Alexandria Real Estate Equities, Inc 10-K, filed Mar 1, 2007
Alexandria Real Estate Equities, Inc. (ARE)
About this 10-K
Alexandria Real Estate Equities, Inc filed this 10-K on March 1, 2007, covering the fiscal year ended December 31, 2006.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
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 1-12993
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
|
Maryland |
95-4502084 |
385 East Colorado Boulevard
Suite 299
Pasadena, California 91101
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (626) 578-0777
Securities registered pursuant to Section 12(b) of the Act:
|
Title of Each Class |
Name of Each Exchange on Which Registered |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO x
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 reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x
The aggregate market value of the shares of Common Stock held by non-affiliates of registrant was approximately $2.3 billion based on the closing price for such shares on the New York Stock Exchange on June 30, 2006.
As of February 26, 2007, the registrant had outstanding 29,425,361 shares of Common Stock.
Documents Incorporated By Reference
Part III of this report incorporates certain information by reference from the registrant's definitive proxy statement to be filed within 120 days of the end of the fiscal year covered by this report in connection with the registrant's annual meeting of stockholders to be held on or about May 23, 2007.
INDEX TO FORM 10-K
ALEXANDRIA REAL ESTATE EQUITIES, INC.
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PART I |
Page |
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Business |
1 |
|
|
Risk Factors |
4 |
|
|
Unresolved Staff Comments |
13 |
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Properties |
14 |
|
|
Legal Proceedings |
17 |
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Submission of Matters to a Vote of Security Holders |
17 |
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PART II |
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
18 |
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Selected Financial Data |
19 |
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Management's Discussion and Analysis of Financial Condition and Results of Operation |
21 |
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Quantitative and Qualitative Disclosures About Market Risk |
35 |
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Financial Statements and Supplementary Data |
36 |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
36 |
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Controls and Procedures |
36 |
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Other Information |
39 |
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PART III |
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Directors, Executive Officers and Corporate Governance |
39 |
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Executive Compensation |
39 |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
39 |
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Certain Relationships and Related Transactions, and Director Independence |
39 |
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Principal Accountant Fees and Services |
39 |
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PART IV |
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Exhibits, Financial Statement Schedules |
40 |
PART I
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify some of the forward-looking statements by the use of forward-looking words such as "believes", "expects", "may", "will", "should", "seeks", "intends", "plans", "estimates" or "anticipates", or the negative of these words or similar words. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions and financial trends that may affect our future plans of operation, business strategy, results of operations and financial position. A number of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking statements, including, but not limited to, those described below in this report and under the headings "Item 1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation". We do not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document, whether as a result of new information, future events or otherwise.
As used in this Form 10-K, references to the "Company", "we", "our", and "us" refer to Alexandria Real Estate Equities, Inc. and its subsidiaries.
General
We are a Maryland corporation formed in October 1994 that has elected to be taxed as a real estate investment trust ("REIT") for federal income tax purposes. We are engaged principally in the ownership, operation, management, selective redevelopment, development and acquisition of properties for the life sciences industry. Our properties are designed and improved for lease primarily to institutional (universities and independent not-for-profit institutions), pharmaceutical, biotechnology, medical device, life science product, service, biodefense and translational research entities, as well as governmental agencies. Our properties leased to tenants in the life science industry typically consist of buildings containing scientific research and development laboratories and other improvements that are generic to tenants operating in the life science industry. We refer to such properties as "life science properties". As of December 31, 2006, we had 159 properties (156 properties located in nine states in the United States and three properties located in Canada) with approximately 11.2 million rentable square feet of office/laboratory space plus 1.2 million square footage undergoing ground-up development and an imbedded pipeline for ground-up development of approximately 5.9 million additional rentable square feet.
Business and growth strategy
We focus our property operations and investment activities principally in the following life science markets:
- California - Los Angeles Metro;
- California - San Diego;
- California - San Francisco Bay;
- Eastern Massachusetts;
- International - Canada;
- New Jersey/Suburban Philadelphia;
- New York City;
- Southeast;
- Suburban Washington D.C.; and
- Washington - Seattle.
Our tenant base is broad and diverse within the life science industry and reflects our focus on regional, national and international tenants with substantial financial and operational resources. For a more detailed description of our properties and tenants, see "Item 2. Properties." We have an experienced Board of Directors and are led by a senior management team with extensive experience in both the real estate and life science industries.
We seek to maximize growth in funds from operations ("FFO") and cash available for distribution to our stockholders through the ownership, operation, management, selective redevelopment, development and acquisition of life science properties, as well as management of our balance sheet. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation" for a discussion of how we compute and view FFO, as well as a discussion of other measures of cash flow. In particular, we seek to increase FFO and cash available for distribution by:
- redeveloping existing office, warehouse or shell space or newly acquired properties into generic laboratory space that can be leased at higher rental rates in our target life science cluster markets;
- selectively developing properties in our target life science cluster markets;
- acquiring high quality life science properties in our target life science cluster markets at prices that enable us to realize attractive returns;
- retenanting and re-leasing space at higher rental rates while minimizing tenant improvement costs;
- realizing contractual rental rate escalations, which are currently provided for in approximately 89% of our leases (on a square footage basis);
- implementing effective cost control measures, including negotiating pass-through provisions in tenant leases for operating expenses and certain capital expenditures; and
- maintaining a strong and flexible balance sheet.
We seek to achieve a significant component of our growth primarily from internal growth through selective redevelopment and development, favorable lease terms and successful leasing activity. In addition, our internal growth strategy is supplemented with external growth through selective acquisition of properties in our target life science cluster markets.
Internal growth
We seek to achieve internal growth from several sources. For example, we seek to:
- redevelop existing and/or newly acquired space to higher rent, generic laboratory space;
- develop office/laboratory properties;
- improve investment returns through leasing of vacant space and replacement of existing tenants with new tenants at higher rental rates;
- include rental rate escalation provisions in our leases;
- implement effective cost control measures, including negotiating pass-through provisions in tenant leases for operating expenses and certain capital expenditures; and
- achieve higher rental rates from existing tenants as existing leases expire.
Redevelopment
We seek to enhance our growth by redeveloping existing office, warehouse or shell space as generic laboratory space that can be leased at higher rates. As of December 31, 2006, we had approximately 613,000 rentable square feet undergoing redevelopment at 13 properties. In addition to properties undergoing redevelopment, as of December 31, 2006, our asset base contained imbedded opportunities for a future permanent change of use to office/laboratory space through redevelopment aggregating approximately 1.2 million rentable square feet.
Development
We seek to acquire strategic land parcels in key life science cluster markets to enhance our growth through ground-up development projects. Our development strategy is primarily to pursue selective projects where we expect to achieve investment returns that will equal or exceed our returns on acquisitions. We generally have undertaken ground-up development projects only if our investment in infrastructure will be substantially made for generic, rather than tenant specific, improvements. As of December 31, 2006, we had four parcels of land undergoing development for approximately 1,176,000 rentable square feet of office/laboratory space. In addition to properties undergoing development, as of December 31, 2006, our asset base contained strategically located land with ground-up development opportunities for approximately 5.9 million developable square feet of office/laboratory space.
Acquisitions
We seek to identify and acquire high quality life science properties in our target life science cluster markets. Critical evaluation of prospective property acquisitions is an essential component of our acquisition strategy. When evaluating acquisition opportunities, we assess a full range of matters relating to the properties, including:
- opportunities to redevelop existing space into higher rent generic laboratory space;
- opportunities to develop office/laboratory properties;
- location of the property and our strategy in the relevant market;
- quality of existing and prospective tenants;
- condition and capacity of the building infrastructure;
- quality and generic characteristics of laboratory facilities;
- physical condition of the structure and common area improvements; and
- opportunities available for leasing vacant space and for retenanting occupied space.
Financing and working capital
We believe that cash provided by operations, our unsecured line of credit and our unsecured term loan will be sufficient to fund our working capital requirements. We generally expect to finance future redevelopment, development and acquisition of properties through our unsecured line of credit and unsecured term loan and, then, to refinance some or all of that indebtedness periodically with additional equity or debt capital. We may also issue shares of our common stock, preferred stock or interests in our subsidiaries to fund future operations. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation-Liquidity and capital resources-Unsecured line of credit and unsecured term loan".
We seek to maintain a balance between the amounts of our fixed and variable rate debt with a view to moderating our exposure to interest rate risk. We also use financial instruments, such as interest rate swap agreements, to hedge a portion of our exposure to variable interest rates primarily associated with our unsecured line of credit and our unsecured term loan. Interest rate swap agreements involve an exchange of fixed and floating rate interest payments without the exchange of the underlying principal or "notional amount". Interest received under our current interest rate swap agreements is based on the one-month London interbank offered rate, or LIBOR. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation-Liquidity and capital resources-Interest rate swaps" for a more complete discussion of our unsecured line of credit, unsecured term loan, interest rate swap agreements and other outstanding indebtedness.
Preferred securities
We expect to continue to issue additional series of preferred stock that are senior to our common stock. At December 31, 2006, we had preferred stock with a liquidation preference of approximately $187 million. The preferred stock has general preference rights with respect to liquidation and quarterly distributions. In June 2004, we completed a public offering of 5,185,500 shares of our 8.375% Series C cumulative redeemable preferred stock with aggregate proceeds of approximately $124.0 million. In July 2004, we redeemed all 1,543,500 outstanding shares of our 9.50% Series A cumulative redeemable preferred stock at an aggregate redemption price of approximately $38.6 million. In February 2007, we announced that we will redeem all 2,300,000 outstanding shares of our 9.10% Series B Cumulative Redeemable Preferred Stock at a redemption price of $25.00 per share plus $0.4107639 per share representing accumulated and unpaid dividends through the redemption date of March 20, 2007. Future redemptions or repurchases of our preferred securities may occur after their respective call dates. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation-Liquidity and capital resources- Other resources and liquidity requirements".
Available information
We will provide, upon request and free of charge, paper copies of our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments to the foregoing reports, as soon as is reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. These materials, along with our corporate governance guidelines, Business Integrity Policy and board committee charters, are also available through our corporate website at http://www.labspace.com. The public may also download these materials from the Securities and Exchange Commission's website at http://www.sec.gov. Any amendments to, and waivers of, our Business Integrity Policy will be posted on our corporate website.
Employees
As of December 31, 2006, we had 105 full-time employees. We believe that we have good relations with our employees. We have adopted a Business Integrity Policy that applies to all of our employees. Its receipt and review by each employee is documented and verified annually.
We are largely dependent on the life science industry for revenues from lease payments
In general, our strategy is to invest primarily in properties used by tenants in the life science industry. Our business could be adversely affected if the life science industry experiences an economic downturn or migrates from U.S. to other countries. Because of our industry focus, events within the life science industry may have a more pronounced effect on our ability to make distributions to our stockholders than if we had more diversified investments. Also, some of our properties may be better suited for a particular life science industry tenant and could require modification before we are able to re-lease vacant space to another life science industry tenant. Generally, our properties may not be suitable for lease to traditional office tenants without significant expenditures on renovations.
Our ability to negotiate contractual rent escalations in future leases and to achieve increases in rental rates will depend upon market conditions and the demand for life science properties at the time the leases are negotiated and the increases are proposed.
Our tenants may not be able to pay us if they are unsuccessful in discovering, developing, making or selling their products and technologies
Our life science industry tenants are subject to a number of risks, including the following, any one or more of which may adversely affect their ability to make rental payments to us.
- Some of our tenants developing potential drugs may find that their drugs are not effective, or may even be harmful, when tested in humans.
- Some of our tenants may not be able to manufacture their drugs economically, even if such drugs are proven through human clinical trials to be safe and effective in humans.
- Drugs that are developed and manufactured by some of our tenants require regulatory approval prior to being made, marketed, sold and used. The regulatory approval process to manufacture and market drugs is costly, typically takes several years, requires the expenditure of substantial resources and is often unpredictable. A tenant may fail or experience significant delays in obtaining these approvals.
- Some of our tenants and their licensors require patent, copyright or trade secret protection to develop, make, market and sell their products and technologies. A tenant may be unable to commercialize its products or technologies if patents covering such products or technologies do not issue, or are successfully challenged, narrowed, invalidated or circumvented by third parties, or if a tenant fails to obtain licenses to the discoveries of third parties necessary to commercialize its products or technologies.
- A drug made by a tenant may not be well accepted by doctors and patients, or may be less effective or accepted than competitor's drugs, or may be subsequently recalled from the market, even if it is successfully developed, proven safe and effective in human clinical trials, manufactured and the requisite regulatory approvals are obtained.
- Some of our tenants require significant funding to develop and commercialize their products and technologies, which funding must be obtained from private investors, the public markets, companies in the life science industry or federal, state and local governments. Such funding may become unavailable or difficult to obtain.
- Even with sufficient funding, some of our tenants may not be able to discover or identify potential drug targets in humans, or potential drugs for use in humans, or to create tools or technologies which are commercially useful in the discovery or identification of potential drug targets or drugs.
We cannot assure you that our tenants will be able to develop, make, market or sell their products and technologies due to the risks inherent in the life science industry. Any tenant that is unable to avoid, or sufficiently mitigate, the risks described above, may have difficulty making rental payments to us.
We could be held liable for damages resulting from our tenants' use of hazardous materials
Many of our life science industry tenants engage in research and development activities that involve the controlled use of hazardous materials, chemicals and biological and radioactive compounds. In the event of contamination or injury from the use of these hazardous materials, we could be held liable for damages that result. This liability could exceed our resources and any recovery available through any applicable environmental remediation insurance coverage, and could adversely affect our ability to make distributions to our stockholders.
Together with our tenants, we must comply with federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. Failure to comply with, or changes in, these laws and regulations could adversely affect our business or our tenants' business and their ability to make rental payments to us.
The inability of a tenant to pay us rent could adversely affect our business
Our revenues are derived primarily from rental payments and reimbursement of operating expenses under our leases. If our tenants, especially significant tenants, fail to make rental payments under their leases, our financial condition, cash flow and our ability to make distributions to our stockholders could be adversely affected.
As of December 31, 2006, we had 370 leases with a total of 310 tenants, and 80 of our 159 properties were single-tenant properties. Our three largest tenants accounted for approximately 14.9% of our aggregate annualized base rent, or approximately 7.9%, 3.9% and 3.1%, respectively. "Annualized base rent" means the annualized fixed base rental amount in effect as of December 31, 2006, using rental revenues calculated on a straight-line basis in accordance with United States generally accepted accounting principles ("GAAP"). Annualized base rent does not include reimbursements for real estate taxes and insurance, common area and other operating expenses, substantially all of which are borne by the tenants in the case of triple net leases.
The bankruptcy or insolvency of a major tenant may also adversely affect the income produced by a property. If any of our tenants becomes a debtor in a case under the U.S. Bankruptcy Code, we cannot evict that tenant solely because of its bankruptcy. The bankruptcy court may authorize the tenant to reject and terminate its lease with us. Our claim against such a tenant for unpaid future rent would be subject to a statutory limitation that might be substantially less than the remaining rent actually owed to us under the tenant's lease. Any shortfall in rent payments could adversely affect our cash flow and our ability to make distributions to our stockholders.
Our U.S. government tenants may not receive annual budget appropriations, which could adversely affect their ability to pay us
U.S. government tenants may be subject to annual budget appropriations. If one of our U.S. government tenants fails to receive its annual budget appropriation, it might not be able to make its lease payments to us. In addition, defaults under leases with federal government tenants are governed by federal statute and not by state eviction or rent deficiency laws. All of our leases with U.S. government tenants provide that the government tenant may terminate the lease under certain circumstances. As of December 31, 2006, leases with U.S. government tenants at our properties accounted for approximately 3.2% of our aggregate annualized base rent.
Our inability to renew leases or re-lease space on favorable terms as leases expire may significantly affect our business
Our revenues are derived primarily from rental payments and reimbursement of operating expense under our leases. If a tenant experiences a downturn in its business or other types of financial distress, it may be unable to make timely payments under its lease. Also, when our tenants decide not to renew their leases or terminate early, we may not be able to re-lease the space. Even if tenants decide to renew or lease space, the terms of renewals or new leases, including the cost of any tenant improvements, concessions and lease commissions, may be less favorable to us than current lease terms. Consequently, we could lose the cash flow from the affected property, which could negatively impact our business. We may have to divert cash flow generated by other properties to meet our mortgage payments, if any, or to pay other expenses related to owning the affected property. As of December 31, 2006, leases at our properties representing approximately 12.8% and 7.9% of the total square footage of our properties were scheduled to expire in 2007 and 2008, respectively.
Poor economic conditions in our markets could adversely affect our business
Our properties are located only in the following markets:
- California - Los Angeles Metro;
- California - San Diego;
- California - San Francisco Bay;
- Eastern Massachusetts;
- International - Canada;
- New Jersey/Suburban Philadelphia;
- New York City;
- Southeast;
- Suburban Washington D.C.; and
- Washington - Seattle.
As a result of our geographic concentration, we depend upon the local economic conditions in these markets, including local real estate conditions. We are, therefore, subject to increased exposure (positive or negative) to economic and other competitive factors specific to markets in confined geographic areas. Our operations may also be affected if too many competing properties are built in any of these markets. An economic downturn in any of these markets could adversely affect our operations and our ability to make distributions to stockholders. We cannot assure you that these markets will continue to grow or will remain favorable to the life science industry.
We may have difficulty managing our growth
We expect to continue to grow by selectively redeveloping, developing and acquiring additional properties in our key life science cluster markets. To manage our growth effectively, we must successfully integrate new properties into our existing operations. We may not succeed with the integration. In addition, we may not effectively manage new properties, and new properties may not perform as expected. Our business could be adversely affected if we are unsuccessful in managing our growth.
Our debt service obligations may have adverse consequences on our business operations
We use debt to finance our operations, including redevelopment, development and acquisitions of properties. Our use of debt may have adverse consequences, including the following:
- Our cash flow from operations may not be sufficient to meet required payments of principal and interest.
- We may be forced to dispose of one or more of our properties, possibly on disadvantageous terms, to make payments on our debt.
- We may default on our debt obligations, and the lenders or mortgagees may foreclose on our properties that secure those loans.
- A foreclosure on one of our properties could create taxable income without any accompanying cash proceeds to pay the tax.
- A default under a mortgage loan that has cross default provisions may cause us to automatically default on another loan.
- We may not be able to refinance or extend our existing debt.
- The terms of any refinancing or extension may not be as favorable as the terms of our existing debt.
- We may be subject to a significant increase in the variable interest rates on our unsecured line of credit and unsecured term loan and certain other borrowings, which could adversely impact our operations.
As of December 31, 2006, we had outstanding mortgage indebtedness of approximately $1.2 billion, secured by 76 properties and 11 land development parcels, and outstanding debt under our unsecured line of credit and unsecured term loan of $850 million. In January 2007, we completed a private offering of $460 million of 3.70% convertible unsecured notes due in 2027.
Our unsecured line of credit and unsecured term loan restrict our ability to engage in some business activities
Our unsecured line of credit and unsecured term loan facilities contain customary negative covenants and other financial and operating covenants that, among other things:
- restrict our ability to incur additional indebtedness;
- restrict our ability to make certain investments;
- restrict our ability to merge with another company;
- restrict our ability to make distributions to stockholders;
- require us to maintain financial coverage ratios; and
- require us to maintain a pool of unencumbered assets approved by the lenders.
These restrictions could cause us to default on our unsecured line of credit and unsecured term loan or negatively affect our operations and our ability to make distributions to our stockholders.
We may not be able to obtain additional capital to further our business objectives
Our ability to redevelop, develop or acquire properties depends upon our ability to obtain capital. Periodically, the real estate industry experiences reduced supplies of favorably-priced equity or debt capital, which decreases the level of new investment activity by publicly-traded real estate companies. A prolonged period in which we cannot effectively access the public equity or debt markets may result in heavier reliance on alternative financing sources to undertake new investments. An inability to obtain equity or debt capital on acceptable terms could delay or prevent us from acquiring, financing and completing desirable investments, which could adversely affect our business. Also, the issuance of additional shares of capital stock or interests in subsidiaries to fund future operations could dilute the ownership of then existing stockholders.
We have filed a "shelf" registration statement on Form S-3, under which we may offer from time to time and at our discretion, common stock, preferred stock, warrants and debt securities in amounts, at prices and on terms to be determined at the time of offering.
If interest rates rise, our debt service costs will increase
Borrowings outstanding under our unsecured line of credit, unsecured term loan and certain other borrowings bear interest at a variable rate, and we may incur additional variable rate debt in the future. Increases in market interest rates would increase our interest expense under these debt instruments and would increase the costs of refinancing existing indebtedness or obtaining new debt. Accordingly, these increases could adversely affect our financial position and our ability to make distributions to our stockholders.
We have spaces available for redevelopment that may be difficult to redevelop or successfully lease to tenants
A key component of our internal growth is through the redevelopment of existing office, warehouse or shell space as generic laboratory space that can be leased at higher rates. There can be no assurance that we will be able to initiate the redevelopment of spaces or complete spaces undergoing redevelopment. Redevelopment activities subject us to many risks, including delays in permitting, financing availability, engaging contractors, availability and pricing of materials and labor and other redevelopment uncertainties. In addition, there can be no assurance that, upon completion, we will be able to successfully lease the space or lease the space at rental rates at or above the returns on our investment anticipated by our stockholders.
We may be unsuccessful with our real estate development activities
A significant component of our current and future internal growth is through the ground-up development of generic laboratory space. Our success with our development projects depend on many risks that may adversely affect our business, including those associated with:
- delays in construction;
- budget overruns;
- lack of availability and/or increasing costs of materials;
- commodity pricing of building materials and supplies;
- financing availability;
- volatility in interest rates;
- labor availability;
- timing of the commencement of rental payments;
- delays or denials of entitlements or permits; and
- other property development uncertainties.
In addition, development activities, regardless of whether they are ultimately successful, typically require a substantial portion of management's time and attention. This may distract management from focusing on other operational activities. If we are unable to complete development projects successfully, our business may be adversely affected.
Our real estate development strategy has and will continue to increase in the future
We will continue to pursue opportunities to acquire land for future ground-up development and we will continue to initiate ground-up development projects. As of December 31, 2006, we had approximately 1.2 million square feet undergoing ground-up development and we had an imbedded pipeline for ground-up development of an additional 5.9 million rentable square feet. Our existing projects undergoing ground-up development and future ground-up development projects increase our risk of unsuccessful real estate development activities which may have an adverse affect on our business.
We may not be able to acquire properties or operate them successfully
Our success depends in large part upon our ability to acquire additional properties on satisfactory terms and to operate them successfully. If we are unable to do so, our business could be adversely affected. In addition, the acquisition of life science properties generally involves a higher per square foot price than the acquisition of traditional office properties.
The acquisition, ownership and operation of real estate is subject to many risks that may adversely affect our business and our ability to make payments to our stockholders, including the risks that:
- Our properties may not perform as we expect.
- We may not be able to acquire a desired property because of competition from other real estate investors with significant capital.
- We may lease space at rates below our expectations.
- We may not be able to obtain financing on acceptable terms.
- We may overpay for new acquisitions.
- We may underestimate the cost of improvements required to bring an acquired property up to standards established for the market position intended for that property.
If we encounter any of these risks, our business and our ability to make payments to our stockholders could be adversely affected.
If our revenues are less than our expenses, we may have to borrow additional funds and we may not be able to make distributions to our stockholders
If our properties do not generate revenues sufficient to meet our operating expenses, including debt service and other capital expenditures, we may have to borrow additional amounts to cover fixed costs and cash flow needs. This could adversely affect our ability to make distributions to our stockholders. Factors that could adversely affect the revenues from, and the values of, our properties include:
- national and local economic conditions;
- competition from other life science properties;
- changes in the life science industry;
- real estate conditions in our target markets;
- our ability to collect rent payments;
- availability of financing;
- changes in interest rate levels;
- vacancies at our properties and our ability to re-lease space;
- changes in tax or other regulatory laws;
- costs of compliance with government regulation;
- lack of liquidity of real estate investments; and
- increases in operating costs.
In addition, if a lease at a property is not a triple net lease, we will have greater expenses associated with that property and greater exposure to increases in such expenses. Significant expenditures, such as mortgage payments, real estate taxes, insurance and maintenance costs, generally are fixed and do not decrease when revenues at the related property decrease.
Improvements to life science properties are significantly more costly than traditional office space
Our properties contain generic infrastructure improvements that are significantly more costly than other property types. Although we have historically been able to recover the additional investment in generic infrastructure improvements through higher rental rates, there is the risk that we will not be able to continue to do so in the future. Typical improvements include:
- reinforced concrete floors;
- upgraded roof loading capacity;
- increased floor to ceiling heights;
- heavy-duty HVAC systems;
- enhanced environmental control technology;
- significantly upgraded electrical, gas and plumbing infrastructure; and
- laboratory benches.
We may not be able to sell our properties quickly to raise money
Investments in real estate are relatively illiquid. Accordingly, we may not be able to sell our properties when we desire or at acceptable prices in response to changes in economic or other conditions. In addition, the Internal Revenue Code limits our ability to sell properties held for fewer than four years. These limitations on our ability to sell our properties may adversely affect our cash flows and our ability to make distributions to our stockholders.
We face substantial competition in our target markets
The significant competition for business in our target markets could have an adverse effect on our operations. We compete for investment opportunities with:
- insurance companies;
- pension and investment funds;
- private equity entities;
- partnerships;
- developers;
- investment companies;
- other REITs; and
- owner/occupants.
Many of these entities have substantially greater financial resources than we do and may be able to pay more than us or accept more risk than we are willing to accept. These entities may be less sensitive to risks with respect to the creditworthiness of a tenant or the geographic concentration of their investments. Competition may also reduce the number of suitable investment opportunities available to us or may increase the bargaining power of property owners seeking to sell.
Our properties may have defects that are unknown to us
Although we review the physical condition of our properties before they are acquired, and on a periodic basis after acquisition, any of our properties may have characteristics or deficiencies unknown to us that could adversely affect the property's value or revenue potential.
If we fail to qualify as a REIT, we would be taxed at corporate rates and would not be able to take certain deductions when computing our taxable income
If, in any taxable year, we fail to qualify as a REIT:
- We would be subject to federal income tax on our taxable income at regular corporate rates.
- We would not be allowed a deduction for distributions to our stockholders in computing taxable income.
- Unless we were entitled to relief under the Internal Revenue Code of 1986, as amended, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which we lost qualification.
- We would no longer be required by the Internal Revenue Code to make any distributions to our stockholders.
As a result of any additional tax liability, we might need to borrow funds or liquidate certain investments in order to pay the applicable tax. Accordingly, funds available for investment or distribution to our stockholders would be reduced for each of the years involved.
Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code to our operations and financial results, and the determination of various factual matters and circumstances not entirely within our control. There are only limited judicial or administrative interpretations of these provisions. Although we believe that we have operated, commencing with our taxable year ended December 31, 1996, in a manner so as to qualify as a REIT, we cannot assure you that we are or will remain so qualified.
In addition, although we are not aware of any pending tax legislation that would adversely affect our ability to operate as a REIT, new legislation, regulations, administrative interpretations or court decisions could change the tax laws or interpretations of the tax laws regarding qualification as a REIT, or the federal income tax consequences of that qualification, in a manner that is adverse to our stockholders.
There are limits on the ownership of our capital stock under which a stockholder may lose beneficial ownership of its shares
The Internal Revenue Code provides that, in order for us to maintain our qualification as a REIT, not more than 50% of the value of our outstanding capital stock may be owned, directly or constructively, by five or fewer individuals or entities.
In addition, our charter prohibits, with certain limited exceptions, direct or constructive ownership of shares of our capital stock representing more than 9.8% of the combined total value of the outstanding shares of our capital stock by any person (the "Ownership Limit"). Our Board of Directors may exempt a stockholder from the Ownership Limit if, prior to the exemption, our Board of Directors receives all information it deems necessary to determine or ensure our status as a REIT.
The constructive ownership rules are complex and may cause shares of our common stock owned directly or constructively by a group of related individuals or entities to be constructively owned by one individual or entity. A transfer of shares to a person who, as a result of the transfer, violates the Ownership Limit, may be void or may be deemed to be made to a trust, for the benefit of one or more qualified charitable organizations designated by us. In that case, the intended transferee will have only a right to share, to the extent of the transferee's original purchase price for such shares, in proceeds from the trust's sale of those shares.
In addition to the ownership limit, certain provisions of our charter and bylaws and our stockholder rights plan may delay or prevent transactions that may be deemed to be desirable to our stockholders
As authorized by Maryland law, our charter allows our Board of Directors to cause us to issue additional authorized but unissued shares of our common stock or preferred stock and to classify or reclassify unissued shares of common or preferred stock without any stockholder approval. Our Board of Directors could establish a series of preferred stock that could delay, defer or prevent a transaction that might involve a premium price for our common stock or for other reasons be desired by our common stockholders or that have a dividend preference which may adversely affect our ability to pay dividends on our common stock.
Our charter permits the removal of a director only upon a two-thirds vote of the votes entitled to be cast generally in the election of directors and our bylaws require advance notice of a stockholder's intention to nominate directors or to present business for consideration by stockholders at an annual meeting of our stockholders. Our charter and bylaws also contain other provisions that may delay, defer or prevent a transaction or change in control that involves a premium price for our common stock or that for other reasons may be desired by our stockholders.
Under our Stockholder Rights Plan, if a stockholder acquires beneficial ownership of 15% or more of our common stock, other stockholders would become entitled to purchase our common stock at half the market price, which would likely result in substantial dilution to the 15% or greater stockholder. This may also have the effect of delaying or preventing a change in control or other transaction that might involve a premium price for our common stock or for other reasons desired by our common stockholders.
Our insurance may not adequately cover all potential losses
If we experience a loss at any of our properties that is not covered by insurance or that exceeds our insurance policy limits, we could lose the capital invested in the affected property and, possibly, future revenues from that property. In addition, we could continue to be obligated on any mortgage indebtedness or other obligations related to the affected properties. We carry comprehensive liability, fire, extended coverage and rental loss insurance with respect to our properties. We have obtained earthquake insurance for all of our properties because many of them are located in the vicinity of active earthquake faults. We also carry environmental remediation insurance and have title insurance policies on all of our properties. We obtain our title insurance policies when we acquire the property, with each policy covering an amount equal to the initial purchase price of each property. Accordingly, any of our title insurance policies may be in an amount less than the current value of the related property.
We believe that our insurance policy specifications, insured limits and deductibles are consistent with or superior to those customarily carried for similar properties. Our tenants are also required to maintain comprehensive insurance, including liability and casualty insurance, that is customarily obtained for similar properties. There are, however, certain types of losses that we and our tenants do not generally insure against because they are uninsurable or because it is not economical to insure against them. In the current market, there have recently been substantial increases in the premium cost of property and liability insurance. The availability of coverage against certain types of losses, such as from terrorism or toxic mold, has become more limited and, when available, is at a significantly higher premium cost. We cannot predict whether insurance coverage against terrorism or toxic mold will remain available for our properties because insurance companies may no longer offer coverage against such losses or, if offered, such coverage may become prohibitively expensive. Many, but not all, of our properties are low-rise buildings. Toxic mold has not presented any material problems at any of our properties.
We could incur significant costs complying with environmental laws
Federal, state and local environmental laws and regulations may require us, as a current or prior owner or operator of real estate, to investigate and clean up hazardous or toxic substances or petroleum products released at or from any of our properties. The cost of investigating and cleaning up contamination could be substantial and could exceed the amount of any environmental remediation insurance coverage available to us. In addition, the presence of contamination, or the failure to properly clean it up, may adversely affect our ability to lease or sell an affected property, or to borrow funds using that property as collateral.
Under environmental laws and regulations, we may have to pay governmental entities or third parties for property damage and for investigation and clean-up costs incurred by those parties relating to contaminated properties regardless of whether we knew of or caused the contamination. Even if more than one party may have been responsible for the contamination, we may be held responsible for all of the clean-up costs. In addition, third parties may sue us for damages and costs resulting from environmental contamination or jointly responsible parties may contest their responsibility or be financially unable to pay their share of such costs.
Environmental laws also govern the presence, maintenance and removal of asbestos-containing materials. These laws may impose fines and penalties on us for the release of asbestos-containing materials and may allow third parties to seek recovery from us for personal injury from exposure to asbestos fibers. We have detected asbestos-containing materials at some of our properties, but we do not expect that it will result in material environmental costs or liabilities to us.
Environmental laws and regulations also require the removal or upgrading of certain underground storage tanks and regulate:
- the discharge of storm water, wastewater and any water pollutants;
- the emission of air pollutants;
- the generation, management and disposal of hazardous or toxic chemicals, substances or wastes; and
- workplace health and safety.
Many of our tenants routinely handle hazardous substances and wastes as part of their operations at our properties. Environmental laws and regulations subject our tenants, and potentially us, to liability resulting from these activities. Environmental liabilities could also affect a tenant's ability to make rental payments to us. We require our tenants to comply with these environmental laws and regulations and to indemnify us for any related liabilities.
Independent environmental consultants have conducted Phase I or similar environmental assessments at all of our properties. We intend to use consultants to conduct similar environmental assessments on our future acquisitions. This type of assessment generally includes a site inspection, interviews and a public records review, but no subsurface sampling. These assessments and certain additional investigations of our properties have not to date revealed any environmental liability that we believe would have a material adverse effect on our business or results of operations.
The additional investigations have included, as appropriate:
- asbestos surveys;
- radon surveys;
- lead surveys;
- mold surveys;
- additional public records review;
- subsurface sampling; and
- other testing.
Nevertheless, it is possible that the assessments on our properties have not revealed, or that assessments on future acquisitions, will not reveal all environmental liabilities. Consequently, there may be material environmental liabilities of which we are unaware that may result in substantial costs to us or our tenants and that could have a material adverse effect on our business.
We may incur significant costs complying with the Americans With Disabilities Act and similar laws
Under the Americans With Disabilities Act, places of public accommodation and/or commercial facilities are required to meet federal requirements related to access and use by disabled persons. We may be required to make substantial capital expenditures at our properties to comply with this law. In addition, our noncompliance could result in the imposition of fines or an award of damages to private litigants.
A number of additional federal, state and local laws and regulations exist regarding access by disabled persons. These regulations may require modifications to our properties or may affect future renovations. This may limit the overall returns on our investments.
We believe that our properties are substantially in compliance with the present requirements of the Americans With Disabilities Act and similar laws.
We may incur significant costs if we fail to comply with laws or if laws change
Our properties are subject to many federal, state and local regulatory requirements and to state and local fire and life-safety requirements. If we do not comply with all of these requirements, we may have to pay fines to governmental authorities or damage awards to private litigants. We believe that our properties are currently in compliance with all of these regulatory requirements. We do not know whether these requirements will change or whether new requirements will be imposed. Changes in these regulatory requirements could require us to make significant unanticipated expenditures. These expenditures could have an adverse effect on us and our ability to make distributions to our stockholders.
The loss of services of any of our senior executive officers could adversely affect us
We depend upon the services of relatively few executive officers. The loss of services of any one of them may adversely affect our business, financial condition and prospects. We use the extensive personal and business relationships that members of our management have developed over time with owners of life science properties and with major life science industry tenants. We cannot assure you that our senior executive officers will remain employed with us.
We may change our business policies without stockholder approval
Our Board of Directors determines all of our material business policies, with management's input, including those related to our:
- status as a REIT;
- incurrence of debt and debt management activities;
- selective development and acquisition activities;
- stockholder distributions; and
- other policies, as appropriate.
Our Board of Directors may amend or revise these policies at any time without a vote of our stockholders. A change in these policies could adversely affect our business and our ability to make distributions to our stockholders.
We could become highly leveraged and our debt service obligations could increase
Our organizational documents do not limit the amount of debt that we may incur. Therefore, we could become highly leveraged. This would result in an increase in our debt service obligations that could adversely affect our cash flow and our ability to make distributions to our stockholders. Higher leverage could also increase the risk of default on our debt obligations.
Our distributions to stockholders may decline at any time
We may not continue our current level of distributions to our stockholders. Our Board of Directors will determine future distributions based on a number of factors, including:
- our amount of cash available for distribution;
- our financial condition;
- any decision by our Board of Directors to reinvest funds rather than to distribute such funds;
- our capital expenditures;
- the annual distribution requirements under the REIT provisions of the Internal Revenue Code; and
- other factors our Board of Directors deems relevant.
Possible future sales of shares of our common stock could adversely affect its market price
We cannot predict the effect, if any, of future sales of shares of our common stock on the market price of our common stock from time to time. Sales of substantial amounts of capital stock (including common stock issued upon the exercise of stock options, upon conversion of convertible debt securities or redemption of preferred stock), or the perception that such sales may occur, could adversely affect prevailing market prices for our common stock.
We have reserved for issuance to our officers, directors and employees pursuant to our Amended and Restated 1997 Stock Award and Incentive Plan that number of shares of our common stock that equals 12% of the total number of shares outstanding at any time, provided that in no event may the number of shares of our common stock available for issuance under the plan exceed 3,000,000 shares at any time. As of December 31, 2006, a total of 942,283 shares we reserved for issuance under our 1997 Stock Award and Incentive Plan.
As of December 31, 2006, options to purchase 338,680 shares of our common stock were outstanding, all of which were exercisable. We have filed a registration statement with respect to the issuance of shares of our common stock pursuant to grants under our equity incentive plan. In addition, any shares issued under our equity incentive plan will be available for sale in the public market from time to time without restriction by persons who are not our "affiliates" (as defined in Rule 144 adopted under the Securities Act of 1933). Affiliates will be able to sell shares of our common stock pursuant to exemptions from registration requirements or upon registration.
External factors may adversely impact the valuation of investments
We hold equity investments in certain publicly-traded companies and privately held entities primarily involved in the life science industry. The valuation of these investments is affected by many external factors beyond our control, including, but not limited to, market prices, market conditions, prospects for favorable or unfavorable clinical trial results, new product initiatives and new collaborative agreements. Unfavorable developments with respect to any of these factors may have an adverse impact on the valuation of our investments.
We are subject to risks from potential fluctuations in exchange rates between the U.S. dollar and foreign currencies
As of December 31, 2006, we had three properties located in Canada. We are pursuing, and intend to continue to pursue, additional growth opportunities in Canada and other international markets. Investments in countries where the U.S. dollar is not the national currency are subject to international currency risk from the potential fluctuations in exchange rates between the U.S. dollar and the local currency. A significant decrease in the value of the Canadian dollar or other foreign currencies where we may have a significant investment could materially affect our results of operations. We may attempt to mitigate such effects by borrowing in the local foreign currency in which we invest. Any international currency gain recognized with respect to changes in exchange rates may not qualify under the 75% gross income test or the 95% gross income test that we must satisfy annually in order to qualify and maintain our status as a REIT.
Item 1B. Unresolved Staff Comments
None
General
As of December 31, 2006, we had 159 properties comprising approximately 11.2 million rentable square feet of office/laboratory space. Excluding properties undergoing redevelopment, our properties were approximately 93.1% leased as of December 31, 2006. The exteriors of our properties typically resemble traditional office properties, but the interior infrastructures are designed to accommodate the needs of life science industry tenants. These improvements typically are generic to life science industry tenants rather than being specific to a particular tenant. As a result, we believe that the improvements have long-term value and utility and are usable by a wide range of life science industry tenants. Generic infrastructure improvements to our life science properties typically include:
- reinforced concrete floors;
- upgraded roof loading capacity;
- increased floor to ceiling heights;
- heavy-duty HVAC systems;
- enhanced environmental control technology;
- significantly upgraded electrical, gas and plumbing infrastructure; and
- laboratory benches.
As of December 31, 2006, we own a fee simple interest in each of our properties, except for the following nineteen properties that account for approximately 18% of the total rentable square footage of our properties:
- three properties in the San Francisco Bay market, in which we hold a commercial condominium interest, together with an undivided interest in the common areas of the project of which the property is a part;
- three properties in the San Francisco Bay market, one property in the Southeast market, two properties in the Suburban Washington D.C. market and one property in the Eastern Massachusetts market in which we hold ground leasehold interests;
- one property located in the San Francisco Bay market and one property located in the Eastern Massachusetts market, in which we have a controlling interest. The non-controlling interest held by certain third parties is reflected as minority interest in our consolidated financial statements. See further discussion in our consolidated financial statements and notes thereto in "Item 15. Exhibits, Financial Statement Schedules"; and
- seven properties in the Eastern Massachusetts market in which we hold ground leasehold interests and a controlling interest. The non-controlling interest held by certain third parties is reflected as minority interest in our consolidated financial statements. See further discussion in our consolidated financial statements and notes thereto in "Item 15. Exhibits, Financial Statement Schedules".
As of December 31, 2006, our asset base contains two ground-up development projects in New York City and the San Francisco Bay markets in which we hold ground leasehold interests.
As of December 31, 2006, we had 370 leases with a total of 310 tenants, and 80 of our 159 properties were single-tenant properties. Leases in our multi-tenant buildings typically have terms of three to seven years, while the single-tenant building leases typically have initial terms of 10 to 20 years. As of December 31, 2006:
- approximately 90% of our leases (on a square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses (including increases thereto) in addition to base rent, and, in addition to our triple net leases, approximately 4% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses;
- approximately 89% of our leases (on a square footage basis) contained effective annual rent escalations that are either fixed (generally ranging from 3% to 3.5%) or indexed based on a consumer price index or other index; and
- approximately 91% of our leases (on a square footage basis) provided for the recapture of certain capital expenditures (such as HVAC systems maintenance and/or replacement, roof replacement and parking lot resurfacing), which we believe would typically be borne by the landlord in traditional office leases.
Our leases also typically give us the right to review and approve tenant alterations to the property. Generally, tenant-installed improvements to the properties remain our property after termination of the lease at our election. However, we are permitted under the terms of most of our leases to require that the tenant, at its expense, remove the improvements and restore the premises to their original condition.
Location of properties
The locations of our properties are diversified among a number of life science markets. The following table sets forth, as of December 31, 2006, the total rentable square footage, annualized base rent and encumbrances of our properties in each of our existing markets (dollars in thousands).
% of
Total Total
Number Rentable Rentable % of
of Square Square Annualized Annualized
Markets Properties Footage Footage Base Rent (1) Base Rent Encumbrances (2)
- --------------- --------- ----------- ---------- -------------- ----------- ---------------
California - Los Angeles Metro 2 61,003 0.5% $ 775 0.3% $ --
California - San Diego 27 1,310,256 11.7% 29,385 10.3% 176,887
California - San Francisco Bay 24 1,733,251 15.5% 49,666 17.5% 248,994
Eastern Massachusetts 39 3,275,103 29.2% 99,515 35.1% 294,268
International - Canada 3 296,362 2.6% 6,486 2.3% 6,081
New Jersey/Suburban Philadelphia 8 443,349 3.9% 8,907 3.1% 16,659
Southeast 12 658,406 5.9% 9,221 3.3% 8,326
Suburban Washington D.C. 32 2,575,370 22.9% 54,063 19.1% 193,420
Washington - Seattle 12 879,251 7.8% 25,557 9.0% 55,072
--------- ----------- ---------- -------------- ----------- ---------------
Total 159 11,232,351 100.0% $ 283,575 100.0% $ 999,707 (3)
========= =========== ========== ============== =========== ===============
_____________
(1) Annualized base rent means the annualized fixed base rental amount in effect as of December
31, 2006 (using rental revenue computed on a straight-line basis in accordance with GAAP).
(2) Certain properties are pledged as security under our secured notes payable as of December 31, 2006. See
Schedule III - Consolidated Financial Statement Schedule of Rental Properties and Accumulated Depreciation in "Item 15. Exhibits,
Financial Statement Schedules" for additional information on our properties, including encumbered properties.
(3) Excludes $175.2 million of encumbrances primarily related to eleven land parcels.
In addition, as of December 31, 2006, our asset base contained land parcels totaling 1.2 million square footage undergoing development and future ground-up development opportunities for approximately 5.9 million developable square feet of office/laboratory space.
Tenants
Our life science properties are leased principally to a diverse group of tenants, with no tenant being responsible for more than 7.9% of our annualized base rent. The following table sets forth information regarding leases with our 10 largest tenants based upon annualized base rent as of December 31, 2006.
10 Largest Tenants
Remaining Percentage
Lease Approximate Percentage Percentage Annualized of Aggregate
Number Term Aggregate of Aggregate Annualized of Aggregate Net Effective Annualized
of in Rentable Leased Base Rent (in Annualized Rent (in Net Effective
Tenant Leases Years Square Feet Square Feet thousands) (1) Base Rent thousands) (2) Rent
- -------------------------------------- ------- -------- ------------ ------------ -------------- ------------- -------------- -------------
Novartis AG 3 8.5 (3) 374,789 3.8% $22,372 7.9% $21,752 8.3%
GlaxoSmithKline 5 8.0 (4) 293,602 3.0% 10,958 3.9% 10,588 4.0%
ZymoGenetics, Inc. 2 12.4 (5) 203,369 2.1% 8,747 3.1% 8,742 3.3%
Human Genome Sciences, Inc. 4 0.1 (6) 197,704 2.0% 8,237 2.9% 8,070 3.1%
Massachusetts Institute of Technology 3 5.3 (7) 178,952 1.8% 7,899 2.8% 7,637 2.9%
Theravance, Inc. 2 5.3 (8) 170,244 1.7% 6,136 2.2% 5,885 2.2%
Genentech, Inc. 1 11.7 126,971 1.3% 5,533 1.9% 5,208 2.0%
Amylin Pharmaceuticals, Inc. 3 9.4 (9) 158,983 1.6% 5,452 1.9% 5,182 2.0%
Amgen, Inc. 3 2.8 (10) 203,600 2.1% 5,045 1.8% 4,875 1.9%
Senomyx, Inc. 1 10.2 64,000 0.7% 2,396 0.8% 2,129 0.9%
------- -------- ------------ ----------- -------------- ------------- -------------- ----------
Total/Weighted Average (11): 27 7.2 1,972,214 20.1% $82,775 29.2% $80,068 30.6%
======= ======== ============ ============ ============== ============= ============== ==========
________________
(1) Annualized base rent means the annualized fixed base rental amount in effect as of December 31, 2006 (using
rental revenue computed on a straight-line basis in accordance with GAAP).
(2) Annualized net effective rent is the annualized base rent in effect as of December 31, 2006 (using rental revenue
computed on a straight-line basis in accordance with GAAP), less (for gross leases) real estate taxes and insurance, common area and
other operating expenses and (for all leases) amortization of tenant improvements and leasing
commissions.
(3) Amount shown is a weighted average of multiple leases with this tenant for 255,441 rentable square feet, 81,441
rentable square feet and 37,907 rentable square feet with remaining lease terms of 11.3 years, 3.5 years and 0.8 years,
respectively.
(4) Amount shown is a weighted average of multiple leases with this tenant for 128,759 rentable square feet
(represents two leases at two properties containing 60,579 rentable square feet and 68,000 rentable square feet); 13,883 rentable
square feet and 150,960 rentable square feet with remaining lease terms of 13.3 years, 4.8 years and 3.9 years,
respectively.
(5) Novo A/S owns approximately 33% of ZymoGenetics, Inc.
(6) Leases with Human Genome Sciences, Inc. end on January 31, 2007.
(7) Amount shown is a weighted average of multiple leases with this tenant for 86,515 rentable square feet, 8,876
rentable square feet and 83,561 rentable square feet with remaining lease terms of 6.5 years, 4.8 years and 4.1 years,
respectively.
(8) GlaxoSmithKline plc ("GSK") owns 15.9% of the outstanding stock of Theravance, GSK's ownership of their
stock could increase to approximately 58% pursuant to the terms of the strategic alliance between GSK and Theravance.
(9) Amount shown is a weighted average of multiple leases with this tenant for 71,510 rentable square feet and
87,473 rentable square feet (represents two leases at two properties containing 45,030 rentable square feet and 42,443 rentable
square feet) with remaining lease terms of 11.1 years and 8.1 years, respectively.
(10) Amount shown is a weighted average of multiple leases with this tenant for 66,000 rentable square feet, 21,316
rentable square feet and 116,284 rentable square feet with remaining lease terms of 5.4 years, 4.0 years and 1.2 years, respectively.
(11) Weighted average based on percentage of aggregate leased square feet. Excluding the four leases that end
on January 31, 2007 with Human Genome Sciences, Inc., the remaining average lease term of our top tenants was approximately 7.9
years.
To our knowledge, no litigation is pending against us, other than routine actions and administrative proceedings, substantially all of which are expected to be covered by liability insurance and which, in the aggregate, are not expected to have a material adverse effect on our financial condition, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
We did not submit any matters to a vote of our security holders in the fourth quarter of the fiscal year ended December 31, 2006.
PART II
Our common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "ARE". On February 26, 2007, the last reported sales price per share of our common stock was $106.70, and there were approximately 268 holders of record of our common stock (excluding beneficial owners whose shares are held in the name of CEDE & Co.). The following table sets forth the quarterly high and low sales prices per share of our common stock as reported on the NYSE and the distributions paid by us with respect to each such period.
Per Share Period High Low Distribution - ------ ------ ------ ------------ 2006 Fourth Quarter........................ $105.45 $92.60 $0.74 Third Quarter......................... $99.35 $88.09 $0.72 Second Quarter........................ $95.70 $81.52 $0.70 First Quarter......................... $98.00 $79.46 $0.70 2005 Fourth Quarter........................ $85.00 $76.02 $0.70 Third Quarter......................... $85.85 $73.02 $0.68 Second Quarter........................ $75.42 $62.09 $0.68 First Quarter......................... $74.50 $63.15 $0.66
Future distributions on our common stock will be determined by and at the discretion of our Board of Directors and will be dependent upon a number of factors, including actual cash available for distribution, our financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our Board of Directors deems relevant. To maintain our qualification as a REIT, we must make annual distributions to stockholders of at least 90% of our taxable income for the current taxable year, determined without regard to deductions for dividends paid and excluding any net capital gains. Under certain circumstances, we may be required to make distributions in excess of cash flow available for distributions to meet these distribution requirements. In such a case, we may borrow funds or may raise funds through the issuance of additional debt or equity capital. We cannot assure you that we will make any future distributions.
The tax treatment of distributions paid in 2006 is as follows: (1) 82.1% ordinary dividend, (2) 12.3% capital gain at 15%, (3) 3.3% return of capital, and (4) 2.3% Section 1250 capital gain at 25%. The tax treatment of distributions on common stock paid in 2005 is as follows: (1) 71.8% ordinary dividend, (2) 3.9% capital gain at 15%, (3) 24.1% return of capital, and (4) 0.2% Section 1250 capital gain at 25%.
See "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" for information on securities authorized for issuance under equity compensation plans.
Item 6. Selected Financial Data
The following table should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Form 10-K. See "Item 15. Exhibits, Financial Statement Schedules".
Year Ended December 31,
----------------------------------------------------------------
2006 2005 2004 2003 2002
----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share amounts)
Operating Data:
Total revenue ................................................................. $ $316,821 $238,138 $ $178,300 $ $155,235 $ $136,990
Total expenses ................................................................ 242,564 177,304 122,203 109,780 101,706
Minority interest ............................................................. 2,287 634 - - -
----------- ----------- ----------- ----------- -----------
Income from continuing operations.............................................. 71,970 60,200 56,097 45,455 35,284
Income from discontinued operations, net...................................... 1,446 3,233 4,098 14,188 4,748
----------- ----------- ----------- ----------- -----------
Net income..................................................................... 73,416 63,433 60,195 59,643 40,032
Dividends on preferred stock................................................... 16,090 16,090 12,595 8,898 8,579
Preferred stock redemption charge.............................................. - - 1,876 - -
----------- ----------- ----------- ----------- -----------
Net income available to common stockholders.................................... $ 57,326 47,343 $ 45,724 $ 50,745 $ 31,453
=========== =========== =========== =========== ===========
Earnings per share - basic
Continuing operations (net of preferred stock dividends
and preferred stock redemption charge) .............................. $ 2.22 2.11 $ 2.16 $ 1.92 $ 1.52
Discontinued operations, net............................................ 0.06 0.15 0.21 0.75 0.27
----------- ----------- ----------- ----------- -----------
Earnings per share - basic.............................................. $ 2.28 2.26 $ 2.37 $ 2.67 $ 1.79
=========== =========== =========== =========== ===========
Earnings per share - diluted
Continuing operations (net of preferred stock dividends
and preferred stock redemption charge) .............................. $ 2.19 2.07 $ 2.12 $ 1.90 $ 1.50
Discontinued operations, net............................................ 0.06 0.15 0.21 0.74 0.26
----------- ----------- ----------- ----------- -----------
Earnings per share - diluted............................................ $ 2.25 2.22 $ 2.33 $ 2.64 $ 1.76
=========== =========== =========== =========== ===========
Weighted average shares of common stock outstanding
Basic .................................................................. 25,102,200 20,948,915 19,315,364 18,993,856 17,594,228
=========== =========== =========== =========== ===========
Diluted ................................................................ 25,524,478 21,316,886 19,658,759 19,247,790 17,859,787
=========== =========== =========== =========== ===========
Cash dividends declared per share of common stock.............................. $ 2.86 2.72 $ 2.52 $ 2.20 $ 2.00
=========== =========== =========== =========== ===========
Year Ended December 31,
----------- ---------------------------------------------------
2006 2005 2004 2003 2002
----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
Balance Sheet Data (at year end):
Rental properties, net ........................................................ $ 2,924,881 1,788,818 $ 1,427,853 $ 982,297 $ 976,422
Total assets .................................................................. $ 3,617,477 2,362,450 $ 1,872,284 $ 1,272,577 $ 1,159,243
Secured notes payable, unsecured line of credit and unsecured term loan ....... $ 2,024,866 1,406,666 $ 1,186,946 $ 709,007 $ 614,878
Total liabilities ............................................................. $ 2,208,348 1,512,535 $ 1,251,811 $ 765,442 $ 673,390
Minority interest ............................................................. $ 57,477 20,115 $ - $ - $ -
Stockholders' equity .......................................................... $ 1,351,652 829,800 $ 620,473 $ 507,135 $ 485,853
Reconciliation of Net Income Available to Common Stockholders to
Funds from Operations Available to Common Stockholders:
Net income available to common stockholders (1)................................ $ 57,326 47,343 $ 45,724 $ 50,745 $ 31,453
Add:
Depreciation and amortization (2).............................................. 74,039 55,416 42,523 38,901 34,071
Impairment of investments...................................................... - - - - 2,545
Minority interests' share of income............................................ 2,287 634 - - -
Subtract:
Gain/loss on sales of property (3)............................................. (59) (36) (1,627) (8,286) -
FFO allocable to minority interest............................................. (1,928) (668) - - -
----------- ----------- ----------- ----------- -----------
Funds from operations available to common stockholders (4) .................... $ 131,665 102,689 $ 86,620 $ 81,360 $ 68,069
=========== =========== =========== =========== ===========
Other Data:
Cash provided by operating activities ......................................... $ 128,390 120,678 65,316 74,311 67,050
Cash used in investing activities ............................................. $ (970,590) (432,900) (448,252) (139,274) (227,840)
Cash provided by financing activities ......................................... $ 841,237 312,975 381,109 66,158 156,204
Number of properties owned at year end ........................................ 159 133 112 90 90
Rentable square feet of properties owned at year end........................... 11,232,351 8,817,239 7,441,440 5,721,340 5,792,432
Occupancy of properties owned at year end ..................................... 88% 88% 87% 88% 89%
Occupancy of properties owned at year end, excluding properties under
redevelopment............................................................... 93% 93% 95% 94% 96%
(1) During the second quarter of 2004, we elected to redeem the 9.50% Series A
cumulative redeemable preferred stock ("Series A preferred stock"). Accordingly, in compliance with Emerging Issues Task Force Topic
D-42, we recorded a charge of $1,876,000, or $0.10 per common share (diluted), in the second quarter of 2004 for costs related to the
redemption of the Series A preferred stock.
(2) Includes depreciation and amortization on assets "held for sale" reflected as discontinued operations (for the
periods prior to when such assets were designated as "held for sale").
(3) Gain/loss on sales of property relates to the disposition of three properties in the Suburban Washington D.C. and
the New Jersey/Suburban Philadelphia markets during 2006, the disposition of a property in the Southeast market during 2005, the
disposition of a property in the Suburban Washington D.C. market during 2004, the disposition of three properties in the Suburban
Washington D.C., the Eastern Massachusetts and the San Francisco Bay markets during 2003. Gain/loss on sales of property is
included in the income statement in income from discontinued operations, net.
(4) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") established the measurement tool of Funds From Operations ("FFO"). Since its introduction, FFO has become a widely used non-GAAP financial measure by REITs. We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT. We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its April 2002 White Paper (the "White Paper") and related implementation guidance, which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs. The White Paper defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. While FFO is a relevant and widely used measure of operating performance for REITs, it should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. For a more detailed discussion of FFO, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation - Funds from operations".
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation
The terms "Company", "we", "our" and "us" as used in this Form 10-K refer to Alexandria Real Estate Equities, Inc. and its subsidiaries. The following discussion should be read in conjunction with our consolidated financial statements and notes in "Item 15. Exhibits, Financial Statement Schedules". Forward-looking statements involve inherent risks and uncertainties regarding events, conditions and financial trends that may affect our future plans of operation, business strategy, results of operations and financial position. A number of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking statements, including, but not limited to, those described below in this report and under the headings "Item 1A. Risk Factors". We do not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document, whether as a result of new information, future events or otherwise.
Overview
We are a publicly-traded real estate investment trust focused principally on the ownership, operation, management, selective redevelopment, development and acquisition of properties for the life science industry. Our properties are designed and improved for lease primarily to institutional (universities and independent not-for-profit institutions), pharmaceutical, biotechnology, medical device, life science product, service, biodefense and translational research entities, as well as governmental agencies.
In 2006, we:
- Completed the redevelopment of multiple spaces at eleven properties aggregating 356,000 rentable square feet.
- Executed the East River Science Park ground lease in New York City for the ground up development of approximately 725,000 rentable square feet.
- Completed ground-up development of four properties aggregating 360,000 rentable square feet.
- Commenced ground-up development of three properties aggregating 1,022,000 square feet.
- Acquired 25 properties aggregating 2.4 million rentable square feet.
- Acquired three land parcels aggregating 662,000 square feet.
- Increased capacity of our unsecured credit facilities to $1.4 billion with an option to increase capacity by an additional $500 million.
- Closed a $146 million fixed rate financing.
- Completed two public offerings for a total of 6,295,000 shares of our common stock in two separate offerings resulting in net proceeds of approximately $535.3 million.
As of December 31, 2006, we had 159 properties containing approximately 11.2 million rentable square feet of office/laboratory space. As of that date, our properties were approximately 93.1% leased, excluding those properties undergoing redevelopment. In addition, as of December 31, 2006, our asset base contained land parcels totaling 1.2 million square footage undergoing development and future ground-up development opportunities for approximately 5.9 million developable square feet of office/laboratory space.
Our primary sources of revenue are rental income and tenant recoveries from leases of our properties. The comparability of financial data from period to period is affected by the timing of our property redevelopment, development and acquisition activities. Of the 159 properties as of December 31, 2006, 76 were acquired prior to 2004, 22 in 2004, 19 in 2005 and 25 in 2006. In addition, we completed the development of 10 properties prior to 2004, one property in 2004 (together with the 22 properties acquired in 2004, the "2004 Properties"), two properties in 2005 (together with the 19 properties acquired in 2005, the "2005 Properties") and four properties in 2006 (together with the 25 properties acquired in 2006, the "2006 Properties"). As a result of these acquisition and development activities, as well as our ongoing leasing and redevelopment activities, there have been significant increases in total revenues and expenses, including significant increases in total revenues and expenses for 2006 as compared to 2005, and for 2005 as compared to 2004.
As of December 31, 2006, approximately 90% of our leases (on a square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses, including increases thereto. In addition, as of December 31, 2006, approximately 4% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses. Additionally, as of December 31, 2006, approximately 91% of our leases (on a square footage basis) provided for the recapture of certain capital expenditures and approximately 89% of our leases (on a square footage basis) contained effective annual rent escalations that are either fixed or indexed based on the consumer price index or another index.
Critical accounting policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles ("GAAP"). Our significant accounting policies are described in the notes to our consolidated financial statements in "Item 15. Exhibits, Financial Statement Schedules". The preparation of these financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates, judgments and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
REIT compliance
We have elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code. Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code to our operations and financial results, and the determination of various factual matters and circumstances not entirely within our control. We believe that our current organization and method of operation comply with the rules and regulations promulgated under the Internal Revenue Code to enable us to qualify, and continue to qualify, as a REIT. However, it is possible that we have been organized or have operated in a manner that would not allow us to qualify as a REIT, or that our future operations could cause us to fail to qualify.
If we fail to qualify as a REIT in any taxable year, then we will be required to pay federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. If we lose our REIT status, then our net earnings available for investment or distribution to our stockholders would be significantly reduced for each of the years involved and we would no longer be required to make distributions to our stockholders.
Rental properties, properties undergoing development and land held for development
In accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), we allocate the purchase price of acquired properties to land, land improvements, buildings, building improvements, tenant improvements, equipment, and identified intangibles (including intangible value to above, below and at-market leases, origination costs associated with in-place leases, tenant relationships and other intangible assets) based upon their relative fair values. The value of tangible assets acquired is based upon our estimation of value on an "as if vacant" basis. We assess the fair value of tangible and intangible assets based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property.
The values allocated to land improvements, buildings, building improvements, tenant improvements and equipment are depreciated on a straight-line basis using an estimated life of 20 years for land improvements, 40 years for buildings and building improvements, the respective lease term for tenant improvements and the estimated useful life for equipment. The values of above and below market leases are amortized over the life of the related lease and recorded as either an increase (for below market leases) or a decrease (for above market leases) to rental income. The values of at-market leases and origination costs are classified as leasing costs, included in other assets in the accompanying consolidated balance sheets and amortized over the remaining life of the lease.
Rental properties, properties undergoing development and land held for development and intangibles are individually evaluated for impairment in accordance with SFAS 141 when conditions exist which may indicate that it is probable that the sum of expected future undiscounted cash flows is less than the carrying amount. Upon determination that an impairment has occurred, a write-down is recorded to reduce the carrying amount to its estimated fair value.
Capitalization of costs
In accordance with Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost" ("SFAS 34") and Statement of Financial Accounting Standards No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects" ("SFAS 67"), we capitalize direct construction and development costs, including predevelopment costs, interest, property taxes, insurance and other costs directly related and essential to the acquisition, development, redevelopment or construction of a project. Pursuant to SFAS 34 and SFAS 67, capitalization of construction, development and redevelopment costs is required while activities are ongoing to prepare an asset for its intended use. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Costs previously capitalized related to abandoned acquisition or development opportunities are written off. Should development, redevelopment or construction activity cease, a portion of interest, property taxes, insurance and certain costs would no longer be eligible for capitalization, and would be expensed as incurred. Expenditures for repairs and maintenance are expensed as incurred.
We also capitalize costs directly related and essential to our leasing activities. These costs are amortized on a straight-line basis over the terms of the related leases. Costs related to unsuccessful leasing opportunities are expensed.
Accounting for investments
We hold equity investments in certain publicly-traded companies and privately held entities primarily involved in the life science industry. All of our investments in publicly-traded companies are considered "available for sale" in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"), and are recorded at fair value. Fair value has been determined as the closing trading price at the balance sheet date, with unrealized gains and losses shown as a separate component of stockholders' equity. The classification of investments under SFAS 115 is determined at the time each investment is made, and such determination is reevaluated at each balance sheet date. The cost of investments sold is determined by the specific identification method, with net realized gains included in other income.
Investments in privately held entities are generally accounted for under the cost method because we do not influence any operating or financial policies of the entities in which we invest. Certain investments are accounted for under the equity method in accordance with Accounting Principles Board Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock" and Emerging Issues Task Force Topic D-46, "Accounting for Limited Partnership Investments". Under the equity method of accounting, we record our investment initially at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment.
For all of our investments, if a decline in the fair value of an investment below its carrying value is determined to be other than temporary, such investment is written down to its estimated fair value with a non-cash charge to current earnings. The factors that we consider in making these assessments include, but are not limited to, market prices, market conditions, financial condition, prospects for favorable or unfavorable clinical trial results, new product initiatives and/or sales, and new collaborative agreements.
Interest rate swap agreements
We utilize interest rate swap agreements to hedge a portion of our exposure to variable interest rates primarily associated with our unsecured line of credit and unsecured term loan. These agreements involve an exchange of fixed and floating rate interest payments without the exchange of the underlying principal amount (the "notional amount"). Interest received under all of our swap agreements is based on the one-month LIBOR rate. The net difference between the interest paid and the interest received is reflected as an adjustment to interest expense.
We reflect our interest rate swap agreements on the balance sheet at their estimated fair values with an offsetting adjustment reflected as unrealized gains/losses in accumulated other comprehensive income in stockholders' equity. We use a variety of methods and assumptions based on market conditions and risks existing at each balance sheet date to determine the fair values of our interest rate swap agreements. These methods of assessing fair value result in a general approximation of value, and such value may never be realized.
All of our interest rate swap agreements meet the criteria to be deemed "highly effective" under the provisions of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") in reducing our exposure to variable interest rates. In accordance with SFAS 133, we formally document all relationships between interest rate swap agreements and hedged items, including the method for evaluating effectiveness and the risk strategy. Accordingly, we have categorized these instruments as cash flow hedges. We make an assessment at the inception of each interest rate swap agreement and on an on going basis to determine whether these instruments are highly effective in offsetting changes in cash flows associated with the hedged items. While we intend to continue to meet the conditions for such hedge accounting, if hedges did not qualify as "highly effective", the changes in the fair values of the derivatives used as hedges would be reflected in earnings.
We do not believe we are exposed to a significant amount of credit risk in our interest rate swap agreements as our counterparties are established, well-capitalized financial institutions.
Recognition of rental income and tenant recoveries
Rental income from leases with scheduled rent increases, free rent, incentives and other rent adjustments is recognized on a straight-line basis over the respective lease terms. We include amounts currently recognized as income, and expected to be received in later years, in deferred rent in the accompanying consolidated balance sheets. Amounts received currently, but recognized as income in future years, are included as unearned rent in accounts payable, accrued expenses and tenant security deposits in the accompanying consolidated balance sheets. We commence recognition of rental income at the date the property is ready for its intended use and the tenant takes possession of or controls the physical use of the property.
Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred.
We maintain an allowance for estimated losses that may result from the inability of our tenants to make payments required under the terms of the lease. If a tenant fails to make contractual payments beyond any allowance, we may recognize additional bad debt expense in future periods equal to the amount of unpaid rent and unrealized deferred rent. As of December 31, 2006 and 2005, we had no allowance for doubtful accounts.
Discontinued operations
We follow the provisions of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" in determining whether a property qualifies as an asset "held for sale" and should be classified as "discontinued operations". A property is classified as "held for sale" when all of the following criteria for a plan of sale have been met: (1) management, having the authority to approve the action, commits to a plan to sell the property; (2) the property is available for immediate sale in its present condition, subject only to the terms that are usual and customary; (3) an active program to locate a buyer, and other actions required to complete the plan to sell, have been initiated; (4) the sale of the property is probable and is expected to be completed within one year; (5) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When all of these criteria have been met, the property is classified as "held for sale", its operations are classified as discontinued operations in our consolidated statements of income and amounts for all prior periods presented are reclassified from continuing operations to discontinued operations. A loss is recognized for any initial adjustment of the asset's carrying amount to fair value less costs to sell in the period the asset qualifies as "held for sale". Depreciation of assets ceases upon designation of a property as "held for sale".
Results of operations
Comparison of the year ended December 31, 2006 to the year ended December 31, 2005
Rental revenues increased by $56.4 million, or 31%, to $241.2 million for 2006 compared to $184.8 million for 2005. The increase resulted primarily from the 2005 Properties being owned for a full year and the addition of the 2006 Properties.
Tenant recoveries increased by $15.2 million, or 31%, to $63.8 million for 2006 compared to $48.5 million for 2005. The increase resulted primarily from the 2005 Properties being owned for a full year and the addition of the 2006 Properties.
Other income increased by $7.1 million, or 147%, to $11.9 million for 2006 compared to $4.8 million for 2005, due to an overall increase in all sources of other income. Other income consists of construction management fees, interest, investment income and storage.
Rental operating expenses increased by $18.4 million, or 35%, to $71.6 million for 2006 compared to $53.1 million for 2005. The increase resulted primarily from increases in rental operating expenses (primarily property taxes, insurance and utilities) from properties redeveloped, developed or acquired in 2006. The majority of the increase in rental operating expenses is recoverable from our tenants through tenant recoveries.
General and administrative expenses increased by $5.0 million, or 24%, to $26.1 million for 2006 compared to $21.1 million for 2005, primarily due to the growth in both the depth and breadth of our operations in multiple markets, from 133 properties with approximately 8.8 million rentable square feet as of December 31, 2005 to 159 properties with approximately 11.2 million rentable square feet as of December 31, 2006. As a percentage of total revenues, general and administrative expenses for 2006 remained relatively consistent with 2005.
Interest expense increased by $22.3 million, or 45%, to $71.4 million for 2006 compared to $49.1 million for 2005. The increase resulted primarily from increases in indebtedness on our unsecured line of credit, unsecured term loan and secured notes payable, and increases in the floating interest rates on our unsecured line of credit, unsecured term loan and other floating rate debt. These borrowings were utilized to finance the redevelopment and development of properties and the acquisition of the 2005 and 2006 Properties. The weighted average interest rate on our unsecured line of credit and unsecured term loan (not including the effect of interest rate swap agreements) increased from 5.68% as of December 31, 2005 to 6.5% as of December 31, 2006. We have entered into certain swap agreements to hedge a portion of our exposure to variable interest rates primarily associated with our unsecured line of credit and unsecured term loan (see "Liquidity and capital resources - Interest rate swaps").
Depreciation and amortization increased by $19.6 million, or 36%, to $73.6 million for 2006 compared to $54.0 million for 2005. The increase resulted primarily from depreciation associated with the 2005 Properties being owned for a full year and the addition of the 2006 Properties.
Income from discontinued operations of $1.4 million for 2006 reflects the results of operations of one property that was designated as "held for sale" as of December 31, 2006 and three properties sold during 2006. In connection with the properties sold in 2006, we recorded a gain of approximately $59,000. Income from discontinued operations of $3.2 million for 2005 reflects the results of operations of one property designated as "held for sale" as of December 31, 2006, three properties sold during 2006 and one property sold in 2005. In connection with the property sold in 2005, we recorded a gain of approximately $36,000.
Comparison of the year ended December 31, 2005 to the year ended December 31, 2004
Rental revenues increased by $44.4 million, or 32%, to $184.8 million for 2005 compared to $140.4 million for 2004. The increase resulted primarily from the 2004 Properties being owned for a full year and the addition of the 2005 Properties.
Tenant recoveries increased by $14.1 million, or 41%, to $48.5 million for 2005 compared to $34.4 million for 2004. The increase resulted primarily from the 2004 Properties being owned for a full year and the addition of the 2005 Properties.
Other income increased by $1.3 million, or 36%, to $4.8 million for 2005 compared to $3.5 million for 2004, due to an overall increase in all sources of other income. Other income consists of construction management fees, interest, and investment income and storage.
Rental operating expenses increased by $16.0 million, or 43%, to $53.1 million for 2005 compared to $37.1 million for 2004. The increase resulted primarily from increases in rental operating expenses (primarily property taxes and utilities) from properties redeveloped, developed or acquired in 2005. The majority of the increase in rental operating expenses is recoverable from our tenants through tenant recoveries.
General and administrative expenses increased by $6.0 million or 40%, to $21.1 million for 2005 compared to $15.1 million for 2004, primarily due to the growth in both the depth and breadth of our operations in multiple markets, including internationally, from 112 properties with approximately 7.4 million rentable square feet as of December 31, 2004 to 133 properties with approximately 8.8 million rentable square feet as of December 31, 2005 and the costs associated with continued compliance with Section 404 of the Sarbanes- Oxley Act. As a percentage of total revenues, general and administrative expenses for 2005 remained relatively consistent with 2004.
Interest expense increased by $20.4 million, or 71%, to $49.1 million for 2005 compared to $28.7 million for 2004. The increase resulted primarily from increases in indebtedness on our unsecured line of credit, unsecured term loan and secured notes payable, and increases in the floating interest rates on our unsecured line of credit, unsecured term loan and other floating rate debt. These borrowings were utilized to finance the redevelopment and development of properties and the acquisition of the 2004 and 2005 Properties. The weighted average interest rate on our unsecured line of credit and unsecured term loan (not including the effect of interest rate swap agreements) increased from 3.72% as of December 31, 2004 to 5.68% as of December 31, 2005. We have entered into certain swap agreements to hedge a portion of our exposure to variable interest rates with our unsecured line of credit and unsecured term loan (see "Liquidity and capital resources - Interest rate swaps").
Depreciation and amortization increased by $12.6 million, or 31%, to $54.0 million for 2005 compared to $41.3 million for 2004. The increase resulted primarily from depreciation associated with the 2004 Properties being owned for a full year and the addition of the 2005 Properties.
Income from discontinued operations of $3.2 million for 2005 reflects the results of operations of one property that was designated as "held for sale" as of December 31, 2006, three properties sold during 2006 and one property sold during 2005. In connection with the property sold in 2005, we recorded a gain of approximately $36,000. Income from discontinued operations of $4.1 million for 2004 reflects the results of operations of one property that was designated as "held for sale" as of December 31, 2006, three properties sold during 2006, one property sold during 2005 and one property sold in 2004. In connection with the sale of one property in 2004, we recorded a gain of approximately $1.6 million.
Liquidity and capital resources
Cash flows
Net cash provided by operating activities for 2006 increased by $7.7 million to $128.4 million compared to $120.7 million for 2005. The increase resulted primarily from increases in cash flows from our operating properties. As of December 31, 2006 our asset base contains 159 properties comprising approximately 11.2 million rentable square feet as compared to 133 properties comprising approximately 8.8 million rentable square feet as of December 31, 2005.
Net cash used in investing activities for 2006 increased by $537.7 million to $970.6 million compared to $432.9 million for 2005. The increase was primarily due to purchases of rental properties, and increases in additions to properties undergoing development and land held for development. In addition to the increase in our asset base noted above, the square footage undergoing redevelopment and development as of December 31, 2006 was approximately 1.8 million square feet as compared to 1.1 million square feet as of December 31, 2005.
Net cash provided by financing activities for 2006 increased by $528.3 million to $841.3 million compared to $313.0 million for 2005. The increase was primarily due to an increase in borrowings from our unsecured line of credit and unsecured term loan, an increase in proceeds from secured notes payable and an increase in proceeds from issuances of common stock. This was partially offset by the repayments of our unsecured line of credit and principal reductions of our outstanding balance of secured notes payable.
Off-balance sheet arrangements
As of December 31, 2006, we had no off-balance sheet arrangements.
Contractual obligations and commitments
Contractual obligations as of December 31, 2006 consisted of the following (in thousands):
Payments by Period
------------------------------------------------
Total 2007 2008-2009 2010-2011 Thereafter
- ---------------------------------------------------------------------------------------------
Secured notes payable $ 1,174,866 $ 72,790 $ 336,074 $ 201,463 $ 564,539
Unsecured line of credit and
unsecured term loan 850,000 -- -- 850,000 --
Ground lease obligations 352,486 3,754 7,922 9,798 331,012
Other obligations 5,848 1,048 1,960 2,021 819
------------ ----------- ------------ ----------- ------------
Total $ 2,383,200 $ 77,592 $ 345,956 $1,063,282 $ 896,370
============ =========== ============ =========== ============
Secured notes payable as of December 31, 2006 included 34 notes secured by 76 properties and 11 land development parcels.
In October 2006, we amended our unsecured line of credit and our unsecured term loan (see "Unsecured line of credit and unsecured term loan" below). Our unsecured line of credit matures in October 2010 and may be extended at our sole option for an additional one-year period. Our unsecured term loan matures in October 2011 and may be extended at our sole option for an additional one-year period.
In January 2007, we completed a private offering of $460 million of 3.70% convertible unsecured notes due in 2027.
Ground lease obligations as of December 31, 2006 included leases for fourteen of our properties and two land development parcels. These lease obligations have remaining lease terms of 26 to 58 years, exclusive of extension options. Included in our ground lease obligations as of December 31, 2006 is a ground lease related to our ground-up development project in New York City totaling approximately 725,000 rentable square feet. This ground lease obligation has a remaining term of 99 years, inclusive of extension options.
In addition to the above, we were committed as of December 31, 2006 under the terms of contracts to complete the construction of properties undergoing development and land held for development at a remaining aggregate cost of $58.8 million.
As of December 31, 2006, we were also committed to fund approximately $33.7 million for the construction of building infrastructure improvements under the terms of leases and/or construction contracts and approximately $23.4 million for certain investments.
Tenant security deposits and other restricted cash
Tenant security deposits and other restricted cash consisted of the following (in thousands):
December 31,
----------------------
2006 2005
---------- ----------
Funds held in trust under the terms of
certain secured notes payable $ 20,071 $ 13,838
Other funds held in escrow 14,289 7,175
---------- ----------
$ 34,360 $ 21,013
========== ==========
Secured notes payable
Secured notes payable totaled $1.2 billion and $666.7 million as of December 31, 2006 and 2005, respectively. Our secured notes payable had weighted average interest rates of 6.21% and 6.31% at December 31, 2006 and 2005, respectively, with maturity dates ranging from March 2007 to August 2016.
Our secured notes payable generally require monthly payments of principal and interest. The total book values of properties securing debt were $1.7 billion and $848.3 million at December 31, 2006 and 2005, respectively. At December 31, 2006, our secured notes payable were comprised of $940.0 million and $234.9 million of fixed and variable rate debt, respectively, compared to $595.9 million and $70.8 million of fixed and variable rate debt, respectively, at December 31, 2005.
The following is a summary of the scheduled principal payments for our secured notes payable and the weighted average interest rates as of December 31, 2006 (in thousands):
Weighted
Average
Year Amount Interest Rate(1)
----------------------- ----------- -------------
2007 $ 72,790 6.21%
2008 290,088 6.17%
2009 45,986 6.26%
2010 93,259 6.23%
2011 108,204 6.09%
Thereafter 564,539 6.00%
-----------
Total secured notes
payable $ 1,174,866
===========
(1) The weighted average interest rate related to our secured debt is calculated based on the outstanding debt as of December 31st of the year immediately preceding the year presented.
Unsecured line of credit and unsecured term loan
In October 2006, we entered into an amendment to our amended and restated credit agreement to increase the maximum permitted borrowings under our unsecured credit facilities from $1.0 billion to $1.4 billion consisting of a $800 million unsecured line of credit and a $600 million unsecured term loan. We may in the future elect to increase commitments under the unsecured credit facilities by up to an additional $500 million.
Borrowings under our unsecured line of credit, as amended, bear interest at a floating rate based on our election of either a LIBOR-based rate or the higher of the bank's reference rate and the Federal Funds rate plus 0.5%. For each LIBOR-based advance, we must elect a LIBOR period of one, two, three or six months. Our unsecured line of credit matures in October 2010 and may be extended at our sole option for an additional one-year period. As of December 31, 2006, we had borrowings of $250 million outstanding on the unsecured line of credit with a weighted average interest rate of 6.50%.
Our unsecured term loan bears interest at a floating rate based on our election of either a LIBOR-based rate or the higher of the bank's reference rate and the Federal Funds rate plus 0.5%. For each LIBOR-based advance, we must elect to fix for a period of one, two, three or six months. Our unsecured term loan matures in October 2011 and may be extended at our sole option for an additional one-year period. As of December 31, 2006, we had borrowings of $600 million outstanding on the unsecured term loan with a weighted average interest rate of 6.50%.
Our unsecured line of credit and our unsecured term loan contain financial covenants, including, among other things, maintenance of minimum net worth, a leverage ratio and a fixed charge coverage ratio. In addition, the terms of the unsecured line of credit and unsecured term loan restrict, among other things, certain investments, indebtedness, distributions and mergers.
Aggregate borrowings under our unsecured line of credit and unsecured term loan may be limited to an amount based primarily on the net operating income derived from a pool of unencumbered properties. Accordingly, as we complete the redevelopment, development or acquisition of additional unencumbered properties, aggregate unsecured borrowings available under our credit facilities may increase up to a maximum combined amount of $1.4 billion.
Interest rate swaps
We utilize interest rate swap agreements to hedge a portion of our exposure to variable interest rates primarily associated with our unsecured line of credit and unsecured term loan. These agreements involve an exchange of fixed and floating rate interest payments without the exchange of the underlying principal amount (the "notional amount"). Interest received under all of our swap agreements is based on the one-month LIBOR rate. The net difference between the interest paid and the interest received is reflected as an adjustment to interest expense.
The following table summarizes our interest rate swap agreements as of December 31, 2006 (dollars in thousands)(1):
Notional Effective at Interest Termination Fair
Transaction Dates Effective Dates Amounts December 31, 2006 Pay Rates Dates Values
- -------------------- -------------------- ----------- ------------------- --------- ------------------ ---------
December 2003 December 29, 2006 $ 50,000 $ 50,000 5.090% October 31, 2008 $ (44)
April 2004 April 28, 2006 50,000 50,000 4.230% April 30, 2007 174
April 2004 April 30, 2007 50,000 -- 4.850% April 30, 2008 106
June 2004 June 30, 2005 50,000 50,000 4.343% June 30, 2007 232
December 2004 December 31, 2004 50,000 50,000 3.590% January 2, 2008 864
December 2004 January 3, 2006 50,000 50,000 3.927% July 1, 2008 909
May 2005 June 30, 2006 50,000 50,000 4.270% June 29, 2007 253
May 2005 November 30, 2006 25,000 25,000 4.330% November 30, 2007 201
May 2005 June 29, 2007 50,000 -- 4.400% June 30, 2008 291
May 2005 November 30, 2007 25,000 -- 4.460% November 28, 2008 97
May 2005 June 30, 2008 50,000 -- 4.509% June 30, 2009 151
May 2005 November 28, 2008 25,000 -- 4.615% November 30, 2009 49
December 2005 December 29, 2006 50,000 50,000 4.730% November 30, 2009 314
December 2005 December 29, 2006 50,000 50,000 4.740% November 30, 2009 300
December 2005 January 2, 2008 50,000 -- 4.768% December 31, 2010 106
June 2006 June 30, 2006 125,000 125,000 5.299% September 30, 2009 (1,075)
June 2006 October 31, 2008 50,000 -- 5.340% December 31, 2010 (469)
June 2006 October 31, 2008 50,000 -- 5.347% December 31, 2010 (476)
June 2006 June 30, 2008 50,000 -- 5.325% June 30, 2010 (446)
June 2006 June 30, 2008 50,000 -- 5.325% June 30, 2010 (446)
December 2006 December 31, 2006 50,000 50,000 4.990% March 31, 2014 (10)
December 2006 June 29, 2007 50,000 -- 4.920% October 31, 2008 19
December 2006 November 30, 2009 75,000 -- 5.015% March 31, 2014 (24)
December 2006 November 30, 2009 75,000 -- 5.023% March 31, 2014 (44)
December 2006 December 31, 2010 100,000 -- 5.015% October 31, 2012 8
------------------- ---------
Total Notional Amount in Effect at December 31, 2006 $ 600,000 $ 1,040
=================== =========
(1) As of December 31, 2006, we had one additional interest rate swap agreement with a notional amount of $28,500,000. This interest rate swap agreement has an interest pay rate of 5.003%, is effective on January 2, 2007, terminates on January 3, 2011 and has a fair value as of December 31, 2006 of approximately $(67,000).
We do not believe we are exposed to a significant amount of credit risk in our interest rate swap agreements as our counterparties are established, well-capitalized financial institutions. In addition, we have entered into master derivative agreements with each counterparty. These master derivative agreements (all of which are on the standard International Swaps & Derivatives Association, Inc. form) define certain terms between us and each counterparty to address and minimize certain risks associated with our swap agreements, including a default by a counterparty.
As of December 31, 2006 and 2005, our interest rate swap agreements were classified in other assets and accounts payable, accrued expenses and tenant security deposits at their fair values aggregating approximately $973,000 and $4.9 million, respectively, with the offsetting adjustment reflected as unrealized gains in accumulated other comprehensive income in stockholders' equity. Balances in accumulated other comprehensive income are recognized in earnings as swap payments are made. During the next twelve months, we expect to reclassify $3.1 million from accumulated other comprehensive income to interest income.
Other resources and liquidity requirements
In June 2006, we sold 3,795,000 shares of our common stock in a follow-on offering (including the shares issued upon exercise of the underwriter's over-allotment option). The shares were issued at a price of $84.00 per share, resulting in aggregate proceeds of approximately $303.1 million (after deducting underwriting discounts and other offering costs).
In September 2006, we sold 2,500,000 shares of our common stock in a follow-on offering. The shares were issued at a price of $94.75 per share, resulting in aggregate proceeds of approximately $232.2 million (after deducting underwriting discounts and other offering costs).
In October 2006, we entered into an amendment to our existing amended and restated credit agreement. The maximum permitted unsecured borrowings under our credit facilities was increased from $1 billion to $1.4 billion consisting of a $800 million unsecured line of credit and a $600 million unsecured term loan. We may in the future elect to increase commitments under our unsecured credit facilities by up to an additional $500 million.
We expect to continue meeting our short-term liquidity and capital requirements generally through our working capital and net cash provided by operating activities. We believe that the net cash provided by operating activities will continue to be sufficient to enable us to make distributions necessary to continue qualifying as a REIT. We also believe that net cash provided by operating activities will be sufficient to fund recurring non-revenue enhancing capital expenditures, tenant improvements and leasing commissions.
We expect to meet certain long-term liquidity requirements, such as for property acquisitions, property development and redevelopment activities, scheduled debt maturities, expansions and other non-recurring capital improvements, through net cash provided by operating activities, long-term secured and unsecured indebtedness, including borrowings under the unsecured line of credit and unsecured term loan, and the issuance of additional debt and/or equity securities.
Exposure to environmental liabilities
In connection with the acquisition of all of our properties, we have obtained Phase I environmental assessments to ascertain the existence of any environmental liabilities or other issues. The Phase I environmental assessments of our properties have not revealed any environmental liabilities that we believe would have a material adverse effect on our financial condition or results of operations taken as a whole, nor are we aware of any material environmental liabilities that have occurred since the Phase I environmental assessments were completed. In addition, we carry a policy of pollution legal liability insurance covering exposure to certain environmental losses at all of our properties.
Capital expenditures, tenant improvements and leasing costs
The following table shows total and weighted average per square foot property-related capital expenditures, tenant improvements and leasing costs (all of which are added to the basis of the properties) related to our life science properties (excluding capital expenditures and tenant improvements that are recoverable from tenants, revenue-enhancing or related to properties that have undergone redevelopment) for the years ended December 31, 2006, 2005, 2004, 2003 and 2002:
Total/
Weighted
Average 2006 2005 2004 2003 2002
----------- ---------- ----------- ---------- ---------- ----------
Capital expenditures (1):
Major capital expenditures $ 6,766,000 $ 575,000 $ 972,000 $2,628,000 (2)$1,632,000 (3)$ 959,000
Recurring capital expenditures $ 5,485,000 $ 639,000 $ 1,278,000 $1,243,000 $ 853,000 $1,472,000 (4)
Weighted average square feet
in portfolio 35,251,118 9,790,326 8,128,690 6,123,807 5,708,635 5,499,660
Per weighted average square
foot in portfolio
Major capital expenditures $ 0.19 $ 0.06 $ 0.12 $ 0.43 (2)$ 0.29 (3)$ 0.17
Recurring capital expenditures $ 0.16 $ 0.07 $ 0.16 $ 0.20 $ 0.15 $ 0.27 (4)
Tenant improvements and leasing
costs:
Retenanted space (5)
Tenant improvements and
leasing costs $ 5,795,000 $1,370,000 $ 324,000 $ 713,000 $2,890,000 $ 498,000
Retenanted square feet 1,089,677 248,846 130,887 142,814 248,488 318,642
Per square foot leased of
retenanted space $ 5.32 $ 5.51 $ 2.48 $ 4.99 $ 11.63 $ 1.56
Renewal space
Tenant improvements and
leasing costs $ 3,303,000 $ 957,000 $ 778,000 $ 937,000 $ 105,000 $ 526,000
Renewal square feet 2,208,126 455,980 666,058 558,874 271,236 255,978
Per square foot leased of
renewal space $ 1.50 $ 2.10 $ 1.17 $ 1.68 $ 0.39 $ 2.05
(1) Property-related capital expenditures include all major capital and recurring capital expenditures except capital expenditures that are recoverable from tenants, revenue-enhancing capital expenditures, or costs related to the redevelopment of a property. Major capital expenditures consisted of roof replacements and HVAC systems that are typically identified and considered at the time a property is acquired. Major capital expenditures for 2003 also included one-time costs related to the implementation of our national branding and signage program. Recurring capital expenditures exclude major capital expenditures.
(2) Major capital expenditures for 2004 included a one-time HVAC system upgrade at one property totaling $1,551,000 or $0.25 per square foot.
(3) Major capital expenditures for 2003 included $1,072,000 or $0.19 per square foot in one-time costs related to the implementation of our national branding and signage program.
(4) Recurring capital expenditures for 2002 included $552,000 or $0.10 per square foot related to a fully leased property in San Diego, California that underwent substantial renovation in 2002.
(5) Excludes space that has undergone redevelopment before retenanting.
Capital expenditures fluctuate in any given period due to the nature, extent and timing of improvements required and the extent to which they are recoverable from our tenants. Approximately 91% of our leases provide for the recapture of certain capital expenditures (such as HVAC systems maintenance and/or replacement, roof replacement and parking lot resurfacing). In addition, we maintain an active preventative maintenance program at each of our properties to minimize capital expenditures.
Tenant improvements and leasing costs also fluctuate in any given year depending upon factors such as the timing and extent of vacancies, property age, location and characteristics, the type of lease (renewal tenant or retenanted space), the involvement of external leasing agents and overall competitive market conditions.
Inflation
As of December 31, 2006, approximately 90% of our leases (on a square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses, including increases thereto. In addition, as of December 31, 2006, approximately 4% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses. Approximately 89% of our leases (on a square footage basis) contained effective annual rent escalations that are either fixed (generally ranging from 3% to 3.5%) or indexed based on the consumer price index or another index. Accordingly, we do not believe that our earnings or cash flow from real estate operations are subject to any significant risk from inflation. An increase in inflation, however, could result in an increase in the cost of our variable rate borrowings, including borrowings related to our unsecured line of credit and unsecured term loan.
Funds from operations
GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") established the measurement tool of Funds From Operations ("FFO"). Since its introduction, FFO has become a widely used non-GAAP financial measure by REITs. We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT. We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its April 2002 White Paper (the "White Paper") and related implementation guidance, which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs. The White Paper defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. While FFO is a relevant and widely used measure of operating performance for REITs, it should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. (See "Liquidity and capital resources - cash flows" above for information regarding these measures of cash flow.)
The following table presents a reconciliation of net income available to common stockholders to funds from operations available to common stockholders (in thousands):
Year Ended December 31,
-----------------------
2006 2005
----------- ----------
Net income available to common stockholders $57,326 $47,343
Add:
Depreciation and amortization (1) 74,039 55,416
Minority interests' share of income 2,287 634
Less:
Gain on sales of property (2) (59) (36)
FFO allocable to minority interest (1,928) (668)
----------- ----------
Funds from operations available to common
stockholders $131,665 $102,689
=========== ==========
(1) Includes depreciation and amortization on assets "held for sale" reflected as discontinued operations (for the periods prior to when such assets were designated as "held for sale").
(2) Gain on sales of property relates to the disposition of three properties in the Suburban Washington D.C and New Jersey markets during 2006, and two properties in the Southeast and Suburban Washington D.C. markets during 2005. Gain on sales of property is included in the income statement in income from discontinued operations, net.
Property and lease information
The following table is a summary of our properties as of December 31, 2006 (dollars in thousands):
Rentable Square Feet
Number of -------------------------------------------------- Annualized Occupancy
Markets Properties Operating Redevelopment Total Base Rent (1) Percentage (1)
- --------------------------------- ---------- ---------------- -------------------- ----------- ------------ --------------
California - Los Angeles Metro 2 31,343 29,660 61,003 $ 775 82.5%
California - San Diego 27 1,149,369 160,887 1,310,256 29,385 89.5%
California - San Francisco Bay 24 1,660,349 72,902 1,733,251 49,666 94.0%
Eastern Massachusetts 39 3,044,186 230,917 3,275,103 99,515 95.9%
International - Canada 3 296,362 -- 296,362 6,486 100.0%
New Jersey/Suburban Philadelphia 8 443,349 -- 443,349 8,907 96.6%
Southeast 12 612,565 45,841 658,406 9,221 78.1%(2)
Suburban Washington D.C. 32 2,575,370 -- 2,575,370 54,063 92.5%
Washington - Seattle 12 806,759 72,492 879,251 25,557 94.9%
---------- ---------------- -------------------- ----------- ------------ -----------------
Total Properties 159 10,619,652 612,699 11,232,351 $ 283,575 93.1%(3)
========== ================ ==================== =========== ============ =================
(1) Excludes spaces at properties totaling 612,699 square feet undergoing a permanent change in use to office/laboratory space through redevelopment.
(2) Substantially all of the vacant space is office or warehouse space.
(3) Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of December 31, 2006 was 88.0%.
The following table summarizes information with respect to the lease expirations at our properties as of December 31, 2006:
Square Annualized Base Year of Number of Footage of Percentage of Rent of Expiring Lease Expiring Expiring Aggregate Leased Leases (per Expiration Leases Leases Square Feet square foot) - ---------- ----------- ------------ -------------- --------------- 2007 90 (1) 1,267,876 12.8% $24.59 2008 43 780,175 7.9% $26.52 2009 50 685,896 6.9% $22.83 2010 40 1,013,669 10.3% $26.97 2011 51 1,457,414 14.7% $27.07 Thereafter 96 4,680,559 47.4% $31.89
(1) Includes month-to-month leases for approximately 86,000 square feet.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risk to which we believe we are exposed is interest rate risk, which may result from many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control.
In order to modify and manage the interest rate characteristics of our outstanding debt and to limit the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate swaps, caps, floors and other interest rate exchange contracts. The use of these types of instruments to hedge a portion of our exposure to changes in interest rates carries additional risks, such as counter-party credit risk and the legal enforceability of hedging contracts.
Our future earnings and fair values relating to financial instruments are primarily dependent upon prevalent market rates of interest, such as LIBOR. However, our interest rate swap agreements are intended to reduce the effects of interest rate changes. Based on interest rates at, and our swap agreements in effect on, December 31, 2006 and 2005, we estimate that a 1% increase in interest rates on our variable debt, including our unsecured line of credit and unsecured term loan, after considering the effect of our interest rate swap agreements, would decrease annual future earnings by approximately $1.5 million and $2.1 million, respectively. We further estimate that a 1% decrease in interest rates on our variable debt, including our unsecured line of credit and unsecured term loan, after considering the effect of our interest rate swap agreements in effect on December 31, 2006 and 2005, would increase annual future earnings by approximately $1.5 million and $2.1 million, respectively. A 1% increase in interest rates on our secured debt and interest rate swap agreements would decrease their aggregate fair values by approximately $68.8 million and $36.8 million at December 31, 2006 and 2005, respectively. A 1% decrease in interest rates on our secured debt and interest rate swap agreements would increase their aggregate fair values by approximately $71.7 million and $38.4 million at December 31, 2006 and 2005, respectively.
These amounts are determined by considering the impact of the hypothetical interest rates on our borrowing cost and our interest rate swap agreements in effect on December 31, 2006 and 2005. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, we would consider taking actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our capital structure.
We have exposure to equity price market risk because of our equity investments in certain publicly-traded companies and privately held entities. We classify investments in publicly-traded companies as available-for-sale and, consequently, record them on our balance sheets at fair value with unrealized gains or losses reported as a component of comprehensive income or loss. Investments in privately held entities are generally accounted for under the cost method because we do not influence any of the operating or financial policies of the entities in which we invest. For all investments, we recognize other than temporary declines in value against earnings in the same period the decline in value was deemed to have occurred. There is no assurance that future declines in values will not have a material adverse impact on our future results of operations. By way of example, a 10% decrease in the fair value of our equity investments as of December 31, 2006 and 2005 would decrease their fair values by approximately $7.5 million and $8.2 million, respectively.
We have exposure to foreign currency exchange rate market risk related to our wholly-owned subsidiaries operating in Canada. The functional currency of our foreign subsidiaries operating in Canada is the local currency, the Canadian dollar. Gains or losses resulting from the translation of our foreign subsidiaries' balance sheets and income statements are included in accumulated other comprehensive income as a separate component of stockholders' equity. Gains or losses will be reflected in our income statement when there is a sale or partial sale of our investment in these operations or upon a complete or substantially complete liquidation of the investment.
Item 8. Financial Statements and Supplementary Data
The information required by this Item is included as a separate section in this Annual Report on Form 10-K. See "Item 15. Exhibits, Financial Statement Schedules".
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Changes in internal control over financial reporting
There have been no significant changes in our internal control over financial reporting during the quarter ended December 31, 2006 that could materially affect, or is reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of disclosure controls and procedures
As of December 31, 2006, we performed an evaluation, under the supervision of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures. These controls and procedures have been designed to ensure that information required for disclosure is recorded, processed, summarized and reported within the requisite time periods. Based on our evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2006.
Management's annual report on internal control over financial reporting
The management of Alexandria Real Estate Equities, Inc. and its subsidiaries (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. The Company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with the authorizations of the Company's management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements. Management has assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2006. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in "Internal Control - Integrated Framework". Management concluded that based on its assessment, the Company's internal control over financial reporting was effective as of December 31, 2006. Management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2006 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report on the next page.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Alexandria Real Estate Equities, Inc.
We have audited management's assessment, included in the accompanying Annual Management's Report on Internal Control Over Financial Reporting, that Alexandria Real Estate Equities, Inc. and subsidiaries (the "Company") maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO criteria"). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006 is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of the Company as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2006, and our report dated February 26, 2007 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Los Angeles, California
February 26, 2007
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference from our definitive proxy statement for our 2007 annual meeting of stockholders to be filed pursuant to Regulation 14A within 120 days after the end of our fiscal year (the "2007 Proxy Statement") under the caption "Board of Directors, Executive Officers and Senior Management", "Corporate Governance Guidelines and Code of Ethics" and "Section 16(a) Beneficial Ownership Reporting Compliance".
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference from our 2007 Proxy Statement under the caption "Board of Directors, Executive Officers and Senior Management - Executive Compensation".
The following table sets forth information on the Company's equity compensation plan as of December 31, 2006:
Equity Compensation Plan Information
|
|
Number of securities to be |
Weighted-average exercise price of outstanding options, |
Number of securities |
|
Equity Compensation Plan Approved by Stockholders - 1997 Incentive Plan |
338,680 |
$38.20 |
942,283 |
The other information required by this Item is incorporated herein by reference from our 2007 Proxy Statement under the caption "Security Ownership of Management and Principal Stockholders".
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference from our 2007 Proxy Statement under the captions "Certain Relationships and Related Transactions" and "Director Independence".
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference from our 2007 Proxy Statement under the caption "Fees Billed by Independent Registered Public Accountants".
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) and (2) Financial Statement Schedules
The financial statements and schedule required by this Item are included as a separate section of this Annual Report on Form 10-K, beginning on page F-1.
(a)(3) See Exhibits and Index to Exhibits below.
|
|
Page |
|
Report of Independent Registered Public Accounting Firm |
|
|
Audited Consolidated Financial Statements: |
|
|
Consolidated Balance Sheets as of December 31, 2006 and 2005 |
|
|
Consolidated Statements of Income for the Years Ended |
|
|
Consolidated Statements of Stockholders' Equity for the Years Ended |
|
|
Consolidated Statements of Cash Flows for the Years Ended |
|
|
Notes to Consolidated Financial Statements |
|
|
Schedule III - Consolidated Financial Statement Schedule of Rental Properties and Accumulated Depreciation |
F-27 |
(b) Exhibits and Index to Exhibits
|
Exhibit Number |
Exhibit Title |
|
3.1 * |
Articles of Amendment and Restatement of Alexandria, filed as an exhibit to Alexandria's quarterly report on Form 10-Q filed with the Commission on August 14, 1997 |
|
3.2 * |
Certificate of Correction of Alexandria, filed as an exhibit to Alexandria's quarterly report on Form 10-Q filed with the Commission on August 14, 1997 |
|
3.3* |
Bylaws of Alexandria (as amended February 27, 2006), filed as an exhibit to Alexandria's annual report on Form 10-K filed with the Commission on March 16, 2006 |
|
3.4 * |
Articles Supplementary, dated February 10, 2000, relating to the election to be subject to Subtitle 8 of Title 3 of the Maryland General Corporation Law, filed as an exhibit to Alexandria's current report on Form 8-K filed with the Commission on February 10, 2000 |
|
3.5 * |
Articles Supplementary, dated January 28, 2002, relating to the 9.10% Series B Cumulative Redeemable Preferred Stock, filed as an exhibit to Alexandria's current report on Form 8-A filed with the Commission on February 17, 2002 |
|
4.1 * |
Rights Agreement, dated as of February 10, 2000, between the Company and American Stock Transfer & Trust Company, as Rights Agent, including the forms of Articles Supplementary setting forth the terms of the Series A Junior Participating Preferred Stock, par value $.01 per share, Rights Certificate and the Summary of Rights to Purchase Preferred Stock attached as exhibits to the Rights Agreement. Pursuant to the Rights Agreement, printed Rights Certificates will not be mailed until after the Distribution Date (as defined in the Rights Agreement), filed as an exhibit to Alexandria's current report on Form 8-K filed with the Commission on February 10, 2000 |
|
4.2 * |
Specimen certificate representing shares of Common Stock, filed as an exhibit to Alexandria's Registration Statement on Form S-11 (No. 333-23545) |
|
4.3 * |
Specimen certificate representing shares of 9.10% Series B Cumulative Redeemable Preferred Stock, filed as an exhibit to Alexandria's current report on Form 8-A filed with the Commission on February 17, 2002 |
|
4.4 * |
Specimen certificate representing shares of 8.375% Series C Cumulative Redeemable Preferred Stock, filed as an exhibit to Alexandria's current report on Form 8-A filed with the Commission on June 28, 2004 |
|
10.1 * (1) |
Amended and Restated 1997 Stock Award and Incentive Plan of Alexandria, dated December 29, 2000, filed as an exhibit to Alexandria's annual report on Form 10-K filed with the Commission on March 29, 2002 |
|
10.2 * (1) |
Form of Non-Employee Director Stock Option Agreement for use in connection with options issued pursuant to the Amended and Restated 1997 Stock Award and Incentive Plan, filed as an exhibit to Alexandria's Registration Statement on Form S-11 (No. 333-23545) |
|
10.3 * (1) |
Form of Incentive Stock Option Agreement for use in connection with options issued pursuant to the Amended and Restated 1997 Stock Award and Incentive Plan, filed as an exhibit to Alexandria's Registration Statement on Form S-11 (No. 333-23545) |
|
10.4 * (1) |
Form of Nonqualified Stock Option Agreement for use in connection with options issued pursuant to the Amended and Restated 1997 Stock Award and Incentive Plan, filed as an exhibit to Alexandria's Registration Statement on Form S-11 (No. 333-23545) |
|
10.5 * (1) |
Form of Employee Restricted Stock Agreement for use in connection with shares of restricted stock issued to employees pursuant to the Amended and Restated 1997 Stock Award and Incentive Plan, filed as an exhibit to Alexandria's quarterly report on Form 10-Q filed with the Commission on November 15, 1999 |
|
10.6 * (1) |
Form of Independent Contractor Restricted Stock Agreement for use in connection with shares of restricted stock issued to independent contractors pursuant to the Amended and Restated 1997 Stock Award and Incentive Plan, filed as an exhibit to Alexandria's quarterly report on Form 10-Q filed with the Commission on November 15, 1999 |
|
10.7 * (1) |
Alexandria's 2000 Deferred Compensation Plans, effective December 1, 2000, filed as an exhibit to Alexandria's annual report on Form 10-K filed with the Commission on March 29, 2002 |
|
10.8* |
Amended and Restated Credit Agreement as of December 22, 2004, among Alexandria Real Estate, Inc., Alexandria Real Estate Equities, L.P., ARE-QRS Corp., ARE Acquisitions, LLC, and the other borrowers then and thereafter a party thereto, the banks therein named, the other banks which may become parties thereto, Bank of America, N.A. as Administrative Agent, Citicorp North America, Inc. and Commerzbank AG New York and Grand Cayman Branches, as Co-Syndication Agents, Societe Generale and Eurohypo AG, New York Branch, as Co-Documentation Agents, Banc of America Securities LLC and Citigroup Global Markets, Inc., as Joint Lead Arrangers and Joint Bookrunners, filed as an exhibit to Alexandria's annual report on Form 10-K filed with the Commission on March 16, 2005. |
|
10.9* |
Second Amendment to Amended and Restated Credit Agreement as of November 16, 2005, among Alexandria Real Estate, Inc., Alexandria Real Estate Equities, L.P., ARE-QRS Corp., ARE Acquisitions, LLC, and the other subsidiaries party hereto as the borrowers then and thereafter a party thereto, the banks therein named, the other banks which may become parties thereto, Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, Citicorp North America, Inc. and Commerzbank AG New York and Grand Cayman Branches, as Co-Syndication Agents, Societe Generale and Eurohypo AG, New York Branch, as Co- Documentation Agents, Banc of America Securities LLC and Citigroup Global Markets, Inc., as Joint Lead Arrangers and Joint Bookrunners, filed as an exhibit to Alexandria's annual report on Form 10-K filed with the commission on March 16, 2006 |
|
10.10* (1) |
Executive Employment Agreement between Alexandria Real Estate Equities, Inc. and James H. Richardson, dated January 9, 2006 filed as an exhibit to Alexandria's annual report on Form 10-K filed with the Commission on March 16, 2006 |
|
10.11* (1) |
Executive Employment Agreement between Alexandria Real Estate Equities, Inc. and Joel S. Marcus, dated March 13, 2006 filed as an exhibit to Alexandria's annual report on Form 10-K filed with the Commission on March 16, 2006. |
|
10.12 (1) |
Summary of Director Compensation Arrangements |
|
10.13 |
Second Amended and Restated Credit Agreement as of October 31, 2006, among Alexandria Real Estate, Inc., Alexandria Real Estate Equities, L.P., ARE-QRS Corp., ARE Acquisitions, LLC, and the other subsidiaries parties thereto, Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, Citicorp North America as Syndication Agent, Eurohypo AG, New York Branch, Societe Generale, The Royal Bank of Scotland, PLC, Calyon, The Bank of Nova Scotia, UBS Loan Finance LLC, as Co-Documentation Agents, Banc of America Securities LLC and Citigroup Global Markets, Inc., as Joint Lead Arrangers and Joint Bookrunners |
|
10.14 |
First Amendment to Second Amended and Restated Credit Agreement as of December 1, 2006, among Alexandria Real Estate, Inc., Alexandria Real Estate Equities, L.P., ARE-QRS Corp., ARE Acquisitions, LLC, and the other subsidiaries parties thereto, Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, Citicorp North America as Syndication Agent, Eurohypo AG, New York Branch, Societe Generale, The Royal Bank of Scotland, PLC, Calyon, The Bank of Nova Scotia, UBS Loan Finance LLC, as Co-Documentation Agents, Banc of America Securities LLC and Citigroup Global Markets, Inc., as Joint Lead Arrangers and Joint Bookrunners |
|
12.1 |
Computation of Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends |
|
14.1* |
Alexandria Real Estate Equities, Inc. Business Integrity Policy and Procedures for Reporting Non-Compliance (code of ethics pursuant to Item 406 Regulation S-K), filed as an exhibit to Alexandria's annual report on Form 10-K filed with the Commission on March 16, 2005. |
|
21.1 |
List of Subsidiaries of Alexandria |
|
23.1 |
Consent of Ernst & Young LLP |
|
31.1 |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
31.2 |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32 |
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
___________________
(*) Incorporated by reference.(1) Management contract or compensatory arrangement.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
ALEXANDRIA REAL ESTATE EQUITIES, INC. |
||
| Dated February 27, 2007 |
|
By: /s/ JOEL S. MARCUS |
|
KNOW ALL THOSE BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jerry M. Sudarsky and Joel S. Marcus, and each of them, as his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, if any, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents of their substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
Signature |
Title |
Date |
|
/s/ JERRY M. SUDARSKY |
Chairman of the Board of Directors |
February 27, 2007 |
|
/s/ JOEL S. MARCUS |
Chief Executive Officer (Principal Executive Officer) and Director |
February 27, 2007 |
|
/s/ JAMES H. RICHARDSON |
President and Director |
February 27, 2007 |
|
/s/ DEAN A. SHIGENAGA |
Chief Financial Officer (Principal Financial and Accounting Officer) |
February 27, 2007 |
|
/s/ RICHARD B. JENNINGS |
Director |
February 27, 2007 |
|
/s/ RICHARD H. KLEIN |
Director |
February 28, 2007 |
|
/s/ MARTIN A. SIMONETTI |
Director |
February 26, 2007 |
|
/s/ ALAN G. WALTON |
Director |
February 27, 2007 |
|
/s/ RICHMOND A. WOLF |
Director |
February 28, 2007 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Alexandria Real Estate Equities, Inc.
We have audited the accompanying consolidated balance sheets of Alexandria Real Estate Equities, Inc. and subsidiaries (the "Company") as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Alexandria Real Estate Equities, Inc. and subsidiaries at December 31, 2006 and 2005, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2007, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Los Angeles, California
February 26, 2007
Alexandria Real Estate Equities, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
December 31,
----------------------
2006 2005
---------- ----------
Assets
Rental properties, net $2,924,881 $1,788,818
Properties undergoing development and land held for development 397,701 329,338
Cash and cash equivalents 2,948 3,911
Tenant security deposits and other restricted cash 34,360 21,013
Tenant receivables 6,330 4,764
Deferred rent 68,412 54,573
Investments 74,824 82,010
Other assets 108,021 78,023
---------- ----------
Total assets $3,617,477 $2,362,450
========== ==========
Liabilities and Stockholders' Equity
Secured notes payable $1,174,866 $ 666,666
Unsecured line of credit and unsecured term loan 850,000 740,000
Accounts payable, accrued expenses and tenant security deposits 158,119 86,391
Dividends payable 25,363 19,478
---------- ----------
Total liabilities 2,208,348 1,512,535
Commitments and contingencies
Minority interest 57,477 20,115
Stockholders' equity:
9.10% Series B cumulative redeemable preferred stock, 57,500 57,500
$0.01 par value per share, 2,300,000 shares authorized;
2,300,000 shares issued and outstanding at
December 31, 2006 and 2005; $25.00 liquidation value per share
8.375% Series C cumulative redeemable preferred stock, 129,638 129,638
$0.01 par value per share, 5,750,000 shares authorized;
5,185,500 shares issued and outstanding at
December 31, 2006 and 2005; $25.00 liquidation value per share
Common stock, $0.01 par value per share, 100,000,000 290 224
shares authorized; 29,012,135 and 22,441,294 shares
issued and outstanding at December 31, 2006
and 2005, respectively
Additional paid-in capital 1,139,629 607,405
Retained earnings - -
Accumulated other comprehensive income 24,595 35,033
---------- ----------
Total stockholders' equity 1,351,652 829,800
---------- ----------
Total liabilities and stockholders' equity $3,617,477 $2,362,450
========== ==========
See the accompanying Notes to Consolidated Financial Statements.
Alexandria Real Estate Equities, Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
Year Ended December 31,
-------------------------------------
2006 2005 2004
----------- ----------- -----------
Revenues
Rental $ 241,209 $ 184,812 $ 140,391
Tenant recoveries 63,760 48,528 34,386
Other income 11,852 4,798 3,523
----------- ----------- -----------
316,821 238,138 178,300
Expenses
Rental operations 71,550 53,107 37,081
General and administrative 26,071 21,088 15,105
Interest 71,371 49,116 28,670
Depreciation and amortization 73,572 53,993 41,347
----------- ----------- -----------
242,564 177,304 122,203
Minority interests' share of income 2,287 634 -
----------- ----------- -----------
Income from continuing operations 71,970 60,200 56,097
Income from discontinued operations, net 1,446 3,233 4,098
----------- ----------- -----------
Net income 73,416 63,433 60,195
Dividends on preferred stock 16,090 16,090 12,595
Preferred stock redemption charge - - 1,876
----------- ----------- -----------
Net income available to common stockholders $ 57,326 $ 47,343 $ 45,724
=========== =========== ===========
Earnings per share - basic
Continuing operations (net of preferred stock dividends and $ 2.22 $ 2.11 $ 2.16
preferred stock redemption charge)
Discontinued operations, net 0.06 0.15 0.21
----------- ----------- -----------
Earnings per share - basic $ 2.28 $ 2.26 $ 2.37
=========== =========== ===========
Earnings per share - diluted
Continuing operations (net of preferred stock dividends and $ 2.19 $ 2.07 $ 2.12
preferred stock redemption charge)
Discontinued operations, net 0.06 0.15 0.21
----------- ----------- -----------
Earnings per share - diluted $ 2.25 $ 2.22 $ 2.33
=========== =========== ===========
Weighted average shares of common stock outstanding
Basic 25,102,200 20,948,915 19,315,364
=========== =========== ===========
Diluted 25,524,478 21,316,886 19,658,759
=========== =========== ===========
See the accompanying Notes to Consolidated Financial Statements.
Alexandria Real Estate Equities, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
Accumulated
Series A Series B Series C Number of Additional Other
Preferred Preferred Preferred Common Common Paid-In Retained Comprehensive
Stock Stock Stock Shares Stock Capital Earnings Income (Loss) Total
---------- ---------- ---------- ----------- ------- ---------- ----------- ------------ ----------
Balance at December 31, 2003 $ 38,588 $ 57,500 $ - 19,264,023 $ 193 $ 407,694 $ 8,635 $ (5,475) $ 507,135
Net income - - - - - - 60,195 - 60,195
Unrealized gain on marketable securities - - - - - - - 15,110 15,110
Unrealized gain on swap agreements - - - - - - - 4,209 4,209
----------
Comprehensive income - - - - - - - - 79,514
Issuance of Series C preferred stock, net of offering costs - - 129,638 - - (5,629) - - 124,009
Redemption of Series A preferred stock (38,588) - - - - 1,876 (1,876) - (38,588)
Issuances pursuant to Stock Plan - - - 330,395 3 10,087 - - 10,090
Dividends declared on preferred stock - - - - - - (12,595) - (12,595)
Dividends declared on common stock - - - - - - (49,092) - (49,092)
---------- ---------- ---------- ----------- ------- ---------- ----------- ------------ ----------
Balance at December 31, 2004 - 57,500 129,638 19,594,418 196 414,028 5,267 13,844 620,473
Net income - - - - - - 63,433 - 63,433
Unrealized gain on marketable securities - - - - - - - 12,439 12,439
Unrealized gain on swap agreements - - - - - - - 6,957 6,957
Foreign currency translation - - - - - - - 1,793 1,793
----------
Comprehensive income - - - - - - - - 84,622
Issuance of common stock, net of offering costs - - - 2,685,500 27 189,344 - - 189,371
Issuances pursuant to Stock Plan - - - 161,376 1 10,929 - - 10,930
Dividends declared on preferred stock - - - - - - (16,090) - (16,090)
Dividends declared on common stock - - - - - (6,896) (52,610) - (59,506)
---------- ---------- ---------- ----------- ------- ---------- ----------- ------------ ----------
Balance at December 31, 2005 - 57,500 129,638 22,441,294 224 607,405 - 35,033 829,800
Net income - - - - - - 73,416 - 73,416
Unrealized loss on marketable securities - - - - - - - (6,636) (6,636)
Unrealized loss on swap agreements - - - - - - - (3,894) (3,894)
Foreign currency translation - - - - - - - 92 92
----------
Comprehensive income - - - - - - - - 62,978
Issuance of common stock, net of offering costs - - - 6,295,000 63 535,199 - - 535,262
Issuances pursuant to Stock Plan - - - 275,841 3 17,073 - - 17,076
Dividends declared on preferred stock - - - - - - (16,090) - (16,090)
Dividends declared on common stock - - - - - (20,048) (57,326) - (77,374)
---------- ---------- ---------- ----------- ------- ---------- ----------- ------------ ----------
Balance at December 31, 2006 $ - $ 57,500 $ 129,638 29,012,135 $ 290 $1,139,629 $ - $ 24,595 $1,351,652
========== ========== ========== =========== ======= ========== =========== ============ ==========
See the accompanying Notes to Consolidated Financial Statements.
Alexandria Real Estate Equities, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
--------------------------------------
2006 2005 2004
----------- ----------- -----------
Operating Activities
Net income $ 73,416 $ 63,433 $ 60,195
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in loss (income) related to investments 632 (483) (208)
Realized gain on sales of investments (7,770) (1,811) (2,228)
Gain/loss on sales of property (59) (36) (1,627)
Minority interest 2,287 634 -
Depreciation and amortization 74,039 55,416 42,523
Amortization of loan fees and costs 4,631 6,666 2,374
Amortization of premiums/discount on secured notes payable (990) (1,089) (161)
Stock compensation expense 7,909 5,136 2,470
Changes in operating assets and liabilities:
Tenant security deposits and other restricted cash (13,347) (3,344) (6,612)
Tenant receivables (1,566) (2,214) (573)
Deferred rent (16,323) (14,904) (11,671)
Other assets (25,532) (26,586) (18,261)
Accounts payable, accrued expenses and tenant security deposits 31,063 39,860 (905)
----------- ----------- -----------
Net cash provided by operating activities 128,390 120,678 65,316
Investing Activities
Purchase of rental properties (744,908) (223,862) (251,091)
Proceeds from sales of rental properties 33,040 1,182 5,454
Additions to rental properties (98,111) (92,417) (70,248)
Additions to properties under development and land held for development (168,299) (117,945) (129,620)
Additions to investments (12,906) (10,367) (7,993)
Proceeds from investments 20,594 10,509 5,246
----------- ----------- -----------
Net cash used in investing activities (970,590) (432,900) (448,252)
Financing Activities
Proceeds from issuances of common stock 535,262 189,371 -
Proceeds from issuance of preferred stock - - 124,009
Redemption of Series A preferred stock - - (38,588)
Proceeds from exercise of stock options 4,298 4,291 7,094
Borrowings from unsecured line of credit and unsecured term loan 1,613,600 515,000 490,000
Repayments of unsecured line of credit (1,503,600) (323,000) (331,000)
Proceeds from secured notes payable 502,500 153,398 198,400
Principal reductions of secured notes payable (221,316) (153,015) (10,376)
Dividends paid on common stock (71,489) (56,312) (47,333)
Dividends paid on preferred stock (16,090) (16,090) (11,097)
Distributions to minority interest (1,928) (668) -
----------- ----------- -----------
Net cash provided by financing activities 841,237 312,975 381,109
Net (decrease) increase in cash and cash equivalents (963) 753 (1,827)
Cash and cash equivalents at beginning of year 3,911 3,158 4,985
----------- ----------- -----------
Cash and cash equivalents at end of year $ 2,948 $ 3,911 $ 3,158
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest, net of interest capitalized $ 64,830 $ 39,292 $ 28,714
=========== =========== ===========
See the accompanying Notes to Consolidated Financial Statements.
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Background
References to the "Company", "we", "our" and "us" refer to Alexandria Real Estate Equities, Inc. and its subsidiaries.
Alexandria Real Estate Equities, Inc. is a real estate investment trust ("REIT") formed in 1994. We are engaged principally in the ownership, operation, management, selective redevelopment, development and acquisition of properties for the life sciences industry. Our properties are designed and improved for lease primarily to institutional (universities and independent not-for-profit institutions), pharmaceutical, biotechnology, medical device, life science product, service, biodefense and translational research entities, as well as governmental agencies. As of December 31, 2006, we had 159 properties (156 properties located in nine states in the United States and three properties located in Canada) with approximately 11.2 million rentable square feet of office/laboratory space, compared to 133 properties (130 properties located in nine states in the United States and three properties located in Canada) with approximately 8.8 million rentable square feet of office/laboratory space as of December 31, 2005.
As of December 31, 2006, approximately 90% of our leases (on a square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses, including increases thereto. In addition, as of December 31, 2006, approximately 4% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses. Additionally, as of December 31, 2006, approximately 91% of our leases (on a square footage basis) provided for the recapture of certain capital expenditures and approximately 89% of our leases (on a square footage basis) contained effective annual rent escalations that are either fixed or indexed based on the consumer price index or another index. The information provided in this paragraph is unaudited.
2. Basis of presentation and summary of significant accounting policies
Basis of presentation
The accompanying consolidated financial statements include the accounts of Alexandria Real Estate Equities, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
We hold interests, together with certain third parties, in a limited partnership and in limited liability companies which we consolidate in our financial statements. Such interests are subject to provisions of FASB Interpretation No. 46R, "Consolidation of Variable Interest Entities", FASB Emerging Issues Task Force Issue No. 96-16, "Investor's Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights", FASB Emerging Issues Task Force Issue No.04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" and AICPA Statement of Position 78-9, "Accounting for Investments in Real Estate Ventures". Based on the provisions set forth in these rules, we consolidate the limited partnership and limited liability companies because we exercise significant control over major decisions by these entities, such as investment activity and changes in financing.
Use of estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Fair value of financial instruments
The carrying amounts of cash and cash equivalents, tenant receivables, unsecured line of credit and unsecured term loan, and accounts payable, accrued expenses and tenant security deposits approximate fair value.
The fair value of our secured notes payable was estimated using discounted cash flows analyses based on borrowing rates we believe we could obtain with similar terms and maturities. As of December 31, 2006 and 2005, the fair values of our secured notes payable were approximately $1,179,404,000 and $682,835,000, respectively.
Operating segments
We view our operations as principally one segment and the financial information disclosed herein represents all of the financial information related to our principal operating segment.
International operations
The functional currency for our subsidiaries operating in the United States is the U.S. dollar. During 2005, we acquired three operating properties in Canada through wholly-owned Canadian subsidiaries. The functional currency for our foreign subsidiaries operating in Canada is the local currency, the Canadian dollar. The assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect as of the financial statement date. Income statement accounts of our foreign subsidiaries are translated using the average exchange rate for the period presented. Gains resulting from the translation are included in accumulated other comprehensive income as a separate component of stockholders' equity.
The appropriate amounts of exchange gains or losses included in accumulated other comprehensive income are reflected in income when there is a sale or partial sale of our investment in these operations or upon a complete or substantially complete liquidation of the investment.
Rental properties, properties undergoing development and land held for development
In accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), we allocate the purchase price of acquired properties to land, land improvements, buildings, building improvements, tenant improvements, equipment, and identified intangibles (including intangible value to above, below and at-market leases, origination costs associated with in-place leases, tenant relationships and other intangible assets) based upon their relative fair values. The value of tangible assets acquired is based upon our estimation of value on an "as if vacant" basis. We assess fair value of tangible and intangible assets based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property.
The values allocated to land improvements, buildings, building improvements, tenant improvements and equipment are depreciated on a straight-line basis using an estimated life of 20 years for land improvements, 40 years for buildings and building improvements, the respective lease term for tenant improvements and the estimated useful life for equipment. The values of above and below market leases are amortized over the life of the related lease and recorded as either an increase (for below market leases) or a decrease (for above market leases) to rental income. The values of at-market leases and origination costs are classified as leasing costs, included in other assets in the accompanying consolidated balance sheets and amortized over the remaining life of the lease.
In accordance with SFAS 141, the values of above and below market leases are amortized over the life of the related lease and recorded as either an increase (for below market leases) or a decrease (for above market leases) to rental income. The value of acquired leases, less accumulated amortization, was approximately $36,389,000 as of December 31, 2006. The weighted average amortization period of acquired leases is approximately 9.5 years. The estimated aggregate annual amortization of acquired leases for each of the five succeeding years is $5,454,000 for 2007, $4,621,000 for 2008, $4,519,000 for 2009, $4,392,000 for 2010 and $3,442,000 for 2011.
Rental properties, properties undergoing development and land held for development and intangibles are individually evaluated for impairment in accordance with SFAS 141 when conditions exist which may indicate that it is probable that the sum of expected future undiscounted cash flows is less than the carrying amount. Upon determination that an impairment has occurred, a write-down is recorded to reduce the carrying amount to its estimated fair value.
In accordance with Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost" ("SFAS 34") and Statement of Financial Accounting Standards No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects" ("SFAS 67"), we capitalize direct construction and development costs, including predevelopment costs, interest, property taxes, insurance and other costs directly related and essential to the acquisition, development or construction of a project. Pursuant to SFAS 34 and SFAS 67, capitalization of construction, development and redevelopment costs is required while activities are ongoing to prepare an asset for its intended use. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Costs previously capitalized related to abandoned acquisitions or development opportunities are written off. Should development activity cease, a portion of interest, property taxes, insurance and certain costs would no longer be eligible for capitalization, and would be expensed as incurred. Expenditures for repairs and maintenance are expensed as incurred.
In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), we classify a property as "held for sale" when all of the following criteria for a plan of sale have been met: (1) management, having the authority to approve the action, commits to a plan to sell the property; (2) the property is available for immediate sale in its present condition, subject only to the terms that are usual and customary; (3) an active program to locate a buyer, and other actions required to complete the plan to sell, have been initiated; (4) the sale of the property is probable and is expected to be completed within one year; (5) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When the property is classified as "held for sale", its operations are classified as discontinued operations in our consolidated statements of income and amounts for all prior periods presented are reclassified from continuing operations to discontinued operations. A loss is recognized for any initial adjustment of the asset's carrying amount to fair value less costs to sell in the period the asset qualifies as "held for sale". Depreciation of assets ceases upon designation of a property as "held for sale".
Conditional asset retirement obligations
Some of our properties may have asbestos which, under certain conditions, requires remediation. Although we believe that the asbestos is appropriately contained in accordance with environmental regulations, our practice is to remediate the asbestos upon the development or redevelopment of the affected property. In accordance with Financial Accounting Standards Board Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations - an Interpretation of FASB Statement No. 143" ("FIN 47"), we recognize a liability for the fair value of a conditional asset retirement obligation (including asbestos) when the fair value of the liability can be reasonably estimated. In addition, for certain properties, we have not recognized an asset retirement obligation when there is an indeterminate settlement date for the obligation because the period in which we may remediate the obligation may not be estimated with any level of precision to provide for a meaningful estimate of the retirement obligation. Conditional asset retirement obligations totaled approximately $6.9 million as of December 31, 2006 and are included in accounts payable, accrued expenses and tenant security deposits.
Cash equivalents
We consider all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.
Tenant security deposits and other restricted cash
Tenant security deposits and other restricted cash consisted of the following (in thousands):
December 31,
----------------------
2006 2005
---------- ----------
Funds held in trust under the terms of
certain secured notes payable $ 20,071 $ 13,838
Other funds held in escrow 14,289 7,175
---------- ----------
$ 34,360 $ 21,013
========== ==========
Investments
We hold equity investments in certain publicly-traded companies and privately held entities primarily involved in the life science industry. All of our investments in publicly-traded companies are considered "available for sale" in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"), and are recorded at fair value. Fair value has been determined as the closing trading price at the balance sheet date, with unrealized gains and losses shown as a separate component of stockholders' equity. The classification of investments under SFAS 115 is determined at the time each investment is made, and such determination is reevaluated at each balance sheet date. The cost of investments sold is determined by the specific identification method, with realized gains and losses included in other income in the accompanying consolidated statements of income.
Investments in privately held entities are generally accounted for under the cost method because we do not influence any operating or financial policies of the entities in which we invest. Certain investments are accounted for under the equity method in accordance with Accounting Principles Board Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock" ("APB 18") and Emerging Issues Task Force Topic D-46, "Accounting for Limited Partnership Investments" ("EITF Topic D-46"). Under the equity method we record our investment initially at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment.
Individual investments are evaluated for impairment when conditions exist which may indicate that it is probable that an impairment exist. The factors that we consider in making these assessments include, but are not limited to, market prices, market conditions, prospects for favorable or unfavorable clinical trial results, new product initiatives and new collaborative agreements. For all of our investments, if a decline in the fair value of an investment below its carrying value is determined to be other than temporary, such investment is written down to its estimated fair value with a non-cash charge to current earnings.
Leasing costs
Costs directly related and essential to our leasing activities are capitalized and amortized on a straight-line basis over the term of the related lease. Costs related to unsuccessful leasing opportunities are expensed. Leasing costs, net of related amortization, totaled $45,980,000 and $32,924,000 as of December 31, 2006 and 2005, respectively, and are included in other assets in the accompanying consolidated balance sheets.
Lease origination costs recorded pursuant to SFAS 141 are included in amounts immediately above and are classified as leasing costs, included in other assets in the accompanying consolidated balance sheets and amortized over the remaining life of the lease. The value of lease origination costs, net of related amortization recognized pursuant to SFAS 141, was approximately $17,004,000 as of December 31, 2006. The annual amortization of lease origination costs pursuant to SFAS 141 for each of the five succeeding years is $4,266,000 for 2007, $3,357,000 for 2008, $2,956,000 for 2009, $2,259,000 for 2010 and $1,497,000 for 2011.
Loan fees and costs
Fees and costs incurred in obtaining long-term financing are amortized over the terms of the related loans and included in interest expense in the accompanying consolidated statements of income. Loan fees and costs, net of related amortization, totaled $19,390,000 and $14,789,000 as of December 31, 2006 and 2005, respectively, and are included in other assets in the accompanying consolidated balance sheets.
Interest rate swaps
We utilize interest rate swap agreements to hedge a portion of our exposure to variable interest rates primarily associated with our unsecured line of credit and unsecured term loan. These agreements involve an exchange of fixed and floating rate interest payments without the exchange of the underlying principal amount (the "notional amount"). Interest received under all of our swap agreements is based on the one-month LIBOR rate. The net difference between the interest paid and the interest received is reflected as an adjustment to interest expense.
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities", as amended by Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" establishes accounting and reporting standards for derivative financial instruments such as our interest rate swap agreements. All of our interest rate swap agreements meet the criteria to be deemed "highly effective" under SFAS 133 in reducing our exposure to variable interest rates. In accordance with SFAS 133, we formally document all relationships between interest rate swap agreements and hedged items, including the method for evaluating effectiveness and the risk strategy. Accordingly, we have categorized these instruments as cash flow hedges. We make an assessment at the inception of each interest rate swap agreement and on an on going basis to determine whether these instruments are highly effective in offsetting changes in cash flows associated with the hedged items. The ineffective portion of each interest rate swap agreement is immediately recognized in earnings. While we intend to continue to meet the conditions for such hedge accounting, if hedges did not qualify as "highly effective", the changes in the fair values of the derivatives used as hedges would be reflected in earnings.
Pursuant to SFAS 133, interest rate swaps are reflected at their estimated fair values in the accompanying consolidated balance sheets. We use a variety of methods and assumptions based on market conditions and risks existing at each balance sheet date to determine the fair values of our interest rate swap agreements. These methods of assessing fair value result in a general approximation of value.
We do not believe we are exposed to a significant amount of credit risk in our interest rate swap agreements as our counterparties are established, well-capitalized financial institutions.
Accumulated other comprehensive income
Accumulated other comprehensive income consisted of the following (in thousands):
December 31,
-----------------------
2006 2005
----------- -----------
Unrealized gain on marketable
securities $ 21,737 $ 28,373
Unrealized gain on interest
rate swap agreements 973 4,867
Unrealized gain on foreign
currency translation 1,885 1,793
----------- -----------
$ 24,595 $ 35,033
=========== ===========
Rental income and tenant recoveries
Rental income from leases with scheduled rent increases, free rent, incentives and other rent adjustments are recognized on a straight-line basis over the respective lease terms. We include amounts currently recognized as income, and expected to be received in later years, in deferred rent in the accompanying consolidated balance sheets. Amounts received currently, but recognized as income in future years, are included as unearned rent in accounts payable, accrued expenses and tenant security deposits in the accompanying consolidated balance sheets. We commence recognition of rental income at the date the property is ready for its intended use and the tenant takes possession of or controls the physical use of the property.
Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred.
We maintain an allowance for estimated losses that may result from the inability of our tenants to make required payments. If a tenant fails to make contractual payments beyond any allowance, we may recognize additional bad debt expense in future periods equal to the amount of unpaid rent and unrealized deferred rent. As of December 31, 2006 and 2005, we had no allowance for doubtful accounts.
Interest income
Interest income was $1,303,000, $578,000, and $181,000 in 2006, 2005 and 2004, respectively, and is included in other income in the accompanying consolidated statements of income.
Income taxes
As a REIT, we are not subject to federal income taxation as long as we meet a number of organizational and operational requirements and make distributions greater than or equal to 100% of our taxable income to our stockholders. Since we believe we have met these requirements and our distributions exceeded taxable income, no federal income tax provision has been reflected in the accompanying consolidated financial statements for the years ended December 31, 2006, 2005 and 2004. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates.
During 2006, 2005 and 2004, we declared dividends on our common stock of $2.86, $2.72, and $2.52 per share, respectively. During 2004, we declared dividends on our Series A cumulative redeemable preferred stock of $1.72847. During 2006, 2005 and 2004, we declared dividends on our Series B cumulative redeemable preferred stock of $2.275, $2.275 and $2.275, respectively. During 2006, 2005 and 2004, we declared dividends on our Series C cumulative redeemable preferred stock of $2.09375, $2.09375 and $0.61649 per share, respectively. See Note 11, Preferred Stock and Excess Stock.
The tax treatment of distributions on common stock paid in 2006 is as follows: (1) 82.1% ordinary dividend, (2) 12.3% capital gain at 15%, (3) 3.3% return of capital, and (4) 2.3% Section 1250 capital gain at 25%. The tax treatment of distributions on common stock paid in 2005 is as follows: (1) 71.8% ordinary dividend, (2) 3.9% capital gain at 15%, (3) 24.1% return of capital, and (4) 0.2% Section 1250 capital gain at 25%. The information provided in this paragraph is unaudited.
Earnings per share, dividends declared and preferred stock redemption cost
The following table shows the computation of earnings per share, and dividends declared per common share:
Year Ended December 31,
------------------------------------------
2006 2005 2004
------------ ------------- -------------
(Dollars in thousands, except per share amounts)
Net income available to common
stockholders $ 57,326 $ 47,343 $ 45,724
============ ============= =============
Weighted average shares of common stock
outstanding - basic 25,102,200 20,948,915 19,315,364
Add: dilutive effect of stock options
and stock grants 422,278 367,971 343,395
------------ ------------- -------------
Weighted average shares of common stock
outstanding - diluted 25,524,478 21,316,886 19,658,759
============ ============= =============
Net income available to common
stockholders - basic $ 2.28 $ 2.26 $ 2.37
Net income available to common ============ ============= =============
stockholders - diluted $ 2.25 $ 2.22 $ 2.33
============ ============= =============
Dividends declared per common share $ 2.86 $ 2.72 $ 2.52
============ ============= =============
Emerging Issues Task Force Topic D-42, "The Effect on the Calculation of Earnings Per Share for the Redemption or Induced Conversion of Preferred Stock" ("EITF Topic D-42") provides, among other things, that any excess of (1) the fair value of the consideration transferred to the holders of preferred stock redeemed over (2) the carrying amount of the preferred stock, should be subtracted from net earnings to determine net income available to common stockholders in the calculation of earnings per share. The cost to issue our preferred stock was recorded as a reduction to additional paid-in capital in the period that the preferred stock was issued. Upon any redemption of our preferred stock, the respective offering costs, representing the excess of the fair value of the consideration transferred to the holders over the carrying amount of the preferred stock, will be recognized as a dividend to preferred stockholders. During 2004, we recorded a charge of approximately $1,876,000 to net income available to common stockholders for costs related to the redemption of our 9.5% Series A cumulative redeemable preferred stock. Dividends on preferred stock are deducted from net income to arrive at net income allocable to common stockholders.
Stock-based compensation expense
Effective January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"). Under the modified-prospective transition method of SFAS 123R, compensation cost is recognized over the remaining service period for the portion of outstanding stock options for which the requisite service had not been rendered that were outstanding as of January 1, 2006. The compensation cost is based on the grant-date fair value of those awards. In addition, SFAS 123R requires that we account for an estimate of awards that are expected to vest and to revise the estimate for actual forfeitures. The adoption of SFAS 123R did not have a material impact on our financial statements since all awards accounted for under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") were fully vested prior to the adoption of SFAS 123R. Effective January 1, 2003, we had adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation" ("SFAS 123") prospectively to all employee awards granted, modified or settled after January 1, 2003. We have not granted any stock options since 2002.
For 2002 and all prior years, we elected to follow ABP 25 and related interpretations in accounting for our employee and non- employee director stock options, stock grants and stock appreciation rights. Under APB 25, because the exercise price of the options we granted equaled the market price of the underlying stock on the date of grant, no compensation expense related to stock options has been recognized. Although we have elected to follow APB 25 for options granted prior to January 1, 2003, pro forma information regarding net income and net income per share is required by SFAS 123R for all periods presented prior to 2006 as if we had accounted for stock options under the fair value method under SFAS 123.
For purposes of the following pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods (in thousands, except per share information):
Year Ended December 31,
--------------------------- --------------
2006 2005 2004
------------ ------------- -------------
Net income available to common
stockholders, as reported $ 57,326 $ 47,343 $ 45,724
Fair value of stock-based compensation cost -- (152) (733)
------------ ------------- -------------
Pro forma net income available to common
stockholders $ 57,326 $ 47,191 $ 44,991
============ ============= =============
Earnings per share:
Basic - as reported $ 2.28 $ 2.26 $ 2.37
Basic - pro forma $ 2.28 $ 2.25 $ 2.33
Diluted - as reported $ $2.25 $ $2.22 $ $2.33
Diluted - pro forma $ $2.25 $ $2.21 $ $2.29
Impact of recently issued accounting standards
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), which provides a framework for measuring fair value, clarifies the definition of fair value within the framework and expands disclosures about the use of fair value measurements. SFAS 157 applies to all existing pronouncements under GAAP that require or permit the use of fair value measurements, except for SFAS 123R. SFAS 157 is effective for fair value measurements beginning in our first quarter of 2008. We do not expect the adoption of SFAS 157 to have a material impact on our financial statements.
In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 increases the relevancy and comparability of financial reporting by clarifying the way a company accounts for uncertainty in measuring income taxes. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 only allows a favorable tax position to be included in the calculation of tax liabilities and expenses if a company concludes that it is more likely than not that its adopted tax position will prevail if challenged by tax authorities. FIN 48 also provides guidance on the accounting and recording of interest and penalties on uncertain tax positions. FIN 48 is effective for accounting of income taxes beginning in our first quarter of 2007. We do not expect the adoption of FIN 48 to have a material impact on our financial statements.
In December 2005, the FASB issued Statement of Financial Accounting Standards No. 153, "Exchanges of Nonmonetary Assets" ("SFAS 153"), which amends Accounting Principles Board Opinion No. 29, "Accounting for Nonmonetary Transactions" ("APB 29"). SFAS 153 addresses the measurement of exchanges of nonmonetary assets and redefines the scope of transactions that should be measured based on the fair values of the assets exchanged. SFAS 153 is effective for nonmonetary asset exchanges beginning in our third quarter of 2005. The adoption of SFAS 153 did not have a material impact on our financial statements.
In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, "Accounting Changes and Error Corrections" ("SFAS 154"), which replaces Accounting Principles Board Opinion No. 20, "Accounting Changes" and Statement of Financial Accounting Standards No. 3, "Reporting Accounting Changes in Interim Financial Statements". SFAS 154 requires retrospective application to prior periods' financial statements of voluntary changes in accounting principles, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes and corrections of errors beginning in 2006. The adoption of SFAS 154 did not have an impact on our financial statements.
3. Rental properties, net and properties undergoing development and land held for development
Rental properties, net consisted of the following (in thousands):
December 31,
---------------------------
2006 2005
------------ -------------
Land $ 482,310 $ 296,841
Buildings and improvements 2,536,542 1,559,385
Tenant and other improvements 185,649 153,482
------------ -------------
3,204,501 2,009,708
Less accumulated depreciation (279,620) (220,890)
------------ -------------
$ 2,924,881 $ 1,788,818
============ =============
As of December 31, 2006 and 2005, certain of our rental properties were encumbered by deeds of trust and assignments of rents and leases associated with the properties. See Note 5, Secured Notes Payable. The net book values of encumbered properties including land parcels as of December 31, 2006 and 2005 were $1,107,526,000 and $848,286,000, respectively.
We lease space under noncancelable leases with remaining terms of up to 17 years.
In July 2006, we completed the acquisition of a 90% equity interest in the leasehold interest in 10.4 acres commonly known as Technology Square ("Tech Square") at Massachusetts Institute of Technology ("MIT") in Cambridge, Massachusetts. The remaining 10% equity interest was retained by MIT. MIT is also a tenant at Tech Square occupying 178,952 rentable square feet as of December 31, 2006. The results of Tech Square's operations have been included in our consolidated financial statements since that date. Tech Square consists of a seven building campus (including a 1,593 space covered car parking garage and a 49 space surface parking lot) containing approximately 1.2 million square feet and is subject to a ground lease with an affiliate of MIT through December 31, 2064.
In accordance with FAS 141, we allocated the purchase price of Tech Square based upon the relative fair values of the assets acquired and liabilities assumed including rental properties of $616 million, other assets of $5 million, secured notes payable of $220 million, accounts payable, accrued expenses and tenant security deposits of $26 million and minority interest of $37 million.
Our financial statements, on an unaudited pro forma basis, for the acquisitions of Tech Square, the issuance of 2.5 million shares of common stock with proceeds of approximately $232 million and borrowings on our unsecured line of credit of approximately $106 million as if it had occurred on January 1, 2005, would have reflected total consolidated revenues of $347.5 million and $287.6 million for the years ended December 31, 2006 and 2005, respectively. Net income available to common stockholders would have been approximately $60.6 million and $51.9 million for the years ended December 31, 2006 and 2005, respectively. Net income available to common stockholders on a diluted per share basis would have been $2.21 and $2.18 for the years ended December 31, 2006 and 2005, respectively. All other properties acquired during the year comprise of a series of individually insignificant transactions, both individually and in aggregate, and have been excluded from this pro forma analysis.
Rental properties, net as of December 31, 2006, include spaces totaling approximately 612,699 rentable square feet at 13 properties in our redevelopment program. Rental properties, net as of December 31, 2005, include spaces totaling approximately 548,051 rentable square feet at 15 properties in our redevelopment program. The allocated net book values of the portion of these properties undergoing redevelopment as of December 31, 2006 and 2005 were approximately $169,131,000 and $139,661,000, respectively. Depreciation ceases on the portion of a property undergoing redevelopment during the period of redevelopment.
In accordance with SFAS 34, we are required to capitalize interest to properties undergoing development or redevelopment during the period an asset is undergoing activities to prepare it for its intended use. Capitalization of interest ceases after a project is substantially complete and ready for its intended use. In addition, should construction activity cease, interest would be expensed as incurred. Total interest capitalized for the years ended December 31, 2006, 2005 and 2004 was $35,282,000, $27,490,000 and $17,902,000, respectively. Total interest incurred for the years ended December 31, 2006, 2005 and 2004 was $107,643,000, $77,695,000 and $46,733,000, respectively.
Minimum lease payments to be received under the terms of the operating lease agreements, excluding expense reimbursements, as of December 31, 2006 are as follows (in thousands):
Year Amount
- ---------------------- ------------
2007 247,920
2008 236,694
2009 220,923
2010 207,037
2011 174,208
Thereafter 587,402
------------
$ 1,674,184
============
4. Investments
We hold equity investments in certain publicly-traded companies and privately held entities primarily involved in the life science industry. All of our investments in publicly-traded companies are considered "available for sale" in accordance with SFAS 115, and are recorded at fair value. Investments in privately held entities are generally accounted for under the cost method because we do not influence any operating or financial policies of the entities in which we invest. Certain investments are accounted for under the equity method in accordance with APB 18 and EITF Topic D-46. For all of our investments, if a decline in the fair value of an investment below its carrying value is determined to be other than temporary, such investment is written down to its estimated fair value with a non-cash charge to current earnings. The factors that we consider in making these assessments include, but are not limited to, market prices, market conditions, prospects for favorable or unfavorable clinical trial results, new product initiatives and new collaborative agreements. For additional discussion of our accounting policies with respect to investments, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies.
The following table summarizes our available-for-sale securities (in thousands):
December 31,
--------------------
2006 2005
--------- ---------
Adjusted cost of available-for-sale securities $ 4,445 $ 4,740
Gross unrealized gains 22,849 29,135
Gross unrealized losses (1,112) (762)
--------- ---------
Fair value of available-for-sale securities $ 26,182 $ 33,113
========= =========
Investments in available-for-sale securities with gross unrealized losses as of December 31, 2006 and 2005 have been in a continuous unrealized loss position for less than twelve months. We believe that these unrealized losses are temporary and accordingly we have not recognized an other-than-temporary impairment related to available-for-sale securities as of December 31, 2006 and 2005.
Our investments in privately held entities as of December 31, 2006 and 2005 totaled $48,642,000 and $48,897,000, respectively. Of these totals, $48,013,000 and $47,164,000 are accounted for under the cost method. The remainder ($629,000 and $1,733,000 for 2006 and 2005, respectively) are accounted for under the equity method in accordance with APB 18 and EITF Topic D-46. As of December 31, 2006 and 2005, there were no unrealized losses in our investments in privately held entities.
Net investment income of $7,138,000, $2,294,000, and $2,436,000 was recognized in 2006, 2005 and 2004, respectively, and is included in other income in the accompanying consolidated statements of income. Net investment income in 2006 consisted of equity in loss of $632,000 related to investments in privately held entities accounted for under the equity method, gross realized gains of $8,305,000, and gross realized losses of $535,000. Net investment income in 2005 consisted of equity in income of $483,000 related to investments in privately held entities accounted for under the equity method, gross realized gains of $2,433,000, and gross realized losses of $622,000. Net investment income in 2004 consisted of equity in income of $208,000 related to investments in privately held entities accounted for under the equity method, gross realized gains of $2,508,000, and gross realized losses of $280,000.
5. Secured notes payable
Secured notes payable totaled $1.2 billion and $666.7 million as of December 31, 2006 and 2005, respectively. Our secured notes payable had weighted average interest rates of 6.21% and 6.31% at December 31, 2006 and 2005, respectively, with maturity dates ranging from March 2007 to August 2016.
Our secured notes payable generally require monthly payments of principal and interest. The total net book values of properties securing debt were $1.7 billion and $848.3 million at December 31, 2006 and 2005, respectively. At December 31, 2006, our secured notes payable were comprised of $940.0 million and $234.9 million of fixed and variable rate debt, respectively, compared to $595.9 million and $70.8 million of fixed and variable rate debt, respectively, at December 31, 2005.
Future principal payments due on secured notes payable as of December 31, 2006, are as follows (dollars in thousands):
Weighted
Average
Year Amount Interest Rate (1)
- -------------------------------------------------- ------------ ---------------
2007 $ 72,790 6.21%
2008 290,088 6.17%
2009 45,986 6.26%
2010 93,259 6.23%
2011 108,204 6.09%
Thereafter 564,539 6.00%
------------
Total secured notes payable $ 1,174,866
============
(1) The weighted average interest rate related to our secured debt is calculated based on the outstanding debt as of December 31st of the year immediately preceding the year presented.
6. Unsecured line of credit and unsecured term loanIn October 2006, we entered into an amendment to our amended and restated credit agreement to increase the maximum permitted borrowings under our unsecured credit facilities from $1 billion to $1.4 billion consisting of an $800 million unsecured line of credit and a $600 million unsecured term loan. We may in the future elect to increase commitments under the unsecured credit facilities by up to an additional $500 million.
Borrowings under our unsecured line of credit, as amended, bear interest at a floating rate based on our election of either a LIBOR-based rate or the higher of the bank's reference rate and the Federal Funds rate plus 0.5%. For each LIBOR-based advance, we must elect a LIBOR period of one, two, three or six months. Our unsecured line of credit matures in October 2010 and may be extended at our sole option for an additional one-year period. As of December 31, 2006, we had borrowings of $250 million outstanding on the unsecured line of credit with a weighted average interest rate of 6.50%.
Our unsecured term loan bears interest at a floating rate based on our election of either a LIBOR-based rate or the higher of the bank's reference rate and the Federal Funds rate plus 0.5%. For each LIBOR-based advance, we must elect to fix for a period of one, two, three or six months. Our unsecured term loan matures in October 2011 and may be extended at our sole option for an additional one-year period. As of December 31, 2006, we had borrowings of $600 million outstanding on the unsecured term loan with a weighted average interest rate of 6.50%.
Our unsecured line of credit and our unsecured term loan contain financial covenants, including, among other things, maintenance of minimum net worth, a leverage ratio and a fixed charge coverage ratio. In addition, the terms of the unsecured line of credit and unsecured term loan restrict, among other things, certain investments, indebtedness, distributions and mergers.
Aggregate unsecured borrowings under our credit facilities may be limited to an amount based primarily on the net operating income derived from a pool of unencumbered properties. Accordingly, as we acquire or complete the development or redevelopment of additional unencumbered properties, aggregate unsecured borrowings available under our credit facilities may increase up to a maximum combined amount of $1.4 billion.
7. Interest rate swaps
We utilize interest rate swap agreements to hedge a portion of our exposure to variable interest rates primarily associated with our unsecured line of credit and unsecured term loan. These agreements involve an exchange of fixed and floating rate interest payments without the exchange of the underlying principal amount (the "notional amount"). Interest received under all of our swap agreements is based on the one-month LIBOR rate. The net difference between the interest paid and the interest received is reflected as an adjustment to interest expense.
SFAS 133, as amended, establishes accounting and reporting standards for derivative financial instruments such as our interest rate swap agreements. All of our interest rate swap agreements meet the criteria to be deemed "highly effective" under SFAS 133 in reducing our exposure to variable interest rates. In accordance with SFAS 133, we formally document all relationships between interest rate swap agreements and hedged items, including the method for evaluating effectiveness and the risk strategy. Accordingly, we have categorized these instruments as cash flow hedges. We make an assessment at the inception of each interest rate swap agreement and on an on going basis to determine whether these instruments are highly effective in offsetting changes in cash flows associated with the hedged items. While we intend to continue to meet the conditions for such hedge accounting, if hedges did not qualify as "highly effective", the changes in the fair values of the derivatives used as hedges would be reflected in earnings.
As of December 31, 2006 and 2005, our interest rate swap agreements were classified in other assets and accounts payable, accrued expenses and tenant security deposits at their fair values aggregating approximately $1.0 million and $4.9 million, respectively, with the offsetting adjustment reflected as unrealized gains in accumulated other comprehensive income in stockholders' equity. Balances in accumulated other comprehensive income are recognized in earnings as swap payments are made. During the next twelve months, we expect to reclassify $3.1 million from accumulated other comprehensive income to interest income.
The following table summarizes our interest rate swap agreements as of December 31, 2006 related to our unsecured line of credit and unsecured term loan (dollars in thousands) (1):
Notional Effective at Interest Termination Fair
Transaction Dates Effective Dates Amounts December 31, 2006 Pay Rates Dates Values
- -------------------- -------------------- ----------- ------------------- --------- ------------------ ---------
December 2003 December 29, 2006 $ 50,000 $ 50,000 5.090% October 31, 2008 $ (44)
April 2004 April 28, 2006 50,000 50,000 4.230% April 30, 2007 174
April 2004 April 30, 2007 50,000 -- 4.850% April 30, 2008 106
June 2004 June 30, 2005 50,000 50,000 4.343% June 30, 2007 232
December 2004 December 31, 2004 50,000 50,000 3.590% January 2, 2008 864
December 2004 January 3, 2006 50,000 50,000 3.927% July 1, 2008 909
May 2005 June 30, 2006 50,000 50,000 4.270% June 29, 2007 253
May 2005 November 30, 2006 25,000 25,000 4.330% November 30, 2007 201
May 2005 June 29, 2007 50,000 -- 4.400% June 30, 2008 291
May 2005 November 30, 2007 25,000 -- 4.460% November 28, 2008 97
May 2005 June 30, 2008 50,000 -- 4.509% June 30, 2009 151
May 2005 November 28, 2008 25,000 -- 4.615% November 30, 2009 49
December 2005 December 29, 2006 50,000 50,000 4.730% November 30, 2009 314
December 2005 December 29, 2006 50,000 50,000 4.740% November 30, 2009 300
December 2005 January 2, 2008 50,000 -- 4.768% December 31, 2010 106
June 2006 June 30, 2006 125,000 125,000 5.299% September 30, 2009 (1,075)
June 2006 October 31, 2008 50,000 -- 5.340% December 31, 2010 (469)
June 2006 October 31, 2008 50,000 -- 5.347% December 31, 2010 (476)
June 2006 June 30, 2008 50,000 -- 5.325% June 30, 2010 (446)
June 2006 June 30, 2008 50,000 -- 5.325% June 30, 2010 (446)
December 2006 December 31, 2006 50,000 50,000 4.990% March 31, 2014 (10)
December 2006 June 29, 2007 50,000 -- 4.920% October 31, 2008 19
December 2006 November 30, 2009 75,000 -- 5.015% March 31, 2014 (24)
December 2006 November 30, 2009 75,000 -- 5.023% March 31, 2014 (44)
December 2006 December 31, 2010 100,000 -- 5.015% October 31, 2012 8
------------------- ---------
Total Notional Amount in Effect at December 31, 2006 $ 600,000 $ 1,040
=================== =========
(1) As of December 31, 2006, we had one additional interest rate swap agreement with a notional amount of $28,500,000. This interest rate swap agreement has an interest pay rate of 5.003%, is effective on January 2, 2007, terminates on January 3, 2011 and has a fair value as of December 31, 2006 of approximately $(67,000).
8. Commitments and contingencies
Employee retirement savings plan
We have a retirement savings plan pursuant to Section 401(k) of the Internal Revenue Code whereby our employees may contribute a portion of their compensation to their respective retirement accounts, in an amount not to exceed the maximum allowed under the Internal Revenue Code. In addition to employee contributions, we have elected to provide discretionary profit sharing contributions (subject to statutory limitations), which amounted to $850,000, $552,000, and $515,000, respectively, for the years ended December 31, 2006, 2005 and 2004. Employees who participate in the plan are immediately vested in their contributions and in the contributions of the company.
Concentration of credit risk
We maintain our cash and cash equivalents at insured financial institutions. The combined account balances at each institution periodically exceed FDIC insurance coverage, and, as a result, there is a concentration of credit risk related to amounts in excess of FDIC insurance coverage. We believe that the risk is not significant.
We are dependent on rental income from relatively few tenants in the life science industry. The inability of any single tenant to make its lease payments could adversely affect our operations. As of December 31, 2006, we held 370 leases with a total of 310 tenants and 80 of our 159 properties were each leased to a single tenant. At December 31, 2006, our three largest tenants accounted for approximately 14.9% of our aggregate annualized base rent.
We generally do not require collateral or other security from our tenants, other than security deposits. In addition to security deposits held in cash, we held $58.7 million in irrevocable letters of credit available from certain tenants as security deposits for 110 leases as of December 31, 2006.
Commitments
As of December 31, 2006, we were committed under the terms of contracts to complete the construction of properties undergoing development and land held for development at a remaining aggregate cost of approximately $58.8 million.
As of December 31, 2006, we were also committed to fund approximately $33.7 million for the construction of building infrastructure improvements under the terms of leases and/or construction contracts and approximately $23.4 million for certain investments.
As of December 31, 2006, we were committed under the terms of ten ground leases. These lease obligations totaling approximately $352.5 million have remaining lease terms of 26 to 58 years, exclusive of extension options. In addition, as of December 31, 2006, we were committed under the terms of certain operating leases for our headquarters and field offices. These lease obligations totaling approximately $5.9 million have remaining lease terms of one to six years, exclusive of extension options. Included in our ground lease obligations as of December 31, 2006 is a ground lease related to our ground-up development project in New York City totaling approximately 725,000 rentable square feet. This ground lease obligation has a remaining term of 99 years, inclusive of extension options.
9. Minority interest
Minority interest represents the interests in a limited partnership and in three limited liability companies held by certain third parties, which own nine properties and one development parcel, and are included in our consolidated financial statements. We recognize minority interest in these entities in which we have a controlling interest. Minority interest is adjusted for additional contributions, distributions to minority holders and the minority holders' proportionate share of the net earnings or losses of each respective entity. Distributions, profits and losses related to these entities are allocated in accordance with the respective operating agreements. As of December 31, 2006, the aggregate minority interest balance related to these entities was approximately $57.5 million and is classified as minority interest in the accompanying consolidated balance sheet.
10. Issuances of common stock
In September 2006, we sold 2,500,000 shares of our common stock in a follow-on offering. The shares were issued at a price of $94.75 per share, resulting in aggregate proceeds of approximately $232.2 million (after deducting underwriting discounts and other offering costs).
In June 2006, we sold 3,795,000 shares of our common stock in a follow-on offering (including the shares issued upon exercise of the underwriter's over-allotment option). The shares were issued at a price of $84.00 per share, resulting in aggregate proceeds of approximately $303.1 million (after deducting underwriting discounts and other offering costs).
In September 2005, we sold 1,248,000 shares of our common stock in a follow-on offering (including the shares issued upon exercise of the underwriter's over-allotment option). The shares were issued at a price of $81.00 per share, resulting in net proceeds of approximately $100.3 million (after deducting underwriting discounts and other offering costs).
In March 2005, we sold 1,437,500 shares of our common stock in a follow-on offering (including the shares issued upon exercise of the underwriter's over-allotment option). The shares were issued at a price of $62.51 per share, resulting in net proceeds of approximately $89.1 million (after deducting underwriting discounts and other offering costs).
11. Preferred stock and excess stock
Series A cumulative redeemable preferred stock
In July 2004, we redeemed all 1,543,500 outstanding shares of our 9.50% Series A cumulative redeemable preferred stock ("Series A preferred stock") at a redemption price of $25.00 per share plus $0.5409722 per share representing accumulated and unpaid dividends to the redemption date. In accordance with EITF Topic D-42, we recorded a charge of approximately $1,876,000 to net income available to common stockholders during the second quarter of 2004 for costs related to the redemption of the Series A preferred stock. We redeemed our Series A preferred stock with proceeds from the Series C preferred stock offering.
Series B cumulative redeemable preferred stock
In January 2002, we completed a public offering of 2,300,000 shares of our 9.10% Series B cumulative redeemable preferred stock ("Series B preferred stock") (including the shares issued upon exercise of the underwriters' over-allotment option). The shares were issued at a price of $25.00 per share, resulting in aggregate proceeds of approximately $55.1 million (after deducting underwriters' discounts and other offering costs). The dividends on our Series B preferred stock are cumulative and accrue from the date of original issuance. We pay dividends quarterly in arrears at an annual rate of $2.275 per share. Our Series B preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not redeemable prior to January 22, 2007, except in order to preserve our status as a REIT. Investors in our Series B preferred stock generally have no voting rights. On or after January 22, 2007, we may, at our option, redeem our Series B preferred stock, in whole or in part, at any time with proceeds from the sale of equity securities at a redemption price of $25.00 per share, plus accrued and unpaid dividends.
In February 2007, we announced that we will redeem all 2,300,000 outstanding shares of our Series B preferred stock at a redemption price of $25.00 per share plus $0.4107639 per share representing accumulated and unpaid dividends through the redemption date of March 20, 2007.
Series C cumulative redeemable preferred stock
In June 2004, we completed a public offering of 5,185,500 shares of our 8.375% Series C cumulative redeemable preferred stock ("Series C preferred stock") (including the shares issued upon exercise of the underwriters' over-allotment option). The shares were issued at a price of $25.00 per share, resulting in aggregate proceeds of approximately $124.0 million (after deducting underwriters' discounts and other offering costs). The proceeds were used to redeem our Series A preferred stock with the remaining portion used to pay down our unsecured line of credit. The dividends on our Series C preferred stock are cumulative and accrue from the date of original issuance. We pay dividends quarterly in arrears at an annual rate of $2.09375 per share. Our Series C preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not redeemable prior to June 29, 2009, except in order to preserve our status as a REIT. Investors in our Series C preferred stock generally have no voting rights. On or after June 29, 2009, we may, at our option, redeem our Series C preferred stock, in whole or in part, at any time for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends.
Preferred stock and excess stock authorizations
Our charter authorizes the issuance of up to 100,000,000 shares of preferred stock, of which 7,485,500 shares were issued and outstanding as of December 31, 2006. In addition, 200,000,000 shares of "excess stock" (as defined) are authorized, none of which were issued and outstanding at December 31, 2006.
12. Stock option plans and stock grants
1997 Stock plan
In 1997, we adopted a stock option and incentive plan (the "Stock Plan") for the purpose of attracting and retaining the highest quality personnel, providing for additional incentives and promoting the success of the company by providing employees the opportunity to acquire common stock pursuant to (i) options to purchase common stock; and (ii) share awards. As of December 31, 2006, a total of 942,283 shares were reserved for the granting of future options and share awards under the Stock Plan.
Options under our plan have been granted at prices that are equal to the market value of the stock on the date of grant and expire ten years after the date of grant. We have not granted any stock options since 2002. The options outstanding under the Stock Plan expire at various dates through October 2012.
The fair values of the options issued under the Stock Plan were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2006, 2005 and 2004:
Year Ended December 31,
--------------------------------------------
2006 2005 2004
------------ --------------- -------------
Risk-free interest rate 4.64% 4.34% 3.94%
Dividend yield 2.71% 3.19% 3.79%
Volatility factor of the expected market price 20.83% 21.14% 21.50%
Weighted average expected life of the options 5.0 years 5.2 years 6.7 years
A summary of the stock option activity under our Stock Plan and related information for the years ended December 31, 2006, 2005 and 2004 follows:
2006 2005 2004
---------------------- ---------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Stock Exercise Stock Exercise Stock Exercise
Options Price Options Price Options Price
---------- ---------- ---------- ---------- ---------- ----------
Outstanding at beginning of year 492,016 $ 34.92 607,331 $ 35.36 809,583 $ 35.39
Granted -- -- -- -- -- --
Exercised (153,336) 27.69 (115,315) 37.22 (200,252) 35.44
Forfeited -- -- -- -- (2,000) 42.15
---------- ---------- ---------- ---------- ---------- ----------
Outstanding at end of year 338,680 $ 38.20 492,016 $ 34.92 607,331 $ 35.36
========== ========== ========== ========== ========== ==========
Exercisable at end of year 338,680 $ 38.20 492,016 $ 34.92 500,000 $ 33.38
========== ========== ========== ========== ========== ==========
Weighted average fair value of
options granted $ - $ - $ -
========== ========== ==========
The following table summarizes information about stock options outstanding at December 31, 2006:
Options Outstanding and Exercisable
---------------------------------
Weighted
Weighted Average
Range of Average Number Remaining
Exercise Exercise of Contractual
Prices Price Options Life
- --------------- -------- ----------- ------------
$20.00 - $37.00 $27.21 116,310 1.4
$38.38 - $43.50 $40.95 123,466 4.8
$47.20 - $47.69 $47.69 98,904 5.5
----------- ------------
$20.00-$47.69 $38.20 338,680 3.8
=========== ============
In addition, the Stock Plan permits us to issue share awards to our employees and non-employee directors. A share award is an award of common stock, which (i) may be fully vested upon issuance or (ii) may be subject to the risk of forfeiture under Section 83 of the Internal Revenue Code. Shares issued generally vest over a one to three year period from the date of issuance and the sale of the shares is restricted prior to the date of vesting. The unearned portion of these awards is amortized as stock compensation expense on a straight-line basis over the vesting period.
As of December 31, 2006 and 2005 there were 444,349 and 271,537 nonvested share awards outstanding, respectively. During 2006, we granted 286,569 shares of common stock, 105,782 of share awards vested and 7,975 of shares were forfeited. The weighted average grant-date fair value of share awards granted during 2006 was approximately $91.36 and the total fair value of share awards vested, based on the market price on the vesting date, was approximately $11.9 million. As of December 31, 2006, there was $24.3 million of unrecognized compensation related to nonvested share awards under the Stock Plan, which is expected to be recognized over a weighted average period of approximately 2 years.
13. Non-cash transactions
During the year ended December 31, 2006, our non-cash transactions related to one transaction in connection with the acquisitions of seven properties located in the Eastern Massachusetts market and another transaction in connection with the acquisitions of one land parcel located in the San Francisco Bay market. During the year ended December 31, 2005, our non-cash transactions related to acquisitions of seven properties, in seven separate transactions, located in the San Francisco Bay, Suburban Washington D.C., Eastern Massachusetts, Seattle and Canada markets. The following table summarizes these transactions (in thousands):
2006 2005 2004
------------ --------------- -------------
Aggregate purchase price $ 608,363 $ 55,400 $ 185,912
Minority interest 36,898 -- --
Notes payable 232,525 31,853 127,653
------------ --------------- -------------
Cash paid for the properties $ 338,940 $ 23,547 $ 58,259
============ =============== =============
The following is a summary of operations and net assets of the properties included in discontinued operations presented in compliance with SFAS 144 (in thousands):
Year Ended December 31,
--------------------------------------------
2006 2005 2004
------------ --------------- -------------
Total revenue $ 2,402 $ 6,073 $ 4,998
Operating expenses 548 1,453 1,351
------------ --------------- -------------
Revenue less operating expenses 1,854 4,620 3,647
Interest -- -- --
Depreciation 467 1,423 1,176
------------ --------------- -------------
Income before gain/loss on sales of property 1,387 3,197 2,471
Gain/loss on sales of property 59 36 1,627
------------ --------------- -------------
Income from discontinued operations, net $ 1,446 $ 3,233 $ 4,098
============ =============== =============
December 31,
-----------------------------
2006 2005
------------ ---------------
Properties held for sale, net $ 6,160 $ --
Other assets 1,156 --
------------ ---------------
Total assets $ 7,316 $ --
============ ===============
Total liabilities -- --
------------ ---------------
Net assets of discontinued operations $ 7,316 $ --
============ ===============
Income from discontinued operations, net for 2006 includes the results of operations of one property that was designated as "held for sale" as of December 31, 2006, and three properties sold during 2006, Income from discontinued operations, net for 2005 reflects the results of operations of one property that was designated as "held
14. Discontinued operations (continued)
for sale" as of December 31, 2006, three properties sold during 2006 and one property sold during 2005. Income from discontinued operations, net for 2004 reflects the results of operations of one property that was designated as "held for sale" as of December 31, 2006, three properties sold during 2006, one property sold during 2005 and one property sold in 2004. See Note 2, Basis of Presentation and Summary of Significant Accounting Policies.
As of December 31, 2006, we had one property designated as "held for sale" in accordance with SFAS 144. During 2006, we sold one property located in the New Jersey/Suburban Philadelphia market and two properties located in the Suburban Washington D.C. market . The total sale price for these properties was approximately $41.8 million. In connection with this sale, we recorded a gain on sale of property of approximately $59,000. During 2005, we sold one property located in the Southeast market. The total sale price for the property was approximately $1.3 million. In connection with this sale, we recorded a gain on sale of property of approximately $36,000. During 2004, we sold one property located in the Suburban Washington D.C. market. The total sale price for the property was approximately $5.7 million. In connection with the sale, we recorded a gain on sale of property of approximately $1.6 million. Gains and losses on sales of these properties are included in the income statement in income from discontinued operations, net.
15. Quarterly financial data (unaudited)
The following is a summary of consolidated financial information on a quarterly basis for 2006 and 2005:
Quarter
----------------------------------------------------------
First Second Third Fourth
------------- ------------- ------------- -------------
(In thousands, except per share amounts)
2006
- ----
Revenues $ 68,283 $ 70,187 $ 84,911 $ 93,440
Net income available to common stockholders $ 12,733 $ 13,139 $ 14,942 $ 16,512
Earnings per share:
Basic $ 0.57 $ 0.57 $ 0.57 $ 0.57
Diluted $ 0.56 $ 0.57 $ 0.56 $ 0.57
Quarter
----------------------------------------------------------
First Second Third Fourth
------------- ------------- ------------- -------------
(In thousands, except per share amounts)
2005
- ----
Revenues $ 54,764 $ 56,987 $ 61,735 $ 64,652
Net income available to common stockholders $ 10,967 $ 12,250 $ 11,969 $ 12,157
Earnings per share:
Basic $ 0.56 $ 0.59 $ 0.57 $ 0.55
Diluted $ 0.55 $ 0.58 $ 0.56 $ 0.54
16. Subsequent events
In January 2007, we completed a private offering of $460 million of convertible notes that are due in 2027 (the "Notes") with a coupon of 3.70%. The Notes have an initial conversion rate of approximately 8.4774 common shares per $1,000 principal amount of the Notes representing a conversion price of approximately $117.96 per share of the Company's common stock and a conversion premium of 20% based on the last reported sale price of $98.30 per share of the Company's common stock on January 10, 2007. The net proceeds from this offering, after underwriters' discount, were approximately $450.8 million.
Holders of the Notes may convert their Notes into cash and, if applicable, shares of the Company's common stock prior to stated maturity only under the following circumstances: (1) the Notes will be convertible during any calendar quarter after the calendar quarter ending March 31, 2007, if the closing sale price of the Company's common stock for each of 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 120% of the conversion price in effect on the last trading day of the immediately preceding calendar quarter; (2) the Notes will be convertible during the five consecutive business days immediately after any five consecutive trading day period (the "Note Measurement Period") in which the average trading price per $1,000 principal amount of Notes was equal to or less than 98% of the average conversion value of the Notes during the Note measurement period; (3) the Notes will convertible upon the occurrence of specified corporate transactions; (4) the Notes will be convertible if the Company has called the Notes for redemption; and (5) the Notes will convertible at any time from, and including, December 15, 2026 until the close of business on the business day immediately preceding January 15, 2027 or earlier redemption or repurchase.
Prior to January 15, 2012, the Company will not have the right to redeem the Notes, except to preserve its qualification as a real estate investment trust. On and after that date, we have the right to redeem the Notes, in whole or in part, at any time and from time to time, for cash equal to 100% of the principal amount of the Notes to be redeemed plus any accrued and unpaid interest to, but excluding, the redemption date.
Holders of the Notes may require the Company to repurchase their Notes, in whole or in part, on January 15, 2012, 2017 and 2022 for cash equal to 100% of the principal amount of the Notes to be purchased plus any accrued and unpaid interest to but excluding the repurchase date.
Alexandria Real Estate Equities, Inc. and Subsidiaries
Schedule III
Consolidated Financial Statement Schedule of Rental Properties and Accumulated Depreciation
December 31, 2006
(Dollars in thousands)
Initial Costs Costs Total Costs
Square ----------------------- Capitalized ----------------------
Footage Buildings and Subsequent to Buildings and Accumulated Year Built/
Property Name (unaudited) Land Improvements Acquisition Land Improvements Total (27) Depreciation (Encumbrances (28) Renovated
------------- ----------- -------- ------------- ------------- -------- ------------ ----------- ------------ ---------------- -------------------
California - Los Angeles Metro 31,343 $ 2,172 $ 812 $ 10,627 $ 2,172 $ 11,439 $ 13,611 $ (2,181) $ 1940's/2002
California - Los Angeles Metro 29,660 928 4,280 118 928 4,398 5,326 (8) early 1980's
California - San Diego 107,709 1,321 5,960 7,407 1,321 13,367 14,688 (3,210) 1971/2003
California - San Diego 74,557 1,013 - 16,802 1,013 16,802 17,815 (5,613) 2000
California - San Diego 44,733 620 9,531 9,667 620 19,198 19,818 (951) 1962/2005
California - San Diego 86,962 2,663 10,649 5,223 2,663 15,872 18,535 (5,799) 1986/1996
California - San Diego 76,084 2,651 18,046 1,460 2,651 19,506 22,157 (7,210) 36,655 (2) 1986/2000
California - San Diego 43,600 1,227 9,554 330 1,227 9,884 11,111 (3,624) (2) 1991
California - San Diego 18,173 463 1,840 2,787 463 4,627 5,090 (1,238) (5) 1983/1998
California - San Diego 67,050 2,548 13,638 263 2,548 13,901 16,449 (4,629) 31,600 (3) 1989
California - San Diego 64,000 2,248 10,952 14,261 2,248 25,213 27,461 (430) 1998/2006
California - San Diego 34,723 1,122 - 3,881 1,122 3,881 5,003 (659) (2) 2000
California - San Diego 55,200 1,683 - 5,647 1,683 5,647 7,330 (1,276) (2) 1999
California - San Diego 29,333 733 2,273 1,878 733 4,151 4,884 (1,879) (19) 1997
California - San Diego 17,603 444 1,699 1,842 444 3,541 3,985 (1,184) late 1970's/1999
California - San Diego 15,410 651 1,375 1,922 651 3,297 3,948 (1,490) 1978/1999
California - San Diego 45,030 275 8,621 3,666 275 12,287 12,562 (2,072) 88,581 (4) 1987/2003
California - San Diego 51,768 320 10,070 2,965 320 13,035 13,355 (2,765) (4) 1987/2000
California - San Diego 41,780 258 8,170 8,725 258 16,895 17,153 (3,133) (4) 1987/2000
California - San Diego 17,590 506 2,581 2,352 506 4,933 5,439 (190) 22,915 (5) 1981
California - San Diego 30,147 754 4,288 619 754 4,907 5,661 (555) (5) 1981/1998
California - San Diego 22,577 564 3,224 43 564 3,267 3,831 (582) (5) 1981/1995
California - San Diego 17,433 436 2,480 431 436 2,911 3,347 (418) (5) 1981/1999
California - San Diego 24,208 605 3,459 42 605 3,501 4,106 (625) (5) 1981/1995
California - San Diego 21,940 515 1,566 2,502 515 4,068 4,583 (875) early 1980's/2001
California - San Diego 71,510 4,329 16,165 10,497 4,329 26,662 30,991 (1,207) 10,301 1986/1998
California - San Diego 56,698 1,984 10,397 238 1,984 10,635 12,619 (783) (4) 1987/2001
California - San Diego 87,140 10,124 9,448 4,233 10,124 13,681 23,805 (122) 21,883 1980
California - San Diego 87,298 3,492 18,285 212 3,492 18,497 21,989 (959) 15,180 (6) 1999/2000
California - San Francisco Bay 61,015 1,506 5,357 3,691 1,506 9,048 10,554 (3,385) (3) 1983/1999
California - San Francisco Bay 27,745 775 1,917 1,632 775 3,549 4,324 (1,225) (3) 1984/2000
California - San Francisco Bay 47,777 1,200 3,880 447 1,200 4,327 5,527 (1,210) (3) 1986/1994
California - San Francisco Bay 68,711 1,800 9,731 755 1,800 10,486 12,286 (2,600) 1,104 1985/1994
California - San Francisco Bay 153,837 4,751 12,612 14,476 4,751 27,088 31,839 (5,703) 1962/2002
California - San Francisco Bay 32,074 - 6,628 8,385 - 15,013 15,013 (4,419) 1968/2000
California - San Francisco Bay 98,964 - 21,323 20,954 - 42,277 42,277 (6,971) 1980/2003
California - San Francisco Bay 53,980 3,519 - 12,941 3,519 12,941 16,460 (4,050) 32,070 (7) 2001
California - San Francisco Bay 53,980 3,519 - 7,671 3,519 7,671 11,190 (1,757) (7) 2001
California - San Francisco Bay 110,428 7,730 24,397 24 7,730 24,421 32,151 (2,914) 145,391 (8) 2000
California - San Francisco Bay 59,816 4,187 14,020 25 4,187 14,045 18,232 (2,551) (8) 2002
California - San Francisco Bay 126,971 8,250 33,846 4,287 8,250 38,133 46,383 (370) (8) 2006
California - San Francisco Bay 67,482 1,349 9,915 372 1,349 10,287 11,636 (780) 1984/2001
California - San Francisco Bay 91,644 - 19,154 1,150 - 20,304 20,304 (1,511) (4) 1962/2002
California - San Francisco Bay 140,143 7,038 39,704 3,337 7,038 43,041 50,079 (2,412) (8) 2001
California - San Francisco Bay 60,000 4,800 6,693 4,412 4,800 11,105 15,905 (177) 6,543 (9) 1982
California - San Francisco Bay 116,284 28,290 - 17 28,290 17 28,307 - 1985
California - San Francisco Bay 58,400 3,568 5,255 572 3,568 5,827 9,395 - 8,861 1982/1999
California - San Francisco Bay 82,712 6,617 7,091 667 6,617 7,758 14,375 (122) 13,970 early 1980's
California - San Francisco Bay 70,328 9,799 - 24 9,799 24 9,823 - 1940's/1990's
California - San Francisco Bay 150,960 25,259 48,796 - 25,259 48,796 74,055 (110) 1999
Eastern Massachusetts 24,940 - 6,247 399 - 6,646 6,646 (1,505) (20) 1880/1991
Eastern Massachusetts 24,867 622 3,053 70 622 3,123 3,745 (421) 1965/1990
Eastern Massachusetts 40,200 960 3,032 8,196 960 11,228 12,188 (1,152) 1975
Eastern Massachusetts 115,179 2,734 14,567 4,545 2,734 19,112 21,846 (4,025) 1991
Eastern Massachusetts 92,711 2,352 14,173 2,512 2,352 16,685 19,037 (3,551) 17,877 (19) 1993
Eastern Massachusetts 92,423 651 - 15,860 651 15,860 16,511 (7,128) 2000
Eastern Massachusetts 92,500 3,360 7,316 14,719 3,360 22,035 25,395 (6,672) 1978/2001
Eastern Massachusetts 59,000 1,475 7,194 11,426 1,475 18,620 20,095 (3,992) 36,486 (20) 1972/2002
Eastern Massachusetts 51,000 6,507 - 21,759 6,507 21,759 28,266 (4,194) 2002
Eastern Massachusetts 47,497 6,058 - 21,345 6,058 21,345 27,403 (2,414) 2002
Eastern Massachusetts 96,150 6,413 5,457 30,885 6,413 36,342 42,755 (2,589) 1980/2003
Eastern Massachusetts 46,700 2,567 4,522 9,763 2,567 14,285 16,852 (1,008) (4) 1972
Eastern Massachusetts 78,916 1,578 10,195 901 1,578 11,096 12,674 (684) 9,155 (21) 1929/2003
Eastern Massachusetts 11,774 228 1,501 301 228 1,802 2,030 (109) (21) 1940/2003
Eastern Massachusetts 48,640 876 5,033 17 876 5,050 5,926 (273) 1975/1997
Eastern Massachusetts 60,759 1,220 22,375 44 1,220 22,419 23,639 (1,027) 1977
Eastern Massachusetts 82,330 1,466 9,046 3,931 1,466 12,977 14,443 (395) 7,400 1982/1997
Eastern Massachusetts 26,828 1,341 8,448 50 1,341 8,498 9,839 (353) 5,718 (22) 1975/2000
Eastern Massachusetts 128,325 12,833 27,333 55 12,833 27,388 40,221 (1,141) 1999
Eastern Massachusetts 30,000 750 3,312 37 750 3,349 4,099 (139) 2,650 (23) 1972/2001
Eastern Massachusetts 45,820 2,775 7,679 5,071 2,775 12,750 15,525 (199) 1907/1982
Eastern Massachusetts 36,000 1,440 5,238 15 1,440 5,253 6,693 (197) 1985/1996
Eastern Massachusetts 38,000 893 4,000 81 893 4,081 4,974 (127) 1,829 (24) 1975/2004
Eastern Massachusetts 26,589 1,628 3,554 3,369 1,628 6,923 8,551 - 1920
Eastern Massachusetts 54,391 1,278 7,057 22 1,278 7,079 8,357 (206) 1973/2000
Eastern Massachusetts 131,547 15,774 54,481 12,406 15,774 66,887 82,661 (1,366) 2001
Eastern Massachusetts 113,045 2,261 7,099 4,014 2,261 11,113 13,374 (134) 1970/2001
Eastern Massachusetts 97,566 2,342 9,892 30 2,342 9,922 12,264 (234) 2006
Eastern Massachusetts 1,136,734 - 619,658 2,638 - 622,296 622,296 (5,788) 220,639 (25) 2006
Eastern Massachusetts 27,960 2,209 9,059 - 2,209 9,059 11,268 (70) 1920's/1998
Eastern Massachusetts 184,577 58,697 38,331 - 58,697 38,331 97,028 (210) 1920's/2006
Eastern Massachusetts 132,135 36,852 5,377 - 36,852 5,377 42,229 - 1900/1990's
International - Canada 68,000 2,930 17,735 1,050 2,930 18,785 21,715 (859) 2004
International - Canada 162,362 6,995 20,651 535 6,995 21,186 28,181 (574) 1999
International - Canada 66,000 2,281 8,612 198 2,281 8,810 11,091 (222) 6,081 (26) 1969/2003
New Jersey/Suburban Philadelphia 42,782 654 4,234 738 654 4,972 5,626 (1,128) (20) 1989
New Jersey/Suburban Philadelphia 40,000 600 3,110 3,542 600 6,652 7,252 (3,340) 1983/1998
New Jersey/Suburban Philadelphia 41,015 621 4,258 28 621 4,286 4,907 (259) 1968
New Jersey/Suburban Philadelphia 111,451 1,289 12,039 70 1,289 12,109 13,398 (780) 1997/2004
New Jersey/Suburban Philadelphia 50,000 1,625 19,715 98 1,625 19,813 21,438 (241) 1975/1996/2002
New Jersey/Suburban Philadelphia 37,000 740 4,506 1,266 740 5,772 6,512 (1,124) 1982/1994
New Jersey/Suburban Philadelphia 78,501 1,840 2,298 14,565 1,840 16,863 18,703 (4,881) (20) late 1960's/1999
New Jersey/Suburban Philadelphia 42,600 1,161 1,438 4,423 1,161 5,861 7,022 (2,389) 1984/1999
Southeast 20,580 214 3,802 5 214 3,807 4,021 (778) 1976/1993
Southeast 65,114 337 5,795 1,325 337 7,120 7,457 (1,685) 1986
Southeast 59,397 288 5,789 5,840 288 11,629 11,917 (4,870) 1985
Southeast 60,519 289 5,899 7,477 289 13,376 13,665 (2,472) 1985
Southeast 32,120 161 3,410 261 161 3,671 3,832 (828) 1981
Southeast 82,206 - 376 11,842 - 12,218 12,218 (2,243) 2000
Southeast 38,861 339 3,383 7,168 339 10,551 10,890 (1,919) 1995/2003
Southeast 46,557 363 9,101 8,452 363 17,553 17,916 (798) 2000
Southeast 48,236 364 8,734 6 364 8,740 9,104 (235) 2005
Southeast 81,580 713 12,827 442 713 13,269 13,982 (764) 8,326 1995
Southeast 77,395 785 11,546 - 785 11,546 12,331 (27) 2002
Southeast 45,841 2,916 5,314 1,349 2,916 6,663 9,579 - 2003
Suburban Washington D.C. 105,000 1,733 9,611 3,482 1,733 13,093 14,826 (3,869) 1967/2000
Suburban Washington D.C. 47,558 871 5,362 3,095 871 8,457 9,328 (3,312) 1989/1999
Suburban Washington D.C. 63,154 1,129 6,940 1,012 1,129 7,952 9,081 (1,799) 1987
Suburban Washington D.C. 138,938 3,281 14,416 207 3,281 14,623 17,904 (3,879) 23,438 (13) 1989/1997
Suburban Washington D.C. 44,500 775 4,122 350 775 4,472 5,247 (1,101) (14) 1981/1995
Suburban Washington D.C. 131,415 2,800 11,533 20,962 2,800 32,495 35,295 (3,155) 1994/2005
Suburban Washington D.C. 49,225 1,267 3,031 5,168 1,267 8,199 9,466 (5,317) (13) 1982/1997
Suburban Washington D.C. 44,464 900 2,732 1,592 900 4,324 5,224 (1,891) (15) 1989
Suburban Washington D.C. 72,170 1,514 21,946 3,627 1,514 25,573 27,087 (682) 2006
Suburban Washington D.C. 45,989 748 3,609 1,599 748 5,208 5,956 (1,491) (14) 1981/2003
Suburban Washington D.C. 191,884 - 13,679 1,669 - 15,348 15,348 (3,786) 28,866 (14) 1990/2003
Suburban Washington D.C. 75,500 1,510 5,210 1,849 1,510 7,059 8,569 (2,409) 1983/1997
Suburban Washington D.C. 143,585 2,463 493 23,577 2,463 24,070 26,533 (7,427) 26,903 (15) 2000
Suburban Washington D.C. 25,175 376 3,192 2,199 376 5,391 5,767 (1,043) 1974/2000
Suburban Washington D.C. 53,464 971 5,141 6,936 971 12,077 13,048 (2,555) (16) 1980/2001
Suburban Washington D.C. 54,000 947 5,092 5,002 947 10,094 11,041 (1,322) (16) 1980/2003
Suburban Washington D.C. 54,874 970 5,138 919 970 6,057 7,027 (999) 9,319 (16) 1981/2003
Suburban Washington D.C. 59,838 983 6,638 105 983 6,743 7,726 (1,300) (15) 1989/1992
Suburban Washington D.C. 58,632 1,466 5,708 4,182 1,466 9,890 11,356 (1,408) 1972/2003
Suburban Washington D.C. 92,449 2,773 23,906 3,856 2,773 27,762 30,535 (1,028) 1999
Suburban Washington D.C. 49,185 1,476 7,267 37 1,476 7,304 8,780 (426) 1963/1979
Suburban Washington D.C. 37,861 2,576 5,661 55 2,576 5,716 8,292 (333) 1999
Suburban Washington D.C. 343,100 10,052 106,240 17,895 10,052 124,135 134,187 (7,014) 76,794 (17) 1996/1998/2002
Suburban Washington D.C. 54,906 1,647 13,258 3,586 1,647 16,844 18,491 (799) 1970/1992
Suburban Washington D.C. 180,650 5,527 26,365 3,649 5,527 30,014 35,541 (1,587) 1982
Suburban Washington D.C. 26,127 784 4,705 85 784 4,790 5,574 (219) 3,323 (18) 2000/2003
Suburban Washington D.C. 83,541 2,924 19,664 433 2,924 20,097 23,021 (623) 1972/1983
Suburban Washington D.C. 248,186 4,800 27,639 390 4,800 28,029 32,829 (6,884) (11) 1992
Washington - Seattle 164,345 5,654 22,916 18,191 5,654 41,107 46,761 (11,247) 14,541 (10) 1975/1997
Washington - Seattle 70,647 2,119 11,275 4,781 2,119 16,056 18,175 (5,454) 1980/2000
Washington - Seattle 47,746 1,432 7,497 3,323 1,432 10,820 12,252 (3,145) 32,880 (11) 1929/2000
Washington - Seattle 106,003 4,240 31,232 25 4,240 31,257 35,497 (3,320) 1997
Washington - Seattle 97,366 1,570 15,917 14,929 1,570 30,846 32,416 (2,788) 1997
Washington - Seattle 165,493 6,940 - 60,427 6,940 60,427 67,367 (2,894) 2004
Washington - Seattle 32,279 2,156 1,645 5,933 2,156 7,578 9,734 (242) 1962
Washington - Seattle 2,896 1,700 344 103 1,700 447 2,147 (22) 1951
Washington - Seattle 121,790 8,525 20,064 197 8,525 20,261 28,786 (1,011) 28,500 1962/2000
Washington - Seattle 27,633 2,212 6,788 347 2,212 7,135 9,347 (185) 3,928 (12) 1998
Washington - Seattle 24,000 5,134 - 19 5,134 19 5,153 - 1927
Washington - Seattle 19,053 5,114 - 319 5,114 319 5,433 (1) 1962/2000
----------- -------- ------------- ------------- -------- ------------ ----------- ------------ ----------------
11,232,351 $482,310 $ 2,044,459 $ 677,732 $482,310 $ 2,722,191 $ 3,204,501 (279,620) $ 999,707
=========== ======== ============= ============= ======== ============ =========== ============ ================
____________________
- The depreciable life for buildings and improvements ranges from 30 to 40 years, 20 for land improvements, and the term of the respective lease for tenant improvements.
- Loan of $36,655 secured by 4 properties identified by this reference.
- Loan of $31,600 secured by 4 properties identified by this reference.
- Loan of $88,581 secured by 6 properties identified by this reference.
- Loan of $22,915 secured by 6 properties identified by this reference.
- The balance shown includes an unamortized premium of $1,212.
- Loan of $32,070 secured by 2 properties identified by this reference.
- Loan of $145,391 secured by 4 properties identified by this reference.
- The balance shown includes an unamortized premium of $44.
- Loan of $14,541 secured by 1 property identified by this reference and a property undergoing development.
- Loan of $32,880 secured by 2 properties identified by this reference.
- The balance shown includes an unamortized premium of $260.
- Loan of $23,438 secured by 2 properties identified by this reference.
- Loan of $28,866 secured by 3 properties identified by this reference.
- Loan of $26,903 secured by 3 properties identified by this reference.
- Loan of $9,319 secured by 3 properties identified by this reference.
- The balance shown includes an unamortized premium of $794.
- The balance shown includes an unamortized premium of $195.
- Loan of $17,877 secured by 2 properties identified by this reference.
- Loan of $36,486 secured by 4 properties identified by this reference.
- Loan of $9,155 secured by 2 properties identified by this reference.
- The balance shown includes an unamortized premium of $343.
- The balance shown includes an unamortized premium of $241.
- The balance shown includes an unamortized premium of $90.
- The balance shown includes an unamortized discount of $4,359.
- The balance shown includes an unamortized premium of $145.
- The aggregate cost of real estate for federal income tax purposes is not materially different from the cost basis under GAAP (unaudited).
- Excludes $175,200 of encumbrances primarily related to 11 land parcels.
A summary of activity of consolidated rental properties and accumulated depreciation is as follows (in thousands):
Rental Properties
Year Ended December 31,
------------------------------------------
2006 2005 2004
------------ ------------- -------------
Balance at beginning of period $ 2,009,708 $ 1,603,912 $ 1,123,857
Purchase of rental properties 1,030,439 272,532 383,350
Sale of properties (41,913) (1,237) (4,084)
Additions 76,717 94,210 70,248
Transfer of costs from properties
under development and land held for development 129,550 40,291 30,541
------------ ------------- -------------
Balance at end of period $ 3,204,501 $ 2,009,708 $ 1,603,912
============ ============= =============
EXHIBIT 10.12
SUMMARY OF DIRECTOR COMPENSATION ARRANGEMENTS
Non-employee directors of Alexandria Real Estate Equities, Inc. (the "Company") will receive the following compensation in 2007:
- An annual retainer fee of $25,000;
- The committee chairpersons will receive additional annual fees as follows:
|
Board of Directors Chairperson |
$10,000 |
|
Audit Committee Chairperson |
$20,000 |
|
Compensation Committee Chairperson |
$15,000 |
|
Nominating & Governance Committee Chairperson |
$10,000 |
- A fee payable for each meeting attended of the Company's Board of Directors, or committee thereof, equal to $1,500 for each meeting attended in person and $750 for each meeting attended telephonically;
- Reimbursement of out-of-pocket expenses incurred to attend such meetings;
- A restricted stock grant of 1,500 shares of common stock on January 1, 2007 under the Company's Amended and Restated 1997 Stock Award and Incentive Plan, such shares vesting in full on January 1, 2010; and
- A tax "gross-up" fee of $60,240, equal to 40% of the value of the restricted stock grant of 1,500 shares of common stock based on the closing price of our common stock on January 1, 2007.
The Company's non-employee directors may elect to defer all or any portion of the fees above in accordance with the Company's deferred compensation plan for its directors.
Directors who are also employees of the Company will not receive any compensation for their services as directors of the Company.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 31, 2006
among
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
ALEXANDRIA REAL ESTATE EQUITIES, L.P.,
ARE-QRS CORP.,
ARE ACQUISITIONS, LLC,
and
The Other Subsidiaries Party Hereto,
as the Borrowers,
BANK OF AMERICA, N.A.,
as Administrative Agent, Swing Line Lender and L/C Issuer,
CITICORP NORTH AMERICA, INC.,
as Syndication Agent,
Eurohypo AG, New York Branch,
SOCIETE GENERALE,
THE ROYAL BANK OF SCOTLAND, PLC,
CALYON, NEW YORK BRANCH,
THE BANK OF NOVA SCOTIA,
and
UBS LOAN FINANCE LLC
as Co-Documentation Agents,
and
The Other Lenders Party Hereto
BANC OF AMERICA SECURITIES LLC
and
CITIGROUP GLOBAL MARKETS INC.,
as Joint Lead Arrangers and Joint Bookrunners
TABLE OF CONTENTS
|
Page |
||||
| ARTICLE I DEFINITIONS AND ACCOUNTING TERMS | 1 | |||
| 1.01 | Defined Terms | 1 | ||
| 1.02 | Other Interpretive Provisions | 33 | ||
| 1.03 | Accounting Terms | 34 | ||
| 1.04 | Times of Day | 35 | ||
| 1.05 | Letter of Credit Amounts | 35 | ||
| ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS | 35 | |||
| 2.01 | Committed Loans | 35 | ||
| 2.02 | Borrowings, Conversions and Continuations of Committed Loans | 36 | ||
| 2.03 | Letters of Credit | 37 | ||
| 2.04 | Swing Line Loans | 46 | ||
| 2.05 | Prepayments | 49 | ||
| 2.06 | Termination or Reduction of Aggregate Revolving Commitments | 50 | ||
| 2.07 | Repayment of Loans | 51 | ||
| 2.08 | Interest | 51 | ||
| 2.09 | Fees | 52 | ||
| 2.10 | Computation of Interest and Fees | 53 | ||
| 2.11 | Evidence of Debt | 53 | ||
| 2.12 | Payments Generally; Administrative Agent's Clawback | 54 | ||
| 2.13 | Sharing of Payments by Lenders | 55 | ||
| 2.14 | Extension of Revolving Commitment Termination Date and/or Term Loan Maturity Date | 56 | ||
| 2.15 | Increase in Commitments | 57 | ||
| 2.16 | Unencumbered Asset Pool | 59 | ||
| ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY | 60 | |||
| 3.01 | Taxes | 60 | ||
| 3.02 | Illegality. | 62 | ||
| 3.03 | Inability to Determine Rates. | 63 | ||
| 3.04 | Increased Costs; Reserves on Eurodollar Rate Loans. | 63 | ||
| 3.05 | Compensation for Losses. | 65 | ||
| 3.06 | Mitigation Obligations; Replacement of Lenders. | 66 | ||
| ARTICLE IV CONDITIONS PRECEDENT TO THE AMENDMENT AND RESTATEMENT OF THE EXISTING | ||||
| CREDIT AGREEMENT AND FURTHER CREDIT EXTENSIONS | 66 | |||
| 4.01 | Conditions of Effectiveness of this Agreement. | 66 | ||
| 4.02 | Conditions to all Credit Extensions. | 68 | ||
| ARTICLE V REPRESENTATIONS AND WARRANTIES | 69 | |||
| 5.01 | Existence, Qualification and Power; Compliance with Laws. | 69 | ||
| 5.02 | Authorization; No Contravention. | 69 | ||
| 5.03 | Governmental Authorization; Other Consents. | 70 | ||
| 5.04 | Binding Effect. | 70 | ||
| 5.05 | Financial Statements; No Material Adverse Effect. | 70 | ||
| 5.06 | Litigation. | 71 | ||
| 5.07 | No Default. | 71 | ||
| 5.08 | Ownership of Property; Liens. | 71 | ||
| 5.09 | Environmental Compliance. | 71 | ||
| 5.10 | Insurance. | 71 | ||
| 5.11 | Taxes. | 72 | ||
| 5.12 | ERISA Compliance. | 72 |
i
| 5.13 | Subsidiaries; Equity Interests. | 73 | ||
| 5.14 | Margin Regulations; Investment Company Act; REIT and Tax Status; Stock Exchange Listing | 73 | ||
| 5.15 | Disclosure. | 73 | ||
| 5.16 | Compliance with Laws | 74 | ||
| 5.17 | Intellectual Property; Licenses, Etc. | 74 | ||
| 5.18 | Initial Pool Properties. | 74 | ||
| 5.19 | Property. | 74 | ||
| 5.20 | Brokers. | 75 | ||
| 5.21 | Other Debt. | 75 | ||
| 5.22 | Solvency. | 75 | ||
| ARTICLE VI AFFIRMATIVE COVENANTS | 75 | |||
| 6.01 | Financial Statements. | 76 | ||
| 6.02 | Certificates; Other Information. | 77 | ||
| 6.03 | Payment of Obligations. | 79 | ||
| 6.04 | Preservation of Existence, Etc. | 79 | ||
| 6.05 | Maintenance of Properties. | 80 | ||
| 6.06 | Maintenance of Insurance. | 80 | ||
| 6.07 | Compliance with Laws. | 80 | ||
| 6.08 | Books and Records. | 80 | ||
| 6.09 | Inspection Rights. | 80 | ||
| 6.10 | Use of Proceeds. | 81 | ||
| 6.11 | Qualified Revenue-Producing Properties | 81 | ||
| 6.12 | Additional Borrowers | 81 | ||
| ARTICLE VII NEGATIVE COVENANTS | 81 | |||
| 7.01 | Liens. | 82 | ||
| 7.02 | Investments. | 84 | ||
| 7.03 | Fundamental Changes. | 85 | ||
| 7.04 | Restricted Payments. | 85 | ||
| 7.05 | Change in Nature of Business. | 86 | ||
| 7.06 | Transactions with Affiliates. | 86 | ||
| 7.07 | Burdensome Agreements. | 86 | ||
| 7.08 | Use of Proceeds. | 86 | ||
| 7.09 | Financial Covenants. | 87 | ||
ii
| ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES | 87 | |||
| 8.01 | Events of Default | 87 | ||
| 8.02 | Remedies Upon Event of Default. | 89 | ||
| 8.03 | Application of Funds. | 90 | ||
| ARTICLE IX ADMINISTRATIVE AGENT | 91 | |||
| 91 | ||||
| 9.01 | Appointment and Authority. | 91 | ||
| 9.02 | Rights as a Lender. | 92 | ||
| 9.03 | Exculpatory Provisions. | 93 | ||
| 9.04 | Reliance by Administrative Agent. | 93 | ||
| 9.05 | Delegation of Duties. | 93 | ||
| 9.06 | Successor Administrative Agent. | 93 | ||
| 9.07 | Non-Reliance on Administrative Agent and Other Lenders. | 94 | ||
| 9.08 | No Other Duties, Etc. | 95 | ||
| 9.09 | Administrative Agent May File Proofs of Claim. | 95 | ||
| 9.10 | Collateral Matters. | 96 | ||
| 9.11 | No Obligations of Borrowers. | 96 | ||
| ARTICLE X MISCELLANEOUS | 96 | |||
| 10.01 | Amendments, Etc. | 96 | ||
| 10.02 | Notices; Effectiveness; Electronic Communication. | 96 | ||
| 10.03 | No Waiver; Cumulative Remedies. | 100 | ||
| 10.04 | Expenses; Indemnity; Damage Waiver. | 100 | ||
| 10.05 | Payments Set Aside. | 102 | ||
| 10.06 | Successors and Assigns. | 103 | ||
| 10.07 | Treatment of Certain Information; Confidentiality. | 108 | ||
| 10.08 | Right of Setoff. | 110 | ||
| 10.09 | Interest Rate Limitation. | 110 | ||
| 10.10 | Counterparts; Integration; Effectiveness. | 111 | ||
| 10.11 | Survival of Representations and Warranties. | 111 | ||
| 10.12 | Severability. | 111 | ||
| 10.13 | Replacement of Lenders. | 112 | ||
| 10.14 | Governing Law; Jurisdiction; Etc. | 112 | ||
| 10.15 | Waiver of Jury Trial. | 113 | ||
| 10.16 | USA PATRIOT Act Notice. | 114 | ||
| 10.17 | Borrowers' Obligations. | 114 | ||
| 10.18 | ENTIRE AGREEMENT. | 118 | ||
| 10.19 | Hazardous Material Indemnity. | 119 | ||
| 10.20 | Release of a Borrower. | 119 | ||
| 10.21 | No Advisory or Fiduciary Responsibility. | 120 |
iii
SCHEDULES
2.01A Revolving Commitments and Applicable Percentages
5.18 Initial Pool Properties
10.02 Administrative Agent's Office; Certain Addresses for Notices
EXHIBITS
Form of
A Committed Loan Notice
B Swing Line Loan Notice
C-1 Revolving Note
C-2 Term Note
D Compliance Certificate
E Assignment and Assumption
F Joinder Agreement
G Lender Joinder Agreement
iv
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of October 31, 2006, among Alexandria Real Estate Equities, Inc., a Maryland corporation ("Parent"), Alexandria Real Estate Equities, L.P., a Delaware limited partnership ("Operating Partnership"), ARE-QRS Corp., a Maryland corporation ("QRS"), ARE Acquisitions, LLC, a Delaware limited liability company ("ARE"), the other borrowers set forth on the signature pages of this Agreement, each other Wholly-Owned Subsidiary of Parent which becomes a party to this Agreement as a borrower (collectively, together with Parent, Operating Partnership, QRS and ARE, the "Borrowers"); each lender from time to time party hereto (collectively, the "Lenders" and individually, a "Lender"); Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and Banc of America Securities LLC and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Bookrunners, with reference to the following Recitals:
RECITALS
WHEREAS, the Borrowers, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other agents party thereto entered into that certain Amended and Restated Credit Agreement dated as of December 22, 2004 (as amended previously from time to time, the "Existing Credit Agreement"); and
WHEREAS, the Borrowers have requested that the parties amend and restate the Existing Credit Agreement, and the Lenders are willing to do so on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree that the Existing Credit Agreement is hereby amended and restated in its entirety as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:
"Adjusted EBITDA" means, for any period of determination and without duplication, an amount equal to (a) EBITDA of Parent and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, minus (b) the Capital Improvement Reserve for the Real Property of Parent and its Subsidiaries, minus (c) (without duplication to the extent already deducted in the calculation of EBITDA) any Minority Interest's share of the EBITDA of Parent and its Subsidiaries for such period.
"Adjusted Interest Expense" means, with respect to any Person as of the last day of any fiscal period and without duplication, an amount equal to Interest Expense less any financing fees to the extent amortized and any amortization thereof (including fees payable under a Swap Contract), prepayment penalties or deferred financing costs.
"Adjusted NOI" means, for any period and with respect to a Revenue-Producing Property, an amount equal to (a) NOI of that Revenue-Producing Property, minus (b) the Capital Improvement Reserve for such Revenue- Producing Property, minus (c) any Minority Interest's share of the NOI of that Revenue-Producing Property.
"Adjusted Tangible Assets" means, as of any date of determination, without duplication, an amount equal to (a) Total Assets of Parent and its Subsidiaries as of that date, minus (b) Intangible Assets of Parent and its Subsidiaries as of that date, plus (c) any Minority Interest's share of Intangible Assets minus (d) any Minority Interest's share of Total Assets as of that date.
"Administrative Agent's Office" means the Administrative Agent's address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrowers and the Lenders.
"Administrative Agent" means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.
"Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to any 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.
"Aggregate Commitments" means the Commitments of all the Lenders.
"Aggregate Revolving Commitments" means all Revolving Commitments of the Revolving Lenders. As of the Closing Date, the Aggregate Revolving Commitments are equal to $800,000,000.
"Agreement" means this Second Amended and Restated Credit Agreement, as it may be amended, restated, amended and restated, extended, supplemented or otherwise modified in writing from time to time.
"Applicable Percentage" means, with respect to any Lender at any time, the following percentages (carried out to the ninth decimal place), as of the date of determination:
(a) with respect to a Lender's obligation to make Revolving Loans and receive payments of principal, interest, fees, costs, and expenses with respect thereto, (i) prior to the Aggregate Revolving Commitments being terminated or reduced to zero, the percentage obtained by dividing (x) such Lender's Revolving Commitment, by (y) the Aggregate Revolving Commitments, and (ii) from and after the time the Aggregate Revolving Commitments have been terminated or reduced to zero, the percentage obtained by dividing (x) the aggregate outstanding principal amount of such Lender's Revolving Loans by (y) the aggregate outstanding principal amount of all Revolving Loans;
(b) with respect to a Lender's obligation to participate in Letters of Credit or Swing Line Loans, to reimburse the Issuing Lender or Swing Line Lender, as applicable, and to receive payments of fees with respect thereto, (i) prior to the Aggregate Revolving Commitments being terminated or reduced to zero, the percentage obtained by dividing (x) such Lender's Revolving Commitment, by (y) the Aggregate Revolving Commitments, and (ii) from and after the time the Aggregate Revolving Commitments have been terminated or reduced to zero, the percentage obtained by dividing (x) the aggregate outstanding principal amount of such Lender's Revolving Loans by (y) the aggregate outstanding principal amount of all Revolving Loans;
(c) with respect to a Term Lender's right to receive payments of interest, fees, and principal with respect to Term Loans made by such Term Lender, the percentage obtained by dividing (i) the aggregate outstanding amount of such Lender's Term Loans by (ii) the Term Loan Amount;
(d) with respect to all other matters as to a particular Lender (including the indemnification obligations arising under Section 10.04), the percentage obtained by dividing (i) the sum of such Lender's Revolving Commitment, plus such Lender's portion of the Term Loan Amount, by (ii) the Aggregate Revolving Commitments plus the Term Loan Amount; provided, however, that in the event the Aggregate Revolving Commitments have been terminated or reduced to zero, the Applicable Percentage under this clause (d) shall be the percentage obtained by dividing (A) the outstanding principal amount of such Lender's Revolving Loans, plus such Lender's ratable portion of the outstanding Letters of Credit and Swing Line Loans, plus such Lender's portion of the Term Loan Amount by (B) the principal amount of all outstanding Revolving Loans, plus the aggregate amount of outstanding Letters of Credit, plus the aggregate amount of outstanding Swing Line Loans, plus the Term Loan Amount; and
(e) the initial Applicable Percentage of each Revolving Lender and Term Lender is set forth opposite the name of such Lender on Schedule 2.01A (as it may be amended hereunder) or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, or in the records of the Administrative Agent, as applicable.
"Applicable Rate" means, from time to time, the following percentages per annum:
|
Pricing |
Debt Rating of Parent |
Leverage Ratio |
Eurodollar |
Base Rate |
Facility |
Unused |
|
1 |
³ BBB+/Baal |
N/A |
0.60% |
0% |
0.15% |
0% |
|
2 |
BBB/Baa2 |
N/A |
0.70% |
0% |
0.15% |
0% |
|
3 |
BBB-/Baa3 |
N/A |
0.80% |
0% |
0.15% |
0% |
|
4 |
unrated or |
<40% |
1.00% |
0% |
0% |
.15% |
|
5 |
unrated or |
³ 40% and <50% |
1.15% |
.15% |
0% |
.15% |
|
6 |
unrated or |
³ 50% and <60% |
1.25% |
.20% |
0% |
.15% |
|
7 |
unrated or |
³ 60% |
1.45% |
.25% |
0% |
.15% |
For any applicable period, the Applicable Rate shall be the rate set forth opposite the Debt Rating of the Parent for such period; provided, however, that, subject to the definition of Debt Rating, if in any period the Parent does not have a Debt Rating of BBB- or better from S&P or a Debt Rating of Baa3 or better from Moody's, then the Applicable Rate shall be the rate set forth opposite the Leverage Ratio in effect from time to time.
Initially, the Applicable Rate shall be set at Pricing Level 4. Thereafter, each change in the Applicable Rate resulting from a publicly announced change in the Debt Rating shall be effective during the period commencing on the date of the public announcement thereof and ending on the date immediately preceding the effective date of the next such change. Any increase or decrease in the Applicable Rate resulting from a change in the Leverage Ratio shall become effective as of the first Business Day immediately following the date the Compliance Certificate is delivered pursuant to Section 6.02(a)(i); provided, however, that if a Compliance Certificate is not delivered timely in accordance with such Section, then the Applicable Rate for Pricing Level 7 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to be delivered, until the Business Day such Compliance Certificate is delivered.
"Appraised Value" means, as of any date of determination, without duplication, with respect to any Real Property, the appraised value (if any) thereof based on its unimproved as-is basis determined pursuant to an appraisal prepared by an M.A.I. certified appraisal and otherwise reasonably satisfactory to Administrative Agent (it being understood and agreed that in no event shall the Borrowers be required to deliver updated appraisals more frequently than once during any 24-month period).
"Approved Fund" means any Fund 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.
"Arrangers" mean Banc of America Securities LLC and Citigroup Global Markets Inc., in their capacity as joint lead arrangers and joint bookrunners.
"Asset Value" means, as of any date of determination and without double counting any item, the following amounts for the following types of Real Property:
(a) with respect to any Qualified Revenue-Producing Property or Qualified Encumbered Asset Property owned for a full four consecutive fiscal quarter period or longer, an amount equal to (i) the Adjusted NOI of such Real Property for the prior four full consecutive fiscal quarters divided by (ii) the Capitalization Rate.
(b) with respect to any Qualified Revenue-Producing Property or Qualified Encumbered Asset Property owned for less than four full consecutive fiscal quarters, an amount equal to (i) the Adjusted NOI of such Real Property for the period which the applicable Borrower or Subsidiary has owned and operated such Real Property, adjusted by the Parent to an annual Adjusted NOI in a manner reasonably acceptable to the Administrative Agent, divided by (ii) the Capitalization Rate.
(c) with respect to Qualified Revenue-Producing Property or Qualified Encumbered Asset Property that is being renovated or with respect to which a partial or total renovation was recently completed, an amount as determined at the sole election of the Administrative Agent based on (i) the annualized Adjusted NOI with respect to such Real Property, annualized based on bona fide, arms length signed tenant leases which are in full force and effect requiring current rental payments, divided by the Capitalization Rate, or (ii) the cost basis of such Real Property determined in accordance with GAAP multiplied by the Borrowers' or their Subsidiaries' percentage ownership interest in such Qualified Revenue Property or Qualified Encumbered Asset Property.
(d) with respect to any Real Property that constitutes Qualified Land, an amount equal to, at the option of the Borrowers, (i) the cost basis or the Appraised Value (if any) of such Qualified Land multiplied by (ii) the Borrowers' or their Subsidiaries' percentage ownership interest in such Qualified Land.
(e) with respect to any Real Property that constitutes Qualified Development Assets, an amount equal to (i) the cost basis of such Qualified Development Asset multiplied by (ii) the Borrowers' or their Subsidiaries' percentage ownership interest in such Qualified Development Asset.
"Assignee Group" means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.
"Assignment and Assumption" means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit E or any other form approved by the Administrative Agent.
"Attributable Indebtedness" means, on any date, in respect of any Capital Lease Obligation of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.
"Audited Financial Statements" means the audited consolidated balance sheet of the Parent and its Subsidiaries for the fiscal year ended December 31, 2005, and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year of the Parent and its Subsidiaries, including the notes thereto.
"Availability Period" means the period from and including the Closing Date to the earliest of (a) the Revolving Commitment Termination Date, (b) the date of termination of the Revolving Commitments pursuant to Section 2.06, and (c) the date of termination of the commitment of each Revolving Lender to make Revolving Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.
"Bank of America" means Bank of America, N.A. and its successors.
"BAS" means Banc of America Securities LLC and its successors.
"Base Rate" means, for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." The "prime rate" is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.
"Base Rate Loan" means a Committed Loan that bears interest based on the Base Rate.
"Borrower Materials" has the meaning set forth in Section 6.02.
"Borrowers" has the meaning specified in the introductory paragraph hereto. Any reference to Borrowers herein shall be deemed to refer to each Person constituting Borrowers, and the responsibilities, obligations and covenants of each such Person under this Agreement and the other Loan Documents shall be joint and several, unless expressly stated otherwise herein or the context otherwise requires; provided, however, that the obligations of Borrowers with respect to the delivery of reports, financial statements, certifications and requests for Borrowings may be performed and executed by Parent with the effect of binding all Borrowers.
"Borrowing" means a Committed Borrowing or a Swing Line Borrowing, as the context may require.
"Borrowing Base" means, as of any date of determination, the Gross Borrowing Base minus (i) the Term Loan Amount minus (ii) other unsecured Indebtedness of the Parent and its Subsidiaries (other than Total Revolving Outstandings) plus (iii) any Minority Interest's share of other unsecured Indebtedness of the Parent and its Subsidiaries.
"Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of or are in fact closed in, the state of the United States where the Administrative Agent's Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London Interbank Eurodollar market.
"Capital Improvement Reserve" means, with respect to any Real Property now or hereafter owned by the Borrowers or their Subsidiaries, an amount equal to thirty cents ($.30) multiplied by the Net Rentable Area of the Real Property.
"Capital Lease Obligations" means all monetary obligations of a Person under any leasing or similar arrangement which, in accordance with GAAP, is classified as a capital lease.
"Capitalization Rate" means 8.25% or such greater amount pursuant to Section 2.14.
"Cash" means money, currency or a credit balance in any demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit.
"Cash Collateral" has the meaning specified in Section 2.03(g).
"Cash Collateralize" has the meaning specified in Section 2.03(g).
"Cash Equivalents" means:
(a) securities issued or fully guaranteed or insured by the United States Government or any agency thereof and backed by the full faith and credit of the United States having maturities of not more than one year from the date of acquisition;
(b) certificates of deposit, time deposits, demand deposits, eurodollar time deposits, repurchase agreements, reverse repurchase agreements, or bankers' acceptances, having in each case a term of not more than one year, issued by Administrative Agent or any Lender, or by any U.S. commercial bank (or any branch or agency of a non-U.S. bank licensed to conduct business in the U.S.) having combined capital and surplus of not less than $100,000,000 whose short-term securities are rated (at the time of acquisition thereof) at least A-1 by S&P and P-1 by Moody's;
(c) demand deposits on deposit in accounts maintained at commercial banks having membership in the FDIC and in amounts not exceeding the maximum amounts of insurance thereunder;
(d) commercial paper of an issuer rated (at the time of acquisition thereof) at least A-2 by S&P or P-2 by Moody's and in either case having a term of not more than one year; and
(e) money market mutual or similar funds that invest primarily in assets satisfying the requirements of clauses (a) through (d) of this definition.
"Cash Interest Expense" means Adjusted Interest Expense of a Person that is paid or currently payable in Cash.
"Change of Control" means (a) any transaction or series of related transactions in which any Unrelated Person or two or more Unrelated Persons acting in concert acquire beneficial ownership (within the meaning of Rule 13d 3(a)(l) under the Securities Exchange Act of 1934, as amended), directly or indirectly, of 40% or more of the outstanding Common Stock, (b) Parent consolidates with or merges into another Person or conveys, transfers or leases its properties and assets substantially as an entirety to any Person or any Person consolidates with or merges into Parent, in either event pursuant to a transaction in which the outstanding Common Stock is changed into or exchanged for cash, securities or other property, with the effect that any Unrelated Person becomes the beneficial owner, directly or indirectly, of 40% or more of Common Stock or that the Persons who were the holders of Common Stock immediately prior to the transaction hold less than 60% of the common stock of the surviving corporation after the transaction, (c) during any period of 12 consecutive months, individuals who at the beginning of such period constituted the board of directors of Parent (together with any new or replacement directors whose election by the board of directors, or whose nomination for election, was approved by a vote of at least a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for reelection was previously so approved) cease for any reason to constitute a majority of the directors then in office, or (d) a "change of control" as defined in any document governing Indebtedness or Preferred Equity of Parent in excess of $50,000,000 which gives the holders of such Indebtedness or Preferred Equity the right to accelerate or otherwise require payment of such Indebtedness or Preferred Equity prior to the maturity date thereof.
"Change in Law" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.
"Closing Date" means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01.
"Co-Documentation Agents" means Eurohypo AG, New York Branch, Societe Generale, The Royal Bank of Scotland, plc, The Bank of Nova Scotia, Calyon, New York Branch, and UBS Loan Finance LLC in their capacity as co- documentation agents.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Commitment" means any Term Loan Commitment or any Revolving Commitment, as applicable.
"Committed Borrowing" means a borrowing consisting of simultaneous Committed Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01.
"Committed Loan" means a Revolving Loan or a Term Loan.
"Committed Loan Notice" means a notice of (a) a Committed Borrowing, (b) a conversion of Committed Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.
"Common Stock" means the common stock of Parent.
"Compliance Certificate" means a certificate substantially in the form of Exhibit D.
"Confidential Information" means (a) all of the terms, covenants, conditions or agreements set forth in any letters of intent or in this Agreement or any amendments hereto and any related agreements of whatever nature, (b) the information and reports provided in compliance with the terms of this Agreement, (c) any and all information provided, disclosed or otherwise made available to the Administrative Agent and the Lenders including, without limitation, any and all plans, maps, studies (including market studies), reports or other data, operating expense information, as-built plans, specifications, site plans, drawings, notes, analyses, compilations, or other documents or materials relating to the properties or their condition or use, whether prepared by Borrowers or others, which use, or reflect, or that are based on, derived from, or are in any way related to the foregoing, and (d) any and all other information of Borrowers that the Administrative Agent or any Lender may have access to including, without limitation, ideas, samples, media, techniques, sketches, specifications, designs, plans, forecasts, financial information, technical information, drawings, works of authorship, models, inventions, know-how, processes, apparatuses, equipment, algorithms, financial models and databases, software programs, software source documents, manuals, documents, properties, names of tenants or potential tenants, vendors, suppliers, distributors and consultants, and formulae related to the current, future, and proposed products and services of Borrowers or tenants or potential tenants (including, without limitation, information concerning research, experimental work, development, design details and specifications, engineering, procurement requirements, purchasing, manufacturing, customer lists, investors, employees, clients, business and contractual relationships, business forecasts, and sales and marketing plans). Confidential Information may be disclosed or accessible to the Administrative Agent and the Lenders as embodied within tangible material (such as documents, drawings, pictures, graphics, software, hardware, graphs, charts, or disks), orally, or visually.
"Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
"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. "Controlling" and "Controlled" have meanings correlative thereto.
"Credit Extension" means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.
"Debt Rating" means, as of any date of determination, the higher of the credit ratings then assigned to Parent's long-term senior unsecured debt by either of the Rating Agencies. For purposes of the foregoing, a credit rating of BBB- from S&P is equivalent to a credit rating of Baa3 from Moody's and vice versa. A credit rating of BBB from S&P is equivalent to a credit rating of Baa2 from Moody's and vice versa. It is the intention of the parties that if Parent shall only obtain a Debt Rating from one of the Rating Agencies without seeking a credit rating from the other of the Rating Agencies, the Borrowers shall be entitled to the benefit of the Pricing Level for such credit rating. If Parent obtains a Debt Rating from both of the Rating Agencies, the higher of the two ratings shall control, provided that the lower rating is only one level below that of the higher rating. If, however, the lower rating is more than one level below that of the higher Debt Rating, the Pricing Level that is one level higher than the lower Debt Rating shall apply. If Parent obtains a Debt Rating from both of the Rating Agencies and thereafter loses such rating from one of the Rating Agencies, the Parent shall be deemed to not have a Debt Rating from such Rating Agency. At any time, if either of the Rating Agencies shall no longer perform the functions of a securities rating agency, then the Borrowers and the Administrative Agent shall promptly negotiate in good faith to agree upon a substitute rating agency or agencies (and to correlate the system of ratings of each substitute rating agency with that of the rating agency being replaced), and pending such amendment, the Debt Rating of the other of the Rating Agencies, if one has been provided, shall continue to apply.
"Debt Service" means, for any period with respect to a Person's Indebtedness, the sum of all Interest Charges and mandatory principal payments or regularly scheduled principal payments due and payable during such period, excluding any balloon payments due upon maturity of the Indebtedness, refinancing of the Indebtedness or repayments thereof in connection with asset sales; provided that Debt Service shall not include any Minority Interest's share of any of the foregoing. Debt Service shall include the portion of rent payable by a Person during such period under Capital Lease Obligations that should be treated as principal in accordance with GAAP but shall exclude Interest Charges related to committed construction loans. For purposes of this definition, mandatory principal payments do not include repayments of principal required as a result of application of casualty or condemnation proceeds or out of the proceeds of equity issuances or similar events or equity or debt sweeps.
"Debtor Relief Laws" means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
"Default" means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.
"Default Rate" means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate for Eurodollar Rate Loans plus 2% per annum.
"Defaulting Lender" means any Lender that (a) has failed to fund any portion of the Committed Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within one Business Day after the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day after the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.
"Development Investments" means, as of any date of determination, direct or indirect investments in Real Property which, as of such date, is the subject of ground-up development to be used principally for office, office/laboratory, research or manufacturing/warehouse purposes; provided, that, such Real Property or any portion thereof will only constitute a Development Investment from the date construction has commenced thereon until the date on which the Real Property and applicable improvements receive a final certificate of occupancy or equivalent certification allowing legal occupancy for its intended purpose.
"Disposition" or "Dispose" means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and dispositions due to casualty or condemnation) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.
"Dollar" and "$"mean lawful money of the United States.
"EBITDA" means, with respect to any Person (or any asset of a Person) for any fiscal period and without double counting, the sum of (a) the Net Income of such Person (or attributable to asset of the Person) for that period, plus the following to the extent deducted in calculating Net Income of such Person (b) any non-recurring loss, minus (c) any non-operating, non-recurring gain, plus (d) Interest Expense for that period, plus (e) the aggregate amount of federal and state taxes on or measured by income of such Person for that period (whether or not payable during that period), plus (f) depreciation, amortization and all other non-cash expenses (including non-cash officer compensation and any write-down of goodwill pursuant to FASB 142) of such Person for that period, in each case as determined in accordance with GAAP.
"Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent, and (ii) unless an Event of Default has occurred and is continuing, the Parent (on behalf of the Borrowers) (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, "Eligible Assignee" shall not include the Borrowers or any of the Borrowers' Affiliates or Subsidiaries.
"Environmental Laws" means any and all applicable Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions governing pollution and the protection of the environment or the release of any Hazardous Materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.
"Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrowers, or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement by any Borrower pursuant to which liability is assumed or imposed with respect to any of the foregoing.
"Equity Interest" means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including partnership, member 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 the issuance and sale by any Borrower of any equity securities of such Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrowers 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 any of the following: (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrowers or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrowers or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any material liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrowers or any ERISA Affiliate.
"Eurodollar Rate" means, for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate ("BBA LIBOR"), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the "Eurodollar Rate" for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the London interbank eurodollar market at their request at approximately 4:00 p.m. (London time) two Business Days prior to the commencement of such Interest Period.
"Eurodollar Rate Loan" means a Committed Loan that bears interest at a rate based on the Eurodollar Rate.
"Event of Default" has the meaning set forth in Section 8.01.
"Exchange Proceeds" means the net issuance proceeds from Equity Offerings, which Borrowers have designated or otherwise stated that they intend to use to make Restricted Payments on account of then existing Preferred Equity.
"Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrowers hereunder, (a) taxes imposed on or measured by its overall net income (or any Person whose net income is measured with reference to it) (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located, or in which it is doing business, or in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrowers are located and (c) other than with respect to an assignee pursuant to a request by the Borrowers under Section 10.13, any United States Federal withholding tax that is imposed on amounts payable to such Person at the time such Person becomes a party hereto (or designates a new Lending Office) or is attributable to such Person's failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Person (or its assignor, if any) was entitled, at the time of its appointment or designation of a new Lending Office (or assignment), to receive additional amounts from the Borrowers with respect to such withholding tax pursuant to Section 3.01(a).
"Existing Credit Agreement" has the meaning set forth in the Recitals.
"Existing Revolving Commitment Termination Date" has the meaning set forth in Section 2.14(a).
"Existing Term Loan Maturity Date" has the meaning set forth in Section 2.14(b).
"FASB 142" shall mean Statement of Accounting Standards No. 142 issued on June 29, 2001 by the Financial Accounting Standards Board.
"Federal Funds Rate" means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.
"Fee Letter" means that certain letter agreement dated as of August 31, 2006 among the Parent, the Administrative Agent and BAS.
"Fixed Charge Coverage Ratio" means, as of the last day of any fiscal quarter, the ratio obtained by dividing (a) Adjusted EBITDA for the period consisting of that fiscal quarter and the three immediately preceding fiscal quarters by (b) an amount equal to (i) Debt Service of the Parent and its Subsidiaries for such period, plus (ii) all Preferred Distributions (other than redemptions) of Parent and its Subsidiaries during such period.
"Fixed Eurodollar Rate" means, on any date of determination, for any Swing Line Loan, the sum of: (a) the rate per annum equal to the BBA LIBOR (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) for a 30 day interest period at approximately 4:00 p.m. (London time) on the date of borrowing; plus (b) the Applicable Rate. If such rate is not available for any reason, then the "Fixed Eurodollar Rate", on such date of determination, shall be (a) the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of a 30 day interest period in same day funds in the approximate amount of the Swing Line Loan by Bank of America and with a term equivalent to a 30 day interest period would be offered by Bank of America's London Branch to major banks in the London interbank eurodollar market at their request at approximately 4:00 p.m. (London time) on the day of commencement of such 30 day interest period; plus (b) the Applicable Rate.
"Fixed Eurodollar Rate Loan" means a Swing Line Loan that bears interest at a rate based on the Fixed Eurodollar Rate.
"Foreign Lender" means any Lender that is not a United States person as defined in Section 770(a)(30) of the Code.
"FRB" means the Board of Governors of the Federal Reserve System of the United States.
"Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
"Funds From Operations" means, with respect to any fiscal period and without double counting, an amount equal to the Net Income (or deficit) of Parent and its Subsidiaries for that period computed on a consolidated basis in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect Funds From Operations on the same basis. Funds From Operations shall be reported in accordance with the NAREIT Policy Bulletin dated April 5, 2002, as amended, restated, supplemented or otherwise modified from time to time.
"GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.
"Governmental Authority" means the government of the United States or any other nation, or of 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 (including any supra-national bodies such as the European Union or the European Central Bank).
"Granting Lender" has the meaning specified in Section 10.06(h).
"Gross Borrowing Base" means, with respect to Qualified Asset Pool Properties, as of any date of determination and without duplication, and subject to the limitations set forth below, an amount equal to: (i) 65% of the aggregate Asset Value of the Qualified Revenue-Producing Properties in the Unencumbered Asset Pool, as of such date, plus (ii) 50% of the aggregate Asset Value of the Qualified Lands in the Unencumbered Asset Pool, as of such date, plus (iii) 65% of the aggregate Asset Value of Qualified Development Assets in the Unencumbered Asset Pool as of such date plus (iv) (A) 60% of the aggregate Asset Value of Qualified Encumbered Asset Properties in the Unencumbered Asset Pool as of such date minus (B) the aggregate indebtedness associated with the Qualified Encumbered Asset Properties.
For purposes of calculating the Gross Borrowing Base:
(a) the portion of the Gross Borrowing Base attributable to Qualified Development Assets pursuant to clause (iii) above plus the portion of the Borrowing Base attributable to Qualified Land pursuant to clause (ii) above cannot exceed 35% of the Gross Borrowing Base.
(b) the portion of the Gross Borrowing Base attributable to Qualified Encumbered Asset Properties pursuant to clause (iv) above (whether or not owned by a Borrower) cannot exceed 10% of the Gross Borrowing Base.
(c) the portion of the Gross Borrowing Base attributable to Qualified Asset Pool Properties that are not owned either by the Parent or a Wholly-Owned Subsidiary of the Parent that is a Borrower cannot exceed 15% of the Gross Borrowing Base. Notwithstanding this clause (c), if the Operating Partnership issues partnership units to third parties but remains a Borrower hereunder (and jointly and severally liable for all obligations hereunder), any Qualified Asset Pool Properties owned by the Operating Partnership shall not be applied toward the limitation set forth in this clause (c).
"Guarantee" means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness payable or performable by another Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness of the payment or performance of such Indebtedness, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term "Guarantee" as a verb has a corresponding meaning.
"Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, 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 under any Environmental Law.
"Honor Date" is defined in Section 2.03(c)(i).
"Indebtedness" means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with
GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances and bank guaranties;
(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) Capital Lease Obligations; and
(g) all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include all obligations, contingent and otherwise, that in accordance with GAAP should be classified upon the obligor's balance sheet as liabilities, including all of the foregoing whether or not so classified, including the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or is otherwise liable for such Indebtedness, unless such Indebtedness is expressly made non-recourse to such Person but Indebtedness shall not include any Minority Interest's share of any of the foregoing. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any Capital Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitees" has the meaning specified in Section 10.04(b).
"Initial Pool Properties" means the Qualified Asset Pool Properties described in Schedule 5.18 hereto.
"Intangible Assets" means the value of all assets of a Person and its Subsidiaries (without duplication), determined on a consolidated basis in accordance with GAAP, that are considered to be intangible assets under GAAP, including customer lists, goodwill, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs.
"Interest Charges" means, as of the last day of any fiscal period and without double counting, the sum of (a) Cash Interest Expense of a Person, plus (b) all interest currently payable in Cash by a Person which is incurred during that fiscal period and capitalized under GAAP, minus (c) any Minority Interest's share of Cash Interest Expense.
"Interest Coverage Ratio" means, as of the last day of any fiscal quarter, the ratio obtained by dividing (a) the sum of the aggregate Adjusted NOI from the Unencumbered Asset Pool for that fiscal quarter and the preceding three full fiscal quarters, by (b) the aggregate Interest Charges for such period in respect of the Borrowers' unsecured Indebtedness and Indebtedness associated with the Qualified Encumbered Assets. The Interest Coverage Ratio shall be determined by the Borrowers and shall be reasonably satisfactory to the Administrative Agent excluding interest during construction to the extent capitalized.
"Interest Expense" means, with respect to any Person as of the last day of any fiscal period and without duplication, an amount equal to (a) all interest, fees, charges and related expenses paid or payable (without duplication) for that fiscal period by that Person to a lender in connection with borrowed money (including any obligations for fees, charges and related expenses payable to the issuer of any letter of credit) or the deferred purchase price of assets that are considered "interest expense" under GAAP, plus (b) the portion of rent paid or payable (without duplication) for that fiscal period by that Person under Capital Lease Obligations that should be treated as interest in accordance with Financial Accounting Standards Board Statement No. 13, minus (or plus, as applicable) (c) amounts received (or paid) under Swap Contracts plus (d) all other amounts considered to be "interest expense" under GAAP.
"Interest Payment Date" means the fifth (5th) calendar day of each month; provided that if the fifth (5th) calendar day of any month falls on a day other than a Business Day, then the Interest Payment Date shall be the immediately succeeding Business Day.
"Interest Period" means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrowers in their applicable Committed Loan Notice; provided that:
(i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Revolving Commitment Termination Date (in the case of Interest Periods relating to Revolving Loans) or the Term Loan Maturity Date (in the case of Interest Periods relating to Term Loans), as applicable.
"Investment" means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment, but reduced by any amounts received in respect of such Investment which constitute capital distributions, principal, sale proceeds or otherwise in respect thereof
"IP Rights" has the meaning specified in Section 5.17.
"IRS" means the United States Internal Revenue Service.
"ISP" means, with respect to any Letter of Credit, the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).
"Issuer Documents" means, with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrowers (or any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of Credit.
"Joinder Agreement" means a joinder agreement substantially in the form attached hereto as Exhibit F.
"Laws" means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
"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 Committed 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.
"L/C Issuer" means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder.
"L/C Obligations" means, as at any date of determination, 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 purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.05. For all purposes of this 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, such Letter of Credit shall be deemed to be "outstanding" in the amount so remaining available to be drawn.
"Lender" has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the Swing Line Lender.
"Lender Joinder Agreement" means a lender joinder agreement substantially in the form attached hereto as Exhibit G.
"Lender Party" has the meaning set forth in Section 10.07.
"Lending Office" means, as to any Lender, the office or offices of such Lender described as such in such Lender's Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrowers and the Administrative Agent.
"Letter of Credit" means any standby letter of credit issued hereunder.
"Letter of Credit Application" means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.
"Letter of Credit Expiration Date" means the day that is seven days prior to the Revolving Commitment Termination Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).
"Letter of Credit Fee" has the meaning specified in Section 2.03(i).
"Letter of Credit Sublimit" means an amount equal to $50,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Revolving Commitments.
"Leverage Ratio" means, as of the last day of each fiscal quarter, the ratio obtained by dividing (a) Total Indebtedness of Parent and its Subsidiaries as of that date by (b) the Adjusted Tangible Assets of Parent and its Subsidiaries as of that date.
"Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment for security, deposit arrangement, encumbrance, lien (statutory or other), charge, or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing, other than a precautionary financing statement with respect to a lease that is not in the nature of a security interest).
"Loan" means a Term Loan, a Revolving Loan, a Swing Line Loan and/or an L/C Borrowing, as the context requires.
"Loan Documents" means this Agreement, each Revolving Note, each Term Note, each Issuer Document, the Fee Letter and any other instrument, document or agreement from time to time delivered by a Borrower in connection with this Agreement.
"Majority Lenders" means, as of any date of determination, at least two Lenders having more than 50% of the sum of (a) the Aggregate Revolving Commitments then in effect or, if the Aggregate Revolving Commitments have been terminated pursuant to Section 8.02, the Total Revolving Outstandings (with the aggregate amount of each Revolving Lender's risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed "held" by such Revolving Lender for purposes of this definition), and (b) the Term Loan Amount; provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority Lenders.
"Material Adverse Effect" means any set of circumstances or events which (a) has had or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Loan Document (other than as a result of any action or inaction of the Administrative Agent or any Lender), (b) has been or could reasonably be expected to be material and adverse to the business or condition (financial or otherwise) of Borrowers or (c) has materially impaired or could reasonably be expected to materially impair the ability of Borrowers to perform the Obligations.
"Maximum Rate" has the meaning set forth in Section 10.09.
"Minimum Book Value" means, as of any date of determination, without duplication, the sum of: (a) all consolidated assets of Parent and its Subsidiaries as of that date, plus (b) Parent's and its Subsidiaries' minority interest in unconsolidated assets as of that date, minus (i) Intangible Assets of Parent and its Subsidiaries and (ii) Total Liabilities of Parent and its Subsidiaries as of that date.
"Minority Interest" means, with respect to any non-Wholly-Owned Subsidiary, direct or indirect, of the Parent, any ownership interest of a third party in such Subsidiary.
"Moody's" means Moody's Investors Service, Inc. and any successor thereto.
"Mortgageable Ground Lease" means on any date of determination, a lease (a) which is a lease granted by the fee owner of Real Property, (b) which has a remaining term (calculated only once on the Closing Date or the date the Real Property subject to such lease becomes part of the Qualified Unencumbered Asset Pool) of not less than thirty (30) years, including extension options exercisable solely at the discretion of a Borrower or any applicable Subsidiary, (c) under which no material default has occurred and is continuing and (d) with respect to which a security interest may be granted (i) without the consent of the lessor or (ii) pursuant to the consent of the lessor, which consent has been granted.
"Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrowers or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
"Negative Pledge" means a Contractual Obligation that contains a covenant binding on Borrowers that prohibits Liens on any of their Property, other than (a) any such covenant contained in a Contractual Obligation granting or relating to a particular Lien which affects only the property that is the subject of such Lien and (b) any such covenant that does not apply to Liens which may secure the Obligations now or in the future.
"Net Income" means, for any period and for any Person, the net income of the Person for that period, determined in accordance with GAAP; provided that there shall be excluded therefrom the net amount of any real estate gains or losses.
"Net Rentable Area" means with respect to any Real Property, the floor area of any buildings, structures or improvements available for leasing to tenants (excluding storage lockers and parking spaces) determined in accordance with the Borrowers' rent roll for such Real Property, the manner of such determination shall be consistently applied for all Real Property, unless otherwise approved by the Administrative Agent.
"NOI" means, with respect to any Revenue-Producing Property and with respect to any fiscal period, the sum of (a) the net income of that Revenue-Producing Property for that period, plus (b) Interest Expense of that Revenue-Producing Property for that period, plus (c) the aggregate amount of federal and state taxes on or measured by income of that Revenue-Producing Property for that period (whether or not payable during that period), plus (d) depreciation, amortization and all other non-cash expenses of that Revenue-Producing Property for that period, in each case as determined in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness of any Person for which the liability of such Person (except with respect to fraud, Environmental Laws liability and other customary exceptions) either is contractually limited to collateral securing such Indebtedness or is so limited by operation of Laws.
"Note(s)" means either or both of the Term Notes or Revolving Notes, as the context requires.
"NYSE" means the New York Stock Exchange.
"Obligations" means all advances to, and debts, liabilities, obligations of, any Borrower arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect, 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 Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
"Organization Documents" means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
"Other Taxes" means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document; provided, however, that "Other Taxes" shall not include such amounts to the extent imposed as a result of any transfer by any Lender or the Administrative Agent of any interest in or under any Loan Document.
"Outstanding Amount" means (i) with respect to Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments thereof occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C 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 L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date.
"Participant" has the meaning set forth in Section 10.06(d).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrowers or any ERISA Affiliate or to which the Borrowers or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.
"Permitted Purposes" has the meaning set forth in Section 10.07(a).
"Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
"Plan" means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) established by the Borrowers or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.
"Platform" has the meaning set forth in Section 6.02.
"Preferred Distributions" means for any period, the amount of any and all Restricted Payments due and payable in cash to the holders of Preferred Equity but shall not include any Minority Interest's share of any such Restricted Payments.
"Preferred Equity" means any form of preferred stock (whether perpetual, convertible or otherwise) or other ownership or beneficial interest in Parent or any of its Subsidiaries that entitles the holders thereof to preferential payment or distribution priority with respect to dividends, assets or other payments over the holders of any other stock or other ownership or beneficial interest in such Person.
"Property" means all assets of the Parent and its Subsidiaries, whether real property or personal property.
"Public Lender" has the meaning set forth in Section 6.02.
"Qualified Asset Pool Property" means Qualified Land, Qualified Revenue-Producing Property, Qualified Development Assets and Qualified Encumbered Asset Property that is owned by the Parent, another Borrower or a direct or indirect Subsidiary of the Parent.
"Qualified Development Asset" means a Real Property that:
(a) is either owned in fee simple absolute (or through ownership of a condominium unit) or with a leasehold interest pursuant to a Mortgageable Ground Lease, in either case, by the Parent, another Borrower or a direct or indirect Subsidiary of the Parent;
(b) to the best of Borrowers' knowledge and belief, does not have any title, survey, environmental or other defects that would give rise to a materially adverse effect as to the value, use of or ability to sell or refinance such property;
(c) constitutes a Development Investment;
(d) is Unencumbered; and
(e) does not otherwise constitute a Qualified Revenue-Producing Property or Qualified Land.
"Qualified Encumbered Asset Property" means a Revenue-Producing Property that:
(a) is owned in fee simple absolute (or through ownership of a condominium unit) or with a leasehold interest pursuant to a Mortgageable Ground Lease, in either case, directly or indirectly, by the Parent, another Borrower or a direct or indirect Subsidiary of the Parent;
(b) is occupied or available for occupancy (subject to final tenant improvements);
(c) to the best of Borrowers' knowledge and belief, does not have any title, survey, environmental or other defects that would give rise to a materially adverse effect as to the value, use of or ability to sell or refinance such property; and
(d) does not have debt associated with such Revenue-Producing Property (which, for the sake of clarity, excludes the Obligations) that is in excess, at the time such Property is added to the Borrowing Base or at the end of any fiscal quarter thereafter, of 55% of its Asset Value; and
(e) does not otherwise constitute a Qualified Development Asset or Qualified Land.
"Qualified Land" means, as of any date of determination, without duplication, Real Property that:
(a) has received all entitlements required for the contemplated development of the Real Property into Revenue-Producing Property;
(b) is owned in fee simple absolute or with a leasehold interest pursuant to a Mortgageable Ground Lease, in either case by the Parent, another Borrower or a direct or indirect Subsidiary of the Parent;
(c) to the best of Borrowers' knowledge and belief, does not have any title, survey, environmental or other defects that would give rise to a materially adverse effect as to the value, use of or ability to sell or refinance such property;
(d) is Unencumbered; and
(e) does not otherwise constitute a Qualified Revenue-Producing Property or Qualified Development Asset.
"Qualified Revenue-Producing Property" means a Revenue-Producing Property that:
(a) is owned in fee simple absolute (or through ownership of a condominium unit) or with a leasehold interest pursuant to a Mortgageable Ground Lease, in either case by the Parent, another Borrower or a direct or indirect Subsidiary of the Parent;
(b) is occupied or available for occupancy (subject to final tenant improvements);
(c) to the best of Borrowers' knowledge and belief, does not have any title, survey, environmental or other defects that would give rise to a materially adverse effect as to the value, use of or ability to sell or refinance such property;
(d) is Unencumbered; and
(e) does not otherwise constitute a Qualified Development Asset or Qualified Land.
"Rating Agencies" means (a) S&P and (b) Moody's.
"Real Property" means, as of any date of determination, real property (together with the underlying real property interests and appurtenant real property rights) then owned, leased or occupied by any Borrower or any of its Subsidiaries.
"Register" has the meaning specified in Section 10.06(c).
"REIT Status" means, with respect to any Person, (a) the qualification of such Person as a real estate investment trust under Sections 856 through 860 of the Code, and (b) the applicability to such Person and its shareholders of the method of taxation provided for in Sections 857 et seq. of the Code.
"Related Parties" means, with respect to any Person, such Person's Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person's Affiliates.
"Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.
"Request for Credit Extension" means (a) with respect to a Borrowing, conversion or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.
"Required Lenders" means, as of any date of determination, Lenders having at least 66-2/3% of the sum of (a) the Revolving Commitments then in effect or, if the Aggregate Revolving Commitments have been terminated pursuant to Section 8.02, the Total Revolving Outstandings (with the aggregate amount of each Revolving Lender's risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed "held" by such Revolving Lender for purposes of this definition), and (b) the Term Loan Amount; provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.
"Required Revolving Lenders" means, as of any date of determination, Revolving Lenders having more than 66-2/3% of the Aggregate Revolving Commitments, or if the Aggregate Revolving Commitments have been terminated pursuant to Section 8.02, Revolving Lenders holding in the aggregate more than 66-2/3% of the Total Revolving Outstandings (with the aggregate amount of each Revolving Lender's risk participation and funded participation in L/C Obligations and Swing Line Loans deemed "held" by such Revolving Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Revolving Lenders.
"Responsible Officer" means, (i) with respect to delivery of executed copies of this Agreement or any Compliance Certificate, the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or any executive vice president of a Borrower and (ii) for all other purposes, the chief executive officer, president, chief financial officer, treasurer, assistant treasurer, secretary, assistant secretary or any executive vice president of a Borrower. Any document delivered hereunder that is signed by a Responsible Officer of a Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Borrower.
"Restricted Payment" means, with respect to any equity interest or any warrant or option to purchase an equity interest issued by a Person, (a) the retirement, redemption, purchase or other acquisition for Cash or for Property by such Person of any such security or interest (excluding any Indebtedness which by its terms is convertible into an Equity Interest), (b) the declaration or (without duplication) payment by such Person of any dividend in Cash or in Property on or with respect to any such security or interest, (c) any Investment by such Person in the holder of 5% or more of any such security or interest if a purpose of such Investment is to avoid characterization of the transaction as a Restricted Payment and (d) any other payment in Cash or Property by such Person constituting a distribution under applicable Laws with respect to such security or interest.
"Revenue-Producing Property" means an identifiable improved Real Property that is used principally for office, office/laboratory, research or manufacturing/warehouse purposes, or for such other revenue-producing purposes as the Required Lenders may approve.
"Revolving Commitment" means, as to each Revolving Lender, its obligation to (a) make Revolving Loans to the Borrowers pursuant to Section 2.01, (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Revolving Lender's name on Schedule 2.01A or in the Assignment and Assumption pursuant to which such Revolving Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.
"Revolving Commitment Termination Date" means the earlier of (a) the later of (i) October 29, 2010 and (ii) if the Existing Revolving Commitment Termination Date is extended pursuant to Section 2.14, such extended Revolving Commitment Termination Date as determined pursuant to such Section 2.14 and (b) the date the Revolving Commitments are terminated pursuant to Section 2.06 or Article VIII.
"Revolving Lender" means each Lender that has a Revolving Commitment or, following termination of the Revolving Commitments, has Revolving Loans outstanding.
"Revolving Loan" means a Base Rate Loan or a Eurodollar Rate Loan made to the Borrowers by a Revolving Lender in accordance with their Applicable Percentage pursuant to Section 2.01(a), except as otherwise provided herein.
"Revolving Note" means a promissory note made by the Borrowers in favor of, and payable to the order of, a Revolving Lender evidencing Revolving Loans made by such Revolving Lender, substantially in the form of Exhibit C-1.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.
"SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
"SEC Report" means all filings on Form 10-K, Form 10-Q or Form 8-K with the SEC made by the Parent pursuant to the Securities Exchange Act of 1934.
"Secured Debt" means Indebtedness of Parent or any of its Subsidiaries (including Indebtedness of any non-Wholly-Owned Subsidiary which is the subject of a Guarantee of Parent or a Subsidiary of Parent or, if such Person is a partnership, of which Parent or a Subsidiary of Parent is a general partner, Parent's or such Subsidiaries' pro rata share of any such Indebtedness of unconsolidated Persons but excluding any Minority Interest's share of Indebtedness) that is secured by a Lien or is subject to a Negative Pledge; provided, that Secured Debt shall not include any of the Obligations.
"Secured Debt Ratio" means, as of the last day of any fiscal quarter, the ratio obtained by dividing (a) the Secured Debt of Parent and its Subsidiaries as of such date by (b) the Adjusted Tangible Assets, as of such date.
"SPC" has the meaning set forth in Section 10.06(h).
"Subsidiary" of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrowers.
"Swap Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement.
"Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
"Swing Line" means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04.
"Swing Line Borrowing" means a borrowing of a Swing Line Loan pursuant to Section 2.04.
"Swing Line Lender" means Bank of America 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 2.04(a).
"Swing Line Loan Notice" means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B.
"Swing Line Sublimit" means an amount equal to $75,000,000. The Swing Line Sublimit is part of, and not in addition to, the Aggregate Revolving Commitments.
"Syndication Agent" means Citicorp North America, Inc., in its capacity as syndication agent.
"Taxes" means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
"Term Lenders" means the Term A Lenders and any other Term Lenders holding a Term Loan pursuant to Section 2.15.
"Term A Lenders" means Lenders with a Term A Loan Commitment or holding Term A Loans.
"Term A Loan" means a Term A Loan of any type made to Borrowers by the Term A Lenders in accordance with their Applicable Percentage pursuant to Section 2.01(b).
"Term A Loan Amount" means, at any time, the aggregate principal amount of the Term A Loans outstanding, which on the Closing Date is equal to $600,000,000.
"Term A Loan Commitment" means, as to each Term A Lender, its obligation to make a Term A Loan to the Borrowers pursuant Section 2.01(b), in an aggregate principal amount on the Closing Date not to exceed such Term A Lender's portion of the Term A Loan Amount or the amount set forth in the Assignment and Assumption pursuant to which such Term A Lender becomes a party hereto, as applicable.
"Term Loan" means a Term A Loan or any other term loan made pursuant to Section 2.15.
"Term Loan Amount" means, at any time, the Term A Loan Amount plus the aggregate outstanding principal amount of all other Term Loans.
"Term Loan Maturity Date" means the later of (a) October 31, 2011 and (b) if the Existing Term Loan Maturity Date is extended pursuant to Section 2.14, such extended Term Loan Maturity Date as determined pursuant to such Section 2.14.
"Term Note" means a promissory note made by the Borrowers in favor of, and payable to the order of, a Term Lender evidencing that portion of the Term Loan made by such Term Lender substantially in the form of Exhibit C- 2.
"Total Assets" means the value of all assets of a Person and its Subsidiaries (without duplication), determined on a consolidated basis in accordance with GAAP; provided that all Real Property shall be valued based on its Asset Value (it being understood that the Asset Value for any Real Property that is not a Qualified Asset Pool Property shall be calculated as if it was a Qualified Asset Pool Property). In the event that a Person has an ownership or other equity interest in any other Person, which investment is not consolidated in accordance with GAAP (that is, such interest is a "minority interest"), then the assets of a Person and its Subsidiaries shall include such Person's or its Subsidiaries' allocable share of all assets of such Person in which a minority interest is owned based on such Person's respective ownership interest in such other Person.
"Total Indebtedness" means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances and bank guaranties;
(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) Capital Lease Obligations; and
(g) all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, Total Indebtedness shall not include any Minority Interest's share of any of the foregoing. The amount of any net obligation under any Swap Contract on any date shall be deemed to be (i) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (ii) for any date prior to the date referenced in clause (i), zero. The amount of any Capital Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.
"Total Liabilities" means all liabilities of a Person and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, and (without duplication) all Indebtedness and Guarantees of such Person and its Subsidiaries (determined on a consolidated basis), whether or not so classified; provided, that, Total Liabilities shall not include any Minority Interest's share of liabilities. In the event that a Person has an ownership or other equity interest in any other Person, which investment is not consolidated in accordance with GAAP (that is, such interest is a "minority interest"), then the liabilities of a Person and its Subsidiaries shall include such Person's or its Subsidiaries' allocable share of all liabilities of such Person in which a minority interest is owned based on such Person's respective ownership interest in such other Person.
"Total Outstandings" means the aggregate Outstanding Amount of all Loans and all L/C Obligations.
"Total Revolving Outstandings" means the sum of (i) the aggregate Outstanding Amount of all Revolving Loans plus (ii) the aggregate Outstanding Amount of all Swing Line Loans plus (iii) the aggregate Outstanding Amount of all L/C Obligations.
"to the best knowledge of" means, when modifying a representation, warranty or other statement of any Person, that the fact or situation described therein is known by the Person (or, in the case of a Person other than a natural Person, known by a Responsible Officer of that Person) making the representation, warranty or other statement, or with the exercise of reasonable due diligence under the circumstances (in accordance with the standard of what a reasonable Person in similar circumstances would have done) would have been known by the Person (or, in the case of a Person other than a natural Person, would have been known by a Responsible Officer of that Person).
"Trade Date" has the meaning set forth in Section 10.06(b).
"Type" means, with respect to a Committed Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.
"Unencumbered" means, with respect to any Revenue-Producing Property, Qualified Land or Qualified Development Assets, that such Revenue-Producing Property, Qualified Land or Qualified Development Assets (a) is not subject to any Lien other than Liens permitted under Section 7.01, (b) is not subject to any Negative Pledge and (c) is not held by a Person any of whose direct or indirect equity interests are subject to a Lien or Negative Pledge.
"Unencumbered Asset Pool" means, as of any date of determination, (a) the Initial Pool Properties, plus (b) each other Qualified Asset Pool Property added to the Unencumbered Asset Pool pursuant to Section 2.16 as of such date, less (c) any Qualified Asset Pool Property removed from the Unencumbered Asset Pool pursuant to Section 2.16 as of such date; provided that:
- if all or any material portion of a Qualified Revenue-Producing Property is materially damaged then, except for a Qualified Revenue-Producing Property that is covered by business interruption insurance in an amount substantially similar to the NOI of such Qualified Revenue-Producing Property during such period, such Qualified Revenue-Producing Property shall no longer be a part of the Unencumbered Asset Pool until such damage is repaired or restored and such Qualified Revenue-Producing Property becomes fully operational and the Administrative Agent receives evidence reasonably satisfactory to it of the Asset Value of such Property, including the NOI of any Qualified Revenue-Producing Property;
- if all or any material portion of a Qualified Development Asset is materially damaged, such Qualified Development Asset shall no longer be a part of the Unencumbered Asset Pool until such damage is repaired or restored and such Qualified Asset Pool Property becomes fully operational and the Administrative Agent receives evidence reasonably satisfactory to it of the Asset Value of such Qualified Development Asset; provided that such Qualified Development Asset may be included as an Unencumbered Asset Pool Property in the amount assigned to such Qualified Development Asset prior to the damage less the amount (as determined by the Borrowers in good faith) by which the casualty insurance proceeds that are owed or received in respect of such casualty event are insufficient to restore such Qualified Development Asset for a period of up to the lesser of (A) 365 days following such casualty event and (B) the date such Qualified Development Asset is restored and fully functional or the Borrowers submit another Property in substitution therefore; and
- if all or any material portion of a Qualified Asset Pool Property is taken by condemnation, then such Qualified Asset Pool Property shall no longer be a part of the Unencumbered Asset Pool.
"Unfunded Pension Liability" means the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.
"United States" and "U.S." mean the United States of America.
"Unreimbursed Amount" has the meaning specified in Section 2.03(c)(i).
"Unrelated Person" means any Person other than (i) a Subsidiary of Parent, (ii) an employee stock ownership plan or other employee benefit plan covering the employees of Parent and its Subsidiaries or (iii) any Person that held Common Stock on the day prior to the effective date of Parent's registration statement under the Securities Act of 1933 covering the initial public offering of Common Stock.
"Wholly-Owned Subsidiary" means a Subsidiary of Parent, 100% of the capital stock or other equity interest of which is owned, directly or indirectly, by Parent, except for director's qualifying shares required by applicable Laws.
1.02 Other Interpretive Provisions.
With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) 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, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) 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 or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person's successors and assigns, (iii) the words "herein," "hereof" and "hereunder," and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof; (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) 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.
(b) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including;" the words "to" and "until" each mean "to but excluding;" and the word "through" means "to and including."
(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
(a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.
(b) Changes in GAAP If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrowers or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders, the Administrative Agent and the Borrowers); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) upon written request, the Borrowers shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.
Unless otherwise specified, all references herein to times of day shall be references to Pacific time (daylight or standard, as applicable).
1.05 Letter of Credit Amounts.
Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof; the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
ARTICLE II
THE COMMITMENTS AND CREDIT EXTENSIONS
(a) Revolving Loans. Subject to the terms and conditions set forth herein, each Lender with a Revolving Commitment (a "Revolving Lender") severally agrees to make loans (each such loan, a "Revolving Loan") to the Borrowers from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Revolving Lender's Revolving Commitment; provided, however, that after giving effect to any Committed Borrowing, the Total Revolving Outstandings shall not exceed the lesser of (i) the Aggregate Revolving Commitments or (ii) the Borrowing Base then in effect. Within the limits of each Revolving Lender's Revolving Commitment, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.01(a), prepay under Section 2.05, and reborrow under this Section 2.01(a). On the Closing Date, all Revolving Loans shall be Base Rate Loans unless the Borrowers shall have delivered at least three Business Days prior to the Closing Date, a funding indemnity letter in form and substance reasonably satisfactory to the Administrative Agent. Thereafter, Revolving Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.
(b) Term A Loan. Subject to the terms and conditions set forth herein, each Term A Lender severally agrees to fund the portion of the Term A Loan Amount represented by its Term A Loan Commitment to the Borrowers on the Closing Date in an aggregate amount not to exceed such Term A Lender's Term A Loan Commitment or the Term A Loan Amount. The Term A Loan shall be made in one draw on the Closing Date. To the extent all or any portion of the Term A Loans are repaid or prepaid, they may not be reborrowed. On the Closing Date, all Term A Loans shall be Base Rate Loans unless the Borrowers shall have delivered at least three Business Days prior to the Closing Date, a funding indemnity letter in form and substance reasonably satisfactory to the Administrative Agent. Thereafter, Term A Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.
2.02 Borrowings, Conversions and Continuations of Committed Loans.
(a) Each Committed Borrowing, each conversion of Committed Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrowers' irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than (i) 12:00 Noon, three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans, and (ii) 12:00 Noon, one Business Day prior to the requested date of any Borrowing of Base Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans. Each telephonic notice by the Borrowers pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrowers. Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $2,000,000 or a whole multiple of $500,000 in excess thereof. Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrowers are requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrowers fail to specify a Type of Committed Loan in a Committed Loan Notice or if the Borrowers fail to give a timely notice requesting a conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the Borrowers request a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Committed Loan Notice, but fail to specify an Interest Period, they will be deemed to have specified an Interest Period of one month.
(b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the Borrowers, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of a Committed Borrowing, each Lender shall make the amount of its Committed Loan available to the Administrative Agent in immediately available funds at the Administrative Agent's Office not later than 11:00 a.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrowers in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrowers on the books of Administrative Agent with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrowers; provided, however, that if; on the date the Committed Loan Notice with respect to such Borrowing is given by the Borrowers, there are L/C Borrowings outstanding, then the proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and second, shall be made available to the Borrowers as provided above.
(c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of a Default or Event of Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.
(d) The Administrative Agent shall promptly notify the Borrowers and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrowers and the Lenders of any change in Bank of America's prime rate used in determining the Base Rate promptly following the public announcement of such change.
(e) After giving effect to all Committed Borrowings, all conversions of Committed Loans from one Type to the other, and all continuations of Committed Loans as the same Type, there shall not be more than 20 Interest Periods in effect with respect to Committed Loans.
(a) The Letter of Credit Commitment.
(i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Revolving Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrowers or their Subsidiaries, and to amend Letters of Credit previously issued by it, in accordance with Section 2.03(b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Revolving Lenders severally agree to participate in Letters of Credit issued for the account of the Borrowers or their Subsidiaries and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (y) the Total Revolving Outstandings shall not exceed the lesser of (i) the Aggregate Revolving Commitments or (ii) the Borrowing Base and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit. Each request by the Borrowers for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrowers that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrowers' ability to obtain Letters of Credit shall be fully revolving, and, accordingly, the Borrowers may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.
(ii) The L/C Issuer shall not issue any Letter of Credit, if:
(A) Subject to Section 2.03(b)(iv), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance, unless the Required Revolving Lenders have approved such expiry date; or
(B) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Revolving Lenders have approved such expiry date.
(iii) The L/C Issuer shall not be under any 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 L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;
(B) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer applicable to letters of credit generally;
(C) except as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of Credit is in an initial stated amount of less than $500,000, in the case of a standby Letter of Credit;
(D) such Letter of Credit is to be denominated in a currency other than Dollars;
(E) such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder; or
(F) a default of any Revolving Lender's obligations to fund under Section 2.03(c) exists or any Revolving Lender is at such time a Defaulting Lender hereunder, unless the L/C Issuer has entered into satisfactory arrangements with the Borrowers or such Revolving Lender to eliminate the L/C Issuer's risk with respect to such Revolving Lender.
(iv) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.
(v) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C 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.
(vi) The L/C Issuer shall act on behalf of the Revolving Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C 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 IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C 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 Borrowers delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrowers. Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than 11:00 a.m. at least five Business Days (or such later date and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C 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 L/C Issuer may reasonably require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may reasonably require. Additionally, the Borrowers shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Administrative Agent may require.
(ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrowers and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Unless the L/C Issuer has received written notice from any Revolving Lender, the Administrative Agent or any Borrower, at least one 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 Article IV shall not then be satisfied, then, subject to the terms and conditions hereof; the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrowers (or the applicable Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C 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 L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Revolving Lender's Applicable Percentage times the amount of such Letter of Credit.
(iii) 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 L/C Issuer will also deliver to the Borrowers and the Administrative Agent and to any requesting Lender a true and complete copy of such Letter of Credit or amendment.
(iv) If the Borrowers so request in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to 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 L/C 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 sixty (60) days (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 L/C Issuer, the Borrowers shall not be required to make a specific request to the L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit any such extension if (A) the L/C 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 (ii) or (iii) of Section 2.03(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the Borrowers that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.
(v) 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 L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.
(c) Drawings and Reimbursements; Funding of Participations.
(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrowers and the Administrative Agent thereof. Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an "Honor Date") or 9:00 am. on the following Business Day if the notification is later than 11:00 a.m. on the Honor Date, the Borrowers shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing (unless the Borrowers elect to reimburse the L/C Issuer through a Revolving Loan, as set forth below). If the Borrowers fail to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the "Unreimbursed Amount"), and the amount of such Revolving Lender's Applicable Percentage thereof and in such event, the Borrowers shall be deemed to have requested a Committed 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 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Revolving Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.03(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 shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent's Office in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, which date will not be earlier than the Business Day after the Honor Date, whereupon, subject to the provisions of Section 2.03(c)(iii), each Revolving Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrowers in such amount. The Administrative Agent shall remit the funds so received to the L/C Issuer.
(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Committed Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrowers shall be deemed to have incurred from the L/C 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 the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(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 2.03.
(iv) Until each Revolving Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Revolving Lender's Applicable Percentage of such amount shall be solely for the account of the L/C Issuer.
(v) Each Revolving Lender's obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(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 L/C Issuer, the Borrowers or any other Person for any reason whatsoever; (B) the occurrence or continuance of a 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 Committed Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrowers of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrowers to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.
(vi) If any Revolving Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Revolving Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), the L/C Issuer 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 L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender's Committed Loan included in the relevant Committed Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be. A certificate of the L/C Issuer submitted to any Revolving Lender (through the 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 L/C 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 2.03(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrowers or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Revolving Lender its Applicable Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's L/C Advance was outstanding) in the same funds as those received by the Administrative Agent.
(ii) If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Revolving Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable Percentage thereof on demand of the 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. The obligations of the Revolving Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
(e) Obligations Absolute. The obligation of the Borrowers to reimburse the L/C 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 Agreement under all circumstances, including the following:
(i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;
(ii) the existence of any claim, counterclaim, setoff, defense or other right that the Borrowers or any Subsidiary 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 L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;
(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) any payment by the L/C 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 L/C 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
(v) 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 Borrowers or any Subsidiary.
The Borrowers 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 Borrowers' instructions or other irregularity, the Borrowers will promptly notify the L/C Issuer. The Borrowers shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.
(f) Role of L/C Issuer. Each Revolving Lender and the Borrowers agree that, in paying any drawing under a Letter of Credit, the L/C 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 L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Revolving Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Revolving Lenders or the Required Revolving Lenders, as applicable; (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 Issuer Document. The Borrowers hereby assume 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 Borrowers' pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrowers may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrowers, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrowers which the Borrowers prove were caused by the L/C Issuer's willful misconduct or gross negligence or the L/C 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 L/C 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 L/C 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.
(g) Cash Collateral. Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing which has not been repaid as provided for herein, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrowers shall, in each case, immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations. Sections 2.05 and 8.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder. For purposes of this Section 2.03, Section 2.05 and Section 8.02(c), "Cash Collateralize" means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Revolving Lenders, as collateral for the L/C Obligations, cash or deposit account balances (collectively, "Cash Collateral") pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Revolving Lenders). Derivatives of such term have corresponding meanings. The Borrowers hereby grant to the Administrative Agent, for the benefit of the L/C Issuer and the Revolving Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America.
(h) Applicability of ISP. Unless otherwise expressly agreed by the L/C Issuer and the Borrowers when a Letter of Credit is issued the rules of the ISP shall apply to each Letter of Credit.
(i) Letter of Credit Fees. The Borrowers shall pay to the Administrative Agent for the account of each Revolving Lender in accordance with its Applicable Percentage a Letter of Credit fee (the "Letter of Credit Fee") for each Letter of Credit equal to the Applicable Rate for Eurodollar Rate Loans, stated as a percentage per annum times the daily amount available to be drawn under such Letter of Credit. 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 1.05. Letter of Credit Fees shall be (i) computed on a quarterly basis in arrears and (ii) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. If there is any change in the Applicable Rate for Eurodollar Rate Loans during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Rate for Eurodollar Rate Loans separately for each period during such quarter that such Applicable Rate for Eurodollar Rate Loans was in effect. Notwithstanding anything to the contrary contained herein, upon the request of the Required Revolving Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.
(j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrowers shall pay directly to the L/C Issuer for its own account a fronting fee with respect to each Letter of Credit, at the rate equal to 0.125% per annum, computed on the daily amount available to be drawn under such Letter of Credit on a quarterly basis in arrears, and due and payable on the first Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. 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 1.05. In addition, the Borrowers shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C 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.
(k) Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.
(l) Letters of Credit Issued for Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of; a Subsidiary, the Borrowers shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrowers hereby acknowledge that the issuance of Letters of Credit for the account of Subsidiaries inures to the benefit of the Borrowers, and that the Borrowers' business derives substantial benefits from the businesses of such Subsidiaries.
(a) The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender agrees, in reliance upon the agreements of the other Revolving Lenders set forth in this Section 2.04, to make loans (each such loan, a "Swing Line Loan") to the Borrowers from time to time on any Business Day during the Availability Period 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 Applicable Percentage of the Outstanding Amount of Revolving Loans and L/C 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 Total Revolving Outstandings shall not exceed the Revolving Commitments, and (ii) the aggregate Outstanding Amount of the Revolving Loans of any Revolving Lender, plus such Revolving Lender's Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Revolving Lender's Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Revolving Lender's Revolving Commitment, and provided, further, that the Borrowers 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 Borrowers may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04. Each Swing Line Loan shall be a Base Rate Loan or a Fixed Eurodollar Rate Loan. 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 Borrowers' 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 $100,000, 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 Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrowers. Promptly after receipt by the Swing Line Lender of any telephonic Swing Line 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 Swing Line 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 the Required Revolving Lenders) 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 proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 2:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrowers at its office by crediting the account of the Borrowers on the books of the Swing Line Lender in immediately available funds.
(c) Refinancing of Swing Line Loans.
(i) The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrowers (which hereby irrevocably authorize the Swing Line Lender to so request on their behalf), that each Revolving Lender make a Base Rate Loan in an amount equal to such Revolving Lender's Applicable 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 Committed 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 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 Borrowers with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent. Each Revolving Lender shall make an amount equal to its Applicable Percentage of the amount specified in such Committed Loan Notice available to the Administrative Agent in immediately available funds 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 Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Revolving Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrowers 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 Committed Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate 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 2.04(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 2.04(c) by the time specified in Section 2.04(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 Committed Loan included in the relevant Committed 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 clause (iii) shall be conclusive absent manifest error.
(iv) Each Revolving Lender's obligation to make Committed Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(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 Lender may have against the Swing Line Lender, the Borrowers or any other Person for any reason whatsoever, (B) the occurrence or continuance of a 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 Committed Loans pursuant to this Section 2.04(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 Borrowers 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 Applicable Percentage of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Revolving Lender's risk participation was funded) 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 10.05 (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 Applicable 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 Agreement.
(e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrowers for interest on the Swing Line Loans. Until each Revolving Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Revolving Lender's Applicable Percentage of any Swing Line Loan, interest in respect of such Applicable Percentage shall be solely for the account of the Swing Line Lender.
(f) Payments Directly to Swing Line Lender. The Borrowers shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.
(a) The Borrowers may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Committed Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 12:00 Noon (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $2,000,000 or a whole multiple of $500,000 in excess thereof, and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Committed Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such notice and the contents thereof and of the amount of such Lender's Applicable Percentage of such prepayment. If such notice is given by the Borrowers, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Committed Loans of the Lenders in accordance with their respective Applicable Percentages.
(b) The Borrowers may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 9:00 a.m. on the date of the prepayment, and (ii) any such prepayment shall be in a minimum principal amount of $100,000. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrowers, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.
(c) If for any reason the Total Revolving Outstandings at any time exceed the lesser of the Aggregate Revolving Commitments and the Borrowing Base then in effect, the Borrowers shall immediately prepay the Revolving Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrowers shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(c) unless after the prepayment in full of the Revolving Loans the Total Revolving Outstandings exceed the lesser of the Aggregate Revolving Commitments and the Borrowing Base then in effect. Each such prepayment shall be applied to the Committed Loans of the Lenders in accordance with their respective Applicable Percentages.
(d) If the Borrowers have prepaid all Revolving Loans and Cash Collateralized all Letters of Credit pursuant to Section 2.05(c) above and the Term Loan Amount exceeds the Gross Borrowing Base then in effect, the Borrowers shall immediately prepay the Term Loans in an aggregate amount equal to such excess (to be applied pro rata among all Term Loans outstanding).
2.06 Termination or Reduction of Aggregate Revolving Commitments.
The Borrowers may, upon notice to the Administrative Agent, terminate the Aggregate Revolving Commitments, or from time to time permanently reduce the Aggregate Revolving Commitments; provided that the Aggregate Revolving Commitments may not be reduced below $150,000,000 (except in connection with a termination of the Aggregate Revolving Commitments and payment in full of the Obligations thereunder); and, provided further (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m. three Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Borrowers shall not terminate or reduce the Aggregate Revolving Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Revolving Outstandings would exceed the Aggregate Revolving Commitments, and (iv) if, after giving effect to any reduction of the Aggregate Revolving Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Aggregate Revolving Commitments, such Letter of Credit Sublimit or Swing Line Sublimit, as applicable, shall be automatically reduced by the amount of such excess. The Administrative Agent will promptly notify the Revolving Lenders of any such notice of termination or reduction of the Aggregate Revolving Commitments and the contents thereof. Any 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 pursuant to Section 2.09(a) until the effective date of any termination of the Aggregate Revolving Commitments shall be paid on the effective date of such termination.
(a) The Borrowers shall repay on the Revolving Commitment Termination Date the aggregate principal amount of Revolving Loans outstanding on such date, together with all interest and accrued fees related thereto.
(b) The Borrowers shall repay to the Swing Line Lender each Swing Line Loan on the earlier to occur of (i) the date three Business Days after such Swing Loan is made and (ii) the Revolving Commitment Termination Date.
(c) The Borrowers shall repay on the Term Loan Maturity Date the aggregate principal amount of the Term Loans outstanding on such date, together with all interest and accrued fees related thereto.
(a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate or the Fixed Eurodollar Rate.
(b)
(i) If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.
(ii) If any amount (other than principal of any Loan) payable by the Borrowers under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.
(iii) Upon the request of the Required Lenders, while any Event of Default exists, the Borrowers shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.
(iv) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.
(c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto (for interest accrued through the last day of the prior month) and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.
2.09 Fees. In addition to certain fees described in subsections (i) and (j) of Section 2.03:
(a) Unused Fee. The Borrower shall pay to the Administrative Agent, for the account of each Revolving Lender in accordance with its Applicable Percentage, an unused fee equal to the Applicable Rate times the actual daily amount by which the Aggregate Revolving Commitments exceed the sum of (i) the Outstanding Amount of Revolving Loans plus (ii) the Outstanding Amount of L/C Obligations. The unused fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Section 4.02 is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Revolving Commitment Termination Date. The unused fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.
(b) Facility Fee. The Borrower shall pay to the Administrative Agent, for the account of each Revolving Lender in accordance with its Applicable Percentage, a facility fee equal to the Applicable Rate times the actual daily amount of the Aggregate Revolving Commitments (or, if the Aggregate Revolving Commitments have terminated, on the Total Revolving Outstandings, regardless of usage. The facility fee shall accrue at all times during the Availability Period (and thereafter so long as any Revolving Loans, Swing Line Loans or L/C Obligations remain outstanding), including at any time during which one or more of the conditions in Section 4.02 is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Revolving Commitment Termination Date (and, if applicable, thereafter on demand). The facility fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.
(c) Other Fees.
(i) The Borrowers shall pay to BAS and the Administrative Agent for their own respective accounts fees in the amounts and at the times specified in the Fee Letter. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.
(ii) The Borrowers shall pay to the Lenders such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.
2.10 Computation of Interest and Fees.
All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America's "prime rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.
(a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrowers and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrowers shall execute and deliver to such Lender (through the Administrative Agent) the applicable Note(s), which shall evidence such Lender's Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.
(b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.
2.12 Payments Generally; Administrative Agent's Clawback.
(a) General. All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrowers hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent's Office in Dollars and in immediately available funds not later than 11:00 a.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender's Lending Office. All payments received by the Administrative Agent after 11:00 a.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.
(b)
(i) Funding by Lenders: Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Committed Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Committed Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 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 Committed Borrowing available to the Administrative Agent, then the applicable Lender and the Borrowers severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds 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 (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrowers, the interest rate applicable to such Committed Borrowing. If the Borrowers and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrowers the amount of such interest paid by the Borrowers for such period. If such Lender pays its share of the applicable Committed Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender's Committed Loan included in such Committed Borrowing. Any payment by the Borrowers shall be without prejudice to any claim the Borrowers may have against a Lender that shall have failed to make such payment to the Administrative Agent.
(ii) Payments by Borrowers: Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrowers prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer 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 or the L/C Issuer, as the case may be, the amount due. In such event, if the Borrowers have not in fact made such payment and without relieving the Borrowers' obligation to make such payment, then each of the Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the L/C Issuer, in immediately available funds 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 greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
A notice of the Administrative Agent to any Lender or the Borrowers with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.
(c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrowers by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall promptly return such funds (in like funds as received from such Lender) to such Lender, without interest.
(d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Committed Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Committed Loan, to fund any such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan, to purchase its participation or to make its payment under Section 10.04(c).
(e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.
2.13 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Committed Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lender's receiving payment of a proportion of the aggregate amount of such Committed Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Committed Loans and subparticipations in L/C Obligations and Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, 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 Committed Loans and other amounts owing them, provided that:
(a) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and
(b) the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than to the Borrowers or any Subsidiary thereof (as to which the provisions of this Section shall apply).
Each Borrower party hereto 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 such Borrower rights of setoff 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.
2.14 Extension of Revolving Commitment Termination Date and/or Term Loan Maturity Date.
(a) Requests for Extension of Revolving Commitment Termination Date. The Borrowers may, on a one-time basis, by notice to the Administrative Agent (who shall promptly notify the Revolving Lenders) not earlier than 90 days prior to, and not later than 30 days prior to, the Revolving Commitment Termination Date then in effect hereunder (the "Existing Revolving Commitment Termination Date"), cause each Revolving Lender to extend such Revolving Lender's Existing Revolving Commitment Termination Date for an additional one (1) year from the Existing Revolving Commitment Termination Date and each Revolving Lender shall extend such Revolving Lender's Revolving Commitment Termination Date for an additional one (1) year from the Existing Revolving Commitment Termination Date in accordance with this Section 2.14(a).
(b) Requests for Extension of Term Loan Maturity Date. The Borrowers may on a one-time basis, by notice to the Administrative Agent (who shall promptly notify the Term Lenders) not earlier than 90 days prior to, and not later than 30 days prior to, the Term Loan Maturity Date then in effect hereunder (the "Existing Term Loan Maturity Date"), cause each Term Lender to extend such Term Lender's Existing Term Loan Maturity Date for an additional one (1) year from the Existing Term Loan Maturity Date and each Term Lender shall extend such Term Lender's Term Loan Maturity Date for an additional one (1) year from the Existing Term Loan Maturity Date in accordance with this Section 2.14(b).
(c) Conditions to Effectiveness of Extensions. Notwithstanding the foregoing, the extension of the Revolving Commitment Termination Date or the Term Loan Maturity Date pursuant to this Section shall not be effective with respect to the Revolving Lenders or the Term Lenders, as applicable, unless:
(i) no Default or Event of Default shall have occurred and be continuing on the date of such extension and after giving effect thereto;
(ii) the representations and warranties contained in this Agreement are true and correct in all material respects, on and as of the date of such extension and after giving effect thereto, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, only as of such specific date);
(iii) in the case of an extension of the Revolving Commitment Termination Date, the Borrowers pay the Revolving Lenders, based on their Applicable Percentage, an extension fee on the Existing Revolving Commitment Termination Date in an amount equal to the product of (i) 0.15%, multiplied by (ii) the Aggregate Revolving Commitments then in effect at the time of the extension;
(iv) in the case of an extension of the Term Loan Maturity Date, the Borrowers pay the Term Lenders, based on their Applicable Percentage, an extension fee on the Existing Term Loan Maturity Date in an amount equal to the product of (i) 0.15%, multiplied by (ii) the Term Loan Amount at the time of the extension; and
(v) the Capitalization Rate shall be increased on the date of such extension of the Revolving Commitment Termination Date or the Term Loan Maturity Date, as applicable, if requested by the Required Lenders; provided that (A) the Capitalization Rate may not be increased more than .25% greater than the Capitalization Rate then in effect and in no event shall the Capitalization Rate exceed 8.50% and (B) the Capitalization Rate may not be increased on more than one occasion.
(d) Conflicting Provisions. This Section shall supersede any provisions in Section 2.13 or 10.01 to the contrary.
(a) Aggregate Revolving Commitments. The Borrowers shall have the right from time to time, prior to the Revolving Commitment Termination Date and with the consent of the Administrative Agent and the L/C Issuer (such consent not to be unreasonably withheld), and subject to the terms and conditions set forth below, to increase the amount of the Aggregate Revolving Commitments; provided that (i) no Default or Event of Default shall exist at the time of the request of the proposed increase in the Aggregate Revolving Commitments or after giving effect thereto; (ii) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects, on and as of the date of the increase in the Aggregate Revolving Commitments, 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 except that for purposes of this Section 2.15(a), the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, (iii) such increase must be in a minimum amount of $25,000,000 and in integral multiples of $1,000,000 above such amount, (iv) the Aggregate Revolving Commitments shall not be increased by an amount, in the aggregate, that is greater than $350,000,000 less the aggregate amount of any additional term tranches added pursuant to clause (b) below, (v) no individual Lender's Revolving Commitment may be increased without such Lender's written consent, (vi) Schedule 2.01A shall be amended to reflect the revised amount of the Aggregate Revolving Commitments and revised Revolving Commitments of the Lenders and (vii) if any Revolving Loans are outstanding at the time of an increase in the Aggregate Revolving Commitments, the Borrowers will prepay (provided that any such prepayment shall be subject to Section 3.05) one or more existing Revolving Loans (or in the case of the addition of any new Lender as set forth in the paragraph below, prepay and reborrow the outstanding Revolving Loans) in an amount necessary such that after giving effect to the increase in the Aggregate Revolving Commitments, each Lender will hold its Applicable Percentage (based on its Revolving Commitment of the revised Aggregate Revolving Commitments) of outstanding Revolving Loans.
Any such increase in the Aggregate Revolving Commitments shall apply, at the option of the Borrowers, to (x) the Revolving Commitment of one or more existing Lenders; provided that any Lender whose Revolving Commitment is being increased must consent in writing thereto and/or (y) the creation of a new Revolving Commitment to one or more institutions that is not an existing Lender; provided that any such institution (A) must conform to the definition of Eligible Assignee and (B) must become a Revolving Lender under this Agreement by execution and delivery of an appropriate joinder agreement or of counterparts to this Agreement in a manner reasonably acceptable to the Borrowers and the Administrative Agent.
(b) New Term Tranches. The Borrowers shall have the right from time to time, prior to the Term Loan Maturity Date, and subject to the conditions set forth below, to request new tranches of term loans; provided that (i) no Default or Event of Default shall exist at the time of such new term tranche or after giving effect thereto, (ii) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects, on and as of the date of the funding of the new term tranche, 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 except that for purposes of this Section 2.15(b), the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, (iii) no Lender shall be required to participate in any such term tranche without its written consent, (iv) the aggregate amount of such term tranches shall not exceed $350,000,000 less any increases in the Aggregate Revolving Commitments pursuant to clause (a) above, (v) the maturity date for such new term tranche shall be the Term Loan Maturity Date, (vi) the Borrowers and the Lenders providing such term tranche shall enter into an amendment to this agreement as is necessary to evidence this new term tranche and all issues related thereto, including but not limited to, pricing of such new term tranche, and all Lenders not providing such term tranche hereby consent to such limited scope amendment without future consent rights, and (vii) Schedule 2.01A shall be amended to reflect the addition of any term tranche and the commitments related thereto.
Any new term tranche may be provided by one or more existing Lenders (at the sole discretion of any such existing Lender) or by one or more institutions that is not an existing Lender; provided that any such institution (A) must conform to the definition of Eligible Assignee and (B) must become a Lender under this agreement by execution of a Lender Joinder agreement substantially in the form of Exhibit G or of counterparts to this agreement in a manner reasonably acceptable to the Administrative Agent.
(c) Conflicting Provisions. This Section 2.15 shall supersede any provisions in Sections 2.13 or 10.01 to the contrary.
(a) The Lenders agree that the Borrowers may add a Real Property to the Unencumbered Asset Pool subject to satisfaction of all of the following conditions:
(i) the Borrowers shall deliver to the Administrative Agent (which shall promptly be delivered to the Revolving Lenders) the following:
(A) a complete description of the proposed Qualified Asset Pool Property;
(B) for any Revenue-Producing Property only, the prior twelve (12) months' operating income statements related to such Qualified Asset Pool Property (to the extent available);
(C) a certification of a Responsible Officer of the Borrowers that Parent has obtained a current written report prepared by a qualified independent expert with respect to Hazardous Materials related thereto which discloses that such property would not be in violation of the representations and covenants of this Agreement;
(D) for any Qualified Encumbered Asset Property, the amount of debt associated with such Qualified Encumbered Asset Property;
(E) for any Qualified Development Asset, the cost of such Qualified Development Asset;
(F) for any Qualified Land, the Appraised Value or the cost of such Qualified Land;
(G) an updated Schedule 3 to the Compliance Certificate giving effect to such addition; and
(H) such other written materials with respect to such Real Property reasonably requested by any Lender.
(ii) such Real Property must satisfy the requirements to be a Qualified Asset Pool Property.
(iii) after giving effect to such addition, the Borrowers shall be in compliance with Section 2.05(c).
(iv) If the Borrowers want to add a Property to the classification of Unencumbered Asset Pool Properties and such Property is not currently owned by a Borrower then (subject to clause (c) of the definition of "Gross Borrowing Base"), prior to such Property being added, the Subsidiary owning such new Property shall (A) execute a Joinder Agreement in the form of Exhibit F and (B) deliver such other documentation as the Administrative Agent may reasonably request in connection therewith, including, without limitation, certified resolutions and other organizational and customary authorizing documents of such Person, all in form, content and scope reasonably satisfactory to the Administrative Agent.
(b) The Lenders agree that the Borrowers may withdraw a Qualified Asset Pool Property from the Unencumbered Asset Pool subject to satisfaction of all of the following conditions:
(i) The Borrowers must provide an updated Schedule 3 to the Compliance Certificate giving effect to such withdrawal; and
(ii) after giving effect to such withdrawal, the Borrowers shall be in compliance with Section 2.05(c).
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrowers hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrowers shall be required by applicable law to deduct any Indemnified Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, each Lender or the L/C Issuer, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrowers shall make such deductions and (iii) the Borrowers shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.
(b) Payment of Other Taxes by the Borrowers. Without limiting the provisions of subsection (a) above, the Borrowers shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) Indemnification by the Borrowers. The Borrowers shall indemnify the Administrative Agent, each Lender and the L/C Issuer, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other 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 Borrowers by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer shall be conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority, the Borrowers 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.
(e) Status of Lenders. Any Administrative Agent, L/C Issuer or Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrowers are resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrowers (with a copy to the Administrative Agent), at the time or times prescribed by applicable law and reasonably requested by the Borrowers or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Administrative Agent, L/C Issuer or Lender, if requested by the Borrowers or the Administrative Agent, shall deliver such other documentation prescribed by applicable law and reasonably requested by the Borrowers or the Administrative Agent as will enable the Borrowers or the Administrative Agent to determine whether or not such Administrative Agent, L/C Issuer or Lender is subject to backup withholding or information reporting requirements.
Without limiting the generality of the foregoing any Administrative Agent, L/C Issuer or Lender shall deliver to the Borrowers 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 Person becomes a party to this Agreement (and from time to time thereafter upon the request of the Borrowers or the Administrative Agent, but only if such Person is legally entitled to do so), whichever of the following is applicable:
(i) duly completed copies of IRS Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,
(ii) duly completed copies of IRS Form W-8ECI,
(iii) 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 to the effect that such Foreign Lender is not (A) a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of any Borrower within the meaning of Section 881 (c)(3)(B) of the Code, or (C) a "controlled foreign corporation" described in Section 881(c)(3)(C) of the Code and (y) duly completed copies of IRS Form W-8BEN,
(iv) in the case of any Administrative Agent, Lender or L/C Issuer that is a "United States person" within the meaning of Section 7701(a)(30) of the Code, duly completed copies of IRS W-9, establishing a complete exemption from backup withholding taxes; provided, however, that such a Person that the Borrowers are entitled to treat as an "exempt recipient" (without regard to whether any Borrower has requested any certificates or forms in this respect) shall not be required to provide such form, and/or
(v) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrowers to determine the withholding or deduction required to be made.
(f) Treatment of Certain Refunds. If the Administrative Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section, it shall pay to the Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrowers, upon the request of the Administrative Agent, such Lender or the L/C Issuer, agree to repay the amount paid over to the Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the L/C Issuer in the event the Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrowers or any other Person.
If any Lender determines in good faith that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrowers through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrowers that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or converted.
3.03 Inability to Determine Rates.
If the Required Lenders determine in good faith that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrowers and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrowers may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.
3.04 Increased Costs; Reserves on Eurodollar Rate Loans.
(a) Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(e)) or the L/C Issuer; or
(ii) subject any Lender or the L/C Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Rate Loan made by it, or change the basis of taxation of payments to such Lender or the L/C Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax); or
(iii) impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit or participation therein (other than with respect to Taxes, which shall be governed solely by Section 3.01);
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C 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 or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Borrowers will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.
(b) Capital Requirements. If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender's or the L/C Issuer's holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the L/C Issuer's capital or on the capital of such Lender's or the L/C Issuer's holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender's or the L/C Issuer's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the L/C Issuer's policies and the policies of such Lender's or the L/C Issuer's holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender's or the L/C Issuer's holding company for any such reduction suffered.
(c) Certificates for Reimbursement. A certificate of a Lender or the L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrowers shall be conclusive absent manifest error. The Borrowers shall pay such Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender's or the L/C Issuer's right to demand such compensation, provided that the Borrowers shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than three months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Borrowers of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the L/C Issuer's intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof).
(e) Reserves on Eurodollar Rate Loans. The Borrowers shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan; provided, the Borrowers shall have received at least 10 days' prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.
Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrowers shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:
(a) any continuation, conversion, payment or prepayment of any Eurodollar Rate Loan on a day other than the last day of the Interest Period for such Eurodollar Rate Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
(b) any failure by the Borrowers (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Eurodollar Rate Loan on the date or in the amount notified by the Borrowers; or
(c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrowers pursuant to Section 10.13;
including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained (but excluding any loss of anticipated profits). The Borrowers shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.
For purposes of calculating amounts payable by the Borrowers to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate used in determining the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.
3.06 Mitigation Obligations; Replacement of Lenders.
(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign 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 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if material amounts are paid to such Lender under Section 3.05, or if the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrowers may replace such Lender in accordance with Section 10.13.
3.07 Survival.
All of the Borrowers' obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.
4.01 Conditions of Effectiveness of this Agreement.
The effectiveness of this Agreement and the obligation of the L/C Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:
(a) The Administrative Agent's receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Borrower, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders.
(i) executed counterparts of this Agreement;
(ii) a Revolving Note executed by the Borrowers in favor of each Revolving Lender requesting a Revolving Note and a Term Note executed by the Borrowers in favor of each Term Lender requesting a Term Note;
(iii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Borrower as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized as of the date hereof to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Borrower is a party;
(iv) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Borrower is duly organized or formed (including, without limitation, articles or certificates of incorporation or other charter documents and bylaws or other governance documents of each Borrower), and that each Borrower is validly existing and in good standing in its jurisdiction of organization and the tax identification number for each Borrower;
(v) favorable opinions of each counsel to the Borrowers, addressed to the Administrative Agent and each Lender, as to the matters concerning the Borrowers and the Loan Documents as the Required Lenders may reasonably request;
(vi) a certificate of a Responsible Officer of each Borrower either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Borrower and the validity against such Borrower of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;
(vii) a certificate signed by a Responsible Officer of the Borrowers certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied and (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect;
(viii) a duly completed Schedule 5.18 to this Agreement and Schedule 3 to the Compliance Certificate signed by a Responsible Officer of the Borrowers and such other information regarding the Initial Pool Properties as reasonably requested by the Administrative Agent;
(ix) evidence that all amounts outstanding under the Existing Credit Agreement have been, or concurrently with the Closing Date, are being repaid in full; and
(x) such other assurances, certificates, documents, consents or opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lender or the Required Lenders reasonably may require.
(b) Any fees required to be paid on or before the Closing Date shall have been, or concurrently with the Closing Date are being, paid.
(c) Unless waived by the Administrative Agent, the Borrowers shall have paid all fees, charges and disbursements of counsel to the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrowers and the Administrative Agent).
Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.
4.02 Conditions to all Credit Extensions.
The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type, or a continuation of Eurodollar Rate Loans) is subject to the following conditions precedent:
(a) The representations and warranties of the Borrowers contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith (including a representation regarding compliance with the Borrowing Base after giving effect to such Credit Extension), shall be true and correct on and as of the date of such Credit Extension in all material respects, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date, and except that for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (d), respectively, of Section 6.01.
(b) No Default or Event of Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.
(c) The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.
(d) The Administrative Agent shall have received, in form and substance reasonably satisfactory to the Administrative Agent, such other assurances, certificates, documents or consents related to the foregoing as the Administrative Agent or Required Revolving Lenders reasonably may require.
Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Borrowers shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to the Administrative Agent and the Lenders that:
5.01 Existence, Qualification and Power; Compliance with Laws.
Each Borrower (a) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization except to the extent permitted by Sections 7.03, or 10.20, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, and (d) is in compliance with all Laws; except in each case referred to in clause (b)(i), (c) or (d), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
5.02 Authorization; No Contravention.
The execution, delivery and performance by each Borrower of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any material Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law.
5.03 Governmental Authorization; Other Consents.
No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Borrower of this Agreement or any other Loan Document.
This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Borrower party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of each Borrower party thereto, enforceable against each such Borrower in accordance with its terms.
5.05 Financial Statements; No Material Adverse Effect.
(a) The Audited Financial Statements fairly present in all material respects the financial condition of the Parent and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein.
(b) The unaudited consolidated balance sheet of the Borrowers and their Subsidiaries dated June 30, 2006, and the related consolidated statements of income or operations and cash flows for the fiscal quarter ended on that date (fairly present in all material respects the financial condition of the Borrowers and their Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, subject to the absence of footnotes and to normal year-end audit adjustments.
(c) Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.
(d) The consolidated financial projections of the Parent delivered pursuant to Section 6.02(a) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts (it being understood that such financial projections are subject to uncertainties and contingencies, which may be beyond the control of the Borrowers and their Subsidiaries and that no assurance is given by the Borrowers that such projections will be realized).
There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrowers, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Borrower or any of their Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.
Neither any Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.
5.08 Ownership of Property; Liens.
Each of the Borrowers and their Subsidiaries has good record and marketable title in fee simple (subject to the rights of other parties as owners of condominium units) to, or valid leasehold interests in, all real property 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. The property of the Borrowers and their Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01.
5.09 Environmental Compliance.
The Borrowers and their Subsidiaries have conducted in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof the Borrowers have reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
The properties of each Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrowers, in such amounts and with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where such Borrower or the applicable Subsidiary operates.
The Borrowers and their Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against Borrowers or any of their Subsidiaries that would, if made, have a Material Adverse Effect. As of the date hereof neither any Borrower nor any Subsidiary thereof is party to any material tax sharing agreement.
(a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Borrowers, nothing has occurred which would prevent, or cause the loss of, such qualification. The Borrowers and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of the Borrowers, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability that could reasonably be expected to have a Material Adverse Effect; (iii) neither the Borrowers nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrowers nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan that could reasonably be expected to have a Material Adverse Effect; and (v) neither the Borrowers nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 42 12(c) of ERISA.
5.13 Subsidiaries; Equity Interests.
All of the outstanding Equity Interests in the Parent's Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Parent or another Borrower, directly or indirectly, free and clear of all Liens except as permitted under this Agreement.
5.14 Margin Regulations; Investment Company Act; REIT and Tax Status; Stock Exchange Listing.
(a) No Borrower is engaged or will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. Following the application of the proceeds of each Borrowing or drawing under each Letter of Credit, not more than 25% of the value of the assets subject to the provisions of Section 7.01 or subject to any restriction contained in any agreement or instrument between the Borrowers, and any Lender or any Affiliate of any Lender relating to Indebtedness and within the scope of Section 8.01(e) will be margin stock.
(b) None of the Borrowers, any Person Controlling the Borrowers, or any Subsidiary is or is required to be registered as an "investment company" under the Investment Company Act of 1940.
(c) Except as disclosed to Administrative Agent, as of the Closing Date, none of Borrowers nor any Wholly- Owned Subsidiary is a "foreign person" within the meaning of Section 1445(f)(3) of the Code.
(d) The Parent currently has REIT Status and has maintained REIT Status on a continuous basis since its formation. The shares of common stock of the Parent are listed on the NYSE, American Stock Exchange or NASDAQ Stock Exchange.
Each Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished by or on behalf of any Borrower to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, taken as a whole and 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 materially misleading; provided that, with respect to projected financial information, the Borrowers represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time made (it being understood that such financial projections are subject to uncertainties and contingencies, which may be beyond the control of the Borrowers and their Subsidiaries and that no assurance is given by the Borrowers that such projections will be realized).
Each Borrower and each of its Subsidiaries are in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
5.17 Intellectual Property; Licenses, Etc.
Each Borrower and each of its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, "IP Rights") that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person except to the extent that failure to so own or possess such IP Rights could not reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Borrowers, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
The Initial Pool Properties described on Schedule 5.18 are, as of the Closing Date, Qualified Asset Pool Properties and comprise the initial Unencumbered Asset Pool.
All of the Borrowers' and their respective Subsidiaries' Properties are in good repair and condition, subject to ordinary wear and tear, other than with respect to deferred maintenance existing as of the date of acquisition of such Property and except for such defects relating to properties, other than Real Properties in the Unencumbered Asset Pool, which would not have a Material Adverse Effect. The Borrowers further have completed or caused to be completed an appropriate investigation of the environmental condition of each such Property as of (a) the date of the Borrowers' or such Subsidiaries' purchase thereof or (b) the date upon which such Property was last security for Indebtedness of such Borrower or such Subsidiary if such financing was not closed on or about the date of the acquisition of such property, including preparation of a "Phase I" report and, if appropriate, a "Phase II" report, in each case prepared by a recognized environmental consultant in accordance with customary standards which discloses that such property is not in violation of the representations and covenants set forth in this Agreement, unless such violation, as to Real Properties in the Unencumbered Asset Pool, has been disclosed in writing to the Administrative Agent and satisfactory remediation actions are being taken. There are no unpaid or outstanding real estate or other taxes or assessments on or against any Property of any Borrower or any of their respective Subsidiaries which are payable by such Person (except only real estate or other taxes or assessments, that are not yet due and payable). There are no pending eminent domain proceedings against any Property included within the Unencumbered Asset Pool, and, to the knowledge of the Borrowers, no such proceedings are presently threatened or contemplated by any taking authority which may individually or in the aggregate have a Material Adverse Effect. None of the Property of Borrowers or their respective Subsidiaries is now damaged or injured as a result of any fire, explosion, accident, flood or other casualty in any manner which individually or in the aggregate would have a Material Adverse Effect.
None of the Borrowers or any of their respective Subsidiaries has engaged or otherwise dealt with any broker, finder or similar entity in connection with this Agreement or the Loans contemplated hereunder.
None of the Borrowers or any of their respective Subsidiaries is in default (after expiration of all applicable grace and cure periods) in the payment of any other Indebtedness or under any mortgage, deed of trust, security agreement, financing agreement or indenture involving Indebtedness of $50,000,000 or more or under any other material agreement or lease to which any of them is a party. None of the Borrowers is a party to or bound by any agreement, instrument or indenture that may require the subordination in right or time of payment of any of the Obligations to any other indebtedness or obligation of such Borrower.
As of the Closing Date and after giving effect to the transactions contemplated by this Agreement and the other Loan Documents, including all of the Loans made or to be made hereunder and Letters of Credit issued or to be issued hereunder (including but not limited to, the date any such Loan is made or Letter of Credit is issued), the Borrowers and their Subsidiaries (on a consolidated basis) are solvent on a balance sheet basis such that the sum of the Borrowers' and their Subsidiaries' assets exceeds the sum of the Borrowers' and their Subsidiaries' liabilities, the Borrowers and their Subsidiaries are able to pay their debts as they become due, and the Borrowers and their Subsidiaries have sufficient capital to carry on their business.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder (other than contingent indemnity obligations) shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless a replacement letter of credit or cash collateral reasonably satisfactory to the L/C Issuer has been provided to the L/C Issuer), the Borrowers shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Subsidiary to:
Deliver to the Administrative Agent and each Lender, in form and detail reasonably satisfactory to the Administrative Agent:
(a) As soon as practicable, and in any event within 90 days after the end of each fiscal year, the consolidated balance sheet of Parent and its Subsidiaries as at the end of such fiscal year and the consolidated statements of operations, stockholders' equity and cash flows, in each case of Parent and its Subsidiaries for such fiscal year, all in reasonable detail. Such financial statements shall be prepared in accordance with GAAP, consistently applied, audited and shall be accompanied by a report of Ernst & Young LLP or other independent public accountants of recognized standing selected by Parent and reasonably satisfactory to the Required Lenders (any "Big 4" accounting firm shall be deemed satisfactory to the Required Lenders), which report and opinion shall be prepared in accordance with generally accepted auditing standards as at such date, and shall not be subject to any "going concern" or like qualifications or exception or any qualification or exception as to the scope of the audit;
(b) As soon as practicable, and in any event within 60 days after the end of each fiscal quarter (other than the fourth fiscal quarter in any fiscal year), the consolidated balance sheet of Parent and its Subsidiaries as at the end of such fiscal quarter and the consolidated statements of operations and cash flows for such fiscal quarter, and the portion of the fiscal year ended with such fiscal quarter, all in reasonable detail. Such financial statements shall be certified by a Responsible Officer of Parent as fairly presenting in all material respects the financial condition, results of operations and cash flows of Parent and its Subsidiaries in accordance with GAAP (other than footnote disclosures), consistently applied, as at such date and for such periods, subject only to normal year-end accruals and audit adjustments; and
(c) As soon as practicable, and in any event (i) within 60 days after the end of each of the first three fiscal quarters in any fiscal year and (ii) within 90 days after the end of the fourth fiscal quarter, statements of operating income for such fiscal quarter for each of the Revenue-Producing Properties in the Unencumbered Asset Pool, each in reasonable detail.
6.02 Certificates; Other Information.
Deliver to the Administrative Agent (and the Administrative Agent shall deliver to each Lender requesting same), in form and detail reasonably satisfactory to the Administrative Agent:
(a) Concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer;
(b) As soon as practicable, and in any event no later than 90 days after the commencement of each fiscal year, a budget and projection by fiscal quarter for that fiscal year and by fiscal year for the next two succeeding fiscal years, including for the first such fiscal year, projected consolidated balance sheets, statements of operations and statements of cash flow and, for the second and third such fiscal years, projected consolidated balance sheets and statements of operations and cash flows, of Parent and its Subsidiaries, all in reasonable detail;
(c) Promptly after request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of Parent by independent accountants in connection with the accounts or books of Parent or any of its Subsidiaries, or any audit of any of them;
(d) Promptly after the same are available, and in any event within five (5) Business Days after filing with the SEC, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of Parent, and copies of all publicly available annual, regular, periodic and special reports and registration statements which Parent may file or be required to file with the Securities and Exchange Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and not otherwise required to be delivered to the Lenders pursuant to Section 6.01 or other provisions of this Section 6.02;
(e) Promptly upon a Responsible Officer becoming aware, and in any event within five (5) Business Days after becoming aware, of the occurrence of any (i) "reportable event" (as such term is defined in Section 4043 of ERISA, but excluding such events as to which the PBGC has by regulation waived the requirement therein contained that it be notified within thirty days of the occurrence of such event) or (ii) non-exempt "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) involving any Pension Plan or any trust created thereunder that could reasonably be expected to give rise to a material liability, telephonic notice specifying the nature thereof, and, no more than two (2) Business Days after such telephonic notice, written notice again specifying the nature thereof and specifying what action Borrowers are taking or propose to take with respect thereto, and, when known, any action taken by the IRS with respect thereto;
(f) As soon as practicable, and in any event within two (2) Business Days after a Responsible Officer becomes aware of the existence of any condition or event which constitutes a Default or Event of Default, telephonic notice specifying the nature and period of existence thereof, and, no more than two (2) Business Days after such telephonic notice, written notice again specifying the nature and period of existence thereof and specifying what action Borrowers are taking or propose to take with respect thereto;
(g) Promptly upon a Responsible Officer becoming aware that (i) any Person has commenced a legal proceeding with respect to a claim against Borrowers that is $10,000,000 or more in excess of the amount thereof that is fully covered by insurance, (ii) any creditor under a credit agreement involving Indebtedness of $10,000,000 or more or any lessor under a lease involving aggregate rent of $10,000,000 or more has asserted a default thereunder on the part of Borrowers or (iii) any Person has commenced a legal proceeding with respect to a claim against Borrowers under a contract (that is not a credit agreement or material lease) in excess of $10,000,000 or which otherwise may reasonably be expected to result in a Material Adverse Effect, a written notice describing the pertinent facts relating thereto and what action Borrowers are taking or propose to take with respect thereto;
(h) Not later than sixty (60) days after the end of each fiscal quarter of the Borrowers (other than the fourth fiscal quarter in any fiscal year in which case not later than ninety (90) days), a statement listing the properties of Parent and its Subsidiaries which are Development Investments and providing a brief summary of the status of such development;
(i) Promptly upon a Responsible Officer becoming aware of a change in the Debt Rating or any other credit rating given by a Rating Agency to Parent's long-term senior unsecured debt or any announcement that any such rating is "under review" or that such rating has been placed on a watch list or that any similar action has been taken by a Rating Agency, written notice of such change, announcement or action; and
(j) Such other data and information as from time to time may be reasonably requested by the Administrative Agent.
Documents required to be delivered pursuant to this Agreement (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrowers post such documents, or provide a link thereto on the Borrowers' website on the Internet at the website address listed on Schedule 10.02 or (ii) on which such documents are posted on the Borrowers' behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent), including the SEC's EDGAR website; provided that the Borrowers shall deliver paper copies of such documents to the Administrative Agent for any Lender that requests the Borrowers to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender. Notwithstanding anything contained herein, in every instance the Borrowers shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(a) to the Administrative Agent. Except for such Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrowers with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
The Borrowers hereby acknowledge that (a) the Administrative Agent and/or the Arrangers will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrowers hereunder (collectively, "Borrower Materials") by posting the Borrower Materials on IntraLinks or another similar electronic system (the "Platform") and (b) certain of the Lenders may be "public-side" Lenders (i.e., Lenders that do not wish to receive material non- public information with respect to the Borrowers or their securities) (each, a "Public Lender"). The Borrowers hereby agree that (w) all Borrower Materials (other than SEC Reports) that are to be made available to Public Lenders 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, (x) by marking Borrower Materials "PUBLIC," the Borrowers shall be deemed to have authorized the Administrative Agent, the Arrangers, the L/C Issuer and the Lenders to treat such Borrower Materials as either publicly available information or not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Borrowers or their securities for purposes of United States Federal and state securities laws; (y) all SEC Reports and all Borrower Materials marked "PUBLIC" are permitted to be made available through a portion of the Platform designated "Public Investor;" and (z) the Administrative Agent and the Arrangers shall be entitled to treat any Borrower Materials (other than SEC Reports) that are not marked "PUBLIC" as being suitable only for posting on a portion of the Platform not designated "Public Investor." The Borrowers shall be in compliance with all requirements to deliver information under this Agreement if they have made such information available to the Administrative Agent and, to the extent required, Lenders other than Public Lenders, and the failure of Public Lenders to receive information made available to other Lenders shall not result in any breach of this Agreement.
Pay and discharge as the same shall become due and payable, all material tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrowers or such Subsidiary prior to the imposition of such Lien, except that Borrowers and their respective Subsidiaries shall not be required to pay or cause to be paid (a) any tax, assessment, charge, levy or claim that is not yet past due, or is being contested in good faith by appropriate proceedings so long as the relevant entity has established and maintains adequate reserves for the payment of the same or (b) any immaterial tax or claim so long as no material Property of Borrowers or their Subsidiaries is at immediate risk of being seized, levied upon or forfeited.
6.04 Preservation of Existence, Etc.
(a) Preserve, renew and maintain in full force and effect the legal existence and good standing of the Borrowers under the Laws of the jurisdiction of its organization except in a transaction permitted by Sections 7.03 or 10.20; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.
6.05 Maintenance of Properties.
(a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted and subject to exceptions for extraordinary or reasonably unforeseeable events; (b) make all necessary repairs thereto and renewals and replacements thereof in a reasonably timely manner except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.
6.06 Maintenance of Insurance.
Maintain liability, casualty and other insurance (subject to customary deductibles and retentions) with responsible insurance companies in such amounts and against such risks as is carried by responsible companies engaged in similar businesses and owning similar assets in the general areas in which Borrowers or such Subsidiaries, as applicable, operate.
Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
(a) Maintain proper books of record and account, in which entries true and correct in all material respects are made in conformity with GAAP consistently applied; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrowers and their Subsidiaries, as the case may be.
Permit the Lenders, through the Administrative Agent or any representative designated by the Administrative Agent, at the Borrowers' expense, to visit and inspect any of the properties of the Borrowers or any of their respective Subsidiaries (subject to the rights of any tenants), to examine the books of account of the Borrowers and their respective Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrowers and their respective Subsidiaries with, and to be advised as to the same by, their Responsible Officers, all at such reasonable times (typically during normal business hours) and intervals as the Administrative Agent or any Lender may reasonably request upon not less than four (4) Business Days' notice; provided, however, that inspections made at the Borrowers' expense shall be limited to once per year, unless an Event of Default shall have occurred and be continuing. The Lenders shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to the Borrowers' or such Subsidiaries' normal business operations. Notwithstanding anything to the contrary in this Section 6.09, no Borrower nor any of their Subsidiaries will be required to disclose, permit the inspection, examination or making of extracts, or discussion of, any document, information or other matter that (i) in respect of which disclosure to the Administrative Agent (or its designated representative) or any Lender is then prohibited by law or any agreement binding on any Borrower or any of its Subsidiaries or (ii) is subject to attorney-client or similar privilege or constitutes attorney work product.
Use the proceeds of any Credit Extensions for general corporate purposes (including permitted Investments and acquisitions) not in contravention of any Laws or any Loan Documents.
6.11 Qualified Revenue-Producing Properties.
Cause the aggregate occupancy rate of all Qualified Revenue-Producing Properties, as of the end of the most recently ended four fiscal quarter period of the Borrowers, to be greater than or equal to 80%, based on bona-fide, arms length tenant leases which are in full force and effect requiring current rental payments and which are in good standing.
Cause each Wholly-Owned Subsidiary of the Parent that owns a Qualified Asset Pool Property (other than a Qualified Encumbered Asset Property) to become a Borrower under this Agreement. Cause each other Subsidiary that owns a Qualified Asset Pool Property to become a Borrower under this Agreement except to the extent becoming a Borrower under this Agreement (a) is prohibited by, or requires the consent of any Person pursuant to, contractual provisions entered into by the Subsidiary in the ordinary course of business or (b) is prohibited by any provision of applicable law.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder (other than contingent indemnity obligations) shall remain unpaid or unsatisfied, or any Letter of Credit (unless a replacement letter of credit or cash collateral reasonably satisfactory to the L/C Issuer has been provided to the L/C Issuer) shall remain outstanding, each Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly:
Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:
(a) inchoate Liens incident to construction on or maintenance of Property; or Liens incident to construction on or maintenance of Property now or hereafter filed of record for which adequate reserves have been set aside (or deposits made pursuant to applicable Law) and which are not overdue for a period of more than 30 days or which are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that, by reason of nonpayment of the obligations secured by such Liens, no such Property is subject to a material impending risk of loss or forfeiture;
(b) Liens for taxes and assessments on Property which are not yet past due; or Liens for taxes and assessments on Property for which adequate reserves have been set aside and are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that, by reason of nonpayment of the obligations secured by such Liens, no such Property is subject to a material impending risk of loss or forfeiture;
(c) defects and irregularities in title to any Property which would not reasonably be expected to result in a Material Adverse Effect;
(d) easements, exceptions, reservations, or other agreements for the purpose of pipelines, conduits, cables, wire communication lines, power lines and substations, streets, trails, walkways, drainage, irrigation, water, and sewerage purposes, dikes, canals, ditches, the removal of oil, gas, coal, or other minerals, and other like purposes affecting Property in the ordinary course;
(e) easements, exceptions, reservations, or other agreements for the purpose of facilitating the joint or common use of Property in or adjacent to a shopping center, business or office park or similar project affecting Property in the ordinary conduct of the business of the applicable Person;
(f) rights reserved to or vested in any Governmental Authority to control or regulate, or obligations or duties to any Governmental Authority with respect to, the use of any Property;
(g) rights reserved to or vested in any Governmental Authority to control or regulate, or obligations or duties to any Governmental Authority with respect to, any right, power, franchise, grant, license, or permit;
(h) present or future zoning laws and ordinances or other laws and ordinances restricting the occupancy, use, or enjoyment of Property in the ordinary conduct of the business of the applicable Person;
(i) statutory Liens, other than those described in clauses (a) or (b) above, arising in the ordinary course of business (but not in connection with the incurrence of any Indebtedness) with respect to obligations which are not delinquent or are being contested in good faith, provided that, if delinquent, adequate reserves have been set aside with respect thereto and, by reason of nonpayment, no Property is subject to a material impending risk of loss or forfeiture;
(j) covenants, conditions, and restrictions affecting the use of Property which may not give rise to any Lien against such Property in the ordinary conduct of the business of the applicable Person;
(k) rights of tenants as tenants only under leases and rental agreements covering Property entered into in the ordinary course of business of the Person owning such Property;
(l) Liens consisting of pledges or deposits to secure obligations under workers' compensation laws or similar legislation, including Liens of judgments thereunder which are not currently dischargeable;
(m) Liens consisting of pledges or deposits of Property to secure performance in connection with operating leases made in the ordinary course of business, provided the aggregate value of all such pledges and deposits in connection with any such lease does not at any time exceed 20% of the annual fixed rentals payable under such lease;
(n) Liens consisting of deposits of Property to secure bids made with respect to, or performance of, contracts (including Liens securing surety or performance bonds);
(o) Liens consisting of any right of offset, or statutory bankers' lien, on bank deposit accounts maintained in the ordinary course of business so long as such bank deposit accounts are not established or maintained for the purpose of providing such right of offset or bankers' lien;
(p) Liens consisting of deposits of Property to secure statutory obligations of Borrowers;
(q) Liens created by or resulting from any litigation or legal proceeding in the ordinary course of business which is currently being contested in good faith by appropriate proceedings, provided that, adequate reserves have been set aside and no material Property is subject to a material impending risk of loss or forfeiture;
(r) other nonconsensual Liens incurred in the ordinary course of business but not in connection with the incurrence of any Indebtedness, which do not individually involve amounts in excess of $5,000,000 or in the aggregate involve amounts in excess of $10,000,000; and
(s) Liens securing Secured Debt not prohibited by this Agreement.
Make any Investments, except:
(a) Investments held by any Borrower or any of its Subsidiaries in the form of Cash, Cash Equivalents or short-term marketable securities;
(b) advances to officers, directors and employees of any Borrower or any of its Subsidiaries for travel, entertainment, relocation and similar ordinary business purposes;
(c) Investments of the Borrowers in any Subsidiary or any other Borrower, Investments of any Subsidiary in the Borrowers or in another Subsidiary and Investments in any Person that, as a result of or in connection with such Investment, becomes or will become a Subsidiary of a Borrower;
(d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;
(e) Investments in Real Property of the Borrowers and their Subsidiaries consisting of improved real estate property used principally for office, office/laboratory, research, or manufacturing/warehouse purposes (and appurtenant amenities);
(f) Investments in Real Property of the Borrowers and their Subsidiaries consisting of (i) Development Investments (the amount of such Investment shall be an amount equal to the aggregate costs incurred in connection therewith), (ii) undeveloped land without improvements, or (iii) any other Real Property, other than an improved real estate property used principally for office, office/laboratory, research, or manufacturing/warehouse purposes (and appurtenant amenities); provided, that, as of the most recently ended fiscal quarter, the aggregate book value of such Investments may not exceed 35% of the Adjusted Tangible Assets. To determine such book value of Investments described in this Section 7.02(f) which are not owned 100%, directly or indirectly, by Parent or any of its Subsidiaries, the book value of such Investment shall be adjusted by multiplying the same by the Parent's or such Subsidiaries' interest therein during the fiscal quarter of the Parent ending as of the date of determination of such book value;
(g) other Investments, other than Investments in Real Property not otherwise permitted by Section 7.02; provided that as of the most recently ended fiscal quarter, the aggregate book value of such Investments pursuant to this Section 7.02(g) shall not exceed 15% of the Adjusted Tangible Assets. To determine such book value of Investments described in this Section 7.02(g) which are not owned 100%, directly or indirectly, by Parent or any of its Subsidiaries, the book value of such Investment shall be adjusted by multiplying the same by the Parent's or such Subsidiaries' interest therein during the fiscal quarter of the Parent ending as of the date of determination of such book value; and
(h) Guarantees by any Borrower or any Subsidiary in respect of Indebtedness not prohibited hereunder.
Merge, dissolve, liquidate or consolidate with or into another Person, except that, so long as no Default or Event of Default exists or would result therefrom, (a) a Borrower may merge or consolidate with or into one or more other Borrowers; provided that if the Parent or Operating Partnership is a party to such merger or consolidation it shall be the surviving entity, (b) any Subsidiary may merge or consolidate with or into a Borrower or another Subsidiary or may dissolve or liquidate, or (c) any other merger, dissolution, liquidation or consolidation that does not result in a Change of Control shall be permitted.
With respect to any Borrower or any Subsidiary thereof, make any Restricted Payment except (A) so long as no Event of Default shall have occurred and be continuing or would result therefrom except unless expressly permitted or required by this Agreement, such Restricted Payment shall be permitted (i) in an amount not to exceed the amount which, when added to the amount of all other Restricted Payments paid in the same fiscal quarter and the preceding three fiscal quarters, would exceed 95% of Funds From Operations of Parent and its Subsidiaries for the four consecutive fiscal quarters ending prior to the fiscal quarter in which such Restricted Payment is paid, (ii) to the extent it relates to the retirement of Preferred Equity in an amount not to exceed any Exchange Proceeds so used notwithstanding the limitations set forth in clause (i), and (iii) with the proceeds of sales of property notwithstanding the limitation set forth in clause (i), and (B) in all events, Parent shall be permitted to pay the minimum Restricted Payment required under the Code to maintain and preserve Parent's status as a real estate investment trust under the Code, as evidenced by a certification of a Responsible Officer of Parent containing calculations in reasonable detail satisfactory to the Administrative Agent, if such Restricted Payment is greater than the amount set forth in clause (A) above; provided however, that if an Event of Default has occurred and is continuing, Borrowers and their Subsidiaries may only make the Restricted Payments in the minimum amount necessary to comply with Section 857(a) of the Code. Notwithstanding the foregoing, any Subsidiary of the Parent may (a) make Restricted Payments payable to the Parent or any Borrower (directly or indirectly through Subsidiaries) and (b) declare and make Restricted Payments to its equity holders generally so long as the Parent or such Subsidiary that owns the equity interest or interests in the Subsidiary making such Restricted Payments receives at least its proportionate share thereof (based upon its relative equity interests in the Subsidiary making such Restricted Payment); provided that in the case of clause (b) above, if an Event of Default has occurred and is continuing, such Subsidiaries may only make Restricted Payments in the minimum amount necessary to comply with Section 857(a) of the Code.
7.05 Change in Nature of Business.
Make any material change in the principal nature of the business of Borrowers and their Subsidiaries, such business being the acquisition, ownership, development and renovation of buildings for use as office or, with respect to the life science industry only, office/laboratory, research or manufacturing/warehouse properties.
7.06 Transactions with Affiliates.
Enter into any transaction of any kind with any Affiliate of Borrowers or their respective Subsidiaries other than (a) salary, bonus, employee stock option, relocation assistance and other compensation arrangements with directors or officers in the ordinary course of business, (b) transactions that are fully disclosed to the board of directors of Parent and expressly authorized by a resolution of the board of directors of Parent which is approved by a majority of the directors not having an interest in the transaction, (c) transactions permitted by this Agreement, (d) transactions between or among Borrowers and Subsidiaries and (e) transactions on overall terms at least as favorable to Borrowers or their Subsidiaries as would be the case in an arm's length transaction between unrelated parties.
Enter into any agreement, instrument or transaction which has or may have the effect of prohibiting or limiting any Borrower's ability to pledge to Administrative Agent any Qualified Asset Pool Property owned by a Borrower (other than Qualified Encumbered Asset Properties) included in the Unencumbered Asset Pool (the "Available Properties"). The Borrowers, and their respective Subsidiaries, shall take such actions as are necessary to preserve the right and ability of the Borrowers to pledge to Administrative Agent for the benefit of Lenders the Available Properties without any such pledge after the date hereof causing or permitting the acceleration (after the giving of notice or the passage of time, or otherwise) of any other Indebtedness of Borrowers or any of their respective Subsidiaries. The Borrowers shall, upon demand, provide to the Administrative Agent such evidence as the Administrative Agent may reasonably require to evidence compliance with this Section 7.07, which evidence shall include, without limitation, copies of any agreements or instruments which would in any way restrict or limit a Borrower's ability to pledge to Administrative Agent Available Properties as security for the Obligations, or which provide for the occurrence of a default (after the giving of notice or the passage of time, or otherwise) if Available Properties are pledged to Administrative Agent in the future as security for the Obligations.
Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.
(a) Permit the Fixed Charge Coverage Ratio, as of the last day of any fiscal quarter, to be less than 1.40:1.00;
(b) Permit the Secured Debt Ratio, as of the last day of any fiscal quarter, to exceed 0.55:1.00;
(c) Permit the Leverage Ratio, as of the last day of any fiscal quarter, to exceed 0.65:1.00;
(d) Permit Minimum Book Value, as of the last day of any fiscal quarter, to be less than the sum of (i) $800,000,000, plus (ii) 85% of the net issuance proceeds of all Equity Offerings from and after the Closing Date (excluding the amount of Exchange Proceeds); and
(e) Permit the Interest Coverage Ratio, as of the last day of any fiscal quarter, to be less than 1.75 to 1.0.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Any of the following shall constitute an "Event of Default":
(a) Non-Payment. The Borrowers fail to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or (ii) within five Business Days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or any other amount payable hereunder or under any other Loan Document; or
(b) Specific Covenants. The Borrowers fail to perform or observe any term, covenant or agreement contained in any of Article VII; or
(c) Other Defaults. Any Borrower or Subsidiary fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 Business Days following written notice by Administrative Agent or, if such Default is not reasonably susceptible of cure within such period, within such longer period as is reasonably necessary to effect a cure so long as such Borrower or such Subsidiary continues to diligently pursue cure of such Default but not in any event in excess of 60 Business Days; or
(d) Representations and Warranties. Any representation or warranty of Borrowers or any of their respective Subsidiaries made in any Loan Document, or in any certificate or other writing delivered by Borrowers or any of their respective Subsidiaries pursuant to any Loan Document, proves to have been incorrect when made or reaffirmed in any respect that is materially adverse to the interests of the Lenders; or
(e) Cross-Default. Any Borrower or any of their respective Subsidiaries (i) fails to pay (A) the principal, or any principal installment, of (1) any Indebtedness (other than Non-Recourse Debt) of $50,000,000 or more or (2) any Non- Recourse Debt individually or in the aggregate of $150,000,000 or more, (B) any guaranty of Indebtedness (other than Non-Recourse Debt) of $50,000,000 or more or (C) any guaranty of Non-Recourse Debt individually or in the aggregate of $150,000,000 or more, on its part to be paid, in each case when due (or within any stated grace period), whether at the stated maturity, upon acceleration, by reason of required prepayment or otherwise or (ii) fails to perform or observe any other term, covenant or agreement on its part to be performed or observed, or suffers any event of default to occur, in connection with any Indebtedness (other than Non-Recourse Debt) of $50,000,000 or more, or of any guaranty of Indebtedness (other than Non-Recourse Debt) of $50,000,000 or more, if as a result of such failure or sufferance any holder or holders thereof (or an agent or trustee on its or their behalf) has the right to declare such Indebtedness due before the date on which it otherwise would become due or the right to require Borrowers or any such Subsidiary to redeem or purchase, or offer to redeem or purchase, all or any portion of such Indebtedness (provided, that for the purpose of this clause (e), the principal amount of Indebtedness consisting of a Swap Contract shall be the amount which is then payable by the counterparty to close out the Swap Contract); or
(f) Insolvency Proceedings, Etc. Any Borrower or any Subsidiary institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or
(g) Inability to Pay Debts; Attachment. (i) Any Borrower or any Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or
(h) Judgments. There is entered against any Borrower or any Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount exceeding $50,000,000 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or
(i) ERISA. An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrowers or their Subsidiaries under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of 5% of the combined total assets of such Borrowers or Subsidiaries as of the most recent fiscal quarter, or (ii) the Borrowers or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of 5% of the combined total assets of such Borrowers or Subsidiaries as of the most recent fiscal quarter; or
(j) Invalidity of Loan Documents. Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or relating to the satisfaction in full of all the Obligations (or cash collateralization in a manner reasonably satisfactory to the L/C Issuer with respect to outstanding Letters of Credit), ceases to be in full force and effect; or any Borrower contests in any manner the validity or enforceability of any provision of any Loan Document; or any Borrower denies that it has any liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or
(k) Change of Control. There occurs any Change of Control.
8.02 Remedies Upon Event of Default.
If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, (i) the Required Revolving Lenders with respect to Sections 8.02(a) and (c) below, and (ii) the Required Lenders with respect to Sections 8.02(b) and (d) below, take any or all of the following actions:
(a) declare the commitment of each Revolving Lender to make Revolving Loans, the Swing Line Lender to make Swing Line Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers;
(c) require that the Borrowers Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and
(d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents;
provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to any one or more of the Borrowers under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to or for the account of such Borrower shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrowers to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.
After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the 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 the Administrative Agent and amounts payable under Article III) payable to the 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 and interest) payable to the Lenders and the L/C Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer (including fees and time charges for attorneys who may be employees of any Lender or the L/C Issuer) and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;
Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans, L/C Borrowings and other Obligations, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Third payable to them;
Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, L/C Borrowings and Obligations to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Fourth held by them; and
Last, the balance, if any, after all of the Obligations have been paid in full, to the Borrowers or as otherwise required by Law.
Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fourth 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 IX
ADMINISTRATIVE AGENT
9.01 Appointment and Authority.
Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents 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 or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and neither the Borrowers nor any other Borrower shall have rights as a third party beneficiary of any of such provisions.
The Person 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 the term "Lender" or "Lenders" shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrowers or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrowers or any of their Affiliates that is communicated to or obtained by the Person serving as the 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 (i) with the consent or at the request of the Required Lenders or Required Revolving Lenders, as the case may be (or such other number, percentage or class of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) 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 notice describing such Default is given to the Administrative Agent by the Borrowers, a Lender or the L/C Issuer.
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 or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document 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.
9.04 Reliance by Administrative Agent.
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 (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated 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 have been 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 of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit. The 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 accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document 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 of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article 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.
9.06 Successor Administrative Agent.
The Administrative Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Borrowers. The Required Lenders may remove the Administrative Agent from its capacity as Administrative Agent in the event of the Administrative Agent's willful misconduct or gross negligence. Upon receipt of any such notice of resignation or the removal of the Administrative Agent as Administrative Agent hereunder, the Required Lenders shall have the right (with the consent of the Borrowers provided there does not exist an Event of Default at such time), to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders (with the consent of the Borrowers provided there does not exist an Event of Default at such time) and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation or the Required Lenders remove the Administrative Agent hereunder, then the retiring Administrative Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrowers and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor's appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrowers to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the retiring Administrative Agent's resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 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 the retiring Administrative Agent was acting as Administrative Agent.
Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also constitute its resignation as L/C Issuer and Swing Line Lender. Upon the acceptance of a successor's appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer and Swing Line Lender, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C 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 arrangement satisfactory to the retiring L/C Issuer to effectively assume the obligations of the retiring L/C Issuer with respect to such Letters of Credit.
9.07 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender, the Swing Line Lender and the L/C 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 Agreement. Each Lender, the Swing Line Lender and the L/C 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 Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Anything herein to the contrary notwithstanding, none of the Co-Documentation Agents, Co-Syndication Agents, or Arrangers listed on the cover page hereof or any additional titled agents which may be added thereto from time to time shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the L/C Issuer hereunder.
9.09 Administrative Agent May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Borrower, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrowers) 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, L/C 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 L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, indemnification, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.03(i) and (j), 2.09 and 10.04) 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; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, indemnification, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 10.04.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
The Lenders, the Swing Line Lender and the L/C Issuer irrevocably authorize the Administrative Agent, at its option and in its discretion and the Administrative Agent hereby agrees:
(a) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (unless cash collateralized or supported by a letter of credit of manner satisfactory to the L/C Issuer), (ii) that is sold or to be sold as part of or in connection with any sale not prohibited hereunder or under any other Loan Document, or (iii) subject to Section 10.01, if approved, authorized or ratified in writing by the Required Lenders; and
(b) to release a Borrower from liability for the Obligations in accordance with Section 10.20.
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent's authority to release or subordinate its interest in particular types or items of property.
9.11 No Obligations of Borrowers.
Nothing contained in this Article IX shall be deemed to impose upon Borrowers any obligation in respect of the due and punctual performance by the Administrative Agent of its obligations to the Lenders under any provision of this Agreement, and Borrowers shall have no liability to the Administrative Agent or any of the Lenders in respect of any failure by the Administrative Agent or any Lender to perform any of its obligations to the Administrative Agent or the Lenders under this Agreement. Without limiting the generality of the foregoing, where any provision of this Agreement relating to the payment of any amounts due and owing under the Loan Documents provides that such payments shall be made by Borrowers to the Administrative Agent for the account of the Lenders, Borrowers' obligations to the Lenders in respect of such payments shall be deemed to be satisfied upon the making of such payments to the Administrative Agent in the manner provided by this Agreement.
No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrowers therefrom, shall be effective unless in writing signed by the Required Lenders (or the Administrative Agent with the written concurrence of the Required Lenders) and the Borrowers, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:
(a) waive any condition set forth in Section 4.01(a) without the written consent of each Lender;
(b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender (subject to Sections 2.14 and 2.15);
(c) postpone any date fixed by this Agreement or any other Loan Document for any payment of principal or payment of interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby (subject to Section 2.14);
(d) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary (i) to amend the definition of "Default Rate" or to waive any obligation of the Borrowers to pay interest at the Default Rate or Letter of Credit Fees (subject to clause (i) of the second proviso to this Section 10.01) at the Default Rate or (ii) to amend any financial covenant hereunder (or any defined term used therein);
(e) change Section 2.13 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;
(f) change any provision of this Section or the definition of "Required Lenders" or "Required Revolving Lenders" or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;
(g) release the Parent or the Operating Partnership, as a Borrower hereunder or substantially all of the other Borrowers without the written consent of each Lender; or
(h) impose any greater restriction on the ability of any Lender to assign any of its rights or obligations hereunder without the written consent of the Required Lenders and Lenders having more than 66-2/3% of the Total Outstandings then in effect within each of the following classes of Commitments, Loans and/or other Credit Extensions: (i) the class consisting of the Revolving Commitments, and (ii) the class consisting of the Term Loan Commitments;
and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; (iv) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto; and (v) so long as the Revolving Commitments remain outstanding, no amendment, waiver or consent which has the effect of enabling the Borrowers to satisfy any condition to a Committed Borrowing contained in Section 4.02 hereof, which, but for such amendment, waiver or consent would not be satisfied, shall be effective to require the Revolving Lenders to make any additional Revolving Loan unless and until the Required Revolving Lenders shall consent thereto. Notwithstanding anything herein to the contrary, the Administrative Agent may with the approval of the Majority Lenders temporarily waive compliance by Borrowers with any condition, obligation or covenant contained in this Agreement or the Loan Documents (other than a failure to make a payment of any principal, interest or fee when due) for a period not to exceed ninety (90) days, provided, however, that any such condition, obligation or covenant so waived may not be consecutively waived after the expiration of such ninety (90) day period. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender (subject to Section 2.14 and 2.15). Notwithstanding anything to the contrary contained herein, the Administrative Agent may, with the approval of the Required Lenders and at the Borrowers' request, increase the maximum aggregate amount of the increase in the Aggregate Commitments on the terms and conditions set forth in Section 2.15(a) or 2.15(b).
10.02 Notices; Effectiveness; Electronic Communication.
(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), 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 telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
(i) if to the Borrowers, the Administrative Agent, the L/C Issuer or the Swing Line Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02 and
(ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been received upon the sender's receipt of an acknowledgement from the intended recipient (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).
(b) Electronic Communications. Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article 11 if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrowers may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested" function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(c) The Platform. THE PLATFORM IS PROVIDED "AS IS" AND "AS AVAILABLE." THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING 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 ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the "Agent Parties") have any liability to the Borrowers, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of any Borrower's or the Administrative Agent's transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to any Borrower, any Lender, the L/C Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
(d) Change of Address, Etc. Each of the Borrowers, the Administrative Agent, the L/C Issuer and the Swing Line Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrowers, the Administrative Agent, the L/C Issuer and the Swing Line Lender. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.
(e) Reliance by Administrative Agent, L/C Issuer and Lenders. The Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of the Borrowers even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof as understood by the recipient, varied from any confirmation thereof. The Borrowers shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrowers except to the extent resulting from the gross negligence or willful misconduct of Administrative Agent, the L/C Issuer, any Lender or any Related Party. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.
10.03 No Waiver; Cumulative Remedies.
No failure by any Lender, the L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
10.04 Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses. The Borrowers shall pay (i) all reasonable out of pocket expenses incurred by the Administrative Agent 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, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out of pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out of pocket expenses incurred by the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the L/C Issuer), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
(b) Indemnification by the Borrowers. The Borrowers shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, 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 any Indemnitee or asserted against any Indemnitee by any third party or by the Borrowers or any other Borrower arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C 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 the Borrowers or any of their Subsidiaries, or any Environmental Liability related in any way to the Borrowers or any of their 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, whether brought by a third party or by the Borrowers or any other Borrower, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrowers or any other Borrower against an Indemnitee for breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document, if the Borrowers or such Borrower has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.
(c) Reimbursement by Lenders. To the extent that the Borrowers for any reason fail to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the L/C Issuer or any Related Party of any of the foregoing, and without limiting the obligation of the Borrowers to do so, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer or such Related Party, as the case may be, such Lender's Applicable Percentage (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 (or any such sub-agent) or the L/C Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or L/C Issuer in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d).
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrowers shall not assert, and hereby waive, 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, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No 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 by it 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 except to the extent resulting from the gross negligence or willful misconduct of any Indemnitee.
(e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefore (accompanied by reasonable back-up documentation).
(f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent and the L/C Issuer, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.
To the extent that any payment by or on behalf of the Borrowers is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the L/C Issuer 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, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
(a) Successors and Assigns Generally. 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 none of the Borrowers may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto 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, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement
(b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i) Minimum Amounts.
(A) in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and
(B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the 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 or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrowers otherwise consent (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single assignee (or to an assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;
(ii) Proportionate Amounts. 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, except that this clause (ii) shall not apply to rights in respect of the Swing Line Lender's rights and obligations in respect of Swing Line Loans;
(iii) Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:
(A) the consent of the Borrowers (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;
(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender;
(C) the consent of the L/C Issuer (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding); and
(D) the consent of the Swing Line Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment (other than any assignment of a Term Loan or an assignment to a Person that is a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender).
(iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
(v) No Assignment to Borrowers. No such assignment shall be made to the Borrowers or any of the Borrowers' Affiliates or Subsidiaries.
(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural person.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement 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 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrowers (at their expense) shall execute and deliver a Note, as applicable, to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection 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 subsection (d) of this Section.
(c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at the Administrative Agent's Office 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 Commitments of, and principal amounts of, and interest owing on, the Loans and L/C 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 shall 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 each of the Borrowers and any Lender at any reasonable time and from time to time upon reasonable prior notice.
(d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrowers or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrowers or any of the Borrowers' Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender's participations in L/C Obligations and/or Swing Line 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 and (iii) the Borrowers, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement.
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, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender.
(e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 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 Borrowers' 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 3.01 unless the Borrowers are notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 3.01(e) as though it were a Lender.
(f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(g) Electronic Execution of Assignments. The words "execution," "signed," "signature," and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York Uniform Electronic Transactions Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
(h) Special Purpose Funding Vehicles. Notwithstanding anything to the contrary contained herein, any Revolving Lender (a "Granting Lender") may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrowers (an "SPC") the option to provide all or any part of any Committed Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Committed Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Committed Loan, the Granting Lender shall be obligated to make such Committed Loan pursuant to the terms hereof or, if it fails to do so, to make such payment to the Administrative Agent as is required under Section 2.12(b)(ii). Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrowers under this Agreement (including its obligations under Section 3.01 or 3.04), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making of a Committed Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Committed Loan were made by such Granting Lender. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any State thereof Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrowers and the Administrative Agent and with the payment of a processing fee of $3,500, assign all or any portion of its right to receive payment with respect to any Committed
Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Committed Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.
(i) Resignation as L/C Issuer or Swing Line Lender after Assignment. Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to subsection (b) above, Bank of America may, (i) upon 30 days' notice to the Borrowers and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days' notice to the Borrowers, resign as Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrowers shall be entitled to appoint from among the Revolving Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Borrowers to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of America resigns as L/C Issuer, it shall retain all the rights and obligations of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C 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 2.03(c)). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c). Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C 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 Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.
10.07 Treatment of Certain Information; Confidentiality.
(a) Confidentiality. Each Lender and the Administrative Agent (each, a "Lender Party") hereby agrees for itself for Swing Line Lender and for L/C Issuer only that, except as specifically set forth herein, (i) such Lender Party shall not participate in or generate any press release or other release of information to the general public relating to the closing of the Loan without the prior written consent of the Borrowers, (ii) such Lender Party shall hold the Confidential Information in strict confidence in accordance with such Lender Party's customary procedures to prevent the misuse or disclosure of confidential information of this nature and in accordance with safe and sound banking practices, (iii) such Lender Party shall use the Confidential Information solely for the purposes of underwriting the Loan or acquiring an interest therein, carrying out such Lender Party's rights or obligations under this Agreement, in connection with the syndication of the Loan, the enforcement of the Loan Documents, or other internal examination, supervision or oversight of the transactions contemplated hereby as reasonably determined by such Lender Party, or as otherwise permitted by the terms of this Section 10.07 (collectively, "Permitted Purposes"), and (iv) not disclose the Confidential Information to any party, except as expressly authorized in this Agreement or with prior written consent of Borrowers. Each Lender Party shall promptly notify Borrowers in the event that it becomes aware of any loss or unauthorized disclosure of any Confidential Information.
Each Lender Party shall not have any obligations under this Agreement with respect to a specific portion of the Confidential Information if such Lender Party can demonstrate that such Confidential Information (i) was publicly available at the time it was disclosed to such Lender Party, (ii) became publicly available subsequent to the time it was disclosed to such Lender Party, (iii) was in or comes into a Lender Party's possession from a source not known to such Lender Party (after reasonable inquiry) to be in breach of an obligation of confidentiality owed to Borrowers in making such disclosure to such Lender Party, (iv) was in or comes into Lender Party's possession free of any obligation of confidence owed to the Borrowers at the time it was disclosed to them, or (v) was developed by the employees or agents of the Lender Party without the use of the Confidential Information.
(b) Disclosures. Any Lender Party or its legal counsel may disclose the Confidential Information (i) to Borrowers, other Lenders, the Administrative Agent or any of their respective legal counsel, (ii) to its auditors in connection with bank audits or regulatory officials having jurisdiction over such Lender Party, (iii) to its legal counsel who need to know the Confidential Information for the purposes of representing or advising the Lender Parties, (iv) with prior written notice to the Chief Executive Officer of the Parent, to its consultants, agents and advisors retained in good faith by such Lender Party with a need to know such information in connection with a Permitted Purpose, (v) as required by Law or legal process (subject to the terms below), or in connection with any legal proceeding to which that Lender Party and any of Borrowers are adverse parties, (vi) to another potential Lender or participant in connection with a disposition or proposed disposition to that Person of all or part of that Lender Party's interests hereunder or a participation interest in its Notes, and (vii) to its directors, officers, employees and affiliates that control, are controlled by, or are under common control with such Lender Party or its parent or otherwise within the corporate umbrella of such Lender Party who need to know the confidential information for purposes of underwriting the Loan or becoming a party to this Agreement, the syndication of the Loan, the administration, interpretation, performance or exercise of rights under the Loan Documents, the enforcement of the Loan Documents, or other internal supervision, examination or oversight of the transactions contemplated hereby as reasonably determined by such Lender Party, provided that any Person to whom any of the Confidential Information is disclosed is informed by such Lender Party of the strictly confidential nature of the Confidential Information, and such Persons described in clauses (b)(iv), (vi) and (vii) shall agree in writing to be bound by confidentiality restrictions at least as restrictive as those contained herein. Notwithstanding the foregoing, a Lender Party may disclose Confidential Information to the extent such Lender Party is requested or required by any Law or any order of any court, governmental, regulatory or self-regulatory body or other legal process to make any disclosure of or about any of the Confidential Information. In such event (except with respect to banking regulators or auditors), such Lender Party shall, if permitted by law, promptly notify Borrowers in writing so that Borrowers may seek an appropriate protective order or waive compliance with the provisions of this Agreement (provided that if a protective order or the receipt of a waiver hereunder has not been obtained, or if prior notice is not possible, and a Lender Party is, in the opinion of its counsel, compelled to disclose Confidential Information, such Lender Party may disclose that portion of the Confidential Information which its counsel advises it that such Lender Party is compelled to disclose, and provided further that in any event, such Lender Party will not oppose action by Borrowers to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information.) Each Lender Party shall be liable (but only to the extent it is finally determined to have breached the provisions of this Section 10.07(b)) for any actions by such Lender Party (but not any other Person) which are not in accordance with the provisions of this Section 10.07(b).
(c) No Rights in Confidential Information. The Administrative Agent and each Lender recognizes and agrees that nothing contained in this Section 10.07 shall be construed as granting any property rights, by license or otherwise, to any Confidential Information (other than the Agreement or any amendments thereto or any related agreements), or to any invention or any patent, copyright, trademark, or other intellectual property right that has issued or that may issue, based on such Confidential Information (other than the Agreement or any amendments thereto or any related agreements). No Lender Party shall make, have made, use or sell for any purpose any product or other item using, incorporating or derived from any such Confidential Information; provided that the foregoing shall not limit or restrict in any way the creation, use or sale of banking or related services by any Lender Party.
(d) Survival. All Confidential Information provided by or on behalf of Borrowers during the term of this Agreement or any predecessor agreements shall remain confidential indefinitely and shall continue to receive that level of confidential treatment customarily provided by commercial banks dealing with confidential information of their borrower customers, subject, however, to the specific exceptions to confidential treatment provided herein. For a period of one year after the Termination Date, the affected Lender Party shall continue to make reasonable inquiry of any third party providing Confidential Information as to whether such third party is subject to an obligation of confidentiality owed to the Borrowers or their Subsidiaries and if such Lender Party obtains knowledge that such third party is violating a confidentiality agreement with Borrowers, such Lender Party shall treat the Confidential Information received from such third party as strictly confidential in accordance with the provisions of this Section 10.07. For purposes of this Section 10.07(d), the Termination Date shall mean the earlier of the termination of this Agreement or, with respect to a specific Lender Party, the date such Person no longer holds an interest in the Loan.
(e) Injunctive Relief. Each Lender Party hereby agrees that breach of this Section 10.07 will cause Borrowers irreparable damage for which recovery of damages would be inadequate, and that Borrowers shall therefore be entitled to obtain timely injunctive relief under this Agreement, as well as such further relief as may be granted by a court of competent jurisdiction.
(f) No Fiduciary Duty. Nothing in this Section shall be construed to create or give rise to any fiduciary duty on the part of the Administrative Agent or the Lenders to Borrowers.
(g) Separate Action. Borrowers covenant and agree not to, and hereby expressly waive any right to, raise as a defense, affirmative defense, set off, recoupment or otherwise against any Lender Party any claim arising from or relating to an alleged breach of this Section 10.07 in any action, claim or proceeding relating to a breach of the Loan Documents by Borrowers or other action to enforce or recover the Obligations, and covenant and agree that any claim against a Lender Party arising from or relating to an alleged breach of this Section 10.07 by a Lender Party shall only be asserted as an affirmative claim in a separate action against the applicable Lender Party.
If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrowers against any and all of the obligations of the Borrowers now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer, irrespective of whether or not such Lender or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrowers may be contingent or unmatured or are owed to a branch or office of such Lender or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have. Each Lender and the L/C Issuer agrees to notify the Borrowers and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.
10.09 Interest Rate Limitation.
Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the "Maximum Rate"). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrowers. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
10.10 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 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 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 shall be effective as delivery of a manually executed counterpart of this Agreement.
10.11 Survival of Representations and Warranties.
All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
If any Lender requests compensation under Section 3.04, or if the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, if any Lender is a Defaulting Lender, or if any other circumstance exists hereunder that gives the Borrowers the right to replace a Lender as a party hereto, then the Borrowers may, at their sole expense and effort, 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, and consents required by, Section 10.06 except as provided in this Section 10.13), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a) the Borrowers shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b);
(b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Sections 3.04, 3.05 and 10.04) 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);
(c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and
(d) such assignment does not conflict with applicable Laws.
A Lender shall not be required to make any such assignment or 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.
10.14 Governing Law; Jurisdiction; Etc.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) SUBMISSION TO JURISDICTION. THE BORROWERS IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF 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 IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE 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 OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER 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) WAIVER OF VENUE. THE BORROWERS IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY 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 APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
EACH PARTY HERETO HEREBY IRREVOCABLY 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 OR 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 PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON 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 AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrowers in accordance with the Act. The Borrowers shall, following a request by the Administrative Agent or any Lender, promptly provide all documentation and other information that the Administrative Agent or such Lender reasonably requests in order to comply with its ongoing obligations under applicable "know your customer" and anti-money laundering rules and regulations, including the USA Patriot Act."
Each of the Borrowers represents, warrants, covenants and agrees as follows:
(a) Defenses. The obligations pursuant to the Loan Documents shall not be affected by any of the following: (i) the bankruptcy, disability, dissolution, incompetence, insolvency, liquidation, or reorganization of any Borrower; or (ii) the discharge, modification of the terms of, reduction in the amount of, or stay of enforcement of any or all liens and encumbrances or any or all obligations pursuant to the Loan Documents in any bankruptcy, insolvency, reorganization, or other legal proceeding or by law, ordinance, regulation, or rule (federal, state, or local).
(b) Rights of Administrative Agent. Subject to receiving any required consents of the Required Lenders or all of the Lenders, as may be required pursuant to applicable provisions of this Agreement, the Administrative Agent on behalf of the Lenders, may do the following acts or omissions from time to time without notice to or consent of any Borrower and without receiving payment or other value, nor shall the following acts or omissions affect, delay or impair any of the obligations pursuant to the Loan Documents or any or all liens and encumbrances: (i) the Administrative Agent may obtain collateral or additional collateral; (ii) the Administrative Agent may substitute for any or all collateral regardless of whether the same type or greater or lesser value; (iii) the Administrative Agent may release any or all collateral; (iv) the Administrative Agent may compromise, delay enforcement, fail to enforce, release, settle or waive any rights or remedies of the Administrative Agent as to any or all collateral; (v) the Administrative Agent may sell or otherwise dispose of any collateral in such manner or order as the Administrative Agent determines in accordance with the Loan Documents; (vi) the Administrative Agent may fail to perfect, fail to protect the priority of, and fail to ensure any or all liens or encumbrances; (vii) the Administrative Agent may fail to inspect, insure, maintain, preserve or protect any or all collateral; (viii) the Administrative Agent may obtain additional obligors for any or all obligations pursuant to the Loan Documents; (ix) the Administrative Agent may increase or decrease any or all obligations or otherwise change terms of any or all obligations in accordance with the Loan Documents; (x) the Administrative Agent may release any Borrower; (xi) Administrative Agent may compromise, delay enforcement, fail to enforce, release, settle or waive any obligations of any Borrower with the agreement of that Borrower; (xii) the Administrative Agent may make advances, or grant other financial accommodations to any Borrower; (xiii) the Administrative Agent may fail to file or pursue a claim in any bankruptcy, insolvency, reorganization or other proceeding as to any or all liens and encumbrances or any or all obligations; (xiv) the Administrative Agent may amend, modify, extend, renew, restate, supplement or terminate in whole or in part the obligation of any Borrower with the agreement of that Borrower; (xv) the Administrative Agent may take or fail to take any other action with respect to any Loan Document or any Borrower; and (xvi) the Administrative Agent may do any other acts or make any other omissions that result in the extinguishment of the obligation of any Borrower.
(c) Suretyship Waivers. Each Borrower waives any and all rights and benefits under any statutes or rules now or hereafter in effect that purport to confer specific rights upon or make specific defenses or procedures available to each Borrower.
(d) Information. Each Borrower represents and warrants to the Administrative Agent and Lenders that such Borrower is currently informed of the financial condition of the Borrowers and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Each Borrower further represents and warrants to the Administrative Agent and Lenders that such Borrower has read and understands the terms and conditions of the Loan Documents. Each Borrower hereby covenants that such Borrower will continue to keep informed of the Borrowers' financial condition, the financial condition of other guarantors, if any, and of all other circumstances which bear upon the risk of nonpayment or nonperformance of the Obligations. Notwithstanding anything herein which may be construed to the contrary, the Administrative Agent shall have no obligation to provide to any Borrower any information concerning the performance of any other Borrower, the obligations pursuant to the Loan Documents, or the ability of any other Borrower to perform the obligations pursuant to the Loan Documents or any other matter, regardless of what information Administrative Agent may from time to time have.
(e) Waivers. Each Borrower waives, until payment in full of the Obligations, any and all present and future claims, remedies and rights against any other Borrower, any collateral and any other property, interest in property or rights to property of any other Borrower (A) arising from any performance hereunder, (B) arising from any application of any collateral, or any other property, interest in property or rights to property of any Borrower, or (C) otherwise arising in respect of the Loan Documents, regardless of whether such claims, remedies and rights arise under any present or future agreement, document or instrument or are provided by any law, ordinance, regulation or rule (federal, state or local) (including, without limitation, any and all rights of contribution, exoneration, indemnity, reimbursement, and subrogation and any and all rights to participate in the rights and remedies of Lenders against any Borrower).
(f) Joint and Several Liability of Borrowers.
(i) Each of the Borrowers is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Administrative Agent and the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations.
(ii) Each of the Borrowers, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this Section 10.17), it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of each Borrower without preferences or distinction among them.
(iii) If and to the extent that any Borrower shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Borrowers will make such payment with respect to, or perform, such Obligation.
(iv) The Obligations of each Borrower under the provisions of this Section 10.17 constitute the absolute and unconditional, full recourse Obligations of each Borrower enforceable against each such Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever.
(v) Except as otherwise expressly provided in this Agreement, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of any Loans issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event of Default, or of any demand for any payment under this Agreement, notice of any action at any time taken or omitted by the Administrative Agent or Lenders, or any of them, under or in respect of any of the Obligations, any requirement of diligence or to mitigate damages and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement (except as otherwise provided in this Agreement). Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Administrative Agent or Lenders, or any of them, at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by the Administrative Agent or Lenders, or any of them, in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any Borrower Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or failure to act on the part of the Administrative Agent or Lenders, or any of them, with respect to the failure by any Borrower to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this Section 10.17 afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from any of its Obligations under this Section 10.17, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of such Borrower under this Section 10.17 shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each Borrower under this Section 10.17 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower or the Administrative Agent or Lenders, or any of them. The joint and several liability of each Borrower hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, constitution or place of formation of any of the Borrowers or Administrative Agent or Lenders, or any of them.
(vi) The provisions of this Section 10.17 are made for the benefit of the Administrative Agent, the Lenders and their respective successors and assigns, and may be enforced by it or them from time to time against any or all Borrowers as often as occasion therefor may arise and without requirement on the part of Administrative Agent, or any Lender, successor or assign first to marshal any of its or their claims or to exercise any of its or their rights against any Borrower or to exhaust any remedies available to it or them against any Borrower or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 10.17 shall remain in effect until all of the Obligations shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of this Section 10.17 will forthwith be reinstated in effect, as though such payment had not been made.
(vii) Each Borrower hereby agrees that it will not enforce any of its rights of contribution or subrogation against any other Borrower with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to the Administrative Agent or any Lender with respect to any of the Obligations or any collateral security therefor until such time as all of the Obligations have been paid in full in cash. Any claim which any Borrower may have against the other Borrowers with respect to any payments to the Administrative Agent or any Lender hereunder or under any other Loan Documents are hereby expressly made subordinate and junior in right of payment, including without limitation, as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be made to the other Borrowers therefor.
(viii) Notwithstanding any provision to the contrary contained herein or in any of the other Loan Documents, to the extent the obligations of any Borrower shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of such Borrower hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including, without limitation, the Bankruptcy Code of the United States).
(iv) Each Borrower hereby appoints the Parent to act as its agent for all purposes under this agreement (including, without limitation, with respect to all matters related to the borrowing and repayment of Loans) and agrees that (a) the Parent may execute such documents on behalf of the Borrowers as the Parent deems appropriate in its sole discretion and the Borrowers shall be obligated by all of the terms of any such document executed on their behalf, (b) any notice or communication delivered by the Administrative Agent or any Lender to the Parent shall be deemed delivered to each Borrower and (c) the Administrative Agent or the Lenders may accept, and be permitted to rely on, any document, instrument or agreement executed by the Parent on behalf of the Borrowers.
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
10.19 Hazardous Material Indemnity.
Each of Borrowers hereby agrees to indemnify, hold harmless and defend (by counsel reasonably satisfactory to the Administrative Agent) the Administrative Agent and each of the Lenders and their respective directors, officers, employees, agents, successors and assigns from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial action requirements, enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including but not limited to reasonable attorneys' fees and the reasonably allocated costs of attorneys employed by the Administrative Agent or any Lender, and expenses to the extent that the defense of any such action has not been assumed by Borrowers), arising directly or indirectly out of (i) the presence on, in, under or about any Real Property of any Hazardous Materials, or any releases or discharges of any Hazardous Materials on, under or from any Real Property and (ii) any activity carried on or undertaken on or off any Real Property by Borrowers or any of its predecessors in title, whether prior to or during the term of this Agreement, and whether by Borrowers or any predecessor in title or any employees, agents, contractors or subcontractors of Borrowers or any predecessor in title, or any third persons at any time occupying or present on any Real Property, in connection with the handling, treatment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Materials at any time located or present on, in, under or about any Real Property. The foregoing indemnity shall further apply to any residual contamination on, in, under or about any Real Property, or affecting any natural resources, and to any contamination of any Property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any of such activities were or will be undertaken in accordance with applicable Laws, but the foregoing indemnity shall not apply to Hazardous Materials on any Real Property, the presence of which is caused by the Administrative Agent or the Lenders. Borrowers hereby acknowledge and agree that, notwithstanding any other provision of this Agreement or any of the other Loan Documents to the contrary, the obligations of Borrowers under this Section shall be unlimited corporate obligations of Borrowers and shall not be secured by any Lien on any Real Property. Any obligation or liability of Borrowers to any Indemnitee under this Section 10.19 shall survive the expiration or termination of this Agreement and the repayment of all Loans and the payment and performance of all other Obligations owed to the Lenders.
(a) Notwithstanding anything to the contrary contained in this Agreement, Parent may sell, assign, transfer or dispose of its interest in another Borrower (other than Operating Partnership) that is a Subsidiary of Parent; provided, that, on or before the closing of such sale the Borrowers shall have delivered to the Administrative Agent a certification, together with such other evidence as Administrative Agent may require, that the Borrowers will be in compliance with all terms of this Agreement after giving effect to such sale, assignment, transfer or other disposition; and, provided, further, that from and after any such sale, the assets of such Borrower shall no longer be included within the Unencumbered Asset Pool. Administrative Agent shall promptly notify the Lenders of any such sale, assignment, transfer or other disposition permitted hereunder.
(b) If the Borrowers withdraw a Qualified Asset Pool Property from the Unencumbered Asset Pool in accordance with Section 2.16 and after giving effect to such withdrawal, a Borrower (other than the Parent or the Operating Partnership) no longer owns any Real Property that is part of the Unencumbered Asset Pool, the Borrowers may request that such Borrower be released from its obligations under the Credit Documents.
(c) Upon a sale in accordance with clause (a) above or a request in accordance with clause (b) above, the Administrative Agent shall, at the expense of the Borrowers, take such action as reasonably appropriate to effect such release.
10.21 No Advisory or Fiduciary Responsibility.
In connection with all aspects of each transaction contemplated hereby, the Borrowers acknowledge and agree, and acknowledge their Affiliates' understanding, that: (i) the credit facilities provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm's-length commercial transaction between the Borrowers and their respective Affiliates, on the one hand, and the Administrative Agent, the Arrangers and the Lenders, on the other hand, and the Borrowers are capable of evaluating and understanding and understand and accept the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, the Administrative Agent, each Arranger and each Lender, each is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrowers or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) neither the Administrative Agent, any Arranger nor any Lender has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrowers with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether the Administrative Agent, any Arranger or any Lender has advised or is currently advising the Borrowers or any of their respective Affiliates on other matters) and neither the Administrative Agent, any Arranger or any Lender has any obligation to the Borrowers or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Administrative Agent, the Arrangers and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrowers and their respective Affiliates, and neither the Administrative Agent, any Arranger nor any Lender has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Administrative Agent, the Arrangers and the Lenders have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Borrowers have consulted their own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. Each of the Borrowers hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against the Administrative Agent, the Arrangers and the Lenders with respect to any breach or alleged breach of agency or fiduciary duty arising out of the transactions contemplated hereby.
[Signatures to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ALEXANDRIA REAL ESTATE EQUITIES, L.P., a Delaware limited partnership
By: ARE-QRS Corp., a Maryland corporation, general partner
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-QRS CORP., a Maryland corporation
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE ACQUISITIONS, LLC, a Delaware limited liability company
By: ARE-QRS Corp., a Maryland corporation, managing member
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-1201/1208 EASTLAKE AVENUE, LLC
ARE-1208 EASTLAKE AVENUE, LLC
ARE-129/153/161 HILL STREET, LLC
ARE-HARBOR BAY NO. 4, LLC
ARE-EASTLAKE AVENUE NO. 3, LLC
ARE-MA REGION NO. 23, LLC
ARE-MA REGION NO. 26, LLC
ARE-MA REGION NO. 28, LLC
ARE-MA REGION NO. 30, LLC
ARE-ORANGE COAST, LLC
ARE-SAN FRANCISCO NO. 26, LLC
ARE-SEATTLE NO. 10, LLC
ARE-SEATTLE NO. 12, LLC
ARE-SEATTLE NO. 16, LLC
LMC STORAGE, LLC
ARE-MA REGION NO. 13, LLC
ARE-MA REGION NO. 14, LLC
ARE-MA REGION NO. 19, LLC
ARE-MA REGION NO. 20, LLC
ARE-MA REGION NO. 21, LLC
ARE-MARYLAND NO. 23, LLC
ARE-MD NO. 1, LLC
ARE-PA REGION NO. 6, LLC
JP HOSPITALITY, LLC
ARE-SAN FRANCISCO NO. 15, LLC
ARE-MA REGION NO. 25, LLC
ARE-MA REGION NO. 33 LLC
JC TWINS, LLC
ARE-SAN FRANCISCO NO. 31, LLC, each a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, their sole member
By: ARE-QRS Corp., a Maryland
corporation, general partner
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-10150 Old Columbia, LLC
ARE-10505 Roselle Street, LLC
ARE-108 Alexander Road
ARE-150/154 TECHNOLOGY PARKWAY, LLC
ARE-170 WILLIAMS DRIVE, LLC
ARE-19 FIRSTFIELD ROAD, LLC
ARE-2425/2400/2450 GARCIA BAYSHORE, LLC
ARE-2625/2627/2631 HANOVER, LLC
ARE-279 PRINCETON ROAD, LLC
ARE-3005 FIRST AVENUE, LLC
ARE-3770 TANSY STREET, LLC
ARE-480 ARSENAL STREET, LLC
ARE-5 TRIANGLE DRIVE, LLC
ARE-500 ARSENAL STREET, LLC
ARE-6146 NANCY RIDGE, LLC
ARE-7030 KIT CREEK, LLC
ARE-770/784/790 MEMORIAL DRIVE, LLC
ARE-819/863 MITTEN ROAD, LLC
ARE-EAST JAMIE COURT, LLC
ARE-NEXUS CENTRE II, LLC, each a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, their managing member
By: ARE-QRS Corp., a Maryland
corporation, general partner
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-MARYLAND NO. 25, LLC
ARE-MARYLAND NO. 26, LLC
ARE-MARYLAND NO. 27, LLC
ARE-MARYLAND NO. 31, LLC, each a
Maryland limited liability company
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, their sole member
By: ARE-QRS Corp., a Maryland corporation, general partner
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-5 RESEARCH PLACE, LLC
ARE-MARYLAND NO. 32, LLC, each a Maryland limited liability company
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, their managing member
By: ARE-QRS Corp., a Maryland corporation, general partner
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-10933 NORTH TORREY PINES, LLC
ARE-11099 NORTH TORREY PINES, LLC, each a Delaware limited liability company
By: Alexandria Real Estate Equities, Inc., a Maryland corporation, their managing member
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-381 PLANTATION STREET, LLC
ARE-60 WESTVIEW, LLC
ARE-ONE INNOVATION DRIVE, LLC, each a Delaware limited liability company
By: AREE-Holdings, L.P., a Delaware limited partnership, their managing member
By: ARE-GP Holdings QRS Corp., a Delaware corporation, general partner
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-PA REGION NO. 3, L.P.
ARE-PA REGION NO. 4, L.P.
ARE-702 ELECTRONIC DRIVE, L.P., each a Delaware limited partnership
By: AREE-Holdings, L.P., a Delaware limited partnership, their general partner
By: ARE-GP Holdings QRS Corp., a Delaware corporation, general partner
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-VIRGINIA NO. 2, LLC, a Delaware limited liability company
By: ARE-Virginia No. 2 Member, LLC, a Delaware limited liability company, sole member
By: Alexandria Real Estate Equities, Inc., a Maryland corporation, sole member
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-Maryland No. 7 Corp.
ARE-Maryland No. 8 Corp., each a Maryland corporation
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-MARYLAND NO. 30, LLC, a Maryland limited liability company
By: ARE-Maryland No. 29, LLC, a Delaware limited liability company, sole member
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, sole member
By: ARE-QRS Corp., a Maryland corporation, general partner
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-SAN FRANCISCO NO. 21, LP, a California limited partnership
By: ARE-San Francisco No. 21 GP, LLC, a Delaware limited liability company, general partner
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, sole member
By: ARE-QRS Corp., a Maryland corporation, general partner
By:/s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
Address for all the foregoing:
Alexandria Real Estate Equities, Inc.
385 E. Colorado Blvd., Suite 299
Pasadena, CA 91101
Attention: Joel S. Marcus, Chief Executive Officer
Telephone: (626) 578-0777
Telecopier: (626) 578-0770
BANK OF AMERICA, N.A.,
as Administrative Agent
By:/s/ Liliana Claar
Name: Liliana Claar
Title: Vice President
BANK OF AMERICA, N.A.,
as a Lender, L/C Issuer, and Swing Line Lender
By:/s/ Thomas R. Sullivan
Name: Thomas R. Sullivan
Title: Vice President
TAIPEI FUBON COMMERCIAL BANK
NEW YORK AGENCY
By:/s/ Sophia Jing
Name: Sophia Jing
Title: VP & General Manager
MERRILL LYNCH BANK USA
By:/s/ Louis Alder
Name: Louis Alder
Title: Director
UNITED OVERSEAS BANK LIMITED,
LOS ANGELES AGENCY
By:/s/ Hoong Chen
Name: Hoong Chen
Title: FVP and GM
SOCIETE GENERALE
By:/s/ Joseph T. Martinez Jr.
Name: Joseph T. Martinez Jr.
Title: Director
STATE BANK OF INDIA, LOS ANGELES
AGENCY
By:/s/ Mr. K.S.S. Naidu
Name: Mr. K.S.S. Naidu
Title: Vice President
C.M. LIFE INSURANCE COMPANY
By: Babson Capital Management LLC, as Investment Sub-Advisor
By:/s/ Emeka O. Onukwugha
Name: Emeka O. Onukwugha
Title: Managing Director
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: Babson Capital Management LLC, as Investment Sub-Advisor
By:/s/ Emeka O. Onukwugha
Name: Emeka O. Onukwugha
Title: Managing Director
BANK OF THE WEST
By:/s/ Wendy Reed
Name: Wendy Reed
Title: Vice President
By:/s/ Chuck Weerasooriya
Name: Chuck Weerasooriya, CFA
Title: Senior Vice President
FORTIS CAPITAL CORP
By:/s/ Alan Krouk
Name: Alan Krouk
Title: Managing Director
By:/s/ Barry Chung
Name: Barry Chung
Title: Senior Vice President
LAND BANK OF TAIWAN
By:/s/ Henry C.R. Leu
Name: Henry C.R. Leu
Title: Vice President & General Manager Los Angeles Branch
THE ROYAL BANK OF SCOTLAND PLC
By:/s/ Neil Crawford
Name: Neil Crawford
Title: Senior Vice President
HUA NAN COMMERCIAL BANK, LTD. LOS ANGELES BRANCH
By:/s/ Oliver C.H. Shu
Name: Neil Crawford
Title: VP & General Manager
SOVEREIGN BANK
By:/s/ T. Gregory Donohue
Name: T. Gregory Donohue
Title: Senior Vice President
CALYON, NEW YORK BRANCH
By:/s/ John A. Wain
Name: John A. Wain
Title: Managing Director
By:/s/ Paul T. Ragusin
Name: Paul T. Ragusin
Title: Director
PB (USA) REALTY CORPORATION
By:/s/ Michael Rogers
Name: Michael Rogers
Title: Assistant Vice President
By:/s/ Olivia Lam
Name: Olivia Lam
Title: Asst. Treasurer
HSH NORDBANK AG, NEW YORK BRANCH
By:/s/ James R. Fitzgerald
Name: James R. Fitzgerald
Title: Senior Vice President, Head of Real Estate
By:/s/ Jeffrey J. O'Brien
Name: Jeffrey J. O'Brien
Title: Vice President, Real Estate Finance
ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG
By:/s/ Gregory Aptman
Name: Gregory Aptman
Title: Vice President
By:/s/ Bryan Lynch
Name: Bryan Lynch
Title: First Vice President
COMPASS BANK
By:/s/ Johanna Duke Paley
Name: Johanna Duke Paley
Title: Senior Vice President
THE BANK OF NOVA SCOTIA
By:/s/ Mark Sparrow
Name: Mark Sparrow
Title: Director
AMSOUTH BANK
By:/s/ Kerri L. Raines
Name: Kerri L. Raines
Title: Assistant Vice President
CHANG HWA COMMERCIAL BANK, LTD., LOS ANGELES BRANCH
By:/s/ Wen Che Chen
Name: Wen Che Chen
Title: Vice President & General Manager
BMO CAPITAL MARKETS FINANCING, INC.
By:/s/ Virginia Neale
Name: Virginia Neale
Title: Vice President
PACIFIC WESTERN BANK, A CALIFORNIA STATE-CHARTERED BANK
By:/s/ Steven Clark
Name: Steven Clark
Title: Vice President
FIRST HORIZON BANK,
a division of First Tennessee Bank, NA
By:/s/ Kenneth W. Rub
Name: Kenneth W. Rub
Title: Vice President
CATHAY UNITED BANK
By:/s/ Allen Peng
Name: Allen Peng
Title: EVP & General Manager
CITICORP NORTH AMERICA, INC.
By:/s/ Niraj R. Shah
Name: Niraj R. Shah
Title: Vice President
UNION BANK OF CALIFORNIA
By:/s/ Angela D. Smailey
Name: Angela D. Smailey
Title: Vice President
UBS LOAN FINANCE LLC
By:/s/ Richard L. Tavrow
Name: Richard L. Tavrow
Title: Director
By:/s/ Irja R. Otsa
Name: Irja R. Otsa
Title: Associate Director
MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD, NEW YORK BRANCH
By:/s/ Nae-Yee Lung
Name: Nae-Yee Lung
Title: SVP & General Manager
CHEVY CHASE BANK, F.S.B.
By:/s/ Frederick H. Denecke
Name: Frederick H. Denecke
Title: Vice President
EUROHYPO AG, NEW YORK BRANCH
By:/s/ John Lippmann
Name: John Lippmann
Title: Vice President
By:/s/ Stephen Cox
Name: Stephen Cox
Title: Director
COMERICA BANK
By:/s/ James Graycheck
Name: James Graycheck
Title: Vice President
MIDFIRST BANK, A FEDERALLY CHARTERED SAVING ASSOCIATION
By:/s/ Darrin Rigler
Name: Darrin Rigler
Title: Vice President
THE BANK OF TOKYO - MITSUBISHI UFJ, LTD.
By:/s/ Yoichi Orikasa
Name: Yoichi Orikasa
Title: Vice President & Manager
TAIWAN BUSINESS BANK
By:/s/ Ben Chou
Name: Ben Chou
Title: VP & General Manager
PEOPLE'S BANK
By:/s/ Anne Kuchinski
Name: Anne Kuchinski
Title: Vice President
SUNTRUST BANK
By:/s/ Gregory T. Horstman
Name: Gregory T. Horstman
Title: Senior Vice President
SCOTIABANC, INC.
By:/s/ Nadine Bell
Name: Nadine Bell
Title: Senior Manager
EXHIBIT 10.14
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment"), dated as of December 1, 2006, is entered into among Alexandria Real Estate Equities, Inc., a Maryland corporation ("Parent"), Alexandria Real Estate Equities, L.P., a Delaware limited partnership ("Operating Partnership"), ARE-QRS Corp., a Maryland corporation ("QRS"), ARE Acquisitions, LLC, a Delaware limited liability company ("ARE"), and the other borrowers set forth on the signature pages hereto (collectively, together with Parent, Operating Partnership, QRS and ARE, the "Borrowers"), the Lenders identified on the signature pages hereto and Bank of America, N.A., as administrative agent (the "Administrative Agent"). Terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement described below.
W I T N E S S E T H
WHEREAS, the Borrowers, the Lenders party thereto, and the Administrative Agent entered into that certain Second Amended and Restated Credit Agreement dated as of October 31, 2006 (the "Existing Credit Agreement");
WHEREAS, the Borrowers have requested that the Required Lenders agree to amend certain provisions of the Credit Agreement as hereinafter set forth; and
WHEREAS, the Required Lenders have agreed to such modifications on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
PART 1
DEFINITIONS
SUBPART 1.1 Certain Definitions. Unless otherwise defined herein or the context otherwise requires, the following term used in this Amendment, including its preamble and recitals, have the following meanings:
"Amendment No. 1 Effective Date" is defined in Subpart 3.1.
SUBPART 1.2 Other Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Amendment, including its preamble and recitals, have the meanings provided in the Existing Credit Agreement.
PART 2
AMENDMENT TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 1 Effective Date, the Existing Credit Agreement is hereby amended in accordance with this Part 2.
SUBPART 2.1 Amendment to Section 2.15(a). Clause (iv) contained in Section 2.15(a) of the Existing Credit Agreement is hereby amended and restated to read as follows:
(iv) the Aggregate Revolving Commitments shall not be increased by an amount, in the aggregate, that is greater than $500,000,000 less the aggregate amount of any additional term tranches added pursuant to clause (b) below,
SUBPART 2.2 Amendment to Section 2.15(b). Clause (iv) contained in Section 2.15(b) of the Existing Credit Agreement is hereby amended and restated to read as follows:
(iv) the aggregate amount of such term tranches shall not exceed $500,000,000 less any increases in the Aggregate Revolving Commitments pursuant to clause (a) above,
PART 3
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1 Amendment No. 1 Effective Date. This Amendment shall be and become effective as of the date hereof (the "Amendment No. 1 Effective Date") when all of the conditions set forth in this Part 3 shall have been satisfied, and thereafter this Amendment shall be known, and may be referred to, as the "Amendment".
SUBPART 3.2 Execution of Counterparts of Amendment. The Administrative Agent shall have received counterparts of this Amendment, which collectively shall have been duly executed on behalf of each of the Borrowers, the Required Lenders and the Administrative Agent.
SUBPART 3.3 Fees and Expenses. The Administrative Agent shall have received all out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment (including without limitation the fees and expenses of Moore & Van Allen PLLC, special counsel to the Administrative Agent to the extent the Borrowers have received an invoice prior to the Amendment No. 1 Effective Date).
PART 4
MISCELLANEOUS
SUBPART 4.1 Representations and Warranties. The Borrowers hereby represent and warrant to the Administrative Agent and the Lenders that, after giving effect to this Amendment, (a) no Default or Event of Default exists under the Existing Credit Agreement and (b) the representations and warranties set forth in Article V of the Existing Credit Agreement are true and correct in all material respects on and as of the date hereof, subject to the limitations set forth therein, as if made on and as of such date (except to the extent such representations and warranties expressly relate to another date in which case such representations and warranties shall be true and correct in all material respects as of such date).
SUBPART 4.2 Ratification of Credit Documents.
(a) The term "Credit Agreement" as used in each of the Loan Documents shall hereafter mean the Existing Credit Agreement as amended and modified by this Amendment. Except as herein specifically agreed, the Existing Credit Agreement, as amended by this Amendment, is hereby ratified and confirmed and, together with the other Loan Documents, shall remain in full force and effect according to its terms.
(b) The Borrowers acknowledge and consent to the modifications set forth herein and agree that this Amendment does not impair, reduce or limit any of its respective obligations under the Loan Documents and that, after the date hereof, this Amendment shall constitute a Loan Document.
SUBPART 4.3 Authority/Enforceability.
(a) The Borrowers represent and warrant to the Administrative Agent as follows:
(i) They have taken all necessary action to authorize the execution, delivery and performance of this Amendment.
(ii) This Amendment has been duly executed and delivered by the Borrowers and constitute the Borrowers' legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be subject to (A) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors' rights generally and (B) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).
(iii) The execution and delivery of this Amendment does not (A) violate, contravene or conflict with any provision of their Organizational Documents or (B) materially violate, contravene or conflict with any Law applicable to them.
SUBPART 4.4 Cross-References. References in this Amendment to any Part or Subpart are, unless otherwise specified, to such Part or Subpart of this Amendment.
SUBPART 4.5 Counterparts/Telecopy. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery of executed counterparts of the Amendment by telecopy or other electronic means shall be effective as an original and shall constitute a representation that an original shall be delivered.
SUBPART 4.6 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SUBPART 4.7 Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Credit Agreement as of the date first above written.
BORROWERS:
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ALEXANDRIA REAL ESTATE EQUITIES, L.P., a Delaware limited partnership
By: ARE-QRS Corp., a Maryland corporation, general partner
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-QRS CORP., a Maryland corporation
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE ACQUISITIONS, LLC, a Delaware limited liability company
By: ARE-QRS Corp., a Maryland corporation, managing member
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-1201/1208 EASTLAKE AVENUE, LLC
ARE-1208 EASTLAKE AVENUE, LLC
ARE-HARBOR BAY NO. 4, LLC
ARE-EASTLAKE AVENUE NO. 3, LLC
ARE-MA REGION NO. 23, LLC
ARE-MA REGION NO. 26, LLC
ARE-MA REGION NO. 28, LLC
ARE-MA REGION NO. 30, LLC
ORANGE COAST, LLC
ARE-SAN FRANCISCO NO. 26, LLC
ARE-SEATTLE NO. 10, LLC
ARE-SEATTLE NO. 12, LLC
ARE-SEATTLE NO. 16, LLC
LMC STORAGE, LLC
ARE-MA REGION NO. 13, LLC
ARE-MA REGION NO. 14, LLC
ARE-MA REGION NO. 19, LLC
ARE-MA REGION NO. 20, LLC
ARE-MA REGION NO. 21, LLC
ARE-MARYLAND NO. 23, LLC
ARE-MD NO. 1, LLC
ARE-PA REGION NO. 6, LLC
ARE-SAN FRANCISCO NO. 15, LLC
ARE-MA REGION NO. 25, LLC
ARE-MA REGION NO. 33 LLC
JC TWINS, LLC, each a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, their sole member
By: ARE-QRS Corp., a Maryland
corporation, general partner
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-10150 Old Columbia, LLC
ARE-10505 Roselle Street, LLC
ARE-108 Alexander Road
ARE-150/154 TECHNOLOGY PARKWAY, LLC
ARE-170 WILLIAMS DRIVE, LLC
ARE-19 FIRSTFIELD ROAD, LLC
ARE-2425/2400/2450 GARCIA BAYSHORE, LLC
ARE-2625/2627/2631 HANOVER, LLC
ARE-279 PRINCETON ROAD, LLC
ARE-3005 FIRST AVENUE, LLC
ARE-3770 TANSY STREET, LLC
ARE-480 ARSENAL STREET, LLC
ARE-5 TRIANGLE DRIVE, LLC
ARE-500 ARSENAL STREET, LLC
ARE-6146 NANCY RIDGE, LLC
ARE-7030 KIT CREEK, LLC
ARE-770/784/790 MEMORIAL DRIVE, LLC
ARE-819/863 MITTEN ROAD, LLC
ARE-EAST JAMIE COURT, LLC
ARE-NEXUS CENTRE II, LLC
ARE-129/153/161 HILL STREET, LLC, each a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, their managing member
By: ARE-QRS Corp., a Maryland
corporation, general partner
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-MARYLAND NO. 25, LLC
ARE-MARYLAND NO. 26, LLC
ARE-MARYLAND NO. 27, LLC
ARE-MARYLAND NO. 31, LLC
ARE-MARYLAND NO. 32, LLC, each a
Maryland limited liability company
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, their sole member
By: ARE-QRS Corp., a Maryland corporation, general partner
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-5 RESEARCH PLACE, LLC, a Maryland limited liability company
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, manager
By: ARE-QRS Corp., a Maryland corporation, general partner
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-10933 NORTH TORREY PINES, LLC
ARE-11099 NORTH TORREY PINES, LLC, each a Delaware limited liability company
By: Alexandria Real Estate Equities, Inc., a Maryland corporation, their managing member
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-381 PLANTATION STREET, LLC
ARE-60 WESTVIEW, LLC
ARE-ONE INNOVATION DRIVE, LLC, each a Delaware limited liability company
By: AREE-Holdings, L.P., a Delaware limited partnership, their managing member
By: ARE-GP Holdings QRS Corp., a Delaware corporation, general partner
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-PA REGION NO. 3, L.P.
ARE-PA REGION NO. 4, L.P.
ARE-702 ELECTRONIC DRIVE, L.P., each a Delaware limited partnership
By: AREE-Holdings, L.P., a Delaware limited partnership, their general partner
By: ARE-GP Holdings QRS Corp., a Delaware corporation, general partner
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-VIRGINIA NO. 2, LLC, a Delaware limited liability company
By: ARE-Virginia No. 2 Member, LLC, a Delaware limited liability company, manager
By: Alexandria Real Estate Equities, Inc., a Maryland corporation, sole member
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-Maryland No. 7 Corp.
ARE-Maryland No. 8 Corp., each a Maryland corporation
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-MARYLAND NO. 30, LLC, a Maryland limited liability company
By: ARE-Maryland No. 29, LLC, a Delaware limited liability company, sole member
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, sole member
By: ARE-QRS Corp., a Maryland corporation, general partner
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ARE-SAN FRANCISCO NO. 21, LP, a California limited partnership
By: ARE-San Francisco No. 21 GP, LLC, a Delaware limited liability company, general partner
By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, sole member
By: ARE-QRS Corp., a Maryland corporation, general partner
By: /s/ Dean A. Shigenaga
Name: Dean A. Shigenaga
Title: Chief Financial Officer
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ Kathleen M. Carry
Name: Kathleen M. Carry
Title: Vice President
LENDERS:
BANK OF AMERICA, N.A.,
as a Lender, L/C Issuer, and Swing Line Lender
By: /s/ James P. Johnson
Name: James P. Johnson
Title: Senior Vice President
AMSOUTH BANK
By: /s/ Kerri L. Raines
Name: Kerri L. Raines
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Mark Sparrow
Name: Mark Sparrow
Title: Director
BANK OF THE WEST
By: /s/ Wendy Reed
Name: Wendy Reed
Title: Vice President
BANK OF THE WEST
By: /s/ Chuck Weerasooriya
Name: Chuck Weerasooriya
Title: Senior Vice President
BMO CAPITAL MARKETS FINANCING, INC.
By: /s/ Virginia Neale
Name: Virginia Neale
Title: Vice President
CATHAY UNITED BANK
By: /s/ Allen Peng
Name: Allen Peng
Title: EVP & General Manager
CHANG HWA COMMERCIAL BANK, LTD., LOS ANGELES BRANCH
By: /s/ Wen Che Chen
Name: Wen Che Chen
Title: Vice President & General Manager
CHEVY CHASE BANK, F.S.B.
By: /s/ Frederick H. Denecke
Name: Frederick H. Denecke
Title: Vice President
CITICORP NORTH AMERICA, INC.
By: /s/ Malay Kakad
Name: Malay Kakad
Title: Vice President
EUROHYPO AG, NEW YORK BRANCH
By: /s/ David Sarner
Name: David Sarner
Title: Director
By: /s/ Stephen Cox
Name: Stephen Cox
Title: Director
FORTIS CAPITAL CORP
By: /s/ Jack Ali
Name: Jack Ali
Title: Senior Vice President
By: /s/ Alan Krouk
Name: Alan Krouk
Title: Managing Director
HUA NAN COMMERCIAL BANK, LTD. LOS ANGELES BRANCH
By: /s/ Oliver C.H. Hsu
Name: Oliver C.H. Hsu
Title: VP & General Manager
LAND BANK OF TAIWAN
By: /s/ Henry Rong Ching Leu
Name: Henry Rong Ching Leu
Title: VP and General Manager
MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD. NEW YORK BRANCH
By: /s/ Nae-Yee Lung
Name: Nae-Yee Lunch
Title: SVP & General Manager
MIDFIRST BANK, A FEDERALLY CHARTERED SAVINGS ASSOCIATION
By: /s/ Darrin D. Rigler
Name: Darrin D. Rigler
Title: MidFirst Bank
PACIFIC WESTERN BANK, A CALIFORNIA STATE-CHARTERED BANK
By: /s/ Steven Clark
Name: Steven Clark
Title: Vice President
PEOPLE'S BANK
By: /s/ Anne Kuchinski
Name: Anne Kuchinski
Title: Vice President
THE ROYAL BANK OF SCOTLAND PLC
By: /s/ Neil J. Crawford
Name: Neil J. Crawford
Title: Senior Vice President
SCOTIABANC INC.
By: /s/ William E. Zarrett
Name: Willian E. Zarrett
Title: Managing Director
SOCIETE GENERALE
By: /s/ Joseph T. Martinez Jr.
Name: Joseph T. Martinez Jr.
Title: Director
SOVEREIGN BANK
By: /s/ T. Gregory Donohue
Name: T. Gregory Donohue
Title: Senior Vice President
STATE BANK OF INDIA, LOS ANGELES AGENCY
By: /s/ Sanjiv Chadha
Name: Sanjiv Chadha
Title: Chief Executive Officer
TAIWAN BUSINESS BANK
By: /s/ Ben Chou
Name: Ben Chou
Title: VP & General Manager
UBS LOAN FINANCE LLC
By: /s/ Richard L. Tavrow
Name: Richard L. Tavrow
Title: Director
By: /s/ Irja R. Otsa
Name: Irja R. Otsa
Title: Associate Director
UNION BANK OF CALIFORNIA
By: /s/ Angela D. Smailey
Name: Angela D. Smailey
Title: Vice President
EXHIBIT 12.1
ALEXANDRIA REAL ESTATE EQUITIES, INC.
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(in thousands, except ratios)
|
Year Ended December 31, (a)
|
||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002 (b)
|
||||||
| Income from continuing operations | ||||||||||
| before minority interest | $ 74,257 | $ 60,834 | $ 56,097 | $ 45,455 | $ 35,284 | |||||
| Add: Interest expense | 71,371 | 49,116 | 28,670 | 26,416 | 24,984 | |||||
| Subtract: Minority interest in income of | ||||||||||
| subsidiaries which have not incurred | ||||||||||
| fixed charges |
(1,404)
|
(571)
|
-
|
-
|
-
|
|||||
| Earnings available for fixed charges |
$ 144,224
|
$ 109,379
|
$ 84,767
|
$ 71,871
|
$ 60,268
|
|||||
| Combined fixed charges and preferred stock | ||||||||||
| dividends: | ||||||||||
| Interest incurred | $ 107,643 | $ 77,695 | $ 46,733 | $ 40,647 | $ 39,865 | |||||
| Preferred stock dividends | 16,090 | 16,090 | 12,595 | 8,898 | 8,579 | |||||
| Preferred stock redemption charge |
-
|
-
|
1,876
|
-
|
-
|
|||||
| Total combined fixed charges and | ||||||||||
| preferred stock dividends |
$ 123,733
|
$ 93,785
|
$ 61,204
|
$ 49,545
|
$ 48,444
|
|||||
| Ratio of earnings to combined fixed charges | ||||||||||
| and preferred stock dividends (c) | 1.17 | 1.17 | 1.38 | (d) | 1.45 | 1.24 | ||||
| (a) Amounts disclosed for prior periods have been reclassified to conform to the current year presentation related to discontinued operations. | ||||||||||
| (b) Pursuant to SFAS 145, "Rescission of FASB Statement Nos. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections", in 2003 we reclassfied the 2002 loss on early extinguishment of debt to continuing operations. In 2002, this loss was classified as an extraordinary item as previously required under SFAS 4, "Reporting Gains and Losses from Extinguishment of Debt". Amounts shown for 2002 have been adjusted to reflect this reclassification. | ||||||||||
| (c) For purposes of calculating the consolidated ratio of earnings to combined fixed charges and preferred stock dividends, earnings consist of earnings from continuing operations before income taxes and fixed charges less minority interest in income of subsidiaries which have not incurred fixed charges. Fixed charges consist of interest incurred (including amortization of deferred financing costs and capitalized interest) and preferred stock dividends. | ||||||||||
| (d) Ratio of earnings to combined fixed charges and preferred stock dividends for the year ended December 31, 2004 includes the effect of the preferred stock redemption charge pursuant to Emerging Issues Task Force Topic D-42. Excluding the impact of this charge, the ratio of earnings to combined fixed charges and preferred stock dividends for the year ended December 31, 2004 is 1.43. | ||||||||||
EXHIBIT 21.1
List of Subsidiaries of Alexandria Real Estate Equities, Inc.
The list below excludes subsidiaries in the same line of business (ownership and operation of commercial real estate) and includes the immediate parent of each excluded subsidiary. The list also excludes subsidiaries, which in the aggregate, as a single subsidiary, would not constitute a significant subsidiary as of December 31, 2006. A total of 247 subsidiaries have been excluded.
|
ARE-QRS Corp. |
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Alexandria Real Estate Equities, L.P. |
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ARE - MA Region No. 31, LLC |
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ARE - Tech Square, LLC |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-34223 and Form S-8 No. 333-60075) pertaining to the Amended and Restated 1997 Stock Award and Incentive Plan of Alexandria Real Estate Equities, Inc., the Registration Statement (Form S-3 No. 333-133496) of Alexandria Real Estate Equities, Inc. and in the related Prospectus, the Amended Registration Statement (Form S-3/A No. 333-56449) of Alexandria Real Estate Equities, Inc. and in the related Prospectus, and the Amended Registration Statement (Form S-3/A No. 333-81985) of Alexandria Real Estate Equities, Inc. and in the related Prospectus, of our reports dated February 26, 2007, with respect to the consolidated financial statements and schedule of Alexandria Real Estate Equities, Inc., Alexandria Real Estate Equities, Inc. management's assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Alexandria Real Estate Equities, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2006.
/s/ Ernst & Young LLP
Los Angeles, California
February 26, 2007
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joel S. Marcus, Chief Executive Officer (Principal Executive Officer) of Alexandria Real Estate Equities, Inc., certify that:
1. I have reviewed this annual report on Form 10-K of Alexandria Real Estate Equities, Inc.;
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;
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;
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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. 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;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. 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
d. 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
5. 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):
a. 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
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: February 27, 2007
|
/s/ Joel S. Marcus |
|
|
Joel S. Marcus |
|
|
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dean A. Shigenaga, Chief Financial Officer (Principal Financial and Accounting Officer) of Alexandria Real Estate Equities, Inc., certify that:
1. I have reviewed this annual report on Form 10-K of Alexandria Real Estate Equities, Inc.;
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;
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;
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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. 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;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. 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
d. 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
5. 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):
a. 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
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: February 27, 2007
|
/s/ Dean A. Shigenaga |
|
|
Dean A. Shigenaga |
|
|
Chief Financial Officer |
EXHIBIT 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350.
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Joel S. Marcus, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of Alexandria Real Estate Equities, Inc. for the year ended December 31, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Alexandria Real Estate Equities, Inc.
Date: February 27, 2007
|
/s/ Joel S. Marcus |
|
|
Joel S. Marcus |
|
|
Chief Executive Officer |
I, Dean A. Shigenaga, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of Alexandria Real Estate Equities, Inc. for the year ended December 31, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Alexandria Real Estate Equities, Inc.
Date: February 27, 2007
|
/s/ Dean A. Shigenaga |
|
|
Dean A. Shigenaga |
|
|
Chief Financial Officer |