EXHIBIT 10.2
INTEREST RATE SWAP AGREEMENT
THIS AGREEMENT ("Agreement") is entered into as of the 18th day of
September, 1998, by and between PUBLIC STORAGE PROPERTIES IV, LTD. ("Fixed Rate
Payer"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Floating Rate Payer").
WHEREAS, both Fixed Rate Payer and Floating Rate Payer seek to reduce
actual or expected exposure to changes in interest rates or to lower costs of
actual or expected borrowings.
WHEREAS, the Fixed Rate Payer is willing to make the payments based on
a fixed rate of interest as provided herein; and
WHEREAS, the Floating Rate Payer is willing to make the payments based
on a floating rate of interest as provided herein;
NOW THEREFORE, in consideration of their mutual covenants, Fixed Rate
Payer and Floating Rate Payer agree as follows:
1. DEFINITIONS. The capitalized terms, "Effective Date", "Fixed Rate",
"Floating Rate", "Floating Rate Maturity", "Net Swap Settlement Payment Dates",
"Reset Dates", "Swap Amount", "Termination Date" and "Trade Date" shall each be
as specified in the Swap Confirmation. All other capitalized terms shall have
the meanings set forth below or otherwise as set forth in this Agreement:
(a) "BUSINESS DAY" means a day (other than Saturday, Sunday or
holiday) on which Bank is open and conducting its customary banking transactions
in the State of California.
(b) "BUSINESS DAY CONVENTION" means, for purposes of
determining each Calculation Period, that convention specified in the Swap
Confirmation for adjusting any relevant date if it would otherwise fall on a day
that is not a Business Day, so that:
(i) if "following" is specified, that date will be
the first following day that is a Business Day;
(ii) if "modified following" is specified, that date
will be the first following day that is a Business Day unless that day
falls in the next calendar month, in which case that date will be the
first preceding day that is a Business Day; and
(iii) if "preceding" is specified, that date will be
the first preceding day that is a Business Day.
(c) "CALCULATION PERIOD" means, subject to the Business Day
Convention, each consecutive period designated in the Swap Confirmation, the
first of which will commence on, and include, the Effective Date and extend to,
but exclude, the first Reset Date. Each subsequent Calculation Period will
commence on, and include, the Reset Date and extend to, but exclude the next
Reset Date. The final Calculation Period will end on, but exclude, the
Completion Date.
(d) "SWAP CONFIRMATION" means a document, substantially in the
form of Exhibit A hereto, with the information required in each blank space
completed.
(e) "COMPLETION DATE" shall mean the Termination Date unless
an Early Termination Date has occurred, in which case the Completion Date shall
be the Early Termination Date.
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(f) "DAY COUNT CONVENTION" means that the calculation of each
Net Swap Settlement will be based on the actual number of days in the
Calculation Period divided by a 360-day year.
(g) "EARLY TERMINATION DATE" means the date, if any, prior to
the Termination Date upon which this Agreement is terminated pursuant to
Paragraph 3(a) below.
(h) "LIBOR" means, with respect to each Calculation Period,
the rate for deposits in U.S. Dollars for a period equal to the Floating Rate
Maturity, as such rate appears on Telerate Page 3750 as of 11:00 AM, London
Time, on the Reset Date (or the Effective Date in the case of the initial
Period). If such rate does not appear on Telerate Page 3750, the rate for that
Reset Date will be the arithmetic mean of the rates quoted by major Banks in
London, selected by Floating Rate Payer, for a period equal to the Floating Rate
Maturity, as of 11:00 AM, London Time, on the Reset Date.
(i) "TELERATE PAGE 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service (or such other page as may replace Page
3750 on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for U.S. Dollar
Deposits).
2. DETERMINATION; NET SWAP SETTLEMENT PAYMENTS.
(a) On the first Business Day following the end of each
Calculation Period, Floating Rate Payer will send Fixed Rate Payer a written
notice ("Settlement Notice") specifying:
(i) the amount of interest which would have accrued
on the Swap Amount during the Calculation Period at a rate per annum
equal to the Floating Rate ("Floating Rate Payment").
(ii) the amount of interest which would have accrued
on the Swap Amount during the Calculation Period at a rate per annum
equal to the Fixed Rate ("Fixed Rate Payment"); and
(iii) the difference, if any, between the Floating
Rate Payment and the Fixed Rate Payment ("Net Swap Settlement
Payment").
(b) All calculations under Paragraph 2(a) above will be made
on the basis of the Day Count Convention.
(c) On each Net Swap Settlement Payment Date:
(i) if the Fixed Rate Payment exceeds the Floating
Rate Payment, Fixed Rate Payer shall pay Floating Rate Payer the amount
of the Net Swap Settlement Payment by, at Floating Rate Payer's option,
Floating Rate Payer's debiting Fixed Rate Payer's demand deposit
account with Floating Rate Payer, or by wiring funds to Floating Rate
Payer; or
(ii) if the Floating Rate Payment exceeds the Fixed
Rate Payment, Floating Rate Payer shall pay Fixed Rate Payer the amount
of the Net Swap Settlement Payment by, at Floating Rate Payer's option,
crediting Fixed Rate Payer's demand deposit account with Floating Rate
Payer, or by wiring funds to a designated Fixed Rate Payer account.
3. EARLY TERMINATION.
(a) This Agreement shall expire on the Termination Date and
neither party may terminate this Agreement prior thereto; provided, however that
in the event that either Floating Rate Payer or Fixed Rate Payer fail to make
any payment when due hereunder or otherwise fail to perform any of their
obligations hereunder, unless such default is cured within five Business Days of
the defaulting party's receipt of written notice thereof, the non-defaulting
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party may, so long as such default in then continuing, upon five Business Days
written notice terminate this Agreement.
(b) In the event of an early termination of this Agreement
pursuant to Paragraph 3(a), the defaulting party shall promptly pay the
non-defaulting party, on demand, an amount equal to the Termination Amount. Each
party hereto acknowledges the Termination Amount to be a reasonable estimate of
the value, costs and loss of compensation incurred by the other party as a
result of the early termination of this Agreement.
(c) "Termination Amount" means the amount in U.S. Dollars
equal to the arithmetic mean of the respective one-time all-in fees (including
documentation costs) communicated to the non-defaulting party on the earliest
practicable Business Day following the Early Termination Date by each of three
leading commercial banks or investment banking firms in San Francisco, Los
Angeles or New York selected in good faith by the non-defaulting party as the
fee that it would charge to assume, as of the Early Termination Date, all of the
rights and obligations of the defaulting party. However, if one or more such
entities fail so to communicate such a fee, the Termination Amount shall be
determined on the basis of those fees so communicated by the other entities.
4. LIMITATIONS OF LIABILITY. In no event shall either party hereto be
liable to the other for loss of profit or indirect, special, consequential,
punitive or exemplary damages, arising out of any default under this Agreement.
5. NOTICES. All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed served when
personally delivered or, if mailed, upon the first to occur of receipt or the
expiration of seventy-two hours after deposit in the United States Postal
Service, certified mail, or if sent by overnight courier service, upon the first
to occur of receipt or 3:00 p.m. (local time at place of delivery) the next
Business Day, addressed to Floating Rate Payer or Fixed Rate Payer at their
respective addresses set forth in the Swap Confirmation.
6. SUCCESSORS; ASSIGNS. This Agreement shall be binding on and inure to
the benefit of the successors and assigns of the parties; provided, however,
that Fixed Rate Payer shall not, without the prior written consent of Floating
Rate Payer, assign (whether by operation of law or otherwise) its rights and
obligations under this Agreement or any interest herein and any such attempted
assignment shall be void and without force or effect.
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
any choice of law doctrine.
8. NO THIRD PARTY BENEFICIARY. This Agreement and the payments to be
made by the parties hereunder are solely for the benefit of the parties hereto
for the purposes stated herein and no other person or entity shall have any
rights hereunder or be a beneficiary of either party's obligations under this
Agreement.
9. COUNTERPARTS. This Agreement and the Swap Confirmation may be
executed in any number of counterparts and by each party hereto on separate
counterparts, each of which when executed and delivered shall constitute an
original, but all the counterparts shall together constitute but one and the
same instrument.
10. AMENDMENTS; WAIVERS. Any amendment or waiver of any right under any
provision of this Agreement shall be in writing and, in the case of an
amendment, signed by both parties hereto, or in the case of a waiver, signed by
the party waiving such right. No failure or delay by either party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
11. TRADE DATE; INTEREST AGREEMENT NOT CREDIT COMMITMENT. This
Agreement shall be effective at, and as of, 12:01 a.m., California time, on the
Trade Date. Nothing in this Agreement shall be construed to (i) mean that
Floating Rate Payer is committed to make a loan or extend any other credit to
Fixed Rate Payer, or (ii) amend or modify any contract, instrument or document
executed in connection with the Loan Facility.
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12. COSTS, EXPENSES AND ATTORNEYS' FEES. In the event of any dispute or
litigation between the parties hereto, the prevailing party shall be entitled to
recover from the other party, immediately upon demand, all costs and expenses,
including reasonable attorneys' fees, incurred by the prevailing party in
connection with the enforcement of its rights and/or the collection of any
amounts which become due to it under this Agreement, and the prosecution or
defense of any action in any way related to this Agreement, including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to such
other party.
13. ENTIRE AGREEMENT. This Agreement and the Swap Confirmation
constitute the entire agreement and understanding of the parties with respect to
its subject matter and supersedes all oral communications and prior writings
with respect thereto.
14. SECURITY. Unsecured.
15. NO RELIANCE. In connection with the negotiation of and entering
into this Agreement, (i) Fixed Rate Payer acknowledges that the Floating Rate
Payer is not acting as a fiduciary or a financial or investment advisor for it;
(ii) Fixed Rate Payer is not relying upon any advice, counsel or representations
(whether written or oral) of the Floating Rate Payer hereto other than the
representations expressly set forth in this Agreement, and in any Confirmation;
(iii) the Floating Rate Payer has not given Fixed Rate Payer any advice or
counsel as to the expected or projected success, return, performance, result,
consequence or benefit (either legal, regulatory, tax, financial, accounting, or
otherwise) of this Agreement; (iv) Fixed Rate Payer has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent is has deemed necessary and has made its own investment, hedging,
and trading decisions (including decisions regarding suitability of any
Transaction pursuant to this Agreement) based upon its own judgment and upon any
advice from such advisors as it has deemed necessary and not upon any view
expressed by the other party hereto; (v) Fixed Rate Payer has determined that
the rates, prices, or amounts and other terms of each Transaction in the
indicative quotations (if any) provided by Floating Rate Payer hereto reflect
those in the relevant market for similar Transactions, and all trading decisions
have been the result of arms length negotiations between the parties; (vi) Fixed
Rate Payer is entering into this Agreement with a full understanding of all of
the terms, conditions and risks thereof (economic and otherwise), and Fixed Rate
Payer is capable of assuming and willing to assume (financially and otherwise)
those risks; and (vii) Fixed Rate Payer is a sophisticated investor.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
Floating Rate Payer: Fixed Rate Payer:
WELLS FARGO BANK, PUBLIC STORAGE PROPERTIES IV, LTD.
NATIONAL ASSOCIATION
By: Public Storage, Inc.,
general partner
By: /s/ Steven D. Berg By: /s/ David P. Singelyn
------------------ ---------------------
Name: Steven D. Berg Name: David P. Singelyn
Its: Vice President Its: Vice President and Treasurer
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[Wells Fargo Bank Letterhead]
September 18, 1998
David Singelyn
Public Storage Properties IV, Ltd.
701 Western Avenue
2nd Floor
Glendale, CA 91201
VIA FAX: (818) 244-9267
Dear David,
The purpose of this letter agreement is to confirm the terms and conditions
of the Swap Transaction entered into between Wells Fargo Bank, N.A. ("Floating
Rate Payer") and Public Storage Properties IV, Ltd. ("Fixed Rate Payer"). This
Swap Transaction is effective at, and as of 12:01 a.m., California time, on the
Trade Date specified below.
This confirmation supplements, forms part of, and is subject to Wells
Fargo's customary form of Swap Interest Rate Agreement, a copy of which will
follow via overnight mail. In the absence of any other such agreement, this
communication itself constitutes a binding agreement setting forth the essential
terms of the Swap Transaction.
The terms of the Swap Transaction to which this Swap Confirmation relates
are as follows:
Trade Date: September 18, 1998
Effective Date: September 18, 1998
Termination Date: September 18, 2000 (exclusive)
Swap Amount: $11,500,000 - initial notional
amount - please refer to attached
Schedule I.
Fixed Amounts:
Fixed Rate Payer: Public Storage IV, Ltd.
Fixed Rate: 5.22%
Day Count Convention: Actual/360
Business Day Convention: Following
Calculation Period: From the 18th day of each month,
beginning with September 18, 1998, up
to the 18th day of the following
month, continuing until the
Termination Date, subject to
adjustment in accordance with the
designated Business Day Convention.
Floating Amounts:
Floating Rate Payer: Wells Fargo Bank
Floating Rate: LIBOR
Floating Rate Maturity: 1-month
Reset Date: The 18th of each month, subject to
adjustment in accordance with the
designated Business Day Convention.
The first reset date is September 18,
1998.
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Day Count Convention: Actual/360
Business Day Convention: Following
Calculation Period: From the 18th day of each month,
beginning with September 18, 1998, up
to the 18th day of the following
month, continuing until the
Termination Date, subject to
adjustment in accordance with the
designated Business Day Convention.
Net Swap Settlement Payment
Dates: The 18th day of each month,
beginning with October 19, 1998,
continuing up to and including the
Termination Date, subject to
adjustment in accordance with the
designated Business Day convention.
Account Details:
Payments to Fixed Rate Payer: Credit DDA# 4648-058-048
Payments to Floating Rate Payer: Debit DDA# 4648-058-048
Addresses for Notices:
Fixed Rate Payer: Public Storage Properties IV, Ltd.
701 Western Avenue
2nd Floor
Glendale, CA 91201
Attention: David Singelyn
(818) 244-8080 ext. 385
FAX: (818) 244-9267
Floating Rate Payer: Wells Fargo Bank, National Association
420 Montgomery Street, 6th Floor
MAC: 0101-063
San Francisco, CA 94163
Attention: Steven D. Berg
(415) 394-4020
FAX: (415) 956-9581
Please confirm that the foregoing correctly sets forth the terms of our
agreement by signing this facsimile and sending it as a return acknowledgment to
Kelly Johnson's attention (FAX: (415) 956-9581). Swap agreement documents will
follow via overnight delivery. If you have any questions, please call me at
(415) 394-4020.
Sincerely,
/s/ Steven D. Berg
CONFIRMED BY: Public Storage, Inc., general partner
BY: /s/ David P. Singelyn
---------------------
NAME: David P. Singelyn
TITLE: Vice President and Treasurer
DATE: September 18, 1998
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