LIMITED CONSENT AND SECOND AMENDMENT TO CREDIT
AGREEMENT
This
Limited Consent and Second Amendment to Credit Agreement (this
“Agreement”), dated as of
August 14, 2020 (the “Second Amendment Effective
Date”), is by and among HC GOVERNMENT REALTY HOLDINGS,
L.P., a Delaware limited partnership (“Borrower”), certain
Subsidiaries of the Borrower party to the Credit Agreement referred
to below (the “Subsidiary Guarantors”),
HC GOVERNMENT REALTY TRUST, INC., a Maryland corporation (the
“Parent
Guarantor”), HOLMWOOD PORTFOLIO HOLDINGS, LLC, a
Delaware limited liability company (“Holmwood”; and together
with the Parent Guarantor and the Subsidiary Guarantors,
collectively the “Guarantors”), KEYBANK
NATIONAL ASSOCIATION (“KeyBank”), as a Lender
(as hereinafter defined) and as administrative agent (in such
capacity, the “Administrative Agent”),
and each of the other Lenders party hereto. All capitalized terms
used herein without definitions shall have the meanings given to
such terms in the Credit Agreement (as hereinafter
defined).
WHEREAS, the Credit Agreement, dated as
of October 22, 2019 (as amended, modified, supplemented or restated
and in effect from time to time, the “Credit Agreement”), is by
and among the Borrower, the Guarantors, the Administrative Agent,
and the financial institutions which are or will become a party
thereto as lenders (each a “Lender” and,
collectively, the “Lenders”);
WHEREAS, the Loan Parties desire to
issue Series C Preferred Equity Interests in the Parent Guarantor
in a maximum aggregate amount of up to $100,000,000 (the
“Series C
Preferred”), and to use a portion of the proceeds of
such offering to repay in full and discharge the HCM Mezzanine Debt
on the Second Amendment Effective Date (the “HCM Mezz Payoff”), and to
repurchase all Series A Preferred tendered to the Parent Guarantor
by existing holders thereof within sixty (60) days of the issuance
of the Series C Preferred (the “Series A Redemption”)
(such offering and use of proceeds collectively referred to herein
as the “Series C
Transactions”);
WHEREAS, the Borrower and the Parent
Guarantor have requested that the Lenders consent to the HCM Mezz
Payoff and the Series A Redemption and make certain modifications
to the Credit Agreement, including to the financial covenants set
forth therein;
WHEREAS the Administrative Agent and
Lenders party hereto (constituting Requisite Lenders) are willing
to consent to the HCM Mezz Payoff and the Series A Redemption and
to make such modifications to the Credit Agreement, in each case
subject to, and on the terms and conditions more fully set forth
in, this Agreement.
NOW THEREFORE, the parties hereto hereby
agree as follows:
1. Limited
Consent to the HCM Mezz Payoff and the Series A
Redemption.
(a) At
the Loan Parties’ request and effective as of the Second
Amendment Effective Date, the Administrative Agent and the Lenders
hereby consent, notwithstanding Section 10.2 of the Credit
Agreement and the terms and provisions of the HCM Subordination
Agreement, to the HCM Mezz Payoff and the Series A Redemption, in
each case, solely with proceeds of the issuance of the Series C
Preferred.
(b) The
foregoing consents and are limited strictly to the matters
specified herein and shall not extend to or affect any Obligations
of the Borrower, Parent Guarantor or any other Loan Party contained
in the Credit Agreement or any other Loan Document, and no other
consent and waiver is hereby implied or intended.
2. Amendments
to Credit Agreement.
(a) Amendments to
Section 1.1 (Definitions) of the Credit
Agreement.
(i) Section 1.1 of the
Credit Agreement is hereby amended to add the following new
definitions in the appropriate alphabetical order.
“Adjustment Period” means the period
commencing on and including the Second Amendment Effective Date and
ending on the earlier to occur of (x) March 31, 2022; or (y) the
date on which the Borrower delivers a Compliance Certificate to the
Administrative Agent demonstrating (1) a Fixed Charge Coverage
Ratio of 1.25 to 1.00 or higher, and (2) an FFO Payout Percentage
equal to or less than 95%.
“Debt Yield” means on any date of
determination, the ratio of (i) Adjusted Consolidated EBITDA for
the Reference Period then ended to (ii) Consolidated Total
Indebtedness on such date.
“FFO Payout Percentage”
means, at
any date of determination, the ratio, expressed as a percentage, of
(a) the sum of, without duplication, all Restricted Payments
paid by the Borrower and Parent Guarantor on account of any Equity
Interests (other than (i) distributions by the Borrower to the
Parent Guarantor and (ii) quarterly dividends in accordance with
the Existing Dividend Policies on the Series B Preferred and the C
Preferred), to (b) Funds From Operations (calculated on
a cumulative basis for the then-current fiscal quarter and the
three immediately preceding fiscal quarters).
“First Amendment” means that
certain Increase Agreement and Amendment No. 1 to Credit Agreement
dated as of December 20, 2019, by and among the Borrower, the
Guarantors, the Lenders party thereto, and the Administrative
Agent.
“HCM
Mezz Payoff” has the meaning given that term in
Section
7.28.
“Second Amendment” means that
certain Limited Consent and Second Amendment to Credit Agreement
dated as of the Second Amendment Effective Date, by and among the
Borrower, the Guarantors, the Lenders party thereto, and the
Administrative Agent.
“Second Amendment Effective Date”
means August 14, 2020.
“Series A Preferred” means the
7.00% Series A Cumulative Convertible Preferred Stock issued by the
Parent Guarantor, par value $0.01 per share, as provided for in the
Parent Guarantor’s Articles of Incorporation.
“Series C Articles Supplementary”
means the Articles Supplementary Establishing and Fixing the Rights
and Preferences of a Series of Preferred Stock with respect to the
Series C Preferred filed with the Maryland SDAT as of August 12,
2020.
“Series C Preferred” means the 7%
Cumulative Redeemable Preferred Stock issued by the Parent
Guarantor, par value $0.001 per share, as provided for in the
Parent Guarantor’s Articles of Incorporation, of which an
amount equal to $90,000,000 shall be issued as of the Second
Amendment Effective Date.
“Total Liquidity” means as of any
date, (i) unencumbered and unrestricted (other than encumbrances
and restrictions in favor of the Agent and Lenders) cash and Cash
Equivalents of the Loan Parties and their consolidated Subsidiaries
on such date, plus (ii) the amount that is equal to Borrowing Base
Availability minus aggregate Revolving Credit Exposure of all
Lenders on such date.
(ii) Section
1.1 of the Credit Agreement is hereby further amended by (A)
deleting the definitions of “Existing Preferred Equity”
and “Preferred Dividends” and (B) amending and
restating each of the following definitions in its entirety as
follows:
“Consolidated EBITDA” means, for
any period, without duplication, the Consolidated Net Income (or
loss) of the Loan Parties and their consolidated Subsidiaries for
such period (before minority interests), adjusted by (x) adding
thereto, in each case to the extent actually deducted in
determining such Consolidated Net Income, (i) Consolidated Interest
Expense of the Loan Parties and their consolidated Subsidiaries for
such period, (ii) consolidated Income Tax expense of the Loan
Parties and their consolidated Subsidiaries for such period, (iii)
real estate and related intangible asset amortization and
depreciation of the Loan Parties and their consolidated
Subsidiaries for such period, (iv) any loss (or minus any income or
gain) in each case resulting from early extinguishment of
Indebtedness in such period, (v) any loss (or minus any net income
or gain) resulting from a Derivatives Contract (including by virtue
of a termination thereof) in such period, (vi) any non-recurring
non-cash charges in such period to the extent that such non-cash
charges do not give rise to a liability that would be required to
be reflected on the Consolidated balance sheet of the Loan Parties
(and so long as no cash payments or cash expenses will be
associated therewith (whether in the current period or for any
future period)), (vii) fees, costs and expenses incurred in
connection with the consummation of the transactions contemplated
by (x) the Loan Documents and (y) the HCM Mezzanine Debt Documents
and the amendments thereto on or about the Effective Date and the
issuance of Series B Preferred by the Parent Guarantor, in each
case as reasonably approved by the Administrative Agent (it being
acknowledged that the Administrative Agent is satisfied with the
addbacks set forth in the model delivered by the Borrower on the
Effective Date), (viii) solely with respect to any applicable
period which includes a fiscal quarter ending on or before
September 30, 2020, certain non-recurring, one-time cash charges,
expenses and losses in an amount not to exceed the respective
amounts set forth on Schedule 1.1 with respect to
the items set forth therein, and (ix) fees, costs and expenses
incurred in connection with the consummation of the transactions
contemplated by the Second Amendment (including the issuance of
Series C Preferred by the Parent Guarantor on the Second Amendment
Effective Date), in each case as reasonably approved by the
Administrative Agent (it being acknowledged that the Administrative
Agent is satisfied with the addbacks set forth in the model
delivered by the Borrower on or about the Second Amendment
Effective Date), and (y) subtracting therefrom, in each case to the
extent included in determining Consolidated Net Income for such
period, the amount of non-recurring non-cash gains during such
period; provided,
however, that
Consolidated EBITDA shall be determined without giving effect to
any extraordinary gains or losses (including any taxes attributable
to any such extraordinary gains or losses) or gains or losses
(including any taxes attributable to such gains or losses) from
sales of assets other than from sales of inventory (excluding real
property) in the ordinary course of business. Consolidated EBITDA
for any Reference Period shall be adjusted on a pro forma basis to
exclude any Consolidated EBITDA from Real Estate Assets sold or
otherwise transferred during such Reference Period and to include
the Consolidated EBITDA for Real Estate Assets acquired during such
Reference Period in a manner satisfactory to the Administrative
Agent. Notwithstanding the foregoing, for purposes of calculating
Consolidated EBITDA, only the Loan Parties’ Equity Percentage
of the items comprising Consolidated EBITDA of any non-Wholly-Owned
Subsidiary or Unconsolidated Affiliate (or, if applicable, such
other amount to which such Loan Party is entitled or for which it
is obligated based on an arm’s length agreement), shall be
included in such determination of Consolidated EBITDA. Consolidated
EBITDA shall be adjusted to remove any impact of straight-lining of
rents and amortization of intangibles pursuant to Accounting
Standards Codification No. 805, Business Combinations (formerly
Statement of Financial Account Standards No. 141 (revised 2007),
Business Combinations).
“Consolidated Fixed Charges” means,
for any fiscal period, the sum (without duplication) of, on a
Consolidated basis for the Loan Parties and their respective
Subsidiaries, (a) Consolidated Interest Expense paid or required to
be paid in cash for such period (excluding the HCM Mezzanine
Interest so long as the payment of such interest is subject at all
times to the HCM Subordination Agreement), (b) the aggregate amount
of scheduled principal payments of Indebtedness (excluding balloon
payments at maturity) made or required to be made during such
period by the Loan Parties and their respective Subsidiaries, (c)
Restricted Payments paid or required to be paid in cash by the
Parent Guarantor or any of their Subsidiaries during such period on
any Preferred Equity Interests (other than any Preferred Equity
Interests that meet the Preferred Equity Conditions to the
reasonable satisfaction of the Administrative Agent but including,
in any event, such Restricted Payments on the Series B Preferred
and the Series C Preferred) issued by the Loan Parties or any of
their Subsidiaries, and (d) the Parent Guarantor’s and its
Subsidiaries’ Equity Percentage of all Consolidated Fixed
Charges from any non-Wholly-Owned Subsidiaries or Unconsolidated
Affiliates (or, if applicable, such greater amount for which it is
liable by contract or otherwise). Consolidated Fixed Charges shall
be adjusted on a pro forma basis to account for properties acquired
or sold in the period in a manner satisfactory to the
Administrative Agent. For the avoidance of doubt, the Restricted
Payments paid or required to be paid on the Series B Preferred, the
Series C Preferred and any purchase price paid in connection with
the repurchase of shares of Series A Preferred will be included in
the calculation of Consolidated Fixed Charges, but the cash
dividends paid or required to be paid on the Series A Preferred
will not be included in such calculation.
`
“Existing Dividend Policies” means
the dividend and
distribution policy or practice with respect to dividends,
distributions or other payments to holders of the Parent
Guarantor’s Equity Interests (i) with respect to the Parent
Guarantor’s common stock, Series A Preferred and the Series B
Preferred, as detailed in the Parent Guarantor’s Articles of
Incorporation and the offering circular dated November 16, 2018
(with respect to the common stock of the Parent Guarantor), each as
in effect as of the Effective Date and delivered to the
Administrative Agent and (ii) with respect to the Series C
Preferred, as detailed in the Series C Articles Supplementary, as
in effect as of the Second Amendment Effective Date and delivered
to the Administrative Agent.
“Funds from Operations” means, with
respect to a Person and for a given period, (a) net income (loss)
of such Person computed in accordance with GAAP (including net of
the greater of Capital Reserves and actual recurring capital
expenditures on its Real Estate Assets to the extent not already
included in such net income), calculated without regard to (i)
gains (or losses) from debt restructuring and sales of property
during such period, and (ii) charges for impairment of real estate,
plus (b) HCM Mezzanine Interest paid in cash during such period,
plus (c) depreciation with respect to such Person’s real
estate assets and amortization (other than amortization of deferred
financing costs) of such Person for such period, plus (d) other
non-cash items (other than amortization of deferred financing
costs), plus (e) costs in connection with acquisitions, all after
adjustment for Unconsolidated Affiliates, plus (f) fees, costs and
expenses incurred in connection with the consummation of the
transactions contemplated by the Loan Documents and the HCM
Mezzanine Debt Documents and the amendments thereto on or about the
Effective Date and the issuance of Series B Preferred by the Parent
Guarantor, in each case as reasonably approved by the
Administrative Agent, plus (g) fees, costs and expenses incurred in
connection with the consummation of the transactions contemplated
by the Second Amendment, including the HCM Mezz Payoff on or about
the Second Amendment Effective Date and the issuance of Series C
Preferred by the Parent Guarantor, in each case as reasonably
approved by the Administrative Agent (it being acknowledged that
the Administrative Agent is satisfied with the addbacks set forth
in the model delivered by the Borrower on or about the Second
Amendment Effective Date), plus (h) solely with respect to any
applicable period which includes a fiscal quarter ending on or
before September 30, 2020, certain non-recurring, one-time cash
charges, expenses and losses in an amount not to exceed the
respective amounts set forth on Schedule 1.1 with respect to
the items set forth therein, plus (or minus) (i) extraordinary
non-recurring gains and losses. Notwithstanding the foregoing, for
purposes of calculating Funds from Operations, (x) only the Loan
Parties’ and their respective Subsidiaries’ Equity
Percentage of the items comprising Funds from Operations of any
non-Wholly-Owned Subsidiary or Unconsolidated Affiliate (or, if
applicable, such other amount to which such Loan Party or
Subsidiary is entitled or for which Parent Guarantor or such
Subsidiary are obligated based on an arm’s length agreement),
shall be included in such determination of Funds from Operations
and (y) the Restricted Payments paid or required to be paid on the
Series B Preferred, the Series C Preferred and any purchase price
paid in connection with the repurchase of shares of Series A
Preferred during the applicable period will be included in the
calculation of (and reduce) Funds from Operations, but the cash
dividends paid or required to be paid on the Series A Preferred
will not be included in such calculation.
“Indebtedness” means, with respect
to any Person, at any time, the sum of (without duplication) (i)
all indebtedness (including principal, accrued interest, fees and
charges) for borrowed money (including obligations evidenced by
bonds, notes or similar instruments), (ii) all obligations for the
deferred purchase price of property or services (excluding ordinary
trade payables and accrued expenses and deferred purchase price
which is not yet a liquidated sum), (iii) all reimbursement
obligations with respect to letters of credit or acceptances
(whether or not the same have been presented for payment), (iv) the
aggregate amount of all Capital Lease Obligations, (v) all
indebtedness of the types described in clauses (i) through (iv) of
this definition of another Person secured by any Lien on any
property owned by such Person, whether or not such indebtedness has
been assumed by such Person (provided that, if the person
has not assumed or otherwise become liable in respect of such
indebtedness, such indebtedness shall be deemed to be the
outstanding principal amount (or maximum principal amount, if
larger) of such indebtedness or, if not stated or if
indeterminable, in an amount equal to the Fair Market Value of the
property to which such Lien relates, as determined in good faith by
such Person), (vi) all obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of
any mandatorily redeemable Equity Interests issued by such Person
(unless such mandatorily redeemable Equity Interests may be settled
100% in Equity Interests (other than mandatorily redeemable Equity
Interests) in the Borrower’s sole discretion), valued at the
greater of its voluntary or involuntary liquidation preference plus
accrued and unpaid dividends (excluding the Series B Preferred and
the Series C Preferred), (vii) all contingent obligations,
including all indebtedness of other Persons which such Person has
Guaranteed or is otherwise recourse to such Person (only to the
extent of the maximum amount for which such guaranteeing Person may
be liable pursuant to the terms of the instrument embodying such
guarantee) (including liability of a general partner in respect of
liabilities of a partnership in which it is a general partner which
would constitute “Indebtedness” hereunder, any
obligation to supply funds to or in any manner to invest directly
or indirectly in a Person, to maintain working capital or equity
capital of a Person or otherwise to maintain net worth, solvency or
other financial condition of a Person, to purchase indebtedness, or
to assure the owner of indebtedness against loss, including,
without limitation, through an agreement to purchase property,
securities, goods, supplies or services for the purpose of enabling
the debtor to make payment of the indebtedness held by such owner
or otherwise), (viii) all obligations under forward equity
commitments and off-balance sheet obligations, (ix) the net
obligations under any Derivatives Contract, in an amount equal to
the Derivatives Termination Value. Consolidated Indebtedness shall
include the pro-rata share of indebtedness from any unconsolidated
joint venture or non-wholly owned subsidiary (or such greater
amount for which the applicable person is liable by way of
agreement or otherwise), and (x) such Person’s pro rata share
of the Indebtedness (based upon its Equity Percentage in such
non-Wholly-Owned Subsidiaries or Unconsolidated Affiliates) of any
non-Wholly-Owned Subsidiary or Unconsolidated Affiliate of such
Person (or, if applicable, such higher amount for which such Person
is obligated based on an arm’s length agreement). Any
calculation of Indebtedness hereunder shall be made in a manner
consistent with the last sentence of Section 1.2 and shall be
adjusted to remove any impact of intangibles pursuant to FAS 141,
as issued by the Financial Accounting Standards Board in June of
2001. Notwithstanding the foregoing, the HCM Mezzanine Debt will be
deemed to be equity for the purposes of this definition and not
treated as Indebtedness so long as such HCM Mezzanine Debt remains
subject to the HCM Subordination Agreement. For the avoidance of
doubt, neither the Series B Preferred nor the Series C Preferred
will be included in calculations of Indebtedness or Consolidated
Total Indebtedness.
“Loan Document” means,
collectively, (i) this Agreement, each Note, each Letter of Credit
Document, each Collateral Document, the HCM Subordination
Agreement, each Environmental Indemnities Agreement, each Guaranty,
each Compliance Certificate, each Borrowing Base Certificate, the
Post-Closing Letter (if applicable), each amendment to any thereof,
and (ii) each other document or instrument now or hereafter
executed and delivered by a Loan Party in favor of the
Administrative Agent and/or the Lenders in connection with,
pursuant to or relating to this Agreement (in each case other than
any Specified Derivatives Contract).
“Parent Guarantor’s Articles of
Incorporation” means the Articles of Incorporation of
the Parent Guarantor filed on March 11, 2016 with the Maryland
SDAT, as amended by the “Articles Supplementary” filed
on April 4, 2016 with the Maryland SDAT, and as further amended by
the “Articles Supplementary Establishing and Fixing the
Rights and Preferences of a Series of Preferred Stock” filed
with the Maryland SDAT on March 14, 2019, as further amended by the
Series C Articles Supplementary, collectively, as the same may be
in effect on the Second Amendment Effective Date.
“Preferred Equity Interests”
means, with respect to any Person, Equity Interests in such Person
which are entitled to preference or priority over any other Equity
Interest in such Person in respect of the payment of dividends or
distribution of assets upon liquidation or both (including, in any
event, the Series B Preferred and the Series C
Preferred).
“Restricted Payment” means (a) any
dividend or other distribution, direct or indirect, on account of
any Equity Interest of any Loan Party or any of its Subsidiaries
now or hereafter outstanding, except a dividend payable solely in
Equity Interests of an identical or junior class to the holders of
that class; (b) any redemption, conversion, exchange, retirement,
sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any Equity Interest of any Loan Party
or any of its Subsidiaries now or hereafter outstanding; (c) any
payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire any Equity
Interests of any Loan Party or any of its Subsidiaries now or
hereafter outstanding; and (d) any “annual asset management
fees,” “acquisition fees,” “loan
fees,” “property management fees,”
“disposition fees” and/or other fees or expenses
payable to any Affiliate of any Loan Party under any Management
Agreement or similar arrangement, or organizational or other
document.
(b) Amendments to
Section 7.2 of the Credit Agreement (Ownership
Structure).
(i) The second sentence
of Section 7.2(i) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
“Without
limitation of the foregoing, Part I of Schedule 7.2 sets forth the
holders of the Series B Preferred and the percentage of Series B
Preferred held by each such holder as of the Second Amendment
Effective Date.”
(ii) The
fourth sentence of Section 7.2(i) of the Credit Agreement is hereby
amended and restated in its entirety, and a new sentence is added
thereafter, in each case as follows:
“Without
limitation of the foregoing, Part I of Schedule 7.2 sets forth the
Person Controlling the Schedule 7.2 Party as of the Agreement Date
(such Person, without regard to any subsequent update to such
Schedule as contemplated below, the “Schedule 7.2 Party Control
Person”) and the Schedule 7.2 Party Control Person has
not changed as of the Second Amendment Effective Date after giving
effect to the issuance of the Series C Preferred. In addition, from
the Effective Date through the Second Amendment Effective Date,
other than as contemplated by the Second Amendment with respect to
the addition of Series C Preferred pursuant to the Series C
Articles Supplementary and the repurchase of shares of Series A
Preferred, no Loan Party has amended, supplemented or otherwise
altered its Existing Dividend Policies as in effect on the
Effective Date in any manner that had the effect of increasing the
dividends, distributions or other payments paid or payable
thereon.”
(iii) A
new clause (iii) and clause (iv) are hereby inserted at the end of
Section 7.2 as follows:
“(iii) The
Series C Preferred has been issued in conformity with the
organizational documents of the Loan Parties and Applicable Law.
The terms of the Series C Preferred do not provide its holders any
mandatory redemption right or other mandatory payment thereunder
until the date that is seven (7) years from the issuance thereof.
The Loan Parties have not entered into any side letters in respect
of the Series C Preferred. Upon the issuance of a new class or
series of Preferred Equity Interests or the incurrence any
additional Indebtedness or the issuance of additional shares of any
class or series of Parity Preferred Stock or Senior Stock (each as
defined in the Series C Articles Supplementary), the Borrower and
Parent Guarantor will be in compliance with Paragraph 7 of the
Series C Articles Supplementary.
(iv) To
the extent that any Series A Preferred remains outstanding on or
after the Second Amendment Effective Date, the Series A Preferred
meets the Preferred Equity Conditions.”
(c) New Section 7.28 of
the Credit Agreement (HCM Mezzanine Debt; HCM Subordination
Agreement). A new Section 7.28 is hereby inserted at the end
of Article VII of the Credit Agreement, as follows:
“Section 7.28. HCM Mezzanine Debt; HCM Mezzanine
Debt Documents.
The
Loan Parties hereby acknowledge and agree that on the Second
Amendment Effective Date, the HCM Mezzanine Debt shall be fully
repaid and discharged with proceeds of the Series C Preferred (such
repayment, the “HCM
Mezz Payoff”), the obligations of the Loan Parties
thereunder shall be fully satisfied, and the HCM Mezzanine Debt
Documents shall be terminated (other than with respect to
indemnification and expense reimbursement obligations for which no
claim has been asserted).”
(d) Amendment to
Section 10.1(1)(b) of the Credit Agreement (Fixed Charge Coverage
Ratio. Section 10.1(1)(b) of the Credit Agreement is hereby
amended and restated in its entirety as follows:
“(b) Minimum
Fixed Charge Coverage Ratio. Commencing with the first
fiscal quarter-end to occur after the termination of the Adjustment
Period (and in no event later than the fiscal quarter ending March
31, 2022), and each fiscal quarter
thereafter, the Fixed Charge Coverage Ratio at any time to
be less than (i) 1.25 to 1.00 for each such fiscal quarter
through the fiscal quarter ending
September 30, 2022, and (ii) 1.40 to 1.00 for each such
fiscal quarter ending on and after December 31, 2022 (if
applicable) (in each case, with compliance certified as of the last
day of each fiscal quarter for the Reference Period then ended in a
Compliance Certificate delivered pursuant to Section 9.3 and at each other
date of determination).”
(e) Amendment to
Section 10.1(1) of the Credit Agreement (Financial
Covenants). Section 10.1 of the
Credit Agreement is hereby amended to add the following Section
10.1(3) at the end thereof:
“(3) Adjustment Period
Covenants.
At any
time during the Adjustment Period the Loan Parties shall not
permit:
(j) Minimum
Debt Yield.
The Debt Yield at any time to be less than 12% (with compliance
certified as of the last day of each fiscal quarter for the
Reference Period then ended in a Compliance Certificate delivered
pursuant to Section
9.3 and at each other date of determination).
(k) Minimum
Liquidity. Total
Liquidity at any time to be less than $15,000,000 (with compliance
certified as of the last day of each fiscal quarter for the
Reference Period then ended in a Compliance Certificate delivered
pursuant to Section
9.3 and at each other date of determination).
For the
avoidance of doubt, the Loan Parties shall not be required to
maintain compliance with the Minimum Debt Yield and Minimum
Liquidity covenants set forth in this Section 10.1(3) following the
termination of the Adjustment Period.”
(f) Amendment to
Section 10.1(2)(i) of the Credit Agreement (Borrowing Base Maximum
Concentration; Single Tenant Concentration). Section 10.1(2)(i) of the Credit
Agreement is hereby amended and restated in its entirety as
follows:
“(i) Commencing
with the fiscal quarter ending March 31, 2022 and each fiscal
quarter thereafter, (a) Property NOI from any single Federal Agency
tenant to at any time exceed twenty percent (20%) of the total
Property NOI from all of the Borrowing Base Properties at such
time; or (b) any single Federal Agency to comprise more than twenty
percent (20%) of Total Asset Value; or (c) Property NOI from any
Borrowing Base Property or from any group of Borrowing Base
Properties in any single State to at any time exceed thirty percent
(30%) of the total Property NOI from all of the Borrowing Base
Properties at such time.”
(g) Amendments to
Section 10.2 of the Credit Agreement (Restricted
Payments). Section
10.2 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
“Section 10.2. Restricted Payments.
The Loan
Parties shall not declare or make any Restricted Payment except for
the following:
(a) so
long as no Event of Default exists or would result therefrom, each
Subsidiary Guarantor shall be permitted to declare and pay
dividends on its Equity Interests and to make distributions with
respect thereto to the Borrower from time to time;
(b) so
long as no Default or Event of Default exists or would result
therefrom, the Borrower may declare or make cash distributions to
the Parent Guarantor and the Borrower’s (or its
Subsidiary’s) limited partners;
(c) during
the Adjustment Period, the Borrower and the Parent Guarantor shall
be permitted to declare and pay dividends quarterly on their
respective Equity Interests, and to make quarterly distributions
with respect thereto from time to time solely in accordance with
and not in excess of the amounts contemplated by the Existing
Dividend Policies; provided, however, that prior to making
an dividend or distribution permitted by this Section 10.2(c)
during the Adjustment Period, the Borrower shall deliver to the
Administrative Agent evidence of the Borrower’s pro forma
compliance with each of the financial covenants set forth in
Section 10.1(3)
both before and after giving effect to the making of such dividend
or distribution (with Adjusted Consolidated EBITDA being measured
as of the most recently ended Reference Period for which financial
statements are required to have been delivered and Consolidated
Total Indebtedness being measured as of the date of such dividend
or distribution);
(d) following
the termination of the Adjustment Period, the Borrower and the
Parent Guarantor shall be permitted to declare and pay dividends
quarterly on their respective Equity Interests, and to make
quarterly distributions with respect thereto, from time to time so
long as after giving effect thereto, the FFO Payout Percentage for
the applicable period shall not exceed 95%;
(e) subject
to Section 11.1(l),
the issuance of common stock (or common partnership interests) upon
conversion of any Preferred Equity Interests;
(f) subject
to Section 11.1(l),
the issuance of shares in the Parent Guarantor in satisfaction of
the right of limited partners of the Borrower to redeem the
partnership interests held by such partners; and
(g) the
Loan Parties may pay management fees and other amounts described in
clause (d) of the definition of Restricted Payments to the extent
set forth in the Management Agreements, provided that (i) no Default or
Event of Default exists or would result therefrom and (ii) such
payment is not in contravention of any applicable Assignment and
Subordination of Management Agreement; provided, however, that,
subject to Section
11.1(l) and the other terms of this Agreement, the foregoing
proviso shall not prohibit the making of the HCA Termination
Payment and such other payments through the issuance of common
Equity Interests in the Borrower or the Parent Guarantor to the
Person(s) entitled thereto.
Notwithstanding the
foregoing Sections
10.2(c) and (d), if a Default or Event of
Default exists or would result therefrom, (x) the Borrower may
declare and make cash distributions to the Parent Guarantor and
other holders of partnership interests in the Borrower with respect
to any fiscal year to the extent (but only to the extent) necessary
for the Parent Guarantor to distribute, and the Parent Guarantor
may so distribute, an aggregate amount not to exceed the minimum
amount necessary for the Parent Guarantor to remain in compliance
with the first sentence of Section 8.12; provided that upon the
occurrence of any Default or Event of Default described in
Section 11.1(a),
11.1(b),
11.1(f) or
11.1(g) or the
acceleration of the maturity of any of the Obligations, the Parent
Guarantor and the Borrower may not make any distributions or
dividends under this Section 10.2 and (y) except to
the extent permitted pursuant to clause (x) above, the Loan Parties
shall not, and shall not permit any other Subsidiary of the
Borrower to, make any Restricted Payments to any Person other than
to the Borrower or any of its Wholly-Owned
Subsidiaries.”
(h) Amendment
to Section 10.7 of the Credit Agreement (Fundamental
Changes). Section 10.7 of the Credit Agreement is hereby
amended to insert the following sentence at the end
thereof:
“The
aggregate amount of Series C Preferred issued by the Parent
Guarantor during the period commencing on the Second Amendment
Effective Date and ending on the last day of the Adjustment Period
shall not exceed $100,000,000 (inclusive of the Series C Preferred
issued on the Second Amendment Effective Date).”
(i) Amendment
to Section 10.10 of the Credit Agreement (Modifications of
Organizational Documents; Dividend Policy). Section 10.10 of the Credit Agreement
is hereby amended and restated in its entirety as
follows:
“No Loan
Party shall amend, supplement, restate or otherwise modify its
articles or certificate of incorporation, by-laws, operating
agreement, declaration of trust, partnership agreement or other
applicable organizational document in any material respect or in
any respect that could reasonably be expected to be adverse to the
Lenders or the Administrative Agent. Without limitation of the
foregoing, from the Second Amendment Effective Date until the
termination of the Adjustment Period, no Loan Party shall amend,
supplement or otherwise alter its Existing Dividend Policies in any
manner that would have the effect of increasing the dividends,
distributions or other payments paid or payable
thereon.”
(j) Update
to Schedule 7.2.
Schedule 7.2 to the Credit Agreement is hereby amended and restated
in its entirety as of the date hereof in the form attached
hereto.
3. Affirmation
and Acknowledgment. The Borrower hereby ratifies and
confirms all of its Obligations to the Lenders, including, without
limitation, the Loans, the Notes and the other Loan Documents, and
the Borrower hereby affirms its absolute and unconditional promise
to pay to the Lenders all Obligations under (and as defined in) the
Credit Agreement, both before and after giving effect to this
Agreement. Each of the Guarantors hereby jointly and severally
consents to the transactions contemplated by this Agreement and
hereby ratifies and confirms all of its Obligations to the Lenders
and the Administrative Agent and acknowledges and agrees that the
guaranties made by it contained in the Guaranty are, and shall
remain, in full force and effect after giving effect to this
Agreement and the modifications and consents effected hereby. The
execution, delivery and effectiveness of this Agreement shall not,
except as expressly consented to herein, operate as a waiver of any
right, power or remedy of any Lender or the Administrative Agent
under any of the Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents.
4. Representations
and Warranties. The Borrower and each of the Guarantors
hereby jointly and severally represent and warrant to the Lenders
and the Administrative Agent as follows:
(a)
The execution,
delivery and performance of this Agreement by the Borrower and each
Guarantor and the consummation of the Series C Transactions (i) are
within the authority of each Loan Party, (ii) have been duly
authorized by all necessary proceedings on the part of such Loan
Party and any direct or indirect general partner or manager
thereof, (iii) do not and will not, by the passage of time, the
giving of notice, or both, (A) require any Governmental Approval or
violate any Applicable Law (including all Environmental Laws)
relating to any Loan Party, (B) conflict with, result in a breach
of, constitute a default under, or require any consent under (other
than those consents that have been obtained and furnished to the
Administrative Agent), the operating agreement and other
organizational documents of any Loan Party (including the
organizational documents of the Parent Guarantor as modified by the
Series C Articles Supplementary), any Management Agreement, or any
indenture, agreement or other instrument to which any Loan Party or
any of their respective Subsidiaries is a party or by which any of
them or any of their respective properties may be bound (including,
in any event, the agreements and other documents listed on
Schedule 7.7 of the
Credit Agreement), or conflict with any judgment, order or decree
that is binding upon Loan Party or any of their respective
properties; or (C) result in or require the creation or imposition
of any Lien upon or with respect to any property now owned or
hereafter acquired by any Loan Party other than Liens created under
the Loan Documents.
(b)
This Agreement and
the Credit Agreement and other Loan Documents constitute legal,
valid and binding obligations of each Loan Party, enforceable
against each such Loan Party in accordance with its respective
terms except as the same may be limited by bankruptcy, insolvency,
and other similar laws affecting the rights of creditors generally
and the availability of equitable remedies for the enforcement of
certain obligations (other than the payment of principal) contained
herein or therein and as may be limited by equitable principles
generally.
(c)
Other than
approvals or consents which have been obtained (written copies of
which have been furnished to the Administrative Agent), the
execution, delivery and performance by the Borrower and Guarantors
of this Agreement and the consummation of the Series C Transactions
and the other transactions contemplated hereby and thereby, do not
require any approval or consent of, or filing with, any third party
or any governmental agency or authority.
(d)
The representations
and warranties made or deemed made by each Loan Party in the Loan
Documents to which it is a party are true and correct in all
material respects (or in all respects to the extent that such
representations and warranties are already subject to concepts of
materiality) on and as of the Second Amendment Effective Date (both
before and after giving effect to this Agreement and the
consummation of the Series C Transactions) with the same force and
effect as if made on and as of such date except to the extent that
such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties
were true and correct in all material respects on and as of such
earlier date). For purposes of this clause (d), the representations
and warranties contained in Section 7.11 of the Credit Agreement
are deemed to refer to the most recent statements furnished
pursuant to Article IX of the Credit Agreement.
(e)
Both immediately
before and immediately after giving effect to this Agreement and
the Series C Transactions and the other transactions contemplated
hereby and thereby, no Default or Event of Default under (and as
defined in) the Credit Agreement has occurred and is
continuing.
5. Conditions
Precedent. This Agreement shall be deemed to be effective as
of the Second Amendment Effective Date, subject to the execution
and delivery of the following documents, each in form and substance
satisfactory to the Administrative Agent, and satisfaction of the
additional conditions set forth below to the satisfaction of the
Administrative Agent:
(a) this Agreement
executed and delivered by the Borrower, the Guarantors, the
Administrative Agent and the Lenders constituting Requisite
Lenders;
(b)
evidence of the
consummation of the issuance of Series C Preferred in a minimum
aggregate amount of $75,000,000;
(c)
a payoff letter
duly executed by each of the holders of the HCM Mezzanine Debt (as
in effect immediately prior to the Second Amendment Effective
Date), together with satisfactory evidence that the HCM Mezz Payoff
shall occur substantially concurrently with the issuance of the
Series C Preferred on the Second Amendment Effective Date using the
proceeds thereof;
(d)
a schedule of the
Sources and Uses of the proceeds of the Series C Preferred
issuance, including paydown of the Revolving Loans with net
proceeds of the issuance of the Series C Preferred in an amount at
least equal to $61,250,000;
(e)
a certificate dated
as of the date hereof signed by a duly authorized officer of the
Borrower and each Guarantor (i) certifying and attaching the
resolutions adopted by the Borrower’s and each
Guarantor’s general partner (or other appropriate governing
body or Persons) authorizing the transactions described herein and
evidencing the due authorization, execution and delivery of this
Agreement and each of the other Loan Documents to which such Loan
Party is a party executed in connection with this Agreement; (ii)
certifying that the organizational documents of the Borrower and
each Guarantor (other than (A) the Parent Guarantor pursuant to the
Series C Articles Supplementary and (B) the Borrower pursuant to
the Third Amendment to its limited partnership agreement) have not
been amended, modified or rescinded since they were last furnished
in writing to the Administrative Agent (and, in the case of the
Borrower and Parent Guarantor, attaching and certifying to copies
of any such modifications), and remain in full force and effect as
of the date hereof; (iii) in the case of the Borrower, certifying
that, immediately before and immediately after giving effect to
this Agreement, the consummation of the Series C Transactions and
the other transactions contemplated hereby and thereby, (A) the
representations and warranties contained in Section 7 of the Credit
Agreement and in the other Loan Documents are true and correct in
all material respects (or in all respects to the extent that such
representations and warranties are already subject to concepts of
materiality) on and as of the Second Amendment Effective Date with
the same force and effect as if made on and as of such date except
to the extent that such representations and warranties expressly
relate solely to an earlier date (in which case such
representations and warranties shall have been true and correct in
such respects on and as of such earlier date) and except that for
purposes hereof, the representations and warranties contained in
Section 7.11 of the Credit Agreement shall be deemed to refer to
the most recent statements furnished pursuant to Article IX of the
Credit Agreement, (B) no Default or Event of Default exists, (C)
since December 31, 2019, there shall not have occurred any event or
condition that could reasonably be expected to have a Material
Adverse Effect on the Loan Parties or any transaction contemplated
hereby, and (D) the Series C Preferred is being issued in
conformity with the organizational documents of the Loan Parties
and Applicable Law.
(f)
favorable opinions
of counsel to the Parent Guarantor and the Borrower with respect to
this Agreement;
(g)
the Administrative
Agent’s receipt and satisfactory review of the Loan
Parties’ organizational
structure and corporate model, and all other documents that
the Administrative Agent may
deem necessary for the Loan Parties and their Subsidiaries,
together with an updated organizational chart and capitalization
table;
(h)
a true, correct and
complete copy of the Private Placement Memorandum dated August 6,
2020 setting forth the terms and conditions of the Series C
Preferred in effect on the Second Amendment Effective
Date;
(i)
payment by the
Borrower to the Administrative Agent (i) on account of the Lenders
party to this Agreement, an amendment fee equal to 0.05% (or 5
basis points) multiplied by such Lender’s Revolving
Commitment (whether or not utilized), which fee shall be deemed
fully earned when paid, shall be paid in immediately available
funds and shall not be refundable for any reason and (ii) all other
fees set forth in any fee letter delivered in connection with this
Agreement; and satisfactory arrangements for the payment of the
fees and expenses of counsel to the Administrative Agent;
and
(j)
such other
documents, agreements and instruments as the Administrative Agent
on behalf of the Lenders may deem necessary.
6. Miscellaneous
Provisions.
(a) THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED,
AND TO BE FULLY PERFORMED, IN SUCH STATE.
(b)
This Agreement may
be executed in any number of counterparts and by different parties
hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which counterparts taken
together shall be deemed to constitute one and the same instrument.
Counterparts may be delivered via facsimile, electronic mail
(including pdf or any electronic signature complying with the U.S.
federal ESIGN Act of 2000, e.g., www.docusign.com)
or other transmission method and any counterpart so delivered shall
be deemed to have been duly and validly delivered and be valid and
effective for all purposes. Notwithstanding the foregoing, any
electronic signature shall be promptly followed by a manually
executed, original counterpart if requested by the Administrative
Agent or any Lender. The existence of this Agreement may be
established by the introduction into evidence of counterparts that
are separately signed, provided they are otherwise identical in all
material respects. This Agreement shall constitute a “Loan
Document” for all purposes under the Loan
Agreement.
[Remainder of Page Intentionally Blank]
IN WITNESS WHEREOF, the undersigned have
duly executed this Agreement as of the date first above
written.
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BORROWER:
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HC
GOVERNMENT REALTY HOLDINGS, L.P.
By: HC
Government Realty Trust, Inc., its general partner
By:
/s/ Jacqlyn
Piscetelli
Name:
Jacqlyn Piscetelli
Title:
Chief Financial Officer
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[SIGNATURE
PAGE TO SECOND AMENDMENT (HC GOV)]
GUARANTORS: HOLMWOOD PORTFOLIO HOLDINGS,
LLC
By: HC
Government Realty Trust, Inc., its sole member
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By:
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/s/ Jacqlyn
Piscetelli
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Name: Jacqlyn
Piscetelli
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Title:
Chief
Financial Officer
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HC
GOVERNMENT REALTY TRUST, INC.
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By:
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/s/ Jacqlyn
Piscetelli
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Name: Jacqlyn
Piscetelli
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Title:
Chief
Financial Officer
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[SIGNATURE
PAGE TO SECOND AMENDMENT (HC GOV)]
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GOV
FBI JOHNSON CITY, LLC
GOV
CBP CAPE CANAVERAL, LLC
GOV
SILT, LLC
GOV
MOORE SSA, LLC
GOV
LAWTON SSA, LLC
GOV
LAKEWOOD DOT, LLC
GOV
FT. SMITH, LLC
GOV
NORFOLK, LLC
GOV
SAN ANTONIO, LLC
GOV
MONTGOMERY, LLC
GOV
KNOXVILLE, LLC
GOV
CHAMPAIGN, LLC
GOV
SARASOTA, LLC
GOV
MONROE, LLC
GOV
OKLAHOMA CITY, LLC
GOV
FT. LAUDERDALE, LLC
GOV
LAWRENCE, LLC
GOV
BIRMINGHAM, LLC
By: HC
Government Realty Holdings, L.P., the member-manager of each of the
foregoing
By: HC
Government Realty Trust, Inc., its general partner
By: /s/
Jacqlyn Piscetelli
Name:
Jacqlyn Piscetelli
Title:
Chief Financial Officer
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[SIGNATURE
PAGE TO SECOND AMENDMENT (HC GOV)]
ADMINISTRATIVE
AGENT:
KEYBANK
NATIONAL ASSOCIATION, as Administrative Agent
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By:
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/s/ James K.
Komperda
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Name: James K.
Komperda
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Title:
Senior
Vice President
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L/C
ISSUER, SWINGLINE LENDER, AND LENDER:
KEYBANK
NATIONAL ASSOCIATION,
as L/C
Issuer, Swingline Lender and Lender
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By:
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/s/ James K.
Komperda
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Name: James K.
Komperda
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Title:
Senior
Vice President
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[SIGNATURE
PAGE TO SECOND AMENDMENT (HC GOV)]
LENDER:
IBERIABANK, as a
Lender
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By:
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/s/ Jon
McConnell
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Name: Jon
McConnell
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Title:
Senior
Vice President
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[SIGNATURE
PAGE TO SECOND AMENDMENT (HC GOV)]
LENDER:
SYNOVUS
BANK, as a Lender
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By:
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/s/ Zachary
Brown
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Name: Zachary
Brown
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Title:
Relationship
Manager
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[SIGNATURE
PAGE TO SECOND AMENDMENT (HC GOV)]
LENDER:
ATLANTIC UNION
BANK, as a Lender
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By:
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/s/ Randolph E. Trow
III
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Name: Randolph E. Trow
III
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Title:
Senior
Vice President
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[SIGNATURE
PAGE TO SECOND AMENDMENT (HC GOV)]
Schedule 7.2
[see
attached]