Exhibit 10.23
CREDIT AGREEMENT
This CREDIT AGREEMENT (the "AGREEMENT") is made and entered into as of
the 9th day of April, 1996 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 that certain Line of Credit Agreement dated as of June
21, 1991 between the Bank and the predecessor in interest of the Borrower
(as amended, the "Line of Credit Agreement"), Bank agreed to extend a
revolving line of credit (the "Original Line Commitment") to the Borrower
secured by a Collateral Pool (as therein defined).
B. The Bank has agreed to extend an unsecured line of credit to the
Borrower pursuant to the terms of this Agreement.
C. At the request of the Borrower, the initial extensions of credit
under this Agreement shall be applied to repay in full all obligations of the
Borrower under the Line of Credit Agreement; thereupon, the Original Line
Commitment shall be terminated, and the lien of the Bank on the Collateral
Pool will be released.
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:
1. DEFINITIONS
1.1 DEFINITIONS. The following terms, as used in this Agreement, shall
have the following meanings:
"AFFILIATE" shall mean any corporation, association, partnership, joint
venture or other business entity of which more than 20% of the voting stock
or other equity interests (in the case of entities other than corporations)
is owned or controlled directly or indirectly by the Borrower, or one or more
of the Subsidiaries of the Borrower, or a combination thereof.
"APPLICABLE LIBOR RATE" shall mean, with respect to any Interest Period
for a LIBOR Loan, the rate per annum (rounded upward, if necessary, to the
next higher 1/100 of one percent (0.01%)) equal to the LIBOR Rate for such
Interest Period plus the LIBOR Rate Spread.
"BUSINESS DAY" shall mean a day other than a Saturday or Sunday on which
the Bank is open for business in Los Angeles, California.
"CAPITAL LEASE" shall mean a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
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"CPLTD" shall mean all Debt which, by its terms or by the terms of any
instrument or agreement relating thereto, matures on demand or within one
year from the date of determination and is not directly or indirectly
renewable or extendible at the option of the obligor in respect thereof to a
date one year or more from such date.
"CREDIT LIMIT" shall mean $30,000,000, as such amount shall be modified
from time to time pursuant to this Agreement.
"DEBT" shall mean, with respect to the Borrower on a consolidated basis,
without duplication (a) its liabilities for borrowed money; (b) its
liabilities for the deferred purchase price of property acquired (excluding
accounts payable arising in the ordinary course of business but including,
without limitation, all liabilities created or arising under any conditional
sale or other title retention agreement with respect to any such property);
(c) its obligations to make payments under Capital Leases; (d) all
liabilities for borrowed money secured by any Lien with respect to any
property owned by the Borrower or any of its Subsidiaries (whether or not it
has assumed or otherwise become liable for such liabilities); and (e) any
Guaranty of such Person with respect to liabilities of a type described in
any of clauses (a) through (d) hereof. Debt shall include all obligations of
the character described in clauses (a) through (e) to the extent that the
Borrower or any of its Subsidiaries remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be extinguished under
GAAP.
"DEFAULT INTEREST RATE" shall mean a rate per annum equivalent to the
Reference Rate plus 3%, adjusted concurrently with any change in the
Reference Rate and calculated on the basis of 360 days per year but charged
on the actual number of days elapsed.
"DEVELOPMENT UNITS" shall mean housing units Under Construction by the
Borrower, any of its Subsidiaries or any Person in which the Borrower is a
general partner, joint venturer or otherwise fully liable for the
Indebtedness of such Person.
"DIVIDEND PAYMENTS" shall mean (a) dividends or other distributions or
payments on capital stock or other equity interest thereof (except
distributions in such stock or other equity interest); and (b) the redemption
or acquisition of such stock or other equity interests or of warrants, rights
or other options to purchase such stock or other equity interests (except
when solely in exchange for such stock or other equity interests) unless
made, contemporaneously, from the net proceeds of a sale of such stock or
other equity interests.
"DRAWING" shall mean the presentation of a draft(s) together with any
accompanying documents by a beneficiary under a Letter of Credit seeking
payment under such Letter of Credit.
"EBITDA" shall mean the sum of (a) net income of the Borrower and its
Subsidiaries, on a consolidated basis, for the relevant period, plus (b)
interest expense deducted in determining such net income plus (c) tax
provision deducted in determining such net income plus (d) depreciation and
amortization deducted in determining such net income.
"EFFECTIVE TANGIBLE NET WORTH" shall mean the Borrower's consolidated
stated net worth plus Subordinated Debt but less all intangible assets of the
Borrower and its Subsidiaries (i.e. goodwill, trademarks, patents,
copyrights, organization expenses and similar intangible items).
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"ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release of
Hazardous Materials or injury to the environment as a result thereof.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in Section 5.9 below.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as it may from time to time be amended, supplemented or otherwise modified or
replaced.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 8 below.
"EXPIRATION DATE" shall mean April 30, 1999, as such date may be
extended in the sole discretion of the Bank.
"FFO" shall mean "funds from operations" as such terms are defined by
NAREIT from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or other political subdivision thereof, any central bank (or similar monetary
or regulatory authority thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"GAAP" shall mean generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the American
Institute of Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board (or agencies with similar
functions of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which
are applicable to the circumstances as of the date of determination.
"GUARANTY" shall mean, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in
effect guaranteeing any Indebtedness, dividend or other obligation of any
other Person in any manner, whether directly or indirectly.
"HAZARDOUS MATERIAL" shall mean any flammable materials (excluding wood
products normally used in construction), explosives, radioactive materials,
hazardous wastes, toxic substances or related materials, including, without
limitation, any substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," or "toxic
substances" under any applicable federal, state, county, regional or local
laws, ordinances, regulations or guidelines.
"INDEBTEDNESS" shall mean, with respect to the Borrower and its
Subsidiaries, all items of indebtedness which, in accordance with GAAP, would
be included in determining liabilities as shown on the liability side of a
statement of condition thereof as of the date as of which indebtedness is to
be determined, including, without limitation, all Debt of the Borrower and
its Subsidiaries.
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"INTEREST PERIOD" shall mean with respect to any LIBOR Loan, the period
commencing on the date advanced and ending one, two, three, six or twelve
months thereafter, as designated in the relevant Loan Request; provided,
however, that (1) any Interest Period which would otherwise end on a day
which is not a LIBOR Business Day shall be extended to the next succeeding
LIBOR Business Day unless by such extension it would fall in another calendar
month, in which case such Interest Period shall end on the immediately
preceding LIBOR Business Day, (2) any Interest Period applicable to a LIBOR
Loan which begins on a day for which there is no numerically corresponding
day in the calendar month during which such Interest Period is to end shall,
subject to the provisions of clause (1) hereof, end on the last day of such
calendar month, and (3) no such Interest Period shall extend beyond the
relevant Expiration Date.
"L/C SUBLIMIT" shall mean $2,000,000, as such amount shall be reduced
from time to time pursuant to the terms of this Agreement.
"L/C DOCUMENTS" shall have the meaning given such term in SECTION 3.2
below.
"LETTER OF CREDIT" shall mean a letter of credit issued by the Bank for
the account of the Borrower pursuant to the terms of this Agreement.
"LETTER OF CREDIT OBLIGATIONS" shall mean, at any time, the aggregate
obligations of the Borrower then outstanding, or which may thereafter arise
in respect of Letters of Credit then issued by the Bank, to reimburse the
amount paid by the Bank with respect to a past, present or future Drawing
under Letters of Credit.
"LETTER OF CREDIT REQUEST" shall mean a request for a Letter of Credit
in form satisfactory to the Bank.
"LIBOR BUSINESS DAY" shall mean a Business Day upon which commercial
banks in London, England, New York, New York and Los Angeles, California are
open for domestic and international business.
"LIBOR LOANS" shall mean Loans hereunder at such time as they are made
and/or being maintained at a rate of interest based upon the LIBOR.
"LIBOR RATE" shall mean with respect to any Interest Period for a LIBOR
Loan, the rate per annum (rounded upward, if necessary to the next higher
1/100 of one percent (0.01%); calculated in accordance with the following
formula:
LIBOR = IR
------
1 - IRP___
WHERE
IR = with respect to any Interest Period for a LIBOR Loan, the rate
per annum quoted to the Bank by major banks in the interbank eurocurrency
market at approximately 11:00 a.m. London time two LIBOR Business Days prior
to the first day of the proposed Interest Period for LIBOR Loans for deposits
in immediately available U.S. Dollars in an amount equal to the aggregate
amount of LIBOR Loans proposed to be subject to such rate during such
Interest Period.
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IRP = for any day, that percentage, expressed as a decimal, which
is in effect on such day, as specified by the Board of Governors of the
Federal Reserve System for determining the maximum aggregate reserve
requirement which is imposed on eurocurrency liabilities.
"LIBOR RATE SPREAD" shall mean 1.00% per annum.
"LIEN" shall mean any security interest, mortgage, pledge, lien, claim on
property, charge or encumbrance (including any conditional sale or other title
retention agreement), any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction.
"LOAN" shall have the meaning set forth in SECTION 2.1 below
"LOAN DOCUMENTS" has the meaning set forth in SECTION 4.1 below.
"LOAN REQUEST" shall mean written request for a loan in form and
substance satisfactory to the Bank.
"MARKET CAPITALIZATION" shall mean, as of any date, the then current
market value of the capital stock of the Borrower calculated by multiplying
the number of shares of such stock outstanding (but excluding treasury stock
and capital stock subscribed and unissued) times the price for such stock as
quoted in the Wall Street Journal (Western Edition) (or any successor
publication) as of the close of trading on the Business Day immediately
preceding the date of determination.
"NAREIT" shall mean the National Association of Real Estate Investment
Trusts.
"NET EQUITY INVESTMENTS" shall mean the net equity investments in
Property of the Borrower and its Subsidiaries, on a consolidated basis, as
set forth from time to time in the financial statements filed with the
Securities and Exchange Commission in the form of Forms 10K and 10Q, or any
successor forms, or if no such filings are made, on the financial statements
of the Borrower otherwise delivered to the Bank pursuant to the terms of this
Agreement.
"NET OPERATING INCOME OF UNENCUMBERED PROPERTY" shall mean, with
reference to any period, the net income (or loss) of the Borrower and its
Subsidiaries from operation of Unencumbered Property during such period
(taken as a cumulative whole), as determined in accordance with GAAP, 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; provided that there shall be excluded
(i) the income (or loss) of any Person accrued prior to the date it becomes a
Subsidiary or is merged into or consolidated with the Borrower or a
Subsidiary, and the income (or loss) of any Person, substantially all of the
assets of which have been acquired in any manner, realized by such other
Person prior to the date of acquisition, (ii) the income (or loss) of any
Person (other than a Subsidiary) in which the Borrower or any Subsidiary has
an ownership interest, except to the extent that any such income has been
actually received by the Borrower or such Subsidiary in the form of cash
dividends or similar cash distributions, (iii) the undistributed earnings of
any Subsidiary to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the
terms of its charter or any
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agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary, (iv) any restoration to income of
any contingency reserve, except to the extent that provision for such reserve
was made out of income accrued during such period, (v) any aggregate net
gain (including any aggregate net loss) during such period arising from the
sale, conversion, exchange or other disposition of capital assets (such term
to include, without duplication, (y) all non-current assets and, without
duplication (z) the following whether or not current: all fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets, and all securities), (vi) any net gain from the
collection of the proceeds of life insurance policies, (vii) any gain arising
from the acquisition of any security, or the extinguishment, under GAAP, of
any Indebtedness of the Borrower or any Subsidiary, (viii) any net income or
gain (but not any net loss) during such period from (w) any change in
accounting principles in accordance with GAAP, any prior period adjustments
resulting from any change in accounting principles in accordance with GAAP,
(y) any extraordinary items, or (z) any discontinued operations or the
disposition thereof, (ix) any deferred credit representing the excess of
equity in any Subsidiary at the date of acquisition over the cost of the
investment in such Subsidiary, (x) in the case of a successor to the Borrower
by consolidation or merger or as a transferee of its assets, any earnings of
the successor corporation prior to such consolidation, merger or transfer of
assets, and (xi) any portion of such net income that cannot be freely
converted into United States Dollars.
"OBLIGATIONS" shall mean all amounts owing by the Borrower to the Bank
pursuant to this Agreement including, but not limited to Loans and the Letter
of Credit Obligations.
"ORDINARY COURSE OF BUSINESS" shall mean, in respect of any transaction
involving the Borrower or any Subsidiary, the ordinary course of the
Borrower's or such Subsidiary's business, as conducted by the Borrower or
such Subsidiary in accordance with past practice and undertaken by the
Borrower or such Subsidiary in good faith.
"OUTSTANDING LETTERS OF CREDIT" shall mean (i) any Letter of Credit
which has not been canceled, expired un-utilized or fully drawn down and (ii)
the amount of any unreimbursed Drawings.
"PERMITTED LIENS" shall mean:
(i) Liens and security interests securing indebtedness owed by the
Borrower to the Bank;
(ii) Liens for taxes, assessments or similar charges either not yet
due or being contested in good faith;
(iii) Liens of materialmen, mechanics, warehousemen, or carriers or
other like Liens arising in the Ordinary Course of Business and securing
obligations which are not yet delinquent;
(iv) Liens securing Indebtedness in an aggregate amount outstanding
at any one time not to exceed 40% of the Borrower's and its Subsidiaries
consolidated Net Equity Investments as of the end of the Borrower's fiscal
quarter immediately preceding the date of determination;
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(v) Liens on equipment leased by the Borrower to the extent rents
payable in connection therewith which are not otherwise prohibited under
Section 7; and
(vi) Liens which, as of the date hereof, have been disclosed to and
approved by the Bank in writing or which may hereafter be approved by the
Bank in writing.
"PERSON" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture
or Governmental Authority.
"POTENTIAL EVENT OF DEFAULT" shall mean an event or occurrence which
with the passage of time or the giving of notice or of both would become an
Event of Default.
"PROPERTY" shall mean, collectively and severally, any and all real
property, including all improvements and fixtures thereon, owned, occupied,
or leased by the Borrower.
"REFERENCE RATE" shall mean an index for a variable interest rate which
is quoted, published or announced from time to time by the Bank as its
reference rate and as to which loans may be made by the Bank at, below or
above such rate.
"REFERENCE RATE LOANS" shall mean Loans bearing interest calculated
based on the Reference Rate.
"SUBORDINATED DEBT" shall mean such liabilities of the Borrower which
have been subordinated to those owed to the Bank in a manner acceptable to
the Bank.
"SUBSIDIARY" shall mean, as to any Person, any corporation, association
or other business entity in which such Person or one or more of its
Subsidiaries or such person and one or more of its Subsidiaries own
sufficient equity or voting interests to enable it or them (as a group)
ordinarily, in the absence of contingencies, to elect a majority of the
directors (or Persons performing similar functions) of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries (unless such partnership can
and does ordinarily take major business actions without the prior approval of
such Person or one or more of its Subsidiaries).
"UNDER CONSTRUCTION" shall mean that a Person has agreed to incur, or
has incurred, any liability to (i) obtain entitlement to develop land, (ii)
improve land, or (iii) construct one or more buildings on land. The number
of housing units deemed Under Construction, as of any date of determination,
shall be the maximum number of housing units that the Borrower reasonably
determines can or will be constructed on such land.
"UNENCUMBERED PROPERTY" shall mean a Property fee title to which is
vested in the Borrower or any of its Wholly-Owned Subsidiaries and which is
free and clear of all Liens except for Liens for taxes, assessments or
similar charges either not yet due or being contested in good faith;
"WHOLLY-OWNED UNITS" shall mean housing units, whether Under
Construction or complete, on Properties fee title to which is fully vested in
the Borrower or any of its Wholly-Owned Subsidiaries.
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"WHOLLY OWNED SUBSIDIARY" shall mean any Subsidiary of the Borrower, all
of the equity securities (except director's qualifying shares) of which are
owned by the Borrower and/or the Borrower's other Wholly-Owned Subsidiaries.
1.2 ACCOUNTING TERMS. All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein
shall mean such financial statements or such items prepared or determined in
accordance with GAAP consistently applied, and, except where otherwise
specified, all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
1.3 OTHER TERMS. Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Uniform Commercial Code.
2. CREDIT FACILITIES.
2.1 CREDIT LIMITS.
(a) REVOLVING LOANS. On the terms and subject to the conditions
set forth herein, the Bank agrees that it shall, from time to time, to and
including the Expiration Date (as such term and capitalized terms not
otherwise defined herein are defined in Section 1 above) make revolving loans
(each a "Loan" and, collectively, the "Loans") to the Borrower in an
aggregate amount with all its other outstanding Loans not to exceed the
Credit Limit minus the face amount of Outstanding Letters of Credit. Loans
may be repaid and reborrowed in accordance with this Agreement.
(b) LETTERS OF CREDIT. On the terms and subject to the conditions
set forth herein, the Bank agrees to issue for the account of the Borrower
from time to time from the date hereof to and including the 30th day
immediately preceding the Expiration Date, its standby Letters of Credit (a
"Letter of Credit" and collectively the "Letters of Credit") in an aggregate
face amount with the face amount of other Outstanding Letters of Credit not
to exceed at any one time the lesser of (i) the L/C Sublimit or (ii) the
Credit Limit minus Revolving Loans outstanding.
2.2 MAINTENANCE OF LOANS. Loans shall be maintained, at the election
of the Borrower made from time to time as permitted herein, as Reference Rate
Loans and/or LIBOR Loans or any combination thereof.
2.3 CALCULATION OF INTEREST. The Borrower shall pay interest on Loans
outstanding hereunder from the date disbursed to but not including the date
of payment at a rate per annum equal to, at the option of and as selected by
the Borrower from time to time (subject to the provisions of SECTIONS 2.6,
2.7 AND 2.8 below): (1) with respect to each Loan which is a LIBOR Loan, at
the Applicable LIBOR Rate for the applicable Interest Period, and (2) with
respect to each Loan which is a Reference Rate Loan, at a fluctuating rate
per annum equal to the Reference Rate during the applicable calculation
period.
2.4 PAYMENT OF INTEREST. Interest accruing on Reference Rate Loans
outstanding hereunder shall be payable monthly, in arrears, for each month on
or before the [tenth] Business Day of the
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next succeeding month and a final payment shall be payable on the Expiration
Date in the amount of interest then accrued but unpaid. Interest accruing on
LIBOR Loans outstanding hereunder shall be payable in arrears: (1) in the
case of LIBOR Loans with Interest Periods ending from not more than three (3)
months from the date advanced, at the end of the applicable Interest Period
therefor; and (2) in the case of LIBOR Loans with Interest Periods ending
later than three (3) months from the date advanced, at the end of each three
(3) month period from the date advanced, and then at the end of the
applicable Interest Period therefor. The Borrower hereby irrevocably
authorizes and directs the Bank to collect interest when due by debiting the
amount of interest payable from any collected funds then on deposit in such
account maintained by the Borrower with the Bank as the Borrower shall
designate, but no failure by the Bank to so debit such account and no
insufficiency in the amount on deposit in such account shall excuse the
Borrower from making any payment in full when due. In accordance with its
usual procedures, the Bank will notify the Borrower of the date and
approximate amount of any such debit prior to the date thereof.
2.5 REPAYMENT OF PRINCIPAL. Subject to the prepayment requirements of this
Agreement, the Borrower shall pay the principal amount of all Loans remaining
outstanding on the Expiration Date. The Borrower hereby irrevocably authorizes
and directs the Bank to collect principal on the Loans when due by debiting the
amount of principal payable from any collected funds then on deposit in such
account maintained by the Borrower with the Bank as the Borrower shall
designate, but no failure by the Bank to so debit such account and no
insufficiency in the amount on deposit in such account shall excuse the
Borrower from making any payment in full when due.
2.6 ELECTION OF TYPE OF LOAN; CONVERSION OPTIONS.
(a) The Borrower may elect from time to time to have Loans funded (i) as
Reference Rate Loans by giving the Bank prior irrevocable notice no later
than 10:00 a.m. (Los Angeles time) on the proposed date of borrowing of such
election, and (ii) as LIBOR Loans by giving the Bank at least three LIBOR
Business Days' prior irrevocable notice of such election. The Borrower may
elect from time to time to (i) convert Loans outstanding as LIBOR Loans to
Reference Rate Loans by giving the Bank at least one Business Day's prior
irrevocable notice of such election, and (ii) convert Loans outstanding as
Reference Rate Loans to LIBOR Loans by giving the Bank at least three
Business Days' prior irrevocable notice of such election. Any such
conversion of LIBOR Loans may only be made on the last day of the applicable
Interest Period. All such elections shall be evidenced by the delivery by
the Borrower to the Bank within the required time frame of a duly executed
Loan Request. No Reference Rate Loan shall be converted into a LIBOR Loan if
an Event Of Default or Potential Default has occurred and is continuing on
the day occurring three LIBOR Business Days prior to the date of the
conversion requested by the Borrower. All or any part of outstanding Loans
may be converted as provided in this SECTION 2.6(a), provided that partial
conversions shall be in a principal amount of $500,000 or whole multiples of
$100,000 in excess thereof, and in the case of conversions into LIBOR Loans,
after giving effect thereto the aggregate of the then number of respective
LIBOR Loans having a different Interest Period does not exceed five.
(b) Any LIBOR Loan may be continued as such upon the expiration of the
Interest Period with respect thereto by giving the Bank at least three LIBOR
Business Days' prior irrevocable
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notice of such election as set forth on a duly executed Loan Request;
provided, however, that no LIBOR Loan may be continued as such when any Event
Of Default or Potential Default has occurred and is continuing, but shall be
automatically converted to a Reference Rate Loan on the last day of the then
current Interest Period applicable thereto. If the Borrower shall fail to
give notice as provided above, the Borrower shall be deemed to have elected
to convert the affected LIBOR Loan to a Reference Rate Loan on the last day
of the relevant Interest Period.
2.7 INABILITY TO DETERMINE RATE. In the event that the Bank shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that by reason of circumstances affecting the interbank market
adequate and reasonable means do not exist for ascertaining the LIBOR Rate
for any Interest Period, the Bank shall forthwith give notice to the
Borrower. If such notice is given: (1) no Loan may be funded as a LIBOR
Loan, (2) any Loan that was to have been or would be converted to a LIBOR
Loan shall, subject to the provisions hereof, be continued as a Reference
Rate Loan, and (3) any outstanding LIBOR Loan shall be converted, on the last
day of the then current Interest Period with respect thereto, to a Reference
Rate Loan.
2.8 ILLEGALITY. Notwithstanding any other provisions herein, if any
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for Bank to
make or maintain LIBOR Loans as contemplated by this Agreement: (1) the
commitment of the Bank hereunder to make or to continue LIBOR Loans or to
convert Reference Rate Loans to LIBOR Loans shall forthwith be canceled and
(2) Loans then outstanding as LIBOR Loans, if any, shall be converted
automatically to Reference Rate Loans at the end of their respective Interest
Periods or within such earlier period as required by law. In the event of a
conversion of any such Loan prior to the end of its applicable Interest
Period the Borrower hereby agrees promptly to pay the Bank, upon demand in
writing setting forth in reasonable detail the calculation of the amount so
demanded, the amounts required pursuant to SECTION 2.11 below, it being
agreed and understood that such conversion shall constitute a prepayment for
all purposes hereof. The provisions hereof shall survive the termination of
this Agreement and payment of the outstanding Loans and all other amounts
payable hereunder.
2.9 REQUIREMENTS OF LAW; INCREASED COSTS. In the event that any
applicable law, order, regulation, treaty or directive issued by any central
bank or other Governmental Authority, agency or instrumentality or in the
governmental or judicial interpretation or application thereof, or compliance
by Bank with any request or directive (whether or not having the force of
law) issued by any central bank or other Governmental Authority, agency or
instrumentality:
(1) Does or shall subject the Bank to any tax of any kind whatsoever
with respect to this Agreement or any Loans made or Letters Of Credit
issued hereunder, or change the basis of taxation of payments to the Bank
of principal, fee, interest or any other amount payable hereunder (except
for change in the rate of tax on the overall net income of the Bank);
(2) Does or shall impose, modify or hold applicable any reserve,
capital requirement, special deposit, compulsory loan or similar
requirements against assets held by, or deposits or other liabilities
in or for the account of, advances or Loans by, or other credit
extended by, or any other acquisition of funds by, any office of
such Bank which are not otherwise included in the determination of
interest payable on the Obligations; or
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(3) Does or shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank of
making, renewing or maintaining any Loan or to reduce any amount receivable
in respect thereof or the rate of return on the capital of the Bank or any
corporation controlling the Bank, then, in any such case, the Borrower shall
promptly pay to the Bank, upon its written demand made to the Borrower, any
additional amounts necessary to compensate the Bank for such additional cost
or reduced amounts receivable or rate of return as determined by the Bank
with respect to this Agreement or Loans made or Letters Of Credit issued
hereunder. If the Bank becomes entitled to claim any additional amounts
pursuant to this SECTION 2.9, it shall promptly notify the Borrower of the
event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to the foregoing sentence containing the
calculation thereof in reasonable detail submitted by the Bank to the
Borrower shall be conclusive in the absence of manifest error. The
provisions hereof shall survive the termination of this Agreement and payment
of the outstanding Loans and all other amounts payable hereunder.
2.10 FUNDING. The Bank shall be entitled to fund all or any portion of
its Loans in any manner it may determine in its sole discretion, including,
without limitation, in the Grand Cayman inter-bank market, the London
inter-bank market and within the United States, but all calculations and
transactions hereunder shall be conducted as though the Bank actually funds
all LIBOR Loans through funding dollar deposits in the amount of the relevant
Loan in maturities corresponding to the applicable Interest Period in a
manner consistent with the method based on which the LIBOR Rate was
calculated by the Bank.
2.11 PREPAYMENT PREMIUM. In addition to all other payment obligations
hereunder, in the event: (1) any Loan which is outstanding as a LIBOR Loan
is prepaid prior to the last day of the applicable Interest Period, whether
following a voluntary prepayment, a mandatory prepayment or otherwise, or (2)
the Borrower shall fail to continue or to make a conversion to a LIBOR Loan
after the Borrower has given notice thereof as provided in SECTION 2.6 above,
then the Borrower shall immediately pay to the Bank, an additional premium
sum compensating the Bank for losses, costs and expenses incurred by the Bank
in connection with such prepayment, including, without limitation, those
incurred in connection with redeployment of funds.
3. MISCELLANEOUS PROVISIONS.
3.1 USE OF PROCEEDS. Loans and Letters of Credit will be used by the
Borrower in connection with the acquisition of Properties, for working
capital, and payment of distributions.
3.2 REQUEST FOR LOANS AND LETTERS OF CREDIT; MAKING OF LOANS AND ISSUANCE
OF LETTERS OF CREDIT.
(a) THE LOANS. If the Borrower desires to borrow hereunder, the
Borrower shall deliver a Loan Request to the Bank, which shall be delivered
telephonically no later than 10:00 a.m. (Los Angeles time) and immediately
confirmed by facsimile transmission, on the day notice of borrowing is
required to be given for the type of Loan being requested pursuant to SECTION
2.6 above. Each Loan that is a Reference Rate Loan shall be in a minimum
amount not less than $100,000 and in increments of $50,000 in excess thereof.
Each Loan that is a LIBOR Loan shall be in a minimum amount not less than
$500,000 and in increments of $100,000 in excess thereof.
11
(b) LETTERS OF CREDIT. If the Borrower desires to request a Letter
Of Credit hereunder, the Borrower shall deliver a Letter Of Credit Request
(which shall be completed in form and substance satisfactory to the Bank) to
the Bank which shall be delivered by telefacsimile transmission at least
three (3) Business Days prior to the requested date of issuance. Each such
Letter Of Credit Request shall be accompanied by all other documents,
instruments, and agreements as the Bank may reasonably request in connection
with such request (the "L/C Documents").
3.3 EVIDENCE OF REPAYMENT OBLIGATIONS.
(a) THE LOANS. The obligation of the Borrower to repay the Loans shall
be evidenced by the book, records and accounts of the Bank. Upon any
advance, conversion or prepayment as provided in this Agreement with respect
to any Loan, the Bank is hereby authorized to record the date and amount of
each such advance and conversion, or the date and amount of each such payment
or prepayment of principal of the Loan, the applicable Interest Period and
interest rate with respect thereto, by any method the Bank may elect
consistent with its customary practices and any such recordation shall
constitute PRIMA FACIE evidence of the accuracy of the information so
recorded absent manifest error. The failure of the Bank to make any such
notation shall not affect in any manner or to any extent the Borrower's
Obligations hereunder.
(b) LETTERS OF CREDIT. Each Drawing under a Letter Of Credit shall
be payable in full by the Borrower on the date thereof, without demand or
notice of any kind. If the Borrower desires to repay a Drawing from the
proceeds of a Loan, the Borrower may request a Reference Rate Loan in
accordance with the other terms and conditions of this Agreement and, if
disbursed on the date of such Drawing, such Reference Rate Loan shall be
applied in payment of such reimbursement obligation by the Borrower. The
obligation of the Borrower to reimburse the Bank for Drawings shall be
absolute, irrevocable and unconditional under any and all circumstances
whatsoever and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Bank (except such
as may arise out of the Bank's gross negligence or willful misconduct
hereunder) or any other Person, including, without limitation, any set-off,
counterclaim or defense based upon or arising out of:
(i) Any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(ii) Any amendment or waiver of or any consent to departure from
the terms of any Letter Of Credit;
(iii) The existence of any claim, set-off, defense or other right
which the Borrower or any other Person may have at any time against
any beneficiary or any transferee of any Letter Of Credit (or any
Person for whom any such beneficiary or any such transferee may be
acting); or
(iv) Any allegation that any demand, statement or any other
document presented under any Letter Of Credit is forged, fraudulent,
invalid or insufficient in any respect, or any statement therein
being untrue or inaccurate in any respect whatsoever or any
variations in punctuation, capitalization, spelling or format of
the drafts or any statements presented in connection with any
Drawing.
12
3.4 NATURE AND PLACE OF PAYMENTS. All payments made on account of the
Obligations shall be made by the Borrower, without setoff or counterclaim, in
lawful money of the United States of America in immediately available funds,
free and clear of and without deduction for any taxes, fees or other charges
of any nature whatsoever imposed by any taxing authority and must be received
by the Bank by 1:00 p.m. (Los Angeles time) on the day of payment, it being
expressly agreed and understood that if a payment is received after 1:00 p.m.
(Los Angeles time) by the Bank, such payment will be considered to have been
made by the Borrower on the next succeeding Business Day and interest thereon
shall be payable by the Borrower at the Reference Rate during such extension.
If any payment required to be made by the Borrower hereunder becomes due and
payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall be
payable at the then applicable rate during such extension.
3.5 DEFAULT INTEREST. After the occurrence of and during the
continuance of an Event Of Default, the Bank, in its sole discretion, may
determine that all Obligations shall bear interest from the date due until
paid in full at a per annum rate equal to the Default Rate.
3.6 COMPUTATIONS. All computations of interest and fees payable
hereunder shall be based upon a year of 360 days for the actual number of
days elapsed.
3.7 PREPAYMENTS.
(1) The Borrower may prepay Reference Rate Loans hereunder in whole
or in part at any time. LIBOR Loans may only be paid at the end of their
respective Interest Periods.
(2) The Borrower shall pay in connection with any prepayment
hereunder, whether voluntary or mandatory, all interest accrued but
unpaid on Loans to which such prepayment is applied, and all prepayment
premiums, if any, on LIBOR Loans to which such prepayment is applied,
concurrently with payment to the Bank of any principal amounts.
(3) Subject to the other terms and conditions of this Agreement, the
Borrower may, from time to time upon five (5) Business Days' prior written
notice to the Bank, reduce the Credit Limit, in increments of not less than
$1,000,000, to an amount not less than the aggregate Loans outstanding and
Outstanding Letters Of Credit.
3.8 FEES.
(1) LOAN FEE. The Borrower shall pay to the Bank on the date of this
Agreement and on each annual anniversary thereafter a non-refundable loan
fee equal to $75,000.
(2) LETTER OF CREDIT FEES. The Borrower shall pay to the Bank (i) on
the date of issuance of each Letter of Credit a non-refundable letter of
credit commission computed at the per annum rate of 1.5% on the face amount
of such standby Letters Of Credit and (ii) on demand, such other fees as
may be required by the Bank in accordance with its standard fee structure
for such Letters of Credit.
13
(3) OTHER FEES. The Borrower shall pay such other fees as it shall
from time to time agree upon in connection with this Agreement pursuant
to letter agreements entered into with reference to this paragraph.
4. CONDITIONS TO EXTENDING CREDIT. As conditions precedent to the
obligation of the Bank to make any Loan and to issue any Letter of Credit:
4.1 CONDITIONS PRECEDENT TO FIRST CREDIT EXTENSION. With respect to the
first such credit extension under this Agreement:
(a) DELIVERY OF DOCUMENTS. The Borrower shall have delivered to the
Bank, in form and substance satisfactory to the Bank and each of its counsel,
each of the following:
(i) LOAN DOCUMENTS. This Agreement and all other documents,
instruments and agreements required or necessary to consummate the
transactions contemplated under this Agreement (collectively, the
"LOAN DOCUMENTS"), all duly executed.
(ii) EVIDENCE OF AUTHORITY. Certified resolutions of the Board
of Directors of the Borrower approving the execution, delivery and
performance of each of the Loan Documents to which it is a party.
(iii) INCUMBENCY. A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true signatures of
the officers of the Borrower authorized to sign the Loan Documents to
which it is party and, on an ongoing basis, to act under and to
perform the Loan Documents.
(iv) BYLAWS. A copy of the Bylaws of the Borrower, certified by
the Secretary or an Assistant Secretary of the Borrower as being
accurate and complete.
(v) ARTICLES OF INCORPORATION. A copy of the Articles of
Incorporation of the Borrower certified by the Secretary of State or
other official of the state or jurisdiction of incorporation as of a
recent date.
(vii) OPINIONS. An opinion of counsel in form and substance
satisfactory to the Bank with respect to the matters set forth in
SECTIONS 5.1, 5.2, 5.3 AND 5.4 below.
(viii) CREDIT APPLICATIONS, ETC. Such credit applications,
financial statements, authorizations and such information concerning
the Borrower as the Bank may reasonably request.
(ix) MISCELLANEOUS DOCUMENTS. Such other documents as the Bank
may reasonably require with respect to the transactions described in
this Agreement.
(b) OTHER ACTIONS. All acts and conditions (including, without
limitation, the obtaining of any necessary regulatory approvals and the
making of any required filings, recordings or registrations) required to be
done and performed and to have happened precedent to the execution, delivery
and performance of the Loan Documents and to constitute the same legal, valid
and binding obligations, enforceable in accordance with their respective
terms, shall have been done and performed and shall have happened in due and
strict compliance with all applicable laws.
14
(c) DOCUMENTATION SATISFACTORY. All documentation, including, without
limitation, documentation for corporate and legal proceedings in connection
with the transactions contemplated by the Loan Documents shall be in form and
substance satisfactory to the Bank and its counsel.
4.2 CONDITIONS TO EACH CREDIT EXTENSION. As conditions precedent to the
Bank's obligation to make any Loan and to issue any Letter of Credit,
including the first such credit extension, at and as of the date of the
funding or issuance thereof.
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Section 5 hereof and in any other document,
instrument, agreement or certificate delivered to the Bank hereunder
are true and correct in all material respects.
(ii) EVENT OF DEFAULT. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both, would
constitute an Event of Default.
For the purposes hereof, the Borrower's request for a Loan or a Letter of
Credit shall be deemed to constitute the Borrower's representation and
warranty that the statements set forth in clauses (i) and (ii) of this
SECTION 4.2 are true and correct.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby makes the following
representations and warranties to the Bank, which representations and
warranties are continuing:
5.1 STATUS. That the Borrower:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of Maryland, and is in good
standing under the laws of the jurisdiction of California;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its
business and to execute, deliver, and perform its obligations under the Loan
Documents;
(c) is duly qualified as a foreign corporation, licensed and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of rpoperty or the conduct of its business requires such
qualification; and
(d) is in compliance with all applicable laws and regulations;
except, in each case referred to in clauses (b), (c), or (d), to the
extent that the failure to do so could not reasonably be expected to have
a material adverse effect.
5.2 AUTHORITY. The execution, delivery and performance by the Borrower
of this Agreement and any instrument, document or agreement required
hereunder have been duly authorized and do not and will not: (i) violate, in
any material respect, any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in
effect having application to the Borrower or any of its Subsidiaries; (ii)
result in a breach of or constitute a default under any material indenture or
loan or credit agreement or other material agreement, lease or instrument to
which the Borrower or any of its Subsidiaries is a party or by which it or
its properties
15
may be bound or affected; or (iii) require any consent or approval of its
stockholders or violate any provision of its articles of incorporation or
by-laws.
5.3 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
governmental authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Borrower
of this Agreement or any other Loan Document.
5.4 LEGAL EFFECT. This Agreement has been duly executed and delivered on
behalf of the Borrower and constitutes, and any instrument, document or
agreement required hereunder when delivered hereunder will constitute, legal,
valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms subject to bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditors
rights generally and by general equitable principles.
5.5 FINANCIAL STATEMENTS. All financial statements which may have been
or which may hereafter be submitted by the Borrower to the Bank are true,
accurate and correct in all material respects, as of their respective dates
and with respect to year end financial statements, have been or will be
prepared in accordance with GAAP consistently applied, and, with respect to
other financial statements, fairly represent the Borrower's consolidated
financial condition or, as applicable, the other information disclosed
therein. Since the most recent submission of any such financial statement,
information or other data to the Bank, the Borrower represents and warrants
that no material adverse change in the Borrower's consolidated financial
condition has occurred which has not been fully disclosed to the Bank in
writing.
5.6 LITIGATION. Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of
the Borrower, threatened against or affecting the Borrower, any of its
Subsidiaries or the Borrower's or any Subsidiary's properties before any
court or administrative agency which, if determined adversely to the Borrower
or such Subsidiary, would have a material adverse effect on the Borrower's
consolidated financial condition or operations.
5.7 ERISA. If the Borrower has a pension, profit sharing or retirement
plan subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and will continue to
comply with the requirements of ERISA.
5.8 TAXES. The Borrower and each of its Subsidiaries have filed all tax
returns required to be filed and paid all taxes shown thereon to be due,
including interest and penalties, other than taxes which are currently
payable without penalty or interest or those which are being duly contested
in good faith.
5.9 ENVIRONMENTAL MATTERS. Except as otherwise disclosed to the Bank in
writing, including without limitation Form S-4 filed by the Borrower with the
Securities and Exchange Commission as of December 22, 1995, as amended, the
operations of the Borrower and each of its Subsidiaries comply, and during
the term of this Agreement will at all times comply, in all material respects
with all federal, state and local laws, statutes, common law duties, rules,
regulations, ordinances and codes applicable to the Borrower ("ENVIRONMENTAL
LAWS"); the Borrower and each of its Subsidiaries have obtained all licenses,
permits, authorizations and registrations required under any Environmental
Law ("ENVIRONMENTAL PERMITS") and necessary for their respective Ordinary
Course
16
of Business, all such Environmental Permits are in good standing, and the
Borrower and each of its Subsidiaries are in compliance with all material
terms and conditions of such Environmental Permits; neither the Borrower nor
any of its Subsidiaries nor any of their respective present Property or
operations is subject to any outstanding written order from or agreement with
any governmental authority nor subject to any judicial or docketed
administrative proceeding respecting any Environmental Law, Environmental
Claim or Hazardous Material which would have a material adverse effect on the
Borrower's consolidated financial condition or operations; there are no
conditions or circumstances existing, or arising from operations prior to the
date of this Agreement, with respect to any Property of the Borrower or any
of its Subsidiaries that would reasonably be expected to give rise to
Environmental Claims which would have a material adverse effect on the
Borrower's consolidated financial condition or operations; PROVIDED, however,
that with respect to property leased from an unrelated third party, the
foregoing representation is made to the best knowledge of the Borrower. In
addition, (i) neither the Borrower nor any of its Subsidiaries have any
underground storage tanks (x) that are not properly registered or permitted
under applicable Environmental Laws, or (y) that are leaking or disposing
Hazardous Materials, and (ii) the Borrower and each of its Subsidiaries have
notified all of their respective employees of the existence, if any, of any
health hazard arising from the conditions of their employment and have met
all notification requirements under all Environmental Laws.
6. FINANCIAL CONDITION; REPORTING. The Borrower promises and agrees, during
the term of this Agreement and until full payment of all of Borrower's
Obligations hereunder, to:
6.1 REPORTING AND CERTIFICATION REQUIREMENTS. Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:
(a) ANNUAL STATEMENTS. As soon as available, and in any event not later
than ninety (90) days after the close of each fiscal year of the Borrower,
consolidated and consolidating financial statements for the Borrower for such
fiscal year, including a balance sheet, cash flow statement, income statement
and such other statements as may be reasonably required by the Bank prepared
in accordance with GAAP accompanied by an unqualified report of a firm of
independent certified accountants acceptable to the Bank and including
therewith a copy of the management letter from such certified public
accountants;
(b) QUARTERLY STATEMENTS. As soon as available, and in any event not
later than sixty (60) days after the last day of each fiscal quarter,
consolidated and consolidating financial statements for the Borrower for the
quarter just ended and the fiscal year to date, including a balance sheet,
cash flow statement, income statement and such other statements as may be
reasonably required by the Bank prepared in accordance with GAAP and
certified as true and complete by the Chief Financial Officer of the Borrower.
(c) COMPLIANCE CERTIFICATE. Together with the delivery of the financial
statements of the Borrower pursuant to the preceding clauses (a) and (b), a
certificate of the Chief Financial Officer of the Borrower substantially in
the form of Exhibit A;
(d) TWO-YEAR STATEMENTS. As soon as available, and in any event not
later than ninety (90) days after the close of each fiscal year of the
Borrower, consolidated and consolidating financial projections for the
Borrower for the succeeding two (2) fiscal years, including a balance
17
sheet, cash flow statement, income statements and such other statements as
may be reasonably required by the Bank prepared.
(e) SEC FILINGS, ETC. Promptly after sending, filing or publishing the
same, copies of all proxy statements, financial statements and reports which
the Borrower sends to its public stockholders and copies of all regular and
periodic reports and all registration statements which the Borrower files
with the Securities and Exchange Commission. Delivery of such documents to
the Bank shall satisfy the requirements of SECTIONS 6.1(a) and (b) to the
extent the contents, date, and delivery of such documents are consistent with
the requirements of such Sections.
(f) MANAGEMENT REPORTS. As soon as available and in any event not later
than sixty (60) days after the last day of each fiscal quarter, quarterly
Management Reports, including a schedule of all cash debt service payments
(including principal and interest) during the quarter just ended, a schedule
of net operating income for each Property for the four fiscal quarters just
ended, a schedule of all Indebtedness secured by a Lien on any such Property,
a statement of the number of housing units that Borrower and its Subsidiaries
had in development as at the end of the fiscal quarter just ended and such
other information as the Bank may reasonably request, all certified as true
and complete by the Chief Financial Officer of the Borrower.
(g) GOOD STANDING CERTIFICATION. As soon as available and in any event
not later than forty-five (45) days after the date of this Agreement, a
certificate of authority and good standing as of a recent date for the
Borrower for each state in which the Borrower is qualified to do business.
6.2 ACCOUNTING RECORDS: Maintain adequate books and records in accordance
with GAAP consistently applied and in a manner otherwise acceptable to the
Bank, and, at any reasonable time and from time to time, upon three Business
Days' notice, permit the Bank or any representative thereof to examine and
make copies of the records and visit the Properties of the Borrower and any
of its Subsidiaries and discuss the business and operations of the Borrower
and any of its Subsidiaries with any of its officers and employees. If the
Borrower or any of its Subsidiaries shall maintain any records (including,
but not limited to, computer generated records or computer programs for the
generation of such records) in the possession of a third party, the Borrower
hereby agrees to provide the Bank with copies of any such records that it may
request, all at the Bank's expense, the amount of which shall be payable
immediately upon demand. In addition, the Bank may, at any reasonable time
and from time to time, upon three Business Days' notice, conduct inspections
and audits of the Borrower's and its Subsidiaries' accounts payable, the cost
and expenses of which shall be paid by the Bank.
7. OTHER COVENANTS During the term of this Agreement and until payment in
full of the Borrower's Obligations hereunder, the Borrower promises and
agrees to and, except with respect to SECTION 7.4 below, to cause each of
its Subsidiaries to:
7.1 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS. Maintain
and preserve its existence and all rights and privileges material to its
business as conducted as of the date of this Agreement; not liquidate or
dissolve, merge or consolidate with or into any other business organization;
and conduct its business and operations in accordance with all applicable
laws, rules and regulations.
7.2 MAINTENANCE OF INSURANCE. Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which
the Borrower and each of its Subsidiaries operate and maintain such other
18
insurance and coverages as may be reasonably required by the Bank. All such
insurance shall be in form and amount and with companies satisfactory to the
Bank. Upon the Bank's request, the Borrower shall furnish the Bank with a
copy of the policy or binder of all such insurance.
7.3 PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations including,
but not limited to, trade payables, unless the same are being contested in
good faith by appropriate proceedings with the appropriate court or
regulatory agency. For purposes hereof, the issuance of a check, draft or
similar instrument without delivery to the intended payee shall not
constitute payment.
7.4 REDEMPTION OR REPURCHASE OF STOCK; REPURCHASE OF PARTNERSHIP
INTERESTS: Not redeem or repurchase any class of its stock now or hereafter
outstanding or purchase or repurchase, in whole or in part, any partnership
interest; provided that any Subsidiary wholly owned by the Borrower may do
any of the foregoing.
7.5 LIENS AND ENCUMBRANCES: Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust, or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of its properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.
7.6 INDEBTEDNESS. Not create, incur, assume or suffer to exist, or
otherwise become or be liable, or cause any Subsidiary to be liable, in
respect of any Indebtedness 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 and does not exceed an aggregate amount at any one
time outstanding of $100,000,000;
(e) Other Unsecured Indebtedness which, when aggregated with the
Indebtedness incurred as permitted by the preceding clause(d), does not
exceed an aggregate amount at any one time outstanding of $300,000,000.
7.7 CHANGE IN NATURE OF BUSINESS. Not make any material change in its
financial structure or the nature of its business as existing or conducted as
of the date hereof.
7.8 COMPENSATION OF EMPLOYEES. Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate
prescribed by any applicable federal or state law or regulation.
19
7.9 NOTICES. Give prompt written notice to the Bank of:
(a) any and all Event(s) of Default and each Potential Default;
(b) any and all litigation, arbitration or administrative proceedings to
which the Borrower or any of its Subsidiaries is a party and in which the
claim or liability exceeds $5,000,000;
(c) any other matter which has resulted in, or might result in, a
material adverse change in the financial condition or affairs of the
Borrower; and
(d) upon, but in no event later than 10 days after, becoming aware after
the date of this Agreement of (i) any enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened
against the Borrower or any of its Subsidiaries or any of their respective
Properties pursuant to any applicable Environmental Laws, (ii) all other
Environmental Claims, and (iii) any environmental or similar condition on any
real property adjoining or in the vicinity of the Property of the Borrower or
any of its Subsidiaries that could reasonably be anticipated to cause such
Property or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of such Property under any
Environmental Laws.
7.12 ENVIRONMENTAL LAWS. Conduct its operations and keep and maintain all
of its property in compliance with all Environmental Laws.
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 the
ratio of Debt to Effective Tangible Net Worth to exceed .90 to 1.00;
(b) As at the end of any fiscal quarter of the Borrower, permit the
ratio of Debt to Market Capitalization to exceed .60 to 1.00;
(c) As at the end of any fiscal quarter of the Borrower until but not
including October 31, 1996, permit Effective Tangible Net Worth to be less
than $375,000,000 or, on or after October 31, 1996, permit Effective Tangible
Net Worth to be less than $425,000,000;
(d) As at the end of any fiscal quarter of the Borrower, permit the
ratio of (i) EBITDA to (ii) CPLTD plus Interest Expense to be less than
2.00:1.00;
(e) Permit the ratio of (i) Dividend Payments for any consecutive four
(4) fiscal quarters to (ii) FFO for such four (4) fiscal quarters to exceed
.95 to 1.00;
(f) Permit the number of Development Units to exceed 20% of the number
of Wholly-Owned Units;
(g) 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 12% of the consolidated Indebtedness of the Borrower and its
Subsidiaries not secured, either directly or indirectly, by a Lien on any
Property of the Borrower or any of its Subsidiaries.
20
7.13 FURTHER ASSURANCES. Execute and deliver all instruments, and perform
such acts, as the Bank may reasonably deem necessary or desirable to confirm
and secure to the Bank all rights and remedies conferred upon it by this
Agreement and all other Loan Documents.
8. EVENTS OF DEFAULT. Any one or more of the following described events
shall constitute an event of default (an "EVENT OF DEFAULT") under this
Agreement:
8.1 NON-PAYMENT. The Borrower shall fail to pay any payment of principal
or interest or any other sum referred to in this Agreement when due and any
such failure shall continue for more than five (5) Business Days after
written notice from the Bank to the Borrower..
8.2 PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The Borrower shall fail
in any material respect to perform or observe any other term, covenant or
agreement contained in this Agreement, in any other Loan Document, or in any
document, instrument or agreement evidencing or relating to any other
Indebtedness of the Borrower to the Bank, and any such failure shall continue
for more than 10 days after written notice from the Bank to the Borrower of
the existence and character of such failure.
8.3 OTHER INDEBTEDNESS. The Borrower or any of its Subsidiaries shall (i)
fail to pay when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) any Indebtedness in an aggregate
principal amount (including amounts owing to all creditors under any combined
or syndicated credit arrangement) of more than $5,000,000 and such failure
shall continue after the applicable grace or notice period, if any, specified
in the document relating thereto; or (ii) shall fail to perform or observe
any other condition or covenant, or any other event shall occur or condition
exist (irrespective of whether such non-performance or non-observance shall
be waived or otherwise excused by the holder or holders of such
Indebtedness), under any agreement or instrument relating to any such
Indebtedness, if the effect of such failure, event or condition is to cause,
or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness
in an aggregate principal amount of more than $5,000,000 to be declared to be
due and payable prior to its stated maturity, or cash collateral in respect
thereof to be demanded.
8.4 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS. Any
representation or warranty made by the Borrower under or in connection with
this Agreement or any financial statement to be provided under this Agreement
shall prove to have been incorrect in any material respect when made or given
or when deemed to have been made or given.
8.5 INSOLVENCY. (a) The Borrower or any of its Subsidiaries shall: (i)
become insolvent or be unable to pay its debts as they mature; (ii) make an
assignment for the benefit of creditors or to an agent authorized to
liquidate any substantial amount of its properties or assets; (iii) file a
voluntary petition in bankruptcy or seek reorganization or to effect a plan
or other arrangement with creditors; (iv) file an answer admitting the
material allegations of an involuntary petition relating to bankruptcy or
reorganization or join in any such petition; (v) become or be adjudicated a
bankrupt; or (vi) apply for or consent to the appointment of, or consent that
an order be made, appointing any receiver, custodian or trustee for itself or
any of its properties, assets or affairs; or (b) with respect to the Borrower
or, any of its Subsidiaries, any receiver, custodian or trustee shall have
been
21
appointed for all or a substantial part of its properties, assets or affairs
and shall not be discharged within 60 days after the date of such appointment.
8.6 SUSPENSION. The Borrower or any of its Subsidiaries shall voluntarily
suspend the transaction of business or allow to be suspended, terminated,
revoked or expired any permit, license or approval of any governmental body
necessary to conduct the Borrower's or a Subsidiary's business as now
conducted.
9. REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default
described in SECTION 8.5 above, automatically and, upon the occurrence of any
other Event of Default, at the sole election of the Bank, without demand or
notice, all of which are hereby waived:
9.1 ACCELERATION. All of the Obligations (including, without limitation,
the obligation to reimburse the Bank for future Drawings under Letters of
Credit) shall be immediately due and payable, whether or not otherwise due
and payable. Any amount paid to the Bank on account of undrawn amounts under
Letters of Credit that is not thereafter applied to reimburse the Bank for
Drawings shall be repaid to the Borrower without interest upon return to the
Bank and termination of the undrawn Letter(s) of Credit.
9.2 NON-EXCLUSIVITY OF REMEDIES. Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other
remedies as may be provided by law, in equity or in any other agreement now
existing or hereafter entered into between the Borrower and the Bank, or
otherwise.
10. DISPUTE RESOLUTION
10.1 DISPUTES. It is understood and agreed that upon, the request of any
party to this Agreement any dispute, claim, or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or equitable
now existing or hereinafter arising between the parties in any way arising
out of, pertaining to or in connection with: (i) this Agreement, or any
related agreements, documents, or instruments, (ii) all past and present
loans, credits, accounts, deposit accounts (whether demand deposits or time
deposits), safe deposit boxes, safekeeping agreements, guarantees, letters of
credit, goods or services, or other transactions, contracts or agreements of
any kind, (iii) any incidents, omissions, acts, practices, or occurrences
causing injury to either party whereby the other party or its agents,
employees or representatives may be liable, in whole or in part, or (iv) any
aspect of the past or present relationships of the parties, shall be resolved
through a two-step dispute resolution process administered by
Endispute/Judicial Arbitration & Mediation Services, Inc. ("J.A.M.S") as
follows:
(a) STEP I - MEDIATION. At the request of any party to the dispute,
claim or controversy of the matter shall be referred to the nearest office of
J.A.M.S. for mediation, that is, an informal, non-binding conference or
conferences between the parties in which a retired judge or justice for the
J.A.M.S. panel will seek to guide the parties to a resolution of the case.
(b) STEP II - ARBITRATION. Should any dispute, claim or controversy
remain unresolved at the conclusion of the Step I Mediation Phase, then all
such remaining matters shall be resolved by final and binding arbitration
before a different judicial panelist, unless the parties shall agree to have
the mediator panelist act as arbitrator. The hearing shall be conducted at a
location determined by the
22
arbitrator in Los Angeles, California, and shall be administered by and in
accordance with the then existing Rules of Practice and Procedure of
J.A.M.S., and judgment upon any award rendered by the arbitrator may be
entered by any State or Federal Court having jurisdiction thereof. The
arbitrator shall determine which is the prevailing party and shall include in
the award that party's reasonable attorneys' fees and costs. This Section
9.1 shall apply only if, at the time of the submission of the matter to
J.A.M.S., the dispute(s) or issue(s) do(es) not arise out of a transaction(s)
which is/are secured by real property collateral or, if so secured, all
parties consent to such submission.
As soon as practicable after selection of the arbitrator, the arbitrator
or his/her designated representative shall determine a reasonable estimate of
anticipated fees and costs of the arbitrator, and render a statement to each
party setting forth that party's pro-rata share of said fees and costs.
Thereafter each party shall, within 10 days of receipt of said statement,
deposit said sum with the arbitrator.
(c) PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No provision of,
or the exercise of any right(s) under this Section 10.1, nor any other
provision of this Dispute Resolution Provision, shall limit the right of any
party to exercise self-help remedies such as set off, to foreclose against
any real or personal property collateral, or obtain provisional or ancillary
remedies such as injunctive relief or the appointment of a receiver from any
court having jurisdiction before, during or after the pendency of any
arbitration. At the Bank's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power of sale under the
deed of trust or mortgage, or by judicial foreclosure. The institution and
maintenance of an action for provisional remedies, pursuit of provisional or
ancillary remedies or exercise of self-help remedies, shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration.
10.2 PRIVILEGE. Borrower agrees that any proceeding under the immediately
preceding Section shall, for purposes of Section 47 of the California Civil
Code, be a judicial proceeding.
10.3 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE BANK EACH AGREE THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS
TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
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11. MISCELLANEOUS PROVISIONS
11.1 DEFAULT INTEREST RATE. The Borrower shall pay to the Bank interest
on any Indebtedness or amount payable under this Agreement, from the date
that such Indebtedness or amount became due or was demanded to be due until
paid in full, at the Default Interest Rate. If any regularly scheduled
payment of principal and/or interest (exclusive of the final payment upon
maturity), or any portion thereof, under this Agreement is not paid within
ten (10) calendar days after it is due, a late payment
24
charge equal to five percent (5%) of such past due payment may be assessed
and shall be immediately payable.
11.2 NOTICES. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be delivered by hand, by prepaid
telegram, by telecopy or by registered or certified U.S. mail, return receipt
requested (postage prepaid), to the respective notice addresses set forth
below or to such other addresses as the parties may provide to one another in
accordance with this Section. Such notices and other communications shall,
if sent by mail in accordance with this Section, be deemed given two Business
Days after deposit in the U.S. mail, on the date sent if by telecopy and, if
sent by any other method, shall be effective only if and when received by the
addressee. All notices and other communications shall be addressed as
follows:
If to the Bank: If to the Borrower:
Sanwa Bank California BRE Properties, Inc.
Xxxxxxx Oaks CBC One Xxxxxxxxxx Street
15165 Ventura Blvd., Suite 000 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxx, XX 00000 Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx Attn: XxXxx X. Xxxxxxx
11.3 RELIANCE. Each warranty, representation, covenant and agreement
contained in this Agreement shall be conclusively presumed to have been
relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants or agreements which the Borrower shall
now or hereafter give, or cause to be given, to the Bank.
11.4 ATTORNEYS' FEES. The Borrower agrees to pay or reimburse the Bank
within five Business Days after demand for (i) all costs and expenses
incurred by the Bank in connection with the development, preparation,
delivery, administration and execution of any amendment, supplement, waiver
or modification to (in each case, whether or not consummated) this Agreement,
any other Loan Document and any other documents prepared in connection
therewith, and the consummation of the transactions contemplated hereby and
thereby, including the reasonable attorneys' fees and costs incurred by Bank
with respect thereto; and (ii) all costs and expenses incurred by the Bank in
connection with the enforcement, attempted enforcement, or preservation of
any rights or remedies (including in connection with any restructuring
regarding the obligations and including in any insolvency proceeding or
appellate proceeding) under this Agreement, any other Loan Document,and any
such other documents, including reasonable attorneys' fees incurred by the
Bank; and (iii) in the event of any action in relation to this Agreement or
any document, instrument or agreement executed with respect to, evidencing or
securing the Obligations, the prevailing party, in addition to all other sums
to which it may be entitled, shall be entitled to reasonable attorneys' fees.
11.5 WAIVER. Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder or under any other document, instrument or agreement mentioned
herein constitute a waiver of any other right or default or constitute a
waiver of any other default of the same or any other term or provision.
25
11.6 CONFLICTING PROVISIONS. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those contained
in any other document, instrument or agreement executed pursuant hereto, the
terms and provisions contained herein shall control. Otherwise, such
provisions shall be considered cumulative.
11.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the Bank's prior
written consent. The Bank may sell, assign or grant participations in all or
any portion of its rights and benefits hereunder. The Borrower agrees that,
in connection with any such sale, grant or assignment, the Bank may deliver
to the prospective buyer, participant or assignee financial statements and
other relevant information relating to the Borrower.
11.8 JURISDICTION. THIS AGREEMENT, ANY NOTES ISSUED HEREUNDER, AND ANY
DOCUMENTS, INSTRUMENTS OR AGREEMENTS MENTIONED OR REFERRED TO HEREIN SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES, TO THE JURISDICTION OF WHOSE
COURTS THE PARTIES HEREBY SUBMIT.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each set of counterparts signed by all the parties shall
constitute one original.
11.10 SEVERABILITY. If any provision of this Agreement shall be
unenforceable for any reason, then the remaining provisions of this Agreement
shall be enforced without regard to such provision.
11.11 HEADINGS. The headings set forth herein are solely for the purpose
of identification and have no legal significance.
11.12 ENTIRE AGREEMENT. This Agreement and the other Loan Documents shall
constitute the entire and complete understanding of the parties with respect
to the transactions contemplated hereunder. All previous conversations,
memoranda and writings between the parties or pertaining to the transactions
contemplated hereunder that are not incorporated or referenced in this
Agreement or the other Loan Documents are superseded hereby
26
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA BRE PROPERTIES, INC.
By: /s/ Xxxxx X. XxXxxxxx By: Xxxxx X. XxXxxxxx
---------------------------
Title: Title: President
------------------------
By: /s/ XxXxx Xxxxxxx By: XxXxx Xxxxxxx
---------------------------
Title: Title: Executive Vice President and Secretary
------------------------
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