Document:

Exhibit 4.2

 

 

 

 

____________________________________________________________________________

 

 

 

 

 

 

THE VALSPAR CORPORATION

 

$400,000,000 4.200% Notes
due 2022

 

FOURTH SUPPLEMENTAL INDENTURE

 

Dated as of January 13, 2012

 

to

 

Indenture Dated as of April
24, 2002

 

 

U.S. BANK NATIONAL ASSOCIATION

 

Series Trustee

 

and

 

THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A

(as successor to Bank One
Trust Company, N.A.)

 

Original Trustee

 

 

 

____________________________________________________________________________

 

 

 

 

 

    	 

    	 

    

 

FOURTH SUPPLEMENTAL INDENTURE (this “Fourth
Supplemental Indenture”), dated as of January 13, 2012, between THE VALSPAR CORPORATION, a Delaware corporation (the
“Company”), U.S. Bank National Association, (the “Series Trustee”), and The Bank of New York
Mellon Trust Company, N.A. (as successor to Bank One Trust Company, N.A.) (the “Original Trustee,” and together
with the Series Trustee, the “Trustee”).

 

RECITALS

 

WHEREAS, the Company has heretofore executed
and delivered to the Original Trustee an Indenture dated as of April 24, 2002 (the “Existing Indenture” and,
together with the First Supplemental Indenture dated as of April 30, 2002, the Second Supplemental Indenture dated as of April
17, 2007, the Third Supplemental Indenture dated as of June 19, 2009 and this Fourth Supplemental Indenture, the “Indenture”)
providing for the issuance by the Company from time to time of its debt securities to be issued in one or more series;

 

WHEREAS, the Company, in the exercise of the
power and authority conferred upon and reserved to it under the provisions of the Existing Indenture and pursuant to appropriate
resolutions of the Board of Directors, has duly determined to make, execute and deliver to the Series Trustee this Fourth Supplemental
Indenture to the Existing Indenture in order to issue a new series of debt securities to be designated as the “4.200% Notes
due 2022” (the “Notes”), and to set forth the terms that will be applicable thereto and the form thereof;

 

WHEREAS, the Company has duly determined to
appoint U.S. Bank National Association as Series Trustee, Security Registrar and Paying Agent under the Indenture with respect
to the Notes (but only with respect to the Notes) and U.S. Bank National Association is willing to accept such appointment with
respect to the Notes;

 

WHEREAS, the Company is entering
into this Fourth Supplemental Indenture with the Original Trustee and the Series Trustee to evidence and provide for the acceptance
of appointment thereunder by the Series Trustee with respect to the Notes (but only with respect to the Notes), to add to or change
any of the provisions of the Existing Indenture as shall be necessary to provide for or facilitate the administration of the trusts
thereunder by more than one Trustee, to make certain amendments to the Existing Indenture pursuant to Section 901(2) of the Existing
Indenture to expressly permit the appointment of the Series Trustee as Trustee for the Notes (but only with respect to the Notes),
and to make certain other amendments to the Existing Indenture; 

 

WHEREAS, the Company has requested that the
Original Trustee enter into this Fourth Supplemental Indenture in connection with (i) the foregoing amendments and (ii) the Company’s
appointment of the Series Trustee with all of the rights, powers, trusts, duties and obligations of Trustee, Security Registrar
and Paying Agent with respect to the Notes (but only with respect to the Notes);

 

WHEREAS, Sections 201, 301 and 901 of the Existing
Indenture provide, among other things, that the Company and the Trustee may, without the consent of Holders, enter into indentures
supplemental to the Existing Indenture to provide for specific terms applicable to any series of notes and to add to the covenants
of the Company for the benefit of the Holders of each series of notes (and if such covenants are to be for the benefit of less
than all series of notes, stating that such covenants are expressly being included solely for the benefit of such series); and

 

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WHEREAS, all things necessary to make the Notes,
when executed by the Company and authenticated and delivered by the Series Trustee or any Authenticating Agent and issued upon
the terms and subject to the conditions set forth hereinafter and in the Indenture against payment therefor, the valid, binding
and legal obligations of the Company and to make this Fourth Supplemental Indenture a valid, binding and legal agreement of the
Company, have been done;

 

NOW, THEREFORE, in consideration of the premises
and for other good and valuable consideration, the sufficiency and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:

 

Article
I

APPLICATION OF SUPPLEMENTAL INDENTURE

AND CREATION OF NOTES

 

Section 1.01 Application
of this Fourth Supplemental Indenture.

 

Notwithstanding any other provision of this
Fourth Supplemental Indenture, the provisions of this Fourth Supplemental Indenture, including the covenants and Events of Default
set forth herein, are expressly and solely for the benefit of the Notes. The Notes constitute a series of notes as provided in
Section 301 of the Existing Indenture.

 

Section 1.02 Effect of this
Fourth Supplemental Indenture.

 

With respect to the Notes only, the Existing
Indenture shall be supplemented pursuant to Sections 201, 301 and 901 thereof to establish the terms of the Notes as set forth
in this Fourth Supplemental Indenture, including as follows:

 

		(a)     	The definitions set forth in Article One of the Existing Indenture shall be modified to the extent provided in Article II of this Fourth Supplemental Indenture;
	 	(b)	The form and terms of the securities representing the Notes required to be established pursuant to Sections 201 and 301 of the Existing Indenture shall be established in accordance with Sections 1.03, 1.04, 1.05, 1.06 and 1.07 of this Fourth Supplemental Indenture;
	 	(c)	Sections 501(1), (6) and (7) of the Existing Indenture regarding certain events of default are deleted as contemplated by Section 301(12) of the Existing Indenture and replaced in their entirety by Section 5.01 of this Fourth Supplemental Indenture.
	 	(d)	The provisions of Article Ten of the Existing Indenture regarding certain covenants of the Company shall be supplemented and amended by the provisions of Article VI of this Fourth Supplemental Indenture.

 

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		(e)     	Section  901 of the Existing Indenture regarding the entering into of supplemental indentures without the consent of Holders shall be amended by inserting therein a new Section 901(8) of the Existing Indenture (as set forth in Section 8.01 of this Fourth Supplemental Indenture).
	 	(f)	Section  901(6) of the Existing Indenture regarding the appointment of a successor Trustee by entering into of supplemental indentures without the consent of Holders shall be amended and replaced in its entirety by Section 8.02 of this Fourth Supplemental Indenture.

 

Section
1.03 Designation and Amount of Notes.

 

The Notes shall be known and designated as the
“4.200% Notes due 2022.” The initial maximum aggregate principal amount of the Notes that may be authenticated and
delivered under this Fourth Supplemental Indenture shall not exceed $400,000,000 except for Notes authenticated and delivered upon
registration or transfer of, or in exchange for, or in lieu of, Notes pursuant to Sections 202, 304, 305, 306 or 905 of the Existing
Indenture (unless the issue of this series of Notes are “reopened” pursuant to Section 901(8) of the Existing Indenture
(as set forth in Section 8.01 of this Fourth Supplemental Indenture) by issuing additional Notes of such series (the “Additional
Notes”), in an amount or amounts and registered in the names of such Persons as shall be set forth in any written order of
the Company for the authentication and delivery of the Notes pursuant to Section 303 of the Existing Indenture).

 

Section 1.04 Terms; Form
of Security.

 

The Notes and the Additional Notes shall together
constitute one series for purposes of the Existing Indenture and this Fourth Supplemental Indenture, including, without limitation,
waivers, amendments, redemptions and offers to purchase. The Company shall issue any additional notes of a series by adopting a
Board Resolution in the manner set forth in Section 301 of the Existing Indenture providing for the terms of such issuance.
Notwithstanding the foregoing, the Notes are issuable in fully registered form as Global Notes (unless otherwise permitted by Section
202 of the Existing Indenture) without coupons and shall be in substantially the form of Exhibit A. The Notes are not issuable
in bearer form. The terms and provisions contained in the form of Note shall constitute, and are hereby expressly made, a part
of this Fourth Supplemental Indenture and the Company, by its execution and delivery of this Fourth Supplemental Indenture, expressly
agrees to such terms and provisions and to be bound thereto. Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers executing the same may approve (execution thereof to
be conclusive evidence of such approval) and are not inconsistent with the provisions of the Indenture (and which do not affect
the rights, duties or immunities of the Series Trustee), or as may be required to comply with any law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes
may be listed.

 

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Section 1.05 Payment of
Principal and Interest.

 

(a)                
The Notes shall mature, and the principal of the Notes shall be due and payable in U.S. Dollars to the Holders thereof,
together with all accrued and unpaid interest thereon, on January 15, 2022 (the Stated Maturity of principal of the Notes).

 

(b)                
The Notes shall bear interest at 4.200% per annum, from and including January 13, 2012, or from the most recent Interest
Payment Date (defined below) on which interest has been paid or provided for until the principal thereof becomes due and payable,
and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue
installment of interest at the same rate per annum. Interest shall be calculated on the basis of a 360-day year comprised of twelve
30-day months. Interest on the Notes shall be payable semi-annually in arrears in U.S. Dollars on January 15 and
July 15 of each year, commencing on July 15, 2012 (each such date, an “Interest Payment Date” for the purposes
of the Notes under this Fourth Supplemental Indenture). Payments of interest shall be made to the Person in whose name a Note (or
predecessor Note) is registered (which shall initially be the Depositary) at the close of business on the January 1 or July 1,
as the case may be, next preceding such Interest Payment Date (each such date, a “Regular Record Date” for the
purposes of the Notes under this Fourth Supplemental Indenture).

 

(c)                
For so long as the Notes are represented by one or more Global Notes, all payments of principal and interest shall be made
by the Company by wire transfer of immediately available funds in U.S. Dollars to the Depositary or its nominee, as the case may
be, as the registered owner of the Global Notes representing such Notes. In the event that definitive Notes shall have been issued,
all payments of principal and interest shall be made by the Company by wire transfer of immediately available funds in U.S. Dollars
to the accounts of the registered Holders thereof; provided, that the Company may elect to make such payments at the office
of the Paying Agent in The City of New York; and provided further, that the Company may at its option pay interest
by check to the registered address of each Holder of a definitive Note.

 

(d)                
The Notes shall trade in the Depositary’s Same-Day Funds Settlement System until Stated Maturity (or until they are
subject to acceleration pursuant to Article V of the Existing Indenture) and secondary market trading activity in the Notes
may be required by the Depositary to settle in immediately available funds.

 

(e)                
The Notes are subject to redemption by the Company in whole or in part in the manner described herein.

 

Section 1.06 Ranking.

                 

The
Notes shall be general unsecured obligations of the Company. The Notes shall rank pari passu in right of payment with all
unsecured and unsubordinated indebtedness of the Company and senior in right of payment to all subordinated indebtedness of the
Company.

                 

                 

Section 1.07 Sinking Fund.

 

The Notes are not subject to any sinking fund.

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Article
II

DEFINITIONS AND INCORPORATION BY REFERENCE

 

Section 2.01 Definitions.

 

(a)                
All capitalized terms used herein and not otherwise defined below shall have the meanings ascribed thereto in the Existing
Indenture.

 

(b)                
The following are definitions used in this Fourth Supplemental Indenture and to the extent that a term is defined both herein
and in the Existing Indenture, the definition in this Fourth Supplemental Indenture shall govern with respect to the Notes.

 

“Attributable Debt” for a
lease means, as of the date of determination, the present value of net rent for the remaining term of the lease. Rent shall be
discounted to present value at a discount rate that is compounded semi-annually. The discount rate shall be 10% per annum or, if
the Company elects, the discount rate shall be equal to the weighted average Yield to Maturity of the Notes. Such average shall
be weighted by the principal amount of the Notes then outstanding. Rent is the lesser of (a) rent for the remaining term of the
lease assuming it is not terminated, or (b) rent from the date of determination until the first possible termination date plus
the termination payment then due, if any. The remaining term of a lease includes any period for which the lease has been extended.
Rent does not include (1) amounts due for maintenance, repairs, utilities, insurance, taxes, assessments and similar charges,
or (2) contingent rent, such as that based on sales. Rent may be reduced by the discounted present value of the rent that any sublessee
must pay from the date of determination for all or part of the same property. If the net rent on a lease is not definitely determinable,
the Company may estimate it in any reasonable manner.

 

“Below Investment Grade Rating Event”
means the Notes are rated below Investment Grade by both Rating Agencies on any date from the date of the public notice of an arrangement
that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change
of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible
downgrade by either of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of
a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall
not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event) if the
Rating Agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm
or inform the Series Trustee in writing at the request of the Company that the reduction was the result, in whole or in part, of
any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or
not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).

 

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“Change of Control” means
the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any
“person” (as that term is used in Section 13(d)(3) of the Exchange Act) becomes the beneficial owner, directly
or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares. Notwithstanding
the foregoing, a transaction will not be deemed to involve a Change of Control if (1) the Company becomes a wholly owned subsidiary
of a holding company and (2) the holders of the Voting Stock of such holding company immediately following that transaction
are substantially the same as the holders of the Company’s Voting Stock immediately prior to that transaction.

 

“Change of Control Repurchase Event”
means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.

 

“Comparable Treasury Issue”
means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term
of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice,
in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes.

 

“Comparable
Treasury Price” means, with respect to any redemption date, (i) the average of four Reference Treasury Dealer Quotations
for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Series
Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations, or (iii) if only
one Reference Treasury Dealer Quotation is received, such quotation.

 

“Consolidated Total Assets”
means total consolidated assets as reflected in the Company’s most recent consolidated balance sheet preceding the date of
a determination under Section 6.01(i) of this Fourth Supplemental Indenture.

 

“Control,” as used with respect
to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition,
the terms “controlling,” “controlled by” and “under common control with”
have correlative meanings.

 

“Debt” means any debt for
borrowed money or any guarantee of such debt.

 

“Government Securities” means
direct obligations of the United States for the payment of which its full faith and credit is pledged, or obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the United States the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States.

 

“Investment Grade” means
a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s); a rating
of BBB- or better by S&P (or its equivalent under any successor rating categories of S&P); or the equivalent investment
grade credit rating from any additional Rating Agency or Rating Agencies selected by the Company.

 

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“Lien” means any mortgage,
pledge, security interest or lien to secure or assure payment of Debt.

 

“Moody’s” means Moody’s
Investors Service, Inc.

 

“Long-Term Debt” means Debt
that by its terms matures on a date more than 12 months after the date it was created or Debt that the obligor may extend
or renew without the obligee’s consent to a date more than 12 months after the date the Debt was created.

 

“Officer” means the Chief
Executive Officer, the President, the Chief Financial Officer, any Executive or Senior Vice President or the Principal Accounting
Officer (so long as such Principal Accounting Officer is at least a Vice President) of the Company.

 

“Principal Property” means
(i) any manufacturing facility, whether now or hereafter owned, located in the United States (excluding territories and possessions
other than Puerto Rico), except any such facility that in the opinion of the board of directors of the Company or any authorized
committee of such board is not of material importance to the total business conducted by the Company and its consolidated Subsidiaries,
and (ii) any shares of stock of a Restricted Subsidiary.

 

“Quotation Agent” means the
Reference Treasury Dealer appointed by the Company.

 

“Reference Treasury Dealer”
means (i) Deutsche Bank Securities Inc. and its successors (provided, however, that if such firm or such successor, as the case
may be, shall cease to be a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”),
the Company shall substitute therefor another Primary Treasury Dealer), (ii) one other Primary Treasury Dealer selected by Mitsubishi
UFJ Securities (USA), Inc. or its successor after consultation with the Company, (iii) one other Primary Treasury Dealer selected
by U.S. Bancorp Investments, Inc. or its successor after consultation with the Company, and (iv) one other Primary Treasury Dealer
selected by the Company.

 

“Rating Agency” means (1) each
of Moody’s and S&P; and (2) if either of Moody’s or S&P ceases to rate the Notes or fails to make a rating
of the Notes publicly available for reasons outside of the Company’s control, a “nationally recognized statistical
rating organization” as defined in Section 3(a)(62) of the Exchange Act, selected by the Company (as certified by a resolution
of the Company’s Board of Directors) as a replacement agency for Moody’s or S&P, or both, as the case may be.

 

“Reference
Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average,
as determined by the Series Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Series Trustee
by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date.

 

“Restricted Subsidiary” means
a Wholly-Owned Subsidiary that has substantially all of its assets located in the United States (excluding territories or possessions
other than Puerto Rico) and owns a Principal Property.

 

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“S&P” means Standard &
Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

 

“Sale-Leaseback Transaction”
means an arrangement pursuant to which the Company or a Restricted Subsidiary now owns or hereafter acquires a Principal Property,
transfers it to a person, and leases it back from the person.

 

“Treasury Rate” means, with
respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.

 

“Voting Stock” of any specified
“person” (as that term is used in Section 13(d)(3) of the Exchange Act) as of any date means the capital
stock or other equity interest of such person that is at the time entitled to vote generally in the election of the board of directors
or equivalent body of such person.

 

“Wholly-Owned Subsidiary”
of any specified Person means a corporation all of whose Voting Stock is owned by the Company or a Wholly-Owned Subsidiary, the
accounts of which are consolidated with those of the Company in its consolidated financial statements.

 

“Yield to Maturity” means
the yield to maturity on a security at the time of its issuance or at the most recent determination of interest on the security.

 

Section 2.02 Other Definitions.

 

	Term	Defined in Section
	 	 
	“Additional Notes”	1.03

 

Section 2.03 Incorporation
by Reference of Trust Indenture Act.

 

The Indenture is subject to the mandatory provisions
of the Trust Indenture Act, which are incorporated by reference in and made a part of the Indenture. The following Trust Indenture
Act terms have the following meanings:

 

“indenture securities” means the
Notes.

 

“indenture security holder” means
a Holder.

 

“indenture to be qualified” means
this Fourth Supplemental Indenture.

 

“indenture trustee” or “institutional
trustee” means the Series Trustee.

 

“obligor” on the indenture securities
means the Company and any other obligor on the indenture securities.

 

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All other Trust Indenture Act terms used in
this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined
by Commission rule have the meanings assigned to them by such definitions.

 

Article
III

REDEMPTION

Section 3.01 Optional Redemption.

 

The Notes are subject to redemption, in whole
or in part, on any date prior to October 15, 2021 (three months prior to the stated maturity thereof), at the Company’s option
at a Redemption Price equal to the greater of:

 

		(i)     	100% of the principal amount of the Notes to be redeemed, and
	 	 	 
	 	(ii)	as determined by the Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest in respect of the Notes to be redeemed (not including any portion of those payments of interest accrued as of the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 30 basis points,

 

plus accrued and unpaid interest to the redemption
date.

 

In addition, at any time on or after October
15, 2021 (three months prior to the stated maturity of the Notes), the Company may also redeem some or all of the Notes at its
option, at a Redemption Price equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest
to the redemption date.

 

The Company may provide in the redemption notice
described in Section 3.04 herein that payment of such Redemption Price and performance of the Company’s obligations with
respect to such redemption or purchase may be performed by another Person. Any such notice may, at the Company’s discretion,
be subject to the satisfaction of one or more conditions precedent.

 

Section 3.02 Notices to Series Trustee.

 

If the Company elects to redeem the Notes pursuant
to this Article, it shall notify the Series Trustee in writing of the redemption date and the principal amount of the Notes to
be redeemed.

 

The Company shall give each notice to the Series
Trustee provided for in this Section at least 35 days but not more than 60 days before the redemption date unless the Series Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers’ Certificate and an Opinion of Counsel from
the Company to the effect that such redemption will comply with the conditions herein. If fewer than all the Notes are to be redeemed,
the record date relating to such redemption shall be selected by the Company and given to the Series Trustee, which record date
shall be not fewer than 15 days after the date of notice to the Series Trustee. Any such notice may be canceled at any time
prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect.

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Section 3.03 Selection of Notes To
Be Redeemed.

 

If fewer than all the Notes are to be redeemed,
the Series Trustee shall select the Notes to be redeemed pro rata or by lot or by a method that complies with applicable legal
and securities exchange requirements, if any, and that the Series Trustee in its sole discretion shall deem to be fair and appropriate
and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Series Trustee
shall make the selection from outstanding Notes not previously called for redemption. The Series Trustee may select for redemption
portions of the principal of the Notes that have denominations equal to $2,000 or an integral multiple of $1,000 in excess thereof.
The Notes and portions of them the Series Trustee selects shall be in amounts of $2,000 or an integral multiple of $1,000 in excess
therof. Provisions of this Fourth Supplemental Indenture that apply to the Notes called for redemption also apply to portions of
the Notes called for redemption. The Series Trustee shall notify the Company promptly of the Notes or portions of the Notes to
be redeemed.

 

Section 3.04 Notice of Redemption.

 

At least 30 days but not more than 60 days
before a date for redemption of Notes, the Company shall mail a notice of redemption by first-class mail to each Holder of Notes
to be redeemed at such Holder’s registered address.

 

The notice shall identify the Notes to be redeemed
and shall state:

(a)                 the redemption date;

(b)                 the calculation of the redemption
price and the amount of accrued interest to the redemption date;

(c)                 the name and address of the
Paying Agent;

(d)                 that the Notes called for
redemption must be surrendered to the Paying Agent to collect the redemption price;

(e)                 if fewer than all the outstanding
the Notes are to be redeemed, the certificate numbers and principal amounts of the particular the Notes to be redeemed;

(f)                 that, unless the Company
defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of
this Indenture, interest on the Notes (or portion thereof) called for redemption ceases to accrue on and after the Redemption Date;

(g)                 the CUSIP number, if any,
printed on the Notes being redeemed; and

(h)                 that no representation is
made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.

 

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At the Company’s request, the Series
Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense. In such event, the
Company shall provide the Series Trustee with the information required by this Section.

 

Section 3.05 Effect of Notice of Redemption.

 

Once notice of redemption is mailed, the Notes
called for redemption become due and payable on the Redemption Date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in the notice, plus accrued and unpaid interest, if
any, to the redemption date; provided, however, that if the redemption date is after a Regular Record Date and on
or prior to the Interest Payment Date, the accrued interest shall be payable to the holder of the Notes registered on the relevant
Regular Record Date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice
to any other Holder.

 

Section 3.06 Deposit of Redemption
Price.

 

Prior to 11:00 a.m. New York City time on the
redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on
that date other than the Notes or portions of the Notes called for redemption that have been delivered by the Company to the Series
Trustee for cancellation.

 

Section 3.07 Notes Redeemed in Part.

 

Upon surrender of a Note that is redeemed in
part, the Company shall execute and the Series Trustee shall authenticate for the Holder (at the Company’s expense) a new
Note equal in principal amount to the unredeemed portion of the Notes surrendered.

 

Article
IV 

 

CHANGE
OF CONTROL

 

Section 4.01 Change of Control.

 

(a)                
Upon the occurrence of a Change of Control Repurchase Event, unless all Notes have been called for redemption pursuant to
Section 3.01 hereof, each Holder of Notes of such series shall have the right to require the Company to repurchase all or any part
(equal to $2,000 or an integral multiple of $1,000 in excess thereof) of such Holder’s Notes at an offer price in cash equal
to 101% of the aggregate principal amount of Notes repurchased plus any accrued and unpaid interest on the Notes repurchased to
the date of purchase (the “Change of Control Payment”).

 

(b)                
Within 30 days following any Change of Control Repurchase Event or, at the Company’s option, prior to any proposed
Change of Control, but after the public announcement of the proposed Change of Control, the Company shall mail, or cause to be
mailed, a notice (a “Change in Control Offer”) to each Holder, with a copy to the Series Trustee, describing the transaction
or transactions that constitute or may constitute the Change of Control Repurchase Event and specifying:

 

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(i)                  
that the Change of Control Offer is being made pursuant to this Section 4.01 and that all Notes tendered will be accepted
for payment;

(ii)                
the Change of Control Payment and the purchase date, which shall be a Business Day no earlier than 30 days and no later
than 60 days from the date such notice is mailed (the “Change of Control Payment Date”);

(iii)               
the CUSIP numbers for the Notes;

(iv)              
that any Note not tendered will continue to accrue interest;

(v)                
that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant
to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;

(vi)              
that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such
Notes to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date;

(vii)             
that Holders will be entitled to withdraw their election referred to in clause (vi) if the Paying Agent receives, not later
than the close of business on the second Business Day preceding the Change of Control Payment Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder
is withdrawing his election to have the Notes purchased;

(viii)           
that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion will be equal to $2,000 in principal amount or an integral multiple
of $1,000 in excess thereof; and

(ix)              
if the notice is mailed prior to the date of consummation of the Change of Control, that the Change of Control Offer is
conditioned on the Change of Control Repurchase Event occurring on or prior to the payment date specified in the notice.

 

(c)                
The Company shall cause the Change of Control Offer to remain open for at least 20 Business Days or such longer period as
is required by applicable law. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase
of the Notes as a result of a Change in Control Repurchase Event. To the extent that the provisions of any securities laws or regulations
conflict with the provisions of this Section 4.01, the Company will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under this Section 4.01 by virtue of such conflict.

 

    	13

    	 

    

 

(d)                
On the Change of Control Payment Date, the Company will, to the extent lawful:

(i)                  
accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;

(ii)                
deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes
properly tendered; and

(iii)               
deliver or cause to be delivered to the Series Trustee the Notes so accepted together with an Officers’ Certificate
stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

 

(e)                
The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes,
and the Series Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a
principal amount of $2,000 or an integral multiple of $1,000 in excess thereof. The Company will publicly announce the results
of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

 

(f)                 
The Company shall not be required to make a Change of Control Offer upon a Change of Control Repurchase Event if a third
party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.01 applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and
not withdrawn under such Change of Control Offer.

 

Article
V

REMEDIES

Section 5.01 Events of Default.

 

(a)                 For purposes of the Notes, the following
events of default shall replace the events of default in Section 501(1), (6) and (7) of the Existing Indenture in its entirety
and shall be in addition to the other events of default in Section 501 of the Existing Indenture, which shall in all respects be
applicable in respect of the Notes.

 

(b)                 For purposes of the Notes, Section 501(1)
of the Existing Indenture is replaced in its entirety by inserting therein a new Section 501(1) to read as follows:

 

“(1)                 default in the payment
of any interest on any Note of such series when such interest becomes due and payable, and continuance of such default for a period
of 30 days;”.

 

    	14

    	 

    

 

(c)                 For purposes of the Notes, Section 501(6)
of the Existing Indenture is replaced in its entirety by inserting the word “Restricted” before each reference to “Subsidiary”
therein, such that Section 501(6) shall read as follows:

 

“(6)             the
entry by a court or agency or supervisory authority having competent jurisdiction of:

 

(a)                a decree
or order for relief in respect of the Company or any Restricted Subsidiary in an involuntary proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law and such decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or

 

(b)                a decree
or order adjudging the Company or any Restricted Subsidiary to be insolvent, or approving a petition seeking reorganization, arrangement,
adjustment or composition of the Company or any Restricted Subsidiary and such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or

 

(c)                 a decree
or order appointing any Person to act as a custodian, receiver, liquidator, assignee, trustee or other similar official of the
Company or any Restricted Subsidiary or of any substantial part of the property of the Company or any Restricted Subsidiary, as
the case may be, or ordering the winding up or liquidation of the affairs of the Company or any Restricted Subsidiary and such
decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or”.

 

(d)                 For purposes of the Notes, Section 501(7)
of the Existing Indenture is replaced in its entirety by inserting the word “Restricted” before each reference to “Subsidiary”
therein, such that Section 501(7) shall read as follows:

 

“(7)             the
commencement by the Company or any Restricted Subsidiary of a voluntary proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or of a voluntary proceeding seeking to be adjudicated insolvent or the consent by the Company
or any Restricted Subsidiary to the entry of a decree or order for relief in an involuntary proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any insolvency proceeding against it, or the filing by
the Company or any Restricted Subsidiary of a petition or answer or consent seeking reorganization or relief under any applicable
law, or the consent by the Company or any Restricted Subsidiary to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or similar official of the Company or any Restricted Subsidiary
or any substantial part of the property of the Company or any Restricted Subsidiary or the making by the Company or any Restricted
Subsidiary of an assignment for the benefit of creditors, or the taking of corporate action by the Company or any Restricted Subsidiary
in furtherance of any such action; or”.

 

 

    	15

    	 

    

 

Article
VI

COVENANTS

 

The covenants set forth in this Article VI
shall be applicable to the Company in addition to the covenants in Article Ten of the Existing Indenture, which shall in all respects
be applicable in respect of the Notes.

 

Section 6.01 Limitation on Liens.

 

The Company shall not, and shall not permit
any Restricted Subsidiary to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind
on a Principal Property securing Debt unless one or more of the following exceptions apply:

 

(a)                 the Lien equally and ratably secures
the Notes and the Debt or any other obligation of the Company or a Subsidiary; provided that any obligation secured by a
Lien is not subordinated to the Notes;

 

(b)                 the Lien secures Debt incurred to finance
all or part of the purchase price or the cost of construction or improvement of property of the Company or a Restricted Subsidiary;
provided that (i) such Lien shall not extend to any other Principal Property owned by the Company or a Restricted Subsidiary
at the time the Lien is incurred, except for unimproved real property used for such construction or improvement, and (ii) such
Debt shall not be incurred more than 18 months after the later of the acquisition, completion of construction or improvement, or
commencement of full operation of the property subject to the Lien;

 

(c)                 the Lien is on property of an entity
at the time the entity merges into or consolidates with the Company or a Restricted Subsidiary;

 

(d)                 the Lien is on property at the time such
property is acquired by the Company or a Restricted Subsidiary;

 

(e)                 the Lien is on property of a Person at
the time such Person becomes a Restricted Subsidiary;

 

(f)                 the Lien secures Debt of a Restricted
Subsidiary owing to the Company or another Restricted Subsidiary;

 

(g)                 the Lien is in favor of a government
or governmental entity and secures (i) payments pursuant to a contract or statute, or (ii) Debt incurred to finance all or
part of the purchase price or cost of construction or improvement of the property subject to the Lien;

 

(h)                 the Lien extends, renews or replaces
in whole or in part a Lien (“existing Lien”) permitted by any of clauses (a) through (g) or extends to
property that at the time is not a Principal Property; provided that (i) such Lien does not extend beyond the property
subject to the existing Lien and improvements and construction on such property, and (ii) the amount of the Debt secured by
such Lien does not exceed the amount of the Debt secured at the time by the existing Lien unless the existing Lien or a predecessor
Lien was incurred under clause (a) or (f); or

 

    	16

    	 

    

 

(i)                 the Debt plus all other Debt secured
by Liens on Principal Property at the time does not exceed 10% of Consolidated Total Assets, excluding (i) Debt secured by a Lien
permitted by any of clauses (a) through (h) of this Section and (ii) Debt secured by a Lien incurred prior to the date
of the Existing Indenture that would have been permitted by any of those clauses if the Existing Indenture had been in effect at
the time the Lien was incurred, and including Attributable Debt for any lease permitted by Section 6.02(d) of this Fourth Supplemental
Indenture not otherwise permitted by any of clauses (a) through (h) of this Section.

 

Section 6.02 Limitation on Sale and
Leaseback Transactions.

 

The Company shall not, and shall not permit
any Restricted Subsidiary to, enter into a Sale-Leaseback Transaction for a Principal Property, unless one or more of the following
exceptions apply:

 

(a)                 the lease has a term of three years or
less;

 

(b)                 the lease is between the Company and
a Restricted Subsidiary or between Restricted Subsidiaries;

 

(c)                 the Company or a Restricted Subsidiary
under Sections 6.01(b) through (h) of this Fourth Supplemental Indenture may create a Lien on the property to secure Debt
in an amount at least equal to the Attributable Debt for the lease;

 

(d)                 the Company or a Restricted Subsidiary
under Section 6.01(i) of this Fourth Supplemental Indenture could create a Lien on the Principal Property to secure Debt in
an amount at least equal to the Attributable Debt for the lease; or

 

(e)                 the Company or a Restricted Subsidiary,
within 180 days of the effective date of the lease, retires Long-Term Debt of the Company or a Restricted Subsidiary in an amount
at least equal to the Attributable Debt for the lease, excluding Debt of the Company that is subordinated to the Notes and Debt,
if paid in cash, that is owned by the Company or a Restricted Subsidiary.

 

 

 

 

    	17

    	 

    

 

Article
VII 

 

SERIES
TRUSTEE, SECURITY REGISTRAR AND PAYING AGENT WITH RESPECT TO THE NOTES

 

Section 7.01 Appointment by the Company
of U.S. Bank National Association as Series Trustee etc.

 

Pursuant
to the Existing Indenture as amended by this Fourth Supplemental Indenture, the Company hereby appoints U.S. Bank National Association
as Series Trustee, Security Registrar and Paying Agent under the Indenture with respect to the Notes (but only with respect to
the Notes) with all of the rights, powers, trusts, duties and obligations of Trustee, Security Registrar and Paying Agent under
the Indenture with respect to the Notes (but only with respect to the Notes) with like effect as if originally named as such in
the Indenture.

 

Section 7.02 Acceptance by U.S. Bank
National Association of Appointment as Series Trustee etc.

 

U.S. Bank
National Association hereby accepts its appointment as Series Trustee, Security Registrar and Paying Agent under the Indenture
with respect to the Notes (but only with respect to the Notes) and accepts all of the rights, powers, trusts, duties and obligations
of Trustee, Security Registrar and Paying Agent under the Indenture with respect to the Notes (but only with respect to the Notes),
upon the terms and conditions set forth herein and therein, with like effect as if originally named as such in the Indenture. Pursuant
to the Existing Indenture, there shall continue to be vested in the Original Trustee all of its rights, powers, trusts, duties
and obligations as Trustee under the Existing Indenture with respect to all of the series of securities as to which it has served
and continues to serve as Trustee, and the Original Trustee shall have no rights, powers, trusts, duties and obligations with respect
to the Notes.

 

Section 7.03 Eligibility of Series
Trustee.

 

The Series
Trustee hereby represents that it is qualified and eligible under the provisions of the Trust Indenture Act and Section 610 of
the Existing Indenture to accept its appointment as Series Trustee with respect to the Notes.

 

Section 7.04 Concerning the Series
Trustee.

 

Neither the
Original Trustee nor the Series Trustee assumes any duties, responsibilities or liabilities by reason of this Fourth Supplemental
Indenture other than as set forth in the Existing Indenture and, in carrying out its responsibilities hereunder, each shall have
all of the rights, powers, privileges, protections, duties and immunities which it possesses under the Existing Indenture. The
Original Trustee and the Series Trustee shall not constitute co-trustees of the same trust, and each of the Original Trustee and
the Series Trustee shall be trustee of a trust or trusts under the Indenture separate and apart from any trust or trusts under
the Indenture administered by the other trustee. The Original Trustee shall have no liability for any acts or omissions of the
Series Trustee and the Series Trustee shall have no liability for any acts or omissions of the Original Trustee.

 

    	18

    	 

    

 

References in this Fourth Supplemental Indenture
to sections of the Existing Indenture that require or permit actions by the Original Trustee with respect to the Notes shall be
deemed to require or permit actions only by the Series Trustee and the Original Trustee shall have no responsibility therefor.

 

Article
VIII

MISCELLANEOUS

 

Section 8.01 Issuance of Additional
Notes.

 

For purposes of the Notes, Section 901 of the
Existing Indenture is hereby amended by inserting therein a new Section 901(8) to read as follows:

 

“(8) to issue additional Notes
of any series in the future pursuant to Section 303 of this Indenture; provided that such additional Notes have the same terms
as, and be deemed part of the same series as, the Notes issued hereunder.”

 

Section 8.02 Amendment to Section
901(6)

 

For purposes of the Notes, Section 901(6) of
the Existing Indenture is hereby amended to read as follows:

 

“(6)                 to evidence and provide acceptance
of the appointment of a successor Trustee hereunder or if other than the Person named as the “Trustee” in the first
paragraph of this Indenture (or a successor to such Person pursuant to the applicable provisions of this Indenture) (for purposes
of this Section 901(6), herein called the “Original Trustee”), the identity of a Trustee for such Notes, and, at the
election of the Company, other Notes of any series to be issued thereafter pursuant to this Indenture (a “Series Trustee”),
and if not the Series Trustee, the identity of each Security Registrar, Paying Agent or Authenticating Agent with respect to such
Notes, and such additions or changes to any provisions of this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being understood that, anything contained herein or in any
Board Resolution, Officer’s Certificate or supplemental indenture to the contrary notwithstanding, that (i) nothing herein
shall constitute such Trustees co-trustees of the same trust, (ii) each such Trustee shall be a trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other such Trustee, (iii) the Series Trustee shall have
all the rights, powers, trusts, duties and obligations of the Original Trustee with respect to, and only with respect to, such
Notes, (iv) the Original Trustee shall have no rights, powers, trusts, duties or obligations with respect to such Notes, (v) no
Trustee hereunder shall have any liability for any acts or omissions of any other Trustee hereunder and (vi) no appointment of
a Series Trustee shall become effective until the acceptance of the appointment by the Series Trustee in writing; or”

 

Section 8.03 Trust Indenture Act Controls.

 

If any provision of this Fourth Supplemental
Indenture limits, qualifies or conflicts with another provision that is required or deemed to be included in this Fourth Supplemental
Indenture by the Trust Indenture Act, the required or deemed provision shall control.

 

    	19

    	 

    

 

Section 8.04 Notices.

 

Any notice or communication shall be in writing
and delivered in person or mailed by first-class mail or sent by facsimile (with a hard copy delivered in person or by mail promptly
thereafter) and addressed as follows:

 

if to the Company:

 

The Valspar Corporation

901 – Third Avenue South

Minneapolis, Minnesota 55402

Attention: Rolf Engh

Facsimile: (612) 375-7313

 

with a copy to:

 

Lindquist & Vennum PLLP

4200 IDS Center

80 South 8th Street

Minneapolis, Minnesota 55402

Attention: Richard D. McNeil

Facsimile: (612) 371-3207

 

if to the Series Trustee:

 

U.S. Bank National Association

60 Livingston Avenue

EP-MN-WS3C

St. Paul, MN 55107-2292

Attn: Corporate Trust Administration

Fax (651) 495-8097

 

The Company or the Series Trustee by notice to
the other may designate additional or different addresses for subsequent notices or communications.

 

Section 8.05 When Notes Disregarded.

 

In determining whether the Holders of the required
principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or by any Person directly
or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and
deemed not to be Outstanding, except that, for the purpose of determining whether the Series Trustee shall be protected in relying
on any such direction, waiver or consent, only Notes that a Responsible Officer of the Series Trustee actually knows are so owned
shall be so disregarded. Also, subject to the foregoing, only Notes Outstanding at the time shall be considered in any such determination.

 

    	20

    	 

    

 

Section 8.06 Rules by Series Trustee,
Paying Agent and Security Registrar.

 

The Series Trustee may make reasonable rules
for action by or a meeting of Holders. The Security Registrar and the Paying Agent or co-registrar may make reasonable rules for
their functions.

 

Section 8.07 Payment on Business Days.

 

If a payment date is not a Business Day, payment
shall be made on the next succeeding day that is a Business Day, and no interest shall accrue for the intervening period. If a
Regular Record Date is not a Business Day, the Regular Record Date shall not be affected.

 

Section 8.08 Governing Law.

 

THIS FOURTH SUPPLEMENTAL INDENTURE AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

Section 8.09 No Personal Liability
of Directors, etc.

 

None of the Company’s directors, officers,
employees, incorporators or stockholders, as such, shall have any liability for any of the Company’s obligations under the
Notes, the Indenture, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder
of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance
of the Notes.

 

Section 8.10 Successors.

 

All agreements of the Company in the Indenture
and the Notes shall bind its successors. All agreements of the Series Trustee in the Indenture shall bind its successors.

 

Section 8.11 Multiple Originals.

 

The parties may sign any number of copies of
this Fourth Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
One signed copy is enough to prove this Fourth Supplemental Indenture.

 

Section 8.12 Table of Contents; Headings.

 

The table of contents and headings of the Articles
and Sections of this Fourth Supplemental Indenture have been inserted for convenience of reference only, are not intended to be
considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

 

Section 8.13 Trustees Not Responsible
for Recitals.

 

The recitals
contained herein shall be taken as statements of the Company, and the Original Trustee and the Series Trustee do not assume any
responsibility for their correctness. The Original Trustee and the Series Trustee make no representations as to the validity or
sufficiency of this Fourth Supplemental Indenture, except that the Original Trustee and the Series Trustee each represents that
it is duly authorized to execute and deliver this Fourth Supplemental Indenture and with respect to the Series Trustee to perform
its obligations hereunder.

 

Section 8.14 Adoption, Ratification
and Confirmation.

 

The Existing Indenture, as supplemented and
amended by this Fourth Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed.

 

 

 

 

    	21

    	 

    

IN WITNESS WHEREOF, the parties have caused
this Fourth Supplemental Indenture to be duly executed as of the date first written above.

 

	 	THE VALSPAR CORPORATION	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	 
	 	 	
        Name:

        Title:
	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as Series Trustee	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	 
	 	 	
        Name:

        Title:
	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Original Trustee	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	 
	 	 	
        Name:

        Title:
	 

 

 

 

 

 

This is a signature page
to the Fourth Supplemental Indenture.

 

 

    	22

    	 

    

EXHIBIT A

 

THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING
OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. THIS NOTE MAY NOT
BE EXCHANGED IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED,
IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITORY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

CUSIP No. 920355 AG9

ISIN No. US920355AG93

 

THE VALSPAR CORPORATION

 

4.200% NOTE DUE 2022

 

	$400,000,000	No.: R- ●

 

The Valspar Corporation, a Delaware corporation
(herein called the “Company”), for value received, hereby promises to pay to CEDE & CO., or registered assigns,
the principal sum of FOUR HUNDRED MILLION DOLLARS or such other Principal Amount as shall be set forth
on Schedule I hereto on January 15, 2022 and to pay interest thereon at the rate of 4.200% per annum from the Initial Interest
Accrual Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, on January 15
and July 15 of each year, commencing July 15, 2012 (each an “Interest Payment Date”), until the principal hereof is
paid or made available for payment.

 

The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, except as provided in the Indenture hereinafter referred to, be paid to
the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest, which will be the January 1 and July 1, as the case may be, immediately preceding each Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date and either may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Series Trustee, notice
whereof shall be given to the Holders not less than ten days prior to such Special Record Date, or may be paid at any time in any
other lawful manner, all as more fully provided in the Indenture. Payment of the principal of and interest on this Note will be
made at the office or agency of the Company maintained for that purpose in Minneapolis, Minnesota, or in such other office or agency
as may be established by the Company pursuant to the Indenture (initially the principal corporate trust office of the Series Trustee
in New York, New York (the “Corporate Trust Office”)), in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may
be made at the option of the Company (i) by check mailed to the address of the Person entitled thereto as such address shall appear
in the Note Register or (ii) by wire transfer to an account maintained by the Person entitled thereto as specified in the Note
Register. Payments of principal and interest at maturity will be made against presentation of this Note at the Corporate Trust
Office (or such other office as may be established pursuant to the Indenture), by check or wire transfer.

 

    	A-1

    	 

    

 

Reference is hereby made to the further provisions
of this Note set forth on the reverse side hereof, which further provisions shall for all purposes have the same effect as though
fully set forth at this place.

 

Unless the Certificate of Authentication hereon
has been executed by the Series Trustee or an Authenticating Agent under the Indenture referred to on the reverse hereof by the
manual signature of one of its authorized officers, this Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.

 

 

 

 

 

 

 

 

    	A-2

    	 

    

IN WITNESS WHEREOF, the Company has caused this
Note to be signed in its name by the manual or facsimile signature of its Chief Executive Officer, its President or one of its
Vice Presidents and attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries.

 

Date: January 13, 2012

 

	 	THE VALSPAR CORPORATION	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	 
	 	 	
        Name:

        Title:
	 
	ATTEST:	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	Secretary	 	 	 	 

 

 

 

 

 

    	A-3

    	 

    

Series Trustee’s Certificate
of Authentication

 

This is one of the Notes described in the Indenture.

 

Dated: January 13, 2012

	 	U.S. Bank National Association, as Series Trustee	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	 
	 	 	Authorized Signatory	 

 

 

 

 

 

 

 

 

    	A-4

    	 

    

(Reverse of Note)

 

THE VALSPAR CORPORATION

 

4.200% NOTE DUE 2022

 

 

1.                 This Note is one of a duly authorized
issue of securities of the Company designated as its 4.200% Notes due 2022 (the “Notes”), issued under an Indenture
dated as of April 24, 2002 (herein called, together with the First Supplemental Indenture dated as of April 30, 2002, the Second
Supplemental Indenture dated as of April 17, 2007, the Third Supplemental Indenture dated as of June 19, 2009 and the Fourth Supplemental
Indenture referred to below and all other indentures supplemental thereto, the “Indenture”) between the Company and
The Bank of New York Mellon Trust Company, N.A. (successor to Bank One Trust Company, N.A.), as trustee, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of the respective rights thereunder of the Company,
the Original Trustee (as defined below), the Series Trustee (as defined below) and the Holders of the Notes, and the terms upon
which the Notes are, and are to be, authenticated and delivered. The indebtedness of the Company evidenced by the Notes, including
the principal thereof and interest thereon (including post-default interest).

 

2.                 This Note is one of the series designated
on the face hereof, limited to an aggregate principal amount not to exceed $400,000,000, which amount may be increased at the option
of the Company if in the future it determines that it may wish to sell additional Notes of this series, as specified in the Fourth
Supplemental Indenture among the Company, The Bank of New York Mellon Trust Company, N.A., as original trustee (herein called the
“Original Trustee,” which term includes any successor trustee thereto under the Indenture) and U.S. Bank National Association,
as series trustee for the Notes (herein called the “Series Trustee,” which term includes any successor trustee thereto
with respect to the Notes under the Indenture) and as Security Registrar and Paying Agent with respect to the Notes, dated as of
January 13, 2012, establishing the form and certain terms of the Notes pursuant to the Indenture (the “Fourth Supplemental
Indenture”). References herein to “this series” mean the series of Notes designated on the face hereof.

 

3.                 The Notes are subject to redemption, in
whole or in part, on any date prior to October 15, 2021 (three months prior to the stated maturity thereof), at the Company’s
option at a Redemption Price equal to the greater of:

 

(i)                  
100% of the principal amount of the Notes to be redeemed, and

 

(ii)                
as determined by the Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and
interest in respect of the Notes to be redeemed (not including any portion of those payments of interest accrued as of the date
of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate plus 30 basis points, plus accrued and unpaid interest to the redemption date,

 

plus accrued and unpaid interest to the redemption date.

 

    	A-5

    	 

    

 

In addition, at any time on or after October
15, 2021 (three months prior to the stated maturity of the Notes), the Company may also redeem some or all of the Notes at its
option, at a Redemption Price equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest
to the redemption date.

 

“Comparable Treasury Issue” means
the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the
Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to the remaining term of such Notes.

 

“Comparable Treasury Price” means,
with respect to any redemption date, (i) the average of four Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Series Trustee obtains fewer than four
such Reference Treasury Dealer Quotations, the average of all such quotations, or (iii) if only one Reference Treasury Dealer Quotation
is received, such quotation.

 

“Quotation Agent” means the Reference
Treasury Dealer appointed by the Company.

 

“Reference Treasury Dealer” means
(i) Deutsche Bank Securities Inc. and its successors (provided, however, that if such firm or such successor, as the case may be,
shall cease to be a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”), the
Company shall substitute therefor another Primary Treasury Dealer), (ii) one other Primary Treasury Dealer selected by Mitsubishi
UFJ Securities (USA), Inc. or its successor after consultation with the Company, (iii) one other Primary Treasury Dealer selected
by U.S. Bancorp Investments, Inc. or its successor after consultation with the Company, and (iv) one other Primary Treasury Dealer
selected by the Company.

 

“Reference Treasury Dealer Quotations”
means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Series Trustee,
of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Series Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business
day preceding such redemption date.

 

“Treasury Rate” means, with respect
to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.

 

Any notice to holders of Notes of a redemption
pursuant to this paragraph 3 hereof will include the appropriate calculation of the redemption price, but does not need to include
the redemption price itself. The actual redemption price, calculated as described above, will be set forth in an Officers’
Certificate of the Company delivered to the Series Trustee no later than two Business Days prior
to the redemption date.

 

    	A-6

    	 

    

 

4.                 Upon the occurrence of a Change of Control
Repurchase Event, unless all Notes have been called for redemption pursuant to paragraph 3 of this Note, each Holder of the Notes
shall have the right to require the Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in
excess thereof) of such Notes at an offer price in cash equal to 101% of the aggregate principal amount of such Notes plus accrued
and unpaid interest thereon, if any, to the date of repurchase. “Change of Control Repurchase Event” means the occurrence
of both a Change of Control and a Below Investment Grade Rating Event, as such terms are defined in the Indenture. The Change of
Control Offer will be made in accordance with the terms specified in the Indenture.

 

5.                 If an Acceleration Event with respect
to the Notes shall occur and be continuing, the Series Trustee or the Holders of not less than
25% in principal amount of the Outstanding Notes may declare the principal of all Notes due and payable in the manner and with
the effect provided in the Indenture. An “Acceleration Event” is an Event of Default relating to bankruptcy, insolvency,
or reorganization of the Company as more specifically defined by the Indenture. The Indenture provides that such declaration and
its consequences may, in certain events, be annulled by the Holders of a majority in principal amount of the Outstanding Notes.

 

6.                 The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of
the Holders of Notes under the Indenture at any time by the Company and the Series Trustee with
the consent of the Holders of a majority in aggregate principal amount of Notes at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate principal amount of Notes at the time Outstanding, on behalf
of the Holders of all Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in
exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

 

7.                 No reference herein to the Indenture and
no provisions of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Note at the times, places and rate, and in the coin or currency, herein prescribed.

 

8.                 As provided in the Indenture and subject
to certain limitations therein set forth, the transfer of this Note may be registered on the Note Register of the Company, upon
surrender of this Note for registration of transfer at the office or agency of the Company to be maintained for that purpose in
New York, New York, or at such other office or agency as may be established by the Company for such purpose pursuant to the Indenture
(initially the principal corporate trust office of the Series Trustee in New York, New York),
duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company, and duly executed by
the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

    	A-7

    	 

    

 

9.                 The Notes are issuable only in fully registered
form, without coupons, in denominations of $2,000 or any amount in excess thereof which is an integral multiple of $1,000. As provided
in the Indenture, and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal
amount of Notes in authorized denominations, as requested by the Holder surrendering the same.

 

10.                 No service charge shall be made for any
such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.

 

11.                 Prior to the due presentment of this
Note for registration of transfer or exchange, the Company, the Series Trustee and any agent
of the Company or the Series Trustee may treat the Person in whose name this Note is registered
as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Series
Trustee, nor any such agent shall be affected by notice to the contrary.

 

12.                 Interest on the Notes shall be computed
on the basis of a 360-day year of twelve 30- day months. Interest shall be payable to and excluding any Interest Payment Date.

 

13.                 The Series
Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Series
Trustee.

 

14.                 This Note shall not be valid until authenticated
by the manual signature of the Series Trustee or an Authenticating Agent.

 

15.                 Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUT (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

 

16.                 Each Holder of this Note covenants and
agrees by such Holder’s acceptance thereof to comply with and be bound by the foregoing provisions.

 

17.                 All terms used in this Note which are
defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

 

 

 

    	A-8

    	 

    

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, the undersigned
hereby sell(s), assign(s) and transfer(s) unto

 

PLEASE INSERT SOCIAL SECURITY
OR

OTHER IDENTIFYING NUMBER
OF ASSIGNEE

 

	
         

         
	 
	PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
	 	 
	 	 
	 	 
	 	 

 

the within Security and all
rights thereunder, hereby irrevocably constituting and appointing ______ _____________________________ attorney to transfer said
Security on the books of the Company, with full power of substitution in the premises.

 

	Dated:	 	 
	Signature: 	 	 

 

	NOTICE: 	THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WITHIN INSTRUMENT IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

 

 

Signature Guarantee:

 

SIGNATURE GUARANTEE

 

Signatures must be guaranteed by an “eligible
guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation
in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program”
as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.

 

 

 

    	A-9

    	 

    

Schedule I

SCHEDULE OF TRANSFERS
AND EXCHANGES

The following increases
or decreases in Principal Amount of this Global Security have been made:

 

	Date of Exchange	 	Amount of Decrease in Principal Amount of this Global Security	 	Amount of Increase in Principal Amount of this Global Security	 	Principal Amount of this Global Security following such Decrease or Increase	 	Signature of Authorized Signatory of Series trustee or Custodian
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

 

 

 

 

 

 

    	A-10second amended

 

 

 

 

 

 

 

SECOND AMENDED AND RESTATED
CREDIT AGREEMENT 

DATED AS OF JANUARY 12, 2012

 

 

AMONG

 

ASSOCIATED ESTATES REALTY
CORPORATION,

AS BORROWER

 

AND

 

PNC BANK, NATIONAL ASSOCIATION

AS ADMINISTRATIVE AGENT

 

AND

 

PNC CAPITAL MARKETS, LLC, AS
CO-LEAD ARRANGER

AND BOOK MANAGER

 

AND

 

WELLS FARGO BANK, N.A., AS
SYNDICATION AGENT 

 

AND

 

WELLS FARGO SECURITIES, LLC, AS
CO-LEAD ARRANGER

 

AND

 

BANK OF AMERICA, N.A., AS
CO-DOCUMENTATION AGENT

 

AND

 

CITIBANK, N.A., AS
CO-DOCUMENTATION AGENT

 

AND

 

RBS CITIZENS BANK, N.A., AS CO-DOCUMENTATION
AGENT

 

AND

 

THE SEVERAL LENDERS

FROM TIME TO TIME PARTIES HERETO,

AS LENDERS

 

 

 

 

 

 

TABLE OF CONTENTS

 

Page

ARTICLE I DEFINITIONS. 1

1.1      Definitions. 1

1.2      Construction. 22

1.3      Accounting Principles. 22

ARTICLE II
THE CREDIT. 23

2.1      Generally. 23

2.2      Revolving Credit Advances. 23

2.3      Interest Rate Options. 23

2.4      Unused Fee. 24

2.5      Facility Fee and Other Fees. 24

2.6      Usury. 24

2.7      Voluntary Commitment Reductions. 25

2.8      Minimum Amount of Each Advance. 25

2.9      Final Principal Payment; Optional Prepayments. 25

2.10    Revolving Credit Loan Requests; Swing Loan Requests. 25

2.11    Conversion and Continuation of Outstanding Advances. 26

2.12    Changes in Interest Rate, Etc. 26

2.13    Rates Applicable After Event of Default 26

2.14    Method of Payment 27

2.15    Notes; Telephonic Notices. 27

2.16    Interest Payment Dates; Interest and Fee Basis. 27

2.17    Notification of Advances, Interest Rates and Prepayments. 27

2.18    Increasing Lenders and New Lenders. 27

2.19    Presumptions by Administrative Agent 29

2.20    Replacement of a Lender 29

2.21    Swing Advances. 30

2.22    Letter of Credit Subfacility. 31

2.23    Extension of Facility Termination Date. 36

ARTICLE III
UNENCUMBERED POOL PROPERTIES. 36

3.1      Eligibility of Projects. 36

3.2      Conditions Precedent to a Project Becoming a Qualifying
Unencumbered Project 37

3.3      Release of Subsidiary Guarantors and Qualifying Unencumbered
Projects. 37

3.4      Termination of Subsidiary Guaranty. 38

ARTICLE IV
INCREASED COSTS. 39

4.1      Increased Costs Generally. 39

4.2      Taxes. 40

4.3      Indemnity. 42

                                                                           -
i -

 

 

 

 

 

 

4.4      Settlement Date Procedures. 42

4.5      LIBOR Rate Unascertainable; Illegality; Increased Costs;
Deposits Not Available. 43

4.6      Administrative Agent’s and Lender’s Rights. 43

ARTICLE V
CONDITIONS PRECEDENT. 44

5.1      Initial Advance. 44

5.2      Each Advance. 45

ARTICLE VI
REPRESENTATIONS AND WARRANTIES. 46

6.1      Existence. 46

6.2      Authorization and Validity. 46

6.3      No Conflict; Government Consent 46

6.4      Financial Statements; Material Adverse Effect 46

6.5      Taxes. 47

6.6      Litigation and Guarantee Obligations. 47

6.7      Subsidiaries. 47

6.8      ERISA.. 47

6.9      Accuracy of Information. 47

6.10    Regulation U.. 47

6.11    Material Agreements. 48

6.12    Compliance With Laws. 48

6.13    Ownership of Projects. 48

6.14    Investment Company Act 48

6.15    Solvency. 48

6.16    Insurance. 48

6.17    REIT and Listing Status. 49

6.18    Title to Property. 49

6.19    Environmental Matters. 49

6.20    Office of Foreign Asset Control 49

6.21    Subsidiary Guaranty. 50

6.22    Intellectual Property. 50

ARTICLE VII
COVENANTS. 50

7.1      Financial Reporting. 50

7.2      Use of Proceeds. 52

7.3      Notice of Default 52

7.4      Conduct of Business. 52

7.5      Taxes. 52

7.6      Insurance. 52

7.7      Compliance with Laws. 53

7.8      Maintenance of Properties and Equipment 53

7.9      Inspection. 53

7.10    Maintenance of Status. 53

7.11    Dividends. 53

7.12    No Change in Control 53

7.13    Non-Real Estate Investments. 53

                                                                           -
ii -

 

 

 

 

 

7.14    Merger; Sale of Assets. 53

7.15    Acquisitions and Investments. 54

7.16    Liens. 54

7.17    Affiliates. 55

7.18    Secured Indebtedness. 55

7.19    Minimum Consolidated Tangible Net Worth. 55

7.20    Indebtedness and Cash Flow Covenants. 55

7.21    Environmental Matters. 56

7.22    Permitted Investments. 56

7.23    Additional Unsecured Indebtedness. 57

7.24    Limits on Ownership Encumbrances. 57

ARTICLE VIII
EVENTS OF DEFAULT. 57

ARTICLE IX
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES. 59

9.1      Acceleration. 59

9.2      Amendments. 60

9.3      Preservation of Rights. 61

9.4      Insolvency of Borrower 61

ARTICLE X
GENERAL PROVISIONS. 61

10.1    Survival of Representations. 61

10.2    Governmental Regulation. 61

10.3    No Plan Assets. 61

10.4    Headings. 61

10.5    Entire Agreement 61

10.6    Several Obligations; Benefits of this Agreement 61

10.7    Expenses; Indemnification. 62

10.8    Electronic Document Deliveries. 62

10.9    Accounting. 63

10.10  Severability of Provisions. 63

10.11  Nonliability of Lenders. 63

10.12  CHOICE OF LAW... 63

10.13  SUBMISSION TO JURISDICTION.. 63

10.14  WAIVER OF VENUE. 63

10.15  SERVICE OF PROCESS. 64

10.16  WAIVER OF JURY TRIAL. 64

ARTICLE XI
THE ADMINISTRATIVE AGENT. 64

11.1    Appointment and Authority. 64

11.2    Rights as a Lender 64

11.3    Exculpatory Provisions. 64

11.4    Reliance by Administrative Agent 65

11.5    Delegation of Duties. 65

11.6    Resignation of Administrative Agent 66

11.7    Non-Reliance on Administrative Agent and Other Lenders. 66

                                                                           -
iii -

 

 

 

 

 

11.8    No Other Duties, etc. 67

11.9    No Reliance on Administrative Agent’s Customer Identification
Program.. 67

11.10  Requests for Approval 67

11.11  Defaulting Lenders. 67

ARTICLE XII
SETOFF; RATABLE PAYMENTS. 68

12.1    Setoff. 68

12.2    Ratable Payments. 68

ARTICLE XIII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS. 69

13.1    Successors and Assigns Generally. 69

13.2    Assignments by Lenders. 69

13.3    Register 71

13.4    Participations. 71

13.5    Limitations upon Participant Rights Successors and Assigns
Generally. 71

13.6    Certain Pledges; Successors and Assigns Generally. 71

13.7    Confidentiality. 72

ARTICLE XIV
NOTICES. 72

14.1    Giving Notice. 72

14.2    Change of Address. 72

ARTICLE XV
PATRIOT ACT. 73

ARTICLE XVI
COUNTERPARTS. 73

 

EXHIBITS

 

EXHIBIT A - FORM OF NOTE

EXHIBIT B - COMPLIANCE CERTIFICATE

EXHIBIT C - FORM OF ASSIGNMENT AND ASSUMPTION

EXHIBIT D - SUBSIDIARY GUARANTY

EXHIBIT E - FORM OF OPINION
OF BORROWER’S COUNSEL

EXHIBIT F - LOAN REQUEST

EXHIBIT G - AMENDMENT TO
CREDIT AGREEMENT

EXHIBIT H - PRICING SCHEDULE

SCHEDULE 1.1 -  ORIGINAL FACILITY LETTERS OF CREDIT

SCHEDULE 3.1 -    INITIAL QUALIFYING UNENCUMBERED PROJECTS AND 

                                SUBSIDIARY GUARANTORS

SCHEDULE 6.6 -
LITIGATION

SCHEDULE 6.7 - SUBSIDIARIES
OF BORROWER

SCHEDULE 6.13 -  EXCEPTIONS,
IF ANY, TO OWNERSHIP FREE OF UNPERMITTED 

                                LIENS

SCHEDULE 6.19 - ENVIRONMENTAL MATTERS

                                                                           -
iv -

 

 

 

 

 

SECOND AMENDED
AND RESTATED CREDIT AGREEMENT

This Second
Amended and Restated Credit Agreement, dated as of January 12, 2012, is among
Associated Estates Realty Corporation, an Ohio corporation (the “Borrower”),
PNC Bank, National Association, and the several banks, financial institutions
and other entities from time to time parties to this Credit Agreement
(collectively, the “Lenders”), PNC Bank, National Association, not
individually, but as “Agent” or “Administrative Agent” and Wells Fargo
Bank, N.A., as “Syndication Agent.”

RECITALS

WHEREAS, the Borrower is
primarily engaged in the business of purchasing, owning, operating, developing
and managing apartment communities.

WHEREAS,  the Borrower and
certain of the Lenders are parties to that certain Amended and Restated Credit
Agreement dated as of October 18, 2010, as amended by a First Amendment thereto
dated as of June 3, 2011 (as amended, the “Original Agreement”).

WHEREAS, the Borrower has
requested that the Lenders agree to amend and restate the Original Agreement
to, among other things, increase the maximum aggregate amount of loans
available thereunder, provide for an extension of the maturity date thereof and
modify certain of the pricing and financial covenants thereunder.

WHEREAS, the Lenders are
willing to so amend and restate the Original Agreement in consideration of the
Borrower’s agreement to the terms and conditions of this Agreement.

NOW, THEREFORE,
in consideration of the mutual covenants and agreements herein contained, the
parties hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1       
Definitions.  As used in this
Agreement:

“Acquisition”
means any transaction, or any series of related transactions, consummated on or
after the date of this Agreement, by which the Borrower or any of its
Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership.

“Adjusted Funds
From Operations” shall mean Funds From Operations, as adjusted for impairments
and other non-cash charges and without any reduction  for Defeasance Costs.

“Administrative
Agent” means PNC Bank, National Association in its capacity as agent for the
Lenders pursuant to Article XI, and not in its individual capacity as a
Lender, and any successor Administrative Agent appointed pursuant to Article
XI.

 

 

 

 

 

 

“Advance” means
a borrowing hereunder consisting of the aggregate amount of the several Loans
made by one or more of the Lenders to the Borrower of the same Type and, in the
case of LIBOR Rate Advances, for the same Interest Period, including Swing
Advances.

“Affiliate” as to any
Person shall mean any other Person (i) which directly or indirectly controls,
is controlled by, or is under common control with such Person, or (ii) which
beneficially owns or holds 5% or more of any class of the voting or other
equity interests of such Person, or (iii) 5% or more of any class of voting
interests or other equity interests of which is beneficially owned or held,
directly or indirectly, by such Person.  

“Affordable Housing
Projects” means any Project for which rents are subsidized and certain aspects
of the operations are regulated by the U.S. Department of Housing and Urban
Development.

“Aggregate
Commitment” means, as of any date, the aggregate of the then-current Commitments
of all the Lenders, which is, as of the Agreement Execution Date, $350,000,000.

“Agreement”
means this Second Amended and Restated Credit Agreement, as it may be amended
or modified and in effect from time to time.

“Agreement
Execution Date” means the date this Agreement has been fully executed and
delivered by all parties hereto.

“Anti-Terrorism Laws” shall
mean any Laws relating to terrorism or money laundering, including Executive
Order No. 13224, the USA Patriot Act, the Laws comprising or implementing the
Bank Secrecy Act, and the Laws administered by the United States Treasury
Department’s Office of Foreign Asset Control (as any of the foregoing Laws may
from time to time be amended, renewed, extended, or replaced).

“Applicable Facility Fee Rate” means, as of any date with respect to the calculation of
the Facility Fee, the percentage then in effect as determined in accordance
with Schedule B of Exhibit H attached hereto.  

 

“Applicable Margin” means an annual
percentage to be used in calculating the interest rate applicable to the
various Types of Advances which shall vary from time to time in accordance with Exhibit H attached hereto. 

 

“Applicable Unused Fee
Rate” means, with respect to any day during a calendar quarter, (i) 0.25%
per annum, if the Revolving Facility Usage on such day is 50% or more of the
Aggregate Commitment or (ii) 0.30% per annum if the Revolving Facility Usage on
such day is less than 50% of the Aggregate Commitment.

“Article” means
an article of this Agreement unless another document is specifically
referenced.

“Assignment and
Assumption Agreement” means an assignment and assumption agreement governing
transfers of a Lender’s Commitment and related rights and interests under this
Agreement, in the form attached hereto as Exhibit C and made a part
hereof.

- 2 -

 

 

 

 

 

“Authorized
Officer” means any of the President and Chief Executive Officer, Vice President
and General Counsel, and  Vice President and Chief Financial Officer, of
Borrower, acting singly,  or such other
individuals, designated by written notice to the Administrative Agent from the
Borrower, authorized to execute notices, reports and other documents on behalf
of the Loan Parties required hereunder.  The Borrower may amend such list of
individuals from time to time by giving written notice of such amendment to the
Administrative Agent.

“Base Rate” shall mean, for
any day, a fluctuating per annum rate of interest equal to the highest of (a)
the Federal Funds Open Rate, plus fifty basis points (0.5%), and (b) the
Prime Rate, and (c) the Daily LIBOR Rate, plus 100 basis points (1.0%). 
Any change in the Base Rate (or any component thereof) shall take effect at the
opening of business on the day such change occurs.

“Base Rate Advance” means
an Advance that bears interest at the Base Rate Option.

“Base Rate
Applicable Margin” means as of any date, with respect to the percentage
spread to be added to the Base Rate under the Base Rate Option, the percentage
in effect on such date under the definition of the “Applicable Margin”.

“Base Rate
Loan” means a Loan which bears interest at the Base Rate Option.

“Base Rate
Option” shall mean the option of the Borrower to have Advances bear interest at
the rate and under the terms set forth in Section 2.3.

“Borrower”
means Associated Estates Realty Corporation, a corporation organized under the
laws of the State of Ohio, and its successors and assigns.

“Borrowing
Date” means a date on which an Advance is made hereunder.

“Borrowing Tranche” shall
mean specified portions of Advances outstanding as follows:  (i) any Advances
to which a LIBOR Rate Option applies which become subject to the same Interest
Rate Option under the same Loan Request by the Borrower and which have the same
Interest Period shall constitute one Borrowing Tranche, and (ii) all Advances
to which a Base Rate Option applies shall constitute one Borrowing Tranche.

“Business Day” means (i)
with respect to any borrowing, payment or rate selection of LIBOR Rate
Advances, a day (other than a Saturday or Sunday) on which banks generally are
open in Cleveland, Ohio and New York, New York for the conduct of substantially
all of their commercial lending activities and on which dealings in United
States dollars are carried on in the London interbank market and (ii) for all
other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Cleveland, Ohio and New York, New York for the conduct of
substantially all of their commercial lending activities.

“Capital Stock”
means any and all shares, interests, participations or other equivalents
(however designated) of capital stock of a corporation, any and all equivalent
ownership interests in a Person which is not a corporation and any and all
warrants or options to purchase any of the foregoing.

“Capitalization
Rate” means six and three quarters percent (6.75%).

“Capitalized
Lease” of a Person means any lease of Property imposing obligations on such
Person, as lessee thereunder, which are required in accordance with GAAP to be
capitalized on a balance sheet of such Person.

“Capitalized
Lease Obligations” of a Person means the amount of the obligations of such
Person under Capitalized Leases which would be shown as a liability on a
balance sheet of such Person prepared in accordance with GAAP.

- 3 -

 

 

 

 

 

“Cash
Equivalents”  means, as of any date:

(i)         securities issued or directly
and fully guaranteed or insured by the United States Government or any agency
or instrumentality thereof having maturities of not more than one year from
such date;

(ii)        mutual funds organized under
the United States Investment Company Act rated AAm or AAm-G by S&P and P-1
by Moody’s;

(iii)       certificates of deposit or
other interest-bearing obligations of a bank or trust company which is a member
in good standing of the Federal Reserve System having a short term unsecured
debt rating of not less than A-1 by S&P and not less than P-1 by Moody’s
(or in each case, if no bank or trust company is so rated, the highest
comparable rating then given to any bank or trust company, but in such case
only for funds invested overnight or over a weekend) provided that such
investments shall mature or be redeemable upon the option of the holders
thereof on or prior to a date one month from the date of their purchase;

(iv)       certificates of deposit or
other interest-bearing obligations of a bank or trust company which is a member
in good standing of the Federal Reserve System having a short term unsecured
debt rating of not less than A-1+ by S&P, and not less than P-1 by Moody’s
and which has a long term unsecured debt rating of not less than A1 by Moody’s
(or in each case, if no bank or trust company is so rated, the highest
comparable rating then given to any bank or trust company, but in such case
only for funds invested overnight or over a weekend) provided that such
investments shall mature or be redeemable upon the option of the holders
thereof on or prior to a date three months from the date of their purchase;

(v)        bonds or other obligations
having a short term unsecured debt rating of not less than A-1+ by S&P and
P-1+ by Moody’s and having a long term debt rating of not less than A1 by
Moody’s issued by or by authority of any state of the United States, any
territory or possession of the United States, including the Commonwealth of
Puerto Rico and agencies thereof, or any political subdivision of any of the
foregoing;

(vi)       repurchase agreements issued by
an entity rated not less than A-1+ by S&P, and not less than P-1 by Moody’s
which are secured by U.S. Government securities of the type described in
clause (i) of this definition maturing on or prior to a date one month
from the date the repurchase agreement is entered into;

(vii)      short term promissory notes
rated not less than A-1+ by S&P, and  not less than P-1 by Moody’s maturing
or to be redeemable upon the option of the holders thereof on or prior to a
date one month from the date of their purchase; and

(viii)     commercial paper (having
original maturities of not more than 365 days) rated at least A-1+ by S&P
and P-1 by Moody’s and issued by a foreign or domestic issuer who, at the time
of the investment, has outstanding long-term unsecured debt obligations rated
at least A1 by Moody’s.

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“Change in
Control” means the occurrence of any of
the following:  (i) the Board of Directors or shareholders of Borrower
approve a consolidation or merger in which Borrower is not the surviving
corporation, the sale of all or substantially all of the assets of Borrower, or
the liquidation or dissolution of Borrower; (ii) any Person or group of Persons
which are Affiliates of each other (other than Borrower or another member of
the Consolidated Group or a Single Employer Plan (including any trustee of such
a Single Employer Plan acting in its capacity as trustee)) purchases any
Capital Stock of Borrower (or securities convertible into Capital Stock)
pursuant to a tender or exchange offer without the prior consent of the
Board of Directors of Borrower, or becomes the beneficial owner of Capital
Stock of Borrower (or securities convertible into Capital Stock), in either
case, representing 51%  or more of the voting power of
Borrower’s outstanding Capital Stock. 

“Change in Law”
means (i) any change after the Agreement Execution Date in the Risk‐Based
Capital Guidelines or (ii) any adoption of or change in any other law,
governmental or quasi‐governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
Agreement Execution Date which affects the amount of capital required or
expected to be maintained by any Lender or any
lending office of such Lender or any corporation controlling any
Lender.  Notwithstanding anything herein to the contrary, (i) the Dodd-Frank
Wall Street Reform and Consumer Protection Act and all requests, rules,
guidelines and directives promulgated thereunder and (ii) all requests, rules,
guidelines or directives promulgated by the Bank for International Settlements,
the Basel Committee on Banking Supervision (or any successor or similar
authority) or the United States or foreign regulatory authorities, in each case
pursuant to Basel III, shall be deemed to be a “Change in Law”, regardless of
the date adopted, issued, promulgated or implemented.

“Code” means
the Internal Revenue Code of 1986, as amended, reformed or otherwise modified
from time to time.

“Commitment” means, for
each Lender, the obligation of such Lender to make Loans not exceeding the
amount set forth opposite its signature below or as set forth in any Assignment
and Assumption Agreement relating to any assignment that has become effective
pursuant to Section 13.2, as such amount may be modified from time
to time pursuant to the terms hereof.

“Compliance Certificate” is
defined in Section 7.1(c).

“Consolidated Adjusted
EBITDA” shall mean, as of the date of calculation,
(a) an annualized amount determined by taking the Consolidated Net Income for
the twelve (12) most recent months for which financial results have been
reported, as adjusted by adding or deducting for, as applicable, Defeasance
Costs, gains or losses from sales of assets, impairment and other non-cash
charges, other extraordinary items, interest expense, income taxes,
depreciation expense and amortization expense, plus (b) the Consolidated Group
percentage of the net income (or loss) for such period of the Investment
Affiliates as determined in accordance with GAAP and as adjusted in the same
manner as Consolidated Net Income under clause (a) of this sentence.

“Consolidated
Debt Service” means, for any period, without duplication, (a) Consolidated
Interest Expense for such period plus (b) the aggregate amount of
scheduled principal payments attributable to Consolidated Outstanding
Indebtedness (excluding optional prepayments and balloon principal payments at
maturity in respect of any such Indebtedness) required to be made during such
period by any member of the Consolidated Group plus (c) a
percentage of all such scheduled principal payments required to be made during
such period by any Investment Affiliate on Indebtedness taken into account in
calculating Consolidated Interest Expense, equal to the greater of (x) the
percentage of the principal amount of such Indebtedness for which any member of
the Consolidated Group is liable and (y) the Consolidated Group Pro Rata
Share of such Investment Affiliate.

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“Consolidated Fixed
Charges” shall mean, for any period without duplication, the sum of (i)
Consolidated Debt Service for such period, plus (ii) all Preferred Dividends
payable by Borrower or any other member of the Consolidated Group with respect
to such period.  

“Consolidated
Group” shall mean the Borrower and all Subsidiaries which are consolidated with
them for financial reporting purposes under GAAP.

“Consolidated
Group Pro Rata Share” shall mean, with respect to any Investment Affiliate, the
percentage of the total equity ownership interests held by the Consolidated
Group, in the aggregate, in such Investment Affiliate determined by calculating
the percentage of the issued and outstanding stock, partnership interests or
membership interests in such Investment Affiliate held by the Consolidated Group
in the aggregate.

“Consolidated
Interest Expense” means, for any period without duplication, the sum of
(a) the amount of interest expense, determined in accordance with GAAP, of
the Consolidated Group for such period attributable to Consolidated Outstanding
Indebtedness during such period, excluding any interest expense on the
Consolidated Group’s Secured Indebtedness attributable to Defeasance Costs or
non-cash charges which have been added back to Consolidated Adjusted EBITDA
pursuant to the definition thereof, plus (b) the applicable Consolidated
Group Pro Rata Share of any such interest expense, determined in accordance
with GAAP, of each Investment Affiliate, for such period, on Indebtedness of
such Investment Affiliate, whether recourse or non-recourse, similarly
excluding any interest expense attributable to Defeasance Costs or non-cash
charges of such Investment Affiliate which has been added back to net income of
such Investment Affiliate in calculating Consolidated Adjusted EBITDA.

“Consolidated
Net Income” means, for any period, consolidated net income (or loss) of the
Consolidated Group for such period determined on a consolidated basis in
accordance with GAAP.

“Consolidated
Outstanding Indebtedness” means, as of any date of determination, without
duplication, the sum of (a) all Indebtedness of the Consolidated Group
outstanding at such date, determined on a consolidated basis in accordance with
GAAP (whether recourse or non-recourse) plus (b) the applicable
Consolidated Group Pro Rata Share of any Indebtedness of each Investment
Affiliate other than Indebtedness of such Investment Affiliate to a member of
the Consolidated Group.

“Consolidated Tangible Net
Worth” shall mean Net Worth (Common and Preferred Stock, plus Paid-In-Capital
and Retained Earnings) plus Accumulated Depreciation as defined in accordance
with GAAP. 

“Consolidated
Unsecured Indebtedness” means, as of any date of determination, that portion of
Consolidated Outstanding Indebtedness that is not Secured Indebtedness or
Subordinated Debt.

“Conversion/Continuation
Notice” is defined in Section 2.11.

“Convertible Debt
Accounting Guidance” means any rule, regulation, pronouncement or other
guidance under GAAP in the United States, which specifically relates to the
accounting for convertible debt instruments that may be settled in cash upon
conversion, and requires that the accounting treatment of such instruments be
modified to (i) bifurcate the instrument into an indebtedness and an equity
component, (ii) value each component of the instrument separately, and (iii)
recognize interest expense on the indebtedness component at a rate similar to a
liability instrument that does not have an equity component (which effectively
represents a non-cash adjustment to interest expense in excess of the stated
interest rate on the instrument).

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“Credit Rating” means the
rating assigned by a rating agency to the senior unsecured long term
Indebtedness of a Person.

“Daily LIBOR Rate shall
mean, for any day, the rate per annum determined by the Administrative Agent by
dividing (x) the Published Rate by (y) a number equal to 1.00 minus the LIBOR
Reserve Percentage on such day.

“Default Rate”
means the interest rate which may apply during the continuance of an Event of
Default pursuant to Section 2.13 which shall mean that (i) each LIBOR Rate Advance shall bear interest for
the remainder of the applicable Interest Period at the LIBOR Rate Option
otherwise applicable to such Interest Period plus 4% per annum and (ii) each
Base Rate Advance shall bear interest at a rate per annum equal to the Base
Rate Option otherwise applicable to the Base Rate Advance plus 4% per annum.

“Defaulting Lender” shall
mean any Lender that (a) has failed to fund any portion of the Advances,
participations with respect to Facility Letters of Credit, or participations in
Swing Loans required to be funded by it hereunder within one Business Day of
the date required to be funded by it hereunder unless such failure has been
cured and all interest accruing as a result of such failure has been fully paid
in accordance with the terms hereof, (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 of the date when due, unless the
subject of a good faith dispute or unless such failure has been cured and all
interest accruing as a result of such failure has been fully paid in accordance
with the terms hereof, (c) has failed at any time to comply with the provisions
of Section 12.2 with respect to purchasing participations from the other
Lenders, whereby such Lender’s share of any payment received, whether by setoff
or otherwise, is in excess of its Ratable Share of such payments due and
payable to all of the Lenders, or (d) has since the date of this Agreement been
deemed insolvent by a Governmental Authority or become the subject of a
bankruptcy, receivership, conservatorship or insolvency proceeding, or has a
parent company that since the date of this Agreement been deemed insolvent by a
Governmental Authority or become the subject of a bankruptcy, receivership,
conservatorship or insolvency proceeding.

“Defeasance
Costs” means expenses incurred in the
defeasance or prepayment of secured indebtedness including, but not limited
to:  prepaid interest, yield maintenance or other prepayment premiums, legal,
accounting and consulting fees directly attributable to the defeasance of debt;
the write‐off of deferred financing fees; servicer processing fees;
custodial account fees; rating agency fees; and the computed defeasance
premium. 

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“Eligible Unencumbered
Project” means a Project which satisfies all of the following requirements: 
(a) such Project is located in the continental United States; (b) such Project
is an institutional grade multifamily property as determined by the Agent in
its reasonable discretion; (c) such Project is owned in fee simple or leased
under a Ground Lease containing provisions allowing leasehold mortgage
financing of such lease on terms reasonably acceptable to Administrative Agent
(provided that the aggregate amount added to Unencumbered Real Property Value
on account of Projects subject to such Ground Leases shall not exceed twenty
percent (20%)) entirely by Borrower or a Wholly Owned Subsidiary which is also
a Subsidiary Guarantor if and for so long as required by Section 3.4;
(d) with respect to any Project other than the initial Qualifying Unencumbered
Projects shown on Schedule 3.1, such Project is a “market rate” Project
which is not subject to any restrictions requiring apartment units to be leased
at below-market rates, or if such rent restrictions do exist, they do not (i)
apply to more than twenty percent (20%) of the total residential units in such
Project or (ii) cause more than ten percent (10%) of the total residential
units in all of the then-current Eligible Unencumbered Projects to be subject
to such rent restrictions; (e) neither such Project nor any interest of the
Borrower or any Subsidiary therein, is subject to any Lien (other than
Permitted Liens (but not Liens of the type described in clause (e) of the
definition of Permitted Liens)) or a Negative Pledge; (f) if such Property is
owned or leased by a Subsidiary (i) none of Borrower’s direct or indirect
ownership interest in such Subsidiary is subject to any Lien (other than
Permitted Liens (but not Liens of the type described in clause (e) of the
definition of Permitted Liens)) or to a Negative Pledge; and (ii) Borrower
directly, or indirectly through a Subsidiary, has the right to take the
following actions without the need to obtain the consent of any Person:  (x) to
sell, transfer or otherwise dispose of such Project and (y) to create a Lien on
such Project as security for Indebtedness of the Borrower or such Subsidiary,
as applicable; and (g) such Project has been completed and is free of all
structural defects or major architectural deficiencies, title defects,
environmental conditions or other adverse matters except for defects,
deficiencies, conditions or other matters individually or collectively which
are not material to the profitable operation of such Project.

“Environmental
Laws” includes, but is not limited to, the following statutes, as amended, any
successor thereto, and any regulations promulgated pursuant thereto, and any
state or local statutes, ordinances, rules, regulations and the like addressing
similar issues:  the Comprehensive Environmental Response, Compensation and
Liability Act; the Emergency Planning and Community Right-to-Know Act; the
Hazardous Substances Transportation Act; the Resource Conservation and Recovery
Act (including but not limited to Subtitle I relating to underground storage
tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act;
the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational
Safety and Health Act; the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the
National Environmental Policy Act; and the River and Harbors Appropriation Act.

“Equity Issuance” means any
issuance by a Person of any Capital Stock in such Person and shall in any event
include the issuance of any Capital Stock upon the conversion or exchange of
any security constituting Indebtedness that is convertible or exchangeable, or
is being converted or exchanged, for Capital Stock.

“ERISA”
means the Employee Retirement Income Security Act of 1974, as the same may be
amended or supplemented from time to time, and any successor statute of similar
import, and the rules and regulation thereunder, as from time to time in
effect.

“ERISA Affiliate” shall
mean, at any time, any trade or business (whether or not incorporated) under
common control with the Borrower and are treated as a single employer under
Section 414 of the Code.

“ERISA Event shall mean (a)
a reportable event (under Section 4043 of ERISA and regulations thereunder)
with respect to a Pension Plan; (b) a withdrawal by Borrower 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
Borrower 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 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 liability under Title IV of ERISA, other than for
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower
or any ERISA Affiliate.

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“ERISA Group” shall mean,
at any time, the Borrower and all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
and all other entities which, together with the Borrower, are treated as a
single employer under Section 414 of the Internal Revenue Code.

“Event of Default” shall
mean any of the events described in Article VIII and referred to therein
as an “Event of Default.”

“Excluded Taxes” shall
mean, with respect to the Administrative Agent, any Lender, the Issuing Lender
or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) taxes imposed on or measured by its
overall net income (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 the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) in the case of a Foreign
Lender, any withholding tax that is imposed on amounts payable to such Foreign
Lender at the time such Foreign Lender becomes a party hereto (or designates a
new lending office) or is attributable to such Foreign Lender’s failure or
inability (other than as a result of a Change in Law) to comply with Section
4.2, except to the extent that such Foreign Lender (or its assignor, if
any) was entitled, at the time of designation of a new lending office (or
assignment), to receive additional amounts from the Borrower with respect to
such withholding tax pursuant to Section 4.2.

“Executive Order No. 13224”
shall mean the Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

“Facility Fee” is defined
in Section 2.5.

“Facility Letter of Credit”
means any of the Original Facility Letters of Credit or any Letter of Credit
issued after the Agreement Execution Date pursuant to Section 2.22 of
this Agreement.

“Facility Letter of Credit
Fee” is defined in Section 2.22(h)(i)(a).

“Facility Letter of Credit
Obligations” means, as of any date, all liabilities, whether actual or
contingent, of the Borrower with respect to Facility Letters of Credit,
including the sum of (a) the Reimbursement Obligations and (b) the
aggregate undrawn face amount of the then outstanding Facility Letters of Credit.

“Facility Letter of Credit
Sublimit” means $35,000,000.

“Facility Termination Date” shall mean January 11,
2016, which shall be the day immediately prior to the fourth (4th ) anniversary
of the Agreement Execution Date, or if such day is not a Business Day the last
Business Day immediately preceding such day, as such date may be extended
pursuant to Section 2.23 hereof.

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“Federal Funds Effective
Rate” for any day shall mean the rate per annum (based on a year of 360 days
and actual days elapsed and rounded upward to the nearest 1/100 of 1%)
announced by the Federal Reserve Bank of New York (or any successor) on such
day as being the weighted average of the rates on overnight federal funds
transactions arranged by federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the “Federal Funds Effective
Rate” as of the date of this Agreement; provided, if such Federal Reserve Bank
(or its successor) does not announce such rate on any day, the “Federal Funds
Effective Rate” for such day shall be the Federal Funds Effective Rate for the
last day on which such rate was announced.

“Federal Funds Open Rate”
for any day shall mean the rate per annum (based on a year of 360 days and
actual days elapsed) which is the daily federal funds open rate as quoted by
ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen
BTMM for that day opposite the caption “OPEN” (or on such other substitute
Bloomberg Screen that displays such rate), or as set forth on such other
recognized electronic source used for the purpose of displaying such rate as
selected by the Administrative Agent (for purposes of this definition, an “Alternate
Source”) (or if such rate for such day does not appear on the Bloomberg
Screen BTMM (or any substitute screen) or on any Alternate Source, or if there
shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or
any substitute screen) or any Alternate Source, a comparable replacement rate
determined by the Administrative Agent at such time (which determination shall
be conclusive absent manifest error); provided however, that if such day is not
a Business Day, the Federal Funds Open Rate for such day shall be the “open”
rate on the immediately preceding Business Day.  If and when the Federal Funds
Open Rate changes, the rate of interest with respect to any Advance to which
the Federal Funds Open Rate applies will change automatically without notice to
the Borrower, effective on the date of any such change.

“Fee Letter” is
defined in Section 2.5.

“Financial
Contract” of a Person means (i) any exchange - traded or over-the-counter futures,
forward, swap or option contract or other financial instrument with similar
characteristics, or (ii) any Interest Rate Hedge.

“Financial
Undertaking” of a Person means (i) any transaction which is the functional
equivalent of or takes the place of borrowing but which does not constitute a
liability on the consolidated balance sheet of such Person, or (ii) any
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party’s assets, liabilities or exchange
transactions, including, but not limited to, interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar protection
agreements, forward rate currency or interest rate options.

“First Mortgage
Receivable” means any Indebtedness owing to a member of the Consolidated Group
which is secured by a first-priority mortgage or deed of trust on any real
property (which property may be owned by a member of the Consolidated Group, an
Investment Affiliate or an unrelated third party) having a value in excess of
the amount of such Indebtedness and which has been designated by the Borrower
as a “First Mortgage Receivable” in its most recent compliance certificate.

“Fitch” means Fitch, Inc.,
and its successors.

“Foreign Lender” shall mean
any Lender that is organized under the Laws of a jurisdiction other than that
in which the Borrower is resident for tax purposes.  For purposes of this
definition, the United States of America, each State thereof and the District
of Columbia shall be deemed to constitute a single jurisdiction.

“Funds From
Operations” shall have the meaning determined from time to time by the National
Association of Real Estate Investment Trusts to be the meaning most commonly
used by its members and for avoidance of doubt shall mean “basic” Funds From
Operations, as such term is customarily used by members of such association.

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“GAAP” means
generally accepted accounting principles in
the United States of America, as are in effect from
time to time, applied in a manner consistent with that used in preparing
the financial statements hereunder and in all circumstances subject to the provisions of Section 1.3.

“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.

“Guarantee
Obligation” means, as to any Person (the “guaranteeing person”), any
obligation (determined without duplication) of (a) the guaranteeing person
or (b) another Person to induce the creation of which the guaranteeing
person has issued a reimbursement, counter-indemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness, leases, or
dividends (the “primary obligations”) of any other third Person (the “primary
obligor”) in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation
or (2) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (iii) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however,
that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business, or
any indemnification obligations arising in the ordinary course of business,
including without limitation guaranties of non-recourse “carve-out” exceptions
in secured loans and environmental indemnity agreements in favor of secured
lenders.  The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the maximum stated amount of the primary obligation
relating to such Guarantee Obligation (or, if less, the maximum stated
liability set forth in the instrument embodying such Guarantee Obligation), provided,
that in the absence of any such stated amount or stated liability, the amount
of such Guarantee Obligation shall be such guaranteeing person’s maximum
reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.

“Indebtedness”
of any Person at any date means without duplication, (a) all indebtedness
of such Person for borrowed money including without limitation any repurchase
obligation or liability of such Person with respect to securities, accounts or
notes receivable sold by such Person, (b) all obligations of such Person
for the deferred purchase price of property or services (other than current
accounts payable and trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), to the extent
such obligations constitute indebtedness for the purposes of GAAP, (c) any
other indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument, including any so-called “trust deferred debt”
(d) all Capitalized Lease Obligations, (e) all obligations of such Person
in respect of acceptances issued or created for the account of such Person,
(f) all Guarantee Obligations of such Person (excluding in any calculation
of consolidated Indebtedness of the Consolidated Group, Guarantee Obligations
of one member of the Consolidated Group in respect of primary obligations of
any other member of the Consolidated Group), (g) all reimbursement obligations
of such Person for letters of credit and, to the extent such obligations
constitute “contingent liabilities” which are required to be accrued under GAAP,
other contingent liabilities, (h) any Net Mark-to-Market Exposure and (i)
all liabilities secured by any lien (other than liens for taxes not yet due and
payable) on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.

“Indemnified Taxes” shall
mean Taxes other than Excluded Taxes.

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“Interest
Period” shall mean the period of time
selected by the Borrower in connection with (and to apply to) any election
permitted hereunder by the Borrower to have Advances  bear interest under the
LIBOR Rate Option.  Subject to the last sentence of this definition, such
period shall be one, two, three or six Months. Such Interest Period shall
commence on the effective date of such LIBOR Rate Option, which shall be (i)
the Borrowing Date if the Borrower is requesting new Loans, or (ii) the date of
renewal of or conversion to the LIBOR Rate Option if the Borrower is renewing
or converting to the LIBOR Rate Option applicable to outstanding Loans. 
Notwithstanding the second sentence hereof: (A) any Interest Period which would
otherwise end on a date which is not a Business Day shall be extended to the
next succeeding Business Day unless such Business Day falls in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day, and (B) the Borrower shall not select, convert to or
renew an Interest Period for any portion of the Loans that would end after the
Facility Termination Date.

“Interest Rate Hedge” shall
mean an interest rate exchange, collar, cap, swap, adjustable strike cap,
adjustable strike corridor or similar agreements entered into by the Loan
Parties or their Subsidiaries in order to provide protection to, or minimize
the impact upon, the Borrower, the Guarantor and/or their Subsidiaries of
increasing floating rates of interest applicable to Indebtedness.

“Interest Rate Option”
shall mean any LIBOR Rate Option or Base Rate Option.

“Investment” of
a Person means any loan, advance (other than commission, travel and similar
advances to officers and employees made in the ordinary course of business),
extension of credit (other than accounts receivable arising in the ordinary
course of business on terms customary in the trade), deposit account or
contribution of capital by such Person to any other Person or any investment
in, or purchase or other acquisition of, the stock, partnership interests,
notes, debentures or other securities of any other Person made by such Person.

“Investment
Affiliate” means any Person in which the Consolidated Group, directly or
indirectly, has any ownership interest, whose financial results are not
consolidated under GAAP with the financial results of the Consolidated Group.  For the purposes of this Agreement, The Residences at
Carronade, LLC, an Ohio limited liability company, shall not be deemed to be an
“Investment Affiliate” of the Borrower.

“Investment Grade Rating”
means a Credit Rating of BBB-/BBB-/Baa3 or higher from any of S & P, Fitch,
or Moody’s, respectively.

“Issuance Date” is defined
in Section 2.22.

“Issuance Notice” is
defined in Section 2.22.

“Issuing Lender” means,
with respect to each Facility Letter of Credit, the Lender which issues such
Facility Letter of Credit.  PNC Bank, National Association shall be the sole
Issuing Lender.

“Law” shall mean any law
(including common law), constitution, statute, treaty, regulation, rule,
ordinance, opinion, release, ruling, order, injunction, writ, decree, bond,
judgment, authorization or approval, lien or award by a Governmental Authority.

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“Lender Provided Interest
Rate Hedge” shall mean an Interest Rate Hedge which is provided by any Lender
or its Affiliate and with respect to which the Administrative Agent confirms:
(i) is documented in a standard International Swap Dealer Association
Agreement, and (ii) provides for the method of calculating the reimbursable
amount of the provider’s credit exposure in a reasonable and customary manner.

“Lenders” means
the lending institutions listed on the signature pages of this Agreement, their
respective successors and assigns, any other lending institutions that
subsequently become parties to this Agreement.

“Letter of Credit” of a
Person means a letter of credit or similar instrument which is issued upon the
application of such Person or upon which such Person is an account party or for
which such Person is in any way liable.

“Letter of Credit
Collateral Account” is defined in Section 2.22.

“Letter of Credit
Obligation” shall mean, as of any date of determination, the aggregate amount
available to be drawn under all outstanding Facility Letters of Credit on such
date (if any Letter of Credit shall increase in amount automatically in the
future, such aggregate amount available to be drawn shall currently give effect
to any such future increase) plus the aggregate Reimbursement Obligations on
such date.

“Letter of Credit Request”
is defined in Section 2.22.

“Leverage Ratio” shall
mean, as of the end of any date of determination, the ratio of
(A) Consolidated Outstanding Indebtedness on such date to (B) Total Asset
Value on such date. 

“LIBOR
Applicable Margin” means as of any date, with respect to the percentage spread
to be added to the LIBOR Rate under the LIBOR Rate Option, the percentage in
effect on such date under the definition of “Applicable Margin”.

“LIBOR Rate” shall mean,
with respect to the Loans comprising any Borrowing Tranche to which the LIBOR
Rate Option applies for any Interest Period, the interest rate per annum
determined by the Administrative Agent by dividing (the resulting quotient
rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the
rate which appears on the Bloomberg Page BBAM1 (or on such other substitute
Bloomberg page that displays rates at which US dollar deposits are offered by
leading banks in the London interbank deposit market), or the rate which is
quoted by another source selected by the Administrative Agent which has been
approved by the British Bankers’ Association as an authorized information
vendor for the purpose of displaying rates at which US dollar deposits are
offered by leading banks in the London interbank deposit market (for purposes
of this definition, an “Alternate Source”), at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of such Interest Period
as the London interbank offered rate for U.S. Dollars for an amount comparable
to such Borrowing Tranche and having a borrowing date and a maturity comparable
to such Interest Period (or if there shall at any time, for any reason, no
longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate
Source, a comparable replacement rate determined by the Administrative Agent at
such time (which determination shall be conclusive absent manifest error)), by
(ii) a number equal to 1.00 minus the LIBOR Reserve Percentage.  LIBOR may also
be expressed by the following formula:

                                        London interbank offered rates
quoted by Bloomberg

            LIBOR Rate  =     or appropriate successor as shown on
Bloomberg Page BBAM1

                                        1.00 -  LIBOR Reserve Percentage

 

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The LIBOR Rate shall be
adjusted with respect to any Loan to which the LIBOR Rate Option applies that
is outstanding on the effective date of any change in the LIBOR Reserve
Percentage as of such effective date.  The Administrative Agent shall give
prompt notice to the Borrower of the LIBOR Rate as determined or adjusted in
accordance herewith, which determination shall be conclusive absent manifest
error.

“LIBOR Rate
Advance” means an Advance which bears interest at the LIBOR Rate Option.

“LIBOR Rate
Loan” means a Loan which bears interest at the LIBOR Rate Option.

“LIBOR Rate Option” shall
mean the option of the Borrower to have Advances bear interest at the rate and
under the terms set forth in Section 2.3.

“LIBOR Reserve Percentage”
shall mean as of any day the maximum percentage in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirements (including supplemental,
marginal and emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as “Eurocurrency Liabilities”).

“Lien” means
any lien (statutory or other), mortgage, pledge, negative pledge,
hypothecation, assignment, deposit arrangement, encumbrance or priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or lessor
under any conditional sale, Capitalized Lease or other title retention
agreement).

“Loan” means,
with respect to a Lender, such Lender’s Ratable Share of any Advance.

“Loan
Documents” means this Agreement, the Notes, the Subsidiary Guaranty, and any
other document from time to time evidencing or securing indebtedness incurred
by the Borrower under this Agreement, as any of the foregoing may be amended or
modified from time to time.

“Loan Parties”
means the Borrower and the Subsidiary Guarantors.

“Loan Request” shall have
the meaning specified in Section 2.10.

“Material
Adverse Effect” means, in the Administrative Agent’s reasonable discretion, any
event that is reasonably anticipated to have a material adverse effect on (i)
the business, property or condition (financial or otherwise) of the
Consolidated Group (taken as a whole), (ii) the ability of the Borrower to
perform its obligations under the Loan Documents, or (iii) the validity or
enforceability of any of the Loan Documents.

“Materials of
Environmental Concern” means any gasoline or petroleum (including crude oil or
any fraction thereof) or petroleum products or any hazardous or toxic
substances, materials or wastes, defined or regulated as such in or under any
Environmental Law, including, without limitation, asbestos, polychlorinated
biphenyls and urea-formaldehyde insulation, but excluding substances of kinds
and amounts ordinarily used or stored in similar properties for the purposes of
cleaning or other maintenance or operations or as inventory of tenants and
otherwise in compliance with all Environmental Laws.

“Maximum Legal
Rate” means the maximum nonusurious interest rate, if any, that at any time or
from time to time may be contracted for, taken, reserved, charged or received
on the indebtedness evidenced by the Notes and as provided for herein or in the
Notes or other Loan Documents, under the laws of such state or states whose
laws are held by any court of competent jurisdiction to govern the interest
rate provisions hereof.

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“Month” with respect to an
Interest Period under the LIBOR Rate Option, shall mean the interval between
the days in consecutive calendar months numerically corresponding to the first
day of such Interest Period.  If any LIBOR Rate Interest Period begins on a day
of a calendar month for which there is no numerically corresponding day in the
month in which such Interest Period is to end, the final month of such Interest
Period shall be deemed to end on the last Business Day of such final month.

“Moody’s” means
Moody’s Investors Service, Inc. and its successors.

“Multiemployer Plan shall
mean any employee benefit plan which is a “multiemployer plan” within the
meaning of Section 4001(a)(3) of ERISA and to which the Borrower or any member
of the ERISA Group is then making or accruing an obligation to make
contributions or, within the preceding five Plan years, has made or had an
obligation to make such contributions.

“Negative Pledge” means,
with respect to a given asset, any provision of a document, instrument or
agreement (other than any Loan Document) which prohibits or purports to
prohibit the creation or assumption of any Lien on such asset as security for
Indebtedness of the Person owning such asset or any other Person.

“Net
Mark-to-Market Exposure” of a Person means, as of any date of determination,
the excess (if any) of all unrealized losses over all unrealized profits of
such Person arising from Interest Rate Hedges or any other Financial Contract. 
“Unrealized losses” means the fair market value of the cost to such Person of
replacing such Interest Rate Hedge or other Financial Contract as of the date
of determination (assuming the Interest Rate Hedge or other Financial Contract
were to be terminated as of that date), and “unrealized profits” means the fair
market value of the gain to such Person of replacing such Interest Rate Hedge
or other Financial Contract as of the date of determination (assuming such
Interest Rate Hedge or other Financial Contract were to be terminated as of
that date).

“Net Operating
Income” means, with respect to any Project for any period, “property rental and
other income” (as determined by GAAP) attributable to such Project accruing for
such period minus the amount of all expenses (as determined in
accordance with GAAP) incurred in connection with and directly attributable to
the ownership and operation of such Project for such period, including, without
limitation, Management Fees and amounts accrued for the payment of real estate
taxes and insurance premiums, but excluding any general and administrative
expenses related to the operation of the Borrower or the other members of the
Consolidated Group, any interest expense or other debt service charges and any
non-cash charges such as depreciation or amortization of financing costs.  As
used herein “Management Fees”, means, with respect to each Project for
any period, an amount equal to two and one-half percent (2.5%) per annum on the
aggregate rent due and payable under leases at such Project.

“Net Proceeds” means with respect to any Equity
Issuance by a Person, the aggregate amount of all cash and the fair market
value of all other Property (other than securities of such Person being
converted or exchanged in connection with such Equity Issuance) received by
such Person in respect of such Equity Issuance net of investment banking fees,
legal fees, accountants’ fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred by such Person in connection with
such Equity Issuance.

“Non-Consenting Lender”
shall have the meaning specified in Section 9.2.

“Non-Recourse Indebtedness”
means, with respect to any Person, Secured Indebtedness for which the liability
of such Person (except with respect to fraud, Environmental Laws
liability, bankruptcy and other customary non-recourse “carve-out” exceptions)
either is contractually limited to collateral securing such Indebtedness or is
so limited by operation of law.

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“Note” means a
promissory note, in substantially the form of Exhibit A hereto, duly
executed by Borrower and payable to the order of a Lender in the amount of its
Commitment, including any amendment, modification, renewal or replacement of such
promissory note.

“Obligation” shall mean any
obligation or liability of any of the Loan Parties, howsoever created, arising
or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due, under or in connection with (i)
this Agreement, the Notes, the Facility Letters of Credit, the Administrative
Agent’s Letter or any other Loan Document whether to the Administrative Agent,
any of the Lenders or their Affiliates or other persons provided for under such
Loan Documents and (ii) any Lender Provided Interest Rate Hedge.

“Original
Agreement” is defined in the Recitals to this Agreement.

“Original
Facility Letters of Credit” means those Letters of Credit issued under the
Original Agreement which are outstanding on the Agreement Execution Date, as
identified on Schedule 1.1 attached hereto.

“Other Taxes” shall mean 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.

“Participants”
is defined in Section 13.4.

“Payment Date”
means, (i) with respect to the payment of interest accrued on any LIBOR Rate
Advance ninety (90) or less days in term, the maturity date of any such
Advance, or with respect to an Advance having a term beyond ninety (90) days,
then any such interest payments shall be due every ninety (90) days thereafter,
or (ii) with respect to the payment of interest accrued on any Base Rate
Advance or Swing Advance and the payment of the Commitment Fee, the first
Business Day of each April, July, October and January.

“PBGC” means
the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of
Title IV to ERISA, or any successor thereto.

“Pension Plan” shall mean
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 Borrower or any ERISA Affiliate or to which
Borrower 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 times during the immediately
preceding five plan years.

“Permitted
Acquisitions” are defined in Section 7.15.

“Permitted
Liens” are defined in Section 7.16.

“Person” means
any natural person, corporation, firm, joint venture, partnership, association,
enterprise, trust or other entity or organization, or any government or
political subdivision or any agency, department or instrumentality thereof.

- 16 -

 

 

 

 

 

“Plan” shall mean at any time an employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code and either (i) is maintained by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained by any entity which was at
such time a member of the ERISA Group for employees of any entity which was at
such time a member of the ERISA Group.

“PNC” shall mean PNC Bank,
National Association, its successors and assigns.

“Potential Default” shall
mean any event or condition which with notice or passage of time, or both,
would constitute an Event of Default.

“Preferred
Dividends” means, with respect to any entity, dividends or other distributions
which are payable to holders of any ownership interests in such entity which
entitle the holders of such ownership interests to be paid on a preferred basis
prior to dividends or other distributions to the holders of other types of
ownership interests in such entity, provided that “Preferred Dividends” shall
not mean any preferred equity in any joint venture relationship between the
Borrower or any subsidiary of the Borrower and any Person other than a shareholder
in the Borrower.

“Prime Rate” shall mean the
interest rate per annum announced from time to time by the Administrative Agent
at its Principal Office as its then prime rate, which rate may not be the
lowest or most favorable rate then being charged commercial borrowers or others
by the Administrative Agent.  Any change in the Prime Rate shall take effect at
the opening of business on the day such change is announced.

“Principal Office shall
mean the main banking office of the Administrative Agent in Pittsburgh,
Pennsylvania.

“Project” means
any real estate asset owned by the Borrower or any of its Subsidiaries or any
Investment Affiliate, and operated or intended to be operated as a multifamily
residential property.

“Property” of a
Person means any and all property, whether real, personal, tangible,
intangible, or mixed, of such Person, or other assets owned, leased or operated
by such Person.

“Published Rate” shall mean
the rate of interest published each Business Day in The Wall Street Journal “Money
Rates” listing under the caption “London Interbank Offered Rates” for a one
month period (or, if no such rate is published therein for any reason, then the
Published Rate shall be the rate at which U.S. dollar deposits are offered by
leading banks in the London interbank deposit market for a one month period as
published in another publication selected by the Administrative Agent).

“Qualified Ratings” means a
senior unsecured debt Investment Grade Rating issued by at least two of S &
P, Moody’s and Fitch.

“Qualifying
Unencumbered Project” means the Projects shown on Schedule 3.1 and any
Project which has satisfied the requirements set forth in Section 3.1
below.

“Ratable Share” shall mean
the proportion that a Lender’s Commitment (excluding the Swing Loan Commitment)
bears to the Commitments (excluding the Swing Loan Commitment) of all of the
Lenders.  If the Commitments have terminated or expired, the Ratable Shares
shall be determined based upon the Commitments (excluding the Swing Loan
Commitment) most recently in effect, giving effect to any assignments.

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“Real Property Under
Development” is defined as any Project which either is under construction or
completed and has not yet achieved a leasing level of 85% or more.

“Recourse
Indebtedness” means any Indebtedness of Borrower or any other member of the
Consolidated Group with respect to which the liability of the obligor is not
limited to the obligor’s interest in specified assets securing such
Indebtedness, subject to customary limited exceptions for certain acts or types
of liability, and provided further that Non-Recourse Indebtedness shall not be
considered Recourse Indebtedness even if a breach of such customary limited
exceptions to recourse liability would result in such Non-Recourse Indebtedness
becoming recourse to the obligor thereunder.

“Regulation U”
means Regulation U of the Board of Governors of the Federal Reserve System as
from time to time in effect and any successor or other regulation or official
interpretation of said Board of Governors relating to the extension of credit
by banks for the purpose of purchasing or carrying margin stocks applicable to
member banks of the Federal Reserve System.

“Reimbursement
Obligations” means at any time, the aggregate of the Obligations of the
Borrower to the Lenders, the Issuing Lender and the Administrative Agent in
respect of all unreimbursed payments or disbursements made by the Lenders, the
Issuing Lender and the Administrative Agent under or in respect of the Facility
Letters of Credit.

“Release” is
defined in Section 3.3. 

“Reportable
Event” means a reportable event as defined in Section 4043 of ERISA and the
regulations issued under such section, with respect to a Plan, excluding,
however, such events as to which the PBGC by regulation waived the requirement
of Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event, provided, however, that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall
be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.

“Required Lenders” shall
mean

(A)       If there are only
two (2) Lenders, all Lenders (other than any Defaulting Lender), and

(B)       If there exist
three (3) or more Lenders, Lenders (other than any Defaulting Lender) having
more than 66-2⁄3% of the aggregate amount of the Commitments of the Lenders
(excluding any Defaulting Lender) or, after the termination of the Commitments,
the outstanding Loans and Ratable Share of Letter of Credit Obligations of the
Lenders (excluding any Defaulting Lender).

“Reserve
Requirement” means, with respect to a Rate Loan and LIBOR Interest Period, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Federal Reserve Board or other governmental authority or
agency having jurisdiction with respect thereto for determining the maximum
reserves (including, without limitation, basic, supplemental, marginal and
emergency reserves) for eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D) maintained by a member bank of the
Federal Reserve System.

“Revolving
Credit Advances” shall mean all Advances made to Borrower hereunder other than
Swing Loans.

“Revolving
Credit Loan” means, with respect to a Lender, such Lender’s Ratable Share of
any Revolving Credit Advance.

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“Revolving Facility Usage”
shall mean at any time the sum of the outstanding Revolving Credit Loans, the
outstanding Swing Loans, and the Letter of Credit Obligations.

“Risk‐Based Capital Guidelines” means (i) the
risk‐based capital guidelines in effect in the United States on the
Agreement Execution Date, including transition rules, and (ii) the
corresponding capital regulations promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities, in
each case pursuant to Basel III, including transition rules, and any amendments
to such guidelines, rules and regulations adopted prior to the Agreement
Execution Date.

“Section” means
a numbered section of this Agreement, unless another document is specifically
referenced.

“Secured Indebtedness”
means any Indebtedness which is secured by a Lien on a Project or other
tangible asset (which excludes, without limitation, ownership interests in any
Person) which had, in the aggregate, a value in excess of the amount of such
Indebtedness at the time such Indebtedness was incurred.

“Single
Employer Plan” means a Plan maintained by the Borrower or any member of the
ERISA Group for employees of the Borrower or any member of the ERISA Group.

“S&P” means
Standard & Poor’s Ratings Group and its successors.

“Subordinated
Debt” means (i) any Indebtedness of Borrower or any other member of the
Consolidated Group that is subordinated by its express terms to the repayment
of the Obligations under this Facility; and (ii) any Indebtedness of Borrower
or any Subsidiary of Borrower due to any Affiliate of Borrower that is
expressly subordinate in priority and payment to the Obligations under this
Facility.

“Subsidiary” of
a Person means (i) any corporation more than 50% of the outstanding securities
having ordinary voting power of which shall at the time be owned or controlled,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, or (ii) any partnership,
association, joint venture or similar business organization more than 50% of
the ownership interests having ordinary voting power of which shall at the time
be so owned or controlled.  Unless otherwise expressly provided, all references
herein to a “Subsidiary” shall mean a Subsidiary of Borrower.

“Subsidiary
Guarantor” means, as of any date, each Wholly-Owned Subsidiary of Borrower
which is then a party to the Subsidiary Guaranty pursuant to Section 6.21. 

“Subsidiary
Guaranty” means the guaranty to be executed and delivered by those Subsidiaries
of the Borrower listed on Schedule 6.21, substantially in the form of Exhibit
D, as the same may be amended, supplemented or otherwise modified from time
to time pursuant to Section 6.21, including any joinders executed by
additional Subsidiary Guarantors. 

“Substantial
Portion” means, with respect to the Property of the Borrower and its
Subsidiaries, Property which represents more than 10% of then-current Total
Asset Value.

“Swing Advances” means, as
of any date, collectively, all Swing Loans then outstanding under this
Facility.

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“Swing Loans” shall mean
collectively and Swing Loan shall mean separately all Swing Loans or any
Swing Loan made by PNC to the Borrower pursuant to Section 2.21 hereof.

“Swing Loan Commitment”
means the obligation of the Swing Lender to make Swing Loans not exceeding
$35,000,000, which is included in, and is not in addition to, the Swing
Lender’s total Commitment hereunder.

“Swing Lender” shall mean
PNC Bank, National Association, in its capacity as a Lender.

“Taxes” means
any and all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and any and all liabilities with respect to the
foregoing, but excluding Excluded Taxes and Other Taxes.

- 20 -

 

 

 

 

 

“Total Asset
Value” means, as of any date, (i) the Net
Operating Income for the most recent four (4) consecutive fiscal quarters of
the Borrower for which financial results have been reported attributable to
Projects then owned or leased by Borrower or any other member of the
Consolidated Group (excluding 100% of the Net Operating Income attributable to
any such Projects which have not been owned or leased by any combination of
Borrower, other members of the Consolidated Group or Investment Affiliates and
included in Borrower’s financial statements for at least six (6) fiscal
quarters as of the end of the most recent fiscal quarter for which financial
results have been reported, other than Net Operating Income from Overlimit
General Projects (as defined below) then owned or leased by Borrower or any
other member of the Consolidated Group which Net Operating Income will be
included in this clause (i)) divided by the Capitalization Rate, plus (ii) 100%
of cost for any such Projects first acquired or leased during such six (6)
fiscal quarter period (including the amount of any assumed Indebtedness secured
thereby) which are not Overlimit General Projects, plus
(iii) the Consolidated Group Pro Rata Share of Net Operating Income for
the most recent four (4) consecutive fiscal quarters of the Borrower for which
financial results have been reported attributable to
Projects then owned or leased by an Investment Affiliate (excluding Net
Operating Income attributable to any such Projects which have not been owned or
leased by any combination of Borrower, other members of the Consolidated
Group or Investment Affiliates for six (6) fiscal quarters as of the end of such most recent fiscal
quarter for which financial results have been reported, other than Net
Operating Income from Overlimit General Projects then owned or leased by an
Investment Affiliate which Net Operating Income will be included in this clause
(iii)) divided by the Capitalization Rate, plus (iv) the Consolidated
Group Pro Rata Share of 100% of cost for any such Projects first
acquired or leased by an Investment Affiliate during such six (6) fiscal
quarter period (including the amount of any assumed Indebtedness secured
thereby) which are not Overlimit General Projects; plus (v) cash and Cash Equivalents owned by Borrower or any other
member of the Consolidated Group as of the end of the most recent fiscal
quarter for which financial results have been reported, plus (vi) the
Consolidated Group Pro Rata Share of all cash and Cash Equivalents owned by
Investment Affiliates as of the end of the most recent fiscal quarter financial
results have been reported plus (vii) Real Property Under Development and
Undeveloped Land of the Consolidated Group, valued at cost, plus (viii) the
Consolidated Group Pro Rata Share of any Real Property Under Development and
Undeveloped Land of Investment Affiliates, valued at cost, plus (ix) First
Mortgage Receivables owned by the Consolidated Group, valued in accordance with
GAAP, plus (x) the Consolidated Group Pro Rata Share of First Mortgage
Receivables owned by any Investment Affiliates, valued in accordance with
GAAP.  As used herein, the term “Overlimit General Projects” shall mean,
if at any time the aggregate amount contributed to Total Asset Value under
clauses (ii) and (iv) of this definition on account of acquired Projects owned
or leased for more than four (4) quarters but less than seven (7) quarters
would exceed twenty percent (20%) of Total Asset Value, a sufficient number of
such Project(s) which would otherwise be valued at cost under such clauses (ii)
or (iv), which the Company shall designate to instead be valued in accordance
with clauses (i) or (iii), so that the aggregate value of the remaining
Projects owned or leased for more than four (4) quarters but less than seven
(7) quarters which are included at cost under clauses (ii) and (iv) of this
definition do not exceed twenty percent (20%) of Total Asset Value. For the avoidance of doubt, such references to
“less than seven (7) quarters” shall mean that the applicable Project shall be
included at cost in up to but not more than six (6) quarterly financial
statements of Borrower. 

 “Type” means,
with respect to any Advance, its nature as a Base Rate Advance, a LIBOR Rate
Advance or a Swing Advance.

“Undeveloped
Land” means, as of any date, any undeveloped land owned from time to time by
the Borrower or any other member of the Consolidated Group.

“Unencumbered Real Property Value” shall mean, as of
any date, (i) Unencumbered Real Property Adjusted NOI divided by the
Capitalization Rate, plus (ii) the cost of all Qualifying Unencumbered Projects
then owned by Borrower or a Subsidiary, which Subsidiary is also a Subsidiary
Guarantor if and for so long as required by Section 3.4 which have not
been owned by any combination of Borrower, other members of the Consolidated
Group or Investment Affiliates and included in Borrower’s financial statements
for six (6) consecutive fiscal quarters as of the end of the most recent fiscal
quarter of Borrower for which financial results have been reported other than
Overlimit Unencumbered Projects, with the cost of each such Qualifying
Unencumbered Project being the amount capitalized as “real estate” on
Borrower’s balance sheet plus any portion of the acquisition cost required to
be allocated as an intangible asset by GAAP.  As used herein, the term
“Overlimit Unencumbered Projects” shall mean, if at any time the aggregate
amount contributed to Unencumbered Real Property Value under clause (i) of this
definition for acquired Qualifying Unencumbered Projects owned or leased for
more than four (4) quarters but less than seven (7) quarters would exceed
twenty percent (20%) of Unencumbered Real Property Value, a sufficient number
of such Project(s) which would otherwise be valued at cost under such clause
(ii), which the Company shall designate to instead be valued in accordance with
clause (i), so that the aggregate value of the remaining Qualifying
Unencumbered Projects owned or leased for more than four (4) quarters but less
than seven (7) quarters which are included at cost under clause (ii) of this
definition does not exceed twenty percent (20%) of Unencumbered Real Property
Value. For the avoidance of doubt, such references to “less than seven (7)
quarters” shall mean that the applicable Project shall be included at cost in
up to but not more than six (6) quarterly financial statements of Borrower.

“Unencumbered Real Property
Adjusted NOI” shall mean, as of any date,  the Net Operating Income for the
most recent four (4) consecutive fiscal quarters of Borrower for which
financial results have been reported attributable to Qualifying Unencumbered
Projects then owned or leased by Borrower or a Subsidiary, which Subsidiary is
also a Subsidiary Guarantor if and for so long as required by Section 3.4
(excluding Net Operating Income attributable to any such Qualifying
Unencumbered Projects which have not been owned or leased by any combination of
Borrower, other members of the Consolidated Group or Investment Affiliates and
included in Borrower’s financial statements for six (6) fiscal quarters as of
the end of the most recent fiscal quarter of Borrower for which financial
results have been reported other than Net Operating Income from Overlimit
Unencumbered Projects then owned or leased by Borrower or a Subsidiary , which
Subsidiary is also a Subsidiary Guarantor if and for so long as required by Section
3.4 which shall be included in this definition), less (i) management fees
equal to 2.5% of the aggregate gross revenues attributable to such Qualifying
Unencumbered Projects for such period, and less (ii) a capital expenditure
reserve equal to $150 per unit for such Qualifying Unencumbered Projects.

“Unfunded
Liabilities” means the amount (if any) by which the present value of all vested
nonforfeitable benefits under all Single Employer Plans exceeds the fair market
value of all such Plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plans.

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“Unused Fee” is defined in Section
2.4.

“USA Patriot Act” shall
mean the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107‐56,
as the same has been, or shall hereafter be, renewed, extended, amended or
replaced.

“Wholly-Owned
Subsidiary” of a Person means (i) any Subsidiary all of the outstanding voting
securities of which shall at the time be owned or controlled, directly or
indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such
Person, or by such Person and one or more Wholly-Owned Subsidiaries of such
Person, or (ii) any partnership, association, joint venture or similar business
organization 100% of the ownership interests having ordinary voting power of
which shall at the time be so owned or controlled.

The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.

1.2             
Construction

.  Unless the context
of this Agreement otherwise clearly requires, the following rules of
construction shall apply to this Agreement and each of the other Loan
Documents: (i) references to the plural include the singular, the plural, the
part and the whole and the words “include,” “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”; (ii) the words
“hereof,” “herein,” “hereunder,” “hereto” and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document
as a whole; (iii) article, section, subsection, clause, schedule and exhibit
references are to this Agreement or other Loan Document, as the case may be,
unless otherwise specified; (iv) reference to any Person includes such Person’s
successors and assigns; (v) reference to any agreement, including this
Agreement and any other Loan Document together with the schedules and exhibits
hereto or thereto, document or instrument means such agreement, document or
instrument as amended, modified, replaced, substituted for, superseded or
restated; (vi) relative to the determination of any period of time, “from”
means “from and including,” “to” means “to but excluding,” and “through” means
“through and including”; (vii) 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, (viii) section headings herein and in each other
Loan Document are included for convenience and shall not affect the
interpretation of this Agreement or such Loan Document, and (ix) unless
otherwise specified, all references herein to times of day shall be references
to Eastern Time.

1.3             
Accounting Principles

.  Except as otherwise
provided in this Agreement, all computations and determinations as to
accounting or financial matters and all financial statements to be delivered
pursuant to this Agreement shall be made and prepared in accordance with GAAP
(including principles of consolidation where appropriate), and all accounting
or financial terms shall have the meanings ascribed to such terms by GAAP;
provided, however, that all accounting terms used in Article VII (and
all defined terms used in the definition of any accounting term used in Article
VII shall have the meaning given to such terms (and defined terms) under
GAAP as in effect on the date hereof applied on a basis consistent with those
used in preparing statements referred to in Section 6.4.  In the event
of any change after the date hereof in GAAP, and if such change would affect
the computation of any of the financial covenants set forth in Article VII,
then the parties hereto agree to endeavor, in good faith, to agree upon an
amendment to this Agreement that would adjust such financial covenants in a
manner that would preserve the original intent thereof, but would allow
compliance therewith to be determined in accordance with the Borrower’s
financial statements at that time, provided that, until so amended such
financial covenants shall continue to be computed in accordance with GAAP prior
to such change therein.

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            Notwithstanding
any provision contained herein to the contrary, solely for purposes of
calculating any financial covenant required hereunder, such calculation shall
ignore the application of the Convertible Debt Accounting Guidance, if and to
the extent otherwise applicable to Borrower’s financial statements.  If at
any time any material change in GAAP would materially affect the computation of
any financial ratio or requirement set forth in any of the Loan Documents, and
either the Borrower or the Required Lenders shall so request, the
Administrative Agent, the Lenders and the Borrower 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 (which shall not be unreasonably withheld)); provide 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) the Borrower
shall provide to the Administrative Agent and the Lenders an explanation of the
impact of such change in reasonable detail satisfactory to the Administrative
Agent.

ARTICLE
II

THE CREDIT

2.1             
Generally

.  Subject to the
terms and conditions of this Agreement, Lenders severally agree to make
Advances through the Administrative Agent to Borrower from time to time prior
to the Facility Termination Date, provided that the making of any
such Advance will not cause the then‐current Revolving Facility Usage to
exceed the then-current Aggregate Commitment.  Each Lender shall fund its
Ratable Share of each such Revolving Credit Advance and no Lender will be
required to fund any amounts which, when aggregated with such Lender’s Ratable
Share of all other Advances then outstanding, would exceed such Lender’s
then-current Commitment.  This facility (“Facility”) is a revolving credit
facility and, subject to the provisions of this Agreement, Borrower may request
Advances hereunder, repay such Advances and reborrow Advances at any time prior
to the Facility Termination Date.

2.2             
Revolving Credit Advances

.  Each Revolving
Credit Advance hereunder shall consist of Loans made from the several Lenders
ratably in proportion to the ratio their respective Commitments bear to the
Aggregate Commitment.  The Revolving Credit Advances may be Base Rate Advances,
LIBOR Rate Advances or a combination thereof, selected by Borrower in
accordance with Sections 2.10 and 2.11.

2.3             
Interest Rate Options

.  The Borrower shall
pay interest in respect of the outstanding unpaid principal amount of the Loans
as selected by it from the Base Rate Option or LIBOR Rate Option set forth
below applicable to the Advances, it being understood that, subject to the
provisions of this Agreement, the Borrower may select different Interest Rate
Options and different Interest Periods to apply simultaneously to the Loans
comprising different Borrowing Tranches and may convert to or renew one or more
Interest Rate Options with respect to all or any portion of the Loans
comprising any Borrowing Tranche; provided that there shall not be at any one
time outstanding more than six (6) Borrowing Tranches in the aggregate among
all of the Loans and provided further that if an Event of Default or Potential
Default exists and is continuing, the Borrower may not request, convert to, or
renew the LIBOR Rate Option for any Advances and the Required Lenders may
demand that all existing Borrowing Tranches bearing interest under the LIBOR
Rate Option shall be converted immediately to the Base Rate Option, subject to
the obligation of the Borrower to pay any indemnity under Article IV in
connection with such conversion.  The Borrower shall have the right to select
from the following Interest Rate Options applicable to the Advances:

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(a)               
Base Rate Option:  A fluctuating rate per annum (computed on the basis
of a year of 360 days and actual days elapsed) equal to the Base Rate plus the
Base Rate Applicable Margin, such interest rate to change automatically from
time to time effective as of the effective date of each change in the Base
Rate; or

(b)              
LIBOR Rate Option:  A rate per annum (computed on the basis of a year
of 360 days and actual days elapsed) equal to the LIBOR Rate plus the LIBOR
Applicable Margin.

Subject to Section
2.13, only the Base Rate Option shall apply to the Swing Loans.

2.4             
Unused Fee

.  Accruing from the
date hereof until the Facility Termination Date, except for any period of time on
account of which the Borrower is obligated to pay the Facility Fee, the
Borrower agrees to pay to the Administrative Agent for the account of each
Lender according to its Ratable Share, a nonrefundable unused fee (the “Unused
Fee”) equal to the Applicable Unused Fee Rate (computed on the basis of a
year of 360 days and actual days elapsed) multiplied by the average daily
difference between the amount of (i) the Aggregate Commitment for that portion
of each calendar quarter during which an Unused Fee is accruing and (ii) the
Revolving Facility Usage for such period; provided, however, that any Unused
Fee accrued with respect to the Commitment of a Defaulting Lender during the
period prior to the time such Lender became a Defaulting Lender and unpaid at
such time shall not be payable by the Borrower so long as such Lender shall be
a Defaulting Lender except to the extent that such Unused Fee shall otherwise
have been due and payable by the Borrower prior to such time; and provided
further that no Unused Fee shall accrue with respect to the Commitment of a
Defaulting Lender so long as such Lender shall be a Defaulting Lender.  Subject
to the proviso in the directly preceding sentence, all Unused Fees shall be
payable quarterly in arrears on the first Business Day of each calendar
quarter.

2.5             
Facility Fee and Other Fees

.  From and after the
date that Borrower has received Qualified Ratings and the outstanding Advances have
commenced to accrue interest using the Applicable Margins shown on Schedule B
of Exhibit H attached hereto and for so long thereafter as the
outstanding Advances  accrue interest at such Applicable Margins, which
specifically excludes any period of time on account of which the Borrower is
obligated to pay an Unused Fee, the Borrower agrees to pay to the
Administrative Agent for the account of each Lender according to its Ratable
Share, a nonrefundable facility fee (the “Facility Fee”) equal to the
Applicable Facility Fee Rate (computed on the basis of a year of 360 days and
actual days elapsed) multiplied by the average amount of the Aggregate
Commitment for that portion of each calendar quarter during which a Facility
Fee is accruing; provided, however, that any Facility Fee accrued with respect
to the Commitment of a Defaulting Lender during the period prior to the time
such Lender became a Defaulting Lender and unpaid at such time shall not be
payable by the Borrower so long as such Lender shall be a Defaulting Lender
except to the extent that such Facility Fee shall otherwise have been due and
payable by the Borrower prior to such time; and provided further that no
Facility Fee shall accrue with respect to the Commitment of a Defaulting Lender
so long as such Lender shall be a Defaulting Lender.  Subject to the proviso in
the directly preceding sentence, all Facility Fees shall be payable quarterly
in arrears on the first Business Day of each calendar quarter. The Borrower
also agrees to pay such other fees as may be payable from time to time to the
Administrative Agent, the Syndication Agent or the “Co-Lead Arrangers” pursuant
to the Borrower’s letter agreement with them dated as of November 18, 2011
(collectively, the “Fee Letter”).

2.6             
Usury

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.  This Agreement and
each Note are subject to the express condition that at no time shall Borrower
be obligated or required to pay interest on the principal balance of the Loan
at a rate which could subject any Lender to either civil or criminal liability
as a result of being in excess of the Maximum Legal Rate.  If by the terms of
this Agreement or the Loan Documents, Borrower is at any time required or
obligated to pay interest on the principal balance due hereunder at a rate in
excess of the Maximum Legal Rate, the interest rate or the Default Rate, as the
case may be, shall be deemed to be immediately reduced to the Maximum Legal
Rate and all previous payments in excess of the Maximum Legal Rate shall be
deemed to have been payments in reduction of principal and not on account of
the interest due hereunder.  All sums paid or agreed to be paid to Lender for
the use, forbearance, or detention of the sums due under the Loan, shall, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Loan until payment in full so
that the rate or amount of interest on account of the Loan does not exceed the
Maximum Legal Rate of interest from time to time in effect and applicable to
the Loan for so long as the Loan is outstanding.

2.7             
Voluntary Commitment Reductions

.  Borrower may, at
any time upon five (5) days prior written notice to the Administrative Agent,
elect to reduce or terminate the Aggregate Commitment under this Facility
provided that (i) each such reduction shall be in the minimum amount of
$5,000,000, (ii) all such reductions shall reduce each Lender’s Commitment and
the Swing Loan Commitment on a pro rata basis, (iii) any amount by which the
Revolving Facility Usage exceeds the reduced Aggregate Commitment shall be paid
on the effective date of, and as a condition to such reduction, (iv) Borrower
shall pay all costs associated with any related prepayments of LIBOR Rate
Advances or due under any other provisions contained in this Agreement and (v)
Borrower shall not reduce the Aggregate Commitment below $100,000,000 unless
Borrower elects to terminate the Aggregate Commitment in its entirety.

2.8             
Minimum Amount of Each Advance

.  Each LIBOR Rate
Advance shall be in an amount not less than $1,000,000 or a whole multiple of
$100,000 in excess thereof.  Each Base Rate Advance and each Swing Advance
shall be in the minimum amount of $250,000; provided, however, that, subject to
Section 2.1, any Base Rate Advance or Swing Advance may be in the amount
of the unused Aggregate Commitment.

2.9             
Final Principal Payment; Optional Prepayments.   Any outstanding
Advances and all other unpaid Obligations shall be paid in full by Borrower on
the Facility Termination Date.  The Borrower may, without premium or penalty,
upon at least one (1) Business Day’s notice to the Administrative Agent given
not later than 1:00 p.m. on such Business Day, in the case of all Advances
other than Swing Advances (in which case such notice shall be given not later
than 1:00 p.m. on such date of prepayment), prepay the Advances, which
notice shall specify the date and amount of prepayment and whether the
prepayment is of LIBOR Rate Advances, Base Rate Advances, or a combination
thereof, and if a combination thereof, the amount allocable to each; provided,
however, that (i) any partial prepayment under this Subsection shall be in an
amount not less than $1,000,000 or a whole multiple of $100,000 in excess
thereof and; (ii) any LIBOR Rate Advance prepaid on any day other than the last
day of the applicable LIBOR Interest Period must be accompanied by any amounts payable
pursuant to Section 4.4.  Upon receipt of any such notice the
Administrative Agent shall promptly notify each Lender thereof.  If any such
notice is given, the amount specified in such notice shall be due and payable
on the date specified therein, together with any amounts payable pursuant to Section
4.4.

2.10         
Revolving Credit Loan Requests; Swing Loan
Requests.

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(a)        Revolving Credit Loan Requests.  Except as otherwise
provided herein, the Borrower may from time to time prior to the Facility
Termination Date request the Lenders to make Loans, or renew or convert the
Interest Rate Option applicable to existing Loans, by delivering to the
Administrative Agent, not later than noon, Eastern time, (i) three (3) Business
Days prior to the proposed Borrowing Date with respect to the making of Loans
to which the LIBOR Rate Option applies or the conversion to or the renewal of
the LIBOR Rate Option for any Loans; and (ii) the same Business Day of the
proposed Borrowing Date with respect to the making of a Loan to which the Base
Rate Option applies or the last day of the preceding Interest Period with
respect to the conversion to the Base Rate Option for any Loan, of a duly
completed request therefor substantially in the form of Exhibit F-1 or a
request by telephone immediately confirmed in writing by letter, facsimile or
telex in such form (each, a “Loan Request”), it being understood that
the Administrative Agent may rely on the authority of any individual making
such a telephonic request without the necessity of receipt of such written
confirmation.  Each Loan Request shall be irrevocable and shall specify the
aggregate amount of the proposed Loans comprising each Borrowing Tranche, and,
if applicable, the Interest Period.

Except as
otherwise provided herein, the Borrower may from time to time prior to the
Facility Termination Date request PNC to make Swing Loans by delivery to PNC
not later than 2:00 p.m., Eastern time, on the proposed Borrowing Date of a
duly completed request therefor substantially in the form of Exhibit F-2
hereto or a request by telephone immediately confirmed in writing by letter,
facsimile or telex (each, a “Swing Loan Request”), it being understood
that the Administrative Agent may rely on the authority of any individual
making such a telephonic request without the necessity of receipt of such
written confirmation.  Each Swing Loan Request shall be irrevocable and shall
specify the proposed Borrowing Date and the principal amount of such Swing
Loan.

The
Administrative Agent shall, promptly after receipt by it of a Loan Request
pursuant to this Section 2.10, notify the Lenders of its receipt of such
Loan Request specifying the information provided by the Borrower and the
apportionment among the Lenders of the requested Loans as determined by the
Administrative Agent.  Each Lender shall remit the principal amount of each
Loan to the Administrative Agent such that the Administrative Agent is able to,
and the Administrative Agent shall, to the extent the Lenders have made funds
available to it for such purpose and subject to Section 5.2 fund such
Loans to the Borrower in U.S. Dollars and immediately available funds at the
Principal Office prior to 2:00 p.m., on the applicable Borrowing Date; provided
that if any Lender fails to remit such funds to the Administrative Agent in a
timely manner, the Administrative Agent may elect in its sole discretion to
fund with its own funds the Loans of such Lender on such Borrowing Date, and
such Lender shall be subject to the repayment obligation in Section 2.19.

2.11         
Conversion and Continuation of
Outstanding Advances

.  Base Rate Advances
shall continue as Base Rate Advances unless and until such Base Rate Advances
are converted into LIBOR Rate Advances.  Each LIBOR Rate Advance shall continue
as a LIBOR Rate Advance until the end of the then applicable Interest Period
therefor, at which time such LIBOR Rate Advance shall be automatically
converted into a Base Rate Advance unless the Borrower shall have given the
Administrative Agent a Loan Request requesting that, at the end of such
Interest Period, such LIBOR Rate Advance either continue as a LIBOR Rate
Advance for the same or another Interest Period or be converted to an Advance
of another Type.

2.12         
Changes in Interest Rate, Etc.

  Each Base Rate
Advance shall bear interest on the outstanding principal amount thereof, for
each day from and including the date such Advance is made or is converted from
a LIBOR Rate Advance into a Base Rate Advance to but excluding the date it
becomes due or is converted into a LIBOR Rate Advance, at a rate per annum
equal to the Base Rate for such day.  Changes in the rate of interest on that
portion of any Advance maintained as a Base Rate Advance will take effect
simultaneously with each change in the Base Rate.  Each LIBOR Rate Advance
shall bear interest from and including the first day of the Interest Period
applicable thereto to (but not including) the last day of such Interest Period
at the interest rate determined as applicable to such LIBOR Rate Advance.

2.13         
Rates Applicable After Event of
Default

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.  During the
continuance of an Event of Default the Administrative Agent may, at the
direction of the Required Lenders, by notice to the Borrower, declare that (i)
no Advance may be made as, converted into, or continued beyond the expiration
of any then-current Interest Period as, a LIBOR Rate Advance, and (ii) the
Default Rate shall apply (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 9.2 requiring
unanimous consent of the Lenders to changes in interest rates), provided,
however, that the Default Rate shall become applicable automatically if an
Event of Default occurs under Section 8.1, 8.2, or 8.3,
unless waived by the Required Lenders.

2.14         
Method of Payment

.  All payments of the
Obligations hereunder shall be made, without setoff, deduction, or
counterclaim, in immediately available funds to the Administrative Agent at the
Principal Office of Administrative Agent by noon, Eastern time, on the date
when due and shall be applied ratably by the Administrative Agent among the
Lenders.  As provided elsewhere herein, all Lenders’
interests in the Revolving Credit Advances and the Loan Documents shall be
ratable undivided interests and none of such Lenders’ interests shall have
priority over the others.  Each payment delivered to the Administrative Agent
for the account of any Lender or amount to be applied or paid by the
Administrative Agent to any Lender shall be paid promptly (on the same day as
received by the Administrative Agent if received prior to noon, Eastern time,
on such day and otherwise on the next Business Day) by the Administrative Agent
to such Lender in the same type of funds that the Administrative Agent received
at its address specified pursuant to Article XIV or at any other office
specified in a notice received by the Administrative Agent from such Lender. 
Payments received by the Administrative Agent but not timely funded to the
Lenders shall bear interest payable by the Administrative Agent at the Federal
Funds Effective Rate from the date due until the date paid.  The Administrative
Agent is hereby authorized to charge the account of the Borrower maintained
with PNC Bank, National Association for each payment of principal, interest and
fees as it becomes due hereunder.

2.15         
Notes; Telephonic Notices

.  Each Lender is
hereby authorized to record the principal amount of each of its Loans and each
repayment on the schedule attached to its Note, provided, however, that the
failure to so record shall not affect the Borrower’s obligations under such
Note.  The Borrower hereby authorizes the Lenders and the Administrative Agent
to extend, convert or continue Advances, effect selections of Types of Advances
and to transfer funds based on written notices made by any Authorized Officer
and Borrower agrees to deliver promptly to the Administrative Agent such
written notice.  The Administrative Agent will at the request of the Borrower,
from time to time, but not more often than monthly, provide notice of the
amount of the outstanding Aggregate Commitment, the Type of Advance, and the
applicable interest rate, if for a LIBOR Rate Advance.  Upon a Lender’s
furnishing to Borrower an affidavit to such effect, if a Note is mutilated,
destroyed, lost or stolen, Borrower shall deliver to such Lender, in substitution
therefore, a new note containing the same terms and conditions as such Note
being replaced.

2.16         
Interest Payment Dates;
Interest and Fee Basis

.  Interest accrued on
each Advance shall be payable on each Payment Date, commencing with the first
such date to occur after the date hereof, at maturity, whether by acceleration
or otherwise, and upon any termination of the Aggregate Commitment in its
entirety.  Interest on LIBOR Rate Advances, Facility Letter of Credit Fees,
Facility Fees and Unused Fees shall be calculated for actual days elapsed on
the basis of a 360-day year.  Interest on Base Rate Advances and Swing Advances
shall be calculated for actual days elapsed on the basis of a 360 day year.
Interest shall be payable for the day an Advance is made but not for the day of
any payment on the amount paid if payment is received prior to noon, Eastern
time.  If any payment of principal of or interest on an Advance shall become
due on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and, in the case of a principal payment, such extension
of time shall be included in computing interest in connection with such
payment.

2.17         
Notification of Advances,
Interest Rates and Prepayments

.  The Administrative
Agent will notify each Lender of the contents of each Loan Request,
Conversion/Continuation Notice, and repayment notice received by it hereunder
not later than the close of business on the Business Day such notice is
received by the Administrative Agent.  The Administrative Agent will notify
each Lender of the interest rate applicable to each LIBOR Rate Advance promptly
upon determination of such interest rate and will give each Lender prompt
notice of each change in the Base Rate.

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2.18         
Increasing Lenders and New
Lenders

. The Borrower may, at any
time prior to the third (3rd) anniversary of the Agreement Execution
Date, request that (1) the current Lenders increase their Commitments (any
current Lender which elects to increase its Commitment shall be referred to as
an "Increasing Lender") or (2) one or more new lenders (each a
"New Lender") join this Agreement and provide a Commitment hereunder,
subject to the following terms and conditions: 

2.18.1    No Obligation to Increase.  No current Lender shall be obligated to increase
its Commitment and any increase in the Commitment by any current Lender shall
be in the sole discretion of such current Lender. 

2.18.2   
Defaults.  There shall exist no Events of Default or Potential
Default on the effective date of such increase after giving effect to such
increase. 

2.18.3    Aggregate Commitment.  After giving effect to such increase, the total Aggregate Commitment
shall not exceed $400,000,000. 

2.18.4    Resolutions; Opinion.  The Loan Parties shall deliver to the Administrative Agent on or
before the effective date of such increase the following documents in a form
reasonably acceptable to the Administrative Agent: (1) certifications of their
corporate secretaries with attached resolutions certifying that the increase in
the Aggregate Commitment has been approved by such Loan Parties, and (2) an
opinion of counsel addressed to the Administrative Agent and the Lenders
addressing the authorization and execution of the Loan Documents by, and
enforceability of the Loan Documents against, the Loan Parties. 

2.18.5    Notes.  The
Borrower shall execute and deliver (1) to each Increasing Lender a replacement
revolving credit Note reflecting the new amount of such Increasing Lender's
Commitment after giving effect to the increase (and the prior Note issued to
such Increasing Lender shall be deemed to be terminated) and (2) to each New
Lender a Note reflecting the amount of such New Lender's Commitment. 

2.18.6    Approval of New Lenders.  Any New Lender shall be subject to the approval of
the Borrower, which approval shall not be unreasonably withheld or delayed, and
the Administrative Agent.

2.18.7    Increasing Lenders.  Each Increasing Lender shall confirm its agreement to increase its
Commitment pursuant to an acknowledgement in a form acceptable to the
Administrative Agent, signed by it and the Borrower and delivered to the
Administrative Agent at least five (5) days before the effective date of such
increase. 

2.18.8    New Lenders--Joinder.  Each New Lender shall execute
an amendment to this Agreement in substantially the form of Exhibit G
attached hereto pursuant to which such New Lender shall join and become a party
to this Agreement and the other Loan Documents with a Commitment in the amount
set forth in such amendment. 

Notwithstanding anything in
this Section 2.18 to the contrary, in the event Borrower requests that
Lenders increase their Commitments, current Lenders shall be presented with and
shall have the right to increase their Commitments before any solicitation is
made of a new, prospective lender to provide a new commitment hereunder.

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(ii)        Treatment of Outstanding
Loans and Letters of Credit.  

(a)        Repayment of Outstanding Loans;
Borrowing of New Loans.  On the effective date of such increase, the
Borrower shall repay all Loans then outstanding, subject to the Borrower's
indemnity obligations under Section 4.3; provided that it may borrow new
Loans with a Borrowing Date on such date. Each of the Lenders shall participate
in any new Loans made on or after such date in accordance with their respective
Ratable Shares after giving effect to the increase in the Aggregate Commitment
contemplated by this Section 2.18.

(b)        Outstanding Letters of Credit. Repayment of Outstanding
Loans; Borrowing of New Loans.  On the effective date of such increase,
each Increasing Lender and each New Lender (i) will be deemed to have purchased
a participation in each then outstanding Facility Letter of Credit equal to its
Ratable Share of such Facility Letter of Credit and the participation of each
other Lender in such Facility Letter of Credit shall be adjusted accordingly
and (ii) will acquire, (and will pay to the Administrative Agent, for the
account of each Lender, in immediately available funds, an amount equal to) its
Ratable Share of all outstanding Participation Advances.

2.19         
Presumptions by Administrative
Agent

.  Unless the Administrative
Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders
or the Issuing Lender hereunder that the Borrower will not make such payment,
the Administrative Agent may assume that the Borrower has made such payment on
such date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the Issuing Lender, as the case may be, the amount
due.  In such event, if the Borrower has not in fact made such payment, then
each of the Lenders or the Issuing Lender, 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 Issuing Lender, with interest thereon, for
each day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the greater of
the Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation.

2.20         
Replacement of a Lender

.  In the event any
Lender (i) gives notice under Section 4.5, (ii) requests compensation
under Section 4.1, or requires the Borrower to pay any additional amount
to any Lender or any Governmental Body for the account of any Lender pursuant
to Section 4.2, (iii) is a Defaulting Lender, (iv) becomes subject
to the control of an Governmental Authority (other than normal and customary
supervision), or (v) is a Non-Consenting Lender referred to in Section 9.2,
then in any such event the Borrower may, at its sole expense, 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, Article XIII), 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:

(i)                
the Borrower shall have paid to
the Administrative Agent the assignment fee specified in Section 13.2;

(ii)              
such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans and
Participation Advances, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder and under the other Loan Documents (including
any amounts under Section 4.3) from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts);

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(iii)            
in the case of any such assignment
resulting from a claim for compensation under Section 4.1] or payments
required to be made pursuant to Section 4.2, such assignment will result
in a reduction in such compensation or payments thereafter; and

(iv)            
such assignment does not conflict
with applicable Law.

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
Borrower to require such assignment and delegation cease to apply.

2.21         
Swing Advances.

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 In addition to the
other options available to the Borrower hereunder, the Swing Loan Commitment
shall be available for Swing Advances subject to the following terms and
conditions.  Swing Advances shall be made available for same day borrowings
provided that a Swing Loan Request is given in accordance with Section 2.10
hereof during the period commencing on the Agreement Effective Date and ending
on a date ten (10) days prior to the then-current Facility Termination Date. 
Each Swing Advance shall bear interest at a variable rate for each day such
Swing Advance is outstanding equal to the Base Rate Option for such day or, if
so elected by the Borrower in the applicable Swing Loan Request, the Daily
LIBOR Rate plus the then-current LIBOR Applicable Margin. In no event shall the
Swing Lender be required to fund a Swing Advance if it would increase the total
aggregate outstanding Loans by Swing Lender hereunder plus its Ratable Share of
Reimbursement Obligations to an amount in excess of the Swing Lender’s
Commitment.  No Swing Advance may be made to repay a Swing Advance, but
Borrower may repay Swing Advances from subsequent pro rata Advances hereunder. 
On the fifteenth day and on the last Business Day of each calendar month, if
any Swing Advances have not previously been paid, each Lender irrevocably
agrees to purchase its Ratable Share of any Swing Advance made by the Swing
Lender regardless of whether the conditions for disbursement are satisfied at
the time of such purchase, including the existence of an Event of Default
hereunder provided that Swing Lender did not have actual knowledge of such
Event of Default at the time the Swing Advance was made and provided further
that no Lender shall be required to have total outstanding Loans plus its
Ratable Share of Letter of Credit Obligations exceed its Commitment.  Such
purchase shall take place by the time PNC so requests (which request may be
telephonic or written notice by letter, facsimile or telex), which shall not be
earlier than 3:00 p.m. on the Business Day next after the date the Lenders
receive such request from PNC.  From and after the date it is so purchased,
each such Swing Advance shall, to the extent purchased, (i) be treated as
a Loan made by the purchasing Lenders and not by the selling Lender for all
purposes under this Agreement and the payment of the purchase price by a Lender
shall be deemed to be the making of a Loan by such Lender and shall constitute
outstanding principal under such Lender’s Note, and (ii) shall no longer
be considered a Swing Advance except that all interest accruing on or
attributable to such Swing Advance for the period prior to the date of such
purchase shall be paid when due by the Borrower to the Administrative Agent for
the benefit of the Swing Lender and all such amounts accruing on or
attributable to such Loans for the period from and after the date of such
purchase shall be paid when due by the Borrower to the Administrative Agent for
the benefit of the purchasing Lenders.  If prior to purchasing its Ratable
Share of a Swing Advance one of the events described in Section 8.7
shall have occurred and such event prevents the consummation of the purchase
contemplated by preceding provisions, each Lender will purchase an undivided
participating interest in the outstanding Swing Advance in an amount equal to
its Ratable Share of such Swing Advance.  From and after the date of each
Lender’s purchase of its participating interest in a Swing Advance, if the
Swing Lender receives any payment on account thereof, the Swing Lender will
distribute to such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender’s participating interest was
outstanding and funded); provided, however, that in the event that such payment
was received by the Swing Lender and is required to be returned to the
Borrower, each Lender will return to the Swing Lender any portion thereof
previously distributed by the Swing Lender to it.  If any Lender fails to so
purchase its Ratable Share of any Swing Advance, such Lender shall be deemed to
be a Defaulting Lender hereunder.

2.22         
Letter of Credit Subfacility.  

 

(a)               
Obligation to Issue.  Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the
Borrower herein set forth, the Issuing Lender hereby agrees to issue for the
account of the Borrower, one or more Facility Letters of Credit in accordance
with this Section 2.22, from time to time during the period commencing
on the Agreement Effective Date and ending on a date sixty (60) days prior to
the then-current Facility Termination Date.

(b)              
Types and Amounts. The Issuing Lender shall not have any obligation to:

(i)                
issue any Facility Letter of
Credit if the aggregate maximum amount then available for drawing under Letters
of Credit issued by such Issuing Lender, after giving effect to the Facility
Letter of Credit requested hereunder, shall exceed any limit imposed by law or
regulation upon such Issuing Lender;

(ii)              
issue any Facility Letter of
Credit if, after giving effect thereto, (1) the then applicable Revolving
Facility Usage would exceed the then current Aggregate Commitment, or
(2) the Facility Letter of Credit Obligations would exceed the Facility
Letter of Credit Sublimit; or

(iii)            
issue any Facility Letter of
Credit having an expiration date, or containing automatic extension provision
to extend such date, to a date beyond the second anniversary of the
then-current Facility Termination Date (provided that Borrower agrees to cash
collateralize any such Facility Letter of Credit with an expiration date beyond
the Facility Termination Date that remains outstanding on a date forty-five
(45) days prior to the actual Facility Termination Date as provided in
Subsection (i) of this Section 2.22  and in Section 9.1 below).

(c)               
Conditions. In addition to being subject to the satisfaction of
the conditions contained in Article V hereof, the obligation of the
Issuing Lender to issue any Facility Letter of Credit is subject to the
satisfaction in full of the following conditions:

(i)                
the Borrower shall have delivered
to the Issuing Lender at such times and in such manner as the Issuing Lender
may reasonably prescribe such documents and materials as may be reasonably
required pursuant to the terms of the proposed Facility Letter of Credit (it
being understood that if any inconsistency exists between such documents and the
Loan Documents, the terms of the Loan Documents shall control) and the proposed
Facility Letter of Credit shall be reasonably satisfactory to the Issuing
Lender as to form and content;

(ii)              
as of the date of issuance, no
order, judgment or decree of any court, arbitrator or governmental authority
shall purport by its terms to enjoin or restrain the Issuing Lender from
issuing the requested Facility Letter of Credit and no law, rule or regulation
applicable to the Issuing Lender and no request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction over
the Issuing Lender shall prohibit or request that the Issuing Lender refrain
from the issuance of Letters of Credit generally or the issuance of the
requested Facility Letter or Credit in particular; and

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(iii)            
there shall not exist any Event of
Default.

(d)              
Procedure for Issuance
of Facility Letters of Credit.  Borrower shall give the
Issuing Lender and the Administrative Agent at least five (5) Business Days’
prior written notice, or such shorter period as may be agreed to by the Issuing
Lender, of any requested issuance of a Facility Letter of Credit under this
Agreement (a “Letter of Credit Request”) and shall (i) immediately provide the
Issuing Lender and the Administrative Agent with a telecopy of the written
notice required hereunder which has been signed by an Authorized Officer or a
telex containing all information required to be contained in such written
notice and (ii) promptly provide the Issuing Lender and the Administrative
Agent (in no event later than the requested date of issuance) with the written
notice required hereunder containing the original signature of an authorized
officer; such notice shall be irrevocable, except as provided below in this Section
2.22(d), and shall specify:

(i)                
the stated amount of the Facility Letter of Credit
requested (which stated amount shall not be less than $50,000);

(ii)              
the effective date (which day
shall be a Business Day) of issuance of such requested Facility Letter of
Credit (the “Issuance Date”);

(iii)            
the date on which such requested
Facility Letter of Credit is to expire (which day shall be a Business Day);

(iv)            
the purpose for which such
Facility Letter of Credit is to be issued;

(v)              
the Person for whose benefit the
requested Facility Letter of Credit is to be issued; and

(vi)            
any special language required to
be included in the Facility Letter of Credit.

Such notice, to be
effective, must be received by such Issuing Lender and the Administrative Agent
not later than noon, Eastern time, on the last Business Day on which notice can
be given under this Section 2.22(d).

Subject to the terms and
conditions of this Section 2.22 and provided that the applicable
conditions set forth in Article V hereof have been satisfied, the
Issuing Lender shall, on the Issuance Date, issue a Facility Letter of Credit
on behalf of the Borrower in accordance with the Letter of Credit Request and
the Issuing Lender’s usual and customary business practices unless the Issuing
Lender has actually received (i) written notice from the Borrower specifically
revoking the Letter of Credit Request with respect to such Facility Letter of
Credit given not later than Business Day immediately preceding the Issuance
Date, or (ii) written or telephonic notice from the Administrative Agent stating
that the issuance of such Facility Letter of Credit would violate Section
2.22(b).

The Issuing Lender shall
give the Administrative Agent (who shall promptly notify Lenders) and the
Borrower written or telex notice, or telephonic notice confirmed promptly
thereafter in writing, of the issuance of a Facility Letter of Credit (the “Issuance
Notice”).

The Issuing Lender shall
not extend or amend any Facility Letter of Credit unless the requirements of
this Section 2.22(d) are met as though a new Facility Letter of Credit
was being requested and issued.

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(e)               
Reimbursement Obligations;
Duties of Issuing Lender.

(i)                
The Issuing Lender shall promptly
notify the Borrower and the Administrative Agent (who shall promptly notify
Lenders) of any draw under a Facility Letter of Credit.  Any such draw shall
not be deemed to be a default hereunder but shall constitute an Advance of the
Facility in the amount of the Reimbursement Obligation with respect to such
Facility Letter of Credit and shall bear interest from the date of the relevant
drawing(s) under the pertinent Facility Letter of Credit at the Base Rate;
provided that if an Event of Default or a Potential Default regarding the
non-payment of any monetary obligations to the Administrative Agent or the
Lenders exists at the time of any such drawing(s), then the Borrower shall
reimburse the Issuing Lender for drawings under a Facility Letter of Credit
issued by the Issuing Lender no later than the next succeeding Business Day
after the payment by the Issuing Lender and until repaid such Reimbursement
Obligation shall bear interest at the Default Rate.

(ii)              
Any action taken or omitted to be
taken by the Issuing Lender under or in connection with any Facility Letter of
Credit, if taken or omitted in the absence of willful misconduct or gross
negligence, shall not put the Issuing Lender under any resulting liability to
any Lender or, provided that such Issuing Lender has complied with the
procedures specified in Section 2.22(d), relieve that Lender of its
obligations hereunder to the Issuing Lender. In determining whether to pay
under any Facility Letter of Credit, the Issuing Lender shall have no
obligation relative to the Lenders other than to confirm that any documents
required to be delivered under such Letter of Credit appear to have been
delivered in compliance, and that they appear to comply on their face, with the
requirements of such Letter of Credit.

(f)               
Participation.

(i)                
Immediately upon the Agreement
Execution Date with respect to the Original Facility Letters of Credit, by
their execution hereof, and immediately upon each issuance by the Issuing
Lender of any other Facility Letter of Credit in accordance with the procedures
set forth in Section 2.22(d), each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from the Issuing Lender,
without recourse, representation or warranty, an undivided interest and
participation equal to such Lender’s Ratable Share in such Facility Letter of
Credit (including, without limitation, all obligations of the Borrower with
respect thereto) and all related rights hereunder and under the Guaranty and
other Loan Documents.  Each Lender’s obligation to make further Loans to
Borrower (other than any payments such Lender is required to make under
subparagraph (ii) below) or to purchase an interest from the Issuing Lender in
any subsequent Facility Letters of Credit issued by the Issuing Lender on
behalf of Borrower shall be reduced by such Lender’s Ratable Share of the
undrawn portion of each Facility Letter of Credit outstanding.

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(ii)              
In the event that the Issuing
Lender makes any payment under any Facility Letter of Credit and the Borrower
shall not have repaid such amount to the Issuing Lender pursuant to Section
2.22(g) hereof, the Issuing Lender shall promptly notify the Administrative
Agent, which shall promptly notify each Lender of such failure, and each Lender
shall promptly and unconditionally pay to the Administrative Agent for the
account of the Issuing Lender the amount of such Lender’s Ratable Share of the
unreimbursed amount of such payment, and the Administrative Agent shall
promptly pay such amount to the Issuing Lender.  Lender’s payments of its
Ratable Share of such Reimbursement Obligation as aforesaid shall be deemed to
be a Loan by such Lender and shall constitute outstanding principal under such
Lender’s Note.  The failure of any Lender to make available to the
Administrative Agent for the account of the Issuing Lender its Ratable Share of
the unreimbursed amount of any such payment shall not relieve any other Lender
of its obligation hereunder to make available to the Administrative Agent for
the account of such Issuing Lender its Ratable Share of the unreimbursed amount
of any payment on the date such payment is to be made, but no Lender shall be
responsible for the failure of any other Lender to make available to the
Administrative Agent its Ratable Share of the unreimbursed amount of any
payment on the date such payment is to be made.  Any Lender which fails to make
any payment required pursuant to this Section 2.22(f)(ii) shall be
deemed to be a Defaulting Lender hereunder.

(iii)            
Whenever the Issuing Lender
receives a payment on account of a Reimbursement Obligation, including any
interest thereon, the Issuing Lender shall promptly pay to the Administrative
Agent and the Administrative Agent shall promptly pay to each Lender which has
funded its participating interest therein, in immediately available funds, an
amount equal to such Lender’s Ratable Share thereof.

(iv)            
Upon the request of the
Administrative Agent or any Lender, the Issuing Lender shall furnish to such
Administrative Agent or Lender copies of any Facility Letter of Credit to which
the Issuing Lender is party and such other documentation as may reasonably be
requested by the Administrative Agent or Lender.

(v)              
The obligations of a Lender to
make payments to the Administrative Agent for the account of the Issuing Lender
with respect to a Facility Letter of Credit shall be absolute, unconditional
and irrevocable, not subject to any counterclaim, set‐off, qualification
or exception whatsoever other than a failure of any such Issuing Lender to
comply with the terms of this Agreement relating to the issuance of such
Facility Letter of Credit, and such payments shall be made in accordance with
the terms and conditions of this Agreement under all circumstances.

(g)              
Payment of Reimbursement
Obligations.  The Borrower agrees to pay to the Administrative
Agent for the account of the Issuing Lender the amount of all Advances for
Reimbursement Obligations, interest and other amounts payable to the Issuing
Lender under or in connection with any Facility Letter of Credit when due,
irrespective of any claim, set‐off, defense or other right which the
Borrower may have at any time against any Issuing Lender or any other Person,
under all circumstances, including without limitation any of the following
circumstances:

(i)                
any lack of validity or
enforceability of this Agreement or any of the other Loan Documents;

(ii)              
the existence of any claim,
setoff, defense or other right which the Borrower may have at any time against
a beneficiary named in a Facility Letter of Credit or any transferee of any
Facility Letter of Credit (or any Person for whom any such transferee may be
acting), the Administrative Agent, the Issuing Lender, any Lender, or any other
Person, whether in connection with this Agreement, any Facility Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transactions between the Borrower and the beneficiary
named in any Facility Letter of Credit);

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(iii)            
any draft, certificate or any
other document presented under the Facility Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect of any statement
therein being untrue or inaccurate in any respect;

(iv)            
the surrender or impairment of any
security for the performance or observance of any of the terms of any of the
Loan Documents; or

(v)              
the occurrence of any Event of
Default.

In the event any payment by
the Borrower received by the Issuing Lender or the Administrative Agent with
respect to a Facility Letter of Credit and distributed by the Administrative
Agent to the Lenders on account of their participations is thereafter set
aside, avoided or recovered from the Administrative Agent or Issuing Lender in
connection with any receivership, liquidation, reorganization or bankruptcy
proceeding, each Lender which received such distribution shall, upon demand by
the Administrative Agent, contribute such Lender’s Ratable Share of the amount
set aside, avoided or recovered together with interest at the rate required to
be paid by the Issuing Lender or the Administrative Agent upon the amount
required to be repaid by the Issuing Lender or the Administrative Agent.

(h)              
Compensation for Facility
Letters of Credit.

(i)                
(a)        The Borrower shall pay
to the Administrative Agent, for the ratable account of the Lenders (including
the Issuing Lender), based upon the Lenders’ respective Ratable Shares, a per
annum fee (the “Facility Letter of Credit Fee”) as a percentage of the
face amount of each Facility Letter of Credit outstanding equal to the LIBOR
Applicable Margin in effect from time to time while such Facility Letter of
Credit is outstanding.  The Facility Letter of Credit Fee relating to any
Facility Letter of Credit shall accrue on a daily basis and shall be due and
payable in arrears on the first Business Day of each calendar quarter following
the issuance of such Facility Letter of Credit and, to the extent any such fees
are then due and unpaid, on the Facility Termination Date or any other earlier
date that the Obligations are due and payable in full.  The Administrative
Agent shall promptly remit such Facility Letter of Credit Fees, when paid, to
the other Lenders in accordance with their Ratable Shares thereof.  The
Borrower shall not have any liability to any Lender for the failure of the
Administrative Agent to promptly deliver funds to any such Lender and shall be
deemed to have made all such payments on the date the respective payment is
made by the Borrower to the Administrative Agent, provided such payment is
received by the time specified in Section 2.14 hereof.

(ii)              
(b)        The Issuing Lender also
shall have the right to receive solely for its own account an issuance fee
equal to one‐eighth of one percent (0.125%) of the face amount of each Facility
Letter of Credit, payable by the Borrower on the Issuance Date for each such
Facility Letter of Credit and on the date of any increase therein or extension
thereof.  The Issuing Lender shall also be entitled to receive its reasonable
out‐of‐pocket costs and the Issuing Lender’s standard charges of
issuing, amending and servicing Facility Letters of Credit and processing draws
thereunder.

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(i)                
Letter of Credit Collateral
Account.  The Borrower hereby agrees
that it will immediately upon the earlier of (i) a date forty-five days prior
to the Facility Termination Date or (ii) the occurrence of an Event of Default,
establish a special collateral account (the “Letter of Credit Collateral
Account”) at the Administrative Agent’s office at the address specified pursuant
to Article XIV, in the name of the Borrower but under the sole
dominion and control of the Administrative Agent, for the benefit of the
Lenders, and in which the Borrower shall have no interest other than as set
forth in Section 9.1.  The Letter of Credit Collateral Account
shall hold the deposits the Borrower is required to make either (i) on the
forty-fifth (45th) day prior to the Facility Termination Date under
Section 2.22(b) with respect to any Facility Letter of Credit which remains
outstanding on such date or (ii) immediately after an Event of Default on
account of any outstanding Facility Letters of Credit as described in Section 9.1. 
In addition to the foregoing, the Borrower hereby grants to the Administrative
Agent, for the benefit of the Lenders, a security interest in and to the Letter
of Credit Collateral Account and any funds that may hereafter be on deposit in
such account, including income earned thereon.  The Lenders acknowledge and
agree that the Borrower has no obligation to fund the Letter of Credit
Collateral Account unless and until so required under Section 9.1
hereof.

2.23         
Extension of Facility
Termination Date

.  The Borrower may,
by notice (an “Extension Request”) to the Administrative Agent not later
than sixty (60) days and not earlier than ninety (90) days prior to the
Facility Termination Date, elect that the Facility Termination Date be extended
for an additional one (1) year period (the “Extension Period”). The
Administrative Agent shall promptly notify the Lenders of receipt of an
Extension Request from the Borrower.  Upon receipt by
the Administrative Agent of an Extension Request, accompanied by an extension
fee equal to 0.20% of the then current Aggregate Commitment (the “Extension
Fee”), and provided that (i) the Borrower executes and delivers to the
Administrative Agent such documents as the Administrative Agent may reasonably
request to confirm that such Extension Request has been properly authorized on
behalf of the Borrower and (ii) that no Event of Default or Potential Default
has occurred and is continuing either on the date of receipt of such Extension Request or on the original Facility Termination Date, the
Facility Termination Date shall be automatically extended to a date one
(1) year thereafter without any need for consent or approval of the Lenders. 
The Extension Fee shall be remitted to the Lenders on a pro rata basis in
accordance with their respective Ratable Shares as of the effective date of
such extension.  If the Borrower fails to make a timely Extension Request or
fails to remit the Extension Fee or if an Event of Default or Potential Default
then has occurred and is then continuing, the Commitments will terminate on the
then-current Facility Termination Date and on such date the Borrower will repay
all Advances and collateralize all Facility Letters of Credit as provided in Section
2.22 hereof.

ARTICLE III 

UNENCUMBERED POOL PROPERTIES

            3.1       Eligibility of Projects

.

(a)               
As of the Agreement Execution
Date, the Administrative Agent has approved for inclusion as Qualifying
Unencumbered Projects those Projects identified on Schedule 3.1, and
such Projects shall become the initial Qualifying Unencumbered Projects.

(b)              
If, after the Agreement Execution
Date, Borrower desires to include any additional Projects as Qualifying Unencumbered
Projects Borrower shall so notify the Administrative Agent in writing and
obtain the approval of the Administrative Agent. The Administrative Agent’s
approval shall be conclusive and no approval from the Lenders shall be required
so long as such additional Projects meet the criteria set forth in the
definition of “Eligible Unencumbered Project”. If  such additional Project does
not meet such criteria it shall only be included in Qualifying Unencumbered
Projects if the Required Lenders shall have also approved the inclusion of such
Project. No Property will be approved by the Administrative Agent unless it is
an Eligible Unencumbered Project and unless and until the Borrower delivers to
the Administrative Agent the following, in form and substance satisfactory to
the Administrative Agent: 

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(i)                
a description of such Project,
such description to include the age, location, size and occupancy rate of such
Project;

(ii)              
a certificate of  Borrower
certifying that insurance of the type required hereunder is in effect with
respect to such Project and that, to the best of Borrower’s knowledge, there
are no material environmental concerns with respect to such Project; and

(iii)            
such other information, including
operating statements and site plans, that the Administrative Agent may
reasonably request in order to evaluate such Project.

(c)               
If, after receipt and review of
the foregoing, unless Administrative Agent has reasonably determined that the
additional Project does not satisfy the requirements to be an Eligible
Unencumbered Project, the Administrative Agent will notify the Borrower and
each Lender within five (5) Business Days after receipt of all of the above
items that it is prepared to proceed with the acceptance of such Project as an
Unencumbered Project.  If the Administrative Agent has determined that the
additional Project does not satisfy the requirements to be an Eligible
Unencumbered Project and therefore that addition of such Property as a
Qualifying Unencumbered Project requires Required Lender approval, the Administrative
Agent shall so notify the Borrower and the Lenders and shall forward to the
Lenders all documents and information submitted by Borrower with respect to
such additional Project. In such event each Lender shall notify the
Administrative Agent whether it approves of the designation of such Project as
a Qualifying Unencumbered Project, notwithstanding such non-compliance, within
ten (10) Business Days of receipt of such notice and all such documents and
information.  If a Lender shall fail to so notify the Administrative Agent,
then such Lender shall be deemed to have approved of such Project.  Upon
approval of such Project by the Administrative Agent, or, if required, by
Required Lenders, and upon execution and delivery of all of the documents
required to be provided under Section 3.2, such Project shall become a
Qualifying Unencumbered Project .

3.2             
Conditions Precedent to a
Project Becoming a Qualifying Unencumbered Project

.  No
Property shall become a Qualifying Unencumbered Project until the Administrative
Agent, or, if required, the Required Lenders, shall have approved of such
Project as provided in Section 3.1, and Borrower shall have caused to be
executed and delivered to the Administrative Agent the following instruments,
documents and agreements in respect of such Property, each to be in form and
substance reasonably satisfactory to the Administrative Agent:

(a)               
if such Project is owned by a
Subsidiary that is not already a Subsidiary Guarantor, a joinder agreement with
respect to the Subsidiary Guaranty in the form attached thereto as Exhibit A
executed by such Subsidiary and all of the items that would have been required
to be delivered to the Administrative Agent under Sections 5.1(b)
through (f) had such Subsidiary been a Loan Party on the Effective Date;

(b)              
a Compliance Certificate
calculated after giving effect to the inclusion of such Project as a Qualifying
Unencumbered Project; and

(c)               
such other due diligence
materials, instruments, documents, certificates, and opinions as the
Administrative Agent may reasonably request. 

3.3             
Release of Subsidiary
Guarantors and Qualifying Unencumbered Projects

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.  From time to time Borrower may request, upon not less
than two (2) Business Days prior written notice to the Administrative Agent,
that the Subsidiary owning a Qualifying Unencumbered Project be released from
the Subsidiary Guaranty, or that any Qualifying Unencumbered Project be
released from such status in whole or in part, which release (the “Release”)
shall be effected by the Administrative Agent if all of the following
conditions are satisfied as of the date of such Release:

(a)               
Borrower shall have delivered a
Compliance Certificate showing pro forma compliance with the covenants set
forth in Section 10.1 after giving effect to such Release; and

(b)              
If after giving effect to such
Release (and taking into account any concurrent addition of a new Qualifying
Unencumbered Project pursuant to Section 3.1), the resulting reduction
in the Unencumbered Real Property Value and Unencumbered Real Property Adjusted
NOI would cause a breach of either Section 7.20(c) or Section 7.20(d),
Borrower shall have repaid such Advances, if any, as may be required to reduce
the outstanding Advances to the maximum amount of Advances that can be
outstanding without creating such a breach of Section 7.20(c) or Section
7.20(d).  In addition, if after
giving effect to such Release (and taking into account any concurrent addition
of a new Qualifying Unencumbered Project pursuant to Section 3.1),  any
resulting reduction in the percentage of units in the Qualifying Unencumbered
Projects which are physically occupied would cause a breach of Section
7.20(e), Borrower shall take the actions required under such Section
7.20(e) within the time required thereunder.

In connection with a
Release, Borrower shall deliver to the Administrative Agent a certificate from
Borrower’s chief executive officer or chief financial officer regarding the
matters referred to in the immediately preceding clauses (a) and (b). 
Notwithstanding the foregoing, the Administrative Agent shall not be obligated
to release any such Subsidiary from the Subsidiary Guaranty if (i) such
Subsidiary owns any other Qualifying Unencumbered Projects that are not being
so released from such status or (ii) an Event of Default or
Potential Default has occurred and is then continuing.

3.4             
Termination of Subsidiary
Guaranty

.

(a)               
The Subsidiary Guaranty shall
continue in full force and effect from the Agreement Execution Date through and
until such date as (i) Borrower has delivered to the Agent evidence that Borrower
has received an Investment Grade Rating from either S&P or Moody’s and (ii) Borrower
has notified Agent that it will  within fourteen (14) days or less, (A) file a
preliminary prospectus with the Securities and Exchange Commission for a public
bond offering or (B) enter into a placement agreement for a private debt
issuance.  Within five (5) Business Days after the date on which each of the
foregoing requirements is met, provided that no Event of Default or Potential
Default has occurred and is then continuing, the Agent will, execute and
deliver on behalf of the Lenders such documents as may be required to terminate
the Subsidiary Guaranty in its entirety and to release the Subsidiary
Guarantors from any further liability thereunder. 

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(b)              
Subject to the provisions of
subsection (c) below, in the event that, at any time following a release of the
Subsidiary Guaranty in accordance with subsection (a) above, Borrower shall no
longer be maintaining an Investment Grade Rating from either S&P or Moody’s,
the requirement for a Subsidiary Guaranty shall be reinstated and, not later
than five (5) Business Days after the loss of such Investment Grade Rating,
Borrower shall cause each Subsidiary which then owns a Qualifying Unencumbered
Project to execute and deliver to the Administrative Agent a new Subsidiary
Guaranty in the form of Exhibit D. Borrower shall thereafter cause each
additional Subsidiary which owns a Qualifying Unencumbered Project to execute
and deliver to the Administrative Agent  a joinder thereto in the form of Exhibit
A attached to such form of Subsidiary Guaranty.  In addition,
notwithstanding the fact that Borrower is maintaining an Investment Grade
Rating from either S&P or Moody’s, if at any time after the Subsidiary
Guaranty has been terminated, any owner of a Qualifying Unencumbered Project
shall incur any Recourse Indebtedness, including without limitation any
Guarantee Obligations with respect to any Indebtedness of Borrower, any other
member of the Consolidated Group or any Investment Affiliate, the requirement
for a Subsidiary Guaranty shall be reinstated as to such owner and, not later
than five (5) Business Days after the incurrence of such Indebtedness, Borrower
shall cause each such Subsidiary to execute and deliver to the Administrative
Agent a new Subsidiary Guaranty in the form of Exhibit D, or if such a
Subsidiary Guaranty has previously executed by other Subsidiaries, to execute
and deliver to the Administrative Agent a joinder thereto in the form of Exhibit
A attached to such form of Subsidiary Guaranty.

(c)               
Borrower’s obligation to cause the
Subsidiaries which are the owners of Qualifying Unencumbered Projects to
execute or join in a reinstated Subsidiary Guaranty on account of the loss of an
Investment Grade Rating from either S&P or Moody’s, as set forth in
subsection (b) above, shall not apply to any such Subsidiary if the taking of
such action by such Subsidiary would be prohibited by Borrower’s supplemental
indenture governing its public debt or the placement agreement governing its
private debt issue.  In such case Borrower instead agrees that, in addition to
the general restrictions on Indebtedness of the Consolidated Group imposed by Section
7.23 below, Borrower shall not cause, or permit or suffer, any Subsidiary
owning a Qualifying Unencumbered Project from time to time which is not a party
to the Subsidiary Guaranty to incur any other Indebtedness (other
than obligations of such Subsidiary for the deferred
purchase price of property or services not to exceed an aggregate outstanding
amount of $1,000,000 at any time), including without limitation any
Guarantee Obligations with respect to any Indebtedness of Borrower, any other
member of the Consolidated Group or any Investment Affiliate.

(d)              
In the event Borrower once again delivers
to the Agent evidence that Borrower has received Investment Grade Rating from
either S&P or Moody’s following the occurrence of the events described in Section
3.4(b) above then, in such event, (i) the provisions of Section 3.4(a)
shall operate anew to require the release of the Subsidiary Guaranty then in
effect and the provisions of the first two sentences of Section 3.4(b)
and the provisions of Section 3.4(c) shall both cease to apply to
Borrower unless and until Borrower shall no longer be maintaining such
Investment Grade Rating.

ARTICLE
IV

INCREASED
COSTS

4.1             
Increased Costs Generally

.  

(a)               
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
reflected in the LIBOR Rate) or the Issuing Lender;

(ii)              
subject any Lender or the Issuing
Lender to any tax of any kind whatsoever with respect to this Agreement, any
Facility Letter of Credit, any participation in a Facility Letter of Credit or
any Loan under the LIBOR Rate Option made by it, or change the basis of
taxation of payments to such Lender or the Issuing Lender in respect thereof
(except for Indemnified Taxes or Other Taxes covered by Section 4.2 and
the imposition of, or any change in the rate of, any Excluded Tax payable by
such Lender or the Issuing Lender); or

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(iii)            
impose on any Lender, the Issuing
Lender or the London interbank market any other condition, cost or expense
affecting this Agreement or any Loan under the LIBOR Rate Option made by such
Lender or any Letter of Credit or participation therein;

and the result of any
of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Loan under the LIBOR Rate Option (or of maintaining its
obligation to make any such Loan), or to increase the cost to such Lender or
the Issuing Lender of participating in, issuing or maintaining any Facility
Letter of Credit (or of maintaining its obligation to participate in or to
issue any Facility Letter of Credit), or to reduce the amount of any sum
received or receivable by such Lender or the Issuing Lender hereunder (whether
of principal, interest or any other amount) then, upon request of such Lender
or the Issuing Lender, the Borrower will pay to such Lender or the Issuing
Lender, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Lender, as the case may be, for such
additional costs incurred or reduction suffered.

(b)              
If any Lender or the Issuing
Lender determines that any Change in Law affecting such Lender or the Issuing
Lender or any lending office of such Lender or such Lender’s or the Issuing
Lender’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 Issuing
Lender’s capital or on the capital of such Lender’s or the Issuing Lender’s
holding company, if any, as a consequence of this Agreement, the Commitments of
such Lender or the Loans made by, or participations in Facility Letters of
Credit held by, such Lender, or the Facility Letters of Credit issued by the
Issuing Lender, to a level below that which such Lender or the Issuing Lender
or such Lender’s or the Issuing Lender’s holding company could have achieved
but for such Change in Law (taking into consideration such Lender’s or the
Issuing Lender’s policies and the policies of such Lender’s or the Issuing
Lender’s holding company with respect to capital adequacy), then from time to
time the Borrower will pay to such Lender or the Issuing Lender, as the case
may be, such additional amount or amounts as will compensate such Lender or the
Issuing Lender or such Lender’s or the Issuing Lender’s holding company for any
such reduction suffered.

(c)               
A certificate of a Lender or the
Issuing Lender setting forth the amount or amounts necessary to compensate such
Lender or the Issuing Lender or its holding company, as the case may be, as
specified in this Section 4.1 and delivered to the Borrower shall be
conclusive absent manifest error.  The Borrower shall pay such Lender or the
Issuing Lender, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.

(d)              
Failure or delay on the part of
any Lender or the Issuing Lender to demand compensation pursuant to this
Section shall not constitute a waiver of such Lender’s or the Issuing Lender’s
right to demand such compensation, provided that the Borrower shall not be
required to compensate a Lender or the Issuing Lender pursuant to this Section
for any increased costs incurred or reductions suffered more than nine (9)
months prior to the date that such Lender or the Issuing Lender, as the case
may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or the Issuing Lender’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 nine
(9) month period referred to above shall be extended to include the period of
retroactive effect thereof).

4.2             
Taxes

.

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(a)               
Any and all payments by or on
account of any obligation of the Borrower 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 Borrower shall
be required by applicable Law to deduct any Indemnified Taxes (including any
Other 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, Lender or Issuing Lender, as the case may be, receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall timely
pay the full amount deducted to the relevant Governmental Authority in accordance
with applicable Law.  Without limiting the provisions above, the Borrower shall
timely pay any Other Taxes to the relevant Governmental Authority in accordance
with applicable Law.

(b)              
The Borrower shall indemnify the
Administrative Agent, each Lender and the Issuing Lender, within ten (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 Issuing Lender, 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
Borrower by a Lender or the Issuing Lender (with a copy to the Administrative
Agent), or by the Administrative Agent on its own behalf or on behalf of a
Lender or the Issuing Lender, shall be conclusive absent manifest error.  As
soon as practicable after any payment of Indemnified Taxes or Other Taxes by
the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative
Agent the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.

(c)               
Any Foreign Lender that is
entitled to an exemption from or reduction of withholding tax under the Law of
the jurisdiction in which the Borrower is 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 Borrower (with
a copy to the Administrative Agent), at the time or times prescribed by
applicable Law or reasonably requested by the Borrower 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.  Notwithstanding the submission of such
documentation claiming a reduced rate of or exemption from U.S. withholding
tax, the Administrative Agent shall be entitled to withhold United States
federal income taxes at the full 30% withholding rate if in its reasonable
judgment it is required to do so under the due diligence requirements imposed
upon a withholding agent under § 1.1441-7(b) of the United States Income Tax
Regulations.  Further, the Administrative Agent is indemnified under §
1.1461-1(e) of the United States Income Tax Regulations against any claims and
demands of any Lender or assignee or participant of a Lender for the amount of
any tax it deducts and withholds in accordance with regulations under § 1441 of
the Internal Revenue Code.  In addition, any Lender, if requested by the
Borrower or the Administrative Agent, shall deliver such other documentation
prescribed by applicable Law or reasonably requested by the Borrower or the
Administrative Agent as will enable the Borrower or the Administrative Agent to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements.

(d)              
Without limiting the generality of
the foregoing, in the event that the Borrower is resident for tax purposes in
the United States of America, any Foreign Lender shall deliver to the Borrower
and the Administrative Agent (in such number of copies as shall be requested by
the recipient) on or prior to the date on which such Foreign Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the request
of the Borrower or the Administrative Agent, but only if such Foreign Lender is
legally entitled to do so), whichever of the following is applicable:

(i)                
two (2) duly completed valid
originals of IRS Form W-8BEN claiming eligibility for benefits of an income tax
treaty to which the United States of America is a party,

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(ii)              
two (2) duly completed valid
originals 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 the 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) two duly completed valid originals
of IRS Form W-8BEN,

(iv)            
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 Borrower to
determine the withholding or deduction required to be made.

(v)              
To the extent that any Lender is
not a Foreign Lender, such Lender shall submit to the Administrative Agent two
(2) originals of an IRS Form W-9 or any other form prescribed by applicable Law
demonstrating that such Lender is not a Foreign Lender.

4.3             
Indemnity

.  In addition to the
compensation or payments required by Section 4.1 or Section 4.2,
the Borrower shall indemnify each Lender against all liabilities, losses or
expenses (including loss of anticipated profits, any foreign exchange losses
and any loss or expense arising from the liquidation or reemployment of funds
obtained by it to maintain such Loan, from fees payable to terminate the
deposits from which such funds were obtained or from the performance of any
foreign exchange contract) which such Lender sustains or incurs as a
consequence of any:

(a)               
payment, prepayment, conversion or
renewal of any Loan to which a LIBOR Rate Option applies on a day other than
the last day of the corresponding Interest Period (whether or not such payment
or prepayment is mandatory, voluntary or automatic and whether or not such
payment or prepayment is then due),

(b)              
attempt by the Borrower to revoke
(expressly, by later inconsistent notices or otherwise) in whole or part any
Loan Requests under Section 2.10 or Section 2.11 or notice
relating to prepayments under Section 2.9, or

(c)               
default by the Borrower in the
performance or observance of any covenant or condition contained in this
Agreement or any other Loan Document, including any failure of the Borrower to
pay when due (by acceleration or otherwise) any principal, interest, Facility
Fee, Unused Fee or any other amount due hereunder.

If any Lender
sustains or incurs any such loss or expense, it shall from time to time notify
the Borrower of the amount determined in good faith by such Lender (which
determination may include such assumptions, allocations of costs and expenses
and averaging or attribution methods as such Lender shall deem reasonable) to
be necessary to indemnify such Lender for such loss or expense.  Such notice
shall set forth in reasonable detail the basis for such determination.  Such
amount shall be due and payable by the Borrower to such Lender ten (10)
Business Days after such notice is given.

4.4             
Settlement Date Procedures

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. In order to minimize the
transfer of funds between the Lenders and the Administrative Agent, the
Borrower may borrow, repay and reborrow Swing Loans and PNC may make Swing
Loans as provided in Section 2.21 hereof during the period between
Settlement Dates.  The Administrative Agent shall notify each Lender of its
Ratable Share of the total of the Revolving Credit Advances and the Swing Loans
(each a “Required Share”).  On such Settlement Date, each Lender shall
pay to the Administrative Agent the amount equal to the difference between its
Required Share and its Revolving Credit Loans, and the Administrative Agent
shall pay to each Lender its Ratable Share of all payments made by the Borrower
to the Administrative Agent with respect to the Revolving Credit Advances.  The
Administrative Agent shall also effect settlement in accordance with the
foregoing sentence on the proposed Borrowing Dates for Revolving Credit Advances
and may at its option effect settlement on any other Business Day.  These
settlement procedures are established solely as a matter of administrative
convenience, and nothing contained in this Section 4.4 shall relieve the
Lenders of their obligations to fund Revolving Credit Loans on dates other than
a Settlement Date pursuant to Section 2.21.  The Administrative Agent
may at any time at its option for any reason whatsoever require each Lender to
pay immediately to the Administrative Agent such Lender’s Ratable Share of the
outstanding Revolving Credit Advances and each Lender may at any time require
the Administrative Agent to pay immediately to such Lender its Ratable Share of
all payments made by the Borrower to the Administrative Agent with respect to the
Revolving Credit Advances.

4.5             
LIBOR Rate Unascertainable;
Illegality; Increased Costs; Deposits Not Available

.

(a)               
If on any date on which a LIBOR
Rate would otherwise be determined, the Administrative Agent shall have
determined that:

(i)                
adequate and reasonable means do
not exist for ascertaining such LIBOR Rate, or

(ii)              
a contingency has occurred which
materially and adversely affects the London interbank eurodollar market
relating to the LIBOR Rate, the Administrative Agent shall have the rights
specified in Section 4.6.

(b)              
In addition, if at any time any
Lender shall have determined that:

(i)                
the making, maintenance or funding
of any Loan to which a LIBOR Rate Option applies has been made impracticable or
unlawful by compliance by such Lender in good faith with any Law or any
interpretation or application thereof by any Governmental Authority or with any
request or directive of any such Governmental Authority (whether or not having
the force of Law), or

(ii)              
such LIBOR Rate Option will not
adequately and fairly reflect the cost to such Lender of the establishment or
maintenance of any such Loan, or

(iii)            
after making all reasonable
efforts, deposits of the relevant amount in Dollars for the relevant Interest
Period for a Loan, or to banks generally, to which a LIBOR Rate Option applies,
respectively, are not available to such Lender with respect to such Loan, or to
banks generally, in the interbank eurodollar market,

then the
Administrative Agent shall have the rights specified in Section 4.6.

4.6             
Administrative Agent’s and
Lender’s Rights

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.  In the case of any
event specified in Section 4.5(a) above, the Administrative Agent shall
promptly so notify the Lenders and the Borrower thereof, and in the case of an
event specified in Section 4.5(b) above, such Lender shall promptly so
notify the Administrative Agent and endorse a certificate to such notice as to
the specific circumstances of such notice, and the Administrative Agent shall
promptly send copies of such notice and certificate to the other Lenders and
the Borrower.  Upon such date as shall be specified in such notice (which shall
not be earlier than the date such notice is given), the obligation of (A) the
Lenders, in the case of such notice given by the Administrative Agent, or (B)
such Lender, in the case of such notice given by such Lender, to allow the
Borrower to select, convert to or renew a LIBOR Rate Option shall be suspended
until the Administrative Agent shall have later notified the Borrower, or such
Lender shall have later notified the Administrative Agent, of the Administrative
Agent’s or such Lender’s, as the case may be, determination that the
circumstances giving rise to such previous determination no longer exist.  If
at any time the Administrative Agent makes a determination under Section
4.5(a) and the Borrower has previously notified the Administrative Agent of
its selection of, conversion to or renewal of a LIBOR Rate Option and such
Interest Rate Option has not yet gone into effect, such notification shall be
deemed to provide for selection of, conversion to or renewal of the Base Rate
Option otherwise available with respect to such Loans.  If any Lender notifies
the Administrative Agent of a determination under Section 4.5(b), the
Borrower shall, subject to the Borrower’s indemnification Obligations under Section
4.3, as to any Loan of the Lender to which a LIBOR Rate Option applies, on
the date specified in such notice either convert such Loan to the Base Rate
Option otherwise available with respect to such Loan or prepay such Loan in
accordance with Section 2.9.  Absent due notice from the Borrower of
conversion or prepayment, such Loan shall automatically be converted to the
Base Rate Option otherwise available with respect to such Loan upon such
specified date.

ARTICLE V

CONDITIONS PRECEDENT

5.1             
Initial Advance.

  The Lenders shall
not be required to make the initial Advance hereunder or accept their
respective participation interests in the Original Facility Letters of Credit
unless (i) the Borrower shall, prior to or concurrently with such initial
Advance, have paid all fees due and payable to the Lenders and the
Administrative Agent hereunder, and (ii) the Borrower shall have furnished to
the Administrative Agent, with sufficient copies for the Lenders, the
following:

(a)               
The duly executed originals of the
Loan Documents, including the Notes, payable to the order of each of the
Lenders, and this Agreement; 

(b)              
Certificates of good standing for
each Loan Party from its state of organization, certified by the appropriate
governmental officer and dated not more than thirty (30) days prior to the
Agreement Execution Date;

(c)               
Copies of the formation documents
(including code of regulations, if appropriate) of each Loan Party, certified
by an officer of the Borrower, together with all amendments thereto;

(d)              
Incumbency certificates, executed
by officers of the Borrower, which shall identify by name and title and bear
the signature of the Persons authorized to sign the Loan Documents and to make
borrowings hereunder on behalf of such parties, upon which certificate the
Administrative Agent and the Lenders shall be entitled to rely until informed
of any change in writing by the Borrower;

(e)               
Copies, certified by a Secretary
or an Assistant Secretary, of the Borrower’s resolutions (and resolutions of
the other Loan Parties, if any are reasonably deemed necessary by counsel for
the Administrative Agent) authorizing the Advances provided for herein, with
respect to the Borrower, and the execution, delivery and performance of the
Loan Documents to be executed and delivered by the Loan Parties;

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(f)               
A written opinion of the
Borrower’s counsel, addressed to the Lenders in substantially the form of Exhibit
E hereto or such other form as the Administrative Agent may reasonably
approve;

(g)              
A closing certificate, signed by
an Authorized Officer of the Borrower, stating that on the initial Borrowing
Date no Event of Default or Potential Default has occurred and is continuing,
there has been no Material Adverse Effect nor any current or pending litigation
that may result in a Material Adverse Effect other than as previously disclosed
in writing to the Administrative Agent, and that all representations and
warranties of the Borrower are true and correct in all material respects as of
the initial Borrowing Date provided that such certificate is in fact true and
correct;

(h)              
The most recent financial
statements of the Borrower;

(i)                
UCC financing statement, judgment,
and tax lien searches with respect to each Loan Party from the state of its
organization and the state in which its principal place of business is located;

(j)                
Written money transfer
instructions, addressed to the Administrative Agent and signed by an Authorized
Officer, together with such other related money transfer authorizations as the
Administrative Agent may have reasonably requested;

(k)              
A pro forma Compliance Certificate
in the form of Exhibit B, utilizing the modified covenants established
herein and executed by the Vice President and General Counsel, the Borrower’s
chief financial officer or chief executive officer;

(l)                
Completion of Administrative
Agent’s due diligence review of Borrower and Administrative Agent’s
determination that (i) no Event of Default exists under the Original Agreement
and (ii) no material adverse change in Borrower’s financial condition has
occurred;

(m)            
Evidence that all reasonable costs
related to the initial Advance, including reasonable legal fees, have been or
will be paid and that all upfront fees due to each of the Lenders under the
terms of their respective commitment letters have been paid or will be paid out
of the proceeds of the initial Advance hereunder; 

(n)              
Evidence satisfactory of the
Administrative Agent of payment in full of all amounts due to any lenders under
the Original Agreement which are not continuing as Lenders hereunder and of
acceptance by them of the termination of their commitments thereunder; and

(o)              
Completion of any other
documentation the Administrative Agent or its counsel may have reasonably
requested, the form and substance of which documents shall be reasonably
acceptable to the parties and their respective counsel.

5.2             
Each Advance.  

The Lenders shall not
be required to make any Advance unless on the applicable Borrowing Date:

(i)                
There exists no Event of Default
or Potential Default;

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(ii)              
The representations and warranties
contained in Article VI are true and correct in all material
respects as of such Borrowing Date with respect to the Loan Parties in
existence on such Borrowing Date, except to the extent any such representation
or warranty is stated to relate solely to an earlier date, in which case such
representation or warranty shall be true and correct in all material respects
on and as of such earlier date; and

(iii)            
All legal matters incident to the
making of such Advance shall be satisfactory to the Lenders and their counsel.

Each Loan
Request with respect to each Advance shall constitute a representation and
warranty by the Borrower that the conditions contained in Sections 5.2(i)
and (ii) have been satisfied.  Any Lender may require a duly completed
Compliance Certificate in substantially the same form of the Certificate
attached as Exhibit  B.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

The Borrower
represents and warrants to the Lenders that:

6.1             
Existence

.  Borrower is a
corporation duly organized and validly existing under the laws of the State of
Ohio, with its principal place of business in Richmond Heights, Ohio and is
duly qualified as a foreign corporation, properly licensed (if required), in
good standing and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted, except where the failure to be
so qualified, licensed and in good standing and to have the requisite authority
would not have a Material Adverse Effect.  Each of Borrower’s Subsidiaries is
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted, except where the failure to be so qualified, licensed and in good
standing and to have the requisite authority would not have a Material Adverse
Effect.

6.2             
Authorization and Validity

.  Each Loan Party has the corporate, limited
partnership, or limited liability company power and authority and legal right
to execute and deliver the Loan Documents and to perform its obligations
thereunder.  The execution and delivery by the Borrower of the Loan Documents
and the performance of its obligations thereunder have been duly authorized by
proper proceedings, and the Loan Documents constitute legal, valid and binding
obligations of each Loan Party enforceable against each Loan Party in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally.

6.3             
No Conflict; Government Consent

.  Neither the
execution and delivery by the Loan Parties of the Loan Documents, nor the
consummation of the transactions therein contemplated, nor compliance with the
provisions thereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Borrower, any of
Borrower’s Subsidiaries, or either of their articles of incorporation,
operating agreements, partnership agreement, or by-laws, or the provisions of
any indenture, instrument or agreement to which the Borrower or any of
Borrower’s Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default thereunder, except
where such violation, conflict or default would not have a Material Adverse
Effect, or result in the creation or imposition of any Lien in, of or on the
Property of the Borrower or a Subsidiary pursuant to the terms of any such
indenture, instrument or agreement.  No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the Loan Documents other than the filing of
a copy of this Agreement.

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6.4             
Financial Statements; Material
Adverse Effect

.  All consolidated
financial statements of the Loan Parties heretofore or hereafter delivered to
the Lenders were prepared in accordance with GAAP in effect on the date of such
statements and fairly present in all material respects the consolidated
financial condition and operations of the Consolidated Group at such date and
the consolidated results of their operations for the period then ended,
subject, in the case of interim financial statements, to normal and customary
year-end adjustments.  From the date of the most recent financial statements
delivered to the Lenders through the Agreement Execution Date, there was no
change in the business, properties, or condition (financial or otherwise) of
the Borrower and its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect.

6.5             
Taxes

.  The Loan Parties
have filed all United States federal tax returns and all other tax returns
which are required to be filed and have paid all taxes due pursuant to said
returns or pursuant to any assessment received by the Borrower or any of its
Subsidiaries except such taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided, and except any non‐compliance
which does not have a Material Adverse Effect.  No tax liens have been filed
with respect to such taxes, except for ad valorem real estate tax contests in
the ordinary course of Borrower’s business not having a Material Adverse
Effect.  The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of any taxes or other governmental charges are
adequate.

6.6             
Litigation and Guarantee
Obligations

.  Except as set forth
on Schedule 6.6 hereto or as set forth in written notice to the
Administrative Agent from time to time, there is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the knowledge
of any of their executive officers, threatened against or affecting the Loan
Parties which could reasonably be expected to have a Material Adverse Effect.  

6.7             
Subsidiaries

.  Schedule 6.7
hereto contains, an accurate list of all Subsidiaries of the Borrower, setting
forth their respective jurisdictions of incorporation or formation and the
percentage of their respective capital stock or partnership or membership
interest owned by the Borrower or other Subsidiaries.  All of the issued and
outstanding shares of capital stock of such Subsidiaries that are corporations
have been duly authorized and issued and are fully paid and non-assessable.

6.8             
ERISA

.  The Unfunded
Liabilities of all Single Employer Plans do not in the aggregate exceed
$1,000,000.  Neither the Borrower nor any other member of the ERISA Group has
incurred, or is reasonably expected to incur, any withdrawal liability to
Multiemployer Plans in excess of $250,000 in the aggregate.  Each Plan complies
in all material respects with all applicable requirements of law and
regulations, no Reportable Event has occurred with respect to any Plan, neither
the Borrower nor any other members of the ERISA Group has withdrawn from any
Plan or initiated steps to do so, and no steps have been taken to reorganize or
terminate any Plan.

            None of the
assets of the Borrower or any Subsidiary constitute “plan assets” within the
meaning of ERISA, the Code and the respective regulations promulgated
thereunder.  The execution, delivery and performance of this Agreement and the
other Loan Documents, and the borrowing and repayment of amounts hereunder, do
not and will not constitute “prohibited transactions” under ERISA or the Code.

6.9             
Accuracy of Information

.  To the best of
Borrower’s knowledge, no information, exhibit or report furnished by the Loan
Parties to the Administrative Agent or to any Lender in connection with the
negotiation of, or compliance with, the Loan Documents contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not misleading.

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6.10         
Regulation U

.  The Borrower has
not used the proceeds of any Advance to buy or carry any margin stock (as
defined in Regulation U) in violation of the terms of this Agreement.

6.11         
Material Agreements

.  Neither the
Borrower nor any Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in (i)
any agreement to which it is a party, which default could have a Material
Adverse Effect or (ii) any agreement or instrument evidencing or governing
Indebtedness, which default would constitute an Event of Default hereunder.

6.12         
Compliance With Laws

.  Except as set forth in Schedule 6.6, Borrower
is in compliance in all material aspects with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
their respective businesses or the ownership of their respective Property,
except for any non-compliance which would not have a Material Adverse Effect. 
The Loan Parties have not received any uncured written notice to the effect
that its operations are not in material compliance with any of the requirements
of applicable federal, state and local environmental, health and safety
statutes and regulations or the subject of any federal or state investigation
evaluating whether any remedial action is needed to respond to a release of any
toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could have a Material Adverse Effect.

6.13         
Ownership of Projects

.  Except as set forth on Schedule 6.13 hereto,
on the date of this Agreement, the Borrower or its Subsidiaries will, respectively,
have good and marketable title, free of all Liens other than Permitted Liens,
respectively, to all of the Projects reflected in the financial statements as
owned by it.

6.14         
Investment Company Act

.  Neither the Borrower nor any Subsidiary is an “investment
company” or a company “controlled” by an “investment company”, within the
meaning of the Investment Company Act of 1940, as amended.

6.15         
Solvency

.

(a)               
Immediately after the Agreement
Execution Date and immediately following the making of each Loan and after
giving effect to the application of the proceeds of such Loans, (a) the
fair value of the assets of the Borrower and its Subsidiaries on a consolidated
basis, at a fair valuation, will exceed the debts and liabilities,
subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on
a consolidated basis; (b) the present fair saleable value of the Property of
the Borrower and its Subsidiaries on a consolidated basis will be greater than
the amount that will be required to pay the probable liability of the Borrower
and its Subsidiaries on a consolidated basis on their debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (c) the Borrower and its Subsidiaries
on a consolidated basis will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) the Borrower and its Subsidiaries on a
consolidated basis will not have unreasonably small capital with which to
conduct the businesses in which they are engaged as such businesses are now
conducted and are proposed to be conducted after the date hereof.

(b)              
The Borrower does not intend to,
or to permit any of its Subsidiaries to, and does not believe that it or any of
its Subsidiaries will, incur debts beyond its ability to pay such debts as they
mature, taking into account the timing of and amounts of cash to be received by
it or any such Subsidiary and the timing of the amounts of cash to be payable
on or in respect of its Indebtedness or the Indebtedness of any such
Subsidiary.

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6.16         
Insurance

  The Loan Parties
carry insurance on their Projects with financially sound and reputable
insurance companies, in such amounts, with such deductibles and covering such
risks as are customarily carried by companies engaged in similar businesses and
owning similar Projects in localities where the Borrower and its Subsidiaries
operate. 

6.17         
REIT and Listing Status

.  Borrower is
qualified as a real estate investment trust under Section 856 of the Code and
currently is in compliance in all material respects with all provisions of the
Code applicable to the qualification of the Borrower as a real estate
investment trust. Borrower’s common stock is and shall be at all times
prior to the Facility Termination Date listed on at least one of the New York
Stock Exchange, NASDAQ or the American Stock Exchange.

6.18         
Title to Property

.  The execution,
delivery or performance of the Loan Documents required to be delivered by the
Borrower hereunder will not result in the creation of any Lien on the Projects
of the Consolidated Group.  No consent to the transactions contemplated
hereunder is required from any ground lessor or mortgagee or beneficiary under
a deed of trust or any other party except as has been delivered to the Lenders.

6.19         
Environmental Matters

.  Each of the
following representations and warranties is true and correct on and as of the
Agreement Execution Date except as disclosed on Schedule 6.19 attached
hereto and to the extent that the facts and circumstances giving rise to any
such failure to be so true and correct, in the aggregate, would not reasonably
be expected to have a Material Adverse Effect:

(a)               
To the best knowledge of the
Borrower, all Projects owned by the Borrower and/or its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws.

(b)              
Neither the Borrower nor any of
its Subsidiaries has received any uncured, written notice of violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws from any
Governmental Authority with regard to any of the Projects, nor does the
Borrower have knowledge or reason to believe that any such written notice is being
threatened.

(c)               
To the best knowledge of the
Borrower, Materials of Environmental Concern are not transported or disposed of
from the Projects of the Borrower and its Subsidiaries in violation of, or in a
manner or to a location which could reasonably give rise to liability of the
Borrower or any Subsidiary under, Environmental Laws, nor are any Materials of
Environmental Concern being generated, treated, stored or disposed of at, on or
under any of the Projects of the Borrower and its Subsidiaries in violation of,
or in a manner that could give rise to liability of the Borrower or any
Subsidiary under, any applicable Environmental Laws.

(d)              
No judicial proceedings or
governmental or administrative action is pending, or, to the knowledge of the
Borrower, threatened, under any Environmental Law to which the Borrower or any
of its Subsidiaries is or, to the Borrower’s knowledge, will be named as a
party with respect to the Projects of the Borrower and its Subsidiaries, nor
are there any consent decrees or other decrees, consent orders, administrative
order or other orders, or other administrative of judicial requirements
outstanding under any Environmental Law with respect to the Projects of the
Borrower and its Subsidiaries.

(e)               
To the best knowledge
of the Borrower, there has been no release or threat of release of Materials of
Environmental Concern at or from the Projects of the Borrower and its
Subsidiaries, or arising from or related to the operations of the Borrower and
its Subsidiaries in connection with the Projects in violation of or in amounts
or in a manner that could give rise to liability under Environmental Laws.

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49 -

 

 

 

 

 

6.20         
Office of Foreign Asset Control

.  Borrower and any
Subsidiary Guarantor are not (and will not be) a person with whom any Lender is
restricted from doing business under regulations of the Office of Foreign Asset
Control (“OFAC”) of the Department of the Treasury of the United States of
America (including, those Persons named on OFAC’s Specially Designated and
Blocked Persons list) or under any statute, executive order (including, the
September 24, 2001 Executive Order Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism), or other governmental action and is not and shall not knowingly
engage in any dealings or transactions or otherwise be associated with such
persons.  In addition, Borrower hereby agrees to provide to any Lender with any
additional information that any Lender deems necessary from time to time in
order to ensure compliance with all applicable Laws concerning money laundering
and similar activities.

6.21         
Subsidiary Guaranty

.           Except for
such times as Borrower shall have satisfied the conditions of Section 3.4(a)
and shall maintain an Investment Rating from either S&P or Moody’s and except
with respect to any Subsidiary which shall qualify for exemption under the
conditions of Section 3.4(c), Borrower shall cause each Subsidiary
Guarantor listed on Schedule 3.1, as amended from time to time, to
execute and deliver to the Administrative Agent the Subsidiary Guaranty.  Except
for such times as Borrower shall have satisfied the conditions of Section
3.4(a) and shall maintain an Investment Rating from either S&P or
Moody’s and except with respect to any Subsidiary which shall qualify for exemption
under the conditions of Section 3.4(c), Borrower shall cause each
Subsidiary which hereafter owns a Qualifying Unencumbered Project to execute
and deliver to the Administrative Agent a joinder in the Subsidiary Guaranty in
the form of Exhibit A attached to the form of Subsidiary Guaranty. 
Borrower covenants and agrees that each Subsidiary which it shall cause to
execute the Subsidiary Guaranty shall be fully authorized to do so by its
supporting organizational and authority documents and shall be in good standing
in its state of organization and shall have obtained any necessary foreign
qualifications required to conduct its business.  Notwithstanding the foregoing, certain Subsidiary
Guarantors may be released therefrom pursuant to the terms and provisions of Section
3.3.

6.22         
Intellectual Property

.  To the best
knowledge of Borrower, Borrower and each Subsidiary of Borrower owns or has the
right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, trade secrets and copyrights (collectively, “Intellectual
Property”) necessary to the conduct of its businesses as now conducted and as
contemplated by the Loan Documents, without known conflict as of the Agreement
Date with any patent, license, franchise, trademark, trade secret, trade name,
copyright, or other proprietary right of any other Person.  To the best
knowledge of Borrower, Borrower and each other Subsidiary have taken all such
steps as they deem reasonably necessary to protect their respective rights
under and with respect to such Intellectual Property.

ARTICLE VII

COVENANTS

During the term
of this Agreement the following shall apply, unless the Required Lenders shall
otherwise consent in writing:

7.1             
Financial Reporting

.  Borrower will
maintain a system of accounting established and administered in accordance with
GAAP, and will furnish to the Administrative Agent and the Lenders:

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(a)               
As soon as available, but in any
event not later than 45 days after the close of each fiscal quarter, other than
the fourth quarter, an unaudited consolidated balance sheet as of the close of
each such fiscal quarter and the related unaudited consolidated statements of
income, retained earnings, and cash flows for each such quarter and for such
quarter and the preceding quarters of the current fiscal year, on an aggregate
basis, setting forth in each case in comparative form the figures for the
corresponding period during the previous fiscal year, all certified by the
Borrower’s chief financial officer or chief accounting officer as being true
and correct in all material respects to such officer’s knowledge;

(b)              
As soon as available, but in any
event not later than 90 days after the close of each fiscal year, audited
financial statements, including a consolidated balance sheet as at the end of
such year and the related consolidated statements of income and retained
earnings and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, without a “going concern”
or like qualification or exception, prepared by independent certified public
accountants of nationally recognized standing reasonably acceptable to the
Administrative Agent and Lenders (PriceWaterhouse Coopers and the other big four
firms are pre-approved), plus annual cash flow projections of the Borrower and
annual budgets and forecasts for the Consolidated Group;

(c)               
Together with the quarterly and
annual financial statements required hereunder, a compliance certificate, in
substantially the form of Exhibit B attached hereto (a “Compliance
Certificate”) signed by the Borrower’s chief financial officer or chief
executive officer showing the calculations and computations necessary to
determine compliance with this Agreement and stating that, to such officer’s
knowledge, no Event of Default or Potential Default exists, or if, to such
officer’s knowledge, any Event of Default or Potential Default exists, stating
the nature and status thereof, provided that any Compliance Certificate may address
both this Agreement as well as that certain Term Loan Agreement dated as of
June 3, 2011 by and among Borrower, Administrative Agent and certain other
lenders, as it may be amended from time to time;

(d)              
As soon as available, but in any
event not later than 30 days after the close of each fiscal year, a schedule of
all filings to be made by the Borrower with the Securities and Exchange
Commission for the upcoming fiscal year, including without limitation all 10-Ks
and 10-Qs;

(e)               
As soon as possible and in any event
within 10 days after a responsible officer of the Borrower knows that any
Reportable Event has occurred with respect to any Plan, a statement, signed by
the chief financial officer of the Borrower, describing said Reportable Event
and the action which the Borrower proposes to take with respect thereto;

(f)               
As soon as possible and in any
event within 10 days after receipt by an executive officer of the Borrower, a
copy of (i) any notice or claim from any Governmental Authority to the effect
that the Borrower or any of its Subsidiaries is or may be liable to any Person
as a result of the release by the Borrower, any of its Subsidiaries, or any
other Person of any Material of Environmental Concern into the environment,
(ii) any notice of litigation or alleging any violation of any federal, state
or local environmental, health or safety law or regulation by the Borrower or
any of its Subsidiaries, which would have a Material Adverse Effect, (iii) any
notice of any Lien on any Qualifying Unencumbered Project (other than Permitted
Liens) or any Lien on any other Project (other than Permitted Liens) that would
reasonably be expected to have a Material Adverse Effect, (iv) any notice of
default on any (x) Recourse Indebtedness that exceeds $5,000,000 individually or
in the aggregate, or (y) Non-Recourse Indebtedness that exceeds $25,000,000
individually or in the aggregate, (v) any notice of default on interest rate
hedge agreements, and (vi) any other default under any obligations of any Loan
Party would reasonably be expected to have a Material Adverse Effect;

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(g)              
Prior to the incurrence of any
Defeasance Costs in connection with the defeasance or prepayment of
Indebtedness in excess of $5,000,000, a written notice (to be delivered to the
Administrative Agent only) identifying such Indebtedness and the expected date
of defeasance or prepayment and containing an estimate of the types and amounts
of Defeasance Costs reasonably anticipated to be incurred in connection with
such defeasance or prepayment;

(h)              
Promptly upon the furnishing
thereof to the shareholders of the Borrower, copies of all financial
statements, reports and proxy statements so furnished; and

(i)                
Except for non-public material
information and information that is privileged pursuant to the attorney-client
and/or work product privileges, such other information (including, without
limitation, financial and non-financial information and a listing of capital
expenditures, a rent roll, and such other information on any Project) as the
Administrative Agent or any Lender may from time to time reasonably request.

7.2             
Use of Proceeds

.  The Borrower shall
use the proceeds of the Advances for its general corporate purposes, including
but not limited to debt financing and refinancing (including defeasance or
prepayment of Indebtedness), property acquisitions, new construction,
renovations, expansions, tenant improvement costs, working capital for Borrower
and its Subsidiaries, stock repurchases, dividend payments and equity
investments primarily associated with income-producing, institutional–grade
multifamily properties. The Borrower will not, nor will it permit any
Subsidiary to, use any of the proceeds of the Advances (i) to purchase or carry
any “margin stock” (as defined in Regulation U) if such usage could constitute
a violation of Regulation U by any Lender, (ii) to fund any purchase of,
or offer for, a controlling portion of the Capital Stock of any Person, unless
the board of directors or other manager of such Person has consented to such
offer, or (iii) to make any Acquisition other than a Permitted Acquisition.

7.3             
Notice of Default

.  The Borrower will
give, and will cause each of its Subsidiaries to give, prompt notice in writing
to the Administrative Agent and the Lenders of the occurrence of any Event of
Default or Potential Default.

7.4             
Conduct of Business

.  The Borrower will
do, and will cause each of its Subsidiaries (other than those whose businesses
have been discontinued) to do all things necessary to remain duly incorporated
or duly qualified, validly existing and in good standing as a real estate
investment trust, corporation, limited liability company general partnership or
limited partnership, as the case may be, in its jurisdiction of
incorporation/formation (except with respect to permitted mergers and Permitted
Acquisitions) and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted and to carry on and
conduct their businesses in substantially the same manner as they are presently
conducted where the failure to do so could reasonably be expected to have a
Material Adverse Effect and, specifically, Borrower shall carry on all of its
business operations and investments through the Borrower and its Wholly-Owned
Subsidiaries, except as provided in Section 7.15 and subject to the
limitations set forth in Section 7.22(d). The activities of  the
Borrower and its Subsidiaries shall be limited primarily to (i) the
acquisition, development, ownership, management, operation and leasing of
income-producing, institutional-grade, multifamily residential properties, and
(ii) construction, development and other related activities conducted by
Borrower’s Wholly-Owned Subsidiary, Merit Enterprises, Inc.

7.5             
Taxes

.  The Borrower will
pay, and will cause each of its Subsidiaries to pay, when due all taxes,
assessments and governmental charges and levies upon them of their income,
profits or Properties, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been set
aside, if and to the extent deemed reasonably necessary by Borrower.

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52 -

 

 

 

 

 

7.6             
Insurance

.  The Borrower will,
and will cause each of its Subsidiaries to, maintain insurance which is
consistent with the representation contained in Section 6.16 on all
their Properties and the Borrower will furnish to any Lender upon reasonable
request full information as to the insurance carried.

7.7             
Compliance with Laws

.  The Borrower will,
and will cause each of its Subsidiaries to, comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
they may be subject, the violation of which could reasonably be expected to
have a Material Adverse Effect, if and to the extent deemed reasonably
necessary by Borrower.

7.8             
Maintenance of Properties and Equipment

.  The Borrower will,
and will cause each of its Subsidiaries to, do all things necessary to
maintain, preserve, protect and keep their respective Properties and equipment
in good repair, working order and condition, ordinary wear and tear excepted.

7.9             
Inspection

.  The Borrower will,
and will cause each of its Subsidiaries to, permit the Lenders upon reasonable
notice and during normal business hours and subject to rights of tenants, by
their respective representatives and agents, to inspect any of the Projects,
corporate books and financial records of the Borrower and each of its
Subsidiaries, to examine and make copies of the books of accounts and other
financial records of the Borrower and each of its Subsidiaries, and to discuss
the affairs, finances and accounts of the Borrower and each of its Subsidiaries
with executive officers thereof, and to be advised as to the same by, except
for non-public material information and information that is privileged pursuant
to the attorney-client and/or work product privileges, their respective
officers at such reasonable times and intervals as the Lenders may designate.

7.10         
Maintenance of Status

.  The Borrower shall
at all times maintain its status as a real estate investment trust in
compliance with all applicable provisions of the Code relating to such status.

7.11         
Dividends

.  The Borrower and
its Subsidiaries shall be permitted to declare and pay dividends on their
Capital Stock from time to time, provided, however, that in no
event shall the Borrower declare or pay dividends on its Capital Stock (other
than Preferred Dividends) or make distributions with respect thereto (other
than Preferred Dividends), if such dividends and distributions paid with
respect to the most recent four (4) consecutive full fiscal quarters for which
financial results are available, in the aggregate for such period, would exceed
95% of Adjusted Funds From Operations of the Borrower for such period. 
Notwithstanding the foregoing, the Borrower shall be permitted at all times to
distribute whatever amount of dividends is necessary to maintain its tax status
as a real estate investment trust.

7.12         
No Change in Control

.  The Borrower will
not consent to a Change in Control.

7.13         
Non-Real Estate Investments

.  Borrower shall not
make any acquisition of non-real estate related assets or service companies
without the Administrative Agent’s approval.  Purchases of computers,
automobiles, furniture, office equipment and similar fixed assets used in the
normal course of business are permitted.

7.14         
Merger; Sale of Assets

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.  The Borrower shall
not, nor will it permit any of its Subsidiaries to, without prior written
approval of the Administrative Agent and without providing a pro forma
Compliance Certificate showing the effects of such transaction, enter into any
merger (other than mergers in which such entity is the survivor and mergers of
Subsidiaries as part of transactions that are Permitted Acquisitions, provided
that following such merger the target entity becomes a Wholly-Owned Subsidiary
of Borrower), consolidation, reorganization or liquidation, except for such
transactions that occur between Wholly-Owned Subsidiaries. Neither Borrower nor
any other member of the Consolidated Group, without the prior written approval
of the Administrative Agent, will either (i) acquire in a single transaction
real estate assets which have a value in excess of 20% of the then-current
Total Asset Value or (ii) dispose of in a single transaction real estate assets
which comprise 10% or more of the then-current Total Asset Value.  

7.15         
Acquisitions and Investments

.  The Borrower will
not, nor will it permit any Subsidiary to, make or suffer to exist any
Investments (including without limitation, loans and advances to, and other
Investments in, Subsidiaries), or commitments therefor, or become a partner in
any partnership or joint venture, or to make any Acquisition of any Person,
except:

(a)               
Cash and Cash Equivalents;

(b)              
Investments in Projects, Real
Property Under Development, Undeveloped Land and First Mortgage Receivables,
subject to the limits established in Section 7.22;

(c)               
Investments in existing
Subsidiaries, Investments in Subsidiaries formed for the purpose of developing
or acquiring Projects, and Investments in joint ventures and partnerships
engaged solely in the business of purchasing, developing, owning, operating,
leasing and managing Projects;

(d)              
transactions permitted pursuant to
Section 7.23; 

(e)               
Acquisitions of Persons whose
primary operations consist of the ownership, development, operation and
management of multifamily residential properties; and

(f)               
Interest Rate Hedges related to
hedging interest rates with respect to the Consolidated Outstanding
Indebtedness or the Indebtedness of Investment Affiliates.

provided
that, after giving effect to such Acquisitions and Investments, Borrower continues
to comply with all its covenants herein.  Acquisitions permitted pursuant to
this Section 7.15 shall be deemed to be “Permitted Acquisitions”.

7.16         
Liens

.  The Borrower will
not, nor will it permit any of its Subsidiaries to, create, incur, or suffer to
exist any Lien in, of or on the Property of the Borrower or any of its
Subsidiaries, except:

(a)               
Liens for taxes, assessments or
governmental charges or levies on its Property if the same shall not at the
time be delinquent or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings and for which adequate
reserves shall have been set aside on its books, if and to the extent deemed
reasonably necessary by Borrower;

(b)              
Liens imposed by law, such as
carriers’, warehousemen’s and mechanics’ liens and other similar liens arising
in the ordinary course of business which secure payment of obligations which
are being or will timely be contested in good faith by appropriate proceedings
and for which adequate reserves shall have been set aside on its books, if and
to the extent deemed reasonably necessary by Borrower;

(c)               
Liens arising out of pledges or
deposits under workers’ compensation laws, unemployment insurance, old age
pensions, or other social security or retirement benefits, or similar
legislation;

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(d)              
Easements, restrictions and such
other encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character and which
do not materially and adversely interfere with the use thereof in the business
of the Borrower or its Subsidiaries;

(e)               
Liens on Projects to secure any
Indebtedness to the extent such Liens will not result in an Event of Default in
any of Borrower’s covenants herein.

Liens
permitted pursuant to this Section 7.16 shall be deemed to be “Permitted
Liens”.

7.17         
Affiliates

.  The Borrower will
not, nor will it permit any of its Subsidiaries to, enter into any transaction
(including, without limitation, the purchase or sale of any Property or
service) with, or make any payment or transfer to, any Affiliate which is not a
member of the Consolidated Group except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower’s or such Subsidiary’s
business and upon fair and reasonable terms no less favorable to the Borrower
or such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction.

7.18         
Secured Indebtedness

.  At all times until
the last day of the fiscal quarter in which Borrower first receives an
Investment Grade Rating from either S & P or Moody’s, Borrower will not
allow, or permit any member of the Consolidated Group to allow, the aggregate
outstanding principal amount of Secured Indebtedness of the Consolidated Group
which is also Recourse Indebtedness to exceed ten percent (10%) of the
then-current Total Asset Value at any time. From and after the first day of the
fiscal quarter following the fiscal quarter in which Borrower first receives an
Investment Grade Rating from either S & P or Moody’s, Borrower will not
allow, or permit any member of the Consolidated Group to allow, the aggregate
outstanding principal amount of all of the Consolidated Group’s Secured
Indebtedness (whether Recourse Indebtedness or Non-Recourse Indebtedness) to exceed
forty-five percent (45%) of the then-current Total Asset Value. The amount of
the Consolidated Group’s Secured Indebtedness which is Non-Recourse
Indebtedness shall be limited only by Section 7.20(a) and Section
7.20(b) and the preceding sentence of this Section 7.18.  

7.19         
Minimum Consolidated Tangible
Net Worth

.  Borrower shall not
permit Consolidated Tangible Net Worth to be less than $600,000,000 plus
eighty-five percent (85%) of the Net Proceeds of any Equity Issuance received
after the Agreement Execution Date.

7.20         
Indebtedness and Cash Flow
Covenants

.  The Borrower shall
not permit:

(a)               
The ratio of Consolidated
Outstanding Indebtedness to Total Asset Value to be greater than 0.60:1 as of
the end of any fiscal quarter;

(b)              
The ratio of Consolidated Adjusted
EBITDA to Consolidated Fixed Charges to be less than 1.50:1 as of the end of
any fiscal quarter ending on September 30, 2011 or at any time thereafter; 

(c)               
The ratio of Consolidated
Unsecured Indebtedness to Unencumbered Real Property Value to be greater than 0.60:1
as of the end of any fiscal quarter; 

(d)              
The ratio of Unencumbered Real
Property Adjusted NOI to Consolidated Interest Expense on Consolidated
Unsecured Indebtedness as of the end of any fiscal quarter to be less than
2.00:1; and

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(e)               
The percentage of the total
residential units in the Qualifying Unencumbered Projects that are physically
occupied by tenants under third party occupancy leases to be less than 80% as
of any date, provided however that, if and to the extent that the total
percentage of residential units in the Qualifying Unencumbered Projects that
are physically occupied by tenants under third party occupancy leases falls
below the 80% threshold at any time, Borrower shall, within thirty (30) days
from such date, either (i) add an Eligible Unencumbered Project (in accordance
with Section 3.1 of the Credit Agreement), (ii)  replace a Qualifying
Unencumbered Project, or (iii) remove a Qualifying Unencumbered Project (in
accordance with Section 3.3 of the Credit Agreement) in order to comply
with such 80% minimum threshold.

7.21         
Environmental Matters

.  Borrower and its
Subsidiaries shall:

(a)               
Comply with, and use all
reasonable efforts to ensure compliance by all tenants and subtenants, if any,
with, all applicable Environmental Laws and obtain and comply with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws, except to the extent that
failure to do so could not be reasonably expected to have a Material Adverse
Effect; provided that in no event shall the Borrower or its Subsidiaries be
required to modify the terms of leases, or renewals thereof, with existing
tenants (i) at Projects owned by the Borrower or its Subsidiaries as of the
date hereof, or (ii) at Projects hereafter acquired by the Borrower or its
Subsidiaries as of the date of such acquisition, to add provisions to such
effect.

(b)              
Conduct and complete all
investigations, studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws and promptly comply in all
material respects with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws, except to the extent that (i) the
same are being contested in good faith by appropriate proceedings and the pendency
of such proceedings could not be reasonably expected to have a Material Adverse
Effect, or (ii) the Borrower has determined in good faith that contesting
the same is not in the best interests of the Borrower and its Subsidiaries and
the failure to contest the same could not be reasonably expected to have a
Material Adverse Effect.

(c)               
Defend, indemnify and hold
harmless Administrative Agent and each Lender, and their respective officers
and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability under any
Environmental Laws applicable to the operations of the Borrower, its
Subsidiaries or the Projects, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
attorney’s and consultant’s fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent that any of
the foregoing arise out of the gross negligence or willful misconduct of the
party seeking indemnification therefor.  This indemnity shall continue in full
force and effect regardless of the termination of this Agreement.  

(d)              
Defend each such
indemnified party by counsel selected by Borrower, subject to the reasonable
approval of the indemnified party, promptly after notice of any claims made
against an indemnified party hereunder.

7.22         
Permitted Investments

.

(a)               
The Borrower’s Investment in Real
Property Under Development (with each asset valued in accordance with GAAP at
cost, as incurred through the reporting date for construction in progress in
the most recent quarter of the Consolidated Group for which financial results
have been reported) shall not at any time exceed ten percent (10%) of Total
Asset Value.

(b)              
The Borrower’s Investment in
Undeveloped Land shall not at any time exceed five percent (5%) of Total Asset
Value.

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(c)               
The Borrower’s Investment in First
Mortgage Receivables (with each asset valued at the lower of its acquisition
cost and its fair market value) shall not at any time exceed five percent (5%)
of Total Asset Value.

(d)              
The Borrower’s aggregate
investment shall not exceed $25,000,000, in the aggregate, in other directly
owned assets that are not either income-producing, institutional-grade
multifamily properties or one of the Investments described in the above items
(a)-(c).

(e)               
The Borrower’s aggregate
Investment in Investment Affiliates (valued at the greater of the cash
investment in that entity by the Borrower or the portion of Total Asset Value
attributable to such entity or its assets as the case may be) shall not
at any time exceed ten percent (10%) of Total Asset Value.

(f)               
The aggregate Investment of the
Borrower in the above items (a)-(d), in the aggregate and after eliminating any
duplication of Investments included in more than one of such items, shall not
at any time exceed twenty percent (20%) of Total Asset Value.

7.23         
Additional Unsecured
Indebtedness

.  Neither Borrower nor any other member of the
Consolidated Group shall incur any Indebtedness of a revolving nature other
than this Facility and corporate credit card accounts used by Borrower’s
employees in the ordinary course of business.  Neither Borrower nor any other
member of the Consolidated Group shall incur any other non-revolving unsecured
Indebtedness other than Indebtedness which does not cause any violation of the
provisions of Section 7.20(c) or Section 7.20(d).  Future
trust preferred issuances will be permitted only to the extent they are
expressly subordinate to this Facility.

7.24         
Limits on Ownership
Encumbrances

. The Borrower will
not allow, or permit any member of the Consolidated Group to allow, its direct or
indirect ownership interests in any other member of the Consolidated Group or
any Investment Affiliate to be encumbered to secure any Indebtedness, other
than “mezzanine” Indebtedness of a member of the Consolidated Group provided
that such “mezzanine” Indebtedness is either (A) Non-Recourse Indebtedness
incurred for the purpose of financing the construction and development of  a
new Project  not to exceed $10,000,000, when aggregated with all other
construction and development “mezzanine” Indebtedness then outstanding or
committed, so long as such Indebtedness is not cross-collateralized or
cross-defaulted with other Indebtedness of any member of the Consolidated Group
or (B) created in connection with Indebtedness of a direct or indirect
Wholly-Owned Subsidiary of such member secured by a mortgage or deed of trust
on such Wholly-Owned Subsidiary’s real Property and initially held by the
lender under such secured Indebtedness or an Affiliate thereof.

ARTICLE VIII

EVENTS OF DEFAULT

The occurrence
of any one or more of the following events shall constitute an Event of
Default:

8.1       Nonpayment of any principal payment due
hereunder or under any Note when due.

8.2       Nonpayment
of interest upon any Note or of any fee or other payment Obligations under any
of the Loan Documents within five (5) Business Days after written notice from
Administrative Agent that the same has become due.

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57 -

 

 

 

 

 

8.3       The breach of any
of the terms or provisions of Sections 7.2, 7.10, 7.11, 7.12,
7.18, 7.19, 7.20, 7.22, 7.23, and 7.24.  

8.4       Any
representation or warranty made or deemed made by or on behalf of the Borrower
or any of its Subsidiaries to the Lenders or the Administrative Agent under or
in connection with this Agreement, or any material certificate or information
delivered in connection with this Agreement or any other Loan Document shall be
materially false on the date as of which made, unless such matter is corrected
within thirty (30) days after written notice of such material falsity.

8.5       The breach by
the Borrower (other than a breach which constitutes an Event of Default under Section 8.1,
8.2, 8.3 or 8.4) of any of the terms or provisions of this
Agreement which is not remedied within thirty (30) days after written notice to
Borrower from the Administrative Agent or any Lender.

8.6       The default
by the Borrower or any other member of the Consolidated Group or any Investment
Affiliate in the payment of any amount due under, or the performance of any
term, provision or condition contained in, any agreement with respect to (A)
any Recourse Indebtedness of the Borrower or any other member of the
Consolidated Group having an outstanding principal balance in excess of
$5,000,000 individually or in the aggregate, or (B) any Non-Recourse
Indebtedness of the Borrower or any other member of the Consolidated Group or
any Investment Affiliate having an outstanding principal balance in excess of
$25,000,000 in the aggregate (collectively, “Material Indebtedness”) or any
other event shall occur or condition exist, which causes or permits any such
Material Indebtedness to be due and payable or required to be prepaid (other
than by a regularly scheduled payment) prior to the stated maturity thereof. 

8.7       Borrower or
any member of the Borrower shall voluntarily (i) have an order for relief
entered with respect to it under the Federal bankruptcy laws as now or
hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it
or any Substantial Portion of its Property, (iv) institute any proceeding
seeking an order for relief under the Federal bankruptcy laws as now or
hereafter in effect or seeking to adjudicate it as a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file
an answer or other pleading denying the material allegations of any such
proceeding filed against it, (v) take any corporate action to authorize or
effect any of the foregoing actions set forth in this Section 8.7, (vi)
fail to contest in good faith any appointment or proceeding described in Section 8.8
or (vii) admit in writing its inability to pay its debts generally as they
become due.

8.8       A receiver,
trustee, examiner, liquidator or similar official shall be appointed for any
member of the Consolidated Group or for any Substantial Portion of the Property
of any member of the Consolidated Group (other than a receiver in connection
with the foreclosure of any Secured Indebtedness having an outstanding
principal balance of $25,000,000 or less) or a proceeding described in Section
8.7(iv) shall be instituted against any member of the Consolidated Group
and such appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of ninety (90) consecutive days.

8.9       Any member of
the Consolidated Group shall fail within sixty (60) days to pay, bond or
otherwise discharge any judgments or orders for the payment of money in an
amount which, when added to all other judgments or orders outstanding against
Borrower, would exceed $10,000,000 in the aggregate in excess of any insurance
proceeds available to pay such judgments or orders, which have not been stayed
on appeal or otherwise appropriately contested in good faith.

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8.10     Failure to
remediate within the time period permitted by law or governmental order, after
all administrative hearings and appeals have been concluded (or within a
reasonable time in light of the nature of the problem if no specific time
period is so established), material environmental problems at Properties owned
by the Borrower or any of its Subsidiaries or Investment Affiliates if the
reasonably estimated costs of remediation are in excess of $10,000,000 in the
aggregate.

8.11     The occurrence
of any “Event of Default” as defined in any Loan Document or the breach of any
of the terms, covenants, or provisions of any Loan Document, which default or
breach continues beyond any period of grace therein provided.

8.12     The Borrower, without obtaining consent of
the Required Lenders, shall enter into any merger, consolidation,
reorganization or liquidation or transfer or otherwise dispose of all or
substantially all of their Properties, unless (a) in the case of a merger or
consolidation the Borrower is the surviving entity in such merger or
consolidation and (b) after giving effect to the merger, the Borrower remains
in compliance with the terms of the Credit Agreement, provided that any such
action shall not constitute an Event of Default unless the Borrower shall fail
to reverse such action within sixty (60) days after written notice from the
Administrative Agent that such action constitutes an Event of Default
hereunder.

ARTICLE IX

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

9.1             
Acceleration

.  If any Event of
Default described in Section 8.7 or 8.8 occurs with respect to
the Borrower, the obligations of the Lenders to make Loans and hereunder shall
automatically terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Administrative Agent
or any Lender.  If any other Event of Default occurs, so long as an Event of
Default exists Lenders shall have no obligation to make any Loans and the
Required Lenders, at any time prior to the date that such Event of Default has
been fully cured, may permanently terminate the obligations of the Lenders to
make Loans hereunder and declare the Obligations to be due and payable, or
both, whereupon if the Required Lenders elected to accelerate (i) the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives and (ii) if any automatic or optional acceleration has
occurred, the Administrative Agent, as directed by the Required Lenders (or if
no such direction is given within 30 days after a request for direction, as the
Administrative Agent deems in the best interests of the Lenders, in its sole
discretion), shall use its good faith efforts to collect, including without
limitation, by filing and diligently pursuing judicial action, all amounts owed
by the Borrower and any Subsidiary Guarantor under the Loan Documents.

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Upon the forty-fifth (45th)
day prior to the Facility Termination Date so long as any Facility Letter of
Credit has not been fully drawn and has not been cancelled or expired by its
terms, the Borrower shall deposit in the Letter of Credit Collateral Account
cash in an amount equal to the aggregate undrawn face amount of all outstanding
Facility Letters of Credit and all fees and other amounts due or which may
become due with respect thereto. In addition to the foregoing, following the
occurrence of an Event of Default and so long as any Facility Letter of Credit
has not been fully drawn and has not been cancelled or expired by its terms,
upon demand by the Administrative Agent the Borrower shall deposit in the
Letter of Credit Collateral Account cash in an amount equal to the aggregate
undrawn face amount of all outstanding Facility Letters of Credit and all fees
and other amounts due or which may become due with respect thereto.  The
Borrower shall have no control over funds in the Letter of Credit Collateral
Account and shall not be entitled to receive any interest thereon.  Such funds
shall be promptly applied by the Administrative Agent to reimburse the Issuing
Lender for drafts drawn from time to time under the Facility Letters of Credit
and associated issuance costs and fees.  Such funds, if any, remaining in the
Letter of Credit Collateral Account following the payment of all Obligations in
full shall, unless the Administrative Agent is otherwise directed by a court of
competent jurisdiction, be promptly paid over to the Borrower.

If, within 10
days after acceleration of the maturity of the Obligations or termination of
the obligations of the Lenders to make Loans hereunder as a result of any Event
of Default (other than any Event of Default as described in Section 8.7
or 8.8 with respect to the Borrower) and before any judgment or decree
for the payment of the Obligations due shall have been obtained or entered, all
of the Lenders (in their sole discretion) shall so direct, the Administrative
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.

9.2             
Amendments

.  Subject to the
provisions of this Article IX the Required Lenders (or the
Administrative Agent with the consent in writing of the Required Lenders) and
the Borrower may enter into agreements supplemental hereto for the purpose of
adding or modifying any provisions to the Loan Documents or changing in any
manner the rights of the Lenders or the Borrower hereunder or waiving any Event
of Default hereunder; provided, however, that no such supplemental agreement or
waiver shall, without the consent of all Lenders:

(a)               
Extend the Facility Termination
Date (except as provided in Section 2.22), or forgive all or any portion
of the principal amount of any Loan or accrued interest thereon or the Facility
Fee, the Unused Fee, the Facility Letter of Credit Fee or any other fee payable
to Administrative Agent for the benefit of the Lenders generally, reduce the
Applicable Margins (or modify any definition herein which would have the effect
of reducing the Applicable Margins) or the interest rate or underlying interest
rate options, reduce the Facility Fee, the Unused Fee, the Facility Letter of
Credit Fee or any other fee payable to Administrative Agent for the benefit of
the Lenders generally, or extend the time of payment of any such principal,
interest or fees.

(b)              
Modify Section 7.20(c) or Section
7.20(d) or diminish any of the requirements for a Project to qualify as a
Qualifying Unencumbered Project (or modify any other definitions herein which
would have the effect of diminishing such requirements).

(c)               
Release any Subsidiary Guarantor from the Subsidiary Guaranty,
except as expressly provided for herein.

(d)              
If any collateral shall hereafter
be provided for the Obligations, release all or any portion of such collateral,
except as expressly provided for herein. 

(e)               
Change the definition of Required
Lenders.

(f)               
Increase the Aggregate Commitment,
except as provided for in Section 2.18.

(g)              
Permit the Borrower to assign its
rights under this Agreement.

(h)              
Amend Sections 9.1, 9.2,
or 12.2.

(i)                
Waive a monetary Event of Default.

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No
amendment of any provision of this Agreement relating to the Administrative
Agent shall be effective without the written consent of the Administrative
Agent.  If in connection with any
proposed waiver, amendment or modification referred to in Sections 9.2(a)
through 9.2(h) above, the consent of the Required Lenders is obtained
but the consent of one or more of such other Lenders whose consent is required
is not obtained (each a “Non-Consenting Lender”), then the Borrower
shall have the right to replace any such Non-Consenting Lender with one or more
replacement Lenders pursuant to Section 2.20. Notwithstanding anything
to the contrary in this Section 9.2, no such supplemental agreement or
waiver shall modify Section 7.12 or the definition of Change in Control
or delete or modify the reference to Section 7.12 which is contained in Section
8.3 without the consent of Lenders in the aggregate having at least 75% of
the Aggregate Commitment, or if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 75% of the aggregate unpaid principal
amount of the outstanding Advances.

9.3             
Preservation of Rights

.  No delay or
omission of the Lenders or the Administrative Agent to exercise any right under
the Loan Documents shall impair such right or be construed to be a waiver of
any Event of Default or an acquiescence therein, and the making of a Loan
notwithstanding the existence of an Event of Default or the inability of the
Borrower to satisfy the conditions precedent to such Loan shall not constitute
any waiver or acquiescence.  Any single or partial exercise of any such right
shall not preclude other or further exercise thereof or the exercise of any
other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 9.2,
and then only to the extent in such writing specifically set forth.  All
remedies contained in the Loan Documents or by law afforded shall be cumulative
and all shall be available to the Administrative Agent and the Lenders until
the Obligations have been paid in full.

9.4             
Insolvency of Borrower

.  In the event of the
insolvency of the Borrower, the Lenders shall have no obligation to make
further disbursements of the Facility, and the outstanding principal balance of
the Facility, including accrued and unpaid interest thereon, shall be
immediately due and payable.

ARTICLE X

GENERAL PROVISIONS

10.1         
Survival of Representations

.  All representations
and warranties of the Borrower contained in this Agreement shall survive
delivery of the Notes and the making of the Loans herein contemplated.

10.2         
Governmental Regulation

.  Anything contained
in this Agreement to the contrary notwithstanding, no Lender shall be obligated
to extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.

10.3         
No Plan Assets

.  None of the funds to be advanced by the Lenders
under this Agreement will constitute “plan assets” within the meaning of ERISA,
the Code and the respective regulations promulgated thereunder.  

 

10.4         
Headings

.  Section headings in
the Loan Documents are for convenience of reference only, and shall not govern
the interpretation of any of the provisions of the Loan Documents.

10.5         
Entire Agreement

.  The Loan Documents
embody the entire agreement and understanding among the Borrower, the
Administrative Agent and the Lenders and supersede all prior commitments,
agreements and understandings among the Borrower, the Administrative Agent and
the Lenders relating to the subject matter thereof.

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61 -

 

 

 

 

 

10.6         
Several Obligations; Benefits
of this Agreement

.  The respective obligations
of the Lenders hereunder are several and not joint and no Lender shall be the
partner or agent of any other (except to the extent to which the Administrative
Agent is authorized to act as such).  The failure of any Lender to perform any
of its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder.  This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns.

10.7         
Expenses; Indemnification

.  The Borrower shall
reimburse the Administrative Agent for any reasonable costs and actual
documented (reasonable evidence shall be provided for any expense over $500)
out-of-pocket expenses (including, without limitation, all reasonable fees for
consultants and fees and reasonable expenses for attorneys for the
Administrative Agent, which attorneys may not be employees of the
Administrative Agent) paid or incurred by the Administrative Agent in
connection with the amendment, modification, and enforcement of the Loan
Documents.  The Borrower also agrees to reimburse the Administrative Agent and
the Lenders for any reasonable costs, external charges and out-of-pocket
expenses (including, without limitation, all fees and reasonable expenses for
attorneys for the Administrative Agent and the Lenders, which attorneys may not
be employees of the Administrative Agent or the Lenders) paid or incurred by
the Administrative Agent or any Lender in connection with the collection and
enforcement of the Loan Documents (including, without limitation, any
workout).  The Borrower further agrees to indemnify the Administrative Agent,
each Lender and their Affiliates, and their directors and officers against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all reasonable fees and reasonable expenses for
attorneys of the indemnified parties, all reasonable expenses of litigation or
preparation therefor whether or not the Administrative Agent, or any Lender is
a party thereto) which any of them may pay or incur arising out of or relating
to this Agreement, the other Loan Documents, the Projects, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder, except to the extent that
any of the foregoing arise out of the gross negligence or willful misconduct of
the party seeking indemnification therefor.  The obligations of the Borrower
under this Section shall survive the termination of this Agreement.  Defense of any such indemnified party shall be provided by
counsel selected by Borrower, subject to the reasonable approval of the
indemnified party, promptly after notice to Borrower of the indemnified claims.

10.8         
Electronic Document Deliveries

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.  Documents required
to be delivered pursuant to the Loan Documents shall be delivered by electronic
communication and delivery, including, the Internet, e-mail or intranet
websites  to which the Administrative Agent and each Lender have access
(including a commercial, third-party website such as www.Edgar.com
<http://www.Edgar.com> or a website sponsored or hosted by the
Administrative Agent or the Borrower) provided that (A) the foregoing shall not
apply to notices to any Lender (or the Issuing Lender) pursuant to Article
II and (B) the Lender has not notified the Administrative Agent or Borrower
that it cannot or does not want to receive electronic communications.   The
Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic delivery
pursuant to procedures approved by it for all or particular notices or
communications.  Documents or notices delivered electronically shall be deemed
to have been delivered twenty-four (24) hours after the date and time on which
the Administrative Agent or Borrower posts such documents or the documents
become available on a commercial website and the Administrative Agent or
Borrower notifies each Lender of said posting and provides a link thereto
provided if such notice or other communication is not sent or posted during the
normal business hours of the recipient, said posting date and time shall be
deemed to have commenced as of  9:00 a.m. on the opening of business on the
next business day for the recipient.  Notwithstanding anything contained
herein, in every instance the Borrower shall be required to provide paper
copies of the Compliance Certificate to the Administrative Agent and shall
deliver paper copies of any documents to the Administrative Agent or to any
Lender that requests such paper copies until a written request to cease
delivering paper copies is given by the Administrative Agent or such Lender. 
Except for the Compliance Certificate Provision,  the Administrative Agent
shall have no obligation to request the delivery of or to maintain paper copies
of the documents delivered electronically, and in any event shall have no
responsibility to monitor compliance by the Borrower with any such request for
delivery.  Each Lender shall be solely responsible for requesting delivery to
it of paper copies and maintaining its paper or electronic documents. 

 

10.9         
Accounting

.  Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP.

10.10      Severability of Provisions

.  Any provision in
any Loan Document that is held to be inoperative, unenforceable, or invalid in
any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable,
or invalid without affecting the remaining provisions in that jurisdiction or
the operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.

10.11      Nonliability of Lenders

.  The relationship between the Borrower, on the one
hand, and the Lenders and the Administrative Agent, on the other, shall be
solely that of borrower and lender.  Neither the Administrative Agent nor any
Lender shall have any fiduciary responsibilities to the Borrower.  Neither the
Administrative Agent nor any Lender undertakes any responsibility to the
Borrower to review or inform the Borrower of any matter in connection with any
phase of the Borrower’s business or operations.

10.12     
CHOICE OF LAW

.  THE LOAN DOCUMENTS
(OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL
BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF
CONFLICTS) OF THE STATE OF OHIO, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE
TO NATIONAL BANKS.

10.13     
SUBMISSION TO JURISDICTION

.  THE BORROWER AND
EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
OHIO STATE COURT SITTING IN CLEVELAND 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 OHIO 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, AFTER EXPIRATION OF ANY
APPEAL PERIODS APPLICABLE THERETO, 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 ISSUING LENDER MAY OTHERWISE HAVE TO
BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE
COURTS OF ANY JURISDICTION.

10.14     
WAIVER OF VENUE

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.  THE BORROWER AND
EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, 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 SECTION 10.13.  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 AND AGREES NOT ASSERT ANY SUCH DEFENSE.

10.15     
SERVICE OF PROCESS

.  EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES
IN SECTION 14.1.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY
HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

10.16        WAIVER OF JURY TRIAL

.  THE BORROWER, THE
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

ARTICLE
XI

THE ADMINISTRATIVE AGENT

11.1         
Appointment and Authority

.  Each of the Lenders
and the Issuing Lender hereby irrevocably appoints PNC 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 Section 11 are solely for the benefit
of the Administrative Agent, the Lenders and the Issuing Lender, and neither
the Borrower nor any other Loan Party shall have rights as a third party
beneficiary of any of such provisions.

11.2         
Rights as a Lender

.  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 Borrower 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.

11.3         
Exculpatory Provisions

.  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 Potential Default or
Event of Default has occurred and is continuing;

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(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 Borrower or any of its 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 such
other number or percentage 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 9.1 and 9.2) 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 Potential Default or Event
of Default unless and until notice describing such Potential Default or Event
of Default is given to the Administrative Agent by the Borrower, a Lender or
the Issuing Lender.

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 Potential Default or Event of 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 Section 5  or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.

11.4         
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 Facility
Letter of Credit, that by its terms must be fulfilled to the satisfaction of a
Lender or the Issuing Lender, the Administrative Agent may presume that such
condition is satisfactory to such Lender or the Issuing Lender unless the
Administrative Agent shall have received notice to the contrary from such
Lender or the Issuing Lender prior to the making of such Loan or the issuance
of such Facility Letter of Credit.  The Administrative Agent may consult with
legal counsel (who may be counsel for the Borrower), 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.

11.5         
Delegation of Duties

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.  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 XI 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.

11.6         
Resignation of Administrative
Agent

.  The Administrative
Agent may at any time give notice of its resignation to the Lenders, the
Issuing Lender and the Borrower.  Upon receipt of any such notice of
resignation, the Required Lenders shall have the right, with approval from the
Borrower (so long as no Event of Default has occurred and is continuing), to
appoint a successor, such approval not to be unreasonably withheld or delayed. 
If no such successor shall have been so appointed by the Required Lenders and
shall have accepted such appointment within thirty (30) days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may on behalf of the Lenders and the Issuing Lender,
appoint a successor Administrative Agent; provided that if the Administrative
Agent shall notify the Borrower and the Lenders that no qualifying Person has
accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (i) 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 Issuing Lender
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 (ii) 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 Issuing Lender directly,
until such time as the Required Lenders appoint a successor Administrative
Agent as provided for above in this Section 11.6.  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 Borrower
to a successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor. 
After the retiring Administrative Agent’s resignation hereunder and under the
other Loan Documents, the provisions of this Article XI and Section
10.7 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.

If PNC resigns
as Administrative Agent under this Section 11.6, PNC shall also resign
as an Issuing Lender.  Upon the appointment of a successor Administrative Agent
hereunder, such successor shall (i) succeed to all of the rights, powers,
privileges and duties of PNC as the retiring Issuing Lender and Administrative
Agent and PNC shall be discharged from all of its respective duties and
obligations as Issuing Lender and Administrative Agent under the Loan
Documents, and (ii) issue letters of credit in substitution for the Facility Letters
of Credit issued by PNC, if any, outstanding at the time of such succession or
make other arrangement satisfactory to PNC to effectively assume the
obligations of PNC with respect to such Facility Letters of Credit.

The
Administrative Agent may be removed as administrative agent by the Required
Lenders upon 30 days' prior written notice if the Administrative Agent (i)
shall have committed gross negligence or willful misconduct in the course of
performing its duties hereunder or (ii) has become or is insolvent or has
become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.

11.7         
Non-Reliance on Administrative
Agent and Other Lenders

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.  Each Lender and the
Issuing Lender 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 and the Issuing Lender 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.

11.8         
No Other Duties, etc.

  Anything herein to
the contrary notwithstanding, neither the Syndication Agent nor the
Documentation Agent listed on the cover page hereof shall have any powers,
duties or responsibilities under this Agreement or any of the other Loan
Documents, except in its capacity as a Lender hereunder.

11.9         
No Reliance on Administrative
Agent’s Customer Identification Program

.  Each Lender acknowledges
and agrees that neither such Lender, nor any of its Affiliates, participants or
assignees, may rely on the Administrative Agent to carry out such Lender’s,
Affiliate’s, participant’s or assignee’s customer identification program, or
other obligations required or imposed under or pursuant to the USA Patriot Act
or the regulations thereunder, including the regulations contained in 31 CFR
103.121 (as hereafter amended or replaced, the “CIP Regulations”), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with any of the Loan Parties,
their Affiliates or their agents, the Loan Documents or the transactions
hereunder or contemplated hereby: (i) any identity verification procedures,
(ii) any recordkeeping, (iii) comparisons with government lists, (iv) customer
notices or (v) other procedures required under the CIP Regulations or such
other Laws.

11.10     
Requests for Approval

.  If the
Administrative Agent requests in writing the consent or approval of a Lender,
such Lender shall respond and either approve or disapprove definitively in
writing to the Administrative Agent within ten (10) Business Days (or sooner if
such notice specifies a shorter period for responses based on Administrative
Agent’s good faith determination that circumstances exist warranting its
request for an earlier response) after such written request from the
Administrative Agent.  If the Lender does not so respond, that Lender shall be
deemed to have approved the request.

11.11      Defaulting Lenders

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.  At such time as a
Lender becomes a Defaulting Lender, such Defaulting Lender’s right to vote on
matters which are subject to the consent or approval of the Required Lenders,
each affected Lender or all Lenders shall be immediately suspended until such
time as the Lender is no longer a Defaulting Lender, except that the Commitment
of the Defaulting Lender may not be increased and the Facility Termination Date
may not be extended (other than extensions at Borrower’s option under Section
2.23 or extensions following Borrower’s failure to repay the outstanding
Advances and all other unpaid Obligations in full on the Facility Termination
Date resulting from execution of a forbearance agreement or other agreement
binding the Lenders to refrain from exercising remedies), without such
Defaulting Lender’s consent.  If a Defaulting Lender has failed to fund its pro
rata share of any Advance and until such time as such Defaulting Lender
subsequently funds its pro rata share of such Advance, all Obligations owing to
such Defaulting Lender hereunder shall be subordinated in right of payment, as
provided in the following sentence, to the prior payment in full of all
principal of, interest on and fees relating to the Loans funded by the other
Lenders in connection with any such Advance in which the Defaulting Lender has
not funded its pro rata share (such principal, interest and fees being referred
to as “Senior Loans” for the purposes of this section).  All amounts paid by
Borrower or the Subsidiary Guarantors and otherwise due to be applied to the
Obligations owing to such Defaulting Lender pursuant to the terms hereof shall
be distributed by the Administrative Agent to the other Lenders in accordance
with their respective pro rata shares (recalculated for the purposes hereof to
exclude the Defaulting Lender) until all Senior Loans have been paid in full
provided, however, in no event will any such distribution to the other Lenders
give rise to any liability of the Borrower to the Defaulting Lender.  After the
Senior Loans have been paid in full equitable adjustments will be made in
connection with future payments by the Borrower to the extent a portion of the
Senior Loans had been repaid with amounts that otherwise would have been distributed
to a Defaulting Lender but for the operation of this Section 11.11. 
This provision governs only the relationship among the Administrative Agent,
each Defaulting Lender and the other Lenders; nothing hereunder shall limit the
obligation of the Borrower to repay all Loans in accordance with the terms of
this Agreement.  The provisions of this section shall apply and be effective
regardless of whether an Event of Default occurs and is continuing, and
notwithstanding (i) any other provision of this Agreement to the contrary, (ii)
any instruction of the Borrower as to its desired application of payments or
(iii) the suspension of such Defaulting Lender’s right to vote on matters which
are subject to the consent or approval of the Required Lenders or all Lenders.

ARTICLE XII

SETOFF; RATABLE PAYMENTS

12.1         
Setoff

.  In addition to, and
without limitation of, any rights of the Lenders under applicable law, if the
Borrower becomes insolvent, or any Event of Default occurs and is continuing,
any and all deposits (including all account balances, whether provisional or
final and whether or not collected or available) and any other Indebtedness at
any time held or owing by any Lender or any of its Affiliates to or for the
credit or account of the Borrower may be offset and applied toward the payment
of the Obligations owing to such Lender at any time prior to the date that such
Event of Default has been fully cured, whether or not the Obligations, or any
part hereof, shall then be due, provided that no Lender shall take such an offset
if such action could reasonably be deemed to constitute an election of remedies
under this Agreement that would in any way limit or impair any of the other
rights and remedies of the Administrative Agent and other Lenders hereunder
with respect to such Event of Default. Notwithstanding anything herein to the
contrary, the consent of the Required Lenders shall be required prior to the
exercise of setoff rights by any Lender.

12.2         
Ratable Payments

.  If any Lender
shall, by exercising any right of setoff, counterclaim or banker’s lien, by
receipt of voluntary payment, by realization upon security, or by any other
non-pro rata source, obtain payment in respect of any principal of or interest
on any of its Loans or other obligations hereunder resulting in such Lender’s
receiving payment of a proportion of the aggregate amount of its Loans and
accrued interest thereon or other such obligations greater than the pro-rata
share of the amount such Lender is entitled thereto, 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 Loans and such
other obligations 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 Loans and other amounts owing them, provided
that:

(a)               
if any such participations are
purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, together with interest or other
amounts, if any, required by Law (including court order) to be paid by the
Lender or the holder making such purchase; and

(b)              
the provisions of this Section
12.2 shall not be construed to apply to (x) any payment made by the Loan
Parties pursuant to and in accordance with the express terms of the Loan
Documents or (y) any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in Advances to any assignee or participant, other than to the Borrower or any
Subsidiary thereof (as to which the provisions of this Section 12.2
shall apply).

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Each Loan Party
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 each Loan Party rights of setoff
and counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of each Loan Party in the amount of such participation.

Any Lender that fails
at any time to comply with the provisions of this Section 12.2 shall be
deemed a Defaulting Lender until such time as it performs its obligations
hereunder and is not otherwise a Defaulting Lender for any other reason.  A
Defaulting Lender shall be deemed to have assigned any and all payments due to
it from the Borrower, whether on account of or relating to outstanding Loans,
Facility Letters of Credit, interest, fees or otherwise, to the remaining
non-defaulting Lenders for application to, and reduction of, their respective
Ratable Share of all outstanding Loans and other unpaid Obligations of any of
the Loan Parties.  The Defaulting Lender hereby authorizes the Administrative
Agent to distribute such payments to the non-defaulting Lenders in proportion
to their respective Ratable Share of all outstanding Loans and other unpaid
Obligations of any of the Loan Parties to which such Lenders are entitled.  A
Defaulting Lender shall be deemed to have satisfied the provisions of this Section
12.2 when and if, as a result of application of the assigned payments to
all outstanding Loans and other unpaid Obligations of any of the Loan Parties
to the non-defaulting Lenders, the Lenders’ respective Ratable Share of all
outstanding Loans and unpaid Obligations have returned to those in effect
immediately prior to such violation of this Section 12.2.

ARTICLE
XIII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

13.1         
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 neither the Borrower nor any other Loan Party 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
assignee in accordance with the provisions of Section 13.2, (ii) by
way of participation in accordance with the provisions of Section 13.4,
or (iii) by way of pledge or assignment of a security interest subject to the
restrictions of Section 13.6 (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 Section 13.4
and, to the extent expressly contemplated hereby, the Related Parties of each
of the Administrative Agent and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.  

            PNC Bank,
National Association, agrees to hold no less than ten percent (10%) of the
Aggregate Commitment for so long as it shall serve as the Administrative Agent
hereunder. If an Event of Default should occur pursuant to the terms of this
Agreement, Administrative Agent shall be allowed to transfer all of its rights
and obligations hereunder.

13.2         
Assignments by Lenders

.  Any Lender may at any
time assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it); provided that any such assignment shall
be subject to the following conditions:

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(a)               
Minimum Amounts.

(i)                
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 or an
Affiliate of a Lender, no minimum amount need be assigned; and

(ii)              
in any case not described in
clause (a)(i) of this Section 13.2, the aggregate amount of the
Commitment (which for this purpose includes Loans outstanding thereunder) or,
if the applicable 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 Agreement with respect
to such assignment is delivered to the Administrative Agent or, if “Trade Date”
is specified in the Assignment and Assumption Agreement, 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 Borrower
otherwise consents (each such consent not to be unreasonably withheld or
delayed).

(b)              
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 Loan or the Commitment
assigned.

(c)               
Required Consents.  No consent shall be required for any assignment
except for the consent of the Administrative Agent (which shall not be
unreasonably withheld or delayed) and:

(i)                
the consent of the Borrower (such
consent not to be unreasonably withheld or delayed) shall be required unless
(x) an Event of Default has occurred and is continuing at the time of such
assignment or (y) such assignment is to a Lender, an Affiliate of a Lender; and

(ii)              
the consent of the Issuing Lender
(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).

(d)              
Assignment and Assumption
Agreement.  The parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Assumption Agreement, together with a processing and recordation fee of
$3,500, and the assignee, if it is not a Lender, shall deliver to the
Administrative Agent an administrative questionnaire provided by the
Administrative Agent.

(e)               
No Assignment to Borrower.  No such assignment shall be made to the Borrower or
any of the Borrower’s Affiliates or Subsidiaries.

(f)               
No Assignment to Natural
Persons.  No such assignment shall be
made to a natural person.

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Subject to acceptance
and recording thereof by the Administrative Agent pursuant to Section 13.3,
from and after the effective date specified in each Assignment and Assumption
Agreement, the assignee thereunder shall be a party to this Agreement and, to
the extent of the interest assigned by such Assignment and Assumption
Agreement, 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 Agreement, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption Agreement 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 4.5, 4.1 and 10.7
with respect to facts and circumstances occurring prior to the effective date
of such assignment.  Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 13.2
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 Section 13.4.
PNC agrees that if, at any time that PNC shall have made an assignment or
assignments which result in PNC having no Commitment or outstanding Advances
hereunder, an Event of Default shall have occurred, PNC shall promptly resign
as Administrative Agent and a replacement Administrative Agent shall be
selected as provided in Section 11.6 above, 

13.3         
Register

.  The Administrative
Agent, acting solely for this purpose as an agent of the Borrower, shall
maintain a record of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans owing to, each Lender
pursuant to the terms hereof from time to time.  Such register shall be
conclusive, and the Borrower, the Administrative Agent and the Lenders may treat
each Person whose name is in such register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary.  Such register shall be available for inspection by the Borrower
and any Lender, at any reasonable time and from time to time upon reasonable
prior notice.

13.4         
Participations

.  Any Lender may at
any time, without the consent of, or notice to, the Borrower or the
Administrative Agent, sell participations to any Person (other than a natural
person or the Borrower or any of the Borrower’s 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 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 Borrower, the Administrative Agent and the
Lenders, Issuing Lender 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, modification or waiver with respect to Sections 9.2(a) or 9.2(d).  
Subject to the other provisions of this Article XIII, the Borrower
agrees that each Participant shall be entitled to the benefits of Sections
4.5 and 4.1 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 13.2, provided
however that if such Participant makes a claim under such Sections 4.5 or 4.1,
such Participant shall be subject to replacement at the direction of the
Borrower under Section 2.20 as if such Participant were a Lender.  To
the extent permitted by Law, each Participant also shall be entitled to the
benefits of Section 12.1 as though it were a Lender; provided such
Participant agrees to be subject to Section 12.2 as though it were a
Lender. 

13.5         
Limitations upon Participant
Rights Successors and Assigns Generally

.  A Participant shall
not be entitled to receive any greater payment under Sections 4.1, 4.2
or 10.7 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 Borrower’s prior written
consent.  A Participant that would be a Foreign Lender if it were a Lender
shall not be entitled to the benefits of Section 4.2 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 4.2 as
though it were a Lender.

-
71 -

 

 

 

 

 

13.6         
Certain Pledges; Successors and
Assigns Generally

.  Any Lender may at
any time pledge or assign a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; 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.

13.7         
Confidentiality

.

(a)               
General

.  Each of the
Administrative Agent, the Lenders and the Issuing Lender agrees to maintain the
confidentiality of the Information, except that Information may be disclosed
(i) to its Affiliates and to its and its Affiliates’ respective partners,
directors, officers, employees, agents, advisors and other representatives (it
being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (ii) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (iii) to the extent required by applicable Laws or regulations
or by any subpoena or similar legal process, (iv) to any other party hereto,
(v) in connection with the exercise of any remedies hereunder or under any
other Loan Document or any action or proceeding relating to this Agreement or
any other Loan Document or the enforcement of rights hereunder or thereunder,
(vi) subject to an agreement containing provisions substantially the same as
those of this Section, to (A) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (B) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrower and
its obligations, (vii) with the consent of the Borrower or (viii) to the extent
such Information (Y) becomes publicly available other than as a result of a
breach of this Section or (Z) becomes available to the Administrative Agent,
any Lender, the Issuing Lender or any of their respective Affiliates on a nonconfidential
basis from a source other than the Borrower or the other Loan Parties.  Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

(b)              
Sharing Information With
Affiliates of the Lenders

.  Each Loan Party
acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to the Borrower or one or more of its
Affiliates (in connection with this Agreement or otherwise) by any Lender or by
one or more Subsidiaries or Affiliates of such Lender and each of the Loan
Parties hereby authorizes each Lender to share any information delivered to
such Lender by such Loan Party and its Subsidiaries pursuant to this Agreement
to any such Subsidiary or Affiliate subject to the provisions of this Section
13.7.

ARTICLE XIV

NOTICES

 

14.1         
Giving Notice

.  All notices and other communications provided to any
party hereto under this Agreement or any other Loan Document shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address (or
to counsel for such party) as may be designated by such party in a notice to
the other parties.  Any notice, if mailed and properly addressed with postage
prepaid, shall be deemed given when received; any notice, if transmitted by
telex or facsimile, shall be deemed given when transmitted (answerback
confirmed in the case of telexes).

-
72 -

 

 

 

 

 

14.2         
Change of Address

.  The Borrower, the Administrative Agent and any
Lender may each change the address for service of notice upon it by a notice in
writing to the other parties hereto.

ARTICLE
XV

PATRIOT ACT

Each Lender that is subject
to the USA Patriot Act and the Administrative Agent (for itself and not on
behalf of any Lender) hereby notifies Loan Parties that pursuant to the
requirements of the USA Patriot Act, it is required to obtain, verify and
record information that identifies the Loan Parties, which information includes
the name and address of Loan Parties and other information that will allow such
Lender or Administrative Agent, as applicable, to identify the Loan Parties in
accordance with the USA Patriot Act.

ARTICLE XVI

COUNTERPARTS

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, and any separate letter agreements with respect
to fees payable to the Administrative Agent, constitute the entire contract
among the parties relating to the subject matter hereof and supersede any and
all previous agreements and understandings, oral or written, relating to the
subject matter hereof including any prior confidentiality agreements and
commitments.  Except as provided in Article V, 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 or e-mail shall be effective as delivery of a manually executed
counterpart of this Agreement.

[Signature pages follow]

 

- 73 -

 

 

 

 

 

IN WITNESS WHEREOF, the Borrower, the Lenders and the
Administrative Agent have executed this Agreement as of the date first above
written.

ASSOCIATED ESTATES REALTY CORPORATION, an
Ohio corporation

 

 

By:       /s/Bradley A. Van Auken                                 

Name:  Bradley
A. Van Auken                                     

Title:    Vice
President                                                  

 

1 AEC Parkway

Richmond Heights, Ohio  44143

                                                Attention: 
       Vice President and General Counsel

                                                Telephone: 
     (216) 797-8785

Facsimile:        (216) 797-8719

S-1

 

 

 

 

 

 

COMMITMENT:                                            PNC
BANK, NATIONAL ASSOCIATION,

$75,000,000                                                    Individually
and as Administrative Agent

By:       /s/ John E. Wilgus, II                                        

Name:  John E. Wilgus,
II                                             

Title:    Senior
Vice President                                       

PNC
Real Estate

1900
East Ninth Street - 22nd Floor

Mail
Stop:  B7-YB13-22-1

Cleveland,
OH  44114

Phone:             216-222-6032

Facsimile:        216-222-6070

Attention:         John
E. Wilgus, II

     Senior Vice President

     Real
Estate Banking

S-2

 

 

 

 

 

 

COMMITMENT:                                            WELLS
FARGO BANK, N.A., individually and as

$75,000,000                                                    Syndication
Agent

By:       /s/ Scott S. Solis                                               

Name:  Scott S. Solis                                                    

Title:    Senior
Vice President                                       

                                    123 North Wacker
Drive

                                    Suite 1900

                                    Chicago, IL  60606

                                    Attention:         Scott
Solis

                                    Phone: 
           312-269-4818

                                    Facsimile: 
      312-782-0969

S-3

 

 

 

 

 

 

COMMITMENT:                                             CITIBANK,
N.A., Individually and as

$45,000,000                                                    Co-Documentation
Agent

By:       /s/ John C. Rowland                                         

Name:  John C. Rowland

Title:    Vice
President                                                  

                                    Citibank, N.A.

                                    388 Greenwich
Street, 23rd Floor

                                    New York, NY 
10013

                                    Attention:         Rita
C. Lai

                                    Phone: 
           212-723-5931

                                    Facsimile: 
      212-723-8550

S-4

 

 

 

 

 

 

COMMITMENT:                                             RBS
CITIZENS BANK N.A. d/b/a CHARTER ONE,

$45,000,000                                                    Individually
and as Co-Documentation Agent

 

 

By:       /s/ Samuel A. Bluso                                         

Name:  Samuel
A. Bluso

Title:    Senior Vice
President

RBS Citizens Bank N.A. d/b/a Charter One

1215
Superior Avenue, OH S675

Cleveland,
OH  44114

Attention:
        Samuel A. Bluso

Phone:             216-277-0388

Facsimile:        216-277-4600

S-5

 

 

 

 

 

 

COMMITMENT:                                             BANK
OF AMERICA, N.A., Individually and as

$45,000,000                                                    Co-Documentation
Agent

By:       /s/ Eyal Namordi                                              

Name:  Eyal Namordi                                                  

Title:    Senior
Vice President                                       

                                    Bank of America,
N.A.

                                    135 South LaSalle
Street

                                    Mail Stop:
IL4-135-06-11

                                    Chicago, IL  60603

 

                                    Attention:         Eyal
Namordi

                                    Phone:             312-828-2575

                                    Facsimile:        415-503-5142

 

 

S-6

 

 

 

 

 

 

COMMITMENT:                                             RAYMOND
JAMES BANK, FSB

$35,000,000                                                    

By:       /s/James Armstrong                              

Name: James Armstrong

Title:    Senior Vice
President

                                                                        710 Carillon Parkway

                                                                        St.
Petersburg, FL  33716

                                                                        Attention: 
       James Armstrong

                                                                        Phone: 
           727-567-7919

                                                                        Facsimile: 
      866-205-1396

S-7

 

 

 

 

 

 

COMMITMENT:                                             U.S.
BANK NATIONAL ASSOCIATION

$30,000,000

By:       /s/ Curt M. Steiner                                            

Name: Curt M. Steiner

Title:    Senior
Vice President

                                    U.S. Bank National
Association

                                    209 South LaSalle
Street, Suite 210

                                    Chicago, IL 60604

                                    Attention:         Curt
M. Steiner

                                                           Senior
Vice President

                                    Phone:
            (312)325-8756

                                                                        Facsimile:
        (312)325-8853

 

S-8

 

 

 

 

 

 

EXHIBIT A

 

FORM OF NOTE

 

 

____________, 2012

 

 

Associated
Estates Realty Corporation, a corporation organized under the laws of the State
of Ohio (the “Borrower”), promises to pay to the order of
_________________________ (the “Lender”) the aggregate unpaid principal amount
of all Loans made by the Lender to the Borrower pursuant to Article II of the
Credit Agreement (as the same may be amended or modified, the “Agreement”)
hereinafter referred to, in immediately available funds at the main office of
PNC Bank, National Association in Cleveland, Ohio, as Administrative Agent,
together with interest on the unpaid principal amount hereof at the rates and
on the dates set forth in the Agreement.  The Borrower shall pay remaining
unpaid principal of and accrued and unpaid interest on the Loans in full on the
Facility Termination Date or such earlier date as may be required under the
Agreement.

The Lender
shall, and is hereby authorized to, record on the schedule attached hereto, or
to otherwise record in accordance with its usual practice, the date and amount
of each Loan and the date and amount of each principal payment hereunder.

This Note is
one of the Notes issued pursuant to, and is entitled to the benefits of that
certain Second Amended and Restated Credit Agreement, dated as of
[____________, 2012] among the Borrower, PNC Bank, National Association,
individually and as Administrative Agent, and the other Lenders named therein,
to which Agreement, as it may be amended from time to time, reference is hereby
made for a statement of the terms and conditions governing this Note, including
the terms and conditions under which this Note may be prepaid or its maturity
date accelerated.  Capitalized terms used herein and not otherwise defined
herein are used with the meanings attributed to them in the Agreement.

If there is an
Event of Default under the Agreement or any other Loan Document and
Administrative Agent exercises the remedies provided under the Agreement and/or
any of the Loan Documents for the Lenders, then in addition to all amounts
recoverable by the Administrative Agent and the Lenders under such documents,
the Administrative Agent and the Lenders shall be entitled to receive
reasonable attorneys fees and expenses incurred by the Administrative Agent and
the Lenders in connection with the exercise of such remedies.

Borrower and
all endorsers severally waive presentment, protest and demand, notice of
protest, demand and of dishonor and nonpayment of this Note, and any and all
lack of diligence or delays in collection or enforcement of this Note, and
expressly agree that this Note, or any payment hereunder, may be extended from
time to time, and expressly consent to the release of any party liable for the
obligation secured by this Note, the release of any of the security for this
Note, the acceptance of any other security therefor, or any other indulgence or
forbearance whatsoever, all without notice to any party and without affecting
the liability of the Borrower and any endorsers hereof.

This Note shall
be governed and construed under the internal laws of the State of Ohio.

A-1

 

 

 

 

 

BORROWER AND
LENDER, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS NOTE
OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR ARISING FROM THE LENDING
RELATIONSHIP WHICH IS THE SUBJECT OF THIS NOTE AND AGREE THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.

 

ASSOCIATED ESTATES
REALTY CORPORATION,

a n Ohio corporation

 

 

By:                                                                               

Name:                                                                          

Title:                                                                                                                                                                                                                                                                                                                      A-2

 

 

 

 

 

 

SCHEDULE OF LOANS AND PAYMENTS OF
PRINCIPAL

TO

NOTE OF ASSOCIATED ESTATES REALTY
CORPORATION

DATED ___________, 2012

 

 

                                                                                               Maturity

                           Principal                   Maturity                     Principal

                           Amount
of                of Interest                   Amount                       Unpaid

Date                    Loan                         Period                         Paid                             Balance

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

 

______________________________________________________________________________ 

A-3

 

 

 

 

 

EXHIBIT B

 

COMPLIANCE CERTIFICATE

 

 

PNC Bank, National Association, as Administrative
Agent

Investment Real Estate

1900 East Ninth Street - 22nd Floor

Mail Stop:  B7-YB13-22-1

Cleveland, OH  44114

 

 

	
  Re:

  	
  (1)  
  Term Loan Agreement dated as of June
  3, 2011. as amended by First Amendment to Term Loan Agreement dated as of January
  12, 2012 (as further amended, modified, supplemented, restated, or renewed,
  from time to time, the “Term Agreement”) between ASSOCIATED
  ESTATES REALTY CORPORATION (the “Borrower”), and PNC BANK, NATIONAL
  ASSOCIATION, as Administrative Agent for itself and the other lenders parties
  thereto from time to time (“Term Lenders”).

  

  (2)  
  Second Amended and Restated
  Credit Agreement dated as of January 12, 2012]  (as amended, modified,
  supplemented, restated, or renewed, from time to time, together with the Term
  Agreement, the “Agreement”) between ASSOCIATED
  ESTATES REALTY CORPORATION (the “Borrower”), and PNC BANK, NATIONAL
  ASSOCIATION, as Administrative Agent for itself and the other lenders parties
  thereto from time to time (together with the Term Lenders, the “Lenders”).”

  

 

Reference is made to the
Agreement.  Capitalized terms used in this Certificate (including schedules and
other attachments hereto, this “Certificate”) without definition have the
meanings specified in the Agreement.

Pursuant to applicable
provisions of the Agreement, Borrower hereby certifies to the Lenders that the
information furnished in the attached schedules, including, without limitation,
each of the calculations listed below are true, correct and complete in all
material respects as of the last day of the fiscal periods subject to the
financial statements and associated covenants being delivered to the Lenders
pursuant to the Agreement together with this Certificate (such statements the
“Financial Statements” and the periods covered thereby the “reporting period”)
and for such reporting periods.

The Borrower hereby further
certifies to the Lenders that:

1.         Compliance
with Financial Covenants.  Schedule A attached hereto sets forth financial
data and computations evidencing the Borrower’s compliance with certain
covenants of the Agreement, all of which data and computations are true,
complete and correct.  

2.         Review of
Condition.  The Borrower has reviewed the terms of the Agreement,
including, but not limited to, the representations and warranties of the
Borrower set forth in the Agreement and the covenants of the Borrower set forth
in the Agreement, and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the transactions and condition of
the Borrower through the reporting periods.

B-1

 

 

 

 

 

 

3.         Representations
and Warranties.  To the Borrower’s actual knowledge, the representations
and warranties of the Borrower contained in the Loan Documents, including those
contained in the Agreement, are true and accurate in all material respects as
of the date hereof and were true and accurate in all material respects at all
times during the reporting period except as expressly noted on Schedule B
hereto.

4.         Covenants. 
To the Borrower’s actual knowledge, during the reporting period, the Borrower
observed and performed all of the respective covenants and other agreements
under the Agreement and the Loan Documents, and satisfied each of the
conditions contained therein to be observed, performed or satisfied by the
Borrower, except as expressly noted on Schedule B hereto.

5.         No Default. 
To the Borrower’s actual knowledge, no Event of Default exists as of the date
hereof or existed at any time during the reporting period, except as expressly
noted on Schedule B hereto.

IN WITNESS WHEREOF, this
Certificate is executed by the undersigned this ___ day of January, 2012.

ASSOCIATED
ESTATES REALTY CORPORATION,

an
Ohio corporation

 

 

By:                                                                                     

Name:                                                                                

Title:                                                                                  

B-2

 

 

 

 

 

 

SCHEDULE A

 

FINANCIAL DATA AND COMPUTATIONS

 

B-3

 

 

 

 

 

 

EXHIBIT C

 

FORM OF

ASSIGNMENT AND ASSUMPTION

 

This Assignment and
Assumption (the “Assignment and Assumption”) is dated as of the
Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee]
(the “Assignee”).  Capitalized terms used but not defined herein shall
have the meanings given to them in the Credit Agreement identified below  (as
amended, the “Credit Agreement”), receipt of a copy of which is hereby
acknowledged by the Assignee.  The Standard Terms and Conditions set forth in
Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.

For an agreed
consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to and in accordance with the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto to the extent related
to the amount and percentage interest identified below of all of such
outstanding rights and obligations of the Assignor under the respective
facilities identified below (including without limitation any letters of
credit, guarantees, and swing loans included in such facilities) and (ii) to
the extent permitted to be assigned under applicable law, all claims, suits, causes
of action and any other right of the Assignor (in its capacity as a Lender)
against any Person, whether known or unknown, arising under or in connection
with the Credit Agreement, any other documents or instruments delivered
pursuant thereto or the loan transactions governed thereby or in any way based
on or related to any of the foregoing, including, but not limited to, contract
claims, tort claims, malpractice claims, statutory claims and all other claims
at law or in equity related to the rights and obligations sold and assigned
pursuant to clause (i) above (the rights and obligations sold and assigned
pursuant to clauses (i) and (ii) above being referred to herein collectively
as, the “Assigned Interest”).  Such sale and assignment is without recourse
to the Assignor and, except as expressly provided in this Assignment and
Assumption, without representation or warranty by the Assignor.

1.         Assignor:                     ______________________________

 

2.         Assignee:                     ______________________________

                                                [and
is an Affiliate of [identify Lender][1]]

 

3.         Borrower(s):                ______________________________

 

4.         Administrative Agent:  ______________________,
as the administrative agent under the Credit Agreement

 

5.         Credit Agreement:        The Second Amended
and Restated Credit Agreement dated as of January 12, 2012 among Associated
Estates Realty Corporation, the Lenders parties thereto, PNC Bank, National
Association, as Administrative Agent, and the other agents parties thereto

 

6.          Assigned Interest:      
____________

                                                                            C-1

 

 

 

 

 

 

 

	
  Facility Assigned[2]

  	
  Aggregate Amount of Commitment/Loans for all Lenders*

  	
  Amount of Commitment/Loans Assigned*

  	
  Percentage Assigned of Commitment/Loans[3]

  
	
   

  	
  $

  	
  $

  	
              %

  
	
   

  	
  $

  	
  $

  	
              %

  
	
   

  	
  $

  	
  $

  	
              %

  

 

[7.        Trade
Date:                  ______________][4]

 

                                                                            C-2

 

 

 

 

 

 

Effective Date:  
_____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH
SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in
this Assignment and Assumption are hereby agreed to:

                                                                        ASSIGNOR

                                                                        [NAME
OF ASSIGNOR]

 

                                                                        By:______________________________

                                                                          
Title:

 

                                                                        ASSIGNEE

                                                                        [NAME
OF ASSIGNEE]

 

                                                                        By:______________________________

                                                                          
Title:

[Consented to and][5]
Accepted:

 

PNC Bank, National
Association, 

as Administrative Agent

 

By_________________________________

  Title:

 

[Consented to:][6]

 

Associated Estates Realty
Corporation

 

By________________________________

  Title:

                                                                            C-3

 

 

 

 

 

 

ANNEX 1

 

[__________________][7]

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

 

                        1.  Representations
and Warranties.  

 

                        1.1  
Assignor.  The Assignor (a) represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute
and deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Credit Document[8],
(ii) the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Documents or any collateral thereunder,
(iii) the financial condition of the Borrower, any of its Subsidiaries or
Affiliates or any other Person obligated in respect of any Credit Document or
(iv) the performance or observance by the Borrower, any of its Subsidiaries or
Affiliates or any other Person of any of their respective obligations under any
Credit Document.

 

                        1.2. 
Assignee.  The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it meets all
requirements of an Eligible Assignee under the Credit Agreement (subject to
receipt of such consents as may be required under the Credit Agreement), (iii) from
and after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of the Assigned Interest,
shall have the obligations of a Lender thereunder, (iv) it has received a copy
of the Credit Agreement, together with copies of the most recent financial
statements delivered pursuant to Section ___ thereof, as applicable, and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Assumption and
to purchase the Assigned Interest on the basis of which it has made such
analysis and decision independently and without reliance on the Administrative
Agent or any other Lender, and (v) if it is a Foreign Lender[9],
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently
and without reliance on the Administrative Agent, the Assignor or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Documents are required to be performed by it as a Lender.

 

                        2.   Payments.   
From and after the Effective Date, the Administrative Agent shall make all payments
in respect of the Assigned Interest (including payments of principal, interest,
fees and other amounts) to the Assignor for amounts which have accrued to but
excluding the Effective Date and to the Assignee for amounts which have accrued
from and after the Effective Date.[10]

                                                                            C-4

 

 

 

 

 

 

 

                        3.  General
Provisions. This Assignment and Assumption shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors and
assigns.  This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of
this Assignment and Assumption by telecopy
shall be effective as delivery of a manually executed counterpart of this
Assignment and Assumption.  This
Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of New York.

 

                                                                            C-5

 

 

 

 

 

 

EXHIBIT D

 

SUBSIDIARY GUARANTY

This Guaranty
is made as of January 12, 2012 by the parties identified in the signature pages
thereto, and any joinder to this Guaranty hereafter delivered (collectively,
the “Subsidiary Guarantors”), to and for the benefit of PNC Bank,
National Association, individually (“PNC”) and as administrative agent
(“Administrative Agent”) for itself and the lenders under the Credit
Agreement (as defined below) and their respective successors and assigns
(collectively, the “Lenders”).

RECITALS

A.        Associated
Estates Realty Corporation, a corporation organized under the laws of the State
of Ohio (“Borrower”), and Subsidiary Guarantors have requested that the
Lenders make a revolving credit facility available to Borrower in an aggregate
principal amount of $350,000,000, subject to increase up to $400,000,000 (the “Facility”).

B.         The
Lenders have agreed to make available the Facility to Borrower pursuant to the
terms and conditions set forth in an Second Amended and Restated Credit
Agreement of even date herewith among Borrower, PNC, individually, and as
Administrative Agent, and the Lenders named therein (as amended, modified or
restated from time to time, the “Credit Agreement”).  All capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
such terms in the Credit Agreement.

C.         Borrower
has executed and delivered or will execute and deliver to the Lenders
promissory notes in the principal amount of each Lender’s Commitment and
promissory notes in the principal amount, if any, of each Lender’s Loan as
evidence of Borrower’s indebtedness to each such Lender with respect to the
Facility (the promissory notes described above, together with any amendments or
allonges thereto, or restatements, replacements or renewals thereof, and/or new
promissory notes to new Lenders under the Credit Agreement, are collectively
referred to herein as the “Notes”).

D.        Subsidiary
Guarantors are subsidiaries of Borrower.  Subsidiary Guarantors acknowledge
that the extension of credit by the Administrative Agent and the Lenders to
Borrower pursuant to the Credit Agreement will benefit Subsidiary Guarantors by
making funds available to Subsidiary Guarantors through Borrower and by
enhancing the financial strength of the consolidated group of which Subsidiary
Guarantors and Borrower are members.  The execution and delivery of this
Guaranty by Subsidiary Guarantors are conditions precedent to the performance
by the Lenders of their obligations under the Credit Agreement.

AGREEMENTS

NOW, THEREFORE,
Subsidiary Guarantors, in consideration of the matters described in the
foregoing Recitals, which Recitals are incorporated herein and made a part
hereof, and for other good and valuable consideration, hereby agree as follows:

1.         Subsidiary
Guarantors absolutely, unconditionally, and irrevocably guaranty to each of the
Lenders:

(a)        the
full and prompt payment of the principal of and interest on the Notes when due,
whether at stated maturity, upon acceleration or otherwise, and at all times
thereafter, and the prompt payment of all sums which may now be or may
hereafter become due and owing under the Notes, the Credit Agreement, and the
other Loan Documents;

                                                                           D-1

 

 

 

 

 

(b)        the payment of all Enforcement Costs (as
hereinafter defined in Paragraph 7 hereof); and

(c)        the
full, complete, and punctual observance, performance, and satisfaction of all
of the obligations, duties, covenants, and agreements of Borrower under the
Credit Agreement and the Loan Documents.

All
amounts due, debts, liabilities, and payment obligations described in
subparagraphs (a) and (b) of this Paragraph 1 are referred to
herein as the “Facility Indebtedness.”  All obligations described in
subparagraph (c) of this Paragraph 1 are referred to herein as
the “Obligations.”  Subsidiary Guarantors and Lenders agree that
Subsidiary Guarantors’ obligations hereunder shall not exceed the greater of: 
(i) the aggregate amount of all monies received, directly or indirectly,
by Subsidiary Guarantors from Borrower after the date hereof (whether by loan,
capital infusion or other means), or (ii) the maximum amount of the
Facility Indebtedness not subject to avoidance under Title 11 of the United
States Code, as same may be amended from time to time, or any applicable state
law (the “Bankruptcy Code”).  To that end, to the extent such
obligations would otherwise be subject to avoidance under the Bankruptcy Code
if Subsidiary Guarantors are not deemed to have received valuable
consideration, fair value or reasonably equivalent value for its obligations
hereunder, each Subsidiary Guarantor’s obligations hereunder shall be reduced
to that amount which, after giving effect thereto, would not render such
Subsidiary Guarantor insolvent, or leave such Subsidiary Guarantor with an
unreasonably small capital to conduct its business, or cause such Subsidiary
Guarantor to have incurred debts (or intended to have incurred debts) beyond
its ability to pay such debts as they mature, as such terms are determined, and
at the time such obligations are deemed to have been incurred, under the
Bankruptcy Code.  In the event a Subsidiary Guarantor shall make any payment or
payments under this Guaranty each other Subsidiary Guarantor of the Facility
Indebtedness shall contribute to such Subsidiary Guarantor an amount equal to
such non-paying Subsidiary Guarantor’s pro rata share (based on their
respective maximum liabilities hereunder) of such payment or payments made by
such Subsidiary Guarantor, provided that such contribution right shall be
subordinate and junior in right of payment in full of all the Facility
Indebtedness to Lenders.

2.         In the event of
any default by Borrower in making payment of the Facility Indebtedness, or in
performance of the Obligations, as aforesaid, in each case beyond the
expiration of any applicable grace period, Subsidiary Guarantors agree, on
demand by the Administrative Agent or the holder of a Note, to pay all the
Facility Indebtedness and to perform all the Obligations as are then or
thereafter become due and owing or are to be performed under the terms of the
Notes, the Credit Agreement, and the other Loan Documents.

                                                                           D-2

 

 

 

 

 

3.         Subsidiary
Guarantors do hereby waive (i) notice of acceptance of this Guaranty by
the Administrative Agent and the Lenders and any and all notices and demands of
every kind which may be required to be given by any statute, rule or law,
(ii) any defense, right of set-off or other claim which Subsidiary
Guarantors may have against Borrower or which Subsidiary Guarantors or Borrower
may have against the Administrative Agent or the Lenders or the holder of a
Note, (iii) presentment for payment, demand for payment (other than as
provided for in Paragraph 2 above), notice of nonpayment (other than as
provided for in Paragraph 2 above) or dishonor, protest and notice of
protest, diligence in collection and any and all formalities which otherwise
might be legally required to charge Subsidiary Guarantors with liability,
(iv) any failure by the Administrative Agent and the Lenders to inform
Subsidiary Guarantors of any facts the Administrative Agent and the Lenders may
now or hereafter know about Borrower, the Facility, or the transactions
contemplated by the Credit Agreement, it being understood and agreed that the
Administrative Agent and the Lenders have no duty so to inform and that
Subsidiary Guarantors are fully responsible for being and remaining informed by
Borrower of all circumstances bearing on the existence or creation, or the risk
of nonpayment of the Facility Indebtedness or the risk of nonperformance of the
Obligations, (v) any and all right to cause a marshalling of assets of
Borrower or any other action by any court or governmental body with respect
thereto, or to cause the Administrative Agent and the Lenders to proceed
against any other security given to a Lender in connection with the Facility
Indebtedness or the Obligations and (vi) the unenforceability of all or
any part of the Facility Indebtedness or Obligations against Borrower, whether
because the Facility Indebtedness or Obligations exceed the amount permitted by
law or violate any usury law, or because the act of creating the Facility
Indebtedness or Obligations, or any part thereof, is ultra vires, or because
the officers or Persons creating same acted in excess of their authority, or
because of a lack of validity or enforceability of or defect or deficiency in
any of the Loan Documents, or because Borrower has any valid defense, claim or
offset with respect thereto, or because Borrower’s obligation ceases to exist
by operation of law, or because of any other reason or circumstance, it being
agreed that Guarantor shall remain liable hereon regardless of whether Borrower
or any other Person be found not liable on the Facility Indebtedness or
Obligations, or any part thereof, for any reason (and regardless of any joinder
of Borrower or any other party in any action to obtain payment or performance
of any or all of the Facility Indebtedness or Obligations).  Credit may be granted or continued from time to
time by the Lenders to Borrower without notice to or authorization from
Subsidiary Guarantors, regardless of the financial or other condition of
Borrower at the time of any such grant or continuation.  The Administrative
Agent and the Lenders shall have no obligation to disclose or discuss with
Subsidiary Guarantors the Lenders’ assessment of the financial condition of
Borrower.  Subsidiary Guarantors acknowledge that no representations of any
kind whatsoever have been made by the Administrative Agent and the Lenders to
Subsidiary Guarantors.  No modification or waiver of any of the provisions of
this Guaranty shall be binding upon the Administrative Agent and the Lenders
except as expressly set forth in a writing duly signed and delivered on behalf
of the Administrative Agent and the Lenders.  Subsidiary Guarantors further
agree that any exculpatory language contained in the Credit Agreement, the
Notes, and the other Loan Documents shall in no event apply to this Guaranty,
and will not prevent the Administrative Agent and the Lenders from proceeding
against Subsidiary Guarantors to enforce this Guaranty.

                                                                           D-3

 

 

 

 

 

4.         Subsidiary
Guarantors further agree that Subsidiary Guarantors’ liability as guarantor
shall in no way be impaired by any renewals or extensions which may be made
from time to time, with or without the knowledge or consent of Subsidiary
Guarantors of the time for payment of interest or principal under a Note or by
any forbearance or delay in collecting interest or principal under a Note, or
by any waiver by the Administrative Agent and the Lenders under the Credit
Agreement, or any other Loan Documents, or by the Administrative Agent or the
Lenders’ failure or election not to pursue any other remedies they may have
against Borrower, or by any change or modification in a Note, the Credit
Agreement, or any other Loan Documents, or by the acceptance by the
Administrative Agent or the Lenders of any security or any increase,
substitution or change therein, or by the release by the Administrative Agent
and the Lenders of any security or any withdrawal thereof or decrease therein,
or by the application of payments received from any source to the payment of
any obligation other than the Facility Indebtedness, even though a Lender might
lawfully have elected to apply such payments to any part or all of the Facility
Indebtedness, it being the intent hereof that Subsidiary Guarantors shall
remain liable as principal for payment of the Facility Indebtedness and
performance of the Obligations until all indebtedness has been paid in full and
the other terms, covenants and conditions of the Credit Agreement, and other
Loan Documents and this Guaranty have been performed, notwithstanding any act
or thing which might otherwise operate as a legal or equitable discharge of a
surety.  Subsidiary Guarantors further understand and agree that the
Administrative Agent and the Lenders may at any time enter into agreements with
Borrower to amend and modify a Note, the Credit Agreement or any of the other
Loan Documents, or any other documents related thereto, and may waive or
release any provision or provisions of a Note, the Credit Agreement, or any
other Loan Document and, with reference to such instruments, may make and enter
into any such agreement or agreements as the Administrative Agent, the Lenders
and Borrower may deem proper and desirable, without in any manner impairing
this Guaranty or any of the Administrative Agent and the Lenders’ rights
hereunder or any of Subsidiary Guarantors’ obligations hereunder.

5.         This is an
absolute, unconditional, complete, present and continuing guaranty of payment
and performance and not of collection.  Subsidiary Guarantors agree that its
obligations hereunder shall be joint and several with any and all other
guarantees given in connection with the Facility from time to time.  Subsidiary
Guarantors agree that this Guaranty may be enforced by the Administrative Agent
and the Lenders without the necessity at any time of resorting to or exhausting
any security or collateral, if any, given in connection herewith or with a
Note, the Credit Agreement, or any of the other Loan Documents or by or
resorting to any other guaranties, and Subsidiary Guarantors hereby waive the
right to require the Administrative Agent and the Lenders to join Borrower in
any action brought hereunder or to commence any action against or obtain any
judgment against Borrower or to pursue any other remedy or enforce any other
right.  Subsidiary Guarantors further agree that nothing contained herein or
otherwise shall prevent the Administrative Agent and the Lenders from pursuing
concurrently or successively all rights and remedies available to them at law
and/or in equity or under a Note, the Credit Agreement or any other Loan
Documents, and the exercise of any of their rights or the completion of any of
their remedies shall not constitute a discharge of any of Subsidiary
Guarantors’ obligations hereunder, it being the purpose and intent of
Subsidiary Guarantors that the obligations of such Subsidiary Guarantors
hereunder shall be primary, absolute, independent and unconditional under any
and all circumstances whatsoever.  Neither Subsidiary Guarantors’ obligations
under this Guaranty nor any remedy for the enforcement thereof shall be
impaired, modified, changed or released in any manner whatsoever by any
impairment, modification, change, release or limitation of the liability of
Borrower under a Note, the Credit Agreement or any other Loan Document or by
reason of Borrower’s bankruptcy or by reason of any creditor or bankruptcy
proceeding instituted by or against Borrower.  This Guaranty shall continue to
be effective and be deemed to have continued in existence or be reinstated (as
the case may be) if at any time payment of all or any part of any sum payable
pursuant to a Note, the Credit Agreement or any other Loan Document is
rescinded or otherwise required to be returned by the payee upon the
insolvency, bankruptcy, or reorganization of the payor, all as though such
payment to such Lender had not been made, regardless of whether such Lender
contested the order requiring the return of such payment.  The obligations of
Subsidiary Guarantors pursuant to the preceding sentence shall survive any
termination, cancellation, or release of this Guaranty.

6.         This Guaranty
shall be assignable by a Lender to any assignee of all or a portion of such
Lender’s rights under the Loan Documents.

7.         If: 
(i) this Guaranty, a Note, or any of the Loan Documents are placed in the
hands of an attorney for collection or is collected through any legal
proceeding; (ii) an attorney is retained to represent the Administrative
Agent or any Lender in any bankruptcy, reorganization, receivership, or other
proceedings affecting creditors’ rights and involving a claim under this
Guaranty, a Note, the Credit Agreement, or any Loan Document; (iii) an
attorney is retained to enforce any of the other Loan Documents or to provide
advice or other representation with respect to the Loan Documents in connection
with an enforcement action or potential enforcement action; or (iv) an
attorney is retained to represent the Administrative Agent or any Lender in any
other legal proceedings whatsoever in connection with this Guaranty, a Note,
the Credit Agreement, any of the Loan Documents, or any property subject
thereto (other than any action or proceeding brought by any Lender or
participant against the Administrative Agent alleging a breach by the
Administrative Agent of its duties under the Loan Documents), then Subsidiary
Guarantors shall pay to the Administrative Agent or such Lender upon demand all
reasonable attorney’s fees, costs and expenses, including, without limitation,
court costs, filing fees and all other costs and expenses incurred in
connection therewith (all of which are referred to herein as “Enforcement
Costs”), in addition to all other amounts due hereunder.

                                                                           D-4

 

 

 

 

 

8.         The parties
hereto intend that each provision in this Guaranty comports with all applicable
local, state and federal laws and judicial decisions.  However, if any
provision or provisions, or if any portion of any provision or provisions, in
this Guaranty is found by a court of law to be in violation of any applicable
local, state or federal ordinance, statute, law, administrative or judicial decision,
or public policy, and if such court should declare such portion, provision or
provisions of this Guaranty to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent of all parties hereto that such
portion, provision or provisions shall be given force to the fullest possible
extent that they are legal, valid and enforceable, that the remainder of this
Guaranty shall be construed as if such illegal, invalid, unlawful, void or
unenforceable portion, provision or provisions were not contained therein, and
that the rights, obligations and interest of the Administrative Agent and the
Lender or the holder of a Note under the remainder of this Guaranty shall
continue in full force and effect.

9.         Any indebtedness
of Borrower to Subsidiary Guarantors now or hereafter existing is hereby
subordinated to the Facility Indebtedness.  Subsidiary Guarantors will not
seek, accept, or retain for Subsidiary Guarantors’ own account, any payment
from Borrower on account of such subordinated debt at any time when an Event of
Default or Potential Default exists under the Credit Agreement or the Loan
Documents, and any such payments to Subsidiary Guarantors made while any Event
of Default or Potential Default then exists under the Credit Agreement or the
Loan Documents on account of such subordinated debt shall be collected and
received by Subsidiary Guarantors in trust for the Lenders and shall be paid
over to the Administrative Agent on behalf of the Lenders on account of the
Facility Indebtedness without impairing or releasing the obligations of
Subsidiary Guarantors hereunder.  Subsidiary Guarantors also agree not to incur
any “Indebtedness” (as defined in the Agreement) not permitted to be incurred
by the owner of a “Qualifying Unencumbered Project” (as defined in the
Agreement).

10.       Subsidiary
Guarantors hereby subordinate to the Facility Indebtedness any and all claims
and rights, including, without limitation, subrogation rights, contribution
rights, reimbursement rights and set-off rights, which Subsidiary Guarantors
may have against Borrower arising from a payment made by Subsidiary Guarantors
under this Guaranty and agree that, until the entire Facility Indebtedness is
paid in full, not to assert or take advantage of any subrogation rights of
Subsidiary Guarantors or the Lenders or any right of Subsidiary Guarantors or
the Lenders to proceed against (i) Borrower for reimbursement, or
(ii) any other guarantor or any collateral security or guaranty or right
of offset held by the Lenders for the payment of the Facility Indebtedness and
performance of the Obligations, nor shall Subsidiary Guarantors seek or be
entitled to seek any contribution or reimbursement from Borrower or any other
guarantor in respect of payments made by Subsidiary Guarantors hereunder.  It
is expressly understood that the agreements of Subsidiary Guarantors set forth
above constitute additional and cumulative benefits given to the Lenders for
their security and as an inducement for their extension of credit to Borrower.

11.       Any amounts
received by a Lender from any source on account of any indebtedness may be
applied by such Lender toward the payment of such indebtedness, and in such
order of application, as a Lender may from time to time elect.

                                                                           D-5

 

 

 

 

 

12.       Subsidiary
Guarantors hereby submit to personal jurisdiction in the State of Ohio for the
enforcement of this Guaranty and waive any and all personal rights to object to
such jurisdiction for the purposes of litigation to enforce this Guaranty. 
Subsidiary Guarantors hereby consent to the jurisdiction of either the Ohio
state courts or the United States District Courts in the state of Ohio, in any
action, suit, or proceeding which the Administrative Agent or a Lender may at
any time wish to file in connection with this Guaranty or any related matter. 
Subsidiary Guarantors hereby agree that an action, suit, or proceeding to
enforce this Guaranty may be brought in any state or federal court in the State
of Ohio and hereby waives any objection which Subsidiary Guarantors may have to
the laying of the venue of any such action, suit, or proceeding in any such
court; provided, however, that the provisions of this Paragraph shall not be
deemed to preclude the Administrative Agent or a Lender from filing any such
action, suit, or proceeding in any other appropriate forum.

13.       All notices and
other communications provided to any party hereto under this Agreement or any
other Loan Document shall be in writing or by telex or by facsimile and
addressed or delivered to such party at its address set forth below or at such
other address as may be designated by such party in a notice to the other
parties.  Any notice, if mailed and properly addressed with postage prepaid,
shall be deemed given when received; any notice, if transmitted by facsimile,
shall be deemed given when transmitted.  Notice may be given as follows:

To Subsidiary Guarantors:

c/o
Associated Estates Realty Corporation

1
AEC Parkway

Richmond
Heights, OH  44143

Attention: 
Lou Fatica, Vice President & CFO

Telephone: 
(216) 797-8779

Facsimile: 
(216) 261-3902

 

With a copy to:

Associated
Estates Realty Corporation

1
AEC Parkway

Richmond
Heights, OH  44143

Attention: 
Bradley A. Van Auken, Vice President and General Counsel

Telephone: 
(216) 797-8785

Facsimile: 
(216) 797-8719

 

To PNC Bank,
National Association as Administrative Agent and as a Lender:

PNC Bank, National Association

PNC
Real Estate

1900
East Ninth Street - 22nd Floor

Mail
Stop:  B7-YB13-22-1

Cleveland,
OH  44114

Phone:  216-222-6032

Facsimile:  216-222-6070                    

Attention:
John E. Wilgus, II, Senior Vice
President

 

With a copy to:  

PNC Bank, National Association

Agency Services

500 First Avenue, 4th Floor

Pittsburgh, PA  15219

Attention:  Sharon Turner

Phone:  (412) 762-4532

Facsimile:  (412) 705-2006

 

                                                                           D-6

 

 

 

 

 

With a copy to:

SNR
Denton US LLP

233
South Wacker Drive, Suite 7800

Chicago,
IL  60606

Attention: 
Patrick G. Moran, Esq.

Telephone: 
(312) 876-8132

Facsimile: 
(312) 876-7934

 

If to any other Lender, to its address set forth in the Credit
Agreement.

14.       This Guaranty
shall be binding upon the heirs, executors, legal and personal representatives,
successors and assigns of Subsidiary Guarantors and shall inure to the benefit
of the Administrative Agent and the Lenders’ successors and assigns.  

15.       This Guaranty
shall be construed and enforced under the internal laws of the State of Ohio.

16.       SUBSIDIARY
GUARANTORS, THE ADMINISTRATIVE AGENT AND THE LENDERS, BY THEIR ACCEPTANCE
HEREOF, EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS GUARANTY OR ANY OTHER LOAN
DOCUMENT OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS
THE SUBJECT OF THIS GUARANTY AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

17.       From time to
time, additional parties may execute a joinder substantially in the form of
Exhibit A hereto, and thereby become a party to this Guaranty.  From and after
delivery of such joinder, the Subsidiary delivering such joinder shall be a
Subsidiary Guarantor, and be bound by all of the terms and provisions of this
Guaranty.

[Signature page intentionally left blank.]

                                                                           D-7

 

 

 

 

 

IN WITNESS WHEREOF,
Subsidiary Guarantors have delivered this Guaranty in the State of Ohio as of
the date first written above.

                                                                           D-8

 

 

 

 

 

 

	
   

  	
  SANDLER AT ALTA LAGO, LLC,

  a Virginia limited liability company

  By:       Associated Estates Realty Corporation, 

            its sole member

              By:       ________________________

              Name:  Bradley A. Van Auken

             Title:    Vice President

  

  

  
	
   

  	
  BUCKHEAD AERC,
  LLC,

  a Delaware limited liability company

  By:       Associated Estates Realty Corporation, 

            its sole member

              By:       ________________________

              Name:  Bradley A. Van Auken

              Title:   Vice President

  

  

  
	
   

  	
  AERC WESTWIND,
  LLC,

  a Delaware limited liability company

  By:       Associated Estates Realty Corporation, 

            its sole member

              By:       ________________________

              Name:  Bradley A. Van Auken

              Title:   Vice President

  

  

  
	
   

  	
  AERC SAN
  RAPHAEL, LLC,

  a Delaware limited liability company

  By:       Associated Estates Realty Corporation, 

            its sole member

              By:       ________________________

              Name:  Bradley A. Van Auken

             Title:    Vice President

   

  
	
   

  	
  ASPEN LAKES -
  AERC, INC.,

  a Michigan corporation

  By:       ________________________  

  Name:  Bradley A. Van Auken

  Title:    Vice President

   

   

  
	
   

  	
  AERC BEDFORD COMMONS, INC.,

  a Delaware corporation

  By:       ________________________  

  Name:  Bradley A. Van Auken

  Title:    Vice President

  

  

  
	
   

  	
  AERC LAKE
  FOREST, INC.,

  a Delaware corporation

  By:      ________________________  

  Name: Bradley A. Van Auken

  Title:    Vice President

  

  

  
	
   

  	
  AERC MORGAN
  PLACE, INC.,

  a Delaware corporation

  By:      ________________________  

  Name: Bradley A. Van Auken

  Title:    Vice President

  

  

  
	
   

  	
  AERC ARROWHEAD
  STATION, INC.,

  a Delaware corporation

  By:      ________________________  

  Name:  Bradley A. Van Auken

  Title:    Vice President

  

  

  
	
   

  	
  AERC BENNELL,
  INC.,

  a Delaware corporation

  By:     ________________________  

  Name: Bradley A. Van Auken

  Title:   Vice President

  

  

  
	
   

  	
   

  
	
   

  	
  AERC WILLIAMSBURG, INC.,

  a Delaware corporation

  By:      ________________________  

  Name: Bradley A. Van Auken

  Title:   Vice President

  

  

  
	
   

  	
  AERC WESTCHESTER, INC.,

  a Delaware corporation

  By:       ________________________  

  Name:  Bradley A. Van Auken

  Title:    Vice President

   

   

  
	
   

  	
  AERC STERLING PARK, INC.,

  a Delaware corporation

  By:       ________________________  

  Name:  Bradley A. Van Auken

  Title:    Vice President

  

  

  
	
   

  	
  AERC KENSINGTON GROVE, INC.,

  a Delaware corporation

  By:       ________________________  

  Name:  Bradley A. Van Auken

  Title:    Vice President

  

  

  
	
   

  	
  AERC WESTERN RESERVE, INC.,

  a Delaware corporation

  By:     ________________________  

  Name: Bradley A. Van Auken

  Title:   Vice President

  

  

  
	
   

  	
  AERC SPRING
  BROOK, LLC,

  a Delaware limited liability company

  By:      AERC
  Brook, Inc., its Manager

              By:       ________________________

              Name:  Bradley A. Van Auken

              Title:    Vice President

   

  
	
   

  	
  AERC LANDINGS
  AT PRESERVE, LLC,

  a Delaware limited liability company

  By:      AERC
  Landings, Inc., Manager

              By:       ________________________

              Name:  Bradley A. Van Auken

              Title:   Vice President

  

  

  
	
   

  	
  AERC COUNTRY
  PLACE, LLC,

  a Delaware limited liability company

  By:      AERC
  Country I, Inc., its Manager

              By:       ________________________

              Name:  Bradley A. Van Auken

              Title:   Vice President

   

  
	
   

  	
  AERC GEORGETOWN
  PARK, LLC,

  a Delaware limited liability company

  By:      AERC
  Georgetown, Inc., its Manager

              By:       ________________________

              Name:  Bradley A. Van Auken

              Title:   Vice President

  

  

  
	
   

  	
  AERC OAKS
  HAMPTON, LLC,

  a Delaware limited liability company

  By:      AERC Oaks,
  Inc., its Manager

              By:       ________________________

              Name:  Bradley A. Van Auken

            Title:    Vice President

  

  

  
	
   

  	
  AERC DPF PHASE I, LLC,

  a Delaware limited liability company

   

  By:       AERC
  DPF Georgia Ventures, LLC,

            a Delaware limited liability company

              

              By:       AERC
  of Georgia, Inc., 

                        its Sole Member

   

              By:       ________________________

              Name:  Bradley A. Van  Auken

              Title:    Vice President

   

  
	
   

  	
   

  
	
   

  	
  AERC CENTRAL PARK PLACE, LLC,

  a Delaware limited liability company
  

  

  By:  AERC Central Park, Inc. its Manager

  

  

  By:     ________________________

  Name: Bradley A. Van  Auken

  Title:   Vice
  President

  
	
   

  	
  

  AERC CLINTON  PLACE, LLC,

  a Delaware limited liability company 

   

  By:  AERC Clinton, Inc., its Manager

   

  By:       ________________________

  Name:  Bradley
  A. Van  Auken

  Title:    Vice
  President

   

  
	
   

  	
  AERC SUMMER RIDGE, LLC,

  a Delaware limited liability company 

   

  By:  AERC Summer, Inc., its Manager

   

  By:       ________________________

  Name:  Bradley
  A. Van  Auken

  Title:    Vice
  President

   

   

  AERC
  DPF PHASE II, LLC,

  a
  Delaware limited liability company

   

  By:       AERC
  DPF Georgia Ventures, LLC,

            a Delaware limited liability company

   

              By:       AERC
  of Georgia, Inc., 

                          its
  Sole Member

    

              By: 
                                                     

              Name: 
  Bradley A. Van Auken

              Title:   
  Vice President

   

  

 

                                                                          D-10

 

 

 

 

 

 

	
   

  	
  AERC CHRISTOPHER WREN, INC.,

  a Delaware corporation

   

   

  By:                                                                   

  Name:  Bradley A. Van Auken

  Title:    Vice President

   

   

  AERC HEATHERMOOR, INC.,

  a Delaware corporation

   

   

  By:                                                                   

  Name:  Bradley A. Van Auken

  Title:    Vice President

   

   

  AERC PERIMETER LAKES, INC., 

  a Delaware corporation

   

   

  By:                                                                   

  Name:  Bradley A. Van Auken

  Title:    Vice President

   

  

AERC WELLINGTON, LLC,

a Delaware limited liability
company

 

By: 
Associated Estates Realty Corporation

      
Sole Member

 

By:_______________________________

     
Bradley A. Van Auken, Vice President

 

 

AERC VIENNA METRO, LLC,

a Delaware limited liability
company

 

By: 
Associated Estates Realty Corporation

      
Sole Member

 

By:_______________________________

     
Bradley A. Van Auken, Vice President

 

                                                                          D-11

 

 

 

 

 

EXHIBIT A TO
SUBSIDIARY GUARANTY

FORM
OF JOINDER TO GUARANTY

THIS JOINDER is
executed as of _________, 201_ by the undersigned, each of which hereby agrees
as follows:

1.         All
capitalized terms used herein and not defined in this Joinder shall have the
meanings provided in that certain Subsidiary Guaranty (the “Guaranty”) dated as
of January 12, 2012 executed for the benefit of PNC Bank, National Association,
as agent for itself and certain other lenders, with respect to a loan from the
Lenders to Associated Estates Realty Corporation (“Borrower”).

2.         As
required by the Credit Agreement described in the Guaranty, each of the
undersigned is executing this Joinder to become a party to the Guaranty.

3.         Each
and every term, condition, representation, warranty, and other provision of the
Guaranty, by this reference, is incorporated herein as if set forth herein in
full and the undersigned agrees to fully and timely perform each and every
obligation of a Subsidiary Guarantor under such Guaranty.

[SUBSIDIARY GUARANTOR]

FEIN NO.
______________________

 

 

By:                                                                               

Name:                                                                          

Its:                                                                               

 

 

                                                                          D-12

 

 

 

 

 

EXHIBIT E

FORM OF OPINION OF BORROWER’S COUNSEL

 

  

January 12, 2012

PNC Bank, National Association,
as Agent

1000 East Ninth Street

Mail Stop: B7-YB12-22-1

Cleveland, Ohio 44114

 

Ladies and Gentlemen:

We have acted as special counsel for Associated
Estates Realty Corporation, an Ohio corporation (the “Borrower”), and
the Subsidiaries of the Borrower listed on Exhibit A to this letter
(each, individually, a “Subsidiary Guarantor” and, collectively, the “Subsidiary
Guarantors” and, together with the Borrower, the “Loan Parties”) in
connection with the Second Amended and Restated Credit Agreement dated as of
January 12, 2012 (the “Credit Agreement”) by and among the Borrower, PNC
Bank, National Association and the several Lenders from time to time parties
thereto, and PNC Bank, National Association, as Administrative Agent, et al. 
This letter is furnished to you pursuant to Section 5.1(f) of the Credit
Agreement.  Capitalized terms not defined in this letter have the meanings
given to them in the Credit Agreement.

We have examined and relied on originals or
copies, certified or otherwise identified to our satisfaction as being true
copies, of all such records of the Loan Parties, all such agreements,
certificates of officers of the Loan Parties and others, and such other
documents, certificates and corporate or other records as we have deemed
necessary as a basis for the opinions expressed in this letter, including,
without limitation, the following:

(a)         the Credit Agreement, dated as of January 12, 2012; 

(b)        
the Subsidiary Guaranty, dated as of January 12, 2012; and

(c)        those certain amended and restated and new notes (each a Note and,
collectively, the “Notes”), dated as of January 12, 2012, in the
aggregate amount of $350,000,000.00.

The documents in (a)
through (c) are hereinafter defined as the “Credit Documents.”

                                                                            E-1

 

 

 

 

 

 

In our examination, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals and the conformity
to authentic original documents of all documents submitted to us as certified,
electronic, photostatic or other copies, facsimiles or images.  As to facts
material to the opinions expressed in this letter, we have relied on statements
and certificates of officers of the Loan Parties and of state authorities and
on the representations, warranties and statements contained in the Credit
Documents.  We have assumed that the Credit Documents, together with the other
contracts referred to in the Credit Documents, reflect the complete
understanding and agreement of the parties. 

With your understanding and consent, (i) we
express no opinion, directly or indirectly, as to whether the Original
Agreement, any other documents, agreements, notes or instruments that are
purportedly amended, restated, otherwise modified, ratified or reaffirmed
pursuant to any of the Credit Documents, or any other document, agreement, note
or instrument entered into prior to the date hereof, constitute the valid and
binding obligation of each person that is purportedly bound thereby or a party
thereto, enforceable against each such person in accordance with its terms and
(ii) we opine only as to the Credit Documents as they exist on the date hereof.

We have assumed: that each entity that is a
party to the Credit Documents (other than the Loan Parties) has been duly
organized or formed and is validly existing and in good standing as a corporate
or similar organization under the laws of its jurisdiction of organization, and
is qualified to do business and is in good standing as a foreign corporation or
other organization in each jurisdiction where by law it is required to be so
qualified; that the Credit Documents have been duly authorized, executed and
delivered by each party (other than the Loan Parties) and constitute such
party’s valid and binding obligation, enforceable against such party in
accordance with their terms; that each party (other than the Loan Parties) has
the requisite corporate or other organizational power and authority to perform
such party’s obligations under the Credit Documents; and that each party to the
Credit Documents has performed and will perform such party’s obligations under
the Credit Documents.

We have investigated such questions of law for
the purpose of rendering the opinions in this letter as we have deemed
necessary.  As to the opinions set forth in paragraphs 8, 9, 12, 13 and 20
below, our opinions are based solely on a review of Ohio statutory law and are
premised on our assuming, with your understanding and consent, that, for the
purpose of giving those opinions, (i)(A) Sandler at Alta Lago, LLC, a Virginia
limited liability company (“Sandler LLC”), is a limited liability
company, duly formed and in full force and effect under the laws of the State
of Ohio and (B) the Articles of Organization and the Limited Liability Company
Agreement of Sandler LLC are acceptable to the Secretary of State of Ohio as
valid and compliant, and comply with all applicable Ohio law and regulations
regarding articles of organization and operating agreements, and (ii)(A) Aspen
Lakes – AERC, Inc., a Michigan corporation (“Aspen Lakes Inc.”), is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the State of Ohio and (B) the Articles of Incorporation and By-laws of
Aspen Lakes Inc. are acceptable to the Secretary of State of Ohio as valid and
compliant, and comply with all applicable Ohio law and regulations regarding
articles of incorporation and regulations (collectively, the “Ohio assumptions”). 
We express no opinion in this letter concerning any law other than (i) as to
the opinions set forth in paragraphs 2, 6, 10 and 19 below, the Delaware
General Corporation Law, (ii) as to the opinions set forth in paragraphs 3, 7,
11 and 19 below, the Delaware Limited Liability Company Act, and (iii) the law
of the State of Ohio.

On the basis of and in reliance on the
foregoing, and subject to the limitations, qualifications and exceptions set
forth below, we are of the opinion that:

                                                                            E-2

 

 

 

 

 

 

1.        The Borrower is incorporated, validly existing and in good standing
under the laws of the State of Ohio.

2.        Each Delaware Corporation Subsidiary Guarantor (as identified in Exhibit
A) is incorporated, validly existing and in good standing under the laws of
the State of Delaware.

3.         Each Delaware LLC Subsidiary Guarantor (as identified in Exhibit A)
is a limited liability company, formed and in full force and effect under the
laws of the State of Delaware.

4.         Based solely on a certificate from the Secretary of the Commonwealth of
Virginia, Sandler LLC is a limited liability company, formed and in full force
and effect under the laws of the Commonwealth of Virginia.

5.         Based solely on a certificate from the Secretary of State of Michigan,
Aspen Lakes Inc. is incorporated, validly existing and in good standing under
the laws of the State of Michigan.

6.          The Borrower, and each Delaware Corporation Subsidiary Guarantor, has
the corporate power and authority to execute, deliver and perform its
obligations under the Credit Documents to which it is a party.

7.          Each Delaware LLC Subsidiary Guarantor has the limited liability company
power and authority to execute, deliver and perform its obligations under the
Credit Documents to which it is a party.

8.           Based on the Ohio assumptions, Sandler LLC has the limited liability
company power and authority to execute, deliver and perform its obligations
under the Credit Documents to which it is a party.

9.           Based on the Ohio assumptions, Aspen Lake Inc. has the corporate power
and authority to execute, deliver and perform its obligations under the Credit
Documents to which it is a party.

10.         The execution and delivery of, and the performance of its obligations
under, the Credit Documents to which it is a party by the Borrower and by each
Delaware Corporation Subsidiary Guarantor have been duly authorized by all
requisite corporate action.

11.          The execution and delivery of, and the performance of its obligations
under, the Credit Documents by each Delaware LLC Subsidiary Guarantor have been
duly authorized by all requisite limited liability company action.

12.           Based on the Ohio assumptions, the execution and delivery of, and the
performance of its obligations under, the Credit Documents to which it is a
party by Sandler LLC have been duly authorized by all requisite limited liability
company action.

13.           Based on the Ohio assumptions, the execution and delivery of, and the
performance of its obligations under, the Credit Documents to which it is a
party by Aspen Lake Inc. have been duly authorized by all requisite corporate
action.

                                                                            E-3

 

 

 

 

 

 

14.        No consent, approval or authorization of, or any filing with, any Ohio
governmental authority is required to be obtained or made by the Borrower in
connection with the execution and delivery of the Credit Documents to which it
is a party by the Borrower.

15.        No consent, approval or authorization of, or any filing with, any Ohio
governmental authority is required to be obtained or made by any of the
Subsidiary Guarantors in connection with the execution and delivery of the
Credit Documents to which each of them is a party by the Subsidiary Guarantors.

16.        The execution and delivery of the Credit Documents to which the Borrower
is a party, and the consummation of the transactions contemplated by such
documents, by the Borrower (a) are not in conflict with the Second Amended and
Restated Articles of Incorporation, as amended, or the Amended and Restated
Code of Regulations of the Borrower, (b) do not violate any order binding on,
or judgment against, the Borrower and which is known to us, and (c) do not
constitute a default under, and are not in conflict with, any indenture or
other material agreement to which the Borrower is a party and which is known to
us or, to our knowledge, by which its properties may be bound. 

17.        The execution and delivery of the Credit Documents to which each
Subsidiary Guarantor is a party, and the consummation of the transactions
contemplated by such documents, by each Subsidiary Guarantor (a) are not in
conflict with the Certificates of Incorporation or By-laws, or Certificate of
Formation, Articles of Organization, Operating Agreements or Limited Liability
Company Agreements, as the case may be, of the Subsidiary Guarantors, (b) do
not violate any order binding on, or judgment against, any Subsidiary Guarantor
and which is known to us, and (c) do not constitute a default under, and are
not in conflict with, any indenture or other material agreement to which any
Subsidiary Guarantor is a party and which is known to us or, to our knowledge,
by which any Subsidiary Guarantor’s properties may be bound.

18.        The Credit Documents to which the Borrower is a party constitute the
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their terms.

19.        The Credit Documents to which each Subsidiary Guarantor (other than Sandler LLC and Aspen Lake Inc.) is a party constitute the valid and binding
obligations of each such Subsidiary Guarantor, enforceable against each such
Subsidiary Guarantor in accordance with their terms.

20.        Based on the Ohio assumptions, the Credit Documents to which Sandler LLC
and Aspen Lake Inc. are a party, as the case may be, constitute the valid and
binding obligation of Sandler LLC and Aspen Lake Inc., enforceable against
Sandler LLC and Aspen Lake Inc., as the case may be, in accordance with their
terms.

21.        The interest rate payable under the Notes does not violate the civil
usury law of the State of Ohio.

                                                                            E-4

 

 

 

 

 

 

22.        So long as the interest payable, related charges and/or any charges
which could be deemed related (including, without limitation, prepayment
premiums or penalties, yield maintenance payments, late charges, service fees
and the like), do not exceed the applicable rate per annum permitted by the
Ohio Revised Code (which rate as of the date of this letter is twenty-five
percent (25%) per annum) or the equivalent rate for a longer or shorter period,
then the interest rate payable under the Notes does not violate the criminal
usury laws of the State of Ohio as provided in Ohio Revised Code Section
2905.21(H) (the “Criminal Usury Statute”).  The law under the Criminal
Usury Statute is unclear with respect to which amounts payable under a note or
credit or security document are to be deemed interest payable or related
charges for purposes of testing against the maximum permitted rate.

23.        The Ohio Supreme Court in Schulke Radio Productions, Ltd. v.
Midwestern Broadcasting Company, 6 Ohio St. 3d 436, 438, 453, N.E. 2d
683, 686 (1983), held that the law of the state specifically designated by the
parties to an agreement to govern their contractual rights and duties as the
forum state should be applied unless either (a) the chosen state has
no substantial relationship to the parties or the transaction and there is no
other reasonable basis for the parties’ choice, or (b) application of
the law of the chosen state would be contrary to a fundamental policy of a
state which has a greater material interest than the chosen state in the
determination of the particular issue and such state would be the state of the
applicable law in the absence of a choice by the parties.  Assuming that the
foregoing test is met, the choice of law provisions contained in the Credit
Documents should, according to applicable case law in the State of Ohio, be
given substantial effect by the courts of the State of Ohio.

24.         Based on a review of our docket, we are not representing the Borrower or
any of the Subsidiary Guarantors in any pending litigation in which any of the
Borrower or the Subsidiary Guarantors is a named defendant which directly
challenges the validity or enforceability of the Credit Documents or seeks to
enjoin the execution or delivery of, or the consummation of the transactions
contemplated by, the Credit Documents.

The above opinions
are subject to the following additional limitations, qualifications and
exceptions:

A.      The effect and application of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other laws now or hereafter in effect which relate to or limit creditors’
rights and remedies generally;

B.      The effect and application of
general principles of equity, whether considered in a proceeding in equity or
at law;

C.      Limitations imposed by or
resulting from the exercise by any court of its discretion; and

D.      Limitations imposed by reason
of generally applicable public policy principles or considerations.

Whenever we have asserted above that a matter
is “to our knowledge” or “known to us,” our knowledge is limited to actual
knowledge of those attorneys in our office who have directly participated in
this engagement.

                                                                            E-5

 

 

 

 

 

 

We do not assume any
responsibility for the accuracy, completeness or fairness of any information,
including, but not limited to, financial information, furnished to you by the
Borrower or any of the Subsidiary Guarantors concerning the business or affairs
of the Borrower or any of the Subsidiary Guarantors or any other information
furnished to you of a factual nature.

The opinions
expressed in paragraphs 14 and 15 above as to the absence of any requirement to
obtain any consent, approval or authorization of, or filing with, any Ohio
governmental authority is based upon a review of, and is limited to those laws,
rules and regulations of the State of Ohio which, in our experience, without
our having made any special investigation with respect thereto, are generally
applicable to transactions of the type contemplated by the Credit Documents.

We express no opinion
regarding the validity, binding effect or enforceability of any (a) warrant of
attorney authorizing confession of judgment against any
person, (b) arbitration or other provision whereby disputes will be
resolved other than by a court of competent jurisdiction, or any waiver of any
right to have disputes resolved by such a court, (c) waiver of any right to
trial by jury, (d) provision whereby any person waives of any right
to personal service of process or agrees that process may be served on such
person other than in person, (e) provision whereby any person submits
to, or consents to the jurisdiction of, any court, or waives any defense based
upon, or right to object to, the laying of venue in any court, whether based on
the doctrine of forum non conveniens or
otherwise, (f) provision authorizing appointment of a receiver as a
matter of right, (g) appointment of any person as an agent or an attorney‐in‐fact,
(h) rights to contribution, indemnification, or exculpation, (i) rights to
receive attorneys, paralegal, or law‐clerk fees, or (j) provision
restricting competition, solicitation or acceptance of customers, of business
relationships or of employees, or the use or disclosure of information.

We express no opinion
regarding the validity, binding effect, enforceability, or availability of (a)
self-help remedies which may result in or cause a breach of the
peace, (b) provisions which purport to establish evidentiary
standards, (c) provisions related to (i) any person’s
actions or inactions as not resulting in a waiver of remedies (or delay in
enforcing or failure to enforce remedies), (ii) any person’s release
of legal or equitable rights, waivers of defenses, counterclaims, rights of
recoupment, rights of setoff, or waivers of diligent performance or other care
on the part of another, or (iii) liquidated damages, or
(d) provisions which purport to secure any indebtedness or obligations
other than those within the contemplation of the parties as of the dates of the
execution of the Credit Documents and satisfying any applicable “relatedness”
test.

We express no opinion
regarding the exercise of the rights and remedies under the Credit Documents
where (a) enforcement of such rights and remedies by a party is not
reasonably necessary for the protection of such party, (b) the fees
or charges imposed in a default bear no reasonable relation to the damages
suffered by the injured party, to the extent such amount may be deemed a
“penalty” or “forfeiture”, (c) the enforcement of the covenants,
rights, and remedies would violate the obligation of a party to act in good
faith, or (d) any default or defaults of any provision of any of the
Credit Documents that are not material.

We express no opinion
regarding any agreement or other writing or record that is purportedly
incorporated by reference into a Credit Document, unless such agreement or
other writing or record is itself a Credit Document.

                                                                            E-6

 

 

 

 

 

 

We express no opinion
regarding the authority of any corporation or other entity to guarantee, or
subordinate any claims it may have in right of payment to, the payment or
performance of any obligation of another except to the extent that such
corporation or other entity shall have benefited from the incurrence of such
obligation, or as to whether any such corporation or other entity will be found
to have so benefited, or as to the enforceability of any guaranty or
subordination provided for in the absence of such authority.

With regard to the
opinions expressed in paragraphs 19 and 20 above, we assume that a court would
not find that any Subsidiary Guarantors, contrary to the determination made by
the applicable board of directors (or comparable governing body), received less
than a reasonably equivalent value in exchange for their guaranty of the
Borrower’s obligations outstanding on the date thereof or subsequently incurred
or for any payment made pursuant to such guaranty under the Subsidiary
Guaranty.  

Moreover, we express
no opinion regarding (a) any (I) federal securities laws, rules, or
regulations (including, without limitation, any laws administered by, and any
rules or regulations administered or promulgated by, the United States
Securities and Exchange Commission) or (II) state securities laws,
rules, or regulations (including, without limitation, any so‐called “Blue
Sky” laws); (b) antitrust and unfair competition laws or regulations, banking
laws or regulations, or insurance laws or regulations; (c) compliance with
fiduciary duty requirements; and (d) the enforceability of any provisions of a
Credit Document which purport to (i) entitle any person to contribution,
indemnification, or reimbursement from a Loan Party for the gross negligence or
willful misconduct of a person other than such Loan Party, (ii) entitle any Lender
to contribution, indemnification, or reimbursement from a Loan Party for the
ordinary negligence of any Lender unless said Credit Document expressly
provides that the Lenders are entitled to contribution, indemnification, or
reimbursement from said Loan Party for the ordinary negligence of any Lender,
(iii) exculpate or limit the liability of any person other than a Loan
Party, for the gross negligence or willful misconduct of said person other than
a Loan Party.

                                                                            E-7

 

 

 

 

 

 

The opinions rendered
in this letter are rendered only to the Administrative Agent and the Lenders
and, at your request, we hereby consent to reliance hereon by any future
successors to or assignees of their interests in their respective Notes and
under the other Credit Documents, in accordance with the Credit Agreement, on
the condition and understanding that (i) we have no responsibility or
obligation to consider this letter’s applicability or correctness to any person
other than its addressee(s) and (ii) any such reliance must be actual and reasonable
(the Lenders and such future successors or assignees, if any, collectively, the
“Reliance Parties” and each a “Reliance Party”), and only for
purposes of the transactions contemplated by the Credit Documents.  The
opinions so rendered may not be relied upon by the Reliance Parties or any of
them for any other purpose, or relied upon by any other person, firm, or entity
for any purpose.  This letter may not be paraphrased or summarized, nor may it
be quoted, duplicated or reproduced in part.

Very truly
yours,

BENESCH, FRIEDLANDER,

COPLAN & ARONOFF LLP

 

                                                                            E-8

 

 

 

 

 

 

Exhibit A

Subsidiary Guarantors

	
  Delaware Corporation
  Subsidiary Guarantors:

  
	
  AERC Arrowhead Station, Inc.

  	
   

  
	
  AERC Bedford Commons, Inc.

  	
   

  
	
  AERC Bennell, Inc.

  	
   

  
	
  AERC Christopher Wren, Inc.

  	
   

  
	
  AERC Heathermoor, Inc.

  	
   

  
	
  AERC Kensington Grove, Inc.

  	
   

  
	
  AERC Lake Forest, Inc.

  	
   

  
	
  AERC Morgan Place, Inc.

  	
   

  
	
  AERC Perimeter Lakes, Inc.

  	
   

  
	
  AERC Sterling Park, Inc.

  	
   

  
	
  AERC Westchester, Inc.

  	
   

  
	
  AERC Western Reserve, Inc.

  	
   

  
	
  AERC Williamsburg, Inc.

  	
   

  
	
  Delaware LLC Subsidiary Guarantors:

  
	
  AERC Central Park Place, LLC

  	
   

  
	
  AERC Clinton Place, LLC

  	
   

  
	
  AERC Country Place, LLC

  	
   

  
	
  AERC DPF Phase I, LLC

  	
   

  
	
  AERC DPF Phase II, LLC

  	
   

  
	
  AERC Georgetown Park, LLC

  	
   

  
	
  AERC Landings at Preserve, LLC

  	
   

  
	
  AERC Oaks Hampton, LLC

  	
   

  
	
  AERC San Raphael, LLC

  	
   

  
	
  AERC Spring Brook, LLC

  	
   

  
	
  AERC Summer Ridge, LLC

  	
   

  
	
  AERC Vienna Metro, LLC

  	
   

  
	
  AERC Wellington, LLC

  	
   

  
	
  AERC Westwind, LLC

  	
   

  
	
  Buckhead AERC, LLC

  	
   

  
	
  Other Subsidiary Guarantors:

  
	
  Sandler at Alta Lago, LLC

  	
   

  
	
  Aspen Lakes – AERC, Inc.

  	
   

  

 

	
  
    

  

  

 

 

                                                                            E-9

 

 

 

 

 

 

EXHIBIT F

 

LOAN
REQUEST

 

___________, 201_

 

 

PNC Real Estate

1900 East Ninth Street - 22nd
Floor

Mail Stop:  B7-YB13-22-1

Cleveland, OH  44114

Phone:  216-222-6032

Facsimile:  216-222-6070                    

Attention:   John E. Wilgus,
II

                  Senior Vice
President

                  Real Estate
Banking

 

Loan Request

 

Associated Estates Realty
Corporation (“Borrower”) hereby requests an Advance pursuant to Section 2.10
of the Second Amended and Restated Credit Agreement, dated as of January 12, 2012 (as amended or modified from time
to time, the “Credit Agreement”), among Borrower, the Lenders referenced
therein, and you, as an administrative agent for the Lenders.

 

An Advance is requested to be
made in the amount of $__________, to be made on _____________.  Such Advance
shall be a [LIBOR] [Base] Rate Advance.  [The applicable Interest Period shall
be _____________.]  

 

The proceeds of the requested
loan shall be directed to the following account:

 

Wiring
Instructions:

(Bank
Name)

(ABA
No.)

(Beneficiary)

(Account
No. to Credit)

(Notification
Requirement)

 

                                                                            F-1

 

 

 

 

 

In support of this request,
Borrower hereby represents and warrants to the Administrative Agent and the
Lenders that acceptance of the proceeds of such Advance by the Borrower shall
be deemed to further represent and warrant that all requirements of Section
5.2 of the Credit Agreement in connection with such Advance have been
satisfied at the time such proceeds are disbursed.

 

Date:_________________________________

 

Associated Estates Realty Corporation, 

an Ohio corporation,

 

 

By:                                                                   

Name:                                                              

Its:                                                                   

                                                                            F-2

 

 

 

 

 

EXHIBIT G

 

AMENDMENT TO CREDIT AGREEMENT

This Amendment to the
Credit Agreement described below (the “Amendment”) is made as of
________________, 201_, by and among Associated Estates Realty Corporation, PNC
Bank National Association, individually and as “Administrative Agent”, and one
or more New Lenders or Increasing Lenders shown on the signature pages hereof.

R E
C I T A L S

A.        Borrower, Administrative Agent and certain
other Lenders have entered into an Second Amended and Restated Revolving Credit
Agreement dated as of January 12, 2012 (as
amended, the “Credit Agreement”).  All capitalized terms used herein and not
otherwise defined shall have the meanings given to them in the Credit
Agreement.

B.         Pursuant to the terms of the Credit
Agreement, the Lenders initially agreed to provide Borrower with a revolving
credit facility in an aggregate principal amount of up to $350,000,000.  The
Borrower, the Administrative Agent and the Lenders now desire to amend the
Credit Agreement in order to, among other things (i) increase the
Aggregate Commitment to $____,000,000; (ii) increase the Commitments of the
Increasing Lenders as shown below and (iii) admit [name of new
banks] as “New Lenders” under the Credit Agreement. 

NOW, THEREFORE, in
consideration of the foregoing Recitals and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

AGREEMENTS

1.         The foregoing
Recitals to this Amendment hereby are incorporated into and made part of this
Amendment.

2.         From and after
_______________, _____ (the “Effective Date”) (i) [name of new
banks] shall be considered as “New Lenders” under the Credit Agreement
and the Loan Documents, and (ii) [name of existing lenders]
are “Increasing Lenders” and shall each be deemed to have increased its
Commitment to the amount shown next to their respective signatures on the
signature pages of this Amendment, each having a Commitment in the amount shown
next to their respective signatures on the signature pages of this Amendment. 
The Borrower shall, on or before the Effective Date, execute and deliver to
each of such New Lenders and Increasing Lenders a new or amended and restated
Note in the amount of such Commitment .

3.         From and after
the Effective Date, the Aggregate Commitment shall equal             
 Million Dollars ($_____,000,000).

4.         For purposes of
Section 14.1 of the Credit Agreement (Giving Notice), the address(es) and
facsimile number(s) for the New Lenders shall be as specified below
their respective signature(s) on the signature pages of this Amendment.

                                                                           G-1

 

 

 

 

 

5.         The Borrower
hereby represents and warrants that, as of the Effective Date, there is no
Event of Default or Potential Default, the representations and warranties
contained in Article VI of the Agreement are true and correct as of such
date, except to the extent any such representation or warranty is stated to
relate solely to an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date and the Borrower has no
offsets or claims against any of the Lenders.

6.         As expressly
modified as provided herein, the Credit Agreement shall continue in full force
and effect.

7.         This Amendment
may be executed in any number of counterparts, all of which taken together
shall constitute one agreement, and any of the parties hereto may execute this
Amendment by signing any such counterpart.

                                                                           G-2

 

 

 

 

 

            IN
WITNESS WHEREOF, the parties have
executed and delivered this Amendment as of the date first written above.

	
  ASSOCIATED ESTATES REALTY CORPORATION

   

   

  By:                                                                   

  Print Name:                                                      

  Title:                                                                

   

   

   

  	
  PNC BANK, NATIONAL ASSOCIATION, Individually and as Administrative
  Agent

   

   

  By:                                                                                           

  Print Name:                                                                              

  Title:                                                                                        

   

   

  

 

Amount
of Commitment:  $ ____________                [NAME OF NEW LENDER]

 

By:_________________________________ 

Print
Name:__________________________ 

Title:________________________________ 

 

[Address
of New Lender]

 

Attention:____________________________ 

Telephone:___________________________ 

Facsimile:____________________________ 

 

Amount
of Commitment:  $ ____________                [NAME OF INCREASING LENDER]

 

By:_________________________________ 

Print
Name:__________________________ 

Title:________________________________ 

 

                                                                           G-3

 

 

 

 

 

EXHIBIT
H

PRICING SCHEDULE

 

            Until such time
as the Borrower has obtained Qualified Ratings, the LIBOR Applicable Margin and
the Base Rate Applicable Margin shall be determined according to “Schedule A”
hereinbelow.  

 

 

 

	
  SCHEDULE A 

  
	
  Pricing prior to obtaining Qualified Ratings

  
	
   

  Level

  	
   

  Leverage Ratio

  	
   

  LIBOR Applicable Margin

  	
   

  Base Rate Applicable Margin

  
	
   

  	
   

  	
   

  	
   

  
	
  I

  	
  Less than or equal to 45%

  	
  1.65%

  	
  0.65%

  
	
  II

  	
  Greater than 45%, but less
  than or equal to 50%

  	
  1.90%

  	
  0.90%

  
	
  III

  	
  Greater than 50% but less
  than or equal to 55%

  	
  2.15%

  	
  1.15%

  
	
  IV

  	
  Greater than 55% 

  	
  2.40%

  	
  1.40%

  

 

As of the
Agreement Execution Date, based on the Leverage Ratio shown on the Compliance
Certificate delivered to the Administrative Agent by Borrower pursuant to Section
5.1(k), the LIBOR Applicable Margin is 1.65% and the Base Rate Applicable
Margin is 0.65%. The percentages set
forth in Schedule A above shall be changed from time to time in accordance with
the Leverage Ratio of the last day of the most recent preceding fiscal quarter
for which financial results have been reported, which percentage shall be
effective on the first day of the calendar month following the date on which
Administrative Agent receives a Compliance Certificate as required by Section
7.1(c) from the Borrower as of the end of such fiscal quarter, beginning
with the Compliance Certificate for the fiscal quarter ending [December 31,
2011].  If any such Compliance Certificate shall later be determined to be
incorrect and as a result a higher Applicable Margin should have been in effect
for any period, Borrower shall pay to the Administrative Agent for the benefit
of the Lenders all additional interest which would have accrued if the original
Compliance Certificate had been correct, as shown on an invoice to be prepared
by the Administrative Agent and delivered to Borrower, on the next Payment Date
following delivery of such invoice.

 

After the Borrower has received its Qualified Ratings,
the LIBOR Applicable Margin, the Base Rate Applicable Margin and the Facility
Fee Rate shall be determined according to “Schedule B” below.   

                                                                           H-1

 

 

 

 

 

 

	
  SCHEDULE B

  
	
   Pricing after obtaining Qualified Ratings

  
	
   

  

  

  Level

  	
   

  

  

  Qualified Ratings

  	
   

  LIBOR 

  Applicable 

  Margin

  	
   

  Base Rate Applicable Margin

  	
  

  

  

  Facility Fee

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
  Greater than or equal to
  (i) BBB+ (S&P/Fitch), or (ii) Baa1 (Moody’s)

  	
  1.05%

  	
  0.05%

  	
  0.20%

  
	
  II

  	
  Equal to (i) BBB (S&P/Fitch),
  or (ii) Baa2 (Moody’s)

  	
  1.25%

  	
  0.25%

  	
  0.25%

  
	
  III

  	
  Equal to (i) BBB- (S&P/Fitch),
  or (ii) Baa3 (Moody’s)

  	
  1.50%

  	
  0.50%

  	
  0.35%

  
	
  IV

  	
  Less than (i) BBB- (S&P/Fitch),
  or (ii) Baa3 (Moody’s)

  	
  1.85%

  	
  0.85%

  	
  0.45%

  

 

The change from Schedule A to Schedule B shall be effective
as of the first day of the first calendar month immediately following the month
in which the Administrative Agent receives written notice delivered by the
Borrower that it has achieved Qualified Ratings. Any subsequent change in any
of the Borrower’s Credit Ratings which would cause a different Level to be
applicable shall be effective as of the first day of the first calendar month
immediately following the month in which the Administrative Agent receives
written notice delivered by the Borrower that such change in a Credit Rating
has occurred; provided, however, if the Borrower has not delivered the notice
required but the Administrative Agent becomes aware that any of the Borrower’s
Credit Ratings have changed, then the Administrative Agent shall adjust the
Level effective as of the first day of the first calendar month following the
date the Administrative Agent becomes aware of such change in Borrower’s Credit
Rating.  During any period that the Borrower has received three (3) Credit
Ratings that are not equivalent, the applicable Level shall be determined based
upon the Level corresponding with the lower of the two (2) highest Credit
Ratings. During any period that the Borrower has received two (2) Credit
Ratings that are not equivalent and both of those Credit Ratings are from S
& P and Moody’s, the applicable Level shall be determined based upon the
Level corresponding with the higher of the two (2) Credit Ratings. During any
period that the Borrower has received a Credit Rating from Fitch and from
either S & P or Moody’s, but not both, and such Credit Ratings are not
equivalent, the applicable Level shall be determined based upon the Level
corresponding with the Credit Rating from S & P or Moody’s, as applicable.
During any period that the Borrower has (a) failed to maintain Qualified
Ratings or (b) received a Credit Rating from only Fitch, then the applicable
Level shall be Level IV of Schedule B.

                                                                           H-2

 

 

 

 

 

SCHEDULE
1.1

 

ORIGINAL
FACILITY LETTERS OF CREDIT

 

(See
attached)

SCHEDULE 1.1

 

 

 

 

 

SCHEDULE
3.1

 

INITIAL
QUALIFYING UNENCUMBERED

PROJECTS
AND SUBSIDIARY GUARANTORS

 

(See
attached)

 

SCHEDULE 3.1

 

 

 

 

 

 

SCHEDULE 6.6

 

LITIGATION

 

(See attached)

 

 

SCHEDULE 6.6

 

 

 

 

 

Schedule 6.7

 

SUBSIDIARIES OF BORROWER

 

(See attached)

  SCHEDULE 6.7

 

 

 

 

 

SCHEDULE 6.13

 

EXCEPTIONS,
IF ANY, TO OWNERSHIP FREE OF UNPERMITTED LIENS

 

 

None.

 

SCHEDULE 6.13

 

 

 

 

 

SCHEDULE 6.19

 

ENVIRONMENTAL
MATTERS

 

None.   

 

 SCHEDULE 6.19

 

 

[1] Select as
applicable.

[2] Fill in the
appropriate terminology for the types of facilities under the Credit Agreement
that are being assigned under this Assignment (e.g. “Revolving Credit
Commitment,” “Term Loan Commitment,” etc.)

* Amount to be
adjusted by the counterparties to take into account any payments or prepayments
made between the Trade Date and the Effective Date.

[3] Set forth, to at
least 10 decimals, as a percentage of the Commitment/Loans of all Lenders
thereunder.

[4] To be completed
if the Assignor and the Assignee intend that the minimum assignment amount is
to be determined as of the Trade Date.

[5] To be added only
if the consent of the Administrative Agent is required by the terms of the
Credit Agreement.

[6] To be added only
if the consent of the Borrower and/or other parties (e.g. Swing Lender, L/C
Issuer) is required by the terms of the Credit Agreement.

[7] Describe Credit
Agreement at option of Administrative Agent.

[8] The term “Credit
Document” should be conformed to that used in the Credit Agreement.

[9] The concept of 
“Foreign Lender” should be conformed to the section in the Credit Agreement
governing withholding taxes and gross-up.

[10] The
Administrative Agent should consider whether this method conforms to its
systems.  In some circumstances, the following alternative language may be
appropriate:  “From and after the Effective Date, the Administrative Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees and other amounts) to the Assignee whether such
amounts have accrued prior to, on or after the Effective Date. 
The Assignor and the Assignee shall make all appropriate adjustments in
payments by the Administrative Agent for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.”

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