SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (the "Second Amendment") is made
and entered into as of the 17 day of July 1997 by and between Sanwa Bank
California, a California banking corporation (the "Bank"), and BRE Properties,
Inc., a Maryland corporation (the "Borrower").
RECITALS
A. Pursuant to a Credit Agreement dated as of the 9th day of April, 1996
(as amended by that certain First Amendment to Credit Agreement dated as of the
12th day of December, 1996, as further modified or waived from time to time, the
"Credit Agreement"), the Bank agreed to extend credit to the Borrower on the
terms and conditions contained therein.
B. The parties desire to amend the Credit Agreement, as more particularly
described below.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. AMENDMENTS.
1(a) CREDIT LIMIT. To increase the Credit Limit (as such term is defined
in and as all other capitalized terms used in this Second Amendment but not
otherwise defined herein are defined in the Credit Agreement), the definition of
"Credit Limit" in Section 1.1 is amended to read as follows:
"'CREDIT LIMIT' shall mean $35,000,000, as such amount shall be
modified from time to time pursuant to this Agreement."
1(b) EXPIRATION DATE. To extend the Expiration Date, the definition of
"Expiration Date" in Section 1.1 is amended to read as follows:
"'EXPIRATION DATE' shall mean April 30, 2000, as such date may be
extended in the sole discretion of the Bank."
1(c) INTEREST RATE. To change the interest rate payable by the Borrower on
Loans, the definition of "LIBOR Rate Spread" is amended to read as follows:
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"'LIBOR RATE SPREAD' shall mean, until June 30, 1998, .0.80% and,
thereafter, on any date, the applicable percentage set forth below
based upon the Ratings in effect on such date:
"Category LIBOR Rate Spread
------------- --------------------
A+ or higher by S&P 0.60%
A1 or higher by Moody's
A+ or higher by D&P
A by S&P 0.65%
A2 by Moody's
A by D&P
A- by S&P 0.70%
A3 by Moody's
A- by D&P
BBB+ by S&P 0.80%
Baa1 by Moody's
BBB+ by D&P
BBB by S&P 0.95%
Baa2 by Moody's
BBB by D&P
BBB- by S&P 1.10%
Baa3 by Moody's
BBB- by D&P
Lower than BBB- by S&P 1.40%
Lower than Baa3 by Moody's
Lower than BBB- by D&P
"For purposes of the foregoing, if any Rating established or deemed to
have been established by any Rating Agency shall be changed (other
than as a result of a change in the rating system of such Rating
Agency), such change shall be effective as of the date on which such
change is first announced by the Rating Agency making such change.
Each change in the LIBOR Rate Spread shall apply to all LIBOR Rate
Loans that are outstanding at any time during the period commencing
on the effective date of such change and ending on the date
immediately preceding the effective date of such change. If the rating
system of any Rating Agency shall change, or if either such Rating
Agency shall cease rating the corporate debt obligations of the
Borrower (other than by reason of any action or
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nonaction by the Borrower following or in anticipation of a ratings
downgrade), the parties hereto shall negotiate in good faith to amend
the references to specific ratings in this definition (including by
way of substituting another Rating Agency mutually acceptable to the
Borrower for the Rating Agency with respect to which the rating system
has changed or for which no Rating is then in effect) to reflect such
changed rating system or the nonavailability of Ratings from such
Rating Agency, and pending agreement on such amendment, the Rating in
effect immediately prior to such change or cessation will be used in
determining the LIBOR Rate Spread. If any Rating Agency shall not
have a rating in effect by reason of any action or nonaction by the
Borrower following or in anticipating of a ratings downgrade, then
such Rating Agency shall be deemed to have established a Rating in the
lowest category with the highest interest rate.
"If the Borrower's senior long-term debt has only one Rating, then
LIBOR Rate Spread shall be determined by reference solely to such
Credit Rating.
"If the Borrower's long-term unsecured debt has two or more Ratings,
(i) if the Ratings are in the same Category, then the related LIBOR
Rate Spread shall apply; (ii) if the Ratings differ, then the highest
applicable LIBOR Rate Spread resulting shall apply.
"If the Borrower's long-term unsecured debt has no Rating, then the
highest LIBOR Rate Spread shall apply.
"For purposes of this definition, the following terms shall have the
following meanings:
"'D&P' shall mean Duff & Xxxxxx Rating Agency
"'XXXXX`S' shall mean Xxxxx'x Investors Service, Inc.
"'RATING AGENCIES' shall mean D&P, Moody's and S&P and any substitute
rating agencies agreed upon by the Borrower and the Bank.
"'RATINGS' shall mean the rating from time to time established by the
Rating Agencies by the Borrower's long term unsecured debt.
"'S&P' shall mean Standard and Poor's Ratings Group."
1(d) UNUSED FEES. To change the fees payable by the Borrower to the Bank,
Section 3.8(1) is amended to read as follows:
"(1) UNUSED FEES. The Borrower shall pay to the Bank an unused
credit fee on the average daily amount by which the Credit Limit
exceeds
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the sum of outstanding Loans and Letter of Credit Obligations,
computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter, based upon the daily utilization for such
quarter, equal to .125% per annum. Such fee shall accrued from the
date of the Second Amendment to this Agreement and shall be due and
payable quarterly in arrears on the last Business Day of each calendar
quarter, commencing on September 30, 1997 with the final payment to be
made on the Maturity Date."
1(e) REPORTING. To delete certain reporting requirements, Section 6.1(d)
is deleted in its entirety.
1(f) FINANCIAL COVENANTS.
(1) To change Indebtedness permitted under the Agreement, Section 7.6
is amended to read as follows:
"7.6 INDEBTEDNESS. Not create, incur, assume or suffer to
exist, or otherwise come or liable or, with respect to Indebtedness
not secured by a Lien, accept a commitment for, or cause any
Subsidiary to liable in respect of any Indebtedness or accept any such
commitment except:
"(a) The Obligations;
"(b) Trade debt incurred in the ordinary course of
business and outstanding less than thirty (30) days after the
same has become due and payable or which is being contested in
good faith, provided provision is made to the satisfaction of
the Bank for the eventual payment thereof in the event it is
found that such contested trade debt is payable by the Borrower
or Subsidiary;
"(c) Indebtedness secured by Liens permitted under
Section 7.5 above;
"(d) Unsecured Indebtedness which is incurred under lines
of credit with financial institutions with an aggregate amount of
unused commitments and outstandings not to exceed $150,000,000;
"(e) Non-revolving, non-amortizing Indebtedness with a
maturity or call date not earlier than five (5) years after the
date incurred;
"(f) Non-revolving, amortizing Indebtedness in favor of
the Prudential Insurance Company."
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(2) To replace the financial covenants of the Borrower, Section 7.13
is amended to read as follows:
"7.13 FINANCIAL COVENANTS. Not, on a consolidated basis for the
Borrower and its Subsidiaries:
"(a) As at the end of any fiscal quarter of the Borrower
permit its Effective Tangible Net Worth to be less than
$400,000,000 plus 85% of the Net Proceeds of Capital Stock.
"(b) As at the end of any fiscal quarter, permit the Net
Operating Income of Unencumbered Real Property, for the preceding
four fiscal quarters, to be less than 175% of the Unsecured
Interest Expense for such period.
"(c) At any time, permit aggregate Indebtedness to exceed
50% of Total Assets.
"(d) As at the end of any fiscal quarter, permit the ratio
of EBITDA to Debt Service for the preceding four fiscal quarters
to be less than 1.80 to 1.00.
"(e) Permit the ratio of (i) Aggregate Distributions to
Shareholders for any consecutive four (4) fiscal quarter to (ii)
FFO for such four (4) fiscal quarters to exceed .95 to 1.00.
"(f) At any time, permit the number of Development Units
to exceed 20% of the number of Wholly-Owned Units (disregarding
all Wholly-Owned Units which are Under Construction)."
(3) To change the definition of "Permitted Liens" which may be
secured by Liens, clause (iv) of the definition of "Permitted Liens" is amended
to read as follows:
"(iv) Liens on real estate securing Indebtedness in an aggregate
amount outstanding at any one time not to exceed 30% of the Borrower's
and its Subsidiaries' Total Assets."
(4) In connection with the foregoing change in the financial
covenants, the following definitions are added to Section 1.1 in their correct
alphabetical order:
"'Aggregate Distributions to Shareholders' shall mean (a) any
Dividend Payments in respect of the Borrower or any Subsidiary of the
Borrower (other than on account of capital stock or other equity
interests of a Subsidiary of the Borrower or another Subsidiary of the
Borrower), including, without limitation, any Dividend Payments
resulting in the
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acquisition by the Borrower of securities which would constitute
treasury stock, and (b) any payment, repayment, redemption,
retirement, repurchase or other acquisition, direct or indirect, by
the Borrower or any Subsidiary of, on account of, or in respect of,
the principal of any subordinated debt (or any installment thereof)
prior to the regularly scheduled maturity date thereof (as in effect
on the date such subordinated debt was originally incurred). For
purposes of this Agreement, the amount of any Aggregate Distributions
to Shareholders made in property shall be the greater of (x) the fair
market value of such property (as determined in good faith by the
board of directors (or equivalent governing body) of the Person making
such distribution) and (y) the net book value thereof on the books of
such Person, in each case determined as of the date on which such
distribution is made.
"'Debt Service' shall mean, with respect to any period, the sum
of the following (a) Interest Charges for such period and (b) all
payments of principal in respect of Debt of the Borrower and its
Subsidiaries (including the principal component of any payments in
respect of capital lease obligations) paid or payable during such
period after eliminating all offsetting debits and credits between the
Borrower and its Subsidiaries and all other items required to be
eliminated in the course of the preparation of consolidated financial
statements of the Borrower and its Subsidiaries in accordance with
GAAP.
"'Interest Charges' shall mean, with respect to any period, the
sum (without duplication) of the following (in each case, eliminating
all offsetting debits and credits between the Borrower and its
Subsidiaries, all other items required to be eliminated in the course
of the preparation of consolidated financial statements of the
Borrower and its Subsidiaries in accordance with GAAP) (a) all
interest in respect of Debt of the Company and its Subsidiaries
deducted in determining Net Income for such period and (b) all debt
discount and expense with respect to Debt amortized or required to be
amortized in the determination of Net Income for such period.
"'Net Proceeds of Capital Stock' shall mean, with respect to any
period ending on or after March 31, 1997, cash proceeds (net of all
costs and out-of-pocket expenses in connection therewith, including,
without limitation, placement, underwriting and brokerage fees and
expenses), received by the Borrower and its Subsidiaries during such
period, from the sale of all capital stock of the Borrower, including
in such net proceeds (i) the net amount paid upon issuance and
exercise during such period of any right to acquire any capital stock,
or paid during such period to convert a convertible debt security to
capital stock and (ii) any amount paid to the Borrower upon issuance
of any convertible debt securities and thereafter converted to capital
stock during such period.
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"'Swap' shall mean, with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps and
similar obligations obligating such Person to make payments, whether
periodically or upon the happening of a contingency. For the purposes
of this Agreement, the amount of the obligation under any Swap shall
be the amount determined in respect thereof as of the end of the then
most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating
to such Swap provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each
such case, the amount of such obligation shall be the net amount so
determined.
"'Total Assets' shall mean the total assets of the Borrower and
its Subsidiaries which would be shown as assets on a consolidated
balance sheet of the Borrower and its Subsidiaries determined on a
current value basis.
"'Unsecured Interest Expense' shall mean, with respect to any
period, the Interest Charges calculated for Unsecured Debt.
"'Unsecured Debt' shall mean Debt not secured directly or
indirectly by a Lien, including, without limitation, Debt under (i)
this Agreement and (ii) that certain Credit Agreement dated as of
___________, 199_ between the Borrower and Bank of America National
Trust and Savings Association."
2. EFFECTIVE DATE. This Second Amendment shall be effective as of
the date first written above, provided that as of such date the Borrower shall
have delivered to Bank:
(a) Duly executed copies of this Second Amendment;
(b) Certified copies of resolutions of the Board of Directors of the
Borrower approving the execution and delivery of this Second Amendment;
(c) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and the signatures of the Officers of the Borrower
authorized to sign this Second Amendment; and
(d) Such other documents, certificates and agreements that the Bank
may reasonably request.
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3. NO OTHER AMENDMENT. Except as expressly amended herein, the
Credit Agreement and all documents, instruments and agreements relating thereto
or executed in connection therewith shall remain in full force and effect as
currently written.
4. REPRESENTATIONS AND WARRANTIES. As of the effective date of this
Second Amendment, the Borrower hereby represents and warrants to the Bank as
follows:
(a) The Borrower has the corporate power and authority and the
legal right to execute, deliver and perform this Second Amendment and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Second Amendment and the Credit Agreement as amended hereby.
This Second Amendment has been duly executed and delivered on behalf of the
Borrower and constitutes the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with its respective
terms.
(b) At and as of the date of execution hereof and at and as of
the effective date of this Second Amendment and both prior to and after giving
effect to this Second Amendment: (1) the representations and warranties of the
Borrower contained in the Credit Agreement are accurate and complete in all
respects, and (2) there has not occurred an Event of Default or Potential Event
of Default under the Credit Agreement.
5. MISCELLANEOUS.
(a) COUNTERPARTS. This Second Amendment may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and all of which when taken together shall constitute one and the
same agreement.
(b) GOVERNING LAW. This Second Amendment shall be governed
by and construed in accordance with the laws of the State of California, without
giving effect to choice of law rules.
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IN WITNESS WHEREOF, this Second Amendment has been executed by the parties
hereto as of the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA BRE PROPERTIES, INC.
By: By: Xxxxx XxXxxxxx
----------------------------------
Title: Title: President
---------------------------------
By: By: XxXxx Xxxxxxx
---------------------------------
Title: Title: Executive Vice President
------------------------------- and Secretary
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