with replacement insurance policies containing substantially similar coverage);
(xv) enter into, modify, amend, or terminate any collective bargaining or similar Contract with any union, works council, or labor organization;
(xvi) settle or compromise any pending or threatened litigation which is not fully covered by insurance without any deductible (except for any deductible that will be paid prior to Closing or which is credited to Buyer at Closing), which would impose any cost or expense on Buyer following the Closing (unless Seller is responsible or agrees to be responsible for such cost or expense following the Closing) and which settlement is in excess of $20,000; or
(xvii) except in connection with the obtaining the Existing Lender Consent, satisfying the Existing Loan Assumption Approval Conditions and/or the Excluded Properties, amend, supplement, or modify (other than paying off any Indebtedness and causing such Indebtedness and any liens relating thereto to be terminated) any documents, agreements or instruments evidencing, securing, guaranteeing or otherwise pertaining to any Indebtedness of the Acquired Entities or any provision thereof; provided, such amendment shall not (except for representations, warranties, covenants, agreements and other terms and provisions, in each case required by the Existing Lender pursuant to the Existing Loan Documents in granting the Loan Assumption Approval, provided that such representations, warranties, covenants, agreements, or other terms and provisions are substantially the same as those contained in the Existing Loan Documents or are customarily provided to lenders in connection with loan assumptions) adversely affect the Buyer or any Acquired Entity after the Closing Date, except to a de minimis extent.
(c) Without limiting the generality of the foregoing, except (w) to the extent compelled or required by applicable Law, (x) as otherwise permitted by this Agreement, (y) as set forth in Section 5.1 of the Company Disclosure Schedules, or (z) as consented to in writing by Buyer, which consent shall not be unreasonably conditioned, withheld or delayed, Seller shall cause each Acquired Entity not to, enter into any Leases for Properties now vacant or for Properties which may become vacant, or enter into any amendments of any Acquired Entity Leases or consent to any renewals, extensions, expansions or terminations of any Acquired Entity Leases (in each of the foregoing cases, other than those (i) to which the Tenant is entitled pursuant to the terms of the Acquired Entity Lease and/or (ii) lease renewals delivered by any Acquired Entity to any tenant under the Acquired Entity Leases as of the Effective Date) unless such actions are in the ordinary course of business and on similar lease forms, rental rates and other terms as is consistent with the past practices of Seller (and in any event, without monetary tenant inducements and for terms not less than ten (10) months and, for Properties which become vacant, at rental rates not less than as set forth in the immediately previous Acquired Entity Lease for such Property) or are approved in advance in writing by Buyer. Seller shall deliver a true, correct and complete copy of any document or agreement subject to this Section 5.1(c) or a summary of the proposed business terms to Buyer at least five (5) Business Days prior to the Closing Date. Buyer shall have five (5) Business Days after Buyer receives a true, correct and complete copy of any document or agreement subject to this Section 5.1(c) or a summary of the proposed business terms, to review and to consent or disapprove in writing such agreement or summary, which consent or disapproval shall not be unreasonably withheld, conditioned or delayed; it being the understanding, however, that Buyer’s failure to respond in writing within said five (5) Business Day period shall be deemed its consent. Without limiting the foregoing, Seller shall cause the termination of the lease of the Property identified on Section 3.21 of the Company Disclosure Schedules (the “Tiber Lease”) on or prior to the Closing Date.
(d) Nothing contained in this Agreement shall give Buyer, directly or indirectly, rights to control or direct the operation of any Acquired Entity prior to the Closing Date. Prior to the Closing Date, Seller shall cause each Acquired Entity to exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of its operations. Notwithstanding anything to the contrary contained in this Agreement, no consent of Buyer shall be required with respect to any matter set forth in this Section 5.1 or elsewhere in this Agreement to the extent that the requirement of such consent would violate or conflict with applicable Law or any Contract to which any Acquired Entity is a party.
(e) Notwithstanding anything contained herein to the contrary, nothing in this Agreement shall prohibit Seller or any Acquired Entity from taking any action that in the reasonable judgment of such party, upon advice of counsel to such party, is reasonably necessary for any Acquired Entity to avoid incurring U.S. federal income or excise Taxes under the Code.
5.2. Access to Information Prior to the Closing. During the period from the date hereof through the Closing Date or the earlier termination of this Agreement, Seller shall provide, or make available, to Buyer the Materials (as defined in the Access Agreement) in accordance with the terms, provisions and conditions of the Access Agreement.
5.3. Efforts; Assumption of Existing Loans.
(a) Efforts Generally. Upon the terms and conditions set forth herein, each of the parties shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things, necessary, proper or advisable to make effective as promptly as practicable, but in no event later than the Closing Date, the Contemplated Transactions, including obtaining required approvals, if any, from any Governmental Authorities.
(b) Intentionally Omitted.
(c) Assumption of Existing Loans. Seller and Buyer acknowledge and agree that in connection with Buyer’s proposed acquisition of the Purchased Interests (i) (x) the consent and approval of the Existing Lender (the “Existing Lender Consent”) and (y) the satisfaction of all Existing Loan Assumption Requirements, in each case are required pursuant to the terms of the Existing Loan Documents, and (ii) Seller shall receive a release executed by the Existing Lender of all guarantors (including the Existing Guarantor) under the Existing Loan Documents (including the Sponsor Guaranty and the Repurchase Guaranty) in the form and substance required by the Existing Loan Documents (the conditions described in clauses (i) and (ii) above are referred to herein collectively as the “Existing Loan Assumption Approval Conditions” and satisfaction of the Existing Loan Assumption Approval Conditions is referred to herein as the “Existing Loan Assumption Approval”); it being acknowledged and agreed with respect to the foregoing clause (i)(y) that satisfaction of the conditions therein shall be deemed not to have been satisfied if the Existing Lender takes the position that the Contemplated Transactions violate the terms, provisions and conditions of the Existing Loan Documents, whether as a result of failing to satisfy the Existing Loan Assumption Requirements or otherwise. In connection with the foregoing, (i) promptly after the execution of this Agreement, Seller shall cause the applicable Acquired Entity to deliver written notice to the Existing Lender, as applicable, of the prospective sale of the Purchased Interests to Buyer in accordance with the requirements of the Existing Loan Documents, and (ii) thereafter and prior to Closing, (1) Buyer shall (and Buyer shall cause its applicable Affiliates to) use commercially reasonable efforts to satisfy all Existing Loan Assumption Requirements (provided that Seller, in consultation with Existing Lender, will draft and submit to the applicable rating agencies any rating agency confirmations required by the Loan Agreement with respect to the Contemplated Transactions) and reasonably cooperate with the Existing Lender in connection therewith, (2) Seller shall reasonably cooperate with Buyer and Existing Lender in satisfying the Existing Loan Assumption Requirements and the Existing Loan Assumption Approval Conditions for purposes of obtaining the Existing Loan Assumption Approval. Buyer and Seller shall each pay fifty percent (50%) of any loan assumption fees, legal costs and expenses and other amounts actually incurred and payable to, or on behalf of, the Existing Lender in connection with obtaining the Existing Loan Assumption Approval and satisfying the Existing Loan Approval Assumption Conditions pursuant to Section 5.3(c) (the “Existing Loan Assumption Fees”).
(d) Association Estoppels. If Buyer delivers to Seller addressed estoppel certificates (the “Association Estoppels”) with respect to any Association, then Seller (or Existing Manager or the Title Company) shall, within three (3) Business Days following Seller’s receipt of such Association Estoppels, send such Association Estoppels to the addressees thereof and exercise commercially reasonable efforts to obtain execution and return of the same to Seller. If Seller receives any such executed Estoppels Certificates, Seller shall promptly deliver the same to Buyer. Notwithstanding the foregoing or anything contained herein to the contrary, in no event shall (x) obtaining or delivering such executed Association Estoppels be a condition to Closing, or
(y) the failure to obtain such executed Association Estoppels cause Seller to be in breach or default of the terms and provisions of this Agreement.
(e) Required Association Approvals. Seller shall use commercially reasonable efforts to obtain from each applicable Association a Required Association Approval with respect to the applicable Property promptly following Buyer’s identification of such Required Association Approval to Seller.
(f) Construction Projects. Seller shall provide timely details and information regarding (a) any Existing Construction Projects and (b) any new construction, renovation, repair or development projects with respect to any Property with costs or expenses in excess of $15,000 in the aggregate with respect to such Property that first commences after the Effective Date (collectively, the “New Construction Projects”).
(g) Non-Imputation Endorsements. Seller shall use commercially reasonable efforts to assist Buyer’s procurement of non-imputation endorsements to any existing title insurance policies covering the Properties, including, without limitation, by Seller executing and delivering the title affidavit substantially in the form attached hereto as Exhibit E. Notwithstanding the foregoing or anything contained herein to the contrary, neither Seller nor any of its Affiliates shall be required to deliver any indemnity and/or any similar instrument, documentation or other form of inducement, in each case with respect to or for the purpose of Buyer’s procurement of non-imputation endorsements to any existing title insurance policies covering the Properties.
5.4. Certain Tax Matters.
(a) Transfer Taxes. All Transfer Taxes incurred in connection with this Agreement or the transactions contemplated by this Agreement shall be borne fifty percent (50%) by Buyer and fifty percent (50%) by Seller. Seller shall timely prepare all necessary Tax Returns with respect to all Transfer Taxes and shall provide a draft copy of such Tax Returns and other documentation to Buyer at least ten (10) days prior to the due date for the filing of such Tax Returns for Buyer’s review and comment, and Seller shall incorporate any such comments to the extent that they are reasonable. Seller shall timely file or cause to be filed all such Tax Returns, and pay all applicable Transfer Taxes in connection therewith, and Buyer shall reasonably cooperate with Seller as may be necessary to effectuate such filings.
(b) Tax Returns.
(i) Seller will be responsible for and will cause to be prepared and duly filed all Tax Returns of the Acquired Entities and any Subsidiaries thereof for all taxable periods ending on or before the Closing Date. Buyer shall file or cause to be filed when due all Tax Returns with respect to the Acquired Entities and any Subsidiaries thereof, other than those that are the responsibility of Seller pursuant to this Section 5.4.
(ii) All Tax Returns that are to be prepared and filed by Buyer pursuant to the preceding paragraph with respect to any taxable period ending on or prior to the Closing Date or any Straddle Period shall be submitted to Seller not later than thirty (30) days prior to the due date for filing of such Tax Returns (or, if such due date is within forty- five (45) days following the Closing Date, as promptly as practicable following the Closing Date). Seller shall have the right to review such Tax Returns and all work papers and procedures used to prepare them, and Seller shall have the right to access any other information of or controlled by Buyer relating to such Tax Returns that reasonably is necessary for Seller to perform such review. If Seller, within ten (10) days after delivery of any Tax Return pursuant to this paragraph, notifies Buyer that it objects to any item in such Tax Return, the parties shall attempt in good faith to resolve the dispute; provided, if they are unable to do so, any disputed item shall be resolved by an accounting firm of national prominence mutually selected by and reasonably acceptable to Buyer and Seller (provided that the accounting firm’s position is supported by at least “more likely than not” authority). Upon resolution of all disputed items, the relevant Tax Return shall be filed on that basis and such determination shall be binding on the parties for purposes of filing such Tax Returns.
(iii) All Tax Returns that are to be prepared and filed by Seller pursuant to Section 5.4(c)(i) shall be submitted to Buyer not later than thirty (30) days prior to the due date for filing of such Tax Returns (or, if such due date is within forty-five (45) days following the Closing Date, as promptly as practicable following the Closing Date). Buyer shall have the right to review such Tax Returns and all work papers and procedures used to prepare them, and Buyer shall have the right to access any other information of or controlled by Seller relating to such Tax Returns that reasonably is necessary for Buyer to perform such review. If Buyer, within ten (10) days after delivery of any such Tax Return, notifies Seller that it objects to any item in such Tax Return, the parties shall attempt in good faith to resolve the dispute; provided, if they are unable to do so, any disputed item shall be resolved by an accounting firm of national prominence mutually selected by and reasonably acceptable to Buyer and Seller (provided that the accounting firm’s position is supported by at least “more likely than not” authority). Upon resolution of all disputed items, the relevant Tax Return shall be filed on that basis and such determination shall be binding on the parties for purposes of filing such Tax Returns.
(iv) Buyer shall not (and shall not cause or permit any Acquired Entity or Subsidiary thereof to) amend, re-file or otherwise modify (or grant an extension of any statute of limitations with respect to (other than as may be the result of the filing of a timely and valid extension to the deadline for filing a Tax Return)) any Tax Return relating in whole or in part to any Acquired Entity or any Subsidiary thereof with respect to any taxable period ending on or prior to the Closing Date or any Straddle Period or to make any Tax election with respect to any such taxable period or Straddle Period, in each case, without the prior consent of Seller, except to the extent required by applicable law.
(c) Contest Provisions.
(i) In the event (i) Seller or its Affiliates or (ii) Buyer or its Affiliates receives notice of any pending or threatened Tax Contest relating to any Acquired Entity or any Subsidiary thereof with respect to any taxable period ending on or prior to the Closing Date or any Straddle Period, the party in receipt of such notice shall promptly notify the other party of such matter in writing.
(ii) Seller shall have the right to represent the interests of the Acquired Entities or applicable Subsidiary thereof in any Tax Contest (a) relating to any Tax for any taxable periods ending on or before the Closing Date or any Straddle Period or (b) that would affect the liability of Seller (including any Taxes that may be payable by any indirect owners of Seller) for any Tax, and to employ counsel of its choice at its expense. No such Tax Contest shall be settled or otherwise compromised without the prior written consent of Seller (such consent not to be unreasonably withheld, conditioned or delayed).
(iii) Buyer shall have the right to represent the interests of the Acquired Entities in any Tax Contest not described in Section 5.4(d)(ii) and to employ counsel of its choice at its expense.
(d) Assistance and Cooperation. After the Closing Date, Seller, on the one hand, and Buyer, on the other hand, shall (and shall cause their respective Affiliates to): (1) assist the other party in preparing and filing any Tax Return or report that such other party is responsible for preparing and filing in accordance with this Section 5.4; (2) cooperate fully in preparing for any Tax Contest regarding any Tax Return of any Acquired Entity relating to taxable periods for which the other party may have a liability; (3) make available to the other and to any Taxing Authority as reasonably requested all information, records, and documents relating to Taxes of any Acquired Entity; (4) provide timely notice to the other in writing of any pending or threatened Tax Contest of any Acquired Entity for taxable periods for which the other party may have a liability; and (5) furnish the other with copies of all correspondence received from any Taxing Authority in connection with any Tax Contest or information request with respect to any such taxable period described in this paragraph.
(e) Retention of Records. After the Closing Date, Seller and Buyer will, and Buyer shall cause each Acquired Entity to, preserve all information, records or documents relating to liabilities for Taxes of the Acquired Entities until six (6) months after the expiration of any applicable statute of limitations (including extensions thereof) with respect to the assessment of such Taxes. This Section 5.4 shall survive the Closing.
5.5. Exculpation.
(a) Seller Exculpated Parties. Buyer acknowledges and agrees that, notwithstanding anything to the contrary contained in this Agreement, no Representative of Seller, any of its Affiliates (other than Seller and if, and only if, a Post-Closing Liability Trigger has occurred, SOF-XI U.S. NRE Holdings, L.P., a Delaware limited partnership pursuant to the Guarantor Joinder) or any of the Acquired Entities, whether disclosed or undisclosed (collectively, the “Seller Exculpated Parties”) shall have any personal obligation or liability whatsoever hereunder, and Buyer (i) shall not seek to (a) assert (and hereby unconditionally and irrevocably waives) any Action of any kind, type, character or nature whatsoever that Buyer may now or hereafter have against the Seller Exculpated Parties or (b) enforce any of Buyer’s rights hereunder against any Seller Exculpated Party and (ii) hereby unconditionally and irrevocably releases and discharges the Seller Exculpated Parties from and any and all liability whatsoever which may nor or hereafter accrue in favor of Buyer against any Seller Exculpated Party in connection with or arising out of this Agreement or the transactions contemplated hereby.
(b) Buyer Exculpated Parties. Seller acknowledges and agrees that, notwithstanding anything to the contrary contained in this Agreement, no Representative of Buyer or any of its Affiliates (other than Buyer), whether disclosed or undisclosed (collectively, the “Buyer Exculpated Parties”) shall have any personal obligation or liability whatsoever hereunder, and Seller (i) shall not seek to (a) assert (and hereby unconditionally and irrevocably waive) any Action of any kind, type, character or nature whatsoever that Seller may now or hereafter have against the Buyer Exculpated Parties or (b) enforce any of Seller’s rights hereunder against any Buyer Exculpated Party and (ii) hereby unconditionally and irrevocably release and discharge the Buyer Exculpated Parties from and any and all liability whatsoever which may nor or hereafter accrue in favor of Seller against any Buyer Exculpated Party in connection with or arising out of this Agreement or the transactions contemplated hereby.
5.6. Confidentiality. Notwithstanding the execution and delivery of this Agreement, the confidentiality provisions of the Access Agreement shall remain unchanged and in full force and effect. Subject to Section 5.7, the foregoing shall not apply to Buyer following Closing in respect of information with respect to the Property. Notwithstanding the foregoing or any provision of the Access Agreement to the contrary, but subject to Section 5.7, Buyer or any of its Affiliates may make disclosures of this Agreement and information regarding the same to the extent required by applicable law, including Securities and Exchange Commission rules and regulations, without any consent from Seller.
5.7. Public Announcements. None of the Acquired Entities, Buyer or Seller will issue or make any press release or public statement with respect to this Agreement or the Contemplated Transactions without the prior consent of Buyer and Seller, except as may be required by Law (or the requirements of any applicable stock exchange) applicable to such party or its Affiliates.
5.8. Commercially Reasonable Efforts. Except as otherwise set forth in Section 5.3, subject to the terms and conditions set forth herein and to applicable legal requirements, each of the parties shall cooperate and use their respective commercially reasonable efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Contemplated Transactions, including the satisfaction of the respective conditions set forth in Article VI.
5.9. Casualty and Condemnation.
(a) Condemnation Proceeds. If between the date of this Agreement and the Closing Date, any of the Properties are subject to Condemnation proceedings or are condemned, then Buyer shall proceed with the consummation of the Closing pursuant to the terms and conditions of this Agreement; provided, that, (i) the Closing Consideration Amount shall be reduced by an amount (not below zero) equal to (x) the amount of any such Condemnation proceeds collected by any of Seller or any Acquired Entity, minus (y) the sum of (A) any Condemnation proceeds or other funds expended by any of Seller or any Acquired Entity toward restoration or repair of the Properties plus (B) any Condemnation proceeds retained by any Acquired Entity at the Closing, and (ii) to the extent that any right to receive Condemnation proceeds is held by Seller (as opposed to any Acquired Entity), Seller, shall give the applicable Acquired Entity an assignment of Seller’s right to receive such Condemnation proceeds if any portion of the Condemnation proceeds are not collected before the Closing (and if not assignable to the applicable Acquired Entity, then Seller shall collect such proceeds and hold them in trust for the benefit of such Acquired Entity and promptly pay same over to such Acquired Entity. The obligations described herein shall survive Closing.
(b) Insurance Proceeds. If between the date of this Agreement and the Closing Date, any of the Properties suffer damage by fire or other casualty (“Casualty”), then Buyer shall proceed with the consummation of the Closing pursuant to the terms and conditions of this Agreement; provided, that, (i) the Closing Consideration Amount shall be reduced by an amount (not below zero) equal to (x) the amount of any such Casualty insurance proceeds collected by any of Seller or any Acquired Entity and any deductible, minus (y) the sum of (A) any insurance proceeds or other funds expended by any of Seller or any Acquired Entity toward restoration or repair of the Properties plus (B) any insurance proceeds retained by any Acquired Entity at the Closing, and (ii) to the extent that any right to receive insurance proceeds is held by Seller (as opposed to any Acquired Entity), Seller shall give the applicable Acquired Entity an assignment of Seller’s right to receive such insurance proceeds if any portion of the insurance proceeds are not collected before the Closing (and if not assignable to such Acquired Entity, then Seller shall collect such proceeds and hold them in trust for the benefit of such Acquired Entity and promptly pay same over to such Acquired Entity. The obligations described herein shall survive Closing.
(c) Notwithstanding the provisions of Section 5.9 to the contrary, if following the Effective Date and prior to the Closing, any Property or a portion thereof is (i) damaged or destroyed by a Significant Casualty or (ii) taken as a result of a Significant Condemnation, then, as its sole and exclusive remedy with respect to such Significant Casualty or Significant Condemnation, Buyer shall have the right, exercised by written notice to Seller no more than five (5) Business Days after Buyer has received written notice of such Significant Casualty or Significant Condemnation (the time and date of such notice from Buyer in accordance with this Section 5.9, the “Significant Casualty/Condemnation Excluded Property Designation Date”), to terminate this Agreement solely as to the Property(ies) for which such Significant Casualty or Significant Condemnation, as applicable, occurred, in which event such Property shall be deemed to be an “Excluded Property” for all purposes of this Agreement, the provisions of Section 2.9 of this Agreement shall apply thereto and thereafter, the Parties will have no further rights or obligations hereunder with respect to such Excluded Property except for those obligations expressly set forth herein with respect to such Excluded Property and those obligations which expressly survive the termination of this Agreement with respect to such Excluded Property.
5.10. Condition of Properties. Except as otherwise expressly provided in this Agreement or the Ancillary Documents, Buyer acknowledges that Seller shall own the Properties at the Closing in an “as is”, “where is” condition with all faults as of the Closing Date. Buyer agrees that, except as expressly set forth herein, Seller shall not be liable for any construction, latent or patent defects in the Properties, and shall not be bound in any manner whatsoever by any guarantees, promises, projections, forecasts, operating expenses, set-ups or other information pertaining to the Properties made, furnished or claimed to have been made or furnished by Seller, any Acquired Entity or any other Person, including any partner, member, manager, shareholder, employee, agent, attorney or other Person representing or purporting to represent Seller or any Acquired Entity, whether verbally or in writing. Buyer acknowledges that, except as expressly set forth in this Agreement or the Ancillary Documents, neither Seller, nor any Acquired Entity nor any of their respective employees, agents or attorneys have made any verbal or written representations or warranties whatsoever to Buyer, whether express, implied, statutory, or by operation of law, and, in particular, that no such representations and warranties have been made with respect to the Purchased Interests, the physical or environmental condition or operation of the Properties, the layout or footage of the Properties, the actual or projected revenue and expenses of the Properties or any of the Leases, zoning, environmental, and other laws, regulations and rules applicable to the Properties, or the compliance of the Properties therewith, the quantity, quality or condition of the articles of personal property and fixtures included in the Contemplated Transactions, the use or occupancy of the Property or any part thereof or any other matter or thing affecting or relating to the Property or the Contemplated Transactions, except as specifically set forth in this Agreement or the Ancillary Documents. Buyer has not relied and is not relying upon any representations or warranties, other than Seller’s representations set forth in Article III or the Ancillary Documents. Without limitation of the foregoing, except as set forth in Section 5.9 hereof, Buyer specifically acknowledges and agrees that it has assumed the risk of changes in the condition of the Purchased Interests and the Properties between the date hereof and the Closing Date and no adverse change in such condition shall grant Buyer any right to terminate this Agreement or to obtain any damages against Seller, except as expressly set forth in this Agreement.
5.11. Transitional Matters. In connection with Closing and for a period of one hundred (100) days thereafter, Seller shall use commercially reasonable efforts to cooperate, and use commercially reasonable efforts to cause Existing Manager to cooperate, with Buyer in a commercially reasonable manner to facilitate the orderly transition of management of the Properties, all at no out-of-pocket expense to Seller or Existing Manager (other than nominal or typical transitional expenses and expenses reimbursed by Buyer). Subject to the immediately preceding sentence, any and all costs and expenses arising as a result of such transition shall be the sole responsibility of Buyer, and Buyer shall reimburse Seller or the Existing Manager on receipt of any invoice or invoices, together with supporting documentation from Seller or the Existing Manager, for any costs or expenses incurred by Seller or the Existing Manager in the course of effecting such transition. Notwithstanding anything to the contrary set forth herein, this Section 5.11 shall survive for one hundred (100) days following the Closing.
5.12. Rule 3-14 Audit. Prior to Closing, and for a period of up to one hundred twenty (120) days following the Closing Date, Seller agrees to provide to Buyer the right to conduct a one-time audit of the financial books and records of Seller relating to the operations and financial results of the Properties (such financial books and records of Seller, other than any Proprietary Information, collectively, the “Books and Records”) reasonably requested by Buyer, but solely to the extent required by Buyer (a) for the purpose of preparing a property-level Statement of Revenues and Certain Expenses (“Rule 3-14 Financials”) as required by Rule 3-14 of Securities and Exchange Commission Regulation S-X and (b) to support an audit opinion by an independent accounting firm with respect to the Rule 3-14 Financials. As a material inducement for Seller to agree to the foregoing provision, the parties acknowledge and agree that: (i) all costs incurred in connection with such audit (including, without limitation, all costs incurred by Seller (and/or any of its affiliates) shall be borne exclusively by Buyer; it being acknowledged and agreed that the costs of Seller (and/or any of its affiliates) for purposes of this Section 5.12 shall include the reasonable and documented personnel costs of Seller and its affiliates incurred in connection with such personnel assisting in, participating in or otherwise cooperating with any such audit, and (ii) Seller shall not be required to make any representations or warranties with respect to the information contained in such books and records, nor shall such information in any way increase the scope of the representations of, or liabilities and obligations of, Seller contained in this Agreement or any Ancillary Document. All such audit activities shall be conducted at Seller's place of business (or such other location reasonably designated by Seller), in a commercially reasonably fashion during normal business hours and upon ten (10) Business Days prior written notice from Buyer to Seller. Seller is only required to produce Books and Records in the possession of Seller; provided, however, that to the extent any such Books and Records are in the possession of the Property Manager, Seller shall use commercially reasonable efforts to cause the Property Manager to provide such Books and Records to Seller for purposes of Seller delivering the same to Buyer pursuant to this Section 5.12. Notwithstanding the foregoing in this Section 5.12 to the contrary, (1) this Section 5.12 shall be subject to Section 5.10 and (2) this Section 5.12 shall not apply to any Proprietary Information. The provisions of this Section 5.12 shall survive Closing.
5.13. Exclusivity. Commencing upon the Effective Date and continuing until the earlier to occur of (a) the Closing or (b) the termination of this Agreement, Seller agrees not to market the Acquired Entities or the Property (other than Excluded Properties) for sale or enter into any agreement for the sale of the Property (other than Excluded Properties) to any other person or entity.
5.14. Termination of Property Management Agreements. At or prior to Closing, Seller shall terminate any property management or similar agreements to which any Acquired Entity is a party, including, without limitation. those agreements set forth on Section 3.8(a)(iii) of the Company Disclosure Schedules (each, a “Property Management Agreement”).
5.15. Texas Qualifications. Promptly following the Effective Date and in any event prior to Closing, Seller shall use commercially reasonable efforts to cause Property Owner to be qualified to do business and in good standing in the State of Texas, including, without limitation, by paying any and all Taxes, costs, expenses, fees, fines, or penalties required in connection therewith (the “Texas Qualification”).
ARTICLE VI
Conditions to Closing
6.1. Conditions to All Parties’ Obligations. The obligations of the parties to consummate the Contemplated Transactions are subject to the fulfillment prior to or at the Closing of each of the following conditions (any or all of which may be waived by the parties):
(a) No Injunction. No Governmental Authority or federal or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, Order or other notice (whether temporary, preliminary or permanent), in any case which is in effect and which prevents or prohibits consummation of the Contemplated Transactions;
(b) Existing Loan Assumption Approval. The Existing Loan Assumption Approval shall have been received pursuant to Section 5.3(c).
(c) Other Agreement Closing. The Other Agreement Closing shall occur simultaneously with the Closing.
6.2. Conditions to Seller’s Obligations. The obligations of Seller to consummate the Contemplated Transactions are subject to the fulfillment at or prior to the Closing of each of the following conditions (any or all of which may be waived in whole or in part by Seller):
(a) Representations and Warranties. The Fundamental Representations of Buyer shall be true and correct in all respects as of the date when made and as the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date). The representations and warranties of Buyer other than the Fundamental Representations shall be true and correct in all material respects as of the date when made and as of the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date).
(b) Performance. Buyer shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be so performed or complied with by Buyer at or prior to the Closing, including payment of the Closing Consideration Amount to Seller.
(c) Deliveries. Seller shall have received the deliveries contemplated by Article VIII.
6.3. Conditions to Buyer’s Obligations. The obligations of Buyer to consummate the Contemplated Transactions are subject to the fulfillment at or prior to the Closing of each of the following conditions (any or all of which may be waived in whole or in part by Buyer) (each, a “Buyer Condition to Closing”):
(a) Representations and Warranties. The Fundamental Representations of Seller shall be true and correct in all respects as of the date when made and as the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date). The representations and warranties of Seller other than the Fundamental Representations shall be true and correct in all material respects as of the date when made and as of the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date).
(b) Performance. Seller shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be so performed or complied with by Seller at or prior to the Closing.
(c) Deliveries. Buyer shall have received the deliveries contemplated by Article VII.
(d) Title Policies. The Title Company shall be irrevocably committed to issue (or to endorse the Acquired Entities’ existing title insurance policies to the Closing Date), upon payment of the title premium by Buyer, owner’s Title Policies for each of the Properties with face coverage in the amount of the allocated portion of the Purchase Price for each Property, and subject only to the Permitted Liens and as otherwise provided in this Agreement.
(e) R&W Insurance Policy. So long as Buyer has satisfied its obligations set forth in Section 9.3, the R&W Insurance Policy Insurer shall have bound, upon payment of the premiums therefore, the R&W Insurance Policy (such Buyer Condition to Closing set forth in this Section 6.3(e), the “R&W Insurance Policy Buyer Condition to Closing”); provided, however, that, and notwithstanding the foregoing or anything contained herein to the contrary, if the R&W Insurance Policy Buyer Condition to Closing has not been satisfied as of the Closing Date and so long has Buyer has satisfied its obligations set forth in Section 9.3, then (i) either Buyer or Seller shall have the right upon written notice to the other party to extend the Closing Date and the Outside Closing Date for a period of up to thirty (30) days (provided that the Closing Date or the Outside Closing Date, as applicable, shall not be later than 364 days following the Effective Date) and (ii) upon the extension of the Closing Date and the Outside Closing Date pursuant to the immediately preceding clause (i), the R&W Insurance Policy Buyer Condition to Closing shall (a) be terminated and of no further force and effect and (b) not constitute a Buyer Condition to Closing for all purposes of this Agreement, including, without limitation, this Section 6.3; provided, further, however, that if neither (1) the R&W Insurance Policy Insurer shall have bound, upon payment of the premiums therefore, the R&W Insurance Policy on or prior to the Closing Date and the Outside Closing Date, as extended pursuant to the immediately preceding proviso, nor (2) the Replacement R&W Insurance Policy Insurer shall have bound, upon payment of the premiums therefore, the Replacement R&W Insurance Policy on or prior to the Closing Date and the Outside Closing Date, as extended pursuant to the immediately preceding proviso, and in each case Buyer has satisfied its obligations set forth in Section 9.3, then, and only in such instance (such instance, the “Post-Closing Liability Trigger”) and without otherwise limiting the terms and provisions of Article IX, the Seller’s Representations (and only the Seller’s Representations) shall survive closing in accordance with the terms, provisions, conditions and limitations of Exhibit G. If the Other Agreement Closing Date and the Other Agreement Outside Closing Date are extended in accordance with Section 6.3(e) of the Other Agreement, then this Agreement shall automatically be extended pursuant to this Section 6.3(e) simultaneously with such extension of the Other Agreement Closing Date and the Other Agreement Outside Closing Date.
(f) Required Association Approvals. With respect to each Property for which a Required Association Approval is required, such Required Association Approval shall have been obtained.
(g) Excluded Properties. The Excluded Property Disposition shall have occurred with respect to each Excluded Property.
Notwithstanding the foregoing or anything contained herein to the contrary, if any Buyer Condition to Closing is not satisfied with respect to any Property or Properties (as opposed to the Contemplated Transaction as a whole), then, as its sole and exclusive remedy with respect to any such Property, Buyer will have the right on or before the Closing to either (x) terminate this Agreement with respect to such affected Property by giving irrevocable written notice to Seller (the time and date of such notice from Buyer in accordance with this Section 6.3, the “Buyer Condition to Closing Excluded Property Designation Date”) and the Escrow Agent, in which event such Property shall be deemed to be an “Excluded Property” for all purposes of this Agreement and the provisions of Section 2.9 of this Agreement shall apply to such Excluded Property, and thereafter, the Parties will have no further rights or obligations hereunder with respect to such Excluded Property except for those obligations expressly set forth herein with respect to such Excluded Property and those obligations which expressly survive the termination of this Agreement with respect to such Excluded Property, or (y) proceed to Closing without reduction of or set off against the Total Consideration.
ARTICLE VII
Deliveries by Seller at Closing
On the Closing Date, Seller shall deliver or cause to be delivered to Buyer:
7.1. Officer’s Certificate. An officer’s certificate signed by a senior officer of Seller to the effect set forth in Sections 6.3(a) and 6.3(b).
7.2. Assignment of Purchased Interests. An assignment and assumption agreement, in the form attached hereto as Exhibit D, whereby each Seller assigns its entire interest in the Purchased Interests owned by such Seller to Buyer (or Buyer’s Subsidiary, at Buyer’s discretion) free and clear of all Liens other than Permitted Entity Liens (the “Assignment Agreement”), duly executed by such Seller.
7.3. W-9. A properly completed and duly executed IRS Form W-9 with respect to SOF- XI Term Holdings, L.P., Seller’s regarded parent for U.S. federal income tax purposes.
7.4. Title Affidavit. The title affidavit(s) pursuant to Section 2.5.
7.5. Existing Loan Assumption Approval. If received by Seller, the Existing Loan Assumption Approval.
7.6. FIRPTA Certificate. An affidavit with respect to compliance with the Foreign Investment in Real Property Tax Act (I.R.C. Section 1445 and the Treasury Regulations thereunder).
7.7. Termination of Property Management Agreements and Tiber Lease. Evidence of the termination of each Property Management Agreement and of the Tiber Lease.
7.8. Association Estoppels. Association Estoppels received by Seller (if any).
7.10. Guarantor Joinder. If, and only if, a Post-Closing Liability Trigger has occurred, then Seller shall cause SOF-XI U.S. NRE Holdings, L.P., a Delaware limited partnership, to execute and deliver to Buyer a guarantor joinder in the form of Exhibit H (the “Guarantor Joinder”).
7.11. Texas Qualification. Evidence that Seller has obtained the Texas Qualification.
ARTICLE VIII
Deliveries by Buyer at Closing
On the Closing Date, Buyer shall deliver or cause to be delivered to Seller:
8.1. Officer’s Certificate. A certificate signed by an authorized signatory of Buyer to the effect set forth in Sections 6.2(a) and 6.2(b).
8.2. Closing Consideration Amount. The Closing Consideration Amount, by wire transfer of immediately available funds, to the Escrow Account.
8.3. Assignment Agreement. A copy of the Assignment Agreement, duly executed by Buyer (or Buyer’s Subsidiary, at Buyer’s discretion).
8.4. Existing Loan Assumption Approval. If received by Buyer, the Existing Loan Assumption Approval.
ARTICLE IX
Survival; R&W Insurance Policy
9.1. No Post-Closing Liability. Subject to Section 6.3(e), Exhibit G and the Guarantor Joinder, none of the representations and warranties of Seller contained in this Agreement or any of the other documents delivered by Seller in connection with the Contemplated Transactions (including any certificate to be delivered under Article VII of this Agreement) (collectively, the “Transaction Documents”) and none of the covenants of any party required to be performed by such party before the Closing shall survive the Closing, and thereafter none of the parties hereto or any of their Affiliates or any of their respective managers, officers, trustees, directors, employees, shareholders, members, partners, agents, representatives, advisors, successors and assigns (collectively, “Representatives”) shall have any liability whatsoever with respect to any such representation, warranty, covenant or agreement, and no claim for breach of any such representation or warranty, detrimental reliance or other right or remedy (whether in contract, in tort or at law or in equity) may be brought after the Closing with respect thereto, except in the event of fraud by Seller or any of its Representatives. The provisions of this Section 9.1 will not, however, prevent or limit a cause of action prior to Closing under Section 10.2(c) to enforce specifically the terms and provisions of this Agreement or prevent or limit any claim under the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy).
9.2. Sole Remedy. Notwithstanding anything in this Agreement to the contrary, subject to Section 6.3(e), Exhibit G and the Guarantor Joinder and except for any fraud by Seller or any of its Representatives, the sole and exclusive remedy for claims with respect to any and all losses, liabilities, claims, damages and expenses of Buyer and its Affiliates and their respective Representatives based upon, arising out of, with respect to or by reason of any breach of any representation or warranty by Seller contained in this Agreement or in any Transaction Documents discovered after the Closing Date shall be to recover under either (as applicable) (i) any buyer side representations and warranties policy obtained by Buyer in connection with Contemplated Transactions and the Transaction Documents and on the non-binding indicative terms set forth on Exhibit F attached hereof (collectively, the “R&W Insurance Policy” and such non-binding indicative terms, the “R&W Insurance Policy Non-Binding Indicative Terms”) or (ii) a Replacement R&W Insurance Policy, regardless of whether or not the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) is, after it is issued and bound, invalid, invalidated, disputed or ineffective, or not obtained for any reason whatsoever, and regardless of whether or not, after the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) is issued and bound, any or all of the coverage intended to be provided thereunder is disputed, denied or otherwise unavailable in whole or in part.
9.3. Covenant. From and after the date hereof, Buyer shall diligently pursue and use commercially reasonable efforts to obtain, on the R&W Insurance Non-Binding Indicative Terms, the R&W Insurance Policy; provided that the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) shall expressly provide that the insurer has no subrogation rights, and will not pursue any claim against Seller or any of its Representatives, except in the event of fraud by Seller or any of its Representatives. At Closing, Buyer and Seller shall each pay for fifty percent (50%) of the costs and expenses of the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) (in either case, including without limitation underwriting fees and legal fees of the R&W Insurance Policy Insurer, or, if applicable, the Replacement R&W Insurance Policy Insurer (in each case, as opposed to Buyer), premiums, deposits for binding and taxes) (collectively, “R&W Insurance Policy Costs”), provided that Buyer shall pay one hundred percent (100%) of (i) all legal fees, costs and expenses incurred by Buyer in obtaining the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) and (ii) all costs and expenses incurred by Buyer in connection with any third party reports obtained for, or provided to, the issuer of the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy Insurer). Without limiting the foregoing, but on the condition of Seller’s performance of its obligations under this Section 9.3, (i) Buyer shall use commercially reasonable efforts to respond to and satisfy any and all reasonable requests from the underwriter and/or insurer(s) with respect to the R&W Insurance Policy (collectively, the “R&W Insurance Policy Insurer”), or, if applicable, the Replacement R&W Insurance Policy Insurer, including, without limitation, requests for due diligence information and third-party reports and payment of any Expense Deposit (subject to Seller’s payment of 50% thereof pursuant to the last sentence of this Section 9.3), (ii) exercise commercially reasonable efforts to participate in an “underwriting call” no later than August 10, 2022 with the R&W Insurance Policy Insurer (or, with respect to any Replacement R&W Insurance Policy, with the Replacement R&W Insurance Policy Insurer no later than the date reasonably selected by Seller), and, within a commercially reasonable period following such “underwriting call” respond to any questions and/or issues raised by the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) during, or as a result of, such “underwriting call”, and (iii) exercise commercially reasonable efforts to promptly bind the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) and, concurrently with such binding, Buyer and Seller shall each pay to the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) fifty percent (50%) of the portion of the premium for the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) required to be paid to the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) in order to so bind the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy), including any applicable taxes collected by the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) (such portion of the premium, the “R&W Insurance Policy Binding Premium”). Without limiting the foregoing, Seller shall reasonably cooperate with Buyer in pursuing and obtaining the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy), including, without limitation, providing such information, documents and diligence materials as the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) may reasonably require. Prior to the date when due, Seller and Buyer shall each pay the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) an amount equal to 50% of the non-refundable underwriting fee (or so called “loss mitigation” fee or expense deposit) payable to the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) in connection with the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) (“Expense Deposit”).
9.4. No Seller Responsibility. Except as specifically provided in Section 9.3 above, and subject to Section 6.3(e), Exhibit G and the Guarantor Joinder, Seller and its Representatives shall not have any direct or indirect liability of any kind or any nature in connection with the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) except in the event of fraud by such parties, including in the event that: (a) the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) is not in force on the Closing Date for any reason; (b) the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) is terminated or cancelled or becomes null and of no effect at any time on or after the Closing Date for any reason; or (c) the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) refuses, omits, is unable to or delays to make any payment under the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) for any reason, whether or not the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) is in default or not under the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy).
9.5. Replacement R&W Insurance Policy. If the R&W Insurance Policy Buyer Condition to Closing has not been satisfied as of the originally scheduled Closing Date pursuant to Section 6.3(e), then at any time on or before the Closing Date (as the Closing Date may be extended pursuant to Section 6.3(e)), Seller shall have the right to cause a Replacement R&W Insurance Policy Insurer to bind the Replacement R&W Insurance Policy in lieu of the R&W Insurance Policy, in which case (1) Section 6.3(e), Exhibit G and the Guarantor Joinder shall not be applicable to the Contemplated Transaction and shall be of no force and effect and (2) Buyer and Seller shall proceed to Closing with the Replacement R&W Insurance Policy and otherwise (subject to the immediately preceding clause (1)) on the terms, provisions and conditions of this Agreement. Without limiting the terms and provisions of Section 9.3 with respect to the Replacement R&W Insurance Policy Insurer and the Replacement R&W Insurance Policy, Buyer shall reasonably cooperate with Seller in causing the Replacement R&W Insurance Policy Insurer to bind the Replacement R&W Insurance Policy.
ARTICLE X
Termination
10.1. Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written agreement of Seller and Buyer; or
(b) by Buyer, (1) if a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Seller set forth in this Agreement shall have occurred such that a condition set forth in Section 6.3 would not be satisfied, and (i) such breach is not reasonably capable of being cured by the Closing Date or (ii) if such breach is reasonably capable of being cured by the Closing Date, such breach shall not have been cured by the earlier of (A) ten (10) days after receipt of written notice of such breach from Buyer and (B) the Closing Date or (2) if Other Agreement Buyer has the right to terminate, and is simultaneously terminating, the Other Agreement pursuant to Section 10.1(b) of the Other Agreement; provided, however, that Buyer will not have the right to terminate this Agreement pursuant to this Section 10.1(b) (1) if Buyer or Other Agreement Buyer is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the Other Agreement, respectively or (2) if the last paragraph of Section 6.3 applies to such failure of a condition set forth in Section 6.3 to be satisfied; provided further, however, that the foregoing notice and cure period set forth in this clause (b) shall not apply to any failure by Seller to close the Contemplated Transactions on the Closing Date in accordance with the terms, provisions and conditions of this Agreement;
(c) by Seller, (1) if a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Buyer set forth in this Agreement shall have occurred such that a condition set forth in Section 6.2 would not be satisfied, and (i) such breach is not reasonably capable of being cured by the Closing Date or (ii) if such breach is reasonably capable of being cured by the Closing Date, such breach shall not have been cured by the earlier of (A) ten (10) days after receipt of written notice of such breach from Buyer and (B) the Closing Date or (2) if Other Agreement Seller has the right to terminate, and is simultaneously terminating, the Other Agreement pursuant to Section 10.1(c) of the Other Agreement; provided that Seller will not have the right to terminate this Agreement pursuant to this Section 10.1(c) if Seller or Other Agreement Seller is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the Other Agreement, respectively; provided further that the foregoing notice and cure period set forth in this clause (c) shall not apply to any failure by Buyer to close the Contemplated Transactions on the Closing Date in accordance with the terms, provisions and conditions of this Agreement;
(d) by written notice by either Seller or Buyer to the other party if the condition to Closing set forth in Section 6.1 is not satisfied as of the Closing Date so long as such failure is not otherwise a result of any breach of this Agreement by such party;
(e) by Buyer pursuant to, and subject to the terms and conditions of, Section 2.7;
(f) in accordance with Section 2.2; or
(g) by Seller in accordance with Section 2.9(b).
10.2. Effect of Termination.
(a) In the event that this Agreement is terminated pursuant to Section 10.1(a), Section 10.1(b), Section 10.1(d), Section 10.1(e), Section 10.1(f) or Section 10.1(g), then the Escrow Agent shall return the Deposit to the Buyer by wire transfer of immediately available funds to the account designated by the Buyer as promptly as reasonably practicable after such termination (with deduction of Buyer’s portion of the fee payable to Escrow Agent pursuant to this Agreement, if unpaid, with deduction for the Independent Consideration, if applicable pursuant to Section 2.7 and, if this Agreement is terminated other than pursuant to Section 10.1(b), with deduction for fifty percent (50%) of the Existing Loan Assumption Fees) (and, in the event that this Agreement is terminated pursuant to Section 10.1(b), Seller shall reimburse Buyer for (x) its direct and documented reasonable out of pocket costs and expenses actually incurred by Buyer in the negotiation of this Agreement, conducting its diligence activities, and otherwise in preparation for Closing, in an aggregate amount up to One Million Five Hundred Thousand Dollars ($1,500,000.00), (y) the amounts paid by Buyer for the R&W Insurance Policy Binding Premium, and (z) amounts paid by Buyer for the Expense Deposit), whereupon this Agreement shall automatically terminate and none of the parties shall have any further obligation to the others, except that the parties hereto shall remain bound by the provisions of this Section 10.2 and Section 5.6 and Article XI, and by the provisions of the Access Agreement and the Confidentiality Agreement (collectively, the “Surviving Provisions”).
(b) In the event that this Agreement is terminated pursuant to Section 10.1(c), then Buyer shall forfeit, and the Escrow Agent shall deliver to Seller, and Seller shall be entitled to retain, the Deposit. In such event, except with respect to the Surviving Provisions, the delivery of the Deposit shall be deemed to be liquidated damages and the sole and exclusive remedy of Seller and its Affiliates and Representatives against Buyer and any of its Affiliates and Representatives for any failure to close this Agreement. The parties acknowledge and agree that the damages to Seller in the circumstances described in this Section 10.2(b) would be difficult, if not impossible to ascertain, and the liquidated damages provided for in this Section 10.2(b) are a reasonable estimate thereof.
(c) In the event that a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Seller set forth in this Agreement shall have occurred such that Buyer would have the right to terminate this Agreement pursuant to Section 10.1(b), Buyer shall be entitled, in lieu of termination, to seek specific performance of the terms hereof; provided, however, that Buyer must file suit for specific performance against Seller in a tribunal permitted by this Agreement on or before sixty (60) days following the date upon which the Closing was scheduled to have occurred as provided herein; provided further, however, that if, specific performance is not a remedy to Buyer pursuant to Section 10.2(c) because Seller has sold the Acquired Entities or the Properties to a third party in breach of this Agreement, then (i) Buyer may instruct Escrow Agent to return the Deposit and accrued interest thereon, (ii) Buyer may recover from Seller the amount by which the total consideration received by Seller for the sale of the Acquired Entities or the Properties (as applicable) to a third party in breach of this Agreement exceeds the Purchase Price for the Property and (iii) Buyer may exercise its rights and remedies set forth in Section 10.2(a).
(d) Notwithstanding the foregoing or anything contained herein to the contrary, a party shall only be entitled to elect and/or exercise a right and/or remedy under this Section 10.2 (including, without limitation, the termination of this Agreement and/or seeking specific performance) if such party’s Affiliate that is a party to the Other Agreement is (i) entitled to exercise the same right and/or remedy under Section 10.2 of the Other Agreement, and (ii) simultaneously exercising the same right and/or remedy under Section 10.2 of the Other Agreement.
ARTICLE XI
Miscellaneous
11.1. Expenses. Other than any fees and expenses expressly allocated among the parties pursuant to this Agreement, all fees and expenses incurred in connection with the Contemplated Transactions shall be paid by the party incurring such expenses, whether or not the Contemplated Transactions are consummated.
11.2. Notices. All notices, demands, requests and other communications required or permitted hereunder shall be in writing, and shall be (a) personally delivered with a written receipt of delivery; (b) sent by a nationally-recognized overnight delivery service requiring a written acknowledgement of receipt or providing a certification of delivery or attempted delivery; (c) sent by certified or registered mail, return receipt requested; or (d) sent by confirmed facsimile transmission or electronic delivery with an original copy thereof transmitted to the recipient by one of the means described in subsections (a) through (c) no later than three (3) business days thereafter. All notices shall be deemed effective when actually delivered as documented in a delivery receipt except for electronic delivery which shall be deemed effective when sent by email; provided, however, that if the notice was sent by overnight courier or mail as aforesaid and is affirmatively refused or cannot be delivered during customary business hours by reason of the absence of a signatory to acknowledge receipt, or by reason of a change of address with respect to which the addressor did not have either knowledge or written notice delivered in accordance with this paragraph, then the first attempted delivery shall be deemed to constitute delivery. Each party shall be entitled to change its address for notices from time to time by delivering to the other party notice thereof in the manner herein provided for the delivery of notices. All notices shall be sent to the addressee at its address set forth following its name below:
| If to Seller: |
c/o Starwood Capital Group Global 100 Pine Street, Suite 3000 Attention: Sam Caven |
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With a copy (which shall not |
Rinaldi, Finkelstein and Franklin Greenwich, CT 06830 Attention: James Raved Email: jraved@starwood.com |
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Kirkland & Ellis LLP 601 Lexington Avenue Email: christopher.hartmann@kirkland.com |
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| If to Buyer: |
VB FIVE, LLC grace.chu@vinebrookhomes.com |
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With a copy (which shall not |
NexPoint Real Estate Advisors, L.P. Email: BMitts@nexpoint.com dsauter@nexpoint.com rharris@nexpoint.com |
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With a copy (which shall not |
Wick Phillips Gould & Martin, LLP Email: chris.fuller@wickphillips.com ryan.goins@wickphillips.com |
11.3. Governing Law. This Agreement shall in all respects be governed by, and construed in accordance with, the Laws (excluding conflict of laws rules and principles) of the State of Delaware applicable to agreements made and to be performed entirely within such State, including all matters of construction, validity and performance.
11.4. Entire Agreement. This Agreement, together with the Exhibits hereto, the Company Disclosure Schedules, the Ancillary Documents, the Confidentiality Agreement, the Other Agreement, the Access Agreement and the Other Agreement Access Agreement constitute the entire agreement of the parties relating to the subject matter hereof and supersede all prior contracts or agreements, whether oral or written.
11.5. Severability. Should any provision of this Agreement or the application thereof to any Person or circumstance be held invalid or unenforceable to any extent: (a) such provision shall be ineffective to the extent, and only to the extent, of such unenforceability or prohibition and shall be enforced to the greatest extent permitted by Law, (b) such unenforceability or prohibition in any jurisdiction shall not invalidate or render unenforceable such provision as applied (i) to other Persons or circumstances or (ii) in any other jurisdiction, and (c) such unenforceability or prohibition shall not affect or invalidate any other provision of this Agreement.
11.6. Amendment. Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented or modified orally, but only by an instrument in writing signed by Buyer and Seller; provided, that the observance of any provision of this Agreement may be waived in writing by the party that will lose the benefit of such provision as a result of such waiver.
11.7. Effect of Waiver or Consent. No waiver or consent, express or implied, by any party to or of any breach or default by any party in the performance by such party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such party of the same or any other obligations of such party hereunder. No single or partial exercise of any right or power, or any abandonment or discontinuance of steps to enforce any right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. Failure on the part of a party to complain of any act of any party or to declare any party in default, irrespective of how long such failure continues, shall not constitute a waiver by such party of its rights hereunder until the applicable statute of limitation period has run.
11.8. Parties in Interest; Limitation on Rights of Others. The terms of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective legal representatives, successors and assigns. Nothing in this Agreement, whether express or implied, shall be construed to give any Person (other than the parties hereto and their respective legal representatives, successors and assigns and as expressly provided herein) any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenants, conditions or provisions contained herein, as a third party beneficiary or otherwise; provided, that Buyer Exculpated Parties, Seller Exculpated Parties and Indemnified Individuals who are not otherwise a party to this Agreement shall be third party beneficiaries of Section 5.5.
11.9. Assignability. This Agreement shall not be assigned by Seller without the prior written consent of Buyer. This Agreement shall not be assigned by Buyer without the prior written consent of Seller; provided, however, that Buyer shall have the right to assign this Agreement to one or more entities that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with Buyer upon at least five (5) days’ prior written notice to (but without the consent of) Seller so long as (a) Buyer is not released from its liability hereunder and (b) any such assignment would not impair, restrain, prevent, delay or otherwise negatively impact satisfying and/or obtaining the Existing Loan Assumption Approval Conditions or the Existing Loan Assumption Approval. No transfer or assignment by Buyer in violation of the provisions hereof shall be valid or enforceable.
11.10. Jurisdiction; Court Proceedings; Waiver of Jury Trial. Any Litigation against any party to this Agreement arising out of or in any way relating to this Agreement shall be brought in any federal or state court located in the State of Delaware and each of the parties hereby submits to the exclusive jurisdiction of such courts for the purpose of any such Litigation; provided, that a final judgment in any such Litigation shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each party irrevocably and unconditionally agrees not to assert (a) any objection which it may ever have to the laying of venue of any such Litigation in any federal or state court located in the State of Delaware, (b) any claim that any such Litigation brought in any such court has been brought in an inconvenient forum and
(c) any claim that such court does not have jurisdiction with respect to such Litigation. To the extent that service of process by mail is permitted by applicable Law, each party irrevocably consents to the service of process in any such Litigation in such courts by the mailing of such process by registered or certified mail, postage prepaid, at its address for notices provided for herein. Each party irrevocably and unconditionally waives any right to a trial by jury and agrees that any of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained-for agreement among the parties irrevocably to waive its right to trial by jury in any Litigation.
11.11. No Other Duties. The only duties and obligations of the parties under this Agreement are as specifically set forth in this Agreement, and no other duties or obligations shall be implied in fact, Law or equity, or under any principle of fiduciary obligation.
11.12. Reliance on Counsel and Other Advisors. Each party has consulted such legal, financial, technical or other expert as it deems necessary or desirable before entering into this Agreement. Each party represents and warrants that it has read, knows, understands and agrees with the terms and conditions of this Agreement.
11.13. Sole Remedies. The sole and exclusive remedies of the parties in relation to any breach of the provisions of this Agreement shall be as expressly set forth in Article IX and Article X.
11.14. Counterparts. This Agreement may be executed by in any number of counterparts with the same effect as if all signatory parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. Delivery of an executed counterpart by facsimile transmission or by electronic means (including a .pdf document) shall be effective.
11.15. Further Assurance. If at any time after the Closing any further action is necessary or desirable to fully effect the transactions contemplated by this Agreement or any other of the Ancillary Documents, each of the parties shall take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request.
11.16. Legal Representation. Each of the parties to this Agreement acknowledges that Kirkland & Ellis LLP (“Kirkland”) currently serves as counsel to both (a) the Acquired Entities and (b) Seller and its Affiliates (Seller individually and collectively with its Affiliates, the “Seller Group”) in connection with the negotiation, preparation, execution and delivery of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby. There may come a time, including after the consummation of the transactions contemplated by this Agreement and the Ancillary Documents, when the interests of the Seller Group and the Acquired Entities may no longer be aligned or when, for any reason, the Seller Group, Kirkland or any Acquired Entity believes that Kirkland can or should no longer represent both the Seller Group and the Acquired Entities. The parties understand and specifically agree that Kirkland may withdraw from representing any Acquired Entity and continue to represent the Seller Group, even if the interests of the Seller Group and the interests of any Acquired Entity are or may be adverse, including in connection with any dispute arising out of or relating to this Agreement or any of the Ancillary Documents or the transactions contemplated hereby or thereby, and even though Kirkland may have represented the Acquired Entities in a matter substantially related to such dispute or may be handling ongoing matters for any Acquired Entity, and Buyer and the Acquired Entities hereby consent thereto and waive any conflict of interest arising therefrom. Each of the parties further agrees that, as to all communications among Kirkland, any Acquired Entity and the Seller Group, the attorney-client privilege, the expectation of client confidence and all other rights to any evidentiary privilege belong to the Seller Group and shall not pass to or be claimed by any Acquired Entity or any of its Affiliates. In addition, if the transactions contemplated by this Agreement and the Ancillary Documents are consummated, the Acquired Entities shall have no right of access to or control over any of Kirkland’s records related to such transactions, which shall become property of (and be controlled by) the Seller Group. Furthermore, in the event of a dispute between the Seller Group and any Acquired Entity arising out of or relating to any manner in which Kirkland acted for them both, none of the attorney-client privilege, the expectation of client confidence or any other rights to any evidentiary privilege will protect from disclosure to the Seller Group any information or documents developed or shared during the course of Kirkland’s joint representation of the Seller Group and the Acquired Entities.
11.17. Attorneys’ Fees. If any action or proceeding is commenced by any party or parties hereto against any other party or parties hereto that arises out of, or relates to, this Agreement and/or any of Ancillary Documents, then the non-prevailing party shall be responsible for all costs and expenses in connection therewith, including reasonable attorneys’ fees and witness fees as determined by a court of competent jurisdiction or any other trier of fact.
11.18. Release. Effective as of the Closing Date, except for any rights or obligations under this Agreement that expressly survive the Closing, Buyer on behalf of itself and each of its Affiliates and each of the Buyer Exculpated Parties, hereby irrevocably and unconditionally releases and forever discharges Seller and the Seller Exculpated Parties of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, Contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which Buyer or the Buyer Exculpated Parties may have against Seller or the Seller Exculpated Parties, now or in the future, in each case, arising out of or related to (i) any of the Acquired Entities or their business, assets or operations, or (ii) actions of the board of managers or directors, or any officers, of any Acquired Entities (collectively, the “Released Claims”). Effective as of the Closing Date, except for any rights or obligations under this Agreement that expressly survive the Closing, Seller on behalf of itself and each of its Affiliates and each of the Seller Exculpated Parties, hereby irrevocably and unconditionally releases and forever discharges the Acquired Entities and the Buyer Exculpated Parties of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, Contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which Seller or the Seller Exculpated Parties may have against the Acquired Entities or the Buyer Exculpated Parties, now or in the future, in each case, arising out of or related to (i) any of the Acquired Entities or their business, assets or operations, or (ii) actions of the board of managers or directors, or any officers, of any Acquired Entities.
11.19. Third-Party Beneficiary. Buyer hereby (a) acknowledges that Essex is an indirect affiliate of Seller, and (b) agrees that such affiliation shall not, in any event or circumstance, be asserted by Buyer, or any affiliate, successor, or assign of Buyer, as a grounds or basis, in whole or in part, for (i) any defense with respect to Buyer’s obligations under this Agreement, (ii) the annulment, avoidance, invalidation, rescission, or termination of this Agreement, (iii) the annulment, avoidance, disregard, invalidation, qualification, or modification of any limitations with respect to Seller’s liability under this Agreement or the documents required to be delivered pursuant to Section 7 (collectively, the “Closing Documents”) as set forth herein or in the Closing Documents, (iv) any expansion or imposition of a covenant, representation, or warranty of Seller under this Agreement or in the Closing Documents with respect to the title to be conveyed pursuant to this Agreement, (v) any expansion or imposition of liability under the title policy beyond the express terms thereof, or (vi) any other claim, at law or in equity, against Seller, Essex, or any direct or indirect member, partner, shareholder, director, officer, or employee of either such party (other than claims for fraud). Notwithstanding anything to the contrary contained in this Agreement, Essex shall be considered to be a third-party beneficiary of Buyer’s covenants as set forth in this Section 11.19. The provisions of this Section 11.19 shall survive the termination of this Agreement and/or the Closing.
11.20. State-Specific Provisions. In no event shall any of the following be deemed to limit anything contained in Section 11.3 hereof.
(a) Florida.
(i) Radon Notice. Pursuant to Section 404.056(5), Florida Statutes, Buyer is hereby notified as follows: “RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.”
(b) Texas.
(i) As to Properties located in the State of Texas, Section 3.7(c) is replaced with the following: To Seller’s knowledge, the Property Owner has good and indefeasible fee simple title to the Properties located in the State of Texas, free and clear of Liens, except for Permitted Liens, instruments securing the Existing Loan and any liens, claims and security interests that will be released at or prior to the Closing.
11.21. Jointly and Severally. Notwithstanding anything to the contrary contained in this Agreement or any document executed in connection herewith, each Seller shall be jointly and severally liable to Buyer under or in connection with this Agreement or any document executed in connection herewith.
11.22. Closing; Dates. Notwithstanding anything to the contrary contained in this Agreement or any document executed in connection herewith, (1) it is understood and agreed that the Closing shall occur simultaneously with the Other Agreement Closing and (2) if the Other Agreement Closing Date, the Other Agreement Outside Closing Date or any other date set forth in the Other Agreement is adjourned or extended in accordance with the terms of the Other Agreement, then the Closing Date, the Outside Closing Date or any such other date hereunder shall be automatically adjourned or extended concurrently to such as-adjourned or extended Other Agreement Closing Date, Other Agreement Outside Closing Date or other date set forth in the Other Agreement.
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IN WITNESS WHEREOF, each of the patties hereto has caused this Agreement to be duly executed and delivered in its name and on its behalf, all as of the Effective Date.
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| SOF-XI TERM HOLDINGS, L.P., a Delaware limited partnership |
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By: |
SOF-XI Tenn Holdings GP, L.L.C., a Delaware limited liability company, its general partner |
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By: /s/ Sam Caven |
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| Name: Sam Caven | |||
| Its: Authorized Signatory | |||
| SOF-XI TERM PARENT HOLDINGS, L.P., a Delaware limited partnership |
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| By: |
SOF-XI Term Parent Holdings GP, L.L.C., a Delaware limited liability company, its general partner |
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| By: /s/ Sam Caven | |||
| Name: Sam Caven | |||
| Its: Authorized Signatory | |||
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BUYER: |
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| VB FIVE, LLC, a Delaware limited liability company |
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By: |
/s/ Dana Sprong |
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Name: |
Dana Sprong |
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Its: |
Authorized Signatory |
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Exhibit A
Allocated Purchase Prices
See attached.
Exhibit B
Form of Escrow Agreement
Exhibit C
Mandatory Removal Exceptions
See attached.
Exhibit D
Form of Assignment Agreement
Exhibit E
Form of Title Affidavit
Exhibit F
R&W Insurance Policy Non-Binding Indicative Terms
Exhibit G
Post-Closing Liability Terms and Provisions
Exhibit H
Form of Guarantor Joinder
Exhibit 2.2
EXECUTION VERSION
INTEREST PURCHASE AGREEMENT
by and among
SOF-XI TERM HOLDINGS, L.P.
SOF-XI RS HOLDINGS, L.P.
and
SFR MASTER HOLDINGS, L.P.
and
VB FIVE, LLC
Dated: August 3, 2022
TABLE OF CONTENTS
| Page | |||
| ARTICLE I Definitions and Rules of Construction | 2 | ||
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1.1. |
Definitions |
2 | |
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1.2. |
Rules of Construction |
17 | |
| ARTICLE II Purchase and Sale | 18 | ||
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2.1. |
Purchase and Sale |
18 | |
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2.2. |
Closing |
18 | |
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2.3. |
Payments at the Closing |
19 | |
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2.4. |
Deposit |
23 | |
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2.5. |
Title Matters |
24 | |
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2.6. |
Transfer Taxes |
24 | |
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2.7. |
Due Diligence Period |
25 | |
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2.8. |
Title Defect Excluded Properties |
26 | |
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2.9. |
Treatment of Excluded Properties; Seller Termination Event |
27 | |
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2.10. |
Seller Mandatory Removal Properties |
28 | |
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2.11. |
Holly Hock Property |
28 | |
| ARTICLE III Representations and Warranties of Seller | 29 | ||
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3.1. |
Organization and Power |
29 | |
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3.2. |
Authorization and Enforceability |
29 | |
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3.3. |
Capitalization |
30 | |
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3.4. |
No Violation |
32 | |
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3.5. |
Consents |
33 | |
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3.6. |
Financial Statements |
33 | |
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3.7. |
Real Property |
34 | |
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3.8. |
Leases |
34 | |
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3.9. |
Contracts |
35 | |
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3.10. |
Compliance with Laws |
35 | |
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3.11. |
Environmental Matters |
35 | |
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3.12. |
Litigation |
36 | |
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3.13. |
Labor and Employment Matters |
36 | |
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3.14. |
Tax Matters |
36 | |
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3.15. |
Bank Accounts |
37 | |
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3.16. |
No Brokers |
37 | |
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3.17. |
ERISA |
37 | |
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3.18. |
Real Property Matters |
37 | |
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3.19. |
Authority and Association Payments |
38 | |
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3.20. |
Bankruptcy |
38 | |
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3.21. |
Relationship with Affiliates |
38 | |
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3.22. |
Special Purpose Entities |
39 | |
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3.23. |
Insurance |
39 | |
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3.24. |
Restricted Persons |
39 | |
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3.25. |
Seller’s Designated Representative |
39 | |
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3.26. |
Disclaimer |
39 | |
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3.27. |
Limitation with respect to Seller’s Representations |
39 | |
| ARTICLE IV Representations and Warranties of Buyer | 40 | ||
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4.1. |
Organization and Power |
40 | |
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4.2. |
Authorization |
40 | |
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4.3. |
Enforceability |
40 | |
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4.4. |
No Violation |
40 | |
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4.5. |
Consents |
41 | |
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4.6. |
Financial Capacity |
41 | |
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4.7. |
Litigation |
41 | |
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4.8. |
No Brokers |
41 | |
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4.9. |
Investment Intent |
41 | |
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4.10. |
Qualified Transferee |
41 | |
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4.11. |
Restricted Persons |
41 | |
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4.12. |
ERISA |
41 | |
| ARTICLE V Covenants | 42 | ||
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5.1. |
Conduct of the Acquired Entities |
42 | |
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5.2. |
Access to Information Prior to the Closing |
44 | |
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5.3. |
Efforts; Assumption of Existing Loans |
45 | |
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5.4. |
Certain Tax Matters |
46 | |
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5.5. |
Exculpation |
48 | |
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5.6. |
Confidentiality |
49 | |
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5.7. |
Public Announcements |
49 | |
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5.8. |
Commercially Reasonable Efforts |
49 | |
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5.9. |
Casualty and Condemnation |
49 | |
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5.10. |
Condition of Properties |
51 | |
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5.11. |
Transitional Matters |
51 | |
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5.12. |
Rule 3-14 Audit |
52 | |
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5.13. |
Exclusivity |
52 | |
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5.14. |
Termination of Property Management Agreements |
52 | |
| ARTICLE VI Conditions to Closing | 52 | ||
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6.1. |
Conditions to All Parties’ Obligations |
52 | |
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6.2. |
Conditions to Seller’s Obligations |
53 | |
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6.3. |
Conditions to Buyer’s Obligations |
53 | |
| ARTICLE VII Deliveries by Seller at Closing | 55 | ||
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7.1. |
Officer’s Certificate |
55 | |
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7.2. |
Assignment of Purchased Interests |
55 | |
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7.3. |
W-9 |
55 | |
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7.4. |
Title Affidavit |
55 | |
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7.5. |
Existing Loan Assumption Approval |
55 | |
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7.6. |
FIRPTA Certificate |
55 | |
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7.7. |
Termination of Property Management Agreements |
55 | |
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7.8. |
Association Estoppels |
55 | |
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7.9. |
Guarantor Joinder |
55 | |
| ARTICLE VIII Deliveries by Buyer at Closing | 55 | ||
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8.1. |
Officer’s Certificate |
55 | |
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8.2. |
Closing Consideration Amount |
56 | |
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8.3. |
Assignment Agreement |
56 | |
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8.4. |
Existing Loan Assumption Approval |
56 | |
| ARTICLE IX Survival; R&W Insurance Policy | 56 | ||
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9.1. |
No Post-Closing Liability |
56 | |
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9.2. |
Sole Remedy |
56 | |
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9.3. |
Covenant |
57 | |
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9.4. |
No Seller Responsibility |
58 | |
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9.5. |
Replacement R&W Insurance Policy |
58 | |
| ARTICLE X Termination | 58 | ||
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10.1. |
Termination |
58 | |
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10.2. |
Effect of Termination |
59 | |
| ARTICLE XI Miscellaneous | 61 | ||
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11.1. |
Expenses |
61 | |
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11.2. |
Notices |
61 | |
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11.3. |
Governing Law |
62 | |
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11.4. |
Entire Agreement |
62 | |
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11.5. |
Severability |
62 | |
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11.6. |
Amendment |
62 | |
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11.7. |
Effect of Waiver or Consent |
63 | |
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11.8. |
Parties in Interest; Limitation on Rights of Others |
63 | |
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11.9. |
Assignability |
63 | |
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11.10. |
Jurisdiction; Court Proceedings; Waiver of Jury Trial |
63 | |
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11.11. |
No Other Duties |
64 | |
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11.12. |
Reliance on Counsel and Other Advisors |
64 | |
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11.13. |
Sole Remedies |
64 | |
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11.14. |
Counterparts |
64 | |
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11.15. |
Further Assurance |
64 | |
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11.16. |
Legal Representation |
64 | |
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11.17. |
Attorneys’ Fees |
65 | |
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11.18. |
Release |
65 | |
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11.19. |
Intentionally Omitted |
65 | |
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11.20. |
State-Specific Provisions |
65 | |
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11.21. |
Jointly and Severally |
66 | |
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11.22. |
Closing; Dates |
66 |
| Exhibit A | Allocated Purchase Prices | ||
| Exhibit B | Form of Escrow Agreement | ||
| Exhibit C | Mandatory Removal Exceptions | ||
| Exhibit D | Form of Assignment Agreement | ||
| Exhibit E | Title Affidavit | ||
| Exhibit F | R&W Insurance Policy Non-Binding Indicative Terms | ||
| Exhibit G | Post-Closing Liability Terms and Provisions | ||
| Exhibit H | Form of Guarantor Joinder | ||
INTEREST PURCHASE AGREEMENT
INTEREST PURCHASE AGREEMENT, dated as of August 3, 2022, by and among SOF-XI TERM HOLDINGS, L.P., a Delaware limited partnership (“Term Holdings Seller”), SOF-XI RS HOLDINGS, L.P., a Delaware limited partnership (“Roofstock Seller”), SFR MASTER HOLDINGS, L.P., a Delaware limited partnership (“Tiber Seller”; and together with Term Holdings Seller and Roofstock Seller, each a “Seller” and collectively “Sellers”), and VB Five, LLC, a Delaware limited liability company (“Buyer”).
RECITALS
WHEREAS, (a) Term Holdings Seller is the owner of all of the rights, title and interests in and to all of the limited liability company interests (the “Term Holdings Seller GP Interests”) in STAR 2021-SFR2 Equity Owner GP, L.L.C., a Delaware limited liability company (the “Term Holdings Seller General Partner”); (b) the Term Holdings Seller General Partner is the sole general partner of, and the owner of all of the rights, title and interests in and to a 0.1% general partnership interest (the “Term Holdings Seller General Partner Interest”) in STAR 2021-SFR2 Equity Owner, L.P., a Delaware limited partnership (the “Term Holdings Seller Partnership”; and together with the Term Holdings Seller General Partner, the “Term Holdings Seller Acquired Entities”); and (c) Term Holdings Seller is the sole limited partner of, and the owner of all of the rights, title and interests in and to a 99.9% limited partnership interest, in the Terms Holdings Seller Partnership (the “Term Holdings Seller LP Interests”; the Term Holdings Seller GP interests and the Term Holdings Seller LP Interests are referred to herein collectively as the “Term Holdings Seller Purchased Interests”);
WHEREAS, (a) the Term Holdings Seller Partnership is the owner of all of the rights, title and interests in and to all of the limited liability company interests (the “Star Property Owner GP Interests”) in STAR 2021-SFR2 Borrower GP, L.L.C., a Delaware limited liability company (the “Star Property Owner General Partner”); (b) Star Property Owner General Partner is the sole general partner of, and the owner of all of the rights, title and interests in and to a 0.1% general partnership interest (the “Star Property Owner General Partner Interest”) in, STAR 2021-SFR2 Borrower, L.P., a Delaware limited partnership (the “Star Property Owner”; and together with the Star Property Owner General Partner, collectively, the “Star Property Owner Acquired Entities”); and (c) the Term Holdings Seller Partnership is the sole limited partner of, and the owner of all of the rights, title and interests in and to a 99.9% limited partnership interests in, the Star Property Owner (the “Star Property Owner LP Interests”; and together with the Star Property Owner GP Interests, collectively, the “Star Property Owner Interests”);
WHEREAS, (a) Roofstock Seller is the owner of all of the rights, title and interests in and to all of the limited liability company interests (the “Roofstock Seller GP Interests”) in RS SFR Holdco Owner GP, L.L.C., a Delaware limited liability company (the “Roofstock General Partner”); (b) Roofstock General Partner is the sole general partner of, and the owner of all of the rights, title and interests in and to a 0.1% general partnership interest (the “Roofstock General Partner Interest”) in, RS SFR Holdco Owner, L.P., a Delaware limited partnership (the “Roofstock Partnership”; and together with the Roofstock General Partner, collectively, the “Roofstock Acquired Entities”); and (c) the Roofstock Seller is the sole limited partner of, and the owner of all of the rights, title and interests in and to a 99.9% limited partnership interests in, the Roofstock Partnership (the “Roofstock Seller LP Interests”; and together with the Roofstock Seller GP Interests, collectively, the “Roofstock Purchased Interests”);
WHEREAS, (a) Tiber Seller is the owner of all of the rights, title and interests in and to all of the limited liability company interests (the “Tiber Seller GP Interests”) in SFR Holdco Owner GP, L.L.C., a Delaware limited liability company (the “Tiber General Partner”); (b) Tiber General Partner is the sole general partner of, and the owner of all of the rights, title and interests in and to a 0.1% general partnership interest (the “Tiber General Partner Interest”) in, SFR Holdco Owner, L.P., a Delaware limited partnership (the “Tiber Partnership”; and together with the Tiber General Partner, individually or collectively, as the context may permit or require, the “Tiber Acquired Entities”; the Tiber Acquired Entities, the Term Holdings Seller Acquired Entities, the Star Property Owner Acquired Entities and the Roofstock Acquired Entities are referred to herein, individually or collectively, as the context may permit or require, as the “Acquired Entities”); and (c) Tiber Seller is the sole limited partner of, and the owner of all of the rights, title and interests in and to a 99.9% limited partnership interests in, the Tiber Partnership (the “Tiber Seller LP Interests”; and together with the Tiber Seller GP Interests, individually or collectively, as the context may permit or require, the “Tiber Purchased Interests”; the Tiber Purchased Interests, the Term Holdings Seller Purchased Interests and the Roofstock Purchased Interests are referred to herein, individually or collectively, as the context may permit or require, as the “Purchased Interests”; the Purchased Interests, the Term Holdings Seller General Partner Interest, the Star Property Owner GP Interests, the Star Property Owner LP Interests, the Roofstock General Partner Interest and the Tiber General Partner Interest are referred to herein collectively as the “Interests”);
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell, all of Seller’s right, title and interest in and to the Purchased Interests, upon the terms and subject to the conditions hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
Definitions and Rules of Construction
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1.1. |
Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: |
“Access Agreement” means, that certain Access Agreement with respect to the Properties, dated June 24, 2022, between Buyer and Seller.
“Acquired Entities” has the meaning set forth in the Recitals.
“Acquired Entity Leases” means any Lease to which an Acquired Entity is a party. “Action” means any litigation, arbitration, suit, claim, action, order, decree,proceeding, hearing, petition, investigation, grievance or complaint before any Governmental Authority or arbitrator.
“Additional Deposit” has the meaning set forth in Section 2.4(a).
“Additional Transfer Taxes” has the meaning set forth in Section 2.6.
“Adjustment Time” means 11:59 p.m. on the day immediately preceding the Closing Date.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
“Agreement” means this Interest Purchase Agreement, as it may be amended from time to time.
“Allocated Purchase Prices” has the meaning set forth in Section 2.3(a).
“Ancillary Documents” means the documents being executed and delivered in connection with this Agreement and the transactions contemplated hereby.
“Approval Notice” has the meaning set forth in Section 2.7. “Assignment Agreement” has the meaning set forth in Section 7.2.
“Association(s)” means any condominium association, any homeowner’s association or any other association or non-governmental entity under any Declaration and Covenants.
“Association Approval” means the Association approvals required with respect to the Contemplated Transaction.
“Association Estoppels” has the meaning set forth in Section 5.3(d).
“Authority Payments” has the meaning set forth in Section 3.19.
“Balance Sheet Date” has the meaning set forth in Section 3.6(a).
“Business Day” means any day other than a Saturday, Sunday or day on which banks are closed in New York, New York. If any period expires on a day which is not a Business Day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is not a Business Day, such period shall expire or such event or condition shall occur or be fulfilled, as the case may be, on the next succeeding Business Day.
“Buyer” has the meaning set forth in the Preamble.
“Buyer Condition to Closing” has the meaning set forth in Section 6.3.
“Buyer Condition to Closing Excluded Property Designation Date” has the meaning set forth in Section 6.3.
“Buyer Exculpated Parties” has the meaning set forth in Section 5.5(b).
“Casualty” has the meaning set forth in Section 5.9(b).
“Closing” has the meaning set forth in Section 2.2.
“Closing Consideration Amount” has the meaning set forth in Section 2.3(a).
“Closing Date” has the meaning set forth in Section 2.2.
“Closing Date Indebtedness” means the Indebtedness of the Property Owner as of the Adjustment Time (without duplication of any amounts included in the calculation of the Proration Items); provided that, for the avoidance of doubt, Closing Date Indebtedness shall not include any amounts payable with respect such Indebtedness that are repaid at, or prior to, Closing (including, without limitation, in connection with the Excluded Properties and the Seller Mandatory Removal Properties).
“Closing Date Statement” has the meaning set forth in Section 2.3(b).
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or corresponding provisions of subsequent superseding federal revenue Laws.
“Company Disclosure Schedule” means the disclosure schedule of even date herewith delivered by Seller to Buyer in connection with the execution and delivery of this Agreement.
“Condemnation” has the meaning set forth in Section 5.9.
“Contested Liens” has the meaning set forth in Section 2.3(f)(7).
“Confidentiality Agreement” means that certain Principal Confidentiality Agreement, dated as of May 12 2022, made by Vinebrook Homes Operating Partnership, L.P. in favor of Star Property Owner and its affiliates, with respect to Project Siete.
“Consents” has the meaning set forth in Section 3.5.
“Contemplated Transactions” means the transactions contemplated by this Agreement and the Ancillary Documents.
“Consultants” has the meaning set forth in the Access Agreement.
“Contract” means any written agreement, contract, arrangement, understanding, obligation or commitment to which a party is bound.
“Data Room Information” means any written information, documents or materials made available to Buyer in the Data Room Website, which may be updated by (or on behalf of) Seller at any time until 5:00 pm EST on the date that is two (2) Business Days’ prior to the expiration of the Due Diligence Period.
“Data Room Website” has the meaning set forth in the Access Agreement.
“Declarations and Covenants” means, collectively, any homeowner or condominium declarations, reciprocal easement agreements, covenants, conditions and restrictions agreements or other similar agreements of record and affecting or encumbering any of the Properties.
“Deposit” has the meaning set forth in Section 2.4(a).
“Due Diligence Period” means, notwithstanding anything contained in the Access Agreement to the contrary, the period commencing on June 24, 2022 and ending at 5:00 p.m. (Eastern Time) on August 3, 2022.
“Effective Date” has the meaning set forth in the Preamble.
“Environmental Laws” means any applicable foreign, federal, state or local law, statute, ordinance, rule or regulation governing Environmental Matters, in each case as in effect at the Closing Date.
“Environmental Matter” means any matters arising out of or relating to pollution or protection of the environment or natural resources, including any of the foregoing relating to the use, generation, transport, treatment, storage or disposal of any material defined as a “hazardous substance” or “hazardous waste” under any Environmental Law.
“Equity Securities” of any Person means any and all shares of capital stock, limited liability company interests, partnership interests, warrants or options to acquire capital stock, limited liability company interests or partnership interests of such Person, and all securities exchangeable for, or convertible or exercisable into, any of the foregoing.
“Escrow Account” has the meaning set forth in Section 2.4.
“Escrow Agent” means Fidelity National Title Insurance Company, 1050 Wilshire Drive, Suite 310, Troy, Michigan 48084, Attn: Maxine J. Lievois, Esq., Phone: (248) 816-3850, Email: Maxine.lievois@fnf.com.
“Escrow Agreement” means that certain Escrow Agreement to be entered into promptly following the date hereof in connection with the establishment of the Escrow Account, by and between Buyer, Seller and Escrow Agent substantially in the form attached hereto as Exhibit B.
“Estimated Transfer Taxes” means the Title Company’s good faith determination of the estimated amount of Transfer Taxes to be paid in connection with the Contemplated Transaction, as reasonably approved by Buyer and Seller.
“Excluded Property” means each Property that is deemed an “Excluded Property” pursuant to the terms hereof; it being acknowledged and agreed that (a) in no event shall any Seller Mandatory Removal Property constitute (or be deemed to constitute) an “Excluded Property” and (b) in all events “Excluded Property” shall expressly exclude any Seller Mandatory Removal Property.
“Excluded Property Purchase Price Reduction” has the meaning set forth in Section 2.9(a).
“Excluded Property Designation Date” means, individually or collectively as the context may permit or require (i) a Title Defect Excluded Property Designation Date, (ii) a Significant Casualty/Condemnation Excluded Property Designation Date, (iii) a Buyer Condition to Closing Excluded Property Designation Date and/or (iv) the Holly Hock Property Designation Date.
“Excluded Property Disposition” has the meaning set forth in Section 2.9(a). “Existing Construction Projects” has the meaning set forth in Section 3.18(c). “Existing Guarantor” means SOF-XI U.S. NRE Holdings, L.P., a Delaware limited partnership.
“Existing Lender” means any lender under the Existing Loan.
“Existing Lender Consent” has the meaning set forth in Section 5.3(c).
“Existing Loan” means the Indebtedness evidenced by the Existing Loan Documents.
“Existing Loan Agreement” has the meaning set forth in Section 3.6(c)(i) of the Company Disclosure Schedules.
“Existing Loan Assumption Approval” has the meaning set forth in Section 5.3(c).
“Existing Loan Assumption Approval Conditions” has the meaning set forth in Section 5.3(c).
“Existing Loan Assumption Fees” has the meaning set forth in Section 5.3(c).
“Existing Loan Assumption Requirements” means, collectively, (1) the satisfaction of all reasonable requests, searches, requirements, deliveries (including, without limitation, documents, instruments, certificates and opinions) and conditions of the Existing Lender (including, without limitation, the requests, searches, requirements, deliveries and conditions set forth in Section 4.2.14(d)(vii) of the Existing Loan Agreement) in connection with the Contemplated Transactions (including, if applicable, with respect to any Excluded Properties and Excluded Property Disposition and/or any Seller Mandatory Removal Properties and Seller Mandatory Removal Property Disposition), (2) intentionally omitted, (3) the delivery of any information and materials reasonably required by the Existing Lender with respect to the Contemplated Transactions, including, without limitation, any information and materials such that the Existing Lender can perform the searches and other due diligence contemplated by Section 4.2.14(d)(vii) of the Existing Loan Agreement, in each case with respect to Buyer, its Affiliates and their respective businesses, (4) the delivery of releases to the Existing Lender that are required by the Existing Loan Documents or which are reasonably requested by the Existing Lender, (5) the delivery of an Additional Insolvency Opinion (as such term is defined in the Existing Loan Documents) to the existing Lender, (6) the satisfaction of the Guaranty Assumption Requirements, (7) Existing Lender’s receipt of any applicable rating agency confirmations required pursuant to the Existing Loan Agreement with respect to the Contemplated Transactions and (8) the satisfaction of any other reasonable requirements and conditions of the Existing Lender in connection with the Contemplated Transactions.
“Existing Loan Documents” has the meaning set forth in Section 3.6(c).
“Existing Manager” means (a) with respect to the Properties currently managed by Tiber Capital Group LLC (or its affiliates, delegees or subcontractors (if any)), Tiber Capital Group LLC and (b) with respect to the Properties currently managed by Roofstock, Inc. (or its affiliates, delegees or subcontractors (if any)), Roofstock, Inc.
“Financial Statements” has the meaning set forth in Section 3.6(a).
“Fundamental Representations” means the representations and warranties of (i) Seller set forth in Section 3.1 (Organization and Power), Section 3.2 (Authorization and Enforceability), Section 3.3 (Capitalization) and Section 3.14 (Tax Matters) and (ii) Buyer set forth in Section 4.1 (Organization and Power), Section 4.2 (Authorization), and Section 4.3 (Enforceability).
“GAAP” means generally accepted accounting principles as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession in the United States.
“General Partner” has the meaning set forth in the Recitals.
“General Partner Interest” has the meaning set forth in the Recitals.
“Governmental Authority” means any nation or government, any foreign or domestic federal, state, county, municipal or other political instrumentality or subdivision thereof and any foreign or domestic entity or body exercising executive, legislative, judicial, regulatory, administrative or taxing functions of or pertaining to government, including any court.
“Guarantor Joinder” has the meaning set forth in Section 7.10.
“Guaranty Assumption Requirements” means, collectively, (1) either the execution by a Qualified Transferee (as defined in the Existing Loan Agreement) of a replacement guaranty with respect to the Sponsor Guaranty or the execution by a Qualified Transferee (as defined in the Existing Loan Agreement) of an assumption of the obligations of Existing Guarantor under the Sponsor Guaranty, in either case pursuant to Section 4.2.14(e)of the Existing Loan Agreement and (2) the execution by a Qualified Transferee (as defined in the Existing Loan Agreement) of a replacement guaranty with respect to the Repurchase Guaranty and the execution by a Qualified Transferee (as defined in the Existing Loan Agreement) of an assumption of the obligations of Existing Guarantor under the Repurchase Guaranty, in each case pursuant to Section 10 of the Repurchase Guaranty.
“Holly Hock Claim” means that certain claim made by Pamela and Miriam Winston with respect to the Holly Hock Property, which claim is more particularly described on Section 3.12 of the Company Disclosure Schedules.
“Holly Hock Property” means that certain property located at 1581 Hollyhock Terrace, Decatur, GA 30032.
“Holly Hock Property Designation Date’ has the meaning set forth in Section 2.11.
“Housing Authority” has the meaning set forth in Section 3.19.
“Indebtedness” means all obligations and indebtedness of the Acquired Entities (a) for borrowed money (other than trade debt and other similar liabilities incurred in the ordinary course of business), (b) evidenced by a note, bond, debenture, or similar instrument, but excluding letters of credit to the extent not drawn upon, (c) drawn under letters of credit, banker’s acceptances or similar credit transactions, (d) for any other Person’s obligation or indebtedness of the same type as any of the foregoing, whether as obligor, guarantor or otherwise, (e) created or arising under any capital lease, conditional sale, earn out or other arrangement for the deferral of purchase price of any Property; and/or (f) for accrued but unpaid interest (including default interest) and penalties on any of the foregoing; provided, that Indebtedness shall not include (i) accounts payable to trade creditors and deferred revenues arising in the ordinary course of business, (ii) the endorsement of negotiable instruments for collection in the ordinary course of business, and (iii) Indebtedness owing from any Acquired Entity to any wholly owned Subsidiaries thereof or from any such wholly-owned Subsidiaries to any Acquired Entity.
“Indemnified Individuals” has the meaning set forth in Section 5.5(c).
“Independent Consideration” means a portion of the Deposit equal to one hundred dollars ($100.00).
“Initial Deposit” has the meaning set forth in Section 2.4(a). “JLL” means Jones Lang LaSalle Inc.
“Kirkland” has the meaning set forth in Section 11.16.
“Knowledge of Buyer” (and correlative uses thereof) means the actual knowledge (and not imputed or constructive knowledge), without any duty of inquiry or investigation, of Dana Sprong and Kyle Bodmer. There shall be no personal liability on the part of the foregoing named individuals arising out of any of the representations or warranties of Buyer under this Agreement.
“Knowledge of Seller” means the actual knowledge (and not imputed or constructive knowledge), without any duty of inquiry or investigation, of Sam Caven and Nick Haechler (collectively, “Seller’s Designated Representatives”). There shall be no personal liability on the part of the foregoing named individuals arising out of any of the representations or warranties of Seller under this Agreement.
“Laws” means all laws, Orders, statutes, codes, regulations, ordinances, orders, decrees, rules or other requirements with similar effect of any Governmental Authority.
“Leases” means all leases, subleases, licenses or other agreements that permit the use or occupancy of a Property and use of related improvements, or portion thereof and guaranties relating thereto.
“Liability” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person.
“Lien” means any lien, statutory or otherwise, security interest, mortgage, deed to secure debt, deed of trust, security instrument, financing statement, priority, pledge, charge, right of first offer, right of first refusal, option or other encumbrance or similar right of others, or any agreement to give any of the foregoing.
“Litigation” has the meaning set forth in Section 3.12.
“Loss” or “Losses” means any and all claims, losses, Taxes, Liabilities, damages, deficiencies, interest and penalties, costs and expenses, including losses resulting from the defense, settlement and/or compromise of a claim and/or demand and/or assessment, reasonable attorneys’, accountants’ and expert witnesses’ fees, costs and expenses of investigation, and the costs and expenses of enforcing any indemnification provided hereunder.
“Mandatory Removal Exceptions” means (i) any Liens voluntarily recorded by any Acquired Entity or arising from the voluntary action (or failure to take required action) of any Acquired Entity (in each case, as opposed to any tenant or other party), in each case but other than with the prior written approval of Buyer, (ii) all matters set forth on Exhibit C hereto, and (iii) any other Lien granted by any Acquired Entity which secures indebtedness for borrowed money (other than the Lien created by the Existing Loan Documents).
“Material Contracts” has the meaning set forth in Section 3.9(a).
“Material Title Matter” means any Lien, encumbrance or other title matter with respect to any Property, in each case which has a material and adverse effect on the value, use or operation of such Property as a single family rental property and which is not a Permitted Lien or a Mandatory Removal Exception.
“New Construction Projects” has the meaning set forth in Section 5.3(e).
“Non-Terminating Party” has the meaning set forth in Section 2.2.
“Orders” means all judgments, orders, writs, injunctions, decisions, rulings, decrees and awards of any Governmental Authority.
“OSN” means OS National LLC, 3097 Satellite Blvd, Bldg 700, Ste 400, Duluth, GA 30096, Attn: James F. Duggan and Amy Johnson, Phone: (678) 527-7864, Email: jduggan@osnational.com and ajohnson@osnational.com.
“Other Agreement” means that certain Interest Purchase Agreement among Buyer, Term Holdings Seller and SOF-XI Term Parent Holdings, L.P., a Delaware limited partnership, dated as of the Effective Date.
“Other Agreement Access Agreement” has the meaning ascribed to the term “Access Agreement” in the Other Agreement.
“Other Agreement Buyer” has the meaning ascribed to the term “Buyer” in the Other Agreement.
“Other Agreement Closing” has the meaning ascribed to the term “Closing” in the Other Agreement.
“Other Agreement Closing Date” has the meaning ascribed to the term “Closing Date” in the Other Agreement.
“Other Agreement Excluded Properties” has the meaning ascribed to the term “Excluded Properties” in the Other Agreement.
“Other Agreement Fundamental Representations” has the meaning ascribed to the term “Fundamental Representations” in the Other Agreement.
“Other Agreement Losses” has the meaning ascribed to the term “Losses” in the Other Agreement.
“Other Agreement Outside Closing Date” has the meaning ascribed to the term “Outside Closing Date” in the Other Agreement.
“Other Agreement Properties” has the meaning ascribed to the term “Properties” in the Other Agreement.
“Other Agreement Property Representations” has the meaning ascribed to the term “Property Representations” in the Other Agreement.
“Other Agreement Purchase Price” has the meaning ascribed to the term “Purchase Price” in the Other Agreement.
“Other Agreement Seller” has the meaning ascribed to the term “Seller” in the Other Agreement.
“Other Agreement Seller Termination Event” has the meaning ascribed to the term “Seller Termination Event” in the Other Agreement.
“Outside Closing Date” has the meaning set forth in Section 2.2.
“Permitted Entity Liens” means restrictions under applicable state and federal securities laws or under the applicable Organizational Documents and/or Liens and restrictions under the terms of the Existing Loan Documents.
“Permitted Liens” means: (i) statutory Liens for current Taxes, assessments or other governmental charges not yet due and payable or being contested in good faith by appropriate proceedings; (ii) all water, sewer, utility, trash and other similar charges that are or may become or give rise to a Lien on all or any portion of such Property, in each case that are not yet due and payable and delinquent as of the Closing Date or that are being contested in good faith (it being understood that such items shall be subject to apportionment or adjustment at the Closing as provided herein); (iii) the rights of the tenants pursuant to the applicable Leases; (iv) Liens securing Indebtedness under the Existing Loan Documents or other obligations secured by the Existing Loan Documents; (v) any Liens and/or title exceptions disclosed in any title commitment provided to Buyer (other than any Material Title Matters for which Buyer has timely delivered a Title Defect Notice in accordance with the terms hereof); (vi) all Laws, including all environmental, building and zoning restrictions affecting such Property or the ownership, use or operation thereof adopted by any Governmental Authority having jurisdiction over such Property or the ownership, use or operation thereof, and all amendments or additions thereto now in effect or which may be in force and effect after the date hereof with respect to such Property but excluding judgments against any Seller or Affiliate thereof, provided that none of the foregoing materially restrict use of the Properties as single family rental properties (vii) all matters created or caused by or on behalf of, or with the written consent of, Buyer; (viii) the state of facts disclosed on any surveys provided to Buyer (other than those items set forth on Exhibit C attached hereto), and any further state of facts as a current survey or inspection of the applicable Property would disclose, possible encroachments and/or projections of stoop areas, roof cornices, window trims, vent pipes, cellar doors, steps, columns and column bases, flue pipes, signs, piers, lintels, window sills, fire escapes, satellite dishes, protective netting, sidewalk sheds, ledges, fences, coping walls (including retaining walls and yard walls), air conditioners and the like, if any, on, under or above any street or highway, the Property or any adjoining property; (ix) such matters as the Escrow Agent shall be willing, at no material cost to Buyer, to omit as exceptions to coverage or affirmatively insure over with respect to a new title insurance policy (other than any Material Title Matters for which Buyer has timely delivered a Title Defect Notice in accordance with the terms hereof); (x) the standard printed exclusions from coverage contained in the ALTA form of owner’s title policy currently in use and in the state where a Property is located; (xi) all covenants, restrictions and utility company rights, easements and franchises relating to electricity, water, steam, gas, telephone, sewer or other service or the right to use and maintain poles, lines, wires, cables, pipes, boxes and other fixtures and facilities in, over, under and upon the Property; (xii) mechanic’s, materialmen’s, carriers’, repairers’ and other Liens arising or incurred in the ordinary course of business for amounts that are not yet delinquent or are being contested in good faith, including, without limitation, any such Liens with respect to the Existing Construction Projects or the New Construction Projects for which Buyer receives a credit at Closing; (xiii) Liens (other than Liens securing indebtedness for borrowed money), defects or irregularities in title, easements, rights-of-way, covenants, restrictions and other similar matters that would not reasonably be expected to, individually or in the aggregate, materially impair the value or continued use and operation of the applicable individual Property, in each case other than any Material Title Matters for which Buyer has timely delivered a Title Defect Notice in accordance with the terms hereof; (xiv) Liens securing obligations for which Seller, in its sole discretion, causes to be removed or provides a credit to Buyer at Closing together with the fees associated with such removal; or (xv) Contested Liens. In no event shall any “Permitted Lien” include any Mandatory Removal Exception.
“Person” means any individual, person, entity, general partnership, limited partnership, limited liability partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association, foreign trust or foreign business organization and the heirs, executors, administrators, legal representatives, successors and assigns of the “Person” when the context so permits.
“Post-Closing Date Statement” has the meaning set forth in Section 2.3(e).
“Post-Closing Liability Trigger” has the meaning set forth in Section 6.3(e).
“Properties” has the meaning set forth in Section 3.7(a).
“Property Owner” means, individually or collectively, as the context may permit or require (a) Star Property Owner, (b) the Roofstock Partnership and (c) the Tiber Partnership.
“Property Representations” means the representations and warranties of Seller set forth in this Agreement other than the Fundamental Representations.
“Proration Items” has the meaning set forth in Section 2.3(f).
“Purchase Price” has the meaning set forth in Section 2.3(a).
“Purchased Interests” has the meaning set forth in the Recitals.
“Purchaser Investigations” has the meaning set forth in the Access Agreement.
“Property Management Agreement” has the meaning set forth in Section 5.14.
“Proprietary Information” shall mean (i) information and materials that are legally privileged, constitute attorney work product or are subject to a third-party confidentiality agreement prohibiting Seller and/or its Affiliates from providing such information and materials and/or (ii) information and materials that constitute confidential internal forecast, projection and/or strategy assessments, reports, studies, analyses, memoranda, notes and related correspondence prepared by or on behalf of any officer or employee of Seller or any of its affiliates.
“R&W Insurance Policy” has the meaning set forth in Section 9.2.
“R&W Insurance Policy Binding Premium” has the meaning set forth in Section 9.3.
“R&W Insurance Policy Buyer Condition to Closing” has the meaning set forth in Section 6.3(e).
“R&W Insurance Policy Insurer” has the meaning set forth in Section 9.3.
“R&W Insurance Policy Non-Binding Indicative Terms” has the meaning set forth in Section 9.2.
“Required Association Approval” means any Association Approval identified by Buyer to Seller in writing no later than twelve (12) Business Days prior to the Closing Date.
“Released Claims” has the meaning set forth in Section 11.18.
“Rent” has the meaning set forth in Section 2.3(f)(i).
“Rent Roll” has the meaning set forth in Section 3.8.
“Replacement R&W Insurance Policy” means a buyer side representations and warranties policy that is (i) procured by Seller for the benefit of Buyer in connection with the Contemplated Transactions and (ii) issued by the Replacement R&W Insurer on the R&W Insurance Policy Non-Binding Indicative Terms.
“Replacement R&W Insurance Policy Insurer” means any reputable insurance company regularly engaged in the issuance of representation and warranty insurance policies.
“Representatives” has the meaning set forth in Section 9.1.
“Repurchase Guaranty” means that certain Repurchase Guarantor for Material Document Defects, executed by Existing Guarantor in favor of Existing Lender.
“Restricted Person” means any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, or other entity which (i) is included on the List of Specially Designated Nationals and Blocked Persons maintained by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”), (ii) resides or has a place of business in a country or territory named on an OFAC list or which is designated as a Non-Cooperative Jurisdiction by the Financial Action Task Force on Money Laundering or transfers its funds from or through such a jurisdiction, (iii) resides in or is organized under the laws of a jurisdiction designated by the Secretary of the Treasury of the United States as warranting special measures due to money laundering concerns, (iv) is a senior foreign political figure, member of a senior foreign political figure’s immediate family or close associate of a senior foreign political figure (as each is defined below), or (v) is a foreign shell bank (as defined below). For purposes of this definition, senior foreign political figure means a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a senior foreign political figure includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure. The immediate family of a senior foreign political figure includes the senior foreign political figure’s parents, siblings, spouse, children and in-laws. A close associate of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure. For purposes of this definition, “foreign shell bank” means a foreign bank that does not have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision.
“Roofstock Acquired Entities” has the meaning set forth in the Recitals.
“Roofstock General Partner” has the meaning set forth in the Recitals.
“Roofstock General Partner Interest” has the meaning set forth in the Recitals.
“Roofstock Partnership” has the meaning set forth in the Recitals.
“Roofstock Purchased Interests” has the meaning set forth in the Recitals.
“Roofstock Seller” has the meaning set forth in the Preamble.
“Roofstock Seller GP Interests” has the meaning set forth in the Recitals.
“Roofstock Seller LP Interests” has the meaning set forth in the Recitals.
“Rule 3-14 Financials” has the meaning set forth in Section 5.12.
“Security Deposits” has the meaning set forth in Section 3.8.
“Seller” has the meaning set forth in the Preamble.
“Seller Exculpated Parties” has the meaning set forth in Section 5.5(a).
“Seller GP Interests” has the meaning set forth in the Recitals.
“Seller Group” has the meaning set forth in Section 11.16.
“Seller LP Interests” has the meaning set forth in the Recitals.
“Seller Mandatory Removal Property” or “Seller Mandatory Removal Properties” has the meaning set forth in Section 2.10.
“Seller Mandatory Removal Property Disposition” has the meaning set forth in Section 2.10.
“Seller Termination Event” shall occur each time the sum of (a) the number of Excluded Properties plus (b) the number of Other Agreement Excluded Properties, is more than two percent (2%) of the sum of (x) the total number of Properties subject to this Agreement as of the Effective Date plus (y) the total number of Other Agreement Properties subject to the Other Agreement as of the Effective Date.
“Seller’s Representations” means the Fundamental Representations and the Property Representations.
“Significant Casualty” means, if any individual Property (or portions thereof) is damaged by a fire or other casualty and the cost to repair and restore such Property is expected to cost more than $50,000.00.
“Significant Casualty/Condemnation Excluded Property Designation Date” has the meaning set forth in Section 5.9(c).
“Significant Condemnation” means, if a taking occurs with respect to all or a portion of any Property as a result of a condemnation or eminent domain proceeding, such taking will result in the loss of a Property or portions thereof valued in an aggregate amount of more than $50,000.00.
“Sponsor Guaranty” means that certain Sponsor Guaranty, dated as of December 14, 2021, executed by Existing Guarantor in favor of Existing Lender.
“Star Property Owner” has the meaning set forth in the Recitals.
“Star Property Owner Acquired Entities” has the meaning set forth in the Recitals.
“Star Property Owner General Partner” has the meaning set forth in the Recitals.
“Star Property Owner General Partner Interest” has the meaning set forth in the Recitals.
“Star Property Owner GP Interests” has the meaning set forth in the Recitals.
“Star Property Owner Interests” has the meaning set forth in the Recitals.
“Star Property Owner LP Interests” has the meaning set forth in the Recitals.
“Straddle Period” means any Tax period beginning on or before and ending after the Closing Date.
“Subsidiary” means, with respect to any Person, any Person controlled by such Person, directly or indirectly, through one or more intermediaries, and includes any entity in respect of which such Person, directly or indirectly, beneficially owns 50% or more of the voting securities or equity.
“Surviving Provisions” has the meaning set forth in Section 10.2(a).
“Tax” or “Taxes” (including, with correlative meaning, the term “Taxable”) means all U.S. federal, state, local and non-U.S. foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise production, value added, occupancy, Transfer Taxes, and other taxes, duties or assessments of any nature whatsoever imposed by a Governmental Authority, together with all interest, penalties or additions to tax attributable to such taxes.
“Tax Contest” shall mean any audit, hearing, proposed adjustment, arbitration, deficiency, assessment, suit, dispute, claim, or similar proceeding commenced, filed or otherwise initiated or convened to investigate or resolve the existence and extent of a Liability for Taxes.
“Tax Return” means any report, return, statement, or similar form (including elections, declarations, disclosures, schedules, estimates and information returns) filed with a Taxing Authority in connection with any Taxes.
“Taxing Authority” shall mean any government or any subdivision, agency, commission or authority thereof, or any quasi-governmental or private body, having jurisdiction over the assessment, determination, collection or other imposition of Taxes.
“Tenant” means any person or entity entitled to occupy any portion of the Properties under a Lease.
“Term Holdings Seller” has the meaning set forth in the Recitals.
“Term Holdings Seller Acquired Entities” has the meaning set forth in the Recitals.
“Term Holdings Seller General Partner” has the meaning set forth in the Recitals.
“Term Holdings Seller General Partner Interests” has the meaning set forth in the Recitals.
“Term Holdings Seller GP Interests” has the meaning set forth in the Recitals.
“Term Holdings Seller LP Interests” has the meaning set forth in the Recitals.
“Term Holdings Seller Partnership” has the meaning set forth in the Recitals.
“Term Holdings Seller Purchased Interests” has the meaning set forth in the Recitals.
“Terminating Notice” has the meaning set forth in Section 2.2.
“Terminating Party” has the meaning set forth in Section 2.2.
“Tiber Acquired Entities” has the meaning set forth in the Recitals.
“Tiber General Partner” has the meaning set forth in the Recitals.
“Tiber General Partner Interest” has the meaning set forth in the Recitals.
“Tiber Partnership” has the meaning set forth in the Recitals.
“Tiber Purchased Interests” has the meaning set forth in the Recitals.
“Tiber Seller” has the meaning set forth in the Preamble.
“Tiber Seller GP Interests” has the meaning set forth in the Recitals.
“Tiber Seller LP Interests” has the meaning set forth in the Recitals.
“Title Company” means Fidelity National Title Insurance Company, 1050 Wilshire Drive, Suite 310, Troy, Michigan 48084, Attn: Maxine J. Lievois, Esq., Phone: (248) 816-3850, Email: Maxine.lievois@fnf.com, through its agent, OSN.
“Title Defect Excluded Property Designation Date” has the meaning set forth in Section 2.8(b).
“Title Defect List” has the meaning set forth in Section 2.8(a).
“Title Defect Notice” has the meaning set forth in Section 2.8(a).
“Title Policies” has the meaning set forth in Section 2.5.
“Total Consideration” has the meaning set forth in Section 2.3(a).
“Transaction Documents” has the meaning set forth in Section 9.1.
“Transfer Taxes” means all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees (including any penalties and interest) incurred in connection with the Contemplated Transactions.
“Treasury Regulations” means the regulations promulgated under the Code, as amended from time to time (including any successor regulations).
“Utilities” has the meaning set forth in Section 2.3(f)(iii).
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1.2. |
Rules of Construction. |
Unless the context otherwise requires:
(a) A capitalized term has the meaning assigned to it;
(b) An accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(c) References in the singular or to “him,” “her,” “it,” “itself,” or other like references, and references in the plural or the feminine or masculine reference, as the case may be, shall also, when the context so requires, be deemed to include the plural or singular, or the masculine or feminine reference, as the case may be;
(d) References to Articles, Sections and Exhibits shall refer to articles, sections and exhibits of this Agreement, unless otherwise specified;
(e) The headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof;
(f) This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party that drafted and caused this Agreement to be drafted;
(g) All monetary figures shall be in U.S. dollars unless otherwise specified;
(h) References to “including” in this Agreement shall mean “including, without limitation,” whether or not so specified; and
(i) The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other theory extends and such phrase shall not mean “if.”
ARTICLE II
Purchase and Sale
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2.1. |
Purchase and Sale. |
Subject to the terms and conditions set forth in this Agreement, at the Closing, Buyer shall purchase from Seller, and Seller shall sell, transfer and assign to Buyer, free and clear of all Liens other than Permitted Liens, all of the Purchased Interests.
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2.2. |
Closing. |
The closing of the Contemplated Transactions (the “Closing”) shall take place on the date that is fifteen (15) days after the later to occur of (a) the expiration of the Due Diligence Period and (b) the receipt of the Existing Loan Assumption Approval (the “Closing Date”), through an escrow with Escrow Agent and pursuant to escrow instructions consistent with the terms of this Agreement and otherwise reasonably satisfactory to Seller and Buyer, subject in each case to the satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions); provided, however, to the extent the Existing Loan Assumption Approval has not been received by the date which is one hundred twenty (120) days after the Effective Date (the “Outside Closing Date”), then Seller or Buyer shall have the right in its sole discretion to notify the other party in writing (such written notice, a “Termination Notice”; the party delivering a Termination Notice shall be referred to herein as a “Terminating Party” and the other party will be referred to hereinafter as a “Non-Terminating Party”) that the Terminating Party elects to terminate this Agreement as of the date of such Termination Notice, whereupon neither party shall have any further rights or obligations under this Agreement except for those that expressly survive the termination of this Agreement and the Deposit (less fifty percent (50%) of any outstanding Existing Loan Assumption Fees) shall be promptly returned to Buyer; provided further, however, (a) notwithstanding the immediately preceding proviso, upon receipt of the Termination Notice from the Terminating Party, the Non-Terminating Party shall have a one-time right, by delivering written notice to the Terminating Party within two (2) Business Days of the Terminating Party’s receipt of such Termination Notice, to extend the Outside Closing Date by thirty (30) days, provided that the effectiveness of such extension shall be conditioned upon Buyer and Seller in good faith reasonably agreeing in writing that substantial progress has been made with respect to obtaining the Existing Loan Assumption Approval and (b) to the extent the Existing Loan Assumption Approval has not been received by the Outside Closing Date (as extended pursuant to the immediately preceding clause (a)), then Buyer and Seller shall be deemed to have mutually agreed to terminate this Agreement as of such extended Outside Closing Date, whereupon neither party shall have any further rights or obligations under this Agreement except for those that expressly survive the termination of this Agreement and the Deposit (less fifty percent (50%) of any outstanding Existing Loan Assumption Fees) shall be promptly returned to Buyer. Notwithstanding the foregoing or anything contained herein to the contrary, (i) if the Other Agreement is terminated in accordance with Section 2.2 of the Other Agreement, then this Agreement shall automatically terminate pursuant to this Section 2.2 simultaneously with such termination of the Other Agreement, (ii) a Terminating Party shall only have the right to terminate this Agreement pursuant to this Section 2.2 if such Terminating Party (or its Affiliate) is simultaneously terminating the Other Agreement pursuant to Section 2.2 of the Other Agreement, and (iii) a Non-Terminating Party shall only have the right to extend the Outside Closing Date pursuant to this Section 2.2 if such Non-Terminating Party (or its Affiliate) is extending the Other Agreement Outside Closing Date pursuant to Section 2.2 of the Other Agreement.
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2.3. |
Payments at the Closing. |
(a) Subject to adjustments made under this Section 2.3 and Section 2.6, (i) the amount to be paid by Buyer to Seller for the Purchased Interests shall be (A) $353,532,934.13, as reduced by all Excluded Property Purchase Price Reductions pursuant to Section 2.9(a) (the “Total Consideration”) less (B) the Closing Date Indebtedness (the “Purchase Price”), and (ii) the amount to be paid by Buyer to Seller at the Closing shall be (A) the Purchase Price less (B) the amount of the Deposit (which will be released to Seller from the Escrow Account at Closing) (the “Closing Consideration Amount”). Buyer and Seller acknowledge and agree that the Total Consideration has been allocated to the Properties as set forth on Exhibit A attached hereto (the “Allocated Purchase Prices”). The Allocated Purchase Prices, the Purchase Price and the Total Consideration shall not be modified for purposes of this Agreement without the prior written consent of both Seller and Buyer (which consent may be withheld in the sole discretion of either party); provided that the Allocated Purchase Prices (other than with respect to any Excluded Properties) shall be subject to adjustment among the Properties (other than the Excluded Properties) at least three (3) Business Days prior to the expiration of the Due Diligence Period (upon written notice thereof from Buyer to Seller) by Buyer (but not by more than 2% without Seller’s approval in Seller’s sole and absolute discretion), and in all events so long as the total Allocated Purchase Prices continue to equal the Total Consideration.
(b) Not fewer than five (5) Business Days prior to the Closing, Seller shall deliver to Buyer its good faith determination of the Closing Date Indebtedness, the Estimated Transfer Taxes and the Proration Items. Buyer shall have the opportunity to review all materials and information used by Seller or the Acquired Entities in preparing such determination, as reasonably requested by Buyer. Such determination, as it may be adjusted as mutually agreed by Buyer and Seller, is referred to as the “Closing Date Statement”.
(c) The net amount of credits to Buyer and/or Seller for the Proration Items as reflected on the Closing Date Statement shall result in an increase or decrease to the Closing Consideration Amount.
(d) At the Closing, Buyer shall pay Seller in consideration for the Purchased Interests an amount equal to the Closing Consideration Amount, and Buyer and Seller shall each deliver to the Escrow Agent (subject to Section 5.4(a)) an amount equal to fifty percent (50%) of the Estimated Transfer Taxes, in each case, by wire transfer of immediately available funds to the Escrow Agent.
(e) If the cost or amount of any item which is to be adjusted pursuant to Section 2.3(f) or with respect to Closing Date Indebtedness, the Estimated Transfer Taxes or the Contested Liens cannot be finally determined on the Closing Date, then an initial adjustment for such item shall be made on the Closing Date, such amount to be estimated by Seller, acting reasonably, as of the Closing Date on the basis of the best information available at the Closing as to what the final cost or amount of such item will be. Not later than one hundred eighty (180) days following the Closing Date, Seller shall deliver to Buyer its good faith final determination of the adjustments and prorations provided for herein and setting forth any items which are not capable of being determined at such time (and the manner and timing in which such items shall be determined and paid). Buyer shall have the opportunity to review all materials and information used by Seller or the Acquired Entities in preparing such final determination, as reasonably requested by Buyer. Such determination, as it may be adjusted as mutually agreed by Buyer and Seller, is referred to as the “Post-Closing Date Statement”. If by reason of adjustments to the Closing Date Statement, as shown in the Post-Closing Date Statement, any such prorated amounts shall be adjusted post- closing, then the net amount allocable to (i) Seller shall be paid by Buyer to Seller, and (ii) Buyer shall be paid by Seller to Buyer. This Section 2.3(e) shall survive Closing. To secure Seller’s obligations under this Section 2.3(e), Seller shall collectively maintain an aggregate net worth in an amount not less than $5,000,000.00 from and after the Closing until all net amounts due to Buyer pursuant to the Post Closing Date Statement are paid to Buyer.
(f) Prorations. All prorations and other adjustments described in this Section 2.3(f) shall be made at the Closing based on the Closing Date Statement prepared in accordance with Section 2.3(b) above. All prorations and other adjustments made pursuant to this Section 2.3(f) shall be made without duplication whatsoever. Except as otherwise set forth herein, all items to be prorated and other adjustments to be made pursuant to this Section 2.3(f) (the “Proration Items”) shall be prorated as of the Adjustment Time and the net amount allocable thereof shall be allocated to Seller and Buyer by increasing or reducing the Closing Consideration Amount to be delivered by Buyer at the Closing pursuant to Section 2.3(c). Buyer shall be treated as the owner of the Properties for purposes of prorations of income and expenses on and after the Adjustment Time. The Proration Items shall be calculated before the calculation of Closing Date Indebtedness and the calculation of Closing Date Indebtedness shall exclude any items taken into account in the determination of the Proration Items with the intent of the parties hereto being to avoid double counting Proration Items in any adjustments to the Closing Consideration Amount. Buyer and Seller acknowledge that, except as otherwise expressly provided herein, the purpose and intent as to prorations and other adjustments pursuant to this Section 2.3(f) is that (i) Seller shall bear one hundred percent (100%) of all expenses of ownership and operation of the Properties, and shall receive the benefit of one hundred percent (100%) of all income therefrom, in each case accruing until the Adjustment Time, and (ii) Buyer shall bear one hundred percent (100%) of all expenses of ownership and operation of the Properties, and shall receive the benefit of one hundred percent (100%) of all income therefrom, in each case accruing from and after the Adjustment Time. Notwithstanding anything herein to the contrary, but subject to the last sentence of Section 2.3(f)(ii), all prorations shall be made on the basis of the actual number of days of the applicable time period which shall have elapsed prior to the Adjustment Time and based upon the actual number of days in the applicable time period and a three hundred sixty five (365) day year.
(i) Rent. All rents and other amounts (excluding Security Deposits) (“Rent”) paid by the tenants under the Acquired Entity Leases shall be prorated as of the Adjustment Time. At Closing, Buyer shall receive a credit for any advance or prepaid Rent applicable to the period after the Closing actually received by Seller. Without duplication of the immediately preceding, if the Closing occurs on a day other than the first day of a calendar month, then Buyer will receive a credit at the Closing for the portion of the Rent actually received by Seller for the month of the Closing relating to the period of time from and after the Closing Date. From and after the Closing Date, all Rent paid by the tenants under the Acquired Entity Leases shall be the sole and exclusive property of and for the account of Buyer. After the Closing, Seller may not commence any action to collect delinquent Rent with respect to the Properties.
(ii) Real Property Taxes. Seller (through the Term Holdings Seller Partnership (solely with respect to the Term Holdings Seller Partnership)) shall pay (or shall cause the Property Owner to pay), at or prior to the Closing, all real property taxes to the extent due and payable with respect to periods prior to the Adjustment Time. Buyer shall bear all real property taxes to the extent due and payable with respect to periods from and after the Adjustment Time. If any real property taxes relate to periods both prior to and after the Closing Date, such real property taxes shall be prorated as of the Adjustment Time between Seller and Buyer as otherwise provided in the last sentence of the first paragraph of Section 2.3(f), which proration shall be determined by apportioning such real property taxes ratably over the taxable year on a daily basis. The proration of real property taxes or installments of assessments shall be based upon the assessed valuation and tax rate figures (assuming payment at the earliest time to allow for the maximum possible discount) for the year or the state real estate tax payment period (solely with respect to the Properties located in the State of Arizona) in which the Closing occurs to the extent the same are available; provided, however, that in the event that actual figures (whether for the assessed value of such Property or for the tax rate) for the year or the state real estate tax payment period (solely with respect to the Properties located in the State of Arizona) of Closing are not available at the Closing Date, the proration shall be made using figures from the preceding year or the preceding state real estate tax payment period (solely with respect to the Properties located in the State of Arizona).
(iii) Utilities. Charges for all water, vault and sewer charges and rents, electricity, steam, gas and other utility services (collectively, “Utilities”) shall be borne by Seller or the Acquired Entities up to the Adjustment Time and, from and after the Adjustment Time, all Utilities shall be borne by Buyer. If any apportionment is not based on an actual current reading, such utility charges shall be prorated as of the Adjustment Time between Seller and Buyer as provided in the last sentence of the first paragraph of Section 2.3(f). Any deposits held by all Utility companies for the benefit of Acquired Entities which remains in the name of the Acquired Entities after the Closing shall be credited to Seller at the Closing.
(iv) Service Contracts. Amounts payable by any Acquired Entity under service Contracts for services received prior to the Adjustment Time shall be borne by Seller, and amounts payable by any Acquired Entity under such Contracts for services to be performed following the Adjustment Time shall be borne by Buyer. Amounts prepaid by any Acquired Entity under service Contracts for services to be performed following the Adjustment Time shall be for the account of Seller.
(v) Other Revenues and Expenses. All revenues of any Acquired Entity (including cash on hand (other than any such cash that represents the unapplied portion of any tenant security deposits under the Acquired Entity Leases) and any and all deposits, reserves and escrows or amounts in lockbox or other accounts or sub-accounts being held by the Existing Lender or its servicers) relating to the period prior to the Adjustment Time shall be for the account of Seller and all revenues of any Acquired Entity relating to the period following the Adjustment Time shall be for the account of Buyer; provided that, notwithstanding anything to the contrary set forth herein, any “door fees” or other non- recurring payments due under any Acquired Entity Leases shall not be prorated, and under no circumstances shall Buyer be entitled to receive a credit for any portion of such fees received prior to the Closing Date. Subject to Section 11.1, all expenses incurred by any Acquired Entity during the period prior to the Adjustment Time shall be borne by Seller and, from and after the Adjustment Time, all expenses incurred by any Acquired Entity shall be borne by the Buyer. All such cash on hand may be distributed by the Acquired Entities to the direct or indirect owners of the Acquired Entities at or prior to Closing.
(vi) Security Deposits. At Closing, Buyer shall receive a credit against the Closing Consideration Amount in an amount (the “Tenant Security Deposit Balance”) equal to the received and unapplied balance of all cash (or cash equivalent) Security Deposits, including, but not limited to, refundable security, damage, pet or other refundable deposits paid by any of the Tenants to secure their respective obligations under the Acquired Entity Leases, together, in all cases, with any interest payable to the Tenants thereunder as may be required by their respective Acquired Entity Lease or state law, provided that (a) the Terms Holdings Seller Partnership has properly notified (or has caused the applicable Property Owner to properly notify) or (b) the other Property Owners have properly notified, in either case the Tenant pursuant to their respective Acquired Entity Lease. Any cash (or cash equivalents) held by Seller which constitutes the Tenant Security Deposit Balance shall be retained by Seller in exchange for the foregoing credit against the Closing Consideration Amount and shall not be transferred by Seller pursuant to this Agreement (or any of the documents delivered at Closing), but the obligation with respect to the Tenant Security Deposit Balance nonetheless shall be assumed by Buyer. The Tenant Security Deposit Balance shall not include any non-refundable fees or other amounts paid by Tenants to Seller or any Acquired Entity for periods prior to the Adjustment Time, either pursuant to the Acquired Entity Leases or otherwise.
(vii) Contested Liens. At Closing, Buyer shall receive a credit against the Closing Consideration Amount in an amount equal to the full amount of (i) any statutory Liens for current Taxes, assessments or other governmental charges, (ii) all water, sewer, utility, trash and other similar charges that are or may become or give rise to a Lien on all or any portion of such Property, and (iii) mechanic’s, materialmen’s, carriers’, repairers’ and other Liens arising or incurred in the ordinary course of business that, in each case, have not been paid and are being contested in good faith by appropriate proceedings (collectively, the “Contested Liens”).
(viii) Construction Projects. At Closing, Buyer shall receive a credit against the Closing Consideration Amount in an amount equal to the full amount of any costs and expenses with respect to the Existing Construction Projects and the New Construction Projects (x) that are then unpaid and/or (y) which are necessary to complete such Existing Construction Projects and/or New Construction Projects following Closing (in each case, as reasonably determined by Seller and Buyer).
(ix) Survival. This Section 2.3(f) shall survive Closing.
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2.4. |
Deposit. |
(a) Within two (2) Business Days following the execution of this Agreement by Buyer and Seller, Buyer shall deliver to the Escrow Agent by wire transfer of immediately available funds to the account designated and administered by the Escrow Agent pursuant to the Escrow Agreement (the “Escrow Account”) the amount of $8,838,323.35 (such deposit which is made pursuant to this Section 2.4, together with all interest earned thereon, the “Initial Deposit”), which Initial Deposit shall be non-refundable to Buyer except as otherwise expressly set forth herein. If Buyer elects to proceed to Closing by notice to Seller prior to the expiration of the Due Diligence Period, Buyer shall, within two (2) Business Days following the expiration of the Due Diligence Period, deliver to the Escrow Agent by wire transfer of immediately available funds an additional deposit in the amount of $8,838,323.35 (the “Additional Deposit”; the Initial Deposit, and together with the Additional Deposit when required to be made pursuant to the terms and provisions of this Agreement, collectively, the “Deposit”). The Additional Deposit shall be non- refundable to Buyer except as otherwise expressly set forth herein. The Escrow Agreement shall provide, among other things, that:
(i) The Deposit (including all accrued interest) shall be released to Seller at the Closing;
(ii) The Deposit shall be delivered to Seller following receipt by Escrow Agent of written demand therefor from Seller stating that this Agreement was terminated under circumstances entitling Seller to the Deposit and specifying the Section of this Agreement which entitles Seller to the Deposit, in each case provided Buyer shall not have given written notice of objection in accordance with the provisions set forth in the Escrow Agreement;
(iii) The Deposit shall be delivered to Buyer following receipt by Escrow Agent of written demand therefor from Buyer stating that this Agreement was terminated under circumstances entitling Buyer to the return of the Deposit and specifying the Section of this Agreement which entitles Buyer to the return of the Deposit, in each case provided Seller shall not have given written notice of objection in accordance with the provisions set forth in the Escrow Agreement; or
(iv) The Deposit shall be delivered to Buyer or Seller as directed by joint written instructions of Seller and Buyer (other than as provided in subsections (i)-(iii) above) or an order by a court of competent jurisdiction.
(b) Interest earned on the Deposit shall accrue for the benefit of the party who is entitled to receive the Deposit under this Agreement and shall be paid to such party either at the Closing or concurrently with the release of the Deposit to such party. Buyer shall report all interest earned on the Deposit as its income for all applicable Tax purposes.
2.5. Title Matters. Seller agrees to reasonably cooperate with Buyer, at Buyer’s sole cost and expense, in connection with, and shall, if requested by Buyer, provide to the Title Company a title affidavit substantially in the form attached hereto as Exhibit E in order to assist Buyer in obtaining new title policies from the Title Company (or date-down endorsements to Acquired Entities’ existing title insurance policies to the Closing Date) for each Property (collectively, the “Title Policies”). Buyer shall pay any and all premiums with respect to (x) the Title Policies (and all date-down endorsements thereto) and/or (y) any date-down endorsements to any Acquired Entities existing title insurance policies. All other costs and expenses associated with the procurement of the Title Policies or charged by the Title Company or OSN, including, without limitation, policy review, search fees, tax certificates, closing fees, Association and lien diligence shall be paid fifty percent (50%) by Buyer and fifty percent (50%) by Seller (it being acknowledged and agreed that any legal fees with respect to the Properties, the Title Policies and/or title commitments incurred by Buyer shall be the sole responsibility of Buyer). Notwithstanding anything to the contrary contained herein, Seller shall, at Closing, either (i) pay in full or cause to be canceled and discharged, bonded, removed of record, or, (ii) if the Property Owner obtains a new owner’s title insurance policy (or a date-down endorsement to Acquired Entities’ existing title insurance policies to the Closing Date), cause the Title Company to insure over or otherwise cure, or (iii) credit to Buyer the cost to cure (other than with respect to the items set forth in Exhibit C attached hereto and identified as “Mandatory”), all Mandatory Removal Exceptions of which it has received written notice from Buyer, Title Company or OSN prior to the Closing provided, however, that if any notice of any such Mandatory Removal Exception is not so provided to Seller prior to Closing, and, as a result thereof, such Mandatory Removal Exception remains in effect following Closing, then the cost to remove, satisfy, discharge or cure such Mandatory Removal Exception shall constitute a Proration Item and shall be subject to post-closing adjustment under Section 2.3(e).
2.6. Transfer Taxes. If any Transfer Taxes are payable in connection with the Contemplated Transactions in excess of the Estimated Transfer Taxes paid at Closing (“Additional Transfer Taxes”), then Buyer and Seller shall each pay fifty percent (50%) of all such Additional Transfer Taxes, and each party shall indemnify and hold harmless the other party and its Representatives from and against any Losses incurred by such other party as a result of such party’s failure to pay such Additional Transfer Taxes.
2.7. Due Diligence Period. Subject to (i) the terms of the Access Agreement (which are hereby incorporated herein and made a part hereof by this reference) and (ii) the rights of Tenants under the Leases, Buyer, and its Consultants shall, at no cost or expense to Seller, have the right to conduct Purchaser Investigations in accordance with the terms, provisions and conditions of the Access Agreement for so long as this Agreement remains in effect. Notwithstanding anything to the contrary set forth in this Agreement, if Buyer, in Buyer’s sole and absolute discretion, determines during the Due Diligence Period that Buyer wishes to proceed with the Contemplated Transaction, then Buyer shall provide written notice to Seller prior to the expiration of the Due Diligence Period (an “Approval Notice”). If Buyer, for any reason or no reason, in Buyer’s sole and absolute discretion, determines during the Due Diligence Period that Buyer does not wish to proceed with the Contemplated Transaction, Buyer shall have the right to not provide an Approval Notice. If Buyer does not provide an Approval Notice prior to the expiration of the Due Diligence Period, then this Agreement shall immediately terminate, the Deposit, less the Independent Consideration, shall be returned to Buyer, the Independent Consideration shall be paid to Seller, and neither Buyer nor Seller shall have any further rights or obligations under this Agreement other than those that are to survive any termination hereof as provided in Section 10.2(a). In the event that Buyer delivers an Approval Notice prior to the expiration of the Due Diligence Period, then Buyer shall have no further right to terminate this Agreement pursuant to this Section 2.7, the Deposit shall be become non-refundable (except as otherwise expressly set forth herein to the contrary) to Buyer and Buyer’s obligation to consummate the Contemplated Transaction shall be conditional only to the extent as specifically provided in this Agreement. In the event that Buyer delivers an Approval Notice prior to the expiration of the Due Diligence Period, Buyer shall have the right to enter into and inspect the inside of any Properties from the expiration of the Due Diligence Period through the Closing Date; provided that interior inspections of any Property occupied by a tenant shall be conducted in accordance with Section 2(b)(i) of the Access Agreement. Notwithstanding anything to the contrary set forth in this Agreement, (i) if the Other Agreement is terminated in accordance with Section 2.7 of the Other Agreement, then this Agreement shall automatically terminate pursuant to this Section 2.7 simultaneously with such termination of the Other Agreement, (ii) Buyer shall only have the right to terminate this Agreement pursuant to this Section 2.7 if Buyer simultaneously terminates the Other Agreement pursuant to Section 2.7 of the Other Agreement and (iii) if the Other Agreement is not timely terminated pursuant to Section 2.7 of the Other Agreement, then Buyer shall not have the right to terminate this Agreement pursuant to this Section 2.7. Notwithstanding the foregoing or anything contained herein to the contrary, (1) the Due Diligence Period has expired and Buyer has completed its due diligence review of the Acquired Entities and the Properties, (2) Buyer’s execution and delivery of this Agreement to Seller shall constitute Buyer’s Approval Notice for all purposes of this Agreement and (3) Buyer shall have no further right to terminate this Agreement pursuant to this Section 2.7.
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2.8. |
Title Defect Excluded Properties. |
(a) On or prior to the date that is five (5) Business Days following Buyer’s receipt from the Title Company or OSN of a complete list of underlying defect items for all Properties (a “Title Defect List”), Buyer shall have the right to give irrevocable notice to Seller of any Material Title Matters (a “Title Defect Notice”) with respect to any Property. Seller may elect (but shall not be obligated) to remove, or cause to be removed, eliminate or cause to be insured over, at the expense of Seller, any Material Title Matters set forth in the Title Defect Notice, which removal will be deemed effected if the Title Company agrees to issue a title policy that will eliminate or insure over such Material Title Matter in a manner acceptable to Buyer in its sole discretion.
(b) If Seller does not elect pursuant to Section 2.8(a) to (x) insure over any Material Title Matters affecting a Property in a manner acceptable to Buyer in its sole discretion or (y) remove, cause to be removed or eliminate such Material Title Matter, then, as its sole and exclusive remedy with respect to such Material Title Matter(s) affecting the applicable Property, Buyer may (i) terminate this Agreement with respect to such affected Property by giving irrevocable written notice to Seller and the Escrow Agent (the time and date of such notice from Buyer in accordance with this Section 2.8, the “Title Defect Excluded Property Designation Date”), in which event such Property shall be deemed to be an “Excluded Property” and the provisions of Section 2.9 of this Agreement shall apply to such “Excluded Property”, and thereafter, the Parties will have no further rights or obligations hereunder with respect to such Excluded Property except for those obligations expressly set forth herein with respect to such Excluded Property and those obligations which expressly survive the termination of this Agreement with respect to such Excluded Property or (ii) waive such Title Policy, in which event the Closing with respect to such Property will occur as herein provided without any reduction of or credit against the Total Consideration.
(c) In the event that (i) any update to a title commitment, title search, title report, or other list of title matters, in each case received by Buyer prior to the Closing Date reveals a Material Title Matter first arising on or after the date that Buyer received the Title Defect List, (ii) a Material Title Matter is first disclosed in an Association Estoppel received by Buyer following the Effective Date and which was not disclosed in the Title Defect List, or (iii) for Properties located in the State of Florida, a Material Title Matter is disclosed on a municipal lien search with respect to any such Property located in the State of Florida, then Buyer may give irrevocable notice to Seller of any such Material Title Matter not later than three (3) Business Days prior to the Closing Date (a “Title Update Defect Notice”). If Buyer delivers a Title Update Defect Notice to Seller with respect to a Property at least twelve (12) Business Days prior to the Closing Date, then Seller and Buyer shall make their respective elections with respect to such Property pursuant to Section 2.8(b). If Buyer delivers a Title Update Defect Notice with respect to a Property between twelve (12) Business Days prior to the Closing Date and three (3) Business Days prior to the Closing Date, Buyer will close on such Property (notwithstanding such Material Title Matters) and Seller will provide Buyer a credit at Closing in the amount reasonably necessary to cure, remove, or eliminate such Material Title Defect, as reasonably determined by Buyer and Seller. Buyer shall not be entitled to deliver a Title Update Defect Notice fewer than three (3) Business Days prior to the Closing Date.
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2.9. |
Treatment of Excluded Properties; Seller Termination Event. |
(a) If any Property is deemed to be an “Excluded Property” pursuant to the terms hereof, then from and after the Excluded Property Designation Date with respect to such Excluded Property: (1) such Excluded Property shall be eliminated from the Contemplated Transaction for all purposes hereof and the Total Consideration shall be reduced by the Allocated Purchase Price for such Excluded Property (the Allocated Purchase Price with respect to any such Excluded Property is referred to herein as the “Excluded Property Purchase Price Reduction”) and (2) (a) such Excluded Property shall not constitute (or be deemed to constitute) a “Property” for any purposes under this Agreement, (b) until Closing on the Closing Date, Seller shall be obligated to, or to cause the Property Owner to, effectuate the conveyance, assignment or other transfer of such Excluded Property (each, an “Excluded Property Disposition”), including, without limitation, to any Affiliates of Seller and/or bona fide third party purchasers, (c) none of the representations, warranties or covenants of Seller contained in this Agreement, including, without limitation, any representations or warranties contained in Article III, shall apply to such Excluded Property and/or such Excluded Property Disposition and it shall not be a breach of any of the representations, or covenants warranties contained in this Agreement upon any Excluded Property ceasing to be owned by the Property Owner, (d) none of Article V shall apply to such Excluded Property and it shall not be a breach of any of the provisions contained in Article V upon such Excluded Property ceasing to be owned by the Property Owner, (e) this Agreement shall not apply to such Excluded Property and/or such Excluded Property Disposition, (f) Seller shall not be liable, or be obligated in any way, to Buyer in respect of such Excluded Property and/or such Excluded Property Disposition other than effectuating such Excluded Property Disposition on or prior to the Closing Date, (g) such Excluded Property shall not be included in the transactions contemplated by this Agreement, (h) there shall be no reduction of, offset to, or increase of, the Total Consideration in connection with any Excluded Property Disposition other than the Excluded Property Purchase Price Reduction applicable thereto, (i) Buyer shall not be entitled to any credit in respect of any Excluded Property and/or such Excluded Property Disposition, except for the Excluded Property Purchase Price Reduction applicable thereto, and (j) with respect to each Excluded Property, the Total Consideration shall be reduced by the amount of the Excluded Property Purchase Price Reduction applicable thereto. Buyer shall, at no cost or expense to Buyer (other than to a de minimis extent) and with no liability to Buyer, reasonably cooperate with Seller and the Existing Lender in connection with any Excluded Property and the Excluded Property Disposition with respect thereto.
(b) Notwithstanding anything in this Agreement to the contrary, if a Seller Termination Event or an Other Agreement Seller Termination Event occurs on or prior to the Closing Date, then, subject to the immediately following sentence, Seller shall have the right, in its sole discretion, to terminate this Agreement, whereupon neither party shall have any further rights or obligations under this Agreement except for those that expressly survive the termination of this Agreement and the Deposit (less fifty percent (50%) of any outstanding Existing Loan Assumption Fees) shall be promptly returned to Buyer. Seller shall only have the right to terminate this Agreement pursuant to this Section 2.9(b) if Other Agreement Seller is simultaneously terminating the Other Agreement pursuant to Section 2.9(b) of the Other Agreement.
2.10. Seller Mandatory Removal Properties. Notwithstanding anything to the contrary set forth herein, Term Holdings Seller shall, prior to Closing, sell, convey, dispose of or otherwise transfer, or cause the applicable Acquired Entity to sell, convey, dispose of or otherwise transfer, all of the properties set forth in Section 2.10 of the Company Disclosure Schedules (the Properties set forth in Section 2.10 of the Company Disclosure Schedules shall be referred to hereinafter as the “Seller Mandatory Removal Properties” and each a “Seller Mandatory Removal Property”). Notwithstanding anything in this Agreement to the contrary, (a) the Seller Mandatory Removal Properties shall not constitute (or be deemed to constitute) a Property for all purposes under this Agreement, (b) until Closing on the Closing Date, Term Holdings Seller shall be obligated to, or cause the Star Property Owner to, effectuate the conveyance, assignment or other transfer of such Seller Mandatory Removal Property (each, a “Seller Mandatory Removal Property Disposition”), including, without limitation, to any Affiliates of Seller and/or bona fide third party purchasers, (c) there shall be no reduction or offset to the Purchase Price or Total Consideration in connection with the Seller Mandatory Removal Property Disposition and, for the avoidance of doubt, Buyer shall not be entitled to any credit in respect of the Seller Mandatory Removal Properties and/or the Seller Mandatory Removal Property Disposition, (d) this Agreement shall not apply to, and Buyer shall not be entitled to and has no right to, any proceeds of the Seller Mandatory Removal Property Disposition, (e) none of the representations, warranties or covenants of Sellers contained in this Agreement, including, without limitation, any representations or warranties contained in Article III, shall apply to the Seller Mandatory Removal Properties and/or the Seller Mandatory Removal Property Disposition and it shall not be a breach of any of the representations, or covenants warranties contained in this Agreement upon the Seller Mandatory Removal Properties ceasing to be owned directly or indirectly by Term Holdings Seller, (f) none of Article V shall apply to the Seller Mandatory Removal Properties and it shall not be a breach of any of the provisions contained in Article V upon the Seller Mandatory Removal Properties ceasing to be owned directly or indirectly by Term Holdings Seller, (g) this Agreement shall not apply to the Seller Mandatory Removal Properties and/or the Seller Mandatory Removal Property Disposition, (h) Sellers shall not be liable, or be obligated in any way to, Buyer in respect of the Seller Mandatory Removal Properties and/or the Seller Mandatory Removal Property Disposition, (i) Buyer hereby acknowledges and agrees that the Seller Mandatory Removal Properties are not included in the transactions contemplated by this Agreement and (j) for the avoidance of doubt, Sellers shall have the right to effectuate the Seller Mandatory Removal Property Disposition irrespective of whether or not Buyer has exercised its right to seek specific performance pursuant to Section 10.2(c). Buyer shall, at no cost or expense to Buyer (other than to a de minimis extent) and with no liability to Buyer, reasonably cooperate with Seller and the Existing Lender in connection with any Seller Mandatory Removal Property and the Seller Mandatory Removal Property Disposition with respect thereto.
2.11. Holly Hock Property. Notwithstanding the foregoing or anything contained herein to the contrary, Seller and Buyer acknowledge and agree that (a) the Holly Hock Property constitutes an “Excluded Property” as of the date hereof (the “Holly Hock Property Designation Date”) and the provisions of Section 2.9 of this Agreement shall apply to such “Excluded Property” and (b) on and after the Holly Hock Property Designation Date, Parties will have no further rights or obligations hereunder with respect to such Excluded Property except for those obligations expressly set forth herein with respect to such Excluded Property and those obligations which expressly survive the termination of this Agreement with respect to such Excluded Property; provided, however, notwithstanding the foregoing or anything contained herein to the contrary, if, following the Holly Hock Property Designation Date, Seller settles and/or compromises the Holly Hock Claim, then, upon any such settlement or compromise of the Holly Hock Claim (as long as (i) any such settlement or compromise of the Holly Hock Claim includes a release by the claimants thereunder of the applicable Acquired Entity and (ii) at or prior to the Closing, Seller pays (or shall cause the applicable Acquired Entity to pay) any and all judgments, settlements or other amounts directly resulting from any such settlement and/or compromise required to be paid by the applicable Acquired Entity), the Holly Hock Property shall no longer constitute an “Excluded Property” for all purposes of this Agreement (including, without limitation, for the avoidance of doubt, the Holly Hock Property shall not be included or accounted for in respect of any determination as to the occurrence of a Seller Termination Event) and shall constitute a “Property” for all purposes of this Agreement.
ARTICLE III
Representations and Warranties of Seller
Except as set forth in the Company Disclosure Schedules (it being agreed that any matter disclosed in the Company Disclosure Schedules with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other section to the extent the applicability thereto is reasonably apparent), Seller represents and warrants to Buyer as of the date hereof and on and as of the Closing Date (except to the extent such representation or warranty is expressly made as of a date as set forth herein, and then only as of such express date) as follows, but solely as to such Seller and the Acquired Entities, Purchased Interests, Interests and Properties directly or indirectly owned by such Seller:
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3.1. |
Organization and Power. |
(a) Seller. Seller is a legal entity duly incorporated or organized, validly existing and in good standing under the Laws of its jurisdiction of organization. Seller has full power and authority or legal capacity, as applicable, to execute, deliver and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the Contemplated Transactions. Seller has all power (corporate or otherwise) and authority to own or lease and to operate its properties and assets and carry on its business as it is now being conducted.
(b) The Acquired Entities. Each Acquired Entity is a legal entity duly incorporated or organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization. Each Acquired Entity has full power and authority to execute, deliver and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the Contemplated Transactions. Each Acquired Entity is duly qualified to do business and is in good standing in each jurisdiction in which the Properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary. The Acquired Entities have all power (corporate or otherwise) and authority to own or lease and to operate its properties and assets and carry on its business as it is now being conducted.
3.2. Authorization and Enforceability. The execution and delivery of this Agreement and the Ancillary Documents to which Seller is a party and the performance by Seller of the Contemplated Transactions that are required to be performed by Seller have been duly authorized by Seller in accordance with applicable Law and organizational documents of Seller, and no other corporate proceedings on the part of Seller are necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents to which Seller is a party or the consummation of the Contemplated Transactions that are required to be performed by Seller. This Agreement and each of the Ancillary Documents to be executed and delivered at the Closing by Seller will be, at the Closing, duly authorized, executed and delivered by Seller, and constitute, or as of the Closing Date will constitute, a valid and legally binding agreement of Seller, as the case may be, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by equitable principles and by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other Laws of general applicability relating to or affecting the rights of creditors generally (whether applied in a proceeding at law or in equity).
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3.3. |
Capitalization. |
(a) The Term Holdings Seller Purchased Interests are owned beneficially and of record by Term Holdings Seller, free and clear of any Lien other than Permitted Entity Liens, and the Term Holdings Seller General Partner Interest is owned beneficially and of record by the Term Holdings Seller General Partner, free and clear of any Lien other than Permitted Entity Liens.
(b) The Roofstock Purchased Interests are owned beneficially and of record by Roofstock Seller, free and clear of any Lien other than Permitted Entity Liens, and the Roofstock General Partner Interest is owned beneficially and of record by the Roofstock General Partner, free and clear of any Lien other than Permitted Entity Liens.
(c) The Tiber Purchased Interests are owned beneficially and of record by Tiber Seller, free and clear of any Lien other than Permitted Entity Liens, and the Tiber General Partner Interest is owned beneficially and of record by the Tiber General Partner, free and clear of any Lien other than Permitted Entity Liens.
(d) Upon delivery to Buyer of the Purchased Interests at the Closing and Buyer’s payment of the Purchase Price in accordance herewith, Buyer shall acquire the Purchased Interests, free and clear of any Lien other than Permitted Entity Liens and other Liens created by Buyer. The Purchased Interests (i) are duly authorized, validly issued, fully paid and nonassessable, (ii) have been issued in compliance with all applicable Laws and the organizational or constituent documents of each applicable Acquired Entity, and (iii) have been issued without violation of any preemptive or similar rights.
(e) The Term Holdings Seller General Partner Interest (i) is duly authorized, validly issued, fully paid and nonassessable, (ii) has been issued in compliance with all applicable Laws and the organizational or constituent documents of the Term Holdings Seller Partnership, and (iii) have been issued without violation of any preemptive or similar rights. The Term Holdings Seller General Partner Interest and the Term Holdings Seller LP Interests collectively constitute all of the issued and outstanding Equity Securities of the Term Holdings Seller Partnership. The Term Holdings Seller GP Interests constitute all of the issued and outstanding Equity Securities of the Term Holdings Seller General Partner. There are no outstanding obligations of the Term Holdings Seller Partnership to repurchase, redeem or otherwise acquire any Equity Security of the Term Holdings Seller Partnership. The Term Holdings Seller Partnership does not own any Equity Securities in any Person other than the Star Property Owner General Partner and the Star Property Owner. There are no outstanding obligations of the Term Holdings Seller General Partner to repurchase, redeem or otherwise acquire any Equity Security of the Term Holdings Seller General Partner. The Term Holdings Seller General Partner does not own any Equity Securities in any Person other than the Term Holdings Seller Partnership.
(f) The Star Property Owner Interests are owned beneficially and of record by the Partnership, free and clear of any Lien other than Permitted Entity Liens, and the Star Property Owner General Partner Interest is owned beneficially and of record by the Star Property Owner General Partner, free and clear of any Lien other than Permitted Entity Liens. Upon delivery to Buyer of the Term Holdings Seller Purchased Interests at the Closing and Buyer’s payment of the Purchase Price in accordance herewith, Buyer shall indirectly acquire the Star Property Owner Interests, free and clear of any Lien other than Permitted Entity Liens and other Liens created by Buyer. The Star Property Owner Interests (i) are duly authorized, validly issued, fully paid and nonassessable, (ii) have been issued in compliance with all applicable Laws and the organizational or constituent documents of each applicable Acquired Entity, and (iii) have been issued without violation of any preemptive or similar rights. The Star Property Owner General Partner Interest (i) is duly authorized, validly issued, fully paid and nonassessable, (ii) has been issued in compliance with all applicable Laws and the organizational or constituent documents of the Star Property Owner, and (iii) have been issued without violation of any preemptive or similar rights. The Star Property Owner General Partner Interest and the Star Property Owner LP Interests collectively constitute all of the issued and outstanding Equity Securities of the Star Property Owner. The Star Property Owner GP Interests constitute all of the issued and outstanding Equity Securities of the Star Property Owner General Partner. There are no outstanding obligations of the Star Property Owner to repurchase, redeem or otherwise acquire any Equity Security of the Star Property Owner. The Star Property Owner does not own any Equity Securities in any Person. There are no outstanding obligations of the Star Property Owner General Partner to repurchase, redeem or otherwise acquire any Equity Security of the Star Property Owner General Partner. The Star Property Owner General Partner does not own any Equity Securities in any Person other than the Star Property Owner.
(g) Upon delivery to Buyer of the Roofstock Purchased Interests at the Closing and Buyer’s payment of the Purchase Price in accordance herewith, Buyer shall acquire the Roofstock GP Interests and the Roofstock LP Interests, free and clear of any Lien other than Permitted Entity Liens and other Liens created by Buyer. The Roofstock Purchased Interests (i) are duly authorized, validly issued, fully paid and nonassessable, (ii) have been issued in compliance with all applicable Laws and the organizational or constituent documents of the Roofstock Partnership, and (iii) have been issued without violation of any preemptive or similar rights. The Roofstock General Partner Interest (i) is duly authorized, validly issued, fully paid and nonassessable, (ii) has been issued in compliance with all applicable Laws and the organizational or constituent documents of the Roofstock Partnership, and (iii) have been issued without violation of any preemptive or similar rights. The Roofstock General Partner Interest and the Roofstock LP Interests collectively constitute all of the issued and outstanding Equity Securities of the Roofstock Partnership. The Roofstock GP Interests constitute all of the issued and outstanding Equity Securities of the Roofstock General Partner. There are no outstanding obligations of the Roofstock Partnership to repurchase, redeem or otherwise acquire any Equity Security of the Roofstock Partnership. The Roofstock Partnership does not own any Equity Securities in any Person. There are no outstanding obligations of the Roofstock General Partner to repurchase, redeem or otherwise acquire any Equity Security of the Roofstock General Partner. The Roofstock General Partner does not own any Equity Securities in any Person other than the Roofstock Partnership.
(h) Upon delivery to Buyer of the Tiber Purchased Interests at the Closing and Buyer’s payment of the Purchase Price in accordance herewith, Buyer shall acquire the Tiber GP Interests and the Tiber LP Interests, free and clear of any Lien other than Permitted Entity Liens and other Liens created by Buyer. The Tiber Purchased Interests (i) are duly authorized, validly issued, fully paid and nonassessable, (ii) have been issued in compliance with all applicable Laws and the organizational or constituent documents of the Tiber Partnership, and (iii) have been issued without violation of any preemptive or similar rights. The Tiber General Partner Interest (i) is duly authorized, validly issued, fully paid and nonassessable, (ii) has been issued in compliance with all applicable Laws and the organizational or constituent documents of the Tiber Partnership, and (iii) have been issued without violation of any preemptive or similar rights. The Tiber General Partner Interest and the Tiber LP Interests collectively constitute all of the issued and outstanding Equity Securities of the Tiber Partnership. The Tiber GP Interests constitute all of the issued and outstanding Equity Securities of the Tiber General Partner. There are no outstanding obligations of the Tiber Partnership to repurchase, redeem or otherwise acquire any Equity Security of the Tiber Partnership. The Tiber Partnership does not own any Equity Securities in any Person. There are no outstanding obligations of the Tiber General Partner to repurchase, redeem or otherwise acquire any Equity Security of the Tiber General Partner. The Tiber General Partner does not own any Equity Securities in any Person other than the Tiber Partnership.
(i) No Acquired Entity has any outstanding securities convertible into or exchangeable or exercisable for its Equity Securities or any rights to subscribe for or to purchase, or any agreements providing for the issuance (contingent or otherwise) of, or any calls against, commitments by or claims against it of any character relating to, any of its Equity Securities, subject to the Permitted Entity Liens. Other than the Equity Securities and Organizational Documents for each Acquired Entity (a true and correct copy of which has been provided by Seller to Buyer) and subject to the Permitted Entity Liens, no Acquired Entity will be a party immediately after the Closing to any contract, agreement, right of first refusal, right of first offer, proxy, voting agreement, voting trust, registration rights agreement or shareholders or members agreement, whether or not any Acquired Entity is a party thereto, with respect to the purchase, sale or voting of any Equity Securities of any Acquired Entity or any securities convertible into or exchangeable or exercisable for any Equity Securities of any Acquired Entity. No certificates were issued in conjunction with any Equity Securities of any Acquired Entity, except for certificates issued in connection with the Existing Loan.
3.4. No Violation. Subject to obtaining the Existing Lender Consent, the execution and delivery by Seller of this Agreement and the Ancillary Documents to which Seller is a party, consummation of the Contemplated Transactions that are required to be performed by Seller and compliance with the terms of this Agreement and the Ancillary Documents to which Seller is a party will not (a) conflict with or violate any provision of the certificate of formation, operating agreement, certificate of limited partnership, partnership agreement, certificate of incorporation, bylaws or similar organizational documents of any Acquired Entity, (b) conflict with or violate in any material respect any Law applicable to any Acquired Entity or Seller or by which any of their respective properties are bound or affected, (c) result in the creation of, or require the creation of, any material Lien upon any limited liability company interest, partnership interest, other equity interest or any Property of any Acquired Entity, or (d) conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel, any contract to which such Acquired Entity or Seller is a party or by which such Acquired Entity or Seller is bound or to which any of their respective properties and assets are subject.
3.5. Consents. No consents, licenses, approvals or authorizations of, or registrations, declarations or filings with, or notice to any party, including any Governmental Authority (“Consents”) are required to be obtained or made by Seller in connection with the execution, delivery, performance, validity and enforceability of this Agreement or any Ancillary Documents to which Seller is, or is to be, a party or the consummation by Seller of the Contemplated Transactions, except for the Existing Lender Consent and the Association Approvals.
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3.6. |
Financial Statements. |
(a) In General. Section 3.6(a) of the Company Disclosure Schedules sets forth the unaudited financial statements of the Term Holdings Seller Partnership, the Term Holdings Seller General Partner, the Star Property Owner and the Star Property Owner General Partner as of December 31, 2021, based on the period from March 10, 2021 to December 31, 2021, as well as the unaudited consolidated balance sheet of the Term Holdings Seller Partnership, the Term Holdings Seller General Partner, the Star Property Owner and the Star Property Owner General Partner as of June 30, 2022 (the “Balance Sheet Date”) and the profit and loss statement for the period then ended (collectively, the “Financial Statements”). Except as set forth in Section 3.6(a) of the Company Disclosure Schedules, each of the Financial Statements (i) has been prepared in accordance with GAAP, (ii) fairly presents in all material respects the consolidated financial condition of the Acquired Entities as of its respective date (subject to, in the case of unaudited statements, normal year-end adjustments), and (iii) has been prepared in all material respects in accordance with the books and records of the Acquired Entities. The books and records of Seller and each Acquired Entity delivered to Buyer are accurate, correct and complete in all material respects as of their respective date and fairly present in all material respects the financial condition of Seller and the Acquired Entities as of their respective date. Since the date of the most recent Financial Statements, each of the Acquired Entities has conducted its business in the ordinary course and in a manner consistent with past practice as a special purpose entity whose sole business is the direct or indirect ownership, operation, management and leasing of the applicable Properties.
(b) No Undisclosed Liabilities. Except as reflected or adequately reserved against in the Financial Statements, as set forth in Section 3.6(b) of the Company Disclosure Schedules, there are no Liabilities (including, without limitation, Indebtedness) of the Acquired Entities that would be required to be set forth on the Financial Statements in accordance with GAAP other than, in each case, any such Liabilities (i) that may have arisen in the ordinary course of business consistent with past practice which is not material to the value of the applicable Property, (ii) arising out of or relating to adjustments and prorations covered by Section 2.3, (iii) arising out of or relating to casualty or condemnation, (iv) arising out of or relating to compliance of the Properties with any or all past, present or future federal, state or local laws pertaining to building, fire or zoning ordinances, codes or other similar laws, or whether the Improvements were built, in whole or in part, in compliance applicable building codes or zoning ordinances, (v) arising under or pursuant to this Agreement or the documents to be executed in connection with the consummation of the Contemplated Transaction, (vi) relating to any environmental matter, structural matter, defect, physical condition or other matters related to the Property or (vii) under the Existing Loan Documents.
(c) Existing Loan. Section 3.6(c)(i) of the Company Disclosure Schedules sets forth the outstanding principal balance of all Indebtedness for borrowed money of the Acquired Entities as of August 1, 2022, and the balances of all escrow and/or reserve accounts, late charges and default interest as of August 1, 2022 under the documents, agreements or instruments evidencing, guaranteeing and/or securing such Indebtedness (collectively, the “Existing Loan Documents”). Section 3.6(c)(ii) of the Company Disclosure Schedules sets forth a true, accurate and complete list of all Existing Loan Documents and true, correct and complete copies the Existing Loan Documents have been made available to Buyer for review. The Existing Loan Documents are in full force and effect and (i) neither the Acquired Entities, nor the other parties to the Existing Loan Documents, are in monetary or material non-monetary default thereunder, (ii) to Seller’s Knowledge, neither the Acquired Entities, nor the other parties to the Existing Loan Documents, are in non-material non-monetary default thereunder and (iii) Seller has not received or delivered any written notice of a default or written notice of any events that could materialize into a default following expiration of any notice and/or cure periods under the Existing Loan Documents.
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3.7. |
Real Property. |
(a) Section 3.7(a) of the Company Disclosure Schedules sets forth a true and complete list of the real estate properties owned by the Acquired Entities (the “Properties”).
(b) Except as otherwise set forth in Section 3.7(b)(i) of the Company Disclosure Schedules, there are no unexpired option agreements, right of first refusals, right of first offers or the equivalent with respect to the purchase of a Property or any portion thereof. Except as otherwise set forth in Section 3.7(b)(ii) of the Company Disclosure Schedules, none of Seller or any Acquired Entity has entered into any Contract for the sale, ground lease or letter of intent to sell or ground lease any Property (in each case, other than an Excluded Property and/or any Seller Mandatory Removal Property).
(c) The Property Owner has good, marketable and insurable indefeasible fee simple title to the Properties, free and clear of Liens except for Permitted Liens, instruments securing the Existing Loan and any liens, claims and security interests that will be released at or prior to the Closing.
3.8. Leases. Section 3.8(a)(i) of the Company Disclosure Schedules sets forth a rent roll (the “Rent Roll”) that is used by Seller in the ordinary course of business for all of the Properties (including a list of (x) all security, pet and other deposits (whether in the form of cash, letter of credit or otherwise) under the Acquired Entity Leases being held by Seller or any Acquired Entity (collectively, the “Security Deposits”) and (y) tenants, free rent and concessions under the Acquired Entity Leases, in each case with respect to the Properties) as of the date set forth thereon. To the Knowledge of Seller, solely as of the Effective Date, (1) the Rent Roll is true, accurate and complete in all material respects as of the date of the Rent Roll and (2) the Rent Roll describes, in all material respects, the amounts of any Security Deposits held by Seller or any Acquired Entity. The Acquired Entity Leases are enforceable and freely assignable to Buyer without receiving any approvals or consents. Seller has delivered or made available to Buyer true, complete, and correct copies of all Acquired Entity Leases and all amendments, addenda, or other material modifications thereto. No tenant under any Acquired Entity Lease is or will be entitled to any rebates, rents, concessions or free rent (other than as reflected in the Rent Roll and/or in the applicable Lease). The Rent Roll will be updated by Seller as of the 15th and 30th of each calendar month (or reasonably promptly thereafter when Seller is in receipt of the applicable information to update the Rent Roll). Except as set forth on Section 3.8(a)(ii) of the Company Disclosure Schedules or on the Rent Roll, neither Seller nor the Property Owner has (a) sent to any tenant under any Acquired Entity Lease any written notice asserting a material default by the tenant under such Acquired Entity Lease or (b) received from any tenant any written notice asserting a material default by the applicable Acquired Entity under such Acquired Entity Lease that remains uncured. Except as set forth on Section 3.8(a)(iii) of the Company Disclosure Schedules, there are no leasing commission agreements entered into by Seller or by any Acquired Entity or affecting all or any portion of the Property. To the Knowledge of Seller, there are no Leases other than the Acquired Entity Leases.
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3.9. |
Contracts. |
(a) Contracts. Section 3.9(a) of the Company Disclosure Schedules is a true and complete list of all of the Contracts (other than Leases and the Existing Loan Documents) to which any Acquired Entity is a party involving payments to or from any Acquired Entity in excess of $25,000 per annum (other than any such Contracts that may be terminated upon thirty (30) days’ notice without any termination fee or other penalty) (each such Contract, excluding each Property Management Agreement, a “Material Contract”).
(b) Status of Contracts. A true and complete copy of each Material Contract has been made available to Buyer. Except as disclosed in Section 3.9(b) of the Company Disclosure Schedules, to Seller’s Knowledge, all Material Contracts are valid, binding and in full force and effect and enforceable by any Acquired Entity, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles. As to each Material Contract, neither Seller nor the applicable Acquired Entity has received any written notice of any material default by Seller or the applicable Acquired Entity that remains uncured under any of the Material Contracts.
3.10. Compliance with Laws. Except as set forth in Section 3.10 of the Company Disclosure Schedules, Seller has received no written notice from a governmental agency or tenant under any Lease that any of the Properties or the Acquired Entities are not in material compliance with the Laws to which they are subject and such material noncompliance has not been cured.
3.11. Environmental Matters. None of the Acquired Entities has received a written notice alleging or stating that (i) any Property is not in compliance with all applicable Environmental Law in any material respect, (ii) that any “hazardous substance” or “hazardous waste” under any Environmental Law exist on, under, or about any Property in violation of Environmental Law, or (iii) that such party proposes to carry out an environmental inspection, audit or other investigation of any Property (other than any potential environmental inspection, audit or other investigation by Buyer in connection with this Agreement). Notwithstanding any other provision to the contrary contained in this Agreement, this Section 3.11 contains the exclusive representation of Seller concerning Environmental Matters..
3.12. Litigation. Except as set forth in Section 3.12 of the Company Disclosure Schedules or for matters that are fully covered by any Acquired Entity’s insurance policies (and without any deductible unless such deductible is paid by Seller or any Acquired Entity prior to Closing) to which Buyer or the Acquired Entity may access from and after Closing,, there are no claims, actions, suits, audits, inquiries, proceedings or governmental investigations (including, without limitation, condemnation, eminent domain, or similar proceedings) (“Litigation”) pending or, to the knowledge of Seller, threatened in writing, against any Acquired Entity, at Law or in equity or before any Governmental Authority which will materially and adversely affect any Property following Closing. Except as set forth in Section 3.12 of the Company Disclosure Schedules, none of the Acquired Entities is subject to any material Order arising from any Litigation against any Acquired Entity before any Governmental Authority which will materially and adversely affect any Property following Closing.
3.13. Labor and Employment Matters. None of Acquired Entities has any employees and no Acquired Entity is (i) bound by any collective bargaining agreement or other similar agreement with any union or other labor organization or (ii) is obligated by, or subject to, any order of the National Labor Relations Board or other labor board or administration, or any unfair labor practice decision.
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3.14. |
Tax Matters. |
(a) Each Acquired Entity has, since the date of its formation, been treated as an entity that is disregarded as separate from its owner for U.S. federal income tax purposes. No entity classification election pursuant to Treasury Regulations Section 301.7701-3 has been filed by or with respect to any Acquired Entity.
(b) There are no material Liens for Taxes on any of the interests in any Acquired Entity or on any Property, other than, in either case, statutory Liens for current Taxes, assessments or other governmental charges not yet due and payable.
(c) Seller has not been notified in writing of any material audit, inquiry or investigation with respect to any Acquired Entity’s Tax Returns by any Taxing Authority in the past three (3) years, and, to the knowledge of Seller, no Taxing Authority has undertaken any such audit, inquiry or investigation. No material Tax audits or other administrative or judicial proceedings with respect to Taxes are being conducted or are pending with respect to any Acquired Entity or any Property.
(d) Neither Seller nor Seller’s regarded parent entity is a “foreign person” within the meaning of Sections 1445 or 7701 of the Code.
(e) Each of the material Tax Returns required to be filed by the Seller and each Acquired Entity with any Taxing Authority on or before the Closing Date: (i) has been filed on or before the applicable due date (including any valid and timely extensions of such due date); and (ii) has been prepared in compliance with applicable laws, and is otherwise true, correct and complete in all material respects. All Taxes, whether or not shown as due on such Tax Returns, owed by Seller or the Acquired Entities have been or will at Closing be paid in full to the proper Taxing Authority, to the extent such Taxes (in the aggregate) exceed $10,000. There are no material liens for Taxes on the assets of the Seller or any Acquired Entity or interests therein, other than material liens for Taxes that are not yet due or payable. All Taxes that the Seller or any Acquired Entity have been required to collect or withhold have been duly collected or withheld and have been duly and timely paid or will be paid at Closing to the proper Taxing Authority, to the extent such Taxes (in the aggregate) exceed $10,000.
(f) There has not been any audit, inquiry or investigation of the Seller or any Acquired Entity’s Tax Returns by any Taxing Authority in the past three (3) years. None of such Seller, or any Acquired Entity has been notified in writing that any such audit is contemplated or pending.
(g) Each of the Seller and each Acquired Entity has at all times been treated as a “disregarded entity” within the meaning of Treasury Regulation 301.7701-3 (and none such entity has made any election to be treated as an association Taxable as a corporation for U.S. federal income Tax purposes).
(h) This Section 3.14 contains the sole and exclusive representations and warranties of the Acquired Entities with respect to Taxes.
3.15. Bank Accounts. Section 3.15 of the Company Disclosure Schedules sets forth a true and complete list as of the date of this Agreement of all banks accounts or safe deposit boxes under the control or for the benefit of any Acquired Entities.
3.16. No Brokers. Except for JLL, none of Seller or any Acquired Entity has employed or incurred any Liability to any broker, finder or agent for any brokerage fees, finder’s fees, commissions or other amounts with respect to this Agreement, the Ancillary Documents or the Contemplated Transactions.
3.17. ERISA. None of Seller nor any Acquired Entity is (i) an “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that is subject to the provisions of Title I of ERISA, (ii) a “plan” that is subject to the prohibited transaction provisions of Section 4975 of the Code or (iii) an entity whose assets are treated as “plan assets” under the Department of Labor Regulation located at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, by reason of an employee benefit plan’s or plan’s investment in such entity.
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3.18. |
Real Property Matters. |
(a) Except as set forth in Section 3.18(iii) of the Company Disclosure Schedules, to the Knowledge of Seller, (i) neither Seller, the Acquired Entities, nor any of their respective affiliates has received written notice that any of Seller, the Acquired Entities or any of their respective affiliates have violated any covenants, conditions or restrictions affecting any Property; (ii) none of the Properties are subject to material property damage, and no fire or other casualty has occurred with respect to any Property which has not been restored; (iii) other than the Leases, the Permitted Liens, the Existing Loan Documents or as permitted by this Agreement, neither Seller nor any of its Affiliates nor any Acquired Entity has entered into an agreement which would restrict the current use and occupation of any Property after the Closing; or (iv) no Property is on a septic, cistern, or well system, and no Property is located in a flood zone.
(b) Section 3.18(i) of the Company Disclosure Schedules contains a list of outstanding or pending claims against any existing title insurance policies for the Properties.
(c) Solely as of the Effective Date, Section 3.18(ii) of the Company Disclosure Schedules details ongoing construction, renovation, repair or development projects with respect to any Property with costs or expenses in excess of $15,000 in the aggregate with respect to such Property (the "Existing Construction Projects"). Except as set forth in Section 3.18(ii) of the Company Disclosure Schedules, none of Seller nor any Acquired Entity has received or given written notice of a material default of any obligation with respect to the Existing Construction Projects which remains uncured as of the Effective Date.
(d) Other than Leases, the Permitted Liens and the Existing Loan Documents, neither Seller nor any Acquired Entity has entered into an agreement which would restrict the current use and occupation of any Property after the Closing. Neither Seller nor any Acquired Entity has entered into any agreement containing, and to Seller’s Knowledge there are no agreements, containing any restriction on the use of the Property as a rental property.
(e) Section 3.18(i) of the Company Disclosure Schedules contains a list, to the Knowledge of Seller, of outstanding or pending claims against any existing title insurance policies for the Properties.
3.19. Authority and Association Payments. Other than as set forth on Section 3.19(i) of the Company Disclosure Schedules, to Seller’s Knowledge, there are no material homeowner association fees or amounts (the “Authority Payments”) payable from a federal, state, county or city housing authority (each, a “Housing Authority”) or material fees payable to an Association relating to the Properties due and payable and outstanding with respect to the Property (in each of the foregoing cases, except for those which will be paid in the ordinary course or which will be prorated in accordance with the terms of this Agreement). To the Knowledge of Seller, none of the Properties consist of housing cooperatives or manufactured housing.
3.20. Bankruptcy. No Seller or Acquired Entity has: (A) commenced a voluntary case, or had entered against it a petition, for relief under the federal bankruptcy code or any similar petition, order or decree under any federal or state law or statute relative to bankruptcy, insolvency or other relief for debtors, (B) caused, suffered or consented to the appointment of a receiver, trustee, administrator, conservator, liquidator or similar official in any federal, state or foreign judicial or non-judicial proceedings, to hold, administer and/or liquidate all or substantially all of its property, or (C) made an assignment for the benefit of creditors.
3.21. Relationship with Affiliates. Except as set forth on Section 3.21 of the Company Disclosure Schedules, none of Seller or any of its Affiliates (nor any officer or director of any of the foregoing) is a party to any Contract with any Acquired Entity, including with respect to compensation or remuneration to be paid to Seller or any of its Affiliates (nor any officer or director of any of the foregoing) in connection with this Agreement or the transactions contemplated herein, which Contract will not be terminated at or prior to Closing.
3.22. Special Purpose Entities. Other than the ownership, leasing, financing, management and operation of the respective Properties and other single family residential properties that have previously been sold or conveyed by the applicable Acquired Companies, if any by the applicable Acquired Entities, no Acquired Entity (x) has owned, developed, leased, managed or operated any material asset or material property unrelated to the business of owning, leasing, financing, managing, operating and disposing of single-family rental homes, or (y) has engaged in any material business not related to the activities described in the foregoing clause (x).
3.23. Insurance. Seller has delivered or made available to Buyer true and correct in all material respects copies of the insurance maintained by Seller and/or its Affiliates with respect to the Properties as of the Effective Date.
3.24. Restricted Persons. None of Seller or any Acquired Entity (other than the holder of any publicly traded interest in any publicly traded company) is a Restricted Person.
3.25. Seller’s Designated Representative. Seller’s Designated Representatives have reviewed with the Existing Manager the representations made by Seller under this Article III that are qualified by the Knowledge of Seller.
3.26. Disclaimer. Notwithstanding anything to the contrary contained in this Agreement, none of Seller, any Acquired Entity, their Affiliates or their respective officers, directors, employees, shareholders, members, partners, agents, representatives, successors and assigns has made, or shall be deemed to have made, to Buyer or any other Person any representation or warranty on behalf of Seller other than those expressly made by Seller in this Article III or any Ancillary Document, and Buyer is not relying on any statement, representation or warranty, oral or written, legal or contractual, express or implied, made by Seller, any Acquired Entity, their Affiliates or their respective officers, directors, employees, shareholders, members, partners, agents, representatives, successors and assigns other than those expressly made by Seller in this Article III or any Ancillary Document and Seller hereby disclaims any other express or implied representations or warranties. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent (or any other representation or warranty referred to in Section 2-312 of the Uniform Commercial Code of any applicable jurisdiction or in Section 2.312 of the Texas Business and Commerce Code with respect to any such assets located in Texas), (ii) with respect to any projections, forecasts, business plans, estimates or budgets delivered to or made available to Buyer or any other Person or (iii) with respect to any other information or documents made available at any time to Buyer or any other Person.
3.27. Limitation with respect to Seller’s Representations. The representations and warranties of Seller are subject to the following limitations:
(a) Except to the extent that any breach results from any actions or omissions of Seller in breach of this Agreement, Seller does not represent or warrant that any particular Contract, Lease or other service contract, maintenance contract or management contract will be in force or effect as of the Closing or that the parties thereunder (other than the Acquired Entities), as applicable, will not be in default thereunder; and
(b) Solely with respect to the determination of whether the Buyer Condition to Closing set forth in Section 6.3(a) is satisfied, the representations and warranties of Seller in this Agreement shall be deemed modified in all respects to reflect any facts, circumstances or information (1) that is set forth in the Company Disclosure Schedules, (2) that constitutes Data Room Information that has been uploaded to the Data Room Website, in each case, no later than 5:00 pm EST on the date that is two (2) Business Days prior to the Effective Date (in each case other than Data Room Information which, pursuant to the terms of this Agreement, is required to be included in the Company Disclosure Schedules), and/or (3) of which Buyer has actual Knowledge as of the Effective Date.
ARTICLE IV
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as of the date hereof and on and as of the Closing Date (except to the extent such representation or warranty is expressly made as of a date as set forth herein, and then only as of such express date) as follows:
4.1. Organization and Power. Buyer is a limited liability company duly incorporated, organized or formed, validly existing and in good standing under the Laws of the state of Delaware and has full power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the Contemplated Transactions.
4.2. Authorization. Buyer has duly authorized the execution and delivery of this Agreement and the Ancillary Documents to which it is a party and the performance of its obligations hereunder and thereunder and no other corporate proceedings on the part of Buyer (including any shareholder, member or manager vote or approval) are necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents to which Buyer is a party or the consummation of the Contemplated Transactions that are required to be performed by Buyer.
4.3. Enforceability. This Agreement and each of the Ancillary Documents constitute, or when executed and delivered will constitute, the valid and legally binding obligation of Buyer, enforceable in accordance with its terms, except as such enforceability may be limited by equitable principles and by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or similar Laws relating to or affecting the rights of creditors generally.
4.4. No Violation. The execution, delivery and performance of this Agreement and the Ancillary Documents executed or to be executed by Buyer pursuant to this Agreement and the consummation of the Contemplated Transactions and compliance with the terms of this Agreement and the Ancillary Documents to which Buyer is a party will not (i) conflict with or violate any provision of the certificate of formation, operating agreement, certificate of incorporation, bylaws or similar organizational documents of Buyer, or (ii) conflict with or violate in any material respect any provisions of any Law applicable to Buyer or by which Buyer or its properties are bound or affected. Neither Buyer nor its Affiliates are subject to any Contract that would impair or delay Buyer’s ability to consummate the Contemplated Transactions.
4.5. Consents. Except for the Existing Lender Consent, no Consents are required to be obtained or made by Buyer in connection with the execution, delivery, performance, validity and enforceability of this Agreement or any Ancillary Documents to which it is a party or the consummation by Buyer of the Contemplated Transactions.
4.6. Financial Capacity. Buyer has, or will have at closing, access to capital in an amount that is sufficient to pay the Closing Consideration Amount (together with any fees and expenses incurred in connection with this Agreement) as required by and in accordance with this Agreement.
4.7. Litigation. There is no Litigation pending or, to the Knowledge of Buyer, threatened against or involving Buyer which questions the validity of this Agreement or any of the Ancillary Documents to which it is a party or seeks to prohibit, enjoin or otherwise challenge Buyer’s ability to consummate the Contemplated Transactions.
4.8. No Brokers. None of Buyer or any of its Affiliates has employed or incurred any Liability to any broker, finder or agent for any brokerage fees, finder’s fees, commissions or other amounts with respect to this Agreement, the Ancillary Documents or the Contemplated Transactions.
4.9. Investment Intent. Buyer is acquiring the Purchased Interests for its own account for investment, without a view to resale or distribution thereof in violation of U.S. federal or state securities Laws and with no present intention of distributing or reselling any part thereof.
4.10. Qualified Transferee. Buyer, or an affiliate of Buyer which controls Buyer, will be, at Closing, a Qualified Transferee (as defined in the Existing Loan Agreement), in each case, assuming clause (D) of the definition of Qualified Transferee (as defined in the Existing Loan Agreement) is satisfied,
4.11. Restricted Persons. Buyer (other than the holder of any publicly traded interest in any publicly traded company) is not a Restricted Person.
4.12. ERISA. Buyer is not, and no portion of the Closing Consideration Amount shall include the assets of, (i) an “employee benefit plan” (within the meaning of Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a “plan” that is subject to the prohibited transaction provisions of Section 4975 of the Code or (iii) an entity whose assets are treated as “plan asset” under the Department of Labor regulation located at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, by reason of an employee benefit plan’s or plan’s investment in such entity.
ARTICLE V
Covenants
| 5.1. |
Conduct of the Acquired Entities. |
(a) Except (i) to the extent compelled or required by applicable Law, (ii) as otherwise permitted by this Agreement, (iii) as set forth in Section 5.1 of the Company Disclosure Schedules, or (iv) as consented to in writing by Buyer, which consent shall not be unreasonably conditioned, withheld or delayed, Seller shall cause each Acquired Entity directly or indirectly owned by such Seller (1) to conduct its business and operations in all material respects in the ordinary course, consistent with past practice, and in a commercially reasonable manner, and (2) to the extent consistent therewith (x) use commercially reasonable efforts to maintain the Properties in all material respects (in each case, reasonable wear and tear excepted) and in compliance with applicable law in all material respects, and (y) perform in all material respects all of its material obligations under the Contracts and the Acquired Entity Leases, and (3) to maintain its books and records in the usual, regular and ordinary manner, on a basis consistent with past practice.
(b) Without limiting the generality of the foregoing, except (w) to the extent compelled or required by applicable Law, (x) as otherwise permitted by this Agreement, (y) as set forth in Section 5.1 of the Company Disclosure Schedules, or (z) as consented to in writing by Buyer, (I) which consent shall not be unreasonably conditioned, withheld or delayed prior to the expiration of the Due Diligence Period and (II) which consent may be withheld in Buyer’s sole and absolute discretion from and after the expiration of the Due Diligence Period, during the period from the date hereof to the Closing Date, Seller shall cause each Acquired Entity not to:
(i) modify or amend the terms of the organizational documents of any Acquired Entity, except in connection with obtaining the Existing Lender Consent, provided such modification or amendment shall not have an adverse effect on Buyer or any Acquired Entity after the Closing Date, except to a de minimis extent;
(ii) issue, or authorize the issuance of, any Equity Securities of any Acquired Entity;
(iii) except as otherwise set forth in Section 5.1(b)(iii) of the Company Disclosure Schedules, split, combine, redeem or reclassify, or purchase or otherwise acquire any Equity Securities of any Acquired Entity, as applicable;
(iv) incur any Indebtedness except (A) for such Indebtedness that is repaid at or prior to Closing or prorated in accordance with the terms hereof or (B) pursuant to the Existing Loan Documents;
(v) enter into any Material Contract that would be binding on the Buyer or any Acquired Entity after Closing or modify or amend in any material respect, or terminate (unless such termination results from a default by the counterparty thereto), any Material Contract;
(vi) acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, any corporation, limited liability company, partnership, joint venture, association or other business organization or division thereof;
(vii) divest, sell or otherwise dispose of, or encumber any asset of any Acquired Entity, other than the sales of products or services in the ordinary course of business, in accordance with the terms of this Agreement, immaterial personal property assets in the ordinary course of business and Permitted Liens;
(viii) initiate or consent to any material zoning reclassification of any Property;
(ix) adopt a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other material reorganization of any Acquired Entity;
(x) hire any employees to be employed by any Acquired Entity;
(xi) file or cause to be filed any U.S. federal entity classification election or any material amended Tax Return, or agree to extend the statute of limitations (other than any extension resulting from a timely and valid extension for the filing of a Tax Return) in respect of any material amount of Taxes;
(xii) materially modify or materially amend, or terminate, any insurance policies with respect to the Acquired Entities and the Properties;
(xiii) make any change in accounting methods, principles or practices, except as may be required by a change in standard accounting principles, GAAP or applicable law with respect to the Acquired Entities and the Properties;
(xiv) maintain in full force and effect the insurance policies currently in effect with respect to the Acquired Entities and the Properties (unless with replacement insurance policies containing substantially similar coverage);
(xv) enter into, modify, amend, or terminate any collective bargaining or similar Contract with any union, works council, or labor organization;
(xvi) settle or compromise any pending or threatened litigation which is not fully covered by insurance without any deductible (except for any deductible that will be paid prior to Closing or which is credited to Buyer at Closing), which would impose any cost or expense on Buyer following the Closing (unless Seller is responsible or agrees to be responsible for such cost or expense following the Closing) and which settlement is in excess of $20,000; or
(xvii) except in connection with the obtaining the Existing Lender Consent, satisfying the Existing Loan Assumption Approval Conditions, the Excluded Properties and/or the Seller Mandatory Removal Properties, amend, supplement, or modify (other than paying off any Indebtedness and causing such Indebtedness and any liens relating thereto to be terminated) any documents, agreements or instruments evidencing, securing, guaranteeing or otherwise pertaining to any Indebtedness of the Acquired Entities or any provision thereof; provided, such amendment shall not (except for representations, warranties, covenants, agreements and other terms and provisions, in each case required by the Existing Lender pursuant to the Existing Loan Documents in granting the Loan Assumption Approval, provided that such representations, warranties, covenants, agreements, or other terms and provisions are substantially the same as those contained in the Existing Loan Documents or are customarily provided to lenders in connection with loan assumptions) adversely affect the Buyer or any Acquired Entity after the Closing Date, except to a de minimis extent.
(c) Without limiting the generality of the foregoing, except (w) to the extent compelled or required by applicable Law, (x) as otherwise permitted by this Agreement, (y) as set forth in Section 5.1 of the Company Disclosure Schedules, or (z) as consented to in writing by Buyer, which consent shall not be unreasonably conditioned, withheld or delayed, Seller shall cause each Acquired Entity not to, enter into any Leases for Properties now vacant or for Properties which may become vacant, or enter into any amendments of any Acquired Entity Leases or consent to any renewals, extensions, expansions or terminations of any Acquired Entity Leases (in each of the foregoing cases, other than those (i) to which the Tenant is entitled pursuant to the terms of the Acquired Entity Lease and/or (ii) lease renewals delivered by any Acquired Entity to any tenant under the Acquired Entity Leases as of the Effective Date) unless such actions are in the ordinary course of business and on similar lease forms, rental rates and other terms as is consistent with the past practices of Seller (and in any event, without monetary tenant inducements and for terms not less than ten (10) months and, for Properties which become vacant, at rental rates not less than as set forth in the immediately previous Acquired Entity Lease for such Property) or are approved in advance in writing by Buyer. Seller shall deliver a true, correct and complete copy of any document or agreement subject to this Section 5.1(c) or a summary of the proposed business terms to Buyer at least five (5) Business Days prior to the Closing Date. Buyer shall have five (5) Business Days after Buyer receives a true, correct and complete copy of any document or agreement subject to this Section 5.1(c) or a summary of the proposed business terms, to review and to consent or disapprove in writing such agreement or summary, which consent or disapproval shall not be unreasonably withheld, conditioned or delayed; it being the understanding, however, that Buyer’s failure to respond in writing within said five (5) Business Day period shall be deemed its consent.
(d) Nothing contained in this Agreement shall give Buyer, directly or indirectly, rights to control or direct the operation of any Acquired Entity prior to the Closing Date. Prior to the Closing Date, Seller shall cause each Acquired Entity to exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of its operations. Notwithstanding anything to the contrary contained in this Agreement, no consent of Buyer shall be required with respect to any matter set forth in this Section 5.1 or elsewhere in this Agreement to the extent that the requirement of such consent would violate or conflict with applicable Law or any Contract to which any Acquired Entity is a party.
(e) Notwithstanding anything contained herein to the contrary, nothing in this Agreement shall prohibit Seller or any Acquired Entity from taking any action that in the reasonable judgment of such party, upon advice of counsel to such party, is reasonably necessary for any Acquired Entity to avoid incurring U.S. federal income or excise Taxes under the Code.
5.2. Access to Information Prior to the Closing. During the period from the date hereof through the Closing Date or the earlier termination of this Agreement, Seller shall provide, or make available, to Buyer the Materials (as defined in the Access Agreement) in accordance with the terms, provisions and conditions of the Access Agreement.
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5.3. |
Efforts; Assumption of Existing Loans. |
(a) Efforts Generally. Upon the terms and conditions set forth herein, each of the parties shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things, necessary, proper or advisable to make effective as promptly as practicable, but in no event later than the Closing Date, the Contemplated Transactions, including obtaining required approvals, if any, from any Governmental Authorities.
(b) Intentionally Omitted.
(c) Assumption of Existing Loans. Seller and Buyer acknowledge and agree that in connection with Buyer’s proposed acquisition of the Purchased Interests (i) (x) the consent and approval of the Existing Lender (the “Existing Lender Consent”) and (y) the satisfaction of all Existing Loan Assumption Requirements, in each case are required pursuant to the terms of the Existing Loan Documents, and (ii) Seller shall receive a release executed by the Existing Lender of all guarantors (including the Existing Guarantor) under the Existing Loan Documents (including the Sponsor Guaranty and the Repurchase Guaranty) in the form and substance required by the Existing Loan Documents (the conditions described in clauses (i) and (ii) above are referred to herein collectively as the “Existing Loan Assumption Approval Conditions” and satisfaction of the Existing Loan Assumption Approval Conditions is referred to herein as the “Existing Loan Assumption Approval”); it being acknowledged and agreed with respect to the foregoing clause (i)(y) that satisfaction of the conditions therein shall be deemed not to have been satisfied if the Existing Lender takes the position that the Contemplated Transactions violate the terms, provisions and conditions of the Existing Loan Documents, whether as a result of failing to satisfy the Existing Loan Assumption Requirements or otherwise. In connection with the foregoing, (i) promptly after the execution of this Agreement, Seller shall cause the applicable Acquired Entity to deliver written notice to the Existing Lender, as applicable, of the prospective sale of the Purchased Interests to Buyer in accordance with the requirements of the Existing Loan Documents, and (ii) thereafter and prior to Closing, (1) Buyer shall (and Buyer shall cause its applicable Affiliates to) use commercially reasonable efforts to satisfy all Existing Loan Assumption Requirements (provided that Seller, in consultation with Existing Lender, will draft and submit to the applicable rating agencies any rating agency confirmations required by the Loan Agreement with respect to the Contemplated Transactions) and reasonably cooperate with the Existing Lender in connection therewith, (2) Seller shall reasonably cooperate with Buyer and Existing Lender in satisfying the Existing Loan Assumption Requirements and the Existing Loan Assumption Approval Conditions for purposes of obtaining the Existing Loan Assumption Approval. Buyer and Seller shall each pay fifty percent (50%) of any loan assumption fees, legal costs and expenses and other amounts actually incurred and payable to, or on behalf of, the Existing Lender in connection with obtaining the Existing Loan Assumption Approval and satisfying the Existing Loan Approval Assumption Conditions pursuant to Section 5.3(c) (the “Existing Loan Assumption Fees”).
(d) Association Estoppels. If Buyer delivers to Seller addressed estoppel certificates (the “Association Estoppels”) with respect to any Association, then Seller (or Existing Manager or the Title Company) shall, within three (3) Business Days following Seller’s receipt of such Association Estoppels, send such Association Estoppels to the addressees thereof and exercise commercially reasonable efforts to obtain execution and return of the same to Seller. If Seller receives any such executed Estoppels Certificates, Seller shall promptly deliver the same to Buyer. Notwithstanding the foregoing or anything contained herein to the contrary, in no event shall (x) obtaining or delivering such executed Association Estoppels be a condition to Closing, or (y) the failure to obtain such executed Association Estoppels cause Seller to be in breach or default of the terms and provisions of this Agreement.
(e) Required Association Approvals. Seller shall use commercially reasonable efforts to obtain from each applicable Association a Required Association Approval with respect to the applicable Property promptly following Buyer’s identification of such Required Association Approval to Seller.
(f) Construction Projects. Seller shall provide timely details and information regarding (a) any Existing Construction Projects and (b) any new construction, renovation, repair or development projects with respect to any Property with costs or expenses in excess of $15,000 in the aggregate with respect to such Property that first commences after the Effective Date (collectively, the “New Construction Projects”).
(g) Non-Imputation Endorsements. Seller shall use commercially reasonable efforts to assist Buyer’s procurement of non-imputation endorsements to any existing title insurance policies covering the Properties, including, without limitation, by Seller executing and delivering the title affidavit substantially in the form attached hereto as Exhibit E. Notwithstanding the foregoing or anything contained herein to the contrary, neither Seller nor any of its Affiliates shall be required to deliver any indemnity and/or any similar instrument, documentation or other form of inducement, in each case with respect to or for the purpose of Buyer’s procurement of non-imputation endorsements to any existing title insurance policies covering the Properties.
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5.4. |
Certain Tax Matters. |
(a) Transfer Taxes. All Transfer Taxes incurred in connection with this Agreement or the transactions contemplated by this Agreement shall be borne fifty percent (50%) by Buyer and fifty percent (50%) by Seller. Seller shall timely prepare all necessary Tax Returns with respect to all Transfer Taxes and shall provide a draft copy of such Tax Returns and other documentation to Buyer at least ten (10) days prior to the due date for the filing of such Tax Returns for Buyer’s review and comment, and Seller shall incorporate any such comments to the extent that they are reasonable. Seller shall timely file or cause to be filed all such Tax Returns, and pay all applicable Transfer Taxes in connection therewith, and Buyer shall reasonably cooperate with Seller as may be necessary to effectuate such filings.
(b) Tax Returns.
(i) Seller will be responsible for and will cause to be prepared and duly filed all Tax Returns of the Acquired Entities and any Subsidiaries thereof for all taxable periods ending on or before the Closing Date. Buyer shall file or cause to be filed when due all Tax Returns with respect to the Acquired Entities and any Subsidiaries thereof, other than those that are the responsibility of Seller pursuant to this Section 5.4.
(ii) All Tax Returns that are to be prepared and filed by Buyer pursuant to the preceding paragraph with respect to any taxable period ending on or prior to the Closing Date or any Straddle Period shall be submitted to Seller not later than thirty (30) days prior to the due date for filing of such Tax Returns (or, if such due date is within forty- five (45) days following the Closing Date, as promptly as practicable following the Closing Date). Seller shall have the right to review such Tax Returns and all work papers and procedures used to prepare them, and Seller shall have the right to access any other information of or controlled by Buyer relating to such Tax Returns that reasonably is necessary for Seller to perform such review. If Seller, within ten (10) days after delivery of any Tax Return pursuant to this paragraph, notifies Buyer that it objects to any item in such Tax Return, the parties shall attempt in good faith to resolve the dispute; provided, if they are unable to do so, any disputed item shall be resolved by an accounting firm of national prominence mutually selected by and reasonably acceptable to Buyer and Seller (provided that the accounting firm’s position is supported by at least “more likely than not” authority). Upon resolution of all disputed items, the relevant Tax Return shall be filed on that basis and such determination shall be binding on the parties for purposes of filing such Tax Returns.
(iii) All Tax Returns that are to be prepared and filed by Seller pursuant to Section 5.4(c)(i) shall be submitted to Buyer not later than thirty (30) days prior to the due date for filing of such Tax Returns (or, if such due date is within forty-five (45) days following the Closing Date, as promptly as practicable following the Closing Date). Buyer shall have the right to review such Tax Returns and all work papers and procedures used to prepare them, and Buyer shall have the right to access any other information of or controlled by Seller relating to such Tax Returns that reasonably is necessary for Buyer to perform such review. If Buyer, within ten (10) days after delivery of any such Tax Return, notifies Seller that it objects to any item in such Tax Return, the parties shall attempt in good faith to resolve the dispute; provided, if they are unable to do so, any disputed item shall be resolved by an accounting firm of national prominence mutually selected by and reasonably acceptable to Buyer and Seller (provided that the accounting firm’s position is supported by at least “more likely than not” authority). Upon resolution of all disputed items, the relevant Tax Return shall be filed on that basis and such determination shall be binding on the parties for purposes of filing such Tax Returns.
(iv) Buyer shall not (and shall not cause or permit any Acquired Entity or Subsidiary thereof to) amend, re-file or otherwise modify (or grant an extension of any statute of limitations with respect to (other than as may be the result of the filing of a timely and valid extension to the deadline for filing a Tax Return)) any Tax Return relating in whole or in part to any Acquired Entity or any Subsidiary thereof with respect to any taxable period ending on or prior to the Closing Date or any Straddle Period or to make any Tax election with respect to any such taxable period or Straddle Period, in each case, without the prior consent of Seller, except to the extent required by applicable law.
(c) Contest Provisions.
(i) In the event (i) Seller or its Affiliates or (ii) Buyer or its Affiliates receives notice of any pending or threatened Tax Contest relating to any Acquired Entity or any Subsidiary thereof with respect to any taxable period ending on or prior to the Closing Date or any Straddle Period, the party in receipt of such notice shall promptly notify the other party of such matter in writing.
(ii) Seller shall have the right to represent the interests of the Acquired Entities or applicable Subsidiary thereof in any Tax Contest (a) relating to any Tax for any taxable periods ending on or before the Closing Date or any Straddle Period or (b) that would affect the liability of Seller (including any Taxes that may be payable by any indirect owners of Seller) for any Tax, and to employ counsel of its choice at its expense. No such Tax Contest shall be settled or otherwise compromised without the prior written consent of Seller (such consent not to be unreasonably withheld, conditioned or delayed).
(iii) Buyer shall have the right to represent the interests of the Acquired Entities in any Tax Contest not described in Section 5.4(d)(ii) and to employ counsel of its choice at its expense.
(d) Assistance and Cooperation. After the Closing Date, Seller, on the one hand, and Buyer, on the other hand, shall (and shall cause their respective Affiliates to): (1) assist the other party in preparing and filing any Tax Return or report that such other party is responsible for preparing and filing in accordance with this Section 5.4; (2) cooperate fully in preparing for any Tax Contest regarding any Tax Return of any Acquired Entity relating to taxable periods for which the other party may have a liability; (3) make available to the other and to any Taxing Authority as reasonably requested all information, records, and documents relating to Taxes of any Acquired Entity; (4) provide timely notice to the other in writing of any pending or threatened Tax Contest of any Acquired Entity for taxable periods for which the other party may have a liability; and (5) furnish the other with copies of all correspondence received from any Taxing Authority in connection with any Tax Contest or information request with respect to any such taxable period described in this paragraph.
(e) Retention of Records. After the Closing Date, Seller and Buyer will, and Buyer shall cause each Acquired Entity to, preserve all information, records or documents relating to liabilities for Taxes of the Acquired Entities until six (6) months after the expiration of any applicable statute of limitations (including extensions thereof) with respect to the assessment of such Taxes. This Section 5.4 shall survive the Closing.
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5.5. |
Exculpation. |
(a) Seller Exculpated Parties. Buyer acknowledges and agrees that, notwithstanding anything to the contrary contained in this Agreement, no Representative of Seller, any of its Affiliates (other than Seller and if, and only if, a Post-Closing Liability Trigger has occurred, SOF-XI U.S. NRE Holdings, L.P., a Delaware limited partnership pursuant to the Guarantor Joinder) or any of the Acquired Entities, whether disclosed or undisclosed (collectively, the “Seller Exculpated Parties”) shall have any personal obligation or liability whatsoever hereunder, and Buyer (i) shall not seek to (a) assert (and hereby unconditionally and irrevocably waives) any Action of any kind, type, character or nature whatsoever that Buyer may now or hereafter have against the Seller Exculpated Parties or (b) enforce any of Buyer’s rights hereunder against any Seller Exculpated Party and (ii) hereby unconditionally and irrevocably releases and discharges the Seller Exculpated Parties from and any and all liability whatsoever which may nor or hereafter accrue in favor of Buyer against any Seller Exculpated Party in connection with or arising out of this Agreement or the transactions contemplated hereby.
(b) Buyer Exculpated Parties. Seller acknowledges and agrees that, notwithstanding anything to the contrary contained in this Agreement, no Representative of Buyer or any of its Affiliates (other than Buyer), whether disclosed or undisclosed (collectively, the “Buyer Exculpated Parties”) shall have any personal obligation or liability whatsoever hereunder, and Seller (i) shall not seek to (a) assert (and hereby unconditionally and irrevocably waive) any Action of any kind, type, character or nature whatsoever that Seller may now or hereafter have against the Buyer Exculpated Parties or (b) enforce any of Seller’s rights hereunder against any Buyer Exculpated Party and (ii) hereby unconditionally and irrevocably release and discharge the Buyer Exculpated Parties from and any and all liability whatsoever which may nor or hereafter accrue in favor of Seller against any Buyer Exculpated Party in connection with or arising out of this Agreement or the transactions contemplated hereby.
5.6. Confidentiality. Notwithstanding the execution and delivery of this Agreement, the confidentiality provisions of the Access Agreement shall remain unchanged and in full force and effect. Subject to Section 5.7, the foregoing shall not apply to Buyer following Closing in respect of information with respect to the Property. Notwithstanding the foregoing or any provision of the Access Agreement to the contrary, but subject to Section 5.7, Buyer or any of its Affiliates may make disclosures of this Agreement and information regarding the same to the extent required by applicable law, including Securities and Exchange Commission rules and regulations, without any consent from Seller.
5.7. Public Announcements. None of the Acquired Entities, Buyer or Seller will issue or make any press release or public statement with respect to this Agreement or the Contemplated Transactions without the prior consent of Buyer and Seller, except as may be required by Law (or the requirements of any applicable stock exchange) applicable to such party or its Affiliates.
5.8. Commercially Reasonable Efforts. Except as otherwise set forth in Section 5.3, subject to the terms and conditions set forth herein and to applicable legal requirements, each of the parties shall cooperate and use their respective commercially reasonable efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Contemplated Transactions, including the satisfaction of the respective conditions set forth in Article VI.
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5.9. |
Casualty and Condemnation. |
(a) Condemnation Proceeds. If between the date of this Agreement and the Closing Date, any of the Properties are subject to Condemnation proceedings or are condemned, then Buyer shall proceed with the consummation of the Closing pursuant to the terms and conditions of this Agreement; provided, that, (i) the Closing Consideration Amount shall be reduced by an amount (not below zero) equal to (x) the amount of any such Condemnation proceeds collected by any of Seller or any Acquired Entity, minus (y) the sum of (A) any Condemnation proceeds or other funds expended by any of Seller or any Acquired Entity toward restoration or repair of the Properties plus (B) any Condemnation proceeds retained by any Acquired Entity at the Closing, and (ii) to the extent that any right to receive Condemnation proceeds is held by Seller (as opposed to any Acquired Entity), Seller, shall give the applicable Acquired Entity an assignment of Seller’s right to receive such Condemnation proceeds if any portion of the Condemnation proceeds are not collected before the Closing (and if not assignable to the applicable Acquired Entity, then Seller shall collect such proceeds and hold them in trust for the benefit of such Acquired Entity and promptly pay same over to such Acquired Entity. The obligations described herein shall survive Closing.
(b) Insurance Proceeds. If between the date of this Agreement and the Closing Date, any of the Properties suffer damage by fire or other casualty (“Casualty”), then Buyer shall proceed with the consummation of the Closing pursuant to the terms and conditions of this Agreement; provided, that, (i) the Closing Consideration Amount shall be reduced by an amount (not below zero) equal to (x) the amount of any such Casualty insurance proceeds collected by any of Seller or any Acquired Entity and any deductible, minus (y) the sum of (A) any insurance proceeds or other funds expended by any of Seller or any Acquired Entity toward restoration or repair of the Properties plus (B) any insurance proceeds retained by any Acquired Entity at the Closing, and (ii) to the extent that any right to receive insurance proceeds is held by Seller (as opposed to any Acquired Entity), Seller shall give the applicable Acquired Entity an assignment of Seller’s right to receive such insurance proceeds if any portion of the insurance proceeds are not collected before the Closing (and if not assignable to such Acquired Entity, then Seller shall collect such proceeds and hold them in trust for the benefit of such Acquired Entity and promptly pay same over to such Acquired Entity. The obligations described herein shall survive Closing.
(c) Notwithstanding the provisions of Section 5.9 to the contrary, if following the Effective Date and prior to the Closing, any Property or a portion thereof is (i) damaged or destroyed by a Significant Casualty or (ii) taken as a result of a Significant Condemnation, then, as its sole and exclusive remedy with respect to such Significant Casualty or Significant Condemnation, Buyer shall have the right, exercised by written notice to Seller no more than five (5) Business Days after Buyer has received written notice of such Significant Casualty or Significant Condemnation (the time and date of such notice from Buyer in accordance with this Section 5.9, the “Significant Casualty/Condemnation Excluded Property Designation Date”), to terminate this Agreement solely as to the Property(ies) for which such Significant Casualty or Significant Condemnation, as applicable, occurred, in which event such Property shall be deemed to be an “Excluded Property” for all purposes of this Agreement, the provisions of Section 2.9 of this Agreement shall apply thereto and thereafter, the Parties will have no further rights or obligations hereunder with respect to such Excluded Property except for those obligations expressly set forth herein with respect to such Excluded Property and those obligations which expressly survive the termination of this Agreement with respect to such Excluded Property.
5.10. Condition of Properties. Except as otherwise expressly provided in this Agreement or the Ancillary Documents, Buyer acknowledges that Seller shall own the Properties at the Closing in an “as is”, “where is” condition with all faults as of the Closing Date. Buyer agrees that, except as expressly set forth herein, Seller shall not be liable for any construction, latent or patent defects in the Properties, and shall not be bound in any manner whatsoever by any guarantees, promises, projections, forecasts, operating expenses, set-ups or other information pertaining to the Properties made, furnished or claimed to have been made or furnished by Seller, any Acquired Entity or any other Person, including any partner, member, manager, shareholder, employee, agent, attorney or other Person representing or purporting to represent Seller or any Acquired Entity, whether verbally or in writing. Buyer acknowledges that, except as expressly set forth in this Agreement or the Ancillary Documents, neither Seller, nor any Acquired Entity nor any of their respective employees, agents or attorneys have made any verbal or written representations or warranties whatsoever to Buyer, whether express, implied, statutory, or by operation of law, and, in particular, that no such representations and warranties have been made with respect to the Purchased Interests, the physical or environmental condition or operation of the Properties, the layout or footage of the Properties, the actual or projected revenue and expenses of the Properties or any of the Leases, zoning, environmental, and other laws, regulations and rules applicable to the Properties, or the compliance of the Properties therewith, the quantity, quality or condition of the articles of personal property and fixtures included in the Contemplated Transactions, the use or occupancy of the Property or any part thereof or any other matter or thing affecting or relating to the Property or the Contemplated Transactions, except as specifically set forth in this Agreement or the Ancillary Documents. Buyer has not relied and is not relying upon any representations or warranties, other than Seller’s representations set forth in Article III or the Ancillary Documents. Without limitation of the foregoing, except as set forth in Section 5.9 hereof, Buyer specifically acknowledges and agrees that it has assumed the risk of changes in the condition of the Purchased Interests and the Properties between the date hereof and the Closing Date and no adverse change in such condition shall grant Buyer any right to terminate this Agreement or to obtain any damages against Seller, except as expressly set forth in this Agreement.
5.11. Transitional Matters. In connection with Closing and for a period of one hundred (100) days thereafter, Seller shall use commercially reasonable efforts to cooperate, and use commercially reasonable efforts to cause Existing Manager to cooperate, with Buyer in a commercially reasonable manner to facilitate the orderly transition of management of the Properties, all at no out-of-pocket expense to Seller or Existing Manager (other than nominal or typical transitional expenses and expenses reimbursed by Buyer). Subject to the immediately preceding sentence, any and all costs and expenses arising as a result of such transition shall be the sole responsibility of Buyer, and Buyer shall reimburse Seller or the Existing Manager on receipt of any invoice or invoices, together with supporting documentation from Seller or the Existing Manager, for any costs or expenses incurred by Seller or the Existing Manager in the course of effecting such transition. Notwithstanding anything to the contrary set forth herein, this Section 5.11 shall survive for one hundred (100) days following the Closing.
5.12. Rule 3-14 Audit. Prior to Closing, and for a period of up to one hundred twenty (120) days following the Closing Date, Seller agrees to provide to Buyer the right to conduct a one-time audit of the financial books and records of Seller relating to the operations and financial results of the Properties (such financial books and records of Seller, other than any Proprietary Information, collectively, the “Books and Records”) reasonably requested by Buyer, but solely to the extent required by Buyer (a) for the purpose of preparing a property-level Statement of Revenues and Certain Expenses (“Rule 3-14 Financials”) as required by Rule 3-14 of Securities and Exchange Commission Regulation S-X and (b) to support an audit opinion by an independent accounting firm with respect to the Rule 3-14 Financials. As a material inducement for Seller to agree to the foregoing provision, the parties acknowledge and agree that: (i) all costs incurred in connection with such audit (including, without limitation, all costs incurred by Seller (and/or any of its affiliates) shall be borne exclusively by Buyer; it being acknowledged and agreed that the costs of Seller (and/or any of its affiliates) for purposes of this Section 5.12 shall include the reasonable and documented personnel costs of Seller and its affiliates incurred in connection with such personnel assisting in, participating in or otherwise cooperating with any such audit, and (ii) Seller shall not be required to make any representations or warranties with respect to the information contained in such books and records, nor shall such information in any way increase the scope of the representations of, or liabilities and obligations of, Seller contained in this Agreement or any Ancillary Document. All such audit activities shall be conducted at Seller's place of business (or such other location reasonably designated by Seller), in a commercially reasonably fashion during normal business hours and upon ten (10) Business Days prior written notice from Buyer to Seller. Seller is only required to produce Books and Records in the possession of Seller; provided, however, that to the extent any such Books and Records are in the possession of the Property Manager, Seller shall use commercially reasonable efforts to cause the Property Manager to provide such Books and Records to Seller for purposes of Seller delivering the same to Buyer pursuant to this Section 5.12. Notwithstanding the foregoing in this Section 5.12 to the contrary, (1) this Section 5.12 shall be subject to Section 5.10 and (2) this Section 5.12 shall not apply to any Proprietary Information. The provisions of this Section 5.12 shall survive Closing.
5.13. Exclusivity. Commencing upon the Effective Date and continuing until the earlier to occur of (a) the Closing or (b) the termination of this Agreement, Seller agrees not to market the Acquired Entities or the Property (other than Excluded Properties and/or the Seller Mandatory Removal Properties) for sale or enter into any agreement for the sale of the Property (other than Excluded Properties and/or the Seller Mandatory Removal Properties) to any other person or entity.
5.14. Termination of Property Management Agreements. At or prior to Closing, Seller shall terminate any property management or similar agreements to which any Acquired Entity is a party, including, without limitation. those agreements set forth on Section 3.8(a)(iii) of the Company Disclosure Schedules (each, a “Property Management Agreement”).
ARTICLE VI
Conditions to Closing
6.1. Conditions to All Parties’ Obligations. The obligations of the parties to consummate the Contemplated Transactions are subject to the fulfillment prior to or at the Closing of each of the following conditions (any or all of which may be waived by the parties):
(a) No Injunction. No Governmental Authority or federal or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, Order or other notice (whether temporary, preliminary or permanent), in any case which is in effect and which prevents or prohibits consummation of the Contemplated Transactions;
(b) Existing Loan Assumption Approval. The Existing Loan Assumption Approval shall have been received pursuant to Section 5.3(c).
(c) Other Agreement Closing. The Other Agreement Closing shall occur simultaneously with the Closing.
6.2. Conditions to Seller’s Obligations. The obligations of Seller to consummate the Contemplated Transactions are subject to the fulfillment at or prior to the Closing of each of the following conditions (any or all of which may be waived in whole or in part by Seller):
(a) Representations and Warranties. The Fundamental Representations of Buyer shall be true and correct in all respects as of the date when made and as the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date). The representations and warranties of Buyer other than the Fundamental Representations shall be true and correct in all material respects as of the date when made and as of the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date).
(b) Performance. Buyer shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be so performed or complied with by Buyer at or prior to the Closing, including payment of the Closing Consideration Amount to Seller.
(c) Deliveries. Seller shall have received the deliveries contemplated by Article VIII.
6.3. Conditions to Buyer’s Obligations. The obligations of Buyer to consummate the Contemplated Transactions are subject to the fulfillment at or prior to the Closing of each of the following conditions (any or all of which may be waived in whole or in part by Buyer) (each, a “Buyer Condition to Closing”):
(a) Representations and Warranties. The Fundamental Representations of Seller shall be true and correct in all respects as of the date when made and as the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date). The representations and warranties of Seller other than the Fundamental Representations shall be true and correct in all material respects as of the date when made and as of the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date).
(b) Performance. Seller shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be so performed or complied with by Seller at or prior to the Closing.
(c) Deliveries. Buyer shall have received the deliveries contemplated by Article VII.
(d) Title Policies. The Title Company shall be irrevocably committed to issue (or to endorse the Acquired Entities’ existing title insurance policies to the Closing Date), upon payment of the title premium by Buyer, owner’s Title Policies for each of the Properties with face coverage in the amount of the allocated portion of the Purchase Price for each Property, and subject only to the Permitted Liens and as otherwise provided in this Agreement.
(e) R&W Insurance Policy. So long as Buyer has satisfied its obligations set forth in Section 9.3, the R&W Insurance Policy Insurer shall have bound, upon payment of the premiums therefore, the R&W Insurance Policy (such Buyer Condition to Closing set forth in this Section 6.3(e), the “R&W Insurance Policy Buyer Condition to Closing”); provided, however, that, and notwithstanding the foregoing or anything contained herein to the contrary, if the R&W Insurance Policy Buyer Condition to Closing has not been satisfied as of the Closing Date and so long has Buyer has satisfied its obligations set forth in Section 9.3, then (i) either Buyer or Seller shall have the right upon written notice to the other party to extend the Closing Date and the Outside Closing Date for a period of up to thirty (30) days (provided that the Closing Date or the Outside Closing Date, as applicable, shall not be later than 364 days following the Effective Date) and (ii) upon the extension of the Closing Date and the Outside Closing Date pursuant to the immediately preceding clause (i), the R&W Insurance Policy Buyer Condition to Closing shall (a) be terminated and of no further force and effect and (b) not constitute a Buyer Condition to Closing for all purposes of this Agreement, including, without limitation, this Section 6.3; provided, further, however, that if neither (1) the R&W Insurance Policy Insurer shall have bound, upon payment of the premiums therefore, the R&W Insurance Policy on or prior to the Closing Date and the Outside Closing Date, as extended pursuant to the immediately preceding proviso, nor (2) the Replacement R&W Insurance Policy Insurer shall have bound, upon payment of the premiums therefore, the Replacement R&W Insurance Policy on or prior to the Closing Date and the Outside Closing Date, as extended pursuant to the immediately preceding proviso, and in each case Buyer has satisfied its obligations set forth in Section 9.3, then, and only in such instance (such instance, the “Post-Closing Liability Trigger”) and without otherwise limiting the terms and provisions of Article IX, the Seller’s Representations (and only the Seller’s Representations) shall survive closing in accordance with the terms, provisions, conditions and limitations of Exhibit G. If the Other Agreement Closing Date and the Other Agreement Outside Closing Date are extended in accordance with Section 6.3(e) of the Other Agreement, then this Agreement shall automatically be extended pursuant to this Section 6.3(e) simultaneously with such extension of the Other Agreement Closing Date and the Other Agreement Outside Closing Date.
(f) Required Association Approvals. With respect to each Property for which a Required Association Approval is required, such Required Association Approval shall have been obtained.
(g) Excluded Properties. The Excluded Property Disposition shall have occurred with respect to each Excluded Property.
(h) Seller Mandatory Removal Properties. The Seller Mandatory Removal Property Disposition shall have occurred with respect to each Seller Mandatory Removal Property.
Notwithstanding the foregoing or anything contained herein to the contrary, if any Buyer Condition to Closing (other than Section 6.3(h)) is not satisfied with respect to any Property or Properties (as opposed to the Contemplated Transaction as a whole), then, as its sole and exclusive remedy with respect to any such Property, Buyer will have the right on or before the Closing to either (x) terminate this Agreement with respect to such affected Property by giving irrevocable written notice to Seller (the time and date of such notice from Buyer in accordance with this Section 6.3, the “Buyer Condition to Closing Excluded Property Designation Date”) and the Escrow Agent, in which event such Property shall be deemed to be an “Excluded Property” for all purposes of this Agreement and the provisions of Section 2.9 of this Agreement shall apply to such Excluded Property, and thereafter, the Parties will have no further rights or obligations hereunder with respect to such Excluded Property except for those obligations expressly set forth herein with respect to such Excluded Property and those obligations which expressly survive the termination of this Agreement with respect to such Excluded Property, or (y) proceed to Closing without reduction of or set off against the Total Consideration.
ARTICLE VII
Deliveries by Seller at Closing
On the Closing Date, Seller shall deliver or cause to be delivered to Buyer:
7.1. Officer’s Certificate. An officer’s certificate signed by a senior officer of Seller to the effect set forth in Sections 6.3(a) and 6.3(b).
7.2. Assignment of Purchased Interests. An assignment and assumption agreement, in the form attached hereto as Exhibit D, whereby each Seller assigns its entire interest in the Purchased Interests owned by such Seller to Buyer (or Buyer’s Subsidiary, at Buyer’s discretion) free and clear of all Liens other than Permitted Entity Liens (the “Assignment Agreement”), duly executed by such Seller.
7.3. W-9. A properly completed and duly executed IRS Form W-9 with respect to SOF- XI Term Holdings, L.P., Seller’s regarded parent for U.S. federal income tax purposes.
7.4. Title Affidavit. The title affidavit(s) pursuant to Section 2.5.
7.5. Existing Loan Assumption Approval. If received by Seller, the Existing Loan Assumption Approval.
7.6. FIRPTA Certificate. An affidavit with respect to compliance with the Foreign Investment in Real Property Tax Act (I.R.C. Section 1445 and the Treasury Regulations thereunder).
7.7. Termination of Property Management Agreements. Evidence of the termination of each Property Management Agreement.
7.8. Association Estoppels. Association Estoppels received by Seller (if any).
7.9. Guarantor Joinder. If, and only if, a Post-Closing Liability Trigger has occurred, then Seller shall cause SOF-XI U.S. NRE Holdings, L.P., a Delaware limited partnership, to execute and deliver to Buyer a guarantor joinder in the form of Exhibit H (the “Guarantor Joinder”).
ARTICLE VIII
Deliveries by Buyer at Closing
On the Closing Date, Buyer shall deliver or cause to be delivered to Seller:
8.1. Officer’s Certificate. A certificate signed by an authorized signatory of Buyer to the effect set forth in Sections 6.2(a) and 6.2(b).
8.2. Closing Consideration Amount. The Closing Consideration Amount, by wire transfer of immediately available funds, to the Escrow Account.
8.3. Assignment Agreement. A copy of the Assignment Agreement, duly executed by Buyer (or Buyer’s Subsidiary, at Buyer’s discretion).
8.4. Existing Loan Assumption Approval. If received by Buyer, the Existing Loan Assumption Approval.
ARTICLE IX
Survival; R&W Insurance Policy
9.1. No Post-Closing Liability. Subject to Section 6.3(e), Exhibit G and the Guarantor Joinder, none of the representations and warranties of Seller contained in this Agreement or any of the other documents delivered by Seller in connection with the Contemplated Transactions (including any certificate to be delivered under Article VII of this Agreement) (collectively, the “Transaction Documents”) and none of the covenants of any party required to be performed by such party before the Closing shall survive the Closing, and thereafter none of the parties hereto or any of their Affiliates or any of their respective managers, officers, trustees, directors, employees, shareholders, members, partners, agents, representatives, advisors, successors and assigns (collectively, “Representatives”) shall have any liability whatsoever with respect to any such representation, warranty, covenant or agreement, and no claim for breach of any such representation or warranty, detrimental reliance or other right or remedy (whether in contract, in tort or at law or in equity) may be brought after the Closing with respect thereto, except in the event of fraud by Seller or any of its Representatives. The provisions of this Section 9.1 will not, however, prevent or limit a cause of action prior to Closing under Section 10.2(c) to enforce specifically the terms and provisions of this Agreement or prevent or limit any claim under the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy).
9.2. Sole Remedy. Notwithstanding anything in this Agreement to the contrary, subject to Section 6.3(e), Exhibit G and the Guarantor Joinder and except for any fraud by Seller or any of its Representatives, the sole and exclusive remedy for claims with respect to any and all losses, liabilities, claims, damages and expenses of Buyer and its Affiliates and their respective Representatives based upon, arising out of, with respect to or by reason of any breach of any representation or warranty by Seller contained in this Agreement or in any Transaction Documents discovered after the Closing Date shall be to recover under either (as applicable) (i) any buyer side representations and warranties policy obtained by Buyer in connection with Contemplated Transactions and the Transaction Documents and on the non-binding indicative terms set forth on Exhibit F attached hereof (collectively, the “R&W Insurance Policy” and such non-binding indicative terms, the “R&W Insurance Policy Non-Binding Indicative Terms”) or (ii) a Replacement R&W Insurance Policy, regardless of whether or not the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) is, after it is issued and bound, invalid, invalidated, disputed or ineffective, or not obtained for any reason whatsoever, and regardless of whether or not, after the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) is issued and bound, any or all of the coverage intended to be provided thereunder is disputed, denied or otherwise unavailable in whole or in part.
9.3. Covenant. From and after the date hereof, Buyer shall diligently pursue and use commercially reasonable efforts to obtain, on the R&W Insurance Non-Binding Indicative Terms, the R&W Insurance Policy; provided that the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) shall expressly provide that the insurer has no subrogation rights, and will not pursue any claim against Seller or any of its Representatives, except in the event of fraud by Seller or any of its Representatives. At Closing, Buyer and Seller shall each pay for fifty percent (50%) of the costs and expenses of the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) (in either case, including without limitation underwriting fees and legal fees of the R&W Insurance Policy Insurer, or, if applicable, the Replacement R&W Insurance Policy Insurer (in each case, as opposed to Buyer), premiums, deposits for binding and taxes) (collectively, “R&W Insurance Policy Costs”), provided that Buyer shall pay one hundred percent (100%) of (i) all legal fees, costs and expenses incurred by Buyer in obtaining the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) and (ii) all costs and expenses incurred by Buyer in connection with any third party reports obtained for, or provided to, the issuer of the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy Insurer). Without limiting the foregoing, but on the condition of Seller’s performance of its obligations under this Section 9.3, (i) Buyer shall use commercially reasonable efforts to respond to and satisfy any and all reasonable requests from the underwriter and/or insurer(s) with respect to the R&W Insurance Policy (collectively, the “R&W Insurance Policy Insurer”), or, if applicable, the Replacement R&W Insurance Policy Insurer, including, without limitation, requests for due diligence information and third-party reports and payment of any Expense Deposit (subject to Seller’s payment of 50% thereof pursuant to the last sentence of this Section 9.3), (ii) exercise commercially reasonable efforts to participate in an “underwriting call” no later than August 10, 2022 with the R&W Insurance Policy Insurer (or, with respect to any Replacement R&W Insurance Policy, with the Replacement R&W Insurance Policy Insurer no later than the date reasonably selected by Seller), and, within a commercially reasonable period following such “underwriting call” respond to any questions and/or issues raised by the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) during, or as a result of, such “underwriting call”, and (iii) exercise commercially reasonable efforts to promptly bind the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) and, concurrently with such binding, Buyer and Seller shall each pay to the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) fifty percent (50%) of the portion of the premium for the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) required to be paid to the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) in order to so bind the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy), including any applicable taxes collected by the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) (such portion of the premium, the “R&W Insurance Policy Binding Premium”). Without limiting the foregoing, Seller shall reasonably cooperate with Buyer in pursuing and obtaining the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy), including, without limitation, providing such information, documents and diligence materials as the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) may reasonably require. Prior to the date when due, Seller and Buyer shall each pay the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) an amount equal to 50% of the non-refundable underwriting fee (or so called “loss mitigation” fee or expense deposit) payable to the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) in connection with the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) (“Expense Deposit”).
9.4. No Seller Responsibility. Except as specifically provided in Section 9.3 above, and subject to Section 6.3(e), Exhibit G and the Guarantor Joinder, Seller and its Representatives shall not have any direct or indirect liability of any kind or any nature in connection with the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) except in the event of fraud by such parties, including in the event that: (a) the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) is not in force on the Closing Date for any reason; (b) the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) is terminated or cancelled or becomes null and of no effect at any time on or after the Closing Date for any reason; or (c) the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) refuses, omits, is unable to or delays to make any payment under the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy) for any reason, whether or not the R&W Insurance Policy Insurer (or, if applicable, the Replacement R&W Insurance Policy Insurer) is in default or not under the R&W Insurance Policy (or, if applicable, the Replacement R&W Insurance Policy).
9.5. Replacement R&W Insurance Policy. If the R&W Insurance Policy Buyer Condition to Closing has not been satisfied as of the originally scheduled Closing Date pursuant to Section 6.3(e), then at any time on or before the Closing Date (as the Closing Date may be extended pursuant to Section 6.3(e)), Seller shall have the right to cause a Replacement R&W Insurance Policy Insurer to bind the Replacement R&W Insurance Policy in lieu of the R&W Insurance Policy, in which case (1) Section 6.3(e), Exhibit G and the Guarantor Joinder shall not be applicable to the Contemplated Transaction and shall be of no force and effect and (2) Buyer and Seller shall proceed to Closing with the Replacement R&W Insurance Policy and otherwise (subject to the immediately preceding clause (1)) on the terms, provisions and conditions of this Agreement. Without limiting the terms and provisions of Section 9.3 with respect to the Replacement R&W Insurance Policy Insurer and the Replacement R&W Insurance Policy, Buyer shall reasonably cooperate with Seller in causing the Replacement R&W Insurance Policy Insurer to bind the Replacement R&W Insurance Policy.
ARTICLE X
Termination
10.1. Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written agreement of Seller and Buyer; or
(b) by Buyer, (1) if a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Seller set forth in this Agreement shall have occurred such that a condition set forth in Section 6.3 would not be satisfied, and (i) such breach is not reasonably capable of being cured by the Closing Date or (ii) if such breach is reasonably capable of being cured by the Closing Date, such breach shall not have been cured by the earlier of (A) ten (10) days after receipt of written notice of such breach from Buyer and (B) the Closing Date or (2) if Other Agreement Buyer has the right to terminate, and is simultaneously terminating,the Other Agreement pursuant to Section 10.1(b) of the Other Agreement; provided, however, that Buyer will not have the right to terminate this Agreement pursuant to this Section 10.1(b) (1) if Buyer or Other Agreement Buyer is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the Other Agreement, respectively or (2) if the last paragraph of Section 6.3 applies to such failure of a condition set forth in Section 6.3 to be satisfied; provided further, however, that the foregoing notice and cure period set forth in this clause (b) shall not apply to any failure by Seller to close the Contemplated Transactions on the Closing Date in accordance with the terms, provisions and conditions of this Agreement;
(c) by Seller, (1) if a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Buyer set forth in this Agreement shall have occurred such that a condition set forth in Section 6.2 would not be satisfied, and (i) such breach is not reasonably capable of being cured by the Closing Date or (ii) if such breach is reasonably capable of being cured by the Closing Date, such breach shall not have been cured by the earlier of (A) ten (10) days after receipt of written notice of such breach from Buyer and (B) the Closing Date or (2) if Other Agreement Seller has the right to terminate, and is simultaneously terminating, the Other Agreement pursuant to Section 10.1(c) of the Other Agreement; provided that Seller will not have the right to terminate this Agreement pursuant to this Section 10.1(c) if Seller or Other Agreement Seller is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the Other Agreement, respectively; provided further that the foregoing notice and cure period set forth in this clause (c) shall not apply to any failure by Buyer to close the Contemplated Transactions on the Closing Date in accordance with the terms, provisions and conditions of this Agreement;
(d) by written notice by either Seller or Buyer to the other party if the condition to Closing set forth in Section 6.1 is not satisfied as of the Closing Date so long as such failure is not otherwise a result of any breach of this Agreement by such party;
(e) by Buyer pursuant to, and subject to the terms and conditions of, Section 2.7;
(f) in accordance with Section 2.2; or
(g) by Seller in accordance with Section 2.9(b).
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10.2. |
Effect of Termination. |
(a) In the event that this Agreement is terminated pursuant to Section 10.1(a), Section 10.1(b), Section 10.1(d), Section 10.1(e), Section 10.1(f) or Section 10.1(g), then the Escrow Agent shall return the Deposit to the Buyer by wire transfer of immediately available funds to the account designated by the Buyer as promptly as reasonably practicable after such termination (with deduction of Buyer’s portion of the fee payable to Escrow Agent pursuant to this Agreement, if unpaid, with deduction for the Independent Consideration, if applicable pursuant to Section 2.7 and, if this Agreement is terminated other than pursuant to Section 10.1(b), with deduction for fifty percent (50%) of the Existing Loan Assumption Fees) (and, in the event that this Agreement is terminated pursuant to Section 10.1(b), Seller shall reimburse Buyer for (x) its direct and documented reasonable out of pocket costs and expenses actually incurred by Buyer in the negotiation of this Agreement, conducting its diligence activities, and otherwise in preparation for Closing, in an aggregate amount up to One Million Five Hundred Thousand Dollars ($1,500,000.00), (y) the amounts paid by Buyer for the R&W Insurance Policy Binding Premium, and (z) amounts paid by Buyer for the Expense Deposit), whereupon this Agreement shall automatically terminate and none of the parties shall have any further obligation to the others, except that the parties hereto shall remain bound by the provisions of this Section 10.2 and Section 5.6 and Article XI, and by the provisions of the Access Agreement and the Confidentiality Agreement (collectively, the “Surviving Provisions”).
(b) In the event that this Agreement is terminated pursuant to Section 10.1(c), then Buyer shall forfeit, and the Escrow Agent shall deliver to Seller, and Seller shall be entitled to retain, the Deposit. In such event, except with respect to the Surviving Provisions, the delivery of the Deposit shall be deemed to be liquidated damages and the sole and exclusive remedy of Seller and its Affiliates and Representatives against Buyer and any of its Affiliates and Representatives for any failure to close this Agreement. The parties acknowledge and agree that the damages to Seller in the circumstances described in this Section 10.2(b) would be difficult, if not impossible to ascertain, and the liquidated damages provided for in this Section 10.2(b) are a reasonable estimate thereof.
(c) In the event that a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Seller set forth in this Agreement shall have occurred such that Buyer would have the right to terminate this Agreement pursuant to Section 10.1(b), Buyer shall be entitled, in lieu of termination, to seek specific performance of the terms hereof; provided, however, that Buyer must file suit for specific performance against Seller in a tribunal permitted by this Agreement on or before sixty (60) days following the date upon which the Closing was scheduled to have occurred as provided herein; provided further, however, that if, specific performance is not a remedy to Buyer pursuant to Section 10.2(c) because Seller has sold the Acquired Entities or the Properties to a third party in breach of this Agreement, then (i) Buyer may instruct Escrow Agent to return the Deposit and accrued interest thereon, (ii) Buyer may recover from Seller the amount by which the total consideration received by Seller for the sale of the Acquired Entities or the Properties (as applicable) to a third party in breach of this Agreement exceeds the Purchase Price for the Property and (iii) Buyer may exercise its rights and remedies set forth in Section 10.2(a).
(d) Notwithstanding the foregoing or anything contained herein to the contrary, a party shall only be entitled to elect and/or exercise a right and/or remedy under this Section 10.2 (including, without limitation, the termination of this Agreement and/or seeking specific performance) if such party’s Affiliate that is a party to the Other Agreement is (i) entitled to exercise the same right and/or remedy under Section 10.2 of the Other Agreement, and (ii) simultaneously exercising the same right and/or remedy under Section 10.2 of the Other Agreement.
ARTICLE XI
Miscellaneous
11.1. Expenses. Other than any fees and expenses expressly allocated among the parties pursuant to this Agreement, all fees and expenses incurred in connection with the Contemplated Transactions shall be paid by the party incurring such expenses, whether or not the Contemplated Transactions are consummated.
11.2. Notices. All notices, demands, requests and other communications required or permitted hereunder shall be in writing, and shall be (a) personally delivered with a written receipt of delivery; (b) sent by a nationally-recognized overnight delivery service requiring a written acknowledgement of receipt or providing a certification of delivery or attempted delivery; (c) sent by certified or registered mail, return receipt requested; or (d) sent by confirmed facsimile transmission or electronic delivery with an original copy thereof transmitted to the recipient by one of the means described in subsections (a) through (c) no later than three (3) business days thereafter. All notices shall be deemed effective when actually delivered as documented in a delivery receipt except for electronic delivery which shall be deemed effective when sent by email; provided, however, that if the notice was sent by overnight courier or mail as aforesaid and is affirmatively refused or cannot be delivered during customary business hours by reason of the absence of a signatory to acknowledge receipt, or by reason of a change of address with respect to which the addressor did not have either knowledge or written notice delivered in accordance with this paragraph, then the first attempted delivery shall be deemed to constitute delivery. Each party shall be entitled to change its address for notices from time to time by delivering to the other party notice thereof in the manner herein provided for the delivery of notices. All notices shall be sent to the addressee at its address set forth following its name below:
| If to Seller: |
c/o Starwood Capital Group Global 100 Pine Street, Suite 3000 San Francisco, California 94111 Attention: Sam Caven Email: scaven@starwood.com |
| With a copy (which shall notconstitute notice) to: |
Rinaldi, Finkelstein and Franklin 591 West Putnam Avenue Greenwich, CT 06830 Attention: James Raved Email: jraved@starwood.com
Kirkland & Ellis LLP 601 Lexington Avenue New York, New York 10022 Attention: Christopher L. Hartmann, P.C. Email: christopher.hartmann@kirkland.com |
| If to Buyer: |
VB FIVE, LLC 3500 Park Center Drive, Suite 100 Dayton, OH 45414 Attn: Dana Sprong; Grace Chu Email: dana.sprong@vinebrookhomes.com grace.chu@vinebrookhomes.com |
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With a copy (which shall not constitute notice) to: |
NexPoint Real Estate Advisors, L.P. 300 Crescent Court, Suite 700 Dallas, TX 75230 Attn: Brian Mitts, D.C. Sauter, Rob Harris Email: BMitts@nexpoint.com dsauter@nexpoint.com rharris@nexpoint.com |
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With a copy (which shall notconstitute notice) to: |
Wick Phillips Gould & Martin, LLP 3131 McKinney Avenue, Suite 500 Dallas, TX 75204 Attn: Chris Fuller, Ryan Goins Email: chris.fuller@wickphillips.com ryan.goins@wickphillips.com |
11.3. Governing Law. This Agreement shall in all respects be governed by, and construed in accordance with, the Laws (excluding conflict of laws rules and principles) of the State of Delaware applicable to agreements made and to be performed entirely within such State, including all matters of construction, validity and performance.
11.4. Entire Agreement. This Agreement, together with the Exhibits hereto, the Company Disclosure Schedules, the Ancillary Documents, the Confidentiality Agreement, the Other Agreement, the Access Agreement and the Other Agreement Access Agreement constitute the entire agreement of the parties relating to the subject matter hereof and supersede all prior contracts or agreements, whether oral or written.
11.5. Severability. Should any provision of this Agreement or the application thereof to any Person or circumstance be held invalid or unenforceable to any extent: (a) such provision shall be ineffective to the extent, and only to the extent, of such unenforceability or prohibition and shall be enforced to the greatest extent permitted by Law, (b) such unenforceability or prohibition in any jurisdiction shall not invalidate or render unenforceable such provision as applied (i) to other Persons or circumstances or (ii) in any other jurisdiction, and (c) such unenforceability or prohibition shall not affect or invalidate any other provision of this Agreement.
11.6. Amendment. Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented or modified orally, but only by an instrument in writing signed by Buyer and Seller; provided, that the observance of any provision of this Agreement may be waived in writing by the party that will lose the benefit of such provision as a result of such waiver.
11.7. Effect of Waiver or Consent. No waiver or consent, express or implied, by any party to or of any breach or default by any party in the performance by such party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such party of the same or any other obligations of such party hereunder. No single or partial exercise of any right or power, or any abandonment or discontinuance of steps to enforce any right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. Failure on the part of a party to complain of any act of any party or to declare any party in default, irrespective of how long such failure continues, shall not constitute a waiver by such party of its rights hereunder until the applicable statute of limitation period has run.
11.8. Parties in Interest; Limitation on Rights of Others. The terms of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective legal representatives, successors and assigns. Nothing in this Agreement, whether express or implied, shall be construed to give any Person (other than the parties hereto and their respective legal representatives, successors and assigns and as expressly provided herein) any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenants, conditions or provisions contained herein, as a third party beneficiary or otherwise; provided, that Buyer Exculpated Parties, Seller Exculpated Parties and Indemnified Individuals who are not otherwise a party to this Agreement shall be third party beneficiaries of Section 5.5.
11.9. Assignability. This Agreement shall not be assigned by Seller without the prior written consent of Buyer. This Agreement shall not be assigned by Buyer without the prior written consent of Seller; provided, however, that Buyer shall have the right to assign this Agreement to one or more entities that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with Buyer upon at least five (5) days’ prior written notice to (but without the consent of) Seller so long as (a) Buyer is not released from its liability hereunder and (b) any such assignment would not impair, restrain, prevent, delay or otherwise negatively impact satisfying and/or obtaining the Existing Loan Assumption Approval Conditions or the Existing Loan Assumption Approval. No transfer or assignment by Buyer in violation of the provisions hereof shall be valid or enforceable.
11.10. Jurisdiction; Court Proceedings; Waiver of Jury Trial. Any Litigation against any party to this Agreement arising out of or in any way relating to this Agreement shall be brought in any federal or state court located in the State of Delaware and each of the parties hereby submits to the exclusive jurisdiction of such courts for the purpose of any such Litigation; provided, that a final judgment in any such Litigation shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each party irrevocably and unconditionally agrees not to assert (a) any objection which it may ever have to the laying of venue of any such Litigation in any federal or state court located in the State of Delaware, (b) any claim that any such Litigation brought in any such court has been brought in an inconvenient forum and (c) any claim that such court does not have jurisdiction with respect to such Litigation. To the extent that service of process by mail is permitted by applicable Law, each party irrevocably consents to the service of process in any such Litigation in such courts by the mailing of such process by registered or certified mail, postage prepaid, at its address for notices provided for herein. Each party irrevocably and unconditionally waives any right to a trial by jury and agrees that any of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained-for agreement among the parties irrevocably to waive its right to trial by jury in any Litigation.
11.11. No Other Duties. The only duties and obligations of the parties under this Agreement are as specifically set forth in this Agreement, and no other duties or obligations shall be implied in fact, Law or equity, or under any principle of fiduciary obligation.
11.12. Reliance on Counsel and Other Advisors. Each party has consulted such legal, financial, technical or other expert as it deems necessary or desirable before entering into this Agreement. Each party represents and warrants that it has read, knows, understands and agrees with the terms and conditions of this Agreement.
11.13. Sole Remedies. The sole and exclusive remedies of the parties in relation to any breach of the provisions of this Agreement shall be as expressly set forth in Article IX and Article X.
11.14. Counterparts. This Agreement may be executed by in any number of counterparts with the same effect as if all signatory parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. Delivery of an executed counterpart by facsimile transmission or by electronic means (including a .pdf document) shall be effective.
11.15. Further Assurance. If at any time after the Closing any further action is necessary or desirable to fully effect the transactions contemplated by this Agreement or any other of the Ancillary Documents, each of the parties shall take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request.
11.16. Legal Representation. Each of the parties to this Agreement acknowledges that Kirkland & Ellis LLP (“Kirkland”) currently serves as counsel to both (a) the Acquired Entities and (b) Seller and its Affiliates (Seller individually and collectively with its Affiliates, the “Seller Group”) in connection with the negotiation, preparation, execution and delivery of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby. There may come a time, including after the consummation of the transactions contemplated by this Agreement and the Ancillary Documents, when the interests of the Seller Group and the Acquired Entities may no longer be aligned or when, for any reason, the Seller Group, Kirkland or any Acquired Entity believes that Kirkland can or should no longer represent both the Seller Group and the Acquired Entities. The parties understand and specifically agree that Kirkland may withdraw from representing any Acquired Entity and continue to represent the Seller Group, even if the interests of the Seller Group and the interests of any Acquired Entity are or may be adverse, including in connection with any dispute arising out of or relating to this Agreement or any of the Ancillary Documents or the transactions contemplated hereby or thereby, and even though Kirkland may have represented the Acquired Entities in a matter substantially related to such dispute or may be handling ongoing matters for any Acquired Entity, and Buyer and the Acquired Entities hereby consent thereto and waive any conflict of interest arising therefrom. Each of the parties further agrees that, as to all communications among Kirkland, any Acquired Entity and the Seller Group, the attorney-client privilege, the expectation of client confidence and all other rights to any evidentiary privilege belong to the Seller Group and shall not pass to or be claimed by any Acquired Entity or any of its Affiliates. In addition, if the transactions contemplated by this Agreement and the Ancillary Documents are consummated, the Acquired Entities shall have no right of access to or control over any of Kirkland’s records related to such transactions, which shall become property of (and be controlled by) the Seller Group. Furthermore, in the event of a dispute between the Seller Group and any Acquired Entity arising out of or relating to any manner in which Kirkland acted for them both, none of the attorney-client privilege, the expectation of client confidence or any other rights to any evidentiary privilege will protect from disclosure to the Seller Group any information or documents developed or shared during the course of Kirkland’s joint representation of the Seller Group and the Acquired Entities.
11.17. Attorneys’ Fees. If any action or proceeding is commenced by any party or parties hereto against any other party or parties hereto that arises out of, or relates to, this Agreement and/or any of Ancillary Documents, then the non-prevailing party shall be responsible for all costs and expenses in connection therewith, including reasonable attorneys’ fees and witness fees as determined by a court of competent jurisdiction or any other trier of fact.
11.18. Release. Effective as of the Closing Date, except for any rights or obligations under this Agreement that expressly survive the Closing, Buyer on behalf of itself and each of its Affiliates and each of the Buyer Exculpated Parties, hereby irrevocably and unconditionally releases and forever discharges Seller and the Seller Exculpated Parties of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, Contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which Buyer or the Buyer Exculpated Parties may have against Seller or the Seller Exculpated Parties, now or in the future, in each case, arising out of or related to (i) any of the Acquired Entities or their business, assets or operations, or (ii) actions of the board of managers or directors, or any officers, of any Acquired Entities (collectively, the “Released Claims”). Effective as of the Closing Date, except for any rights or obligations under this Agreement that expressly survive the Closing, Seller on behalf of itself and each of its Affiliates and each of the Seller Exculpated Parties, hereby irrevocably and unconditionally releases and forever discharges the Acquired Entities and the Buyer Exculpated Parties of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, Contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which Seller or the Seller Exculpated Parties may have against the Acquired Entities or the Buyer Exculpated Parties, now or in the future, in each case, arising out of or related to (i) any of the Acquired Entities or their business, assets or operations, or (ii) actions of the board of managers or directors, or any officers, of any Acquired Entities.
11.19. Intentionally Omitted.
11.20. State-Specific Provisions. In no event shall any of the following be deemed to limit anything contained in Section 11.3 hereof.
(a) Florida.
(i) Radon Notice. Pursuant to Section 404.056(5), Florida Statutes, Buyer is hereby notified as follows: “RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.”
(b) Texas.
(i) As to Properties located in the State of Texas, Section 3.7(c) is replaced with the following: To Seller’s knowledge, the Property Owner has good and indefeasible fee simple title to the Properties located in the State of Texas, free and clear of Liens, except for Permitted Liens, instruments securing the Existing Loan and any liens, claims and security interests that will be released at or prior to the Closing.
11.21. Jointly and Severally. Notwithstanding anything to the contrary contained in this Agreement or any document executed in connection herewith, each Seller shall be jointly and severally liable to Buyer under or in connection with this Agreement or any document executed in connection herewith.
11.22. Closing; Dates. Notwithstanding anything to the contrary contained in this Agreement or any document executed in connection herewith, (1) it is understood and agreed that the Closing shall occur simultaneously with the Other Agreement Closing and (2) if the Other Agreement Closing Date, the Other Agreement Outside Closing Date or any other date set forth in the Other Agreement is adjourned or extended in accordance with the terms of the Other Agreement, then the Closing Date, the Outside Closing Date or any such other date hereunder shall be automatically adjourned or extended concurrently to such as-adjourned or extended Other Agreement Closing Date, Other Agreement Outside Closing Date or other date set forth in the Other Agreement.
[Remainder of Page Intentionally Left Blank;
Signature Page Follows]
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered in its name and on its behalf, all as of the Effective Date.
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SELLER: |
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SOF-XI TERM HOLDINGS, L.P., a Delaware limited partnership |
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| By: |
SOF-XI Term Holdings GP, L.L.C., a Delaware limited liability company, its general partner |
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By: /s/ Sam Caven |
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| Name: Sam Caven | |||
| Its: Authorized Signatory | |||
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SOF-XI RS HOLDINGS, L.P., a Delaware limited partnership |
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| By: |
SOF-XI RS Holdings GP, L.L.C., a Delaware limited liability company |
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| By: /s/ Sam Caven | |||
| Name: Sam Caven | |||
| Its: Authorized Signatory | |||
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SFR MASTER HOLDINGS, L.P., a Delaware limited partnership |
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| By: |
SFR Master Holdings GP, L.L.C., a Delaware limited liability company |
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| By: /s/ Sam Caven | |||
| Name: Sam Caven | |||
| Title: Authorized Signatory | |||
Signature Page to Interest Purchase Agreement (Siete)
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BUYER: |
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VB FIVE, LLC, a Delaware limited liability company |
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By: /s/ Dana Sprong |
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Name: Dana Sprong |
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Its: Authorized Signatory |
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Signature Page to Interest Purchase Agreement (Siete)
Exhibit A
Allocated Purchase Prices
See attached.
Exhibit B
Form of Escrow Agreement
Exhibit C
Mandatory Removal Exceptions
See attached.
Exhibit D
Form of Assignment Agreement
Exhibit E
Form of Title Affidavit
Exhibit F
R&W Insurance Policy Non-Binding Indicative Terms
Exhibit G
Post-Closing Liability Terms and Provisions
Exhibit H
Form of Guarantor Joinder
Exhibit 10.1
Execution Version
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
dated as of
November 3, 2021
among
VINEBROOK HOMES OPERATING PARTNERSHIP, L.P., as Parent Borrower
CERTAIN OF ITS SUBSIDIARIES, as Subsidiary Borrowers
and
The Lenders Party Hereto
and
KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent
and
BMO CAPITAL MARKETS CORP., RAYMOND JAMES BANK, and TRUIST SECURITIES, INC.,
As Co-Syndication Agents
and
KEYBANC CAPITAL MARKETS INC., BMO CAPITAL MARKETS CORP., RAYMOND JAMES
BANK, and TRUIST SECURITIES, INC.
As Joint Lead Arrangers and Joint Bookrunners
TABLE OF CONTENTS
|
ARTICLE I Definitions |
1 | |
|
Section 1.01 |
Defined Terms |
1 |
|
Section 1.02 |
Classification of Loans and Borrowings |
34 |
|
Section 1.03 |
Terms Generally |
34 |
|
Section 1.04 |
Accounting Terms; GAAP |
35 |
|
Section 1.05 |
Benchmark Notification |
35 |
|
Section 1.06 |
Divisions |
35 |
|
Section 1.07 |
Letter of Credit Amounts |
35 |
|
Section 1.08 |
Amendment and Restatement. |
35 |
|
ARTICLE II The Loans |
36 | |
|
Section 2.01 |
Revolving Commitments |
36 |
|
Section 2.02 |
Loans and Borrowings. |
36 |
|
Section 2.03 |
Requests for Borrowings |
37 |
|
Section 2.04 |
Funding of Borrowings. |
37 |
|
Section 2.05 |
Letters of Credit. |
38 |
|
Section 2.06 |
Swing Line Loans. |
45 |
|
Section 2.07 |
Cash Collateral. |
48 |
|
Section 2.08 |
Interest Elections. |
49 |
|
Section 2.09 |
Reduction or Early Termination of Revolving Commitments |
50 |
|
Section 2.10 |
Repayment of Loans; Evidence of Debt. |
51 |
|
Section 2.11 |
Prepayment of Loans. |
51 |
|
Section 2.12 |
Fees. |
52 |
|
Section 2.13 |
Interest. |
53 |
|
Section 2.14 |
Alternate Rate of Interest |
54 |
|
Section 2.15 |
Increased Costs. |
54 |
|
Section 2.16 |
Break Funding Payments |
56 |
|
Section 2.17 |
Taxes. |
56 |
|
Section 2.18 |
Payments Generally; Pro Rata Treatment; Sharing of Set-offs. |
60 |
|
Section 2.19 |
Mitigation Obligations; Replacement of Lenders. |
61 |
|
Section 2.20 |
Defaulting Lenders. |
62 |
|
Section 2.21 |
Extension of Revolving Loan Maturity Date |
64 |
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Section 2.22 |
Increase in the Maximum Total Commitment; Term Loan Option. |
64 |
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Section 2.23 |
Borrowing Base. |
66 |
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Section 2.24 |
Benchmark Replacement Setting. |
70 |
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ARTICLE III Representations and Warranties |
74 | |
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Section 3.01 |
Organization; Powers |
74 |
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Section 3.02 |
Authorization; Enforceability |
74 |
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Section 3.03 |
Governmental Approvals; No Conflicts |
74 |
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Section 3.04 |
Financial Condition; No Material Adverse Change. |
74 |
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Section 3.05 |
Properties. |
75 |
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Section 3.06 |
Intellectual Property |
75 |
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Section 3.07 |
Litigation and Environmental Matters. |
75 |
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Section 3.08 |
Compliance with Laws and Agreements; No Default |
77 |
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Section 3.09 |
Investment and Holding Company Status |
77 |
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Section 3.10 |
Taxes |
77 |
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Section 3.11 |
ERISA |
77 |
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Section 3.12 |
Disclosure |
77 |
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Section 3.13 |
Solvency |
78 |
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Section 3.14 |
Margin Regulations |
78 |
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Section 3.15 |
Subsidiaries; REIT Qualification |
78 |
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Section 3.16 |
OFAC; Anti-Money Laundering |
78 |
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Section 3.17 |
EEA Financial Institution |
78 |
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Section 3.18 |
Borrowing Base Properties |
78 |
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ARTICLE IV Conditions |
80 | |
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Section 4.01 |
Effective Date |
80 |
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Section 4.02 |
Each Borrowing |
81 |
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ARTICLE V Affirmative Covenants |
81 | |
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Section 5.01 |
Financial Statements; Ratings Change and Other Information |
81 |
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Section 5.02 |
Financial Tests |
82 |
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Section 5.03 |
Notices of Material Events |
84 |
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Section 5.04 |
Existence; Conduct of Business |
84 |
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Section 5.05 |
Payment of Obligations |
84 |
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Section 5.06 |
Maintenance of Properties; Insurance. |
84 |
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Section 5.07 |
Books and Records; Inspection Rights. |
85 |
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Section 5.08 |
Compliance with Laws |
85 |
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Section 5.09 |
Use of Proceeds |
85 |
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Section 5.10 |
Fiscal Year |
85 |
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Section 5.11 |
Environmental Matters |
85 |
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Section 5.12 |
Collateral Requirement. |
85 |
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Section 5.13 |
Further Assurances |
86 |
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Section 5.14 |
Bank Accounts |
86 |
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Section 5.15 |
Parent Covenants |
86 |
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Section 5.16 |
Borrowing Base Properties |
87 |
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Section 5.17 |
Environmental Matters |
87 |
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Section 5.18 |
Accounts |
87 |
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Section 5.19 |
Keepwell |
88 |
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Section 5.20 |
Post-Closing Good Standings. The Borrowers shall deliver to the Administrative Agent within thirty (30) days of the date hereof (or such later date as Administrative Agent in its sole discretion may agree), evidence dated within thirty (30) days of such delivery that each of VB One and True Mem2016-1, LLC is validly existing and in good standing in the State of Tennessee. |
88 |
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ARTICLE VI Negative Covenants |
88 | |
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Section 6.01 |
Liens |
88 |
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Section 6.02 |
Fundamental Changes |
88 |
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Section 6.03 |
Investments, Loans, Advances and Acquisitions |
89 |
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Section 6.04 |
Hedging Agreements |
90 |
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Section 6.05 |
Restricted Payments |
90 |
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Section 6.06 |
Transactions with Affiliates |
90 |
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Section 6.07 |
Parent Negative Covenants |
90 |
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Section 6.08 |
Restrictive Agreements |
90 |
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Section 6.09 |
Indebtedness |
91 |
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Section 6.10 |
Fees |
91 |
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Section 6.11 |
Amendment to Organizational Documents |
92 |
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Section 6.12 |
Sanctions |
92 |
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Section 6.13 |
Borrowing Base Properties |
92 |
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Section 6.14 |
[Intentionally Omitted] |
93 |
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ARTICLE VII Events of Default |
93 | |
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Section 7.01 |
Events of Default Generally |
93 |
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Section 7.02 |
Remedies Upon an Event of Default |
95 |
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Section 7.03 |
Application of Funds |
95 |
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ARTICLE VIII The Administrative Agent |
96 | |
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Section 8.01 |
General. |
96 |
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Section 8.02 |
Administrative Agent May File Proof of Claim |
100 |
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Section 8.03 |
Collateral Matters |
100 |
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Section 8.04 |
Certain ERISA Matters |
100 |
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Section 8.05 |
Erroneous Payments |
102 |
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ARTICLE IX Miscellaneous |
104 | |
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Section 9.01 |
Notices |
104 |
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Section 9.02 |
Waivers; Amendments. |
105 |
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Section 9.03 |
Expenses; Indemnity; Damage Waiver. |
107 |
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Section 9.04 |
Successors and Assigns |
108 |
|
Section 9.05 |
Survival |
111 |
|
Section 9.06 |
Counterparts; Integration; Effectiveness. |
111 |
|
Section 9.07 |
Severability |
112 |
|
Section 9.08 |
Right of Setoff |
112 |
|
Section 9.09 |
Governing Law; Jurisdiction; Consent to Service of Process. |
112 |
|
Section 9.10 |
WAIVER OF JURY TRIAL |
113 |
|
Section 9.11 |
Headings |
113 |
|
Section 9.12 |
Confidentiality |
113 |
|
Section 9.13 |
Interest Rate Limitation |
114 |
|
Section 9.14 |
USA PATRIOT Act |
114 |
|
Section 9.15 |
Fiduciary Duty/No Conflicts. |
115 |
|
Section 9.16 |
Acknowledgement and Consent to Bail-In of EEA Financial Institutions |
115 |
|
Section 9.17 |
Multiple Borrowers; Joint and Several Liability. |
116 |
|
Section 9.18 |
Acknowledgement Regarding Any Supported QFCs |
118 |
SCHEDULES:
|
Schedule 2.01 |
– |
Commitments |
|
Schedule 2.23 |
– |
Initial Borrowing Base Properties |
|
Schedule 3.07 |
– |
Litigation Disclosure |
|
Schedule 3.14 |
– |
Subsidiaries |
|
Schedule SB |
– |
Subsidiary Borrowers |
|
EXHIBITS: |
||
|
Exhibit A |
-- |
Form of Assignment and Acceptance |
|
Exhibit B-1 |
– |
Form of Compliance Certificate |
|
Exhibit B-2 |
– |
Form of Borrowing Base Report |
|
Exhibit C |
– |
Form of Guaranty |
|
Exhibit D |
– |
Form of Revolving Note |
|
Exhibit E |
– |
Form of Borrowing Request/Interest Rate Election |
|
Exhibit F |
– |
Form of Tax Compliance Certificate |
|
Exhibit G |
– |
Form of Omnibus Joinder Agreement |
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (“Agreement”) dated as of
November 3, 2021, among
VINEBROOK HOMES OPERATING PARTNERSHIP, L.P., as Parent Borrower,
CERTAIN OF ITS SUBSIDIARIES, as Subsidiary Borrowers,
the LENDERS party hereto,
KEYBANK NATIONAL ASSOCIATION, as Administrative Agent,
And
KEYBANC CAPITAL MARKETS INC., BMO CAPITAL MARKETS CORP., RAYMOND JAMES BANK, and TRUIST SECURITIES, INC., as Joint Lead Arrangers and Joint Bookrunners
ARTICLE I
Definitions
Section 1.01 Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
“ABR,” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
“Acceptable Advisor” means the Advisor, any of its Affiliates, or another advisor that is acceptable to the Administrative Agent in its sole discretion.
“Acceptable Appraisal” means, with respect to any Real Property, (whether one or more) means a BPO or written appraisal of such Real Property by an MAI appraiser satisfactory to the Administrative Agent. Each Acceptable Appraisal must comply with all Legal Requirements and, unless specifically provided to the contrary in this Agreement, must be in form and substance reasonably satisfactory to the Administrative Agent. BPOs from Green River Capital are deemed to be acceptable appraisals for purposes of this Agreement.
“Acceptable Manager” means the Property Manager, any of its Affiliates, or another property manager that is reasonably acceptable to the Administrative Agent.
“Acceptable Property” means a Real Property that meets the Eligibility Criteria (as determined by the Required Lenders) and is otherwise approved by Administrative Agent and Required Lenders in their reasonable discretion.
“Account Pledge” means an account pledge executed by certain of Borrowers in favor of Administrative Agent.
“Additional Borrower” means each Subsidiary of the Parent Borrower that is required to and becomes a Subsidiary Borrower hereunder after the Effective Date in accordance with Section 2.23(f).
“Adjusted EBITDA” means (a) EBITDA for the most recently ended fiscal quarter, annualized, less (b) the Capital Expenditure Reserve. Adjusted EBITDA for any period may be adjusted on a pro forma basis to account for Real Properties acquired or sold during such period as approved by the Administrative Agent.
“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
“Adjusted NOI” means, (a) the Net Operating Income from the Borrowing Base Properties for the most recently ended fiscal quarter, annualized, less (b) the Capital Reserve for such Borrowing Base Properties for such period. Adjusted NOI for any period may be adjusted on a pro forma basis to account for Real Properties acquired or sold during such period as approved by the Administrative Agent; provided that with respect to Real Properties that were vacant at the time of acquisition or any Initial Borrowing Base Properties that were vacant on the Effective Date, Adjusted NOI for any such Real Property for the fiscal quarter when it is first leased will be calculated based on the most recently ended calendar month, annualized, with such adjustments requested by, and subject to approval of, the Administrative Agent, and until the earlier of (i) the date such Borrowing Base Property is actually leased or (ii) six (6) months after the date when such Borrowing Base Property was first acquired, Adjusted NOI for such Borrowing Base Property shall be deemed to be $0.
“Administrative Agent” means KeyBank National Association, in its capacity as administrative agent for the Lenders hereunder.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
“Advisor” means NexPoint Real Estate Advisors V, L.P., a Delaware limited partnership.
“Advisory Agreement” means, collectively, that certain amended and restated advisory agreement dated May 4, 2020, by and among Advisor and VineBrook Homes Trust, Inc., as each may be amended, restated, supplemented, or otherwise modified.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.
“Alternative Interest Rate Election Event” is defined in Section 4.03.
“Anti-Corruption Laws” means all Legal Requirements of any jurisdiction concerning or relating to bribery or corruption, including without limitation, the Foreign Corrupt Practices Act of 1977.
“Anti-Money Laundering Laws” means all Legal Requirements related to the financing of terrorism or money laundering, including without limitation, any applicable provision of the Patriot Act and The Currency and Foreign Transactions Reporting Act (also known as the “Bank Secrecy Act,” 31 U.S.C. §§ 5311-5330 and 12U.S.C. §§ 1818(s), 1820(b) and 1951-1959).
“Applicable Percentage” means, (i) with respect to any Revolving Lender, the percentage of the Revolving Commitments of the Revolving Lenders represented by such Revolving Lender's Revolving Commitment, and (ii) with respect to any Term Lender, the percentage of the aggregate Outstanding Term Loans of the applicable tranche represented by such Term Lender’s Term Loans of such tranche. If the Revolving Commitments have terminated or expired, the Applicable Percentages for the Revolving Lenders shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments.
“Applicable Rate” means, a rate per annum equal to the percentage set forth in the applicable table below determined by reference to the Total Leverage Ratio as set forth in the most recent Compliance Certificate received by Administrative Agent pursuant to Section 5.01(c):
(a) for any day prior to the Collateral Termination Date:
|
Applicable Rate |
|||
|
Pricing Level |
Total Leverage Ratio |
Eurodollar Rate Loan (Letters of Credit) |
Base Rate Loan |
|
1 |
≤40% |
1.70% |
0.70% |
|
2 |
>40% but ≤45% |
1.80% |
0.80% |
|
3 |
>45% but ≤50% |
1.95% |
0.95% |
|
4 |
>50% but ≤55% |
2.10% |
1.10% |
|
5 |
>55% but ≤60% |
2.25% |
1.25% |
|
6 |
>60% |
2.45% |
1.45% |
(b) for any day from and after the Collateral Termination Date:
|
Applicable Rate |
|||
|
Pricing Level |
Total Leverage Ratio |
Eurodollar Rate Loan (Letters of Credit) |
Base Rate Loan |
|
1 |
≤40% |
1.60% |
0.60% |
|
2 |
>40% but ≤45% |
1.70% |
0.70% |
|
3 |
>45% but ≤50% |
1.85% |
0.85% |
|
4 |
>50% but ≤55% |
2.00% |
1.00% |
|
5 |
>55% but ≤60% |
2.15% |
1.15% |
|
6 |
>60% |
2.35% |
1.35% |
Any increase or decrease in the Applicable Rate resulting from a change in the Total Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 5.01(c); provided, however, that if, after the due date, a Compliance Certificate is not delivered within 24 hours of written notice from Administrative Agent, then Pricing Level 6 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and in each case shall remain in effect until the date on which such Compliance Certificate is delivered. The Applicable Rate in effect from the Effective Date until adjusted as set forth above shall be set at Pricing Level 6.
Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.13(f).
“Appraised Value” means, with respect to any Real Property, the “as-is” appraised value of such Real Property determined pursuant to the most recently obtained Acceptable Appraisal of such Real Property, as approved by the Administrative Agent.
“Approved Fund” has the meaning set forth in Section 9.04(b).
“Arranger” means each of KBCM, BMO Capital Markets Corp., Raymond James Bank, and Truist Securities, Inc., or any successors thereto, in their capacities as Joint Lead Arrangers and Joint Bookrunners.
“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.
“Auto-Extension Letter of Credit” is defined in Section 2.05(b).
“Available Revolving Amount” means, at any time, the lesser of: (a) the Maximum Revolving Commitment; and (b) (i) the Borrowing Base less (ii) (x) prior to the Collateral Termination Date, the Outstanding Amount of any Term Loans and (y) from after the Collateral Termination Date, all Total Unsecured Indebtedness (other than the Revolving Principal Obligation).
“Availability Period” means the period from and including the Effective Date to but excluding the Revolving Loan Maturity Date.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time, which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Beneficial Ownership Certification” means a certification regarding beneficial ownership required by the Beneficial Ownership Regulation, which certification shall be substantially similar in form and substance to the form of Certification Regarding Beneficial Owners of Legal Entity Customers published jointly, in May 2018, by the Loan Syndications and Trading Association and Securities Industry and Financial Markets Association, or such other form as may be reasonably requested by any Lender.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Borrower” means each of the Parent Borrower and each Subsidiary Borrower.
“Borrower Appraisal” means an appraisal provided by Green Street or another valuation firm selected by the Parent Borrower to serve as the Parent Borrower’s independent valuation advisor, which appraisal shall be satisfactory to the Administrative Agent and conducted in accordance with the valuation guidelines adopted by the Parent Borrower; it being understood that any material changes to such valuation guidelines after the Effective Date shall be subject to the approval of the Administrative Agent.
“Borrower Appraised Value” means, as of any date and with respect to any Real Property, the current fair market value of such Real Property as determined based on the most recent Borrower Appraisal of such Real Property, which shall be no more than ninety (90) days old as of such day; provided that if a Borrower Appraisal that is no more than ninety (90) days old is not available with respect to any Real Property as of such date, the Borrower Appraised Value of such Real Property as of such date shall be the undepreciated cost basis of such Real Property.
“Borrower Rent Account Bank” means a financial institution at which a Rent Account is maintained.
“Borrower Rent Account Control Agreement” means an Account Control Agreement among the applicable Borrower, a Borrower Rent Account Bank and the Administrative Agent providing for springing control by the Administrative Agent during an Event of Default only, in such form as may be reasonably acceptable to the Administrative Agent and the applicable Borrower.
“Borrowing” means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.
“Borrowing Base” means, as of any date of determination:
(a) at any time prior to the Collateral Termination Date, the lesser of (i) the product of (x) 65% times (y) the aggregate Borrowing Base Value of the Borrowing Base Properties, and (ii) the Borrowing Base Implied Loan Amount, in each case, as of such date; and
(b) at any time from and after the Collateral Termination Date, the lesser of (i) the amount of a hypothetical principal obligation that would result in an Unsecured Leverage Ratio of 60%; provided that if the Borrowers complete a Material Acquisition financed principally with Loans, the Unsecured Leverage Ratio may, on no more than two (2) occasions since the Effective Date, be increased to 65% for a period of no more than four (4) fiscal quarters immediately following the fiscal quarter in which such Material Acquisition was completed, and (ii) the amount of a hypothetical principal obligation that would result in a minimum Unsecured Interest Coverage Ratio of 2.0 to 1.0, in each case, as of such date;
provided that, in each case of (a) and (b), to the extent that the aggregate Borrowing Base attributable to one or more Borrowing Base Properties located in a single MSA exceeds thirty five percent (35%) of the aggregate Borrowing Base from all Borrowing Base Properties, the Borrowing Base attributable to such Borrowing Base Properties (whether the Borrowing Base Value or the Adjusted NOI included in the calculation of the Borrowing Base Implied Loan Amount or Unsecured Interest Coverage Ratio from, such Borrowing Base Properties) in excess of such limit shall be excluded from the calculation of the Borrowing Base.
“Borrowing Base Debt Service” means, as of any date of calculation, the Borrowing Base Implied Loan Amount as of such date, multiplied by the Mortgage Constant.
“Borrowing Base DSCR” means, as of any date of calculation, the ratio of (i) Adjusted NOI for the Borrowing Base Properties divided by (ii) Borrowing Base Debt Service as of such date.
“Borrowing Base Implied Loan Amount” means, as of any date of determination, the amount of a hypothetical principal obligation that would result in a Borrowing Base DSCR of 1.35 to 1.00 at any time prior to the Collateral Termination Date.
“Borrowing Base Properties” means each Acceptable Property that either (a) is an Initial Borrowing Base Property or (b) becomes a Borrowing Base Property pursuant to Section 2.23, but excluding any Acceptable Properties that are subject to an Exclusion Event or have been released from the Borrowing Base pursuant to Section 2.23(h), and “Borrowing Base Property” means any one of the Borrowing Base Properties.
“Borrowing Base Property Owner” means each direct or indirect Wholly Owned Subsidiary (which Subsidiary shall be an entity formed under the laws of the United States of America or one of the several states thereof) of the Parent Borrower that owns a Borrowing Base Property.
“Borrowing Base Report” means a report in substantially the form of Exhibit B-2 (or such other form approved by Administrative Agent) certified by a Financial Officer of the Parent.
“Borrowing Base Value” means, as of any date of calculation:
(a) at any time prior to the Collateral Termination Date, the sum for each Borrowing Base Property (including any Real Property being acquired and added to the Borrowing Base on such date) of (i) if no Borrower Appraisal has been obtained for such Borrowing Base Property, the “as is” Appraised Value of such Borrowing Base Property, which shall have been determined pursuant to an Acceptable Appraisal no more than twelve (12) months old as of such date, or (ii) from and after the date when the first Borrower Appraisal for such Borrowing Base Property is obtained (including if obtained in connection with the acquisition thereof), the Borrower Appraised Value of such Borrowing Base Property; and
(b) at any time from and after the Collateral Termination Date, the quotient of (i) the aggregate Adjusted NOI from all Borrowing Base Properties in the aggregate divided by (ii) the Capitalization Rate.
“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.02.
“BPO” shall mean a broker’s price opinion of the estimated value of any Real Property given by a licensed real estate agent or broker familiar with the real estate market in which the applicable Real Property is located and that is reasonably acceptable to the Administrative Agent in conformity with customary and usual business practices for appraisals.
“Bridge Loan” means one or more bridge loans entered into the by Parent or Parent Borrower in connection with acquisitions or Investments by the Parent Borrower’s Subsidiaries (other than any other Borrower).
“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in Boston, Massachusetts or New York, New York are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.
“Capital Expenditure Reserve” means, on an annual basis for each Real Property of the Borrowers and their Subsidiaries, an amount equal to (i) for single family residential properties, $350 per unit and (ii) for multifamily properties with 2-4 units, $250 per unit.
“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
“Capital Stock” means, collectively, all shares of capital stock (whether denominated as common or preferred stock), equity interests, partnership, limited liability company, or membership interests, joint venture interests or other ownership interests in or equivalents of or in a Person (other than an individual), whether voting or non-voting, and to the extent not included in the foregoing, any of a member’s or partner’s control rights in such Person, including the rights to manage or participate in management, voting rights, inspection rights and other rights.
“Capitalization Rate” means 7.00%.
“Cash Collateral” shall have a meaning correlative to the definition of “Cash Collateralize” below and shall include the proceeds of such cash collateral and other credit support.
“Cash Collateralize” means to pledge and deposit with or deliver to Administrative Agent, for the benefit of one or more of the Letter of Credit Issuer, the Swing Line Lender and the Lenders, as collateral for the Letter of Credit Obligations, Swing Line Loans or obligations of Lenders to fund participations in respect of Letters of Credit, cash or deposit account balances, or, if Administrative Agent and the Letter of Credit Issuer or the Swing Line Lender, as applicable, shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to: (a) Administrative Agent; and (b) the Letter of Credit Issuer or the Swing Line Lender, as applicable.
“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than thirty percent (30%) of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Parent; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Parent (the “Board”) by Persons who were neither (i) nominated by the Board nor (ii) appointed by directors so nominated; provided that any changes to the composition of the Board resulting from the appointment or election of independent directors in connection with the consummation of an IPO shall not constitute a “Change in Control” and the individuals constituting the Board after giving effect to such appointment or election shall be deemed to be the incumbent directors for the period commencing from and after such date; (c) the acquisition of direct or indirect Control of the Parent by any Person or group; (d) the failure of the Parent Borrower to own, directly or indirectly, free and clear of any Liens except those granted in favor of the Administrative Agent, 100% of the ownership interests in each other Borrower; (e) the replacement, removal or resignation of the Advisor as advisor to the Parent, unless replaced with another Acceptable Advisor; (f) the General Partner shall cease to be the sole general partner of the Parent Borrower; (g) the replacement, removal or resignation of VineBrook Homes, LLC as “manager” under the OP Management Agreement, unless replaced with a replacement manager that is reasonably acceptable to the Administrative Agent; and (h) Dana Sprong and Ryan McGarry shall cease to collectively own, directly or indirectly, 80% of the Equity Interests in, and Control, the General Partner.
“Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement by any Governmental Authority, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. Notwithstanding anything herein to the contrary, (a) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (b) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” means the security interest granted to the Administrative Agent, on behalf of the Lenders, in (i) all direct and indirect Equity Interests owned by the Parent Borrower and any Consolidated Owner in each Borrowing Base Property Owner and (ii) each Borrowing Base Property Owner’s Rent Account and other deposit and cash management accounts with respect to its Borrowing Base Property.
“Collateral Termination Date” has the meaning set forth in Section 5.12(c).
“Commitment” means, with respect to each Lender, its Revolving Commitment or Term Loan Commitment, as applicable.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Communication” has the meaning set forth in Article VIII.
“Compliance Certificate” has the meaning set forth in Section 5.01(c) hereof and a form of which is attached hereto as Exhibit B.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated Owner” means, with respect to any Borrowing Base Property Owner, each other Subsidiary of Holdings that owns any direct or indirect Equity Interest in such Borrowing Base Property Owner.
“Contamination” means the presence of Hazardous Materials in amounts exceeding regulatory action levels.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise, which includes the customary powers of a managing member of any limited liability company, any general partner of any limited partnership, or any board of directors of a corporation. “Controlling” and “Controlled” have meanings correlative thereto.
“Core Funds from Operations” means, for any period, Guarantor’s net income (or loss) (after payment of all cash dividends payable on any preferred stock) determined on a consolidated basis for the Borrowers, Guarantor, and their Wholly-Owned Subsidiaries for such period, excluding gains or losses from extraordinary items and early extinguishment of debt, impairment and other non-cash charges, acquisition fees and related expenses, non-cash share-based compensation expenses, no-cash interest expense related to acquired Indebtedness, casualty-related charges on a net basis, non-cash fair value adjustments associated with re-measuring derivative assets and liabilities to fair value, non-cash fair value adjustments associated with re-measuring participating preferred shares derivative liability to fair value, allocation of income to participating preferred shares in connection with their redemption, plus real estate depreciation and amortization. Core Funds from Operations shall be adjusted for (i) the Borrowers’ Equity Percentage of their non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates to reflect funds from operations on the same basis, (ii) the amortization of intangibles associated with the amortization of above or below market rents, pursuant to ASC 805 (formerly FASB 141) and (iii) calculation of interest expense in accordance with FBS APB 14-1. Core Funds from Operations may be adjusted on a pro forma basis to account for Real Properties acquired or sold during such period as approved by the Administrative Agent
“Credit Extension” means each of the following: (a) a Borrowing (including any conversion or continuation of any Borrowing); and (b) an L/C Credit Extension.
“Credit Party” means each Borrower and each Guarantor.
“Debtor Relief Laws” means any applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, fraudulent conveyance, reorganization, or similar laws affecting the rights, remedies, or recourse of creditors generally, including without limitation the Bankruptcy Code and all amendments thereto, as are in effect from time to time during the term of this Agreement.
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“Defaulting Lender” means any Lender that: (a) has failed to (i) fund all or any portion of its Loans within two (2) Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies Administrative Agent and Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to Administrative Agent, the Letter of Credit Issuer, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Loans) within two (2) Business Days of the date when due;; (b) has notified a Borrower, Administrative Agent, the Letter of Credit Issuer or the Swing Line Lender that it does not intend to comply with its funding obligations or has made a public statement to that effect with respect to its funding obligations hereunder (unless such notification or public statement relates to such Lender’s obligation to fund a Loan and indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular Default, if any) to funding a Loan is not or cannot be satisfied) or under other agreements in which it commits to extend credit; (c) has failed, within two (2) Business Days after written request by the Administrative Agent or a Borrower (and the Administrative Agent has received a copy of such request), to confirm in a manner satisfactory to the Administrative Agent that it will comply with its funding obligations hereunder; or (d) has, or has a direct or indirect parent company that has: (i) become the subject of a proceeding under any Debtor Relief Law; (ii) had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or a custodian appointed for it; or (iii) in the good faith determination of the Administrative Agent, taken any material action in furtherance of, or indicated its consent to, approval of or acquiescence in any such proceeding or appointment; or (iv) become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority; provided, further, that such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Lender.
“Designated Jurisdiction” means any country, region, or territory to the extent that such country, region, or territory itself, or its government, is the subject or target of any Sanction.
“Division” and “Divide” means a division of a limited liability company into two or more newly formed or existing limited liability companies pursuant to a plan of division or otherwise, including, pursuant to the Delaware Limited Liability Company Act.
“Dollars” or “$” refers to lawful money of the United States of America.
“EBITDA” means an amount derived from (a) net income (before deduction of dividends with respect to any preferred partnership units or preferred stock), plus (b) to the extent included in the determination of net income, depreciation, amortization, interest expense and income taxes, plus (c) property acquisition and related expenses, plus (d) non-recurring fees and expenses incurred during such period in connection with the consummation of an IPO or Equity Offering, plus or minus (e) to the extent included in the determination of net income, any extraordinary losses or gains, such as those resulting from sales of payment of Indebtedness, plus or minus (f) to the extent included in net income, any net income from non-cash items, such as straight line rent, amortization of in-place lease valuation and fair value adjustments on derivative instruments utilized to hedge interest rate exposure, in each case, as determined for the Borrowers, Guarantor, and their Wholly-Owned Subsidiaries on a consolidated basis, and including (without duplication) the Equity Percentage of EBITDA for the Borrowers’ non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates, and as set forth in more detail in Annex A to the Compliance Certificate.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
“Electronic System” has the meaning set forth in Article VIII.
“Eligibility Criteria” means, with respect to any Real Property, the following requirements as determined by the Required Lenders in their reasonable discretion:
(a) such Real Property is a completed and revenue-producing single family residential dwelling or a 2-4 unit multifamily dwelling; provided that any Initial Borrowing Base Property that is vacant on the Effective Date and any Borrowing Base Property that is acquired thereafter and is vacant on the date of acquisition will not be deemed to be ineligible under this clause (a) solely because it is not revenue-producing for a period not to exceed six (6) months after the Effective Date or such date of acquisition, respectively;
(b) such Real Property is wholly-owned in fee simple by a Borrowing Base Property Owner that is a Borrower hereunder, which may own one or more Borrowing Base Properties and other Real Properties so long as the non-Borrowing Base Properties owned by such Borrower are not subject to any Liens, other than Permitted Liens, and such Borrower has no Indebtedness other than trade payables incurred in the ordinary course of business and, after the Collateral Termination Date, other Unsecured Indebtedness permitted pursuant to Section 6.09;
(c) such Real Property is located in one of the fifty (50) States of the United States or the District of Columbia;
(d) the subject Borrowing Base Property Owner has no other Indebtedness (other than customary trade payables and, after the Collateral Termination Date, other Unsecured Indebtedness permitted pursuant to Section 6.09) and is not subject to any material litigation, and the subject Real Property and the direct and indirect Equity Interests in the Borrowing Base Property Owner are not subject to any Liens (other than customary non-monetary encumbrances which will not reasonably impede the Borrowers’ ability to operate, refinance, or sell such Real Property);
(e) such Real Property must be free of all material environmental conditions, structural defects, mechanical defects, title or survey defects, zoning defect, fire or safety code violations, or other defects affecting the use, value or operation of such Real Property in any adverse manner, as certified by the Borrowers in writing, or otherwise insured over existing environmental issues as reasonably determined by the Administrative Agent;
(f) such Real Property is insured in accordance with the provisions of Section 5.06(a) and, if such Real Property is located in a special or high hazard flood zone, the flood determination, flood insurance, and all other special or high hazard flood requirements with respect to such Real Property are in compliance with all applicable flood insurance regulation and Laws, including that such Real Property is covered by flood insurance in an amount equal to the full replacement cost or the maximum amount then available under the National Flood Insurance Program and otherwise from such providers, on such terms and in such amounts as required by the Flood Disaster Protection Act as amended from time to time or as otherwise required by the Administrative Agent;
(g) the representations set forth in Article III of this Agreement concerning such Real Property are true and correct in all material respects;
(h) such Real Property is managed under a Property Management Agreement with an Acceptable Manager; and
(i) such Real Property is otherwise reasonably acceptable to Administrative Agent.
“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 9.04(a)(ii)(D) (subject to such consents, if any, as may be required under Section 9.04(a)(i)).
“Environmental Claim” means any notice of violation, action, claim, Environmental Lien, demand, abatement or other order or direction (conditional or otherwise) by any Governmental Authority or any other Person for personal injury (including sickness, disease or death), tangible or intangible property damage, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restriction, resulting from or based upon (i) the existence, or the continuation of the existence, of a Release (including, without limitation, sudden or non-sudden accidental or non-accidental Releases) of, or exposure to, any Hazardous Material, or other Release in, into or onto the environment (including, without limitation, the air, soil, surface water or groundwater) at, in, by, from or related to any property owned, operated or leased by the Borrower or any of its Subsidiaries or any activities or operations thereof; (ii) the environmental aspects of the transportation, storage, treatment or disposal of Hazardous Materials in connection with any property owned, operated or leased by the Borrower or any of its Subsidiaries or their operations or facilities; or (iii) the violation, or alleged violation, of any Environmental Laws or Environmental Permits of or from any Governmental Authority relating to environmental matters connected with any property owned, leased or operated by the Borrower or any of its Subsidiaries.
“Environmental Laws” means all applicable laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters related to Hazardous Material and includes (without limitation) the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. § 136 et seq., the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., (to the extent the same relates to any Hazardous Materials), and the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq., as such laws have been amended or supplemented, and the regulations promulgated pursuant thereto, and all analogous state and local statutes.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of a Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) exposure to any Hazardous Materials in violation of any Environmental Law, (c) the Release or threatened Release of any Hazardous Materials into the environment in violation of any Environmental Law or (d) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“Environmental Lien” means any lien in favor of any Governmental Authority arising under any Environmental Law.
“Environmental Permit” means any permit required under any applicable Environmental Law or under any and all supporting documents associated therewith.
“Equity Interests” means, with respect to any Person, all of the shares, partnership or membership interests, economic and other rights, participations or other equivalents (however designated) of Capital Stock of such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of Capital Stock of such Person, all of the securities convertible into or exchangeable for shares of Capital Stock of such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, membership or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“Equity Offering” means, any issuance and/or sale after the effective Date by Parent, Parent Borrower, any Guarantor or any of their Subsidiaries of any Equity Interests or equity securities of such Person, including, without limitation, (a) any new preferred securities, and (b) any conversion of equity interests or securities of any Subsidiary of Parent Borrower into equity interests in the Borrower.
“Equity Percentage” means the aggregate ownership percentage of the Borrowers in each non-Wholly-Owned Subsidiary and Unconsolidated Affiliate, which shall be calculated as the greater of (a) Borrowers’ nominal capital ownership interest in the non-Wholly-Owned Subsidiary or Unconsolidated Affiliate as set forth in the non-Wholly-Owned Subsidiary’s or Unconsolidated Affiliate’s organizational documents, and (b) Borrowers’ economic ownership interest in the non-Wholly-Owned Subsidiary or Unconsolidated Affiliate, reflecting Borrowers’ share of income and expenses of the non-Wholly-Owned Subsidiary or Unconsolidated Affiliate.
“Exiting Lender” has the meaning assigned to it in Section 1.08.
“ERISA” means the Employee Retirement Income Security Act of 1974, and the rules and regulations promulgated thereunder by any Governmental Authority, as from time to time in effect.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with any Credit Party within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by a Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by a Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by a Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by a Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from a Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
“Erroneous Payment” has the meaning assigned to it in Section 8.05.
“Erroneous Payment Deficiency Assignment” has the meaning assigned to it in Section 8.05(b).
“Erroneous Payment Impacted Class” has the meaning assigned to it in Section 8.05(b).
“Erroneous Payment Return Deficiency” has the meaning assigned to it in Section 8.05(b).
“Erroneous Payment Subrogation Rights” has the meaning assigned to it in Section 8.05(b).
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“Eurodollar,” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
“Event of Default” has the meaning assigned to such term in Section 7.01.
“Excluded Swap Obligation” means, with respect to the liability of any Borrower with respect to a Swap Obligation, including the grant of a security interest to secure such Swap Obligation, any Swap Obligation if, and to the extent that, such Swap Obligation is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Borrower’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the liability or grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under an agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Swap Obligation or security interest is or becomes illegal.
“Excluded Taxes” means, any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or its Commitment pursuant to Legal Requirements in effect on the date on which (i) such Lender acquires such interest in the Loan or its Commitment (other than pursuant to an assignment request by the Borrowers under Section 2.17 as a result of costs sought to be reimbursed pursuant to Section 2.17 or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.17 amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.17 and (d) any U.S. federal withholding Taxes imposed under FATCA.
“Exclusion Event” is defined in Section 2.23(i).
“Facility Increase Date” has the meaning specified in Section 2.22(a).
“Facility Increase Fee” means a fee agreed to between the Borrowers and the Administrative Agent in a separate fee letter dated as of the date hereof.
“Facility Increase Request” has the meaning specified in Section 2.22.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and any rules implementing such intergovernmental agreements and/or Sections of the Code.
“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. Notwithstanding the foregoing, if the Federal Funds Effective Rate shall be less than zero, such rate shall be deemed zero for the purposes of this Agreement.
“Fee Letter” means that certain Amended and Restated Fee Letter dated as of the date hereof by and between the Borrower and the Administrative Agent, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
“Financial Officer” means the chief financial officer or the chief accounting officer of the Parent.
“Financing Statements” means all such Uniform Commercial Code financing statements as the Administrative Agent shall require, duly authorized by a Borrower or Guarantor, to give notice of and to perfect or continue perfection of the Lenders' security interest in all Collateral.
“Fixed Charge Coverage Ratio” means the ratio of (a) Adjusted EBITDA for the immediately preceding calendar quarter of Parent and its Subsidiaries, annualized, to (b) the sum of (i) all scheduled principal due and payable and actually paid on Indebtedness (other than amounts paid in connection with balloon maturities, hyper-amortization amounts and repayments of principal of the Loans), plus (ii) all Interest Expense, plus (iii) the aggregate amount of all cash dividends and distributions payable by the Parent and the Parent Borrower on any preferred partnership units or preferred stock, in each case, for the immediately preceding calendar quarter, annualized, in each case, for the Parent, Borrowers and their Wholly-Owned Subsidiaries on a consolidated basis and including (without duplication) the Borrowers’ Equity Percentage of any of the items in (a) or (b) above for their non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates.
“Foreign Lender” means, if a Borrower is a U.S. Person, a Lender that is not a U.S. Person, and if a Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which such Borrower is resident for tax purposes.
“Fronting Exposure” means, at any time there is a Revolving Lender that is a Defaulting Lender, (a) with respect to the Letter of Credit Issuer, such Defaulting Lender’s Revolving Percentage of the outstanding Letter of Credit Obligations other than Letter of Credit Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Revolving Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Revolving Percentage of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof.
“GAAP” means generally accepted accounting principles in the United States of America, subject to the provisions of Section 1.04.
“General Partner” means VineBrook Homes OP GP, LLC, a Delaware limited liability company.
“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.
“Guarantor” means the Parent and any other Person who from time to time has executed a Guaranty as required by the terms of this Agreement.
“Guaranty” means, collectively, the guaranties provided by Guarantor in the form of Exhibit C attached hereto, or such other form as may be agreed upon by the parties.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances or wastes, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law; provided, that Hazardous Materials shall not include any such substances or wastes utilized or maintained at the Real Property in the ordinary course of business and in accordance with all applicable Environmental Laws.
“Hedging Agreement” means any interest rate protection agreement (including an interest rate cap), foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.
“Hedging Obligations” means, with respect to the Parent, any Borrower or any Subsidiary of the Parent or a Borrower, any obligations arising under any Hedging Agreement entered into with the Administrative Agent or any Lender. Under no circumstances shall any of the Hedging Obligations secured or guaranteed by any Loan Document as to a surety or guarantor thereof include any obligation that constitutes an Excluded Swap Obligation of such Person.
“Holdings” means VB OP Holdings LLC, a Delaware limited liability company.
“Honor Date” is defined in Section 2.05(c)(i).
“Impacted Interest Period” has the meaning set forth in the definition of LIBO Rate.
“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, including mandatorily redeemable preferred stock, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, but excluding customary non-recourse, carveout guarantees and environmental indemnitees until such time as such guarantees or indemnitees become a recourse obligation, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances, and (k) all obligations, contingent or otherwise, of such Person with respect to any Hedging Agreements (calculated on a mark-to-market basis as of the reporting date). The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Indebtedness shall be calculated on a consolidated basis for the Borrowers, Guarantor, and their Wholly-Owned Subsidiaries, and including (without duplication) the Equity Percentage of Indebtedness for the Borrowers’ non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrowers under any Loan Document and (b) to the extent not otherwise described in the immediately preceding clause (a), Other Taxes.
“Information Materials” has the meaning set forth in Article VIII.
“Initial Borrowing Base Properties” means the Borrowing Base Properties listed on Schedule 2.23 as of the date of this Agreement.
“Interest Election Request” means a request by the Borrowers to convert or continue the then outstanding amount of the Loan in accordance with Section 2.05.
“Interest Expense” means, with respect to any Person, all paid, accrued or capitalized interest expense on such Person’s Indebtedness (whether direct, indirect or contingent, and including, without limitation, interest on all convertible debt), and including (without duplication) the Equity Percentage of Interest Expense for the Borrowers’ non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates.
“Interest Payment Date” means the first Business Day of each calendar month, the Revolving Loan Maturity Date, and the Maturity Date with respect to any Term Loan.
“Interest Period” means with respect to any Eurodollar Loan, the period commencing on the date that the then outstanding portion of the Loan is converted to or continued as a Eurodollar Loan, and ending on the numerically corresponding day in the calendar month that is one or three months thereafter; provided, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period pertaining to a Eurodollar Loan that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, and (c) no Interest Period applicable to any Loan shall extend beyond the Maturity Date thereof. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Rate for the longest period for which the LIBO Rate is available that is shorter than the Impacted Interest Period; and (b) the LIBO Rate for the shortest period for which that LIBO Rate is available that exceeds the Impacted Interest Period, in each case, at such time.
“IPO” means the initial public offering of the Parent’s common Equity Interests, resulting in such common Equity Interests being traded on the New York Stock Exchange, the Nasdaq stock market, the American Stock Exchange, or another national exchange in the United States.
“Issuer Documents” means with respect to any Letter of Credit, the Request for Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the Letter of Credit Issuer and a Borrower or in favor of the Letter of Credit Issuer and relating to any such Letter of Credit, including, as applicable, any documentation relating to Cash Collateral (which may include, without limitation, an Account Pledge).
“KBCM” means KeyBanc Capital Markets Inc. or any successors thereto.
“KeyBank” means KeyBank National Association, in its individual capacity.
“L/C Advance” means, with respect to each Revolving Lender, such Revolving Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage.
“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Borrowing.
“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.
“Lease” means each existing or future lease, sublease (to the extent of any Borrowing Base Property Owner’s rights thereunder), license, or other agreement under the terms of which any Person has or acquires any right to occupy or use any Real Property, or any part thereof, or interest therein, and each existing or future guaranty of payment or performance thereunder.
“Legal Requirement” means any law, statute, ordinance, decree, requirement, order, judgment, rule, regulation (or interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority.
“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance; and, as the context requires or permits, includes the Swing Line Lender, Letter of Credit Issuer, each Revolving Lender, and each Term Lender.
“Letter of Credit” means any standby letter of credit issued hereunder providing for the payment of cash upon the honoring of a presentation thereunder by the Letter of Credit Issuer pursuant to Section 2.05 either as originally issued or as the same may, from time to time, be amended or otherwise modified or extended.
“Letter of Credit Application” means an application and agreement for standby letter of credit by and between a Borrower and the Letter of Credit Issuer in a form acceptable to the Letter of Credit Issuer (and customarily used by it in similar circumstances) and conformed to the terms of this Credit Agreement, either as originally executed or as it may from time to time be supplemented, modified, amended, renewed, or extended; provided, however, to the extent that the terms of such Letter of Credit Application are inconsistent with the terms of this Credit Agreement, the terms of this Credit Agreement shall control.
“Letter of Credit Collateralization Date” means the day that is the earliest of: (a) thirty (30) days prior to the Revolving Loan Initial Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day); (b) the Revolving Loan Maturity Date; or (c) the date upon which Administrative Agent declares the Obligations due and payable after the occurrence of an Event of Default.
“Letter of Credit Fee” is defined in Section 2.12(b).
“Letter of Credit Issuer” means KeyBank in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder, as requested by a Borrower.
“Letter of Credit Obligations” means the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For all purposes of this Credit Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, or because a pending drawing submitted on or before the expiration date of such Letter of Credit has not yet been honored, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
“Letter of Credit Sublimit” means, at any time, an amount equal to $25,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Commitments.
“LIBO Rate” means, subject to Section 2.24,with respect to any Eurodollar Borrowing for any Interest Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for U.S. Dollars) for a period equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion; in each case the “LIBOR Screen Rate”) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; provided that (i) if the LIBOR Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement; provided further that if the LIBOR Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) then the LIBO Rate shall be the Interpolated Rate; provided that if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement, and (ii) if no such rate administered by ICE Benchmark Administration (or by such other Person that has taken over the administration of such rate for U.S. Dollars) is available to the Administrative Agent, the applicable LIBO Rate for the relevant Interest Period shall instead be the rate determined by the Administrative Agent to be the rate at which KeyBank or one of its Affiliate banks offers to place deposits in U.S. dollars with first class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of the relevant Eurodollar Loan and having a maturity equal to such Interest Period.
“LIBOR Screen Rate” is defined in the definition of LIBO Rate.
“Lien” means, with respect to an asset, (a) any mortgage, deed of trust, lien (statutory or other), pledge, hypothecation, negative pledge, collateral assignment, encumbrance, deposit arrangement, charge or security interest in, on or of such asset; (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; (c) the filing under the Uniform Commercial Code or comparable law of any jurisdiction of any financing statement naming the owner of the asset to which such Lien relates as debtor; (d) any other preferential arrangement of any kind or nature whatsoever intended to assure payment of any Indebtedness or other obligation; and (e) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities, including any dividend reinvestment or redemption plans.
“Liquidity” means the sum of (a) unencumbered and unrestricted cash and cash equivalents of the Parent, Parent Borrower, and their Wholly-Owned Subsidiaries, excluding any debt service, capital improvement or other similar reserve funds held under or required by any loan documents entered in to by the Parent, Parent Borrower or any Subsidiary plus (b) Revolving Availability.
“Loan” means the loans made by the Lenders to the Borrowers pursuant to this Agreement, including, without limitation, the Revolving Loans, Swing Line Loans, and Term Loans.
“Loan Documents” means this Agreement, each Term Loan Amendment, the Notes, the Guaranty, the Pledge Agreement, the Account Pledge, the Borrower Rent Account Control Agreement, the Financing Statements, each Letter of Credit Application, any agreement creating or perfecting rights in Cash Collateral pursuant to the provisions of Section 2.07 of this Credit Agreement, and all other instruments, agreements and written obligations executed and delivered by any of the Credit Parties in connection with the transactions contemplated hereby.
“Management Agreement” means a property management agreement entered into by a Credit Party pursuant to which such Credit Party engages a Person to advise it with respect to the management of a Borrowing Base Property or to provide management services with respect to the same.
“Material Acquisition” means the completed acquisition by Borrowers or any of their Subsidiaries, in one or a series of related transactions, of Real Property or Equity Interests of owners of Real Property with a total cost of more than ten percent (10%) of Total Asset Value as set forth in the Compliance Certificate delivered by Borrowers with respect to the fiscal quarter ending immediately prior to the date when such acquisition is consummated.
“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations, or financial condition of (i) the Parent, the Borrowers and their Subsidiaries taken as a whole, (b) the ability of any of the Credit Parties to perform their obligations under the Loan Documents or (c) the rights of or benefits available to the Administrative Agent or the Lenders under the Loan Documents; provided, however, that none of the following shall constitute, or shall be considered in determining whether there has occurred, and no event, circumstance, change or effect resulting from or arising out of any of the following shall constitute, a Material Adverse Effect: (A) changes in the national or world economy or financial markets as a whole or changes in general economic conditions that affect the industries in which the Parent, the Borrowers, and their Subsidiaries conduct their business, so long as such changes or conditions do not adversely affect the Parent, the Borrowers, and their Subsidiaries, taken as a whole, in a materially disproportionate manner relative to other similarly situated participants in the industries or markets in which they operate; (B) any change in applicable Law, rule or regulation or GAAP or interpretation thereof after the date hereof, so long as such changes do not adversely affect the Parent, the Borrowers, and their Subsidiaries, taken as a whole, in a materially disproportionate manner relative to other similarly situated participants in the industries or markets in which they operate; (C) the failure, in and of itself, of the Parent or the Borrowers to meet any published or internally prepared estimates of revenues, earnings or other financial projections, performance measures or operating statistics; (D) a decline in the price, or a change in the trading volume, of the Parent; and (E) compliance with the terms of, and taking any action required by, this Agreement, or taking or not taking any actions at the request of, or with the consent of, the Administrative Agent.
“Material Contract” means any contract or other arrangement (other than Loan Documents), whether written or oral, to which any Credit Party is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto could reasonably be expected to have a Material Adverse Effect.
“Material Environmental Event” means, with respect to any Borrowing Base Property, (a) a violation of any Environmental Law with respect to such Borrowing Base Property, or (b) the presence of any Hazardous Materials on, about, or under such Borrowing Base Property that, under or pursuant to any Environmental Law, would require remediation, if in the case of either (a) or (b), such event or circumstance could reasonably be expected to have a Material Property Event.
“Material Property Event” means, with respect to any Borrowing Base Property, the occurrence of any event or circumstance occurring or arising after the date of this Agreement that could reasonably be expected to have a (a) material adverse effect with respect to the financial condition or the operations of such Borrowing Base Property, (b) material adverse effect on the Borrowing Base Value of such Borrowing Base Property, (c) material adverse effect on the ownership of such Borrowing Base Property, or (d) a material impairment of the Lien granted to Administrative Agent with respect to the applicable Borrowing Base Property Owners and Consolidated Owners thereof, or the related deposit and cash management accounts.
“Maturity Date” means, (i) with respect to the Revolving Commitments and Revolving Principal Obligation, the Revolving Loan Maturity Date, and (ii) with respect to any tranche of Term Loans, the maturity date for such tranche of Term Loans as set forth in the applicable Term Loan Amendment.
“Maximum Rate” shall have the meaning set forth in Section 9.13.
“Maximum Revolving Commitment” means an amount equal to the aggregate Revolving Commitments of the Revolving Lenders, as such amount may be increased from time to time pursuant to Section 2.22 or decreased pursuant to Section 2.09. As of the Effective Date, the Maximum Revolving Commitment is an amount equal to Three Hundred Fifty Million Dollars ($350,000,000).
“Maximum Total Commitment” means an amount equal to the sum of (i) the Maximum Revolving Commitment plus (ii) the initial amount of any Term Loan Commitments issued from time to time pursuant to Section 2.22. As of the Effective Date, the Maximum Total Commitment is an amount equal to Three Hundred Fifty Million Dollars ($350,000,000).
“Minimum Collateral Amount” means, at any time: (a) with respect to Cash Collateral consisting of cash or deposit account balances provided to reduce or eliminate Fronting Exposure during any period when a Revolving Lender is a Defaulting Lender, an amount equal to 100% of the Fronting Exposure of the Letter of Credit Issuer with respect to Letters of Credit issued and outstanding at such time; (b) with respect to Cash Collateral consisting of cash or deposit account balances provided in accordance with the provisions of Section 2.07(a)(i), (ii), or (iii), an amount equal to 100% of the Outstanding Amount of all Letter of Credit Obligations; and (c) otherwise, an amount determined by Administrative Agent and the Letter of Credit Issuer in their reasonable discretion.
“Mortgage Constant” means, as of any date of determination, the annual factor determined by the Administrative Agent by reference to a standard level constant payment table for a fully amortizing loan with a maturity of 30 years based upon an assumed per annum interest rate equal to the greatest of (i) the ten-year US Treasury rate plus 2.50%, (ii) 5.75%, and (iii) the weighted average interest rate then application to the outstanding Loans.
“MSA” means any metropolitan statistical area (as defined from time to time by the Executive Office of the President of the United States of America, Office of Management and Budget).
“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Credit Party or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding six plan years, has made or been obligated to make contributions.
“Net Operating Income” means, for any income producing Real Property and for a given period, the difference between (a) any rentals, proceeds and other income received from such property during the determination period, less (b) an amount equal to all costs and expenses (excluding Interest Expense, depreciation and amortization expense, asset management fees, acquisition fees and expenses, self-administration and listing expenses and any expenditures that are capitalized in accordance with GAAP) incurred as a result of, or in connection with, or properly allocated to, the operation or leasing of such Real Property during the determination period. Net Operating Income shall be calculated based on the most recently ended calendar quarter, annualized, unless the Real Property is simultaneously being acquired by a Borrower or a Subsidiary thereof and added as a Borrowing Base Property, in which event annualized Net Operating Income shall be calculated based upon the historical data provided by the Borrowers, subject to adjustment by the Administrative Agent in its reasonable discretion and thereafter until such Real Property has been owned by the Borrower or its subsidiaries for the entirety of a calendar quarter, Net Operating Income shall be grossed up for such ownership period. Net Operating Income shall be calculated on a consolidated basis for the Borrower and its Wholly-Owned Subsidiaries and including (without duplication) the Equity Percentage of Net Operating Income for the Borrower’s non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates but adjusted for non-cash operating items such as the amortization of above and below market lease assets and liability, and other non-cash items.
“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.
“Non-Extension Notice Date” is defined in Section 2.05(b)(iii).
“Note” means a Revolving Note. “Notes” means, collectively, all of such Notes outstanding at any given time.
“Obligations” means all liabilities, obligations, covenants and duties of any Credit Party to the Administrative Agent and/or any Lender arising under or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Credit Party or any Affiliate thereof of any proceeding under any bankruptcy or other insolvency proceeding naming such person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceedings including any Erroneous Payments Subrogation Rights. For the avoidance of doubt, “Obligations” shall not include any indebtedness, liabilities, obligations, covenants or duties in respect of Hedging Obligations.
“OFAC” has the meaning set forth in Section 3.16.
“Omnibus Joinder Agreement” means a joinder agreement substantially in the form of Exhibit G attached hereto (or such other form approved by Administrative Agent) executed by the applicable Subsidiary Borrower(s) pursuant to Section 2.23(f).
“OP Management Agreement” means the Management Agreement, dated November 1, 2018, as amended on April 2019, by and among VB One and certain other Subsidiaries of the Parent Borrower and VineBrook Homes, LLC, as manager, as amended by that certain First Amendment to Management Agreement dated as of April, 2019, as hereafter further amended, restated, modified, supplemented or replaced.
“Original Credit Agreement” means that certain Credit Agreement, dated as of September 20, 2019, as amended and in effect on the date hereof, by and among each Borrower and KeyBank, as administrative agent.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means, all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.17 as a result of costs sought to be reimbursed pursuant to Section 2.17).
“Outstanding Amount” means (a) with respect to Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of such Loans, as the case may be, occurring on such date; and (b) with respect to any Letter of Credit Obligations on any date, the amount of such Letter of Credit Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the Letter of Credit Obligations as of such date, including as a result of any reimbursements by the Borrowers of Unreimbursed Amounts.
“Parent” means VineBrook Homes Trust, Inc., a Maryland corporation.
“Parent Borrower” means Vinebrook Homes Operating Partnership, L.P., a Delaware limited partnership.
“Patriot Act” has the meaning set forth in Section 9.14.
“Payout Ratio” means the ratio of cash dividends or distributions (including any redemptions) to common equityholders of the Parent paid or payable for the applicable period to Core Funds from Operations.
“Payment Recipient” has the meaning assigned to it in Section 8.05(a).
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“Permitted Encumbrances” means:
(a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.05;
(b) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;
(c) deposits to secure the performance of bids, trade contracts, purchase, construction or sales contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;
(d) easements, rights-of-way, restrictions, restrictive covenants, encroachments, protrusions and other similar encumbrances affecting Real Property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;
(e) uniform commercial code protective filings with respect to personal property leased to a Borrower or any Subsidiary;
(f) the rights of tenants under leases or subleases not interfering with the ordinary conduct of business of such Person; and
(g) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;
provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.
“Permitted Investments” means:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are 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;
(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having an investment grade credit rating on the date of acquisition;
(c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of not more than 90 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and
(e) investments of a Borrower in Subsidiaries and Unconsolidated Affiliates made in accordance with this Agreement.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which a Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“Plan Assets” means “plan assets” within the meaning of the Plan Assets Regulation or otherwise, subject to Title I of ERISA and/or Section 4975 of the Code.
“Plan Assets Regulation” means 29 C.F.R. §2510.3-101, et seq., as modified by Section 3(42) of ERISA.
“Pledge Agreement” means those certain Pledge and Security Agreements executed by certain of Borrowers in favor of Administrative Agent.
“Prime Rate” means the rate of interest per annum publicly announced from time to time by KeyBank National Association, as its prime rate in effect at its principal office in Cleveland, Ohio; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.
“Property Information” means, with respect to any Real Property proposed for addition as a Borrowing Base Property:
1. A formal written request (which may be delivered via electronic mail) from the Parent Borrower to add the proposed Real Property as a Borrowing Base Property, including a certification that to Parent Borrower’s knowledge the Real Property is free from all material environmental and material structural issues;
2. A Borrowing Base Report and Compliance Certificate from the Parent Borrower showing the revised financial covenant calculations (including reasonable detail and backup) and compliance on a pro-forma basis after giving effect to the addition of such Real Property as a Borrowing Base Property;
3. Property operating statements and rent rolls for such Real Property, as available;
4. A Borrower Appraisal with respect to such Real Property, or if such Borrower Appraisal is not available, an Acceptable Appraisal with respect thereto;
5. Customary real estate diligence documents in respect thereof to the extent in a Borrower’s possession or control, including, without limitation, title report, Phase I environmental reports, copies of leases or lease abstracts, sales information, projections, engineering reports, a survey, and a zoning report;
6. A repositioning plan, if any, to include the budgeted capital improvement costs or leasing strategy, to be reviewed and reasonably approved by Administrative Agent;
7. A certification from the Parent Borrower and the applicable Borrowing Base Property Owner that such Acceptable Property is insured in accordance with the requirements of this Agreement, including, if any building (or any contents) or structure therein is located in any federally designated “special hazard area” (including any area having special flood, mudslide and/or flood-related erosion hazards, and shown on a Flood Hazard Boundary Map or a Flood Insurance Rate Map published by the Federal Emergency Management Agency as Zone A, AO, Al-30, AE, A99, AH, VO, V1-30, VE, V, M or E), flood insurance in an amount equal to the full replacement cost or the maximum amount then available under the National Flood Insurance Program and otherwise from such providers, on such terms and in such amounts as required by the Flood Disaster Protection Act as amended from time to time or as otherwise required by the Administrative Agent, and in any event in compliance with all applicable flood insurance regulation and Laws;
8. true and correct copies of all Management Agreements for such Acceptable Property: and
9. such other customary diligence materials as the Administrative Agent may reasonably request, to the extent such materials are in the possession of Borrowers or are otherwise customarily obtained by Borrowers in connection with their investments.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Public Lender” has the meaning set forth in Article VIII.
“Qualified ECP Party” means, in respect of any interest rate cap, swap or other hedging obligation, each Person which is a Credit Party that has total assets exceeding $10,000,000 at the time another Borrower’s guarantee, mortgage and/or other credit or collateral support, of such interest rate cap, swap or other hedging obligation secured pursuant to a Loan Document becomes effective, or otherwise constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder.
“Real Property” means, collectively, all interest in any land and improvements located thereon (including direct financing leases of land and improvements owned by a Credit Party or any of its Subsidiaries), together with all equipment, furniture, materials, supplies and personal property now or hereafter located at or used in connection with the land and all appurtenances, additions, improvements, renewals, substitutions and replacements thereof now or hereafter acquired by a Credit Party or any of its Subsidiaries.
“Recipient” means Administrative Agent, any Lender, or the Letter of Credit Issuer as applicable.
“Recourse Indebtedness” means any Indebtedness in which the recourse of the applicable creditor or creditors to the obligor for non-payment is not limited solely to such creditor’s lien on an asset or assets, whether direct or indirect, subject to typical non-recourse carve-outs.
“Register” has the meaning set forth in Section 9.04.
“REIT” means a real estate investment trust qualified as such under Sections 856 through 860 of the Code and the regulations promulgated thereunder.
“Related Parties” means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.
“Release” means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the indoor or outdoor environment or into or out of any property in violation of applicable Environmental Laws.
“Release Request” has the meaning set forth in Section 2.23(h).
“Remedial Action” means all actions, including without limitation any capital expenditures, required or necessary to (i) clean up, remove, treat or in any other way address any Hazardous Material; (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material so it does not migrate or endanger public health or the environment; (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care; or (iv) bring facilities on any property owned or leased by a Borrower or any of its Subsidiaries into compliance with all Environmental Laws.
“Rent Account” means a depositary account in the name of a Borrower maintained at a Borrower Rent Account Bank into which tenants have been instructed to deposit rents, which may include a consolidated account across all Borrowers, provided that such consolidated account does not contain funds from any party that is not a Borrower.
“Request for Credit Extension” means: (a) with respect to a Borrowing (including a Swing Line Loan), conversion or continuation of Loans, a Borrowing Request; (b) with respect to an L/C Credit Extension, the related Request for Letter of Credit and Letter of Credit Application.
“Request for Letter of Credit” means a request for the issuance of a Letter of Credit substantially in the form of Exhibit C.
“Required Lenders” means, as of any date of determination, at least two (2) Lenders having more than 50% of the sum of (i) the aggregate Revolving Commitments or, if the Revolving Commitments of each Revolving Lender have been terminated pursuant to Section 7.02, at least two (2) Lenders holding in the aggregate at least 50% of the aggregate Revolving Credit Exposure of all Lenders, plus (ii) the Outstanding Amount of all Term Loans; provided that the Revolving Commitment of, and the portion of the Revolving Credit Exposure or Term Loans held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders; provided further that, at any time when there are two (2) or fewer Lenders, Required Lenders shall mean all Lenders that are not Defaulting Lenders.
“Required Revolving Lenders” means, as of any date of determination, at least two (2) Lenders having more than 50% of the aggregate Revolving Commitments or, if the Revolving Commitments of each Revolving Lender have been terminated pursuant to Section 7.02, at least two (2) Lenders holding in the aggregate at least 50% of the aggregate Revolving Credit Exposure of all Lenders; provided that the Revolving Commitment of, and the portion of the Revolving Credit Exposure held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Revolving Lenders; provided further that, at any time when there are two (2) or fewer Revolving Lenders, Required Revolving Lenders shall mean all Revolving Lenders that are not Defaulting Lenders.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any ownership interests in the Parent, Parent Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such ownership interests in the Parent or Parent Borrower or any option, warrant or other right to acquire any such shares of capital stock of the Parent or the Parent Borrower.
“Revolving Availability” means, as of any date of calculation, the Available Revolving Amount minus the Revolving Principal Obligation, in each case, as of such date.
“Revolving Commitment” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder and purchase risk participations in Letters of Credit and Swing Line Loans as set forth on Schedule 2.01.
“Revolving Credit Exposure” means, as to any Revolving Lender at any time, the aggregate Outstanding Amount at such time of its outstanding Revolving Loans and such Lender’s Revolving Percentage of the Outstanding Amount of Letter of Credit Obligations and Swing Line Loans at such time.
“Revolving Loan” means any loan made by a Lender pursuant to Section 2.01.
“Revolving Loan Initial Maturity Date” means November 3, 2024.
“Revolving Loan Maturity Date” means the earlier of (i) the Revolving Loan Initial Maturity Date, as such date may be extended as provided in Section 2.21, (ii) the date on which the Revolving Loans shall become due and payable pursuant to the terms hereof, or (iii) the date upon which Borrower terminates the Revolving Commitments pursuant to Section 2.09 or otherwise.
“Revolving Note” means a promissory note in the form attached hereto as Exhibit D-1 payable to a Lender evidencing certain of the obligations of the Borrowers under the Revolving Loan to such Lender and executed by Borrowers, as the same may be amended, supplemented, modified or restated from time to time; “Revolving Notes” means, collectively, all of such Notes outstanding at any given time.
“Revolving Principal Obligation” means, as of any date of calculation, the sum of: (a) the aggregate Outstanding Amount of the Revolving Loans; plus (b) the aggregate Outstanding Amount of the Letter of Credit Obligations; plus (c) the aggregate Outstanding Amount of the Swing Line Loans.
“Sanction(s)” means any economic or financial sanctions, sectoral sanctions, secondary sanctions, trade embargoes and anti-terrorism laws, including but not limited to those imposed, administered or enforced from time to time by a United States Governmental Authority (including, without limitation, OFAC), a Canadian Governmental Authority, the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority.
“Sanctioned Person” means any Person that is (i) any Person listed in any Sanctions-related list of designated Persons maintained by any Governmental Authority of the United States of America, including without limitation, OFAC or the U.S. Department of State, or by the United Nations Security Council, Her Majesty’s Treasury, the European Union or any other applicable Governmental Authority or otherwise the subject or target of any Sanctions, (ii) any Person located, operating, organized or resident in a Designated Jurisdiction, (iii) an agency of the government of a Designated Jurisdiction, or (iv) any Person owned or controlled by any Person or agency described in any of the preceding clauses (i) through (iii).
“Secured Indebtedness” means, as of any date of calculation, the portion of Total Indebtedness outstanding on such date that is secured by a Lien on any properties or assets, including any Real Property or Equity Interests, or that otherwise has a priority claim (structural or otherwise) with respect to assets being financed by or subject to such Indebtedness; provided that the Obligations shall not constitute Secured Indebtedness.
“Secured Leverage Ratio” means, as of any date of determination, the ratio of (a) Total Secured Indebtedness to (b) Total Asset Value, in each case, as of such date.
“Secured Party” means each of the Administrative Agent, the Letter of Credit Issuer, each Lender, and each holder of Hedging Obligations.
“Secured Recourse Indebtedness” means, as of any date of calculation, the portion of Total Indebtedness outstanding on such date that is both Secured Indebtedness and Recourse Indebtedness; provided that Secured Recourse Indebtedness shall not include Indebtedness under Hedging Agreements related to interest rate hedges or under customary carve-out guaranties and environmental indemnities in connection with Secured Indebtedness of a Borrower or Subsidiary thereof, in each case, so long as no demand for payment or performance thereof has been made.
“SEMS” means the Superfund Enterprise Management System.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Governmental Authority to which the Administrative Agent is subject, with respect to the Adjusted LIBO Rate, for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
“Subsidiary” means, with respect to any Person (the “parent”), at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held by parent, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent.
“Subsidiary Borrower” means, each Borrowing Base Property Owner and each Consolidated Owner thereof, including, as of the Effective Date, each Subsidiary of the Parent Borrower set forth on Schedule SB, and each Additional Borrower.
“Subsequent Lender” means a Person that becomes a Lender under this Agreement subsequent to the Effective Date in connection with a Facility Increase Request pursuant to Section 2.22.
“Swap Obligation” means, any Hedging Obligation that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.06(a).
“Swing Line Lender” means KeyBank in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.
“Swing Line Loan” has the meaning specified in Section 2.06(a).
“Swing Line Sublimit” means an amount equal to $25,000,000. The Swing Line Sublimit is part of, and not in addition to, the Revolving Commitments.
“Tangible Net Worth” means, as of any date of calculation, for the Parent, Borrowers, and their Subsidiaries on a consolidated basis in accordance with GAAP, total assets (without deduction for accumulated depreciation) less (1) all intangible assets and (2) all liabilities (including contingent and indirect liabilities), all as determined in accordance with GAAP (unless otherwise indicated herein). The term “intangibles” shall include, without limitation, (i) deferred charges and (ii) the aggregate of all amounts appearing on the assets side of such balance sheet for franchises, licenses, permits, patents, patent applications, copyrights, trademarks, trade names, goodwill, treasury stock, experimental or organizational expenses, straight-line rent accruals and other like intangibles but excluding all amounts for real property acquisitions that have been allocated to lease intangibles. The term “liabilities” shall include, without limitation, (i) Indebtedness secured by liens on property of the Person or other debt with respect to which Tangible Net Worth is being computed whether or not such Person is liable for the payment thereof, (ii) deferred liabilities and (iii) capital lease obligations, but shall exclude all amounts for real property acquisition costs which have been allocated to lease intangibles. Tangible Net Worth shall be calculated on a consolidated basis in accordance with GAAP (unless otherwise indicated herein).
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.
“Term Lender” means any Lender or Subsequent Lender making a Term Loan pursuant to and in accordance with the terms of Section 2.22.
“Term Loan” means a term loan made by a Term Lender on any Facility Increase Date by a Term Lender pursuant to any Term Loan Amendment entered into as of such Facility Increase Date.
“Term Loan Amendment” has the meaning specified in Section 2.22(d).
“Term Loan Commitment” has the meaning specified in Section 2.22(a).
“Term Note” means a promissory note in the form attached hereto as Exhibit D-2 payable to a Lender evidencing certain of the obligations of the Borrowers under the Term Loans to such Lender and executed by Borrowers, as the same may be amended, supplemented, modified or restated from time to time; “Term Notes” means, collectively, all of such Notes outstanding at any given time.
“Titled Agents” means, collectively, each Arranger and any syndication agents or documentation agent named as such on the cover page of this Agreement.
“Total Asset Value” means, as of any date of calculation, the sum of (without duplication) (i) the aggregate Borrowing Base Value of all Borrowing Base Properties, plus (ii) the aggregate Value of all of Borrowers’, Guarantor’s and their Subsidiaries’ Real Property (other than Borrowing Base Properties), plus (iii) the aggregate Value of all of Borrowers’, Guarantor’s and their Subsidiaries’ mortgage loan investments, plus (iv) the amount of any unencumbered cash and cash equivalents, excluding tenant security and other restricted deposits of the Borrowers and their Subsidiaries. For any non-wholly owned Real Properties, Total Asset Value shall be adjusted for Borrower’s, Guarantor’s and Subsidiaries’ Equity Percentage thereof.
“Total Exposure” means, as of any date of calculation, the sum of (i) Revolving Credit Exposure plus (ii) the Outstanding Amount of all Term Loans, in each case, as of such date.
“Total Indebtedness” means, as of any date of calculation, without duplication, all Indebtedness of the Parent, the Borrowers, and their Subsidiaries on a consolidated basis for Borrowers, Guarantor, and their Wholly-Owned Subsidiaries and including the Borrowers’ Equity Percentage of Indebtedness of the Borrower’s non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates.
“Total Leverage Ratio” means, as of any date of calculation, the ratio (expressed as a percentage) of (a) the Indebtedness of Borrower and the Indebtedness of the Guarantor (without duplication) and their Subsidiaries to (b) Total Asset Value.
“Total Secured Indebtedness” means, as of any date of determination, Total Indebtedness that is Secured Indebtedness of the Parent, the Borrowers, and their Subsidiaries determined on a consolidated basis.
“Total Secured Recourse Indebtedness” means, as of any date of determination, Total Indebtedness that is Secured Recourse Indebtedness of the Parent, the Borrowers, and their Subsidiaries determined on a consolidated basis.
“Total Unsecured Indebtedness” means, as of any date of determination, Total Indebtedness that is Unsecured Indebtedness of the Parent, the Borrowers, and their Subsidiaries determined on a consolidated basis, including, without limitation, the Obligations.
“Transactions” means the execution, delivery and performance by the Credit Parties of the Loan Documents, the borrowing of the Loans, and the use of the proceeds thereof.
“Type,” when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowings, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“U.S. Tax Compliance Certificate” has the meaning specified in Section 2.17(f)(i)(B)(3).
“UCC” means the Uniform Commercial Code as adopted in the State of New York and any other state, which governs creation or perfection (and the effect thereof) of security interests in any collateral for the Obligations.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unconsolidated Affiliate” means, without duplication, in respect of any Person, any other Person (other than a Person whose stock is traded on a national trading exchange) in whom such Person holds, directly or indirectly, an investment consisting of a voting equity or ownership interest, which investment is accounted for in the financial statements of such Person on an equity basis of accounting.
“Unhedged Variable Rate Debt” means any Indebtedness or portion thereof which is not fixed, capped or otherwise limited pursuant to a Hedging Agreement.
“Unreimbursed Amount” is defined in Section 2.05(c).
“Unsecured Indebtedness” means Total Indebtedness that constitutes general unsecured indebtedness and is not Secured Indebtedness or supported by priority claims on any assets of the obligors thereof, including a borrowing base or exclusive pool; provided that the Obligations shall constitute Unsecured Indebtedness for all purposes hereunder.
“Unsecured Interest Coverage Ratio” means, as of any date, the ratio of (a) the aggregate Adjusted NOI from the Borrowing Base Properties to (b) Unsecured Interest Expense, in each case, for the most recent fiscal quarter, annualized.
“Unsecured Interest Expense” means, as of any date, Interest Expense on the Total Unsecured Indebtedness for the most recently ended fiscal quarter.
“Unsecured Leverage Ratio” means, as of any date of calculation, the ratio (expressed as a percentage) of (a) Total Unsecured Indebtedness to (b) Borrowing Base Value.
“Unused Fee” shall have the meaning set forth in Section 2.12(d).
“Unused Fee Rate” means:
(a) at any time prior to the Collateral Termination Date, a rate equal to (a) twenty five basis points (0.25%) per annum if usage is less than to fifty percent (50%) and (b) twenty basis points (0.20%) per annum if usage is greater than or equal to fifty percent (50%); and
(b) at any time from and after the Collateral Termination Date, a rate equal to (a) twenty basis points (0.20%) per annum if usage is less than to fifty percent (50%) and (b) fifteen basis points (0.15%) per annum if usage is greater than or equal to fifty percent (50%).
“Value” means, as of any date of determination:
(a) at any time prior to the Collateral Termination Date, (i) with respect to any Real Property (other than any Borrowing Base Property), the Borrower Appraised Value (or if no Borrower Appraisal is available therefor, undepreciated cost basis) of such Real Property and (ii) with respect to any mortgage loan investment, the lower of the cost basis or carrying value of such mortgage loan investment; and
(b) at any time from and after the Collateral Termination Date, (i) with respect to any Real Property (other than any Borrowing Base Property) that has been owned by a Borrower or Subsidiary thereof for at least twelve (12) months as of such date, the Adjusted NOI from such Real Property divided by the Capitalization Rate; provided that if the Value for any Real Property as calculated pursuant to this clause (i) would be less than $0, the Value of such Real Estate for the purposes hereof shall be deemed to be $0, (ii) with respect to any Real Property (other than any Borrowing Base Property) that has been owned by a Borrower or Subsidiary thereof for less than twelve (12) months as of such date, any Real Property that is under development, or any Real Property that is undeveloped land, the undepreciated cost basis of such Real Property, and (iii) with respect to any mortgage loan investment, the lower of the cost basis or carrying value of such mortgage loan investment.
“VB One” means VB One, LLC, a Delaware limited liability company.
“Wholly-Owned” means, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (x) director’s qualifying shares and (y) shares issued to foreign nationals to the extent required by applicable law) are owned by such Person and/or by one or more wholly owned Subsidiaries of such Person. In determining whether a Subsidiary of a Person is a Wholly-Owned Subsidiary, all preferred shareholders of a Subsidiary that is organized as a real estate investment trust shall be disregarded.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
“Withholding Agent” means any Borrower and the Administrative Agent.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
Section 1.02 Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a “Eurodollar Loan”). Borrowings also may be classified and referred to by Type (e.g., a “Eurodollar Borrowing”).
Section 1.03 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof,” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
Section 1.04 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Parent Borrower notifies the Administrative Agent that the Borrowers request an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Parent Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.
Section 1.05 Benchmark Notification. The Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to USD LIBOR or with respect to any alternative or successor benchmark thereto, or replacement rate therefor or thereof, including, without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate, as it may or may not be adjusted pursuant to Section 2.24(a), will be similar to, or produce the same value or economic equivalence of, USD LIBOR or any other benchmark or have the same volume or liquidity as did USD LIBOR or any other benchmark rate prior to its discontinuance or unavailability.
Section 1.06 Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.
Section 1.07 Letter of Credit Amounts. Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit or the Issuer Documents related thereto, whether or not such maximum face amount is in effect at such time.
Section 1.08 Amendment and Restatement.
(a) On the Effective Date, the commitment of each lender that is a party to the Original Credit Agreement but is not a party to this Agreement (an “Exiting Lender”) will be terminated, all outstanding obligations owing to the Exiting Lenders will be repaid in full and each Exiting Lender will cease to be a Lender under the Existing Credit Agreement and will not be a Lender under this Agreement. As of the Effective Date, the remaining “Lenders” under (and as defined in) the Original Credit Agreement shall be Lenders under this Agreement with Commitments as set forth on Schedule 2.01 hereto and by its execution and delivery of this Agreement, each such Lender hereby consents to the execution and delivery of this Agreement and to the non-pro rata reduction of commitments occurring on the Effective Date as a result of the termination of the commitments of the Exiting Lenders, and the concurrent repayment in full of all loans and other obligations owing (whether or not due) to the Exiting Lenders. The parties to this Agreement agree that, upon (i) the execution and delivery by each of the parties hereto of this Agreement and (ii) satisfaction of the conditions set forth in Section 4.01, the terms and provisions of the Original Credit Agreement shall be and hereby are amended, superseded and restated in their entirety by the terms and provisions of this Agreement. This Agreement is not intended to and shall not constitute a novation, payment and reborrowing or termination of the “Obligations” (as defined in the Original Credit Agreement). All “Loans” made and “Obligations” incurred under the Original Credit Agreement which are outstanding on the Effective Date, if any, shall continue as Loans and Obligations under (and shall be governed by the terms of) this Agreement and the other Loan Documents. Without limiting the foregoing, upon the effectiveness hereof: all references in the “Loan Documents” (as defined in the Original Credit Agreement) to the “Obligations” shall be deemed to refer to the Obligations hereunder.
(b) Upon the Effective Date, unless expressly terminated or amended and restated in connection herewith, all “Loan Documents” (as defined in the Original Credit Agreement) shall remain in full force and effect and constitute Loan Documents hereunder and all references to the “Administrative Agent”, the “Credit Agreement” and the “Loan Documents” therein shall be deemed to refer to the Administrative Agent, this Agreement and the Loan Documents, respectively. Each Borrower hereby ratifies, confirms, and reaffirms all of its obligations under any such Loan Document to which it is a party and acknowledges and agrees that all Liens in any of its assets and properties created under any such Loan Documents shall continue in full force and effect and shall secure the Obligations and Hedging Obligations (each as defined hereunder).
ARTICLE II
The Loans
Section 2.01 Revolving Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrowers from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender's Revolving Loans exceeding such Lender's Revolving Commitment, provided, however, that, after making any such Revolving Loans, (a) such Revolving Lender’s Revolving Credit Exposure would not exceed such Revolving Lender’s Revolving Commitment as of such date; (b) the aggregate Revolving Principal Obligations would not exceed the Available Revolving Amount; (c) prior to the Collateral Termination Date, the Total Exposure would not exceed the Borrowing Base; and (d) from and after the Collateral Termination Date, the Total Unsecured Indebtedness would not exceed the Borrowing Base. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans.
Section 2.02 Loans and Borrowings.
(a) Each Loan shall be made as part of a Borrowing consisting of Revolving Loans or Term Loans, as applicable, made by the Lenders ratably in accordance with their respective Applicable Percentages. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.
(b) Subject to Section 2.13, each Borrowing shall be comprised of ABR Loans and/or Eurodollar Loans as the Borrowers may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrowers to repay such Loan in accordance with the terms of this Agreement.
(c) Each Eurodollar Loan shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $1,000,000. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of six (6) Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
Section 2.03 Requests for Borrowings. To request a Borrowing, the Parent Borrower shall notify the Administrative Agent of such request not less than (i) with respect to Eurodollar Borrowings, two (2) Business Days before the date of the proposed Borrowing and (ii) with respect to ABR Borrowings, one (1) Business Day before the date of the proposed Borrowing. Each such Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in the form of Exhibit E attached hereto and hereby made a part hereof and signed by the Parent Borrower on behalf of the Borrowers. Each such written Borrowing Request shall specify the following information:
(a) the aggregate amount of the requested Borrowing;
(b) the intended use of the requested Borrowing, accompanied by such financial and other information as may be reasonably requested by Administrative Agent with respect to the Real Property and investment relating to such requested Borrowing;
(c) the date of such Borrowing, which shall be a Business Day;
(d) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(e) in the case of a Eurodollar Borrowing, the Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and
(f) the location and number of a Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.04.
(g) If no election as to the Type of Borrowing is specified in the Borrowing Request, then the requested Borrowing shall be an ABR Borrowing. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. The determination as to whether to fund a requested Borrowing shall be at the sole discretion of the Administrative Agent.
Section 2.04 Funding of Borrowings.
(a) If Administrative Agent, in its sole discretion, has approved the making of any Loan on account of any requested Borrowing, each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, Boston, Massachusetts time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrowers by promptly crediting the amounts so received, in like funds, to an account of a Borrower maintained with the Administrative Agent in Boston, Massachusetts, or wire transferred to such other account or in such manner as may be designated by the Parent Borrower in the applicable Borrowing Request.
(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrowers a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and each Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrowers to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrowers, the interest rate applicable to the corresponding Loan made to the Borrowers. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing.
(c) Each Lender may: (a) designate its principal office or a branch, subsidiary or Affiliate of such Lender as its lending office (and the office to whose accounts payments are to be credited) for any Eurodollar Loan; (b) designate its principal office or a branch, subsidiary or Affiliate as its lending office (and the office to whose accounts payments are to be credited) for any ABR Loan and (c) change its lending office from time to time by notice to Administrative Agent and Borrowers. In such event, such Lender shall continue to hold the Note, if any, evidencing its loans for the benefit and account of such branch, subsidiary or Affiliate. Each Lender shall be entitled to fund all or any portion of its Commitment in any manner it deems appropriate, consistent with the provisions of this Section 2.04, but for the purposes of this Agreement such Lender shall, regardless of such Lender’s actual means of funding, be deemed to have funded its Commitment in accordance with the interest option selected from time to time by the Borrowers for such Borrowing period.
Section 2.05 Letters of Credit.
(a) Letter of Credit Commitment.
(i) Subject to the terms and conditions hereof, on any Business Day during the Availability Period: (A) the Letter of Credit Issuer agrees, in reliance upon the agreements of the Revolving Lenders set forth in this Section 2.05: (1) to issue Letters of Credit for the account of the Borrower, in aggregate face amounts that shall be not less than $100,000, as the Borrower may request (except to the extent a lesser amount is requested by the Borrower and agreed by Administrative Agent and the Letter of Credit Issuer), and to amend or extend Letters of Credit previously issued by it; and (2) to honor drawings under the Letters of Credit; and (B) Revolving Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower and any drawings thereunder; provided, however that after giving effect to any L/C Credit Extension with respect to any Letter of Credit: (1) the Revolving Principal Obligation will not exceed the Available Revolving Amount; (2) the Revolving Credit Exposure of any Revolving Lender shall not exceed such Revolving Lender’s Revolving Commitment; (3) the Letter of Credit Obligations will not exceed the Letter of Credit Sublimit; (4) prior to the Collateral Termination Date, the Total Exposure would not exceed the Borrowing Base; and (5) from and after the Collateral Termination Date, the Total Unsecured Indebtedness would not exceed the Borrowing Base. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired (without any pending drawing) or that have been drawn upon and reimbursed. The Letter of Credit Issuer shall have the right to approve the form of Letter of Credit requested.
(ii) The Letter of Credit Issuer shall not issue any Letter of Credit, if: (A) subject to the proviso in clause (B) below and Section 2.05(b)(iii), the expiry date of such Letter of Credit would occur more than twelve (12) months after the date of issuance or last extension, unless the Letter of Credit Issuer has approved such expiry date in its sole discretion; or (B) the expiry date of such Letter of Credit would occur after the date that is thirty (30) days prior to the Stated Revolving Maturity Date, without the consent of the Letter of Credit Issuer, with Borrower agreeing that any such Letter of Credit with an expiry date later than thirty (30) days prior to the Stated Revolving Maturity Date shall be Cash Collateralized on the Letter of Credit Collateralization Date, and in no event shall any Letter of Credit have an expiry date later than twelve (12) months after the Revolving Maturity Date.
(iii) The Letter of Credit Issuer shall be under no obligation to issue any Letter of Credit if:
(A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Letter of Credit Issuer from issuing such Letter of Credit, or any Law applicable to the Letter of Credit Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Letter of Credit Issuer shall prohibit, or request that the Letter of Credit Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Letter of Credit Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Letter of Credit Issuer is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon the Letter of Credit Issuer any unreimbursed loss, cost or expense which was not applicable on the Effective Date and which the Letter of Credit Issuer in good faith deems material to it (for which the Letter of Credit Issuer is not otherwise compensated hereunder);
(B) the issuance of such Letter of Credit would violate any Laws or one or more policies of the Letter of Credit Issuer applicable to letters of credit generally;
(C) such Letter of Credit is to be denominated in a currency other than Dollars;
(D) such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder; or
(E) any Revolving Lender is at that time a Defaulting Lender, unless the Letter of Credit Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to the Letter of Credit Issuer (in its sole discretion) with the Borrower or such Revolving Lender to eliminate the Letter of Credit Issuer’s actual or potential Fronting Exposure (after giving effect to Section 2.20(a)(iv)) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other Letter of Credit Obligations as to which the Letter of Credit Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion.
(iv) The Letter of Credit Issuer shall be under no obligation to amend any Letter of Credit if: (A) the Letter of Credit Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof; or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
(v) The Letter of Credit Issuer shall act on behalf of Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the Letter of Credit Issuer shall have all of the benefits and immunities: (A) provided to Administrative Agent in Article VIII with respect to any acts taken or omissions suffered by Letter of Credit Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article VIII included Letter of Credit Issuer with respect to such acts or omissions; and (B) as additionally provided herein with respect to Letter of Credit Issuer.
(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.
(i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the Letter of Credit Issuer (with a copy to Administrative Agent) in the form of a Request for Credit Extension, appropriately completed and signed by a Responsible Officer of the Borrower. Such Request for Credit Extension may be sent by fax, by United States mail, by overnight courier, by electronic transmission using the system provided by the Letter of Credit Issuer, by personal delivery or by any other means acceptable to the Letter of Credit Issuer. Such Request for Credit Extension must be received by the Letter of Credit Issuer and Administrative Agent not later than 11:00 a.m. at least five (5) Business Days prior to the proposed issuance date or date of amendment, as the case may be, of any Letter of Credit (or such later date and time as Administrative Agent and the Letter of Credit Issuer may agree in a particular instance in their sole but reasonable discretion). In the case of a request for an initial issuance of a Letter of Credit, such Request for Credit Extension shall specify in form and detail satisfactory to the Letter of Credit Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the Letter of Credit Issuer may reasonably require. In the case of a request for an amendment of any outstanding Letter of Credit, the related Request for Credit Extension shall specify in form and detail satisfactory to the Letter of Credit Issuer: (1) the Letter of Credit to be amended; (2) the proposed date of amendment thereof (which shall be a Business Day); (3) the nature of the proposed amendment; and (4) such other matters as the Letter of Credit Issuer may reasonably require. Additionally, the Borrower shall furnish to the Letter of Credit Issuer and Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the Letter of Credit Issuer or Administrative Agent may reasonably require.
(ii) Promptly after receipt of any Request for Credit Extension relating to a Letter of Credit, the Letter of Credit Issuer will confirm with Administrative Agent (by telephone or in writing) that Administrative Agent has received a copy of such Request for Credit Extension from the Borrower and, if not, the Letter of Credit Issuer will provide Administrative Agent with a copy thereof. Unless the Letter of Credit Issuer has received written notice from any Revolving Lender, Administrative Agent or the Borrower, at least one (1) Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Section 4 shall not then be satisfied, then, subject to the terms and conditions hereof, the Letter of Credit Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the Letter of Credit Issuer’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Revolving Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Letter of Credit Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Revolving Lender’s Revolving Percentage times the amount of such Letter of Credit. With the approval of Administrative Agent and the Letter of Credit Issuer, the risk participation of each Revolving Lender shall terminate upon the occurrence of the Revolving Maturity Date and the full and final payment of the Obligations (other than the Cash Collateralized Letter of Credit Obligations described below), and the Issuer Documents, rather than this Credit Agreement, shall govern the rights and obligations of Administrative Agent, Letter of Credit Issuer and Borrower with respect to such Letter of Credit Obligations, so long as Borrower has Cash Collateralized all Letter of Credit Obligations then outstanding, to the satisfaction of Administrative Agent and Letter of Credit Issuer, in their respective sole discretion.
(iii) If the Borrower so requests in any applicable Request for Credit Extension, the Letter of Credit Issuer shall issue a Letter of Credit that has automatic extension provisions (each, an “Auto‑Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the Letter of Credit Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the Letter of Credit Issuer, the Borrower shall not be required to make a specific request to the Letter of Credit Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Revolving Lenders shall be deemed to have authorized (but may not require) the Letter of Credit Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than thirty (30) days prior to the Stated Maturity Date (subject to Cash Collateralization in accordance with Section 2.05(a)(ii)); provided, however, that the Letter of Credit Issuer shall not permit any such extension if: (A) the Letter of Credit Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (a)(i), clause (a)(ii) or clause (a)(iii) of Section 2.05 or otherwise); or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five (5) Business Days before the Non-Extension Notice Date from Administrative Agent, any Revolving Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the Letter of Credit Issuer not to permit such extension.
(iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the Letter of Credit Issuer will also deliver to the Borrower and Administrative Agent a true and complete copy of such Letter of Credit or amendment.
(c) Drawings and Reimbursements; Funding of Participation.
(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the Letter of Credit Issuer shall notify the Borrower and Administrative Agent thereof. Not later than 11:00 a.m. on the date of any payment by the Letter of Credit Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower shall reimburse the Letter of Credit Issuer through Administrative Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse the Letter of Credit Issuer by such time, Administrative Agent shall promptly notify each Revolving Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Revolving Lender’s Revolving Percentage thereof. In such event, the Borrower shall be deemed to have requested a Revolving Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.03 for the principal amount of Revolving Base Rate Loans, but subject to the amount of the unutilized portion of the Available Revolving Amount and the conditions set forth in Section 4.02 (other than the delivery of a Loan Notice). Any notice given by the Letter of Credit Issuer or Administrative Agent pursuant to this Section 2.05(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
(ii) Each Revolving Lender (including the Revolving Lender acting as Letter of Credit Issuer) shall upon any notice pursuant to Section 2.05(c)(i) make funds available (and Administrative Agent shall apply Cash Collateral provided for this purpose) for the account of the Letter of Credit Issuer at Administrative Agent’s Office in an amount equal to its Revolving Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by Administrative Agent if notice is provided before 10:00 a.m. on such date, and otherwise on the next Business Day, whereupon, subject to the provisions of Section 2.05(c)(iii), each Revolving Lender that so makes funds available shall be deemed to have made a Revolving Base Rate Loan to Borrower in such amount. Administrative Agent shall remit the funds so received to the Letter of Credit Issuer.
(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Revolving Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the Letter of Credit Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Revolving Lender’s payment to Administrative Agent for the account of the Letter of Credit Issuer pursuant to Section 2.05(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Revolving Lender in satisfaction of its participation obligation under this Section 2.07. No L/C Advance shall be funded or held with Plan Assets.
(iv) Until each Revolving Lender funds its Revolving Loan or L/C Advance pursuant to this Section 2.05(c) to reimburse the Letter of Credit Issuer for any amount drawn under any Letter of Credit, interest in respect of such Revolving Lender’s Revolving Percentage of such amount shall be solely for the account of the Letter of Credit Issuer.
(v) Each Revolving Lender’s obligation to make Revolving Loans or L/C Advances to reimburse the Letter of Credit Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.05(c), shall be absolute and unconditional and shall not be affected by any circumstance, including: (A) any set-off, counterclaim, recoupment, defense or other right which such Revolving Lender may have against the Letter of Credit Issuer, the Borrower, or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Potential Default or Event of Default; or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Lender’s obligation to make Revolving Loans pursuant to this Section 2.05(c) is subject to the conditions set forth in Section 4.02 (other than delivery of a Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the Letter of Credit Issuer for the amount of any payment made by the Letter of Credit Issuer under any Letter of Credit, together with interest as provided herein.
(vi) If any Revolving Lender fails to make available to Administrative Agent for the account of the Letter of Credit Issuer any amount required to be paid by such Revolving Lender pursuant to the foregoing provisions of this Section 2.05(c) by the time specified in Section 2.05(c)(ii), then, without limiting the other provisions of this Credit Agreement, the Letter of Credit Issuer shall be entitled to recover from such Revolving Lender (acting through Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Letter of Credit Issuer at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of the Letter of Credit Issuer submitted to any Revolving Lender (through Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.
(d) Repayment of Participations.
(i) At any time after the Letter of Credit Issuer has made a payment under any Letter of Credit and has received from any Revolving Lender such Revolving Lender’s L/C Advance in respect of such payment in accordance with Section 2.05(c), if Administrative Agent receives for the account of the Letter of Credit Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by Administrative Agent), Administrative Agent will distribute to such Revolving Lender its Revolving Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Revolving Lender’s L/C Advance was outstanding) in the same funds as those received by Administrative Agent.
(ii) If any payment received by Administrative Agent for the account of the Letter of Credit Issuer pursuant to Section 2.05(c)(i) is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, each Revolving Lender shall pay to Administrative Agent for the account of the Letter of Credit Issuer its Revolving Percentage thereof on demand of Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Revolving Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.
(e) Obligations Absolute. The obligation of the Borrower to reimburse the Letter of Credit Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Credit Agreement under all circumstances, including the following:
(i) any lack of validity or enforceability of such Letter of Credit, this Credit Agreement, or any other Loan Document;
(ii) the existence of any claim, counterclaim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the Letter of Credit Issuer or any other Person, whether in connection with this Credit Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction, except as set forth in Section 2.05(f);
(iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
(iv) waiver by the Letter of Credit Issuer of any requirement that exists for the Letter of Credit Issuer’s protection and not the protection of the Borrower or any waiver by the Letter of Credit Issuer which does not in fact materially prejudice the Borrower;
(v) honor of a demand for payment presented electronically even if such Letter of Credit requires that demand be in the form of a draft;
(vi) intentionally omitted;
(vii) any payment by the Letter of Credit Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the Letter of Credit Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or
(viii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.
The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will promptly notify the Letter of Credit Issuer. The Borrower shall be conclusively deemed to have waived a claim related to the terms of the respective Letter of Credit, or of any amendments thereto, unless such notice is given as aforesaid.
(f) Role of Letter of Credit Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the Letter of Credit Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the Letter of Credit Issuer, any of its Related Parties nor any of the respective correspondents, participants or assignees of the Letter of Credit Issuer shall be liable to any Lender for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or related Request for Credit Extension. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the Letter of Credit Issuer, any of its Related Parties, nor any of the respective correspondents, participants or assignees of the Letter of Credit Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (viii) of Section 2.05(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the Letter of Credit Issuer, and the Letter of Credit Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the Letter of Credit Issuer’s willful misconduct or gross negligence or the Letter of Credit Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the Letter of Credit Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the Letter of Credit Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. The Letter of Credit Issuer may send a Letter of Credit or conduct any communication to or from the beneficiary via the Society for Worldwide Interbank Financial Telecommunication (known as SWIFT) message or overnight courier, or any other commercially reasonable means of communicating with a beneficiary.
(g) Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Documents, the terms hereof shall control.
(h) Applicability of ISP; Limitation of Liability. Unless otherwise expressly agreed by the Letter of Credit Issuer and the Borrower when a Letter of Credit is issued the rules of the ISP shall apply to each Letter of Credit. Notwithstanding the foregoing, Letter of Credit Issuer shall not be responsible to the Borrower for, and Letter of Credit Issuer’s rights and remedies against the Borrower shall not be impaired by, any action or inaction of the Letter of Credit Issuer required or permitted under any law, order, or practice that is required or permitted to be applied to any Letter of Credit or this Credit Agreement, including the Law or any order of a jurisdiction where Letter of Credit Issuer or the beneficiary is located, the practice stated in the ISP, or in the decisions, opinions, practice statements, or official commentary of the ICC Banking Commission, the Bankers Association for Finance and Trade - International Financial Services Association (BAFT-IFSA), or the Institute of International Banking Law & Practice, whether or not any Letter of Credit chooses such law or practice.
Section 2.06 Swing Line Loans.
(a) The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender, in reliance upon the agreements of the other Revolving Lenders set forth in this Section 2.06, shall make loans (each such loan, a “Swing Line Loan”) to the Borrower from time to time on any Business Day during the Availability Period in Dollars in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Revolving Percentage of the Outstanding Amount of Revolving Loans and Letter of Credit Obligations of the Revolving Lender acting as Swing Line Lender, may exceed the amount of such Revolving Lender’s Revolving Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the Revolving Principal Obligation shall not exceed the Maximum Revolving Commitment, (ii) the aggregate Revolving Credit Exposure of any Revolving Lender at such time shall not exceed such Revolving Lender’s Revolving Commitment, (iii) the Revolving Principal Obligation shall not exceed the Available Revolving Amount, (iv) prior to the Collateral Termination Date, the Total Exposure would not exceed the Borrowing Base; and (v) from and after the Collateral Termination Date, the Total Unsecured Indebtedness would not exceed the Borrowing Base and provided, further, that the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.06, prepay under Section 2.09, and reborrow under this Section 2.06. Each Swing Line Loan shall be a Base Rate Loan. Each Swing Line Loan shall be due and payable within ten (10) Business Days of the date such Swing Line Loan was provided and Borrower hereby agrees (to the extent not refinanced as contemplated by Section 2.08(c) below) to repay each Swing Line Loan on or before the date that is ten (10) Business Days from the date such Swing Line Loan was provided. Immediately upon the making of a Swing Line Loan, each Revolving Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Revolving Lender’s Applicable Percentage times the amount of such Swing Line Loan.
(b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $250,000, and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by the Swing Line Lender of any telephonic Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Revolving Lender) prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the first proviso to the first sentence of Section 2.06(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. on the borrowing date specified in such Loan Notice, make the amount of its Swing Line Loan available to the Borrower. The Swing Line Lender shall not be required to fund any Swing Line Loan to the extent any Revolving Lender is at such time a Defaulting Lender hereunder.
(c) Refinancing of Swing Line Loans.
(i) The Swing Line Lender at any time in its sole discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Revolving Lender make a Eurodollar Loan with an Interest Period of one month in an amount equal to such Revolving Lender’s Revolving Percentage of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Revolving Base Rate Loans, but subject to the unutilized portion of the Revolving Commitments and the conditions set forth in Section 4.02. The Swing Line Lender shall furnish the Borrower with a copy of the applicable Loan Notice promptly after delivering such notice to the Administrative Agent. Each Revolving Lender shall make an amount equal to its Revolving Percentage of the amount specified in such Loan Notice available to the Administrative Agent in immediately available funds (and the Administrative Agent may apply Cash Collateral available with respect to the applicable Swing Line Loan) for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. on the day specified in such Loan Notice, whereupon, subject to Section 2.06(c)(ii), each Revolving Lender that so makes funds available shall be deemed to have made a Eurodollar Loan Loan with an Interest Period of one month to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Swing Line Lender.
(ii) If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Borrowing in accordance with Section 2.06(c)(i), the request for Eurodollar Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Revolving Lenders fund its risk participation in the relevant Swing Line Loan and each Revolving Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.06(c)(i) shall be deemed payment in respect of such participation.
(iii) If any Revolving Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Revolving Lender pursuant to the foregoing provisions of this Section 2.08(c) by the time specified in Section 2.06(c)(i), the Swing Line Lender shall be entitled to recover from such Revolving Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing. If such Revolving Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Revolving Lender’s Revolving Loan included in the relevant Revolving Borrowing or funded participation in the relevant Swing Line Loan, as the case may be. A certificate of the Swing Line Lender submitted to any Revolving Lender (through the Administrative Agent) with respect to any amounts owing under this Section 2.06(c)(iii) shall be conclusive absent manifest error.
(iv) Each Revolving Lender’s obligation to make Revolving Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.06(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Revolving Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of an Event of Default or Potential Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Lender’s obligation to make Revolving Loans pursuant to this Section 2.06(c) is subject to the conditions set forth in Section 4.02. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.
(d) Repayment of Participations.
(i) At any time after any Revolving Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Revolving Lender its Revolving Percentage thereof in the same funds as those received by the Swing Line Lender.
(ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 12.04 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Revolving Lender shall pay to the Swing Line Lender its Revolving Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The Administrative Agent will make such demand upon the request of the Swing Line Lender. The obligations of the Revolving Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Credit Agreement.
(e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Revolving Lender funds its Eurodollar Loan or risk participation pursuant to this Section 2.06 to refinance such Revolving Lender’s Revolving Percentage of any Swing Line Loan, interest in respect of such Revolving Percentage shall be solely for the account of the Swing Line Lender.
(f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.
Section 2.07 Cash Collateral.
(a) Certain Credit Support Events. If: (i) the Letter of Credit Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing that has not been repaid in accordance with the provisions of this Credit Agreement; (ii) as of the Letter of Credit Collateralization Date, any Letter of Credit Obligations for any reason remains outstanding; (iii) the Borrower shall be required to provide Cash Collateral pursuant to Section 7.02; or (iv) there shall exist a Defaulting Lender; Borrower (in the case of clauses (i) through (iii) above) and either Borrower or Defaulting Lender (in the case of clause (iv) above) shall immediately (in the case of clause (iii) above) or within one (1) Business Day (in all other cases) following any request by Administrative Agent, the Letter of Credit Issuer or the Swing Line Lender, provide Cash Collateral in an amount not less than the applicable Minimum Collateral Amount (determined in the case of Cash Collateral provided pursuant to clause (iv) above after giving effect to Section 2.20(a)(iv) and any Cash Collateral provided by the Defaulting Lender).
(b) Grant of Security Interest. Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to (and subjects to the control of) Administrative Agent, for the benefit of Administrative Agent, the Letter of Credit Issuer, the Swing Line Lender and the Lenders, and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.07(c). If at any time Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than Administrative Agent or the Letter of Credit Issuer as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, Borrower o the Defaulting Lender, as applicable, will, promptly upon demand by Administrative Agent, pay or provide to Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency. All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked, non-interest bearing deposit accounts at KeyBank. Borrower shall pay on demand therefor from time to time all customary account opening, activity and other administrative fees and charges in connection with the maintenance and disbursement of Cash Collateral.
(c) Application. Notwithstanding anything to the contrary contained in this Credit Agreement, Cash Collateral provided under any of this Section 2.07 or Section 2.05, Section 2.09, Section 2.11, Section 2.20, or Article VII in respect of Letters of Credit or Swing Line Loans shall be held and applied to the satisfaction of the specific Letter of Credit Obligations, Swing Line Loans, obligations to fund participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may be provided for herein.
(d) Release. Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or to secure other obligations shall be released to the Person providing such Cash Collateral promptly following: (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Lender (or, as appropriate, its assignee following compliance with Section 9.04(a)(ii)(F)); or (ii) the determination by Administrative Agent and the Letter of Credit Issuer that there exists excess Cash Collateral; provided, however: (x) that Cash Collateral furnished by or on behalf of the Borrower shall not be released during the continuance of a Potential Default or Event of Default (and following application as provided in this Section 2.07 may be otherwise applied in accordance with Section 7.03; and (y) the Person providing Cash Collateral and the Letter of Credit Issuer or the Swing Line Lender, as applicable, may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations. If the Borrowers shall have provided Cash Collateral due to a failure of a Defaulting Lender to provide such Cash Collateral as and when required under this Credit Agreement, the amount provided by Borrower shall be released to it upon and to the extent such Defaulting Lender shall subsequently provide all or any part of such Cash Collateral in substitution therefor.
Section 2.08 Interest Elections.
(a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrowers may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrowers may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Parent Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.02 if the Borrowers were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in the form of a Borrowing Request (with proper election made for an interest rate election only) and signed by the Parent Borrower.
(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.08:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing;
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.
(v) If any such Interest Election Request requests a Eurodollar Loan but does not specify an Interest Period, then the Borrowers shall be deemed to have selected an Interest Period of one month’s duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing.
(e) If the Parent Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Eurodollar Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Parent Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
Section 2.09 Reduction or Early Termination of Revolving Commitments. So long as no Request for Credit Extension is outstanding, Borrowers may terminate the Revolving Commitments, or permanently reduce the aggregate Maximum Revolving Commitment, by giving prior irrevocable written notice to Administrative Agent of such termination or reduction three (3) Business Days prior to the effective date of such termination or reduction (which date shall be specified by Parent Borrower in such notice), provided that: (a) any such partial reduction shall be in an aggregate amount of $25,000,000 or any whole multiple of $5,000,000 in excess thereof; (b) Borrowers may not reduce the Maximum Revolving Commitments to an amount below $100,000,000 except in connection with the termination of all of the Revolving Commitments, and (c) Borrowers shall not terminate or reduce the aggregate Revolving Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Revolving Principal Obligation would exceed the aggregate Revolving Commitments (except that if such Revolving Principal Obligation consists solely of Letter of Credit Obligations, Borrower may provide Cash Collateral for such Letter of Credit Obligations and terminate the aggregate Revolving Commitments). Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of the aggregate Revolving Commitments. Each reduction of the aggregate Revolving Commitments shall be applied to the Revolving Commitment of each Revolving Lender according to its Applicable Percentage. All fees accrued until the effective date of any termination of the aggregate Revolving Commitments shall be paid on the effective date of such termination. After any reduction of the aggregate Revolving Commitments under this Section 2.09 the Borrower shall not be permitted to request any increase to the Maximum Total Commitment under Section 2.22.
Section 2.10 Repayment of Loans; Evidence of Debt.
(a) Each Borrower hereby unconditionally, jointly and severally, promises to pay to the Administrative Agent for the account of each Lender the then unpaid Outstanding Amount of each Revolving Loan and all other Revolving Principal Obligations on the Revolving Loan Maturity Date. At the request of each Lender, the Revolving Loans made by such Lender shall be evidenced by a Revolving Note payable to such Lender in the amount of such Lender’s Revolving Commitment.
(b) The Borrower shall repay each Swing Line Loan on the earlier to occur of (i) the date ten (10) Business Days after such Loan is made, and (ii) the Revolving Loan Maturity Date.
(c) Each Borrower hereby unconditionally, jointly and severally, promises to pay to the Administrative Agent for the account of each applicable Term Lender the then unpaid Outstanding Amount of each tranche of Term Loans on the applicable Maturity Date thereof. At the request of each Term Lender, the Term Loans made by such Lender shall be evidenced by a Term Note payable to such Lender in the amount of such Lender’s Term Loan Commitment of the applicable tranche.
(d) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(e) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.
(f) The entries made in the accounts maintained pursuant to paragraph (c) or (d) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein, absent manifest error; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.
Section 2.11 Prepayment of Loans.
(a) The Borrowers shall have the right at any time and from time to time to prepay, without penalty, any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section, and subject to Section 2.15, if applicable.
(b) The Parent Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., Boston, Massachusetts time, three (3) Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., Boston, Massachusetts time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that is an integral multiple of $50,000. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12.
(c) In connection with the prepayment of any portion of the Loan prior to the expiration of the Interest Period applicable thereto, the Borrowers shall also pay any applicable expenses pursuant to Section 2.15.
(d) If, (i) on any day, the Revolving Principal Obligation exceeds the Available Revolving Amount, (ii) on any day prior to the Collateral Termination Date, the Total Exposure exceeds the Borrowing Base, or (iii) on any day from and after the Collateral Termination Date, the Total Unsecured Indebtedness exceeds the Borrowing Base, then, in each case, Borrowers shall pay within two (2) Business Days after demand such excess to Administrative Agent, for the benefit of the Secured Parties, in immediately available funds by prepaying Revolving Loans and Swing Line Loans, and if any portion of such excess still remains after prepaying the Outstanding Amount of all such Loans, Borrower shall Cash Collateralize the Letter of Credit Obligations and/or prepay Term Loans in the amount of such excess.
(e) Amounts to be applied to the prepayment of the Loans pursuant to any of the preceding subsections of this Section shall be applied, first, to reduce outstanding ABR Loans and next, to the extent of any remaining balance, to reduce outstanding Eurodollar Loans. Within the limits of each Lender’s Commitment and, subject to the terms and conditions of this Agreement, during the Availability Period the Borrowers may prepay Loans under this Section 2.11 and reborrow under Section 2.01.
Section 2.12 Fees.
(a) Unused Fee. The Borrowers agree to pay to the Administrative Agent for the account of each Lender, an unused fee (the “Unused Fee”), which shall accrue during the period from and including the date of this Agreement to, but excluding, date on which such Commitment terminates, on the actual daily unused amount of the Commitment of such Lender under the Revolving Loans or Letters of Credit at a rate equal to the Unused Fee Rate applicable for such day. Unused Fees accrued through and including the last day of March, June, September and December of each year shall be payable on the fifth Business Day of the month following the end of the applicable quarter. All Unused Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day) and shall be based on the then existing Commitments of the Lenders.
(b) Letter of Credit Fee. The Borrower shall pay to Administrative Agent for the account of each Revolving Lender in accordance, subject to Section 20, with its Revolving Percentage, a fee for each Letter of Credit (the “Letter of Credit Fee”) equal to the Applicable Margin per annum times the daily amount available to be drawn under such Letter of Credit. Such fee shall be: (i) due and payable in quarterly installments in arrears on the first Business Day of each calendar quarter for the preceding calendar quarter, commencing on the first such date to occur after the issuance of any Letter of Credit, on the Revolving Maturity Date, and thereafter (if applicable) on demand; and (ii) computed quarterly in arrears. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.07. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, such fee shall accrue at a rate equal to the Applicable Margin plus four percent (4%).
(c) Fronting Fee and Administrative Charges. The Borrower shall pay to the Letter of Credit Issuer, for its own account, in consideration of the issuance and fronting of Letters of Credit, a fronting fee with respect to each Letter of Credit, at a rate equal to the greater of (a) 0.125% per annum, computed on the face amount available to be drawn under such Letter of Credit, or (b) $500.00. Such fronting fee shall be due and payable upon the issuance of any Letter of Credit and upon any extension thereof. In addition, the Borrower shall pay directly to the Letter of Credit Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the Letter of Credit Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.
(d) In addition to all fees specified herein, the Borrowers agree to pay to KeyBank and KBCM, for their own account, certain fees for services rendered or to be rendered in connection with the Loans as provided pursuant to the Fee Letter.
(e) All fees payable hereunder shall be paid on the dates due in immediately available funds. Fees paid shall not be refundable under any circumstances.
Section 2.13 Interest.
(a) The ABR Loans shall bear interest at the lesser of (x) the Alternate Base Rate plus the Applicable Rate, or (y) the Maximum Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the lesser of (a) the Adjusted LIBO Rate for the Interest Period in effect for such Eurodollar Loan plus the Applicable Rate, or (b) the Maximum Rate.
(c) Notwithstanding the foregoing, (A) if any principal of or interest on the Loans or any portion thereof or any other amount payable by the Borrowers hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of the Loans, the lesser of (x) 4% plus the rate otherwise applicable to the Loans as provided in the preceding paragraphs of this Section, or (y) the Maximum Rate, or (ii) in the case of any other amount, the lesser of (x) 4% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section, or (y) the Maximum Rate; and (B) after the occurrence of any Event of Default, at the option of the Administrative Agent, or if the Administrative Agent is directed in writing by the Required Lenders to do so, the Loans shall bear interest at a rate per annum equal to the lesser of (x) 4% plus the rate otherwise applicable to the Loans as provided in the preceding paragraphs of this Section, or (y) the Maximum Rate.
(d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Borrowing prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Eurodollar Loan shall be payable on the effective date of such conversion.
(e) All computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year and paid for the actual number of days elapsed. The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
(f) If, as a result of any restatement of or other adjustment to the financial statements of the Parent or for any other reason, Borrowers, Parent or the Lenders determine that (i) the Total Leverage Ratio as calculated by Parent as of any applicable date was inaccurate and (ii) a proper calculation of the Total Leverage Ratio would have resulted in higher pricing for such period, Borrowers shall immediately and retroactively be obligated to pay to Administrative Agent for the account of the applicable Lenders or the Letter of Credit Issuer, as the case may be, promptly on demand by Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to a Borrower under the Bankruptcy Code of the United States, automatically and without further action by Administrative Agent, any Lender or the Letter of Credit Issuer), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period. This paragraph shall not limit the rights of Administrative Agent, any Lender or the Letter of Credit Issuer, as the case may be, under this Agreement. Borrower’s obligations under this paragraph shall survive the termination of the Commitments and the repayment of all other Obligations hereunder.
Section 2.14 Alternate Rate of Interest.
(a) If prior to the commencement of any Interest Period for a Eurodollar Borrowing but subject to Section 2.24(c):
(i) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or
(ii) the Administrative Agent is advised by any Lender that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Eurodollar Loan for such Interest Period;
then the Administrative Agent shall give notice thereof to the Parent Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Parent Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing; provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted.
Section 2.15 Increased Costs.
(a) If any Change in Law shall:
(i) subject any Recipient to any Taxes or withholding of any nature with respect to this Agreement, the other Loan Documents, such Lender’s Commitment or the Loans (other than for Indemnified Taxes, Taxes described in clauses (b) through (d) of the definition of Excluded Taxes, and Connection Income Taxes), or
(ii) materially change the basis of taxation (except for changes in taxes on gross receipts, income or profits or its franchise tax) of payments to any Recipient of the principal of or the interest on any Loans or any other amounts payable to any Lender or Letter of Credit Issuer under this Agreement or the other Loan Documents, or
(iii) impose or increase or render applicable any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law and which are not already reflected in any amounts payable by Borrowers hereunder) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Lender, or
(iv) impose on any Recipient any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, any Letter of Credit, or participation therein, such Lender’s Commitment, or any class of loans or commitments of which any of the Loans or such Lender’s Commitment forms a part;
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the Letter of Credit Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrowers will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.
(b) If any Lender or Letter of Credit Issuer determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or Letter of Credit Issuer’s capital or liquidity or on the capital or liquidity of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit or Swing Line Loans held by, such Lender, or the Letters of Credit issued by the Letter of Credit Issuer, to a level below that which such Lender or such Lender’s holding company would have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.
(c) A certificate of a Lender or Letter of Credit Issuer setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Parent Borrower and shall be conclusive absent manifest error. The Borrowers shall pay such Lender, the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or Letter of Credit Issuer to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrowers shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or Letter of Credit Issuer notifies the Borrowers of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Letter of Credit Issuer’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.
Section 2.16 Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.09 or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrowers pursuant to Section 2.18, then, in any such event, the Borrowers shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Parent Borrower and shall be conclusive absent manifest error. The Borrowers shall pay such Lender the amount shown as due on any such certificate within thirty (30) days after receipt thereof.
Section 2.17 Taxes.
(a) All payments by the Borrowers hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim, and free and clear of and without deduction or withholding for any Taxes, except as required by Legal Requirements. If any Legal Requirement (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Legal Requirements and, if such Tax is an Indemnified Tax, then the sum payable by the Borrowers shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.17) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(b) The Borrowers shall timely pay to the relevant Governmental Authority in accordance with Legal Requirements, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.
(c) The Borrowers shall indemnify each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Parent Borrower by a Lender on the Letter of Credit Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error; provided that the determinations in such statement are made on a reasonable basis and in good faith.
(d) Each Lender and the Letter of Credit Issuer shall severally indemnify the Administrative Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that a Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrowers to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.04(b) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender or the Letter of Credit Issuer, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender and the Letter of Credit Issuer hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender or the Letter of Credit Issuer, as the case may be, under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this subsection.
(e) As soon as practicable after any payment of Taxes by a Borrower to a Governmental Authority pursuant to this Section 2.17, such Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(f) (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Parent Borrower and the Administrative Agent, at the time or times reasonably requested by the Parent Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Parent Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Legal Requirements or reasonably requested by the Parent Borrower or the Administrative Agent as will enable the Borrowers or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in the immediately following clauses (ii)(2)(A), (ii)(2)(B) and (ii)(2)(D)) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(i) Without limiting the generality of the foregoing, in the event that a Borrower is a U.S. Person:
(A) any Lender that is a U.S. Person shall deliver to the Parent Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Parent Borrower or the Administrative Agent), an electronic copy (or an original if requested by the Parent Borrower or the Administrative Agent) of an executed IRS Form W-9 (or any successor form) certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Parent Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Parent Borrower or the Administrative Agent), whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, an electronic copy (or an original if requested by the Parent Borrower or the Administrative Agent) of an executed IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(2) an electronic copy (or an original if requested by the Parent Borrower or the Administrative Agent) of an executed IRS Form W-8ECI;
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit F-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of a Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or W-8BEN-E; or
(4) to the extent a Foreign Lender is not the beneficial owner, an electronic copy (or an original if requested by the Parent Borrower or the Administrative Agent) of an executed IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or Exhibit F-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct and indirect partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Parent Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Parent Borrower or the Administrative Agent), an electronic copy (or an original if requested by a Parent Borrower or the Administrative Agent) of any other form prescribed by Legal Requirements as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by Legal Requirements to permit the Borrowers or the Administrative Agent to determine the withholding or deduction required to be made; and
(D) if a payment made to a Recipient under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Recipient were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Recipient shall deliver to the Parent Borrower and the Administrative Agent at the time or times prescribed by Legal Requirements and at such time or times reasonably requested by the Parent Borrower or the Administrative Agent such documentation prescribed by Legal Requirements (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Parent Borrower or the Administrative Agent as may be necessary for the Borrowers and the Administrative Agent to comply with their obligations under FATCA and to determine that such Recipient has complied with such Recipient’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
Each Recipient agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Parent Borrower and the Administrative Agent in writing of its legal inability to do so.
(g) If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.17 (including by the payment of additional amounts pursuant to this Section 2.17), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.17 with respect to the Taxes giving rise to such refund), net of all reasonable third party out-of-pocket expenses (including Taxes) of such indemnified party actually incurred and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this subsection (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection, in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this subsection the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund has not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This subsection shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it reasonably deems confidential) to the indemnifying party or any other Person.
(h) Each party’s obligations under this Section 2.17 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender or the Letter of Credit Issuer, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
Section 2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) The Borrowers shall make each payment required to be made by them hereunder (whether of principal, interest, fees or of amounts payable under Section 2.15, Section 2.16 or 2.17, or otherwise) prior to 1:00 p.m., Boston, Massachusetts time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the reasonable discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its main offices in Cleveland, Ohio, except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto. If the Administrative Agent receives a payment for the account of a Lender prior to 1:00 p.m., Boston, Massachusetts time, such payment must be delivered to the Lender on the same day and if it is not so delivered due to the fault of the Administrative Agent, the Administrative Agent shall pay to the Lender entitled to the payment interest thereon for each day after payment should have been received by the Lender pursuant hereto until the Lender receives payment, at the Federal Funds Effective Rate. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars.
(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.
(c) If any Lender or Letter of Credit Issuer shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or the participations in the Letter of Credit Obligations resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans or participations and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders and subparticipations in the Letter of Credit Obligations and Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement, the application of Cash Collateral provided for in Section 2.07 or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans, other than to a Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against a Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the Parent Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrowers will not make such payment, the Administrative Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrowers have not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate.
(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) or Section 2.18(d), then the Administrative Agent may, in its reasonable discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.
Section 2.19 Mitigation Obligations; Replacement of Lenders.
(a) Each Lender will notify the Parent Borrower of any event occurring after the date of this Agreement which will entitle such Person to compensation pursuant to Sections 2.13 and 2.15 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, provided that such Person shall not be liable for any costs, fees, expenses, or additional interest due to the failure to provide such notice. If any Lender requests compensation under Section 2.13, or if a Borrower is required to pay any additional amount to any such Person or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to avoid or minimize the amounts payable, including, without limitation, the designation of a different lending office for funding or booking its Loans hereunder or the assignment of its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Each Borrower hereby agrees to pay all reasonable and documented costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.13, or if a Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund Loans hereunder, then such Borrower may, at its sole expense and effort (excluding any costs or expense incurred by such Defaulting Lender), upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrowers shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts), and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.
Section 2.20 Defaulting Lenders.
(a) Adjustments. Notwithstanding anything to the contrary contained in this Credit Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:
(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Credit Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 9.02.
(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Section VII or otherwise) or received by Administrative Agent from a Defaulting Lender pursuant to Section 9.08, shall be applied at such time or times as may be determined by Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Letter of Credit Issuer or the Swing Line Lender hereunder; third, to Cash Collateralize the Letter of Credit Issuer’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.07; fourth, as Borrower may request (so long as no Potential Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Credit Agreement, as determined by Administrative Agent; fifth, if so determined by Administrative Agent and Borrower, to be held in a deposit account and released pro rata in order to: (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Credit Agreement; and (y) Cash Collateralize the Letter of Credit Issuer’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Credit Agreement, in accordance with Section 2.07; sixth, to the payment of any amounts owing to the Lenders, the Letter of Credit Issuer or the Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the Letter of Credit Issuer or the Swing Line Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Credit Agreement; seventh, so long as no Potential Default or Event of Default exists, to the payment of any amounts owing to Borrower as a result of any judgment of a court of competent jurisdiction obtained by Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Credit Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if: (x) such payment is a payment of the principal amount of any Loans or L/C Borrowings in respect of which such Defaulting Lender has not fully funded its appropriate share; and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and Letter of Credit Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or Letter of Credit Obligations owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in Letter of Credit Obligations and Swing Line Loans are held by the Lenders pro rata in accordance with the Revolving Credit Exposures and Revolving Percentages hereunder without giving effect to Section 2.20(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.20(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(iii) Certain Fees.
(A) A Defaulting Lender (x) shall not be entitled to receive any unused commitment fee payable under Section 2.12 for any period during which that Lender is a Defaulting Lender (and Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to such Defaulting Lender); and (y) shall be limited in its right to receive Letter of Credit Fees as provided in Section 2.12.
(B) Each Defaulting Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Revolving Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.07.
(C) With respect to any fee payable under Section 2.12 or any Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (A) or clause (B) above, Borrower shall: (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in Letter of Credit Obligations or Swing Line Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below; (y) pay to the Letter of Credit Issuer and the Swing Line Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such Letter of Credit Issuer’s or the Swing Line Lender’s Fronting Exposure to such Defaulting Lender; and (z) not be required to pay the remaining amount of any such fee.
(iv) Reallocation of Revolving Percentages to Reduce Fronting Exposure. All or any part of such Defaulting Lender’s participation in Letter of Credit Obligations and Swing Line Loans shall be reallocated among the Revolving Lenders that are Non-Defaulting Lenders in accordance with their respective Revolving Percentages (calculated without regard to such Defaulting Lender’s Revolving Commitment) but only to the extent that: (x) the conditions set forth in Section 4.02 are satisfied at the time of such reallocation (and, unless Borrower shall have otherwise notified Administrative Agent at such time, Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time); and (y) such reallocation does not cause the aggregate Revolving Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Revolving Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.
(v) Cash Collateral. If the reallocation described in clause (iv) above cannot, or can only partially, be effected, Borrower shall, without prejudice to any right or remedy available to it hereunder or under applicable Law, (x) first, prepay Swing Line Loans in an amount equal to the Swing Line Lenders’ Fronting Exposure and (y) second, Cash Collateralize the L/C Issuers’ Fronting Exposure in accordance with the procedures set forth in Section 2.16.
(b) Defaulting Lender Cure. If Borrowers, Administrative Agent, the Swing Line Lender and the Letter of Credit Issuer agree in writing that a Lender is no longer a Defaulting Lender, Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages (without giving effect to Section 2.20(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of Borrowers while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.
Section 2.21 Extension of Revolving Loan Maturity Date. The Borrowers shall have the right and option to extend the Revolving Loan Maturity Date for a single one-year term, to November 3, 2025, upon satisfaction of the following conditions precedent, which must be satisfied prior to the effectiveness of any extension of the Revolving Loan Initial Maturity Date:
(a) Extension Request. The Parent Borrower shall deliver written notice of such request (the “Extension Request”) to the Administrative Agent not earlier than the date which is one hundred twenty (120) days prior to the Revolving Loan Initial Maturity Date and not later than the date which is sixty (60) days prior to the Revolving Loan Initial Maturity Date.
(b) Payment of Extension Fee. The Borrowers shall pay to the Administrative Agent for the pro rata accounts of the Lenders in accordance with their respective Revolving Commitments an extension fee in an amount equal to 0.20% of the Maximum Revolving Commitment on the Revolving Loan Initial Maturity Date, which fee shall, when paid, be fully earned and non-refundable under any circumstances.
(c) No Default. On the date the Extension Request is given and the effective date of such extension there shall exist no Default or Event of Default.
Section 2.22 Increase in the Maximum Total Commitment; Term Loan Option.
(a) So long as no Default or Event of Default shall the exist, the Parent Borrower may request an increase in the Maximum Total Commitment (which increase may take the form of an increase to the Maximum Revolving Commitments or one or more tranches of term loan commitments (each, a “Term Loan Commitment”)) to the amount requested by Parent Borrower, which may be effected by doing any or all of the following, as applicable: (x) admitting one or more Subsequent Lenders; or (y) increasing the Revolving Commitment or Term Commitment of any Lender (each, an “Increasing Lender”); subject to the following conditions and Section 2.22(c):
(i) Parent Borrower shall have delivered to Administrative Agent a written request for such increase (the “Facility Increase Request”) specifying the requested date of the increase (the “Facility Increase Date”), the requested amount of the increase;
(ii) Borrowers shall, as applicable, execute: (A) new Notes payable to the order of each Subsequent Lender; or (B) replacement Notes payable to the order of each Increasing Lender;
(iii) after giving effect to any increase in the Lender’s Revolving Commitments and/or new or increased Term Loan Commitment, the Maximum Total Commitment will not exceed $800,000,000;
(iv) each increase in the Maximum Total Commitment (including the amounts of any Term Loans) shall be in the minimum amount of $25,000,000;
(v) no Event of Default or Default has occurred and is continuing or would result from such increase in the Maximum Total Commitment;
(vi) as of the date of such increase, the representations and warranties contained in Section 3 and in each other Loan Document are true and correct in all material respects; except to the extent that such representations and warranties specifically refer to any earlier date, in which case they shall be true and correct as of such earlier date and except that for the purposes of this Section 2.22(a)(vi) the representations and warranties contained in Section 3.04 shall be deemed to refer to the most recent financial statements furnished pursuant to clauses (a) and (b), respectively, of Section 5.01;
(vii) Borrowers shall pay the applicable Facility Increase Fee;
(viii) subject to Section 2.22(b)(i), Administrative Agent can successfully syndicate the requested increase of the Maximum Revolving Commitment or the requested Term Loan Commitments; and
(ix) Borrowers shall not have, prior to the date of such Facility Increase Request or the effective date of the increase requested pursuant thereto, requested or effectuated a reduction of the Maximum Revolving Commitment pursuant to Section 2.09.
(b) With respect to each Facility Increase Request delivered pursuant to Section 2.22(a)(i), Administrative Agent agrees that:
(i) Administrative Agent will use its best efforts to syndicate the requested increase of the Maximum Revolving Commitment and/or the requested Term Loan Commitments, as applicable;
(ii) each Subsequent Lender shall be an Eligible Assignee; and
(iii) Administrative Agent shall cause: (A) each Increasing Lender to execute a confirmation of such increase in a form acceptable to Administrative Agent; and (B) each Subsequent Lender to execute a joinder to this Agreement in a form acceptable to Administrative Agent.
(c) Notwithstanding anything else in the foregoing: (i) no admission of any Subsequent Lender shall increase the Commitments of any existing Lender without such existing Lender’s consent; (ii) no Lender shall become an Increasing Lender without such Lender’s consent; and (iii) no increase will be permitted after Borrowers have decreased the Maximum Revolving Commitment under Section 2.09.
(d) Any increase under this Section 2.22 will be documented by a written confirmation issued by Administrative Agent, and no amendment agreement will be required (unless amendments other than an increase to the Maximum Revolving Commitment are being effected at the time of such increase). If Administrative Agent deems it advisable in its sole discretion, each Borrower and each Lender agree to execute an amendment to this Agreement, in form and substance acceptable to Administrative Agent, to document an increase in the Maximum Revolving Commitment, as requested by Parent Borrower, pursuant to this Section 2.22(d). Upon the effective date of any increase in the Maximum Revolving Commitment pursuant to this Section 2.22, Administrative Agent may unilaterally revise Schedule 2.01 to reflect such increase.
(e) Any increase in the Maximum Total Commitment in the form of an additional tranche of Term Loans may, if determined necessary by the Administrative Agent and the Lenders providing such Term Loans, in their reasonable discretion, be effected pursuant to one or more amendments (each a “Term Loan Amendment”) executed and delivered by the Credit Parties, the Term Lenders participating in such tranche of Term Loan Commitments, and the Administrative Agent. Each Term Loan Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as are consistent with this Section 2.22 and may be necessary or appropriate, in the opinion of the Administrative Agent, to effect the provisions of this this Section 2.22 with respect thereto. All Term Loans shall (A) mature on the applicable Maturity Date with respect thereto as set forth in the applicable Term Loan Amendment, but shall not mature earlier than the Revolving Loan Maturity Date or the latest Maturity Date for any then-existing tranche of Term Loans, (B) bear interest at such rates as are agreed upon by the Borrower and the Term Lenders providing such Term Loans, (C) not require scheduled amortization prior to the earliest Term Loan Maturity Date for any tranche of outstanding Term Loans but may permit voluntary prepayment (subject to sub-clause (D) hereof), (D) not rank higher than pari passu in right of payment and with respect to security with all Revolving Loans and any other Term Loans or have different borrower or guarantors as the Borrower and Guarantor with respect to all other Obligations; and (E) shall be treated substantially the same as (and in any event no more favorably than) the Revolving Loans and each tranche of Term Loans; provided that (I) the terms and conditions applicable to any tranche of Term Loans maturing after the latest Maturity Date for any then-existing Term Loans may provide for material additional or different financial or other covenants or prepayment requirements applicable only during periods after such Maturity Date and (II) each tranche of Term Loans may be priced differently than any other tranche of Term Loans. On any Facility Increase Date on which any Term Loan Commitments are made, subject to the satisfaction of the foregoing terms and conditions, each Term Lender shall become a Lender hereunder with respect to the Term Loans made pursuant thereto and shall fund the applicable Term Loans in accordance with the requirements of the applicable Term Loan Amendment.
Section 2.23 Borrowing Base.
(a) Initial Borrowing Base. As of the Effective Date, the Borrowing Base shall consist of the Initial Borrowing Base Properties, which Initial Borrowing Base Properties have been accepted by the Lenders.
(b) Changes in Borrowing Base Calculation. Each change in the Borrowing Base shall be effective upon receipt of a new Borrowing Base Report pursuant to the terms of this Agreement; provided that any increase in the Borrowing Base reflected in such Borrowing Base Report shall not become effective until (a) the first (1st) Business Day following admission of any new Borrowing Base Property (unless such Borrowing Base Property is being acquired on such date with a Borrowing under the Credit Agreement), and (b) the fifth (5th) Business Day following delivery of the new Borrowing Base Report in all other instances.
(c) Requests for Admission into Borrowing Base. In connection with any request by the Borrowers to add a new Borrowing Base Property, Parent Borrower shall provide Administrative Agent with the Property Information, and the Administrative Agent shall promptly furnish such Real Property Information and other information to the Lenders.
(d) Eligibility. In order for an Acceptable Property to be eligible for inclusion in the Borrowing Base, such Acceptable Property shall satisfy the following as approved by the Administrative Agent or, if such Real Property does not satisfy the eligibility conditions in this Section 2.23(d), the Required Lenders shall have approved such Acceptable Property for inclusion in the Borrowing Base:
(i) all Property Information with respect to such Acceptable Property shall be reasonably acceptable to Administrative Agent;
(ii) the admission of such Acceptable Property into the Borrowing Base shall not breach any obligation of a Borrower under any contractual obligation;
(iii) any of the acts mentioned in any of the provisions of this Agreement or any other Loan Document, agreement or instrument referred to herein or therein shall be done or omitted; and
(iv) Borrowers shall have certified to the Administrative Agent and the Required Lenders that (1) the subject Acceptable Property satisfies the criteria to be included in the calculation of the Borrowing Base, (2) no Default (other than a Default that would be cured by the addition of such Acceptable Property to the pool of Borrowing Base) or Event of Default exists under this Agreement and that the addition of such Acceptable Property as a Borrowing Base Property shall not result in any such Default or Event of Default, and (3) that the applicable Borrowing Base Property Owner and each Consolidated Owner thereof has not incurred, and such Borrowing Base Property Owner and the Consolidated Owners thereof and Acceptable Property are not otherwise subject to or obligated under, any Indebtedness other than the Obligations and, after the Collateral Termination Date, other Unsecured Indebtedness permitted pursuant to Section 6.09.
(e) Approval of Borrowing Base Properties. The admission of any Real Property into the Borrowing Base shall require the prior written approval of the Administrative Agent (not to be unreasonably withheld, conditioned, or delayed). The Administrative Agent shall respond to any such request for admission within ten (10) Business Days following submission by Parent Borrower to Administrative Agent of all of the information required pursuant to Section 2.23(e) hereof, as more particularly set forth in Section 2.23(g) below.
(f) Joinder/Property Information. An Acceptable Property shall not be admitted into the Borrowing Base until (i) each applicable Borrowing Base Property Owner and Consolidated Owner thereof shall have executed and delivered (or caused to be executed and delivered) to Administrative Agent, for the benefit of the Secured Parties, an Omnibus Joinder Agreement, and (ii) prior to the Collateral Termination Date the Administrative Agent has received such documentation as the Administrative Agent may require to properly pledge the Equity Interests in the applicable Borrowing Base Property Owner and Consolidated Owners thereof and the Rent Account with respect to such Borrowing Base Properties, which shall consist of an amendment to (or new) Security Agreement or an Omnibus Joinder Agreement with respect thereto and the items that were delivered by the Guarantors on the Effective Date pursuant to Section 4.01(b), Section 4.01(c), and Section 4.01(e); provided that no such Borrowing Base Property Owner or Consolidated Owner shall become a Subsidiary Borrower under the Loan Documents until such Person shall have delivered all documentation and other information requested by the Administrative Agent and any Lender in order for Administrative Agent or such Lender to confirm compliance with applicable “know your customer” and Anti-Money Laundering Laws, including without limitation, the PATRIOT Act, and Administrative Agent and each Lender shall have completed such compliance processes with respect to such Borrowing Base Property Owner and the Consolidated Owners thereof.
(g) Notice of Admission of New Borrowing Base Properties. If, after the date of this Agreement, the Parent Borrower has submitted to the Administrative Agent all of the information required under Section 2.23(c) of this Agreement to establish that an Acceptable Property meets all the requirements to be included in the Borrowing Base set forth in this Section 2.23, then Administrative Agent shall notify Parent Borrower and Lenders within ten (10) Business Days in writing (a) that such Acceptable Property is admitted into the Borrowing Base, and (b) of any changes to the Borrowing Base as a result of the admission of such Acceptable Property into the Borrowing Base. Section
(h) Release of Borrowing Base Property/Guarantors.
Upon the written request of Parent Borrower delivered to the Administrative Agent at least ten (10) days prior to the requested release date (the “Release Request”), the Administrative Agent shall release a Borrowing Base Property from the Borrowing Base and, if applicable, (i) release any applicable Subsidiary Borrower from its Obligations hereunder solely to the extent such Subsidiary Borrower only owns the Borrowing Base Property (ies) or Equity Interests in the Borrowing Base Property Owner being released and (ii) release any security interest held by the Administrative Agent on behalf of the Lenders in the Equity Interests of any Borrowing Base Property Owner that, after giving effect to the release of the relevant Borrowing Base Property, no longer owns any Real Property that is part of the Borrowing Base; provided that no Default or Event of Default exists before and after giving effect thereto (other than Defaults or Events of Default solely with respect to such Borrowing Base Property that would no longer exist after giving effect to the release of such Borrowing Base Property from the Borrowing Base); provided, further, that Administrative Agent shall have no obligation to release any such obligations without (i) a Borrowing Base Report setting forth in reasonable detail the calculations required to establish the amount of the Borrowing Base without such Borrowing Base Property as of the date of such release, and after giving effect to any such release; (ii) a Compliance Certificate setting forth in reasonable detail the calculations required to show that Borrowers are in compliance with the terms of this Agreement without the inclusion of such Borrowing Base Property in the calculation of the Borrowing Base and the various financial covenants set forth herein, as of the date of such release and after giving effect to any such release; (iii) a certificate of the Borrowers providing that the representations and warranties contained in Article 3 and the other Loan Documents are true and correct in all material respects on and as of the requested release date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date; and (iv) prior to the effectiveness of such release, the Borrowers shall make any prepayments required by Section 2.11(d) in connection with such release.
Administrative Agent shall notify Parent Borrower and Lenders in writing within five (5) days following Administrative Agent’s receipt of a Release Request, whether or not a Borrowing Base Property meets all the requirements to be released from the Borrowing Base set forth in this Section 2.23(h), and if the Borrowing Base Property meets all the requirements to be released from the Borrowing Base, then (a) that such Real Property has been released from the Borrowing Base and as applicable, the applicable Subsidiary Borrower(s) have been released from the Obligations and (b) of any changes to the Borrowing Base as a result of the release of such Real Property from the Borrowing Base.
(i) Exclusion Events. Each of the following events shall be an “Exclusion Event” with respect to a Borrowing Base Property:
(i) such Borrowing Base Property suffers a Material Environmental Event;
(ii) any required permit, license, certificate or approval with respect to such Borrowing Base Property lapses or ceases to be in full force and effect and such lapse or termination results in a Material Property Event;
(iii) the material representations and warranties made by the Credit Parties in this Agreement or any other Loan Documents with respect to such Borrowing Base Property or the Equity Interests in the applicable Borrowing Base Property Owner or Consolidated Owners thereof shall cease to be true and correct in all material respects, except (1) to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and (2) for purposes of this clause (i), the representations and warranties contained in Section 3.04 shall be deemed to refer to the most recent financial statements furnished pursuant to clauses (a) and (b), respectively, of Section 5.01;
(iv) Administrative Agent determines in good faith that a Material Property Event has occurred with respect to any Borrowing Base Property due to Casualty, condemnation, or similar event at any Borrowing Base Property after the date such Real Property was admitted into the Borrowing Base (or in the case of an uninsured Casualty, in respect of such Borrowing Base Property, is reasonably likely to become a Material Property Event); or
(v) a Lien is established against such Borrowing Base Property not permitted by Section 6.01, or any stop notice served on the owner of such Borrowing Base Property, Administrative Agent or a Lender, remains unsatisfied or unbonded for a period of thirty (30) days after the date of filing or service, in each case resulting in a Material Property Event.
Each Borrower shall, promptly after obtaining knowledge thereof, notify the Administrative Agent of the occurrence of any Exclusion Event with respect to any Borrowing Base Property. After the occurrence of any Exclusion Event with respect to any Borrowing Base Property, for so long as such circumstance exists, such Real Property shall no longer be considered a Borrowing Base Property for purposes of determining the Borrowing Base and the Borrowers shall have five (5) Business Days after the occurrence of such Exclusion Event to comply with Section 2.11(d), unless Administrative Agent and the Required Lenders shall otherwise agree. Borrowing Base Properties which have been subject to an Exclusion Event may, at Parent Borrower’s request, be released from the Borrowing Base; provided that such release shall be subject to the conditions for release set forth in Section 2.23(h).
If such Exclusion Event no longer exists, then Parent Borrower may give Administrative Agent written notice thereof (together with reasonably detailed evidence of the cure of such condition) and such Borrowing Base Property shall, effective with the delivery by Parent Borrower of the next Borrowing Base Report, be considered a Borrowing Base Property for purposes of calculating the Borrowing Base as long as such Borrowing Base Property meets all the requirements to be included in the Borrowing Base set forth in this Section 2.23. Any Real Property that is excluded from the Borrowing Base pursuant to this Section 2.23(i) may subsequently be reinstated as a Borrowing Base Property, even if an Exclusion Event exists, upon such terms and conditions as Required Lenders may approve.
Section 2.24 Benchmark Replacement Setting.
(a) Replacing USD LIBOR. On March 5, 2021, the Financial Conduct Authority (“FCA”), the regulatory supervisor of USD LIBOR’s administrator (“IBA”), announced in a public statement the future cessation or loss of representativeness of overnight/Spot Next, 1-month, 3-month, 6-month and 12-month USD LIBOR tenor settings. On the earliest of (i) July 1, 2023, (ii) the date that all Available Tenors of USD LIBOR have either permanently or indefinitely ceased to be provided by IBA or have been announced by the FCA pursuant to public statement or publication of information to be no longer representative and (iii) the Early Opt-in Effective Date, if the then-current Benchmark is USD LIBOR, the Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action by or consent of any other party to, this Credit Agreement or any other Loan Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a monthly basis.
(b) Replacing Future Benchmarks. If any Benchmark Transition Event occurs after the date hereof (other than as described above with respect to USD LIBOR), the then-current Benchmark will be replaced with the Benchmark Replacement for all purposes hereunder and under any Loan Document in respect of any Benchmark setting on the later of (i) as of 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders and the Borrower (together, if applicable, with an amendment to this Credit Agreement implementing such Benchmark Replacement and any applicable Benchmark Replacement Conforming Changes) or (ii) such other date as may be determined by the Administrative Agent, in each case, without any further action or consent of any other party to this Credit Agreement or any other Loan Document, so long as the Administrative Agent has not received, by such time (or, in the case of clause (ii) above, such time as may be specified by the Administrative Agent as a deadline to receive objections, but in any case, no less than five (5) Business Days after the date such notice is provided to the Lenders and the Borrower), written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders; provided, however, that in the event that the then-current Benchmark is not a SOFR-based rate, then the Benchmark Replacement shall be determined in accordance with clause (1) of the definition of “Benchmark Replacement” unless the Administrative Agent has determined that neither of such alternative rates is available. At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be no longer representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored, the Borrower may revoke any request for a borrowing of, conversion to or continuation of Loans to be made, converted or continued that would bear interest by reference to such Benchmark until the Borrower’s receipt of notice from the Administrative Agent that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Base Rate Loans. During the period referenced in the foregoing sentence, the component of Base Rate based upon the Benchmark will not be used in any determination of Base Rate.
(c) Benchmark Replacement Conforming Changes. In connection with the implementation and administration of a Benchmark Replacement (whether in connection with the replacement of USD LIBOR or any future Benchmark), the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Credit Agreement or any other Loan Document.
(d) Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by the Administrative Agent pursuant to this Section including, without limitation, any determination with respect to a tenor, rate or adjustment, or implementation of any Benchmark Replacement Conforming Changes, the timing of implementation of any Benchmark Replacement or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding on all parties hereto absent manifest error and may be made in its sole discretion and without consent from any other party to this Credit Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section, and shall not be a basis of any claim of liability of any kind or nature by any party hereto, all such claims being hereby waived individually by each party hereto.
(e) Unavailability of Tenor of Benchmark. At any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or USD LIBOR or any alternate rate selected in an Early Opt-in Election), then the Administrative Agent may remove any tenor of such Benchmark that is unavailable or non-representative for such Benchmark (including any Benchmark Replacement) settings and (ii) if such tenor becomes available or representative, the Administrative Agent may reinstate any previously removed tenor for such Benchmark (including any Benchmark Replacement) settings.
(f) Certain Defined Terms. As used in this Section:
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if the then-current Benchmark is a term rate, any tenor for such Benchmark that is or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Credit Agreement as of such date.
“Benchmark” means, initially, USD LIBOR; provided that if a replacement for the Benchmark has occurred pursuant to this Section, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Benchmark Replacement” means, for any Available Tenor:
(1) for purposes of clause (a) of this Section, the first alternative set forth below that can be determined by the Administrative Agent:
(a) the sum of: (i) Term SOFR and (ii) 0.11448% (11.448 basis points) for an Available Tenor of one-month’s duration, 0.26161% (26.161 basis points) for an Available Tenor of three-months’ duration, and 0.42826% (42.826 basis points) for an Available Tenor of six-months’ duration; provided, that, if the Borrower has provided a notification to the Administrative Agent in writing on or prior to the date on which the Benchmark Replacement will become effective that the Borrower has a Swap Contract in place with respect to any of the Loans as of the date of such notice (which such notification the Administrative Agent shall be entitled to rely upon and shall have no duty or obligation to ascertain the correctness or completeness of), then the Administrative Agent, in its sole discretion, may decide not to determine the Benchmark Replacement pursuant to this clause (1)(a) for such Benchmark Transition Event or Early Opt-in Election, as applicable; or
(b) the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment for an Available Tenor of one-month’s duration (0.11448% (11.448 basis points));
provided, however, that if an Early Opt-in Election has been made, the Benchmark Replacement will be the benchmark selected in connection with such Early Opt-in Election; and
(2) for purposes of clause (b) of this Section, the sum of: (a) the alternate benchmark rate and (b) an adjustment (which may be a positive or negative value, or zero), in each case, that has been selected pursuant to this clause (2) by the Administrative Agent and the Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time;
provided that, if the Benchmark Replacement as determined pursuant to clause (1) or (2) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for all purposes of this Credit Agreement and the other Loan Documents.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Credit Agreement and the other Loan Documents).
“Benchmark Transition Event” means, with respect to any then-current Benchmark (other than USD LIBOR), the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory supervisor for the administrator of such Benchmark, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, announcing or stating that (a) such administrator has ceased or will cease on a specified date to provide all Available Tenors of such Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark or (b) all Available Tenors of such Benchmark are or will no longer be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored.
“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Administrative Agent in accordance with the conventions for this rate recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided, that if the Administrative Agent decides that any such convention is not administratively feasible for the Administrative Agent, then the Administrative Agent may establish another convention in its reasonable discretion.
“Early Opt-in Effective Date” means, with respect to any Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as the Administrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders.
“Early Opt-in Election” means the occurrence of:
(i) a notification by the Administrative Agent to each of the other parties hereto that at least five currently outstanding U.S. dollar-denominated syndicated credit facilities at such time incorporate or adopt (as a result of amendment or as originally executed) either a SOFR-based rate (including SOFR or Term SOFR or any other rate based upon SOFR) as a benchmark rate or an alternate benchmark interest rate to replace USD LIBOR (and such syndicated credit facilities are identified in such notice and are publicly available for review), and
(ii) the joint election by the Administrative Agent and the Borrower to trigger a fallback from USD LIBOR and the provision by the Administrative Agent of written notice of such election to the Lenders.
“Floor” means the benchmark rate floor, if any, provided in this Credit Agreement initially (as of the execution of this Credit Agreement, the modification, amendment or renewal of this Credit Agreement or otherwise) with respect to USD LIBOR.
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“SOFR” means, for any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org. (or any successor source for the secured overnight financing rate identified as such by the administrator of the secured overnight financing rate from time to time), on the immediately succeeding Business Day.
“Term SOFR” means, for the applicable corresponding tenor, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“USD LIBOR” means the London interbank offered rate for U.S. dollars.
ARTICLE III
Representations and Warranties
Each Borrower represents and warrants to the Lenders, the Letter of Credit Issuer, and the Administrative Agent that:
Section 3.01 Organization; Powers. Each Credit Party and each of its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, other than VB One and True Mem2016-1, LLC as of the date hereof and prior to the date required by Section 5.20 and except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.
Section 3.02 Authorization; Enforceability. The Transactions are within the corporate, partnership or limited liability company powers (as applicable) of the respective Credit Parties and their Subsidiaries and have been duly authorized by all necessary corporate, partnership or limited liability company action. This Agreement and the Loan Documents have been duly executed and delivered by each Credit Party which is a party thereto and constitute the legal, valid and binding obligation of each such Person, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
Section 3.03 Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect or which shall be completed at the appropriate time for such filings under applicable securities laws, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of any Credit Party or any Subsidiary thereof or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon any Credit Party or Subsidiary thereof or its assets, or give rise to a right thereunder to require any payment to be made by any Credit Party or any Borrower’s Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of any Credit Party or any Subsidiary thereof, except pursuant to the Pledge Agreement, the Account Pledge, and Borrower Rent Account Control Agreement.
Section 3.04 Financial Condition; No Material Adverse Change.
(a) The Borrowers have heretofore furnished to the Lenders audited financial statements from the date of the formation of Parent through December 31, 2018 and management-prepared financial statements as of and for the quarterly fiscal period ended June 30, 2019. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Parent and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments.
(b) Since December 31, 2020, no event has occurred which would reasonably be expected to have a Material Adverse Effect.
Section 3.05 Properties.
(a) Each of the Borrowers and its Subsidiaries has title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes, or Liens permitted under Section 6.01.
(b) To each Credit Party’s actual knowledge, all franchises, licenses, authorizations, rights of use, governmental approvals and permits (including all certificates of occupancy and building permits) required to have been issued by Governmental Authority to enable all Real Property owned or leased by a Borrower or any of its Subsidiaries to be operated as then being operated have been lawfully issued and are in full force and effect, other than those which the failure to obtain in the aggregate would not be reasonably expected to have a Material Adverse Effect. To each Credit Party’s actual knowledge, no Credit Party or any Subsidiary thereof is in violation of the terms or conditions of any such franchises, licenses, authorizations, rights of use, governmental approvals and permits, which violation would reasonably be expected to have a Material Adverse Effect.
(c) None of the Credit Parties has received any notice or has any actual knowledge of any pending, threatened or contemplated condemnation proceeding affecting the Borrowing Base Properties or any part thereof, or any proposed termination or impairment of any parking (except as contemplated in any approved expansion approved by Administrative Agent) at the Borrowing Base Properties or of any sale or other disposition of the Borrowing Base Properties or any part thereof in lieu of condemnation, which in the aggregate, are reasonably likely to have a Material Adverse Effect.
Section 3.06 Intellectual Property. To the actual knowledge of each Credit Party, such Credit Party and its Subsidiaries owns, or is licensed to use, all patents and other intellectual property material to its business, and the use thereof by such Credit Party or such Subsidiary does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. To the actual knowledge of each Credit Party, there are no material slogans or other advertising devices, projects, processes, methods, substances, parts or components, or other material now employed, or now contemplated to be employed, by any Credit Party or any Subsidiary of any Credit Party, with respect to the operation of any Real Property, and no claim or litigation regarding any slogan or advertising device, project, process, method, substance, part or component or other material employed, or now contemplated to be employed by any Credit Party or any Subsidiary of any Credit Party, is pending or threatened, the outcome of which could reasonably be expected to have a Material Adverse Effect.
Section 3.07 Litigation and Environmental Matters.
(a) To the actual knowledge of the Borrowers, except as set forth in Schedule 3.07 attached hereto, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, threatened against or affecting any Credit Party or any Borrower’s Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or in a Material Property Event with respect to any Borrowing Base Property or (ii) that involve this Agreement or the Transactions.
(b) Except with respect to any matters that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect or in a Material Property Event with respect to any Borrowing Base Property:
(i) to the actual knowledge of the Credit Parties, all Real Property leased or owned by a Borrower or any of its Subsidiaries is free from contamination by any Hazardous Material, except to the extent such contamination would not reasonably be expected to cause a Material Adverse Effect or in a Material Property Event with respect to any Borrowing Base Property;
(ii) to the actual knowledge of the Credit Parties, the operations of each Borrower and its Subsidiaries, and the operations at the Real Property leased or owned by any Borrower or any of its Subsidiaries are in compliance with all applicable Environmental Laws, except to the extent such noncompliance would not reasonably be expected to cause a Material Adverse Effect or in a Material Property Event with respect to any Borrowing Base Property;
(iii) neither any Borrower nor any of its Subsidiaries have known liabilities with respect to Hazardous Materials and, to the knowledge of each Credit Party, no facts or circumstances exist which would reasonably be expected to give rise to liabilities with respect to Hazardous Materials, in either case, except to the extent such liabilities would not reasonably be expected to have a Material Adverse Effect or in a Material Property Event with respect to any Borrowing Base Property;
(iv) to each Borrower’s actual knowledge, (A) each Borrower and its Subsidiaries and all Real Property owned or leased by a Borrower or its Subsidiaries have all Environmental Permits necessary for the operations at such Real Property and are in compliance with such Environmental Permits; (B) there are no legal proceedings pending nor, to the knowledge of any Credit Party, threatened to revoke, or alleging the violation of, such Environmental Permits; and (C) none of the Credit Parties have received any notice from any source to the effect that there is lacking any Environmental Permit required in connection with the current use or operation of any such properties, in each case, except to the extent the non-obtainment or loss of an Environmental Permit would not reasonably be expected to have a Material Adverse Effect or in a Material Property Event with respect to any Borrowing Base Property;
(v) [intentionally deleted];
(vi) to the actual knowledge of each Credit Party, none of the Credit Parties are subject to any pending legal proceeding alleging the violation of any Environmental Law nor are any such proceedings threatened, in either case, except to the extent any such proceedings would not reasonably be expected to have a Material Adverse Effect or in a Material Property Event with respect to any Borrowing Base Property;
(vii) [intentionally deleted];
(viii) to the actual knowledge of each Credit Party, none of the operations of any Borrower or any of its Subsidiaries or of any owner of premises currently leased by a Borrower or any of its Subsidiaries or of any tenant of premises currently leased from a Borrower or any of its Subsidiaries, involve the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Part 261.3 (in effect as of the date of this Agreement) or any state, local, territorial or foreign equivalent, in violation of Environmental Laws; and
(ix) to the knowledge of the Credit Parties, there is not now (except, in all cases, to the extent the existence thereof would not reasonably be expected to have a Material Adverse Effect or in a Material Property Event with respect to any Borrowing Base Property), on, in or under any Real Property leased or owned by a Borrower or any of its Subsidiaries (A) any underground storage tanks or surface tanks, dikes or impoundments (other than for surface water); (B) any friable asbestos-containing materials; (C) any polychlorinated biphenyls; or (D) any radioactive substances other than naturally occurring radioactive material.
Section 3.08 Compliance with Laws and Agreements; No Default. Each of the Credit Parties and their Subsidiaries is in material compliance with all Legal Requirements (including all Environmental Laws) applicable to it or its property and all indentures, agreements and other instruments binding upon it or to its knowledge, its property, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.
Section 3.09 Investment and Holding Company Status. Neither any of the Credit Parties nor any Borrower’s Subsidiaries is (a) an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.
Section 3.10 Taxes. Each Credit Party and each Borrowers’ Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Person has set aside on its books adequate reserves or (b) to the extent that the failure to do so would not reasonably be expected to result in a Material Adverse Effect or in a Material Property Event with respect to any Borrowing Base Property.
Section 3.11 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, would reasonably be expected to result in a Material Adverse Effect. Neither any Borrower nor any of its Subsidiaries have any Plans as of the date hereof. As to any future Plan the present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) will not exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) will not exceed the fair market value of the assets of all such underfunded Plans.
Section 3.12 Disclosure. To the actual knowledge of the Borrowers, each Borrower has disclosed or made available to the Lenders all agreements, instruments and corporate or other restrictions to which it, any other Credit Party, or any of its Subsidiaries is subject, and all other matters known to it, that, in the aggregate, would reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of any Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, each Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.
Section 3.13 Solvency. As of the Effective Date and after giving effect to the transactions contemplated by this Agreement and the other Loan Documents (including any contribution rights under the Guaranty), including all Loans made or to be made hereunder on the date of each Borrowing, each Credit Party is not insolvent on a balance sheet basis such that the sum of such Person’s assets exceeds the sum of such Person’s liabilities, each Credit Party is able to pay its debts as they become due, and each Credit Party has sufficient capital to carry on its business.
Section 3.14 Margin Regulations. Neither any Borrower nor any Subsidiary of a Borrower is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board), and no proceeds of the Loans will be used to purchase or carry any margin stock.
Section 3.15 Subsidiaries; REIT Qualification. As of the Effective Date, no Person owns any Equity Interests in the Borrowing Base Properties except as set forth on Schedule 3.14 attached hereto. Each Borrower qualifies as a “qualified REIT subsidiary” under Section 856 of the Code. The Parent is a Maryland corporation duly organized pursuant to articles of incorporation filed with the Maryland Department of Assessments and Taxation, and is in good standing under the laws of Maryland. The Parent conducts its business in a manner which enables it to qualify as a real estate investment trust under, and to be entitled to the benefits of, §856 of the Code, and has elected to be treated as and will be entitled to the benefits of a real estate investment trust thereunder.
Section 3.16 OFAC; Anti-Money Laundering. None of the Credit Parties, any of the other Subsidiaries, or any other Affiliate thereof is (or will be) (i) a Sanctioned Person, (ii) located, organized or resident in a Designated Jurisdiction, (iii) to the best of each Borrower’s knowledge, without any independent inquiry, is or has been (within the previous five (5) years) engaged in any transaction with any Sanctioned Person or any Person who is located, organized or resident in any Designated Jurisdiction to the extent that such transactions would violate Sanctions, or (iv) has violated any Anti-Money Laundering Law in any material respect. Each Credit Party and its Subsidiaries, and to the knowledge of the Credit Parties, each director, officer, employee, agent and Affiliate of the Credit Parties and each such Subsidiary, is in compliance with the Anti-Corruption Laws in all material respects. The Credit Parties have implemented and maintain in effect policies and procedures designed to promote and achieve compliance with the Anti-Corruption Laws and applicable Sanctions.
Section 3.17 EEA Financial Institution. No Credit Party is an EEA Financial Institution.
Section 3.18 Borrowing Base Properties. To each Borrower’s knowledge and except (i) as disclosed in the Real Property Information delivered to Administrative Agent, and (ii) where the failure of any of the following to be true and correct would not constitute a Material Adverse Effect or result in a Material Property Event with respect to any Borrowing Base Property:
(a) Each Borrowing Base Property Owner has good record and marketable title in fee simple to all Borrowing Base Properties necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or result in a Material Property Event with respect to such Borrowing Base Property. Each applicable Borrowing Base Property Owner has good record and marketable fee simple title to the Borrowing Base Property owned by such Borrowing Base Property Owner, subject only to Liens permitted by Section 6.01. All of the outstanding Equity Interests in each Borrowing Base Property Owner have been validly issued, are fully paid and nonassessable and are owned by a Borrower or a Wholly Owned Subsidiary thereof free and clear of all Liens (other than Liens permitted by Section 6.01).
(b) Each Borrowing Base Property complies in all material respects with all Legal Requirements, including all subdivision and platting requirements, without reliance on any adjoining or neighboring property. No Credit Party has received any written notice or written claim from any Person that a Borrowing Base Property, or any use, activity, operation, or maintenance thereof or thereon, is not in compliance with any Legal Requirement, and has no knowledge of any such noncompliance except as disclosed to Administrative Agent;
(c) The Credit Parties have not directly or indirectly conveyed, assigned, or otherwise disposed of, or transferred (or agreed to do so), other than pursuant to Permitted Liens, any development rights, air rights, or other similar rights, privileges, or attributes with respect to a Borrowing Base Property, including those arising under any zoning or property use ordinance or other Legal Requirements;
(d) All utility services necessary for the use of each Borrowing Base Property and the operation thereof for their intended purpose are available at each Borrowing Base Property;
(e) The current use of each Borrowing Base Property complies in all material respects with all applicable zoning ordinances, regulations, and restrictive covenants affecting such Borrowing Base Property, all use restrictions of any Governmental Authority having jurisdiction have been satisfied;
(f) Except as disclosed in writing to the Administrative Agent, the rent rolls delivered to the Administrative Agent with respect thereof are true, correct and complete in all material respects and the Leases referred to thereon are all valid and in full force and effect; (ii) the Leases (including modifications thereto) are in writing, and there are no oral agreements with respect thereto; (iii) the copies of each of the Leases (if any) delivered to the Administrative Agent are true, correct and complete in all material respects and have not been modified (or further modified); (iv) to the knowledge of any Credit Party, no material defaults exist under any of the Leases by any party (including any guarantor) thereto that, individually or in the aggregate with respect to all such defaults that could reasonably be expected to be a Material Property Event; (v) no Credit Party has any knowledge of any presently effective notice of termination or notice of default given by any tenant in writing under any other Leases that individually or in the aggregate could reasonably be expected to be a Material Property Event; (vi) no Credit Party has made any presently effective assignment or pledge of any of the Leases, the rents or any interests therein except to the Administrative Agent; (vii) no tenant or other party has an option or right of first refusal to purchase all or any portion of any Borrowing Base Property; (viii) no tenant has the right to terminate any Lease prior to expiration of the stated term of such Lease (except as a result of counterparty breach, casualty, condemnation or other customary basis of a right to terminate); and (ix) no tenant has prepaid more than one month’s rent in advance (except for bona fide security deposits);
(g) No Borrowing Base Property is the subject of any pending or, to any Credit Party’s knowledge, threatened condemnation or material adverse zoning proceeding for which Administrative Agent has not been notified in writing; and
(h) Each Borrowing Base Property complies with the conditions to be included as a Borrowing Base Property under Section 2.23(d)(ii) and, except as previously disclosed to the Administrative Agent in writing, no Exclusion Event with respect to any such Borrowing Base Property has occurred.
ARTICLE IV
Conditions
Section 4.01 Effective Date. The obligations of the Lenders and Letter of Credit Issuer to make Credit Extensions hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received from each Credit Party either (i) a counterpart of this Agreement and all other Loan Documents to which it is party signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of each such Loan Document other than the Notes) that such party has signed a counterpart of the Loan Documents, together with copies of all Loan Documents.
(b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Wick Phillips Gould & Martin, LLP, counsel for the Borrowers and the Guarantor, and such other counsel as the Administrative Agent may approve, covering such matters relating to the Credit Parties, the Loan Documents or the Transactions as the Administrative Agent shall reasonably request. The Borrowers hereby requests such counsel to deliver such opinion.
(c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Credit Parties, the authorization of the Transactions and any other legal matters relating to the Credit Parties, this Agreement (including each Credit Party’s compliance with Section 9.14 and other customary “know your customer” requirements) or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a Compliance Certificate and a Borrowing Base Certificate, each dated the date of this Agreement and signed by a Financial Officer of the Parent Borrower, in form and substance satisfactory to the Administrative Agent.
(e) The Administrative Agent shall have received searches of Uniform Commercial Code (“UCC”) filings (or their equivalent) together with such other customary lien, litigation and bankruptcy searches as the Administrative Agent may require.
(f) The Administrative Agent shall have received the fees required to be paid on the Effective Date under the Fee Letter and all other fees and amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder.
(g) The Administrative Agent shall have received required Property Information with respect to each Initial Borrowing Base Property.
(h) The representations and warranties of each Credit Party set forth in this Agreement or in any other Loan Document shall be true and correct on and as of the Effective Date.
(i) At the time of and immediately after giving effect to the making of the Loans, no Default shall have occurred and be continuing.
(j) [Intentionally Omitted].
(k) Upon the reasonable request of any Lender made at least ten (10) days prior to the Effective Date, each Borrower shall have provided to such Lender the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including the Patriot Act, in each case at least five (5) days prior to the Effective Date.
(l) At least five (5) days prior to the Effective Date, any Borrower that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation shall deliver a Beneficial Ownership Certification in relation to such Borrower to each requesting Lender.
Section 4.02 Each Borrowing. The obligation of each Lender (as applicable) to make a Loan on the occasion of any Borrowing or other Credit Extension is subject to the satisfaction of the following conditions:
(a) The representations and warranties of each Credit Party set forth in this Agreement or in any other Loan Document shall be true and correct on and as of the date of such Credit Extension.
(b) At the time of and immediately after giving effect to such Credit Extension, no Default shall have occurred and be continuing.
(c) With respect to any requested Borrowings, the Borrowers shall have complied with Section 2.02.
(d) In the case of a Letter of Credit, the Letter of Credit Issuer shall have received a Request for Letter of Credit and a Letter of Credit Application executed by the Parent Borrower, and shall have countersigned the same.
(e) Each Request for Credit Extension (other than a Borrowing Request requesting only a conversion of Loans to the other Type of Loan, or a continuation of Eurodollar Rate Loans) shall be deemed to constitute a representation and warranty by the Borrowers on the date thereof as to the matters specified in this Section.
ARTICLE V
Affirmative Covenants
Until the principal of and interest on the Loans and all fees payable hereunder shall have been paid in full, and all Letters of Credit have expired or been fully Cash Collateralized, each Borrower covenants and agrees with the Lenders and Letter of Credit Issuer that:
Section 5.01 Financial Statements; Ratings Change and Other Information. The Borrowers will furnish to the Administrative Agent and each Lender:
(a) within 120 days after the end of each fiscal year of the Parent, the Parent’s audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, together with all notes thereto, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Ernst & Young or other independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Parent and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;
(b) within 60 days after the end of each fiscal quarter of each fiscal year of the Parent, the Parent’s consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year and including supporting notes and schedules, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Parent on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a compliance certificate of a Financial Officer of the Parent (the “Compliance Certificate”) in the form of Exhibit B attached hereto;
(d) within 60 days after the end of each fiscal quarter of each fiscal year of the Parent, an updated Borrowing Base Report executed by a Financial Officer of the Parent and a Borrowing Base Report;
(e) [Intentionally Omitted]; and
(f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of any Credit Party or any Subsidiary of a Borrower, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may reasonably request.
Section 5.02 Financial Tests. The Parent and the Borrowers shall have and maintain at all times, on a consolidated basis, tested as of the close of each calendar quarter:
(a) A Total Leverage Ratio not to exceed (i) at any time prior the Collateral Termination Date, sixty-five percent (65%) and (ii) at any time from and after the Collateral Termination Date, sixty percent (60%); provided, that if the Total Leverage Ratio is greater than 60% after the occurrence of the Collateral Termination Date, then the Borrowers shall be deemed to be in compliance with this Section 5.02(a) so long as (i) the Borrowers completed a Material Acquisition during the quarter in which the Total Leverage Ratio first exceeded 60%, (ii) the Total Leverage Ratio does not exceed 60% for a period of more than four (4) fiscal quarters immediately following the fiscal quarter in which such Material Acquisition was completed, (iii) the Total Leverage Ratio is not greater than 65% at any time, and (iv) the Borrowers have not been deemed to be in compliance with this Section 5.02(a) pursuant to this proviso (or in compliance with Section 5.02(k) pursuant to the proviso thereto) more than two (2) times (each time for up to four (4) fiscal quarters) since the Effective Date;
(b) A minimum Fixed Charge Coverage Ratio of not less than (i) prior to the Collateral Termination Date 1.60:1.00 and (ii) at any time from and after the Collateral Termination Date, 1.75 to 1.0;
(c) Tangible Net Worth at all times of not less than the sum of (i) $1,250,000,000, plus (ii) 80% of the net proceeds of all equity issuances of the Parent or Parent Borrower raised after the Effective Date;
(d) At any time from and after the Collateral Termination Date, a Secured Leverage Ratio not to exceed forty percent (40%); provided, that if the Secured Leverage Ratio is greater than 40% after the occurrence of the Collateral Termination Date, then the Borrowers shall be deemed to be in compliance with this Section 5.02(d) so long as (i) the Borrowers completed a Material Acquisition financed principally with Secured Indebtedness during the quarter in which the Secured Leverage Ratio first exceeded 40%, (ii) the Secured Leverage Ratio does not exceed 40% for a period of more than four (4) fiscal quarters immediately following the fiscal quarter in which such Material Acquisition was completed, (iii) the Secured Leverage Ratio is not greater than 45% at any time, and (iv) the Borrowers have not been deemed to be in compliance with this Section 5.02(d) pursuant to this proviso (or in compliance with Section 5.02(a) or Section 5.02(k) pursuant to the proviso thereto) more than two (2) times (each time for up to four (4) fiscal quarters) since the Effective Date;
(e) At any time from and after the Collateral Termination Date, Total Secured Recourse Indebtedness shall not exceed an aggregate principal amount equal to ten percent (10%) of Total Asset Value at any one time outstanding;
(f) A maximum Payout Ratio of ninety five percent (95%);
(g) A minimum Liquidity of $10,000,000 at all times;
(h) The aggregate Unhedged Variable Rate Debt of the Parent and its Subsidiaries shall not exceed thirty percent (30%) of Total Asset Value;
(i) At any time prior to the Collateral Termination Date, Recourse Indebtedness (other than the Obligations) of the Parent shall not exceed an aggregate principal amount equal to fifteen percent (15%) of Total Asset Value at any one time outstanding;
(j) The Borrowers shall maintain a minimum of five hundred (500) Borrowing Base Properties at all times with a combined Borrowing Base Value of no less than $50,000,000.00;
(k) An Unsecured Leverage Ratio not to exceed, at any time from and after the Collateral Termination Date, sixty percent (60%); provided, that if the Unsecured Leverage Ratio is greater than 60% after the occurrence of the Collateral Termination Date, then the Borrowers shall be deemed to be in compliance with this Section 5.02(k) so long as (i) the Borrowers completed a Material Acquisition financed principally with Loans or other Unsecured Indebtedness during the quarter in which the Unsecured Leverage Ratio first exceeded 60%, (ii) the Unsecured Leverage Ratio does not exceed 60% for a period of more than four (4) fiscal quarters immediately following the fiscal quarter in which such Material Acquisition was completed, (iii) the Unsecured Leverage Ratio is not greater than 65% at any time, and (iv) the Borrowers have not been deemed to be in compliance with this Section 5.02(k) pursuant to this proviso (or in compliance with Section 5.02(a) or Section 5.02(d) pursuant to the proviso thereto) more than two (2) times (each time for up to four (4) fiscal quarters) since the Effective Date; and
(l) A minimum Unsecured Interest Coverage Ratio of not less than, at any time from and after the Collateral Termination Date, 2.00 to 1.0.
Section 5.03 Notices of Material Events. Each Borrower will furnish to the Administrative Agent and each Lender written notice of the following promptly after it becomes aware of same (unless specific time is set forth below):
(a) the occurrence of any Default under this Agreement;
(b) within fifteen (15) Business Days after the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting any Credit Party or any Affiliate thereof that, if adversely determined, would reasonably be expected to result in a Material Adverse Effect;
(c) within fifteen (15) Business Days after the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, would reasonably be expected to result in liability of the Borrowers and their Subsidiaries in an aggregate amount exceeding $10,000,000.00; and
(d) any other development that results in, or would reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of Parent Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
Section 5.04 Existence; Conduct of Business. Each Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under this Agreement. Each Borrower must at all times be a wholly owned Subsidiary of Parent Borrower. The Borrowers may not be organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia.
Section 5.05 Payment of Obligations. Each Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, would result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) such Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest would not reasonably be expected to result in a Material Adverse Effect.
Section 5.06 Maintenance of Properties; Insurance.
(a) Each Borrower will, and will cause each of its Subsidiaries to, (i) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (ii) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are reasonable and customary for similarly situated Real Properties.
(b) Each Borrower will pay and discharge, or cause to be paid and discharged, all taxes, assessments, maintenance charges, permit fees, impact fees, development fees, capital repair charges, utility reservations and standby fees and all other similar impositions of every kind and character charged, levied, assessed or imposed against any interest in any of its material Real Properties owned by it or any of its Subsidiaries, as they become payable and before they become delinquent. The Borrowers shall furnish receipts evidencing proof of such payment to the Administrative Agent promptly after payment and before delinquency.
Section 5.07 Books and Records; Inspection Rights.
(a) Each Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities.
(b) Each Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice and subject to rights of tenants, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.
Section 5.08 Compliance with Laws. Each Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
Section 5.09 Use of Proceeds. The proceeds of the Loans and Letters of Credit will be used solely to fund a portion of the cost to consummate the acquisition of Real Properties consisting of single family homes or 2-4 unit multifamily properties and for other general corporate purposes of the Borrowers and their Subsidiaries.
Section 5.10 Fiscal Year. Borrower shall maintain as its fiscal year the twelve (12) month period ending on December 31 of each year.
Section 5.11 Environmental Matters. Each Borrower shall comply and shall cause each of its Subsidiaries and each Real Property owned or leased by such parties to comply in all material respects with all applicable Environmental Laws currently or hereafter in effect, except to the extent noncompliance would not reasonably be expected to have a Material Adverse Effect.
Section 5.12 Collateral Requirement.
(a) General Requirement. The Obligations and the Hedging Obligations shall be secured by a perfected first priority lien and security interest to be held by the Administrative Agent for the benefit of the Secured Parties, pursuant to the terms of the Security Documents, in all of the Collateral.
(b) Release of Collateral. Upon the refinancing or repayment of the Obligations in full, then, unless otherwise agreed with respect to the Hedging Obligations, the Administrative Agent shall release the Collateral from the lien and security interest of the Security Documents.
(c) Collateral Termination Date. Provided no Default or Event of Default shall have occurred and be continuing (or would exist immediately after giving effect to the transactions contemplated by this Section 5.12(c)), the Administrative Agent shall release the Collateral for the Obligations, promptly upon the request of Parent Borrower subject to the following terms and conditions: (any date of such release, a “Collateral Termination Date”):
(i) no Default or Event of Default exists before and after giving effect thereto;
(ii) Parent Borrower shall deliver to the Administrative Agent with such request a Compliance Certificate setting forth in reasonable detail the calculations evidencing compliance (on a pro forma basis) with the financial covenants set forth in Section 5.02(a) (Total Leverage Ratio), (b) (Fixed Charge Coverage Ratio), (d) (Secured Leverage Ratio), (e) (Secured Recourse Indebtedness Limitation), and (l) (Unsecured Interest Coverage Ratio), in each case, that would be applicable after giving effect to the requested Collateral Termination Date;
(iii) all Bridge Loans shall have been paid in full;
(iv) all release documents and related escrow arrangements to be executed by the Administrative Agent shall be in form and substance reasonably satisfactory to the Administrative Agent; and
(v) Borrower shall pay all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with such release, including without limitation, reasonable and documented outside attorneys’ fees.
The Administrative Agent shall notify Borrowers and the Lenders of the occurrence of the Collateral Termination Date.
Section 5.13 Further Assurances. At any time upon the request of the Administrative Agent, Borrowers will, promptly and at the Borrowers’ expense, execute, acknowledge and deliver such further documents and perform such other acts and things as the Administrative Agent may reasonably request to evidence the Loans made hereunder and interest thereon in accordance with the terms of this Agreement.
Section 5.14 Bank Accounts. The Credit Parties shall use commercially reasonable efforts to maintain with KeyBank all corporate-level accounts and, to the extent not required to be maintained with another applicable lender of Indebtedness permitted hereunder, all escrow or reserve accounts of the Credit Parties and their Subsidiaries . The Credit Parties shall also use commercially reasonable efforts to utilize KeyBank (and cause each Subsidiary thereof to utilize KeyBank) for all cash management services.
Section 5.15 Parent Covenants. The Parent will:
(a) own, directly or indirectly, at least fifty one percent (51%) of the limited partnership interests in the Parent Borrower, free and clear of all Liens;
(b) maintain management and control of Parent Borrower;
(c) conduct substantially all of its operations through Parent Borrower and/or one or more of Parent Borrower’s Subsidiaries;
(d) comply with all Legal Requirements to maintain, and, will at all times elect, qualify as and maintain, its status as a real estate investment trust under Section 856(c)(i) of the Code; and
(e) subject to the terms of the Loan Documents, promptly contribute to Parent Borrower the net proceeds of any stock sales or debt offerings, except for amounts reasonably necessary to supply the working capital of the Parent.
Section 5.16 Borrowing Base Properties. Except where the failure to comply with any of the following would not constitute a Material Property Event with respect to any Borrowing Base Property then in the Borrowing Base, each Borrower and each other Credit Party shall:
(a) Pay all real estate and personal property taxes, assessments, water rates or sewer rents, ground rents, maintenance charges, impositions, and any other charges, including vault charges and license fees for the use of vaults, chutes and similar areas adjoining any Borrowing Base Property, now or hereafter levied or assessed or imposed against any Borrowing Base Property or any part thereof prior to delinquency (except those which are being contested in good faith by appropriate proceedings diligently conducted);
(b) Promptly pay (or cause to be paid) prior to delinquency all bills and costs for labor, materials, and specifically fabricated materials incurred in connection with any Borrowing Base Property (except those which are being contested in good faith by appropriate proceedings diligently conducted), and in any event never permit to be created or exist in respect of any Borrowing Base Property or any part thereof any other or additional Lien or security interest other than Liens permitted by Section 6.01;
(c) Operate the Borrowing Base Properties in a good and workmanlike manner and in all material respects in accordance with all Legal Requirements in accordance with such Credit Party’s prudent business judgment; and
(d) To the extent owned and controlled by a Credit Party, preserve, protect, renew, extend and retain all material rights and privileges granted for or applicable to each Borrowing Base Property.
Section 5.17 Environmental Matters. Each Borrower shall, and shall cause each other Credit Party to:
(a) Use reasonable efforts to keep the Borrowing Base Properties free of Contamination;
(b) Promptly deliver to Administrative Agent a copy of each final report pertaining to any Borrowing Base Property or to any Credit Party prepared by or on behalf of such Credit Party pursuant to a material violation of any Environmental Law; and
(c) As soon as practicable advise Administrative Agent in writing of any Environmental Claim or of the discovery of any Contamination on any Borrowing Base Property, as soon as any Credit Party first obtains knowledge thereof, including a description of the nature and extent of the Environmental Claim or Hazardous Material and all relevant circumstances.
Section 5.18 Accounts. In order to further secure performance by the Credit Parties of the payment and performance of the Obligations, (i) the Borrowers will use commercially reasonable efforts to cause each Borrowing Base Property Owner to establish any new account opened by such Borrowing Base Property Owner in the ordinary course of business for cash management and depository services with the Administrative Agent, and (ii) each Rent Account shall be pledged as collateral to the Administrative Agent, for the benefit of the Secured Parties, and, if maintained with a depository other than the Administrative Agent, the applicable Borrowing Base Property Owner shall enter into a Borrower Rent Account Control Agreement with respect thereto. Provided no Event of Default shall be in existence, the Borrowers shall have full access to and the full use and benefit of all amounts on deposit in each respective Rent Account. After the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have sole control and dominion over such Rent Account and may apply all funds on deposit in each such Rent Account to the repayment of the Obligations. To the extent that any collections of such rental and other payments are not sent directly to a Rent Account but are received by any Credit Party or property manager, such collections shall be held in trust for the benefit of the Administrative Agent and promptly remitted, in the form received, to the applicable Rent Account.
Section 5.19 Keepwell. Each Credit Party that is a Qualified ECP Party at the time that the Agreement becomes effective with respect to any Hedging Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Borrower that is not then an “eligible contract participant” under the Commodity Exchange Act (a “Specified Party”) to honor all of its obligations under the Agreement in respect of Hedging Obligations (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Party’s obligations and undertakings under this Section 5.19 voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of each Qualified ECP Party under this Section 5.19 shall remain in full force and effect until the Loans have been repaid in full. Each Qualified ECP Party intends this Section 5.19 to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Party for all purposes of the Commodity Exchange Act.
Section 5.20 Post-Closing Good Standings. The Borrowers shall deliver to the Administrative Agent within thirty (30) days of the date hereof (or such later date as Administrative Agent in its sole discretion may agree), evidence dated within thirty (30) days of such delivery that each of VB One and True Mem2016-1, LLC is validly existing and in good standing in the State of Tennessee.
ARTICLE VI
Negative Covenants
Until the principal of and interest on the Loans and all other amounts due and payable hereunder have been paid in full, and all Letters of Credit have expired or been fully Cash Collateralized, each Borrower covenants and agrees with the Lenders and Letter of Credit Issuer that:
Section 6.01 Liens. Neither the Parent nor any Borrower will create, incur, assume or permit to exist any Lien on (a) the Collateral other than (i) a first priority security interest in and upon the Collateral in favor of the Administrative Agent, for the benefit of the Secured Parties, (ii) non-consensual Liens, if any, imposed on the property of any Credit Party not yet delinquent or being contested in good faith by appropriate proceedings and for which appropriate reserves in accordance with GAAP have been set aside on the applicable Credit Party’s books and which do not otherwise constitute an Event of Default, and (iii) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights or remedies as to deposit accounts or securities accounts, or (b) any of the Borrowing Base Properties or any direct or indirect Equity Interest in any Borrowing Base Property Owner, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except solely with respect to the Borrowing Base Properties, Permitted Encumbrances.
Section 6.02 Fundamental Changes. Neither the Parent nor any Borrower will, nor will they permit any of their Subsidiaries to:
(a) merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of the assets of a Borrower or all or substantially all of the stock of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve;
(b) sell, transfer, lease or otherwise dispose of any of its assets to the extent such transaction would result in a breach of Section 5.02 or, with respect to the sale of any Borrowing Base Property to the extent such transaction would result in a breach of Section 2.23(h); or
(c) engage to any material extent in any business other than the ownership of interest in entities that own, develop, operate and manage the Real Properties and businesses reasonably related thereto, except as allowed by Section 6.03.
Notwithstanding anything to the contrary in this Section 6.02, the Borrowers shall not, and shall not permit any other Credit Party or any of their Subsidiaries to, consummate any sale, merger, transfer, or any similar transaction with respect to any Real Estate or Equity Interests in any Person if the value or consideration of such transaction, together with the value or consideration of all other similar transactions consummated in the immediately preceding twelve months, would exceed fifteen percent (15%) of the Total Asset Value on such date, unless the Borrowers shall have delivered to the Administrative Agent, at least five (5) Business Days prior to the expected consummation date for such transaction, written notice of such transaction (with reasonable detail) together with a Compliance Certificate evidencing that no Default or Event of Default would exist after giving effect to such transaction or result therefrom.
Section 6.03 Investments, Loans, Advances and Acquisitions. Neither the Parent nor any Borrower will purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness (subject to Section 6.09 below) or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:
(a) Permitted Investments; and
(b) Investments (directly or indirectly) in Real Properties constituting single family rental properties, provided that:
(i) Investments in unimproved land shall not exceed 5% of Total Asset Value;
(ii) Investments in ground-up construction and development and re-development projects (valued on cost incurred to date in accordance with GAAP) shall not exceed 10% of Total Asset Value;
(iii) Investments in joint ventures shall not exceed 15% of Total Asset Value; and
(iv) Investments in mortgage note receivables shall not to exceed 5% of Total Asset Value.
Provided further that the aggregate Investment described in Section 6.03(b) (i), (ii), (iii) and (iv) above shall not exceed 20% of Total Asset Value. To the extent that any of the terms of subsection (b) are not satisfied, no Default will result but Total Asset Value shall be reduced by any overage amount.
Section 6.04 Hedging Agreements. No Credit Party will, nor will it permit any of its Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which any Subsidiary of the Parent Borrower is exposed in the conduct of its business or the management of its liabilities.
Section 6.05 Restricted Payments. The Parent will not, and will not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, during any calendar quarter, any Restricted Payment, except that any of the following Restricted Payments are permitted: (a) Restricted Payments by the Parent required to comply with Section 5.15(d), (b) provided no Default is then in existence, Restricted Payments made by the Parent to its equity holders, including in connection with the existing redemption and dividend reinvestment plans, not to exceed the Payout Ratio set forth in Section 5.02(f), and (c) Restricted Payments declared and paid ratably by Subsidiaries to Borrower and/or Parent with respect to their capital stock or equity interest.
Section 6.06 Transactions with Affiliates. Neither the Parent nor any Borrower will, nor will it permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to such Borrower or such Subsidiary than would be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among a Borrower and its wholly owned Subsidiaries not involving any other Affiliate, (c) transactions related to the closing of and ongoing activities necessary to implement the loan obligations and requirements of this Agreement, and (d) any Restricted Payment permitted by Section 6.05.
Section 6.07 Parent Negative Covenants. The Parent will not (a) own any property other than (i) the ownership interests of Parent Borrower and (ii) other assets with no more than $10,000,000.00 in value; (b) give or allow any Lien on the ownership interests of Parent Borrower; (c) engage to any material extent in any business other than the ownership, development, operation and management residential properties.
Section 6.08 Restrictive Agreements. Neither the Parent nor any Borrower will, nor will it permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of a Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to a Borrower or any other Subsidiary or to Guarantee Indebtedness of a Borrower or any other Subsidiary; provided that the restrictions contained in this Section 6.08 shall not apply to (i) restrictions and conditions imposed by law or by this Agreement or as otherwise approved by the Administrative Agent, (ii) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iii) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to Indebtedness or Liens permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing or being financed with such Indebtedness, or ownership interests in the obligors with respect to such Indebtedness (to the extent they are not also obligors hereunder), (iv) solely with respect to clause (a), provisions in leases restricting the assignment thereof; and (v) after the Collateral Termination Date, clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to Unsecured Indebtedness permitted to be incurred under this Agreement (x) requiring the grant in favor of the holders of such Unsecured Indebtedness of an equal and ratable Lien to secure the obligations to such holders in connection with a pledge of any property or asset to secure the Obligations or (y) prohibiting the creation of a Lien on Borrowing Base Properties or Equity Interests in Borrowing Base Property Owners on terms no more onerous in any material respect than those set forth in the Loan Documents with respect thereto.
Section 6.09 Indebtedness. Neither the Parent, any Borrower, nor any other Credit Party shall, without the prior written consent of the Required Lenders, create, incur, assume, guarantee or be or remain liable, contingently or otherwise with respect to any Recourse Indebtedness, except: (a) Indebtedness under this Agreement; (b) Indebtedness of the Parent, Parent Borrower, or Holdings under any Hedging Obligations permitted under this Agreement, (c) Indebtedness of the Parent or Parent Borrower whose recourse is solely for so-called “bad-boy” acts in respect to Indebtedness secured by Real Property of its Subsidiaries, including without limitation, (i) failure to account for a tenant’s security deposits, if any, for rent or any other payment collected by a borrower from a tenant under the lease, all in accordance with the provisions of any applicable loan documents, (ii) fraud or a material misrepresentation made by a Borrower or Subsidiary thereof, or the holders of beneficial or ownership interests in such Subsidiary, in connection with the financing evidenced by the applicable loan documents; (iii) any attempt by a Borrower or any Guarantor or Subsidiary thereof to divert or otherwise cause to be diverted any amounts payable to the applicable lender in accordance with the applicable loan documents; (iv) the misappropriation or misapplication of any insurance proceeds or condemnation awards relating to any Real Property securing such Indebtedness; (v) voluntary or involuntary bankruptcy by a Borrower or any Guarantor or Subsidiary thereof; (vi) any environmental matter(s) affecting any Real Property securing such Indebtedness; (vii) failure to deliver statements, schedules, reports, or books and records in accordance with the provisions of any applicable loan documents; (viii) failure to pay any deferred amounts in accordance with the provisions of any applicable loan documents; (ix) any material waste of any Real Property securing such Indebtedness; (x) the failure to comply with any single purpose entity requirements in accordance with the provisions of any applicable loan documents; and (xi) the occurrence of any transfer of any interest in violation of the provisions of any applicable loan documents; (d) Indebtedness for trade payables and operating expenses incurred in the ordinary course of business, (e) Indebtedness of the Parent and Parent Borrower under the Bridge Loans in compliance with the financial covenants in Section 5.02; provided that such Indebtedness shall not be secured by or have as credit support any direct or indirect interest in the Borrowers, the Borrowing Base Properties or Borrowing Base Property Owners or any Collateral; (f) at any time prior to the Collateral Termination Date but only to the extent that no Bridge Loans are then outstanding, Recourse Indebtedness of the Parent (in each case, other than the Obligations) in a principal amount permitted under Section 5.02(i); (g) from and after the Collateral Termination Date, Secured Recourse Indebtedness of the Parent so long as the Credit Parties remain in compliance with the financial covenants in Section 5.02; and (h) from and after the Collateral Termination Date, other Unsecured Indebtedness of the Credit Parties so long as the Credit Parties remain in compliance with the financial covenants in Section 5.02.
Section 6.10 Fees. Provided that no Default or Event of Default shall be in existence, each Credit Party may pay all management, property and other asset fees and all advisory fees under the Advisory Agreement then due and payable. At any time that any Default or Event of Default exists under this Agreement or any other Loan Document, then in any of such event(s), no Credit Party or any Subsidiary may pay any management, property, asset or similar fees or any advisory fees under the Advisory Agreement to any other Credit Party or to any Subsidiary or Affiliate, including, without limitation, to any Acceptable Advisor and the Advisor; provided that any such fees may accrue during the continuance of any such Default or Event of Default and be payable at such time as no Default or Event of Default is continuing hereunder. All such parties shall execute subordination agreements in form and substance acceptable to the Administrative Agent with respect to such fees. Notwithstanding the foregoing, Credit Parties and their Subsidiaries may pay at all times any due and payable fees to third party property managers.
Section 6.11 Amendment to Organizational Documents. Without the prior written consent of Administrative Agent, which consent shall not be unreasonably withheld, conditioned or delayed, no Credit Party will amend, modify or waive any rights under its certificate of incorporation, bylaws or other organizational documents in any manner, except: (a) modifications necessary to clarify existing provisions of such organizational documents; (b) modifications which would not have a Material Adverse Effect, and (c) modifications in connection with mergers, consolidations, investments and other transactions not otherwise prohibited by the other provisions of this Agreement.
Section 6.12 Sanctions. No Borrower shall permit the proceeds of any Loan or Letter of Credit: (a) to be lent, contributed or otherwise made available to fund any activity or business in any Designated Jurisdiction; (b) to fund any activity or business of any Sanctioned Person or any Person located, organized, formed, incorporated or residing in any Designated Jurisdiction or who is the subject of any Sanctions; (c) in any other manner that will result in any material violation by any Person (including any Lender or Administrative Agent) of any Sanctions; or (d) to be used in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws.
Section 6.13 Borrowing Base Properties. Neither the Parent nor any Borrower shall, nor shall it permit any other Credit Party to, directly or indirectly:
(a) Use or occupy or conduct any activity on, or knowingly permit the use or occupancy of or the conduct of any activity on any Borrowing Base Properties by any tenant, in any manner which violates any Law or which constitutes a public or private nuisance in any manner which would have a Material Property Event with respect to any Borrowing Base Property or which makes void, voidable, or cancelable any insurance then in force with respect thereto or makes the maintenance of insurance in accordance with Section 5.06(a) commercially unreasonable (including by way of increased premium);
(b) Without the prior written consent of Administrative Agent (which consent shall not be unreasonably withheld or delayed), initiate or permit any zoning reclassification of any Borrowing Base Property or seek any variance under existing zoning ordinances applicable to any Borrowing Base Property or use or knowingly permit the use of any Borrowing Base Property in such a manner which would result in such use becoming a nonconforming use under applicable zoning ordinances or other Laws;
(c) Without the prior written consent of Administrative Agent (which consent shall not be unreasonably withheld or delayed), (i) impose any material easement, restrictive covenant, or encumbrance upon any Borrowing Base Property, (ii) execute or file any subdivision plat or condominium declaration affecting any Borrowing Base Property, or (iii) consent to the annexation of any Borrowing Base Property to any municipality;
(d) Do any act, or suffer to be done any act by any Credit Party or any of its Affiliates, which would reasonably be expected to cause a Material Property Event (including by way of negligent act); or
(e) Without the prior written consent of all the Lenders (which consent shall not be unreasonably withheld or delayed), permit any drilling or exploration for or extraction, removal or production of any mineral, hydrocarbon, gas, natural element, compound or substance (including sand and gravel) from the surface or subsurface of any Borrowing Base Property regardless of the depth thereof or the method of mining or extraction thereof.
Section 6.14 [Intentionally Omitted].
ARTICLE VII
Events of Default
Section 7.01 Events of Default Generally. An Event of Default shall exist if any of the following events (“Events of Default”) shall occur:
(a) the Borrowers shall fail to pay any principal of the Loans when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise, and such failure (other than the payment due on the Revolving Loan Maturity Date with respect to Revolving Loans or the applicable Maturity Date of any Term Loans, for which there shall be no grace period) shall continue unremedied for a period of over three (3) Business Days;
(b) the Borrowers shall fail to pay any interest on the Loans or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under any Loan Documents, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of over three (3) Business Days (such three Business Day period commencing after written notice from the Administrative Agent as to any such failure);
(c) any representation or warranty made or deemed made by or on behalf of any Credit Party in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any amendment or modification hereof or waiver hereunder, shall prove to have been incorrect in any material respect when made or deemed made;
(d) the Borrowers shall fail to observe or perform any covenant, condition or agreement contained in Article V or VI other than Sections 5.04, 5.05, 5.06, 5.07(a), 5.08, 5.11 and 5.20;
(e) any Credit Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of over 30 days after notice thereof from the Administrative Agent to the Parent Borrower (which notice will be given at the request of any Lender) and if such default is not curable within thirty (30) days and the Credit Party is diligently pursuing cure of same, the cure period may be extended for thirty (30) days (for a total of 60 days after the original notice from the Administrative Agent) upon written request from the Borrower to the Administrative Agent;
(f) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of any Credit Party or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Credit Party or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
(g) any Credit Party or any Subsidiary of a Borrower shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for such Person or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;
(h) any Credit Party shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;
(i) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against any Credit Party, any Subsidiary of a Borrower or any combination thereof and the same shall remain undischarged for a period of sixty (60) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of such Person to enforce any such judgment;
(j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, would reasonably be expected to result in liability of any Borrower and its Subsidiaries in an aggregate amount exceeding $10,000,000;
(k) the Guaranty of the Loan by the Guarantor shall for any reason terminate or cease to be in full force and effect;
(l) any Credit Party shall default under any agreement and such default would reasonably be expected to result in a Material Adverse Effect;
(m) any Credit Party shall (or shall attempt to) disavow, revoke or terminate any Loan Document to which it is a party or shall otherwise challenge or contest in any action, suit or proceeding in any court or before any Governmental Authority the validity or enforceability of any Loan Document;
(n) any provision of any Loan Document with respect to the Collateral shall for any reason cease to be valid and binding on, enforceable against, any Credit Party resulting in a Material Adverse Effect, or any lien created under any Loan Document ceases to be a valid and perfected first priority lien in any of the Collateral purported to be covered thereby;
(o) a Change in Control shall occur; or
(p) (i) Any Borrower or Guarantor defaults under any Recourse Indebtedness in an aggregate amount equal to or greater than $25,000,000 at any time, or (ii) any Subsidiaries of Parent or a Borrower defaults under any non-recourse Indebtedness in an aggregate amount equal to or greater than $75,000,000 at any time (such $75,000,000 calculated based on the Equity Percentage of Indebtedness for the Borrowers’ non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates).
Section 7.02 Remedies Upon an Event of Default. If an Event of Default shall have occurred and be continuing, then, and in every such event (other than an event described in clause (f) or (g) of Section 7.01), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrowers, take some or all of the following actions, at the same or different times: (i) suspend the Revolving Commitments of Lenders and any obligation of the Letter of Credit Issuer to make L/C Credit Extensions until such Event of Default is cured; (ii) terminate the Revolving Commitment of Lenders and any obligation of the Letter of Credit Issuer to make L/C Credit Extensions hereunder; (iii) require that the Borrower Cash Collateralize its respective Letter of Credit Obligations (in an amount equal to the Minimum Collateral Amount with respect thereto)declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all reasonable fees and other obligations of the Borrowers accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers, (iv) require that the Borrowers Cash Collateralize its respective Letter of Credit Obligations (in an amount equal to the Minimum Collateral Amount with respect thereto; and (v) exercise any other rights or remedies provided under this Agreement or any other Loan Document, or any other right or remedy available by law or equity; and in case of any event described in clause (f) or (g) of Section 7.01, the obligation of each Lender to make Loans and any obligation of the Letter of Credit Issuer to make L/C Credit Extensions shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all reasonable fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, and the obligation of Borrowers to Cash Collateralize the Letter of Credit Obligations as aforesaid shall automatically become effective, in each case without further act of Administrative Agent or any Lender or Letter of Credit Issuer, and without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.
Section 7.03 Application of Funds. After the exercise of remedies provided for in Section 7.02 (or after the Loans have automatically become immediately due and payable and the Letter of Credit Obligations has automatically been required to be Cash Collateralized as set forth in the proviso to Section 7.02), any amounts received on account of the Obligations shall, subject to the provisions of Section 2.07 and Section 2.20, be applied by Administrative Agent in the following order:
First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to Administrative Agent and amounts payable under Section 2.15, Section 2.16, or Section 2.17) payable to Administrative Agent in its capacity as such;
Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal, interest and Letter of Credit Fees) payable to the Lenders and the Letter of Credit Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the Letter of Credit Issuer (including fees and time charges for attorneys who may be employees of any Lender or the Letter of Credit Issuer) and amounts payable under Section 2.15, Section 2.16, or Section 2.17), ratably among them in proportion to the respective amounts described in this clause Second payable to them;
Third, to the extent that Swing Line Loans have not been refinanced by a Revolving Loan, payment to the Swing Lender of that portion of the Obligations constituting accrued and unpaid interest on the Swing Line Loans;
Fourth, to payment of that portion of the Obligations constituting accrued and unpaid Letter of Credit Fees and unpaid interest on the Loans (other than Swing Line Loans), L/C Borrowings and other Obligations, ratably among the Lenders and the Letter of Credit Issuer in proportion to the respective amounts described in this clause Fourth payable to them;
Fifth, to the extent that Swing Line Loans have not been refinanced by a Revolving Loan, to payment to the Swing Lender of that portion of the Obligations constituting unpaid principal of the Swing Line Loans;
Sixth, to payment of that portion of the Obligations constituting unpaid principal of the Loans (other than Swing Line Loans) and L/C Borrowings, ratably among the Lenders and the Letter of Credit Issuer in proportion to the respective amounts described in this clause Sixth held by them;
Seventh, to Administrative Agent for the account of the Letter of Credit Issuer, to Cash Collateralize that portion of the Letter of Credit Obligations comprised of the aggregate undrawn amount of Letters of Credit to the extent not otherwise Cash Collateralized by Borrower pursuant to Section 2.05 and Section 2.07; and
Last, the balance, if any, after all of the Obligations have been paid in full, to Borrower or as otherwise required by Law.
Subject to Section 2.05 and Section 2.07, amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Seventh above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.
ARTICLE VIII
The Administrative Agent
Section 8.01 General.
(a) Each of the Lenders and the Letter of Credit Issuer hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. In the event of conflicting instructions or notices given to the Borrowers by the Administrative Agent and any Lender, the Borrowers is hereby directed and shall rely conclusively on the instruction or notice given by the Administrative Agent.
(b) The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with a Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.
(c) The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), provided that Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Credit Party that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by a Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent agrees that, in fulfilling its duties hereunder, it will use the same standard of care it utilizes in servicing loans for its own account.
(d) The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Letter of Credit Issuer, Administrative Agent may presume that such condition is satisfactory to such Lender or the Letter of Credit Issuer unless Administrative Agent shall have received notice to the contrary from such Lender or the Letter of Credit Issuer prior to the making of such Loan or the issuance of such Letter of Credit. Administrative Agent may consult with legal counsel (who may be counsel for the Borrowers), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in good faith in accordance with the advice of any such counsel, accountants or experts.
(e) The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
(f) Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the Parent Borrower, and may be removed by the Required Lenders in the event of the Administrative Agent’s gross negligence or willful misconduct. Upon any such resignation or removal, the Required Lenders shall have the right, with the approval of Parent Borrower (provided no Default has occurred and is continuing), which approval shall not be unreasonably withheld, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation or is removed, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a Lender, or a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrowers to a successor Administrative Agent for its own behalf shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. The Administrative Agent shall cooperate with any successor Administrative Agent in fulfilling its duties hereunder.
(g) Any resignation by KeyBank as Administrative Agent pursuant to this Section VIII shall also constitute its resignation as Letter of Credit Issuer and Swing Line Lender. If KeyBank resigns as Letter of Credit Issuer and Swing Line Lender, it shall retain all the rights, powers, privileges and duties of the Letter of Credit Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as Letter of Credit Issuer and all Letter of Credit Obligations with respect thereto, including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.05(c). In the event of any such resignation as Letter of Credit Issuer and Swing Line Lender, Borrower shall be entitled to appoint from among the Lenders a successor Letter of Credit Issuer and Swing Line Lender hereunder (which successor shall in all cases be a Lender other than a Defaulting Lender); provided, however, that no failure by Borrower to appoint any such successor shall affect the resignation of KeyBank as Letter of Credit Issuer and Swing Line Lender. Upon the appointment by Borrower of a successor Letter of Credit Issuer hereunder: (i) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Letter of Credit Issuer and Swing Line Lender; (ii) the retiring Letter of Credit Issuer and Swing Line Lender shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents; and (iii) the successor Letter of Credit Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to KeyBank to effectively assume the obligations of KeyBank with respect to such Letters of Credit.
(h) Each Lender and the Letter Credit Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement. Each Lender and the Letter of Credit Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Credit Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Administrative Agent agrees to provide the Lenders with copies of all material documents and certificates received by the Administrative Agent from any Borrower in connection with the Loans.
(i) The Titled Agents shall not have any additional rights or obligations under the Loan Documents, except for those rights, if any, as a Lender.
(j) Any material to be delivered pursuant to Section 5.01 and Section 5.03 (collectively, “Information Materials”) may be delivered electronically directly to the Administrative Agent or made available to Administrative Agent pursuant to an accessible website and the Lenders and Letter of Credit Issuer provided that such material is in a format reasonably acceptable to Administrative Agent, and such material shall be deemed to have been delivered to Administrative Agent and the Lenders upon Administrative Agent’s receipt thereof or access to the website containing such material. The Administrative Agent shall distribute any such information to the other Lenders after receipt thereof, and may do so by electronic form in the same manner as provided in this Article VIII. Upon the request of Administrative Agent, Borrowers shall deliver paper copies thereof to Administrative Agent and the Lenders. Each Borrower authorizes Administrative Agent and the Arrangers to disseminate any such materials through the use of Intralinks, SyndTrak or any other electronic information dissemination system provided that system is secure and access thereto is protected by a password that is only disclosed to the Lenders (an “Electronic System”). Any such Electronic System is provided “as is” and “as available.” The Administrative Agent and the Arrangers do not warrant the adequacy of any Electronic System and expressly disclaim liability for errors or omissions in any notice, demand, communication, information or other material provided by or on behalf of Borrowers that is distributed over or by any such Electronic System (“Communications”). No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by the Administrative Agent or the Arrangers in connection with the Communications or the Electronic System. In no event shall the Administrative Agent, any Arranger or any of their directors, officers, employees, agents or attorneys have any liability to any Borrower or any Guarantor, any Lender or any other Person for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Credit Party’s, the Administrative Agent’s or any Arranger’s transmission of Communications through the Electronic System, and the Credit Parties release Administrative Agent, the Arrangers and the Lenders from any liability in connection therewith. Certain of the Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public information with respect to the Credit Parties, their Subsidiaries or its Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market related activities with respect to such Persons’ securities. Each Borrower hereby agrees that it will identify that portion of the Information Materials that may be distributed to the Public Lenders and that (i) all such Information Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (ii) by marking Information Materials “PUBLIC,” the Borrowers shall be deemed to have authorized the Administrative Agent, the Lenders and the Arrangers to treat such Information Materials as not containing any material non-public information with respect to the Credit Parties, their Subsidiaries, their Affiliates or their respective securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Information Materials constitute confidential information, they shall be treated as provided in Section 9.12); (iii) all Information Materials marked “PUBLIC” are permitted to be made available through a portion of any electronic dissemination system designated “Public Investor” or a similar designation; and (iv) the Administrative Agent and the Arrangers shall be entitled to treat any Information Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of any electronic dissemination system not designated “Public Investor” or a similar designation.
Section 8.02 Administrative Agent May File Proof of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, Administrative Agent (irrespective of whether the principal of any Loan or Letter of Credit Obligations shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Administrative Agent shall have made any demand on Loan Parties) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Letter of Credit Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Letter of Credit Issuer and Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, Letter of Credit Issuer and Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, Letter of Credit Issuer and Administrative Agent under Section 2.15, Section 2.16, or Section 2.17 and otherwise hereunder) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same.
any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the Letter of Credit Issuer to make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to the Lenders and the Letter of Credit Issuer, to pay to Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Administrative Agent and its agents and counsel, and any other amounts due Administrative Agent hereunder.
Nothing contained herein shall be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the Letter of Credit Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
Section 8.03 Collateral Matters. Without limiting the provisions of Section 8.02, Lenders and the Letter of Credit Issuer irrevocably authorize Administrative Agent, at its option and in its discretion to release any Lien on any property granted to or held by Administrative Agent under any Loan Document: (a) upon termination of the Revolving Commitments and payment in full of all Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit prior to draws thereon (other than Letters of Credit as to which other arrangements satisfactory to Administrative Agent and the Letter of Credit Issuer shall have been made); or (b) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted hereunder or under any other Loan Document; (c) upon the occurrence of the Collateral Termination Date; or (d) subject to Section 9.02, if approved, authorized or ratified in writing by the Required Lenders. Upon request by Administrative Agent at any time, the Required Lenders will confirm in writing Administrative Agent’s authority to release its interest in particular types or items of property pursuant to this Section 8.03.
Section 8.04 Certain ERISA Matters. (a) Each Lender represents and warrants, as of the date such Person became a Lender party hereto, to, and covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that at least one of the following is and will be true:
(i) such Lender is not using Plan Assets with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments, this Credit Agreement or other transactions contemplated under the Loan Documents;
(ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this Credit Agreement;
(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Commitments and this Credit Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Commitments and this Credit Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84- 14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this Credit Agreement; or
(iv) such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.
(b) In addition, unless either sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or a Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding clause (a), such Lender further represents and warrants, as of the date such Person became a Lender party hereto, to, and covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that the Administrative Agent is not a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments, this Credit Agreement and other transactions contemplated under the Loan Documents (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Credit Agreement, any Loan Document or any documents related hereto or thereto).
Section 8.05 Erroneous Payments.
(a) If the Administrative Agent (x) notifies a Lender, Letter of Credit Issuer or Secured Party, or any Person who has received funds on behalf of a Lender, Letter of Credit Issuer or Secured Party (any such Lender, Letter of Credit Issuer, Secured Party or other recipient (and each of their respective successors and assigns), a “Payment Recipient”) that the Administrative Agent has determined in its sole discretion (whether or not after receipt of any notice under immediately succeeding clause (b)) that any funds (as set forth in such notice from the Administrative Agent) received by such Payment Recipient from the Administrative Agent or any of its Affiliates were erroneously or mistakenly transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender, Letter of Credit Issuer, Secured Party or other Payment Recipient on its behalf) (any such funds, whether transmitted or received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and (y) demands in writing the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of the Administrative Agent pending its return or repayment as contemplated below in this Section 8.04 and held in trust for the benefit of the Administrative Agent, and such Lender, Letter of Credit Issuer or Secured Party shall (or, with respect to any Payment Recipient who received such funds on its behalf, shall cause such Payment Recipient to) promptly, but in no event later than two Business Days thereafter (or such later date as the Administrative Agent may, in its sole discretion, specify in writing), return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon (except to the extent waived in writing by the Administrative Agent) in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect. A notice of the Administrative Agent to any Payment Recipient under this clause (a) shall be conclusive, absent manifest error.
(b) Without limiting immediately preceding clause (a), each Lender, Letter of Credit Issuer, Secured Party or any Person who has received funds on behalf of a Lender, Letter of Credit Issuer or Secured Party (and each of their respective successors and assigns), agrees that if it receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from the Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in this Credit Agreement or in a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, (y) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates), or (z) that such Lender, Letter of Credit Issuer or Secured Party, or other such recipient, otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), then in each such case:
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(i) |
it acknowledges and agrees that (A) in the case of immediately preceding clauses (x) or (y), an error and mistake shall be presumed to have been made (absent written confirmation from the Administrative Agent to the contrary) or (B) an error and mistake has been made (in the case of immediately preceding clause (z)), in each case, with respect to such payment, prepayment or repayment; and |
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(ii) |
such Lender, Letter of Credit Issuer or Secured Party shall (and shall cause any other recipient that receives funds on its respective behalf to) promptly (and, in all events, within one Business Day of its knowledge of the occurrence of any of the circumstances described in immediately preceding clauses (x), (y) and (z)) notify the Administrative Agent of its receipt of such payment, prepayment or repayment, the details thereof (in reasonable detail) and that it is so notifying the Administrative Agent pursuant to this Section 8.05. |
For the avoidance of doubt, the failure to deliver a notice to the Administrative Agent pursuant to this Section 8.05(b) shall not have any effect on a Payment Recipient’s obligations pursuant to Section 8.05(a) or on whether or not an Erroneous Payment has been made.
(c) Each Lender, Letter of Credit Issuer or Secured Party hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time owing to such Lender, Letter of Credit Issuer or Secured Party under any Loan Document, or otherwise payable or distributable by the Administrative Agent to such Lender, Letter of Credit Issuer or Secured Party under any Loan Document with respect to any payment of principal, interest, fees or other amounts, against any amount that the Administrative Agent has demanded to be returned under immediately preceding clause (a).
(d) (i) Notwithstanding anything contained in Section 8.05, in the event that an Erroneous Payment (or portion thereof) is not recovered by the Administrative Agent for any reason, after demand therefor in accordance with immediately preceding clause (a), from any Lender that has received such Erroneous Payment (or portion thereof) (and/or from any Payment Recipient who received such Erroneous Payment (or portion thereof) on its respective behalf) (such unrecovered amount, an “Erroneous Payment Return Deficiency”), upon the Administrative Agent’s notice to such Lender at any time, then effective immediately (with the consideration therefor being acknowledged by the parties hereto), (A) such Lender shall be deemed to have assigned its Loans (but not its Commitments) with respect to which such Erroneous Payment was made (the “Erroneous Payment Impacted Class”) in an amount equal to the Erroneous Payment Return Deficiency (or such lesser amount as the Administrative Agent may specify) (such assignment of the Loans (but not Commitments) of the Erroneous Payment Impacted Class, the “Erroneous Payment Deficiency Assignment”) (on a cashless basis and such amount calculated at par plus any accrued and unpaid interest (with the assignment fee to be waived by the Administrative Agent in such instance)), and is hereby (together with the Borrower) deemed to execute and deliver an Assignment and Assumption (or, to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to an electronic platform approved by Administrative Agent as to which the Administrative Agent and such parties are participants) with respect to such Erroneous Payment Deficiency Assignment, and such Lender shall deliver any Notes evidencing such Loans to the Borrower or the Administrative Agent (but the failure of such Person to deliver any such Notes shall not affect the effectiveness of the foregoing assignment), (B) the Administrative Agent as the assignee Lender shall be deemed to have acquired the Erroneous Payment Deficiency Assignment, (C) upon such deemed acquisition, the Administrative Agent as the assignee Lender shall become a Lender, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment and the assigning Lender shall cease to be a Lender, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment, excluding, for the avoidance of doubt, its obligations under the indemnification provisions of this Credit Agreement and its applicable Commitments which shall survive as to such assigning Lender, (D) the Administrative Agent and the Borrower shall each be deemed to have waived any consents required under this Credit Agreement to any such Erroneous Payment Deficiency Assignment, and (E) the Administrative Agent will reflect in the Register its ownership interest in the Loans subject to the Erroneous Payment Deficiency Assignment. For the avoidance of doubt, no Erroneous Payment Deficiency Assignment will reduce the Commitments of any Lender and such Commitments shall remain available in accordance with the terms of this Credit Agreement.
(ii) Subject to Section 9.04 (but excluding, in all events, any assignment consent or approval requirements (whether from the Borrower or otherwise)), the Administrative Agent may, in its discretion, sell any Loans acquired pursuant to an Erroneous Payment Deficiency Assignment and upon receipt of the proceeds of such sale, the Erroneous Payment Return Deficiency owing by the applicable Lender shall be reduced by the net proceeds of the sale of such Loan (or portion thereof), and the Administrative Agent shall retain all other rights, remedies and claims against such Lender (and/or against any recipient that receives funds on its respective behalf). In addition, an Erroneous Payment Return Deficiency owing by the applicable Lender (x) shall be reduced by the proceeds of prepayments or repayments of principal and interest, or other distribution in respect of principal and interest, received by the Administrative Agent on or with respect to any such Loans acquired from such Lender pursuant to an Erroneous Payment Deficiency Assignment (to the extent that any such Loans are then owned by the Administrative Agent) and (y) may, in the sole discretion of the Administrative Agent, be reduced by any amount specified by the Administrative Agent in writing to the applicable Lender from time to time.
(e) The parties hereto agree that (x) irrespective of whether the Administrative Agent may be equitably subrogated, in the event that an Erroneous Payment (or portion thereof) is not recovered from any Payment Recipient that has received such Erroneous Payment (or portion thereof) for any reason, the Administrative Agent shall be subrogated to all the rights and interests of such Payment Recipient (and, in the case of any Payment Recipient who has received funds on behalf of a Lender, Letter of Credit Issuer or Secured Party, to the rights and interests of such Lender, Letter of Credit Issuer or Secured Party, as the case may be) under the Loan Documents with respect to such amount (the “Erroneous Payment Subrogation Rights”) (provided that the Loan Parties’ Obligations under the Loan Documents in respect of the Erroneous Payment Subrogation Rights shall not be duplicative of such Obligations in respect of Loans that have been assigned to the Administrative Agent under an Erroneous Payment Deficiency Assignment) and (y) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Loan Party; provided that this Section 8.05 shall not be interpreted to increase (or accelerate the due date for), or have the effect of increasing (or accelerating the due date for), the Obligations of the Borrower relative to the amount (and/or timing for payment) of the Obligations that would have been payable had such Erroneous Payment not been made by the Administrative Agent; provided, further, that for the avoidance of doubt, immediately preceding clauses (x) and (y) shall not apply to the extent any such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Administrative Agent from the Borrower for the purpose of making such Erroneous Payment.
(f) To the extent permitted by applicable law, no Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payment received, including, without limitation, any defense based on “discharge for value” or any similar doctrine.
(g) Each party’s obligations, agreements and waivers under this Section 8.05 shall survive the resignation or replacement of the Administrative Agent, any transfer of rights or obligations by, or the replacement of, a Lender or Letter of Credit Issuer, the termination of the Commitments and/or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document.
ARTICLE IX
Miscellaneous
Section 9.01 Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrowers, in care of Vinebrook Homes Trust, Inc. at 5550 Huber Road, Huber Heights, Ohio 45424, Attention: Brian Mitts (Telephone No. (972) 419-2665 and Email; copies to: 300 Crescent Court, Suite 700, Dallas, Texas 75201, Attention: Brian Mitts (Telephone No. (972) 419-2665 and Email: bmitts@highlandfunds.com); and Wick Phillips Gould & Martin, LLP, 3131 McKinney, Suite 100, Dallas, Texas 75204, Attention: Isaac J. Brown (Telephone No. (214) 740-4037 and Email: Isaac.brown@wickphillips.com);
(b) if to the Administrative Agent, to KeyBank National Association, 225 Franklin Street, 16th Floor, Boston, Massachusetts 02110, Attention: Christopher T. Neil, (Telephone No. (617) 385-6202 and Email: christopher_t_neil@keybank.com; and
(c) if to any other Lender, to it at its address (or telecopy number) set forth on the signature pages of this Agreement, or as provided to Borrower in writing by the Administrative Agent or the Lender.
Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and the appropriate confirmation is received (or if such day is not a Business Day, on the next Business Day); (ii) if given by mail (return receipt requested), on the earlier of receipt or three (3) Business Days after such communication is deposited in the mail with first class postage prepaid, addressed as aforesaid; or (iii) if given by any other means, when delivered at the address specified in this Section.
Section 9.02 Waivers; Amendments.
(a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder and under any other Loan Document are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof nor any provision of any Loan Document may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders or by the Borrowers and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, (vi) release any Credit Party from its obligations under the Loan Documents or release any Collateral, except as specifically provided for herein, without the written consent of each Lender, (vii) subordinate the Loans or any Collateral without the written consent of each Lender, (viii) waive or modify any conditions of extending the Revolving Loan Maturity Date set forth in Section 2.21 without the written consent of each Lender affected thereby, (ix) consent to the Collateral securing any other Indebtedness without the written consent of each Lender, (x) amend the definitions of “Available Revolving Amount” or “Borrowing Base” or any of the related defined terms without the consent of all Lenders (except that the definition of “Maximum Revolving Commitment” and/or “Maximum Total Commitment” may be revised to increase or decrease such amount pursuant to its terms, or otherwise with the consent of the Lenders increasing or decreasing their Revolving Commitments in connection therewith); (xi) amend the definitions of “Collateral Termination Date” or any of the related defined terms (except that only the consent of the Required Lenders shall be required to waive or amend the financial covenants in Section 5.02 so long as any such waivers or amendments do not impact the conditions for the Collateral Termination Date) without the consent of all Lenders; or (xii) while any Term Loans remain outstanding (A) amend, modify or waive any provision of this Agreement if the effect of such amendment, modification or waiver is to require the Revolving Lenders to make Revolving Loans when such Lenders would not otherwise be required to do so, (B) change the amount of the Swing Line Sublimit, or (C) change the amount of the Letter of Credit Sublimit, in each case, without the written consent of the Required Revolving Lenders; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent;
(c) There shall be no amendment, modification or waiver of (i) ARTICLE VIII or any other provision in the Loan Documents that affects the rights or duties of the Administrative Agent under this Agreement or any of the other Loan Documents without the written consent of the Administrative Agent, (ii) Section 2.05 or any other provision in the Loan Documents that affects the rights or duties of the Letter of Credit Issuer under this Agreement or any of the other Loan Documents without the written consent of the Letter of Credit Issuer, or (iii) Section 2.06 or any other provision in the Loan Documents that affects the rights or duties of the Swing Line Lender under this Agreement or any of the other Loan Documents without the written consent of the Swing Line Lender.
(d) Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender; and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender.
(e) If Administrative Agent shall request in writing the consent of any Lender to any amendment, change, waiver, discharge, termination, consent or exercise of rights covered by this Agreement, and such Lender fails to approve or deny such request in writing within ten (10) Business Days of the making of such written request, the Lender shall be deemed to have consented to the request; provided that this paragraph shall not apply with respect to any request for consent from any Lender if such Lender’s consent to such amendment, change, waiver, discharge, termination, consent or exercise is required pursuant to Sections 9.02(b)(i), (ii), (iii), (iv), (vi), or (ix) above.
Section 9.03 Expenses; Indemnity; Damage Waiver.
(a) The Borrowers shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Arrangers, and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Letter of Credit Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder; and (iii) all reasonable out-of-pocket expenses incurred by the Administrative Agent, Letter of Credit Issuer, or any Lender, including the reasonable fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any waivers, workout, restructuring or negotiations in respect of the Loans.
(b) The Borrowers shall indemnify the Administrative Agent, each Arranger, the Letter of Credit Issuer, and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Letter of Credit Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit); (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by a Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to a Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or willful misconduct of such Indemnitee as determined by a court of law in a final non-appealable judgment, or the failure of the Indemnitee to make Loans pursuant to its Commitment in breach of its obligations hereunder.
(c) To the extent that the Borrowers fail to pay any amount required to be paid by them to the Administrative Agent(or any sub-agent thereof), the Letter of Credit Issuer, or the Swing Line Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent(or any such sub-agent), the Letter of Credit Issuer, or the Swing Line Lender, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such.
(d) To the extent permitted by applicable law, the Borrowers shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, the Loans, the Letters of Credit, or the use of the proceeds thereof. Neither any Borrower nor any Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Borrower or such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Borrower or such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.
(e) All amounts due under this Section shall be payable not later than ten days after written demand therefor.
Section 9.04 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by a Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(a) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:
(A) the Parent Borrower, provided that no consent of the Parent Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if a Default has occurred and is continuing, any other assignee; and (ii) such consent shall be deemed granted unless the Parent Borrower objects within five (5) Business Days of a receipt of written notice of the proposed assignment;
(B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment to a Lender, an Affiliate of a Lender or an Approved Fund; and
(C) the consent of the Letter of Credit Issuer and the Swing Line Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment.
Provided, no consent of the Parent Borrower or Administrative Agent shall be required in connection with any assignment to an entity acquiring, or merging with, a Lender.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000.00 unless each of the Parent Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Parent Borrower shall be required if a Default has occurred and is continuing and such consent shall not be unreasonably withheld;
(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned;
(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500.00;
(D) No such assignment shall be made: (1) to a Credit Party or any Affiliate or Subsidiary of any Credit Party; (2) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (2); or (3) to a natural person;
(E) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and
(F) In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to such assignment shall make such additional payments to Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of Borrowers and Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by such Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to: (A) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to Administrative Agent, the Letter of Credit Issuer or any Lender hereunder (and interest accrued thereon) and (B) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swing Line Loans in accordance with its Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Credit Agreement until such compliance occurs
For the purposes of this Section 9.04(b), the term “Approved Fund” has the following meaning:
“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of the principal amount of the Loans and Letter of Credit Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(b) Any Lender may, without the consent of the Borrowers or the Administrative Agent, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (iv) no Borrower’s obligations hereunder shall be increased. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (d) of this Section, each Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that, except in the case of a Participant asserting any right of set-off pursuant to Section 9.08, no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(c) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Parent Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 2.17(e) as though it were a Lender.
(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
Section 9.05 Survival. All covenants, agreements, representations and warranties made by the Borrowers herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of the Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on the Loans or any fee or any other amount payable under this Agreement is outstanding and unpaid. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans or the termination of this Agreement or any provision hereof.
Section 9.06 Counterparts; Integration; Effectiveness.
(a) This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.
(b) This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
(c) Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 9.07 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
Section 9.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender, the Letter of Credit Issuer, and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits of a Borrower (general or special, time or demand, provisional or final, but excluding any funds held by such Borrower on behalf of tenants or other third parties) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of a Borrower against any of and all the obligations of any Borrower now or hereafter existing under this Agreement held by such Lender or Letter of Credit Issuer, irrespective of whether or not such Lender or Letter of Credit Issuer shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender or Letter of Credit Issuer agrees promptly to notify the Parent Borrower after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender or Letter of Credit Issuer under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender or Letter of Credit Issuer may have. In the event that any Defaulting Lender shall exercise any such right of setoff, (a) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of this Agreement and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Secured Parties, and (b) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.
Section 9.09 Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
(b) Each Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the state and federal courts in Boston, Massachusetts and in New York, New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Borrower or its properties in the courts of any jurisdiction.
(c) Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
Section 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 9.11 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
Section 9.12 Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of a Borrower or (h) to any Person in connection with any Hedging Agreement to the (i) extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than a Borrower, and (j) to the National Association of Insurance Commissioners or any other similar organization or any nationally recognized rating agency that requires access to information about a Lender’s or its Affiliates’ investment portfolio in connection with ratings issued with respect to such Lender or its Affiliates For the purposes of this Section, “Information” means all information received from any Credit Party relating to the Credit Party or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by any Credit Party; provided that, in the case of information received from any Credit Party after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Section 9.13 Interest Rate Limitation. If at any time there exists a maximum rate of interest which may be contracted for, charged, taken, received or reserved by the Lenders in accordance with applicable law (the “Maximum Rate”), then notwithstanding anything herein to the contrary, at any time the interest applicable to the Loans, together with all fees, charges and other amounts which are treated as interest on the Loans under applicable law (collectively, the “Charges”), shall exceed such Maximum Rate, the rate of interest payable in respect of the Loans hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been paid in respect of the Loans but were not payable as result of the operation of this Section shall be cumulated and the interest and Charges payable to the Lenders in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by the Lenders. If, for any reason whatsoever, the Charges paid or received on the Loans produces a rate which exceeds the Maximum Rate, the Lenders shall credit against the principal of the Loans (or, if such indebtedness shall have been paid in full, shall refund to the payor of such Charges) such portion of said Charges as shall be necessary to cause the interest paid on the Loans to produce a rate equal to the Maximum Rate. All sums paid or agreed to be paid to the holders of the Loans for the use, forbearance or detention of the Loans shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of this Agreement, so that the interest rate is uniform throughout the full term of this Agreement. The provisions of this Section shall control all agreements, whether now or hereafter existing and whether written or oral, between the parties hereto. Without notice to any Borrower or any other person or entity, the Maximum Rate, if any, shall automatically fluctuate upward and downward as and in the amount by which such maximum nonusurious rate of interest permitted by applicable law fluctuates.
Section 9.14 USA PATRIOT Act. Each Lender that is subject to the Patriot Act (as hereinafter defined) and Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies such Borrower, which information includes the name and address of such Borrower and other information that will allow such Lender or Administrative Agent, as applicable, to identify such Borrower in accordance with the Patriot Act. Each Borrower shall, promptly following a request by Administrative Agent or any Lender, provide all documentation and other information that Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and Anti-Money Laundering Laws, rules and regulations, including the Patriot Act.
Section 9.15 Fiduciary Duty/No Conflicts.
The Administrative Agent, each Lender and their Affiliates (collectively, solely for purposes of this paragraph, the “Lenders”), may have economic interests that conflict with those of the Borrowers, their stockholders and/or their affiliates. Each Borrower agrees that nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Lender, on the one hand, and such Borrower, its stockholders or its affiliates, on the other. Each Borrower acknowledges and agrees that (i) the transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between the Lenders, on the one hand, and the Borrowers, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Lender has assumed an advisory or fiduciary responsibility in favor of any Borrower, its stockholders or its affiliates with respect to the transactions contemplated hereby (or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lender has advised, is currently advising or will advise any Borrower, its stockholders or its Affiliates on other matters) or any other obligation to any Borrower except the obligations expressly set forth in the Credit Documents and (y) each Lender is acting hereunder solely as principal and not as the agent or fiduciary of any Borrower, its management, stockholders, creditors or any other Person. Each Borrower acknowledges and agrees that it has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. Each Borrower agrees that it will not claim that any Lender has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to such Borrower, in connection with such transaction or the process leading thereto in its capacity as a Lender.
Section 9.16 Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b) the effects of any Bail-in Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.
Section 9.17 Multiple Borrowers; Joint and Several Liability.
(a) Each Borrower acknowledges, agrees, represents and warrants that the Lenders have been induced to make the Loans to and issue Letters of Credit for the account of the Borrowers in part based upon the assurances by each Borrower in this Section. Each Borrower (including the Borrowers and each other Additional Borrower), jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, full recourse joint and several liability with the other Borrowers with respect to the payment and performance of all of the Obligations, including all representations, warranties, covenants, obligations and indemnities of any Borrower under the Loan Documents, it being the intention of the parties hereto that all of the Obligations shall be the joint and several, full recourse obligations of each of the Borrowers without preferences or distinction among them. The Administrative Agent and the Lenders may at their option enforce the entire amount of the Loans, Letters of Credit, and the other Obligations against any one or more of the Borrowers and may exercise remedies against each Borrower and its property separately, whether or not the Administrative Agent and the Lenders exercise any against another Borrower or its property. The Administrative Agent, Letter of Credit Issuer, and the Lenders may enforce any Borrower’s obligations without enforcing any other Borrower’s obligations. Any failure or inability of the Administrative Agent or the Lenders to enforce any Borrower’s obligations shall not in any way limit the right to enforce the obligations of another Borrower. Each Borrower recognizes that credit available to it under the Loans and Letters of Credit is in excess of and on better terms than it otherwise could obtain on and for its own account and that one of the reasons therefor is its joining in the credit facility contemplated herein with all other Borrowers.
(b) To the fullest extent permitted by Law, the obligations of each Borrower shall not be affected by (i) the failure of Administrative Agent to assert any claim or demand or to enforce or exercise any right or remedy against any other Borrower under the provisions of this Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement or any other Loan Document, (iii) the failure to perfect any security interest in, or the release of, any of the collateral or other security held by or on behalf of Administrative Agent, or (iv) any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Borrower or that would otherwise operate as a discharge of any Borrower as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations, excluding, however, any contingent indemnification obligations which are not then due and payable or for which a claim has not then been asserted). The obligations of each Borrower shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations, excluding, however, any contingent indemnification obligations which are not then due and payable or for which a claim has not then been asserted), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations or otherwise.
(c) To the fullest extent permitted by Law, each Borrower waives any defense based on or arising out of any defense of any other Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Borrower, other than the indefeasible payment in full in cash of all the Obligations, excluding, however, any contingent indemnification obligations which are not then due and payable or for which a claim has not then been asserted. Administrative Agent may, at its election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any other Borrower, or exercise any other right or remedy available to them against any other Borrower, without affecting or impairing in any way the liability of any Borrower hereunder except to the extent that all of the Obligations have been indefeasibly paid in full in cash, excluding, however, any contingent indemnification obligations which are not then due and payable or for which a claim has not then been asserted. Each Borrower waives any defense arising out of any such election even though such election operates, pursuant to Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Borrower against any other Borrower.
(d) Notwithstanding the foregoing, it is the intent of each Borrower and the Lenders that in any proceeding under any Debtor Relief Laws, such Borrower's maximum obligation hereunder shall equal, but not exceed, the maximum amount which would not otherwise cause the obligations of such Borrower hereunder (or any other obligations of such Borrower to the Lenders under the Loan Documents) to be avoidable or unenforceable against such Borrower in such proceeding as a result of any Legal Requirements, including, without limitation, (i) Section 548 of the Bankruptcy Code of the United States and (ii) any state fraudulent transfer or fraudulent conveyance act or statute applied in such proceeding, whether by virtue of Section 544 of the Bankruptcy Code of the United States or otherwise. The Legal Requirements under which the possible avoidance or unenforceability of the obligations of such Borrower hereunder (or any other obligations of such Borrower to the Lender under the Loan Documents) shall be determined in any such proceeding are referred to herein as “Avoidance Provisions”. Accordingly, to the extent that the obligations of a Borrower hereunder would otherwise be subject to avoidance under the Avoidance Provisions, the maximum Obligations for which such Borrower shall be liable hereunder shall be reduced to the greater of (A) the amount which, as of the time any of the obligations of such Borrower are deemed to have been incurred by such Borrower under the Avoidance Provisions, would not cause the obligations of such Borrower hereunder (or any other obligations of such Borrower to the Lender under the Loan Documents), to be subject to avoidance under the Avoidance Provisions or (B) the amount which, as of the time demand is made hereunder upon such Borrower for payment on account of the Obligations, would not cause the obligations of such Borrower hereunder (or any other obligations of such Borrower to the Lender under the Loan Documents), to be subject to avoidance under the Avoidance Provisions. The provisions under this Section are intended solely to preserve the rights of the Lenders hereunder to the maximum extent that would not cause the obligations of any Borrower hereunder to be subject to avoidance under the Avoidance Provisions, and no Borrower or any other Person shall have any right or claim under this Section as against the Administrative Agent or any Lender that would not otherwise be available to such Person under the Avoidance Provisions.
(e) Upon payment by any Borrower of any Obligations, all rights of such Borrower against any other Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all of the Obligations, excluding, however, any contingent indemnification obligations which are not then due and payable or for which a claim has not then been asserted. In addition, any indebtedness of any Borrower now or hereafter held by any other Borrower is hereby subordinated in right of payment to the prior indefeasible payment in full of the Obligations, excluding, however, any contingent indemnification obligations which are not then due and payable or for which a claim has not then been asserted and no Borrower will demand, sue for or otherwise attempt to collect any such indebtedness. If any amount shall erroneously be paid to any Borrower on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Borrower, such amount shall be held in trust for the benefit of Administrative Agent and shall forthwith be paid to Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents. Subject to the foregoing, to the extent that any Borrower shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Loans made to another Borrower hereunder or other Obligations incurred directly and primarily by any other Borrower (an “Accommodation Payment”), then the Borrower making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Borrowers in an amount, for each of such other Borrowers, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Borrower's Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Borrowers. As of any date of determination, the “Allocable Amount” of each Borrower shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Borrower hereunder without (a) rendering such Borrower “insolvent” within the meaning of Section 101 (32) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Borrower unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.
(f) Each Borrower agrees that it shall never be entitled to be subrogated to any of the Administrative Agent’s or any Lender’s rights against any Borrower or other Person or any collateral or offset rights held by the Administrative Agent or the Lenders for payment of the Loans until the full and final payment of the Loans and all other obligations incurred under the Loan Documents and final termination of the Lenders’ obligations, if any, to make further advances under this Agreement or to provide any other financial accommodations to any Borrower. The value of the consideration received and to be received by each Borrower is reasonably worth at least as much as the liability and obligation of each Borrower incurred or arising under the Loan Documents. Each Borrower has determined that such liability and obligation may reasonably be expected to substantially benefit each Borrower directly or indirectly. Each Borrower has had full and complete access to the underlying papers relating to the Loans and all of the Loan Documents, has reviewed them and is fully aware of the meaning and effect of their contents. Each Borrower is fully informed of all circumstances which bear upon the risks of executing the Loan Documents and which a diligent inquiry would reveal. Each Borrower has adequate means to obtain from each other Borrower on a continuing basis information concerning such other Borrower’s financial condition, and is not depending on the Administrative Agent or the Lenders to provide such information, now or in the future. Each Borrower agrees that neither the Administrative Agent nor any of the Lenders shall have any obligation to advise or notify any Borrower or to provide any Borrower with any data or information regarding any other Borrower.
Section 9.18 Acknowledgement Regarding Any Supported QFCs To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Swap Contracts or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any QFC Covered Party with respect to a Supported QFC or any QFC Credit Support.
As used in this Section, the following terms have the following meanings:
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §382.2(b).
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§252.81, 47.2 or 382.1, as applicable.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
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PARENT BORROWER:
VINEBROOK HOMES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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[Signature Page to Amended and Restated Revolving Credit Agreement]
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SUBSIDIARY BORROWERS: |
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VB OP HOLDINGS LLC, a Delaware limited liability company |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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VB ONE, LLC, |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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TRUE PIT2017-1, LLC, |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[Signature Page to Amended and Restated Revolving Credit Agreement]
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TRUE PIT2017-2, LLC, |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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TRUE JACK2017-1, LLC, |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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TRUE JACK2017-2, LLC, |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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TRUE OM2016-1, LLC, |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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TI KC BRAVO, LLC, |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[Signature Page to Amended and Restated Revolving Credit Agreement]
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TRUE KC2016-1, LLC, |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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TRUE MEM2016-1, LLC, |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[Signature Page to Amended and Restated Revolving Credit Agreement]
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ADMINISTRATIVE AGENT:
KEYBANK NATIONAL ASSOCIATION, as Administrative Agent, |
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By: |
/s/ Christopher T. Neil |
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Name: |
Christopher T. Neil Senior Banker |
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LENDER:
KEYBANK NATIONAL ASSOCIATION |
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By: |
/s/ Christopher T. Neil |
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Name: |
Christopher T. Neil Senior Banker |
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[Signature Page to Amended and Restated Revolving Credit Agreement]
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LENDER:
BMO HARRIS BANK N.A. |
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By: |
/s/ Jonas L. Robinson |
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Name: |
Jonas L. Robinson VP |
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[Signature Page to Amended and Restated Revolving Credit Agreement]
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LENDER:
RAYMOND JAMES BANK |
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By: |
/s/ Gregory A. Hargrove |
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Name: |
Gregory A. Hargrove Vice President |
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[Signature Page to Amended and Restated Revolving Credit Agreement]
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LENDER:
TRUIST BANK |
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By: |
/s/ Ryan Almond |
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Name: |
Ryan Almond Director |
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[Signature Page to Amended and Restated Revolving Credit Agreement]
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LENDER:
FIRST FINANCIAL BANK |
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By: |
/s/ John Wilgus |
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Name: |
John Wilgus Senior Vice President |
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[Signature Page to Amended and Restated Revolving Credit Agreement]
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LENDER:
S&T BANK |
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By: |
/s/ Sean Apicella |
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Name: |
Sean Apicella Senior Vice President |
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[Signature Page to Amended and Restated Revolving Credit Agreement]
The Guarantor joins in the execution of this Agreement to evidence its agreement to the provisions of Sections 5.01, 5.15, 6.05 and 6.07 of this Agreement.
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VINEBROOK HOMES TRUST, INC., |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts Authorized Signatory |
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[Signature Page to Amended and Restated Revolving Credit Agreement]
SCHEDULE 2.01
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LENDER |
REVOLVING COMMITMENT (Percentage) |
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KeyBank National Association |
$85,000,000 (24.285714285714%) |
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BMO Harris Bank N.A. |
$75,000,000 (21.428571428571%) |
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Raymond James Bank |
$75,000,000 (21.428571428571%) |
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Truist Bank |
$75,000,000 (21.428571428571%) |
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First Financial Bank |
$25,000,000 (7.142857142857%) |
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S&T Bank |
$15,000,000 (4.285714285714%) |
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TOTAL: |
$350,000,000 (100%%) |
Schedule 2.01
SCHEDULE 2.23
INITIAL BORROWING BASE PROPERTIES
Schedule 2.23
SCHEDULE 3.07
LITIGATION
Schedule 3.07
SCHEDULE 3.14
OWNERSHIP OF POOL PROPERTIES
Schedule 3.14
SCHEDULE SB
SUBSIDIARY BORROWERS
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1. |
VB OP Holdings LLC, a Delaware limited liability company |
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VB One, LLC, a Delaware limited liability company |
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TRUE PIT2017-1, LLC, a Delaware limited liability company |
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TRUE PIT2017-2, LLC, a Delaware limited liability company |
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5. |
TRUE JACK2017-1, LLC, a Delaware limited liability company |
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6. |
TRUE JACK2017-2, LLC, a Delaware limited liability company |
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7. |
TRUE OM2016-1, LLC, a Delaware limited liability company |
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8. |
TI KC BRAVO, LLC, a Delaware limited liability company |
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9. |
TRUE KC2016-1, LLC, a Delaware limited liability company |
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10. |
TRUE MEM2016-1, LLC, a Delaware limited liability company |
Schedule SB
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT A
ASSIGNMENT AND ASSUMPTION
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT B-1
FORM OF COMPLIANCE CERTIFICATE
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT B-2
FORM OF BORROWING BASE REPORT
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT C
FORM OF AMENDED AND RESTATED GUARANTY
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT D-1
FORM OF REVOLVING NOTE
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT E
[FORM OF] BORROWING REQUEST
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT F-1
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT F-2
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT F-3
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT F-4
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT G
FORM OF OMNIBUS JOINDER AGREEMENT
OMNIBUS JOINDER AGREEMENT
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
EXHIBIT H
FACILITY INCREASE REQUEST
Execution Version
INCREASE AGREEMENT, JOINDER, AND FIRST AMENDMENT TO CREDIT AGREEMENT
THIS INCREASE AGREEMENT, JOINDER, AND FIRST AMENDMENT TO CREDIT AGREEMENT (this “Agreement”) is dated as of December 9, 2021 by and among VINEBROOK HOMES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“Parent Borrower”), and certain of its subsidiaries, as “Subsidiary Borrowers”, KEYBANK NATIONAL ASSOCIATION, a national banking association (in its individual capacity, “KeyBank”), as administrative agent (together with any successor appointed pursuant to Article VIII of the Credit Agreement (defined below), the “Administrative Agent”), and as a Lender under the Credit Agreement (in such capacity, the “Increasing Lender”), and each financial institution party hereto as a “New Lender” (each, a “New Lender”).
A. The Borrowers, the Administrative Agent and the Lenders are party to that certain Amended and Restated Revolving Credit Agreement, dated as of November 3, 2021 (as amended and in effect as of the date hereof, the “Credit Agreement”, and as further amended by this Agreement, the “Amended Credit Agreement”);
B. The Borrowers have requested, pursuant to Section 2.22 of the Credit Agreement, an increase in the Maximum Revolving Commitment to FOUR HUNDRED SIXTY FIVE MILLION DOLLARS ($465,000,000.00);
C. Each New Lender desires to join into the Credit Agreement as a “Lender” as provided herein;
D. KeyBank desires to increase its Commitment as set forth herein, and
E. The Borrowers and the Administrative Agent have agreed to make certain modifications to the Credit Agreement to correct certain scrivener’s errors therein;
NOW, THEREFORE, in consideration of the mutual promises herein contained and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. CREDIT AGREEMENT DEFINITIONS. Unless otherwise expressly defined herein, capitalized terms used but not defined herein shall have the meaning given to such terms in the Amended Credit Agreement.
2. INCREASE IN COMMITMENTS. Subject to satisfaction of the conditions set forth in Section 6 of this Agreement:
2.01. The parties hereto agree and acknowledge that, effective as of the First Amendment Effective Date (as defined below), the Maximum Revolving Commitment is $465,000,000.00.
2.02. The Increasing Lender and each New Lender hereby acknowledges, agrees and confirms, by its execution of this Agreement, that on the First Amendment Effective Date, the amount of its Revolving Commitment under the Credit Agreement is set forth in Schedule 2.01 of the Credit Agreement (as amended hereby).
2.03. The Administrative Agent shall calculate the net amount to be paid or received by each Lender in connection with the increase effected hereunder on the First Amendment Effective Date. The Increasing Lender and each New Lender shall make the net amount of its required payment available to the Administrative Agent, in same day funds, at the office of the Administrative Agent not later than 12:00 P.M. (New York time) on the First Amendment Effective Date. The Administrative Agent shall distribute on the First Amendment Effective Date the proceeds of such amounts to the Lenders entitled to receive payments pursuant to this Section.
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3. |
JOINDER OF NEW LENDERS. |
3.01. By its signature below, each New Lender joins in the execution of, and becomes a party to, the Credit Agreement and the other Loan Documents as a Revolving Lender and a Lender with the Revolving Commitment set forth in Schedule 2.01 of the Credit Agreement (as amended hereby) and irrevocably assumes all rights and obligations in its capacity as a Revolving Lender and a Lender under the Credit Agreement and the other Loan Documents to the extent of such Revolving Commitment.
3.02. Each New Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Agreement and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement; (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement); (iii) from and after the date hereof, it shall be bound by the provisions of the Amended Credit Agreement as a Lender thereunder and, to the extent of its Revolving Commitment set forth in Schedule 2.01 of the Credit Agreement (as amended hereby), shall have the obligations of a Lender thereunder; (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement and to acquire its Revolving Commitment on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender; and (v) it has delivered any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by it; (b) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers as are reasonably incidental thereto pursuant to the terms of the Loan Documents; and (c) agrees that: (i) it will, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
3.03. By its signature below, each of the Parent Borrower and the Administrative Agent consents to the addition of each New Lender as a Lender under the Credit Agreement.
4. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the First Amendment Effective Date (as defined below), the Credit Agreement is hereby amended to correct certain scrivener’s errors and updated Schedule 2.01 thereof as follows, with (i) stricken text (indicated textually in the same manner as the following example: stricken text) shall indicate text which has been deleted and (ii) double-underlined text (indicated textually in the same manner as the following example: double-underlined text) shall indicate text which has been added:
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4.01. |
Section 2.12(b) of the Credit Agreement is hereby amended as follows: |
(b) Letter of Credit Fee. The Borrower shall pay to Administrative Agent for the account of each Revolving Lender in accordance, subject to Section 2.20, with its Revolving Percentage, a fee for each Letter of Credit (the “Letter of Credit Fee”) equal to the Applicable MarginRate for Eurodollar Rate Loans per annum times the daily amount available to be drawn under such Letter of Credit. Such fee shall be: (i) due and payable in quarterly installments in arrears on the first Business Day of each calendar quarter for the preceding calendar quarter, commencing on the first such date to occur after the issuance of any Letter of Credit, on the Revolving Maturity Date, and thereafter (if applicable) on demand; and (ii) computed quarterly in arrears. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.07. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, such fee shall accrue at a rate equal to the Applicable MarginRate for Eurodollar Rate Loans plus four percent (4%).
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4.02. |
Section 3.17 of the Credit Agreement is hereby amended as follows: |
Section 3.17 EEAAffected Financial Institution. No Credit Party is an EEAAffected Financial Institution.
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4.03. |
Section 9.16 of the Credit Agreement is hereby amended as follows: |
Section 9.16 Acknowledgement and Consent to Bail-In of EEAAffected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEAAffected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write- Down and Conversion Powers of an EEAthe applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEAthe applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEAAffected Financial Institution; and
(b) the effects of any Bail-in Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEAAffected Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEAthe applicable Resolution Authority.
4.04. Schedule 2.01 of the Credit Agreement is hereby amended and restated in its entirety as set forth on Exhibit A to this Agreement.
5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, as of the date hereof:
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a. |
The representations and warranties of each Borrower and each other Credit Party contained in Article III of the Credit Agreement or in any other Loan Document are true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes hereof, the representations and warranties contained in Section 3.04 of the Credit Agreement shall be deemed to refer to the most recent financial statements furnished pursuant to clauses (a) and (b), respectively, of Section 5.01 of the Credit Agreement. |
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b. |
To such Borrower’s knowledge, no Default or Event of Default has occurred and is continuing or would result from the increase in the Maximum Total Commitment. |
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c. |
This Agreement has been duly authorized, executed and delivered by each Borrower so as to constitute the legal and binding obligation of such Borrower, enforceable against it in accordance with its terms, subject to Debtor Relief Laws and equitable principles. |
6. CONDITIONS PRECEDENT. The effectiveness of this Agreement is subject to the conditions precedent that Administrative Agent shall have received the following (the date when such conditions shall have been satisfied or waived, the “First Amendment Effective Date”):
6.01. Agreement. This Agreement duly executed and delivered by each Borrower, Increasing Lender, and each New Lender;
6.02. Notes. If requested by such Lender, a Note, payable to the Increasing Lender and each New Lender in the amount of its respective Commitment (after giving effect hereto), duly executed and delivered by the Borrowers;
6.03. Evidence of Authority. Evidence satisfactory to the Administrative Agent that all corporate action necessary to authorize the execution, delivery and performance by the Borrowers of this Agreement shall have been duly and effectively taken;
6.04. Constituent Documents. A certificate from a responsible officer (not individually, but in his or her capacity as such officer) of each Borrower that its authority documents and certificates that were previously delivered to the Administrative Agent in connection with the Credit Agreement have not been amended or modified since such date; and
6.05. Fees and Expenses. In connection with this Agreement, the Administrative Agent, Lenders, the New Lenders, the Increasing Lender, and the Arranger shall have received all fees, expenses, and other amounts due and payable under the Loan Documents in connection with this Agreement, including, without limitation, the applicable Facility Increase Fee and, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder.
7. NO OTHER AMENDMENTS; RATIFICATION OF LOAN DOCUMENTS. Except for the amendments set forth in Sections 2 and 4 of this Agreement, (a) the Credit Agreement and the other Loan Documents shall remain unchanged and in full force and effect and (b) nothing in this Agreement is intended, or shall be construed, to constitute a novation or an accord and satisfaction of any Borrower’s or Guarantor’s Obligations under or in connection with the Credit Agreement or any other Loan Document. Each Credit Party hereby ratifies, confirms and reaffirms all of the terms and conditions of the Credit Agreement and each of the other Loan Documents, and further acknowledges and agrees that all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect, in each case, except as expressly provided in this Agreement. This Agreement shall constitute a Loan Document for all purposes.
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8. |
MISCELLANEOUS. |
8.01. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
8.02. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted by the Amended Credit Agreement.
8.03. Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement, unless such continued effectiveness of this Agreement, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.
8.04. Headings. Section headings are for convenience of reference only and shall in no way affect the interpretation of this Agreement.
8.05. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 6 of this Agreement, this Agreement shall become effective when it shall have been executed by Administrative Agent and when Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.
Remainder of Page Intentionally Left Blank
Signature Pages Follow.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
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PARENT BORROWER:
VINEBROOK HOMES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory | ||
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SUBSIDIARY BORROWERS:
VB OP Holdings LLC, a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory | ||
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VB One, LLC a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory | ||
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TRUE PIT2017-1 LLC a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
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TRUE PIT2017-2, LLC, a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory | ||
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TRUE JACK2017-1, LLC, a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory | ||
| TRUE JACK2017-2, LLC a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory | ||
| TRUE OM2016-1, LLC a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory | ||
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TI KC BRAVO, LLC, a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
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TRUE KC2016-1, LLC, a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory | ||
| TRUE MEM2016-1, LLC, a Delaware limited liability company |
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| By /s/ Brian Mitts | ||
| Name: Brian Mitts | ||
| Title: Authorized Signatory |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
The Guarantor joins in the execution of this Agreement to evidence its agreement to the provisions of Section 7 of this Agreement.
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VineBrook Homes Trust, Inc. |
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| By: | /s/ Brian Mitts | ||
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Name: |
Brian Mitts |
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Title: |
Authorized Signatory |
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ADMINISTRATIVE AGENT:
KEYBANK NATIONAL ASSOCIATION, as Administrative Agent |
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By: |
/s/ Christopher T. Neil |
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| Name: Christopher T. Neil | |||
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Title: Senior Banker |
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[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
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INCREASING LENDER:
KEYBANK NATIONAL ASSOCIATION, as a Lender |
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By: |
/s/ Christopher T. Neil |
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| Name: Christopher T. Neil | |||
| Title: Senior Banker | |||
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
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NEW LENDER:
MIZUHO BANK, LTD., as a Lender |
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By: |
/s/ Donna DeMagistris |
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Name: |
Donna DeMagistris |
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Title: |
Executive Director |
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NEW LENDER:
COMERICA BANK, as a Lender
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| By: | /s/ Charles Weddell | ||
| Name: | Charles Weddell | ||
| Title: | Senior Vice President | ||
EXHIBIT A
Schedule 2.01
LENDER COMMITMENTS
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LENDER |
REVOLVING COMMITMENT (Percentage) |
APPLICABLE PERCENTAGE |
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KeyBank National Association |
$100,000,000 |
21.505376344086% |
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BMO Harris Bank N.A. |
$75,000,000 |
16.129032258065% |
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Raymond James Bank |
$75,000,000 |
16.129032258065% |
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Truist Bank |
$75,000,000 |
16.129032258065% |
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Mizuho Bank, Ltd. |
$75,000,000 |
16.129032258065% |
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First Financial Bank |
$25,000,000 |
5.376344086022% |
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Comerica Bank |
$25,000,000 |
5.376344086022% |
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S&T Bank |
$15,000,000 |
3.225806451613% |
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TOTAL: |
$465,000,000 |
100% |
Exhibit A
Exhibit 10.1
EXECUTION VERSION
INCREASE AGREEMENT, JOINDER, AND SECOND AMENDMENT TO CREDIT AGREEMENT
THIS INCREASE AGREEMENT, JOINDER, AND SECOND AMENDMENT TO CREDIT AGREEMENT (this “Agreement”) is dated as of April 8, 2022 by and among VINEBROOK HOMES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“Parent Borrower”), and certain of its subsidiaries, as “Subsidiary Borrowers”, KEYBANK NATIONAL ASSOCIATION, a national banking association (in its individual capacity, “KeyBank”), as administrative agent (together with any successor appointed pursuant to Article VIII of the Credit Agreement (defined below), the “Administrative Agent”), KeyBank and certain other Lenders under the Credit Agreement party hereto as “Increasing Lenders” (in such capacity, an “Increasing Lender”), each financial institution party hereto as a “New Lender” (each, a “New Lender”), and certain other Lenders party hereto.
A. The Borrowers, the Administrative Agent and the Lenders are party to that certain Amended and Restated Revolving Credit Agreement, dated as of November 3, 2021, as amended by that certain Increase Agreement, Joinder and First Amendment to Credit Agreement dated as of December 9, 2021 (as further amended and in effect as of the date hereof, the “Credit Agreement”, and as further amended by this Agreement, the “Amended Credit Agreement”);
B. The Borrowers have requested, pursuant to Section 2.22 of the Credit Agreement, an increase in the Maximum Revolving Commitment to EIGHT HUNDRED THIRTY-FIVE MILLION AND 00/100 DOLLARS ($835,000,000.00);
C. Each New Lender desires to join into the Credit Agreement as a “Lender” as provided herein;
D. Each Increasing Lender desires to increase its Commitment as set forth herein, and
E. The Borrowers and the Administrative Agent have agreed to make certain modifications to the Credit Agreement to correct certain scrivener’s errors therein;
NOW, THEREFORE, in consideration of the mutual promises herein contained and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. CREDIT AGREEMENT DEFINITIONS. Unless otherwise expressly defined herein, capitalized terms used but not defined herein shall have the meaning given to such terms in the Amended Credit Agreement.
2. INCREASE IN COMMITMENTS. Subject to satisfaction of the conditions set forth in Section 6 of this Agreement:
2.01. The parties hereto agree and acknowledge that, effective as of the Second Amendment Effective Date (as defined below), the Maximum Revolving Commitment is $835,000,000.00.
2.02. Each Lender party hereto (including each Increasing Lender and each New Lender) hereby acknowledges, agrees and confirms, by its execution of this Agreement, that on the Second Amendment Effective Date, the amount of its Revolving Commitment under the Credit Agreement is set forth in Schedule 2.01 of the Credit Agreement (as amended hereby).
2.03. The Administrative Agent shall calculate the net amount to be paid or received by each Lender in connection with the increase effected hereunder on the Second Amendment Effective Date. Each Increasing Lender and each New Lender shall make the net amount of its required payment available to the Administrative Agent, in same day funds, at the office of the Administrative Agent not later than 12:00 P.M. (New York time) on the Second Amendment Effective Date. The Administrative Agent shall distribute on the Second Amendment Effective Date the proceeds of such amounts to the Lenders entitled to receive payments pursuant to this Section.
3. JOINDER OF NEW LENDERS.
3.01. By its signature below, each New Lender joins in the execution of, and becomes a party to, the Credit Agreement and the other Loan Documents as a Revolving Lender and a Lender with the Revolving Commitment set forth in Schedule 2.01 of the Credit Agreement (as amended hereby) and irrevocably assumes all rights and obligations in its capacity as a Revolving Lender and a Lender under the Credit Agreement and the other Loan Documents to the extent of such Revolving Commitment.
3.02. Each New Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Agreement and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement; (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement); (iii) from and after the date hereof, it shall be bound by the provisions of the Amended Credit Agreement as a Lender thereunder and, to the extent of its Revolving Commitment set forth in Schedule 2.01 of the Credit Agreement (as amended hereby), shall have the obligations of a Lender thereunder; (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement and to acquire its Revolving Commitment on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender; and (v) it has delivered any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by it; (b) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers as are reasonably incidental thereto pursuant to the terms of the Loan Documents; and (c) agrees that: (i) it will, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
3.03. By its signature below, each of the Parent Borrower and the Administrative Agent consents to the addition of each New Lender as a Lender under the Credit Agreement.
4. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the Second Amendment Effective Date (as defined below):
4.01. The Credit Agreement (but not the schedules or exhibits thereto) is hereby amended as set forth on Exhibit A to this Agreement. Language being inserted into the applicable section of the Credit Agreement is evidenced by bold and underling formatting. Language being deleted from the applicable section of the Credit Agreement is evidenced by strike-through formatting;
4.02. Schedule 2.01 of the Credit Agreement is hereby amended and restated in its entirety as set forth on Exhibit B to this Agreement.
4.03. Schedule SB of the Credit Agreement is hereby amended and restated in its entirety as set forth on Exhibit C to this Agreement.
5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, as of the date hereof:
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a. |
The representations and warranties of each Borrower and each other Credit Party contained in Article III of the Credit Agreement or in any other Loan Document are true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes hereof, the representations and warranties contained in Section 3.04 of the Credit Agreement shall be deemed to refer to the most recent financial statements furnished pursuant to clauses (a) and (b), respectively, of Section 5.01 of the Credit Agreement. |
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b. |
To such Borrower’s knowledge, no Default or Event of Default has occurred and is continuing or would result from the increase in the Maximum Total Commitment. |
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c. |
This Agreement has been duly authorized, executed and delivered by each Borrower so as to constitute the legal and binding obligation of such Borrower, enforceable against it in accordance with its terms, subject to Debtor Relief Laws and equitable principles. |
6. CONDITIONS PRECEDENT. The effectiveness of this Agreement is subject to the conditions precedent that Administrative Agent shall have received the following (the date when such conditions shall have been satisfied or waived, the “Second Amendment Effective Date”):
6.01. Agreement. This Agreement duly executed and delivered by each Borrower, each Increasing Lender, each New Lender, and each other Lender party hereto;
6.02. Notes. If requested by such Lender, a Note, payable to each Increasing Lender and each New Lender in the amount of its respective Commitment (after giving effect hereto), duly executed and delivered by the Borrowers;
6.03. Evidence of Authority. Evidence satisfactory to the Administrative Agent that all corporate action necessary to authorize the execution, delivery and performance by the Borrowers of this Agreement shall have been duly and effectively taken;
6.04. Constituent Documents. A certificate from a responsible officer (not individually, but in his or her capacity as such officer) of each Borrower that its authority documents and certificates that were previously delivered to the Administrative Agent in connection with the Credit Agreement have not been amended or modified since such date; and
6.05. Fees and Expenses. In connection with this Agreement, the Administrative Agent, the Increasing Lenders, the New Lenders, and the Arranger shall have received all fees, expenses, and other amounts due and payable under the Loan Documents in connection with this Agreement, including, without limitation, the applicable Facility Increase Fee and, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder.
7. NO OTHER AMENDMENTS; RATIFICATION OF LOAN DOCUMENTS. Except for the amendments set forth in Sections 2 and 4 of this Agreement, (a) the Credit Agreement and the other Loan Documents shall remain unchanged and in full force and effect and (b) nothing in this Agreement is intended, or shall be construed, to constitute a novation or an accord and satisfaction of any Borrower’s or Guarantor’s Obligations under or in connection with the Credit Agreement or any other Loan Document. Each Credit Party hereby ratifies, confirms and reaffirms all of the terms and conditions of the Credit Agreement and each of the other Loan Documents, and further acknowledges and agrees that all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect, in each case, except as expressly provided in this Agreement. This Agreement shall constitute a Loan Document for all purposes.
8. MISCELLANEOUS.
8.01. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
8.02. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted by the Amended Credit Agreement.
8.03. Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement, unless such continued effectiveness of this Agreement, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.
8.04. Headings. Section headings are for convenience of reference only and shall in no way affect the interpretation of this Agreement.
8.05. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 6 of this Agreement, this Agreement shall become effective when it shall have been executed by Administrative Agent and when Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.
Remainder of Page Intentionally Left Blank
Signature Pages Follow.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
PARENT BORROWER:
VINEBROOK HOMES OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
SUBSIDIARY BORROWERS:
VB OP HOLDINGS LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
VB ONE, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
TRUE PIT2017-1, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
TRUE PIT2017-2, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
TRUE JACK2017-1, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
TRUE JACK2017-2, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
TRUE OM2016-1, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
TI KC BRAVO, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
TRUE KC2016-1, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
TRUE MEM2016-1, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN VI HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN VII MEM HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN VII STL HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
P FIN VII KC HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN V FL HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN V NC HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN V NM HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN II F HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
P FIN VI, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN VII MEM, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN VII STL, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN VII KC, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN V FL, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
P FIN V NC, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN V NM, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
P FIN II F, LLC,
a Delaware limited liability company
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
The Guarantor joins in the execution of this Agreement to evidence its agreement to the provisions of Section 7 of this Agreement.
VINEBROOK HOMES TRUST, INC.,
a Maryland corporation
By: /s/ Brian Mitts
Name: Brian Mitts
Title: Authorized Representative
ADMINISTRATIVE AGENT:
KEYBANK NATIONAL ASSOCIATION, as
Administrative Agent
By: /s/ Christopher T. Neil
Name: Christopher T. Neil
Title: Senior Banker
INCREASING LENDER:
KEYBANK NATIONAL ASSOCIATION, as an
Increasing Lender
By: /s/ Christopher T. Neil
Name: Christopher T. Neil
Title: Senior Banker
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
INCREASING LENDER:
TRUIST BANK, as an Increasing Lender
By: /s/ C. Vincent Hughes, Jr.
Name: C. Vincent Hughes, Jr.
Title: Director
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
INCREASING LENDER:
BMO HARRIS BANK N.A., as an
Increasing Lender
By: /s/ Jonas L. Robinson
Name: Jonas L. Robinson
Title: Director
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
INCREASING LENDER:
RAYMOND JAMES BANK, as an Increasing Lender
By: /s/ Jack Robbins
Name: Jack Robbins
Title: Vice President
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
INCREASING LENDER:
MIZUHO BANK, LTD.,
as an Increasing Lender
By: /s/ Donna DeMagisris
Name: Donna DeMagistris
Title: Executive Director
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
COMERICA BANK,
as a Lender
By: /s/ Charles Weddell
Name: Charles Weddell
Title: Senior Vice President
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
NEW LENDER:
WELLS FARGO BANK, NATIONAL
ASSOCIATION,
as a New Lender
By: /s/ Dale Northup
Name: Dale Northup
Title: Managing Director
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
NEW LENDER:
CITIZENS BANK, N.A.,
as a New Lender
By: /s/ Donald Woods
Name: Donald Woods
Title: CRE Relationship Manager
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
INCREASING LENDER:
FIRST FINANCIAL BANK,
as an Increasing Lender
By: /s/ John Wilgus
Name: John Wilgus
Title: Senior Vice President
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
NEW LENDER:
SYNOVUS BANK,
as a New Lender
By: /s/ Zachary Braun
Name: Zachary Braun
Title: Corporate Banker
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
NEW LENDER:
ARVEST BANK,
as a New Lender
By: /s/ Rodney D. Peel
Name: Rodney D. Peel
Title: Senior Vice President
EXHIBIT A
CONFORMED CREDIT AGREEMENT
Exhibit 10.2
Execution Version
INCREASE AGREEMENT, JOINDER, AND THIRD AMENDMENT TO CREDIT AGREEMENT
THIS INCREASE AGREEMENT, JOINDER, AND THIRD AMENDMENT TO CREDIT AGREEMENT (this “Agreement”) is dated as of May 20, 2022 by and among VINEBROOK HOMES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“Parent Borrower”), and certain of its subsidiaries, as “Subsidiary Borrowers”, KEYBANK NATIONAL ASSOCIATION, a national banking association (in its individual capacity, “KeyBank”), as administrative agent (together with any successor appointed pursuant to Article VIII of the Credit Agreement (defined below), the “Administrative Agent”) and Bank of America, N.A., as a “New Lender” (“New Lender”).
A. The Borrowers, the Administrative Agent and the Lenders are party to that certain Amended and Restated Revolving Credit Agreement, dated as of November 3, 2021, as amended by that certain Increase Agreement, Joinder and First Amendment to Credit Agreement dated as of December 9, 2021 (as further amended and in effect as of the date hereof, the “Credit Agreement”, and as further amended by this Agreement, the “Amended Credit Agreement”);
B. The Borrowers have requested, pursuant to Section 2.22 of the Credit Agreement, an increase in the Maximum Revolving Commitment to NINE HUNDRED THIRTY-FIVE MILLION AND 00/100 DOLLARS ($935,000,000.00);
C. New Lender desires to join into the Credit Agreement as a “Lender” as provided herein; and
D. The Borrowers and the Administrative Agent have agreed to make certain modifications to the Credit Agreement to correct certain scrivener’s errors therein;
NOW, THEREFORE, in consideration of the mutual promises herein contained and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. CREDIT AGREEMENT DEFINITIONS. Unless otherwise expressly defined herein, capitalized terms used but not defined herein shall have the meaning given to such terms in the Amended Credit Agreement.
2. INCREASE IN COMMITMENTS. Subject to satisfaction of the conditions set forth in Section 6 of this Agreement:
2.01. The parties hereto agree and acknowledge that, effective as of the Second Amendment Effective Date (as defined below), the Maximum Revolving Commitment is $835,000,000.00.
2.02. Each Lender party hereto (including New Lender) hereby acknowledges, agrees and confirms, by its execution of this Agreement, that on the Third Amendment Effective Date, the amount of its Revolving Commitment under the Credit Agreement is set forth in Schedule 2.01 of the Credit Agreement (as amended hereby).
2.03. The Administrative Agent shall calculate the net amount to be paid or received by each Lender in connection with the increase effected hereunder on the Third Amendment Effective Date. New Lender shall make the net amount of its required payment available to the Administrative Agent, in same day funds, at the office of the Administrative Agent not later than 12:00 P.M. (New York time) on the Third Amendment Effective Date. The Administrative Agent shall distribute on the Third Amendment Effective Date the proceeds of such amounts to the Lenders entitled to receive payments pursuant to this Section.
3. JOINDER OF NEW LENDER.
3.01. By its signature below, New Lender joins in the execution of, and becomes a party to, the Credit Agreement and the other Loan Documents as a Revolving Lender and a Lender with the Revolving Commitment set forth in Schedule 2.01 of the Credit Agreement (as amended hereby) and irrevocably assumes all rights and obligations in its capacity as a Revolving Lender and a Lender under the Credit Agreement and the other Loan Documents to the extent of such Revolving Commitment.
3.02. New Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Agreement and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement; (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement); (iii) from and after the date hereof, it shall be bound by the provisions of the Amended Credit Agreement as a Lender thereunder and, to the extent of its Revolving Commitment set forth in Schedule 2.01 of the Credit Agreement (as amended hereby), shall have the obligations of a Lender thereunder; (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement and to acquire its Revolving Commitment on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender; and (v) it has delivered any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by it; (b) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers as are reasonably incidental thereto pursuant to the terms of the Loan Documents; and (c) agrees that: (i) it will, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
3.03. By its signature below, each of the Parent Borrower and the Administrative Agent consents to the addition of New Lender as a Lender under the Credit Agreement.
4. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the Third Amendment Effective Date (as defined below):
4.01. BofA Securities, Inc. is hereby designated as a joint lead arranger and joint bookrunner and a co-syndication agent under the Credit Agreement. From and after the date of this Agreement, the term “Arranger” as used in the Credit Agreement shall include BofA Securities, Inc., in its capacity as a joint lead arranger and bookrunner.
4.02. Schedule 2.01 of the Credit Agreement is hereby amended and restated in its entirety as set forth on Exhibit A to this Agreement.
5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, as of the date hereof:
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a. |
The representations and warranties of each Borrower and each other Credit Party contained in Article III of the Credit Agreement or in any other Loan Document are true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes hereof, the representations and warranties contained in Section 3.04 of the Credit Agreement shall be deemed to refer to the most recent financial statements furnished pursuant to clauses (a) and (b), respectively, of Section 5.01 of the Credit Agreement. |
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b. |
To such Borrower’s knowledge, no Default or Event of Default has occurred and is continuing or would result from the increase in the Maximum Total Commitment. |
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c. |
This Agreement has been duly authorized, executed and delivered by each Borrower so as to constitute the legal and binding obligation of such Borrower, enforceable against it in accordance with its terms, subject to Debtor Relief Laws and equitable principles. |
6. CONDITIONS PRECEDENT. The effectiveness of this Agreement is subject to the conditions precedent that Administrative Agent shall have received the following (the date when such conditions shall have been satisfied or waived, the “Third Amendment Effective Date”):
6.01. Agreement. This Agreement duly executed and delivered by each Borrower, New Lender, and each other Lender party hereto;
6.02. Notes. If requested by New Lender, a Note, payable to New Lender in the amount of its respective Commitment (after giving effect hereto), duly executed and delivered by the Borrowers;
6.03. Evidence of Authority. Evidence satisfactory to the Administrative Agent that all corporate action necessary to authorize the execution, delivery and performance by the Borrowers of this Agreement shall have been duly and effectively taken;
6.04. Constituent Documents. A certificate from a responsible officer (not individually, but in his or her capacity as such officer) of each Borrower that its authority documents and certificates that were previously delivered to the Administrative Agent in connection with the Credit Agreement have not been amended or modified since such date; and
6.05. Fees and Expenses. In connection with this Agreement, the Administrative Agent, New Lender, and the Arranger shall have received all fees, expenses, and other amounts due and payable under the Loan Documents in connection with this Agreement, including, without limitation, the applicable Facility Increase Fee and, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder.
7. NO OTHER AMENDMENTS; RATIFICATION OF LOAN DOCUMENTS. Except for the amendments set forth in Sections 2 and 4 of this Agreement, (a) the Credit Agreement and the other Loan Documents shall remain unchanged and in full force and effect and (b) nothing in this Agreement is intended, or shall be construed, to constitute a novation or an accord and satisfaction of any Borrower’s or Guarantor’s Obligations under or in connection with the Credit Agreement or any other Loan Document. Each Credit Party hereby ratifies, confirms and reaffirms all of the terms and conditions of the Credit Agreement and each of the other Loan Documents, and further acknowledges and agrees that all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect, in each case, except as expressly provided in this Agreement. This Agreement shall constitute a Loan Document for all purposes.
8. MISCELLANEOUS.
8.01. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
8.02. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted by the Amended Credit Agreement.
8.03. Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement, unless such continued effectiveness of this Agreement, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.
8.04. Headings. Section headings are for convenience of reference only and shall in no way affect the interpretation of this Agreement.
8.05. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 6 of this Agreement, this Agreement shall become effective when it shall have been executed by Administrative Agent and when Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.
Remainder of Page Intentionally Left Blank
Signature Pages Follow.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
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PARENT BORROWER:
VINEBROOK HOMES OPERATING PARTNERSHIP, L.P.,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative
SUBSIDIARY BORROWERS:
VB OP HOLDINGS LLC,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative
VB ONE, LLC,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative
TRUE PIT2017-1, LLC,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement
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TRUE PIT2017-2, LLC,
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
TRUE JACK2017-1, LLC,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative
TRUE JACK2017-2, LLC,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative
TRUE OM2016-1, LLC,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative
TI KC BRAVO, LLC,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement
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TRUE KC2016-1, LLC,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative
TRUE MEM2016-1, LLC,
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN VI HOLDINGS, LLC,
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative
P FIN VII MEM HOLDINGS, LLC, a Delaware limited liability company
By: /s/ Brian Mitts______________________________ Name: Brian Mitts Title: Authorized Representative
P FIN VII STL HOLDINGS, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement
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P FIN VII KC HOLDINGS, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN V FL HOLDINGS, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN V NC HOLDINGS, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN V NM HOLDINGS, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN II F HOLDINGS, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement
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P FIN VI, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN VII MEM, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN VII STL, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN VII KC, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN V FL, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement
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P FIN V NC, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN V NM, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative
P FIN II F, LLC, a Delaware limited liability company
By: /s/ Brian Mitts_____________________________ Name: Brian Mitts Title: Authorized Representative |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement
The Guarantor joins in the execution of this Agreement to evidence its agreement to the provisions of Section 7 of this Agreement.
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VINEBROOK HOMES TRUST, INC., |
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By: |
/s/ Brian Mitts |
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Name: |
Brian Mitts |
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Title: |
Authorized Representative |
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Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement
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ADMINISTRATIVE AGENT:
KEYBANK NATIONAL ASSOCIATION, as Administrative Agent |
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By: |
/s/ Christopher T. Neil |
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Name: |
Christopher T. Neil |
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Title: |
Senior Banker |
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[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement
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NEW LENDER:
BANK OF AMERICA, N.A., as a New Lender |
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By: |
/s/ Stephanie Mejia |
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Name: |
Stephanie Mejia |
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Vice President |
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Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement
EXHIBIT A
Schedule 2.01
LENDER COMMITMENTS
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LENDER |
REVOLVING COMMITMENT |
APPLICABLE PERCENTAGE |
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KeyBank National Association |
$125,000,000 |
13.368983957219% |
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Truist Bank |
$125,000,000 |
13.368983957219% |
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BMO Harris Bank N.A. |
$100,000,000 |
10.695187165775% |
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Raymond James Bank |
$100,000,000 |
10.695187165775% |
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Mizuho Bank, Ltd. |
$100,000,000 |
10.695187165775% |
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Wells Fargo Bank, National Association |
$100,000,000 |
10.695187165775% |
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Bank of America, N.A. |
$100,000,000 |
10.695187165775% |
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Citizens Bank, N.A. |
$75,000,000 |
8.021390374332% |
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First Financial Bank |
$30,000,000 |
3.208556149733% |
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Comerica Bank |
$25,000,000 |
2.673796791444% |
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Synovus Bank |
$25,000,000 |
2.673796791444% |
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S&T Bank |
$20,000,000 |
2.139037433155% |
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Arvest Bank |
$10,000,000 |
1.069518716578% |
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TOTAL: |
$935,000,000 |
100% |
Exhibit B
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian Mitts, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of VineBrook Homes Trust, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 14, 2022
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/s/ Brian Mitts |
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Brian Mitts |
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Interim President and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Brian Mitts, certify that:
1. I have reviewed this Annual Report on Form 10-Q of VineBrook Homes Trust, Inc.; and
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
Date: November 14, 2022
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/s/ Brian Mitts |
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Brian Mitts |
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Interim President and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) |