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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(Mark One)
<TABLE>
<S><C>
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-5305
</TABLE>
BRE PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Maryland 94-1722214
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
One Montgomery Street
Telesis Tower, Suite 2500
San Francisco, California 94104-5525
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(415) 445-6530
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Common Stock, $.01 par value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K (SECTION 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN,
AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE
PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ]
At February 5, 1997, the aggregate market value of the registrant's shares
of Common Stock, $.01 par value, held by nonaffiliates of the registrant was
approximately $835,580,000. At that date 32,919,093 shares were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders of
BRE Properties, Inc. (the "Company") to be filed within 120 days of December 31,
1996 (the "Proxy Statement") are incorporated by reference in Part III of this
report.
FORWARD-LOOKING STATEMENTS
In addition to historical information, certain sections of this Annual
Report contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, such as those pertaining to the Company's capital resources, profitability
and portfolio performance. Forward-looking statements involve numerous risks and
uncertainties. The following factors, among others discussed herein, could cause
actual results and future events to differ materially from those set forth or
contemplated in the forward-looking statements: defaults or non-renewal of
leases, increased interest rates and operating costs, failure to obtain
necessary outside financing, difficulties in identifying properties to acquire
and in effecting acquisitions, failure to qualify as a real estate investment
trust under the Internal Revenue Code of 1986, as amended (the "Code"),
environmental uncertainties, risks related to natural disasters, financial
market fluctuations, changes in real estate and zoning laws and increases in
real property tax rates. The success of the Company also depends upon the trends
of the economy, including interest rates, income tax laws, governmental
regulation, legislation, population changes and those risk factors discussed
elsewhere in this Annual Report. Readers are cautioned not to place undue
reliance on forward-looking statements, which reflect management's analysis only
as the date hereof. The Company assumes no obligation to update forward-looking
statements. See also the Company's reports to be filed from time to time with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934.
2
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BRE PROPERTIES, INC.
PART I
ITEM 1. BUSINESS
CORPORATE PROFILE
BRE Properties, Inc. ("BRE" or the "Company"), formerly a Delaware
corporation that reincorporated in Maryland in March 1996, is a
self-administered equity real estate investment trust which primarily owns and
operates multifamily properties in the Western United States. At December 31,
1996, BRE's multifamily portfolio consisted of 12,212 wholly owned units in
California, Nevada, Arizona, Washington and Oregon. On that date, BRE also owned
15 commercial and retail properties and held one land lease. In addition, at
December 31, 1996, BRE held limited partnership interests in two shopping
centers and one apartment community. Founded in 1970, the Company has paid 106
consecutive quarterly dividends to shareholders since it commenced operations.
On March 15, 1996, Real Estate Investment Trust of California, a California
real estate investment trust ("RCT"), merged with and into BRE (the "Merger"),
in accordance with the terms and conditions of the Agreement and Plan of Merger
dated October 14, 1995. The Merger was treated as a purchase for accounting
purposes.
Pursuant to the Merger, BRE (i) acquired approximately $274,400,000
aggregate book value in equity investments in real estate, including 22
apartment communities (totaling approximately 3,600 units) and 18 commercial and
retail properties, (ii) assumed secured and unsecured RCT notes payable of
approximately $95,400,000, and other liabilities totaling approximately
$8,000,000, and (iii) issued 10,684,436 shares of the Company's common stock,
$.01 par value per share ("Common Stock"), valued at approximately $171,000,000
upon conversion of RCT's then outstanding shares of beneficial interest.
During 1996, in addition to the properties acquired in the Merger, the
Company (i) acquired nine apartment communities comprising 3,156 units at an
aggregate gross cost of approximately $230,000,000 and (ii) sold 14 commercial
and retail properties, and the ground lease underlying one apartment community,
at an aggregate gross sales price of approximately $108,000,000.
The key aspects of the Company's strategy include a focus on the acquisition
of multifamily properties in the Western United States; an orderly disposition
of commercial and retail properties; and increased access to the capital markets
for debt and equity financing.
STRUCTURE AND INVESTMENT POLICY
BRE is a real estate investment trust under Sections 856-860 of the Internal
Revenue Code, as amended (the "Code"). Its long-range investment policy
emphasizes the purchase of fee ownership of both land and improvements,
primarily in multifamily communities located in the Western United States. Among
other things, this policy is designed to enable management to monitor
developments in local real estate markets and to take an active role in managing
the Company's properties and improving their performance. The policy is subject
to ongoing review by the Board of Directors and may be modified in the future to
take into account changes in business or economic conditions, as circumstances
warrant.
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REVENUES AND OCCUPANCY
The following table shows the percentage of the Company's total rental
revenues contributed by certain classes of properties during the years ended
December 31, 1996, 1995 and 1994, respectively. It also shows the average
occupancy levels for these classes of properties at December 31, 1996.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
REVENUES YEAR
AVERAGE OCCUPANCY(1) ENDED DECEMBER 31,
-------------------- ------------------
TYPE OF PROPERTY DEC. 31, 1996 1996 1995 1994
- ------------------------------------------------------------ -------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Multifamily................................................. 96% 77% 76% 71%
Commercial and retail....................................... 93 15 20 25
</TABLE>
(1) For multifamily properties, portfolio occupancy is calculated by dividing
the total occupied units by the total units in the portfolio. For commercial
and retail properties, portfolio occupancy is calculated by dividing the
total occupied square footage by the total square footage in the portfolio.
PORTFOLIO AT DECEMBER 31, 1996
At December 31, 1996, the Company's portfolio of income-producing real
estate included, as a percent of cost, the following investments:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
PROPERTIES COST
----------- ----------
<S> <C> <C>
Properties owned by the
Company:
Multifamily................. 54(1) 87%
Commercial and retail....... 15 13
Properties held in
partnerships (2):
Multifamily................. 1 *
Commercial and retail....... 2 *
--- ---
Total number
of investments.............. 72 100%
--- ---
--- ---
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
PROPERTIES COST
----------- -------------
<S> <C> <C>
Properties owned by the
Company:
California.................. 42(1) 61%
Arizona..................... 17 21
Washington.................. 5 10
Nevada...................... 3 4
Oregon...................... 2 4
Properties held in
partnerships (2):
California.................. 1 *
Arizona..................... 2 *
--- ---
Total number of
investments................. 72 100%
--- ---
--- ---
</TABLE>
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* Less than one percent.
(1) Includes one land lease.
(2) Properties held by partnerships in which the Company has a minority interest
as a limited partner.
See Items 2 and 7 of this report for a description of the Company's
individual investments and certain developments during the year with respect to
these investments.
EMPLOYEES
As of December 31, 1996, the Company had approximately 345 employees. None
of the employees is unionized.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons were executive officers of the Company as of December
31, 1996:
<TABLE>
<CAPTION>
AGE AT DECEMBER 31,
NAME 1996 POSITION(S)
- ------------------------------- ----------------------- -------------------------------------------------------------
<S> <C> <C>
Frank C. McDowell.............. 48 President, Chief Executive Officer and Director
Jay W. Pauly................... 54 Senior Executive Vice President and Chief Operating Officer
Byron M. Fox................... 57 Executive Vice President, Acquisitions and Portfolio Strategy
LeRoy E. Carlson............... 51 Executive Vice President, Chief Financial Officer and
Secretary
John H. Nunn................... 38 Senior Vice President, Property Management
</TABLE>
Mr. McDowell was appointed to his current position in June, 1995. Mr. Fox
was appointed to his current position in October, 1992. Messrs. Pauly, Carlson
and Nunn joined the Company in connection with the Merger in March, 1996. Set
forth below is information regarding the business experience of each of the
executive officers:
From 1992 to 1995, Mr. McDowell was Chief Executive Officer and Chairman of
Cardinal Realty Services, Inc. ("Cardinal"), a Columbus, Ohio-based apartment
management company and owner of multifamily housing. From 1988 to 1992, Mr.
McDowell was Senior Vice President, Head of Real Estate of First Interstate Bank
of Texas. Mr. McDowell holds a Bachelor of Science Degree and a Master of
Business Administration Degree, both from the University of Texas, Austin.
Mr. Pauly served as President and Chief Executive Officer of RCT from 1993
until the Merger in 1996. Prior to joining RCT, from 1990 to 1992 Mr. Pauly
served as First Vice President and was on the Executive Committee of Home
Savings of America ("Home Savings") and served as Chief Executive Officer of
Ahmanson Commercial Development Company, Ahmanson Residential Development
Company and Ahmanson Ranch. From 1986 to 1990, he was Senior Vice President,
Director of Real Estate Services for Home Savings, responsible for REO, Major
Loan Workouts, Asset Valuation, Premises Owned, Property Management and Leasing
and Environmental Risk Management. Prior to joining Home Savings, Mr. Pauly was
President and CEO of McFly, Inc., a company specializing in restaurant
development and hospitality industry investments. Mr. Pauly holds a Bachelor's
Degree in Industrial Engineering and a Master's Degree in Business
Administration both from Stanford University.
Mr. Fox served as a Senior Vice President of the Company from December 1987
until September 1992. From 1977 to 1987, he was Vice President and General
Manager of Dillingham Investment Corporation, a Hawaii land investment firm. Mr.
Fox holds a Bachelor of Arts Degree from Colgate University and a Master of
Business Administration Degree from Harvard Business School.
Mr. Carlson served as Vice President and Chief Financial Officer of RCT from
1980 to 1996. Prior to joining RCT, Mr. Carlson was the Chief Financial Officer
of the William Walters Company, a large asset management company based in Los
Angeles, California. He is a licensed Certified Public Accountant in the State
of California. Mr. Carlson holds a Bachelor's Degree from the University of
Southern California.
Mr. Nunn served as Vice President of Property Management of RCT from 1990 to
1996. Prior to joining RCT, Mr. Nunn was a Vice President and Property Manager
for the William Walters Company from 1986 to 1990. From 1981 to 1986 Mr. Nunn
was the Property Manager for the M.F. Daily Investment Company in Camarillo,
California. Mr. Nunn holds a Bachelor's Degree from California State University
at Long Beach.
There is no family relationship among any of the Company's executive
officers or Directors.
5
<PAGE>
RISK FACTORS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual events, developments and results could differ
materially from those anticipated or projected in the forward-looking statements
as a result of certain factors listed below and elsewhere in this document.
However, because the Company operates in a rapidly changing environment, there
can be no assurance that the following factors include all material risks to the
Company at any given time. See "Forward-Looking Statements."
REAL ESTATE INVESTMENT RISKS
GENERAL
Real property investments are subject to varying degrees of risk. The yields
available from equity investment in real estate depend upon the amount of
revenues generated and expenses incurred. If properties do not generate revenues
sufficient to meet operating expenses, including debt service and capital
expenditures, the Company's results of operations and ability to make
distributions to its shareholders will be adversely affected. The performance of
the economy in each of the areas in which the properties are located affects
occupancy, market rental rates and expenses and, consequently, has an impact on
the revenues from the properties and their underlying values. The financial
results of major local employers also may have an impact on the revenues and
value of certain properties.
Revenues from properties may be further adversely affected by a variety of
factors, including the general economic climate, local conditions in the areas
in which properties are located, such as oversupply of space or a reduction in
the demand for rental space, the attractiveness of the properties to residents
or users, competition from other available space, the ability of the Company to
provide adequate facilities maintenance, services and amenities, and insurance
premiums and real estate taxes. The Company's revenues would also be adversely
affected if residents or users were unable to pay rent or the Company was unable
to rent apartments or commercial properties on favorable terms. If the Company
were unable to promptly relet or renew the leases for a significant number of
apartment units or commercial properties, or if the rental rates upon such
renewal or reletting were significantly lower than expected rates, then the
Company's funds from operations would, and ability to make expected
distributions to shareholders may, be adversely affected. There is also a risk
that as leases on the properties expire, residents or users will vacate or enter
into new leases on terms that are less favorable to the Company. Operating
costs, including real estate taxes, insurance and maintenance costs, and
mortgage payments, if any, do not, in general, decline when circumstances cause
a reduction in income from a property. If a property is mortgaged to secure
payment of indebtedness, and the Company is unable to meet its mortgage
payments, a loss could be sustained as a result of foreclosure on the property.
In addition, revenues from properties and real estate values are also affected
by such factors as applicable laws, including tax laws, interest rate levels and
the availability of financing.
In the normal course of business, the Company typically evaluates potential
acquisitions, enters into non-binding letters of intent, and may, at any time,
enter into contracts to acquire and may acquire additional properties. However,
no assurance can be given that the Company will have the financial resources to
make suitable acquisitions or that properties that satisfy the Company's
investment policies will be available for acquisition. Acquisitions of
properties entail risks that investments will fail to perform in accordance with
expectations. Such risks may include that construction costs may exceed original
estimates, possibly making a project uneconomical, financing may not be
available on favorable terms or at all and construction and lease-up may not be
completed on schedule. Estimates of the costs of improvements to bring an
acquired property up to standards established for the market position intended
for that property may prove inaccurate. In addition, there are general real
estate investment risks associated with any new real estate investment. Although
the Company undertakes an evaluation of the physical condition of each new
investment before it is acquired, certain defects or necessary repairs may not
be detected until
6
<PAGE>
after the investment is acquired, which could significantly increase the
Company's total acquisition costs and which could have a material adverse effect
on the Company and its ability to make distributions to shareholders.
ILLIQUIDITY OF REAL ESTATE AND REINVESTMENT RISK
Real estate investments are relatively illiquid and, therefore, tend to
limit the ability of the Company to adjust its portfolio in response to changes
in economic or other conditions. Additionally, the Code places certain limits on
the number of properties a REIT may sell without adverse tax consequences. To
effect its current operating strategy, the Company has in the past raised, and
will seek to continue to raise additional acquisition funds, both through
outside financing and through the orderly disposition of commercial and retail
properties, and, depending upon interest rates, current acquisition
opportunities and other factors, generally to reinvest the proceeds in
multifamily properties. In this respect, in the markets the Company has targeted
for future acquisition of multifamily properties, there is considerable buying
competition from other real estate companies, many of whom may have greater
resources, experience or expertise than the Company. In many cases, this
competition for acquisition properties has resulted in an increase in property
prices and a decrease in property yields. Due to the relatively low
capitalization rates currently prevailing in the pricing of potential
acquisitions of multifamily properties which meet the Company's investment
criteria, no assurance can be given that the proceeds realized from the
disposition of commercial and retail properties can be reinvested to produce
economic returns comparable to those being realized from the properties disposed
of, or that the Company will be able to acquire properties meeting its
investment criteria. To the extent that the Company is unable to reinvest
proceeds from the disposition of commercial and retail properties, or if
properties acquired with such proceeds produce a lower rate of return than the
properties disposed of, such results may have a material adverse effect on the
Company and its ability to make distributions to shareholders. In addition, a
delay in reinvestment of such proceeds may have a material adverse effect on the
Company and its ability to make distributions to shareholders.
The Company may seek to structure future dispositions as tax-free exchanges,
where appropriate, utilizing the nonrecognition provisions of Section 1031 of
the Code to defer income taxation on the disposition of the exchanged property.
For an exchange of such properties to qualify for tax-free treatment under
Section 1031 of the Code, certain technical requirements must be met. For
example, both the property exchanged and the property acquired must be held for
use in a trade or business or for investment, and the property acquired must be
identified within 45 days, and must be acquired within 180 days, after the
transfer of the exchanged property. If the technical requirements of Section
1031 of the Code are not met, then the exchanged property will be treated as
sold in a taxable transaction for a sales price equal to the fair market value
of the property received, in which event a distribution of cash to the
shareholders may be required to avoid a corporate-level income tax on the
resulting capital gain. Given the competition for properties meeting the
Company's investment criteria, it may be difficult for the Company to identify
suitable properties within the foregoing time frames in order to meet the
requirements of Section 1031. Even if a suitable tax-deferred exchange can be
structured, as noted above, no assurance can be given that the proceeds of any
of these dispositions will be reinvested to produce economic returns comparable
to those currently being realized from the properties which were disposed of.
COMPETITION
All of the properties currently owned by the Company are located in
developed areas. There are numerous other multifamily properties and real estate
companies, many of which have greater financial and other resources than the
Company, within the market area of each of the properties which will compete
with the Company for tenants and development and acquisition opportunities. The
number of competitive multifamily properties and real estate companies in such
areas could have a material effect on (i) the Company's ability to rent the
apartments and the rents charged and (ii) development and
7
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acquisition opportunities. The activities of these competitors could cause the
Company to pay a higher price for a new property than it otherwise would have
paid or may prevent the Company from purchasing a desired property at all, which
could have a material adverse effect on the Company and its ability to make
distributions to shareholders.
GEOGRAPHIC CONCENTRATION; DEPENDENCE ON WESTERN UNITED STATES REGIONS
The Company's portfolio is principally located in the San Francisco Bay
Area, San Diego, Tucson, Phoenix/Scottsdale, Seattle, Portland, the Los Angeles
metropolitan area, Sacramento and Las Vegas. The Company's performance could be
adversely affected by economic conditions in, and other factors relating to,
these geographic areas, including supply and demand for apartments in these
areas, zoning and other regulatory conditions and competition from other
properties and alternative forms of housing. In that regard, certain of these
areas (particularly the Los Angeles and San Diego metropolitan areas) have in
the recent past experienced economic recessions and depressed conditions in the
local real estate markets. To the extent general economic or social conditions
in any of these areas deteriorate or any of these areas experiences natural
disasters, the value of the portfolio, the Company's results of operations and
its ability to make distributions to shareholders could be adversely affected.
RISKS OF REAL ESTATE DEVELOPMENT AND ACQUISITION
Although the Company currently has no properties under development, the
Company may in the future seek to develop properties when market and economic
conditions warrant.
Real estate development involves significant risks in addition to those
involved in the ownership and operation of real estate. While the Company's
policies with respect to development activities are intended to limit some of
the risks otherwise associated with such activities, the Company nevertheless is
subject to certain risks, including lack of financing, construction delays,
budget overruns and lease-up. The occurrence of any of these risks could have a
material adverse effect on the Company and its ability to make distributions to
shareholders.
It is expected that, in the future, the Company's evaluation of real
property acquisition opportunities will be based, in part, upon the cost to
finance the acquisition and the yield expected to be derived from the ongoing
ownership of such real property. If the Company is unable to obtain sufficient
capital on acceptable terms, its ability to acquire new real estate or implement
other aspects of its objectives and strategies will be impaired. In addition,
even if sufficient capital is available on reasonable terms, no assurance can be
given that the costs to maintain the property so acquired or the yields actually
derived from the property will not deviate materially from expectations.
UNINSURED LOSS; LIMITED COVERAGE
The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance with respect to its properties with certain policy
specifications, limits and deductibles. While the Company currently carries
flood and earthquake insurance for its properties with an aggregate annual limit
of $50 million, subject to substantial deductibles, no assurance can be given
that such coverage will be available on acceptable terms or at an acceptable
cost, or at all, in the future, or if obtained, that the limits of those
policies will cover the full cost of repair or replacement of covered
properties. In addition, there may be certain extraordinary losses (such as
those resulting from civil unrest) that are not generally insured (or fully
insured against) because they are either uninsurable or not economically
insurable. Should an uninsured or underinsured loss occur to a property, the
Company could be required to use its own funds for restoration or lose all or
part of its investment in, and anticipated revenues from, the property and would
continue to be obligated on any mortgage indebtedness on the property. Any such
loss could have a material adverse effect on the Company and its ability to make
distributions to shareholders.
8
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CHANGE IN LAWS
Increases in real estate taxes and income, service and transfer taxes cannot
always be passed through to residents or users in the form of higher rents, and
may adversely affect the Company's cash available for distribution and its
ability to make distributions to shareholders. Similarly, changes in laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions, as
well as changes in laws affecting development, construction and safety
requirements, may result in significant unanticipated expenditures, which could
have a material adverse effect on the Company and its ability to make
distributions to shareholders. In addition, future enactment of rent control or
rent stabilization laws or other laws regulating multifamily housing may reduce
rental revenues or increase operating costs.
LAWS BENEFITING DISABLED PERSONS
A number of federal, state and local laws (including the Americans with
Disabilities Act) and regulations exist that may require modifications to
existing buildings or restrict certain renovations by requiring improved access
to such buildings by disabled persons. Legislation or regulations adopted in the
future may impose further burdens or restrictions on the Company with respect to
improved access by disabled persons. The costs of compliance with these laws and
regulations may be substantial, and limits or restrictions on completion of
certain renovations may limit implementation of the Company's investment
strategy in certain instances or reduce overall returns on its investments,
which could have a material adverse effect on the Company and its ability to
make distributions to shareholders. The Company reviews its properties
periodically to determine the level of compliance and, if necessary, takes
appropriate action to bring such properties into compliance. The Company's
management believes, based on property reviews to date, that the costs of such
compliance should not have a material adverse effect on the Company. Such
conclusions are based upon currently available information and data, and no
assurance can be given that further review and analysis of the Company's
properties, or future legal interpretations or legislative changes, will not
significantly increase the costs of compliance.
REAL ESTATE FINANCING RISKS
DEBT FINANCING AND DEBT MATURITIES
The Company is subject to the normal risks associated with debt financing,
including the risk that the Company's cash flow will be insufficient to meet
required payments of principal and interest, the risk that indebtedness on its
properties, or unsecured indebtedness, will not be able to be renewed, repaid or
refinanced when due or that the terms of any renewal or refinancing will not be
as favorable as the terms of such indebtedness. If the Company were unable to
refinance its indebtedness on acceptable terms, or at all, the Company might be
forced to dispose of one or more of the properties on disadvantageous terms,
which might result in losses to the Company, which losses could have a material
adverse effect on the Company and its ability to make distributions to
shareholders. Furthermore, if a property is mortgaged to secure payment of
indebtedness and the Company is unable to meet mortgage payments, the mortgagee
could foreclose upon the property, appoint a receiver and receive an assignment
of rents and leases or pursue other remedies, all with a consequent loss of
revenues and asset value to the Company. Foreclosures could also create taxable
income without accompanying cash proceeds, thereby hindering the Company's
ability to meet the REIT distribution requirements of the Code.
RISK OF RISING INTEREST RATES
The Company has incurred and expects in the future to incur indebtedness
which bears interest at a variable rate. Accordingly, increases in interest
rates would increase the Company's interest costs (to the extent that the
related indebtedness was not protected by interest rate protection
arrangements), which could have a material adverse effect on the Company and its
ability to make distributions to shareholders
9
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or cause the Company to be in default under certain debt instruments. In
addition, an increase in market interest rates may lead holders of the Company's
Common Stock to demand a higher yield on their shares from distributions by the
Company, which could adversely affect the market price for the Common Stock.
ADDITIONAL DEBT
The Company currently funds acquisition opportunities partially through
borrowings (including its lines of credit) as well as from other sources such as
sales of non-core properties. The organizational documents of the Company do not
contain any limitation on the amount of indebtedness that the Company may incur.
Accordingly, the Company could become more highly leveraged, resulting in an
increase in debt service, which could have a material adverse effect on the
Company and its ability to make distributions to shareholders and in an
increased risk of default on its obligations.
ENVIRONMENTAL RISKS
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be liable for the costs
of removal or remediation of certain hazardous or toxic substances in, on,
around or under such property. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. The presence of, or failure to
remediate properly, such substances may adversely affect the owner's or
operator's ability to sell or rent the affected property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at a disposal or treatment facility, whether or
not such facility is owned or operated by such person. Certain environmental
laws impose liability for release of asbestos-containing materials into the air,
and third parties may also seek recovery from owners or operators of real
properties for personal injury associated with asbestos-containing materials and
other hazardous or toxic substances. The operation and subsequent removal of
certain underground storage tanks are also regulated by federal and state laws.
In connection with the current or former ownership (direct or indirect),
operation, management, development and/or control of real properties, the
Company may be considered an owner or operator of such properties or as having
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, may be potentially liable for removal or remediation costs, as well
as certain other costs, including governmental fines, and claims for injuries to
persons and property.
The Company's current policy is to obtain a Phase I environmental study on
each property it seeks to acquire and to proceed accordingly. No assurance can
be given, however, that the Phase I environmental studies or other environmental
studies undertaken with respect to any of the Company's current or future
properties will reveal all or the full extent of potential environmental
liabilities, that any prior owner or operator of a property did not create any
material environmental condition unknown to the Company, that a material
environmental condition does not otherwise exist as to any one or more of such
properties or that environmental matters will not have a material adverse effect
on the Company and its ability to make distributions to shareholders. The
Company currently carries no insurance for environmental liabilities.
Certain environmental laws impose liability on a previous owner of property
to the extent that hazardous or toxic substances were present during the prior
ownership period. A transfer of the property does not relieve an owner of such
liability. Thus, the Company may have liability with respect to properties
previously sold by its predecessors.
PROVISIONS WHICH COULD LIMIT A CHANGE IN CONTROL OR DETER A TAKEOVER
In order to maintain its qualification as a REIT, not more than 50% in value
of the outstanding capital stock of the Company may be owned, actually or
constructively, by five or fewer individuals (as defined in the Code to include
certain entities). In order to protect the Company against risk of losing its
status as a
10
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REIT due to a concentration of ownership among its shareholders, the Articles of
Incorporation of the Company provide, among other things, that if the Board of
Directors determines, in good faith, that direct or indirect ownership of the
Company's stock has or may become concentrated to an extent that would prevent
the Company from qualifying as a REIT, the Board of Directors may prevent the
transfer of stock or call for redemption (by lot or other means affecting one or
more shareholders selected in the sole discretion of the Board of Directors) of
a number of shares sufficient in the opinion of the Board of Directors to
maintain or bring the direct or indirect ownership of the stock into conformity
with the requirements for maintaining REIT status. These limitations may have
the effect of precluding acquisition of control of the Company by a third party
without consent of the Board of Directors.
In addition, certain other provisions contained in the Company's Articles of
Incorporation and Bylaws, as well as its shareholder rights plan, may have the
effect of discouraging a third party from making an acquisition proposal for the
Company and may thereby inhibit a change in control of the Company. For example,
such provisions may (i) deter tender offers for Common Stock, which offers may
be attractive to the shareholders, or (ii) deter purchases of large blocks of
Common Stock, thereby limiting the opportunity for shareholders to receive a
premium for their Common Stock over then-prevailing market prices.
TAX RISKS
TAX LIABILITIES AS A CONSEQUENCE OF FAILURE TO QUALIFY AS A REIT
Although management believes that the Company is organized and is operating
so as to qualify as a REIT under the Code, no assurance can be given that the
Company has in fact operated or will be able to continue to operate in a manner
so as to qualify or remain so qualified. Qualification as a REIT involves the
application of highly technical and complex Code provisions for which there are
only limited judicial or administrative interpretations and the determination of
various factual matters and circumstances not entirely within the Company's
control. For example, in order to qualify as a REIT, at least 95% of the
Company's taxable gross income in any year must be derived from qualifying
sources and the Company must make distributions to shareholders aggregating
annually at least 95% of its REIT taxable income (excluding net capital gains).
In addition, no assurance can be given that new legislation, new regulations,
administrative interpretations or court decisions will not change the tax laws
with respect to qualification as a REIT or the federal income tax consequences
of such qualification.
If the Company fails to qualify as a REIT, the Company will be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at corporate rates. In addition, unless entitled to relief under
certain statutory provisions, the Company would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce funds available for
investment or distributions to shareholders because of the additional tax
liability to the Company for the year or years involved. In addition,
distributions to shareholders would no longer be required to be made. To the
extent that distributions to shareholders would have been made in anticipation
of qualifying as a REIT, the Company might be required to borrow funds or to
liquidate certain of its investments to pay the applicable tax.
ITEM 2. PROPERTIES
GENERAL
In addition to the information set forth in this Item 2, information on the
Company's portfolio is set forth in Schedule III under Item 14(d).
The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance with respect to its properties with certain policy
specifications, limits and deductibles, which the Company deems reasonable. In
addition, the Company currently carries flood and earthquake coverage with an
annual aggregate limit of $50,000,000 (after policy deductibles of 2% of
damages).
11
<PAGE>
MULTIFAMILY PROPERTIES
As reflected in the following chart, during the five years in the period
ended December 31, 1996, multifamily properties have increased as a percentage
of the Company's portfolio of income producing properties and revenues:
<TABLE>
<CAPTION>
MULTIFAMILY PROPERTIES 1996 1995 1994 1993 1992
- ----------------------------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Percentage of portfolio at cost, as of December 31......... 87% 72% 65% 55% 46%
Percentage of total revenue, for the year ended December
31....................................................... 77% 76% 71% 51% 53%
</TABLE>
During 1996, multifamily revenues as a percentage of total revenues did not
increase in proportion to the increase in the relative size of the multifamily
portfolio due to the timing of purchases of multifamily properties and the sales
of commercial properties.
COMMERCIAL AND RETAIL PROPERTIES
During 1996, BRE continued its orderly disposition of commercial and retail
properties, including commercial and retail properties acquired in the Merger.
At December 31, 1996 there were fifteen such properties (plus two held in
partnerships in which the Company is a limited partner). For additional
information regarding leases on the commercial and retail properties, see Note 3
to Notes to Financial Statements. No one resident or user accounted for more
than 10% of revenues for fiscal year 1996.
HEADQUARTERS
The Company maintains its corporate headquarters at One Montgomery Street,
Suite 2500, Telesis Tower, San Francisco, California pursuant to a sublease with
Wells Fargo Bank. The sublease has an eleven-year term, and covers 10,142
rentable square feet at annual per square foot rents which began at $23 and rise
to $34 in the tenth year of the lease. The lease term ends December 17, 1998.
ITEM 3. LEGAL PROCEEDINGS
The Company is defending various claims and legal actions that arise from
its normal course of business, including certain environmental actions. While it
is not feasible to predict or determine the ultimate outcome of these matters,
in the opinion of management, none of these actions will have a material adverse
effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol BRE. As of February 5, 1997, there were approximately
6,500 recordholders of the Company's Common Stock and the last reported sales
price on the NYSE was $25.625. The number of holders does not include persons
whose shares are held of record by a broker or clearing agency, but does include
each such broker or clearing agency as one recordholder. As of February 5, 1997,
there were approximately 29,000 shareholders of the Company's Common Stock. The
high and low last reported sales prices on the NYSE and dividends paid set forth
below retroactively reflect the two-for-one stock split discussed in Note 2 to
Notes to Financial Statements. Additionally, in order to maintain the Company's
status as a REIT, the Code requires dividends of at least 95% of the Company's
taxable income, see Note 2 to Notes to Financial Statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995
--------------------------------- ---------------------------------
STOCK PRICE STOCK PRICE
-------------------- DIVIDENDS -------------------- DIVIDENDS
HIGH LOW PAID HIGH LOW PAID
--------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
First Quarter....................................... $ 19.08 $ 17.63 $ .3395 $ 15.97 $ 15.25 $ .3150
Second Quarter...................................... $ 19.58 $ 17.44 $ .3330 $ 15.58 $ 14.94 $ .3150
Third Quarter....................................... $ 21.50 $ 19.50 $ .3300 $ 16.88 $ 15.38 $ .3150
Fourth Quarter...................................... $ 24.75 $ 20.13 $ .3300 $ 18.07 $ 15.88 $ .3150
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for each of the five years in the
period ended December 31, 1996 have been derived from the financial statements
of the Company which have been recast to give effect to the change in the
Company's fiscal year, see Note 2 to Notes to Financial Statements. The selected
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this report.
The 1996 results have been significantly impacted by the Merger and numerous
13
<PAGE>
acquisitions and dispositions as discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and notes thereto included elsewhere in this report and, therefore,
are not directly comparable to prior years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues................................. $ 101,651 $ 65,387 $ 56,970 $ 49,806 $ 39,829
Net income............................... 89,839 22,010 24,212 20,037 28,737
Less:
Net gain on sales of investments......... 52,825 221 1,646 506 14,199
Plus:
Depreciation and amortization............ 13,283 7,864 7,080 6,097 4,787
Provision for investment losses.......... -- 2,000 -- -- --
------------ ------------ ------------ ------------ ------------
Funds from operations *.................. $ 50,297 $ 31,653 $ 29,646 $ 25,628 $ 19,325
Net cash flows generated from operating
activities............................. $ 43,898 $ 26,032 $ 29,786 $ 24,571 $ 23,743
Dividends paid........................... $ 39,849 $ 27,596 $ 26,210 $ 23,659 $ 19,011
Dividends paid as a percentage of funds
from operations........................ 79% 87% 88% 92% 98%
Weighted average number of shares
outstanding............................ 30,520 21,905 21,840 20,150 15,840
PER SHARE DATA
Income before gain on sales of
investments............................ $ 1.21 $ 1.09 $ 1.03 $ .97 $ .92
Net gain on sales of investments......... 1.73 .01 .08 .02 .90
Provision for possible investment
losses................................. -- (.09) -- -- --
------------ ------------ ------------ ------------ ------------
Net income............................... $ 2.94 $ 1.01 $ 1.11 $ .99 $ 1.82
Dividends paid........................... $ 1.33 $ 1.26 $ 1.20 $ 1.20 $ 1.20
FINANCIAL POSITION
Total assets............................. $ 783,714 $ 354,895 $ 343,853 $ 293,628 $ 231,477
Real estate portfolio, before
depreciation........................... $ 816,389 $ 371,438 $ 373,676 $ 310,003 $ 252,239
Cash and short-term investments.......... $ 184 $ 16,057 $ 3,887 $ 13,742 $ 4,830
Long-term debt........................... $ 311,985 $ 112,290 $ 97,169 $ 45,416 $ 80,155
Shareholders' equity..................... $ 464,114 $ 239,248 $ 243,436 $ 245,156 $ 148,164
</TABLE>
- ------------------------
* Industry analysts generally consider Funds from Operations ("FFO") to be an
appropriate measure of the performance of an equity REIT. FFO is defined by
the National Association of Real Estate Investment Trusts as net income
(loss) (computed in accordance with generally accepted accounting
principles) excluding gains or losses from debt restructuring and sales of
property, plus depreciation and amortization of real estate assets. FFO does
not represent cash generated from operating activities in accordance with
generally accepted accounting principles, and therefore should not be
considered as a substitute for net income as a measure of results of
operations or for cash flow from operations as a measure of liquidity.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
BRE Properties, Inc. (the "Company") is a regionally focused,
self-administered equity real estate investment trust which primarily owns and
manages a portfolio of apartment communities in nine major markets of the
Western United States. The Company also owns a number of commercial and retail
properties. The Company's revenues consist primarily of rental income (92% of
total revenues in 1996 and 96% in each of 1995 and 1994) derived from its
portfolio of income-producing properties. Other income includes interest from
secured notes receivable and, to a lesser extent, income from partnership
investments. The policy of the Company is to emphasize cash flows from
operations rather than the realization of capital gains through property
dispositions. As dispositions of real estate assets are made, the Company
typically seeks to reinvest net proceeds from sales in income-producing real
estate.
The Company's strategic plan emphasizes equity investments in apartment
communities, located across Western markets, and the orderly redeployment of
retail and commercial property investments into apartment investments. Pursuant
to this strategy, the Company merged with Real Estate Investment Trust of
California on March 15, 1996. As a result of the Merger, the Company added 22
wholly owned apartment communities (totaling approximately 3,600 units) and 18
commercial and retail properties to the portfolio. The Merger also provided
increased depth in management and other resources which allowed the Company to
internalize property management during 1996.
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 10-K.
Financial information for 1995 and 1994 has been recast to conform to the
presentation of 1996 financial information, see Note 2 to Notes to Financial
Statements. Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Although the Company
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, such statements are subject to risks and
uncertainties, including those discussed elsewhere in this Form 10-K, that could
cause actual results to differ materially from those projected.
RESULTS OF OPERATIONS
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
REVENUES
Total revenues (excluding net gain on sales of investments in rental
properties) were $101,651,000 in 1996 compared to $65,387,000 in 1995 and
$56,970,000 in 1994. Revenues in 1996 increased primarily as a result of the
Merger and new multifamily property acquisitions which were offset in part by
the disposition
15
<PAGE>
of certain retail and commercial properties. A summary of revenues for the years
ended December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 % OF TOTAL 1995 % OF TOTAL 1994 % OF TOTAL
TOTAL REVENUES TOTAL REVENUES TOTAL REVENUES
---------- ------------- --------- ------------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Multifamily rental......... $ 77,834 77% $ 49,918 76% $ 40,504 71%
Commercial and retail
rental................... 15,301 15 12,947 20 14,232 25
Other income............... 8,516 8 2,522 4 2,234 4
---------- --- --------- --- --------- ---
Total revenue.............. $ 101,651 100% $ 65,387 100% $ 56,970 100%
</TABLE>
<TABLE>
<CAPTION>
% CHANGE FROM
PRIOR YEAR
------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Multifamily rental...................... 56% 23% 59%
Commercial and retail rental............ 18% (9%) (36%)
Other income............................ 238% 13% (1%)
Total revenue........................... 55% 15% 14%
</TABLE>
Multifamily rental revenues have increased in each of the last two years
primarily due to property acquisitions, including for 1996 the 22 apartment
communities acquired in the Merger and nine other direct apartment investments,
which contributed approximately $21,200,000 and $10,400,000, respectively, to
1996 revenue and were offset in part by the sale of the Westlake Village
property in 1996. Multifamily rental revenue in 1996 also benefited from an
increase in average occupancy (calculated as shown below) and a 4% average
increase in rental rates in 1996 when compared to 1995 for properties held
during both years. Multifamily rental revenue increased in 1995 as compared to
1994 primarily due to investments in a portfolio of Tucson, Arizona apartment
properties (the "Tucson Portfolio") during 1994, which were held for the entire
year in 1995. The Tucson Portfolio included seven properties and was acquired
for approximately $51,000,000; six communities were purchased in 1994 and one in
1995.
Revenues from commercial and retail properties increased 18% in 1996 when
compared to 1995, primarily due to the 18 properties in these categories
acquired by the Company in the Merger (which properties contributed
approximately $5,500,000 in revenues during 1996), offset in part by property
sales. Revenues from commercial and retail properties decreased $1,285,000 in
1995 compared to 1994 due primarily to property sales in 1994. Commercial and
retail revenues as a percentage of total revenues have declined in each of the
last two years as a result of the Company's strategy emphasizing redeployment of
these investments into apartment communities. In addition, commercial and retail
properties in California markets experienced rental rate and occupancy weakness
for each of 1996, 1995 and 1994.
Portfolio occupancy rates as of December 31, 1996, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Multifamily............................. 96% 93% 95%
Commercial and retail................... 93% 96% 69%
</TABLE>
For multifamily properties, portfolio occupancy is calculated by dividing
the total occupied units by the total units in the portfolio. For commercial and
retail properties, portfolio occupancy is calculated by dividing the total
occupied square footage by the total square footage in the portfolio.
16
<PAGE>
The following table summarizes, by property classification, portfolio
acquisitions and dispositions for the years ended December 31, 1996, 1995 and
1994 (dollar amounts are gross acquisition costs in the case of acquisitions and
gross sales prices in the case of property sales):
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- ------------
ACQUISITION/DISPOSITION SUMMARY # $ # $ # $
- --------------------------------------------- --- -------- --- -------- --- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Multifamily
Property acquisitions (1).................. 31 $446,412 2 $ 16,023 8 $72,240
Property dispositions (2).................. 1 58,000 -- -- -- --
Commercial and retail
Property acquisitions (3).................. 18 56,443 -- -- -- --
Property dispositions...................... 14 49,600 2 15,406 2 11,911
</TABLE>
- ------------------------
(1) Includes, for 1996, 22 properties acquired in the Merger with an aggregate
cost of $216,612,000 as determined under the purchase method of accounting.
(2) Represents sale of the Company's ground lease interest at Westlake Village
Apartments, Daly City, California.
(3) Represents, for 1996, 18 properties acquired in the Merger with an aggregate
cost of $56,443,000, as determined under the purchase method of accounting.
EXPENSES
REAL ESTATE EXPENSES
Real estate expenses for rental properties (which include maintenance and
repairs, utilities, on-site staff payroll, property taxes, insurance,
advertising and other direct operating expenses) for the year ended December 31,
1996 increased 44% to $31,030,000 from 1995 primarily due to expenses of the 40
properties acquired in the Merger and nine new multifamily property
acquisitions. Real estate expenses as a percentage of rental revenues decreased
from 34% in 1995 to 33% in 1996. Although not measurable with precision,
management believes that this decrease resulted in part from the internalization
of property management and economies of scale derived from increased
concentration of assets in the Company's markets. Real estate expenses increased
by 25% to $21,540,000 in the year ended December 31, 1995 from $17,256,000 for
the prior year due largely to the addition of the Tucson Portfolio, which was
held for the entire year in 1995.
PROVISION FOR DEPRECIATION AND AMORTIZATION
The provision for depreciation and amortization increased by $5,419,000 for
the year ended December 31, 1996 from that of 1995. The increase in 1996
resulted from properties acquired in the Merger and additional multifamily
property acquisitions, offset in part by dispositions of commercial and retail
properties. The provision for depreciation and amortization for the year ended
December 31, 1995 increased $784,000 compared to 1994 due largely to the
acquisition of the Tucson Portfolio in 1994, which resulted in expense for the
entire year of 1995 and only for a portion of the year in 1994.
INTEREST EXPENSE
Interest expense was $16,325,000 for the year ended December 31, 1996, up
from $7,973,000 in 1995. This increase was due primarily to interest on
indebtedness assumed in the Merger totaling $95,400,000 and interest on
subsequent borrowings on the Company's lines of credit to fund multifamily
property acquisitions. At December 31, 1996, the Company's total indebtedness
(including indebtedness assumed in the Merger) was $311,985,000. The $2,374,000
increase in 1995 interest expense over 1994 was due
17
<PAGE>
primarily to interest on borrowings in connection with the acquisition of the
Tucson Portfolio of approximately $27,939,000 for 12 months during 1995 and the
addition in 1995 of a new $12,000,000 secured loan.
GENERAL AND ADMINISTRATIVE
General and administrative costs were $3,999,000 (3.9% of total revenues),
$4,221,000 (6.5% of total revenues) and $4,469,000 (7.8% of total revenues), for
the three years ended December 31, 1996, 1995 and 1994, respectively. The
decrease in 1996 compared to 1995 is primarily from reductions in costs of
administering the Company's day to day operations due to, among other things,
the reorganization of the Company's asset management staff to handle direct
property management duties which were previously handled by outside property
management firms and, to a lesser extent, improved efficiencies in operating
systems, computer systems and software upgrades. The decrease in 1995 compared
to 1994 is due largely to legal expenses incurred in 1994 in connection with
certain litigation and recovered in part in 1995 from the Company's insurance
carriers, offset in part by certain non-recurring financial advisory costs
incurred in 1995.
NET GAIN ON SALES OF INVESTMENT IN RENTAL PROPERTIES
The net gain on sales in 1996 of approximately $52,825,000 was primarily due
to the sale of the Westlake Village leased land property (total sale price of
approximately $58,000,000) and the 525 Almanor industrial warehouse property
(total sale price of approximately $6,300,000). The net loss on sales (including
provision for possible investment losses) in 1995 of approximately $1,779,000
was due to the sale of the then-vacant Pomona Warehouse property and Irvine
Spectrum property. The net gain of approximately $1,646,000 in 1994 was due to
the sale of the Marymoor and 515 Ellis properties. All of these sales were
structured as tax-deferred exchanges, with the proceeds thereof applied toward
new investments in apartment communities. As of December 31, 1996, the Company
had gains on sales totaling approximately $121,000,000 which have been deferred
for federal and state income tax purposes since the Company's organization in
1970.
IMPACT OF INFLATION
Over 75% of the Company's total revenues for 1996 were derived from
apartment properties. Due to the short-term nature of most apartment leases
(typically one year or less), the Company may seek to adjust rents to help
counter the impact of inflation upon renewal of existing leases or commencement
of new leases, although there can be no assurance that the Company will be able
to adjust rents in response to inflation. In addition, occupancy rates may also
fluctuate due to short-term leases which permit apartment residents to leave at
the end of each lease term at minimal cost to the resident.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company's cash and cash equivalents totaled
$184,000, down from $16,057,000 at the end of 1995. Borrowings under the
Company's lines of credit totaled $124,000,000 at December 31, 1996, compared to
no such borrowings at December 31 of the previous year. Lines of credit are
available to pay dividends to shareholders, to fund capital improvements and
operating expenses, as well as to fund new acquisitions. The Company typically
reduces lines of credit with cash balances as available.
Borrowings of up to $150,000,000 are available under the Company's lines of
credit, with $26,000,000 available at December 31, 1996. The current lines of
credit expire in April 1998 as to $120,000,000 and April 1999 as to $30,000,000.
The lines of credit bear interest at prime or LIBOR plus 1.0% as to $30,000,000
and LIBOR plus 1.125% as to $120,000,000. Costs of the lines of credit are
0.125% per annum on the total commitment amount and an unuse fee of 0.125% per
annum as to amounts not outstanding on the $120,000,000 line.
18
<PAGE>
Pursuant to the Merger, the Company assumed $73,000,000 of unsecured
indebtedness which bears interest at 7.44% per annum as to $55,000,000 and 7.88%
per annum as to $18,000,000. This indebtedness is to be repaid through scheduled
principal payments in the years from 2000 to 2005. At December 31, 1996, the
Company also had outstanding mortgage indebtedness of $114,985,000 at interest
rates ranging from 6.5% to 8.4%, with remaining terms of from one to 31 years.
For additional information regarding the Company's lines of credit,
unsecured notes payable and mortgage loans payable, including scheduled
principal payments over the next five years, see Notes 5 and 6 to Notes to
Financial Statements. Certain of the Company's indebtedness contains financial
covenants as to minimum net worth, interest coverage ratios, maximum secured
debt and total debt to capital, among others. The Company was in compliance with
all such covenants during the year ended December 31, 1996.
During 1996, the Company entered into an unsecured treasury lock swap
agreement in the notional amount of $50,000,000. This transaction is intended to
reduce the Company's overall exposure to interest rate changes, see Note 2 to
Notes to Financial Statements.
The Company purchased nine apartment investments for a total purchase price
of approximately $230,000,000 in 1996. These acquisitions were funded with
proceeds of property sales (totaling approximately $104,000,000 after sales
expenses during 1996) and additional borrowings under the Company's lines of
credit. The Company was committed to purchase two apartment communities totaling
803 units for approximately $85,000,000 as of December 31, 1996; one of these
properties (totaling approximately 350 units) was acquired in February 1997 for
approximately $26,000,000 using proceeds from the Company's lines of credit.
Purchase of the remaining property is subject to satisfactory completion of the
Company's due diligence investigation of the property, and there can be no
assurance that this purchase will in fact be consummated. This purchase, if
completed, is expected to close before June 30, 1997.
The Company believes that its cash flow and cash available from lines of
credit will be sufficient to meet its short-term liquidity needs during 1997,
which include normal recurring expenses, debt service requirements, budgeted
expenditures for improvements to certain properties and distributions required
to maintain the Company's REIT qualification under the Internal Revenue Code.
However, the Company anticipates that it will continue to require outside
sources of financing to meet its long-term liquidity needs, such as scheduled
debt repayments, property acquisitions and development activities.
On February 11, 1997, the Company increased its lines of credit from
$150,000,000 to $200,000,000 for a period of 180 days on terms substantially
similar to those described above. Also subsequent to December 31, 1996, the
Company filed a shelf registration statement with the Securities and Exchange
Commission for up to $300 million of unsecured debt securities, Common Stock,
preferred stock, depositary shares or warrants to purchase shares of Common
Stock.
DIVIDENDS
A cash dividend has been paid to shareholders each quarter since the
Company's inception in 1970. Dividends per share were $1.33 in 1996, $1.26 in
1995 and $1.20 in 1994. Total dividends paid to
shareholders for the three years ended December 31, 1996, 1995 and 1994 were
$39,849,000, $27,596,000 and $26,210,000, respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Financial Statements. Such Financial Statements and
Schedules are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
19
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) EXECUTIVE OFFICERS. See "Executive Officers of the Registrant" in Part I of
this report.
(b) DIRECTORS. The information required by this Item is incorporated herein by
reference to the Company's Proxy Statement, relating to the Company's 1997
Annual Meeting of Shareholders, under the headings "Election of BRE
Directors" and "Compliance with Section 16(a) of the Securities Exchange Act
of 1934," to be filed with the Securities and Exchange Commission within 120
days of December 31, 1996.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement, relating to the Company's 1997 Annual Meeting of
Shareholders, under the headings "Executive Compensation and Other Information"
and "Board and Committee Meetings; Compensation of Directors," to be filed with
the Securities and Exchange Commission within 120 days of December 31, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT.
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement, relating to the Company's 1997 Annual Meeting of
Shareholders, under the headings "Security Ownership of Management" and
"Principal Shareholders," to be filed with the Securities and Exchange
Commission within 120 days of December 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement, relating to the Company's 1997 Annual Meeting of
Shareholders, under the heading "Employment Contracts and Termination of
Employment and Change in Control Arrangements--Mr. McDowell-- Stock Loan," to be
filed with the Securities and Exchange Commission within 120 days of December
31, 1996.
20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
1. Financial Statements:
Report of Independent Auditors
Balance Sheets at December 31, 1996 and 1995
Statements of Income for the years ended December 31, 1996, 1995
and 1994
Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994
Statements of Shareholders' Equity for the years ended December 31,
1996, 1995 and 1994
Notes to Financial Statements
2. Financial Statement Schedule:
Schedule III--Real Estate and Accumulated Depreciation
3. See Index to Exhibits immediately following the Financial Statements.
Each of the exhibits listed is incorporated herein by reference.
</TABLE>
(b) REPORTS ON FORM 8-K
On October 16, 1996, the Registrant filed a report on Form 8-K relating
to its purchase of the Foster's Landing Apartments. The Registrant
filed financial statements related thereto pursuant to a Report on Form
8-K/A filed on December 11, 1996.
On January 14, 1997, the Registrant filed a report on Form 8-K relating
to its purchase of the Promontory Point Apartments. The Registrant
filed financial statements related thereto pursuant to a Report on Form
8-K/A filed on February 13, 1997.
(c) EXHIBITS
See Index to Exhibits.
(d) FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statements and Financial Schedule.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
BRE PROPERTIES, INC.
</TABLE>
<TABLE>
<S> <C>
Dated: February 13, 1997 /s/ FRANK C. MCDOWELL
----------------------------------------
Frank C. McDowell, President
</TABLE>
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATED
- ------------------------------ -------------------------- -------------------
/s/ FRANK C. MCDOWELL President and Director
- ------------------------------ (Principal February 13, 1997
Frank C. McDowell Executive Officer)
Executive Vice President
/s/ LEROY E. CARLSON (Principal
- ------------------------------ Financial and Accounting February 13, 1997
LeRoy E. Carlson Officer)
/s/ JOHN MCMAHAN
- ------------------------------ Chairman and Director February 13, 1997
John McMahan
/s/ WILLIAM E. BORSARI
- ------------------------------ Director February 13, 1997
William E. Borsari
/s/ C. PRESTON BUTCHER
- ------------------------------ Director February 13, 1997
C. Preston Butcher
/s/ L. MICHAEL FOLEY
- ------------------------------ Director February 13, 1997
L. Michael Foley
/s/ ROGER P. KUPPINGER
- ------------------------------ Director February 13, 1997
Roger P. Kuppinger
/s/ MALCOLM R. RILEY
- ------------------------------ Director February 13, 1997
Malcolm R. Riley
/s/ GREGORY M. SIMON
- ------------------------------ Director February 13, 1997
Gregory M. Simon
/s/ ARTHUR G. VON THADEN
- ------------------------------ Director February 13, 1997
Arthur G. von Thaden
22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Directors of
BRE Properties, Inc.:
We have audited the accompanying balance sheets of BRE Properties, Inc. as
of December 31, 1996 and 1995, and the related statements of income,
shareholders' equity, cash flows and the related financial schedule for each of
the three years in the period ended December 31, 1996. These financial
statements and the related schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the related financial schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the related
financial schedule are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BRE Properties, Inc. at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
San Francisco, California
January 14, 1997
Except for Note 13, as to which the date is
February 12, 1997
23
<PAGE>
BRE PROPERTIES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Investments in rental properties:
Multifamily............................................................................. $ 710,240 $ 267,847
Commercial and retail................................................................... 103,528 102,269
Less: Accumulated depreciation and amortization......................................... (49,690) (48,036)
---------- ----------
764,078 322,080
Investments in limited partnerships....................................................... 2,621 1,322
---------- ----------
Real estate portfolio................................................................... 766,699 323,402
Mortgage loans, net....................................................................... 9,716 5,727
---------- ----------
776,415 329,129
Cash and short-term investments........................................................... 184 16,057
Other assets.............................................................................. 7,115 9,709
---------- ----------
TOTAL ASSETS........................................................................ $ 783,714 $ 354,895
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage loans payable.................................................................... $ 114,985 $ 112,290
Unsecured notes payable................................................................... 73,000 --
Borrowings on unsecured lines of credit................................................... 124,000 --
Accounts payable and other liabilities.................................................... 7,615 3,357
---------- ----------
Total liabilities................................................................... 319,600 115,647
Shareholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized in 1996. No shares
outstanding at December 31, 1996........................................................ -- --
Common stock, $.01 par value, 50,000,000 shares authorized. Shares issued and outstanding:
32,879,741 at December 31, 1996; 21,941,730 at December 31, 1995........................ 329 219
Additional paid-in capital................................................................ 387,674 212,908
Accumulated net income in excess of cumulative dividends.................................. 76,111 26,121
---------- ----------
Total shareholders' equity.......................................................... 464,114 239,248
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......................................... $ 783,714 $ 354,895
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements
24
<PAGE>
BRE PROPERTIES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
---------- --------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
REVENUE
Rental income:
Multifamily................................................................... $ 77,834 $ 49,918 $ 40,504
Commercial and retail......................................................... 15,301 12,947 14,232
Other income.................................................................... 8,516 2,522 2,234
---------- --------- ---------
Total revenue............................................................... 101,651 65,387 56,970
---------- --------- ---------
EXPENSES
Real estate expenses............................................................ 31,030 21,540 17,256
Provision for depreciation and amortization..................................... 13,283 7,864 7,080
Interest expense................................................................ 16,325 7,973 5,599
General and administrative...................................................... 3,999 4,221 4,469
---------- --------- ---------
Total expenses.............................................................. 64,637 41,598 34,404
---------- --------- ---------
Income before net gain on sales of investments in rental properties and
provision for possible investment losses...................................... 37,014 23,789 22,566
Net gain on sales of investments in rental properties........................... 52,825 221 1,646
Provision for possible investment losses........................................ -- (2,000) --
---------- --------- ---------
NET INCOME.................................................................. $ 89,839 $ 22,010 $ 24,212
---------- --------- ---------
---------- --------- ---------
Net income per share:
Income before net gain on sales of investments in rental properties and
provision for possible investment losses.................................... $ 1.21 $ 1.09 $ 1.03
Net gain on sales of investments in rental properties......................... $ 1.73 $ .01 $ .08
Provision for possible investment losses...................................... -- ($.09) --
---------- --------- ---------
NET INCOME PER SHARE........................................................ $ 2.94 $ 1.01 $ 1.11
---------- --------- ---------
---------- --------- ---------
</TABLE>
See notes to financial statements
25
<PAGE>
BRE PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................... $ 89,839 $ 22,010 $ 24,212
Adjustments to reconcile net income to net cash generated by operating
activities:
Net gain on sales of investments........................................... (52,825) (221) (1,646)
Provision for depreciation and amortization................................ 13,283 7,864 7,080
Provision for possible investment losses................................... -- 2,000 --
(Increase) decrease in other assets.......................................... 1,522 (4,694) 1,225
(Decrease) increase in accounts payable and other liabilities................ (3,932) 109 192
Net (increase) in mortgage loans............................................. (3,989) (1,036) (1,277)
----------- ---------- ----------
Net cash flows generated by operating activities............................. 43,898 26,032 29,786
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property purchased......................................................... (230,967) (16,023) (72,240)
Capital expenditures--multifamily.......................................... (748) (505) (264)
Capital expenditures--commercial and retail................................ (757) (1,662) (4,870)
Proceeds from sales of property, net....................................... 104,379 15,406 11,911
----------- ---------- ----------
Net cash flows used in investing activities.................................. (128,093) (2,784) (65,463)
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage loans payable:
New mortgage loans......................................................... -- 16,227 52,914
Principal payments......................................................... (1,450) (1,107) (1,163)
Lines of credit:
Advances................................................................... 127,300 -- --
Principal repayments....................................................... (21,500) -- --
Proceeds from grants of restricted shares and exercises of options........... 3,821 1,399 280
Dividends paid............................................................... (39,849) (27,596) (26,210)
----------- ---------- ----------
Net cash flows generated by (used in) financing activities................... 68,322 (11,077) 25,821
----------- ---------- ----------
(Decrease) increase in cash and short-term investments....................... (15,873) 12,171 (9,856)
Balance at beginning of period............................................... 16,057 3,886 13,742
----------- ---------- ----------
BALANCE AT END OF PERIOD..................................................... $ 184 $ 16,057 $ 3,886
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
See notes to financial statements
26
<PAGE>
BRE PROPERTIES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
COMMON STOCK SHARES
Balance at beginning of year...................................... 21,941,730 21,850,966 21,832,966
Issuance of shares pursuant to merger............................. 10,684,436 -- --
Restricted shares granted and stock options exercised............. 246,451 90,764 18,000
Shares issued pursuant to dividend reinvestment plan.............. 7,124 -- --
------------- ------------- -------------
Balance at end of year............................................ 32,879,741 21,941,730 21,850,966
------------- ------------- -------------
------------- ------------- -------------
COMMON STOCK
Balance at beginning of year...................................... $ 219 $ 219 $ 219
Issuance of shares pursuant to merger............................. 107 -- --
Restricted shares granted and stock options exercised............. 3 -- --
Shares issued pursuant to dividend reinvestment plan.............. -- -- --
------------- ------------- -------------
Balance at end of year............................................ 329 219 219
------------- ------------- -------------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year...................................... 212,908 211,510 211,231
Issuance of shares pursuant to merger............................. 170,948 -- --
Restricted shares granted and stock options exercised............. 3,681 1,398 279
Shares issued pursuant to dividend reinvestment plan.............. 137 -- --
------------- ------------- -------------
Balance at end of year............................................ 387,674 212,908 211,510
------------- ------------- -------------
ACCUMULATED NET INCOME IN EXCESS OF CUMULATIVE DIVIDENDS
Balance at beginning of year...................................... 26,121 31,707 33,705
Net income for year............................................... 89,839 22,010 24,212
Cash dividends paid--$1.3295 per share for the year ended December
31, 1996; $1.26 per share for the year ended December 31, 1995
and $1.20 per share for the year ended December 31, 1994........ (39,849) (27,596) (26,210)
------------- ------------- -------------
Balance at end of year............................................ 76,111 26,121 31,707
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY...................................... $ 464,114 $ 239,248 $ 243,436
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, the tax components of
its dividends are as follows (unaudited):
<TABLE>
<CAPTION>
ORDINARY LONG-TERM RETURN OF
INCOME CAPITAL GAIN CAPITAL
------------- ---------------- --------------
<S> <C> <C> <C>
December 31, 1996.......................................... 92% 1% 7%
December 31, 1995.......................................... 94% -- 6%
December 31, 1994.......................................... 86% 4% 10%
</TABLE>
See notes to financial statements
27
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. COMPANY
BRE Properties, Inc. ("BRE" or "the Company") is a self-administered real
estate investment trust ("REIT") which owns and operates multifamily communities
and other income producing properties in the Western United States. At December
31, 1996, BRE's portfolio consisted of 72 properties, including 53 wholly owned
multifamily communities (aggregating 12,212 units), 15 commercial and retail
properties, one land lease and three properties held in partnerships in which
BRE is a limited partner. Of these properties, 43 are located in California, 19
in Arizona, five in Washington, three in Nevada and two in Oregon. The 72
properties contain, in the aggregate, approximately 12,887,000 net rentable
square feet of improvements on approximately 866 acres of land.
MERGER WITH REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
On March 15, 1996, Real Estate Investment Trust of California ("RCT") merged
with and into BRE ("the Merger"). Following consummation of the Merger, BRE
changed its state of incorporation from Delaware to Maryland, amended the BRE
Certificate of Incorporation to authorize preferred stock, and approved the
Amended and Restated Non-Employee Director Stock Option Plan. The Merger was
completed in accordance with the terms and conditions of the Agreement and Plan
of Merger dated October 11, 1995, as amended ("the Merger Agreement"). Under the
terms of the Merger Agreement, upon the Merger, each issued and outstanding
share of beneficial interest of RCT was converted into the right to receive 1.14
shares of BRE Common Stock (.57 of a share of BRE Common Stock prior to the
stock split; see Note 2--Stock Split). The Merger was unanimously approved by
the Boards of both companies and by the requisite vote of the shareholders of
both. The Merger has been accounted for in 1996 as a purchase business
combination.
Pursuant to the Merger with RCT on March 15, 1996, BRE (i) acquired
$274,400,000 aggregate book value in equity investments in real estate, (ii)
assumed secured and unsecured RCT notes payable of $95,400,000, and other
liabilities totaling $8,000,000, and (iii) issued 10,684,436 shares of Common
Stock valued at $171,000,000 for the conversion of RCT shares of beneficial
interest.
2. ACCOUNTING POLICIES
RENTAL PROPERTY
Rental property is recorded at cost less accumulated depreciation less an
adjustment, if any, for impairment. Rental properties are evaluated for
impairment when conditions exist which may indicate that it is probable that the
sum of expected future cash flows (undiscounted) from a rental property during
the expected holding period is less than its carrying value. Upon determination
that such impairment has occurred, rental properties are reduced to fair value.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets, which range from 35 to 45 years for buildings and 5 to 25
years for other property.
Development projects are generally considered placed in service as the
property becomes ready for occupancy.
REAL ESTATE HELD FOR SALE
Real estate classified as held for sale is stated at the lower of its
carrying amount or estimated fair value less disposal costs. Depreciation is not
recorded on assets classified as held for sale.
28
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
In the normal course of business, BRE will receive offers for sale of its
properties, either solicited or unsolicited. For those offers which are
accepted, the prospective buyer will usually require a due diligence period
before consummation of the transaction. It is not unusual for matters to arise
which result in the withdrawal or rejection of the offer during this process. As
a result, real estate is not classified as "held for sale" until it is likely,
in the opinion of management, that a property will be disposed of in the near
term, even if sales negotiations for such property are currently under way. No
properties are considered "held for sale" for this purpose as of December 31,
1996 or 1995.
RENTAL EXPENSES AND CAPITALIZED COSTS
For multifamily properties, costs of replacements, such as appliances,
carpets and drapes, are expensed. Leasing commissions and tenant improvement
costs for retail and commercial properties are expensed when the lease term is
less than five years and capitalized on leases of five years or more and
amortized using the straight-line method over the lease terms, which range from
5 to 40 years. For all properties, improvements and betterments that increase
the value of the property or extend its life are capitalized.
CASH AND SHORT-TERM INVESTMENTS
BRE considers highly liquid short-term investments with initial maturities
of three months or less to be cash equivalents. Financial instruments which
potentially subject BRE to concentrations of credit risk include cash and
short-term investments. BRE places its cash deposits and temporary cash
investments with creditworthy, high-quality financial institutions. Cash and
cash equivalent balances are held with various financial institutions and may at
times exceed the applicable Federal Deposit Insurance Corporation limit of
$100,000.
DEFERRED COSTS
Included in other assets are costs incurred in obtaining debt financing that
are deferred and amortized over the terms of the respective debt agreements.
Related amortization expense is included in interest expense (non-cash) in the
accompanying statements of operations. Net deferred financing costs included in
Other Assets in the accompanying balance sheets are $850,000 and $758,000 as of
December 31, 1996 and 1995, respectively.
INCOME TAXES
BRE has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended ("the Code"). As a result, BRE will not be subject to federal
taxation at the corporate level to the extent it distributes, annually, at least
95% of its REIT taxable income, as defined by the Code, to its shareholders and
satisfies certain other requirements. In addition, the states in which BRE owns
and operates real estate properties have provisions equivalent to the federal
REIT provisions. Accordingly, no provision has been made for federal or state
income taxes in the accompanying financial statements.
GAINS ON SALES OF INVESTMENTS IN RENTAL PROPERTIES
Sales are generally recorded at the close of escrow or after title has been
transferred to the buyer and after appropriate payments have been received and
other criteria have been met.
29
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER SHARE
Net income per share is based upon the simple weighted average shares
outstanding. The effect of excluding Common Stock equivalents from the
calculation is less than 3% and is not material to the financial statement
presentation. Net income per share on a fully diluted basis is presented if
dilution is greater than 3%.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of BRE's financial instruments, including cash and other
short-term investments, accounts receivable, mortgage loans receivable, accounts
payable, other accrued expenses, mortgage loans payable, lines of credit and
other financial instruments, approximate their carrying or contract values based
on their nature, terms, and interest rates which approximate current market
rates.
On August 29, 1996 BRE entered into a Treasury Lock Swap Agreement in the
notional amount of $50,000,000 with a large, credit worthy bank. BRE did not
provide any collateral for this transaction. The rate is fixed at 7.05% as
compared to the rate on a United States Government 10-Year Treasury Note on June
30, 1997. The Treasury Lock Swap transaction is intended to reduce BRE's overall
exposure to interest rate changes in anticipation of future fixed rate
financing. Had the transaction been settled as of December 31, 1996, BRE would
have been required to pay approximately $380,000. Any future gain or loss on the
swap transaction will be deferred and will be amortized over the term of the
debt as an adjustment to its interest rate yield.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATION AND CHANGE IN FISCAL YEAR
Certain reclassifications have been made to the prior years' financial
statements to conform to the presentation of the current period financial
statements.
Commencing August 1, 1995, BRE began reallocating a portion of its salaries,
employee benefits and other personnel costs from general and administrative to
real estate expense to better reflect the functional nature of the underlying
activity. While this reclassification does not change BRE's net income or funds
from operations, such allocation reduces reported general and administrative
expenses and increases real estate expense by an equal amount. Management
believes that this allocation is consistent with industry practices and will
provide better matching of the revenue generated by the properties and the
expenses required to generate that revenue.
BRE has elected to recast the full comparative periods pursuant to the
change made in May 1996 in the fiscal year to a calendar year end effective
December 31, 1995. Therefore, amounts presented reflect the financial position
and results of operations from January 1, 1996 to December 31, 1996 and the
30
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
comparative period for the prior years. Certain reclassifications have been made
to the 1995 and 1994 financial statements to conform to the presentation of the
1996 financial statements.
STOCK SPLIT
On May 20, 1996, the Board of Directors approved a two-for-one stock split
effected in the form of a stock dividend to shareholders of record on June 7,
1996, payable on June 27, 1996. All share and per share amounts in these
financial statements have been retroactively restated for the stock split.
3. INVESTMENTS IN RENTAL PROPERTIES
Investments in rental properties consist of the following:
<TABLE>
<CAPTION>
COMMERCIAL AND
DECEMBER 31, 1996 MULTIFAMILY RETAIL TOTAL
- -------------------------------------------- -------------- --------------- --------------
<S> <C> <C> <C>
Land........................................ $ 139,770,000 $ 18,764,000 $ 158,534,000
Improvements................................ 570,470,000 84,764,000 655,234,000
-------------- --------------- --------------
Subtotal.................................... 710,240,000 103,528,000 813,768,000
Accumulated depreciation.................... (33,096,000) (16,594,000) (49,690,000)
-------------- --------------- --------------
Total....................................... $ 677,144,000 $ 86,934,000 $ 764,078,000
-------------- --------------- --------------
-------------- --------------- --------------
<CAPTION>
DECEMBER 31, 1995
- --------------------------------------------
<S> <C> <C> <C>
Land........................................ $ 58,032,000 $ 16,566,000 $ 74,598,000
Improvements................................ 209,815,000 85,703,000 295,518,000
-------------- --------------- --------------
Subtotal.................................... 267,847,000 102,269,000 370,116,000
Accumulated depreciation.................... (22,641,000) (25,395,000) (48,036,000)
-------------- --------------- --------------
Total....................................... $ 245,206,000 $ 76,874,000 $ 322,080,000
-------------- --------------- --------------
-------------- --------------- --------------
</TABLE>
The future minimum lease payments to be received from lessees under
operating leases at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................... $11,432,000
1998........................................................... 10,296,000
1999........................................................... 8,658,000
2000........................................................... 6,835,000
2001........................................................... 5,852,000
Thereafter..................................................... 23,344,000
----------
Total.......................................................... $66,417,000
----------
----------
</TABLE>
Leases with residents or users at wholly owned shopping centers provide for
percentage rents based upon the gross revenue of the residents or users. These
percentage rents are in excess of stipulated
31
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS IN RENTAL PROPERTIES (CONTINUED)
minimums. Percentage rents under these operating leases, which are included in
rental income, amounted to:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Percentage rent portion attributable to:
Land leases*...................................... $ 3,044,000 $ 5,313,000 $ 4,926,000
Wholly owned real estate.......................... 403,000 183,000 245,000
------------ ------------ ------------
Total percentage rent............................... $ 3,447,000 $ 5,496,000 $ 5,171,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- ------------------------
* Consists largely of percentage rent from the Westlake Village property which
was sold in July, 1996.
BRE's carrying value of its assets exceeds the tax basis by $121,180,000.
During the year ended December 31, 1996, approximately $65,000,000 of
taxable gain was deferred under Section 1031 of the Internal Revenue Code for
certain properties sold.
4. MORTGAGE LOANS RECEIVABLE
BRE has various mortgage loans and notes receivable which are to be paid in
monthly installments through 2008. The notes bear interest at rates ranging from
eight to twelve percent. Amounts remaining due to BRE at December 31, 1996 and
1995 aggregate $10,966,000 and $6,977,000, respectively. The allowance for
possible investment losses was $1,250,000 as of December 31, 1996 and 1995. All
loans are secured by real estate.
5. LINES OF CREDIT AND UNSECURED NOTES PAYABLE
At December 31, 1996, two banks had extended to BRE unsecured lines of
credit aggregating $150,000,000, with $30,000,000 expiring in April, 1999 and
$120,000,000 expiring in April, 1998. Borrowings totaled $124,000,000 at
December 31, 1996. No borrowings under these lines of credit were outstanding
during the years ended December 31, 1995 or 1994. In connection with these
arrangements, a fee is charged on the committed amounts. The weighted average
interest rate was 6.6% in the year ended December 31, 1996. Additionally, at
December 31, 1996, there were $73,000,000 in unsecured notes outstanding with an
average interest rate of 7.69% with interest only due until 1999. These
unsecured notes are to be repaid through scheduled principal payments from 2000
through 2005.
The lines of credit and unsecured note agreements contain various covenants
which include, among other factors, tangible net worth and requirements to
maintain certain financial ratios. BRE was in compliance with such covenants as
of December 31, 1996.
32
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. MORTGAGE LOANS PAYABLE
BRE has acquired certain investments in rental property which are subject to
existing mortgage loans payable and has obtained mortgage loans on other
investments. The following data pertains to mortgage loans payable at December
31, 1996, and 1995, respectively:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Mortgage loans payable....................................... $ 114,985,000 $ 112,290,000
Cost of investments in real estate securing mortgage loans
payable.................................................... $ 182,729,000 $ 173,904,000
Annual principal and interest payments....................... $ 10,137,000 $ 9,769,000
Remaining terms of mortgage loans payable.................... 1 - 31 years 2 - 33 years
Interest rates............................................... 6.5 - 8.4% 6.5 - 8.4%
</TABLE>
Included in the $114,985,000 mortgage loans payable is $9,240,000 of
tax-exempt debt with a variable interest rate, which was 4.20% at December 31,
1996. The effective interest rate on this debt is 6.20%, which includes
amortization of related fees and costs. Interest on all other mortgage loans is
fixed.
Scheduled principal payments required on lines of credit, unsecured notes
payable and mortgage loans payable for the next five years are as follows:
<TABLE>
<S> <C>
1997.......................................................... $ 2,655,000
1998.......................................................... 95,675,000
1999.......................................................... 35,739,000
2000.......................................................... 45,436,000
2001.......................................................... 11,392,000
Thereafter.................................................... 121,088,000
-----------
Total......................................................... $311,985,000
-----------
-----------
</TABLE>
Interest expense on mortgage loans and unsecured notes payable including
amortization of related costs aggregated $12,328,000, $7,824,000 and $5,466,000
for the years ended December 31, 1996, 1995 and 1994, respectively. Total
interest paid on long-term debt did not differ materially from interest expense.
7. STOCK OPTION PLANS
BRE has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related Interpretations
in accounting for its employee and non-employee director stock options because,
as discussed below, the alternative fair value accounting provided for under
Financial Accounting Standards Board Statement No. 123, "Accounting and
Disclosure of Stock-Based Compensation" ("Statement 123"), requires the use of
option valuation models that were not developed for use in valuing employee and
non-employee director stock options. Under APB 25, because the exercise price
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
33
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. STOCK OPTION PLANS (CONTINUED)
EMPLOYEE PLAN
The 1984 and 1992 Stock Option Plans ("Plans") provide for the issuance of
Incentive Stock Options, Non-Qualified Stock Options, and Restricted Shares. The
maximum number of shares that may be issued under the Plans is 1,350,000. The
option price may not be less than the fair market value of a share on the date
that the option is granted and the options generally vest over five years.
Changes in options outstanding during years ended December 31, 1996, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1996 1995 1994
----------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period................. 668,200 $ 15.62 635,200 $ 15.55 479,200 $ 15.57
Granted........................................ 354,000 $ 18.13 115,000 $ 15.94 156,000 $ 15.50
Exercised...................................... (259,100) $ 15.27 (75,000) $ 15.44 -- --
Canceled....................................... (10,500) $ 17.18 (7,000) $ 14.46 -- --
---------- ----------- --------- ----------- --------- -----------
Balance at end of period....................... 752,600 $ 16.90 668,200 $ 15.62 635,200 $ 15.55
---------- ----------- --------- ----------- --------- -----------
---------- ----------- --------- ----------- --------- -----------
Exercisable.................................... 438,766 $ 16.04 550,200 $ 15.58 423,700 $ 15.30
Restricted shares granted...................... -- -- 13,764 -- 18,000 --
Shares available for granting future options... 105,436 -- 448,336 -- 590,100 --
Weighted average fair value of options granted
during the year.............................. $ 3.66 $ 2.34 $ 2.07
</TABLE>
At December 31, 1996, the exercise price of shares under option ranged from
$12.97 to $20.00, with a weighted average exercise price of $16.90. Expiration
dates range from August 24, 1997 through August 26, 2006 and the weighted
average remaining contractual life of these options is 8.8 years. Stock options
were exercised during 1996 on options originally granted from $12.97 to $17.75.
In addition to the options granted under the Plans, the following stock
options are also outstanding: An option for 100,000 shares (at $15.32) is held
by the President and Chief Executive Officer. This option was registered with
the Securities and Exchange Commission on a Form S-8 and is not part of the
Plans. This option had a fair value of $2.28 in 1995, the year of the grant. In
conjunction with the Merger, options on 381,900 BRE shares equivalent to options
previously granted under the RCT plan were issued to officers with exercise
prices ranging from $11.41 to $14.70.
In addition to the above, there were 26,264 Restricted Shares outstanding at
December 31, 1996.
NON-EMPLOYEE DIRECTOR STOCK PLAN
The 1994 Non-Employee Director Stock Plan, as amended in 1996, provides for
the issuance of 25,000 Non-Qualified Stock Options per year to each non-employee
member of the Board of Directors and an additional 25,000 shares to the Chairman
of the Board of Directors. The maximum number of shares that may be issued under
the Plan is 800,000. As with the Employee Plan, the option price may not be less
than
34
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. STOCK OPTION PLANS (CONTINUED)
the fair market value of a share on the date the option is granted. Changes in
options outstanding for the years ended December 31, 1996, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1996 1995 1994
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period.................. 195,000 $ 16.48 20,000 $ 15.25 -- $ --
Granted......................................... 225,000 20.63 175,000 16.63 20,000 15.25
Canceled........................................ -- -- -- -- -- --
--------- ----------- --------- ----------- --------- -----------
Balance at end of period........................ 420,000 $ 18.71 195,000 $ 16.48 20,000 $ 15.25
--------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- -----------
Exercisable..................................... 244,999 $ 17.18 49,166 $ 16.06 5,000 $ 15.25
Shares available for granting future options.... 380,000 55,000 230,000
Weighted average fair value of options granted
during the year............................... $ 4.17 $ 2.47 $ 1.95
</TABLE>
At December 31, 1996, the exercise prices of shares under option ranged
between $15.25 and $21.00, with expiration dates from September 25, 2004 to
October 15, 2006. The options vest ratably over one year. The weighted average
remaining contractual life of these options is 9.2 years.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if BRE had accounted for
the employee and non-employee director stock options granted only in the years
ending December 31, 1996, 1995 and 1994 under the fair value method of that
Statement. The impact on the years ending December 31, 1996, 1995 and 1994 of
options granted prior to 1994 has been excluded from this presentation. The fair
value for these options was estimated as of the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for the years ending December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate........................................ 7.12% 7.12% 7.12%
Dividend yield................................................. 5.6% 7.1% 7.8%
Volatility..................................................... .26 .26 .26
Weighted average option life................................... 9 years 9 years 9 years
</TABLE>
The Black-Scholes option pricing model was developed for use in estimating
the fair market value of traded options which have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions, including the expected stock price volatility.
Because the above stock option plans have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of the above stock option plans.
35
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. STOCK OPTION PLANS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. BRE's pro forma
information, as if the Company had adopted Statement 123 as discussed above,
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Pro forma net income............................ $ 88,720,000 $ 21,606,000 $ 24,159,000
Pro forma earnings per share*................... $2.91 $0.97 $1.10
</TABLE>
- ------------------------
* Weighted average outstanding shares are used in the calculation as the
dilutive effect of Common Stock equivalents is less than 3%.
8. SHAREHOLDER RIGHTS
On August 14, 1989, the Directors adopted a Shareholder Rights Plan and
declared a dividend distribution of one Right for each share of BRE's Common
Stock outstanding on September 7, 1989. The Rights entitle holders to purchase,
under certain conditions, shares of Common Stock at a cash purchase price of
$45.00 per share, subject to adjustment. The Rights may also, under certain
conditions, entitle the holders to receive Common Stock, or other consideration,
having a value equal to two times the exercise price of each Right. The Rights
are redeemable by BRE at a price of $.005 per Right. If not so redeemed, the
Rights expire on September 7, 1999.
9. RETIREMENT PLAN
BRE has a defined contribution retirement plan covering all employees with
more than one year of continuous full-time employment. In addition to employee
elective deferrals, BRE contributed an amount equal to 10% of the compensation
expense of participating employees until March 15, 1996; thereafter BRE's
contribution was limited to 1.5% of the participating employee's salary. The
amounts contributed were $78,000, $164,000 and $143,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
10. RELATED PARTY TRANSACTIONS
Certain executives of BRE have purchased stock, the consideration for which
was interest-bearing recourse loans. The loans may be forgiven in whole or in
part upon the achievement of certain performance goals for BRE related to growth
in assets, funds from operations and stock price. A portion of the loans
expected to be forgiven are expensed currently as compensation. At December 31,
1996, the carrying amount of the loans was $1,235,000. The amounts of such loans
expected to be forgiven and treated as compensation expense were $128,000 and
$50,000 for the years ended December 31, 1996 and 1995, respectively. These
receivables are presented as assets rather than reclassified as reductions to
equity because such reclassifications would be immaterial.
11. LITIGATION
BRE is defending various claims and legal actions that arise from its normal
course of business, including certain environmental actions. While it is not
feasible to predict or determine the ultimate outcome of these matters, in the
opinion of management, none of these actions will have a material adverse effect
on BRE's results of operations or financial position.
36
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. PROFORMA INFORMATION (UNAUDITED)
The following table sets forth the results of operations as if the Merger
with RCT had occurred on January 1, 1995:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
Revenues...................................................... $ 110,110,000 $ 99,434,000
Income before gain on sales................................... $ 40,804,000 $ 34,353,000
Net income.................................................... $ 93,629,000 $ 41,952,000
Net income per share:
Income before gain on sales................................. $1.25 $1.05
Net income.................................................. $2.86 $1.29
</TABLE>
The unaudited pro forma statements of operations are presented for
comparative purposes only and are not necessarily indicative of what the actual
results of BRE would have been for the periods presented had the Merger occurred
on those dates, nor do they purport to represent the results of future periods.
The unaudited pro forma condensed statements should be read in conjunction with,
and are qualified in their entirety by, the respective historical financial
statements and notes thereto of BRE and RCT.
13. SUBSEQUENT EVENTS
As of December 31, 1996, the Company was committed to purchase two
multifamily communities comprising approximately 800 units for a total price of
approximately $85,000,000. These purchase commitments are subject to the
satisfactory completion of the Company's due diligence process. At February 12,
1997, neither of these purchases had been finalized.
On January 23, 1997, the Company filed a registration statement on Form S-3
with the Securities and Exchange Commission for the issuance of up to
$300,000,000 of unsecured debt securities, Common Stock, preferred stock,
depositary shares or warrants to purchase Common Stock.
On February 11, 1997, the Company temporarily increased its lines of credit
from a total of $150,000,000 to $200,000,000 under the same terms of the lines
of credit existing at December 31, 1996. The additional $50,000,000 is available
for 180 days.
37
<PAGE>
BRE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------
QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues.......................................... $18,825 $26,849 $26,269 $29,708
Income before gain on sales....................... 7,385 9,852 9,767 10,010
Net income........................................ 7,384 10,078 59,119 13,258
Net income per share:
Income before gain on sales..................... $.31 $.30 $.30 $.30
Net income...................................... $.31 $.31 $1.92 $.40
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------
QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues.......................................... $15,925 $15,862 $16,542 $17,058
Income before gain on sales....................... 5,700 5,794 6,052 6,243
Net income........................................ 6,819 3,794 6,052 5,345
Net income per share:
Income before gain on sales..................... $.27 $.26 $.28 $.28
Net income...................................... $.32 $.17 $.28 $.24
</TABLE>
38
<PAGE>
BRE PROPERTIES, INC
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(000S OMITTED)
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
COSTS
DATES ------------------------ CAPITALIZED
ACQUIRED/ BUILDINGS & SUBSEQUENT TO DEPRECIABLE
NAME LOCATION CONSTRUCTED LAND IMPROVEMENTS ACQUISITION LIVES-YEARS
- ------------------------- ------------------ -------------- --------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
APARTMENTS
Sharon Green........... Menlo Park, CA 1971/1970 $ 1,250 $ 5,770 $ 205 45
The Verandas........... Union City, CA 1993/1989 3,233 12,932 64 40
Foster's Landing....... Foster City, CA 1996/1987 11,741 47,849 40
Promontory Point....... San Ramon, CA 1996/1992 8,724 34,895 40
Montanosa.............. San Diego, CA 1992/1989-90 6,005 24,065 172 40
Lakeview Village....... Spring Valley, CA 1996/1985 3,977 15,910 33 40
Terra Nova Villas...... Chula Vista, CA 1994/1985 2,925 11,699 65 40
San Diego, CA 1993/1985-1987 4,869 19,493 152 40
Mira Mesa
(Cimarron, Hacienda,
Westpark)............
Canyon Villas.......... Chula Vista, CA 1996/1981 3,064 12,258 99 40
Winchester............. San Diego, CA 1994/1987 1,482 5,928 1 40
Countryside Village.... El Cajon, CA 1996/1989 1,002 4,007 36 40
Windrush Village....... Colton, CA 1996/1985 3,747 14,989 5 40
Village Green.......... La Habra, CA 1972/1971 372 2,763 303 45
Candlewood North....... Northridge, CA 1996/1964-1995 2,110 8,477 40
Park Glenn............. Camarillo, CA 1996/1963 1,750 7,000 23 40
The Summit............. Chino Hills, CA 1996/1989 1,839 7,354 9 40
Santa Paula Village.... Santa Paula, CA 1996/1970 550 2,200 1 40
Fountain Valley,
Sycamore Valley........ CA 1996/1969 4,617 18,691 40
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
-------------------------------------------------------------------
BUILDINGS & ACCUMULATED
NAME LAND IMPROVEMENTS TOTAL DEPRECIATION ENCUMBRANCES
- ------------------------- --------- ------------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
APARTMENTS
Sharon Green........... $ 1,250 $ 5,975 $ 7,225 $ (3,146) $ 18,937
The Verandas........... 3,233 12,996 16,229 (1,190) 11,865
Foster's Landing....... 11,741 47,849 59,590 (294) --
Promontory Point....... 8,724 34,895 43,619 -- --
Montanosa.............. 6,005 24,237 30,242 (2,420) 16,866
Lakeview Village....... 3,977 15,943 19,920 (315) --
Terra Nova Villas...... 2,925 11,764 14,689 (807) 9,240
4,869 19,645 24,514 (1,593) 12,976
Mira Mesa
(Cimarron, Hacienda,
Westpark)............
Canyon Villas.......... 3,064 12,357 15,421 (243) --
Winchester............. 1,482 5,929 7,411 (410) --
Countryside Village.... 1,002 4,043 5,045 (79) --
Windrush Village....... 3,747 14,994 18,741 (297) --
Village Green.......... 372 3,066 3,438 (1,703) --
Candlewood North....... 2,110 8,477 10,587 (177) --
Park Glenn............. 1,750 7,023 8,773 (139) --
The Summit............. 1,839 7,363 9,202 (146) --
Santa Paula Village.... 550 2,201 2,751 (44) --
Sycamore Valley........ 4,617 18,691 23,308 (156) --
</TABLE>
<PAGE>
BRE PROPERTIES, INC
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(000S OMITTED)
<TABLE>
<CAPTION>
INITIAL COST
TO COMPANY COSTS
------------------- CAPITALIZED
DATES ACQUIRED/ BUILDINGS & SUBSEQUENT TO DEPRECIABLE
NAME LOCATION CONSTRUCTED LAND IMPROVEMENTS ACQUISITION LIVES-YEARS
- ----------------- -------------- ----------------- ----- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Selby Ranch...... Sacramento, CA 1986/1971-1974 2,660 18,340 291 40
Hazel Ranch...... Fair Oaks, CA 1996/1985 2,471 9,885 6 40
Canterbury
Downs.......... Roseville, CA 1996/1993 2,297 9,190 50 40
Shaliko.......... Rocklin, CA 1996/1990 2,049 8,198 3 40
Rocklin Gold..... Rocklin, CA 1996/1990 1,558 6,232 4 40
Quail Chase...... Folsom, CA 1996/1990 1,303 5,211 5 40
Scottsdale
Cove........... Scottsdale, AZ 1991-94/1992-1994 3,243 14,468 39 40
Fairway
Crossings...... Phoenix, AZ 1996/1985 3,657 14,629 17 40
Newport Landing.. Glendale, AZ 1995-96/1987-1996 4,467 18,171 40
Brentwood........ Phoenix, AZ 1996/1980 1,712 6,849 17 40
Posada del
Este........... Phoenix, AZ 1996/1981 1,670 6,679 20 40
Park
Scottsdale..... Scottsdale, AZ 1996/1979 1,319 5,279 32 40
Los Senderos..... Phoenix, AZ 1996/1980 1,284 5,134 10 40
Shadow Bend...... Scottsdale, AZ 1996/1982 1,284 5,134 8 40
Monte Vista...... Phoenix, AZ 1996/1972 315 1,260 4 40
Arcadia Cove..... Phoenix, AZ 1996/1996 4,909 19,902 40
Hacienda del
Rio............ Tucson, AZ 1994/1983 1,859 7,437 78 40
Springhill....... Tucson, AZ 1994/1987 1,733 6,933 33 40
Fountain Plaza... Tucson, AZ 1994/1975 907 3,628 34 40
Colonia del
Rio............ Tucson, AZ 1994/1985 1,774 7,094 46 40
Camino Seco
Village........ Tucson, AZ 1995/1984 1,335 5,360 15 40
Casas Lindas..... Tucson, AZ 1994/1987 1,513 6,051 22 40
Oracle Village... Tucson, AZ 1994/1983 1,209 4,837 24 40
Ballinger
Commons........ Seattle, WA 1996/1989 5,824 23,519 40
Shadowbrook...... Redmond, WA 1987/1986 3,605 12,709 152 40
Parkwood......... Mill Creek, WA 1989/1989 3,947 15,811 45 40
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
--------------------------------------------------------
BUILDINGS & ACCUMULATED
NAME LAND IMPROVEMENTS TOTAL DEPRECIATION ENCUMBRANCES
- ----------------- ----- ------------ ------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Selby Ranch...... 2,660 18,631 21,291 (4,919) 12,450
Hazel Ranch...... 2,471 9,891 12,362 (196) --
Canterbury
Downs.......... 2,297 9,240 11,537 (182) --
Shaliko.......... 2,049 8,201 10,250 (162) --
Rocklin Gold..... 1,558 6,236 7,794 (123) --
Quail Chase...... 1,303 5,216 6,519 (103) --
Scottsdale
Cove........... 3,243 14,507 17,750 (1,384) --
Fairway
Crossings...... 3,657 14,646 18,303 (291) --
Newport Landing.. 4,467 18,171 22,638 (236) --
Brentwood........ 1,712 6,866 8,578 (136) --
Posada del
Este........... 1,670 6,699 8,369 (132) --
Park
Scottsdale..... 1,320 5,310 6,630 (104) --
Los Senderos..... 1,284 5,144 6,428 (102) --
Shadow Bend...... 1,284 5,142 6,426 (102) --
Monte Vista...... 315 1,264 1,579 (25) --
Arcadia Cove..... 4,909 19,902 24,811 (137) --
Hacienda del
Rio............ 1,859 7,515 9,374 (404) 5,534
Springhill....... 1,733 6,966 8,699 (391) 5,259
Fountain Plaza... 907 3,662 4,569 (197) 3,103
Colonia del
Rio............ 1,774 7,140 8,914 (400) 5,197
Camino Seco
Village........ 1,335 5,375 6,710 (190) 4,173
Casas Lindas..... 1,513 6,073 7,586 (366) --
Oracle Village... 1,209 4,861 6,070 (273) 4,128
Ballinger
Commons........ 5,824 23,519 29,343 (403) --
Shadowbrook...... 3,605 12,861 16,466 (3,052) --
Parkwood......... 3,947 15,856 19,803 (2,832) --
</TABLE>
<PAGE>
BRE PROPERTIES, INC
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(000S OMITTED)
<TABLE>
<CAPTION>
INITIAL COST
TO COMPANY COSTS
----------------------- CAPITALIZED
DATES ACQUIRED/ BUILDINGS & SUBSEQUENT TO DEPRECIABLE
NAME LOCATION CONSTRUCTED LAND IMPROVEMENTS ACQUISITION LIVES-YEARS
- ------------------------ -------------------- --------------- ------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thrasher's Mill......... Bothell, WA 1996/1988 2,031 8,223 40
Citywalk................ Seattle, WA 1988/1988 1,123 4,276 11 40
Brookdale Glen.......... Portland, OR 1993/1985 2,797 11,188 94 40
Berkshire Court......... Wilsonville, OR 1996/1996 3,284 13,200 40
Desert Lakes............ Las Vegas, NV 1996/1991 2,779 11,116 361 40
Cypress Springs II...... Las Vegas, NV 1996/1993 1,965 7,861 -- 40
Tango................... Las Vegas, NV 1996/1990 1,729 6,916 10 40
Villa Serra............. Cupertino, CA 1973/1970 900 --
Construction in progress
and other............. Various Various -- 872 Var.
------- ------- ------
Subtotal--Apartments.... 139,769 567,872 2,599
------- ------- ------
SHOPPING CENTERS
The Hub................. Fremont, CA 1973/1961-87 5,494 5,822 31,060 30-40
Santa Fe Springs
Plaza................. Santa Fe Springs, CA 1996/1985 3,411 13,643 8 40
El Camino............... Woodland Hills, CA 1971/1970 1,500 10,037 4,011 40
Elsinore Valley
Center................ Lake Elsinore, CA 1996/1981 446 1,786 -- 40
Central Shopping
Center................ Ventura, CA 1996/1985 1,060 4,240 73 40
Vista Village Center.... Valencia, CA 1996/1989 600 2,400 31 40
------- ------- ------
Subtotal--Shopping
Centers............... 12,511 37,928 35,183
------- ------- ------
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
-------------------------------------------------------------
BUILDINGS & ACCUMULATED
NAME LAND IMPROVEMENTS TOTAL DEPRECIATION ENCUMBRANCES
- ------------------------ ------- -------------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Thrasher's Mill......... 2,031 8,223 10,254 (141) --
Citywalk................ 1,123 4,287 5,410 (934) --
Brookdale Glen.......... 2,797 11,282 14,079 (1,052) --
Berkshire Court......... 3,284 13,200 16,484 (137) --
Desert Lakes............ 2,779 11,477 14,256 (221) --
Cypress Springs II...... 1,965 7,861 9,826 (156) --
Tango................... 1,729 6,926 8,655 (137) 4,152
Villa Serra............. 900 -- 900 -- --
Construction in progress
and other............. -- 872 872 (317) --
------- ------- ------- ----------- ------------
Subtotal--Apartments.... 139,770 570,470 710,240 (33,096) 113,880
------- ------- ------- ----------- ------------
SHOPPING CENTERS
The Hub................. 5,494 36,882 42,376 (13,260) --
Santa Fe Springs
Plaza................. 3,411 13,651 17,062 (285) --
El Camino............... 1,500 14,048 15,548 (2,664) 1,105
Elsinore Valley
Center................ 446 1,786 2,232 (21) --
Central Shopping
Center................ 1,060 4,313 5,373 (84) --
Vista Village Center.... 600 2,431 3,031 (48) --
------- ------- ------- ----------- ------------
Subtotal--Shopping
Centers............... 12,511 73,111 85,622 (16,362) 1,105
------- ------- ------- ----------- ------------
</TABLE>
<PAGE>
BRE PROPERTIES, INC
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(000S OMITTED)
<TABLE>
<CAPTION>
INITIAL COST
TO COMPANY COSTS
---------------------- CAPITALIZED
DATES ACQUIRED/ BUILDINGS & SUBSEQUENT TO DEPRECIABLE
NAME LOCATION CONSTRUCTED LAND IMPROVEMENTS ACQUISITION LIVES/YEARS
- ----------------------- --------------- --------------- -------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL/
INDUSTRIAL
Montalvo
Industrial......... Oxnard, CA 1996/1965- 200 800 42 40
1984
Santa Ana
Industrial......... Santa Ana, CA 1996/1985 312 805 -- 40
Coast Auto Center.... Ventura, CA 1996/1992 260 1,040 38 40
Hawthorne/Del Amo
Retail............. Torrance, CA 1996/1985 1,500 -- -- 40
Santa Paula
Commercial......... Santa Paula, CA 1996/1963 60 240 23 40
Vagabond Motor
Hotel.............. Ventura, CA 1996/1921 600 -- -- 40
Buenaventura Medical
Clinic............. Ventura, CA 1996/1960 1,200 -- -- 40
Skypark Professional
Building........... Torrance, CA 1996/1978 1,134 4,538 178 40
Valencia Medical
Center............. Valencia, CA 1996/1985 987 3,949 -- 40
-------- ------------ -------------
Subtotal--Commercial/
Industrial......... 6,253 11,372 281
-------- ------------ -------------
Total............ $158,533 $617,172 $38,063
-------- ------------ -------------
-------- ------------ -------------
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
-------------------------------------------------------------
BUILDINGS & ACCUMULATED
NAME LAND IMPROVEMENTS TOTAL DEPRECIATION ENCUMBRANCES
- ----------------------- -------- ------------ -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL/
INDUSTRIAL
Montalvo
Industrial......... 200 842 1,042 (16) --
Santa Ana
Industrial......... 312 805 1,117 (5) --
Coast Auto Center.... 260 1,078 1,338 (21) --
Hawthorne/Del Amo
Retail............. 1,500 -- 1,500 -- --
Santa Paula
Commercial......... 60 263 323 (5) --
Vagabond Motor
Hotel.............. 600 -- 600 -- --
Buenaventura Medical
Clinic............. 1,200 -- 1,200 -- --
Skypark Professional
Building........... 1,134 4,716 5,850 (101) --
Valencia Medical
Center............. 987 3,949 4,936 (84) --
-------- ------------ -------- ----------- ------------
Subtotal--Commercial/
Industrial......... 6,253 11,653 17,906 (232) --
-------- ------------ -------- ----------- ------------
Total............ $158,534 $655,234 $813,768 $(49,690) $114,985
-------- ------------ -------- ----------- ------------
-------- ------------ -------- ----------- ------------
</TABLE>
<PAGE>
BRE PROPERTIES, INC.
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(000S OMITTED)
The activity in investments in rental properties and related depreciation
for the three year period ended December 31, 1996 is as follows:
INVESTMENTS IN RENTAL PROPERTIES:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year....................................... $ 370,116 $ 372,478 $ 308,906
Investments acquired in merger (excluding partnership
investments)..................................................... 273,055 -- --
Investments purchased.............................................. 230,967 16,023 72,240
Transfers from Construction in progress............................ 1,550 -- --
Investments sold................................................... (63,425) (18,802) (13,802)
Reduction in carrying value........................................ -- (1,750) --
Capital Expenditures............................................... 1,505 2,167 5,134
---------- ---------- ----------
Balance at end of year............................................. $ 813,768 $ 370,116 $ 372,478
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
ACCUMULATED DEPRECIATION:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year.......................................... $ 48,036 $ 43,789 $ 40,246
Depreciation expense.................................................. 13,283 7,864 7,080
Accumulated depreciation on Investments sold.......................... (11,629) (3,617) (3,537)
---------- --------- ---------
Balance at end of year................................................ $ 49,690 $ 48,036 $ 43,789
---------- --------- ---------
---------- --------- ---------
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER IDENTITY OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation (Previously filed on March 15, 1995 in the Exhibits to
Form 8-K and incorporated by reference herein.)...........................................
3.2 By-Laws (Previously filed on December 22, 1995 in the Exhibits to Form S-4 (File No.
33-65365) and incorporated by reference herein.)..........................................
10.1 1984 Stock Option Plan, as amended to date (Previously filed on October 19, 1992 in the
Exhibits to Form 10-K and incorporated by reference herein.)..............................
10.2 1992 Employee Stock Option Plan, as amended and restated to date (Previously filed on
October 19, 1992 in the Exhibits to Form 10-K and incorporated by reference herein.)......
10.3 1994 Non-Employee Director Stock Plan (Previously filed on October 23, 1994 in the Exhibits
to Form 10-K and incorporated by reference herein.).......................................
10.4 1992 Payroll Investment Plan (Previously filed on October 19, 1992 in the Exhibits to Form
10-K and incorporated by reference herein.)...............................................
10.5 Form of Indemnification Agreement (Previously filed on September 25, 1986, as amended, in
Exhibits to Form S-4 (File No. 33-9014) and incorporated by reference herein.)............
10.8 Employment agreement with Frank C. McDowell (Previously filed on October 23, 1995 in the
Exhibits to Form 10-K and incorporated by reference herein.)..............................
10.9 Supplemental Executive Retirement Benefit agreement with Arthur G. von Thaden (Previously
filed on October 24, 1988 in the Exhibits to Form 10-K and incorporated by reference
herein.)..................................................................................
10.10 Supplemental Executive Retirement Benefit agreement with Howard E. Mason, Jr. (Previously
filed on October 24, 1988 in the Exhibits to Form 10-K and incorporated by reference
herein.)..................................................................................
10.11 BRE Properties, Inc. Retirement Plan (Previously filed on October 24, 1988 in the Exhibits
to Form 10-K and incorporated by reference herein.).......................................
10.12 BRE Properties, Inc. Supplemental ERISA Retirement Plan (Previously filed on October 23,
1995 in the Exhibits to Form 10-K and incorporated by reference herein.)..................
10.13 Sublease with Wells Fargo Bank on 10,142 square feet at Suite 2500, One Montgomery Street,
San Francisco, California (Previously filed on October 24, 1988 in the Exhibits to Form
10-K and incorporated by reference herein.)...............................................
10.14 Form of deferred compensation agreement with Eugene P. Carver (Previously filed on October
13, 1994 in the Exhibits to Form 10-K and incorporated by reference herein.)..............
10.15 Amended and Restated Non-Employee Director Stock Option Plan, as amended (Previously filed
on December 22, 1995 in the Exhibits to Form S-4 (File No. 33-65365) and incorporated by
reference herein.)........................................................................
10.16 Amendment to the Amended and Restated Non-Employee Director Stock Option Plan, dated as of
April, 1996...............................................................................
10.17 Treasury Lock Swap Transaction (Previously filed on November 13, 1996 in the Exhibits to
Form 10-Q and incorporated by reference herein.)..........................................
10.18 Employment agreement with Jay W. Pauly (Previously filed on December 22, 1995 in the
Exhibits to Form S-4 (File No. 33-65365) and incorporated by reference herein.)...........
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER IDENTITY OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------
<S> <C> <C>
10.19 Employment agreement with LeRoy E. Carlson (Previously filed on December 22, 1995 in the
Exhibits to Form S-4 (File No. 33-65365) and incorporated by reference herein.)...........
10.20 Employment agreement with John H. Nunn (Previously filed on December 22, 1995 in the
Exhibits to Form S-4 (File No. 33-65365) and incorporated by reference herein.)...........
10.21 Dividend Reinvestment Plan (Previously filed on August 9, 1996 in the Exhibits to Form S-3
(File No. 333-09945) and incorporated by reference herein.)...............................
10.22 1991 Stock Option Plan for Real Estate Investment Trust of California.......................
10.23 Sanwa Bank California Credit Agreement, dated April 9, 1996.................................
10.24 First Amendment to Sanwa Bank California Credit Agreement, dated December 12, 1996..........
10.25 Unsecured Line of Credit Loan Agreement by and between BRE Properties, Inc., as Borrower and
Bank of America National Trust and Savings Association, as Lender, dated April 4, 1996....
10.26 Modification Agreement to Syndicate Loan to BRE Properties, Inc. made by various financial
institutions with Bank of America NT & SA as Agent........................................
10.27 Second Modification Agreement Regarding Unsecured Line of Credit to BRE Properties, Inc.
made by various financial institutions with Bank of America NT & SA as Agent..............
10.28 Unsecured Line of Credit Loan Agreement by and between BRE Properties, Inc., as Borrower,
and Bank of America National Trust and Savings Association, as Lender, dated as of
February 11, 1997.........................................................................
10.29 Modification Agreement to Syndicate Loan to BRE Properties, Inc. made by various financial
institutions with Bank of America NT & SA as Agent........................................
10.30 Loan Agreement between The Prudential Insurance Company of America, as Lender and Real
Estate Investment Trust of California, as Borrower, dated as of January 31, 1994..........
10.31 First Amendment to Loan Agreement by and between The Prudential Insurance Company of America
and Real Estate Investment Trust of California, dated July 7, 1995 .......................
10.32 Second Amendment to Loan Agreement by and between The Prudential Insurance Company of
America and BRE Properties, Inc., dated April 30, 1996....................................
10.33 Third Amendment to Loan Agreement by and between The Prudential Insurance Company of America
and BRE Properties, Inc., dated November 20, 1996.........................................
10.34 Loan Agreement between The Prudential Insurance Company of America, as Lender and Real
Estate Investment Trust of California, as Borrower, dated as of July 7, 1995..............
10.35 First Amendment to Loan Agreement by and between The Prudential Insurance Company of America
and BRE Properties, Inc., dated April 30, 1996............................................
10.36 Second Amendment to Loan Agreement by and between The Prudential Insurance Company of
America and BRE Properties, Inc., dated November 20, 1996.................................
11 Computation of earnings per share...........................................................
21 Subsidiaries of the Registrant (Previously filed on October 13, 1994 in the Exhibits to Form
10-K and incorporated by reference herein.)...............................................
23.1 Consent of Ernst & Young LLP................................................................
27 Financial Data Schedule.....................................................................
</TABLE>
<PAGE>
Exhibit 10.16
SECRETARY'S CERTIFICATE
OF BRE PROPERTIES, INC.
The undersigned, LeRoy E. Carlson, hereby certifies that (i) he is the
duly elected, acting and qualified Secretary of BRE Properties, Inc., a
Maryland corporation (the "Company"), and (ii) the following is a true,
complete and correct copy of resolutions adopted by a vote of the duly
elected Board of Directors of the Company at a meeting duly called and held
on April 29, 1996:
AMENDMENT OF NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
WHEREAS, the Board of Directors of the Company deems it advisable
and in the best interests of the Company and its shareholders for the
Company's Amended and Restated Non-Employee Director Stock Option Plan
(the "Plan") to be amended as set forth below;
NOW, THEREFORE, BE IT:
RESOLVED, that paragraph 4(b) of the Plan be and hereby is amended
to read in its entirety as follows:
"(b) ANNUAL STOCK OPTIONS FOR 12,500 SHARES IN LIEU OF CHAIRMAN
FEES. In addition to the Options granted under paragraph 4(a), each
Chairman of the Board of Directors of the Company who is not
otherwise an employee of the Company (a "Non-Employee Chairman")
shall receive the Options described in subparagraphs (i) or (ii)
below, as applicable, and the Options described in subparagraph
(iii) below, in lieu of any separate cash retainer otherwise
payable to the Chairman for serving in his or her capacity as such.
(i) INITIAL GRANT. Effective April 30, 1996, an initial grant
of Options for 12,500 Shares shall be made to the Non-Employee
Chairman then in office.
(ii) GRANTS TO FUTURE CHAIRMEN. Any other person who hereafter
becomes a Non-Employee Chairman shall automatically receive an
Option for 12,500 Shares effective as of the date of his or her
appointment as such.
(iii) SUBSEQUENT ANNUAL GRANTS. In addition to the option
grants provided for in subparagraphs (i) and (ii) of this
paragraph 4(b), each Non-Employee Chairman shall automatically
receive an additional Option for 12,500 Shares on each anniversary
date of the date of grant of the Option received pursuant to
subparagraphs (i) or (ii) of this paragraph 4(b)."
<PAGE>
RESOLVED FURTHER, that the first clause of paragraph 4(c) of the
Plan be and hereby is amended to read as follows:
"In addition to the Options granted pursuant to paragraphs (a) and
(b) above,"
(end)
IN WITNESS WHEREOF, I have signed this certificate as of this 29th day
of April, 1996. ----
-----
BRE Properties, Inc.,
a Maryland corporation
By: /s/LeRoy E. Carlson
-----------------------------------
Name: LeRoy E. Carlson
Title: Secretary
<PAGE>
EXH. 10.22
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
1991 STOCK OPTION PLAN
1. PURPOSE.
This Real Estate Investment Trust of California 1991 Stock Option Plan
(the "Plan") is intended to allow employees, including, without limitation,
executive officers (the "employees"), of Real Estate Investment Trust of
California, a trust organized and existing under the laws of California (the
"Trust"), to receive certain options (the "Options") to purchase Shares of
Beneficial Interest of the Trust (the "Shares"), as herein provided. In the
sole and absolute discretion of the Committee (as defined in paragraph 2
hereof), such Options shall constitute either "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-statutory stock options. The purpose of this
Plan is to advance the interests of the Trust and its Shareholders by
strengthening the Trust's ability to attract and retain employees of ability
commensurate to positions of substantial responsibility and to provide
employees with additional incentives to make significant and extraordinary
contributions to the long-term performance and growth of the Trust.
2. ADMINISTRATION.
2.1. This Plan shall be administered by the non-employee members of the
Board of Trustees of the Trust (the "Board") or any committee duly appointed
by the Board (the non-employee members of the Board or any committee
appointed by the Board are hereinafter sometimes collectively referred to as
the "Committee"). The Committee shall consist of at least three members, each
of whom shall be a "disinterested person" as that term is defined in Rule 16b
3(d)(3) promulgated by the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934 (the "Exchange Act"), but no action of the
Committee shall be invalid if this requirement is not met. The Committee
shall act by vote of a majority of a quorum, or by written consent. A majority
of its members shall constitute a quorum.
2.2. The Committee shall have full and complete authority, in its sole
and absolute discretion, but subject to the express provisions of this Plan;
to approve the employees nominated by the management of the Trust to be
granted Options; to determine the number of Options to be granted to an
employee; to determine the time or times at which Options shall be granted;
to establish the terms and conditions upon which Options may be exercised; to
remove or adjust any restrictions and conditions upon Options; to specify, at
the time of grant, provisions relating to exercisability of Options and to
accelerate or otherwise modify the exercisability of any Options; to
interpret this Plan; and to adopt such rules and regulations and to make all
other determinations deemed necessary or desirable for the administration of
this Plan. All interpretations and constructions of this Plan by the
Committee, and all actions by the Committee hereunder, shall be binding and
conclusive on all persons for all purposes.
2.3. The Trust hereby agrees to indemnify and hold harmless each
Committee member and each employee of the Trust, and the estate and heirs of
such Committee member or employee, against all claims, liabilities, expenses,
penalties, damages or other pecuniary losses, including legal fees incurred by
such Committee member or employee, which such Committee member or employee,
or his or her estate or heirs may suffer as a result of his or her
responsibilities, obligations or duties in connection with this Plan, to the
extent that insurance, if any, does not cover the payment of such items.
3. ELIGIBILITY AND PARTICIPATION.
Employees eligible to participate under this Plan shall be approved by
the Committee, from time to time, from those employees who, in the opinion of
the management of the Trust, are in positions
B-1
<PAGE>
which enable them to make significant and extraordinary contributions to the
long-term performance and growth of the Trust. In selecting employees to whom
Options may be granted, consideration shall be given to factors such as
employment position, duties and responsibilities, ability, productivity,
length of service, morale, interest in the Trust and recommendations of
supervisors. No member of the Committee shall be eligible to participate
under this Plan or under any other Trust plan if such participation would
contravene the standards of paragraph 2.1 hereof relating to "disinterested
persons."
4. GRANTS.
The Committee may grant Options in such amounts, at such times, and to
such employees nominated by the management of the Trust as the Committee, in
its sole and absolute discretion, may determine. Options granted under this
Plan shall constitute "incentive stock options" within the meaning of Section
422A of the Code, if so designated by the Committee on the date of grant. The
Committee shall also have the discretion to grant Options which do not
constitute incentive stock options and any such Options shall be designated
non-statutory stock options by the Committee on the date of grant. To the
extent that the aggregate Fair Market Value (as defined in paragraph 5
hereof) of the Shares with respect to which incentive stock options are
exercisable for the first time by any optionee during any calendar year
exceeds the maximum amount permitted under Section 422A of the Code
(currently $100,000.00), such Options shall be treated as non-statutory stock
options. "Subsidiary" shall mean each corporation which is a "subsidiary
corporation" of the Trust within the definition contained in Section 425(f)
of the Code. Non-statutory stock options shall not be subject to the
limitations relating to incentive stock options contained in Section 422A of
the Code. Subject to the provisions of paragraph 11 hereof, the aggregate
number of Shares issued and issuable pursuant to the exercise of Options
granted hereunder shall not exceed five percent (5%) of the Shares issued and
outstanding from time to time. If an Option expires, terminates or is
canceled for any reason without having been exercised in full, the Shares not
purchased thereunder shall again be available for purposes of this Plan.
5. PURCHASE PRICE.
The purchase price (the "Exercise Price") of the Shares subject to each
Option ("Option Shares") shall be determined and fixed by the Committee, in
its sole and absolute discretion, but in no event shall the price of an
incentive stock option be less than 100% of the Fair Market Value of such
Option Shares on the date of grant of such Option. For purposes of this Plan,
the "Fair Market Value" of a Share shall be the last reported sales price on
the date of grant on the principal stock exchange on which the Shares are
then listed for trading; provided, however, that if no such sales are
reported on that date, then the Exercise Price shall be computed on the next
succeeding day on which such a sale is reported. The "date of grant" shall be
the date on which the Committee approves the issuance of the Option.
Notwithstanding the foregoing, the Exercise Price of Option Shares subject to
an incentive stock option granted to an optionee who at the time of grant
owns Shares possessing more than 10% of the total combined voting power of
all classes of stock of the Trust (or of any parent or Subsidiary) shall be
at least equal to 110% of the Fair Market Value of such Option Shares on the
date of grant of such Option.
6. OPTION PERIOD
The Option period (the "Term") shall be determined by the Committee and
shall commence on the date of grant of the Option and shall be ten years or
such shorter period as is determined by the Committee. Notwithstanding the
foregoing, the Term of an incentive stock option granted to an optionee who
at the time of grant owns Shares possessing more than 10% of the total
combined voting power of all classes of stock of the Trust (or of any parent
or Subsidiary) shall not exceed five years. Each Option shall provide that it
is exercisable over its Term in such periodic installments as the Committee
in its sole and absolute discretion may determine. Such provisions need to be
uniform. If
B-2
<PAGE>
an optionee shall not in any period purchase all of the Option Shares which
the optionee is entitled to purchase in such period, the optionee may
purchase all or any part of such Option Shares at any time prior to the
expiration of the Option.
7. EXERCISE OF OPTIONS.
7.1. Each Option may be exercised in whole or in part (but not as to
Fractional shares) by delivering it for surrender or endorsement to the
Trust, attention of the Trust's Secretary, at the principal office of the
Trust, together with payment of the Exercise Price and an executed Notice and
Agreement of Exercise in the form prescribed by paragraph 7.2 hereof. Payment
may be made in cash, by cashier's or certified check, by surrender of
previously owned Shares valued pursuant to paragraph 5 hereof (if the
Committee authorizes payment in Shares) or by a combination thereof. Subject
to the Board's approval, the Committee may (a) extend credit to an optionee
to pay any income tax liability incurred as a result of the exercise of an
Option, and/or (b) extend credit to an optionee to pay the Exercise Price in
installments, with the unpaid portion of the income tax liability and/or
Exercise Price represented by the optionee's promissory note or notes and the
Shares issued upon the exercise of the Option pledged as security for the
payment of such note or notes.
7.2 Exercise of each Option is conditioned upon the agreement of the
optionee to the terms and conditions of this Plan and of such Option as
evidenced by the optionee's execution and delivery of a Notice and Agreement
of Exercise in a form to be determined by the Committee in its discretion.
Such Notice and Agreement of Exercise shall state the number of Shares with
respect to which the Option is being exercised and shall be signed by the
person exercising the Option and, in the event the Option is being exercised
by any person other than the optionee, shall be accompanied by proof,
satisfactory to counsel for the Trust, of the right of such person to
exercise the Option. Moreover, such Notice and Agreement of Exercise shall
set forth the agreement of the optionee that: (a) no Option Shares will be
sold or otherwise distributed in violation of the Securities Act of 1933, as
amended, or any other applicable federal or state securities laws; (b) each
Option Share certificate may be imprinted with legends reflecting any
applicable federal and state securities law restrictions and conditions; (c)
the Trust may comply with said securities law restrictions and issue "stop
transfer" instructions to its transfer agent and registrar without liability;
(d) if the optionee is subject to reporting requirements under Section 16(a)
of the Exchange Act, the optionee will furnish to the Trust a copy of each
Form 4 filed by said optionee and will timely file all reports required under
federal securities laws; and (e) the optionee will report all sales of Option
Shares to the Trust in writing.
7.3 No Option shall be exercisable unless and until any applicable
registration or qualification requirements of federal and state securities
laws, and all other legal requirements have been fully complied with. The
exercise of Options may be temporarily suspended without liability to the
Trust during times when, in the reasonable opinion of the Committee, such
suspension is necessary to preclude violation of any requirements of
applicable law or regulatory bodies having jurisdiction over the Trust. If
any Option would expire for any reason except the end of its Term during such
a suspension, then if exercise of such Option is duly tendered before its
expiration, such Option shall be exercisable and exercised (unless the
attempted exercise is withdrawn) as of the first day after the end of such
suspension. The Trust shall have no obligation to file any registration
statement covering resales of Option Shares.
8. CONTINUOUS EMPLOYMENT.
Except as provided in paragraph 10 below, an optionee may not exercise an
Option unless from the date of grant to the date of exercise such optionee
remains continuously in the employ of the Trust. For purposes of this
paragraph 8, the period of continuous employment of an optionee with the
Trust shall be deemed to include (without extending the Term of the Option)
any period during which such optionee is on leave of absence with the written
consent of the Trust, provided that such leave of absence shall not exceed
three (3) months and that such optionee returns to the employ of the Trust at
the expiration of such leave of absence. If such optionee fails to return to
the employ of the Trust at
B-3
<PAGE>
the expiration of such leave of absence, such optionee's employment with the
Trust shall be deemed terminated as of the date such leave of absence
commenced. The continuous employment of an optionee with the Trust shall also
be deemed to include any period during which such optionee is a member of the
Armed Forces of the United States, provided that such optionee returns to the
employ of the Trust within ninety (90) days (or such longer period as may
be prescribed by law) from the date such optionee first becomes entitled to
discharge. If an optionee does not return to the employ of the Trust within
ninety (90) days (or such longer period as may be prescribed by law) from
the date such optionee first becomes entitled to discharge, such optionee's
employment with the Trust shall be deemed to have terminated as of the date
such optionee's military service ended.
9. RESTRICTIONS ON TRANSFER.
Each Option granted under this Plan shall be transferable only pursuant
to the optionee's Last Will and Testament, or the laws of descent and
distribution. No interest of any optionee under this Plan shall be subject to
attachment, execution, garnishment, sequestration, the laws of bankruptcy or
any other legal or equitable process. Each Option granted under this Plan
shall be exercisable only by such optionee or by such optionee's legal
representative.
10. TERMINATION OF EMPLOYMENT.
10.1. Upon an optionee's termination of employment with the Trust due to
retirement, disability or death, (a) all Options to the extent then presently
exercisable shall remain in full force and effect and may be exercised
pursuant to the provisions thereof, including expiration at the end of the
fixed Term thereof, and (b) unless otherwise provided by the Committee, all
Options to the extent not then presently exercisable by such optionee shall
terminate as of the date of such termination of employment and shall not be
exercisable thereafter.
10.2 Upon the termination of the employment of an optionee with the
Trust for any reason other than the reasons set forth in paragraph 10.1
hereof, (a) all Options to the extent then presently exercisable by such
optionee shall remain exercisable only for a period of ninety (90) days after
the date of such termination of employment (except that the ninety (90)-day
period shall be extended to twelve (12) months if the optionee shall die
during such ninety (90)-day period) pursuant to the provisions thereof,
including expiration at the end of the fixed Term thereof, and (b) unless
otherwise provided by the Committee, all Options to the extent not then
presently exercisable by such optionee shall terminate as of the date of such
termination of employment and shall not be exercisable thereafter.
10.3 For purposes of this Plan:
(a) "retirement" shall mean an optionee's retirement from the employ
of the Trust on or after the date on which such optionee attains the age of
sixty-five (65) years; and
(b) "disability" shall mean an optionee's inability to perform his
or her normal duties for the Trust if for a period of ninety (90) calendar
days, or for any one hundred and twenty (120) days during any period of one
hundred and eighty (180) calendar days, whether or not consecutive, he or she
shall have been for all purposes in a non-performing state. An additional
determination of permanent disability may be made at any time by a physician
chosen by the majority of the independent Trustees of the Board, which
physician shall opine as to the physical condition of the optionee.
11. ADJUSTMENTS UPON CHANGE IN CAPITALIZATION.
11.1 The number of Shares subject to each outstanding Option, the
Exercise Price thereof (but not the total price), and the maximum number of
Options that may be granted under this Plan, shall be proportionately
adjusted by the Committee in the event of any increase or decrease in the
number of the issued and outstanding Shares which results from a split-up or
consolidation of Shares, payment of
B-4
<PAGE>
a Share dividend or dividends exceeding a total of five percent (5%) for
which the record dates occur in any one fiscal year, a recapitalization
(other than the conversion of convertible securities according to their
term), or other like capital adjustment, so that upon exercise of the Option,
the optionee shall receive the number of Shares such optionee would have
received had such optionee been the holder of the number of Shares for which
the Option is being exercised upon the date of such change or increase or
decrease in the number of issued and outstanding Shares of the Trust.
11.2. In the sole and absolute discretion of the Committee, Options may
include provisions or terms (which need not be uniform) that accelerate the
optionee's rights to exercise Options upon a sale of substantially all of the
Trust's assets, the dissolution of the Trust or upon a change in the
controlling Shareholder interest in the Trust resulting from a tender offer,
reorganization, merger or consolidation, whether or not similar to the
foregoing.
12. WITHHOLDING TAXES.
The Trust shall have the right at the time of exercise of any Option to
make adequate provision for any federal, state, local or foreign taxes which
it believes are or may be required by law to be withheld with respect to such
exercise, to ensure the payment (through withholding from the optionee's
salary or the Option Shares or otherwise as the Trust shall deem in its sole
and absolute discretion to be in its best interests) of any such taxes.
13. RELATIONSHIP TO OTHER EMPLOYEE BENEFIT PLANS.
Options granted hereunder shall not be deemed to be salary or other
compensation to any optionee for purposes of any pension, thrift,
profit-sharing, stock purchase or any other employee benefit plan now
maintained or hereafter adopted by the Trust.
14. AMENDMENTS AND TERMINATION.
The Board may at any time suspend, amend or terminate this Plan;
provided, however, that Shareholder approval is required to: (a) materially
increase the benefits accruing to optionees under this Plan, (b) materially
increase the number of Shares which may be issued under this Plan (except for
adjustments pursuant to paragraph 11 hereof), or (e) materially modify the
requirements as to eligibility for participation in this Plan.
15. SUCCESSORS IN INTEREST.
The provisions of this Plan and sections of the Committee shall be
binding upon all heirs, successors and assigns of the optionees and the
successors and assigns of the Trust.
16. OTHER DOCUMENTS.
All documents prepared, executed or delivered in connection with this
Plan shall be, in substance and form, as established and modified by the
Committee; provided, however, that all such documents shall be subject in
every respect to the provisions of this Plan, and in the event of any
conflict between the terms of any such documents and this Plan, the
provisions of this Plan shall prevail. Each Option granted under this Plan
shall be evidenced by a written agreement (the "Option Agreement") in a
form approved by the Committee, which shall be executed on behalf of the
Trust and by the optionee to whom the Option is granted. Each Option
Agreement shall specify whether an Option is an incentive stock option or a
non-statutory stock option.
17. NO OBLIGATION TO CONTINUE EMPLOYMENT.
This Plan and grants hereunder shall not impose any obligation on the
Trust to continue to employ any optionee. Moreover, no provision of this Plan
or any document executed or delivered pursuant to
B-5
<PAGE>
this Plan shall be deemed modified in any way by any employment agreement
between an optionee and the Trust.
18. MISCONDUCT OF AN OPTIONEE.
Notwithstanding any other provision of this Plan, if an optionee commits
fraud, embezzlement or dishonesty toward the Trust, or wrongfully uses or
discloses any confidential data or other information proprietary to the
Trust, or intentionally takes any other action materially inimical to the
best interests of the Trust, as determined by the Committee, in its sole and
absolute discretion, all unexercised Options previously granted to such
optionee shall terminate as of the date employment terminates and such
optionee shall forfeit all rights and benefits under this Plan.
10. TERM OF PLAN.
This Plan shall terminate ten (10) years from the date of Shareholder
approval unless sooner terminated by action of the Board. No Option may be
granted hereunder after termination of this Plan, but such termination shall
not affect the validity of any Option then outstanding.
20. GOVERNING LAW.
This Plan and any Option Agreement shall be construed in accordance with,
and governed by, the laws of the State of California.
21. SHAREHOLDER APPROVAL.
This Plan shall be submitted for the approval of the Shareholders of the
Trust at the first annual meeting of Shareholders held subsequent to the
adoption of this Plan by the Board. If at said meeting or at any adjournments
thereof the Shareholders of the Trust do not approve this Plan, this Plan
shall terminate. No Option shall be exercisable unless and until the
Shareholders of the Trust have approved this Plan and all other legal
requirements have been fully complied with.
22. PRIVILEGES OF SHARE OWNERSHIP.
The holder of an Option shall not be entitled to the privileges of Share
ownership as to any Shares not actually issued to such holder.
B-6
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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.
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(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.
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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.
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(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.
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(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
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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
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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
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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
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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.
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
23
<PAGE>
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
<PAGE>
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.
Sherman Oaks CBC One Montgomery Street
15165 Ventura Blvd., Suite 445 Telesis Tower, Suite 2500
Sherman Oaks, CA 91403 San Francisco, CA 94104
Attn: Jeffrey D. Harter Attn: LeRoy E. Carlson
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
<PAGE>
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
<PAGE>
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/ Frank C. McDowell By: Frank C. McDowell
---------------------------
Title: Title: President
------------------------
By: /s/ LeRoy Carlson By: LeRoy Carlson
---------------------------
Title: Title: Executive Vice President and Secretary
------------------------
27
<PAGE>
Exhibit 10.24
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "First Amendment") is made
and dated as of the 12th day of December, 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 Credit Agreement dated as of March 9, 1996,
among the Bank and the Borrower (as amended from time to time, the "Credit
Agreement"), the Bank agreed to extend credit to the Borrower on the terms and
subject to the conditions set forth therein. All capitalized terms not
otherwise defined herein shall have the meanings given to such terms in the
Credit Agreement.
B. The parties desire to amend the Credit Agreement, as more particularly
described below.
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. AMENDMENTS. To modify the restrictions on indebtedness, the parties
hereby agree that the Credit Agreement is amended as follows:
1(a) INDEBTEDNESS.
(1) PARAGRAPH 7.6(d) is amended to read as follows:
"(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 $150,000,000;"
2. EFFECTIVE DATE. This First Amendment shall be effective as of December 13,
1996, provided that as of such date the Borrower shall have delivered to the
agent of the Bank (with the sufficient number of copies instructed):
(a) Duly executed copies of this First Amendment;
<PAGE>
(b) Certified copies of resolutions of the Board of Directors of the
Borrower approving the execution and delivery of this First Amendment;
(c) A certificate of the Surety or an Assistant Secretary of the
Borrower certifying the names and the signatures of the Officers of the
Borrower authorized to sign this First Amendment; and
(d) Such other documents, certificates and agreements that the
Bank may reasonably request.
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 First
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 First Amendment and has
taken all necessary corporate action to authorize the execution, delivery and
performance of this First Amendment and the Credit Agreement as amended
hereby. This First 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 First Amendment and both prior to and after giving
effect to this First 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 First 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 First 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.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed as of the day and year above written.
BANK: BORROWER:
SANWA BANK CALIFORNIA BRE PROPERTIES, INC.
By: /s/Frank C. McDowell By: Frank C. McDowell
-------------------------
Title: President Title: President
-----------------------
By: /s/LeRoy Carlson By: LeRoy Carlson
-------------------------
Title: Executive Vice President Title: Executive Vice President
and Secretary and Secretary
-----------------------
<PAGE>
Exhibit 10.25
UNSECURED LINE OF CREDIT LOAN AGREEMENT
By and Between
BRE PROPERTIES, INC.,
as Borrower,
and
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Lender
Dated as of April 4, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. LINE OF CREDIT AMOUNT AND TERMS . . . . . . . . . . . . . . . . . . . . 5
1.1 LINE OF CREDIT AMOUNT. . . . . . . . . . . . . . . . . . . . . . . 5
1.2 AVAILABILITY PERIOD; MANDATORY PREPAYMENT. . . . . . . . . . . . . 6
1.3 INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 LOAN DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. FEES, EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 EXPENSES AND COSTS . . . . . . . . . . . . . . . . . . . . . . . . 7
3. DISBURSEMENTS, PAYMENTS AND COSTS . . . . . . . . . . . . . . . . . . . 8
3.1 REQUESTS FOR CREDIT. . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 DISBURSEMENT AND PAYMENT RECORD. . . . . . . . . . . . . . . . . . 8
3.3 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 BANKING DAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 AUTHORIZATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 GOVERNING DOCUMENTS; GOOD STANDING CERTIFICATES. . . . . . . . . . 9
4.3 LOAN DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 PAYMENT OF FEES. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 OTHER ITEMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 9
5.1 ORGANIZATION OF THE BORROWER; GOOD STANDING. . . . . . . . . . . . 9
5.2 AUTHORIZATION; ENFORCEABLE AGREEMENT . . . . . . . . . . . . . . . 10
5.3 FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 10
5.4 LAWSUITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 TITLE TO ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 PERMITS, FRANCHISES. . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 INCOME TAX RETURNS . . . . . . . . . . . . . . . . . . . . . . . . 11
5.8 ERISA PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.9 OTHER OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.10 EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.11 STATUS AS A REIT . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 12
6.3 OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 14
6.5 TAXES AND OTHER LIABILITIES. . . . . . . . . . . . . . . . . . . . 16
6.6 NOTICES TO THE BANK. . . . . . . . . . . . . . . . . . . . . . . . 16
6.7 AUDITS; BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . 17
6.8 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . 17
6.9 PRESERVATION OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . 17
6.10 MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . . . . . . . 17
A-i
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
PAGE
----
6.11 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.12 ERISA PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.13 ADDITIONAL NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . 18
6.14 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS. . . . . . . . 18
6.15 NYSE LISTED COMPANY. . . . . . . . . . . . . . . . . . . . . . . . 18
6.16 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . 19
6.17 COOPERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 FAILURE TO PAY . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 FALSE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 19
8.3 BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 RECEIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.5 LAWSUITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.6 JUDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.7 ERISA PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.8 GOVERNMENT ACTION. . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9 MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 20
8.10 OTHER BREACH UNDER THIS AGREEMENT OR OTHER LOAN DOCUMENTS. . . . . 20
8.11 CROSS-DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS . . . . . . . . . . . . . . . . 21
9.1 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2 CALIFORNIA LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.3 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4 PRESENTMENT, DEMANDS AND NOTICE. . . . . . . . . . . . . . . . . . 22
9.5 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.6 ATTORNEYS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.7 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.8 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . 23
9.9 NO THIRD PARTIES BENEFITED . . . . . . . . . . . . . . . . . . . . 23
9.10 INTEGRATION; RELATION TO ANY LOAN COMMITMENT; HEADINGS . . . . . . 23
9.11 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.12 SEVERABILITY; WAIVERS; AMENDMENTS. . . . . . . . . . . . . . . . . 25
9.13 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT A - Borrowing Notice
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TABLE OF CONTENTS
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LINE OF CREDIT LOAN AGREEMENT
(Unsecured)
This line of credit loan agreement (the "Agreement"), dated as of
April 4, 1996, is between BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
(the "Bank") and BRE PROPERTIES, INC., a Maryland corporation (the "Borrower").
The Bank has agreed to provide this line of credit to the Borrower on
the terms and conditions set forth herein. This line of credit is revolving and
is unsecured.
CERTAIN DEFINITIONS
The following terms used in this Agreement shall have the following
meanings (such meanings to be applicable, except to the extent otherwise
indicated in a definition of a particular term, both to the singular and the
plural forms of the terms defined; other terms are defined elsewhere in the
Agreement):
"ACCOMMODATION OBLIGATIONS", as applied to any Person, means any
Indebtedness or other Contractual Obligation or liability, contingent or
otherwise, of another Person in respect of which that Person is liable,
including, without limitation, any such indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including in respect of any partnership in which
that Person is a general partner, Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase or otherwise
acquire such indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received.
"AFFILIATE" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
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"APPLICABLE MARGIN" means, as of any date of determination, (i) 1.25%,
OR (ii) effective on the first day of the fiscal quarter following the
Borrower's obtaining a Rating and giving written notice thereof to the Bank, the
Applicable Margin set forth below opposite the then Rating (as hereinbelow
determined) of the Borrower:
Rating
(S&P/MOODY'S) APPLICABLE MARGIN
------------- -----------------
A+/A1 or better 0.75%
A/A2 0.95%
A-/A3 1.00%
BBB+/Baal 1.125%
BBB or BBB-/Baa2 or Baa3 1.50%
Below BBB-/below Baa3 or unrated 1.75%
As used herein, the term "Rating" shall mean the rating of the Borrower's senior
long-term unsecured debt obligations, as determined by one or more Rating
Agencies. If two Ratings are obtained by the Borrower, then the lower Rating
shall control for purposes of determining the Applicable Margin; provided,
however, that if the difference between the two Ratings is greater than two
levels, then the Bank shall reasonably determine the average Applicable Margin
between such two Ratings. If three or more Ratings are obtained by the
Borrower, then the Bank shall reasonably determine the average Applicable Margin
based upon the two highest of such Ratings. If the Borrower shall obtain a
Rating from a Rating Agency other than Standard & Poor's Corporation or Moody's
Investors Services, Inc., then the Bank shall reasonably determine the rating-
level equivalents of such other Rating Agency for purposes of determining the
Applicable Margin in accordance with the matrix above.
"CLOSING DATE" means the date on or before April 10, 1996, on which
all conditions precedent set forth in Section 4 are satisfied or waived by the
Bank.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any
provision of any securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject.
"CPA" means Ernst & Young, LLP, any other "big six" accounting firm or
another firm of certified public accountants of national standing selected by
the Borrower and acceptable to the Bank.
"CURRENT VALUE METHOD" means, with respect to each Real Property as of
any date, capitalization of the Net Operating Income for such Real Property for
the four (4) most recent calendar quarters (or, if the Borrower has owned a Real
Property
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for less than such time period, then the annualized Net Operating Income for
such Real Property based on the period of ownership by the Borrower), as
certified by the Borrower to the Bank, at an annual rate equal to (i) 9.5% for
each Real Property improved with an apartment project, (ii) 10.0% for each Real
Property improved with a shopping center or similar retail project, and
(iii) 10.5% for each Real Property improved with an industrial or other
commercial project and for each Real Property (including apartment and retail
projects) which is subject to a land lease by the Borrower. (All references in
this Agreement to "apartment project" shall be understood to mean multi-family
residential properties held for rental.)
"DEBT SERVICE" means, for the most recent three (3) month period,
Interest Expense for such period PLUS scheduled principal amortization (I.E.,
excluding any balloon payment due at maturity) for such period on all of the
Borrower's Indebtedness.
"EBITDA" means, for the most recent three (3) month period, the sum of
(i) the Borrower's net income as determined in accordance with GAAP, (ii)
depreciation and amortization expense and other non-cash items deducted on the
Borrower's financial statements in determining such net income, (iii) interest
expense (as it appears on the Borrower's income statement in accordance with
GAAP), and (iv) taxes imposed by any jurisdiction upon the Borrower's net
income, absent the effect of extraordinary items or asset sales or write-ups or
forgiveness of Indebtedness.
"FUNDS FROM OPERATIONS" means, for any period, the Borrower's net
income (computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
(Adjustments for unconsolidated partnerships and joint ventures shall be
calculated to reflect funds from operations on the same basis.)
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"INDEBTEDNESS", as applied to any Person (and without duplication),
means (i) all indebtedness, obligations or other liabilities for borrowed money,
(ii) all indebtedness, obligations or other liabilities evidenced by notes,
bonds, debentures or other similar instruments, (iii) all reimbursement
obligations and other liabilities with respect to letters of credit, banker's
acceptances, surety bonds or similar instruments
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issued for such Person's account, (iv) all obligations to pay the deferred
purchase price of property or services, (v) all obligations in respect of
capital leases, (vi) all Accommodation Obligations, and (vii) all indebtedness
, obligations or other liabilities of such Person or others secured by a Lien
on any asset of such Person, whether or not such indebtedness, obligations or
liabilities are assumed by, or are a personal liability of, such Person
(including, without limitation, the principal amount of any assessment or
similar indebtedness encumbering any asset).
"INTEREST EXPENSE" means, for any period, total interest expense of
the Borrower, whether paid, accrued or capitalized (including the interest
component of capital leases).
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, including without limitation any conditional sale or other
title retention agreement, the interest of a lessor under a capital lease, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement or document having similar
effect (other than a financing statement filed by a "true" lessor pursuant to
Section 9408 of the Uniform Commercial Code) naming the owner of the asset to
which such Lien relates as debtor, under the Uniform Commercial Code or other
comparable law of any jurisdiction.
"MATERIAL ADVERSE EFFECT" means, with respect to a Person, a material
adverse effect upon the condition (financial or otherwise), operations,
performance or properties of such Person. The phrase "has a Material Adverse
Effect" or "will result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "has resulted, or will or
could reasonably be anticipated to result, in a Material Adverse Effect", and
the phrase "has no (or does not have a) Material Adverse Effect" or "will not
result in a Material Adverse Effect" or words substantially similar thereto
shall in all cases be intended to mean "does not or will not or could not
reasonably be anticipated to result in a Material Adverse Effect".
"NET OPERATING INCOME" means, at any time with respect to each Real
Property, the cash-basis net operating income of such Real Property determined
on a basis consistent with the operating statements provided by the Borrower to
the Bank prior to the Closing Date.
"PERSON" means any natural person, employee, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal
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entity, or any other non-governmental entity, or any governmental authority.
"PRUDENTIAL INDEBTEDNESS" means the unsecured Indebtedness of the
Borrower to The Prudential Life Insurance Company of America in the original
principal amount of $73,000,000.
"RATING AGENCY" means each of Standard & Poor's Corporation, Moody's
Investors Services, Inc., Duff and Phelps, Fitch Investors or such other
nationally recognized rating service or services as may be mutually agreed upon
by the Borrower and the Bank.
"REAL PROPERTY" means all improved, income-producing real property
owned in fee entirely by the Borrower or a consolidated Affiliate of the
Borrower.
"SECURED INDEBTEDNESS" means all the Borrower Indebtedness that is
secured by a Lien on any real property asset of the Borrower.
"TANGIBLE NET WORTH" means, at any time, shareholders' equity, as
shown on the Borrower's financial statements prepared in accordance with GAAP,
MINUS intangible assets.
"TOTAL ASSETS" means, at any time, the book value (net of any
applicable reserves) of all tangible assets of the Borrower as shown on its most
recent quarterly financial statements prepared in accordance with GAAP.
"TOTAL LIABILITIES" means (i) all Indebtedness of the Borrower,
whether or not such Indebtedness would be included as a liability on the balance
sheet of the Borrower in accordance with GAAP, PLUS (ii) all other liabilities
of every nature and kind of the Borrower that would be included as liabilities
on the balance sheet of the Borrower in accordance with GAAP.
"TOTAL REAL PROPERTY MARKET VALUE" means, at any time, the aggregate
value of all Real Properties as determined using the Current Value Method.
"UNSECURED INDEBTEDNESS" means Indebtedness of the Borrower not
secured by a Lien.
1. LINE OF CREDIT AMOUNT AND TERMS
1.1 LINE OF CREDIT AMOUNT.
(a) During the Availability Period described below, the Bank will
provide a line of credit (also referred to as the "Loan") to the Borrower. The
amount of the line of credit is Seventy Million Dollars ($70,000,000) (the
"Commitment" or the "Maximum Loan Amount").
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(b) This is a revolving line of credit. During the Availability
Period, the Borrower may from time to time repay principal amounts (subject to
the provisions of Exhibit B to the Note referred to below) and reborrow such
principal, subject to compliance with the terms and conditions of the Loan
Documents referenced in Section 1.4 below.
(c) Each advance must be for at least Five Hundred Thousand Dollars
($500,000), or for the amount of the remaining available line of credit if less.
(d) The Borrower agrees not to permit the outstanding principal
balance of the line of credit to exceed the Commitment.
1.2 AVAILABILITY PERIOD.
The line of credit is available (the "Availability Period") between
the date of this Agreement and the Maturity Date (as defined in the Note),
subject to the provisions of Section 3.1 below. If there is an Event of
Default, then, in addition to the Bank's other remedies, the Bank may terminate
the Availability Period and may require the Borrower to repay any amounts
outstanding under the line of credit immediately. In addition, if, within the
first twelve (12) months of the Availability Period, (a) the Borrower fails to
receive a Rating, and (b) the Bank and the Borrower are unable to mutually agree
upon an increase in the Applicable Margin to become effective at the end of such
twelve-month period, then the Bank may, at any time thereafter by written notice
to Borrower, terminate the Availability Period and require the Borrower to repay
any amounts outstanding under the line of credit immediately.
1.3 INTEREST RATE.
Borrower is executing a promissory note (the "Note") in the amount of
the Commitment evidencing the Loan and payable to the Bank. The Note sets forth
the interest rate and certain other terms and conditions applicable to the Loan.
1.4 LOAN DOCUMENTS.
The "Loan Documents" are the documents indicated below, each dated as
of the date of this Agreement unless indicated otherwise. A capitalized term
used in this Agreement but not defined herein has the meaning given to such term
in the other Loan Documents.
(a) This Agreement;
(b) The Note;
(c) The Modification Agreement to Syndicate Loan entered into
concurrently herewith;
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(d) The supplemental agency fee and deposit letter executed by the
Borrower in favor of the Bank; and
(e) Corporate Resolution to borrow, certified by the Corporate
Secretary of the corporation. The Corporate Resolution shall also contain a
Certificate of Incumbency for the authorized signing officers, containing their
specimen signatures and certified by the Corporate Secretary.
2. FEES, EXPENSES
2.1 FEES.
(a) COMMITMENT FEE. The Borrower agrees to pay a fee equal to 0.25%
of the Commitment, payable in advance. This fee is due on the Closing Date.
(b) UNUSED COMMITMENT FEE. The Borrower agrees to pay a fee on any
difference between the Commitment and the amount of credit it actually uses,
determined by the weighted average Loan balance maintained during the specified
period. The fee will be calculated at 0.125% per year. This fee is due
quarterly in arrears until the expiration of the Availability Period and on the
Maturity Date, and shall be due and payable not later than fifteen (15) days
following the rendering of an invoice therefor by the Bank.
2.2 EXPENSES AND COSTS.
(a) Borrower shall pay all costs and expenses incurred by the Bank in
connection with the making, disbursement and administration of the Loan, and in
the exercise of any of the Bank's rights or remedies under the Loan Documents.
Such costs and expenses include legal fees and expenses of the Bank's counsel
and any other reasonable fees and costs for services, regardless of whether such
services are furnished by the Bank's employees or by independent contractors.
The Borrower acknowledges that the other fees payable to the Bank do not include
amounts payable by the Borrower under this Section 2.2.
(b) The Borrower agrees to indemnify the Bank from and hold it
harmless against any transfer or documentary taxes, assessments or charges
imposed by any governmental authority by reason of the execution, delivery and
performance of the Loan Documents. The Borrower's obligations under this
Section 2.2 shall survive payment of the Loan and assignment of any rights
hereunder.
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 REQUESTS FOR CREDIT.
(a) Each request for an extension of credit shall be
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made in writing in a manner acceptable to the Bank.
(b) BORROWING NOTICE. Each draw request shall be made upon the
irrevocable written notice of the Borrower (including notice via facsimile
confirmed by a mailed copy) pursuant to a Borrowing Notice in the form attached
hereto as EXHIBIT A. Each Borrowing Notice shall be submitted to and received
by the Bank prior to 9:00 a.m. (California time) at least two (2) Banking Days
prior to the specified borrowing date. The truth and accuracy of each statement
made in the Borrowing Notice shall be a condition precedent to the advance
requested thereunder.
3.2 DISBURSEMENT AND PAYMENT RECORD.
Each disbursement by the Bank and each payment by the Borrower will be
evidenced by records kept by the Bank.
3.3 AUTHORIZATION.
(a) The Bank may honor facsimile instructions for advances or
repayments (or for the designation of any optional interest rates that may be
permitted by the Note) given by any one of the individuals authorized to sign
loan documents on behalf of the Borrower, or any other individual designated by
any one of such authorized signers.
(b) Advances will be deposited in the Borrower's account number 00333
02 305 at the Bank, or such other of the Borrower's accounts with the Bank as
designated in writing by the Borrower.
(c) The Borrower indemnifies and releases the Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from any instructions the Bank reasonably
believes are made by any individual authorized by the Borrower to give such
instructions. This indemnity and release shall survive this Agreement's
termination.
3.4 BANKING DAYS.
A Banking Day is defined in the Note. All payments and disbursements
which would be due on a day which is not a Banking Day will be due on the next
Banking Day. All payments received on a day which is not a Banking Day will be
applied to the Loan on the next Banking Day.
4. CONDITIONS
The Bank must receive the following items, in form and content acceptable
to the Bank, before it is required to extend any credit to the Borrower under
this Agreement:
4.1 AUTHORIZATIONS.
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Evidence that the execution, delivery and performance by the Borrower
of the Loan Documents have been duly authorized.
4.2 GOVERNING DOCUMENTS; GOOD STANDING CERTIFICATES.
A copy of the Borrower's articles of incorporation and bylaws,
together with a certificate of good standing for the Borrower from the state
where formed and, at the Bank's request, from any other state in which the
Borrower is required to qualify to conduct its business.
4.3 LOAN DOCUMENTS.
Duly executed Loan Documents.
4.4 PAYMENT OF FEES.
Payment of all accrued and unpaid fees and expenses due the Bank as
provided for by the Loan Documents.
4.5 OTHER ITEMS.
Any other documents and other items the Bank may reasonably require as
conditions precedent to this Agreement or any advance.
5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in
full, the Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a restatement of each such
representation and warranty.
5.1 ORGANIZATION OF THE BORROWER; GOOD STANDING.
The Borrower is duly formed and existing under the laws of the state
where organized. In each state in which the Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with any
fictitious name statute.
5.2 AUTHORIZATION; ENFORCEABLE AGREEMENT.
This Agreement and the other Loan Documents are within the Borrower's
powers, have been duly authorized and do not conflict with any of its
organizational documents. The Loan Documents do not conflict with any law,
agreement or obligation by which the Borrower is bound. This Agreement is a
legal, valid and binding agreement of the Borrower, enforceable against the
Borrower in accordance with its terms, and any instrument or document required
hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable.
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5.3 FINANCIAL INFORMATION.
(a) The Form S-4 filed by the Borrower with the Securities and
Exchange Commission on December 22, 1995, a copy of which has been previously
delivered to the Bank by the Borrower, and all other financial statements and
data submitted in writing by the Borrower to the Bank in connection with the
request for the Loan, are true and correct, and all such financial statements
present fairly the financial condition of the Borrower as at the date thereof
and the results of the operations of the Borrower for the period(s) covered
thereby, and have been prepared in accordance with generally accepted accounting
principles on a basis consistently applied. The Borrower has no knowledge of
any liabilities, contingent or otherwise, not reflected in said financial
statements, and the Borrower has not entered into any material commitments or
material contracts which are not reflected in said balance sheet which may have
a Material Adverse Effect on the Borrower. Since said date there have been no
changes in the assets or liabilities or financial condition of the Borrower
other than changes in the ordinary course of business or resulting from the
merger as described in the above referenced Form S-4, and no such changes have
been materially adverse changes.
(b) All financial and other information that has been or will be
supplied to the Bank, including the financial statements of the Borrower:
(i) is sufficiently complete to give the Bank accurate knowledge
of the subject's financial condition;
(ii) is in form and content as required by the Bank;
(iii) is in compliance with any government regulations that
apply; and
(iv) does not fail to state any material facts necessary to make
the information contained therein not misleading.
All such information (other than Funds From Operations) was and will be prepared
in accordance with GAAP, unless otherwise noted.
5.4 LAWSUITS.
There is no lawsuit, arbitration, claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the Loan, except as has been previously
disclosed in writing to the Bank.
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5.5 TITLE TO ASSETS.
The Borrower has good and clear title to its assets, and the same are
not subject to any Liens other than those disclosed to the Bank in writing.
5.6 PERMITS, FRANCHISES.
The Borrower possesses all permits, franchises, contracts and licenses
required and all trademark rights, trade name rights, and fictitious name rights
necessary to enable it to conduct the business in which it is now engaged.
5.7 INCOME TAX RETURNS.
Borrower has filed all tax returns and reports required to be filed
and has paid all applicable federal, state and local franchise, income and
property taxes which are due and payable. The Borrower has no knowledge of any
pending assessments or adjustments of its income taxes or property taxes for any
year, except as have been disclosed in writing to the Bank. The Borrower is not
a "foreign person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
5.8 ERISA PLANS.
(a) As used herein, (i) "ERISA" means the Employee Retirement Income
Act of 1974, as amended; (ii) "PBGC" means the Pension Benefit Guaranty
Corporation established pursuant to ERISA; and (iii) "Plan" means any employee
pension benefit plan maintained or contributed to by the Borrower and insured by
the PBGC.
(b) The Borrower has fulfilled its obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with the presently applicable provisions
of ERISA and the Code, and has not incurred any liability with respect to any
Plan under Title IV of ERISA.
(c) No reportable event has occurred under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice. No action by the Borrower to
terminate or withdraw from any Plan has been taken and no notice of intent to
terminate a Plan has been filed under Section 4041 of ERISA. No proceeding has
been commenced with respect to a Plan under Section 4042 of ERISA, and no event
has occurred or condition exists which might constitute grounds for the
commencement of such a proceeding.
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5.9 OTHER OBLIGATIONS.
The Borrower is not in default on any Indebtedness or Contractual
Obligation of the Borrower except as has been previously disclosed in writing to
the Bank.
5.10 EVENT OF DEFAULT.
There is no event which is, or with notice or lapse of time or both
would be, an Event of Default hereunder.
5.11 STATUS AS A REIT.
The Borrower (i) is a real estate investment trust as defined in
Section 856 of the Code (or any successor provision thereto), (ii) has not
revoked its election to be a real estate investment trust, (iii) has not engaged
in any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the
Code (or any successor provision thereto), and (iv) for its current "tax year"
(as defined in the Code) is and for all prior tax years subsequent to its
election to be a real estate investment trust has been entitled to a dividends
paid deduction which meets the requirements of Section 857 of the Code.
6. COVENANTS
The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
6.1 USE OF PROCEEDS.
Borrower shall use the proceeds of the Loan only for (a) the funding
of costs directly related to the acquisition of apartment projects, or (b) up to
a maximum of Fifteen Million Dollars ($15,000,000) at any one time outstanding,
general working capital purposes of the Borrower. In complying with the
provisions of the foregoing clause (a), the Borrower shall not be required to
apply advances under the Loan in direct payment of acquisition costs, but shall
be permitted to make draws hereunder by way of reimbursement of acquisition
costs previously incurred and funded out of the Borrower's cash reserves.
6.2 FINANCIAL INFORMATION.
The Borrower shall provide the following financial information and
statements and such additional information as requested by the Bank from time to
time:
(a) As soon as available but not later than ninety (90) days after
the Borrower's fiscal year end, the Borrower's annual financial statements
including balance sheet, income statement, statement of cash flows and statement
of shareholders' equity. These financial statements must be audited (with an
unqualified opinion) by the Borrower's CPA and certified by the
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Borrower's Chief Financial Officer (or other officer acceptable to the Bank).
(b) As soon as available but not later than sixty (60) days after
each fiscal quarter end, the Borrower's Form 10-Q Quarterly Report, including
balance sheet, income statement, statement of cash flows and statement of
shareholders' equity. These financial statements must be certified by the
Borrower's Chief Financial Officer (or other officer acceptable to the Bank).
(c) As soon as available but not later than ninety (90) days after
the Borrower's fiscal year end, the Borrower's annual two-year financial
projection, including balance sheet and income statement, in a format and with
such detail as the Bank may require. These projections must be certified by the
Borrower's Chief Financial Officer (or other officer acceptable to the Bank).
(d) Copies of the Borrower's Form 10-K Annual Report, Form 8-K
Current Report and all other filings within fifteen (15) days after the date of
filing with the Securities and Exchange Commission, and copies of all press
releases made by the Borrower.
(e) As soon as available but not later than sixty (60) days after
each fiscal quarter end, the Borrower's quarterly internal management reports
(including (i) a schedule of all Debt Service for the prior quarter, (ii) a
schedule of Net Operating Income for each Real Property for the preceding four
(4) fiscal quarters, (iii) a schedule listing all Indebtedness secured by a Lien
on any real property assets of the Borrower, and (iv) a statement of the number
of apartment units (by project and location) under development (as defined in
Section 6.4(g)) at fiscal quarter-end. These reports must be certified by the
Borrower's Chief Financial Officer (or other officer acceptable to the Bank).
(f) At the time of the delivery of the financial statements provided
for in Sections 6.2(a) and (b), a certificate executed by the Chief Financial
Officer of the Borrower certifying compliance with all financial covenants
herein, including appropriate supporting schedules, and certifying that to the
best of the such officer's knowledge, no Event of Default has occurred and is
continuing or would result after notice or passage of time or both or, if any
Event of Default has occurred and is continuing or would result after notice or
passage of time or both, specifying the nature and extent thereof.
Notwithstanding anything to the contrary contained herein and without limiting
the Bank's other rights and remedies, if any certificate required under this
Section 6.2 is not provided on or before the due date therefor, the Borrower
shall be prohibited from any further borrowing under the line of credit until
such certificate is provided.
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6.3 OTHER INFORMATION.
The Borrower shall provide the Bank:
(a) Promptly upon, and in any event within forty-eight (48) hours
after the Borrower first has actual knowledge of (i) its failing to continue to
qualify as a real estate investment trust as defined in Section 856 of the Code
(or any successor provision thereof), (ii) any act by the Borrower causing its
election to be taxed as a real estate investment trust to be terminated, (iii)
any act causing the Borrower to be subject to the taxes imposed by Section
857(b)(6) of the Code (or any successor provision thereto), or (iv) the Borrower
failing to be entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Code, a notice of any such occurrence or
circumstance.
(b) Such additional financial and other information as the Bank may
reasonably request from time to time.
6.4 FINANCIAL COVENANTS.
(a) MINIMUM NET WORTH. The Borrower will maintain a Tangible Net
Worth of not less than (i) Three Hundred Seventy-Five Million Dollars
($375,000,000) until September 30, 1996, and (ii) Four Hundred Million Dollars
($400,000,000) thereafter.
(b) INDEBTEDNESS TO TOTAL ASSETS. The ratio of the Borrower's
Indebtedness to the sum of (i) Total Real Property Market Value PLUS (ii) Total
Assets (excluding Real Property) shall not exceed 0.55:1.
(c) SECURED INDEBTEDNESS TO TOTAL ASSETS. The ratio of Secured
Indebtedness to Total Assets shall not exceed 0.40:1.
(d) UNENCUMBERED REAL PROPERTY TO UNSECURED INDEBTEDNESS. The ratio
of (i) Total Real Property Market Value of all Real Properties not encumbered by
any Lien to (ii) total commitments (disbursed and undisbursed) under Unsecured
Indebtedness shall not be less than 1.75:1.
(e) EBITDA TO DEBT SERVICE. The ratio of EBITDA to Debt Service
shall not be less than 1.80:1.
(f) DISTRIBUTIONS.
(i) Subject to subparagraph (ii) below, aggregate distributions
to shareholders of the Borrower shall not exceed the following, as reported
in accordance with GAAP (other than Funds From Operations):
(A) as of the end of any fiscal year, distributions shall
not exceed ninety-five percent
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(95%) of the Borrower's Funds From Operations for such period; AND
(B) at the end of the first, second and third fiscal
quarters, distributions shall not exceed, more than once during any
fiscal year, one hundred percent (100%), but in no event in excess of
one hundred fifteen percent (115%), of the Borrower's Funds From
Operations for such period (calculated on a year-to-date basis).
For purposes of this Section 6.4(f), the term "distributions" shall mean
and include all dividends and other distributions to, and the repurchase of
shares from, the holder of any equity interests in the Borrower.
(ii) No distributions shall be made during the continuance of any
Event of Default arising out of the Borrower's failure to pay any monetary
obligation when due under any Loan Document (a "Monetary Default").
Aggregate distributions during the continuance of any Event of Default
other than a Monetary Default shall not exceed the lesser of (A) the
aggregate amount permitted to be made during the continuance thereof under
subparagraph (i) above, or (B) the minimum amount that the Borrower must
distribute to its shareholders in order to maintain compliance with Section
6.14 below.
(g) DEVELOPMENT. At no time shall the Borrower have under
development apartment units totaling in excess of twenty percent (20%) of the
total number of apartment units (excluding such units under development) then
owned by the Borrower. For purposes of the foregoing covenant, "development"
shall mean all units under construction, at or beyond the foundation stage,
within a particular apartment project, until the construction of all units (or
discreet phase(s) thereof, if applicable) shall have been completed,
certificates of occupancy shall have been issued with respect to such units, and
such units shall be available for immediate lease and occupancy in the normal
course of business.
(h) MAXIMUM UNSECURED LINES OF CREDIT. The Borrower shall not permit
total commitments (disbursed and undisbursed) with respect to Unsecured
Indebtedness under lines of credit to exceed One Hundred Million Dollars
($100,000,000). Further, Borrower shall not enter into any commitment for
Unsecured Indebtedness under lines of credit other than under this Agreement and
the existing line of credit established by Sanwa Bank (or other commercial bank
on similar terms and conditions) in favor of the Borrower in the maximum
principal amount of Thirty Million Dollars ($30,000,000).
(i) UNSECURED INDEBTEDNESS. The Borrower shall not incur any
Unsecured Indebtedness other than (i) Indebtedness
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under revolving lines of credit to the extent permitted under Section 6.4(h)
above, and (ii) non- revolving, non-amortizing Indebtedness with a maturity
or call date not earlier than five (5) years after the Maturity Date under
the Note in effect at the time such Indebtedness is incurred; provided,
however, that the foregoing amortization restriction shall not apply to
amortization required, as of the date of this Agreement, under the Prudential
Indebtedness.
(j) CALCULATION. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each fiscal quarter, but
shall be satisfied at all times.
6.5 TAXES AND OTHER LIABILITIES.
The Borrower shall pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any Material Adverse Effect on the
Borrower or the loss of any right of redemption from any sale thereunder; and
(b) The Borrower shall have set aside on its books reserves
(segregated to the extent required by generally accepted accounting principles)
adequate with respect thereto.
6.6 NOTICES TO THE BANK.
The Borrower shall promptly notify the Bank in writing of:
(a) any Event of Default hereunder or any event which would become an
Event of Default hereunder upon the giving of notice, the lapse of time, or
both;
(b) any single lawsuit or arbitration claiming over Two Hundred Fifty
Thousand Dollars ($250,000), and lawsuits or arbitrations collectively claiming
over One Million Dollars ($1,000,000), against the Borrower, provided that the
foregoing shall not apply to the litigation disclosed in the Form S-4 referred
to in Section 5.3(a) above;
(c) any significant dispute between the Borrower and any government
authority; and
(d) any event, circumstance or condition which may have a Material
Adverse Effect on the Borrower.
6.7 AUDITS; BOOKS AND RECORDS.
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The Borrower shall maintain adequate books and records and allow the
Bank and its agents to inspect the Borrower's properties and examine, audit and
make copies of books and records at any reasonable time. If any of the
Borrower's properties, books or records are in the possession of a third party,
the Borrower hereby authorizes that third party to permit the Bank or its agents
to have access to perform inspections or audits and to respond to the Bank's
requests for information concerning such properties, books and records.
6.8 COMPLIANCE WITH LAWS.
The Borrower shall comply with the laws (including any fictitious name
statute), regulations, and orders of any government body with authority over the
Borrower's business.
6.9 PRESERVATION OF RIGHTS.
The Borrower shall maintain and preserve all rights, privileges, and
franchises the Borrower now has.
6.10 MAINTENANCE OF PROPERTIES.
The Borrower shall make repairs, renewals, or replacements to keep the
Borrower's properties in good working condition.
6.11 INSURANCE.
The Borrower shall 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 Affiliates operate and maintain such other 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 and continuing evidence that such insurance remains in
force at applicable renewal dates.
6.12 ERISA PLANS.
The Borrower shall give prompt written notice to the Bank of the
occurrence of any reportable event under Section 4043(b) of ERISA for which the
PBGC requires 30 day notice; any action by the Borrower to terminate or
withdraw from a Plan or the filing of any notice of intent to terminate under
Section 4041 of ERISA; any notice of noncompliance made with respect to a Plan
under Section 4041(b) of ERISA; or the commencement of any proceeding with
respect to a Plan under Section 4042 of ERISA.
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<PAGE>
6.13 ADDITIONAL NEGATIVE COVENANTS.
The Borrower shall not, without the Bank's written consent:
(a) Merge or dissolve into, or consolidate with, any Person, except
mergers and consolidations (i) which result in the Borrower being the surviving
entity, (ii) which do not have a Material Adverse Effect on the Borrower, and
(iii) which do not result in the Borrower, following the consummation of such
merger or consolidation, being in default under any term or condition of this
Agreement. The Borrower shall not sell, lease, transfer, encumber or otherwise
dispose of all or any substantial part of its properties or assets, whether in a
single transaction or series of transactions, if such sale, lease, transfer,
encumbrance or other disposition would cause a Material Adverse Effect on the
Borrower;
(b) Except for any such amendment that is required under any
requirement of law imposed by any governmental authority or in order to maintain
compliance with Section 6.14, amend its articles of incorporation or by-laws
except (i) upon at least ten (10) Banking Days' prior written notice to the
Bank, AND (ii) if the Bank notifies the Borrower within such 10-day period that
such amendment is, in Bank's reasonable judgment, a material amendment, with the
prior written consent of the Bank;
(c) suspend its business activity for more than two days; or
(d) use any proceeds of the Loan, directly or indirectly, to purchase
or carry, or reduce or retire any loan incurred to purchase or carry any "Margin
Stock" (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock.
6.14 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS.
The Borrower (i) will continue to be a real estate investment trust as
defined in Section 856 of the Code (or any successor provision thereto), (ii)
will not revoke its election to be a real estate investment trust, (iii) will
not engage in any "prohibited transactions" as defined in Section 856(b)(6)(iii)
of the Code (or any successor provision thereto), and (iv) will continue to be
entitled to a dividend paid deduction meeting the requirements of Section 857 of
the Code.
6.15 NYSE LISTED COMPANY.
The common stock of the Borrower shall at all times be listed for
trading and be traded on the New York Stock Exchange.
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<PAGE>
6.16 CONDUCT OF BUSINESS.
The Borrower shall engage primarily in the business of direct
ownership, operation and acquisition or development for its own account of
apartment projects located in the Western United States (which shall be
understood to mean Colorado and States westward); provided, however, that the
foregoing shall not restrict either the Borrower's continued ownership and
operation of assets owned as of the Closing Date or other business activities of
the Borrower reasonably incidental to business activities otherwise permitted
under this Section 6.16.
6.17 COOPERATION.
The Borrower shall take any action reasonably requested by the Bank to
carry out the intent of the Loan Documents.
7. COLLATERAL
This line of credit is unsecured.
8. DEFAULT
If any of the following events occurs (an "Event of Default"), the Bank may
declare the Borrower in default, stop making any additional credit available to
the Borrower, and require the Borrower to repay its entire debt immediately and
without prior notice. However, if a bankruptcy petition is filed with respect
to the Borrower, the entire debt outstanding under this Agreement shall
automatically be due immediately.
8.1 FAILURE TO PAY.
The Borrower fails to make a payment due under the Loan Documents
within fifteen (15) days after the date when due.
8.2 FALSE INFORMATION.
The Borrower has given the Bank false or misleading information or
representations.
8.3 BANKRUPTCY.
The Borrower files a bankruptcy petition or makes a general assignment
for the benefit of creditors, or a bankruptcy petition is filed against the
Borrower. The default will be deemed cured if any bankruptcy petition filed
against the Borrower is dismissed within a period of forty-five (45) days after
the filing; provided, however, that the Bank will not be obligated to extend any
additional credit to the Borrower during that period.
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<PAGE>
8.4 RECEIVERS.
A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
8.5 LAWSUITS.
Any lawsuit(s) or arbitration(s) are initiated against the Borrower
involving claims exceeding in the aggregate Fifty Million Dollars ($50,000,000)
or more at any one time in excess of any insurance coverage.
8.6 JUDGMENTS.
Any judgment or arbitration award is entered against the Borrower, or
the Borrower enters into any settlement agreement with respect to any
litigation, claim or arbitration, in an aggregate amount of Ten Million Dollars
($10,000,000) or more in excess of any insurance coverage.
8.7 ERISA PLANS.
The occurrence of any of the following event(s) with respect to the
Borrower, provided such event(s) could reasonably be expected, in the judgment
of the Bank, to subject the Borrower to any tax, penalty or liability (or any
combination of the foregoing) which in the aggregate could have a Material
Adverse Effect on the Borrower with respect to a Plan:
(a) A reportable event occurs with respect to a Plan which in the
reasonable judgment of the Bank may result in the termination of such Plan for
purposes of ERISA.
(b) Any Plan termination (or commencement of proceedings to terminate
a Plan) or the Borrower's full or partial withdrawal from a Plan.
8.8 GOVERNMENT ACTION.
Any government authority takes action that the Bank believes could
have a Material Adverse Effect on the Borrower.
8.9 MATERIAL ADVERSE CHANGE.
Any event, circumstance or condition shall occur which the Bank
believes could have a Material Adverse Effect on the Borrower.
8.10 OTHER BREACH UNDER THIS AGREEMENT OR OTHER LOAN DOCUMENTS.
The Borrower fails to meet the conditions of or fails to perform any
obligation under any term of this Agreement or any other Loan Document not
specifically referred to in this
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Article 8. If, in the Bank's opinion, the breach is capable of being remedied
, the breach will not be considered an Event of Default under this Agreement
for a period of thirty (30) days after the date on which the Bank gives
written notice of the breach to the Borrower; provided, however, that the
Bank will not be obligated to extend any additional credit to the Borrower
during that period.
8.11 CROSS-DEFAULT.
Any default occurs under any agreement in connection with any credit
the Borrower or any of the Borrower's related entities or Affiliates has
obtained from the Bank or any other creditor, or which the Borrower or any of
the Borrower's related entities or Affiliates has guaranteed, if the default
consists of a failure to make a payment when due or gives the creditor the right
to accelerate the obligation.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 REMEDIES.
If an Event of Default occurs under the Loan Documents, the Bank may
exercise any right or remedy which it has under any of the Loan Documents or
which is otherwise available at law or in equity. All of Bank's rights and
remedies shall be cumulative. At Bank's option, exercisable in its sole
discretion, all of the Borrower's obligations under the Loan Documents will
become immediately due and payable without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any kind.
9.2 CALIFORNIA LAW.
This Agreement is governed by California law but without regard to the
choice of law rules of California.
9.3 ARBITRATION.
(a) MANDATORY ARBITRATION. Except as provided below, any controversy
or claim between or among the parties, including those arising out of or
relating to this Agreement or the other Loan Documents and any claim based on or
arising from an alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and
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maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief.
(b) PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No provision of
this Agreement shall limit the right of any party to this Agreement to exercise
self-help remedies such as setoff, or obtaining provisional or ancillary
remedies from a court of competent jurisdiction before, after, or during the
pendency of any arbitration or other proceeding. The exercise of a remedy does
not waive the right of either party to resort to arbitration.
9.4 PRESENTMENT, DEMANDS AND NOTICE.
The Bank shall be under no duty or obligation to make or give any
presentment, demands for performances, notices of nonperformance, protests,
notices of protest or notices of dishonor in connection with any obligation or
indebtedness under the Loan Documents.
9.5 INDEMNIFICATION.
The Borrower shall indemnify, save, and hold harmless the Bank and its
directors, officers, agents and employees (collectively the "Indemnitees") from
and against:
(a) Any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, charges, expenses or disbursements
(including attorneys' fees) of any kind with respect to the execution, delivery,
enforcement, performance and administration of this Agreement and the other Loan
Documents, and the transactions contemplated hereby, and with respect to any
investigation, litigation or proceeding related to this Agreement, the other
Loan Documents, the Loan or the use of the proceeds thereof, whether or not any
Indemnitee is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Borrower shall have no obligation hereunder to
any Indemnitee with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of such Indemnitee.
(b) Any and all writs, subpoenas, claims, demands, actions, or causes
of action that are served on or asserted against any Indemnitee (if directly or
indirectly related to a writ, subpoena, claim, demand, action, or cause of
action against the Borrower or any Affiliate of the Borrower); and any and all
liabilities, losses, costs, or expenses (including attorneys' fees) that any
Indemnitee suffers or incurs as a result of any of said matters.
The obligations of the Borrower under this Section 9.5
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shall survive payment of the Loan and assignment of any rights hereunder.
9.6 ATTORNEYS' FEES.
In the event of a lawsuit or arbitration proceeding, including any
tort proceeding, between or among the parties hereto, the prevailing party is
entitled to recover costs and reasonable attorneys' fees (including any
allocated costs of in-house counsel) incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator.
9.7 NOTICES.
All notices required under this Agreement shall be personally
delivered, sent by facsimile or sent by first class mail, postage prepaid, to
the addresses on the signature page of this Agreement, or to such other
addresses as the Bank and the Borrower may specify from time to time in writing.
9.8 SUCCESSORS AND ASSIGNS.
This Agreement is binding on the Borrower's and the Bank's successors
and assignees. The Borrower agrees that it may not assign this Agreement or the
other Loan Documents without the Bank's prior consent. The Bank may sell
participations in or assign this Loan, and may provide financial information
about the Borrower to actual or potential participants or assignees, without
notice to or consent of the Borrower. Concurrent with any assignment or
participation by the Bank, the Borrower will, at the Bank's request, deliver an
opinion of counsel in form and substance reasonably satisfactory to the Bank.
9.9 NO THIRD PARTIES BENEFITED.
This Agreement is made and entered into for the sole protection and
benefit of the Bank and the Borrower and their successors and assigns. No trust
fund is created by this Agreement and no other persons or entities shall have
any right of action under this Agreement or any right to the Loan funds.
9.10 INTEGRATION; RELATION TO ANY LOAN COMMITMENT; HEADINGS.
The Loan Documents (a) integrate all the terms and conditions in or
incidental to this Agreement, (b) supersede all oral negotiations and prior
writings with respect to their subject matter, including any loan commitment to
the Borrower, and (c) are intended by the parties as the final expression of the
agreement with respect to the terms and conditions set forth in those documents
and as the complete and exclusive statement of the terms agreed to by the
parties. No representation, understanding, promise or condition shall be
enforceable against any party unless it is contained in the Loan Documents. If
there is any conflict between the terms, conditions and provisions of this
Agreement and those of any other agreement or instrument,
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including any other Loan Document, the terms, conditions and provisions of
this Agreement shall prevail. Headings and captions are for reference only
and shall not affect the interpretation or meaning of any provisions of this
Agreement. The exhibit(s) to this Agreement are hereby incorporated in this
Agreement.
9.11 INTERPRETATION.
(a) Time is of the essence in the performance of this Agreement by
the Borrower.
(b) The word "include(s)" means "include(s), without limitation," and
the word "including" means "including but not limited to." No listing of
specific instances, items or matters in any way limits the scope or generality
of any language of this Agreement.
(c) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP. All references herein to the Borrower or any other
Person, in connection with any financial or related covenant, representation or
calculation, shall be understood to mean and refer to the Borrower and such
other Person on a consolidated basis in accordance with GAAP, unless otherwise
specifically provided and subject in all events to any adjustments herein set
forth.
(d) Any time the phrase "to the best of the Borrower's knowledge" or
a phrase similar thereto is used herein, it means: "to the actual knowledge of
the then officers of the Borrower, after reasonable inquiry of those agents,
employees or contractors of the Borrower who could reasonably be anticipated to
have knowledge with respect to the subject matter or circumstances in question
and after review of those documents or instruments which could reasonably be
anticipated to be relevant to the subject matter or circumstances in question."
(e) In each case where the consent or approval of the Bank is
required, or Bank's non-obligatory action is requested by the Borrower, such
consent, approval or action shall be in the sole and absolute discretion of the
Bank, unless otherwise specifically indicated.
(f) Any time the word "or" is used herein, unless the context
otherwise clearly requires, it has the inclusive meaning represented by the
phrase "and/or". The words "hereof", "herein", "hereby", "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement. Article, section, subsection, clause, exhibit and
schedule references are to this Agreement unless otherwise specified. Any
reference in this Agreement to this Agreement or to any other Loan Document
includes any and all amendments, modifications, supplements, renewals or
restatements thereto or
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thereof, as applicable.
9.12 SEVERABILITY; WAIVERS; AMENDMENTS.
This Agreement may not be modified or amended except by a written
agreement signed by the parties. Any consent or waiver under this Agreement
must be in writing. If any part of this Agreement is not enforceable, the rest
of the Agreement may be enforced. If the Bank waives a default, it may enforce
a later default. No waiver shall be construed as a continuing waiver. No
waiver shall be implied from Bank's delay in exercising or failure to exercise
any right or remedy against the Borrower. Consent by the Bank to any act or
omission by the Borrower shall not be construed as a consent to any other or
subsequent act or omission or as a waiver of the requirement for Bank's consent
to be obtained in any future or other instance. The Bank retains all of its
rights and remedies, even if it makes an advance after a default.
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9.13 COUNTERPARTS.
This Agreement may be executed in counterparts each of which, when
executed, shall be deemed an original, and all such counterparts shall
constitute one and the same agreement.
This Agreement is executed as of the date stated at the top of the first page.
Bank: Borrower:
BANK OF AMERICA NATIONAL BRE PROPERTIES, INC.
TRUST AND SAVINGS ASSOCIATION
By____________________________ By _________________________
Janice L. Sears Frank C. McDowell
Vice President President and Chief
Executive Officer
By _________________________
LeRoy E. Carlson
Secretary and Chief
Financial Officer
Address where notices to Address where notices to
the Bank are to be sent: the Borrower are to be sent:
Bank of America National Trust BRE Properties, Inc.
and Savings Association One Montgomery Street
Commercial Real Estate Telesis Tower, Suite 2500
Services/National San Francisco, CA 94104
Accounts 9105 Attn: LeRoy E. Carlson
50 California Street Phone: (415) 445-6561
11th Floor Fax: (415) 445-6505
San Francisco, CA 94111
Attention: Janice L. Sears
Phone: (415) 445-4448
Fax: (415) 445-4154
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EXHIBIT A
BORROWING NOTICE
___________________, 199__
Bank of America National Trust
and Savings Association
Commercial Real Estate
Services Division 8940
50 California Street
11th Floor
San Francisco, CA 94111
Attention: Carol Lynn Yee
Re: Line of Credit Loan Agreement dated as of April 4, 1996 (the "Agreement")
between BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("Bank") and
BRE PROPERTIES, INC. ("Borrower")
Dear __________________:
Reference is made to the Agreement. Capitalized terms used in this
Borrowing Notice without definition have the meanings specified in the
Agreement.
Pursuant to the Agreement, notice is hereby given that the Borrower
desires that the Bank make the advance described in attached SCHEDULE 1 (the
"Advance"). The Borrower and the undersigned Officer of the Borrower hereby
certify that:
(1) COMMITMENT. The outstanding amount of the Line of Credit shall
not, after giving effect to the making of the Advance, exceed the Commitment;
(2) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Borrower contained in the Agreement and the other Loan
Documents are true and correct as of the date hereof and shall be true and
correct on the date of the Advance, both before and after giving effect to the
Advance; provided, however, that the representations and warranties of the
Borrower set forth in the Agreement regarding financial statements shall be
deemed to be made with respect to the financial statements most recently
delivered to the Bank pursuant to the Agreement;
(3) NO EVENT OF DEFAULT. No Event of Default exists as of the date
hereof or will result from the making of the Advance or would result after
notice or passage of time or both;
(4) USE OF PROCEEDS. The proceeds of the Advance will
A-1
<PAGE>
be used only as permitted by the Agreement; and
(5) NO MATERIAL ADVERSE EFFECT. No event, circumstance or condition,
which could have a Material Adverse Effect on the Borrower, has occurred since
the date of the Agreement.
Enclosed are the documents and information, if any, requested by the
Bank with respect to use of proceeds as a condition to this Advance.
BRE PROPERTIES, INC.
By: __________________________
Its: _________________________
A-2
<PAGE>
SCHEDULE 1
to Borrowing Notice
REQUESTED ADVANCE
1. AMOUNT OF REQUESTED ADVANCE: $_______________
(must be $500,000 or more)
2. PURPOSE OF ADVANCE*: ____________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
______________
_____________________
* See Section 6.1; specify acquisition costs for designated apartment
project or general working capital purposes.
<PAGE>
Exhibit 10.26
MODIFICATION AGREEMENT
TO SYNDICATE LOAN
TO
BRE PROPERTIES, INC.
MADE BY VARIOUS
FINANCIAL INSTITUTIONS
WITH
BANK OF AMERICA NT & SA
AS AGENT
<PAGE>
MODIFICATION AGREEMENT
TO SYNDICATE LOAN
This Modification Agreement ("Agreement") is made as of April 4,
1996, by BRE PROPERTIES, INC., a Maryland corporation ("Borrower"); BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association ("BofA"); and the several financial institutions from time to
time party to this Agreement (collectively, the "Banks"; individually a
"Bank").
FACTUAL BACKGROUND
A. Banks agree to make a loan (the "Loan") to the Borrower in
accordance with an Unsecured Line of Credit Loan Agreement dated April 4,
1996 (the "Loan Agreement"). Capitalized terms used herein without
definition have the meanings given in the Loan Agreement. The Loan is
evidenced by a Note dated April 4, 1996 in the stated principal amount of
$70,000,000. Each of the Banks, including BofA, will have a direct lender
relationship with the Borrower in accordance with the Loan Documents, as
hereby amended. The Banks wish to designate BofA as their Agent in this
syndicated Loan. Because BofA is both an individual Bank in the syndicate as
well as agent for all of the Banks in the syndicate, the parties wish to
modify certain defined terms in the Loan Documents.
B. The Borrower, BofA and the other Banks wish to modify the Loan
Documents as set forth herein.
AGREEMENT
Therefore, the Borrower and Banks agree as follows:
1. RECITALS. The recitals set forth above in the Factual Background
are correct.
2. DEFINITIONS. As used herein, the following words have the meanings
indicated.
"ADVANCE" means any advance of Loan proceeds made pursuant to the
terms of the Loan Documents.
"AFFILIATE" means, as to any Person, any other Person, which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract or
otherwise.
"AGENT" means BofA in its capacity as agent for the Banks hereunder,
and any successor agent.
"AGENT-RELATED PERSONS" means BofA and any successor agent hereunder,
together with their respective Affiliates and the officers, directors,
employees and agents of such Persons.
"AGENT'S PAYMENT OFFICE" means the address for payments set forth
herein for the Agent, or such other address as the Agent may specify.
"BANK" has the meaning specified in the introductory sentence of this
Agreement; BofA in its capacity as a lender hereunder is one of the
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Banks.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association.
"CAPITAL ADEQUACY REGULATION" means any guideline or directive of any
central bank or other Governmental Authority, or any other law, rule or
regulation regarding capital adequacy of a Bank or of any corporation
controlling a Bank.
"COMMITMENT" means the amount of the Loan for which each Bank is
obligated.
"ELIGIBLE ASSIGNEE" means (i) a commercial bank or investment bank
organized under the laws of the United States, or any state thereof, and
having a combined capital and surplus of at least $100,000,000; (ii) a
Person that is primarily engaged in the business of commercial banking and
is an Affiliate of a Bank; and (iii) any other Person approved by Majority
Banks and Agent.
"FEDERAL FUNDS RATE" means, for any day, the rate published by the
Federal Reserve Bank of New York for the preceding Banking Day as "Federal
Funds (Effective)"; (or, if not published, the arithmetic mean of the rates
for overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day quoted by three brokers of Federal Funds in New York City
as determined by the Agent).
"INDEMNIFIED LIABILITIES" has the meaning given in Section 15 entitled
"Indemnification by the Borrower".
"INDEMNIFIED PERSON" has the meaning given in Section 15 entitled
"Indemnification by the Borrower".
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such
other statements by such other entity as may be in general use by
significant segments of the accounting profession, which are applicable to
the circumstances as of the date of determination.
"GOVERNMENTAL AUTHORITY" means any government, 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 entity owned or controlled through
capital ownership or otherwise by any of the foregoing.
"LENDING OFFICE" means, as to any Bank, the office specified as its
Lending Office on Schedule I or as the Bank may designate to the Borrower
and the Agent.
"LOAN DOCUMENTS" means the Loan Agreement, the Note and any other
documents designated as "Loan Documents" in the Loan Agreement. This
Modification Agreement is a Loan Document.
"MAJORITY BANKS" means, at any time, a Bank or Banks then holding in
excess of 66-2/3% of the then aggregate unpaid principal amount of the Loan
(or, if no principal amount is then outstanding, having in excess of
66-2/3% of the Commitments).
"NOTE" means a promissory note executed by the Borrower in favor of a
Bank or the Agent on behalf of the Banks in connection with this
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Loan.
"NOTICE OF BORROWING" means a notice as described in the Loan
Agreement.
"OBLIGATIONS" means all advances, debts, liabilities, obligations and
covenants arising under any Loan Document owing by the Borrower to any
Bank, the Agent or any Indemnified Person, whether absolute or contingent,
due or to become due, now existing or hereafter arising.
"PERSON" means any natural person, employee, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other organization, whether or not a legal
entity, or any other non-governmental entity, or any Governmental
Authority.
"PRO RATA SHARE" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal rounded to the fifth decimal place) at
such time of such Bank's share of the Loan.
"SUBSIDIARY" of a Person means any other Person of which 50% or more
of the voting stock, membership interests or other equity interests is
owned or controlled directly or indirectly by the Person, or one or more of
the Subsidiaries of the Person, or a combination thereof.
3. MODIFICATION OF LOAN DOCUMENTS. The Loan Documents are hereby
amended as follows, subject to the terms and conditions hereof:
(a) The Note is modified so that "Bank" means the Agent acting as
agent for the Banks, except that the reference to "Bank" in Section 18 of the
Note and Paragraph 5 of Exhibit B to the Note is modified to mean "Banks".
(b) The Loan Agreement is modified so that "Bank" means the Agent
acting as agent for the Banks, except that the reference to "Bank" in
Sections 9.8 and 9.9 of the Loan Agreement is modified to mean "Banks".
4. THE CREDIT.
(a) Subject to the terms and conditions hereof, each Bank agrees
to fund its Pro Rata Share of each Advance of Loan proceeds from time to time
until the maturity date of the Loan. Such Loan proceeds shall be delivered
to the Borrower in accordance with the provisions of the Loan Documents.
(b) The Borrower and each Bank acknowledge that, as of the date of
this Agreement, the Loan and the amount outstanding, and each Bank's Pro Rata
Share of the Loan, are:
(i) The Loan: $70,000,000
(ii) Total Current Outstanding Principal: $ 0
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(iii) Total Accrued and Unpaid Interest: $ 0
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(iv) On the Effective Date of this Agreement,
each Bank's Pro Rata Share of the Loan
shall be:
BofA: 78.57143%
Manufacturers Bank: 21.42857%
(c) Each Bank shall become vested with its Pro Rata Share of the Loan
upon execution and delivery of the required documents and upon payment of
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its Pro Rata Share of the principal balance of the Loan outstanding and any
other fees, costs or expenses due hereunder or pursuant to another agreement.
Upon such payment, the respective interests of each Bank in the Loan
Documents and the other rights and claims with respect to the Loan shall be
of equal priority with one another, except as otherwise expressly provided.
(d) A complete set of Loan Documents shall be held by Agent.
(e) A Bank which is not the Agent shall have no interest in any
(i) property taken as security for any other loan or financial accommodation
made or furnished to the Borrower by Agent (in which the Bank has not
acquired an interest); (ii) property now or hereafter in Agent's possession
or under Agent's control other than by reason of the Loan Documents; or (iii)
deposits which may be or might become security for the Borrower's Obligations
by reason of the general description contained in any instrument not a Loan
Document held by the Agent or by reason of any right of setoff, counterclaim,
banker's lien or otherwise. If, however, such property shall actually be
applied to the payment of amounts owing by the Borrower in connection with
the Loan, then each Bank shall be entitled to its Pro Rata Share, if any, of
such application to the Loan.
(f) All the parties agree that, except as may be otherwise
expressly provided, all of the interest rates for the Loan are those of and
are calculated in accordance with the requirements and any applicable
assessments of the Agent, regardless of which Bank is making an Advance or
receiving a payment thereon.
5. APPOINTMENT AND AUTHORIZATION OF AGENT.
(a) Each Bank hereby irrevocably appoints, designates and
authorizes the Agent to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers
and perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto and as further provided in the Co-Lender
Agreement described below.
(b) Subject to the limitations set forth in the Loan Documents and
Co-Lender Agreement, Agent's powers include but are not limited to the power:
(i) to administer, manage and service the Loan; (ii) to enforce the Loan
Documents; (iii) to make all decisions under the Loan Documents in connection
with the day-to-day administration of the Loan, any inspections authorized by
the Loan Documents, and other routine administration and servicing matters;
(iv) to collect and receive from the Borrower or any third persons all
payments of amounts due under the terms of the Loan Documents and to
distribute the amounts thereof to the Banks; (v) to collect and distribute or
disburse all other amounts due under the Loan Documents; (vi) to grant or
withhold consents, approvals or waivers, and make any other determinations in
connection with the Loan Documents; and (vii) to exercise all such powers as
are incidental to any of the foregoing matters. Agent shall furnish to Banks
copies of material documents, including confidential ones, received from the
Borrower regarding the Loan, the Loan Documents and the transactions
contemplated thereby. Agent shall have no responsibility with respect to the
authenticity, validity, accuracy or completeness of the information provided.
(c) Notwithstanding any provision to the contrary contained in any
Loan Document, the Agent shall not have any duties or responsibilities,
except those expressly set forth in the Loan Documents or the Co-Lender
Agreement, nor shall the Agent have any fiduciary relationship with any Bank,
and no implied covenants, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document
against the Agent.
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(d) The Borrower acknowledges that the Banks have executed a
Co-Lender Agreement to supplement the Loan Documents with respect to the
relationship of the Banks and the Agent among themselves in connection with
the Loan. The Co-Lender Agreement is not a Loan Document.
(e) The Agent may, and at the request of the Majority Banks shall,
resign as Agent upon 30 days' notice to the Banks. If the Agent resigns
under this Agreement, the Majority Banks shall appoint from among the Banks a
successor agent. If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may appoint, after consulting
with the Banks, a successor agent from among the Banks. Upon the acceptance
of appointment as successor agent hereunder, such successor agent shall
succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent, and the retiring Agent's
appointment, powers and duties as Agent shall terminate. After any retiring
Agent's resignation hereunder as Agent, the provisions regarding payment of
costs and expenses and indemnification of Agent shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under
this Agreement. If no successor agent has accepted appointment as Agent by
the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become
effective, and the Banks shall perform all of the duties of the Agent
hereunder until such time, if any, as the Majority Banks appoint a successor
agent.
6. LOAN ACCOUNTS. The Advances made by each Bank shall be evidenced
by one or more loan accounts or records maintained by such Bank and Agent in
the ordinary course of business. The loan accounts or records maintained by
the Agent and each Bank shall be conclusive absent manifest error of the
amount of the Loan made by the Banks to the Borrower and the interest and
payments thereon. Any failure so to record or any error in doing so shall
not, however, limit or otherwise affect the obligation of the Borrower
hereunder to pay any amount owing with respect to the Loan.
7. PROCEDURE FOR BORROWING.
(a) Each Borrowing shall be made upon the Borrower's irrevocable
written notice delivered to the Agent in accordance with the Loan Agreement.
(b) The Agent will promptly notify each Bank of any Notice of
Borrowing and of the amount of such Bank's Pro Rata Share of that borrowing.
Banks acting through Agent shall disburse the Loan as provided in the Loan
Agreement.
(c) Each Bank will make the amount of its Pro Rata Share of each
borrowing available to the Agent for the account of the Borrower at the
Agent's Payment Office by 11:00 a.m. (San Francisco time) on the borrowing
date requested by the Borrower in funds immediately available to the Agent.
The proceeds of all such Loans will then be made available to the Borrower by
the Agent by wire transfer in accordance with written instructions provided
to the Agent by the Borrower.
(d) Unless the Agent receives notice from a Bank at least one
Banking Day prior to the date of a borrowing that such Bank will not make
available to the Agent when required the amount of that Bank's Pro Rata Share
of the borrowing, the Agent may assume that each Bank has made such amount
available to the Agent in immediately available funds on the borrowing date.
(e) The failure of any Bank to make any Advance on any borrowing
date shall not relieve any other Bank of any obligation hereunder to make an
Advance on such borrowing date, but no Bank shall be responsible for the
failure of any other Bank to make its Advance on the borrowing date.
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8. CONTRACT RATE ELECTIONS.
(a) The Borrower may elect applicable interest rates in accordance
with the requirements, terms and conditions set forth in the Note upon
irrevocable written notice to the Agent to be received by the Agent on the
appropriate day not later than 9:30 a.m. (San Francisco time).
(b) The Agent will promptly notify each Bank of receipt of an
election of the Contract Rate. If no timely notice is provided by the
Borrower, the Agent will promptly notify each Bank of any automatic
conversion to Reference-based Rate. All rate elections and conversions shall
be made ratably according to the respective outstanding principal amounts of
the Loan held by each Bank with respect to which the notice was given.
9. FEES.
(a) AGENCY FEE. The Borrower shall pay an agency fee to the Agent
for the Agent's own account, as set forth in a separate letter understanding
between the Agent and the Borrower.
(b) OTHER FEES. The Borrower shall pay to the Agent for the
account of each Bank the commitment fee and the Unused Commitment Fee as set
forth in Section 2.1 of the Loan Agreement and any extension fee payable
under Section 22 of the Note.
10. PAYMENTS BY THE BORROWER.
(a) All payments to be made by the Borrower shall be made without
set-off, recoupment or counterclaim. Except as otherwise provided, all
payments by the Borrower shall be made to the Agent for the account of the
Banks at the Agent's Payment Office, and shall be made in U.S. dollars and in
immediately available funds, in accordance with the Loan Documents. The
Agent will promptly distribute to each Bank its Pro Rata Share (or other
applicable share as may be agreed by a Bank) of such payment in like funds as
received. Any payment received by the Agent later than 11:00 a.m. (San
Francisco time) shall be deemed to have been received on the following
Banking Day and any applicable interest or fee shall continue to accrue.
(b) To the extent that the Borrower makes a payment to the Agent
or the Banks, or the Agent or the Banks exercise the right of set-off, and
such payment or the proceeds of such set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including by any settlement) to be repaid to a trustee,
receiver, the Borrower or any other party, in connection with any Insolvency
Proceeding or otherwise, then (i) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not
been made or such set-off had not occurred, and (ii) each Bank severally
agrees to pay to the Agent upon demand its Pro Rata Share of any amount so
recovered from or repaid by the Agent.
(c) Agent shall have the exclusive right to collect on the Loan
from the Borrower or any guarantors, third parties, or otherwise including
principal, interest, fees or any prepayment premiums, whether such amounts
are received directly from the Borrower, any guarantors, or other persons, or
are collected by offset by Agent against the money or other property of the
Borrower or any guarantors deposited at or held by Agent, or other
enforcement of the Loan Documents. No Bank shall independently initiate any
judicial action or equivalent action or other proceeding against the Borrower
with respect to the Loan.
11. PREPAYMENTS, TERMINATION OR REDUCTION OF LOAN. In the event the
Borrower elects to prepay the Loan in whole or in part in accordance with the
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Loan Documents, the Agent will promptly notify each Bank of such notice and
of each Bank's Pro Rata Share of such prepayment. Any reduction or
termination of the Loan shall be applied to each Bank according to its Pro
Rata Share. All accrued unused commitment fees up to but not including the
effective date of any reduction or termination of the Loan shall be payable
on the effective date of such reduction or termination.
12. USURY. If a court ultimately determines that the Loan (or an
Advance) violates applicable usury law, then (a) the Borrower shall not be
required to pay to a Bank interest on the Loan (or the Advance) at a rate in
excess of the maximum rate that may be lawfully charged under applicable law;
and (b) in the event that any Bank shall collect interest or other monies
which are deemed to constitute interest which would increase the effective
interest rate on the Loan (or an Advance) to a rate in excess of that
permitted by applicable law, such excess interest shall, at the option of
said Bank, be returned to the Borrower or credited against the principal
balance of the Loan (or Advance) then outstanding; (c) provided, however,
that if a usury law applies to one or more but not all Banks, then the Banks
not affected by the usury law shall be entitled to the full amount of
interest from the Borrower under the Loan Documents even though other Banks
may receive or retain less due to the usury law.
13. INCREASED COSTS AND REDUCTION OF RETURN. If any Bank shall have
determined that a change in or compliance with any Capital Adequacy
Regulation affects the amount of capital required to be maintained by the
Bank or any Person controlling the Bank, and such Bank determines that the
amount of such required capital is increased as a consequence of the Loan or
other obligations under the Loan Documents taking into consideration such
Bank's or such Person's policies with respect to capital adequacy and desired
return on capital, then, upon demand of such Bank to the Borrower through the
Agent, the Borrower shall pay to the Bank an additional amount sufficient to
compensate the Bank for such increase.
14. COSTS AND EXPENSES. The Borrower shall pay or reimburse the Agent
and each Bank within five Banking Days after demand for all costs and
expenses (including legal fees) incurred by them in connection with:
(a) the preparation, administration and execution of any Loan
Document and any amendment, supplement, waiver or modification and any other
documents prepared in connection herewith or therewith, (whether or not the
particular Loan, transaction or document is consummated), including
reasonable legal fees incurred by BofA (including as Agent) with respect
thereto; and
(b) the enforcement or preservation of any rights or remedies
under any Loan Document with respect to an Event of Default (including any
"workout" or restructuring of the Loan, and any Insolvency Proceeding,
judicial proceeding or arbitration).
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15. INDEMNIFICATION BY THE BORROWER. The Borrower shall indemnify,
defend and hold the Agent-Related Persons, each Bank and each of its
respective officers, directors, employees and agents (each, an "Indemnified
Person") harmless from and against any and all liabilities, obligations,
losses, damages, actions, judgments, costs and expenses (including legal
fees) which may be incurred by or asserted against any such Person arising
out of or relating to the Loan or the Loan Documents or any document or
transaction or action taken or not by any such Person in connection with any
of the foregoing, including any investigation, arbitration, litigation,
Insolvency Proceeding or other proceeding whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Borrower shall have no obligation hereunder
to any Indemnified Person with respect to Indemnified Liabilities resulting
solely from the gross negligence or willful misconduct of such Indemnified
Person. The agreements in this Section 15 shall survive payment of all other
Obligations.
16. ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) A Bank may at any time assign to one or more Eligible
Assignees (each an "Assignee") with the written consent of the Borrower
(other than during the existence of an Event of Default) and of the Agent (at
all times), which consent shall not be unreasonably withheld (provided that
no written consent shall be required for an Eligible Assignee that is an
Affiliate of such assignor Bank) all or part of its Pro Rata Share of the
Loan and the other rights and obligations of such assignor Bank hereunder, in
a minimum amount of $5,000,000; provided, however, that no such assignment
shall be permitted if the effect thereof is to cause the remaining Commitment
of the assignor Bank to be less than $15,000,000. However, such assignment
shall be conditioned on, and the Borrower and the Agent may continue to deal
solely and directly with such assignor Bank until, (i) written notice of such
assignment, substantially in the form of the attached Exhibit A shall have
been given to the Borrower and the Agent by such Bank and the Assignee; (ii)
such Bank and its Assignee shall have delivered to the Agent and the Borrower
an Assignment and Assumption Agreement substantially in the form of the
attached Exhibit B ("Assignment and Assumption Agreement") (together with any
Note(s) subject to such assignment); and (iii) the Assignee has paid to the
Agent a processing fee in the amount of $5,000.
(b) From the date that the Agent notifies the assignor Bank that
all conditions and requirements of the assignment have been met, then to the
extent that rights and obligations hereunder have been assigned (i) the
Assignee thereunder shall be a party hereto and shall have the rights and
obligations of a Bank under the Loan Documents and the Co-Lender Agreement,
(ii) the assignor Bank shall relinquish such assigned rights and be released
from such assigned obligations under the Loan Documents, (iii) this Agreement
shall be deemed to be amended to the extent necessary to reflect the addition
of the Assignee and the resulting adjustment of the Pro Rata Shares of the
Loan arising therefrom, and (iv) the Pro Rata Share allocated to an Assignee
shall reduce the Pro Rata Share of the assigning Bank.
(c) A Bank (the "originating Bank") may sell to one or more
Persons not Affiliates of the Borrower (a "Participant") participating
interests in the Loan; provided that (i) the originating Bank's obligations
under the Loan Documents and the Co-Lender Agreement shall remain unchanged,
(ii) the originating Bank shall remain solely responsible for the performance
of such obligations, (iii) the Borrower and the Agent shall continue to deal
solely and directly with the originating Bank in connection with the Loan and
Loan Documents, (iv) no Bank shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment,
consent or waiver with respect to any Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the
Banks, and (v) each participating interest shall be in a minimum amount of
$5,000,000,
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and no such participation shall be permitted if the non-participated interest
of the originating Bank would thereafter be less than $15,000,000. A
Participant shall not have any rights under the Loan Documents or the
Co-Lender Agreement, and all amounts payable by the Borrower hereunder shall
be determined as if the originating Bank had not sold such participation.
(d) Notwithstanding any other provision, a Bank may pledge its
interest in the Loan in favor of any Federal Reserve Bank in accordance with
Federal law.
17. PUBLICITY. Each Bank may refer to the Loan in its own promotional
and advertising materials. The Borrower shall not identify a Bank as a
lender, except with such Bank's prior written consent, provided through the
Agent in each instance.
18. CONDITIONS PRECEDENT. In addition to the conditions precedent set
forth in Section 4 of the Loan Agreement, the obligation of each Bank under
the Loan Documents is subject to the further condition that the Agent has
received reimbursement of all costs and expenses incurred by Agent in
connection with this Agreement, including legal fees and expenses of Agent's
counsel, and the costs for services of Agent's in-house staff, such as legal
services. Such costs and expenses are in addition to the amounts payable by
the Borrower under this Section 18.
19. CONDITIONS TO ALL BORROWINGS. The obligation of each Bank to make
an Advance (including its initial disbursement) is subject to the
satisfaction on the relevant borrowing date of the conditions set forth in
the Loan Documents.
20. AUTHORIZATION AND ENFORCEABILITY REPRESENTATIONS. Each Bank, Agent
and the Borrower hereby represents to the other parties hereto that all
necessary action has been taken to authorize it to execute and to perform its
obligations under the Loan Documents, and that the Loan Documents are binding
and enforceable against it.
21. CONSENT TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO ANY LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA, OR OF THE UNITED STATES FOR THE NORTHERN OR CENTRAL DISTRICTS OF
CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER,
AGENT AND EACH BANK CONSENTS, FOR ITSELF AND ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, AGENT AND EACH
BANK IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING BASED ON VENUE OR FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN CONNECTION WITH THE LOAN. THE
BORROWER, AGENT AND EACH BANK WAIVES PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS WHICH MAY BE MADE BY OTHER MEANS UNDER APPLICABLE
LAW.
22. INCORPORATION. This Agreement shall form a part of each Loan
Document, and all references to a given Loan Document shall mean that
document as hereby modified.
23. NO IMPAIRMENT. As specifically hereby amended, the Loan Documents
shall remain in full force and effect. This Agreement shall not prejudice
any rights or remedies of Banks under the Loan Documents. Banks reserve,
without limitation, all rights which they have against any guarantor or
indemnitor.
24. INTEGRATION. The Loan Documents, including this Agreement: (a)
integrate all the terms and conditions incidental to the Loan Documents; (b)
supersede all oral negotiations and prior and other writings with respect to
their subject matter; and (c) are intended by the parties as the final
expression of their agreement with respect to the terms and conditions set forth
in those documents and as the complete and exclusive statement of the terms
agreed to by the parties. If there is any conflict between the terms,
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conditions and provisions of this Agreement and those of any other agreement
or instrument, including any of the other Loan Documents, the terms,
conditions and provisions of this Agreement shall prevail. The Co-Lender
Agreement addresses matters among the Banks and the Agent and is intended by
the Banks and Agent to supplement and be compatible with and not abrogate the
Loan Documents, and the Borrower's rights, obligations and liabilities shall
not be diminished or increased by the Co-Lender Agreement.
25. ELECTRONIC NOTICES. Any agreement of the Agent to receive certain
notices from the Borrower or Banks by telephone or facsimile is solely for
their convenience and at their request. The Agent shall be entitled to rely
on the authority of any Person giving such notice and the Agent shall not
have any liability to the Borrower, any Bank or other Persons on account of
any action taken or not taken by the Agent in reliance upon such telephonic
or facsimile notice.
26. NOTICES.
Notices shall be sent to the following addresses:
To the Borrower:
BRE Properties, Inc.
One Montgomery Street
Telesis Tower, Suite 2500
San Francisco, CA 94104
Attn: LeRoy E. Carlson
Phone: (415) 445-6561
Fax: (415) 445-6505
To BofA as Bank:
Bank of America National Trust
and Savings Association
Commercial Real Estate Services /
National Accounts 9105
50 California Street
11th Floor
San Francisco, CA 94111
Attention: Janice L. Sears
Phone: (415) 445-4448
Fax: (415) 445-4154
To BofA as Agent:
Bank of America National Trust
and Savings Association
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: David Price
Phone: (415) 436-3496
Fax: (415) 436-2700
To Manufacturers Bank:
Manufacturers Bank
Real Estate Industries Division
515 So. Figueroa Street
Suite 1230
Los Angeles, CA 90071
Attention: Irene Iwamoto
Phone: (213) 489-8715
Fax (213) 489-6244
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<PAGE>
27. MISCELLANEOUS. This Agreement shall be governed by the laws of the
State of California, without regard to the choice of law rules of that State.
This Agreement and any attached consents or exhibits requiring signatures may
be executed in counterparts, and all counterparts shall constitute but one
and the same document. If any court of competent jurisdiction determines any
provision of this Agreement or any of the other Loan Documents to be illegal
or unenforceable, that portion shall be deemed severed from the rest which
shall remain in full force and effect. As used herein, the word "include(s)"
means "includes(s), without limitation," and the word "including" means
"including, but not limited to." Schedule I and Exhibits A and B are
attached to this Agreement and are incorporated in this Agreement by this
reference.
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT.
BRE PROPERTIES, INC.
By:
____________________________
Frank C. McDowell
President & Chief Executive Officer
By:
____________________________
LeRoy E. Carlson
Secretary & Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS A BANK
By:
____________________________
Janice L. Sears
Vice President
MANUFACTURERS BANK, AS A BANK
By:
____________________________
Title:
_________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS AGENT
By:
____________________________
Title:
_________________________
-11-
<PAGE>
SCHEDULE I
LENDING OFFICES OF BANKS
BOFA:
Bank of America National Trust
and Savings Association
Commercial Real Estate Services /
National Accounts 9105
50 California Street
11th Floor
San Francisco, CA 94111
Attention: Janice L. Sears
Phone: (415) 445-4448
Fax: (415) 445-4154
MANUFACTURERS BANK:
Manufacturers Bank
Real Estate Industries Division
515 So. Figueroa Street
Suite 1230
Los Angeles, CA 90071
Attention: Irene Iwamoto
Phone: (213) 489-8715
Fax: (213) 489-6244
<PAGE>
MODIFICATION AGREEMENT
TO SYNDICATE LOAN
TO
BRE PROPERTIES, INC.
MADE BY VARIOUS
FINANCIAL INSTITUTIONS
WITH
BANK OF AMERICA NT & SA
AS AGENT
<PAGE>
EXHIBIT A
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______ , 199_
Bank of America National Trust
and Savings Association, as Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn: Agency Management Services #5596
[NAME AND ADDRESS OF BORROWER]
Ladies and Gentlemen:
We refer to the Unsecured Line of Credit Loan Agreement dated ________,
1996 (as amended or modified, the "Loan Agreement") among BRE PROPERTIES,
INC. (the "Borrower"), the Banks referred to therein and Bank of America
National Trust and Savings Association, as agent for the Banks (the "AGENT").
Terms not defined herein have the meanings given in the Loan Documents and
Co-Lender Agreement.
1. We hereby give you notice of and request your consent to the
assignment by _______________ (the "ASSIGNOR") to ___________________ (the
"ASSIGNEE") of part of the right, title and interest of the Assignor in and
to the Loan (including all outstanding Advances made by the Assignor)
pursuant to the Assignment and Assumption Agreement (the "Assignment and
Assumption Agreement") attached hereto. Before giving effect to such
assignment, the Assignor's Pro Rata Share of the Loan was __%, its Commitment
was $_______________ and the amount of its outstanding Advances was $_________.
After giving effect to this Assignment, Assignee's Pro Rata Share of the
Loan is __%, its Commitment is $_____________, and its share of outstanding
Advances is $______________; Assignor's remaining Pro Rata share of the Loan is
__%, its remaining Commitment is $_____________, and its remaining share of
the outstanding Advances is $____________.
2. The Assignee agrees that upon receiving the consent of the Agent
and, if required, the Borrower to such assignment, the Assignee will be bound
by the terms of the Loan Documents and Co-Lender Agreement as fully and to
the same extent as if the Assignee were a Bank originally holding such
interest in the Loan Documents and Co-Lender Agreement.
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name:
_____________________________________________
Address:
_____________________________________________
Attention:
_____________________________________________
Telephone: ( )
_____________________________________________
Facsimile: ( )
_____________________________________________
Telex (Answerback):
_____________________________________________
<PAGE>
(b) Payment Instructions:
Account No.:
_____________________________________________
At:
_____________________________________________
_____________________________________________
Reference:
_____________________________________________
Attention:
_____________________________________________
4. You are entitled to rely upon the provisions contained in the
Assignment and Assumption Agreement executed by the Assignor and Assignee.
IN WITNESS WHEREOF, the Assignor and the Assignee have executed this
Notice of Assignment and Acceptance as of the date first above mentioned.
Very truly yours,
[ASSIGNOR]
By:
__________________________
Title:
________________________
[ASSIGNEE]
By:
__________________________
Title:
________________________
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
________________________________
Its:
_______________________________
[BRE PROPERTIES, INC.
By:
________________________________
Its:
_______________________________]
<PAGE>
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
BETWEEN
_________________________________
Assignor
and
_________________________________,
Assignee
_______________________________________________________________________
_______________________________________________________________________
Entered into as of __________, 199_
with respect to a loan to
BRE PROPERTIES, INC.
<PAGE>
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
- ------- ----------- ----
1. Assignment and Assumption 1
2. Payments 2
3. Reallocation of Payments 2
4. Independent Credit Decision 2
5. Effective Date; Notices; Notes 2
6. Agent 3
7. Withholding Tax 3
8. Representations and Warranties 3
9. Further Assurances 4
10. Indemnity 4
11. Miscellaneous 4
SCHEDULE I
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<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
___________________________________
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") dated as of
_________________, 199_ is made between ______________________________ (the
"Assignor") and _____________________________ (the "Assignee").
RECITALS
________
WHEREAS, the Assignor is party to an Unsecured Line of Credit Loan
Agreement dated _____________, 1996 among BRE PROPERTIES, INC. (the
"Borrower") and Bank of America Trust and Savings Association, a Modification
Agreement dated ___________, 1996 among Borrower and the lenders named
therein including the Assignor (the "Banks"), and a Co-Lender Agreement dated
____________, 1996 among the Banks. The term "Loan Documents" is
defined in the Loan Agreement and the amendments and modifications thereto.
Terms not defined herein have the meanings given to them in the Loan
Documents and Co-Lender Agreement;
WHEREAS, the Loan Documents provide for a loan (the "Loan") to the
Borrower in an amount not to exceed $70,000,000; and the Assignor's
Commitment as of the date of this Agreement (but before this Assignment) is
$______________;
WHEREAS, [the Assignor has made Advances under the Loan Documents in
the aggregate outstanding principal amount of $____________________ to the
Borrower] [no Advances are outstanding under the Loan Documents]; and
WHEREAS, the Assignor wishes to assign to the Assignee part of the
rights and obligations of the Assignor under the Loan Documents in an amount
equal to $___________ (the "Assigned Amount")* on the terms listed on Schedule I
hereto and subject to the conditions set forth herein, and the Assignee
wishes to accept assignment of such rights and to assume such obligations
from the Assignor on such terms and conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. ASSIGNMENT AND ASSUMPTION.
(a) As of the Effective Date (defined below), the Assignor hereby
sells and assigns to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, the Assigned Amount, which includes Assignor's
interest in the Loan and any outstanding Advances and which shall be equal to
_________ percent (__%) (the "Assignee's Pro Rata Share") of the Loan. The
assignment set forth in this Section 1(a) shall be without recourse to or
representation or warranty by the Assignor (except as expressly provided in
this Agreement).
(b) As of the Effective Date, the Assignee shall be a party to the
Loan Documents and Co-Lender Agreement and succeed to all of the rights and
be obligated to perform all of the obligations of a Bank under the Loan
Documents, with an interest in the Loan equal to the Assigned Amount. The
Assignee agrees that it will perform all of the obligations required to be
performed by it as a Bank under the Loan Documents and the Co-Lender
Agreement. The Pro Rata Share of the Loan of the Assignor shall, as of the
_____________________
(*) Assigned Amount shall not be less than $5,000,000, nor amount
retained by Assignor less than $12,500,000.
-1-
<PAGE>
Effective Date, be reduced by an amount equal to the Assigned Amount, and the
Assignor shall relinquish its rights and be released from its obligations
under the Loan Documents to the extent such obligations have been assumed by
the Assignee.
(c) After giving effect to this assignment and assumption, on the
Effective Date the Assignee's interest in the Loan will be $______________
with a Pro Rata Share of __%, and the Assignor's remaining interest in the
Loan will be $___________ with a remaining Pro Rata Share of __%.
(d) This Agreement is not a Loan Document.
[2. PAYMENTS.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on
the Effective Date in immediately available funds an amount equal to $________,
representing the Assignee's Pro Rata Share of the principal amount of the
Loan outstanding on the Effective Date.
(b) The Assignee agrees to pay to the Agent a processing or
transfer fee in the amount of $_____________.
(c) The Assignee agrees to pay [Agent as an additional service fee]
[the Assignor as additional compensation] a fee in an amount equal to __________
percent (__%) of all interest and fees paid by the Borrower to the
Assignee under the Loan Documents. Such fee shall be payable quarterly in
arrears on the last business day of _______________, commencing on ___________.]
3. REALLOCATION OF PAYMENTS.
Any interest, fees and other payments accrued up to but excluding the
Effective Date with respect to the Loan shall be for the account of the
Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account of
the Assignee. Each of the Assignor and the Assignee agree that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and will promptly pay to the other party such amounts. [The Assignor and the
Assignee's obligations to make the payments referred to in this Section 3 are
non-assignable.]
4. INDEPENDENT CREDIT DECISION.
The Assignee acknowledges that it has received a copy of the Loan
Documents, the Co-Lender Agreement and such other documents and information
as Assignee has deemed appropriate and requested in order to make its own
credit and legal analysis and decision to enter into this Agreement, and will
continue to make its own credit and legal decisions in taking or not taking
action under the Loan Documents independently based on such documents and
information as Assignee shall deem appropriate at the time and without
reliance upon the Assignor, the Agent or any other Bank.
5. EFFECTIVE DATE; NOTICES; NOTES.
(a) The effective date (the "Effective Date") for this Agreement
shall be the date that the following conditions precedent have been satisfied:
(i) this Agreement shall be executed and delivered by the
Assignor and the Assignee to the Agent;
(ii) the requirements for an effective assignment by a Bank set
forth in the Loan Documents and Co-Lender Agreement
-2-
<PAGE>
shall be satisfied with respect to the Assigned Amount including
any required consents;
(iii) the Assignee shall pay to the Assignor all amounts due
to the Assignor under this Agreement; and
(iv) the processing or transfer fee referenced above shall have
been paid to the Agent.
(b) Promptly following the execution of this Agreement, the
Assignor shall deliver to the Agent [and Borrower] any notices, agreements or
other documents as may be required under the Loan Documents.
6. AGENT.
(a) The Assignee hereby appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers as are
delegated to the Agent by the Banks pursuant to the terms of the Loan
Documents and Co-Lender Agreement.
(b) If Assignor is the Agent, the Assignee does not assume under
this Agreement any duties or obligations held by the Assignor in its capacity
as Agent under the Loan Documents or Co-Lender Agreement.
7. WITHHOLDING TAX.
If the Assignee is organized under the laws of any jurisdiction
other than the United States or any state or other political subdivision
thereof, it agrees that it will furnish the Agent and the Borrower,
concurrently with the execution of this Agreement, an appropriate U.S.
Internal Revenue Service form regarding exemption from or reduced rate of
U.S. federal withholding tax on interest payments under the Loan Documents,
unless delivery of such form is not authorized by law.
8. REPRESENTATIONS AND WARRANTIES.
(a) The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any lien, security interest or other
adverse claim; (ii) it is duly organized and existing and it has the full
power and authority to take, and has taken, all action necessary to execute
and deliver this Agreement and any other documents required or permitted to
be executed or delivered by it in connection with this Agreement and to
fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any
already given or obtained) for its due execution, and performance of this
Agreement, and apart from any requirements in the Loan Documents or Co-Lender
Agreement, no further action by, or notice to or filing with any Person is
required of it for such execution, delivery or performance; and (iv) this
Agreement has been fully executed and delivered by it and constitutes the
legal, valid and binding obligation of the Assignor, enforceable against the
Assignor in accordance with the terms hereof, except as to enforcement,
bankruptcy, insolvency, moratorium, and other laws of general application
relating to creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in connection with the Loan Documents or Co-Lender
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents, Co-Lender Agreement or any other
instrument or document furnished pursuant thereto. The Assignor makes no
representation or warranty in connection with, and assumes no responsibility
with respect to, the solvency, financial condition or statements of the
-3-
<PAGE>
Borrower or the performance or observance by the Borrower of any of its
respective obligations under the Loan Documents or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and has full power and authority to take, and has
taken, all action necessary to execute and deliver this Agreement and any
other documents required or permitted to be executed or delivered by it in
connection with this Agreement, and to fulfill its obligations hereunder;
(ii) no notices to, or consents, authorizations or approvals of, any Person
are required (other than any already given or obtained) for its due
execution, delivery and performance of this Agreement, and apart from any
requirements in the Loan Documents or Co-Lender Agreement, no further action
by or notice to or filing with any Person is required of it for such
execution, delivery or performance; (iii) this Agreement has been duly
executed and delivered by it and constitutes the legal, valid and binding
obligations of the Assignee, enforceable against the Assignee in accordance
with the terms hereof, except as to enforcement, bankruptcy, insolvency,
moratorium, and other laws of general application relating to creditors'
rights and to general equitable principles; and (iv) it is eligible under the
Loan Documents to be an assignee of the Loan.
9. FURTHER ASSURANCES.
The Assignor and the Assignee each hereby agrees to execute and
deliver such other instruments and take such other action as either party may
reasonably request in connection with the transactions contemplated by this
Agreement, including the delivery of any notices or other documents to the
Borrower, the Agent which may be required in connection with this assignment
and assumption.
10. INDEMNITY.
The Assignee agrees to indemnify and hold harmless the Assignor
against any and all losses, costs, expenses (including reasonable attorneys'
fees and the cost of any services of in-house legal counsel) and liabilities
incurred by the Assignor in connection with or arising from the
non-performance by the Assignee of any obligation assumed by the Assignee
under this Agreement.
11. MISCELLANEOUS.
(a) Any amendment or waiver of any provision of this Agreement
shall be in writing and signed by the parties hereto. No failure or delay by
either party hereto in exercising any right, power or privilege hereunder
shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Agreement shall be without prejudice with respect to any
other or further breach hereof.
(b) All payments made hereunder shall be without any set-off or
counterclaim.
(c) All communications among the parties or notices in connection
herewith shall be in accordance with the Loan Documents and Co-Lender
Agreement using for the Assignor and the Assignee their respective addresses
set forth on the signature pages hereof. The Assignee specifies as its
Lending Office the office set forth beneath its name on the signature pages
hereof.
(d) The Assignor and the Assignee each shall pay its own costs and
expenses incurred in connection with the negotiation, preparation and execution
of this Agreement.
-4-
<PAGE>
(e) This Agreement shall be binding upon and inure to the benefit
of the Assignor and the Assignee and their respective successors and assigns,
subject however to the provisions of the Loan Documents and the Co-Lender
Agreement.
(f) This Agreement may be executed in counterparts all of which
taken together shall be deemed to constitute one and the same instrument.
(g) This Agreement shall be governed by the laws of the State of
California.
(h) The provisions of the Loan Documents regarding arbitration
shall apply to any controversies or claims between Assignor and Assignee. The
Assignor and the Assignee each irrevocably submits to the non-exclusive
jurisdiction of any California State or Federal court sitting in the cities
of San Francisco or Los Angeles over any suit, action or proceeding arising
out of this Agreement and irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such California
State or Federal court. Each party to this Agreement hereby irrevocably
waives any defense of venue or inconvenient forum to the maintenance of such
action or proceeding.
(i) This Agreement integrates all the terms and conditions hereof,
constitutes the entire agreement and understanding between the parties hereto
and supersedes any and all prior agreements and understandings related to the
subject matter hereof. In the event of any conflict between the terms and
conditions of this Agreement and any other document this Agreement shall
prevail. In the event of any inconsistency between the provisions of this
Agreement and Schedule I hereto, this Agreement shall control. Headings are
for reference only and are to be ignored in interpreting this Agreement. The
illegality or unenforceability of any provision of this Agreement shall not
impair the legality or enforceability of the remaining provisions of this
Agreement.
IN WITNESS WHEREOF, the Assignor and the Assignee have executed this
Agreement as of the date first above written.
[NAME]
__________________________________
(Assignor)
By:
______________________________
Title:
___________________________
[NAME]
__________________________________
(Assignee)
By:
______________________________
Title:
___________________________
Assignee's
Lending Office:
__________________________________
__________________________________
__________________________________
__________________________________
-5-
<PAGE>
SCHEDULE I
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
1. Borrower: BRE PROPERTIES, INC.
2. Date of Loan Agreement: ___________, 1996
3. Assignor:
_______________________________________________
4. Assignee:
_______________________________________________
5. Date of Assignment and Assumption Agreement:
6. Effective Date:
7. Assignee's Pro Rata Share: %
__________
8. Assigned Amount: $
__________
9. Fees: Payment by Borrower [Part of fee payable by
to Assignee Assignee to Assignor]
___________________ _______________________
(i) Fee $ $ [or %]
_________________ ______ _______________________
(ii) Fee $ $ [or %]
_________________ ______ _______________________
10. Fees: Payment by Borrower [Part of Interest
to Assignee Payable By Assignee to
___________________ Assignor
________________________
(i) Reference based-
Rate Loan $ $ [or %]
______ _______________________
(ii) LIBOR Alternative $ $ [or %]
______ _______________________
11. Payment Instructions:
Assignee:
__________________________
__________________________
Assignor:
__________________________
__________________________
12. All written and telephone notices to Assignee in connection with the Loan
be made shall as follows:
__________________________
__________________________
__________________________
Attn:
__________________________
Tele:
__________________________
Fax:
__________________________
13. Other Information:
<PAGE>
Exhibit 10.27
SECOND MODIFICATION AGREEMENT
REGARDING UNSECURED LINE OF CREDIT
TO
BRE PROPERTIES, INC.
MADE BY VARIOUS
FINANCIAL INSTITUTIONS
WITH
BANK OF AMERICA NT & SA
AS AGENT
<PAGE>
TABLE OF CONTENTS
PAGE
CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. LINE OF CREDIT AMOUNT AND TERMS . . . . . . . . . . . . . . . . . . . 5
1.1 Line of Credit Amount. . . . . . . . . . . . . . . . . . . . . . 5
1.2 Availability Period. . . . . . . . . . . . . . . . . . . . . . . 6
1.3 Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. FEES, EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Expenses and Costs . . . . . . . . . . . . . . . . . . . . . . . 7
3. DISBURSEMENTS, PAYMENTS AND COSTS . . . . . . . . . . . . . . . . . . 7
3.1 Requests for Credit. . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Disbursement and Payment Record. . . . . . . . . . . . . . . . . 8
3.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Banking Days . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Governing Documents; Good Standing Certificates. . . . . . . . . 9
4.3 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Payment of Fees. . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Other Items. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 9
5.1 Organization of the Borrower; Good Standing. . . . . . . . . . . 9
5.2 Authorization; Enforceable Agreement . . . . . . . . . . . . . . 9
5.3 Financial Information. . . . . . . . . . . . . . . . . . . . . . 9
5.4 Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.5 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . .10
5.6 Permits, Franchises. . . . . . . . . . . . . . . . . . . . . . .11
5.7 Income Tax Returns . . . . . . . . . . . . . . . . . . . . . . .11
5.8 ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . .11
5.9 Other Obligations. . . . . . . . . . . . . . . . . . . . . . . .11
5.10 Event of Default . . . . . . . . . . . . . . . . . . . . . . . .11
5.11 Status as a REIT . . . . . . . . . . . . . . . . . . . . . . . .12
6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
6.1 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . .12
6.2 Financial Information. . . . . . . . . . . . . . . . . . . . . .12
6.3 Other Information. . . . . . . . . . . . . . . . . . . . . . . .13
6.4 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . .14
6.5 Taxes and Other Liabilities. . . . . . . . . . . . . . . . . . .16
6.6 Notices to the Bank. . . . . . . . . . . . . . . . . . . . . . .16
6.7 Audits; Books and Records. . . . . . . . . . . . . . . . . . . .16
6.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . .17
6.9 Preservation of Rights . . . . . . . . . . . . . . . . . . . . .17
- i -
<PAGE>
TABLE OF CONTENTS
(Continued) PAGE
6.10 Maintenance of Properties. . . . . . . . . . . . . . . . . . . .17
6.11 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.12 ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.13 Additional Negative Covenants. . . . . . . . . . . . . . . . . .17
6.14 Continued Status as a REIT; Prohibited Transactions. . . . . . .18
6.15 NYSE Listed Company. . . . . . . . . . . . . . . . . . . . . . .18
6.16 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . .18
6.17 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . .19
7. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
8. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.1 Failure to Pay . . . . . . . . . . . . . . . . . . . . . . . . .19
8.2 False Information. . . . . . . . . . . . . . . . . . . . . . . .19
8.3 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.4 Receivers. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.5 Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.6 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
8.7 ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . .20
8.8 Government Action. . . . . . . . . . . . . . . . . . . . . . . .20
8.9 Material Adverse Change. . . . . . . . . . . . . . . . . . . . .20
8.10 Other Breach Under This Agreement or Other Loan Documents. . . .20
8.11 Cross-Default. . . . . . . . . . . . . . . . . . . . . . . . . .20
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS . . . . . . . . . . . . . . .21
9.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
9.2 California Law . . . . . . . . . . . . . . . . . . . . . . . . .21
9.3 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . .21
9.4 Presentment, Demands and Notice. . . . . . . . . . . . . . . . .22
9.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .22
9.6 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . .22
9.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
9.8 Successors and Assigns . . . . . . . . . . . . . . . . . . . . .23
9.9 No Third Parties Benefited . . . . . . . . . . . . . . . . . . .23
9.10 Integration; Relation to Any Loan Commitment; Headings . . . . .23
9.11 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . .23
9.12 Severability; Waivers; Amendments. . . . . . . . . . . . . . . .24
9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .25
EXHIBIT A - BORROWING NOTICE . . . . . . . . . . . . . . . . . . . . . . A-1
REQUESTED ADVANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
- ii -
<PAGE>
SECOND MODIFICATION AGREEMENT
This Second Modification Agreement ("Agreement") is made as of October
22, 1996, by and between BRE PROPERTIES, INC., a Maryland corporation
("Borrower"); BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association ("Agent"); and the several financial
institutions a party to this Agreement (collectively, the "Banks";
individually a "Bank").
FACTUAL BACKGROUND
A. Bank of America National Trust and Savings Association ("BofA"),
Manufacturers Bank ("Manufacturers"), and The Industrial Bank of Japan,
Limited, Los Angeles Agency ("IBJ") have agreed to make a loan (the "Loan")
to the Borrower in accordance with an Unsecured Line of Credit Loan Agreement
dated April 4, 1996 (as amended, the "Loan Agreement"). The Loan Agreement
has previously been amended by the Modification Agreement to Syndicate Loan,
dated as of April 4, 1996 (the "First Modification"), and BofA has previously
assigned a portion of its interest under the Loan to IBJ pursuant to an
Assignment and Assumption Agreement dated as of June 19, 1996 (the "IBJ
Assignment"). Capitalized terms used herein without definition have the
meanings given to them in the Loan Agreement. The Loan is evidenced by a
Note dated April 4, 1996 in the stated principal amount of $70,000,000.
B. Borrower has requested that the Maximum Loan Amount under the
Commitment be increased to $120,000,000. In connection with such increase,
Commerzbank AG, Los Angeles Branch ("Commerzbank"), desires to become a party
to the Loan Agreement and to participate in the Commitment in an amount equal
to $25,000,000, IBJ desires to increase its share of the Commitment from
$5,000,000 to $25,000,000 and BofA desires to increase its share of the
Commitment from $50,000,000 to $55,000,000.
C. The Borrower, Agent and the Banks wish to modify the Loan Documents
to increase the Commitment as referred to above, and to make certain related
modifications, all as set forth herein.
AGREEMENT
Therefore, the Borrower, the Banks and Agent agree as follows:
1. MODIFICATION OF LOAN DOCUMENTS. The Loan Documents are hereby
amended as follows, subject to the terms and conditions hereof:
(a) As of the Effective Date (as defined below), Section 1.1(a) of
the Loan Agreement is hereby amended by deleting the reference therein to
"Seventy Million Dollars ($70,000,000)" and inserting in lieu thereof "One
Hundred Twenty Million Dollars ($120,000,000)". All references in the Loan
Documents to the Commitment and the Maximum Loan Amount shall be understood
to mean $120,000,000.
(b) Concurrent with the execution with this Agreement, the
Borrower shall execute and deliver to Agent the Amended and Restated
Promissory Note in the form attached hereto as EXHIBIT A. All references to
the "Note" in the Loan Documents shall mean and refer to said Amended and
Restated Promissory Note. Promptly following the Effective Date, Agent shall
mark the Prior Note (as defined in the Amended and Restated Promissory Note)
"superseded" and return same to the Borrower.
(c) Pursuant to Section 2.1(a) of the Loan Agreement, the Borrower
shall pay to Agent, on or before the Effective Date, a fee equal to 0.25% of the
$50,000,000 increase in the Commitment agreed to under this Agreement, prorated
based upon the number of days remaining in the
<PAGE>
Availability Period, as measured from and including the Effective Date, to
but not including the Maturity Date. Portions of said additional commitment
fee shall be paid by Agent to IBJ and Commerzbank in accordance with separate
letter understandings between Agent and each such Bank.
(d) Section 6.4(h) of the Loan Agreement is hereby amended by
deleting the reference therein to "One Hundred Million Dollars
($100,000,000)" and inserting in lieu thereof "One Hundred Fifty Million
Dollars ($150,000,000)".
(e) Section 26 of the First Modification is hereby amended to change
the address of BofA as Agent to the following:
Bank of America National Trust and Savings Association
Commercial Real Estate Services/National Accounts 9105
50 California Street, 11th Floor
San Francisco, CA 94111
Attention: Janice L. Sears
Phone: (415) 445-4448
Fax: (415) 445-4154
2. THE CREDIT.
(a) The Borrower and each Bank acknowledge that, as of the
Effective Date, the Loan, the principal amount outstanding thereunder, and
each Bank's Pro Rata Share are:
(i) The Loan: $120,000,000
(ii) Total Current Outstanding $ 49,000,000
Principal
(as of October 24, 1996):
(iii) Each Bank's Pro Rata Share of the
Loan:
BofA: 45.8333333334%
Manufacturers: 12.5000000000%
IBJ: 20.8333333333%
Commerzbank: 20.8333333333%
--------------
100.0000000000%
(b) Subject to the terms and conditions of the Loan Documents, each
Bank agrees to fund its Pro Rata Share of each Advance of Loan proceeds from
time to time until the Maturity Date of the Loan. Such Loan proceeds shall
be delivered to the Borrower in accordance with provisions of the Loan
Documents.
(c) BofA and IBJ agree that the IBJ Assignment (which is not a Loan
Document) shall be modified to conform to the terms of this Agreement with
respect to the amended Commitment and Pro Rata Shares.
3. ADDITION OF COMMERZBANK.
(a) As of the Effective Date, Commerzbank shall be a party to the
Loan Documents and the Co-Lender Agreement and, accordingly, shall succeed to
all of the rights and be obligated to perform all of the obligations of a
Bank thereunder, with an interest in the Loan equal to its Pro Rata Share as
set forth above. Without limiting the foregoing, Commerzbank hereby appoints
and authorizes Agent to take such action as Agent on its behalf and to
exercise such powers as are delegated to Agent by the Banks pursuant to the
terms of the Loan Documents and Co-Lender Agreement.
(b) Commerzbank shall furnish to Agent and the Borrower, concurrently
with the execution of this Agreement, an appropriate U.S. Internal Revenue
Service form regarding exemption from or reduced rate of U.S.
- 2 -
<PAGE>
federal withholding tax on interest payments and fees under the Loan
Documents.
- 3 -
<PAGE>
(c) Commerzbank acknowledges that neither Agent nor any Bank (i)
makes any representation or warranty or assumes any responsibility with
respect to any statements, warranties or representations made in connection
with the Loan Documents or Co-Lender Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents, Co-Lender Agreement or any other instrument or document furnished
pursuant thereto, or (ii) makes any representation or warranty in connection
with, or assumes any responsibility with respect to, the solvency, financial
condition or statements of the Borrower or the performance or observance by
the Borrower of any of its respective obligations under the Loan Documents or
any other instrument or document furnished in connection therewith.
Commerzbank acknowledges that it has received a copy of the Loan Documents,
the Co-Lender Agreement and such other documents and information as it has
deemed appropriate and requested in order to make its own credit and legal
analysis and decision to enter into this Agreement, and will continue to make
its own credit and legal decisions in taking or not taking action under the
Loan Documents independently based on such documents and information as it
shall deem appropriate at the time and without reliance upon Agent or any
other Bank.
(d) Commerzbank hereby specifies the following as its Lending
Office and address for purposes of all communications and notices under the
Loan Documents and Co-Lender Agreement:
Commerzbank AG, Los Angeles Branch
660 S. Figueroa, Suite 1450
Los Angeles, CA 90017
Attn: Werner Schmidbauer
Telephone: (213) 623-8223
Facsimile: (213) 623-0039
EXHIBIT B attached sets forth certain additional addresses and payment
instructions of Commerzbank for use by the Agent.
4. EFFECTIVE DATE; ALLOCATION OF PAYMENTS.
(a) The effective date ("Effective Date") for this Agreement shall be
the date that the following conditions precedent have been satisfied:
(i) This Agreement and each other document or instrument
referred to herein as being executed in connection herewith shall have been
fully executed and delivered by all parties thereto;
(ii) The Borrower shall have paid to Agent the additional
commitment fee referred to in Section 1(c) above;
(iii) The Borrower shall have provided to Agent an authorizing
resolution of the Board of Directors of Borrower (as certified by the
Secretary of Borrower) approving the execution, delivery and performance of
this Agreement by the Borrower; and
(iv) IBJ and Commerzbank shall have funded to Agent, in the
manner set forth in the Loan Documents, and the Agent shall have allocated
and paid such funds to BofA and Manufacturers, in each case in the amounts
specified to the Banks by the Agent, as necessary in order to balance
outstanding advances under the Loan to the Pro Rata Shares of the Banks as
set in Section 2(a) above.
(b) Upon payment by the Borrower, Agent shall allocate interest and
the unused commitment fee (i) for the period to but not including the Effective
Date, to those Banks (and in accordance with their respective Pro Rata Shares)
in effect under the Loan Documents prior to the effectiveness of this Agreement,
and (ii) from and including the Effective Date, to the Banks in accordance with
their Pro Rata Shares as set forth in this Agreement.
- 4 -
<PAGE>
5. MISCELLANEOUS.
(a) The Borrower shall reimburse to Agent all of its costs and
expenses (including legal fees) incurred in connection with the negotiation,
preparation and execution of this Agreement and all related documents.
(b) This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns, subject however
to the provisions of the Loan Documents and the Co-Lender Agreement.
(c) This Agreement may be executed in counterparts all of which
taken together shall be deemed to constitute one and the same instrument.
(d) This Agreement shall be governed by the laws of the State of
California.
(e) This Agreement (and those documents and instruments expressly
referred to herein) integrates all the terms and conditions hereof,
constitutes the entire agreement and understanding between the parties hereto
and supersedes any and all prior agreements and understandings related to the
subject matter hereof. In the event of any conflict between the terms and
conditions of this Agreement and any other document, this Agreement shall
prevail.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement of the date
set forth above.
BORROWER: BRE PROPERTIES, INC.
By:
---------------------------
Name: Frank C. McDowell
Title: President & Chief Executive Officer
By:
---------------------------
Name: LeRoy E. Carlson
Title: Secretary & Chief Financial Officer
BANKS: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
---------------------------
Name:
------------------------
Title:
------------------------
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:
---------------------------
Name:
------------------------
Title:
------------------------
MANUFACTURERS BANK
By:
---------------------------
Name:
------------------------
Title:
------------------------
By:
---------------------------
Name:
------------------------
Title:
------------------------
COMMERZBANK AG, LOS ANGELES BRANCH
By:
---------------------------
Name:
------------------------
Title:
------------------------
AGENT: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
---------------------------
Name:
------------------------
Title:
------------------------
- 6 -
<PAGE>
EXHIBIT B
A. COMMERZBANK ADMINISTRATIVE CONTACTS - Borrowings, Paydown, Interest, Fees,
etc.:
Christina Humphrey, Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281-1050
Telephone: (212) 266-7315
Facsimile: (212) 266-7593
B. COMMERZBANK PAYMENT INSTRUCTIONS:
Name of Bank where funds are to be transferred:
Commerzbank AG, New York Branch
Routing Transit/ABA number of Bank were funds are to be transferred:
026008044
Name of Account: Commerzbank AG, Los Angeles Branch
Account Number: 150/940123300USD
Additional Information: Ref: BRE Properties, Inc.
Acct. No.: 123/2920056/05USD
<PAGE>
Exhibit 10.28
UNSECURED LINE OF CREDIT LOAN AGREEMENT
By and Between
BRE PROPERTIES, INC.,
as Borrower,
and
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Lender
Dated as of February 11, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. LINE OF CREDIT AMOUNT AND TERMS . . . . . . . . . . . . . . . . . . . . 5
1.1 LINE OF CREDIT AMOUNT. . . . . . . . . . . . . . . . . . . . . . . 5
1.2 AVAILABILITY PERIOD; MANDATORY PREPAYMENT. . . . . . . . . . . . . 6
1.3 INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 LOAN DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. FEES, EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 EXPENSES AND COSTS . . . . . . . . . . . . . . . . . . . . . . . . 7
3. DISBURSEMENTS, PAYMENTS AND COSTS . . . . . . . . . . . . . . . . . . . 8
3.1 REQUESTS FOR CREDIT. . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 DISBURSEMENT AND PAYMENT RECORD. . . . . . . . . . . . . . . . . . 8
3.3 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 BANKING DAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 AUTHORIZATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 GOVERNING DOCUMENTS; GOOD STANDING CERTIFICATES. . . . . . . . . . 9
4.3 LOAN DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 PAYMENT OF FEES. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 OTHER ITEMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 9
5.1 ORGANIZATION OF THE BORROWER; GOOD STANDING. . . . . . . . . . . . 9
5.2 AUTHORIZATION; ENFORCEABLE AGREEMENT . . . . . . . . . . . . . . . 10
5.3 FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 10
5.4 LAWSUITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 TITLE TO ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 PERMITS, FRANCHISES. . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 INCOME TAX RETURNS . . . . . . . . . . . . . . . . . . . . . . . . 11
5.8 ERISA PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.9 OTHER OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.10 EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.11 STATUS AS A REIT . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 12
6.3 OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 14
6.5 TAXES AND OTHER LIABILITIES. . . . . . . . . . . . . . . . . . . . 16
6.6 NOTICES TO THE BANK. . . . . . . . . . . . . . . . . . . . . . . . 16
6.7 AUDITS; BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . 17
6.8 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . 17
6.9 PRESERVATION OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . 17
6.10 MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . . . . . . . 17
6.11 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.12 ERISA PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A-i
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
PAGE
----
6.13 ADDITIONAL NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . 18
6.14 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS. . . . . . . . 18
6.15 NYSE LISTED COMPANY. . . . . . . . . . . . . . . . . . . . . . . . 18
6.16 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . 19
6.17 COOPERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 FAILURE TO PAY . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 FALSE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 19
8.3 BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 RECEIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.5 LAWSUITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.6 JUDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.7 ERISA PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.8 GOVERNMENT ACTION. . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9 MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 20
8.10 OTHER BREACH UNDER THIS AGREEMENT OR OTHER LOAN DOCUMENTS. . . . . 20
8.11 CROSS-DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS . . . . . . . . . . . . . . . . 21
9.1 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2 CALIFORNIA LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.3 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4 PRESENTMENT, DEMANDS AND NOTICE. . . . . . . . . . . . . . . . . . 22
9.5 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.6 ATTORNEYS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.7 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.8 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . 23
9.9 NO THIRD PARTIES BENEFITED . . . . . . . . . . . . . . . . . . . . 23
9.10 INTEGRATION; RELATION TO ANY LOAN COMMITMENT; HEADINGS . . . . . . 23
9.11 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.12 SEVERABILITY; WAIVERS; AMENDMENTS. . . . . . . . . . . . . . . . . 25
9.13 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT A - Borrowing Notice
A-ii
<PAGE>
LINE OF CREDIT LOAN AGREEMENT
(Unsecured)
This line of credit loan agreement (the "Agreement"), dated as of
February 11, 1997, is between BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Bank") and BRE PROPERTIES, INC., a Maryland corporation (the
"Borrower").
The Bank has agreed to provide this line of credit to the Borrower on
the terms and conditions set forth herein. This line of credit is revolving and
is unsecured.
CERTAIN DEFINITIONS
The following terms used in this Agreement shall have the following
meanings (such meanings to be applicable, except to the extent otherwise
indicated in a definition of a particular term, both to the singular and the
plural forms of the terms defined; other terms are defined elsewhere in the
Agreement):
"ACCOMMODATION OBLIGATIONS", as applied to any Person, means any
Indebtedness or other Contractual Obligation or liability, contingent or
otherwise, of another Person in respect of which that Person is liable,
including, without limitation, any such indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including in respect of any partnership in which
that Person is a general partner, Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase or otherwise
acquire such indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received.
"AFFILIATE" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
-1-
<PAGE>
"APPLICABLE MARGIN" means, as of any date of determination, the
Applicable Margin set forth below opposite the then Rating (as hereinbelow
determined) of the Borrower:
Rating
(S&P/MOODY'S) APPLICABLE MARGIN
------------- -----------------
A+/A1 or better 0.75%
A/A2 0.95%
A-/A3 1.00%
BBB+/Baal 1.125%
BBB or BBB-/Baa2 or Baa3 1.50%
Below BBB-/below Baa3 or unrated 1.75%
As used herein, the term "Rating" shall mean the rating of the Borrower's senior
long-term unsecured debt obligations, as determined by one or more Rating
Agencies. If two Ratings are obtained by the Borrower, then the lower Rating
shall control for purposes of determining the Applicable Margin; provided,
however, that if the difference between the two Ratings is greater than two
levels, then the Bank shall reasonably determine the average Applicable Margin
between such two Ratings. If three or more Ratings are obtained by the
Borrower, then the Bank shall reasonably determine the average Applicable Margin
based upon the two highest of such Ratings. If the Borrower shall obtain a
Rating from a Rating Agency other than Standard & Poor's Corporation or Moody's
Investors Services, Inc., then the Bank shall reasonably determine the rating-
level equivalents of such other Rating Agency for purposes of determining the
Applicable Margin in accordance with the matrix above.
"CLOSING DATE" means the date on or before February 14, 1997, on which
all conditions precedent set forth in Section 4 are satisfied or waived by the
Bank.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any
provision of any securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject.
"CPA" means Ernst & Young, LLP, any other "big six" accounting firm or
another firm of certified public accountants of national standing selected by
the Borrower and acceptable to the Bank.
"CURRENT VALUE METHOD" means, with respect to each Real Property as of
any date, capitalization of the Net Operating Income for such Real Property for
the four (4) most recent calendar quarters (or, if the Borrower has owned a Real
Property for less than such time period, then the annualized Net Operating
Income for such Real Property based on the period of ownership by the Borrower),
as certified by the Borrower to the Bank, at an
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annual rate equal to (i) 9.5% for each Real Property improved with an
apartment project, (ii) 10.0% for each Real Property improved with a shopping
center or similar retail project, and (iii) 10.5% for each Real Property
improved with an industrial or other commercial project and for each Real
Property (including apartment and retail projects) which is subject to a land
lease by the Borrower. (All references in this Agreement to "apartment
project" shall be understood to mean multi-family residential properties held
for rental.)
"DEBT SERVICE" means, for the most recent three (3) month period,
Interest Expense for such period PLUS scheduled principal amortization (I.E.,
excluding any balloon payment due at maturity) for such period on all of the
Borrower's Indebtedness.
"EBITDA" means, for the most recent three (3) month period, the sum of
(i) the Borrower's net income as determined in accordance with GAAP, (ii)
depreciation and amortization expense and other non-cash items deducted on the
Borrower's financial statements in determining such net income, (iii) interest
expense (as it appears on the Borrower's income statement in accordance with
GAAP), and (iv) taxes imposed by any jurisdiction upon the Borrower's net
income, absent the effect of extraordinary items or asset sales or write-ups or
forgiveness of Indebtedness.
"FUNDS FROM OPERATIONS" means, for any period, the Borrower's net
income (computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
(Adjustments for unconsolidated partnerships and joint ventures shall be
calculated to reflect funds from operations on the same basis.)
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"INDEBTEDNESS", as applied to any Person (and without duplication),
means (i) all indebtedness, obligations or other liabilities for borrowed money,
(ii) all indebtedness, obligations or other liabilities evidenced by notes,
bonds, debentures or other similar instruments, (iii) all reimbursement
obligations and other liabilities with respect to letters of credit, banker's
acceptances, surety bonds or similar instruments issued for such Person's
account, (iv) all obligations to pay the deferred purchase price of property or
services, (v) all obligations in respect of capital leases, (vi) all
Accommodation
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Obligations, and (vii) all indebtedness, obligations or other liabilities of
such Person or others secured by a Lien on any asset of such Person, whether
or not such indebtedness, obligations or liabilities are assumed by, or are a
personal liability of, such Person (including, without limitation, the
principal amount of any assessment or similar indebtedness encumbering any
asset).
"INTEREST EXPENSE" means, for any period, total interest expense of
the Borrower, whether paid, accrued or capitalized (including the interest
component of capital leases).
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, including without limitation any conditional sale or other
title retention agreement, the interest of a lessor under a capital lease, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement or document having similar
effect (other than a financing statement filed by a "true" lessor pursuant to
Section 9408 of the Uniform Commercial Code) naming the owner of the asset to
which such Lien relates as debtor, under the Uniform Commercial Code or other
comparable law of any jurisdiction.
"MATERIAL ADVERSE EFFECT" means, with respect to a Person, a material
adverse effect upon the condition (financial or otherwise), operations,
performance or properties of such Person. The phrase "has a Material Adverse
Effect" or "will result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "has resulted, or will or
could reasonably be anticipated to result, in a Material Adverse Effect", and
the phrase "has no (or does not have a) Material Adverse Effect" or "will not
result in a Material Adverse Effect" or words substantially similar thereto
shall in all cases be intended to mean "does not or will not or could not
reasonably be anticipated to result in a Material Adverse Effect".
"NET OPERATING INCOME" means, at any time with respect to each Real
Property, the cash-basis net operating income of such Real Property determined
on a basis consistent with the operating statements provided by the Borrower to
the Bank prior to the Closing Date.
"PERSON" means any natural person, employee, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, or
any other non-governmental entity, or any governmental authority.
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"PRIOR LINE OF CREDIT" means the unsecured line of credit established
in favor of Borrower by Bank and other lenders pursuant to the Unsecured Line of
Credit Loan Agreement, dated as of April 4, 1996, as heretofore or hereafter
amended.
"PRUDENTIAL INDEBTEDNESS" means the unsecured Indebtedness of the
Borrower to The Prudential Life Insurance Company of America in the original
principal amount of $73,000,000.
"RATING AGENCY" means each of Standard & Poor's Corporation, Moody's
Investors Services, Inc., Duff & Phelps Credit Rating Co., Fitch Investors or
such other nationally recognized rating service or services as may be mutually
agreed upon by the Borrower and the Bank.
"REAL PROPERTY" means all improved, income-producing real property
owned in fee entirely by the Borrower or a consolidated Affiliate of the
Borrower.
"SECURED INDEBTEDNESS" means all the Borrower Indebtedness that is
secured by a Lien on any real property asset of the Borrower.
"TANGIBLE NET WORTH" means, at any time, shareholders' equity, as
shown on the Borrower's financial statements prepared in accordance with GAAP,
MINUS intangible assets.
"TOTAL ASSETS" means, at any time, the book value (net of any
applicable reserves) of all tangible assets of the Borrower as shown on its most
recent quarterly financial statements prepared in accordance with GAAP.
"TOTAL LIABILITIES" means (i) all Indebtedness of the Borrower,
whether or not such Indebtedness would be included as a liability on the balance
sheet of the Borrower in accordance with GAAP, PLUS (ii) all other liabilities
of every nature and kind of the Borrower that would be included as liabilities
on the balance sheet of the Borrower in accordance with GAAP.
"TOTAL REAL PROPERTY MARKET VALUE" means, at any time, the aggregate
value of all Real Properties as determined using the Current Value Method.
"UNSECURED INDEBTEDNESS" means Indebtedness of the Borrower not
secured by a Lien.
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1. LINE OF CREDIT AMOUNT AND TERMS
1.1 LINE OF CREDIT AMOUNT.
(a) During the Availability Period described below, the Bank will
provide a line of credit (also referred to as the "Loan") to the Borrower. The
amount of the line of credit is Fifty Million Dollars ($50,000,000) (the
"Commitment" or the "Maximum Loan Amount").
(b) This is a revolving line of credit. During the Availability
Period, the Borrower may from time to time repay principal amounts (subject to
the provisions of Exhibit B to the Note referred to below) and reborrow such
principal, subject to compliance with the terms and conditions of the Loan
Documents referenced in Section 1.4 below.
(c) Each advance must be for at least Five Hundred Thousand Dollars
($500,000), or for the amount of the remaining available line of credit if less.
(d) The Borrower agrees not to permit the outstanding principal
balance of the line of credit to exceed the Commitment.
1.2 AVAILABILITY PERIOD; MANDATORY PREPAYMENT.
(a) The line of credit is available (the "Availability Period")
between the date of this Agreement and the Maturity Date (as defined in the
Note), subject to the provisions of Section 3 below. If there is an Event of
Default, then, in addition to the Bank's other remedies, the Bank may terminate
the Availability Period and may require the Borrower to repay any amounts
outstanding under the line of credit immediately.
(b) The line of credit is intended to provide an additional funding
source to the Borrower pending the consummation of certain public debt and/or
equity offerings by the Borrower. Accordingly, upon the consummation of any
such offering, (i) the Commitment and Maximum Loan Amount hereunder shall be
permanently reduced by an amount equal to the net proceeds received by the
Borrower from each such offering, and (ii) to the extent that the then
outstanding principal under the line of credit shall exceed the Commitment or
Maximum Loan Amount as so reduced, the Borrower shall concurrently repay the
Loan by an amount sufficient to eliminate such excess outstanding principal
balance.
1.3 INTEREST RATE.
Borrower is executing a promissory note (the "Note") in the amount
of the Commitment evidencing the Loan and payable to the Bank. The Note sets
forth the interest rate and certain other terms and conditions applicable to
the Loan. (Based upon the Borrower's Rating of BBB+ by Duff & Phelps Credit
Rating Co.
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with respect to the Prudential Indebtedness, the Applicable Margin in effect
as of the date of this Agreement is 1.125%.)
1.4 LOAN DOCUMENTS.
The "Loan Documents" are the documents indicated below, each dated as
of the date of this Agreement unless indicated otherwise. A capitalized term
used in this Agreement but not defined herein has the meaning given to such term
in the other Loan Documents.
(a) This Agreement;
(b) The Note;
(c) The Modification Agreement to Syndicate Loan entered into
concurrently herewith;
(d) The supplemental agency fee and deposit letter executed by the
Borrower in favor of the Bank; and
(e) Corporate Resolution to borrow, certified by the Corporate
Secretary of the corporation. The Corporate Resolution shall also contain a
Certificate of Incumbency for the authorized signing officers, containing their
specimen signatures and certified by the Corporate Secretary.
2. FEES, EXPENSES
2.1 FEES.
(a) COMMITMENT FEE. The Borrower agrees to pay a fee equal to
0.0625% of the Commitment, payable in advance. This fee is due on the Closing
Date.
(b) UNUSED COMMITMENT FEE. The Borrower agrees to pay a fee on any
difference between the Commitment and the amount of credit it actually uses,
determined by the weighted average Loan balance maintained during the specified
period. The fee will be calculated at 0.125% per year. This fee is due
quarterly in arrears until the expiration of the Availability Period and on the
Maturity Date, and shall be due and payable not later than fifteen (15) days
following the rendering of an invoice therefor by the Bank.
2.2 EXPENSES AND COSTS.
(a) Borrower shall pay all costs and expenses incurred by the Bank in
connection with the making, disbursement and administration of the Loan, and in
the exercise of any of the Bank's rights or remedies under the Loan Documents.
Such costs and expenses include legal fees and expenses of the Bank's counsel
and any other reasonable fees and costs for services, regardless of whether such
services are furnished by the Bank's
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employees or by independent contractors. The Borrower acknowledges that the
other fees payable to the Bank do not include amounts payable by the Borrower
under this Section 2.2.
(b) The Borrower agrees to indemnify the Bank from and hold it
harmless against any transfer or documentary taxes, assessments or charges
imposed by any governmental authority by reason of the execution, delivery and
performance of the Loan Documents. The Borrower's obligations under this
Section 2.2 shall survive payment of the Loan and assignment of any rights
hereunder.
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 REQUESTS FOR CREDIT.
(a) Each request for an extension of credit shall be made in writing
in a manner acceptable to the Bank.
(b) BORROWING NOTICE. Each draw request shall be made upon the
irrevocable written notice of the Borrower (including notice via facsimile
confirmed by a mailed copy) pursuant to a Borrowing Notice in the form attached
hereto as EXHIBIT A. Each Borrowing Notice shall be submitted to and received
by the Bank prior to 9:00 a.m. (California time) at least two (2) Banking Days
prior to the specified borrowing date. The truth and accuracy of each statement
made in the Borrowing Notice shall be a condition precedent to the advance
requested thereunder.
3.2 DISBURSEMENT AND PAYMENT RECORD.
Each disbursement by the Bank and each payment by the Borrower will be
evidenced by records kept by the Bank. With respect to each request for
disbursement and each payment made by the Borrower, the Borrower shall specify
in writing to the Bank whether the disbursement is to be made under, or the
payment is to be applied to, the Prior Line of Credit or the line of credit
established under this Agreement.
3.3 AUTHORIZATION.
(a) The Bank may honor facsimile instructions for advances or
repayments (or for the designation of any optional interest rates that may be
permitted by the Note) given by any one of the individuals authorized to sign
loan documents on behalf of the Borrower, or any other individual designated by
any one of such authorized signers.
(b) Advances will be deposited in the Borrower's account number 00333
02 305 at the Bank, or such other of the Borrower's accounts with the Bank as
designated in writing by the Borrower.
(c) The Borrower indemnifies and releases the Bank
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(including its officers, employees, and agents) from all liability, loss, and
costs in connection with any act resulting from any instructions the Bank
reasonably believes are made by any individual authorized by the Borrower to
give such instructions. This indemnity and release shall survive this
Agreement's termination.
3.4 BANKING DAYS.
A Banking Day is defined in the Note. All payments and disbursements
which would be due on a day which is not a Banking Day will be due on the next
Banking Day. All payments received on a day which is not a Banking Day will be
applied to the Loan on the next Banking Day.
4. CONDITIONS
The Bank must receive the following items, in form and content acceptable
to the Bank, before it is required to extend any credit to the Borrower under
this Agreement:
4.1 AUTHORIZATIONS.
Evidence that the execution, delivery and performance by the Borrower
of the Loan Documents have been duly authorized.
4.2 GOVERNING DOCUMENTS; GOOD STANDING CERTIFICATES.
A copy of the Borrower's articles of incorporation and bylaws,
together with a certificate of good standing for the Borrower from the state
where formed and, at the Bank's request, from any other state in which the
Borrower is required to qualify to conduct its business.
4.3 LOAN DOCUMENTS.
Duly executed Loan Documents.
4.4 PAYMENT OF FEES.
Payment of all accrued and unpaid fees and expenses due the Bank as
provided for by the Loan Documents.
4.5 OTHER ITEMS.
Any other documents and other items the Bank may reasonably require as
conditions precedent to this Agreement or any advance.
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5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in
full, the Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a restatement of each such
representation and warranty.
5.1 ORGANIZATION OF THE BORROWER; GOOD STANDING.
The Borrower is duly formed and existing under the laws of the state
where organized. In each state in which the Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with any
fictitious name statute.
5.2 AUTHORIZATION; ENFORCEABLE AGREEMENT.
This Agreement and the other Loan Documents are within the Borrower's
powers, have been duly authorized and do not conflict with any of its
organizational documents. The Loan Documents do not conflict with any law,
agreement or obligation by which the Borrower is bound. This Agreement is a
legal, valid and binding agreement of the Borrower, enforceable against the
Borrower in accordance with its terms, and any instrument or document required
hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable.
5.3 FINANCIAL INFORMATION.
(a) All financial statements and data submitted in writing by the
Borrower to the Bank in connection with the request for the Loan are true and
correct and present fairly the financial condition of the Borrower as at the
dates thereof and the results of the operations of the Borrower for the periods
covered thereby, and have been prepared in accordance with GAAP on a basis
consistently applied. The Borrower has no knowledge of any liabilities,
contingent or otherwise, not reflected in said financial statements, and the
Borrower has not entered into any material commitments or material contracts
which are not reflected in said balance sheet which may have a Material Adverse
Effect on the Borrower. Since the date of the Borrower's most recent financial
statement provided to the Bank, there have been no changes in the assets or
liabilities or financial condition of the Borrower other than changes in the
ordinary course of business, and no such changes have been materially adverse
changes.
(b) All financial and other information that has been or will be
supplied to the Bank, including the financial statements of the Borrower:
(i) is sufficiently complete to give the Bank accurate knowledge
of the subject's financial condition;
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(ii) is in form and content as required by the Bank;
(iii) is in compliance with any government regulations that
apply; and
(iv) does not fail to state any material facts necessary to make
the information contained therein not misleading.
All such information (other than Funds From Operations) was and will be prepared
in accordance with GAAP, unless otherwise noted.
5.4 LAWSUITS.
There is no lawsuit, arbitration, claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the Loan, except as has been previously
disclosed in writing to the Bank.
5.5 TITLE TO ASSETS.
The Borrower has good and clear title to its assets, and the same are
not subject to any Liens other than those disclosed to the Bank in writing.
5.6 PERMITS, FRANCHISES.
The Borrower possesses all permits, franchises, contracts and licenses
required and all trademark rights, trade name rights, and fictitious name rights
necessary to enable it to conduct the business in which it is now engaged.
5.7 INCOME TAX RETURNS.
Borrower has filed all tax returns and reports required to be filed
and has paid all applicable federal, state and local franchise, income and
property taxes which are due and payable. The Borrower has no knowledge of any
pending assessments or adjustments of its income taxes or property taxes for any
year, except as have been disclosed in writing to the Bank. The Borrower is not
a "foreign person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
5.8 ERISA PLANS.
(a) As used herein, (i) "ERISA" means the Employee Retirement Income
Act of 1974, as amended; (ii) "PBGC" means the Pension Benefit Guaranty
Corporation established pursuant to ERISA; and (iii) "Plan" means any employee
pension benefit plan maintained or contributed to by the Borrower and insured by
the
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PBGC.
(b) The Borrower has fulfilled its obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with the presently applicable provisions
of ERISA and the Code, and has not incurred any liability with respect to any
Plan under Title IV of ERISA.
(c) No reportable event has occurred under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice. No action by the Borrower to
terminate or withdraw from any Plan has been taken and no notice of intent to
terminate a Plan has been filed under Section 4041 of ERISA. No proceeding has
been commenced with respect to a Plan under Section 4042 of ERISA, and no event
has occurred or condition exists which might constitute grounds for the
commencement of such a proceeding.
5.9 OTHER OBLIGATIONS.
The Borrower is not in default on any Indebtedness or Contractual
Obligation of the Borrower except as has been previously disclosed in writing to
the Bank.
5.10 EVENT OF DEFAULT.
There is no event which is, or with notice or lapse of time or both
would be, an Event of Default hereunder.
5.11 STATUS AS A REIT.
The Borrower (i) is a real estate investment trust as defined in
Section 856 of the Code (or any successor provision thereto), (ii) has not
revoked its election to be a real estate investment trust, (iii) has not engaged
in any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the
Code (or any successor provision thereto), and (iv) for its current "tax year"
(as defined in the Code) is and for all prior tax years subsequent to its
election to be a real estate investment trust has been entitled to a dividends
paid deduction which meets the requirements of Section 857 of the Code.
6. COVENANTS
The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
6.1 USE OF PROCEEDS.
Borrower shall use the proceeds of the Loan only for (a) the funding
of costs directly related to the acquisition of apartment projects, or (b) up to
a maximum of Fifteen Million Dollars ($15,000,000) at any one time outstanding,
general working capital purposes of the Borrower. In complying with the
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provisions of the foregoing clause (a), the Borrower shall not be required to
apply advances under the Loan in direct payment of acquisition costs, but
shall be permitted to make draws hereunder by way of reimbursement of
acquisition costs previously incurred and funded out of the Borrower's cash
reserves.
6.2 FINANCIAL INFORMATION.
The Borrower shall provide the following financial information and
statements and such additional information as requested by the Bank from time to
time:
(a) As soon as available but not later than ninety (90) days after
the Borrower's fiscal year end, the Borrower's annual financial statements
including balance sheet, income statement, statement of cash flows and statement
of shareholders' equity. These financial statements must be audited (with an
unqualified opinion) by the Borrower's CPA and certified by the Borrower's Chief
Financial Officer (or other officer acceptable to the Bank).
(b) As soon as available but not later than sixty (60) days after
each fiscal quarter end, the Borrower's Form 10-Q Quarterly Report, including
balance sheet, income statement, statement of cash flows and statement of
shareholders' equity. These financial statements must be certified by the
Borrower's Chief Financial Officer (or other officer acceptable to the Bank).
(c) As soon as available but not later than ninety (90) days after
the Borrower's fiscal year end, the Borrower's annual two-year financial
projection, including balance sheet and income statement, in a format and with
such detail as the Bank may require. These projections must be certified by the
Borrower's Chief Financial Officer (or other officer acceptable to the Bank).
(d) Copies of the Borrower's Form 10-K Annual Report, Form 8-K
Current Report and all other filings within fifteen (15) days after the date of
filing with the Securities and Exchange Commission, and copies of all press
releases made by the Borrower.
(e) As soon as available but not later than sixty (60) days after
each fiscal quarter end, the Borrower's quarterly internal management reports
(including (i) a schedule of all Debt Service for the prior quarter, (ii) a
schedule of Net Operating Income for each Real Property for the preceding four
(4) fiscal quarters, (iii) a schedule listing all Indebtedness secured by a Lien
on any real property assets of the Borrower, and (iv) a statement of the number
of apartment units (by project and location) under development (as defined in
Section 6.4(g)) at fiscal quarter-end. These reports must be certified by the
Borrower's Chief Financial Officer (or other officer acceptable
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to the Bank).
(f) At the time of the delivery of the financial statements provided
for in Sections 6.2(a) and (b), a certificate executed by the Chief Financial
Officer of the Borrower certifying compliance with all financial covenants
herein, including appropriate supporting schedules, and certifying that to the
best of the such officer's knowledge, no Event of Default has occurred and is
continuing or would result after notice or passage of time or both or, if any
Event of Default has occurred and is continuing or would result after notice or
passage of time or both, specifying the nature and extent thereof.
Notwithstanding anything to the contrary contained herein and without limiting
the Bank's other rights and remedies, if any certificate required under this
Section 6.2 is not provided on or before the due date therefor, the Borrower
shall be prohibited from any further borrowing under the line of credit until
such certificate is provided.
6.3 OTHER INFORMATION.
The Borrower shall provide the Bank:
(a) Promptly upon, and in any event within forty-eight (48) hours
after the Borrower first has actual knowledge of (i) its failing to continue to
qualify as a real estate investment trust as defined in Section 856 of the Code
(or any successor provision thereof), (ii) any act by the Borrower causing its
election to be taxed as a real estate investment trust to be terminated, (iii)
any act causing the Borrower to be subject to the taxes imposed by Section
857(b)(6) of the Code (or any successor provision thereto), or (iv) the Borrower
failing to be entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Code, a notice of any such occurrence or
circumstance.
(b) Such additional financial and other information as the Bank may
reasonably request from time to time.
6.4 FINANCIAL COVENANTS.
(a) MINIMUM NET WORTH. The Borrower will maintain a Tangible Net
Worth of not less than Four Hundred Million Dollars ($400,000,000).
(b) INDEBTEDNESS TO TOTAL ASSETS. The ratio of the Borrower's
Indebtedness to the sum of (i) Total Real Property Market Value PLUS (ii) Total
Assets (excluding Real Property) shall not exceed 0.55:1.
(c) SECURED INDEBTEDNESS TO TOTAL ASSETS. The ratio of Secured
Indebtedness to Total Assets shall not exceed 0.40:1.
(d) UNENCUMBERED REAL PROPERTY TO UNSECURED
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INDEBTEDNESS. The ratio of (i) Total Real Property Market Value of all Real
Properties not encumbered by any Lien to (ii) total commitments (disbursed
and undisbursed) under Unsecured Indebtedness shall not be less than 1.75:1.
(e) EBITDA TO DEBT SERVICE. The ratio of EBITDA to Debt Service
shall not be less than 1.80:1.
(f) DISTRIBUTIONS.
(i) Subject to subparagraph (ii) below, aggregate distributions
to shareholders of the Borrower shall not exceed the following, as reported
in accordance with GAAP (other than Funds From Operations):
(A) as of the end of any fiscal year, distributions shall
not exceed ninety-five percent (95%) of the Borrower's Funds From
Operations for such period; AND
(B) at the end of the first, second and third fiscal
quarters, distributions shall not exceed, more than once during any
fiscal year, one hundred percent (100%), but in no event in excess of
one hundred fifteen percent (115%), of the Borrower's Funds From
Operations for such period (calculated on a year-to-date basis).
For purposes of this Section 6.4(f), the term "distributions" shall mean
and include all dividends and other distributions to, and the repurchase of
shares from, the holder of any equity interests in the Borrower.
(ii) No distributions shall be made during the continuance of any
Event of Default arising out of the Borrower's failure to pay any monetary
obligation when due under any Loan Document (a "Monetary Default").
Aggregate distributions during the continuance of any Event of Default
other than a Monetary Default shall not exceed the lesser of (A) the
aggregate amount permitted to be made during the continuance thereof under
subparagraph (i) above, or (B) the minimum amount that the Borrower must
distribute to its shareholders in order to maintain compliance with Section
6.14 below.
(g) DEVELOPMENT. At no time shall the Borrower have under
development apartment units totaling in excess of twenty percent (20%) of the
total number of apartment units (excluding such units under development) then
owned by the Borrower. For purposes of the foregoing covenant, "development"
shall mean all units under construction, at or beyond the foundation stage,
within a particular apartment project, until the construction of all units (or
discreet phase(s) thereof, if applicable) shall have been completed,
certificates of occupancy shall have been
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issued with respect to such units, and such units shall be available for
immediate lease and occupancy in the normal course of business.
(h) MAXIMUM UNSECURED LINES OF CREDIT. The Borrower shall not permit
total commitments (disbursed and undisbursed) with respect to Unsecured
Indebtedness under lines of credit to exceed Two Hundred Million Dollars
($200,000,000). Further, Borrower shall not enter into any commitment for
Unsecured Indebtedness under lines of credit other than under this Agreement,
the Prior Line of Credit and the existing line of credit established by Sanwa
Bank (or other commercial bank on similar terms and conditions) in favor of the
Borrower in the maximum principal amount of Thirty Million Dollars
($30,000,000).
(i) UNSECURED INDEBTEDNESS. The Borrower shall not incur any
Unsecured Indebtedness other than (i) Indebtedness under revolving lines of
credit to the extent permitted under Section 6.4(h) above, and (ii) non-
revolving, non-amortizing Indebtedness with a maturity or call date not earlier
than five (5) years after the Maturity Date under the Note in effect at the time
such Indebtedness is incurred; provided, however, that the foregoing
amortization restriction shall not apply to amortization required, as of the
date of this Agreement, under the Prudential Indebtedness.
(j) CALCULATION. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each fiscal quarter, but
shall be satisfied at all times.
6.5 TAXES AND OTHER LIABILITIES.
The Borrower shall pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any Material Adverse Effect on the
Borrower or the loss of any right of redemption from any sale thereunder; and
(b) The Borrower shall have set aside on its books reserves
(segregated to the extent required by generally accepted accounting principles)
adequate with respect thereto.
6.6 NOTICES TO THE BANK.
The Borrower shall promptly notify the Bank in writing of:
(a) any Event of Default hereunder or any event which would become an
Event of Default hereunder upon the giving of
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notice, the lapse of time, or both;
(b) any single lawsuit or arbitration claiming over Two Hundred Fifty
Thousand Dollars ($250,000), and lawsuits or arbitrations collectively claiming
over One Million Dollars ($1,000,000), against the Borrower, provided that the
foregoing shall not apply to any litigation disclosed in financial statements of
the Borrower heretofore provided to the Bank as referred to in Section 5.3(a)
above;
(c) any significant dispute between the Borrower and any government
authority; and
(d) any event, circumstance or condition which may have a Material
Adverse Effect on the Borrower.
6.7 AUDITS; BOOKS AND RECORDS.
The Borrower shall maintain adequate books and records and allow the
Bank and its agents to inspect the Borrower's properties and examine, audit and
make copies of books and records at any reasonable time. If any of the
Borrower's properties, books or records are in the possession of a third party,
the Borrower hereby authorizes that third party to permit the Bank or its agents
to have access to perform inspections or audits and to respond to the Bank's
requests for information concerning such properties, books and records.
6.8 COMPLIANCE WITH LAWS.
The Borrower shall comply with the laws (including any fictitious name
statute), regulations, and orders of any government body with authority over the
Borrower's business.
6.9 PRESERVATION OF RIGHTS.
The Borrower shall maintain and preserve all rights, privileges and
franchises the Borrower now has.
6.10 MAINTENANCE OF PROPERTIES.
The Borrower shall make repairs, renewals or replacements to keep the
Borrower's properties in good working condition.
-17-
<PAGE>
6.11 INSURANCE.
The Borrower shall 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 Affiliates operate and maintain such other 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 and continuing evidence that such insurance remains in
force at applicable renewal dates.
6.12 ERISA PLANS.
The Borrower shall give prompt written notice to the Bank of the
occurrence of any reportable event under Section 4043(b) of ERISA for which the
PBGC requires 30 day notice; any action by the Borrower to terminate or
withdraw from a Plan or the filing of any notice of intent to terminate under
Section 4041 of ERISA; any notice of noncompliance made with respect to a Plan
under Section 4041(b) of ERISA; or the commencement of any proceeding with
respect to a Plan under Section 4042 of ERISA.
6.13 ADDITIONAL NEGATIVE COVENANTS.
The Borrower shall not, without the Bank's written consent:
(a) Merge or dissolve into, or consolidate with, any Person, except
mergers and consolidations (i) which result in the Borrower being the surviving
entity, (ii) which do not have a Material Adverse Effect on the Borrower, and
(iii) which do not result in the Borrower, following the consummation of such
merger or consolidation, being in default under any term or condition of this
Agreement. The Borrower shall not sell, lease, transfer, encumber or otherwise
dispose of all or any substantial part of its properties or assets, whether in a
single transaction or series of transactions, if such sale, lease, transfer,
encumbrance or other disposition would cause a Material Adverse Effect on the
Borrower;
(b) Except for any such amendment that is required under any
requirement of law imposed by any governmental authority or in order to maintain
compliance with Section 6.14, amend its articles of incorporation or by-laws
except (i) upon at least ten (10) Banking Days' prior written notice to the
Bank, AND (ii) if the Bank notifies the Borrower within such 10-day period that
such amendment is, in Bank's reasonable judgment, a material amendment, with the
prior written consent of the Bank;
(c) suspend its business activity for more than two
-18-
<PAGE>
days; or
(d) use any proceeds of the Loan, directly or indirectly, to purchase
or carry, or reduce or retire any loan incurred to purchase or carry any "Margin
Stock" (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock.
6.14 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS.
The Borrower (i) will continue to be a real estate investment trust as
defined in Section 856 of the Code (or any successor provision thereto), (ii)
will not revoke its election to be a real estate investment trust, (iii) will
not engage in any "prohibited transactions" as defined in Section 856(b)(6)(iii)
of the Code (or any successor provision thereto), and (iv) will continue to be
entitled to a dividend paid deduction meeting the requirements of Section 857 of
the Code.
6.15 NYSE LISTED COMPANY.
The common stock of the Borrower shall at all times be listed for
trading and be traded on the New York Stock Exchange.
6.16 CONDUCT OF BUSINESS.
The Borrower shall engage primarily in the business of direct
ownership, operation and acquisition or development for its own account of
apartment projects located in the Western United States (which shall be
understood to mean Colorado and States westward); provided, however, that the
foregoing shall not restrict either the Borrower's continued ownership and
operation of assets owned as of the Closing Date or other business activities of
the Borrower reasonably incidental to business activities otherwise permitted
under this Section 6.16.
6.17 COOPERATION.
The Borrower shall take any action reasonably requested by the Bank to
carry out the intent of the Loan Documents.
7. COLLATERAL
This line of credit is unsecured.
8. DEFAULT
If any of the following events occurs (an "Event of Default"), the Bank may
declare the Borrower in default, stop making any additional credit available to
the Borrower, and require the Borrower to repay its entire debt immediately and
without prior notice. However, if a bankruptcy petition is filed with respect
to the Borrower, the entire debt outstanding under
-19-
<PAGE>
this Agreement shall automatically be due immediately.
8.1 FAILURE TO PAY.
The Borrower fails to make a payment due under the Loan Documents
within fifteen (15) days after the date when due.
8.2 FALSE INFORMATION.
The Borrower has given the Bank false or misleading information or
representations.
8.3 BANKRUPTCY.
The Borrower files a bankruptcy petition or makes a general assignment
for the benefit of creditors, or a bankruptcy petition is filed against the
Borrower. The default will be deemed cured if any bankruptcy petition filed
against the Borrower is dismissed within a period of forty-five (45) days after
the filing; provided, however, that the Bank will not be obligated to extend any
additional credit to the Borrower during that period.
8.4 RECEIVERS.
A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
8.5 LAWSUITS.
Any lawsuit(s) or arbitration(s) are initiated against the Borrower
involving claims exceeding in the aggregate Fifty Million Dollars ($50,000,000)
or more at any one time in excess of any insurance coverage.
8.6 JUDGMENTS.
Any judgment or arbitration award is entered against the Borrower, or
the Borrower enters into any settlement agreement with respect to any
litigation, claim or arbitration, in an aggregate amount of Ten Million Dollars
($10,000,000) or more in excess of any insurance coverage.
8.7 ERISA PLANS.
The occurrence of any of the following event(s) with respect to the
Borrower, provided such event(s) could reasonably be expected, in the judgment
of the Bank, to subject the Borrower to any tax, penalty or liability (or any
combination of the foregoing) which in the aggregate could have a Material
Adverse Effect on the Borrower with respect to a Plan:
(a) A reportable event occurs with respect to a Plan which in the
reasonable judgment of the Bank may result in the
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<PAGE>
termination of such Plan for purposes of ERISA.
(b) Any Plan termination (or commencement of proceedings to terminate
a Plan) or the Borrower's full or partial withdrawal from a Plan.
8.8 GOVERNMENT ACTION.
Any government authority takes action that the Bank believes could
have a Material Adverse Effect on the Borrower.
8.9 MATERIAL ADVERSE CHANGE.
Any event, circumstance or condition shall occur which the Bank
believes could have a Material Adverse Effect on the Borrower.
8.10 OTHER BREACH UNDER THIS AGREEMENT OR OTHER LOAN DOCUMENTS.
The Borrower fails to meet the conditions of or fails to perform any
obligation under any term of this Agreement or any other Loan Document not
specifically referred to in this Article 8. If, in the Bank's opinion, the
breach is capable of being remedied, the breach will not be considered an Event
of Default under this Agreement for a period of thirty (30) days after the date
on which the Bank gives written notice of the breach to the Borrower; provided,
however, that the Bank will not be obligated to extend any additional credit to
the Borrower during that period.
8.11 CROSS-DEFAULT.
Any default occurs under any agreement in connection with any credit
the Borrower or any of the Borrower's related entities or Affiliates has
obtained from the Bank or any other creditor, or which the Borrower or any of
the Borrower's related entities or Affiliates has guaranteed, if the default
consists of a failure to make a payment when due or gives the creditor the right
to accelerate the obligation.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 REMEDIES.
If an Event of Default occurs under the Loan Documents, the Bank may
exercise any right or remedy which it has under any of the Loan Documents or
which is otherwise available at law or in equity. All of Bank's rights and
remedies shall be cumulative. At Bank's option, exercisable in its sole
discretion, all of the Borrower's obligations under the Loan Documents will
become immediately due and payable without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any
-21-
<PAGE>
kind.
9.2 CALIFORNIA LAW.
This Agreement is governed by California law but without regard to the
choice of law rules of California.
9.3 ARBITRATION.
(a) MANDATORY ARBITRATION. Except as provided below, any controversy
or claim between or among the parties, including those arising out of or
relating to this Agreement or the other Loan Documents and any claim based on or
arising from an alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.
(b) PROVISIONAL REMEDIES, SELF-HELP. No provision of this Agreement
shall limit the right of any party to this Agreement to exercise self-help
remedies such as setoff, or obtaining provisional or ancillary remedies from a
court of competent jurisdiction before, after, or during the pendency of any
arbitration or other proceeding. The exercise of a remedy does not waive the
right of either party to resort to arbitration.
9.4 PRESENTMENT, DEMANDS AND NOTICE.
The Bank shall be under no duty or obligation to make or give any
presentment, demands for performances, notices of nonperformance, protests,
notices of protest or notices of dishonor in connection with any obligation or
indebtedness under the Loan Documents.
9.5 INDEMNIFICATION.
The Borrower shall indemnify, save, and hold harmless the Bank and its
directors, officers, agents and employees (collectively the "Indemnitees") from
and against:
(a) Any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs,
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<PAGE>
charges, expenses or disbursements (including attorneys' fees) of any kind
with respect to the execution, delivery, enforcement, performance and
administration of this Agreement and the other Loan Documents, and the
transactions contemplated hereby, and with respect to any investigation,
litigation or proceeding related to this Agreement, the other Loan Documents,
the Loan or the use of the proceeds thereof, whether or not any Indemnitee is
a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Borrower shall have no obligation hereunder
to any Indemnitee with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnitee.
(b) Any and all writs, subpoenas, claims, demands, actions, or causes
of action that are served on or asserted against any Indemnitee (if directly or
indirectly related to a writ, subpoena, claim, demand, action, or cause of
action against the Borrower or any Affiliate of the Borrower); and any and all
liabilities, losses, costs, or expenses (including attorneys' fees) that any
Indemnitee suffers or incurs as a result of any of said matters.
The obligations of the Borrower under this Section 9.5 shall survive
payment of the Loan and assignment of any rights hereunder.
9.6 ATTORNEYS' FEES.
In the event of a lawsuit or arbitration proceeding, including any
tort proceeding, between or among the parties hereto, the prevailing party is
entitled to recover costs and reasonable attorneys' fees (including any
allocated costs of in-house counsel) incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator.
9.7 NOTICES.
All notices required under this Agreement shall be personally
delivered, sent by facsimile or sent by first class mail, postage prepaid, to
the addresses on the signature page of this Agreement, or to such other
addresses as the Bank and the Borrower may specify from time to time in writing.
9.8 SUCCESSORS AND ASSIGNS.
This Agreement is binding on the Borrower's and the Bank's successors
and assignees. The Borrower agrees that it may not assign this Agreement or the
other Loan Documents without the Bank's prior consent. The Bank may sell
participations in or assign this Loan, and may provide financial information
about the Borrower to actual or potential participants or assignees, without
notice to or consent of the Borrower. Concurrent with any assignment or
participation by the Bank, the Borrower will, at the Bank's request, deliver an
opinion of counsel in form and substance reasonably satisfactory to the Bank.
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<PAGE>
9.9 NO THIRD PARTIES BENEFITED.
This Agreement is made and entered into for the sole protection and
benefit of the Bank and the Borrower and their successors and assigns. No trust
fund is created by this Agreement and no other persons or entities shall have
any right of action under this Agreement or any right to the Loan funds.
9.10 INTEGRATION; RELATION TO ANY LOAN COMMITMENT; HEADINGS.
The Loan Documents (a) integrate all the terms and conditions in or
incidental to this Agreement, (b) supersede all oral negotiations and prior
writings with respect to their subject matter, including any loan commitment to
the Borrower, and (c) are intended by the parties as the final expression of the
agreement with respect to the terms and conditions set forth in those documents
and as the complete and exclusive statement of the terms agreed to by the
parties. No representation, understanding, promise or condition shall be
enforceable against any party unless it is contained in the Loan Documents. If
there is any conflict between the terms, conditions and provisions of this
Agreement and those of any other agreement or instrument, including any other
Loan Document, the terms, conditions and provisions of this Agreement shall
prevail. Headings and captions are for reference only and shall not affect the
interpretation or meaning of any provisions of this Agreement. The exhibit(s)
to this Agreement are hereby incorporated in this Agreement.
9.11 INTERPRETATION.
(a) Time is of the essence in the performance of this Agreement by
the Borrower.
(b) The word "include(s)" means "include(s), without limitation," and
the word "including" means "including but not limited to." No listing of
specific instances, items or matters in any way limits the scope or generality
of any language of this Agreement.
(c) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP. All references herein to the Borrower or any other
Person, in connection with any financial or related covenant, representation or
calculation, shall be understood to mean and refer to the Borrower and such
other Person on a consolidated basis in accordance with GAAP, unless otherwise
specifically provided and subject in all events to any adjustments herein set
forth.
(d) Any time the phrase "to the best of the Borrower's knowledge" or
a phrase similar thereto is used herein, it means: "to the actual knowledge of
the then officers of the Borrower,
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<PAGE>
after reasonable inquiry of those agents, employees or contractors of the
Borrower who could reasonably be anticipated to have knowledge with respect
to the subject matter or circumstances in question and after review of those
documents or instruments which could reasonably be anticipated to be relevant
to the subject matter or circumstances in question."
(e) In each case where the consent or approval of the Bank is
required, or Bank's non-obligatory action is requested by the Borrower, such
consent, approval or action shall be in the sole and absolute discretion of the
Bank, unless otherwise specifically indicated.
(f) Any time the word "or" is used herein, unless the context
otherwise clearly requires, it has the inclusive meaning represented by the
phrase "and/or". The words "hereof", "herein", "hereby", "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement. Article, section, subsection, clause, exhibit and
schedule references are to this Agreement unless otherwise specified. Any
reference in this Agreement to this Agreement or to any other Loan Document
includes any and all amendments, modifications, supplements, renewals or
restatements thereto or thereof, as applicable.
9.12 SEVERABILITY; WAIVERS; AMENDMENTS.
This Agreement may not be modified or amended except by a written
agreement signed by the parties. Any consent or waiver under this Agreement
must be in writing. If any part of this Agreement is not enforceable, the rest
of the Agreement may be enforced. If the Bank waives a default, it may enforce
a later default. No waiver shall be construed as a continuing waiver. No
waiver shall be implied from Bank's delay in exercising or failure to exercise
any right or remedy against the Borrower. Consent by the Bank to any act or
omission by the Borrower shall not be construed as a consent to any other or
subsequent act or omission or as a waiver of the requirement for Bank's consent
to be obtained in any future or other instance. The Bank retains all of its
rights and remedies, even if it makes an advance after a default.
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<PAGE>
9.13 COUNTERPARTS.
This Agreement may be executed in counterparts each of which, when
executed, shall be deemed an original, and all such counterparts shall
constitute one and the same agreement.
This Agreement is executed as of the date stated at the top of the first page.
Bank: Borrower:
BANK OF AMERICA NATIONAL BRE PROPERTIES, INC.
TRUST AND SAVINGS ASSOCIATION
By By
------------------------- ---------------------------
Donna L. Chiaro LeRoy E. Carlson
Vice President Secretary and Chief Financial Officer
By:
---------------------------
Name:
--------------------------
Title:
-------------------------
Address where notices to Address where notices to
the Bank are to be sent: the Borrower are to be sent:
Bank of America National Trust BRE Properties, Inc.
and Savings Association One Montgomery Street
Commercial Real Estate Telesis Tower, Suite 2500
Services Group/National San Francisco, CA 94104
Accounts Unit #9105 Attn: LeRoy E. Carlson
50 California Street Phone: (415) 445-6561
11th Floor Fax: (415) 445-6505
San Francisco, CA 94111
Attention: Donna L. Chiaro
Phone: (415) 445-4150
Fax: (415) 445-4154
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<PAGE>
EXHIBIT A
---------
BORROWING NOTICE
----------------
, 1997
-----------------
Bank of America National Trust
and Savings Association
Commercial Real Estate
Services Group Unit #9105
50 California Street
11th Floor
San Francisco, CA 94111
Attention: Neeta Seletsky
Re: Unsecured Line of Credit Loan Agreement dated as of February 11, 1997 (the
"Agreement") between BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
("Bank") and BRE PROPERTIES, INC. ("Borrower")
Dear :
--------------
Reference is made to the Agreement. Capitalized terms used in this
Borrowing Notice without definition have the meanings specified in the
Agreement.
Pursuant to the Agreement, notice is hereby given that the Borrower
desires that the Bank make the advance described in attached SCHEDULE 1 (the
"Advance"). The Borrower and the undersigned Officer of the Borrower hereby
certify that:
(1) COMMITMENT. The outstanding amount of the Line of Credit shall
not, after giving effect to the making of the Advance, exceed the Commitment;
(2) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Borrower contained in the Agreement and the other Loan
Documents are true and correct as of the date hereof and shall be true and
correct on the date of the Advance, both before and after giving effect to the
Advance; provided, however, that the representations and warranties of the
Borrower set forth in the Agreement regarding financial statements shall be
deemed to be made with respect to the financial statements most recently
delivered to the Bank pursuant to the Agreement;
(3) NO EVENT OF DEFAULT. No Event of Default exists as of the date
hereof or will result from the making of the Advance or would result after
notice or passage of time or both;
(4) USE OF PROCEEDS. The proceeds of the Advance will
A-1
<PAGE>
be used only as permitted by the Agreement; and
(5) NO MATERIAL ADVERSE EFFECT. No event, circumstance or condition,
which could have a Material Adverse Effect on the Borrower, has occurred since
the date of the Agreement.
Enclosed are the documents and information, if any, requested by the
Bank with respect to use of proceeds as a condition to this Advance.
BRE PROPERTIES, INC.
By:
---------------------------
Its:
--------------------------
A-2
<PAGE>
SCHEDULE 1
to Borrowing Notice
REQUESTED ADVANCE
1. AMOUNT OF REQUESTED ADVANCE: $
(must be $500,000 or more) --------------
2. PURPOSE OF ADVANCE *:
----------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3. REQUESTED DATE OF ADVANCE:
----------------------------------------------
- ------------------
* See Section 6.1; specify acquisition costs for designated apartment
project or general working capital purposes.
<PAGE>
EXHIBIT 10.29
MODIFICATION AGREEMENT
TO SYNDICATE LOAN
TO
BRE PROPERTIES, INC.
MADE BY VARIOUS
FINANCIAL INSTITUTIONS
WITH
BANK OF AMERICA NT & SA
AS AGENT
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. MODIFICATION OF LOAN DOCUMENTS . . . . . . . . . . . . . . . . . . 3
4. THE CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. APPOINTMENT AND AUTHORIZATION OF AGENT . . . . . . . . . . . . . . 4
6. LOAN ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. PROCEDURE FOR BORROWING. . . . . . . . . . . . . . . . . . . . . . 5
8. CONTRACT RATE ELECTIONS. . . . . . . . . . . . . . . . . . . . . . 5
9. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. PAYMENTS BY THE BORROWER . . . . . . . . . . . . . . . . . . . . . 6
11. PREPAYMENTS, TERMINATION OR REDUCTION OF LOAN. . . . . . . . . . . 6
12. USURY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
13. INCREASED COSTS AND REDUCTION OF RETURN. . . . . . . . . . . . . . 7
14. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 7
15. INDEMNIFICATION BY THE BORROWER. . . . . . . . . . . . . . . . . . 7
16. ASSIGNMENTS, PARTICIPATIONS, ETC.. . . . . . . . . . . . . . . . . 7
17. PUBLICITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
18. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 8
19. CONDITIONS TO ALL BORROWINGS . . . . . . . . . . . . . . . . . . . 8
20. AUTHORIZATION AND ENFORCEABILITY REPRESENTATIONS . . . . . . . . . 8
21. CONSENT TO JURISDICTION. . . . . . . . . . . . . . . . . . . . . . 9
22. INCORPORATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
23. NO IMPAIRMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
24. INTEGRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
25. ELECTRONIC NOTICES . . . . . . . . . . . . . . . . . . . . . . . . 9
26. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
27. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
MODIFICATION AGREEMENT
TO SYNDICATE LOAN
This Modification Agreement ("Agreement") is made as of February 11, 1997,
by BRE PROPERTIES, INC., a Maryland corporation ("Borrower"); BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association ("BofA");
and the several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually a "Bank").
FACTUAL BACKGROUND
A. Banks agree to make a loan (the "Loan") to the Borrower in accordance
with an Unsecured Line of Credit Loan Agreement dated February 11, 1997 (the
"Loan Agreement"). Capitalized terms used herein without definition have the
meanings given in the Loan Agreement. The Loan is evidenced by a Note dated
February 11, 1997 in the stated principal amount of $50,000,000. Each of the
Banks, including BofA, will have a direct lender relationship with the Borrower
in accordance with the Loan Documents, as hereby amended. The Banks wish to
designate BofA as their Agent in this syndicated Loan. Because BofA is both an
individual Bank in the syndicate as well as agent for all of the Banks in the
syndicate, the parties wish to modify certain defined terms in the Loan
Documents.
B. The Borrower, BofA and the other Banks wish to modify the Loan
Documents as set forth herein.
AGREEMENT
Therefore, the Borrower and Banks agree as follows:
1. RECITALS. The recitals set forth above in the Factual Background are
correct.
2. DEFINITIONS. As used herein, the following words have the meanings
indicated.
"ADVANCE" means any advance of Loan proceeds made pursuant to the
terms of the Loan Documents.
"AFFILIATE" means, as to any Person, any other Person, which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the management
and policies of the other Person, whether through the ownership of
voting securities, membership interests, by contract or otherwise.
"AGENT" means BofA in its capacity as agent for the Banks hereunder,
and any successor agent.
"AGENT-RELATED PERSONS" means BofA and any successor agent hereunder,
together with their respective Affiliates and the officers, directors,
employees and agents of such Persons.
"AGENT'S PAYMENT OFFICE" means the address for payments set forth
herein for the Agent, or such other address as the Agent may specify.
"BANK" has the meaning specified in the introductory sentence of this
Agreement; BofA in its capacity as a lender hereunder is one of the
ii
<PAGE>
Banks.
"BOFA" means Bank of America National Trust and Savings Association, a
national banking association.
"CAPITAL ADEQUACY REGULATION" means any guideline or directive of any
central bank or other Governmental Authority, or any other law, rule or
regulation regarding capital adequacy of a Bank or of any corporation
controlling a Bank.
"COMMITMENT" means the amount of the Loan for which each Bank is
obligated.
"ELIGIBLE ASSIGNEE" means (i) a commercial bank or investment bank
organized under the laws of the United States, or any state thereof, and
having a combined capital and surplus of at least $100,000,000; (ii) a
Person that is primarily engaged in the business of commercial banking and
is an Affiliate of a Bank; and (iii) any other Person approved by Majority
Banks and Agent.
"FEDERAL FUNDS RATE" means, for any day, the rate published by the
Federal Reserve Bank of New York for the preceding Banking Day as "Federal
Funds (Effective)"; (or, if not published, the arithmetic mean of the rates
for overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day quoted by three brokers of Federal Funds in New York City
as determined by the Agent).
"INDEMNIFIED LIABILITIES" has the meaning given in Section 15 entitled
"Indemnification by the Borrower".
"INDEMNIFIED PERSON" has the meaning given in Section 15 entitled
"Indemnification by the Borrower".
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such
other statements by such other entity as may be in general use by
significant segments of the accounting profession, which are applicable to
the circumstances as of the date of determination.
"GOVERNMENTAL AUTHORITY" means any government, 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 entity owned or controlled through
capital ownership or otherwise by any of the foregoing.
"LENDING OFFICE" means, as to any Bank, the office specified as its
Lending Office on Schedule I or as the Bank may designate to the Borrower
and the Agent.
"LOAN DOCUMENTS" means the Loan Agreement, the Note and any other
documents designated as "Loan Documents" in the Loan Agreement. This
Modification Agreement is a Loan Document.
"MAJORITY BANKS" means, at any time, a Bank or Banks then holding in
excess of 66-2/3% of the then aggregate unpaid principal amount of the Loan
(or, if no principal amount is then outstanding, having in excess of
66-2/3% of the Commitments).
"NOTE" means a promissory note executed by the Borrower in favor of a
Bank or the Agent on behalf of the Banks in connection with this
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Loan.
"NOTICE OF BORROWING" means a notice as described in the Loan
Agreement.
"OBLIGATIONS" means all advances, debts, liabilities, obligations and
covenants arising under any Loan Document owing by the Borrower to any
Bank, the Agent or any Indemnified Person, whether absolute or contingent,
due or to become due, now existing or hereafter arising.
"PERSON" means any natural person, employee, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other organization, whether or not a legal
entity, or any other non-governmental entity, or any Governmental
Authority.
"PRO RATA SHARE" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal rounded to the fifth decimal place) at
such time of such Bank's share of the Loan.
"SUBSIDIARY" of a Person means any other Person of which 50% or more
of the voting stock, membership interests or other equity interests is
owned or controlled directly or indirectly by the Person, or one or more of
the Subsidiaries of the Person, or a combination thereof.
3. MODIFICATION OF LOAN DOCUMENTS. The Loan Documents are hereby amended
as follows, subject to the terms and conditions hereof:
(a) The Note is modified so that "Bank" means the Agent acting as
agent for the Banks, except that the reference to "Bank" in Section 18 of the
Note and Paragraph 5 of Exhibit B to the Note is modified to mean "Banks".
(b) The Loan Agreement is modified so that "Bank" means the Agent
acting as agent for the Banks, except that the reference to "Bank" in Sections
9.8 and 9.9 of the Loan Agreement is modified to mean "Banks".
4. THE CREDIT.
(a) Subject to the terms and conditions hereof, each Bank agrees to
fund its Pro Rata Share of each Advance of Loan proceeds from time to time until
the maturity date of the Loan. Such Loan proceeds shall be delivered to the
Borrower in accordance with the provisions of the Loan Documents.
(b) The Borrower and each Bank acknowledge that, as of the date of
this Agreement, the Loan and the amount outstanding, and each Bank's Pro Rata
Share of the Loan, are:
(i) The Loan: $50,000,000
(ii) Total Current Outstanding Principal: $ 0
----------
(iii) Total Accrued and Unpaid Interest: $ 0
----------
(iv) Each Bank's Pro Rata Share of the Loan
shall be:
BofA: 50.00000%
The Industrial Bank of Japan,
Limited, Los Angeles Agency: 25.00000%
Commerzbank AG, Los Angeles Branch: 25.00000%
(c) Each Bank shall become vested with its Pro Rata Share of the
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Loan upon execution and delivery of the required documents and upon payment
of its Pro Rata Share of the principal balance of the Loan outstanding and
any other fees, costs or expenses due hereunder or pursuant to another
agreement, provided that the commitment fee paid by the Borrower to the Agent
pursuant to Section 2.1(a) of the Loan Agreement shall be allocated in
accordance with separate letter understandings between the Agent and each
Bank. Upon such payment, the respective interests of each Bank in the Loan
Documents and the other rights and claims with respect to the Loan shall be
of equal priority with one another, except as otherwise expressly provided.
(d) A complete set of Loan Documents shall be held by Agent.
(e) A Bank which is not the Agent shall have no interest in any
(i) property taken as security for any other loan or financial accommodation
made or furnished to the Borrower by Agent (in which the Bank has not
acquired an interest); (ii) property now or hereafter in Agent's possession
or under Agent's control other than by reason of the Loan Documents; or (iii)
deposits which may be or might become security for the Borrower's Obligations
by reason of the general description contained in any instrument not a Loan
Document held by the Agent or by reason of any right of setoff, counterclaim,
banker's lien or otherwise. If, however, such property shall actually be
applied to the payment of amounts owing by the Borrower in connection with
the Loan, then each Bank shall be entitled to its Pro Rata Share, if any, of
such application to the Loan.
(f) All the parties agree that, except as may be otherwise
expressly provided, all of the interest rates for the Loan are those of and
are calculated in accordance with the requirements and any applicable
assessments of the Agent, regardless of which Bank is making an Advance or
receiving a payment thereon.
5. APPOINTMENT AND AUTHORIZATION OF AGENT.
(a) Each Bank hereby irrevocably appoints, designates and
authorizes the Agent to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers
and perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto and as further provided in the Co-Lender
Agreement described below. The obligations of Agent under the Loan Documents
are separate and independent of the obligations of BofA, as an agent under
the Prior Line of Credit.
(b) Subject to the limitations set forth in the Loan Documents and
Co-Lender Agreement, Agent's powers include but are not limited to the power:
(i) to administer, manage and service the Loan; (ii) to enforce the Loan
Documents; (iii) to make all decisions under the Loan Documents in connection
with the day-to-day administration of the Loan, any inspections authorized by
the Loan Documents, and other routine administration and servicing matters;
(iv) to collect and receive from the Borrower or any third persons all
payments of amounts due under the terms of the Loan Documents and to
distribute the amounts thereof to the Banks; (v) to collect and distribute or
disburse all other amounts due under the Loan Documents; (vi) to grant or
withhold consents, approvals or waivers, and make any other determinations in
connection with the Loan Documents; and (vii) to exercise all such powers as
are incidental to any of the foregoing matters. Agent shall furnish to Banks
copies of material documents, including confidential ones, received from the
Borrower regarding the Loan, the Loan Documents and the transactions
contemplated thereby. Agent shall have no responsibility with respect to the
authenticity, validity, accuracy or completeness of the information provided.
(c) Notwithstanding any provision to the contrary contained in any
Loan Document, the Agent shall not have any duties or responsibilities,
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<PAGE>
except those expressly set forth in the Loan Documents or the Co-Lender
Agreement, nor shall the Agent have any fiduciary relationship with any Bank,
and no implied covenants, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document
against the Agent.
(d) The Borrower acknowledges that the Banks have executed a
Co-Lender Agreement to supplement the Loan Documents with respect to the
relationship of the Banks and the Agent among themselves in connection with
the Loan. The Co-Lender Agreement is not a Loan Document.
(e) The Agent may, and at the request of the Majority Banks shall,
resign as Agent upon 30 days' notice to the Banks. If the Agent resigns
under this Agreement, the Majority Banks shall appoint from among the Banks a
successor agent. If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may appoint, after consulting
with the Banks, a successor agent from among the Banks. Upon the acceptance
of appointment as successor agent hereunder, such successor agent shall
succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent, and the retiring Agent's
appointment, powers and duties as Agent shall terminate. After any retiring
Agent's resignation hereunder as Agent, the provisions regarding payment of
costs and expenses and indemnification of Agent shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under
this Agreement. If no successor agent has accepted appointment as Agent by
the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become
effective, and the Banks shall perform all of the duties of the Agent
hereunder until such time, if any, as the Majority Banks appoint a successor
agent.
6. LOAN ACCOUNTS. The Advances made by each Bank shall be evidenced
by one or more loan accounts or records maintained by such Bank and Agent in
the ordinary course of business. The loan accounts or records maintained by
the Agent and each Bank shall be conclusive absent manifest error of the
amount of the Loan made by the Banks to the Borrower and the interest and
payments thereon. Any failure so to record or any error in doing so shall
not, however, limit or otherwise affect the obligation of the Borrower
hereunder to pay any amount owing with respect to the Loan.
7. PROCEDURE FOR BORROWING.
(a) Each Borrowing shall be made upon the Borrower's irrevocable
written notice delivered to the Agent in accordance with the Loan Agreement.
(b) The Agent will promptly notify each Bank of any Notice of
Borrowing and of the amount of such Bank's Pro Rata Share of that borrowing.
Banks acting through Agent shall disburse the Loan as provided in the Loan
Agreement.
(c) Each Bank will make the amount of its Pro Rata Share of each
borrowing available to the Agent for the account of the Borrower at the
Agent's Payment Office by 11:00 a.m. (San Francisco time) on the borrowing
date requested by the Borrower in funds immediately available to the Agent.
The proceeds of all such Loans will then be made available to the Borrower by
the Agent by wire transfer in accordance with written instructions provided
to the Agent by the Borrower.
(d) Unless the Agent receives notice from a Bank at least one
Banking Day prior to the date of a borrowing that such Bank will not make
available to the Agent when required the amount of that Bank's Pro Rata Share
of the borrowing, the Agent may assume that each Bank has made such amount
available to the Agent in immediately available funds on the borrowing date.
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<PAGE>
(e) The failure of any Bank to make any Advance on any borrowing
date shall not relieve any other Bank of any obligation hereunder to make an
Advance on such borrowing date, but no Bank shall be responsible for the
failure of any other Bank to make its Advance on the borrowing date.
8. CONTRACT RATE ELECTIONS.
(a) The Borrower may elect applicable interest rates in accordance
with the requirements, terms and conditions set forth in the Note upon
irrevocable written notice to the Agent to be received by the Agent on the
appropriate day not later than 9:30 a.m. (San Francisco time).
(b) The Agent will promptly notify each Bank of receipt of an
election of the Contract Rate. If no timely notice is provided by the
Borrower, the Agent will promptly notify each Bank of any automatic
conversion to Reference-based Rate. All rate elections and conversions shall
be made ratably according to the respective outstanding principal amounts of
the Loan held by each Bank with respect to which the notice was given.
9. FEES.
(a) AGENCY FEE. The Borrower shall pay an agency fee to the Agent
for the Agent's own account, as set forth in a separate letter understanding
between the Agent and the Borrower.
(b) OTHER FEES. The Borrower shall pay to the Agent for the
account of each Bank the commitment fee and the unused commitment fee as set
forth in Section 2.1 of the Loan Agreement.
10. PAYMENTS BY THE BORROWER.
(a) All payments to be made by the Borrower shall be made without
set-off, recoupment or counterclaim. Except as otherwise provided, all
payments by the Borrower shall be made to the Agent for the account of the
Banks at the Agent's Payment Office, and shall be made in U.S. dollars and in
immediately available funds, in accordance with the Loan Documents. The
Agent will promptly distribute to each Bank its Pro Rata Share (or other
applicable share as may be agreed by a Bank) of such payment in like funds as
received in accordance with the payment instructions specified on Schedule
II. Any payment received by the Agent later than 11:00 a.m. (San Francisco
time) shall be deemed to have been received on the following Banking Day and
any applicable interest or fee shall continue to accrue.
(b) To the extent that the Borrower makes a payment to the Agent
or the Banks, or the Agent or the Banks exercise the right of set-off, and
such payment or the proceeds of such set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including by any settlement) to be repaid to a trustee,
receiver, the Borrower or any other party, in connection with any Insolvency
Proceeding or otherwise, then (i) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not
been made or such set-off had not occurred, and (ii) each Bank severally
agrees to pay to the Agent upon demand its Pro Rata Share of any amount so
recovered from or repaid by the Agent.
(c) Agent shall have the exclusive right to collect on the Loan
from the Borrower or any guarantors, third parties, or otherwise including
principal, interest, fees or any prepayment premiums, whether such amounts
are received directly from the Borrower, any guarantors, or other persons, or
are collected by offset by Agent against the money or other property of the
Borrower or any guarantors deposited at or held by Agent, or other enforcement
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<PAGE>
of the Loan Documents. No Bank shall independently initiate any judicial
action or equivalent action or other proceeding against the Borrower with
respect to the Loan.
11. PREPAYMENTS, TERMINATION OR REDUCTION OF LOAN. In the event the
Borrower elects to prepay the Loan in whole or in part in accordance with the
Loan Documents, the Agent will promptly notify each Bank of such notice and
of each Bank's Pro Rata Share of such prepayment. Any reduction or
termination of the Loan shall be applied to each Bank according to its Pro
Rata Share. All accrued unused commitment fees up to but not including the
effective date of any reduction or termination of the Loan shall be payable
on the effective date of such reduction or termination.
12. USURY. If a court ultimately determines that the Loan (or an
Advance) violates applicable usury law, then (a) the Borrower shall not be
required to pay to a Bank interest on the Loan (or the Advance) at a rate in
excess of the maximum rate that may be lawfully charged under applicable law;
and (b) in the event that any Bank shall collect interest or other monies
which are deemed to constitute interest which would increase the effective
interest rate on the Loan (or an Advance) to a rate in excess of that
permitted by applicable law, such excess interest shall, at the option of
said Bank, be returned to the Borrower or credited against the principal
balance of the Loan (or Advance) then outstanding; (c) provided, however,
that if a usury law applies to one or more but not all Banks, then the Banks
not affected by the usury law shall be entitled to the full amount of
interest from the Borrower under the Loan Documents even though other Banks
may receive or retain less due to the usury law.
13. INCREASED COSTS AND REDUCTION OF RETURN. If any Bank shall have
determined that a change in or compliance with any Capital Adequacy
Regulation affects the amount of capital required to be maintained by the
Bank or any Person controlling the Bank, and such Bank determines that the
amount of such required capital is increased as a consequence of the Loan or
other obligations under the Loan Documents taking into consideration such
Bank's or such Person's policies with respect to capital adequacy and desired
return on capital, then, upon demand of such Bank to the Borrower through the
Agent, the Borrower shall pay to the Bank an additional amount sufficient to
compensate the Bank for such increase.
14. COSTS AND EXPENSES. The Borrower shall pay or reimburse the Agent
and each Bank within five Banking Days after demand for all costs and
expenses (including legal fees) incurred by them in connection with:
(a) the preparation, administration and execution of any Loan
Document and any amendment, supplement, waiver or modification and any other
documents prepared in connection herewith or therewith, (whether or not the
particular Loan, transaction or document is consummated), including
reasonable legal fees incurred by BofA (including as Agent) with respect
thereto; and
(b) the enforcement or preservation of any rights or remedies
under any Loan Document with respect to an Event of Default (including any
"workout" or restructuring of the Loan, and any Insolvency Proceeding,
judicial proceeding or arbitration).
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<PAGE>
15. INDEMNIFICATION BY THE BORROWER. The Borrower shall indemnify,
defend and hold the Agent-Related Persons, each Bank and each of its
respective officers, directors, employees and agents (each, an "Indemnified
Person") harmless from and against any and all liabilities, obligations,
losses, damages, actions, judgments, costs and expenses (including legal
fees) which may be incurred by or asserted against any such Person arising
out of or relating to the Loan or the Loan Documents or any document or
transaction or action taken or not by any such Person in connection with any
of the foregoing, including any investigation, arbitration, litigation,
Insolvency Proceeding or other proceeding whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Borrower shall have no obligation hereunder
to any Indemnified Person with respect to Indemnified Liabilities resulting
solely from the gross negligence or willful misconduct of such Indemnified
Person. The agreements in this Section 15 shall survive payment of all other
Obligations.
16. ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) A Bank may at any time assign to one or more Eligible
Assignees (each an "Assignee") with the written consent of the Borrower
(other than during the existence of an Event of Default) and of the Agent (at
all times), which consent shall not be unreasonably withheld (provided that
no written consent shall be required for an Eligible Assignee that is an
Affiliate of such assignor Bank) all or part of its Pro Rata Share of the
Loan and the other rights and obligations of such assignor Bank hereunder, in
a minimum amount of $5,000,000; provided, however, that no such assignment
shall be permitted if the effect thereof is to cause the remaining Commitment
of the assignor Bank to be less than $12,500,000. However, such assignment
shall be conditioned on, and the Borrower and the Agent may continue to deal
solely and directly with such assignor Bank until, (i) written notice of such
assignment, substantially in the form of the attached Exhibit A shall have
been given to the Borrower and the Agent by such Bank and the Assignee; (ii)
such Bank and its Assignee shall have delivered to the Agent and the Borrower
an Assignment and Assumption Agreement substantially in the form of the
attached Exhibit B ("Assignment and Assumption Agreement") (together with any
Note(s) subject to such assignment); and (iii) the Assignee has paid to the
Agent a processing fee in the amount of $5,000.
(b) From the date that the Agent notifies the assignor Bank that
all conditions and requirements of the assignment have been met, then to the
extent that rights and obligations hereunder have been assigned (i) the
Assignee thereunder shall be a party hereto and shall have the rights and
obligations of a Bank under the Loan Documents and the Co-Lender Agreement,
(ii) the assignor Bank shall relinquish such assigned rights and be released
from such assigned obligations under the Loan Documents, (iii) this Agreement
shall be deemed to be amended to the extent necessary to reflect the addition
of the Assignee and the resulting adjustment of the Pro Rata Shares of the
Loan arising therefrom, and (iv) the Pro Rata Share allocated to an Assignee
shall reduce the Pro Rata Share of the assigning Bank.
(c) A Bank (the "originating Bank") may sell to one or more
Persons not Affiliates of the Borrower (a "Participant") participating
interests in the Loan; provided that (i) the originating Bank's obligations
under the Loan Documents and the Co-Lender Agreement shall remain unchanged,
(ii) the originating Bank shall remain solely responsible for the performance
of such obligations, (iii) the Borrower and the Agent shall continue to deal
solely and directly with the originating Bank in connection with the Loan and
Loan Documents, (iv) no Bank shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment,
consent or waiver with respect to any Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the
Banks, and (v) each participating interest shall be in a minimum amount of
$5,000,000,
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<PAGE>
and no such participation shall be permitted if the non-participated interest
of the originating Bank would thereafter be less than $12,500,000. A
Participant shall not have any rights under the Loan Documents or the
Co-Lender Agreement, and all amounts payable by the Borrower hereunder shall
be determined as if the originating Bank had not sold such participation.
(d) Notwithstanding any other provision, a Bank may pledge its
interest in the Loan in favor of any Federal Reserve Bank in accordance with
Federal law.
17. PUBLICITY. Each Bank may refer to the Loan in its own promotional
and advertising materials. The Borrower shall not identify a Bank as a
lender, except with such Bank's prior written consent, provided through the
Agent in each instance.
18. CONDITIONS PRECEDENT. In addition to the conditions precedent set
forth in Section 4 of the Loan Agreement, the obligation of each Bank under
the Loan Documents is subject to the further condition that the Agent has
received reimbursement of all costs and expenses incurred by Agent in
connection with this Agreement, including legal fees and expenses of Agent's
counsel, and the costs for services of Agent's in-house staff, such as legal
services.
19. CONDITIONS TO ALL BORROWINGS. The obligation of each Bank to make
an Advance (including its initial disbursement) is subject to the
satisfaction on the relevant borrowing date of the conditions set forth in
the Loan Documents.
20. AUTHORIZATION AND ENFORCEABILITY REPRESENTATIONS. Each Bank, Agent
and the Borrower hereby represents to the other parties hereto that all
necessary action has been taken to authorize it to execute and to perform its
obligations under the Loan Documents, and that the Loan Documents are binding
and enforceable against it.
21. CONSENT TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO ANY LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA, OR OF THE UNITED STATES FOR THE NORTHERN OR CENTRAL DISTRICTS OF
CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER,
AGENT AND EACH BANK CONSENTS, FOR ITSELF AND ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, AGENT AND EACH
BANK IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING BASED ON VENUE OR FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN CONNECTION WITH THE LOAN. THE
BORROWER, AGENT AND EACH BANK WAIVES PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS WHICH MAY BE MADE BY OTHER MEANS UNDER APPLICABLE
LAW.
22. INCORPORATION. This Agreement shall form a part of each Loan
Document, and all references to a given Loan Document shall mean that
document as hereby modified.
23. NO IMPAIRMENT. As specifically hereby amended, the Loan Documents
shall remain in full force and effect. This Agreement shall not prejudice
any rights or remedies of Banks under the Loan Documents. Banks reserve,
without limitation, all rights which they have against any guarantor or
indemnitor.
24. INTEGRATION. The Loan Documents, including this Agreement: (a)
integrate all the terms and conditions incidental to the Loan Documents; (b)
supersede all oral negotiations and prior and other writings with respect to
their subject matter; and (c) are intended by the parties as the final
expression of their agreement with respect to the terms and conditions set
forth in those documents and as the complete and exclusive statement of the
terms agreed to by the parties. If there is any conflict between the terms,
conditions and provisions of this Agreement and those of any other agreement
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<PAGE>
or instrument, including any of the other Loan Documents, the terms,
conditions and provisions of this Agreement shall prevail. The Co-Lender
Agreement addresses matters among the Banks and the Agent and is intended by
the Banks and Agent to supplement and be compatible with and not abrogate the
Loan Documents, and the Borrower's rights, obligations and liabilities shall
not be diminished or increased by the Co-Lender Agreement.
25. ELECTRONIC NOTICES. Any agreement of the Agent to receive certain
notices from the Borrower or Banks by telephone or facsimile is solely for
their convenience and at their request. The Agent shall be entitled to rely
on the authority of any Person giving such notice and the Agent shall not
have any liability to the Borrower, any Bank or other Persons on account of
any action taken or not taken by the Agent in reliance upon such telephonic
or facsimile notice.
26. NOTICES.
Notices shall be sent to the following addresses:
To the Borrower:
BRE Properties, Inc.
One Montgomery Street
Telesis Tower, Suite 2500
San Francisco, CA 94104
Attn: LeRoy E. Carlson
Phone: (415) 445-6561
Fax: (415) 445-6505
To BofA as Bank:
Bank of America National Trust
and Savings Association
Commercial Real Estate Services Group/
National Accounts Unit #9105
50 California Street
11th Floor
San Francisco, CA 94111
Attention: Donna L. Chiaro
Phone: (415) 445-4150
Fax: (415) 445-4154
To BofA as Agent:
Bank of America National Trust
and Savings Association
Commercial Real Estate Services Group/
National Accounts Unit #9105
50 California Street
11th Floor
San Francisco, CA 94111
Attention: Donna L. Chiaro
Phone: (415) 445-4150
Fax: (415) 445-4154
To The Industrial Bank of Japan, Limited:
The Industrial Bank of Japan, Limited, Los Angeles Agency
350 South Grand Avenue, Suite #1500
Los Angeles, California 90071
Attention: Takeshi Kubo
Phone: (213) 893-6447
Fax: (213) 488-9840
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To Commerzbank AG:
Commerzbank AG, Los Angeles Branch
660 S. Figueroa, Suite 1450
Los Angeles, CA 90017
Attn: Werner Schmidbauer
Phone: (213) 623-8223
Fax: (213) 623-0039
27. MISCELLANEOUS. This Agreement shall be governed by the laws of the
State of California, without regard to the choice of law rules of that State.
This Agreement and any attached consents or exhibits requiring signatures may be
executed in counterparts, and all counterparts shall constitute but one and the
same document. If any court of competent jurisdiction determines any provision
of this Agreement or any of the other Loan Documents to be illegal or
unenforceable, that portion shall be deemed severed from the rest which shall
remain in full force and effect. As used herein, the word "include(s)" means
"includes(s), without limitation," and the word "including" means "including,
but not limited to." Schedule I and Exhibits A and B are attached to this
Agreement and are incorporated in this Agreement by this reference.
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<PAGE>
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT.
BRE PROPERTIES, INC.
By: ____________________________________
LeRoy E. Carlson
Secretary & Chief Financial Officer
By: ____________________________________
Name: __________________________________
Title: _________________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS A BANK
By: ____________________________________
Donna L. Chiaro
Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES
AGENCY
By: ____________________________________
Name: __________________________________
Title: _________________________________
COMMERZBANK AG, LOS ANGELES BRANCH
By: ____________________________________
Name: __________________________________
Title: _________________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS AGENT
By: ____________________________________
Donna L. Chiaro
Vice President
-12-
<PAGE>
SCHEDULE I
LENDING OFFICES OF BANKS
BOFA:
Bank of America National Trust
and Savings Association
Commercial Real Estate Services Group/
National Accounts Unit #9105
50 California Street
11th Floor
San Francisco, CA 94111
Attention: Donna L. Chiaro
Phone: (415) 445-4150
Fax: (415) 445-4154
THE INDUSTRIAL BANK OF JAPAN, LIMITED:
The Industrial Bank of Japan, Limited, Los Angeles Agency
350 South Grand Avenue, Suite #1500
Los Angeles, California 90071
Attention: Takeshi Kubo
Phone: (213) 893-6447
Fax: (213) 488-9840
COMMERZBANK AG:
Commerzbank AG, Los Angeles Branch
660 S. Figueroa, Suite 1450
Los Angeles, CA 90017
Attn: Werner Schmidbauer
Telephone: (213) 623-8223
Facsimile: (213) 623-0039
<PAGE>
SCHEDULE II
PAYMENT INSTRUCTIONS
THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY:
Bank of America NT&SA, San Francisco, CA
ABA# 1210-0035-8
For the account of: The Industrial Bank of Japan, Limited,
Los Angeles Agency, Acct #62906-14014
Ref: BRE
COMMERZBANK AG, LOS ANGELES BRANCH:
A. COMMERZBANK ADMINISTRATIVE CONTACTS - Borrowings, Paydown, Interest,
Fees, etc.:
Christina Humphrey, Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281-1050
Telephone: (212) 266-7315
Facsimile: (212) 266-7593
B. COMMERZBANK PAYMENT INSTRUCTIONS:
Name of Bank where funds are to be transferred:
Commerzbank AG, New York Branch
Routing Transit/ABA number of Bank were funds are to be transferred:
026008044
Name of Account: Commerzbank AG, Los Angeles Branch
Account Number: 150/940123300USD
Additional Information: Ref: BRE Properties, Inc.
Acct. No.: 123/2920056/05USD
<PAGE>
EXHIBIT A
NOTICE OF ASSIGNMENT AND ACCEPTANCE
, 1997
Bank of America National Trust
and Savings Association
Commercial Real Estate Services Group/
National Accounts Unit #9105
50 California Street, 11th Floor
San Francisco, CA 94111
Attn: Donna L. Chiaro
BRE PROPERTIES, INC.
One Montgomery Street
Telesis Tower, Sutie 2500
San Francisco, CA 94104
Attn: LeRoy E. Carlson
Ladies and Gentlemen:
We refer to the Unsecured Line of Credit Loan Agreement dated February
11, 1997 (as amended or modified, the "Loan Agreement") among BRE PROPERTIES,
INC. (the "Borrower"), the Banks referred to therein and Bank of America
National Trust and Savings Association, as agent for the Banks (the "AGENT").
Terms not defined herein have the meanings given in the Loan Documents and
Co-Lender Agreement.
1. We hereby give you notice of and request your consent to the
assignment by ________________________ (the "ASSIGNOR") to ________________
(the "ASSIGNEE") of part of the right, title and interest of the Assignor in
and to the Loan (including all outstanding Advances made by the Assignor)
pursuant to the Assignment and Assumption Agreement (the "Assignment and
Assumption Agreement") attached hereto. Before giving effect to such
assignment, the Assignor's Pro Rata Share of the Loan was ______%, its
Commitment was $_____________ and the amount of its outstanding Advances was
$__________. After giving effect to this Assignment, Assignee's Pro Rata
Share of the Loan is _____%, its Commitment is $__________, and its share of
outstanding Advances is $__________; Assignor's remaining Pro Rata share of
the Loan is ______%, its remaining Commitment is $ , and its
remaining share of the outstanding Advances is $__________.
2. The Assignee agrees that upon receiving the consent of the Agent
and, if required, the Borrower to such assignment, the Assignee will be bound
by the terms of the Loan Documents and Co-Lender Agreement as fully and to
the same extent as if the Assignee were a Bank originally holding such
interest in the Loan Documents and Co-Lender Agreement.
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: _________________________________________________
Address: _________________________________________________
_________________________________________________
_________________________________________________
Attention: _________________________________________________
<PAGE>
Page 2
Telephone: _(______)________________________________________
Facsimile: _(______)________________________________________
Telex (Answerback): _________________________________________________
(b) Payment Instructions:
Account No.: _________________________________________________
At: _________________________________________________
_________________________________________________
_________________________________________________
Reference: _________________________________________________
Attention: _________________________________________________
4. You are entitled to rely upon the provisions contained in the
Assignment and Assumption Agreement executed by the Assignor and Assignee.
IN WITNESS WHEREOF, the Assignor and the Assignee have executed this
Notice of Assignment and Acceptance as of the date first above mentioned.
Very truly yours,
[ASSIGNOR]
By: _______________________________________
Title: ____________________________________
[ASSIGNEE]
By: _______________________________________
Title: ____________________________________
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: _______________________________
Its: ______________________________
[BRE PROPERTIES, INC.
By: _______________________________
Its: ______________________________
<PAGE>
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
BETWEEN
_________________________________
Assignor
and
_________________________________,
Assignee
______________________________________________________________________
______________________________________________________________________
Entered into as of , 1997
with respect to a loan to
BRE PROPERTIES, INC.
<PAGE>
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
- ------- ----------- ----
1. Assignment and Assumption 1
2. Payments 2
3. Reallocation of Payments 2
4. Independent Credit Decision 2
5. Effective Date; Notices; Notes 2
6. Agent 3
7. Withholding Tax 3
8. Representations and Warranties 3
9. Further Assurances 4
10. Indemnity 4
11. Miscellaneous 4
SCHEDULE I
-i-
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") dated as of
__________________, 1997 is made between _________________________________
(the "Assignor") and __________________________________________ (the
"Assignee").
RECITALS
WHEREAS, the Assignor is party to an Unsecured Line of Credit Loan
Agreement dated as of February 11, 1997 among BRE PROPERTIES, INC. (the
"Borrower") and Bank of America Trust and Savings Association, a Modification
Agreement dated as of February 11, 1997 among Borrower and the lenders named
therein including the Assignor (the "Banks"), and a Co-Lender Agreement dated
as of February 11, 1997 among the Banks. The term "Loan Documents" is
defined in the Loan Agreement and the amendments and modifications thereto.
Terms not defined herein have the meanings given to them in the Loan
Documents and Co-Lender Agreement;
WHEREAS, the Loan Documents provide for a loan (the "Loan") to the
Borrower in an amount not to exceed $50,000,000; and the Assignor's
Commitment as of the date of this Agreement (but before this Assignment) is
$____________;
WHEREAS, [the Assignor has made Advances under the Loan Documents in the
aggregate outstanding principal amount of $_______________ to the Borrower]
[no Advances are outstanding under the Loan Documents]; and
WHEREAS, the Assignor wishes to assign to the Assignee part of the
rights and obligations of the Assignor under the Loan Documents in an amount
equal to $ (the "Assigned Amount") on the terms listed on Schedule I
hereto and subject to the conditions set forth herein, and the Assignee wishes
to accept assignment of such rights and to assume such obligations from the
Assignor on such terms and conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. ASSIGNMENT AND ASSUMPTION.
(a) As of the Effective Date (defined below), the Assignor hereby
sells and assigns to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, the Assigned Amount, which includes Assignor's
interest in the Loan and any outstanding Advances and which shall be equal to
______ percent (____%) (the "Assignee's Pro Rata Share") of the Loan. The
assignment set forth in this Section 1(a) shall be without recourse to or
representation or warranty by the Assignor (except as expressly provided in
this Agreement).
(b) As of the Effective Date, the Assignee shall be a party to the
Loan Documents and Co-Lender Agreement and succeed to all of the rights and
be obligated to perform all of the obligations of a Bank under the Loan
Documents, with an interest in the Loan equal to the Assigned Amount. The
Assignee agrees that it will perform all of the obligations required to be
performed by it as a Bank under the Loan Documents and the Co-Lender
_______________________
* Assigned Amount shall not be less than $5,000,000, nor amount
retained by Assignor less than $12,500,000.
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<PAGE>
Agreement. The Pro Rata Share of the Loan of the Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Amount, and the
Assignor shall relinquish its rights and be released from its obligations
under the Loan Documents to the extent such obligations have been assumed by
the Assignee.
(c) After giving effect to this assignment and assumption, on the
Effective Date the Assignee's interest in the Loan will be $___________ with
a Pro Rata Share of ______%, and the Assignor's remaining interest in the
Loan will be $_____________ with a remaining Pro Rata Share of ______%.
(d) This Agreement is not a Loan Document.
[2. PAYMENTS.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on
the Effective Date in immediately available funds an amount equal to
$__________, representing the Assignee's Pro Rata Share of the principal
amount of the Loan outstanding on the Effective Date.
(b) The Assignee agrees to pay to the Agent a processing or
transfer fee in the amount of $______________.
(c) The Assignee agrees to pay [Agent as an additional service fee]
[the Assignor as additional compensation] a fee in an amount equal to
__________ percent (_____%) of all interest and fees paid by the Borrower to
the Assignee under the Loan Documents. Such fee shall be payable quarterly
in arrears on the last business day of ______________, commencing on
________________.]
3. REALLOCATION OF PAYMENTS.
Any interest, fees and other payments accrued up to but excluding
the Effective Date with respect to the Loan shall be for the account of the
Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account
of the Assignee. Each of the Assignor and the Assignee agree that it will
hold in trust for the other party any interest, fees and other amounts which
it may receive to which the other party is entitled pursuant to the preceding
sentence and will promptly pay to the other party such amounts. [The Assignor
and the Assignee's obligations to make the payments referred to in this
Section 3 are non-assignable.]
4. INDEPENDENT CREDIT DECISION.
The Assignee acknowledges that it has received a copy of the Loan
Documents, the Co-Lender Agreement and such other documents and information as
Assignee has deemed appropriate and requested in order to make its own credit
and legal analysis and decision to enter into this Agreement, and will continue
to make its own credit and legal decisions in taking or not taking action under
the Loan Documents independently based on such documents and information as
Assignee shall deem appropriate at the time and without reliance upon the
Assignor, the Agent or any other Bank.
5. EFFECTIVE DATE; NOTICES; NOTES.
(a) The effective date (the "Effective Date") for this Agreement
shall be the date that the following conditions precedent have been satisfied:
(i) this Agreement shall be executed and delivered by the
Assignor and the Assignee to the Agent;
(ii) the requirements for an effective assignment by a Bank
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<PAGE>
set forth in the Loan Documents and Co-Lender Agreement shall be
satisfied with respect to the Assigned Amount including any
required consents;
(iii) the Assignee shall pay to the Assignor all amounts due
to the Assignor under this Agreement; and
(iv) the processing or transfer fee referenced above shall have
been paid to the Agent.
(b) Promptly following the execution of this Agreement, the
Assignor shall deliver to the Agent [and Borrower] any notices, agreements or
other documents as may be required under the Loan Documents.
6. AGENT.
(a) The Assignee hereby appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers as are
delegated to the Agent by the Banks pursuant to the terms of the Loan
Documents and Co-Lender Agreement.
(b) If Assignor is the Agent, the Assignee does not assume under
this Agreement any duties or obligations held by the Assignor in its capacity
as Agent under the Loan Documents or Co-Lender Agreement.
7. WITHHOLDING TAX.
If the Assignee is organized under the laws of any jurisdiction
other than the United States or any state or other political subdivision
thereof, it agrees that it will furnish the Agent and the Borrower,
concurrently with the execution of this Agreement, an appropriate U.S.
Internal Revenue Service form regarding exemption from or reduced rate of
U.S. federal withholding tax on interest payments under the Loan Documents,
unless delivery of such form is not authorized by law.
8. REPRESENTATIONS AND WARRANTIES.
(a) The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any lien, security interest or other
adverse claim; (ii) it is duly organized and existing and it has the full
power and authority to take, and has taken, all action necessary to execute
and deliver this Agreement and any other documents required or permitted to
be executed or delivered by it in connection with this Agreement and to
fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any
already given or obtained) for its due execution, and performance of this
Agreement, and apart from any requirements in the Loan Documents or Co-Lender
Agreement, no further action by, or notice to or filing with any Person is
required of it for such execution, delivery or performance; and (iv) this
Agreement has been fully executed and delivered by it and constitutes the
legal, valid and binding obligation of the Assignor, enforceable against the
Assignor in accordance with the terms hereof, except as to enforcement,
bankruptcy, insolvency, moratorium, and other laws of general application
relating to creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in connection with the Loan Documents or Co-Lender
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents, Co-Lender Agreement or any other
instrument or document furnished pursuant thereto. The Assignor makes no
representation or warranty in connection with, and assumes no responsibility
-3-
<PAGE>
with respect to, the solvency, financial condition or statements of the
Borrower or the performance or observance by the Borrower of any of its
respective obligations under the Loan Documents or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and has full power and authority to take, and has
taken, all action necessary to execute and deliver this Agreement and any
other documents required or permitted to be executed or delivered by it in
connection with this Agreement, and to fulfill its obligations hereunder;
(ii) no notices to, or consents, authorizations or approvals of, any Person
are required (other than any already given or obtained) for its due
execution, delivery and performance of this Agreement, and apart from any
requirements in the Loan Documents or Co-Lender Agreement, no further action
by or notice to or filing with any Person is required of it for such
execution, delivery or performance; (iii) this Agreement has been duly
executed and delivered by it and constitutes the legal, valid and binding
obligations of the Assignee, enforceable against the Assignee in accordance
with the terms hereof, except as to enforcement, bankruptcy, insolvency,
moratorium, and other laws of general application relating to creditors'
rights and to general equitable principles; and (iv) it is eligible under the
Loan Documents to be an assignee of the Loan.
9. FURTHER ASSURANCES.
The Assignor and the Assignee each hereby agrees to execute and
deliver such other instruments and take such other action as either party may
reasonably request in connection with the transactions contemplated by this
Agreement, including the delivery of any notices or other documents to the
Borrower, the Agent which may be required in connection with this assignment
and assumption.
10. INDEMNITY.
The Assignee agrees to indemnify and hold harmless the Assignor
against any and all losses, costs, expenses (including reasonable attorneys'
fees and the cost of any services of in-house legal counsel) and liabilities
incurred by the Assignor in connection with or arising from the
non-performance by the Assignee of any obligation assumed by the Assignee
under this Agreement.
11. MISCELLANEOUS.
(a) Any amendment or waiver of any provision of this Agreement
shall be in writing and signed by the parties hereto. No failure or delay by
either party hereto in exercising any right, power or privilege hereunder
shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Agreement shall be without prejudice with respect to any
other or further breach hereof.
(b) All payments made hereunder shall be without any set-off or
counterclaim.
(c) All communications among the parties or notices in connection
herewith shall be in accordance with the Loan Documents and Co-Lender
Agreement using for the Assignor and the Assignee their respective addresses
set forth on the signature pages hereof. The Assignee specifies as its
Lending Office the office set forth beneath its name on the signature pages
hereof.
(d) The Assignor and the Assignee each shall pay its own costs and
expenses incurred in connection with the negotiation, preparation and
execution of this Agreement.
-4-
<PAGE>
(e) This Agreement shall be binding upon and inure to the benefit
of the Assignor and the Assignee and their respective successors and assigns,
subject however to the provisions of the Loan Documents and the Co-Lender
Agreement.
(f) This Agreement may be executed in counterparts all of which
taken together shall be deemed to constitute one and the same instrument.
(g) This Agreement shall be governed by the laws of the State of
California.
(h) The provisions of the Loan Documents regarding arbitration
shall apply to any controversies or claims between Assignor and Assignee. The
Assignor and the Assignee each irrevocably submits to the non-exclusive
jurisdiction of any California State or Federal court sitting in the cities
of San Francisco or Los Angeles over any suit, action or proceeding arising
out of this Agreement and irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such California
State or Federal court. Each party to this Agreement hereby irrevocably
waives any defense of venue or inconvenient forum to the maintenance of such
action or proceeding.
(i) This Agreement integrates all the terms and conditions hereof,
constitutes the entire agreement and understanding between the parties hereto
and supersedes any and all prior agreements and understandings related to the
subject matter hereof. In the event of any conflict between the terms and
conditions of this Agreement and any other document this Agreement shall
prevail. In the event of any inconsistency between the provisions of this
Agreement and Schedule I hereto, this Agreement shall control. Headings are
for reference only and are to be ignored in interpreting this Agreement. The
illegality or unenforceability of any provision of this Agreement shall not
impair the legality or enforceability of the remaining provisions of this
Agreement.
IN WITNESS WHEREOF, the Assignor and the Assignee have executed this
Agreement as of the date first above written.
[Name]
__________________________________________
(Assignor)
By:_______________________________________
Title:____________________________________
[Name]
__________________________________________
(Assignee)
By:_______________________________________
Title:____________________________________
Assignee's
Lending Office:
__________________________________________
__________________________________________
__________________________________________
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<PAGE>
__________________________________________
-6-
<PAGE>
SCHEDULE I
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
1. Borrower: BRE PROPERTIES, INC.
2. Date of Loan Agreement: February 11, 1997
3. Assignor: _____________________________________________________________
4. Assignee: _____________________________________________________________
5. Date of Assignment and Assumption Agreement: __________________________
6. Effective Date: _______________________________________________________
7. Assignee's Pro Rata Share: ____________%
8. Assigned Amount: $____________
9. Fees: Payment by Borrower [Part of fee payable by
to Assignee Assignee to Assignor]
------------------- ------------------------
(i) ____________________ Fee $________ $________________ [or %]
(ii) ____________________ Fee $________ $________________ [or %]
9. Fees: Payment by Borrower [Part of Interest
to Assignee Payable By Assignee to
Assignor]
------------------- ------------------------
(i) Reference based-
Rate Loan $________ $________________ [or %]
(ii) LIBOR Alternative $________ $________________ [or %]
11. Payment Instructions:
Assignee: _________________________________
_________________________________
_________________________________
Assignor: _________________________________
_________________________________
_________________________________
12. All written and telephone notices to Assignee in connection with the Loan
be made shall as follows:
_________________________________
_________________________________
Attn:____________________________
Tele:____________________________
Fax:____________________________
13. Other Information:
<PAGE>
Exhibit 10.30
LOAN AGREEMENT
BETWEEN
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
AS LENDER
AND
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA,
AS BORROWER
RE:
$55,000,000 TERM LOAN
DATED AS OF JANUARY 31, 1994
LOAN NO. 6-100-525
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA,
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of this 31st day of
January, 1994 by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey corporation ("Lender") and REAL ESTATE INVESTMENT TRUST OF CALIFORNIA, a
California real estate investment trust ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower desires to borrow from Lender, and Lender is willing
to make to Borrower, a term loan in the principal amount of $55,000,000 upon the
terms and conditions contained herein.
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
GENERAL DEFINITIONS
1.1 GENERAL TERMS. When used herein, the following terms shall have the
following meanings:
"AFFILIATE" as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under direct or indirect
common control with, that Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and under "common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities or by contract or otherwise.
"AGREEMENT" means this Loan Agreement, as it may be amended,
supplemented or otherwise modified from time to time.
"AMORTIZATION PAYMENTS" is defined in Section 2.4.A hereof.
"ANCHOR LEASES" means a lease of all or any portion of a Facility
covering an amount of space greater than or equal to 20,000 square feet,
together with any other lease designated as an Anchor Lease by Lender.
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<PAGE>
"ANNUAL FINANCIALS" has the meaning assigned to that term in Section
3.l.D.
"APPROVED INDEBTEDNESS" means collectively, (i) the Sanwa Line of
Credit (including amounts borrowed thereunder after the Closing Date in
compliance with the terms hereof), (ii) the Union Line of Credit (including
amounts borrowed thereunder after the Closing Date in compliance with the
terms hereof), (iii) debt incurred in the ordinary course of business to
acquire goods, supplies, services or merchandise on normal trade credit,
(iv) surety bonds which are obtained in the ordinary course of business,
and (v) Capital Lease Obligations in an amount not to exceed, at any time,
$1,000,000; provided, however, that in any and all events, such Approved
Indebtedness shall be subject to, and included within the calculations
relating to, the financial covenants set forth in Section 6.9 hereof.
"APPROVED LIENS" means the Sanwa Liens and the Union Liens, and liens
for real property taxes described in Section 6.2(i) hereof.
"BANKRUPTCY CODE" means Title 11 U.S. Code or any similar federal or
state laws for the relief of debtors.
"BORROWER" means Real Estate Investment Trust of California, a
California real estate investment trust.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, a legal
holiday under the laws of the State of California or a day on which
commercial banks in such state are authorized or required by law or other
governmental action to be closed.
"CAPITALIZED LEASE OBLIGATIONS, means any rental obligation which, in
conformity with GAAP, is or will be required to be capitalized on the books
of Borrower, taken at the amount thereof accounted for as indebtedness (net
of interest expense) in conformity with GAAP.
"CLOSING DATE" means the date that the Loan is disbursed, which shall
be on a date on or before March 15, 1994.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPLIANCE CERTIFICATE" means a Compliance Certificate substantially
in the form of EXHIBIT A attached hereto.
"CONSOLIDATED BOOK VALUE" at any date of determination means the sum
of (i) the aggregate amount shown on Borrower's consolidated balance sheet
opposite the
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<PAGE>
Facilities (whether owned by Borrower or the Consolidated Partnership)
designated as "property, plants and equipment" less accumulated
depreciation for all such Facilities, (ii) all (a) cash, (b) other cash
equivalents then held by Borrower or the Consolidated Partnership and
invested in Permitted Investments, and (c) all expenses which are
prepaid by Borrower or the Consolidated Partnership, (iii) with respect
to Borrower's interest in the Unconsolidated Partnership, the book value
of such interest in such Unconsolidated Partnership less an amount equal
to a pro rata share (based upon Borrower's pro rata equity interest in
the Unconsolidated Partnership) of any and all indebtedness or other
liabilities secured in whole or in part by the property or assets owned
by the Unconsolidated Partnership, and (iv) with respect to the
Leasehold Projects, the sum of (A) the aggregate book value of the
Finance Leases, and (B) the aggregate book value of the promissory
notes secured by the Existing Purchase Money Mortgages; provided,
however that such aggregate book value of such notes shall only be
included within the calculation of this clause (B) if the maker thereof
is not in default in the payment of any obligations under such notes);
less, in each case all applicable accumulated depreciation and all
Intangible Assets relating to the assets included within the definition
of Consolidated Book Value or otherwise; in each case determined on a
consolidated basis pursuant to the Financials and in accordance with
GAAP using the lesser of cost or market in carrying assets.
"CONSOLIDATED PARTNERSHIP" means REIT - Santa Maria Properties, a
California limited partnership.
"CONTINGENT OBLIGATIONS", as applied to any Person, means any direct,
indirect and/or vicarious liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend, letter of credit
or other obligation of any other Person which provides assurance to the
obligee of such obligation of such other Person that such obligation of
another will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof.
Contingent Obligations shall include, without limitation, (i) the direct or
indirect guaranty, endorsement (other than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale
with recourse by such Person of the obligation of another, and (ii) any
liability of such Person for the obligations of another through any
agreement (contingent or otherwise) (a) to purchase, repurchase or
otherwise acquire such obligation or any security therefor or to provide
funds for the payment or discharge of such obligation (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise),
(b) to maintain the solvency or
- 3 -
<PAGE>
any balance sheet item, level of income or financial condition of
another or (c) to make take-or-pay or similar payments if required
regardless of non-performance by any other party or parties to an
agreement, if in the case of any agreement described under subclauses
(a), (b) or (c) of this sentence the primary purpose or intent thereof
is as described in the preceding sentence. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed
or otherwise supported.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any instrument, document or security issued by that Person or
of any indenture, mortgage, deed of trust, contract, undertaking, agreement
or other instrument to which that Person is a party or by which any of its
properties is bound or to which it or any of its properties is subject.
"DEBT SERVICE COVERAGE" means, with respect to any period of Net
Operating Income being measured, the ratio, as calculated by Lender, of
(a) Net Operating Income for the applicable period, to (b) the sum of
(i) the interest payments on the Loan for such period (excluding, when
applicable, the Amortization Payments), and (ii) the interest payments on
all other Indebtedness for such period (collectively, "Debt Service").
"DISCOUNT RATE" means the rate which, when compounded monthly, is
equivalent to the Treasury Rate.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which is maintained for employees of
Borrower or any of its ERISA Affiliates.
"ENVIRONMENTAL CLAIM" means any notice of violation, claim, demand,
abatement order or other order or direction (conditional or otherwise) by
any governmental authority or any Person for any damage, including, without
limitation, personal injury (including sickness, disease or death),
tangible or intangible property damage, contribution, indemnity, indirect
or consequential damages, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon (i) the existence
of a Release (whether sudden or nonsudden or accidental or non-accidental),
of, or exposure to, any Hazardous Material, in, into or onto the
environment at, in, by, from or related to any Facility, (ii) the presence,
use, handling, transportation, storage, treatment or disposal of Hazardous
Materials in connection with the ownership or operation of any Facility, or
(iii) the violation, or alleged violation, of any statutes, ordinances,
orders, rules, regulations, permits, authorizations or licenses of
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or from any governmental authority, agency or court relating to
environmental matters connected with the Facilities.
"ENVIRONMENTAL LAWS" means all laws relating to environmental matters
or Hazardous Materials, including those relating to fines, orders,
injunctions, penalties, damages, contribution, cost recovery, compensation,
losses or injuries resulting from the Release or threatened Release of
Hazardous Materials and to the presence, generation, use, storage,
transportation, or disposal of Hazardous Materials, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Hazardous Material
Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air
Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15
U.S.C. Section 2601 ET SEQ.), the Occupational Safety and Health Act (29
U.S.C. Section 651 ET SEQ.), and the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. Section 11001 ET SEQ.), each as amended or
supplemented, and any analogous future or present local, state and federal
rules, orders, statutes and regulations promulgated pursuant thereto, each
as in effect as of the date of determination.
"ENVIRONMENTAL PERMIT" means any permit, license, approval, or other
authorization with respect to any activities, operations, or businesses
conducted on or in relation to the Facilities under any applicable
Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA AFFILIATE", as applied to any Person, means any trade or
business (whether or not incorporated) which is a member of a group of
which that Person is a member and which is under common control within the
meaning of Sections 414(b) and (c) of the Code.
"EVENT OF DEFAULT" means each of the events specified in Article 7.
"EXISTING FACILITIES" means those Facilities owned by Borrower or the
Consolidated Partnership as of the Closing Date as described in EXHIBIT F
hereof.
"EXISTING PURCHASE MONEY MORTGAGES" means collectively, the existing
notes and deeds of trust held by Borrower, as holder and beneficiary, with
respect to the Leasehold Projects.
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"FACILITIES" means any and all real property, (including, without
limitation, all buildings, fixtures or other improvements located thereon)
now or hereafter owned in fee simple by Borrower or the Consolidated
Partnership (including, without limitation, the Existing Facilities and the
New Facilities, but excluding the Leasehold Projects and the equity
interest of Borrower in the Unconsolidated Partnership).
"FINANCE LEASES" means the ground leases, with respect to which
Borrower constitutes the ground lessor, relating to Leasehold Projects.
"FINANCIALS" has the meaning assigned to that term in Section 3.1.D.
"GAAP" means generally accepted accounting principles, consistently
applied, as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board that are applicable to the circumstances as of the date of
determination.
"HAZARDOUS MATERIALS" means any (i) oil, flammable substances,
explosives, radioactive materials, hazardous wastes or substances, toxic
wastes or substances or any other wastes, materials or pollutants; (ii)
asbestos in any form which is or could become friable, urea formaldehyde
foam insulation, transformers or other equipment which contain dielectric
fluid containing levels of polychlorinated byphenyls, or radon gas; (iii)
chemical, material or substance defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous waste", "restricted hazardous waste", or "toxic
substances" or words of similar import under any applicable local, state or
federal law or under the regulations adopted or publications promulgated
pursuant thereto, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
42 U.S.C. Section 9601, ET SEQ.; the Hazardous Materials Transportation
Act, as amended, 49 U.S. U.S.C. Section 1801, ET SEQ.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, ET SEQ.;
Sections 25115, 25117, 25122.7, 25140, 25249.8, 25281, 25316, 25501, and
25316 of the California Health and Safety Code; and Article 9 or Article 11
of Title 22 of the Administrative Code, Division 4, Chapter 20; (iv) other
chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority or may or could pose a hazard to
the health and safety of the occupants of the Facility or
the owners and/or occupants of property adjacent to or surrounding the
Facility, or any other Person coming upon the Facility or
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adjacent property; and (v) other chemicals, materials or substance which
may or could pose a hazard to the environment.
"INDEBTEDNESS" at any date of determination means: (i) all obligations
of Borrower and the Consolidated Partnership (including, without
limitation, all indebtedness of Borrower to Lender) which in accordance
with GAAP would be shown on the balance sheet of Borrower and/or the
Consolidated Partnership as a liability (including, without limitation,
obligations for borrowed money and for the deferred purchase price of
property or services, trade debt payable, accruals and other liabilities,
and obligations evidenced by bonds, debentures, notes or other similar
instruments); (ii) all Capitalized Lease Obligations; (iii) all Contingent
Obligations of Borrower and or the Consolidated Partnership in respect of,
or obligations to purchase or otherwise acquire or to assure payment of,
Indebtedness of others; and (iv) all Indebtedness of others secured by any
Lien upon property owned by Borrower or the Consolidated Partnership,
whether or not assumed.
"INTANGIBLE ASSETS" means treasury stock, unamortized debt discount
and expense, unamortized deferred charges, capitalized start-up costs or
other organizational or developmental expenses, covenants not to compete,
good will, trademarks, licenses, brand names, patents and other intangible
assets and any write-up of the value of any assets, all as determined in
accordance with GAAP.
"LEASEHOLD PROJECTS" shall mean, any one of or collectively all of,
the Lucky Center located in Orange, California, the Hawthorne/Del Amo
retail project located in Torrance, California, and the Grossman's
Warehouse located in Ventura, California.
"LENDER" means The Prudential Insurance Company of America, a New
Jersey corporation.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and/or the filing of or
agreement to give any financing statement under the Uniform Commercial Code
of any jurisdiction).
"LOAN" means the loan to Borrower provided hereby as more particularly
described in Section 2.1 hereof.
"LOAN DOCUMENTS" means this Agreement, the Note, any Compliance
Certificate, and any other document or certificate executed and delivered
by Borrower to Lender in connection with the transactions contemplated
hereby.
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"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"MATERIAL ADVERSE CHANGE" means any change, event or occurrence which
produces a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, structure or form of operations, properties, assets,
prospects or condition (financial or otherwise) of Borrower or (ii) an
impairment of the ability of Borrower to perform or of Lender to enforce
the Obligations.
"MATURITY DATE" means the date ten (10) years after the Closing Date.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower
or any of its ERISA Affiliates.
"NET OPERATING INCOME" means, for any date of determination, the gross
income realized from operations of the Facilities and any other earnings
derived from any other asset included within the definition of Consolidated
Book Value (but not including repayments of principal under the notes
secured by the Purchase Money Mortgages) for the fiscal quarter just ended
and the three previous fiscal quarters (to the extent Lender reasonably
projects such gross income and earnings will continue for the immediately
succeeding twelve (12) month period and in any and all events excluding all
capital gains from sales and other extraordinary income), subtracting
therefrom all necessary and ordinary operating expenses (both fixed and
variable) as reasonably projected by Lender for the next succeeding twelve
(12) month period, including, but not limited to, utilities,
administrative, cleaning, landscaping, security, repairs and maintenance,
management fees, reserves for replacements, real estate and other taxes,
assessments and insurance, but excluding therefrom, deductions for federal,
state and other income taxes, Debt Service expense and depreciation (all as
determined in accordance with GAAP). Gross income shall not be anticipated
for any greater time period than that approved by GAAP nor shall ordinary
operating expenses be prepaid.
"NEW FACILITIES" means those Facilities acquired after the Closing
Date.
"NOTE" means that certain Promissory Note dated as of even date
herewith in the principal amount of $55,000,000 executed by Borrower, as
maker, in favor of Lender, as Holder, and any and all extensions, renewals,
replacements,
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and modifications thereof, and/or amendments thereto.
"OBLIGATIONS" means all obligations of every nature of Borrower from
time to time owed to Lender under the Note and other Loan Documents.
"OFFICERS' CERTIFICATE" means a certificate signed in the name of
Borrower by a Trustee Officer; provided that every Officers' Certificate
delivered to Lender with respect to the compliance with a covenant or term
hereof shall include: (i) a statement that the Trustee Officer making or
giving such Officers' Certificate shall have read such covenant or term and
any definitions or other provisions contained in this Agreement relating
thereto, (ii) a statement that such Trustee Officer has made or has caused
to be made such examination or investigation as is reasonably necessary to
enable them to express an informed opinion as to whether or not such
condition has been complied with, and (iii) a favorable statement as to
compliance with such condition.
"PENSION PLAN" means any employee plan, other than a Multiemployer
Plan, which is subject to the provisions of Title IV of ERISA and which is
maintained for employees of Borrower or any of its ERISA Affiliates.
"PERMITTED INVESTMENTS" means (i) marketable direct obligations issued
or unconditionally guaranteed by the full faith and credit of the United
States of America maturing within one year from the date of acquisition
thereof, (ii) marketable direct obligations issued by any state of the
United States of America maturing within one year from the date of
acquisitions thereof and having the highest rating obtainable from Standard
& Poor's Ratings Group, (iii) certificates of deposit maturing within one
year from the date of acquisition thereof issued by one or more financial
institutions rated not less than "A" by Standard & Poor's Rating Group and
in each case fully insured by the FDIC, (iv) mutual funds invested solely
in the investments described in clauses (i), (ii) and/or (iii) hereof, or
(v) an amount not to exceed $3,000,000 in the stock of publicly traded real
estate investment trusts which are qualified as a REIT.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts, real estate investment trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
the giving of notice or lapse of time, or both,
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would constitute an Event of Default hereunder.
"PREPAYMENT" means the payment of all or part of the principal of a
Loan prior to its Maturity Date.
"PREPAYMENT AMOUNT" means the amount of the Loan being prepaid on a
Prepayment Date.
"PREPAYMENT DATE" has the meaning assigned to that term in Section
2.4.D.
"PREPAYMENT PREMIUM" has the meaning assigned to that term in Section
2.4.D.
"PRESENT VALUE OF THE PREPAYMENT AMOUNT" shall be determined by
discounting all scheduled payments of principal and interest remaining from
the Prepayment Date to the Maturity Date of the Loan being prepaid,
attributable to the amount being prepaid, at the Discount Rate. If a
Prepayment occurs on a date other than a regularly scheduled interest
payment date, the actual number of days remaining from the Prepayment Date
to the next regularly scheduled interest payment date will be used to
discount within this period.
"QUARTERLY FINANCIALS" has the meaning assigned to that term in
Section 3.l.D.
"REIT" means real estate investment trust, as defined under Section
856 of the Code.
"RELEASE" means any release, spills emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
leaching, or migration into the indoor or outdoor environment (including,
without limitation, the abandonment or disposal of any barrels, containers
or closed receptacles containing any Hazardous Materials), or into or out
of any Facility, including the movement of any Hazardous Material through
the air, soil, surface water, groundwater or property.
"RENT ROLL" means a comprehensive list of the Facilities and each of
the leases pertaining thereto and containing the following information: (i)
each tenant's name and location, (ii) the net rentable square footage of
the Facilities covered by each lease, (iii) the annual rental rate per
square foot per tenant, (iv) the aggregate annual base rent per tenant and
for the Facilities, (v) all items of additional rent, (vi) the term and the
commencement and expiration dates of each lease, (vii) any option(s) to
renew and/or any option(s) to terminate granted to any tenant, (viii) the
security deposit held for each lease, (ix) any free rent, moving allowances
or other tenant concessions granted to any tenant and any obligations of
such tenant
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assumed by Borrower (x) any landlord environmental indemnity in favor of
the tenant, and (xi) any right of first refusal or any right or option
to purchase all or any portion of the Facilities granted thereunder;
which such Rent Roll shall be certified to be true, correct and complete
by a Trustee Officer.
"SANTA FE FACILITY" means Santa Fe Springs Plaza located in Santa Fe
Springs, California.
"SANWA LINE OF CREDIT" means that certain secured line of credit in
the maximum principal amount of Twenty-Nine Million Dollars ($29,000,000)
established by Sanwa Bank California ("Sanwa Bank") in favor of Borrower
which is secured by the Sanwa Liens, and any replacement line(s) of credit
therefor which comply with the provisions of Section 6.12 hereof.
"SANWA LIENS" means those certain liens in favor of Sanwa Bank to
secure the Sanwa Line of Credit and encumbering those certain real
properties set forth in EXHIBIT B attached hereto (the "Sanwa Properties").
"SUBSIDIARY" means the Consolidated Partnership, together with any
corporation, association, partnership or other business entity of which
more than 50% of the total voting power of shares of stock or partnership
shares entitled to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more of the other Subsidiaries of that Person or a
combination thereof.
"TANGIBLE NET WORTH" means with respect to any date of determination,
(i) Consolidated Book Value, minus (ii) total liabilities of Borrower and
the Consolidated Partnership, both current and long term (including,
without limitation, (a) any balance sheet liability with respect to a
Pension Plan recognized pursuant to Financial Accounting Standards Board
Statements 87 or 88, (b) any withdrawal liability under Section 4201 of
ERISA with respect to a withdrawal from a Multiemployer Plan, as such
liability may be set forth in a notice of withdrawal liability under
Section 4219 of ERISA (and as adjusted from time to time subsequent to the
date of such notice), and (c) any asset, liability, contingency and other
appropriate reserves, including reserves for accrued or deferred income
taxes), calculated on a consolidated basis determined in accordance with
GAAP.
"TERMINATION EVENT" means (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
"Reportable Event" not subject to the provisions for 30-day notice to the
Pension Benefit Guaranty Corporation under such regulations), or (ii) the
withdrawal of Borrower or any of its ERISA
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Affiliates from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) or 4068(f) of
ERISA, or (iii) the filing of a notice of intent to terminate a Pension
Plan or the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA, or (iv) the institution of proceedings to
terminate a Pension Plan by the Pension Benefit Guaranty Corporation, or
(v) any other event or condition which would constitute grounds under
Section 4042(a) of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan, or (vi) the imposition of a
lien pursuant to Section 412(n) of the Code.
"TREASURY RATE" means the semi-annual yield on the Treasury Constant
Maturity series with maturity equal to the remaining weighted average life
of the Loan, for the week prior to the Prepayment Date, as reported in
Federal Reserve Statistical release H.15 - Selected Interest Rates,
conclusively determined by Lender (absent manifest error) on the Applicable
Date. The rate will be determined by linear interpolation between the
yields reported in Release H.15, if necessary. (In the event Release H.15
is no longer published, Lender shall select a comparable publication to
determine the Treasury Rate.)
"TRUSTEE OFFICER" means either Jay W. Pauly, the President/Chief
Executive Officer of Borrower, or Leroy E. Carlson, the Vice President/CFO
of Borrower, acting alone.
"UNCONSOLIDATED PARTNERSHIP" means Chateau De Ville, Ltd., a
California limited partnership.
"UNION LINE OF CREDIT" means that certain secured line of credit in
the maximum principal amount of Seven Million Five Hundred Thousand Dollars
($7,500,000) established by Union Bank in favor of Borrower which is
secured by the Union Liens and any replacement line(s) of credit therefor
which comply with the provisions of Section 6.12 hereof.
"UNION LIENS" means those certain liens in favor of Union Bank to
secure the Union Line of Credit and encumbering that certain real property
more commonly referred to as Lakeview Apartments located in San Diego,
California (the "Union Property").
1.2 OTHER TERMS. Any accounting terms used in this Agreement which are
not specifically defined shall have the meanings assigned to them in conformity
with GAAP. References to "Articles" and "Sections" shall be to Articles and
Sections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in Section 1.1 or elsewhere herein may,
unless the context otherwise requires, be used in the singular or the plural
depending on the reference.
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1.3 COMPUTATION OF TIME PERIODS. In this Agreement in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each means "to but
excluding".
ARTICLE 2.
LOAN TERMS
2.1 LOAN.
A. LOAN. Subject to the terms and conditions of this Agreement, and
in reliance upon the representations and warranties of Borrower herein set
forth, Lender agrees to make to Borrower, and Borrower agrees to accept from
Lender, a loan in the principal amount FIFTY-FIVE MILLION DOLLARS ($55,000,000)
(the "Loan").
B. NOTE. Borrower shall execute and deliver to Lender, on or before
the Closing Date, the Note evidencing the Loan. Borrower agrees to repay the
indebtedness evidenced by the Note in accordance with the terms thereof and the
terms hereof.
C. TERM OF LOAN. Subject to Article 7 hereof, the Loan shall mature,
and the then outstanding principal balance of the Loan shall be due and payable,
on the Maturity Date.
D. DISBURSEMENT OF FUNDS. Upon satisfaction of the conditions
precedent specified in Section 3.1 hereof, on the Closing Date, Lender shall
disburse the full proceeds of the Loan, in same day funds, to or on behalf of
Borrower, as follows: (i) to Sanwa Bank, an amount sufficient to repay in full
the then outstanding principal amount of the Sanwa Line of Credit, (ii) to Union
Bank, an amount sufficient to repay in full the then outstanding principal
amount of the Union Line of Credit, and (iii) the balance of the Loan in an
amount which when taken together with the amounts set forth in clauses (i) and
(ii) hereof will not exceed $55,000,000, to be deposited into Borrower's
operating account pursuant to the wiring instructions attached hereto as
EXHIBIT C, such funds to be used in accordance with the terms of Sections 2.5
and 5.10 hereof.
2.2 INTEREST RATE ON THE LOAN.
A. RATE OF INTEREST. The Loan shall bear interest on the unpaid
principal amount thereof from the Closing Date until repaid in full at an
interest rate per annum equal to seven and forty-four one-hundredths percent
(7.44%).
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B. INTEREST PAYMENTS. Subject to Section 2.2.D hereof, interest on
the Loan shall be payable monthly in arrears on the first (1st) day of each
month during the term of such Loan, upon any prepayment of such Loan (to the
extent accrued on the amount being prepaid, and together with any Prepayment
Premium due in connection therewith) and on the Maturity Date of such Loan.
C. LATE CHARGE. If Borrower fails timely to pay any sum due and
payable under the Loan on or before the date due, a late charge equal to four
cents ($.04) for each dollar ($1.00) of each such late payment (the "Late
Charge") shall be immediately due and payable. Borrower acknowledges and agrees
that its failure to make timely payments will result in Lender incurring
additional expense in servicing the Loan, and that it is extremely difficult and
impractical to ascertain the extent of such damages and that the Late Charge
represents a fair and reasonable estimate, considering all of the circumstances
existing on the date of the execution of this Agreement, of the costs that
Lender will incur by reason of such late payment. Acceptance of any Late Charge
shall not constitute a waiver of the default with respect to the late payment,
and shall not prevent Lender from exercising any of the other rights or remedies
available hereunder, at law or in equity.
D. SECONDARY INTEREST. Borrower further acknowledges and agrees that
during the time that any payment of principal, interest or other amount due
under the Note or this Agreement shall be delinquent (including, without
limitation, the entire principal amount of the Loan on maturity or in connection
with an acceleration of the Loan as provided herein and in the Loan Documents),
Lender will incur additional costs and expenses attributable to its loss of use
of the money due and to the adverse impact on Lender's ability to meet its other
obligations and avail itself of other opportunities. Borrower agrees that it is
extremely difficult and impractical to ascertain the extent of such expenses,
and Borrower therefore agrees that interest at a rate of eighteen percent (18%)
per annum (the "Secondary Interest Rate") shall accrue on any delinquent
payments of principal, interest or other amounts due under any Loan Document
(including, without limitation, the entire principal amount of the Loan on
maturity or in connection with an acceleration of the Loan as provided herein
and in the Loan Documents) from the date such payments were due and for so long
as non-payment continues, regardless of whether or not there has been an
acceleration of the Indebtedness evidenced by the Note.
E. COMPUTATION OF INTEREST. Interest on the Loan shall be computed
on the basis of a year of three hundred sixty (360) days consisting of twelve
(12) thirty (30) day months, regardless of the actual time elapsed.
2.3 FEES.
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A. PROCESSING FEE. Lender acknowledges that in connection with fixing
the rate of interest on the Loan, Borrower has paid to Lender a processing fee
in the amount of Fifty-Five Thousand Dollars ($55,000). Borrower agrees that
such processing fee is fully earned by Lender as of the date of receipt thereof
and shall not be returned or refunded to Borrower regardless of whether the Loan
is ever funded or made.
B. OTHER FEES AND COSTS. In addition to the fees described in
Section 2.3.A hereof, Borrower agrees to pay the fees and expenses of Lender set
forth in Section 8.2 hereof.
2.4 PAYMENTS AND PREPAYMENTS.
A. PRINCIPAL AMORTIZATION. In addition to the interest only payments
due under the Note as described in Section 2.2.B hereof, Borrower agrees to make
to Lender, without payment of any Prepayment Premium, the following regularly
scheduled principal amortization payments: (i) on the date six (6) years after
the Closing Date, an amount equal to Ten Million Dollars ($10,000,000), (ii) on
the date seven (7) years after the Closing Date, an amount equal to Ten Million
Dollars ($10,000,000), (iii) on the date eight (8) years after the Closing Date,
an amount equal to Ten Million Dollars ($10,000,000), and (iv) on the date nine
(9) years after the Closing Date, an amount equal to Ten Million Dollars
($10,000,000) (collectively, the "Amortization Payments").
B. PAYMENTS. All payments to Lender shall be made without setoff or
counterclaim not later than 12:00 noon (New York time) on the day when due in
lawful money of the United States by electronic funds transfer of immediately
available funds to Lender at Morgan Guaranty Trust Company, 23 Wall Street, New
York, New York 10019, Account No. 05-054-493 or at such other place or places as
Lender may designate from time to time in writing to Borrower.
C. PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder or under the Note.
D. PREPAYMENTS. Subject to payment of the Prepayment Premium
referred to below and all accrued interest and other sums due with respect to
the Loan, if any, Borrower shall have the right to prepay all or any part of the
outstanding principal balance of the Loan on any regularly scheduled interest
payment date, with a minimum Prepayment Amount of Five Million Dollars
($5,000,000), upon giving not less than thirty (30) days prior written notice to
Lender of its intention to prepay the Loan. Except as set forth below, if the
Loan is prepaid in whole or in
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part for any reason on a date prior to the Maturity Date (provided no such
Prepayment Premium shall be due with respect to an Amortization Payment),
whether voluntarily, involuntarily or by operation of law, or after
acceleration by Lender upon an Event of Default, Borrower shall pay to
Lender, together with the subject Prepayment Amount and any nupaid accrued
interest on the Prepayment Amount, as liquidated damages, a prepayment charge
(the "Prepayment Premium") equal to the greater of:
(i) the product of (a) one percent (1%) of the principal amount of
the Loan being prepaid (the "Prepayment Amount") multiplied by (b) a
fraction the numerator of which is the number of full months remaining to
the Maturity Date of the Loan being prepaid as of the date on which the
Prepayment will be made (hereinafter called the "Prepayment Date") and the
denominator of which is the number of full months comprising the term of
such Loan; or,
(ii) the Present Value of the Prepayment Amount less the sum of (a)
the Prepayment Amount and (b) the unpaid accrued interest, if any,
calculated as of the Prepayment Date;
Lender shall notify Borrower of the amount and basis of determination
of the Prepayment Premium (reflecting therein the calculation thereof). On or
before the Prepayment Date, Borrower shall pay to Lender the Prepayment Premium
together with the Prepayment Amount and all accrued interest and other sums due
with respect to the Prepayment Amount being prepaid and Lender shall not be
obligated to accept any Prepayment Amount unless such Prepayment Amount is so
accompanied by the Prepayment Premium and all accrued interest and other sums
due with respect thereto. Any such Prepayment by Borrower shall not affect,
impair, delay or reduce Borrower's obligation to make Amortization Payments set
forth in Section 2.4.A hereof.
Borrower agrees that the Prepayment Premium represents the reasonable
estimate of Lender and Borrower of a fair average compensation for the loss that
may be sustained by Lender due to any Prepayment; and Borrower agrees that
Lender's agreement to enter into this transaction on the terms set forth in this
Agreement and in the other Loan Documents constitutes adequate and valuable
consideration, given individual weight by Borrower for this Agreement. Such
Prepayment Premium shall be paid without prejudice to the right of Lender to
collect any other amounts provided to be paid as set forth in this Agreement or
the other Loan Documents. Lender shall not be obligated to actually reinvest
any Prepayment Amount in any U.S. Government Treasury obligations as a condition
to receiving the Prepayment Premium.
2.5 USE OF PROCEEDS.
The proceeds of the Loan shall be used as specified in Section 5.10
hereof. No portion of the proceeds of the Loan shall be used for the purpose of
"purchasing" or "carrying" any Margin
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Stock or used in any manner which might cause the borrowing or the
application of such proceeds to violate Regulation G, Regulation U,
Regulation T or Regulation X of the Board of Governors of the Federal Reserve
System or any other regulations of the Board of Governors of the Federal
Reserve System or to violate the Securities Exchange Act, in each case as in
effect on the Closing Date and date or dates of the use of such proceeds.
2.6 FAILED FUNDING.
Borrower recognizes that Lender may suffer damages, including loss
of bargain, if the Loan is not disbursed. In the event Borrower fails to
satisfy the conditions to closing and receive disbursement of the Loan on or
before the Closing Date in accordance with the terms hereof for any reason
(other than Lender's breach of the terms of the Loan Commitment or Borrower's
failure to fulfill the conditions of closing solely as a result of a failed
condition precedent under Section 3.1.O hereof), Borrower shall pay to
Prudential a termination fee equal to the sum of the Unwind Fee and the Loss
of Yield Fee (as such terms are hereinafter defined) (collectively, the
"Termination Fee"), in order to compensate Lender for any loss of yield in
connection with the re-investment by Lender of the Loan funds. As used
herein, the "Unwind Fee" shall be an amount equal to (i) the Percentage Price
Increase (as hereinafter defined), if any, in a treasury note with a face
coupon of 7.5%, yielding 5.72%, due in the month of November in the year of
2001, with a closing bid price of 111.01 as of January 4, 1994 (the "Treasury
Note"), multiplied by (ii) $55,000,000. As used herein, the "Percentage Price
Increase" shall be an amount equal to the quotient of (A) the difference
between (x) the bid price of the Treasury Note as described above (the
"Original Bid Price"), and (y) the bid price of the Treasury Note as of the
Closing Date, as determined by Lender, divided by (B) the Original Bid Price.
In the event the Percentage Price Increase is less than or equal to zero (0)
because the bid price of the Treasury Note did not increase, the amount of
the Unwind Fee shall also be zero (0). As used herein, the "Loss of Yield
Fee" shall mean an amount equal to the (a) the number of days from January 4,
1994 to the Closing Date, inclusive, expressed as a percentage of 360 days,
multiplied by (b) $55,000,000, and thus further multiplied by (c) the
difference between the interest rate of 7.44% and the Treasury Note yield of
5.72%. Lender shall notify Borrower of the amount and the basis of
determination of the Termination Fee. Within five (5) days after Borrower
receives such notification, Borrower shall remit to Lender the Termination
Fee, together with all other amounts due Lender hereunder. Borrower agrees
that Lender shall not be obligated to actually reinvest the undisbursed Loan
amount in any Treasury obligations as a condition to receiving the
Termination Fee.
2.7 NO RECOURSE TO PERSONAL ASSETS OF SHAREOWNERS.
Notwithstanding any term or provision contained in the Loan
Documents, no shareowner of Borrower shall be personally
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liable as such for the Obligations thereunder, whether such Obligations arose
before or after such shareowner became owner or holder of its shares in
Borrower; provided, however, that in seeking repayment for such Obligations,
nothing contained herein shall limit Lender's recourse against (i) Borrower,
(ii) any of Borrower's assets or properties, or (iii) any assets or
properties of Borrower which are wrongfully or fraudulently distributed to
any shareowner.
ARTICLE 3.
CONDITIONS TO LOAN
3.1 CONDITION PRECEDENT TO FUNDING OF LOAN.
On or before the date at least thirty (30) business days prior to the
Closing Date (or by such other date as may be specifically provided below),
Borrower shall submit to Lender for its review the following documents,
evidence, agreements and information. As a condition precedent to its
obligation to close the Loan and disburse the Loan proceeds, (i) Lender must be
satisfied with the form, substance and findings of all such documents, evidence,
agreements and information, and (ii) Borrower must satisfy and fulfill each of
the following conditions precedent to closing, to the satisfaction of Lender (in
its sole and absolute discretion) on or before the Closing Date:
A. LOAN DOCUMENTS. On or before the Closing Date, Borrower shall
deliver to Lender the following, each, unless otherwise noted, dated as of the
Closing Date, and in form and substance satisfactory to Lender, in its sole and
absolute discretion:
(i) This Agreement; and
(ii) The Note.
B. BORROWER ORGANIZATIONAL DOCUMENTS. On or before the date at least
ten (10) days prior to the Closing Date, Borrower shall deliver to Lender the
following:
(i) Certified copies of its Declaration of Trust and all other
agreements or documents relating to its formation as an unincorporated
association (the "Trust Agreement"), each to be dated a recent date prior
to the Closing Date;
(ii) Copies of any other organizational documents or board of trustee
rules or regulations (collectively, the "Bylaws"), certified as of the
Closing Date as true, correct and complete by a Trustee Officer;
(iii) Resolutions of Borrower's Board of Trustees
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approving and authorizing the execution, delivery and performance of
this Agreement and the execution, delivery and payment of the Note,
certified as of the Closing Date by a Trustee Officer as being in full
force and effect without modification or amendment;
(iv) Signature and incumbency certificates of each Trustee Officer
executing this Agreement and the Note;
(v) With respect to the Consolidated Partnership and, the
Unconsolidated Partnership, such charter and partnership documents,
authorization documents, and incumbency certificates relating to such
entities as Lender may require; and
(vi) Such other documents, instruments, agreements, contracts or
other information as Lender may reasonably request.
C. HAZARDOUS MATERIALS. On or before the date at least thirty (30)
days prior to the Closing Date, Borrower shall submit, at its own expense, any
and all reports, investigations, inquiries and other data relating to Hazardous
Materials that Borrower has commissioned, received, or otherwise reviewed or
obtained with respect to each Facility. Such information shall establish that
with respect to the Facilities covered thereby, (i) there are no Hazardous
Materials stored or otherwise present on, in or about any such Facilities except
for Approved Materials (as hereinafter defined); (ii) there are no underground
tanks located on, in or about any such Facilities; (iii) there exists no
Environmental Claims or other material environmental risks, problems or hazards
affecting any such Facilities, and (iv) all activities conducted on any such
Facilities have been conducted in compliance with all Environmental Laws.
D. FINANCIALS. On or before the date at least thirty (30) days prior
to the Closing Date, Borrower shall deliver to Lender audited consolidated
annual financial statements (including, without limitation, balance sheets,
income statements, cash flow statements and changes in owner's equity) for
Borrower and the Consolidated Partnership for the most recently available fiscal
year, prepared by Kenneth Leventhal & Co. or other certified public accountants
approved by Lender (the "Annual Financials"), and consolidated quarterly
financial statements (including, without limitation, balance sheets, income
statements, cash flow statements and changes in owner's equity) for Borrower and
the Consolidated Partnership for each fiscal quarter of the then current fiscal
year, certified by the Trustee Officer of Borrower as being consistently
prepared on a consolidated basis in accordance with GAAP and otherwise true,
correct and complete in all respects (the "Quarterly Financials") (the Annual
Financials and the Quarterly Financials are referred to herein collectively as
the "Financials").
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E. TITLE. On or before the date at least twenty (20) days prior to
the Closing Date, Borrower shall deliver to Lender evidence satisfactory to
Lender that title to all of the Facilities is one hundred percent (100%) vested
fee simple in Borrower (with the exception of the Facility owned by the
Consolidated Partnership which shall be one hundred percent (100%) vested fee
simple in the Consolidated Partnership) and is good and marketable in all
aspects, free and clear of all Liens and other defects other than Approved
Liens.
F. CONFIRMATION OF REIT STATUS. On the date five (5) days prior to
the Closing Date, Lender shall have received a letter from Borrower's
independent accountants or attorneys confirming that Borrower has been a
qualified REIT from its inception through the most recent fiscal quarter just
ended. In addition, Borrower shall deliver to Lender evidence that Borrower has
in excess of 110 shareholders and that in no event do seven (7) or fewer Persons
control, directly or indirectly, fifty percent (50%) or more of the outstanding
shares of Borrower.
G. LENDER STATEMENT AND AGREEMENT. On or before the date at least
ten (10) days prior to the Closing Date, Borrower shall have delivered to Lender
a statement by each of Sanwa Bank and Union Bank, certifying with respect to the
applicable lines of credit made by such parties to Borrower, as to the
following:
(i) The amount of the unpaid balance of the applicable line of credit
and the interest rate applicable thereto, together with the total amounts,
if any, of all overdue installments of either principal or interest, or
both;
(ii) The amounts of periodic payments, if any;
(iii) The date on which the applicable line of credit expires or is
otherwise due in whole or in part;
(iv) The nature and, if known, the amount of any additional charges,
costs, or expenses payable by Borrower; and
In addition, Borrower shall notify each of Sanwa Bank and Union Bank in writing
(with a copy to Lender) that Borrower has, pursuant to the terms of loan
documents relating to such lines of credit, elected to change its address for
notice thereunder such that all such notices to Borrower shall be delivered to
Borrower at the address of Borrower set forth on the signature page hereof, with
a copy to Lender at the address of Lender set forth on the signature page
hereof.
H. OTHER DEBT. As of the Closing Date and after payment of the Loan
proceeds in accordance with the terms of Section 2.1.D hereof, neither Borrower
nor the Consolidated Partnership (i) shall be indebted to any Person for
borrowed
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money on an unsecured basis, (ii) other than the Sanwa Line of Credit and the
Union Line of Credit (which shall each have a zero (0) balance as of the
Closing Date, but which may be redrawn upon after the Closing Date in
accordance with the terms hereof), shall be indebted to any Person for
borrowed money, nor liable for any other obligation, in each case secured in
whole or in part by any Facility, and (iii) shall have incurred any other
Indebtedness other than Approved Indebtedness.
I. OPINIONS OF BORROWER COUNSEL. On or before the Closing Date,
Lender shall have received an originally executed copy of one or more favorable
written opinions of Nordman, Cormany, Hair & Compton, counsel for Borrower and
the Consolidated Partnership, in form and substance reasonably satisfactory to
Lender and its counsel, dated as of the Closing Date, and setting forth
substantially the matters in the opinion set forth in EXHIBIT D attached hereto.
J. PERFORMANCE OF AGREEMENTS. As of the Closing Date, Borrower shall
have performed in all material respects all agreements which this Agreement
provides shall be performed on or before the Closing Date.
K. ADVERSE FINANCIAL CHANGE. On the Closing Date, Borrower shall
deliver to Lender a certificate of the Trustee Officer of Borrower to the effect
that, as of the Closing Date, (i) the then Tangible Net Worth of Borrower and
the Consolidated Partnership is not less than $100,000,000 and (ii) there has
been no Material Adverse Change since the date of the last Quarterly Financials.
L. COMPLIANCE CERTIFICATE. On or before the Closing Date, Borrower
shall have delivered to Lender a Compliance Certificate which shall certify,
among other things, as of the Closing Date and upon giving effect to the funding
of the Loan, (i) that each of the representations and warranties of Borrower
contained in the Loan Documents is true, correct and complete, (ii) that no
Event of Default or Potential Event of Default exists under the Loan Documents,
(iii) as to the outstanding principal balance of all Indebtedness of Borrower
and the Consolidated Partnership, including but not limited to, the Sanwa Line
of Credit and the Union Line of Credit (which shall each have an outstanding
principal balance of zero (0)), and (iv) that Borrower and the Consolidated
Partnership is in compliance with each of the financial covenants applicable to
them set forth in the Loan Documents (and which shall set forth in detail
satisfactory to Lender the methodology used to determine such compliance).
M. TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein and in the other Loan Documents shall be true,
correct and complete in all material respects on the Closing Date.
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N. NO DEFAULT. As of the Closing Date, no event shall have occurred
or would result from the funding of the Loan that would constitute an Event of
Default or a Potential Event of Default.
O. NO RESTRAINT. As of the Closing Date, no order, judgment or decree
of any court, arbitrator or governmental authority shall purport to enjoin or
restrain Lender from making the Loan, no hearing to cause an injunction or other
restraining order to be issued shall be pending or noticed seeking to enjoin or
otherwise prevent the consummation of this Agreement or the making of the Loan
hereunder, and the making of the Loan shall not violate any applicable law, rule
or regulation, including, without limitation, Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System and/or Sections 260.140.93(e) and/or 260.140.103 of the California Code
of Regulations, nor subject Lender to any material tax, penalty, liability or
other onerous condition under any applicable law or regulation.
P. NO PROCEEDINGS. As of the Closing Date, there shall not have
been filed by or against Borrower or the Consolidated Partnership or the
Unconsolidated Partnership (i) a petition in bankruptcy, (ii) a petition or
answer seeking assignment for the benefit of creditors, (iii) a petition or
answer seeking the appointment of a receiver, trustee or liquidator with respect
to Borrower or any of the aforementioned parties, or any substantial portion of
Borrower's or such parties' property, or (iv) any reorganization, arrangement,
liquidation or dissolution or similar relief under the Federal bankruptcy laws
or any state law.
Q. APPLICATION OF PROCEEDS. Lender shall have received evidence
satisfactory to it that the proceeds of the Loan will be disbursed in accordance
with Section 2.1.D hereof and will be used in compliance with Sections 2.5 and
5.10 hereof.
R. NO LITIGATION. Except for those matters disclosed in EXHIBIT E
which shall be satisfactory to Lender (in its sole and absolute discretion), as
of the Closing Date, there shall not be any pending or threatened action, suit,
proceeding, governmental investigation or arbitration against or affecting
Borrower or the Consolidated Partnership or any Facility.
S. NO DAMAGE OR CONDEMNATION. As of the Closing Date, (i) none of
the Facilities shall have suffered any uninsured damage by fire or other
casualty, (ii) not more than 3 Facilities shall have suffered any damage by fire
or other casualty, whether or not insured, and (iii) none of the Facilities
shall have become, in whole or in part, the subject of any actual or threatened
condemnation action or proceeding or the exercise of the power of eminent
domain.
T. LEASES AND OTHER DOCUMENTS. On or before the date
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at least twenty (20) days prior to the Closing Date, Borrower shall submit to
Lender copies of (i) all Anchor Leases and any other lease or sublease
identified by Lender, (ii) all relevant documentation relating to the Sanwa
Line of Credit and the Union Line of Credit, (iii) all relevant documentation
relating to the Leasehold Project (including all ground leases and the
Existing Purchase Money Mortgages), including, in each case, all amendments
and modifications thereto, certified by the Trustee Officer of Borrower as
true, correct and complete.
U. CERTIFIED RENT ROLL. On or before the Closing Date, Borrower
shall deliver to Lender a current Rent Roll covering all Existing Facilities,
certified by the Trustee Officer of Borrower as being true, correct and
complete.
V. UCC SEARCH. On or before the date at least twenty (20) days
prior to the Closing Date, Borrower shall submit to Lender UCC searches relating
to the Facilities, Borrower and the Consolidated Partnership for each state in
which such Facilities are located or with respect to which such entities do
business. The UCC searches must provide that other than the Approved Liens, no
Person shall hold a security interest in any of the assets of Borrower or the
Consolidated Partnership.
W. PROPERTY MANAGEMENT PLAN. On or before the date at least ten
(10) days prior to the Closing Date, Borrower shall submit to Lender a detailed
property management plan with respect to the use, operation and ownership of the
Facilities, and a plan detailing Borrower's proposed investments and
acquisitions of New Facilities in the current fiscal year.
X. MINIMUM RATING. On or before the Closing Date, Borrower shall
have received a letter rating for this transaction of not less than "BBB" by
Standard & Poor's Ratings Group.
Z. ASBESTOS PROGRAM. On or before the Closing Date, Borrower shall
institute and place in operation an Asbestos Operations and Maintenance Program
(satisfactory to Lender) for any Facilities which contain asbestos or asbestos
containing materials.
AA. REQUEST FOR NOTICE OF DEFAULT. On or before the Closing Date,
there shall be recorded in favor of Lender, Requests for Notice of Default with
respect to the Sanwa Properties and the Union Property.
AB. PAYMENT OF ALL FEES AND COSTS. Borrower shall pay all fees,
costs and expenses of Lender due as of the Closing Date as provided in
Section 8.2 hereof.
AC. PAY-OFF OF SANTA FE SPRINGS. Borrower shall have delivered
evidence to Prudential that Borrower shall have repaid in full the indebtedness
secured by the mortgage or deed of trust encumbering the Santa Fe Facility and
effected a reconveyance or
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release of the mortgage or deed of trust encumbering such Santa Fe Facility.
AD. REQUEST FOR DISBURSEMENT. At least five (5) business days
prior to the Closing Date, Borrower shall have delivered to Lender a written
request for disbursement of the Loan in the form attached hereto as EXHIBIT H.
AE. DISBURSEMENT ON OR BEFORE THE CLOSING DATE. The disbursement of
the Loan must occur on or before the Closing Date.
AF. EVIDENCE OF INSURANCE. At least ten (10) days prior to the
Closing Date, delivery to Lender of certificates or other evidence of the
insurance policies required under Section 5.5 hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
All representations and warranties of Borrower contained in this
Agreement shall survive the execution, delivery and acceptance thereof by the
parties hereto and the Closing Date. In order to induce Lender to enter into
this Agreement and to make the Loan, Borrower represents and warrants to Lender
that the following statements are true, correct and complete:
4.1 ORGANIZATION, POWERS, GOOD STANDING, AND BUSINESS.
Borrower is a California real estate investment trust duly formed,
validly existing and in good standing under the laws of the State of
California. Borrower is validly qualified as a REIT. Borrower is duly
qualified to do business in California, Arizona and every other state in
which it does business. The Consolidated Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of California. Borrower and the Consolidated Partnership each have the
trust or partnership power, as the case may be, and authority to own and
operate their properties, to carry on their business as now conducted and
proposed to be conducted, and Borrower has all requisite authority to enter
into each Loan Document, to issue the Note and to carry out the transactions
contemplated hereby and thereby. Borrower is duly qualified as a foreign
unincorporated association to do business in, and is in good standing in
every jurisdiction in which the nature of the business conducted or
properties owned by it makes such qualification necessary. Borrower is not a
"foreign person" within the meaning of Section 1445 and 7701 of the Code.
4.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution delivery
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and performance of the Loan Documents and the issuance, delivery and payment
of the Note have been duly authorized by all necessary trust action by
Borrower.
B. NO CONFLICT. The execution, delivery and performance by Borrower
of each Loan Document to which it is a party and the issuance, delivery and
performance of the Note by Borrower do not and will not (i) violate any
provision of law applicable to Borrower, the Trust Agreement or other
organization documents or Bylaws of Borrower, or any order, judgment or decree
of any court or other agency of government binding on Borrower; (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contractual Obligation of Borrower; (iii) result in or
require the creation or imposition of any Lien, charge or encumbrance of any
nature whatsoever upon any of Borrower's or the Consolidated Partnership's
properties or assets; or (iv) require any approval or consent of any Person
under any Contractual Obligation of Borrower.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Borrower of each Loan Document to which it is a party and the issuance, delivery
and payment of the Note by Borrower do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
Federal, state or other governmental authority or regulatory body or other
Person.
D. BINDING OBLIGATION. The Note and each other Loan Document is the
legally valid and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally.
4.3 FINANCIAL CONDITION.
Borrower has furnished Lender with the most recent Annual Financials
and Quarterly Financials of Borrower. Such financial statements (including any
related schedules and/or notes) are true, correct and complete in all material
respects and have been prepared in conformity with GAAP and show all
liabilities, direct and contingent, of Borrower and the Consolidated Partnership
required to be shown in accordance with GAAP. The balance sheets fairly present
the condition of Borrower and the Consolidated Partnership as at the dates
thereof, and the statements of income and statements of changes in financial
position fairly present the results of the operations of Borrower and the
Consolidated Partnership for the periods indicated. There has been no change in
the business, condition or operations (financial or otherwise) of Borrower or
the Consolidated Partnership since the last Quarterly Financials and since that
date no event or change has occurred that has caused or evidences, either in any
case or in the aggregate,
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a Material Adverse Effect other than as disclosed in this Agreement.
4.4 ACTIONS PENDING.
There is no action, suit, investigation, proceeding or arbitration at
law or in equity or before or by any Federal, State, municipal or other
governmental agency or instrumentally, domestic or foreign, pending or,
threatened against or affecting Borrower or the Consolidated Partnership, or any
properties or rights of Borrower or the Consolidated Partnership which might
result in any Material Adverse Change in the business, condition, properties,
assets or operations of Borrower or the Consolidated Partnership, or could
reasonably be expected to result in a Material Adverse Effect.
4.5 TITLE TO FACILITIES; LIENS.
Borrower and the Consolidated Partnership has good and marketable
title to its Facilities and good title to all of its other properties and
assets, including other properties and assets reflected in the Financials
referred to in Section 4.3. All the Facilities and all such properties and
assets are free and clear of all Liens of any kind except Approved Liens. All
leases necessary in any material respect for the conduct of the business of
Borrower and the Consolidated Partnership or for the realization of Net
Operating Income are valid and subsisting and are in full force and effect. The
ground leases relating to the Leasehold Projects and the Existing Purchase Money
Mortgages are valid and subsisting and are in full force and effect.
4.6 TAXES.
All tax returns and reports of Borrower and the Consolidated
Partnership required to be filed by it have been timely filed, and all taxes,
assessments, fees and other governmental charges upon Borrower and the
Consolidated Partnership and upon their respective properties, assets, income
and franchises which are due and payable have been paid when due and payable,
except to the extent that such taxes, assessments and/or fees are being disputed
in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP. Except as specifically disclosed in
writing to Lender, Borrower knows of no proposed tax assessment against it or
the Consolidated Partnership.
4.7 CONFLICTING AGREEMENTS AND OTHER MATTERS.
Neither Borrower nor the Consolidated Partnership is a party to any
contract or agreement or subject to any charter or other restriction that is
reasonably expected to result in a Material Adverse Effect. Neither Borrower
nor the Consolidated Partnership is a party to, or otherwise subject to any
provisions contained in, any instrument evidencing Indebtedness of Borrower or
the Consolidated Partnership, any agreement relating thereto
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or any other Contractual Obligation (including its Trust Agreement) which
restricts Borrower from entering into this Agreement and borrowing the Loan
proceeds evidenced by the Note. Neither Borrower nor the Consolidated
Partnership is in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any Contractual
Obligation, and no condition exists which, with the giving of notice or the
lapse of time or both, would constitute such a default thereunder.
4.8 REGULATION G, ETC.
Neither Borrower nor the Consolidated Partnership owns or has any
present intention of acquiring any Margin Stock. Neither Borrower nor the
Consolidated Partnership is engaged in the business of extending credit for
the purpose of purchasing or carrying any Margin Stock. None of the proceeds
of the Loan will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of such Regulation G.
Neither Borrower nor the Consolidated Partnership nor any agent acting on
behalf of any of them has taken or will knowingly take any action which, at
the time the action is taken, might cause the Loan Documents or the Note to
violate Regulation G, Regulation T or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934, as amended, in each case as in effect now or as the same may
hereafter be in effect.
4.9 ERISA.
Borrower is in compliance in all material respects with any applicable
provisions of ERISA and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans. No accumulated funding deficiency
(as defined in section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Employee Benefit or Pension Plan (other than
a Multiemployer Plan). No liability to the Pension Benefit Guaranty Corporation
has been or is expected by Borrower to be incurred with respect to any Employee
Benefit or Pension Plan (other than a Multiemployer Plan) by Borrower which
could reasonably be expected to result in a Material Adverse Effect. Borrower
has not incurred nor expects to incur any withdrawal liability under Title IV of
ERISA with respect to any Multiemployer Plan which could reasonably be expected
to result in a Material Adverse Effect. The execution and delivery of the Loan
Documents and the issuance of the Note will not involve any transaction which is
subject to the prohibitions of section 406 of ERISA or in connection with which
a tax could be imposed pursuant to section 4975 of the Code. No Termination
Event has occurred or is reasonably expected to occur with respect to any
Pension Plan which has had or will have a Material Adverse
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Effect.
4.10 CERTAIN FEES.
Other than fees payable hereunder or under the transactions
contemplated hereby (including those payable by Borrower to Kemper Securities,
Inc., Borrower's attorneys and consultants and the title company), no fee
(including without limitation, broker's or finder's fees or commissions) will be
payable with respect to the offer, issue and sale of the Note or any of the
transactions contemplated hereby, and Borrower hereby indemnifies Lender against
and agrees that it will hold Lender harmless from any claim, demand or liability
for any such fees alleged to have been incurred in connection with any such
offer, issue and sale, or any of the other transactions contemplated hereby and
any expenses, including reasonable legal fees, arising in connection with any
such claim, demand or liability.
4.11 DISCLOSURE.
No representation or warranty of Borrower contained in this Agreement,
any Loan Document, or any other document, certificate or written statement
furnished to Lender by Borrower for use in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of circumstances then
existing. There is no fact known to Borrower which could be expected to have a
Material Adverse Effect which has not been disclosed to Lender.
4.12 GOVERNMENTAL REGULATION
Neither Borrower nor the Consolidated Partnership is a (i) "holding
company," a "subsidiary holding company" of a holding company" or an "affiliate"
of a "holding company" or of a "subsidiary holding company" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, or (ii) public utility within the meaning of the Federal Power
Act, as amended. Neither Borrower nor the Consolidated Partnership is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or an "investment
adviser" within the meaning of the Investment Advisers Act of 1940, as amended.
Neither Borrower nor the Consolidated Partnership is subject to any federal or
state statute or regulation limiting its ability to incur Indebtedness for money
borrowed; other than the provisions of Sections 260.140.93(e) and 260.140.103 of
the California Code of Regulations (the "California Reit Regulations"), and
execution, delivery and performance by Borrower of the Loan Documents, the
making of the Loan, and Borrower's use of the proceeds thereof as contemplated
hereby, in each case, is in full compliance with the provisions of the
California Reit Regulations and the terms of Borrower's Trust Agreement.
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4.13 ENVIRONMENTAL MATTERS.
Except as disclosed in EXHIBIT I attached hereto or in the hazardous
materials reports delivered to Lender pursuant to Section 3.1.C hereof: (i) the
Facilities and the operations of Borrower and the Consolidated Partnership
(including, without limitation, all operations and conditions at or in the
Facilities) comply in all material respects with all Environmental Laws; (ii)
Borrower and the Consolidated Partnership have obtained all Environmental
Permits necessary under Environmental Laws applicable to their respective
operations and Facilities, and all such permits are in full force and effect,
and Borrower and the Consolidated Partnership are in compliance with all
material terms and conditions of such Environmental Permits; (iii) neither
Borrower nor the Consolidated Partnership has received (a) any notice or claim
to the effect that it is or may be liable to any person as a result of the
Release or threatened Release of any Hazardous Materials or (b) any letter or
request for information under Section 104 of the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or
comparable state laws, and none of the operations of Borrower or the
Consolidated Partnership is the subject of any Federal or state investigation
evaluating whether any remedial action is needed to respond to a Release or
threatened Release of any Hazardous Material at any of the Facilities or at any
other location; (iv) none of the Facilities nor the operations of Borrower or
the Consolidated Partnership is subject to any judicial or administrative
proceeding alleging the violation of or liability under any Environmental Laws;
(v) neither Borrower nor the Consolidated Partnership nor any of their
Facilities or operations are subject to any outstanding written order or
agreement with any governmental authority or private party respecting any
Environmental Claims; (vi) neither Borrower nor the Consolidated Partnership has
any contingent liability in connection with any Release of any Hazardous
Materials by Borrower or the Consolidated Partnership or any other Person; (vii)
neither Borrower nor the Consolidated Partnership or any predecessor of Borrower
or of the Consolidated Partnership nor any Person has filed any notice under any
Environmental Law indicating past or present treatment, or disposal of Hazardous
Materials at any of the Facilities, and none of Borrower's or the Consolidated
Partnership's operations or the operations of any Person in relation to the
Facilities involves the generation, transportation, treatment, storage, or
disposal of hazardous waste, as defined under 40 C.F.R. Part 260270 or any
applicable state equivalent; (viii) other than Approved Materials, no Hazardous
Materials exist on, under or about any Facility and neither Borrower nor the
Consolidated Partnership nor any Person has filed any notice or report of a
Release of any Hazardous Materials; (ix) neither Borrower nor the Consolidated
Partnership (or any of their predecessors) has disposed of Hazardous Materials
in a manner that may reasonably be expected to give rise to an Environmental
Claim; (x) no underground storage tanks
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or surface impoundments are on or at the Facilities; and (xi) no Lien in
favor of any Person for (a) any liability under Environmental Laws, or (b)
damages arising from or costs incurred by any such Person in response to
Hazardous Materials has been filed or has attached to the Facilities.
4.14 LAND USE.
Except as provided in EXHIBIT G attached hereto, to the best of Borrower's
knowledge, the Facilities and the uses thereof comply with all applicable
zoning, building, environmental and land use laws, ordinances, rules,
regulations and other similar restrictions, and that there is no action or
proceeding pending before any court, quasi-judicial body or administrative
agency relating thereto. Except as provided in EXHIBIT G attached hereto, to
the best of Borrower's knowledge, Borrower has obtained all unconditional
certificates of occupancy and all other certificates, permits, licenses and
other items which are required by or are to be obtained from any board, agency
or department, whether governmental or otherwise for the use and occupancy of
the Facilities as presently used and occupied or as contemplated to be used and
occupied.
4.15 NO SUBSIDIARIES OR AFFILIATES.
Other than the Consolidated Partnership, Borrower has no Subsidiaries or
Affiliates.
4.16 FOREIGN ASSETS CONTROL REGULATIONS.
Neither the making of the Loan nor Borrower's use of the proceeds thereof
as contemplated by this Agreement will violate any of the regulation
administered by the Office of Foreign Assets Control, United States Department
of the Treasury, as amended, or any of the rules or regulations issued
thereunder.
ARTICLE 5.
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as this Agreement shall be
in effect and until payment in full of the Loan and the Note, Borrower shall
perform, and shall cause the Consolidated Partnership to perform, all of the
covenants in this Article 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS
A. Borrower will maintain, and cause the Consolidated Partnership to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP. Borrower shall not, without Lender's prior written
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consent, modify or otherwise change its method of accounting from that set forth
in the Financial delivered as of the Closing Date. Borrower will deliver to
Lender:
(i) Within ninety (90) days after the close of each fiscal year of
Borrower (a) audited consolidated annual financial statements (including,
without limitation, balance sheets, income statements, cash flow statements
and changes in owner's equity) substantially in the form of the Annual
Financials prepared by Kenneth Leventhal & Co. or other certified public
accountants approved by Lender, certified without qualification by such
certified public accountants, each in form and substance satisfactory to
Lender, including all elements of income and expenses for the operation of
the Facilities and (b) a Compliance Certificate;
(ii) Within forty-five (45) days after the close of each fiscal
quarter of Borrower (a) consolidated quarterly financial statements
certified by the Trustee Officer of Borrower substantially in the form of
the Quarterly Financials, or, if Lender has reason to believe that there
has occurred a Material Adverse Change, then audited consolidated quarterly
financial statements prepared by Kenneth Leventhal & Co. or other certified
public accountants acceptable to Lender, each in form and substance
satisfactory to Lender, showing all elements of income and expenses for the
operation of the Facilities and (b) a Compliance Certificate;
(iii) Within five (5) years after Lender's receipt of any statement,
Lender may, upon at least five (5) days' prior notice to Borrower,
(i) inspect and make copies of Borrower's books, records and income tax
returns with respect to the Facilities, for the purpose of verifying any
such statement and/or (ii) audit, at Borrower's expense, the books and
records of Borrower; provided, however, that in the event such audit
reveals a discrepancy of less than 3% from the statements so audited,
Lender shall pay the cost of such audit;
(iv) Promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as Borrower shall send to
their public shareowners/stockholders and copies of all registration
statements (without exhibits) and all reports which it files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange commission);
(v) Promptly upon receipt thereof, a copy of each other report
submitted to Borrower by independent accountants in connection with any
annual, interim or special audit made by them of the books of Borrower;
(vi) Within thirty (30) days of the end of each fiscal
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quarter of Borrower during the term of the Loan, if requested by Lender,
a current Rent Roll covering all Facilities, certified by a Trustee
Officer of Borrower as true, correct and complete, and a plan for
acquisition.
(vii) With reasonable promptness, such other information or financial
data as Lender may reasonably request.
Together with each delivery of audited financial statements when required by
this Section 5.1.A above, Borrower will deliver to Lender a certificate of such
accountants stating that, the scope of the audit conducted by such accountant
was sufficient to make the statements set forth in the certification, and that
in performing such audit, they have (x) obtained no knowledge of any Event of
Default or Potential Event of Default, or, if they have obtained knowledge of
any Event of Default or Potential Event of Default, specifying the nature and
period of existence thereof and (y) have confirmed the accuracy and completeness
of the Compliance Certificate, or, if they have obtained knowledge of any such
inaccuracy or incompleteness, specifying the nature thereof. Lender is hereby
authorized to deliver a copy of any financial statement delivered to it pursuant
to this Section 5.1 to any assignee or participant of or in the Loan or any
regulatory body having jurisdiction over Lender.
B. In addition to the foregoing, Borrower will deliver to Lender:
(i) promptly upon any Trustee Officer of Borrower obtaining knowledge
(a) of any condition or event which constitutes an Event of Default or
Potential Event of Default, (b) that any Person has given any notice to
Borrower or the Consolidated Partnership or taken any other action with
respect to a claimed default or event or condition of the type referred to
in Section 7.2, (c) of the institution of any litigation involving an
alleged liability of Borrower or the Consolidated Partnership equal to or
greater than Five Hundred Thousand Dollars ($500,000) or any adverse
determination in any litigation involving a potential liability of Borrower
or the Consolidated Partnership equal to or greater than Five Hundred
Thousand Dollars ($500,000), or (d) of the occurrence of a Material Adverse
Change; an Officers' Certificate specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such holder or Person and the nature of such claimed
default, Event of Default, Potential Event of Default, event or condition,
and what action Borrower has taken, is taking and proposes to take with
respect thereto;
(ii) promptly upon becoming aware of the occurrence of or forthcoming
occurrence of any (a) Termination Event, or (b) "prohibited transaction,"
as such term is defined in
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Section 4975 of the Code or Section 406 of ERISA, in connection with any
Employee Benefit Plan or any trust created thereunder, a written notice
specifying the nature thereof, what action Borrower has taken, is taking
or proposes to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of
Labor, or the Pension Benefit Guaranty Corporation with respect thereto;
(iii) with reasonable promptness copies of (a) all notices received
by Borrower or any of its ERISA Affiliates of the Pension Benefit Guaranty
Corporation's intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan; (b) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by Borrower or
any of its ERISA Affiliates with the Internal Revenue Service with respect
to each Pension Plan; and (c) all notices received by Borrower or any of
its ERISA Affiliates from a Multiemployer Plan sponsor concerning the
imposition or amount of withdrawal liability pursuant to Section 4202 of
ERISA;
(iv) promptly upon request of Lender, such certifications or other
evidence that (a) Borrower is not an "employee benefit plan" or a
"governmental plan"; and (b) Borrower is not subject to state statutes
regulating investments and fiduciary obligations with respect to
governmental plans; and (c) one or more of the following circumstances is
true:
(1) Equity interests in Borrower are publicly offered securities,
within the meaning of 29 C.F.R. Section 2510.3101(b)(2);
(2) Less than twenty-five percent (25%) of all equity interests in
Borrower are held by "benefit plan investors" within the meaning
of 29 C.F.R. Section 2510.3101(f)(2); or
(3) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e).
(v) Promptly, and in any event within thirty (30) days after receipt
thereof, a copy of any notice, summons, citation, directive, letter or
other form of communication from any governmental authority or court in any
way concerning any action or omission on the part of Borrower or the
Consolidated Partnership in connection with any Hazardous Material or
concerning the filing of a lien upon, against or in connection with
Borrower or the Consolidated Partnership, or any of their leased or owned
real or personal property, in connection with a Hazardous Substance
Superfund or a Post-Closure Liability Fund as maintained pursuant to U.S.C.
Section 9507; and
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(vi) with reasonable promptness, such other information and data with
respect to Borrower or the Consolidated Partnership as from time to time
may be reasonably requested by Lender.
5.2 INSPECTION.
Borrower shall permit any Person designated by Lender in writing to
visit and inspect any of the Facilities to examine the corporate books and
financial records of Borrower and the Consolidated Partnership and make copies
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of Borrower and the Consolidated Partnership with the principal officers of
Borrower and its independent public accountants, all at such reasonable times
and as often as Lender may reasonably request.
5.3 QUALIFICATION AS REIT; PUBLICLY TRADED COMPANY.
Borrower shall at all times cause to be done all things necessary to
maintain, preserve and renew its existence as a California real estate
investment trust, its qualification as a REIT pursuant to the Code and any
regulations promulgated thereunder, and its good standing in each state in which
it is doing business. At all times Borrower shall cause to be done all things
necessary to maintain, preserve and renew its status as a publicly traded REIT
listed on the New York Stock Exchange and in compliance with the rules and
regulations of the Securities and Exchange Commission.
5.4 MAINTENANCE OF FACILITIES.
At its sole cost and expense, Borrower and the Consolidated
Partnership shall continue to use each of the Facilities for the same purpose as
such Facility was being used as of the Closing Date or, for any New Facilities,
at the time of its acquisition, and shall keep and maintain each of the
Facilities, including any parking, recreational and landscaped portions thereof,
in the same or better condition as such Facility is in as of the Closing Date
or, for New Facilities, at the time of its acquisition, and Borrower and the
Consolidated Partnership shall promptly make all necessary structural and non-
structural repairs to the Facilities.
5.5 INSURANCE.
Borrower shall at all times and at its own expense maintain, preserve
and keep in full force and effect, or cause to be maintained, preserved and kept
in full force and effect policies of insurance for its properties (including,
without limitation, the Facilities), assets and operations with reputable
companies and by such methods as shall be adequate in form, substance, and
amount against casualties, losses and liabilities, all in form and substance
satisfactory to Lender; provided,
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however, that Borrower shall not be required to provide earthquake insurance
for the Facilities.
5.6 TAXES.
Borrower will, and will cause the Consolidated Partnership, to duly
pay and discharge all taxes, assessments and other governmental charges or
levies imposed upon them, their income or any of their properties or assets, as
well as all claims of any kind, not later than the due date thereof, provided,
however, that nothing herein shall require Borrower or the Consolidated
Partnership to pay any such tax, assessment, charge, levy or claim so long as
Borrower or the Consolidated Partnership, as the case may be, in good faith
shall contest the amount, validity, or applicability thereof and shall, to the
extent required by GAAP, set aside on its books adequate reserves with respect
thereto, or if requested by Lender, provide other security or bond therefor.
5.7 PAYMENT OF INDEBTEDNESS.
A. Borrower will, and will cause the Consolidated Partnership to, pay
punctually and discharge when due any Indebtedness heretofore or hereafter
incurred by Borrower and the Consolidated Partnership and discharge, perform and
observe the covenants, provisions and conditions to be performed, discharged and
observed on the part of Borrower and the Consolidated Partnership in connection
therewith, or in connection with any agreement or other instrument related
thereto, or in connection with any Lien existing at any time upon or in any of
the properties or assets of Borrower or the Consolidated Partnership; provided,
however, that Borrower's or the Consolidated Partnership's right to maintain or
incur Indebtedness or Liens shall be governed by and limited as provided in
Sections 6.2 and 6.8 hereof.
B. On or before the Closing Date, Borrower will (i) cause to be repaid
all other Indebtedness, other than, except as set forth herein, the Approved
Indebtedness, and (ii) cause the outstanding balance of the Sanwa Line of Credit
and the Union Line of Credit to be zero (0); provided, however, that after the
Closing Date, Borrower shall, subject to the terms hereof, be entitled to draw
on such lines of credit in accordance with the terms thereof.
5.8 COMPLIANCE WITH LAWS.
Borrower will, and will cause the Consolidated Partnership, to comply
with all laws, rules, regulations and orders of any governmental authority which
are applicable to Borrower, the Consolidated Partnership and/or any of the
Facilities.
5.9 ENVIRONMENTAL MATTERS.
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A. Borrower shall (i) comply and cause all tenants and other Persons
on or occupying any of the Facilities, to comply with all Environmental Laws;
(ii) without limiting the generality of clause (i), except for Hazardous
Materials used in accordance with applicable Environmental Laws and prudent
business practices which are reasonably necessary for the operation of the given
Facility as it is currently operated ("Approved Materials"), not install, use,
generate, manufacture, store, release or dispose of, nor permit the
installation, use, generation, storage, release or disposal of Hazardous
Materials on, under or about any of the Facilities, nor transport or permit the
transportation of Hazardous Materials to or from any of the Facilities, except
in accordance with applicable Environmental Laws and prudent business practices,
and as reasonably necessary for the operation of the given Facility as it is
currently operated; (iii) immediately advise Lender in writing of (a) any and
all Environmental Claims, (b) the presence of any Hazardous Materials on, under
or about any of the Facilities or any property adjoining any of the Facilities
(other than Approved Materials); (iv) provide Lender with copies of all reports,
analyses, notices, licenses, approvals, orders, correspondences or other written
materials relating to the environmental condition of any Facility or any
Environmental Claims immediately upon receipt, completion or delivery of such
materials; (v) not install or allow to be installed any underground tanks on any
of the Facilities; (vi) not create or permit to continue in existence any Lien
upon any of the Facilities imposed pursuant to any Environmental Laws; and
(vi) not materially change or alter the present use of any Facility unless
Borrower shall have notified Lender thereof in writing and Lender shall have
determined, in its sole and absolute discretion, that such change or
modif'ication will not result in the presence of Hazardous Materials on such
Facility in such a level that would increase the potential liability for
Environmental Claims.
B. Borrower shall promptly take or cause to be taken any and all
necessary remedial work ("Remedial Work") in response to any Environmental
Claims or the presence, storage, use, disposal, transportation, discharge or
release of any Hazardous Materials on, under or about any of the Facilities.
All Remedial Work shall be conducted (i) in a diligent and timely fashion by
licensed contractors acting under the supervision of a consulting environmental
engineer; (ii) pursuant to a detailed written plan for the Remedial Work in
accordance with all Environmental Laws and approved by any public or private
agencies or persons with a legal or contractual right to such approval;
(iii) with such insurance coverage pertaining to liabilities arising out of the
Remedial Work as is then customarily maintained with respect to such activities;
and (iv) only following receipt of any required permits, licenses or approvals.
As a part of, or following completion of, such Remedial Work, Borrower shall
institute and place in operation a Hazardous Materials operations and
maintenance program to provide for continued environmental monitoring of the
applicable Facility.
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The selection of the Remedial Work contractors and consulting environmental
engineer, the contracts entered into with such parties, any disclosures to or
agreements with any public or private agencies or parties relating to
Remedial Work and the written plan for the Remedial Work (and any changes
thereto) each shall, at Lender's option, be subject to Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed. In
addition, Borrower shall submit to Lender, promptly upon receipt or
preparation, copies of any and all reports, studies, analyses,
correspondence, governmental comments or approvals, proposed removal or other
Remedial Work contracts and similar information prepared or received by
Borrower in connection with any Remedial Work or Hazardous Materials relating
to any Facility. Borrower acknowledges and agrees that in the event Hazardous
Materials are caused to be removed from the Facilities, the Environmental
Protection Agency number, manifest number or similar identification assigned
to the Hazardous Materials so removed shall not name Lender, and Borrower
shall assume all liability for such removed Hazardous Materials. All costs
and expenses of such Remedial Work shall be paid by Borrower, including,
without limitation, the charges of the Remedial Work contractors and the
consulting environmental engineer, any taxes or penalties assessed in
connection with the Remedial Work and Lender's reasonable fees and costs
incurred in connection with monitoring or review of such Remedial Work.
Lender shall have the right but no obligation to join and participate in, as
a party if it so elects, any legal proceedings or actions initiated in
connection with any Environmental Claims.
C. With respect to any Facility which contains asbestos or asbestos
containing materials, Borrower shall institute and place in operation an
Asbestos Operations and Maintenance Program satisfactory to Lender.
D. Borrower and the Consolidated Partnership shall give to Lender,
its agents and employees access to the Facilities, and hereby specifically grant
to Lender, its agents and employees, for the term of the Loan, a license,
subject to the rights of tenants of the Facilities, to enter upon the Facilities
for the purposes of conducting tests and investigations for Hazardous Materials,
and, in the event Borrower fails to comply with the terms of this Section 5.9,
to remove and remediate, at Borrower's sole cost and expense, any Hazardous
Materials. Notwithstanding the provisions hereof, the Note or any other
provision in any Loan Document, Lender shall be entitled to bring an action for
specific performance against Borrower to compel Borrower to comply with the
terms of this Section 5.9.
E. Upon the occurrence of an Event of Default or Potential Event of
Default or upon Lender having reason to believe that a potential environmental
problem exists with respect to any Facility, and upon the request of Lender,
Borrower agrees to submit, at its own expense, hazardous materials report(s)
satisfactory to Lender, in its sole and absolute
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discretion, detailing and describing the past and current uses, operations
and activities on or about such Facilities involving, directly or indirectly,
the use, generation, treatment, storage or disposal of any Hazardous
Materials.
F. Borrower shall protect, indemnify and hold Lender, and any
successors, assigns or participants in or to Lender's interest in the Loan, and
any successors and assigns of such Persons, and all directors, officers,
employees and agents of all of the aforementioned indemnified parties, harmless
from and against any and all actual or potential claims, liabilities, damages,
losses, fines, penalties, judgments, awards, costs and expenses (including,
without limitation, attorneys' fees and costs and expenses of investigation)
which arise out of or relate in any way to any Environmental Claims or any use,
handling, production, transportation, disposal, release or storage of any
Hazardous Materials in, under or on any Facility whether by Borrower or by any
tenant or any other Person, including, without limitation, (i) all foreseeable
and all unforeseeable consequential damages directly or indirectly arising out
of (a) Environmental Claims or the use, generation, storage, discharge or
disposal of Hazardous Materials by Borrower, any prior owner or operator of any
Facility or any Person on or about any Facility; (b) any residual contamination
affecting any natural resource or the environment; (iii) any exercise by Lender
of any of its rights and remedies hereunder; and (iv) Lender's reliance on any
representation or warranty made herein, if such representation or warranty
proves to be materially false or misleading; and (ii) the costs of any required
or necessary repair, cleanup, or detoxification of any Facility and the
preparation of any closure or other required plans. All such claims,
liabilities, damages, losses, fines, penalties, judgments, awards, costs and
expenses heretofore described and/or referred to in this Section 5.9.F are
hereinafter referred to as "Expenses". Borrower's liability to the
aforementioned indemnified parties shall arise upon the earlier to occur of
(x) discovery of any Hazardous Materials on, under or about any Facility, or
(y) the institution of any Environmental Claims, and not upon the realization of
loss or damage, and Borrower shall pay to Lender from time to time, immediately
upon Lender's request, an amount equal to such Expenses, as reasonably
determined by Lender. This Section 5.9.F shall survive the repayment of the
Loan and the termination of the Loan Documents.
5.10 USE OF PROCEEDS OF LOAN.
Borrower shall only use the proceeds of the Loan to pay in full (i)
the outstanding principal balance of the Sanwa Line of Credit and the Union Line
of Credit as of the Closing Date, (ii) transaction costs in connection with the
Loan; and (iii) the acquisition costs for New Facilities permitted hereunder and
other related working capital needs of Borrower. With respect to any proceeds of
the Loan used to repay or retire existing Indebtedness of Borrower or the
Consolidated Partnership, Lender shall have the right to fund such proceeds
directly to the holder
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of such debt being repaid or retired.
5.11 COMPLIANCE WITH LAND USE RESTRICTIONS.
Borrower will, and will cause the Consolidated Partnership to, comply
with all applicable zoning, building, environmental and land use laws,
ordinances, rules, regulations and other similar restrictions, and Borrower will
obtain and keep in full force and effect all certificates of occupancy and other
certificates, permits, licenses and other items which are required by or are to
be obtained from any board, agency or department, whether governmental or
otherwise for the use and occupancy of the Facilities as presently used and
occupied or as contemplated to be used and occupied.
ARTICLE 6.
NEGATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of the Loan
and all other amounts owing hereunder, Borrower will perform, and shall cause
the Consolidated Partnership to perform, all of the covenants in this Article 6.
6.1 ACQUISITIONS.
Borrower shall only acquire New Facilities in its own name and for its
own behalf and not through the use of any partnership entity or any other
Subsidiary or Affiliate. Borrower shall only acquire New Facilities which are
held by Borrower one hundred percent (100%) in fee simple and which are fully
operating income producing investment real property projects and Borrower shall
not invest in or acquire, directly or indirectly, any raw land; construction,
development, or rehabilitation projects (other than (x) those construction,
development, or rehabilitation projects which would not require completion of
construction obligations or other expenditures on capital improvements during
the term of the Loan in excess of $3,000,000 per project or (y) forward
commitments to acquire new construction projects which will be at least 80%
leased pursuant to market rate leases as of the date of acquisition thereof and
the cost of which do not exceed $10,000,000 per project); leasehold or other
sale/leaseback projects or transactions; or any other similar projects or
investments (collectively, "Nonapproved Projects"). At least five (5) days
prior to acquiring any such New Facility, Borrower shall, at its own expense,
deliver to Lender, with respect to such New Facility, (i) a hazardous material
report in form and substance satisfactory to Lender, and (ii) any Anchor Leases.
In the event such hazardous materials report indicates that Phase II testing
should be performed, or recommends any Remedial Work, Borrower shall not,
without the prior written approval of Lender, acquire any such New Facility, and
in no event will Borrower knowingly,
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after due investigation, purchase, demise, or otherwise acquire any Facility
or any interest in Facility containing asbestos, or any other Hazardous
Materials (other than Approved Materials) in levels or amounts which would
increase the likelihood of Environmental Claims. Borrower shall pay all
Lender's fees costs and expenses (including, without limitation, reasonable
attorneys fees) incurred in connection with the review of any materials or
data submitted to Lender in connection with the acquisition of any New
Facility.
6.2 LIENS.
Borrower and the Consolidated Partnership will not, directly or
indirectly, create, assume, incur or suffer to be created, assumed or
incurred or to exist, any Lien on or in any Facility or asset of any kind,
real or personal, tangible or intangible, of Borrower and/or the Consolidated
Partnership, except for (i) Liens for real property taxes (but excluding
special assessments or bond assessment financing) not yet due or which are
being actively contested in good faith by appropriate proceedings, provided
adequate reserves with respect thereto are maintained on the books of
Borrower in accordance with GAAP; (ii) other Liens incidental to the conduct
of its business or the ownership of the properties and assets of Borrower and
the Consolidated Partnership (such as mechanic's liens, materialmen's liens
or vendor's liens) which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit, and which do not in the
aggregate materially detract from the value of its properties or assets or
materially impair the use thereof in the operation of its businesses or which
would have a Material Adverse Effect; (iii) the Approved Liens; and/or (iv)
other Liens approved in writing by Lender. Borrower agrees to disclose the
existence of this Section 6.2 in writing to any lien holder or potential lien
holder other than a lien holder or potential lien holder described in clause
(i) through (iii) above (excluding therefrom a new replacement lienholder of
any Approved Lien in substitution for the existing holder of such Approved
Lien). In the event Borrower at any time defaults in the performance or
observance of this Section 6.2, then notwithstanding the terms of any such
financing between Borrower and such other lien holder, the indebtedness of
such other lien holder shall be junior and subordinate in payment and
application to the indebtedness evidenced hereby and by the Note. Nothing in
this Section 6.2 shall be deemed to constitute a Lien in favor of Lender, and
the inclusion of this Section 6.2 does not evidence any intention to or
contemplation of the creation of a Lien in favor of Lender.
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6.3 SALES, MERGER AND/OR CONSOLIDATION.
Borrower and the Consolidated Partnership will not sell, lease
(other than real property leases to tenants of the Facilities entered into in
the ordinary course of business), transfer, abandon or otherwise dispose of
all, or substantially all, of their property and/or assets to any other
Person or consolidate with or merge into any other trust, entity,
unincorporated association or corporation or permit any trust, entity,
unincorporated association or corporation to merge with or into Borrower, or
purchase, establish or acquire any new Subsidiary, Affiliate, or other entity
or enterprise (other than a New Facility in accordance with the terms of
Section 6.1 hereof); provided, however, that Borrower may, in any single
fiscal year, sell a Nonsubstantial Portion of Borrower's Assets as long as,
and as a condition precedent thereto, Borrower fully reinvests the net
proceeds of such sale(s) in its business as presently conducted. As used
herein "Nonsubstantial Portion of Borrower's Assets" shall mean a portion of
Borrower's or the Consolidated Partnership's assets which are less than 15%
of the Consolidated Book Value calculated at the end of the most recent
fiscal quarter, and with respect to which such assets have generated less
than 15% of Net Operating Income during the four most recent fiscal quarters
as of the date of determination.
6.4 FUNDAMENTAL CHANGES.
Borrower will not, and will not permit the Consolidated Partnership
to engage in any business other than substantially the same line of business
as conducted by Borrower and the Consolidated Partnership on the Closing
Date; or liquidate, wind up or dissolve, whether voluntarily or involuntarily
(or suffer any such liquidation or dissolution); or make any material change
in Borrower's Trust Agreement, capital structure or in any of its business or
investment objectives, purposes and operations which might result in a
Material Adverse Effect.
6.5 TRANSACTIONS WITH AFFILIATES.
Borrower will not, and will not permit the Consolidated Partnership
to, enter into any transaction (including, without limitation, the purchase,
sale, lease, disposition or exchange of property or the rendering of any
service) with the Consolidated Partnership, the Unconsolidated Partnership,
any Subsidiary or any Affiliate except in the ordinary course of business
pursuant to the reasonable requirements of the business of Borrower and the
Consolidated Partnership and upon fair and reasonable terms no less favorable
to Borrower and the Consolidated Partnership than would be obtained in a
comparable arms length transaction with a person not the Consolidated
Partnership, the Unconsolidated Partnership, a Subsidiary, or an Affiliate.
6.6 LOANS; INVESTMENTS.
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A. Borrower will not, and will not permit the Consolidated
Partnership to, make loans to, advances to or otherwise enter into Contingent
Obligations on behalf of or investments in the stock or obligations of any
Person (other than investment of cash or cash equivalents in Permitted
Investments in the ordinary course of business).
B. Borrower will not, and will not permit the Consolidated
Partnership to, invest in or acquire any Nonapproved Project and/or purchase
money mortgages. Notwithstanding the foregoing, Borrower may (i) continue to
hold the Existing Purchase Money Mortgages, and (ii) hold additional purchase
money mortgages obtained in sales of Facilities in the ordinary course of
business and as otherwise allowed hereunder; provided that (a) the principal
balance of any purchase money mortgage does not exceed seventy-five percent
(75%) of the sales price of the applicable Facility sold, or have a term in
excess of five (5) years, and (b) the aggregate amount of all such purchase
money mortgages does not exceed, at any time, the sum of $10,000,000.
6.7 LIMITATION ON LEASES AND LESSEES.
Borrower will not permit more than 15% of Net Operating Income for
any four consecutive fiscal quarters to be generated by, either directly or
indirectly, any one Facility, lessee, operator or borrower, nor shall
Borrower permit any one Facility or assets to constitute more than 15% of
Consolidated Book Value.
6.8 OTHER DEBT.
Other than (i) the Approved Indebtedness and (ii) unsecured
Indebtedness of Borrower incurred after the Closing Date and which, in any
and all events, strictly complies with the terms of this Agreement
(including, without limitation, Section 6.9 hereof ("New Unsecured
Indebtedness")), Borrower and the Consolidated Partnership shall not have
outstanding any Indebtedness or create, assume, suffer to exist or incur any
Indebtedness or lease obligations (other than the Loan from Lender and the
leasing of its headquarters in the ordinary course of business), or become
liable for the indebtedness of another, without the prior written consent of
Lender. Prior to incurring any New Unsecured Indebtedness, Borrower shall
notify Lender of the terms and conditions thereof. Borrower agrees to
disclose the existence of this Section 6.8 in writing to any lender/creditor
other than a lender/creditor holding Approved Indebtedness (excluding
therefrom a new replacement lienholder of any Approved Lien in substitution
for the existing holder of such Approved Lien). In the event Borrower at any
time defaults in the performance or observance of this Section 6.8, then
notwithstanding the terms of any such financing between Borrower and such
other lender/creditor, the indebtedness of such other lender/creditor shall
be junior and subordinate in payment and application to the indebtedness
evidenced hereby and by the Note.
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6.9 FINANCIAL COVENANTS.
Borrower's shall at all time comply with the terms of this Section
6.9 provided that compliance with the terms of this Section 6.9 shall be
measured quarterly as of the last day of each fiscal quarter of Borrower.
A. TANGIBLE NET WORTH. Borrower will not permit its Tangible Net
Worth to be less than One Hundred Million Dollars ($100,000,000).
B. INDEBTEDNESS TO CONSOLIDATED BOOK VALUE. Borrower and the
Consolidated Partnership shall not create, incur, suffer or allow to exist
Indebtedness (including, with respect to the Sanwa Line of Credit and the
Union Line of Credit, only the funded portion of such line of credit
indebtedness within the calculation of Indebtedness) in excess of fifty
percent (50%) of Consolidated Book Value.
C. MAXIMUM SECURED DEBT. Borrower and the Consolidated
Partnership shall not create, incur, suffer or allow to exist Indebtedness
secured in whole or in part by any of its properties (including, without
limitation, the Facilities) or other assets (including, with respect to the
Sanwa Line of Credit and the Union Line of Credit, only the funded portion of
such line of credit indebtedness within the calculation of secured
Indebtedness) which at any time (i) exceeds the lesser of (a) $36,500,000 or
(b) twenty percent (20%) of Consolidated Book Value, or (ii) is secured, in
whole or in part, by any assets or properties of Borrower or the Consolidated
Partnership, other than the Sanwa Properties and the Union Property.
D. DEBT SERVICE COVERAGE. Borrower and the Consolidated
Partnership shall not permit or allow the Debt Service Coverage to be less
than 2.5 to 1.0.
6.10 INTEREST RATE SWAP AGREEMENTS.
Borrower and the Consolidated Partnership will not enter into any
interest rate swap, collar hedge or other similar agreements with respect to
the Loan or any other Indebtedness.
6.11 CALCULATION OF CONSOLIDATED BOOK VALUE.
Borrower shall, in calculating Consolidated Book Value, carry its
assets on its books at the lesser of cost or market and shall not write-up
Consolidated Book Value to reflect increased value based upon market.
Borrower shall not otherwise modify its method of calculating Consolidated
Book Value from that employed in the preparation of Financials delivered to
Lender in connection with the Loan.
6.12 NO CHANGE IN COLLATERAL FOR LINES OF CREDIT.
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Borrower shall not, without the prior written consent of Lender,
change, substitute or otherwise modify the make-up, mix or nature of the
Sanwa Properties or any other property securing the Sanwa Line of Credit or
the make-up, mix or nature of the Union Property or any other property
securing the Union Line of Credit; provided, however, that Borrower shall be
entitled to replace either the Sanwa Line of Credit and/or the Union Line of
Credit with a new line of credit or lines of credit from one or more
institutional lenders as long as (i) the terms thereof comply with the
provisions of this Agreement (including, without limitation, Section 6.9
hereof) and (ii) the only property serving as collateral or security for such
line of credit or lines of credit is the Sanwa Properties and/or the Union
Property.
6.13 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF AGREEMENT.
Except as otherwise expressly provided for in this Agreement, no
termination or cancellation (regardless of cause or procedure) of this
Agreement shall in any way affect or impair the powers, obligations, duties,
rights, and liabilities of Borrower or Lender relating to (i) any transaction
or event occurring prior to such termination or cancellation, or (ii) any of
the undertakings, agreements, covenants, indemnities, warranties and
representations of Borrower or Lender contained in this Agreement.
SECTION 7.
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
IF any of the following conditions or events ("Events of Default")
shall occur and be continuing:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure to pay any installment of principal of, or Prepayment
Premium on, the Loan when due, whether at stated maturity, by acceleration,
by notice or otherwise; or failure to pay any interest on the Loan or any
other amount due under this Agreement within five (5) days after the date
due; or
7.2 DEFAULT IN OTHER AGREEMENTS.
A. FAILURE TO MAKE PAYMENTS. Failure of Borrower or the
Consolidated Partnership to pay when due any principal or interest on any
Indebtedness (including, without limitation, the Sanwa Line of Credit or the
Union Line of Credit) or Contingent Obligation (other than Indebtedness
referred to in Section 7.1); or
B. BREACH OF ANY MATERIAL TERM. Breach or default of Borrower or the
Consolidated Partnership with respect to any
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other material term of (i) any evidence of any Indebtedness or Contingent
Obligation (ii) any loan agreement, mortgage, indenture or other agreement
relating thereto, if the effect of such failure, default or breach is to
cause, or to permit the holder or holders of that Indebtedness or Contingent
obligation (or a trustee on behalf of such holder or holders) then to cause,
that Indebtedness or Contingent Obligation to become or be declared due prior
to its stated maturity (or the stated maturity of any underlying obligation,
as the case may be); or
7.3 BREACH OF CERTAIN COVENANTS.
Failure of Borrower to perform or comply with any term or condition
contained in Sections 5.3, 5.9 or any of the negative covenants set forth in
Sections 6.1 through 6.3, inclusive, hereof, Section 6.6 hereof, or Sections
6.8 through 6.12, inclusive, hereof; or
7.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made
by Borrower herein, in any Compliance Certificate, or in any other Loan
Document or in any statement or certificate at any time given by such Person
in writing pursuant hereto or in connection herewith or therewith shall be
false, inaccurate or misleading in any material respect on the date as of
which made; or
7.5 OTHER DEFAULTS UNDER AGREEMENT OR LOAN DOCUMENTS.
Borrower shall default in the performance of or compliance with any
term contained in this Agreement or in the performance or compliance with any
term contained in the other Loan Documents other than those referred to above
in Sections 7.1, 7.3 or 7.4 hereof and such default shall not have been
remedied within thirty (30) days after the occurrence of such default; or
7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
A. A court having proper jurisdiction shall enter a decree or
order for relief in respect of Borrower or the Consolidated Partnership in an
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or
B. An involuntary case is commenced against Borrower or the
Consolidated Partnership under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
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Borrower or the Consolidated Partnership, or over all or a substantial part
of its property, shall have been entered; or the involuntary appointment of
an interim receiver, trustee or other custodian of Borrower or the
Consolidated Partnership for all or a substantial part of its property; or
the issuance of a warrant of attachment, execution or similar process against
any substantial part of the property of Borrower or the Consolidated
Partnership, and the continuance of any such event in this clause (B) for
sixty (60) days unless dismissed, bonded or discharged; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
A. Borrower, the Consolidated Partnership or any of its
Subsidiaries shall have an order for relief entered with respect to it or
commence a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case, or
to the conversion of an involuntary case to a voluntary case, under any such
law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; the making by Borrower or the Consolidated Partnership of any
assignment for the benefit of creditors; or
B. The inability or failure of Borrower or the Consolidated
Partnership, or the admission by Borrower or the Consolidated Partnership in
writing of its inability, to pay its debts as such debts become due; or the
Board of Trustees of Borrower (or any committee thereof) adopts any
resolution or otherwise authorizes action to approve any of the actions
referred to in clause (A) or this clause (B); or
7.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment, or similar
process involving (i) in any individual case an amount in excess of $500,000
or (ii) in the aggregate at any time an amount in excess of $1,000,000 (in
either case not fully covered by insurance as to which the insurance company
has acknowledged coverage) shall be entered or filed against Borrower or the
Consolidated Partnership or any of their respective assets; or
7.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Borrower or
the Consolidated Partnership decreeing the dissolution or split up of
Borrower or the Consolidated Partnership; or
7.10 ERISA.
A. PENSION PLANS.
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(i) Borrower or any of its ERISA Affiliates fails to make full
payment when due of all amounts which, under the provisions of any
Pension Plan or Section 412 of the Code, Borrower or any of its ERISA
Affiliates is required to pay as contributions thereto and such
failure results in a Material Adverse Effect;
(ii) Any accumulated funding deficiency occurs or exists,
whether or not waived, with respect to any Pension Plan and such
deficiency results in a Material Adverse Effect;
(iii) The excess of the actuarial present value of all benefit
liabilities under all Pension Plans over the fair market value of the
assets of such Pension Plans (excluding in such computation Pension
Plans with assets greater than benefit liabilities) allocable to such
benefit liabilities is greater than Five Hundred Thousand Dollars
($500,000) but only if such excess is not reduced to Five Hundred
Thousand Dollars ($500,000) (or less) within thirty (30) days
following the earliest of (a) the date of the filing with the Pension
Benefit Guaranty Corporation of a notice of intent to terminate any
Pension Plan other than under a standard termination as defined in
Section 4041(b) of ERISA, or (b) the date a trustee is appointed by an
appropriate United States district court to administer any Pension
Plan, or (c) the Pension Benefit Guaranty Corporation institutes
proceedings to terminate any Pension Plan or to appoint a trustee to
administer any Pension Plan, or (d) the date coincident with or any
date following the date on which Borrower or any of its ERISA
Affiliates withdraws (under Section 4063 of ERISA) from any Pension
Plan if either Borrower or any of its ERISA Affiliates has a liability
greater than Five Million Dollars ($5,000,000) to the Pension Benefit
Guaranty Corporation, or any successor thereto, or to any other party
resulting from or otherwise associated with such withdrawal; or
(iv) (a) Any Pension Plan maintained by Borrower or any of its
ERISA Affiliates shall be terminated within the meaning of Title IV of
ERISA, or (b) a trustee shall be appointed by an appropriate United
States district court to administer any Pension Plan, or (c) the
Pension Benefit Guaranty Corporation (or any successor thereto) shall
institute proceedings to terminate any Pension Plan or to appoint a
trustee to administer any Pension Plan, or (d) Borrower or any of its
ERISA Affiliates shall withdraw (under Section 4063 of ERISA) from a
Pension Plan, if as of the date of the event listed in subclauses
(a) - (d) above or any subsequent date, either Borrower or its ERISA
Affiliates has any liability (such liability to include, without
limitation, any liability to the Pension Benefit Guaranty Corporation,
or any successor thereto, or to any other party under Sections 4062,
4063 or 4064 of ERISA or any other provision of law) resulting from or
otherwise associated
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with the events listed in subclauses (a) - (d) above, and any such
event or events shall have a Material Adverse Effect;
B. MULTIEMPLOYER PLANS. Either Borrower or any of its ERISA
Affiliates as employers under one or more Multiemployer Plans shall have made
a complete or partial withdrawal from such Multiemployer Plans and the plan
sponsor of such Multiemployer Plans shall have notified such withdrawing
employer that such employer has incurred a withdrawal liability requiring
annual payments in an amount exceeding Five Hundred Thousand Dollars
($500,000) (as used in this Section 7.10 the term "accumulated funding
deficiency" has the meaning specified in Section 412 of the Code, and the
terms "actuarial present value" and "benefit liabilities" have the meanings
specified in Section 4001 of ERISA); or
7.11 LITIGATION.
Any lawsuit, lawsuits, other actions or proceedings are filed
against Borrower or the Consolidated Partnership in an aggregate amount of
$2,000,000 if such lawsuit(s), actions or proceedings are not (i) dismissed
within sixty (60) days or (ii) fully covered by insurance where the insurer
therefor has accepted tender of such claim without reservation; or
7.12 CHANGE OF CONTROL.
A. Any Person shall have (i) acquired beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) directly or indirectly, of shares or
securities of Borrower (or other securities convertible into such
securities), or (ii) acquired by contract or otherwise, or shall have entered
into a contract or arrangement which upon consummation will result in its
acquisition of, control over shares securities of Borrower (or other
securities convertible into such securities), in either case, representing
ten percent (10%) or more of the outstanding shares or securities of
Borrower; or
B. Borrower shall have less than one hundred ten (110)
shareholders/shareowners at any time; or
C. Any seven (7) or fewer Persons alone or acting in concert shall
have (i) acquired beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of
1934) directly or indirectly, of shares or securities of Borrower (or other
securities convertible into such securities), or (ii) acquired by contract or
otherwise, or shall have entered into a contract or arrangement which upon
consummation will result in its or their acquisition of, control over shares
or securities of Borrower (or other securities convertible into such
securities), in either case, representing fifty percent (50%) or more of the
outstanding
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shares or securities of Borrower; or
D. Any Share Purchase Rights (as defined in Borrower's Rights
Agreement dated as of May 29, 1990 (the "Rights Agreement")) at any time
become exercisable or transferrable under the Rights Agreement; or
7.13 MATERIAL ADVERSE CHANGE.
The occurrence of a Material Adverse Change;
THEN (i) upon the occurrence of any Event of Default described in
the foregoing Sections 7.6 or 7.7, the unpaid principal amount of and accrued
interest on the Loan and all other Obligations (including, without
limitation, any Prepayment Premium) shall automatically become immediately
due and payable, without presentment, demand, protest or other requirements
of any kind, all of which are hereby expressly waived by Borrower, and (ii)
upon the occurrence of any other Event of Default, Lender may, by written
notice to Borrower, declare all or any portion of the Loan (including,
without limitation, any Prepayment Premium), and all or some of the other
Obligations to be, and the same shall forthwith become, immediately due and
payable, together with accrued interest thereon.
ARTICLE 8
MISCELLANEOUS
8.1 ASSIGNMENTS AND PARTICIPATIONS IN LOAN AND NOTE.
Lender may assign its rights and delegate its obligations under
this Agreement and further may assign, or sell participations in, all or any
part of the Loan, the Loan Documents, or the Loan commitments evidenced
hereby or any other interest herein or in the Note to any Person; and to the
extent of such assignment, Lender shall be relieved of its obligations with
respect to the Loan and the assignee (the "Assignee") shall have, to the
extent of such assignment, the same rights, benefits and obligations as it
would if it were Lender hereunder and a holder of such Note. Lender may
furnish any information concerning Borrower, the Consolidated Partnership and
any of the assets of either from time to time to (i) assignees and
participants (including prospective assignees and participants), (ii) such
assignees' and participants' officers, directors, employees, agents and
consultants, (iii) to any transferee or potential transferee of such assignee
or participant, (iv) any federal or state regulatory authority having
jurisdiction over Lender or such assignees or participants, (iv) the National
Association of Insurance Commissioners or any similar organization, or (v)
any other Person to which such delivery or disclosure may be necessary or
appropriate (a) in compliance with any law, rule, regulation or order, (b) in
response to any subpoena or other legal process or formal investigative
demand,
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or (c) in connection with any litigation to which Lender or such assignees or
participants are or could become a party. Borrower hereby acknowledges and
agrees that any participation will give rise to a direct obligation of
Borrower to the participant and the participant shall for purposes of
Sections 5.1, 8.4 and 8.5 be considered to be a "Lender".
8.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to pay promptly (i) all the costs and expenses
of preparation of the Loan Documents and all the costs of furnishing all
opinions by counsel for any party hereto (including without limitation any
opinions requested by Lender as to any legal matters arising hereunder), and
of Borrower's and Lender's performance of and compliance with all agreements
and conditions contained herein and or the other Loan Documents on its part
to be performed or complied with; (ii) the reasonable fees, expenses and
disbursements of counsel to Lender (including allocated costs of internal
counsel) in connection with the negotiation, preparation, execution and
administration of the Loan Documents and the Loan and any amendments,
modifications or departures hereto or thereto; (iii) all other costs and
expenses incurred by Lender (including reasonable attorneys' fees (including
allocated costs of internal counsel)) in connection with the negotiation,
preparation, execution and administration of the Loan, the Loan Documents and
the transactions contemplated hereby; and (iv) all costs and expenses
(including attorneys' fees, including allocated costs of internal counsel,
and costs of settlement) incurred by Lender in enforcing, or in deciding how
or whether to enforce, any Obligations of or in collecting any payments due
from Borrower hereunder or under the Note, or any other Loan Document or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or of any
insolvency or bankruptcy proceedings, or in responding to any subpoena or
other legal process or formal investigative demand issued in connection with
the Loan or this Agreement or the transactions contemplated hereby or by
reason of any assignee or participant having acquired an interest herein or
in the Loan. All such expenses incurred and billed prior to the Closing Date
shall be paid on the Closing Date. All closing costs not billed by the
Closing Date shall be paid on demand. All legal fees and expenses incurred
after the Closing Date shall be paid on a monthly basis as billed.
8.3 INDEMNITY.
In addition to the payment of expenses pursuant to Section 8.2,
whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to indemnify, pay and hold Lender and the officers,
directors, employees, agents, and affiliates of Lender, and any successors or
assigns of Lender (collectively called the "Indemnities") harmless from and
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against: any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of counsel for such Indemnitee in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto), that may
be imposed on, incurred by, or asserted against that Indemnitee, in any
manner relating to or arising out of this Agreement or the other Loan
Documents, Lender's agreement to make the Loan hereunder or the use or
intended use of the proceeds of any of the Loan (the "Indemnified
Liabilities"); PROVIDED that Borrower shall have no obligation to an
Indemnitee hereunder with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of that Indemnitee. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnities or
any of them.
8.4 SET OFF.
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of
any Event of Default, Lender is hereby authorized by Borrower at any time or
from time to time, without notice to such Person, or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and
to apply any and all deposits (general or special, including, but not limited
to, Indebtedness evidenced by certificates of deposit, whether matured or
unmatured but not including trust accounts) and any other Indebtedness at any
time held or owing by Lender to or for the credit or the account of Borrower,
against and on account of the obligations and liabilities of Borrower to
Lender under this Agreement, the Note, including, but not limited to, all
claims of any nature or description arising out of or connected with this
Agreement, the Note, or any other Loan Document, irrespective of whether or
not (i) Lender shall have made any demand hereunder or (ii) the principal of
or the interest on the Loan or Note, any obligations of Borrower in respect
of and other amounts due hereunder shall have become due and payable pursuant
to Article 7 and although said obligations and liabilities, or any of them,
may be contingent or unmatured.
8.5 RATABLE SHARING
Lender and each subsequent holder of all or any portion of the Note
by acceptance thereof agrees among themselves that if any of them shall,
through the exercise of any right of counterclaim, set-off, banker's lien or
otherwise or as adequate protection of a deposit treated as cash collateral
under the
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Bankruptcy Code, receive payment or reduction of a proportion of
the aggregate amount of principal and interest then due with respect to the
Note or portion thereof held by Lender or holder, the amount then due to that
Lender or holder with respect to any participation therein or amounts due to
Lender or holder in respect of fees due hereunder (collectively, the
"Aggregate Amounts Due" to Lender or holder), which is greater than the
proportion received by Lender or holder of the Note or portion thereof in
respect to the Aggregate Amounts Due to such Lender or holder, then Lender or
holder of the Note receiving such proportionately greater payment shall (i)
notify each Lender or holder, as applicable, of such receipt and (ii)
purchase participations (which it shall be deemed to have purchased from each
seller simultaneously upon the receipt by such seller of its portion of such
payment) in the Aggregate Amounts Due to Lender and holders so that all such
recoveries of Aggregate Amounts Due shall be shared by Lender and holders of
the Note or portion thereof in proportion to the Aggregate Amounts Due them;
PROVIDED that if all or part of such proportionately greater payment received
by such holder is thereafter recovered from such holder, those purchases
shall be rescinded and the purchase prices paid for such participations shall
be returned to the applicable holder to the extent of such recovery, but
without interest. Borrower expressly consents to the foregoing arrangement
and agrees that any holder of a participation so purchased and any other
subsequent holder of a participation in the Note or portion thereof otherwise
acquired may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by Borrower to that
holder as fully as if that holder were a holder of the Note or portion
thereof, in the amount of the participation held by that holder.
8.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision
of this Agreement or of the Note, or consent to any departure by Borrower
therefrom, shall in any event be effective without the written concurrence of
Lender and in the case of an amendment or modification hereto, Borrower. Any
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on
Borrower in any case shall entitle Borrower to any other or further notice or
demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this Section 8.6
shall be binding upon each holder of the Note at the time outstanding, each
future holder of the Note, and on Borrower.
8.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that
if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence
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of an Event of Default or Potential Event of Default if such action is taken
or condition exists.
8.8 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing
and may be personally served, telecopied, telexed or sent by United States
mail or courier service and shall be deemed to have been given when delivered
in person, receipt of telecopy or telex or three Business Days after
depositing it in the United States mail, registered or certified, with
postage prepaid and properly addressed. For the purposes hereof, the
addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 8.8) shall be as set forth under each
party's name on the signature pages hereof.
8.9 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS.
A. All agreements, indemnities, representations and warranties
made herein shall survive the execution and delivery of this Agreement, the
making of the Loan hereunder and the execution and delivery of the Note.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of Borrower set forth in Sections 5.9, 8.2 and
8.3 shall survive the payment of the Loan, and the Note, and the termination
of this Agreement.
8.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Lender or any holder of the Note
or portion thereof in the exercise of any power, right or privilege hereunder
or under the Note shall impair such power, right or privilege or be construed
to be a waiver of any default or acquiescence therein, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement and the Note are cumulative
to, and not exclusive of, any rights or remedies otherwise available at law
or in equity. All amounts due or to be due hereunder shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by Borrower.
Borrower expressly waives all right to the benefit of any statute of
limitations and any moratorium, reinstatement, marshaling, forbearance,
extension, redemption, or appraisement now or hereafter provided by the
Constitution and the laws of the United States and of any state thereof, as a
defense to any demand against Borrower to the fullest extent permitted by law.
8.11 SEVERABILITY.
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In case any provision in or obligation under this Agreement or the
Note shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
8.12 HEADINGS.
Article and Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
8.13 APPLICABLE LAW.
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
8.14 SUCCESSORS AND ASSIGNS; SUBSEQUENT HOLDERS OF NOTE.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the
parties hereto and the successors and assigns of Lender. The terms and
provisions of this Agreement shall inure to the benefit of any assignee or
transferee of the Note, and in the event of such transfer or assignment, the
rights and privileges herein conferred upon Lender shall automatically extend
to and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. Borrower's rights and obligations or any interest therein
hereunder may not be assigned without the prior written consent of Lender,
and any purported assignment shall be null and void AB INITIO.
8.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL.
All judicial proceedings brought against Borrower arising out of or
relating to this Agreement, the Note or other Loan Document or any Obligation
may be brought in any state or Federal court of competent jurisdiction in the
State of California and by execution and delivery of this Agreement, Borrower
accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
waives any defense of forum non conveniens, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement,
such Note, such other Loan Document or such Obligation. ALL PARTIES TO THIS
AGREEMENT HEREBY AGREE THAT THIS SECTION 8.15 CONSTITUTES A WRITTEN CONSENT
TO WAIVER OF TRIAL BY JURY, PURSUANT TO THE PROVISIONS OF CALIFORNIA CODE OF
CIVIL PROCEDURE SECTION 631 IN ANY JUDICIAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS
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AGREEMENT, THE NOTE OR ANY OBLIGATION AND, IN FURTHERANCE THEREOF, BORROWER
DOES HEREBY CONSTITUTE AND APPOINT LENDER ITS TRUE AND LAWFUL
ATTORNEY-IN-FACT, WHICH APPOINTMENT IS COUPLED WITH AN INTEREST, AND BORROWER
DOES HEREBY AUTHORIZE AND EMPOWER LENDER IN THE NAME, PLACE AND STEAD OF
BORROWER TO FILE THIS AGREEMENT WITH THE CLERK OR JUDGE OF ANY COURT OF
COMPETENT JURISDICTION AS STATUTORY WRITTEN CONSENT TO WAIVER OF TRIAL BY
JURY. Borrower designates and appoints Leroy E. Carlson, Secretary of
Borrower on the date hereof, with offices at Real Estate Investment Trust of
California, 12011 San Vicente Boulevard, Suite 707, Los Angeles, California
90049-4949, and such other Persons as may hereafter be selected by Borrower
irrevocably agreeing in writing to so serve, as its agent to receive on its
behalf service of all process in any such proceedings in any such court, such
service being hereby acknowledged by Borrower to be effective and binding
service in every respect. A copy of any such process so served shall be
mailed by registered mail to Borrower at its address provided in the
applicable signature page hereto, except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity
of service of process. If any agent appointed by Borrower refuses to accept
service, Borrower hereby agrees that service upon it by mail shall constitute
sufficient notice. Nothing herein shall affect the right to serve process in
any other manner permitted by law or shall limit the right of Lender to bring
proceedings against Borrower in the courts of any other jurisdiction.
8.16 COUNTERPARTS.
This Agreement and any amendments, waivers, consents or supplements
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts together shall constitute
but one and the same Agreement.
8.17 EXHIBITS AND SCHEDULES.
The exhibits attached hereto are incorporated herein by this
reference and shall be a part of this Agreement.
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<PAGE>
8.18 ENTIRE AGREEMENT.
The Loan Documents set forth the entire understanding between
Borrower and Lender relative to the Loan and the same supersedes all prior
agreements and understandings relating to the subject matter hereof.
8.19 LOSS OF NOTE.
Upon receipt of written notice from the holder of the Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any
such loss, theft, or destruction, upon receipt of such holder's satisfactory
indemnity agreement (which in the case of Lender shall be an unsecured
indemnity), or in the case of any such mutilation, upon surrender and
cancellation of such Note, Borrower shall make and deliver a new Note, of
like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by a duly
authorized officer of each of Borrower and Lander as of the date first above
written.
BORROWER:
REAL ESTATE INVESTMENT TRUST OF
CALIFORNIA, a California real
estate investment trust
By:____________________________________________
Jay W. Pauly
President
By:____________________________________________
Leroy E. Carlson
Vice President
ATTEST: ADDRESS:
__________________________ Real Estate Investment Trust of
California
12011 San Vicente Boulevard
Suite 707
Los Angeles, California 90049-4949
LENDER:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:____________________________________________
ATTEST: ADDRESS:
__________________________ Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel
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Exhibit A
COMPLIANCE CERTIFICATE
The Prudential Insurance
Company of America
Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel
Gentlemen:
I, the undersigned, the _________________________ of Real Estate
Investment Trust of California, a California real estate investment trust
("Borrower"), do hereby certify, represent and warrant as follows:
1. This Certificate is furnished pursuant to [Section 3.1.L]
[Section 5.1.A.[(i)][(ii)]] of that certain Loan Agreement dated as of
________________, 1994 (the "Loan Agreement", the terms defined therein being
used herein as therein defined) by and between Borrower and The Prudential
Insurance Company of America, a New Jersey corporation ("Lender").
2. SCHEDULE 1 attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with Section 6.9 of the
Loan Agreement, all of which data and computations are complete, true and
correct.
3. No Event of Default or Potential Event of Default under the Loan
Agreement or the other Loan Documents has occurred and is continuing.
4. The representations and warranties set forth in Article 4 of the
Loan Agreement are true and correct as of the date hereof as though made on
and as of the date hereof.
5. The total credit commitments relating to, and the principal balance
of, all Indebtedness of the Borrower and the Consolidated Partnership as of
___________ __, 19__ are as follows:
LENDER/CREDITOR COMMITTED AMOUNT PRINCIPAL BALANCE
Prudential $55,000,000 $_____________
Sanwa $29,000,000 $_____________
Union $ 7,500,000 $_____________
_______________ $_____________
_______________ $_____________
6. The total credit commitments relating to, and the
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principal balance of, all secured Indebtedness of the Borrower and the
Consolidated Partnership as of ___________ __, 19__ are as follows:
LENDER/CREDITOR COMMITTED AMOUNT PRINCIPAL BALANCE
Sanwa $29,000,000 $_____________
Union $ 7,500,000 $_____________
The only properties and/or assets serving as security for secured
Indebtedness of the Borrower and the Consolidated Partnership are the Sanwa
Properties and the Union Property.
7. The total credit commitments relating to, and the principal balance
of, all unsecured Indebtedness of the Borrower and the Consolidated Partnership
as of ___________ __, 19__ are as follows:
LENDER/CREDITOR COMMITTED AMOUNT PRINCIPAL BALANCE
Prudential $55,000,000 $_____________
_______________ $_____________
_______________ $_____________
Executed this ____ day of _____________, 19__.
______________________________________________________
Name:_________________________________________________
Title:________________________________________________
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Schedule 1
To
Compliance Certificate
For the _____________ Ended ______________, 19__
SECTION 6.9.A Tangible Net Worth ($ Thousands)
A. Consolidated Book Value:
(i) Facilities (net of accumulated
depreciation), PLUS $___________
(ii) Cash, PLUS $___________
(iii) Permitted Investments, PLUS $___________
(iv) Prepaid Expenses, PLUS $___________
(v) Equity interest in Unconsolidated
Partnership (net of Borrower's pro rata
share of Unconsolidated Partnership's
secured indebtedness), PLUS $___________
(vi) Leasehold Projects (sum of
(A)(1), and (2)) $___________
(1) aggregate book value of
Finance Leases, PLUS $___________
(2) aggregate book value of all
outstanding Existing Purchase
Money Mortgages not in default $___________
(vii) Consolidated Book Value (sum of
(A)(i) through (A)(vi), inclusive) $___________
B. Consolidated total liabilities of
Borrower and the Consolidated Partnership: $___________
C. Tangible Net Worth (A(vii)-B): $___________
D. MINIMUM TANGIBLE NET WORTH ($ THOUSANDS): $100,000
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<PAGE>
SECTION 6.9.B INDEBTEDNESS TO CONSOLIDATED
BOOK VALUE ($ Thousands)
A. Indebtedness: $___________
B. Consolidated Book Value
(from A(vi) above): $___________
C. Indebtedness to Consolidated
Book Value (A/B): ____: 1.00
D. MAXIMUM INDEBTEDNESS TO CONSOLIDATED
BOOK VALUE: .50: 1.00
SECTION 6.9.C MAXIMUM SECURED DEBT ($ Thousands)
A. Secured Indebtedness: $___________
B. MAXIMUM SECURED INDEBTEDNESS -
(LESSER OF (i) $36,500 ($ THOUSANDS)
OR (ii) 20% OF CONSOLIDATED BOOK VALUE
(FROM A(vi) ABOVE): $___________
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SECTION 6.9.D. DEBT SERVICE COVERAGE ($ Thousands)
(All figures are for the period from
___________ __, 19__ to ____________ __, 19__,
inclusive)
A. Net Operating Income:
(i) gross income derived from Facilities,
PLUS $___________
(ii) earnings derived from cash and
cash equivalents, PLUS $___________
(iii) net earnings derived from Unconsolidated
Partnership Interest, PLUS $___________
(iv) net rent from Leasehold Projects, PLUS $___________
(v) interest payments on Existing Purchase
Money Mortgages not in default $___________
(vi) Gross Income (sum of (i) through (v)) $___________
(vii) Operating Expenses $___________
(viii) Administrative Expenses $___________
(ix) Net Operating Income ((vi)-((vii)+(viii)) $___________
B. Debt Service
(i) Interest payments on Loan: $___________
(ii) Interest payments on all
other Indebtedness: $___________
(iii) Debt Service ((i)+(ii)) $___________
C. Debt Service Coverage Ratio ((A)(viii)/B(iii)) ____ to 1.0
D. MAXIMUM DEBT SERVICE COVERAGE RATIO: 2.5 TO 1.0
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Exhibit B
[Sanwa Properties]
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<PAGE>
Exhibit C
[Borrower's Wiring Instructions]
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<PAGE>
Exhibit D
______________ __, 1994
The Prudential Insurance Company
of America
Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel
Re:U.S. $55,000,000 Loan Agreement (the "Agreement"), dated as of
____________ __, 1994 by and between Real Estate Investment Trust of
California, a California real estate investment trust ("Borrower") and The
Prudential Insurance Company of America, a New Jersey corporation ("Lender")
Ladies and Gentlemen:
We are special counsel to Borrower and to REIT of Santa Maria Properties, a
California general partnership (the "Partnership"), and, in this capacity, we
have advised Borrower with respect to the negotiation and preparation of the
Agreement, the Note, and the other Loan Documents. This Opinion Letter is
provided to you at the request of Borrower pursuant to Section 3.1.I of the
Agreement. Except as otherwise indicated herein, capitalized terms used in
this Opinion Letter are defined as set forth in the Agreement.
In connection with the foregoing we have examined:
(1) The Agreement;
(2) The Note;
(3) The Compliance Certificate (together with the Agreement and
the Note, collectively, the "Loan Documents");
(4) The other documents, instruments, agreements, reports and
other information furnished by Borrower pursuant to Section
3.1 of the Agreement;
(5) The Declaration of Trust of Borrower, as amended, together
with good standing certificates and tax clearance
certificates from the State of California and each other
state in which it conducts business or in which its
principal place of business is located (the "Trust
Agreement");
(6) The Trustee's Regulations of Borrower and all amendments
thereto (the "By-laws");
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(7) The Partnership Agreement of the Partnership;
(8) Statement of Partnership of the Partnership recorded in the
Official Records of _____________ County, California; and
(9) Fictitious Name Statement of the Partnership recorded in the
Official Records of _____________ County, California.
In addition, we have examined the originals, or copies
certified to our satisfaction, of such other records of Borrower and the
Partnership, certificates of public officials and of officers of Borrower and
the Partnership, and agreements, instruments and other documents, as we have
deemed necessary as a basis for the opinions expressed below.
We are qualified to practice law in the State of California
and we do not purport to be experts on any laws other than the laws of the
State of California and the laws of the United States of America.
Based upon the foregoing and upon such investigation as we
have deemed necessary, we are of the following opinion:
1. Borrower is an unincorporated association duly organized,
validly existing and in good standing under the laws of the
State of California.
2. Borrower has been a qualified real estate investment trust
(as defined under Section 856 of the Internal Revenue Code
of 1986, as amended) from the date of its inception and is a
qualified real estate investment trust (as defined under
Section 856 of the Internal Revenue Code of 1986, as
amended) as of the date hereof.
3. The Partnership is a general partnership duly formed and
validly existing under the laws of the State of California.
4. The execution, delivery and performance by Borrower of the
Loan Documents are within Borrower's trust powers, have been
duly authorized by all necessary trust action, and do not
contravene (i) the Trust Agreement or the By-laws, (ii) any
order, writ, judgment, decree, determination, award, demand,
law, rule or regulation applicable to Borrower, or (iii) any
contractual or legal restriction contained in any document
to which Borrower or the Partnership is a party.
5. The Loan Documents have been duly executed and delivered to
Lender by and on behalf of Borrower.
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<PAGE>
6. The Loan Documents are legal, valid and binding obligations
of Borrower enforceable against Borrower in accordance with
their respective terms.
7. No authorization, approval, consent, license, filing,
recordation, declaration, registration or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by Borrower of the Loan Documents.
8. There are no pending or threatened suits, actions,
investigations or proceedings against Borrower or the
Partnership before any court, arbitrator or governmental
agency.
9. Borrower is not in default with respect to any judgement,
order, writ, injunction, decree, determination, award or
demand of any court, arbitrator or governmental agency.
10. Receipt by Lender of all principal, interest and fees
required to be paid pursuant to the terms of the Loan
Documents will not violate the usury laws of the Sate of
California.
11. Neither Borrower nor the Partnership is subject to
regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act or the Investment Company Act of
1940 or to any federal or state statute or regulation
limiting its ability to incur indebtedness for money
borrowed; other than the provisions of
Sections 260.140.93(e) and 260.140.103 of the California
Code of Regulations (the "California Reit Regulations"), and
execution, delivery and performance by Borrower of the Loan
Documents, the making of the Loan, and Borrower's use of the
proceeds thereof as contemplated by the Loan Documents, in
each case, is in full compliance with the provisions of the
California Reit Regulations and the terms of Borrower's
Trust Agreement.
12. Neither the making of the Loan nor Borrower's use of the
proceeds thereof as contemplated by the Loan Documents will
violate any of the regulations administered by the Office of
Foreign Assets Control, United States Department of the
Treasury, as amended, or any of the rules or regulations
issued thereunder.
13. Neither the making of the Loan nor the use of the
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<PAGE>
proceeds thereof as contemplated by the Loan Documents
will violate or result in a violation of the rules of the
Federal Reserve System, including, without limitation,
Regulation G, Regulation T, Regulation U or Regulation X
of the Board of Governors of the Federal Reserve System.
14. There are no sovereign immunity defenses available to
Borrower which would affect Lender's ability to enforce any
of its rights or remedies under the Loan Documents, at law
or in equity.
This Opinion Letter is addressed to the Lender for the benefit
of the Lender and its participants and assigns.
Very truly yours,
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Exhibit E
[Pending Litigation]
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<PAGE>
Exhibit F
[Existing Facilities]
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<PAGE>
Exhibit G
[Land Use Compliance Disclosure]
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<PAGE>
Exhibit H
[Request for Disbursement]
_________________, 1994
The Prudential Insurance Company of America
The Prudential Mortgage Capital, Inc.
Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel
Loan No.: 6 100 525
Name: Real Estate Investment Trust of
California
Ladies and Gentlemen:
Pursuant to that certain Loan Agreement dated as of January 31, 1994 by
and between you ("Lender") and the undersigned ("Borrower"), the Borrower
does hereby request that you disburse the full amount of the Loan in the
amount of $55,000,000 in accordance with the terms and provisions of the Loan
Agreement (including without limitation, Section 2.1.D thereof) as provided
in Schedule One attached hereto.
It is understood that you will not see to, or be responsible for, the
disbursement of the funds beyond payment thereof as above authorized, and it
is agreed that payment to third parties as provided and allowed under the
terms of the Loan Agreement shall constitute payment to us. We understand
and acknowledge that interest shall begin to accrue on all such funds upon
such disbursement.
REAL ESTATE INVESTMENT TRUST OF
CALIFORNIA, a California real
estate investment trust
By:____________________________________
Jay W. Pauly
President
By:____________________________________
Leroy E. Carlson
Vice President
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<PAGE>
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<PAGE>
SCHEDULE ONE OF DISBURSEMENT REQUEST
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<PAGE>
Exhibit I
[Environmental Compliance Disclosure]
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<PAGE>
Exhibit 10.31
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment"), is made as of
July 7, 1995 by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey corporation ("Lender") and REAL ESTATE INVESTMENT TRUST OF CALIFORNIA, a
California real estate investment trust ("Borrower").
RECITALS:
A. Lender has made a loan to Borrower in the original principal amount of
$55,000,000, which loan is governed by that certain Loan Agreement dated as of
January 31, 1994 by and between Borrower and Lender (the "Loan Agreement") and
evidenced by that certain Promissory Note dated as of January 31, 1994 executed
by Borrower in favor of Lender (the "Note").
B. Borrower and Lender have agreed to modify and amend the Loan Agreement
as provided herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged by Borrower, Borrower and Beneficiary hereby agree as follows:
AGREEMENT:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined, shall have the meanings given thereto in the Loan Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. Borrower and Lender agree that the Loan
Agreement shall be amended as provided in this Paragraph 2.
2.1. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Approved Indebtedness, in its entirety, with the following revised
definition therefor:
"APPROVED INDEBTEDNESS" means collectively, (i) this
Loan, (ii) the 955 Prudential Loan, (iii) the Sanwa Line of
Credit (including amounts borrowed thereunder after the
Closing Date in compliance with the terms hereof), (iv) the
Union Line of Credit (including amounts borrowed thereunder
after the Closing Date in compliance with the terms hereof),
(v) the Tango Loan, (vi) debt incurred in the ordinary
course of business to acquire goods, supplies, services or
merchandise on normal trade credit, (vii) surety bonds which
are obtained in the ordinary course of business, and
(ix) Capital Lease Obligations in an amount not to exceed,
at any time, $1,000,000; provided, however, that in any and
all events, such Approved Indebtedness shall be subject to,
and included within the calculations relating to, the
financial covenants set forth in Section 6.9 hereof.
2.2. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Approved Liens, in its entirety, with the following revised
definition therefor:
"APPROVED LIENS" means the Sanwa Liens, the Prudential
Liens, the Union Liens, the Tango Lien, and liens for real
property taxes described in Section 6.2(i) hereof.
2.3. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Debt Service Coverage, in its entirety, with the following revised
definition therefor:
<PAGE>
"DEBT SERVICE COVERAGE" means, with respect to any
period of Net Operating Income being measured, the ratio, as
calculated by Lender, of (a) Net Operating Income for the
applicable period, to (b) the sum of (i) the interest
payments on the Loan for such period, (ii) the interest
payments on the 955 Prudential Loan for such period
(excluding, when applicable, the Amortization Payments), and
(iii) the interest payments and all regularly scheduled
principal amortization payments on all other Indebtedness
for such period (collectively, "Debt Service").
2.4. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"PRUDENTIAL LIENS" means the Liens on the Secured
Facilities (as defined in the 955 Loan Documents) provided
by the Deeds of Trust (as defined in the 955 Loan Documents)
as security for the 955 Prudential Loan.
2.5. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Sanwa Line of Credit, in its entirety, with the following revised
definition therefor:
"SANWA LINE OF CREDIT" means that certain secured line
of credit established by Sanwa Bank California ("Sanwa
Bank") in favor of Borrower which is secured by the Sanwa
Liens, and any replacement line(s) of credit therefor which
comply with the provisions of Section 6.12 hereof.
2.6. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"TANGO LIEN" means the lien on the Tango Apartments
located in Las Vegas, Nevada (the "Tango Property"), created
by the deed of trust in favor of Lincoln National Life
Insurance Company with respect to the Tango Loan.
2.7. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"TANGO LOAN" means the first mortgage loan in the
principal amount of approximately $4,261,320 (as of March
31, 1995) made by Lincoln National Life Insurance Company,
which loan was assumed by Borrower and is secured by the
Tango Lien.
2.8. Section 1.1 of the Loan Agreement shall be amended by adding the
following definitions at the end of Section 1.1:
"955 LOAN DOCUMENTS" means the "Loan Documents" as
defined in the 955 Loan Agreement.
"955 PRUDENTIAL LOAN" means that certain $18,000,000 term loan
made by Lender to Borrower under Loan No. 6-100-955 as described in
that certain Loan Agreement dated as of July 7, 1995 by and between
Lender and Borrower, as amended from time to time (the "955 Loan
Agreement").
2.9. Section 5.7.B(ii) of the Loan Agreement shall be amended, in its
2
<PAGE>
entirety, to provide as follows:
(ii) on or before July 24, 1995, repay, in full, the Union
Line of Credit and cause the Union Property to be reconveyed
as security therefor, and on or before July 27, 1995, and
continually thereafter, cause the outstanding balance of the
Sanwa Line of Credit to be not greater than $18,500,000;
provided, however, that after the Closing Date, Borrower
shall, subject to the terms hereof, be entitled to repay
such indebtedness and draw on such line of credit in
accordance with the terms thereof as long as the outstanding
principal balance thereof does not exceed, at any time,
$18,500,000.
3
<PAGE>
2.10. A new Section 5.12 of the Loan Agreement shall be added thereto and
shall provide, in its entirety, as follows:
5.12 OBTAIN/MAINTAIN RATING.
On or before December 31, 1996, Borrower will obtain, and shall
thereafter always maintain in effect, a rating for the long-term
unsecured debt of Borrower from Standard & Poor's Rating Group, Moody
Investor Services, Fitch Investor Services, Duff & Phelps or any other
nationally recognized rating agency approved by Lender (an "Approved
Rating Agency"). Borrower shall pay all of the fees, costs and
expenses incurred in connection with obtaining and maintaining such
rating.
2.11. Section 6.8 of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
6.8 OTHER DEBT.
Other than (i) the Approved Indebtedness and (ii) unsecured
Indebtedness of Borrower incurred after the Closing Date and which, in
any and all events, strictly complies with the terms of this Agreement
(including, without limitation, Section 6.9 hereof ("New Unsecured
Indebtedness")), Borrower and the Consolidated Partnership shall not
have outstanding any Indebtedness or create, assume, suffer to exist
or incur any Indebtedness or lease obligations (other than the Loan
and the 955 Prudential Loan from Lender and the leasing of its
headquarters in the ordinary course of business), or become liable for
the indebtedness of another, without the prior written consent of
Lender. Prior to incurring any New Unsecured Indebtedness, Borrower
shall notify Lender of the terms and conditions thereof and shall
certify to Lender in writing that the incurring of such unsecured debt
does not violate any Restrictions (as defined in the 955 Loan
Agreement). Borrower agrees to disclose the existence of this
Section 6.8 in writing to any lender/creditor other than a
lender/creditor holding Approved Indebtedness (excluding therefrom a
new replacement lienholder of any Approved Lien in substitution for
the existing holder of such Approved Lien). In the event Borrower at
any time defaults in the performance or observance of this
Section 6.8, then notwithstanding the terms of any such financing
between Borrower and such other lender/creditor, the indebtedness of
such other lender/creditor shall be junior and subordinate in payment
and application to the indebtedness evidenced hereby and by the Note.
2.12. Section 6.9.C of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
C. MAXIMUM SECURED DEBT. Borrower and the Consolidated
Partnership shall not create, incur, suffer or allow to exist
Indebtedness secured in whole or in part by any of its properties
(including, without limitation, the Facilities) or other assets
(including, with respect to the Sanwa Line of Credit and the Union
Line of Credit, only the funded portion of such line of credit
indebtedness within the calculation of secured Indebtedness) which at
any time (i) exceeds the lesser of (a) (x) $40,800,000 or (y) twenty
percent (20%) of Consolidated Book Value, or (ii) is secured, in whole
or in part, by any assets or properties of Borrower or the
Consolidated Partnership, other than the Secured Facilities (until the
Unsecured Conversion Date (as defined in the 955 Loan Agreement)
occurs), the Tango Property, the Sanwa
4
<PAGE>
Properties, and the Union Property.
2.13. Section 6.12 of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
6.12 NO CHANGE IN COLLATERAL FOR LINES OF CREDIT.
Borrower shall not, without the prior written consent of
Lender, change, substitute or otherwise modify the make-up, mix or
nature of the Sanwa Properties or any other property securing the
Sanwa Line of Credit or the make-up, mix or nature of the Union
Property or any other property securing the Union Line of Credit;
provided, however, that Borrower shall be entitled to (i) replace
either the Sanwa Line of Credit and/or the Union Line of Credit with a
new line of credit or lines of credit from one or more institutional
lenders as long as (x) the terms thereof comply with the provisions of
this Agreement (including, without limitation, Section 6.9 hereof) and
(y) the only property serving as collateral or security for such line
of credit or lines of credit is the Sanwa Properties and/or the Union
Property or (ii) pay-off the Union Line of Credit in full by
increasing the amounts available under the Sanwa Line of Credit to
$18,500,000, adding the Union Property as collateral for the Sanwa
Line of Credit, and using the proceeds of the increased Sanwa Line of
Credit to repay in full the Union Line of Credit. At no time shall the
aggregate amount available under the Sanwa Line of Credit and the
Union Line of Credit exceed $18,500,000.
5
<PAGE>
2.14. Section 7.2.A of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
A. FAILURE TO MAKE PAYMENTS. Failure of Borrower or
the Consolidated Partnership to pay when due any principal
or interest on any Indebtedness (including, without
limitation, the Tango Loan, the Sanwa Line of Credit or the
Union Line of Credit) (other than Indebtedness referred to
in Section 7.1 and Section 7.2.C) or Contingent Obligation;
or
2.15. Section 7.2.B of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
B. BREACH OF ANY MATERIAL TERM. Breach or default of Borrower
or the Consolidated Partnership with respect to any other material
term of (i) any evidence of any Indebtedness or Contingent Obligation
(ii) any loan agreement, mortgage, indenture or other agreement
relating thereto, if the effect of such failure, default or breach is
to cause, or to permit the holder or holders of that Indebtedness or
Contingent Obligation (or a trustee on behalf of such holder or
holders) then to cause, that Indebtedness or Contingent Obligation to
become or be declared due prior to its stated maturity (or the stated
maturity of any underlying obligation, as the case may be); or
2.16. A new Section 7.2.C of the Loan Agreement shall be added thereto and
shall provide, in its entirety, as follows:
C. DEFAULT UNDER 955 PRUDENTIAL LOAN. Any default,
Event of Default or Potential Event of Default under or as
defined in any of the 955 Loan Documents; or
2.17. Section 7.5 of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
7.5 OTHER DEFAULTS UNDER AGREEMENT OR LOAN DOCUMENTS.
Borrower shall default in the performance of or
compliance with any term contained in this Agreement or in
the performance or compliance with any term contained in the
other Loan Documents (other than the occurrence of an event
of default otherwise specifically described in Sections 7.1,
7.2.C, 7.3, 7.4, 7.6, or 7.7 hereof, which shall not have
any additional cure periods hereunder) and such default
shall not have been remedied within thirty (30) days after
the occurrence of such default; or
2.18. Section 7.12.A of the Loan Agreement shall be amended, in its
entirety, to provide as follows:
A. Any Person shall have (i) acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) directly or
indirectly, of shares or securities of Borrower (or other securities
convertible into such securities), or (ii) acquired by contract or
otherwise, or shall have entered into a contract or arrangement which
upon consummation will result in its acquisition of or control over
shares or securities of Borrower (or other
6
<PAGE>
securities convertible into such securities), in either case,
representing ten percent (10%) or more of the outstanding shares or
securities of Borrower; or
2.19. Section 7.13 of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
7.13 MATERIAL ADVERSE CHANGE.
The occurrence of a Material Adverse Change; or
2.20. A new Section 7.14 of the Loan Agreement shall be added thereto and
shall provide, in its entirety, as follows:
7.14 FAILURE TO OBTAIN/MAINTAIN RATING.
On and after December 31, 1996, Borrower shall have failed to
obtain or maintain a rating for the long-term unsecured debt of
Borrower from an Approved Rating Agency;
2.21. Section 8.3 of the Loan Agreement shall be amended such that any
reference therein to "Indemnities" shall be a reference to "Indemnitee."
2.22. EXHIBIT A to the Loan Agreement shall be replaced with SCHEDULE ONE
attached hereto.
2.23. EXHIBIT B to the Loan Agreement shall be replaced with SCHEDULE TWO
attached hereto.
2.24. EXHIBIT F to the Loan Agreement shall be replaced with an update
thereto attached as SCHEDULE THREE hereto.
7
<PAGE>
3. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties to Lender all of which are material and are
made to induce Lender to enter into this Amendment.
3.1. All representations and warranties in the Loan Documents
were true, accurate and complete in every material respect as of
the date made and are true, accurate and complete in every
respect as of the date hereof, and do not fail to disclose any
material fact necessary to make the representations not
misleading.
3.2. Borrower has full power, legal capacity and authority to
execute and deliver this Amendment.
3.3. This Amendment has been duly authorized, executed and
delivered by Borrower.
4. NO OTHER MODIFICATIONS. Except as provided herein, the Loan Agreement
shall remain unchanged and in full force and effect.
5. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
6. SEVERABILITY. If any term, provision, covenant or condition of this
Amendment or any application thereof should be held by a court of competent
jurisdiction to be invalid, void or unenforceable, all terms, provisions,
covenants and conditions hereof and all applications thereof not held
invalid, void or unenforceable shall continue in full force and effect and
shall in no way be affected, impaired or invalidated thereby.
7. SUCCESSOR AND ASSIGNS. The provisions of this Amendment shall be binding
upon and inure solely to the benefit of Lender and Borrower, and their
respective heirs, legal representatives, successors and assigns.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be
an original, and all of which counterparts, taken together, shall constitute
but one and the same Amendment.
8
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have caused this Amendment to
be executed as of the day and year first above written.
BORROWER:
REAL ESTATE INVESTMENT TRUST OF
CALIFORNIA, a California real
estate investment trust
By:____________________________________
Jay W. Pauly
President
By:____________________________________
Leroy E. Carlson
Vice President
LENDER:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:____________________________________
Its:___________________________________
<PAGE>
SCHEDULE ONE
EXHIBIT A
COMPLIANCE CERTIFICATE
The Prudential Insurance
Company of America
Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel
Gentlemen:
I, the undersigned, the _________________________ of Real Estate
Investment Trust of California, a California real estate investment trust
("Borrower"), do hereby certify, represent and warrant as follows:
1. This Certificate is furnished pursuant to [Section 3.1.L]
[Section 5.1.A.[(i)][(ii)]] of that certain Loan Agreement dated as of January
31, 1994 (the "Loan Agreement", the terms defined therein being used herein as
therein defined) by and between Borrower and The Prudential Insurance Company of
America, a New Jersey corporation ("Lender").
2. SCHEDULE 1 attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with Section 6.9 of the Loan
Agreement, all of which data and computations are complete, true and correct.
3. No Event of Default or Potential Event of Default under the Loan
Agreement or the other Loan Documents has occurred and is continuing.
4. The representations and warranties set forth in Article 4 of the
Loan Agreement are true and correct as of the date hereof as though made on and
as of the date hereof.
5. The total credit commitments relating to, and the principal
balance of, all Indebtedness of the Borrower and the Consolidated Partnership as
of ___________ __, 19__ are as follows:
Lender/Creditor Committed Amount Principal Balance
--------------- ---------------- -----------------
Prudential $55,000,000 $_____________
955 Prudential
Loan $18,000,000 $18,000,000
Sanwa $__________ $_____________
Union $__________ $_____________
Tango Loan $ 4,300,000 $_____________
_______________ $_____________
_______________ $_____________
6. The total credit commitments relating to, and the principal
balance of, all secured Indebtedness of the Borrower and the Consolidated
Partnership as of ___________ __, 19__ are as follows:
Lender/Creditor Committed Amount Principal Balance
--------------- ---------------- -----------------
Prudential (955) $18,000,000 $18,000,000
Sanwa $__________ $_____________
Union $__________ $_____________
<PAGE>
Tango Loan $ 4,300,000 $_____________
The only properties and/or assets serving as security for secured
Indebtedness of the Borrower and the Consolidated Partnership are the Secured
Facilities, the Sanwa Properties, the Union Property, and the Tango Property.
7. The total credit commitments relating to, and the principal
balance of, all unsecured Indebtedness of the Borrower and the Consolidated
Partnership as of ___________ __, 19__ are as follows:
Lender/Creditor Committed Amount Principal Balance
--------------- ---------------- -----------------
Prudential $55,000,000 $_____________
_______________ $_____________
_______________ $_____________
Executed this ____ day of _____________, 19__.
___________________________________________
Name: _____________________________________
Title:_____________________________________
<PAGE>
Schedule 1
To
Compliance Certificate
For the _____________ Ended ______________, 19__
SECTION 6.9.A TANGIBLE NET WORTH ($ Thousands)
A. Consolidated Book Value:
(i) Facilities (net of accumulated
depreciation), PLUS $___________
(ii) Cash, PLUS $___________
(iii) Permitted Investments, PLUS $___________
(iv) Prepaid Expenses, PLUS $___________
(v) Equity interest in Unconsolidated
Partnership (net of Borrower's pro rata
share of Unconsolidated Partnership's
secured indebtedness), PLUS $___________
(vi) Leasehold Projects (sum of
(A)(1), and (2)) $___________
(1) aggregate book value of
Finance Leases, PLUS $___________
(2) aggregate book value of all
outstanding Existing Purchase
Money Mortgages not in default $___________
(vii) Consolidated Book Value (sum of
(A)(i) through (A)(vi), inclusive) $___________
B. Consolidated total liabilities of
Borrower and the Consolidated Partnership: $___________
C. Tangible Net Worth (A(vii)-B): $___________
D. MINIMUM TANGIBLE NET WORTH ($ THOUSANDS): $100,000
<PAGE>
SECTION 6.9.B INDEBTEDNESS TO CONSOLIDATED
BOOK VALUE ($ Thousands)
A. Indebtedness: $___________
B. Consolidated Book Value
(from A(vi) above): $___________
C. Indebtedness to Consolidated
Book Value (A/B): ____: 1.00
D. MAXIMUM INDEBTEDNESS TO CONSOLIDATED
BOOK VALUE: .50: 1.00
SECTION 6.9.C MAXIMUM SECURED DEBT ($ Thousands)
A. Secured Indebtedness: $___________
B. MAXIMUM SECURED INDEBTEDNESS -
((i) $40,800 ($ THOUSANDS) OR (ii) 20% OF
CONSOLIDATED BOOK VALUE (FROM A(vi) ABOVE): $___________
<PAGE>
SECTION 6.9.D. DEBT SERVICE COVERAGE ($ Thousands)
(All figures are for the period from
___________ __, 19__ to ____________ __, 19__,
inclusive)
A. Net Operating Income:
(i) gross income derived from Facilities,
PLUS $___________
(ii) earnings derived from cash and
cash equivalents, PLUS $___________
(iii) net earnings derived from Unconsolidated
Partnership Interest, PLUS $___________
(iv) net rent from Leasehold Projects, PLUS $___________
(v) interest payments on Existing Purchase
Money Mortgages not in default $___________
(vi) Gross Income (sum of (i) through (v)) $___________
(vii) Operating Expenses $___________
(viii) Administrative Expenses $___________
(ix) Net Operating Income ((vi)-((vii)+(viii)) $___________
B. Debt Service
(i) Interest payments on Loan: $___________
(ii) Interest payments on all
other Indebtedness: $___________
(iii) Debt Service ((i)+(ii)) $___________
C. Debt Service Coverage Ratio ((A)(viii)/B(iii)) ____ to 1.0
D. MAXIMUM DEBT SERVICE COVERAGE RATIO: 2.5 TO 1.0
<PAGE>
SCHEDULE TWO
Exhibit B
[Sanwa Properties]
1. Parkglen Apartments
2. Windrush Apartments
3. Skypark Professional Building
4. Valencia Medical Center
5. PSICOR Building
<PAGE>
SCHEDULE THREE
Exhibit F
[Existing Facilities]
<PAGE>
Exhibit 10.32
SECOND AMENDMENT TO LOAN AGREEMENT
[$55,000,000]
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment"), is made as of
April 30, 1996 by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a
New Jersey corporation ("Lender"), and BRE PROPERTIES, INC., a Maryland
corporation ("Borrower"), as ultimate successor-in-interest by merger to Real
Estate Investment Trust of California, a California real estate investment trust
("Original Borrower").
RECITALS:
A. Lender has made a loan (the "Loan") to Original Borrower in the
original principal amount of $55,000,000, which loan is governed by that certain
Loan Agreement dated as of January 31, 1994, as amended by that certain First
Amendment to Loan Agreement dated as of July 7, 1995 by and between Original
Borrower and Lender (collectively, the "Loan Agreement") and evidenced by that
certain Promissory Note dated as of January 31, 1994 executed by Original
Borrower in favor of Lender (the "Note").
B. Pursuant to a series of mergers, Original Borrower merged into Real
Estate Investment Trust of Maryland, a Maryland real estate investment trust,
which in turn merged into BRE Properties Inc., a Delaware corporation, which in
turn merged into Borrower (which was then and formerly known as BRE Maryland,
Inc., a Maryland corporation).
C. Pursuant to the terms of that certain Assumption Agreement dated as of
even date herewith by and between Borrower and Lender, Borrower absolutely and
irrevocably assumed the Loan, the Loan Agreement, the Note and the other Loan
Documents and the obligations of Original Borrower thereunder.
D. Borrower and Lender have agreed to modify and amend the Loan Agreement
as provided herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
AGREEMENT:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined, shall have the meanings given thereto in the Loan Agreement.
<PAGE>
2. AMENDMENTS TO LOAN AGREEMENT. Borrower and Lender agree that the Loan
Agreement shall be amended as provided in this Paragraph 2.
2.1. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Approved Indebtedness, in its entirety, with the following revised
definition therefor:
"APPROVED INDEBTEDNESS" means collectively, (i) this
Loan, (ii) the 955 Prudential Loan, (iii) the Sanwa Line of
Credit (including amounts borrowed thereunder after the
Closing Date in compliance with the terms hereof), (iv) the
PruExpress Loans, (v) the Tango Loan, (vi) the Bank of
America Line of Credit (including amounts borrowed
thereunder after the Closing Date in compliance with the
terms hereof), (vii) debt incurred in the ordinary course of
business to acquire goods, supplies, services or merchandise
on normal trade credit, (viii) surety bonds which are
obtained in the ordinary course of business,
(ix) Indebtedness secured by New Purchase Money Liens,
(x) Existing BRE Secured Debt, and (xi) Capital Lease
Obligations in an amount not to exceed, at any time,
$1,000,000; provided, however, that in any and all events,
such Approved Indebtedness shall be subject to, and included
within the calculations relating to, the financial covenants
set forth in Section 6.9 hereof.
2.2. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Approved Liens, in its entirety, with the following revised
definition therefor:
"APPROVED LIENS" means the Prudential Liens, the
PruExpress Liens, the Tango Lien, the Existing BRE Liens,
any New Purchase Money Liens, and liens for real property
taxes described in Section 6.2(i) hereof.
2.3. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"BANK OF AMERICA LINE OF CREDIT" means that certain unsecured
line of credit in the maximum amount of $70,000,000 provided to
Borrower by Bank of America, NT&SA.
2.4. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"EXISTING BRE LIENS" means the Liens on the Existing BRE
Properties which secure the Existing BRE Secured Debt.
2.5. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"EXISTING BRE SECURED DEBT" means the Indebtedness of Borrower
existing as of the date of merger with the Original Borrower as
identified in EXHIBIT J attached hereto and incorporated herein, which
is secured by the Facilities described in such Exhibit (collectively,
the "Existing BRE Facilities").
2.6. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"NEW PURCHASE MONEY LIENS" means Liens entered into or
2
<PAGE>
assumed after April 30, 1996 which (i) finances the purchase and
acquisition by Borrower of any New Facility as permitted under
Section 6.1 hereof, (ii) secures an amount equal to the lesser of
(x) the then existing indebtedness on such New Facility prior to
the time of purchase, or (y) seventy-five percent (75%) of the
purchase price of such New Facility, and (iii) encumbers only the
New Facility so acquired by Borrower.
2.7. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"PRUEXPRESS LOANS" means that certain $13,000,000 term loan made
by Lender to Borrower under Loan No. 6-100-537 secured by the real
property commonly known as Selby Ranch and that certain $17,500,000
term loan made by Lender to Borrower under Loan No. 6-100-032 secured
by the real property commonly known as Montanosa Apartments.
2.8. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"PRUEXPRESS LIENS" means the Liens securing the PruExpress Loans.
2.9. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"UNENCUMBERED ASSETS" means the sum of the Consolidated
Book Value of all Facilities which are not encumbered in
whole or in part by any Lien.
2.10. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"UNSECURED DEBT" means the aggregate of all
Indebtedness which is not secured in whole or in part by any
Lien.
2.11. Section 1.1 of the Loan Agreement shall be amended by deleting the
definitions of "Union Line of Credit" and "Union Liens."
2.12. Section 5.12 of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
5.12 OBTAIN/MAINTAIN RATING.
On or before November 30, 1996, Borrower will obtain, and shall
thereafter always maintain in effect, a rating for the long-term
unsecured debt of Borrower from Standard & Poor's Rating Group, Moody
Investor Services, Fitch Investor Services, Duff & Phelps or any other
nationally recognized rating agency approved by Lender (an "Approved
Rating Agency"). After receiving such rating, Borrower shall take all
steps necessary to maintain such rating and shall provide the Approved
Rating Agency and Lender with all such information as may be necessary
to monitor, assess and maintain such rating. Borrower shall pay all of
the fees, costs and expenses incurred in connection with obtaining and
maintaining such rating.
2.13. A new Section 5.13 of the Loan Agreement shall be added thereto and
shall provide, in its entirety, as follows:
5.13 INFORMATION REQUIRED BY RULE 144A. Borrower
covenants that it will, upon the request of
3
<PAGE>
Lender, provide Lender, and any qualified institutional buyer
designated by Lender, such financial and other information as such
holder may reasonably determine to be necessary in order to permit
compliance with the information requirements of Rule 144A under the
Securities Act of 1933 in connection with the resale of the Loan
and the Note, except at such times as the Borrower is subject to
the reporting requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934. For the purpose of this Section 5.13, the
term "qualified institutional buyer" shall have the meaning
specified in Rule 144A under the Securities Act of 1933.
2.14. Section 6.9 of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
6.9 FINANCIAL COVENANTS.
Borrower shall at all times comply with the terms of this Section
6.9 provided that compliance with the terms of this Section 6.9 shall
be measured quarterly as of the last day of each fiscal quarter of
Borrower.
A. TANGIBLE NET WORTH. Borrower will not permit its
Tangible Net Worth to be less than Three Hundred Million Dollars
($300,000,000).
B. INDEBTEDNESS TO CONSOLIDATED BOOK VALUE. Borrower and
the Consolidated Partnership shall not create, incur, suffer or
allow to exist Indebtedness (including, with respect to the Sanwa
Line of Credit and the Bank of America Line of Credit, only the
funded portion of such line of credit indebtedness within the
calculation of Indebtedness) in excess of fifty-five percent
(55%) of Consolidated Book Value.
C. MAXIMUM SECURED DEBT. Borrower and the Consolidated
Partnership shall not create, incur, suffer or allow to exist
Indebtedness secured in whole or in part by any of its properties
(including, without limitation, the Facilities, but excluding,
for the purpose of this Section 6.9.C only, the 955 Loan from the
calculation of such secured Indebtedness) or other assets which
at any time exceeds twenty-five percent (25%) of Consolidated
Book Value.
D. DEBT SERVICE COVERAGE. Borrower and the Consolidated
Partnership shall not permit or allow the Debt Service Coverage
to be less than 2.2 to 1.0.
E. UNSECURED DEBT TO UNENCUMBERED ASSETS. Borrower and the
Consolidated Partnership shall not create, incur, suffer or allow
to exist Unsecured Debt (including, with respect to the Sanwa
Line of Credit and the Bank of America Line of Credit, only the
funded portion of such line of credit indebtedness within the
calculation of Indebtedness) in excess of fifty percent (50%) of
Unencumbered Assets.
2.15. Section 6.12 of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
6.12 NO COLLATERAL FOR LINES OF CREDIT.
4
<PAGE>
As of the date hereof, Borrower shall have converted the
Sanwa Line of Credit into an unsecured facility and shall have caused
a release and reconveyance of all Liens on the Sanwa Properties.
Neither the Sanwa Line of Credit, the Bank of America Line of Credit
nor any other revolving, line of credit, or other general Indebtedness
shall be at any time secured in whole or in part by the Facilities or
any assets of Borrower.
2.16. Section 7.2.A of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
A. FAILURE TO MAKE PAYMENTS. Failure of Borrower or
the Consolidated Partnership to pay when due any principal
or interest on any Indebtedness (including, without
limitation, the Tango Loan, the Sanwa Line of Credit, the
Bank of America Line of Credit, and/or the Existing BRE
Secured Debt) (other than Indebtedness referred to in
Section 7.1 and Section 7.2.C) or Contingent Obligation; or
2.17. Section 7.2.C of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
C. DEFAULT UNDER PRUDENTIAL LOANS. Any default,
Event of Default or Potential Event of Default under or as
defined in any of the 955 Loan Documents or under or with
respect to any loan document evidencing, securing or
relating to any of the PruExpress Loans; or
2.18. Section 7.14 of the Loan Agreement shall be amended, in its entirety,
to provide as follows:
7.14 FAILURE TO OBTAIN/MAINTAIN RATING.
On and after November 30, 1996, Borrower shall have failed to
obtain or maintain a rating for the long-term unsecured debt of
Borrower from an Approved Rating Agency;
2.19. A new Section 8.20 shall be added to the Loan Agreement which shall
provide, in its entirety, as follows:
8.20 CONVERSION OF PRUEXPRESS LOANS TO UNSECURED LOANS.
Borrower and Lender understand, acknowledge and agree that in connection
with obtaining Lender's consent and approval of Borrower's assumption of
Original Borrower's obligations, Borrower and Lender have mutually agreed
that, upon Lender's election (to be exercised or not exercised by Lender in
its sole and absolute discretion), the PruExpress Loans shall be converted
into unsecured facilities and shall be amended such that (i) the PruExpress
Loans shall be fully recourse to Borrower, (ii) the PruExpress Loans shall
be governed by a loan agreement and financial covenants in substantially
the same form and substance of this Agreement, (iii) the PruExpress Liens
shall be released and reconveyed as security for the PruExpress Loans, and
(iv) on and after such conversion, the PruExpress Loans shall be unsecured
loans and the California one-action and antideficiency laws relating to
real property secured transactions (including, without limitation,
Sections 580a, 580b, 580d, and 726 of the California Code of Civil
Procedure) shall not apply to the PruExpress Loans or be available to
Borrower as a defense or right with respect to the PruExpress Loans.
2.20. EXHIBIT A to the Loan Agreement shall be replaced with SCHEDULE ONE
attached hereto.
5
<PAGE>
2.21. EXHIBIT F to the Loan Agreement shall be replaced with an update
thereto attached as SCHEDULE TWO hereto.
2.22. A new EXHIBIT J shall be added to the Loan Agreement in the form
attached hereto as SCHEDULE THREE.
3. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties to Lender all of which are material and are made
to induce Lender to enter into this Amendment.
3.1. All representations and warranties in the Loan Documents
were true, accurate and complete in every material respect as of
the date made and are true, accurate and complete in every
respect as of the date hereof, and do not fail to disclose any
material fact necessary to make the representations not
misleading.
3.2. Borrower has full power, legal capacity and authority to
execute and deliver this Amendment.
3.3. This Amendment has been duly authorized, executed and
delivered by Borrower.
4. NO OTHER MODIFICATIONS. Except as provided herein, the Loan
Agreement shall remain unchanged and in full force and effect.
5. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of California.
6. SEVERABILITY. If any term, provision, covenant or condition of
this Amendment or any application thereof should be held by a court of competent
jurisdiction to be invalid, void or unenforceable, all terms, provisions,
covenants and conditions hereof and all applications thereof not held invalid,
void or unenforceable shall continue in full force and effect and shall in no
way be affected, impaired or invalidated thereby.
7. SUCCESSOR AND ASSIGNS. The provisions of this Amendment shall be
binding upon and inure solely to the benefit of Lender and Borrower, and their
respective heirs, legal representatives, successors and assigns.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original, and all of which counterparts, taken together, shall constitute but
one and the same Amendment.
6
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have caused this Amendment to
be executed as of the day and year first above written.
BORROWER:
BRE PROPERTIES, INC., a Maryland corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
LENDER:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
-----------------------------------
Its:
----------------------------------
<PAGE>
SCHEDULE ONE
EXHIBIT A
COMPLIANCE CERTIFICATE
The Prudential Insurance
Company of America
Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel
Gentlemen:
I, the undersigned, the _________________________ of BRE
Properties, Inc., a Maryland corporation ("Borrower"), do hereby certify,
represent and warrant as follows:
1. This Certificate is furnished pursuant to [Section 3.1.L]
[Section 5.1.A.[(i)][(b)]] of that certain Loan Agreement dated as of January
31, 1994, as amended by that certain First Amendment to Loan Agreement dated as
of July 5, 1995, as further amended by that certain Second Amendment to Loan
Agreement dated as of __________, 1996, as further amended from time to time
(the "Loan Agreement", the terms defined therein being used herein as therein
defined) by and between Borrower and The Prudential Insurance Company of
America, a New Jersey corporation ("Lender").
2. SCHEDULE 1 attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with Section 6.9 of the Loan
Agreement, all of which data and computations are complete, true and correct.
3. No Event of Default or Potential Event of Default under the Loan
Agreement or the other Loan Documents has occurred and is continuing.
4. The representations and warranties set forth in Article 4 of the
Loan Agreement are true and correct as of the date hereof as though made on and
as of the date hereof.
5. The total credit commitments relating to, and the principal
balance of, all Indebtedness of the Borrower and the Consolidated Partnership as
of ___________ __, 19__ are as follows:
Lender/Creditor Committed Amount Principal Balance
---------------- ----------------- -----------------
Prudential Loan $55,000,000 $_____________
955 Prudential Loan $18,000,000 $_____________
Sanwa $__________ $_____________
Bank of America $70,000,000 $_____________
Tango Loan $ 4,300,000 $_____________
Existing BRE
Secured Debt ___________ $_____________
New Purchase
Money Liens ___________ $_____________
_______________ ___________ $_____________
6. The total credit commitments relating to, and the principal
balance of, all secured Indebtedness of the Borrower and the Consolidated
Partnership as of ___________ __, 19__ are as follows:
Lender/Creditor Committed Amount Principal Balance
---------------- ----------------- -----------------
<PAGE>
955 Prudential Loan $18,000,000 $_____________
Tango Loan $ 4,300,000 $_____________
Existing BRE
Secured Debt $___________ $_____________
New Purchase
Money Liens $___________ $_____________
The only properties and/or assets serving as security for secured
Indebtedness of the Borrower and the Consolidated Partnership are the Secured
Facilities, the Existing BRE Properties, the Tango Property, and the New
Facilities encumbered by the New Purchase Money Liens as shown on SCHEDULE 2
attached hereto.
7. The total credit commitments relating to, and the principal
balance of, all unsecured Indebtedness of the Borrower and the Consolidated
Partnership as of ___________ __, 19__ are as follows:
Lender/Creditor Committed Amount Principal Balance
---------------- ----------------- -----------------
Prudential Loan $55,000,000 $_____________
Sanwa $__________ $_____________
Bank of America $70,000,000 $_____________
_______________ $_____________
_______________ $_____________
8. The total unencumbered assets/Facilities of Borrower (as well as
the Consolidated Book Value thereof) are listed on the attached SCHEDULE 3
hereof.
Executed this ____ day of _____________, 19__.
Name:
---------------------------------
Title:
--------------------------------
<PAGE>
Schedule 1
To
Compliance Certificate
For the _____________ Ended ______________, 19__
SECTION 6.9.A Tangible Net Worth ($ Thousands)
- --------------------------------
A. Consolidated Book Value:
(i) Facilities (net of accumulated
depreciation), PLUS $___________
(ii) Cash, PLUS $___________
(iii) Permitted Investments, PLUS $___________
(iv) Prepaid Expenses, PLUS $___________
(v) Equity interest in Unconsolidated
Partnership (net of Borrower's pro rata
share of Unconsolidated Partnership's
secured indebtedness), PLUS $___________
(vi) Leasehold Projects (sum of
(A)(1), and (2)) $___________
(1) aggregate book value of
Finance Leases, plus $___________
(2) aggregate book value of all
outstanding Existing Purchase
Money Mortgages not in default $___________
(vii) Consolidated Book Value (sum of
(A)(i) through (A)(vi), inclusive) $___________
B. Consolidated total liabilities of
Borrower and the Consolidated Partnership: $___________
C. Tangible Net Worth (A(vii)-B): $___________
D. MINIMUM TANGIBLE NET WORTH ($ THOUSANDS): $300,000
SECTION 6.9.B Indebtedness to Consolidated
- ------------------------------------------
Book Value ($ Thousands)
- ----------
A. Indebtedness: $___________
B. Consolidated Book Value
(from A(vii) above): $___________
C. Indebtedness to Consolidated
Book Value (A/B): ____: 1.00
D. MAXIMUM INDEBTEDNESS TO CONSOLIDATED
BOOK VALUE: .55: 1.00
<PAGE>
SECTION 6.9.C Maximum Secured Debt ($ Thousands)
- ----------------------------------
A. Secured Indebtedness (excluding this Loan): $___________
B. MAXIMUM SECURED INDEBTEDNESS -
(TWENTY-FIVE (25%) OF
CONSOLIDATED BOOK VALUE (FROM A(vii) ABOVE): $___________
<PAGE>
SECTION 6.9.D. Debt Service Coverage ($ Thousands)
- ------------------------------------
(All figures are for the period from
___________ __, 19__ to ____________ __, 19__,
inclusive)
A. Net Operating Income:
(i) gross income derived from Facilities,
PLUS $___________
(ii) earnings derived from cash and
cash equivalents, PLUS $___________
(iii) net earnings derived from Unconsolidated
Partnership Interest, PLUS $___________
(iv) net rent from Leasehold Projects, PLUS $___________
(v) interest payments on Existing Purchase
Money Mortgages not in default $___________
(vi) Gross Income (sum of (i) through (v)) $___________
(vii) Operating Expenses $___________
(viii) Administrative Expenses $___________
(ix) Net Operating Income ((vi)-((vii)+(viii)) $___________
B. Debt Service
(i) Interest payments on Loan: $___________
(ii) Interest payments on all
other Indebtedness: $___________
(iii) Debt Service ((i)+(ii)) $___________
C. Debt Service Coverage Ratio ((A)(viii)/B(iii)) ____ to 1.0
D. MAXIMUM DEBT SERVICE COVERAGE RATIO: 2.2 TO 1.0
<PAGE>
SECTION 6.9.E Unsecured Indebtedness to
- ---------------------------------------
Unencumbered Assets ($ Thousands)
- -------------------
A. Unsecured Indebtedness: $___________
B. Unencumbered Assets: $___________
C. Unsecured Indebtedness to Unencumbered
Assets (A/B): ____: 1.00
D. MAXIMUM UNSECURED INDEBTEDNESS TO
UNENCUMBERED ASSETS: .50: 1.00
<PAGE>
Schedule 2
To
Compliance Certificate
For the _____________ Ended ______________, 19__
[New Purchase Money Liens]
Prop Loc Units Pur Price Lien Amt Ltv Lender Mat Date % Rate
- ---- --- ----- --------- -------- --- ------ -------- ------
<PAGE>
Schedule 3
To
Compliance Certificate
For the _____________ Ended ______________, 19__
[Unencumbered Assets]
Property Location Units Consold Book Value
- -------- -------- ----- ------------------
<PAGE>
SCHEDULE TWO
Exhibit F
[Existing Facilities]
<PAGE>
SCHEDULE THREE
Exhibit J
[Existing BRE Secured Debt]
Property Location Units Loan Balance Lender Mat Date % Rate
- -------- -------- ----- ------------ ------ -------- ------
<PAGE>
Exhibit 10.33
THIRD AMENDMENT TO LOAN AGREEMENT
[$55,000,000]
THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Amendment"), is dated as
of November __, 1996 by and between THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("Lender"), and BRE PROPERTIES, INC., a
Maryland corporation ("Borrower"), as ultimate successor-in-interest by
merger to Real Estate Investment Trust of California, a California real
estate investment trust ("Original Borrower").
RECITALS:
A. Lender has made a loan (the "Loan") to Original Borrower in the
original principal amount of $55,000,000, which loan is governed by that
certain Loan Agreement dated as of January 31, 1994, as amended by that
certain First Amendment to Loan Agreement dated as of July 7, 1995 by and
between Original Borrower and Lender, as further amended by that certain
Second Amendment to Loan Agreement dated as of April 30, 1996 by and between
Borrower and Lender (collectively, the "Loan Agreement") and evidenced by
that certain Promissory Note dated as of January 31, 1994 executed by
Original Borrower in favor of Lender (the "Note").
B. Pursuant to a series of mergers, Original Borrower merged into Real
Estate Investment Trust of Maryland, a Maryland real estate investment trust,
which in turn merged into BRE Properties Inc., a Delaware corporation, which
in turn merged into Borrower (which was then and formerly known as BRE
Maryland, Inc., a Maryland corporation).
C. Pursuant to the terms of that certain Assumption Agreement dated as
of even date herewith by and between Borrower and Lender, Borrower absolutely
and irrevocably assumed the Loan, the Loan Agreement, the Note and the other
Loan Documents and the obligations of Original Borrower thereunder.
D. Borrower and Lender have agreed to modify and amend the Loan
Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
AGREEMENT:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined, shall have the meanings given thereto in the Loan
Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. Borrower and Lender agree that the Loan
Agreement shall be amended as provided in this Paragraph 2.
2.1. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Bank of America Line of Credit, in its entirety, with the
following revised definition therefor:
"BANK OF AMERICA LINE OF CREDIT" means that certain unsecured
line of credit in the maximum amount of $120,000,000 provided to
Borrower by Bank of America, NT&SA.
2.2. A new Section 5.14 of the Loan Agreement shall be added thereto and
shall provide, in its entirety, as follows:
5.14 S&P RATING.
Borrower will use its best efforts to obtain on or before
December 31, 1997, and shall thereafter always maintain in effect,
<PAGE>
an investment grade rating for the long-term unsecured debt of
Borrower from Standard & Poor's Rating Group or Moody Investor
Services. Borrower shall pay all of the fees, costs and expenses
incurred in connection with obtaining and maintaining such rating.
3. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties to Lender all of which are material and are
made to induce Lender to enter into this Amendment.
3.1. All representations and warranties in the Loan Documents
were true, accurate and complete in every material respect as of
the date made and are true, accurate and complete in every respect
as of the date hereof, and do not fail to disclose any material
fact necessary to make the representations not misleading.
3.2. Borrower has full power, legal capacity and authority to
execute and deliver this Amendment.
3.3. This Amendment has been duly authorized, executed and
delivered by Borrower.
4. NO OTHER MODIFICATIONS. Except as provided herein, the Loan Agreement shall
remain unchanged and in full force and effect.
5. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
2
<PAGE>
6. SEVERABILITY. If any term, provision, covenant or condition of this
Amendment or any application thereof should be held by a court of competent
jurisdiction to be invalid, void or unenforceable, all terms, provisions,
covenants and conditions hereof and all applications thereof not held invalid,
void or unenforceable shall continue in full force and effect and shall in no
way be affected, impaired or invalidated thereby.
7. SUCCESSOR AND ASSIGNS. The provisions of this Amendment shall be binding
upon and inure solely to the benefit of Lender and Borrower, and their
respective heirs, legal representatives, successors and assigns.
8. COUNTERPARTS. This Amendment may be executed in any number of counterparts
and by different parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original,
and all of which counterparts, taken together, shall constitute but one and the
same Amendment.
3
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have caused this Amendment
to be executed as of the day and year first above written.
BORROWER:
BRE PROPERTIES, INC., a Maryland corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
LENDER:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: _____________________________________
Its: _____________________________________
4
<PAGE>
Exhibit 10.34
LOAN AGREEMENT
BETWEEN
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
AS LENDER
AND
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA,
AS BORROWER
RE:
$18,000,000 TERM LOAN
DATED AS OF JULY 7, 1995
LOAN NO. 6-100-955
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA,
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of this 7th day of
July, 1995 by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey corporation ("Lender") and REAL ESTATE INVESTMENT TRUST OF CALIFORNIA, a
California real estate investment trust ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower desires to borrow from Lender, and Lender is willing
to make to Borrower, a term loan in the principal amount of $18,000,000 upon the
terms and conditions contained herein.
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
GENERAL DEFINITIONS
1.1 GENERAL TERMS.
When used herein, the following terms shall have the following
meanings:
"AFFILIATE" as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under direct or indirect
common control with, that Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and under "common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities or by contract or otherwise.
"AGREEMENT" means this Loan Agreement, as it may be amended,
supplemented or otherwise modified from time to time.
"ANCHOR LEASES" means a lease of all or any portion of a Facility
covering an amount of space greater than or equal to 20,000 square feet,
together with any other lease designated as an Anchor Lease by Lender.
"ANNUAL FINANCIALS" has the meaning assigned to that term in Section
3.l.D.
"APPROVED INDEBTEDNESS" means collectively, (i) this Loan, (ii) the
525 Prudential Loan, (iii) the Sanwa Line of Credit (including amounts
borrowed thereunder after the Closing Date in compliance with the terms
hereof), (iv) the Union Line of Credit (including amounts borrowed
thereunder after the Closing Date in compliance with the terms hereof),
(v) the Tango Loan, (vi) debt incurred in the ordinary course of business
to acquire goods, supplies, services or merchandise on normal trade credit,
(vii) surety bonds which are obtained in the ordinary course of business,
and (ix) Capital Lease Obligations in an amount not to exceed, at any time,
$1,000,000; provided, however, that in any and all events, such Approved
Indebtedness shall be subject to, and included within the calculations
relating to, the financial covenants set forth in Section 6.9 hereof.
"APPROVED LIENS" means the Sanwa Liens, the Prudential Liens, the
- 1 -
<PAGE>
Union Liens, the Tango Lien, and liens for real property taxes described in
Section 6.2(i) hereof.
"BANKRUPTCY CODE" means Title 11 U.S. Code or any similar federal or
state laws for the relief of debtors.
"BORROWER" means Real Estate Investment Trust of California, a
California real estate investment trust.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, a legal
holiday under the laws of the State of California or a day on which
commercial banks in such state are authorized or required by law or other
governmental action to be closed.
"CAPITALIZED LEASE OBLIGATIONS, means any rental obligation which, in
conformity with GAAP, is or will be required to be capitalized on the books
of Borrower, taken at the amount thereof accounted for as indebtedness (net
of interest expense) in conformity with GAAP.
"CLOSING DATE" means the date that the Loan is disbursed, which shall
be on a date on or before July 11, 1995.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPLIANCE CERTIFICATE" means a Compliance Certificate substantially
in the form of EXHIBIT A attached hereto.
"CONSOLIDATED BOOK VALUE" at any date of determination means the sum
of (i) the aggregate amount shown on Borrower's consolidated balance sheet
opposite the Facilities (whether owned by Borrower or the Consolidated
Partnership) designated as "property, plants and equipment" less
accumulated depreciation for all such Facilities, (ii) all (a) cash,
(b) other cash equivalents then held by Borrower or the Consolidated
Partnership and invested in Permitted Investments, and (c) all expenses
which are prepaid by Borrower or the Consolidated Partnership, (iii) with
respect to Borrower's interest in the Unconsolidated Partnership, the book
value of such interest in such Unconsolidated Partnership less an amount
equal to a pro rata share (based upon Borrower's pro rata equity interest
in the Unconsolidated Partnership) of any and all indebtedness or other
liabilities secured in whole or in part by the property or assets owned by
the Unconsolidated Partnership, and (iv) with respect to the Leasehold
Projects, the sum of (A) the aggregate book value of the Finance Leases,
and (B) the aggregate book value of the promissory notes secured by the
Existing Purchase Money Mortgages; provided, however that such aggregate
book value of such notes shall only be included within the calculation of
this clause (B) if the maker thereof is not in default in the payment of
any obligations under such notes); less, in each case all applicable
accumulated depreciation and all Intangible Assets relating to the assets
included within the definition of Consolidated Book Value or otherwise; in
each case determined on a consolidated basis pursuant to the Financials and
in accordance with GAAP using the lesser of cost or market in carrying
assets.
"CONSOLIDATED PARTNERSHIP" means REIT - Santa Maria Properties, a
California limited partnership.
"CONTINGENT OBLIGATIONS", as applied to any Person, means any direct,
indirect and/or vicarious liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend, letter of credit
or other obligation of any other Person which provides assurance to the
obligee of such obligation of such other Person that such obligation of
another will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in
- 2 -
<PAGE>
respect thereof. Contingent Obligations shall include, without
limitation, (i) the direct or indirect guaranty, endorsement (other than
for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, and (ii) any liability of such
Person for the obligations of another through any agreement (contingent
or otherwise) (a) to purchase, repurchase or otherwise acquire such
obligation or any security therefor or to provide funds for the payment
or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise), (b) to maintain
the solvency or any balance sheet item, level of income or financial
condition of another or (c) to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to
an agreement, if in the case of any agreement described under subclauses
(a), (b) or (c) of this sentence the primary purpose or intent thereof
is as described in the preceding sentence. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed
or otherwise supported.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any instrument, document or security issued by that Person or
of any indenture, mortgage, deed of trust, contract, undertaking, agreement
or other instrument to which that Person is a party or by which any of its
properties is bound or to which it or any of its properties is subject.
"CORE SECURED FACILITIES" is defined in EXHIBIT K attached hereto.
"DEBT SERVICE COVERAGE" means, with respect to any period of Net
Operating Income being measured, the ratio, as calculated by Lender, of
(a) Net Operating Income for the applicable period, to (b) the sum of
(i) the interest payments on the Loan for such period, (ii) the interest
payments on the 525 Prudential Loan for such period (excluding, when
applicable, the Amortization Payments (as defined in the 525 Loan
Documents)), and (iii) the interest payments and all regularly scheduled
principal amortization payments on all other Indebtedness for such period
(collectively, "Debt Service").
"DEEDS OF TRUST" means individually any one of, and collectively all
of, the Deeds of Trust, Security Agreements and Fixture Filings with
Assignments of Rents, Proceeds and Agreements described in EXHIBIT J
attached hereto and encumbering the Secured Facilities.
"DISCOUNT RATE" means the rate which, when compounded monthly, is
equivalent to the Treasury Rate.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which is maintained for employees of
Borrower or any of its ERISA Affiliates.
"ENVIRONMENTAL CLAIM" means any notice of violation, claim, demand,
abatement order or other order or direction (conditional or otherwise) by
any governmental authority or any Person for any damage, including, without
limitation, personal injury (including sickness, disease or death),
tangible or intangible property damage, contribution, indemnity, indirect
or consequential damages, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon (i) the existence
of a Release (whether sudden or nonsudden or accidental or non-accidental),
of, or exposure to, any Hazardous Material, in, into or onto the
environment at, in, by, from or related to any Facility, (ii) the presence,
use, handling, transportation, storage, treatment or disposal of Hazardous
Materials in connection with the ownership or operation of any Facility, or
(iii) the violation, or alleged violation, of any statutes, ordinances,
orders, rules,
- 3 -
<PAGE>
regulations, permits, authorizations or licenses of or from any
governmental authority, agency or court relating to environmental
matters connected with the Facilities.
"ENVIRONMENTAL LAWS" means all laws relating to environmental matters
or Hazardous Materials, including those relating to fines, orders,
injunctions, penalties, damages, contribution, cost recovery, compensation,
losses or injuries resulting from the Release or threatened Release of
Hazardous Materials and to the presence, generation, use, storage,
transportation, or disposal of Hazardous Materials, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Hazardous Material
Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air
Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15
U.S.C. Section 2601 ET SEQ.), the Occupational Safety and Health Act (29
U.S.C. Section 651 ET SEQ.), and the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. Section 11001 ET SEQ.), each as amended or
supplemented, and any analogous future or present local, state and federal
rules, orders, statutes and regulations promulgated pursuant thereto, each
as in effect as of the date of determination.
"ENVIRONMENTAL PERMIT" means any permit, license, approval, or other
authorization with respect to any activities, operations, or businesses
conducted on or in relation to the Facilities under any applicable
Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA AFFILIATE", as applied to any Person, means any trade or
business (whether or not incorporated) which is a member of a group of
which that Person is a member and which is under common control within the
meaning of Sections 414(b), (c), (m) or (o) of the Code.
"EVENT OF DEFAULT" means each of the events specified in Article 7.
"EXISTING FACILITIES" means those Facilities owned by Borrower or the
Consolidated Partnership as of the Closing Date as described in EXHIBIT F
hereof.
"EXISTING PURCHASE MONEY MORTGAGES" means collectively, the existing
notes and deeds of trust held by Borrower, as holder and beneficiary, with
respect to the Leasehold Projects.
"FACILITIES" means any and all real property, (including, without
limitation, all buildings, fixtures or other improvements located thereon)
now or hereafter owned in fee simple by Borrower or the Consolidated
Partnership (including, without limitation, the Existing Facilities, the
Secured Facilities, and the New Facilities, but excluding the Leasehold
Projects and the equity interest of Borrower in the Unconsolidated
Partnership).
"FINANCE LEASES" means the ground leases, with respect to which
Borrower constitutes the ground lessor, relating to Leasehold Projects.
"FINANCIALS" has the meaning assigned to that term in Section 3.1.D.
"GAAP" means generally accepted accounting principles, consistently
applied, as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified
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Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board that are applicable to the circumstances as
of the date of determination.
"HAZARDOUS MATERIALS" means any (i) oil, flammable substances,
explosives, radioactive materials, hazardous wastes or substances, toxic
wastes or substances or any other wastes, materials or pollutants; (ii)
asbestos in any form which is or could become friable, urea formaldehyde
foam insulation, transformers or other equipment which contain dielectric
fluid containing levels of polychlorinated byphenyls, or radon gas; (iii)
chemical, material or substance defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous waste", "restricted hazardous waste", or "toxic
substances" or words of similar import under any applicable local, state or
federal law or under the regulations adopted or publications promulgated
pursuant thereto, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
42 U.S.C. Section 9601, ET SEQ.; the Hazardous Materials Transportation
Act, as amended, 49 U.S. U.S.C. Section 1801, ET SEQ.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, ET SEQ.;
Sections 25115, 25117, 25122.7, 25140, 25249.8, 25281, 25316, 25501, and
25316 of the California Health and Safety Code; and Article 9 or Article 11
of Title 22 of the Administrative Code, Division 4, Chapter 20; (iv) other
chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority or may or could pose a hazard to
the health and safety of the occupants of the Facility or the owners and/or
occupants of property adjacent to or surrounding the Facility, or any other
Person coming upon the Facility or adjacent property; and (v) other
chemicals, materials or substance which may or could pose a hazard to the
environment.
"INDEBTEDNESS" at any date of determination means: (i) all obligations
of Borrower and the Consolidated Partnership (including, without
limitation, all indebtedness of Borrower to Lender) which in accordance
with GAAP would be shown on the balance sheet of Borrower and/or the
Consolidated Partnership as a liability (including, without limitation,
obligations for borrowed money and for the deferred purchase price of
property or services, trade debt payable, accruals and other liabilities,
and obligations evidenced by bonds, debentures, notes or other similar
instruments); (ii) all Capitalized Lease Obligations; (iii) all Contingent
Obligations of Borrower and or the Consolidated Partnership in respect of,
or obligations to purchase or otherwise acquire or to assure payment of,
Indebtedness of others; and (iv) all Indebtedness of others secured by any
Lien upon property owned by Borrower or the Consolidated Partnership,
whether or not assumed.
"INTANGIBLE ASSETS" means treasury stock, unamortized debt discount
and expense, unamortized deferred charges, capitalized start-up costs or
other organizational or developmental expenses, covenants not to compete,
good will, trademarks, licenses, brand names, patents and other intangible
assets and any write-up of the value of any assets, all as determined in
accordance with GAAP.
"LEASEHOLD PROJECTS" shall mean, any one of or collectively all of,
the Lucky Center located in Orange, California, the Hawthorne/Del Amo
retail project located in Torrance, California.
"LENDER" means The Prudential Insurance Company of America, a New
Jersey corporation.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and/or the
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filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction).
"LOAN" means the loan to Borrower provided hereby as more particularly
described in Section 2.1 hereof.
"LOAN DOCUMENTS" means this Agreement, the Note, the Deeds of Trust,
any Compliance Certificate, and any other document or certificate executed
and delivered by Borrower to Lender in connection with the transactions
contemplated hereby.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"MATERIAL ADVERSE CHANGE" means any change, event or occurrence which
produces a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, structure or form of operations, properties, assets,
prospects or condition (financial or otherwise) of Borrower or (ii) an
impairment of the ability of Borrower to perform or of Lender to enforce
the Obligations.
"MATURITY DATE" means the date ten (10) years after the Closing Date.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower
or any of its ERISA Affiliates.
"NET OPERATING INCOME" means, for any date of determination, the gross
income realized from operations of the Facilities and any other earnings
derived from any other asset included within the definition of Consolidated
Book Value (but not including repayments of principal under the notes
secured by the Purchase Money Mortgages) for the fiscal quarter just ended
and the three previous fiscal quarters (to the extent Lender reasonably
projects such gross income and earnings will continue for the immediately
succeeding twelve (12) month period and in any and all events excluding all
capital gains from sales and other extraordinary income), subtracting
therefrom all necessary and ordinary operating expenses (both fixed and
variable) as reasonably projected by Lender for the next succeeding twelve
(12) month period, including, but not limited to, utilities,
administrative, cleaning, landscaping, security, repairs and maintenance,
management fees, reserves for replacements, real estate and other taxes,
assessments and insurance, but excluding therefrom, deductions for federal,
state and other income taxes, Debt Service expense and depreciation (all as
determined in accordance with GAAP). Gross income shall not be anticipated
for any greater time period than that approved by GAAP nor shall ordinary
operating expenses be prepaid.
"NEW FACILITIES" means those Facilities acquired after the Closing
Date.
"NOTE" means that certain Promissory Note dated as of even date
herewith in the principal amount of $18,000,000 executed by Borrower, as
maker, in favor of Lender, as Holder, and any and all extensions, renewals,
replacements, and modifications thereof, and/or amendments thereto.
"OBLIGATIONS" means all obligations of every nature of Borrower from
time to time owed to Lender under the Note and other Loan Documents.
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"OFFICERS' CERTIFICATE" means a certificate signed in the name of
Borrower by a Trustee Officer; provided that every Officers' Certificate
delivered to Lender with respect to the compliance with a covenant or term
hereof shall include: (i) a statement that the Trustee Officer making or
giving such Officers' Certificate shall have read such covenant or term and
any definitions or other provisions contained in this Agreement relating
thereto, (ii) a statement that such Trustee Officer has made or has caused
to be made such examination or investigation as is reasonably necessary to
enable them to express an informed opinion as to whether or not such
condition has been complied with, and (iii) a favorable statement as to
compliance with such condition.
"PENSION PLAN" means any employee plan, other than a Multiemployer
Plan, which is subject to the provisions of Title IV of ERISA and which is
maintained for employees of Borrower or any of its ERISA Affiliates.
"PERMITTED INVESTMENTS" means (i) marketable direct obligations issued
or unconditionally guaranteed by the full faith and credit of the United
States of America maturing within one year from the date of acquisition
thereof, (ii) marketable direct obligations issued by any state of the
United States of America maturing within one year from the date of
acquisition thereof and having the highest rating obtainable from Standard
& Poor's Ratings Group, (iii) certificates of deposit maturing within one
year from the date of acquisition thereof issued by one or more financial
institutions rated not less than "A" by Standard & Poor's Rating Group and
in each case fully insured by the FDIC, (iv) mutual funds invested solely
in the investments described in clauses (i), (ii) and/or (iii) hereof, or
(v) an amount not to exceed $3,000,000 in the stock of publicly traded real
estate investment trusts which are qualified as a REIT.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts, real estate investment trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
the giving of notice or lapse of time, or both, would constitute an Event
of Default hereunder.
"PREPAYMENT" means the payment of all or part of the principal of a
Loan prior to its Maturity Date.
"PREPAYMENT AMOUNT" means the amount of the Loan being prepaid on a
Prepayment Date.
"PREPAYMENT DATE" has the meaning assigned to that term in Section
2.4.D.
"PREPAYMENT PREMIUM" has the meaning assigned to that term in Section
2.4.D.
"PRESENT VALUE OF THE PREPAYMENT AMOUNT" shall be determined by
discounting all scheduled payments of principal and interest remaining from
the Prepayment Date to the Maturity Date of the Loan being prepaid,
attributable to the amount being prepaid, at the Discount Rate. If a
Prepayment occurs on a date other than a regularly scheduled interest
payment date, the actual number of days remaining from the Prepayment Date
to the next regularly scheduled interest payment date will be used to
discount within this period.
"PRUDENTIAL LIENS" means the Liens on the Secured Facilities
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provided by the Deeds of Trust as security for this Loan.
"QUARTERLY FINANCIALS" has the meaning assigned to that term in
Section 3.l.D.
"REIT" means real estate investment trust, as defined under Section
856 of the Code.
"RELEASE" means any release, spills emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
leaching, or migration into the indoor or outdoor environment (including,
without limitation, the abandonment or disposal of any barrels, containers
or closed receptacles containing any Hazardous Materials), or into or out
of any Facility, including the movement of any Hazardous Material through
the air, soil, surface water, groundwater or property.
"RENT ROLL" means a comprehensive list of the Facilities and each of
the leases pertaining thereto and containing the following information: (i)
each tenant's name and location, (ii) the net rentable square footage of
the Facilities covered by each lease, (iii) the annual rental rate per
square foot per tenant, (iv) the aggregate annual base rent per tenant and
for the Facilities, (v) all items of additional rent, (vi) the term and the
commencement and expiration dates of each lease, (vii) any option(s) to
renew and/or any option(s) to terminate granted to any tenant, (viii) the
security deposit held for each lease, (ix) any free rent, moving allowances
or other tenant concessions granted to any tenant and any obligations of
such tenant assumed by Borrower (x) any landlord environmental indemnity in
favor of the tenant, and (xi) any right of first refusal or any right or
option to purchase all or any portion of the Facilities granted thereunder;
which such Rent Roll shall be certified to be true, correct and complete by
a Trustee Officer.
"RESTRICTIONS" is defined in Section 9.1 hereof.
"SANWA LINE OF CREDIT" means that certain secured line of credit
established by Sanwa Bank California ("Sanwa Bank") in favor of Borrower
which is secured by the Sanwa Liens, and any replacement line(s) of credit
therefor which comply with the provisions of Section 6.12 hereof.
"SANWA LIENS" means those certain liens in favor of Sanwa Bank to
secure the Sanwa Line of Credit and encumbering those certain real
properties set forth in EXHIBIT B attached hereto (the "Sanwa Properties").
"SECURED FACILITIES" means those Facilities encumbered by the Deeds of
Trust as described in EXHIBIT K attached hereto.
"SUBSIDIARY" means the Consolidated Partnership, together with any
corporation, association, partnership or other business entity of which
more than 50% of the total voting power of shares of stock or partnership
shares entitled to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more of the other Subsidiaries of that Person or a
combination thereof.
"TANGIBLE NET WORTH" means with respect to any date of determination,
(i) Consolidated Book Value, minus (ii) total liabilities of Borrower and
the Consolidated Partnership, both current and long term (including,
without limitation, (a) any balance sheet liability with respect to a
Pension Plan recognized pursuant to Financial Accounting Standards Board
Statements 87 or 88, (b) any withdrawal liability under Section 4201 of
ERISA with respect to a withdrawal from a Multiemployer Plan, as such
liability may be set forth in a notice of withdrawal
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liability under Section 4219 of ERISA (and as adjusted from time to time
subsequent to the date of such notice), and (c) any asset, liability,
contingency and other appropriate reserves, including reserves for
accrued or deferred income taxes), calculated on a consolidated basis
determined in accordance with GAAP.
"TANGO LIEN" means the lien on the Tango Apartments located in Las
Vegas, Nevada (the "Tango Property"), created by the deed of trust in favor
of Lincoln National Life Insurance Company with respect to the Tango Loan.
"TANGO LOAN" means the first mortgage loan in the principal amount of
approximately $4,261,320 (as of March 31, 1995) made by Lincoln National
Life Insurance Company, which loan was assumed by Borrower and is secured
by the Tango Lien.
"TERMINATION EVENT" means (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
"Reportable Event" not subject to the provisions for 30-day notice to the
Pension Benefit Guaranty Corporation under such regulations), or (ii) the
withdrawal of Borrower or any of its ERISA Affiliates from a Pension Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) or 4068(f) of ERISA, or (iii) the filing of a notice of
intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA, or (iv) the
institution of proceedings to terminate a Pension Plan by the Pension
Benefit Guaranty Corporation, or (v) any other event or condition which
would constitute grounds under Section 4042(a) of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan, or
(vi) the imposition of a lien pursuant to Section 412(n) of the Code.
"TREASURY RATE" means the semi-annual yield on the Treasury Constant
Maturity series with maturity equal to the remaining weighted average life
of the Loan, for the week prior to the Prepayment Date, as reported in
Federal Reserve Statistical release H.15 - Selected Interest Rates,
conclusively determined by Lender (absent manifest error) on the Applicable
Date. The rate will be determined by linear interpolation between the
yields reported in Release H.15, if necessary. (In the event Release H.15
is no longer published, Lender shall select a comparable publication to
determine the Treasury Rate.)
"TRUSTEE OFFICER" means either Jay W. Pauly, the President/Chief
Executive Officer of Borrower, or Leroy E. Carlson, the Vice President/CFO
of Borrower, acting alone.
"UNCONSOLIDATED PARTNERSHIP" means Chateau De Ville, Ltd., a
California limited partnership.
"UNION LINE OF CREDIT" means that certain secured line of credit in
the maximum principal amount of Seven Million Five Hundred Thousand Dollars
($7,500,000) established by Union Bank in favor of Borrower which is
secured by the Union Liens and any replacement line(s) of credit therefor
which comply with the provisions of Section 6.12 hereof.
"UNION LIENS" means those certain liens in favor of Union Bank to
secure the Union Line of Credit and encumbering that certain real property
more commonly referred to as Lakeview Apartments located in San Diego,
California (the "Union Property").
"UNSECURED CONVERSION DATE" is defined in Section 9.2 hereof.
"525 LOAN DOCUMENTS" means the "Loan Documents" as defined in the 525
Loan Agreement.
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"525 PRUDENTIAL LOAN" means that certain $55,000,000 term loan made by
Lender to Borrower under Loan No. 6-100-525 as described in that certain
Loan Agreement dated as of January 31, 1994 by and between Lender and
Borrower, as amended by that certain First Amendment to Loan Agreement
dated as of even date herewith, and as further amended from time to time
(the "525 Loan Agreement").
1.2 OTHER TERMS.
Any accounting terms used in this Agreement which are not specifically
defined shall have the meanings assigned to them in conformity with GAAP.
References to "Articles" and "Sections" shall be to Articles and Sections,
respectively, of this Agreement unless otherwise specifically provided. Any of
the terms defined in Section 1.1 or elsewhere herein may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference.
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1.3 COMPUTATION OF TIME PERIODS.
In this Agreement in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding".
ARTICLE 2.
LOAN TERMS
2.1 LOAN.
A. LOAN. Subject to the terms and conditions of this Agreement, and
in reliance upon the representations and warranties of Borrower herein set
forth, Lender agrees to make to Borrower, and Borrower agrees to accept from
Lender, a loan in the principal amount EIGHTEEN MILLION DOLLARS ($18,000,000)
(the "Loan").
B. NOTE. Borrower shall execute and deliver to Lender, on or before
the Closing Date, the Note evidencing the Loan. Borrower agrees to repay the
indebtedness evidenced by the Note in accordance with the terms thereof and the
terms hereof.
C. TERM OF LOAN. Subject to Article 7 hereof, the Loan shall mature,
and the then outstanding principal balance of the Loan shall be due and payable,
on the Maturity Date.
D. DISBURSEMENT OF FUNDS. Upon satisfaction of the conditions
precedent specified in Section 3.1 hereof, on the Closing Date, Lender shall
disburse the full proceeds of the Loan, in same day funds, to or on behalf of
Borrower, into escrow with such funds to be paid and disbursed as follows: to
Sanwa Bank, through escrow, the full $18,000,000 disbursement of the Loan.
2.2 INTEREST RATE ON THE LOAN.
A. RATE OF INTEREST. The Loan shall bear interest on the unpaid
principal amount thereof from the Closing Date until repaid in full at an
interest rate per annum equal to seven and eighty-eight one-hundredths percent
(7.88%).
B. INTEREST PAYMENTS. Subject to Section 2.2.D hereof, interest only
on the Loan shall be payable monthly in arrears on the first (1st) day of each
month during the term of such Loan, upon any prepayment of such Loan (to the
extent accrued on the amount being prepaid, and together with any Prepayment
Premium due in connection therewith) and on the Maturity Date of such Loan.
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C. LATE CHARGE. If Borrower fails timely to pay any sum due and
payable under the Loan on or before the date due, a late charge equal to four
cents ($.04) for each dollar ($1.00) of each such late payment (the "Late
Charge") shall be immediately due and payable. Borrower acknowledges and agrees
that its failure to make timely payments will result in Lender incurring
additional expense in servicing the Loan, and that it is extremely difficult and
impractical to ascertain the extent of such damages and that the Late Charge
represents a fair and reasonable estimate, considering all of the circumstances
existing on the date of the execution of this Agreement, of the costs that
Lender will incur by reason of such late payment. Acceptance of any Late Charge
shall not constitute a waiver of the default with respect to the late payment,
and shall not prevent Lender from exercising any of the other rights or remedies
available hereunder, at law or in equity.
D. SECONDARY INTEREST. Borrower further acknowledges and agrees that
during the time that any payment of principal, interest or other amount due
under the Note or this Agreement shall be delinquent (including, without
limitation, the entire principal amount of the Loan on maturity or in connection
with an acceleration of the Loan as provided herein and in the Loan Documents),
Lender will incur additional costs and expenses attributable to its loss of use
of the money due and to the adverse impact on Lender's ability to meet its other
obligations and avail itself of other opportunities. Borrower agrees that it is
extremely difficult and impractical to ascertain the extent of such expenses,
and Borrower therefore agrees that interest at a rate of eighteen percent (18%)
per annum (the "Secondary Interest Rate") shall accrue on any delinquent
payments of principal, interest or other amounts due under any Loan Document
(including, without limitation, the entire principal amount of the Loan on
maturity or in connection with an acceleration of the Loan as provided herein
and in the Loan Documents) from the date such payments were due and for so long
as non-payment continues, regardless of whether or not there has been an
acceleration of the Indebtedness evidenced by the Note.
E. COMPUTATION OF INTEREST. Interest on the Loan shall be computed
on the basis of a year of three hundred sixty (360) days consisting of twelve
(12) thirty (30) day months, regardless of the actual time elapsed.
2.3 FEES.
A. APPLICATION FEE. Lender acknowledges that in connection with
fixing the rate of interest on the Loan, Borrower has paid to Lender an
application fee in the amount of One Hundred Eighty Thousand Dollars ($180,000).
Borrower agrees that unless Lender's Western Division Credit Committee or
appropriate corporate officers of Lender fails to issue a Loan commitment (the
"Loan Commitment"), then such processing fee shall be fully earned by Lender as
of the date of receipt thereof and shall not be returned or refunded to Borrower
regardless of whether the Loan is ever funded or made.
B. OTHER FEES AND COSTS. In addition to the fees described in
Section 2.3.A hereof, Borrower agrees to pay the fees and expenses of Lender set
forth in Section 8.2 hereof.
2.4 PAYMENTS AND PREPAYMENTS.
A. PRINCIPAL REPAYMENT. There shall be no regularly scheduled
principal amortization payments during the term of the Loan and the entire
outstanding principal balance of the Loan, together with all accrued and unpaid
interest thereon, and any other amounts due under the Loan Documents shall be
due and payable on the Maturity Date.
B. PAYMENTS. All payments to Lender shall be made without setoff or
counterclaim not later than 12:00 noon (New York time) on the day when due in
lawful money of the United States by electronic funds transfer of immediately
available funds to Lender at Morgan Guaranty Trust Company, 23
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Wall Street, New York, New York 10019, Account No. 05-054-493 or at such
other place or places as Lender may designate from time to time in writing to
Borrower.
C. PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder or under the Note.
D. PREPAYMENTS. Subject to payment of the Prepayment Premium
referred to below and all accrued interest and other sums due with respect to
the Loan, if any, Borrower shall have the right to prepay all or any part of the
outstanding principal balance of the Loan on any regularly scheduled interest
payment date, with a minimum Prepayment Amount of Five Million Dollars
($5,000,000), upon giving not less than thirty (30) days prior written notice to
Lender of its intention to prepay the Loan. Except as set forth below, if the
Loan is prepaid in whole or in part for any reason on a date prior to the
Maturity Date, whether voluntarily, involuntarily or by operation of law, or
after acceleration by Lender upon an Event of Default, Borrower shall pay to
Lender, together with the subject Prepayment Amount and any unpaid accrued
interest on the Prepayment Amount, as liquidated damages, a prepayment charge
(the "Prepayment Premium") equal to the greater of:
(i) the product of (a) one percent (1%) of the principal amount of
the Loan being prepaid (the "Prepayment Amount") multiplied by (b) a
fraction the numerator of which is the number of full months remaining to
the Maturity Date of the Loan being prepaid as of the date on which the
Prepayment will be made (hereinafter called the "Prepayment Date") and the
denominator of which is the number of full months comprising the term of
such Loan; or,
(ii) the Present Value of the Prepayment Amount less the sum of (a)
the Prepayment Amount and (b) the unpaid accrued interest, if any,
calculated as of the Prepayment Date.
Lender shall notify Borrower of the amount and basis of determination
of the Prepayment Premium (reflecting therein the calculation thereof). On or
before the Prepayment Date, Borrower shall pay to Lender the Prepayment Premium
together with the
[BALANCE OF PAGE LEFT INTENTIONALLY BLANK]
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Prepayment Amount and all accrued interest and other sums due with respect to
the Prepayment Amount being prepaid and Lender shall not be obligated to accept
any Prepayment Amount unless such Prepayment Amount is so accompanied by the
Prepayment Premium and all accrued interest and other sums due with respect
thereto.
Borrower agrees that the Prepayment Premium represents the reasonable
estimate of Lender and Borrower of a fair average compensation for the loss that
may be sustained by Lender due to any Prepayment; and Borrower agrees that
Lender's agreement to enter into this transaction on the terms set forth in this
Agreement and in the other Loan Documents constitutes adequate and valuable
consideration, given individual weight by Borrower for this Agreement. Such
Prepayment Premium shall be paid without prejudice to the right of Lender to
collect any other amounts provided to be paid as set forth in this Agreement or
the other Loan Documents. Lender shall not be obligated to actually reinvest
any Prepayment Amount in any U.S. Government Treasury obligations as a condition
to receiving the Prepayment Premium.
Borrower hereby expressly waives any right it may have under California
Civil Code Section 2954.10 to prepay this Loan, in whole or in part, without
prepayment charge, upon acceleration of the Maturity Date upon or following the
conveyance by Borrower of any right, title or interest in the properties
encumbered by the Deeds of Trust, and agrees that if for any reason a prepayment
of any or all of this Loan is made, upon or following any acceleration of the
Maturity Date, Borrower shall pay, concurrently therewith, a Prepayment Premium
calculated pursuant to this SECTION 2.4.D. By initialling this provision in the
space provided below, Borrower hereby declares that Lender's agreement to make
the Loan at the interest rate provided herein and for the term set forth in this
Agreement constitutes adequate consideration, given individual weight by
Borrower, for this waiver.
INITIALS: __________ ____________
2.5 USE OF PROCEEDS.
The proceeds of the Loan shall be used as specified in Section 5.10
hereof. No portion of the proceeds of the Loan shall be used for the purpose of
"purchasing" or "carrying" any Margin Stock or used in any manner which might
cause the borrowing or the application of such proceeds to violate Regulation G,
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulations of the Board of Governors of the
Federal Reserve System or to violate the Securities Exchange Act, in each case
as in effect on the Closing Date and date or dates of the use of such proceeds.
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2.6 FAILED FUNDING.
Borrower recognizes that Lender may suffer damages, including loss of
bargain, if the Loan is not disbursed. In the event Borrower fails to satisfy
the conditions to closing and receive disbursement of the Loan on or before the
Closing Date in accordance with the terms hereof for any reason (other than
Lender's breach of the terms of the Loan Commitment or Borrower's failure to
fulfill the conditions of closing solely as a result of a failed condition
precedent under Section 3.1.O hereof), Borrower shall pay to Lender a
termination fee equal to the sum of the Unwind Fee and the Loss of Yield Fee (as
such terms are hereinafter defined) (collectively, the "Termination Fee"), in
order to compensate Lender for any loss of yield in connection with the re-
investment by Lender of the Loan funds. As used herein, the "Unwind Fee" shall
be an amount equal to (i) the Percentage Price Increase (as hereinafter
defined), if any, in a treasury note with a face coupon of 6.5%, yielding 6.58%,
due in the month of May in the year of 2005, with a closing bid price of 99.17
as of May 23, 1995 (the "Treasury Note"), multiplied by (ii) $18,000,000. As
used herein, the "Percentage Price Increase" shall be an amount equal to the
quotient of (A) the difference between (x) the bid price of the Treasury Note as
described above (the "Original Bid Price"), and (y) the bid price of the
Treasury Note as of the Closing Date, as determined by Lender, divided by
(B) the Original Bid Price. In the event the Percentage Price Increase is less
than or equal to zero (0) because the bid price of the Treasury Note did not
increase, the amount of the Unwind Fee shall also be zero (0). As used herein,
the "Loss of Yield Fee" shall mean an amount equal to (a) the number of days
from May 23, 1995 to the Closing Date, inclusive, expressed as a percentage of
360 days, multiplied by (b) $18,000,000, and thus further multiplied by (c) the
difference between the interest rate of 7.88% and the yield on 30-day commercial
paper (as determined by Lender) as of the date Borrower fails to satisfy the
conditions precedent to the making of the Loan. Lender shall notify Borrower of
the amount and the basis of determination of the Termination Fee. Within five
(5) days after Borrower receives such notification, Borrower shall remit to
Lender the Termination
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Fee, together with all other amounts due Lender hereunder. Borrower agrees that
Lender shall not be obligated to actually reinvest the undisbursed Loan amount
in any Treasury obligations as a condition to receiving the Termination Fee.
2.7 NO RECOURSE TO PERSONAL ASSETS OF SHAREOWNERS.
Notwithstanding any term or provision contained in the Loan Documents,
no shareowner of Borrower shall be personally liable as such for the Obligations
thereunder, whether such Obligations arose before or after such shareowner
became owner or holder of its shares in Borrower; provided, however, that in
seeking repayment for such Obligations, nothing contained herein shall limit
Lender's recourse against (i) Borrower, (ii) any of Borrower's assets or
properties, or (iii) any assets or properties of Borrower which are wrongfully
or fraudulently distributed to any shareowner.
ARTICLE 3.
CONDITIONS TO LOAN
3.1 CONDITION PRECEDENT TO FUNDING OF LOAN.
On or before the date at least thirty (30) business days prior to the
Closing Date (or by such other date as may be specifically provided below),
Borrower shall submit to Lender for its review the following documents,
evidence, agreements and information. As a condition precedent to its
obligation to close the Loan and disburse the Loan proceeds, (i) Lender must be
satisfied with the form, substance and findings of all such documents, evidence,
agreements and information, and (ii) Borrower must satisfy and fulfill each of
the following conditions precedent to closing, to the satisfaction of Lender (in
its sole and absolute discretion) on or before the Closing Date:
A. LOAN DOCUMENTS. On or before the Closing Date, Borrower shall
deliver to Lender the following, each, unless otherwise noted, dated as of the
Closing Date, and in form and substance satisfactory to Lender, in its sole and
absolute discretion:
(i) This Agreement;
(ii) The Note;
(iii) The Deeds of Trust;
(iv) UCC-1 Financing Statements; and
(v) Amendments to the 525 Loan Agreement and/or the 525 Loan
Documents.
B. BORROWER ORGANIZATIONAL DOCUMENTS. On or before the date at least
ten (10) days prior to the Closing Date, Borrower shall deliver to Lender the
following:
(i) Certified copies of its Declaration of Trust and all other
agreements or documents relating to its formation as an unincorporated
association (the "Trust Agreement"), each to be dated a recent date prior
to the Closing Date;
(ii) Copies of any other organizational documents or board of trustee
rules or regulations (collectively, the "Bylaws"), certified as of the
Closing Date as true, correct and complete by a Trustee Officer;
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(iii) Resolutions of Borrower's Board of Trustees approving and
authorizing the execution, delivery and performance of this Agreement and
the execution, delivery and payment of the Note, certified as of the
Closing Date by a Trustee Officer as being in full force and effect without
modification or amendment;
(iv) Signature and incumbency certificates of each Trustee Officer
executing this Agreement and the Note;
(v) With respect to the Consolidated Partnership and the
Unconsolidated Partnership, such charter and partnership documents,
authorization documents, and incumbency certificates relating to such
entities as Lender may require; and
(vi) Such other documents, instruments, agreements, contracts or
other information as Lender may reasonably request.
C. HAZARDOUS MATERIALS. On or before the date at least thirty (30)
days prior to the Closing Date, Borrower shall submit, at its own expense, any
and all reports, investigations, inquiries and other data relating to Hazardous
Materials that Borrower has commissioned, received, or otherwise reviewed or
obtained with respect to each Facility. Such information shall establish that
with respect to the Facilities covered thereby, (i) there are no Hazardous
Materials stored or otherwise present on, in or about any such Facilities except
for Approved Materials (as hereinafter defined); (ii) there are no underground
tanks located on, in or about any such Facilities; (iii) there exists no
Environmental Claims or other material environmental risks, problems or hazards
affecting any such Facilities, and (iv) all activities conducted on any such
Facilities have been conducted in compliance with all Environmental Laws.
D. FINANCIALS. On or before the date at least thirty (30) days prior
to the Closing Date, Borrower shall deliver to Lender audited consolidated
annual financial statements (including, without limitation, balance sheets,
income statements, cash flow statements and changes in owner's equity) for
Borrower and the Consolidated Partnership for the most recently available fiscal
year, prepared by Kenneth Leventhal & Co. or other certified public accountants
approved by Lender (the "Annual Financials"), and consolidated quarterly
financial statements (including, without limitation, balance sheets, income
statements, cash flow statements and changes in owner's equity) for Borrower and
the Consolidated Partnership for each fiscal quarter of the then current fiscal
year, certified by the Trustee Officer of Borrower as being consistently
prepared on a consolidated basis in accordance with GAAP and otherwise true,
correct and complete in all respects (the "Quarterly Financials") (the Annual
Financials and the Quarterly Financials are referred to herein collectively as
the "Financials").
E. TITLE. On or before the date at least thirty (30) days prior to
the Closing Date, Borrower shall deliver to Lender (i) evidence satisfactory to
Lender that title to all of the Facilities is one hundred percent (100%) vested
fee simple in Borrower (with the exception of the Facility owned by the
Consolidated Partnership which shall be one hundred percent (100%) vested fee
simple in the Consolidated Partnership) and is good and marketable in all
aspects, free and clear of all Liens and other defects other than Approved
Liens; and (ii) preliminary title reports (and copies of exceptions described
therein) with respect to the Secured Facilities. At Closing, Borrower shall
deliver to Lender, at Borrower's expense, an ALTA Loan Policy (Form 1970 Amended
10-17-70) (together with all endorsements thereto reasonably required by, and in
form and substance satisfactory to, Lender) with respect to the Secured
Facilities, showing fee simple title therein vested in Borrower, and insuring
the Prudential Liens as $18,000,000 first priority Liens against the Secured
Facilities, subject only to exceptions reasonably satisfactory to Lender.
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F. CONFIRMATION OF REIT STATUS. On the date five (5) days prior to
the Closing Date, Lender shall have received a letter from Borrower's
independent accountants or attorneys confirming that Borrower has been a
qualified REIT from its inception through the most recent fiscal quarter just
ended. In addition, Borrower shall deliver to Lender evidence that Borrower has
in excess of 110 shareholders and that in no event do seven (7) or fewer Persons
control, directly or indirectly, fifty percent (50%) or more of the outstanding
shares of Borrower.
G. LENDER STATEMENT AND AGREEMENT. On or before the date at least
ten (10) days prior to the Closing Date, Borrower shall have delivered to Lender
a statement by each of Lincoln National Life Insurance Company, Sanwa Bank and
Union Bank, certifying with respect to the applicable loan or lines of credit
made by such parties to Borrower, as to the following:
(i) The amount of the unpaid balance of the applicable loan or line
of credit and the interest rate applicable thereto, together with the total
amounts, if any, of all overdue installments of either principal or
interest, or both;
(ii) The amounts of periodic payments, if any;
(iii) The date on which the applicable loan or line of credit expires
or is otherwise due in whole or in part;
(iv) The nature and, if known, the amount of any additional charges,
costs, or expenses payable by Borrower; and
In addition, Borrower shall notify each of Sanwa Bank and Union Bank in writing
(with a copy to Lender) that Borrower has, pursuant to the terms of loan
documents relating to such lines of credit, elected to change its address for
notice thereunder such that all such notices to Borrower shall be delivered to
Borrower at the address of Borrower set forth on the signature page hereof, with
a copy to Lender at the address of Lender set forth on the signature page
hereof.
H. OTHER DEBT. As of the Closing Date and after payment of the Loan
proceeds in accordance with the terms of Section 2.1.D hereof, neither Borrower
nor the Consolidated Partnership (i) shall be indebted to any Person for
borrowed money on an unsecured basis, (ii) other than this Loan, the 525
Prudential Loan, the Tango Loan, and the Sanwa Line of Credit and the Union Line
of Credit (which such lines of credit when taken together will not have a
balance greater than $18,500,000, in the aggregate, as of July 27, 1995), shall
be indebted to any Person for borrowed money, nor liable for any other
obligation, in each case secured in whole or in part by any Facility, and
(iii) shall have incurred any other Indebtedness other than Approved
Indebtedness.
I. OPINIONS OF BORROWER COUNSEL. On or before the Closing Date,
Lender shall have received an originally executed copy of one or more favorable
written opinions of Nordman, Cormany, Hair & Compton, counsel for Borrower and
the Consolidated Partnership, in form and substance reasonably satisfactory to
Lender and its counsel, dated as of the Closing Date, and setting forth
substantially the matters in the opinion set forth in EXHIBIT D attached hereto.
J. PERFORMANCE OF AGREEMENTS. As of the Closing Date, Borrower shall
have performed in all material respects all agreements which this Agreement
provides shall be performed on or before the Closing Date.
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K. ADVERSE FINANCIAL CHANGE. On the Closing Date, Borrower shall
deliver to Lender a certificate of the Trustee Officer of Borrower to the effect
that, as of the Closing Date, (i) the then Tangible Net Worth of Borrower and
the Consolidated Partnership is not less than $100,000,000 and (ii) there has
been no Material Adverse Change since the date of the last Quarterly Financials.
L. COMPLIANCE CERTIFICATE. On or before the Closing Date, Borrower
shall have delivered to Lender a Compliance Certificate which shall certify,
among other things, as of the Closing Date and upon giving effect to the funding
of the Loan, (i) that each of the representations and warranties of Borrower
contained in the Loan Documents is true, correct and complete, (ii) that no
Event of Default or Potential Event of Default exists under the Loan Documents,
(iii) as to the outstanding principal balance of all Indebtedness of Borrower
and the Consolidated Partnership, including but not limited to, the Tango Loan
and the Sanwa Line of Credit and the Union Line of Credit, and (iv) that each of
Borrower and the Consolidated Partnership is in compliance with each of the
financial covenants applicable to them set forth in the Loan Documents (and
which shall set forth in detail satisfactory to Lender the methodology used to
determine such compliance).
M. TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein and in the other Loan Documents shall be true,
correct and complete in all material respects on the Closing Date.
N. NO DEFAULT. As of the Closing Date, no event shall have occurred
or would result from the funding of the Loan that would constitute an Event of
Default or a Potential Event of Default.
O. NO RESTRAINT. As of the Closing Date, no order, judgment or decree
of any court, arbitrator or governmental authority shall purport to enjoin or
restrain Lender from making the Loan, no hearing to cause an injunction or other
restraining order to be issued shall be pending or noticed seeking to enjoin or
otherwise prevent the consummation of this Agreement or the making of the Loan
hereunder, and the making of the Loan shall not violate any applicable law, rule
or regulation, including, without limitation, Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System and/or Sections 260.140.93(e) and/or 260.140.103 of the California Code
of Regulations, nor subject Lender to any material tax, penalty, liability or
other onerous condition under any applicable law or regulation.
P. NO PROCEEDINGS. As of the Closing Date, there shall not have
been filed by or against Borrower or the Consolidated Partnership or the
Unconsolidated Partnership (i) a petition in bankruptcy, (ii) a petition or
answer seeking assignment for the benefit of creditors, (iii) a petition or
answer seeking the appointment of a receiver, trustee or liquidator with respect
to Borrower or any of the aforementioned parties, or any substantial portion of
Borrower's or such parties' property, or (iv) any reorganization, arrangement,
liquidation or dissolution or similar relief under the Federal bankruptcy laws
or any state law.
Q. APPLICATION OF PROCEEDS. Lender shall have received evidence
satisfactory to it that the proceeds of the Loan will be disbursed in accordance
with Section 2.1.D hereof and will be used in compliance with Sections 2.5 and
5.10 hereof.
R. NO LITIGATION. Except for those matters disclosed in EXHIBIT E
which shall be satisfactory to Lender (in its sole and absolute discretion), as
of the Closing Date, there shall not be any pending or threatened action, suit,
proceeding, governmental investigation or arbitration
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against or affecting Borrower or the Consolidated Partnership or any
Facility.
S. NO DAMAGE OR CONDEMNATION. As of the Closing Date, (i) none of
the Facilities shall have suffered any uninsured damage by fire or other
casualty, (ii) not more than 3 Facilities shall have suffered any damage by fire
or other casualty, whether or not insured, and (iii) none of the Facilities
shall have become, in whole or in part, the subject of any actual or threatened
condemnation action or proceeding or the exercise of the power of eminent
domain.
T. LEASES AND OTHER DOCUMENTS. On or before the date at least
twenty (20) days prior to the Closing Date, to the extent not previously
delivered to Lender, Borrower shall submit to Lender copies of (i) all Anchor
Leases and any other lease or sublease identified by Lender, (ii) all relevant
documentation relating to the Tango Loan, the Sanwa Line of Credit and the Union
Line of Credit, (iii) all relevant documentation relating to the Leasehold
Project (including all ground leases and the Existing Purchase Money Mortgages),
including, in each case, all amendments and modifications thereto, certified by
the Trustee Officer of Borrower as true, correct and complete.
U. CERTIFIED RENT ROLL. On or before the Closing Date, Borrower
shall deliver to Lender a current Rent Roll covering all Secured Facilities,
together with an aggregate rent roll summary with respect to all Existing
Facilities, in each case, certified by the Trustee Officer of Borrower as being
true, correct and complete.
V. UCC SEARCH. On or before the date at least twenty (20) days
prior to the Closing Date, Borrower shall submit to Lender UCC searches relating
to the Facilities, Borrower and the Consolidated Partnership for each state in
which such Facilities are located or with respect to which such entities do
business. The UCC searches must provide that other than the Approved Liens, no
Person shall hold a security interest in any of the assets of Borrower or the
Consolidated Partnership.
W. PROPERTY MANAGEMENT PLAN. On or before the date at least ten
(10) days prior to the Closing Date, Borrower shall submit to Lender a detailed
property management plan with respect to the use, operation and ownership of the
Facilities, and a plan detailing Borrower's proposed investments and
acquisitions of New Facilities in the current fiscal year.
X. ENVIRONMENTAL QUESTIONNAIRE. On or before the Closing Date,
Borrower shall have delivered to Lender an Environmental Questionnaire in the
form of EXHIBIT L attached hereto with respect to each Secured Facility.
Z. ASBESTOS PROGRAM. On or before the Closing Date, Borrower shall
institute and place in operation an Asbestos Operations and Maintenance Program
(satisfactory to Lender) for any Facilities which contain asbestos or asbestos
containing materials.
AA. REQUEST FOR NOTICE OF DEFAULT. On or before the Closing Date,
there shall be recorded in favor of Lender, Requests for Notice of Default with
respect to the Tango Property, the Sanwa Properties and the Union Property.
AB. PAYMENT OF ALL FEES AND COSTS. Borrower shall pay all fees,
costs and expenses of Lender due as of the Closing Date as provided in
Section 8.2 hereof.
AC. PAY-DOWN OF LINES OF CREDIT. Borrower shall have delivered
evidence to Lender that Borrower shall have (i) arranged to pay in full the
Union Line of Credit on or before July 24, 1995 and pay-down the Sanwa Line of
Credit to not more than $18,500,000 on or before July 27, 1995, and
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(ii) effected a reconveyance or release of the mortgages or deeds of trust
encumbering the Core Secured Facilities.
AD. EVIDENCE OF INSURANCE. At least ten (10) days prior to the
Closing Date, delivery to Lender of certificates or other evidence of the
insurance policies required under Section 5.5 hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
All representations and warranties of Borrower contained in this
Agreement shall survive the execution, delivery and acceptance thereof by the
parties hereto and the Closing Date. In order to induce Lender to enter into
this Agreement and to make the Loan, Borrower represents and warrants to Lender
that the following statements are true, correct and complete:
4.1 ORGANIZATION, POWERS, GOOD STANDING, AND BUSINESS.
Borrower is a California real estate investment trust duly formed,
validly existing and in good standing under the laws of the State of California.
Borrower is validly qualified as a REIT. Borrower is duly qualified to do
business in California, Arizona and every other state in which it does business.
The Consolidated Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of California.
Borrower and the Consolidated Partnership each have the trust or partnership
power, as the case may be, and authority to own and operate their properties, to
carry on their business as now conducted and proposed to be conducted, and
Borrower has all requisite authority to enter into each Loan Document, to issue
the Note and to carry out the transactions contemplated hereby and thereby.
Borrower is duly qualified as a foreign unincorporated association to do
business in, and is in good standing in every jurisdiction in which the nature
of the business conducted or properties owned by it makes such qualification
necessary. Borrower is not a "foreign person" within the meaning of Section
1445 and 7701 of the Code.
4.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and
performance of the Loan Documents and the issuance, delivery and payment of the
Note have been duly authorized by all necessary trust action by Borrower.
B. NO CONFLICT. The execution, delivery and performance by Borrower
of each Loan Document to which it is a party and the issuance, delivery and
performance of the Note by Borrower do not and will not (i) violate any
provision of law applicable to Borrower, the Trust Agreement or other
organization documents or Bylaws of Borrower, or any order, judgment or decree
of any court or other agency of government binding on Borrower; (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contractual Obligation of Borrower; (iii) result in or
require the creation or imposition of any Lien, charge or encumbrance of any
nature whatsoever upon any of Borrower's or the Consolidated Partnership's
properties or assets; or (iv) require any approval or consent of any Person
under any Contractual Obligation of Borrower.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Borrower of each Loan Document to which it is a party and the issuance, delivery
and payment of the Note by Borrower do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
Federal, state or other governmental authority or regulatory body or other
Person.
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D. BINDING OBLIGATION. The Note and each other Loan Document are the
legally valid and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally.
4.3 FINANCIAL CONDITION.
Borrower has furnished Lender with the most recent Annual Financials
and Quarterly Financials of Borrower. Such financial statements (including
any related schedules and/or notes) are true, correct and complete in all
material respects and have been prepared in conformity with GAAP and show all
liabilities, direct and contingent, of Borrower and the Consolidated
Partnership required to be shown in accordance with GAAP. The balance sheets
fairly present the condition of Borrower and the Consolidated Partnership as
at the dates thereof, and the statements of income and statements of changes
in financial position fairly present the results of the operations of
Borrower and the Consolidated Partnership for the periods indicated. There
has been no change in the business, condition or operations (financial or
otherwise) of Borrower or the Consolidated Partnership since the last
Quarterly Financials and since that date no event or change has occurred that
has caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect other than as disclosed in this Agreement.
4.4 ACTIONS PENDING.
There is no action, suit, investigation, proceeding or arbitration at
law or in equity or before or by any Federal, State, municipal or other
governmental agency or instrumentally, domestic or foreign, pending or
threatened against or affecting Borrower or the Consolidated Partnership, or any
properties or rights of Borrower or the Consolidated Partnership which might
result in any Material Adverse Change in the business, condition, properties,
assets or operations of Borrower or the Consolidated Partnership, or could
reasonably be expected to result in a Material Adverse Effect.
4.5 TITLE TO FACILITIES; LIENS.
Borrower and the Consolidated Partnership each has good and marketable
title to its Facilities and good title to all of its other properties and
assets, including other properties and assets reflected in the Financials
referred to in Section 4.3. All the Facilities and all such properties and
assets are free and clear of all Liens of any kind except Approved Liens. All
leases necessary in any material respect for the conduct of the business of
Borrower and the Consolidated Partnership or for the realization of Net
Operating Income are valid and subsisting and are in full force and effect. The
ground leases relating to the Leasehold Projects and the Existing Purchase Money
Mortgages are valid and subsisting and are in full force and effect.
4.6 TAXES.
All tax returns and reports of Borrower and the Consolidated
Partnership required to be filed by each of them have been timely filed, and all
taxes, assessments, fees and other governmental charges upon Borrower and the
Consolidated Partnership and upon their respective properties, assets, income
and franchises which are due and payable have been paid when due and payable,
except to the extent that such taxes, assessments and/or fees are being disputed
in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP. Except as specifically disclosed in
writing to Lender, Borrower knows of no proposed tax assessment against it or
the Consolidated Partnership.
4.7 CONFLICTING AGREEMENTS AND OTHER MATTERS.
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Neither Borrower nor the Consolidated Partnership is a party to any
contract or agreement or subject to any charter or other restriction that is
reasonably expected to result in a Material Adverse Effect. Neither Borrower
nor the Consolidated Partnership is a party to, or otherwise subject to any
provisions contained in, any instrument evidencing Indebtedness of Borrower or
the Consolidated Partnership, any agreement relating thereto or any other
Contractual Obligation (including its Trust Agreement) which restricts Borrower
from entering into this Agreement and borrowing the Loan proceeds evidenced by
the Note. Neither Borrower nor the Consolidated Partnership is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any Contractual Obligation, and no condition exists
which, with the giving of notice or the lapse of time or both, would constitute
such a default thereunder.
4.8 REGULATION G, ETC.
Neither Borrower nor the Consolidated Partnership owns or has any
present intention of acquiring any Margin Stock. Neither Borrower nor the
Consolidated Partnership is engaged in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock. None of the proceeds of the
Loan will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any Margin Stock
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of such Regulation G. Neither Borrower nor the
Consolidated Partnership nor any agent acting on behalf of any of them has taken
or will knowingly take any action which, at the time the action is taken, might
cause the Loan Documents or the Note to violate Regulation G, Regulation T or
any other regulation of the Board of Governors of the Federal Reserve System or
to violate the Securities Exchange Act of 1934, as amended, in each case as in
effect now or as the same may hereafter be in effect.
4.9 ERISA.
Borrower (and to the best of Borrower's knowledge, all ERISA
Affiliates) are in compliance in all material respects with any applicable
provisions of ERISA and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans. No accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any Employee Benefit or Pension Plan (other than
a Multiemployer Plan). No liability to the Pension Benefit Guaranty Corporation
has been or is expected by Borrower to be incurred with respect to any Employee
Benefit or Pension Plan (other than a Multiemployer Plan) by Borrower which
could reasonably be expected to result in a Material Adverse Effect. Borrower
has not incurred nor expects to incur any withdrawal liability under Title IV of
ERISA with respect to any Multiemployer Plan which could reasonably be expected
to result in a Material Adverse Effect. The execution and delivery of the Loan
Documents and the issuance of the Note will not involve any transaction which is
subject to the prohibitions of Section 406 of ERISA or in connection with which
a tax could be imposed pursuant to Section 4975 of the Code. No Termination
Event has occurred or is reasonably expected to occur with respect to any
Pension Plan which has had or will have a Material Adverse Effect.
4.10 CERTAIN FEES.
Other than fees payable hereunder or under the transactions
contemplated hereby (including those payable by Borrower to Borrower's attorneys
and consultants and the title company), no fee (including without limitation,
broker's or finder's fees or commissions) will be payable with respect to the
offer, issue and sale of the Note or any of the transactions
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contemplated hereby, and Borrower hereby indemnifies Lender against and
agrees that it will hold Lender harmless from any claim, demand or liability
for any such fees alleged to have been incurred in connection with any such
offer, issue and sale, or any of the other transactions contemplated hereby
and any expenses, including reasonable legal fees, arising in connection with
any such claim, demand or liability.
4.11 DISCLOSURE.
No representation or warranty of Borrower contained in this Agreement,
any Loan Document, or any other document, certificate or written statement
furnished to Lender by Borrower for use in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of circumstances then
existing. There is no fact known to Borrower which could be expected to have a
Material Adverse Effect which has not been disclosed to Lender.
4.12 GOVERNMENTAL REGULATIONS.
Neither Borrower nor the Consolidated Partnership is a (i) "holding
company," a "subsidiary holding company" of a holding company" or an "affiliate"
of a "holding company" or of a "subsidiary holding company" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, or (ii) public utility within the meaning of the Federal Power
Act, as amended. Neither Borrower nor the Consolidated Partnership is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or an "investment
adviser" within the meaning of the Investment Advisers Act of 1940, as amended.
Neither Borrower nor the Consolidated Partnership is subject to any federal or
state statute or regulation limiting its ability to incur Indebtedness for money
borrowed; other than the provisions of Sections 260.140.93(e) and 260.140.103 of
the California Code of Regulations (the "California Reit Regulations"), and
execution, delivery and performance by Borrower of the Loan Documents, the
making of the Loan, and Borrower's use of the proceeds thereof as contemplated
hereby, in each case, is in full compliance with the provisions of the
California Reit Regulations and the terms of Borrower's Trust Agreement.
4.13 ENVIRONMENTAL MATTERS.
Except as disclosed in EXHIBIT I attached hereto or in the hazardous
materials reports delivered to Lender pursuant to Section 3.1.C hereof: (i) the
Facilities and the operations of Borrower and the Consolidated Partnership
(including, without limitation, all operations and conditions at or in the
Facilities) comply in all material respects with all Environmental Laws; (ii)
Borrower and the Consolidated Partnership have obtained all Environmental
Permits necessary under Environmental Laws applicable to their respective
operations and Facilities, and all such permits are in full force and effect,
and Borrower and the Consolidated Partnership are in compliance with all
material terms and conditions of such Environmental Permits; (iii) neither
Borrower nor the Consolidated Partnership has received (a) any notice or claim
to the effect that it is or may be liable to any person as a result of the
Release or threatened Release of any Hazardous Materials or (b) any letter or
request for information under Section 104 of the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or
comparable state laws, and none of the operations of Borrower or the
Consolidated Partnership is the subject of any Federal or state investigation
evaluating whether any remedial action is needed to respond to a Release or
threatened Release of any Hazardous Material at any of the Facilities or at any
other location; (iv) none of the Facilities nor the operations of Borrower or
the Consolidated Partnership is subject to any judicial or administrative
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proceeding alleging the violation of or liability under any Environmental Laws;
(v) neither Borrower nor the Consolidated Partnership nor any of their
Facilities or operations are subject to any outstanding written order or
agreement with any governmental authority or private party respecting any
Environmental Claims; (vi) neither Borrower nor the Consolidated Partnership has
any contingent liability in connection with any Release of any Hazardous
Materials by Borrower or the Consolidated Partnership or any other Person; (vii)
neither Borrower nor the Consolidated Partnership or any predecessor of Borrower
or of the Consolidated Partnership nor any Person has filed any notice under any
Environmental Law indicating past or present treatment, or disposal of Hazardous
Materials at any of the Facilities, and none of Borrower's or the Consolidated
Partnership's operations or the operations of any Person in relation to the
Facilities involves the generation, transportation, treatment, storage, or
disposal of hazardous waste, as defined under 40 C.F.R. Part 260270 or any
applicable state equivalent; (viii) other than Approved Materials, no Hazardous
Materials exist on, under or about any Facility and neither Borrower nor the
Consolidated Partnership nor any Person has filed any notice or report of a
Release of any Hazardous Materials; (ix) neither Borrower nor the Consolidated
Partnership (or any of their predecessors) has disposed of Hazardous Materials
in a manner that may reasonably be expected to give rise to an Environmental
Claim; (x) no underground storage tanks or surface impoundments are on or at the
Facilities; and (xi) no Lien in favor of any Person for (a) any liability under
Environmental Laws, or (b) damages arising from or costs incurred by any such
Person in response to Hazardous Materials has been filed or has attached to the
Facilities.
4.14 LAND USE.
Except as provided in EXHIBIT G attached hereto, to the best of Borrower's
knowledge, the Facilities and the uses thereof comply with all applicable
zoning, building, environmental and land use laws, ordinances, rules,
regulations and other similar restrictions, and that there is no action or
proceeding pending before any court, quasi-judicial body or administrative
agency relating thereto. Except as provided in EXHIBIT G attached hereto, to
the best of Borrower's knowledge, Borrower has obtained all unconditional
certificates of occupancy and all other certificates, permits, licenses and
other items which are required by or are to be obtained from any board, agency
or department, whether governmental or otherwise for the use and occupancy of
the Facilities as presently used and occupied or as contemplated to be used and
occupied.
4.15 NO SUBSIDIARIES OR AFFILIATES.
Other than the Consolidated Partnership, Borrower has no Subsidiaries or
Affiliates.
4.16 FOREIGN ASSETS CONTROL REGULATIONS.
Neither the making of the Loan nor Borrower's use of the proceeds thereof
as contemplated by this Agreement will violate any of the regulations
administered by the Office of Foreign Assets Control, United States Department
of the Treasury, as amended, or any of the rules or regulations issued
thereunder.
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ARTICLE 5.
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as this Agreement shall be
in effect and until payment in full of the Loan and the Note, Borrower shall
perform, and shall cause the Consolidated Partnership to perform, all of the
covenants in this Article 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
A. Borrower will maintain, and cause the Consolidated Partnership to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP. Borrower shall not, without Lender's prior written
consent, modify or otherwise change its method of accounting from that set forth
in the Financials delivered as of the Closing Date. Borrower will deliver to
Lender:
(i) Within ninety (90) days after the close of each fiscal year of
Borrower (a) audited consolidated annual financial statements (including,
without limitation, balance sheets, income statements, cash flow statements
and changes in owner's equity) substantially in the form of the Annual
Financials prepared by Kenneth Leventhal & Co. or other certified public
accountants approved by Lender, certified without qualification by such
certified public accountants, each in form and substance satisfactory to
Lender, including all elements of income and expenses for the operation of
the Facilities and (b) a Compliance Certificate;
(ii) Within forty-five (45) days after the close of each fiscal
quarter of Borrower (a) consolidated quarterly financial statements
certified by the Trustee Officer of Borrower substantially in the form of
the Quarterly Financials, or, if Lender has reason to believe that there
has occurred a Material Adverse Change, then audited consolidated quarterly
financial statements prepared by Kenneth Leventhal & Co. or other certified
public accountants acceptable to Lender, each in form and substance
satisfactory to Lender, showing all elements of income and expenses for the
operation of the Facilities and (b) a Compliance Certificate;
(iii) Within five (5) years after Lender's receipt of any statement,
Lender may, upon at least five (5) days' prior notice to Borrower,
(i) inspect and make copies of Borrower's books, records and income tax
returns with respect to the Facilities, for the purpose of verifying any
such statement and/or (ii) audit, at Borrower's expense, the books and
records of Borrower; provided, however, that in the event such audit
reveals a discrepancy of less than 3% from the statements so audited,
Lender shall pay the cost of such audit;
(iv) Promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as Borrower shall send to
their public shareowners/stockholders and copies of all registration
statements (without exhibits) and all reports which it files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange commission);
(v) Promptly upon receipt thereof, a copy of each other report
submitted to Borrower by independent accountants in connection with any
annual, interim or special audit made by them of the books of Borrower;
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(vi) Within thirty (30) days of the end of each fiscal quarter of
Borrower during the term of the Loan, if requested by Lender, a current
Rent Roll covering all Facilities, certified by a Trustee Officer of
Borrower as true, correct and complete, and a plan for acquisition.
(vii) With reasonable promptness, such other information or financial
data as Lender may reasonably request.
Together with each delivery of audited financial statements when required by
this Section 5.1.A above, Borrower will deliver to Lender a certificate of such
accountants stating that the scope of the audit conducted by such accountant was
sufficient to make the statements set forth in the certification, and that in
performing such audit, they have (x) obtained no knowledge of any Event of
Default or Potential Event of Default, or, if they have obtained knowledge of
any Event of Default or Potential Event of Default, specifying the nature and
period of existence thereof and (y) confirmed the accuracy and completeness of
the Compliance Certificate, or, if they have obtained knowledge of any such
inaccuracy or incompleteness, specifying the nature thereof. Lender is hereby
authorized to deliver a copy of any financial statement delivered to it pursuant
to this Section 5.1 to any assignee or participant of or in the Loan or any
regulatory body having jurisdiction over Lender.
B. In addition to the foregoing, Borrower will deliver to Lender:
(i) promptly upon any Trustee Officer of Borrower obtaining knowledge
(a) of any condition or event which constitutes an Event of Default or
Potential Event of Default, (b) that any Person has given any notice to
Borrower or the Consolidated Partnership or taken any other action with
respect to a claimed default or event or condition of the type referred to
in Section 7.2, (c) of the institution of any litigation involving an
alleged liability of Borrower or the Consolidated Partnership equal to or
greater than Five Hundred Thousand Dollars ($500,000) or any adverse
determination in any litigation involving a potential liability of Borrower
or the Consolidated Partnership equal to or greater than Five Hundred
Thousand Dollars ($500,000), or (d) of the occurrence of a Material Adverse
Change; an Officers' Certificate specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such holder or Person and the nature of such claimed
default, Event of Default, Potential Event of Default, event or condition,
and what action Borrower has taken, is taking and proposes to take with
respect thereto;
(ii) promptly upon becoming aware of the occurrence of or forthcoming
occurrence of any (a) Termination Event, or (b) "prohibited transaction,"
as such term is defined in Section 4975 of the Code or Section 406 of
ERISA, in connection with any Employee Benefit Plan or any trust created
thereunder, a written notice specifying the nature thereof, what action
Borrower has taken, is taking or proposes to take with respect thereto,
and, when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor, or the Pension Benefit Guaranty
Corporation with respect thereto;
(iii) with reasonable promptness copies of (a) all notices received
by Borrower or any of its ERISA Affiliates of the Pension Benefit Guaranty
Corporation's intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan; (b) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by Borrower or
any of its ERISA Affiliates with the Internal Revenue Service with respect
to each Pension Plan; and (c) all notices received by Borrower or any of
its ERISA Affiliates from a
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Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA;
(iv) promptly upon request of Lender, such certifications or other
evidence that (a) Borrower is not an "employee benefit plan" or a
"governmental plan"; and (b) Borrower is not subject to state statutes
regulating investments and fiduciary obligations with respect to
governmental plans; and (c) one or more of the following circumstances is
true:
(1) Equity interests in Borrower are publicly offered securities,
within the meaning of 29 C.F.R. Section 2510.3101(b)(2);
(2) Less than twenty-five percent (25%) of all equity interests in
Borrower are held by "benefit plan investors" within the meaning
of 29 C.F.R. Section 2510.3101(f)(2); or
(3) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e).
(v) Promptly, and in any event within thirty (30) days after receipt
thereof, a copy of any notice, summons, citation, directive, letter or
other form of communication from any governmental authority or court in any
way concerning any action or omission on the part of Borrower or the
Consolidated Partnership in connection with any Hazardous Material or
concerning the filing of a lien upon, against or in connection with
Borrower or the Consolidated Partnership, or any of their leased or owned
real or personal property, in connection with a Hazardous Substance
Superfund or a Post-Closure Liability Fund as maintained pursuant to U.S.C.
Section 9507; and
(vi) with reasonable promptness, such other information and data with
respect to Borrower or the Consolidated Partnership as from time to time
may be reasonably requested by Lender.
5.2 INSPECTION.
Borrower shall permit any Person designated by Lender in writing to
visit and inspect any of the Facilities to examine the corporate books and
financial records of Borrower and the Consolidated Partnership and make copies
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of Borrower and the Consolidated Partnership with the principal officers of
Borrower and its independent public accountants, all at such reasonable times
and as often as Lender may reasonably request.
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5.3 QUALIFICATION AS REIT; PUBLICLY TRADED COMPANY.
Borrower shall at all times cause to be done all things necessary to
maintain, preserve and renew its existence as a California real estate
investment trust, its qualification as a REIT pursuant to the Code and any
regulations promulgated thereunder, and its good standing in each state in which
it is doing business. At all times Borrower shall cause to be done all things
necessary to maintain, preserve and renew its status as a publicly traded REIT
listed on the New York Stock Exchange and in compliance with the rules and
regulations of the Securities and Exchange Commission.
5.4 MAINTENANCE OF FACILITIES.
At its sole cost and expense, Borrower and the Consolidated
Partnership shall continue to use each of the Facilities for the same purpose as
such Facility was being used as of the Closing Date or, for any New Facility, at
the time of its acquisition, and shall keep and maintain each of the Facilities,
including any parking, recreational and landscaped portions thereof, in the same
or better condition as such Facility is in as of the Closing Date or, for New
Facilities, at the time of its acquisition, and Borrower and the Consolidated
Partnership shall promptly make all necessary structural and non-structural
repairs to the Facilities.
5.5 INSURANCE.
Borrower shall at all times and at its own expense maintain, preserve
and keep in full force and effect, or cause to be maintained, preserved and kept
in full force and effect policies of insurance for its properties (including,
without limitation, the Facilities), assets and operations with reputable
companies and by such methods as shall be adequate in form, substance, and
amount against casualties, losses and liabilities, all in form and substance
satisfactory to Lender; provided, however, that Borrower shall not be required
to provide earthquake insurance for the Facilities. Borrower will provide
Lender with loss-payee endorsements and/or shall name Lender as an additional
insured, as the case may be, with respect to all insurance policies relating to
the Secured Facilities.
5.6 TAXES.
Borrower will, and will cause the Consolidated Partnership to, duly
pay and discharge all taxes, assessments and other governmental charges or
levies imposed upon them, their income or any of their properties or assets, as
well as all claims of any kind, not later than the due date thereof, provided,
however, that nothing herein shall require Borrower or the Consolidated
Partnership to pay any such tax, assessment, charge, levy or claim so long as
Borrower or the Consolidated Partnership, as the case may be, in good faith
shall contest the amount, validity, or applicability thereof and shall, to the
extent required by GAAP, set aside on its books adequate reserves with respect
thereto, or if requested by Lender, provide other security or bond therefor.
5.7 PAYMENT OF INDEBTEDNESS.
A. Borrower will, and will cause the Consolidated Partnership to, pay
punctually and discharge when due any Indebtedness heretofore or hereafter
incurred by Borrower and the Consolidated Partnership and discharge, perform and
observe the covenants, provisions and conditions to be performed, discharged and
observed on the part of Borrower and the Consolidated Partnership in connection
therewith, or in connection with any agreement or other instrument related
thereto, or in connection with any Lien existing at any time upon or in any of
the properties or assets of Borrower or the Consolidated Partnership; provided,
however, that Borrower's or the
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Consolidated Partnership's right to maintain or incur Indebtedness or Liens
shall be governed by and limited as provided in Sections 6.2 and 6.8 hereof.
B. Borrower will (i) on or before the Closing Date, cause to be repaid
all other Indebtedness (other than the Approved Indebtedness), and (ii) on or
before July 24, 1995, repay, in full, the Union Line of Credit and cause the
Union Property to be reconveyed as security therefor, and on or before July 27,
1995, and continually thereafter, cause the outstanding balance of the Sanwa
Line of Credit to be not greater than $18,500,000; provided, however, that after
the Closing Date, Borrower shall, subject to the terms hereof, be entitled to
repay such indebtedness and draw on such line of credit in accordance with the
terms thereof as long as the outstanding principal balance thereof does not
exceed, at any time, $18,500,000.
5.8 COMPLIANCE WITH LAWS.
Borrower will, and will cause the Consolidated Partnership to, comply
with all laws, rules, regulations and orders of any governmental authority which
are applicable to Borrower, the Consolidated Partnership and/or any of the
Facilities.
5.9 ENVIRONMENTAL MATTERS.
A. Borrower shall (i) comply and cause all tenants and other Persons
on or occupying any of the Facilities to comply with all Environmental Laws;
(ii) without limiting the generality of clause (i), except for Hazardous
Materials used in accordance with applicable Environmental Laws and prudent
business practices which are reasonably necessary for the operation of the given
Facility as it is currently operated ("Approved Materials"), not install, use,
generate, manufacture, store, release or dispose of, nor permit the
installation, use, generation, storage, release or disposal of Hazardous
Materials on, under or about any of the Facilities, nor transport or permit the
transportation of Hazardous Materials to or from any of the Facilities, except
in accordance with applicable Environmental Laws and prudent business practices,
and as reasonably necessary for the operation of the given Facility as it is
currently operated; (iii) immediately advise Lender in writing of (a) any and
all Environmental Claims, (b) the presence of any Hazardous Materials on, under
or about any of the Facilities or any property adjoining any of the Facilities
(other than Approved Materials); (iv) provide Lender with copies of all reports,
analyses, notices, licenses, approvals, orders, correspondences or other written
materials relating to the environmental condition of any Facility or any
Environmental Claims immediately upon receipt, completion or delivery of such
materials; (v) not install or allow to be installed any underground tanks on any
of the Facilities; (vi) not create or permit to continue in existence any Lien
upon any of the Facilities imposed pursuant to any Environmental Laws; and
(vi) not materially change or alter the present use of any Facility unless
Borrower shall have notified Lender thereof in writing and Lender shall have
determined, in its sole and absolute discretion, that such change or
modification will not result in the presence of Hazardous Materials on such
Facility in such a level that would increase the potential liability for
Environmental Claims.
B. Borrower shall promptly take or cause to be taken any and all
necessary remedial work ("Remedial Work") in response to any Environmental
Claims or the presence, storage, use, disposal, transportation, discharge or
release of any Hazardous Materials on, under or about any of the Facilities.
All Remedial Work shall be conducted (i) in a diligent and timely fashion by
licensed contractors acting under the supervision of a consulting environmental
engineer; (ii) pursuant to a detailed written plan for the Remedial Work in
accordance with all Environmental Laws and approved by any public or private
agencies or persons with a legal or contractual right to such approval;
(iii) with such insurance coverage pertaining to liabilities arising out of the
Remedial Work as is then customarily maintained with
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respect to such activities; and (iv) only following receipt of any required
permits, licenses or approvals. As a part of, or following completion of,
such Remedial Work, Borrower shall institute and place in operation a
Hazardous Materials operations and maintenance program to provide for
continued environmental monitoring of the applicable Facility. The selection
of the Remedial Work contractors and consulting environmental engineer, the
contracts entered into with such parties, any disclosures to or agreements
with any public or private agencies or parties relating to Remedial Work and
the written plan for the Remedial Work (and any changes thereto) each shall,
at Lender's option, be subject to Lender's prior written approval, which
approval shall not be unreasonably withheld or delayed. In addition, Borrower
shall submit to Lender, promptly upon receipt or preparation, copies of any
and all reports, studies, analyses, correspondence, governmental comments or
approvals, proposed removal or other Remedial Work contracts and similar
information prepared or received by Borrower in connection with any Remedial
Work or Hazardous Materials relating to any Facility. Borrower acknowledges
and agrees that in the event Hazardous Materials are caused to be removed
from the Facilities, the Environmental Protection Agency number, manifest
number or similar identification assigned to the Hazardous Materials so
removed shall not name Lender, and Borrower shall assume all liability for
such removed Hazardous Materials. All costs and expenses of such Remedial
Work shall be paid by Borrower, including, without limitation, the charges of
the Remedial Work contractors and the consulting environmental engineer, any
taxes or penalties assessed in connection with the Remedial Work and Lender's
reasonable fees and costs incurred in connection with monitoring or review of
such Remedial Work. Lender shall have the right but no obligation to join
and participate in, as a party if it so elects, any legal proceedings or
actions initiated in connection with any Environmental Claims.
C. With respect to any Facility which contains asbestos or asbestos
containing materials, Borrower shall institute and place in operation an
Asbestos Operations and Maintenance Program satisfactory to Lender.
D. Borrower and the Consolidated Partnership shall give to Lender,
its agents and employees access to the Facilities, and hereby specifically grant
to Lender, its agents and employees, for the term of the Loan, a license,
subject to the rights of tenants of the Facilities, to enter upon the Facilities
for the purposes of conducting tests and investigations for Hazardous Materials,
and, in the event Borrower fails to comply with the terms of this Section 5.9,
to remove and remediate, at Borrower's sole cost and expense, any Hazardous
Materials. Notwithstanding the provisions hereof, the Note or any other
provision in any Loan Document, Lender shall be entitled to bring an action for
specific performance against Borrower to compel Borrower to comply with the
terms of this Section 5.9.
E. Upon the occurrence of an Event of Default or Potential Event of
Default or upon Lender having reason to believe that a potential environmental
problem exists with respect to any Facility, and upon the request of Lender,
Borrower agrees to submit, at its own expense, hazardous materials report(s)
satisfactory to Lender, in its sole and absolute discretion, detailing and
describing the past and current uses, operations and activities on or about such
Facilities involving, directly or indirectly, the use, generation, treatment,
storage or disposal of any Hazardous Materials.
F. Borrower shall protect, indemnify and hold Lender, and any
successors, assigns or participants in or to Lender's interest in the Loan, and
any successors and assigns of such Persons, and all directors, officers,
employees and agents of all of the aforementioned indemnified parties, harmless
from and against any and all actual or potential claims, liabilities, damages,
losses, fines, penalties, judgments, awards, costs and expenses (including,
without limitation, attorneys' fees and costs and expenses of investigation)
which arise out of or relate in any way to any Environmental Claims or any use,
handling, presence, production, transportation, disposal, release or storage of
any Hazardous Materials in, under or on any Facility
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whether by Borrower or by any tenant or any other Person, including, without
limitation, (i) all foreseeable and all unforeseeable consequential damages
directly or indirectly arising out of (a) Environmental Claims or the use,
generation, storage, discharge or disposal of Hazardous Materials by
Borrower, any prior owner or operator of any Facility or any Person on or
about any Facility; (b) any residual contamination affecting any natural
resource or the environment; (iii) any exercise by Lender of any of its
rights and remedies hereunder; and (iv) Lender's reliance on any
representation or warranty made herein, if such representation or warranty
proves to be materially false or misleading; and (ii) the costs of any
required or necessary repair, cleanup, or detoxification of any Facility and
the preparation of any closure or other required plans. All such claims,
liabilities, damages, losses, fines, penalties, judgments, awards, costs and
expenses heretofore described and/or referred to in this Section 5.9.F are
hereinafter referred to as "Expenses". Borrower's liability to the
aforementioned indemnified parties shall arise upon the earlier to occur of
(x) discovery of any Hazardous Materials on, under or about any Facility, or
(y) the institution of any Environmental Claims, and not upon the realization
of loss or damage, and Borrower shall pay to Lender from time to time,
immediately upon Lender's request, an amount equal to such Expenses, as
reasonably determined by Lender. This Section 5.9.F shall survive the
repayment of the Loan and the termination of the Loan Documents.
5.10 USE OF PROCEEDS OF LOAN.
Borrower shall only use the proceeds of the Loan to pay (i) pay-down
the outstanding principal balance of the Sanwa Line of Credit and repay the
Union Line of Credit such that the total amount outstanding under the Sanwa Line
of Credit does not exceed an amount greater than $18,500,000; and (ii)
transaction costs in connection with the Loan. With respect to any proceeds of
the Loan used to repay or retire existing Indebtedness of Borrower or the
Consolidated Partnership, Lender shall have the right to fund such proceeds
directly to the holder of such debt being repaid or retired.
5.11 COMPLIANCE WITH LAND USE RESTRICTIONS.
Borrower will, and will cause the Consolidated Partnership to, comply
with all applicable zoning, building, environmental and land use laws,
ordinances, rules, regulations and other similar restrictions, and Borrower will
obtain and keep in full force and effect all certificates of occupancy and other
certificates, permits, licenses and other items which are required by or are to
be obtained from any board, agency or department, whether governmental or
otherwise, for the use and occupancy of the Facilities as presently used and
occupied or as contemplated to be used and occupied.
5.12 OBTAIN/MAINTAIN RATING.
On or before December 31, 1996, Borrower will obtain, and shall
thereafter always maintain in effect, a rating for the long-term unsecured debt
of Borrower from Standard & Poor's Rating Group, Moody Investor Services, Fitch
Investor Services, Duff & Phelps or any other nationally recognized rating
agency approved by Lender (an "Approved Rating Agency"). Borrower shall pay all
of the fees, costs and expenses incurred in connection with obtaining and
maintaining such rating.
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ARTICLE 6.
NEGATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of the Loan
and all other amounts owing hereunder, Borrower will perform, and shall cause
the Consolidated Partnership to perform, all of the covenants in this Article 6.
6.1 ACQUISITIONS.
Borrower shall only acquire New Facilities in its own name and for its
own behalf and not through the use of any partnership entity or any other
Subsidiary or Affiliate. Borrower shall only acquire New Facilities which are
held by Borrower one hundred percent (100%) in fee simple and which are fully
operating income producing investment real property projects and Borrower shall
not invest in or acquire, directly or indirectly, any raw land; construction,
development, or rehabilitation projects (other than (x) those construction,
development, or rehabilitation projects which would not require completion of
construction obligations or other expenditures on capital improvements during
the term of the Loan in excess of $3,000,000 per project or (y) forward
commitments to acquire new construction projects which will be at least 80%
leased pursuant to market rate leases as of the date of acquisition thereof and
the cost of which do not exceed $10,000,000 per project); leasehold or other
sale/leaseback projects or transactions; or any other similar projects or
investments (collectively, "Nonapproved Projects"). At least five (5) days
prior to acquiring any such New Facility, Borrower shall, at its own expense,
deliver to Lender, with respect to such New Facility, (i) a hazardous material
report in form and substance satisfactory to Lender, and (ii) any Anchor Leases.
In the event such hazardous materials report indicates that Phase II testing
should be performed, or recommends any Remedial Work, Borrower shall not,
without the prior written approval of Lender, acquire any such New Facility, and
in no event will Borrower knowingly, after due investigation, purchase, demise,
or otherwise acquire any Facility or any interest in a Facility containing
asbestos, or any other Hazardous Materials (other than Approved Materials) in
levels or amounts which would increase the likelihood of Environmental Claims.
Borrower shall pay all Lender's fees, costs and expenses (including, without
limitation, reasonable attorneys fees) incurred in connection with the review of
any materials or data submitted to Lender in connection with the acquisition of
any New Facility.
6.2 LIENS.
Borrower and the Consolidated Partnership will not, directly or
indirectly, create, assume, incur or suffer to be created, assumed or incurred
or to exist, any Lien on or in any Facility or asset of any kind, real or
personal, tangible or intangible, of Borrower and/or the Consolidated
Partnership, except for (i) Liens for real property taxes (but excluding special
assessments or bond assessment financing) not yet due or which are being
actively contested in good faith by appropriate proceedings, provided adequate
reserves with respect thereto are maintained on the books of Borrower in
accordance with GAAP; (ii) subject to Paragraph 4.2 of the Deeds of Trust
relating to the Secured Facilities, other Liens incidental to the conduct of its
business or the ownership of the properties and assets of Borrower and the
Consolidated Partnership (such as mechanic's liens, materialmen's liens or
vendor's liens) which were not incurred in connection with the borrowing of
money or the obtaining of advances or credit, and which do not in the aggregate
materially detract from the value of its properties or assets or materially
impair the use thereof in the operation of its businesses or which would have a
Material Adverse Effect; (iii) the Approved Liens; and/or (iv) other Liens
approved in writing by Lender. Borrower agrees to disclose the existence of
this Section 6.2 in writing to any lien holder or potential lien holder other
than a lien holder or potential lien
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holder described in clause (i) through (iii) above (excluding therefrom a new
replacement lienholder of any Approved Lien in substitution for the existing
holder of such Approved Lien). In the event Borrower at any time defaults in
the performance or observance of this Section 6.2, then notwithstanding the
terms of any such financing between Borrower and such other lien holder, the
indebtedness of such other lien holder shall be junior and subordinate in
payment and application to the indebtedness evidenced hereby and by the Note.
Without limiting the provision of Article 9 hereof, nothing in this Section
6.2 shall be deemed to constitute a Lien in favor of Lender, and the
inclusion of this Section 6.2 does not evidence any intention to or
contemplation of the creation of a Lien in favor of Lender.
6.3 SALES, MERGER AND/OR CONSOLIDATION.
Borrower and the Consolidated Partnership will not sell, lease (other
than real property leases to tenants of the Facilities entered into in the
ordinary course of business), transfer, abandon or otherwise dispose of any,
all, or substantially all, of their property and/or assets to any other Person
or consolidate with or merge into any other trust, entity, unincorporated
association or corporation or permit any trust, entity, unincorporated
association or corporation to merge with or into Borrower, or purchase,
establish or acquire any new Subsidiary, Affiliate, or other entity or
enterprise (other than a New Facility in accordance with the terms of
Section 6.1 hereof); provided, however, that subject to Paragraph 4.2 of the
Deeds of Trust relating to the Secured Facilities, Borrower may, in any single
fiscal year, sell a Nonsubstantial Portion of Borrower's Assets as long as, and
as a condition precedent thereto, Borrower fully reinvests the net proceeds of
such sale(s) in its business as presently conducted. As used herein
"Nonsubstantial Portion of Borrower's Assets" shall mean a portion of Borrower's
or the Consolidated Partnership's assets which are less than 15% of the
Consolidated Book Value calculated at the end of the most recent fiscal quarter,
and with respect to which such assets have generated less than 15% of Net
Operating Income during the four most recent fiscal quarters as of the date of
determination.
6.4 FUNDAMENTAL CHANGES.
Borrower will not, and will not permit the Consolidated Partnership
to, engage in any business other than substantially the same line of business as
conducted by Borrower and the Consolidated Partnership on the Closing Date; or
liquidate, wind up or dissolve, whether voluntarily or involuntarily (or suffer
any such liquidation or dissolution); or make any material change in Borrower's
Trust Agreement, capital structure or in any of its business or investment
objectives, purposes and operations which might result in a Material Adverse
Effect.
6.5 TRANSACTIONS WITH AFFILIATES.
Borrower will not, and will not permit the Consolidated Partnership
to, enter into any transaction (including, without limitation, the purchase,
sale, lease, disposition or exchange of property or the rendering of any
service) with the Consolidated Partnership, the Unconsolidated Partnership, any
Subsidiary or any Affiliate except in the ordinary course of business pursuant
to the reasonable requirements of the business of Borrower and the Consolidated
Partnership and upon fair and reasonable terms no less favorable to Borrower and
the Consolidated Partnership than would be obtained in a comparable arms length
transaction with a person not the Consolidated Partnership, the Unconsolidated
Partnership, a Subsidiary, or an Affiliate.
6.6 LOANS; INVESTMENTS.
A. Borrower will not, and will not permit the Consolidated
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Partnership to, make loans to, advances to or otherwise enter into Contingent
Obligations on behalf of or investments in the stock or obligations of any
Person (other than investment of cash or cash equivalents in Permitted
Investments in the ordinary course of business).
B. Borrower will not, and will not permit the Consolidated
Partnership to, invest in or acquire any Nonapproved Project and/or purchase
money mortgages. Notwithstanding the foregoing, Borrower may (i) continue to
hold the Existing Purchase Money Mortgages, and (ii) hold additional purchase
money mortgages obtained in sales of Facilities in the ordinary course of
business and as otherwise allowed hereunder; provided that (a) the principal
balance of any purchase money mortgage does not exceed seventy-five percent
(75%) of the sales price of the applicable Facility sold, or have a term in
excess of five (5) years, and (b) the aggregate amount of all such purchase
money mortgages does not exceed, at any time, the sum of $10,000,000.
6.7 LIMITATION ON LEASES AND LESSEES.
Borrower will not permit more than 15% of Net Operating Income for any
four consecutive fiscal quarters to be generated by, either directly or
indirectly, any one Facility, lessee, operator or borrower, nor shall Borrower
permit any one Facility or assets to constitute more than 15% of Consolidated
Book Value.
6.8 OTHER DEBT.
Other than (i) the Approved Indebtedness and (ii) unsecured
Indebtedness of Borrower incurred after the Closing Date and which, in any and
all events, strictly complies with the terms of this Agreement (including,
without limitation, Section 6.9 hereof ("New Unsecured Indebtedness")),
Borrower and the Consolidated Partnership shall not have outstanding any
Indebtedness or create, assume, suffer to exist or incur any Indebtedness or
lease obligations (other than the Loan and the 525 Prudential Loan from Lender
and the leasing of its headquarters in the ordinary course of business), or
become liable for the indebtedness of another, without the prior written consent
of Lender. Prior to incurring any New Unsecured Indebtedness, Borrower shall
notify Lender of the terms and conditions thereof and shall certify to Lender in
writing that the incurring of such unsecured debt does not violate any
Restrictions. Borrower agrees to disclose the existence of this Section 6.8 in
writing to any lender/creditor other than a lender/creditor holding Approved
Indebtedness (excluding therefrom a new replacement lienholder of any Approved
Lien in substitution for the existing holder of such Approved Lien). In the
event Borrower at any time defaults in the performance or observance of this
Section 6.8, then notwithstanding the terms of any such financing between
Borrower and such other lender/creditor, the indebtedness of such other
lender/creditor shall be junior and subordinate in payment and application to
the indebtedness evidenced hereby and by the Note.
6.9 FINANCIAL COVENANTS.
Borrower shall at all times comply with the terms of this Section 6.9
provided that compliance with the terms of this Section 6.9 shall be measured
quarterly as of the last day of each fiscal quarter of Borrower.
A. TANGIBLE NET WORTH. Borrower will not permit its Tangible Net
Worth to be less than One Hundred Million Dollars ($100,000,000).
B. INDEBTEDNESS TO CONSOLIDATED BOOK VALUE. Borrower and the
Consolidated Partnership shall not create, incur, suffer or allow to exist
Indebtedness (including, with respect to the Sanwa Line of Credit and the Union
Line of Credit, only the funded portion of such line of credit indebtedness
within the calculation of Indebtedness) in excess of fifty percent (50%) of
Consolidated Book Value.
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C. MAXIMUM SECURED DEBT. Borrower and the Consolidated Partnership
shall not create, incur, suffer or allow to exist Indebtedness secured in whole
or in part by any of its properties (including, without limitation, the
Facilities) or other assets (including, with respect to the Sanwa Line of Credit
and the Union Line of Credit, only the funded portion of such line of credit
indebtedness within the calculation of secured Indebtedness) which at any time
(i) exceeds the lesser of (a) (x) $40,800,000 or (y) twenty percent (20%) of
Consolidated Book Value, or (ii) is secured, in whole or in part, by any assets
or properties of Borrower or the Consolidated Partnership, other than the
Secured Facilities (until the Unsecured Conversion Date occurs), the Tango
Property, the Sanwa Properties, and the Union Property.
D. DEBT SERVICE COVERAGE. Borrower and the Consolidated Partnership
shall not permit or allow the Debt Service Coverage to be less than 2.5 to 1.0.
6.10 INTEREST RATE SWAP AGREEMENTS.
Borrower and the Consolidated Partnership will not enter into any
interest rate swap, collar hedge or other similar agreements with respect to the
Loan or any other Indebtedness.
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6.11 CALCULATION OF CONSOLIDATED BOOK VALUE.
Borrower shall, in calculating Consolidated Book Value, carry its
assets on its books at the lesser of cost or market and shall not write-up
Consolidated Book Value to reflect increased value based upon market. Borrower
shall not otherwise modify its method of calculating Consolidated Book Value
from that employed in the preparation of Financials delivered to Lender in
connection with the Loan.
6.12 NO CHANGE IN COLLATERAL FOR LINES OF CREDIT.
Borrower shall not, without the prior written consent of Lender,
change, substitute or otherwise modify the make-up, mix or nature of the Sanwa
Properties or any other property securing the Sanwa Line of Credit or the make-
up, mix or nature of the Union Property or any other property securing the Union
Line of Credit; provided, however, that Borrower shall be entitled to (i)
replace either the Sanwa Line of Credit and/or the Union Line of Credit with a
new line of credit or lines of credit from one or more institutional lenders as
long as (x) the terms thereof comply with the provisions of this Agreement
(including, without limitation, Section 6.9 hereof) and (y) the only property
serving as collateral or security for such line of credit or lines of credit is
the Sanwa Properties and/or the Union Property or (ii) pay-off the Union Line of
Credit in full by increasing the amounts available under the Sanwa Line of
Credit to $18,500,000, adding the Union Property as collateral for the Sanwa
Line of Credit, and using the proceeds of the increased Sanwa Line of Credit to
repay in full the Union Line of Credit. Borrower agrees to repay the Union Line
of Credit in full on or before July 24, 1995. At no time shall the aggregate
amount available under the Sanwa Line of Credit and the Union Line of Credit
exceed $18,500,000.
6.13 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF AGREEMENT.
Except as otherwise expressly provided for in this Agreement, no
termination or cancellation (regardless of cause or procedure) of this Agreement
shall in any way affect or impair the powers, obligations, duties, rights, and
liabilities of Borrower or Lender relating to (i) any transaction or event
occurring prior to such termination or cancellation, or (ii) any of the
undertakings, agreements, covenants, indemnities, warranties and representations
of Borrower or Lender contained in this Agreement.
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SECTION 7.
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
IF any of the following conditions or events ("Events of Default")
shall occur and be continuing:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure to pay any installment of principal of, or Prepayment Premium
on, the Loan when due, whether at stated maturity, by acceleration, by notice or
otherwise; or failure to pay any interest on the Loan or any other amount due
under this Agreement within five (5) days after the date due; or
7.2 DEFAULT IN OTHER AGREEMENTS.
A. FAILURE TO MAKE PAYMENTS. Failure of Borrower or the Consolidated
Partnership to pay when due any principal or interest on any Indebtedness
(including, without limitation, the Tango Loan, the Sanwa Line of Credit or the
Union Line of Credit) (other than Indebtedness referred to in Section 7.1 and
Section 7.2.C) or Contingent Obligation; or
B. BREACH OF ANY MATERIAL TERM. Breach or default of Borrower or the
Consolidated Partnership with respect to any other material term of (i) any
evidence of any Indebtedness or Contingent Obligation (ii) any loan agreement,
mortgage, indenture or other agreement relating thereto, if the effect of such
failure, default or breach is to cause, or to permit the holder or holders of
that Indebtedness or Contingent Obligation (or a trustee on behalf of such
holder or holders) then to cause, that Indebtedness or Contingent Obligation to
become or be declared due prior to its stated maturity (or the stated maturity
of any underlying obligation, as the case may be); or
C. DEFAULT UNDER 525 PRUDENTIAL LOAN. Any default, Event of Default
or Potential Event of Default under or as defined in any of the 525 Loan
Documents; or
7.3 BREACH OF CERTAIN COVENANTS.
Failure of Borrower to perform or comply with any term or condition
contained in Sections 5.3, 5.9 or any of the negative covenants set forth in
Sections 6.1 through 6.3, inclusive, hereof, Section 6.6 hereof, or Sections 6.8
through 6.12, inclusive, hereof; or
7.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made by
Borrower herein, in any Compliance Certificate, or in any other Loan Document or
in any statement or certificate at any time given by such Person in writing
pursuant hereto or in connection herewith or therewith shall be false,
inaccurate or misleading in any material respect on the date as of which made;
or
7.5 OTHER DEFAULTS UNDER AGREEMENT OR LOAN DOCUMENTS.
Borrower shall default in the performance of or compliance with any
term contained in this Agreement or in the performance or compliance with any
term contained in the other Loan Documents (other than the occurrence of an
event of default otherwise specifically described in Sections 7.1, 7.2.C, 7.3,
7.4, 7.6, or 7.7 hereof, which shall not have any additional cure periods
hereunder) and such default shall not have been remedied within thirty (30) days
after the occurrence of such default; or
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7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
A. A court having proper jurisdiction shall enter a decree or order
for relief in respect of Borrower or the Consolidated Partnership in an
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or
B. An involuntary case is commenced against Borrower or the
Consolidated Partnership under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
Borrower or the Consolidated Partnership, or over all or a substantial part of
its property, shall have been entered; or the involuntary appointment of an
interim receiver, trustee or other custodian of Borrower or the Consolidated
Partnership for all or a substantial part of its property; or the issuance of a
warrant of attachment, execution or similar process against any substantial part
of the property of Borrower or the Consolidated Partnership, and the continuance
of any such event in this clause (B) for sixty (60) days unless dismissed,
bonded or discharged; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
A. Borrower, the Consolidated Partnership or any of its Subsidiaries
shall have an order for relief entered with respect to it or commence a
voluntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or shall consent to
the entry of an order for relief in an involuntary case, or to the conversion of
an involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; the making by Borrower
or the Consolidated Partnership of any assignment for the benefit of creditors;
or
B. The inability or failure of Borrower or the Consolidated
Partnership, or the admission by Borrower or the Consolidated Partnership in
writing of its inability, to pay its debts as such debts become due; or the
Board of Trustees of Borrower (or any committee thereof) adopts any resolution
or otherwise authorizes action to approve any of the actions referred to in
clause (A) or this clause (B); or
7.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment, or similar process
involving (i) in any individual case an amount in excess of $500,000 or (ii) in
the aggregate at any time an amount in excess of $1,000,000 (in either case not
fully covered by insurance as to which the insurance company has acknowledged
coverage) shall be entered or filed against Borrower or the Consolidated
Partnership or any of their respective assets; or
7.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Borrower or the
Consolidated Partnership decreeing the dissolution or split up of Borrower or
the Consolidated Partnership; or
7.10 ERISA.
A. PENSION PLANS.
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(i) Borrower or any of its ERISA Affiliates fails to make full
payment when due of all amounts which, under the provisions of any Pension
Plan or Section 412 of the Code, Borrower or any of its ERISA Affiliates is
required to pay as contributions thereto and such failure results in a
Material Adverse Effect;
(ii) Any accumulated funding deficiency occurs or exists, whether or
not waived, with respect to any Pension Plan and such deficiency results in
a Material Adverse Effect;
(iii) The excess of the actuarial present value of all benefit
liabilities under all Pension Plans over the fair market value of the
assets of such Pension Plans (excluding in such computation Pension Plans
with assets greater than benefit liabilities) allocable to such benefit
liabilities is greater than Five Hundred Thousand Dollars ($500,000) but
only if such excess is not reduced to Five Hundred Thousand Dollars
($500,000) (or less) within thirty (30) days following the earliest of (a)
the date of the filing with the Pension Benefit Guaranty Corporation of a
notice of intent to terminate any Pension Plan other than under a standard
termination as defined in Section 4041(b) of ERISA, or (b) the date a
trustee is appointed by an appropriate United States district court to
administer any Pension Plan, or (c) the Pension Benefit Guaranty
Corporation institutes proceedings to terminate any Pension Plan or to
appoint a trustee to administer any Pension Plan, or (d) the date
coincident with or any date following the date on which Borrower or any of
its ERISA Affiliates withdraws (under Section 4063 of ERISA) from any
Pension Plan if either Borrower or any of its ERISA Affiliates has a
liability greater than Five Million Dollars ($5,000,000) to the Pension
Benefit Guaranty Corporation, or any successor thereto, or to any other
party resulting from or otherwise associated with such withdrawal; or
(iv) (a) Any Pension Plan maintained by Borrower or any of its ERISA
Affiliates shall be terminated within the meaning of Title IV of ERISA, or
(b) a trustee shall be appointed by an appropriate United States district
court to administer any Pension Plan, or (c) the Pension Benefit Guaranty
Corporation (or any successor thereto) shall institute proceedings to
terminate any Pension Plan or to appoint a trustee to administer any
Pension Plan, or (d) Borrower or any of its ERISA Affiliates shall withdraw
(under Section 4063 of ERISA) from a Pension Plan, if as of the date of the
event listed in subclauses (a) - (d) above or any subsequent date, either
Borrower or its ERISA Affiliates has any liability (such liability to
include, without limitation, any liability to the Pension Benefit Guaranty
Corporation, or any successor thereto, or to any other party under Sections
4062, 4063 or 4064 of ERISA or any other provision of law) resulting from
or otherwise associated with the events listed in subclauses (a) - (d)
above, and any such event or events shall have a Material Adverse Effect;
or
B. MULTIEMPLOYER PLANS. Either Borrower or any of its ERISA
Affiliates as employers under one or more Multiemployer Plans shall have made a
complete or partial withdrawal from such Multiemployer Plans and the plan
sponsor of such Multiemployer Plans shall have notified such withdrawing
employer that such employer has incurred a withdrawal liability requiring annual
payments in an amount exceeding Five Hundred Thousand Dollars ($500,000) (as
used in this Section 7.10 the term "accumulated funding deficiency" has the
meaning specified in Section 412 of the Code, and the terms "actuarial present
value" and "benefit liabilities" have the meanings specified in Section 4001 of
ERISA); or
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7.11 LITIGATION.
Any lawsuit, lawsuits, other actions or proceedings are filed against
Borrower or the Consolidated Partnership in an aggregate amount of $2,000,000 if
such lawsuit(s), actions or proceedings are not (i) dismissed within sixty (60)
days or (ii) fully covered by insurance where the insurer therefor has accepted
tender of such claim without reservation; or
7.12 CHANGE OF CONTROL.
A. Any Person shall have (i) acquired beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) directly or indirectly, of shares or securities
of Borrower (or other securities convertible into such securities), or (ii)
acquired by contract or otherwise, or shall have entered into a contract or
arrangement which upon consummation will result in its acquisition of or control
over shares or securities of Borrower (or other securities convertible into such
securities), in either case, representing ten percent (10%) or more of the
outstanding shares or securities of Borrower; or
B. Borrower shall have less than one hundred ten (110)
shareholders/shareowners at any time; or
C. Any seven (7) or fewer Persons alone or acting in concert shall
have (i) acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934)
directly or indirectly, of shares or securities of Borrower (or other securities
convertible into such securities), or (ii) acquired by contract or otherwise, or
shall have entered into a contract or arrangement which upon consummation will
result in its or their acquisition of, control over shares or securities of
Borrower (or other securities convertible into such securities), in either case,
representing fifty percent (50%) or more of the outstanding shares or securities
of Borrower; or
D. Any Share Purchase Rights (as defined in Borrower's Rights
Agreement dated as of May 29, 1990 (the "Rights Agreement")) at any time become
exercisable or transferrable under the Rights Agreement; or
7.13 MATERIAL ADVERSE CHANGE.
The occurrence of a Material Adverse Change; or
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7.14 FAILURE TO OBTAIN/MAINTAIN RATING.
On and after December 31, 1996, Borrower shall have failed to obtain
or maintain a rating for the long-term unsecured debt of Borrower from an
Approved Rating Agency;
THEN (i) upon the occurrence of any Event of Default described in the
foregoing Sections 7.6 or 7.7, the unpaid principal amount of and accrued
interest on the Loan and all other Obligations (including, without limitation,
any Prepayment Premium) shall automatically become immediately due and payable,
without presentment, demand, protest or other requirements of any kind, all of
which are hereby expressly waived by Borrower, and (ii) upon the occurrence of
any other Event of Default, Lender may, by written notice to Borrower, declare
all or any portion of the Loan (including, without limitation, any Prepayment
Premium), and all or some of the other Obligations to be, and the same shall
forthwith become, immediately due and payable, together with accrued interest
thereon.
ARTICLE 8
MISCELLANEOUS
8.1 ASSIGNMENTS AND PARTICIPATIONS IN LOAN AND NOTE.
Lender may assign its rights and delegate its obligations under this
Agreement and further may assign, or sell participations in, all or any part of
the Loan, the Loan Documents, or the Loan commitments evidenced hereby or any
other interest herein or in the Note to any Person; and to the extent of such
assignment, Lender shall be relieved of its obligations with respect to the Loan
and the assignee (the "Assignee") shall have, to the extent of such assignment,
the same rights, benefits and obligations as it would if it were Lender
hereunder and a holder of such Note. Lender may furnish any information
concerning Borrower, the Consolidated Partnership and any of the assets of
either from time to time to (i) assignees and participants (including
prospective assignees and participants), (ii) such assignees' and participants'
officers, directors, employees, agents and consultants, (iii) to any transferee
or potential transferee of such assignee or participant, (iv) any federal or
state regulatory authority having jurisdiction over Lender or such assignees or
participants, (iv) the National Association of Insurance Commissioners or any
similar organization, or (v) any other Person to which such delivery or
disclosure may be necessary or appropriate (a) in compliance with any law, rule,
regulation or order, (b) in response to any subpoena or other legal process or
formal investigative demand, or (c) in connection with any litigation to which
Lender or such assignees or participants are or could become a party. Borrower
hereby acknowledges and agrees that any participation will give rise to a direct
obligation of Borrower to the participant and the participant shall for purposes
of Sections 5.1, 8.4 and 8.5 be considered to be a "Lender".
8.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to pay promptly (i) all the costs and expenses of
preparation of the Loan Documents and all the costs of furnishing all opinions
by counsel for any party hereto (including without limitation any opinions
requested by Lender as to any legal matters arising hereunder), and of
Borrower's and Lender's performance of and compliance with all agreements and
conditions contained herein and or the other Loan Documents on its part to be
performed or complied with; (ii) the reasonable fees, expenses and disbursements
of counsel to Lender (including allocated costs of internal counsel) in
connection with the negotiation, preparation, execution and administration of
the Loan Documents and the Loan and any amendments,
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modifications or departures hereto or thereto; (iii) all other costs and
expenses incurred by Lender (including reasonable attorneys' fees (including
allocated costs of internal counsel)) in connection with the negotiation,
preparation, execution and administration of the Loan, the Loan Documents and
the transactions contemplated hereby; and (iv) all costs and expenses
(including attorneys' fees, including allocated costs of internal counsel,
and costs of settlement) incurred by Lender in enforcing, or in deciding how
or whether to enforce, any Obligations of or in collecting any payments due
from Borrower hereunder or under the Note, or any other Loan Document or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or of any
insolvency or bankruptcy proceedings, or in responding to any subpoena or
other legal process or formal investigative demand issued in connection with
the Loan or this Agreement or the transactions contemplated hereby or by
reason of any assignee or participant having acquired an interest herein or
in the Loan. All such expenses incurred and billed prior to the Closing Date
shall be paid on the Closing Date. All closing costs not billed by the
Closing Date shall be paid on demand. All legal fees and expenses incurred
after the Closing Date shall be paid on a monthly basis as billed.
8.3 INDEMNITY.
In addition to the payment of expenses pursuant to Section 8.2,
whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to indemnify, pay and hold Lender and the officers, directors,
employees, agents, and affiliates of Lender, and any successors or assigns of
Lender (collectively called the "Indemnitees") harmless from and against: any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for each such Indemnitee in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto), that may be
imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Agreement or the other Loan Documents,
Lender's agreement to make the Loan hereunder or the use or intended use of the
proceeds of any of the Loan (the "Indemnified Liabilities"); PROVIDED that
Borrower shall have no obligation to an Indemnitee hereunder with respect to
Indemnified Liabilities arising from the gross negligence or willful misconduct
of that Indemnitee. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Borrower shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law, to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
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8.4 SET OFF.
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of any
Event of Default, Lender is hereby authorized by Borrower at any time or from
time to time, without notice to such Person, or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether matured or unmatured
but not including trust accounts) and any other Indebtedness at any time held or
owing by Lender to or for the credit or the account of Borrower, against and on
account of the obligations and liabilities of Borrower to Lender under this
Agreement, the Note, including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement, the Note, or any
other Loan Document, irrespective of whether or not (i) Lender shall have made
any demand hereunder or (ii) the principal of or the interest on the Loan or
Note, any obligations of Borrower in respect of and other amounts due hereunder
shall have become due and payable pursuant to Article 7 and although said
obligations and liabilities, or any of them, may be contingent or unmatured.
8.5 RATABLE SHARING.
Lender and each subsequent holder of all or any portion of the Note by
acceptance thereof agree among themselves that if any of them shall, through the
exercise of any right of counterclaim, set-off, banker's lien or otherwise or as
adequate protection of a deposit treated as cash collateral under the Bankruptcy
Code, receive payment or reduction of a proportion of the aggregate amount of
principal and interest then due with respect to the Note or portion thereof held
by Lender or holder, the amount then due to that Lender or holder with respect
to any participation therein or amounts due to Lender or holder in respect of
fees due hereunder (collectively, the "Aggregate Amounts Due" to Lender or
holder), which is greater than the proportion received by Lender or holder of
the Note or portion thereof in respect to the Aggregate Amounts Due to such
Lender or holder, then Lender or holder of the Note receiving such
proportionately greater payment shall (i) notify each Lender or holder, as
applicable, of such receipt and (ii) purchase participations (which it shall be
deemed to have purchased from each seller simultaneously upon the receipt by
such seller of its portion of such payment) in the Aggregate Amounts Due to
Lender and holders so that all such recoveries of Aggregate Amounts Due shall be
shared by Lender and holders of the Note or portion thereof in proportion to the
Aggregate Amounts Due them; PROVIDED that if all or part of such proportionately
greater payment received by such holder is thereafter recovered from such
holder, those purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to the applicable holder to the extent of such
recovery, but without interest. Borrower expressly consents to the foregoing
arrangement and agrees that any holder of a participation so purchased and any
other subsequent holder of a participation in the Note or portion thereof
otherwise acquired may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by Borrower to that holder
as fully as if that holder were a holder of the Note or portion thereof, in the
amount of the participation held by that holder.
8.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of
this Agreement or of the Note, or consent to any departure by Borrower
therefrom, shall in any event be effective without the written concurrence of
Lender and in the case of an amendment or modification hereto, Borrower. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on Borrower in
any case shall entitle Borrower to any other or further notice or demand in
47
<PAGE>
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 8.6 shall be
binding upon each holder of the Note at the time outstanding, each future
holder of the Note, and on Borrower.
8.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of an Event of
Default or Potential Event of Default if such action is taken or condition
exists.
8.8 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United States mail or
courier service and shall be deemed to have been given when delivered in person,
receipt of telecopy or telex or three Business Days after depositing it in the
United States mail, registered or certified, with postage prepaid and properly
addressed. For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this Section 8.8) shall
be as set forth under each party's name on the signature pages hereof.
8.9 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS.
A. All agreements, indemnities, representations and warranties made
herein shall survive the execution and delivery of this Agreement, the making of
the Loan hereunder and the execution and delivery of the Note.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of Borrower set forth in Sections 5.9, 8.2 and 8.3
shall survive the payment of the Loan, and the Note, and the termination of this
Agreement.
8.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Lender or any holder of the Note or
portion thereof in the exercise of any power, right or privilege hereunder or
under the Note shall impair such power, right or privilege or be construed to be
a waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing under this Agreement and the Note are cumulative to, and not
exclusive of, any rights or remedies otherwise available at law or in equity.
All amounts due or to be due hereunder shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by Borrower. Borrower expressly waives all
right to the benefit of any statute of limitations and any moratorium,
reinstatement, marshaling, forbearance, extension, redemption, or appraisement
now or hereafter provided by the Constitution and the laws of the United States
and of any state thereof, as a defense to any demand against Borrower to the
fullest extent permitted by law.
48
<PAGE>
8.11 SEVERABILITY.
In case any provision in or obligation under this Agreement or the
Note shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
8.12 HEADINGS.
Article and Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
8.13 APPLICABLE LAW.
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
8.14 SUCCESSORS AND ASSIGNS; SUBSEQUENT HOLDERS OF NOTE.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lender. The terms and provisions of
this Agreement shall inure to the benefit of any assignee or transferee of the
Note, and in the event of such transfer or assignment, the rights and privileges
herein conferred upon Lender shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof.
Borrower's rights and obligations or any interest therein hereunder may not be
assigned without the prior written consent of Lender, and any purported
assignment shall be null and void AB INITIO.
8.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL.
All judicial proceedings brought against Borrower arising out of or
relating to this Agreement, the Note or other Loan Document or any Obligation
may be brought in any state or Federal court of competent jurisdiction in the
State of California and by execution and delivery of this Agreement, Borrower
accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
waives any defense of forum non conveniens, and irrevocably agrees to be bound
by any judgment rendered thereby in connection with this Agreement, such Note,
such other Loan Document or such Obligation. ALL PARTIES TO THIS AGREEMENT
HEREBY AGREE THAT THIS SECTION 8.15 CONSTITUTES A WRITTEN CONSENT TO WAIVER OF
TRIAL BY JURY, PURSUANT TO THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE
SECTION 631 IN ANY JUDICIAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTE OR ANY OBLIGATION AND, IN FURTHERANCE THEREOF, BORROWER DOES
HEREBY CONSTITUTE AND APPOINT LENDER ITS TRUE AND LAWFUL ATTORNEY-IN-FACT, WHICH
APPOINTMENT IS COUPLED WITH AN INTEREST, AND BORROWER DOES HEREBY AUTHORIZE AND
EMPOWER LENDER IN THE NAME, PLACE AND STEAD OF BORROWER TO FILE THIS AGREEMENT
WITH THE CLERK OR JUDGE OF ANY COURT OF COMPETENT JURISDICTION AS STATUTORY
WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY. Borrower designates and appoints
Leroy E. Carlson, Secretary of Borrower on the date hereof, with offices at Real
Estate Investment Trust of California, 12011 San Vicente Boulevard, Suite 707,
Los Angeles, California 90049-4949, and such other Persons as may hereafter be
selected by Borrower irrevocably agreeing in writing to so serve, as its agent
to receive on its behalf service of all process in any such proceedings in any
such court, such service being hereby acknowledged by Borrower to be effective
and binding service in every respect. A copy of any such process so served
shall be mailed by registered mail to Borrower at its address provided in the
49
<PAGE>
applicable signature page hereto, except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity
of service of process. If any agent appointed by Borrower refuses to accept
service, Borrower hereby agrees that service upon it by mail shall constitute
sufficient notice. Nothing herein shall affect the right to serve process in
any other manner permitted by law or shall limit the right of Lender to bring
proceedings against Borrower in the courts of any other jurisdiction.
8.16 COUNTERPARTS.
This Agreement and any amendments, waivers, consents or supplements
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same Agreement.
8.17 EXHIBITS AND SCHEDULES.
The exhibits attached hereto are incorporated herein by this reference
and shall be a part of this Agreement.
8.18 ENTIRE AGREEMENT.
The Loan Documents set forth the entire understanding between Borrower
and Lender relative to the Loan and the same supersede all prior agreements and
understandings relating to the subject matter hereof.
8.19 LOSS OF NOTE.
Upon receipt of written notice from the holder of the Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft, or destruction, upon receipt of such holder's satisfactory
indemnity agreement (which in the case of Lender shall be an unsecured
indemnity), or in the case of any such mutilation, upon surrender and
cancellation of such Note, Borrower shall make and deliver a new Note, of like
tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
ARTICLE 9
CONVERSION TO UNSECURED LOAN
9.1 LOAN SECURED BY BORROWER'S REQUEST AS OF CLOSING DATE.
Borrower and Lender understand, acknowledge and agree that due to
certain restrictions contained in Borrower's Trust Agreement and/or other
charter documents and/or set forth in federal and/or state laws, rules, and/or
regulations applicable to REITs and/or Borrower, in each case, which limit the
amount of unsecured debt which may be incurred by Borrower (collectively, the
"Restrictions"), Borrower has requested, and Lender has agreed, to make the Loan
to Borrower on a secured basis as provided herein until such time, if any, that
the Unsecured Conversion Date occurs.
9.2 CONVERSION OF SECURED LOAN TO UNSECURED LOAN.
Notwithstanding any term or provision contained herein, upon the
written request of Borrower, Lender shall reconvey the Deeds of Trust
encumbering the Secured Facilities as collateral for the Loan, and convert the
Loan from a fully recourse secured Loan into a fully recourse unsecured Loan (an
"Unsecured Conversion") only upon satisfaction by Borrower of the following
terms and provisions:
A. No Event of Default or Potential Event of Default shall have
50
<PAGE>
occurred and be continuing as of the date of Borrower's request for an
Unsecured Conversion and/or as of the effective date of Lender's reconveyance
of the Deeds of Trust (the "Unsecured Conversion Date");
B. Borrower shall have delivered to Lender evidence (satisfactory to
Lender in its sole and absolute discretion) that Borrower shall have amended its
Trust Agreement and other charter documents and otherwise shall have complied
with all Restrictions such that Borrower is fully authorized and empowered to
incur and maintain the Loan as an unsecured Loan, and that the Unsecured
Conversion of the Loan to an unsecured status does not violate any such
Restrictions;
C. Borrower shall have delivered to Lender evidence that its long
term unsecured debt rating as determined by Standard & Poor's Ratings Group is
not less than "BBB";
D. Borrower shall have provided not less than thirty (30) days'
written notice to Lender of such intention to seek such reconveyance and
Unsecured Conversion; and
E. Borrower shall have paid any and all fees and expenses incurred
by Lender to review and/or prepare any documents, instruments or agreements
relating to the Unsecured Conversion and/or such reconveyance, including,
without limitation, the fees and expenses of Lender's outside counsel.
9.3 UNSECURED CONVERSION NOT TO IMPAIR LOAN INDEBTEDNESS.
Borrower understands, acknowledges and agrees that notwithstanding any
Unsecured Conversion or release or reconveyance of the Deeds of Trust, the same
shall not impair, reduce, satisfy, or otherwise limit any of Borrower's
obligations under the Loan Documents and/or any of Lender's rights or remedies
with respect thereto, and all such obligations, rights and remedies shall remain
in full force and effect.
9.4 NONAPPLICABILITY OF ONE-ACTION AND ANTIDEFICIENCY RULES ON AND AFTER
UNSECURED CONVERSION DATE.
Borrower understands, acknowledges and agrees that notwithstanding any
other term or provision contained herein or in the Loan Documents, that (i) the
reconveyance of the Deeds of Trust on the Unsecured Conversion Date is a
consensual act of Lender and Borrower which shall be performed, if at all, on
Borrower's request therefor and satisfaction of the conditions described in
Section 9.2 hereof, and shall not constitute a unilateral action by Lender and
(ii) on and after the Unsecured Conversion Date, the Loan shall be an unsecured
Loan and the California one-action and antideficiency laws relating to real
property secured transactions (including, without limitation, Sections 580a,
580b, 580d, and 726 of the California Code of Civil Procedure) shall not apply
to the Loan or be available to Borrower as a defense or right with respect to
the Loan or with respect to an Unsecured Conversion of the Loan.
51
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by a duly
authorized officer of each of Borrower and Lander as of the date first above
written.
BORROWER:
REAL ESTATE INVESTMENT TRUST OF
CALIFORNIA, a California real
estate investment trust
By:
-----------------------------------------
Jay W. Pauly
President
By:
-----------------------------------------
Leroy E. Carlson
Vice President
ATTEST: ADDRESS:
--------------------
Real Estate Investment Trust of California
12011 San Vicente Boulevard
Suite 707
Los Angeles, California 90049-4949
LENDER:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
-----------------------------------------
ATTEST: ADDRESS:
--------------------
Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel
<PAGE>
Exhibit A
COMPLIANCE CERTIFICATE
The Prudential Insurance
Company of America
Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel
Gentlemen:
I, the undersigned, the _________________________ of Real Estate
Investment Trust of California, a California real estate investment trust
("Borrower"), do hereby certify, represent and warrant as follows:
1. This Certificate is furnished pursuant to [Section 3.1.L] [Section
5.1.A.[(i)][(b)]] of that certain Loan Agreement dated as of July, 1995 (the
"Loan Agreement", the terms defined therein being used herein as therein
defined) by and between Borrower and The Prudential Insurance Company of
America, a New Jersey corporation ("Lender").
2. SCHEDULE 1 attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with Section 6.9 of the Loan Agreement, all
of which data and computations are complete, true and correct.
3. No Event of Default or Potential Event of Default under the Loan
Agreement or the other Loan Documents has occurred and is continuing.
4. The representations and warranties set forth in Article 4 of the Loan
Agreement are true and correct as of the date hereof as though made on and as of
the date hereof.
5. The total credit commitments relating to, and the principal balance
of, all Indebtedness of the Borrower and the Consolidated Partnership as of
___________ __, 19__ are as follows:
Lender/Creditor Committed Amount Principal Balance
--------------- ---------------- -----------------
Prudential $18,000,000 $18,000,000
525 Prudential Loan $55,000,000 $_____________
Sanwa $__________ $_____________
Union $__________ $_____________
Tango Loan $ 4,300,000 $_____________
_______________ $_____________
_______________ $_____________
6. The total credit commitments relating to, and the principal balance
of, all secured Indebtedness of the Borrower and the Consolidated Partnership as
of ___________ __, 19__ are as follows:
Lender/Creditor Committed Amount Principal Balance
--------------- ---------------- -----------------
Prudential $18,000,000 $18,000,000
Sanwa $____________ $_____________
Union $____________ $_____________
Tango Loan $ 4,300,000 $_____________
The only properties and/or assets serving as security for secured
A-1
<PAGE>
Indebtedness of the Borrower and the Consolidated Partnership are the Secured
Facilities, the Sanwa Properties, the Union Property, and the Tango Property.
7. The total credit commitments relating to, and the principal balance
of, all unsecured Indebtedness of the Borrower and the Consolidated Partnership
as of ___________ __, 19__ are as follows:
Lender/Creditor Committed Amount Principal Balance
--------------- ---------------- -----------------
525 Prudential Loan $55,000,000 $_____________
_______________ $_____________
_______________ $_____________
Executed this ____ day of _____________, 19__.
---------------------------------------------------------
Name:
--------------------------------------------------------
Title:
-------------------------------------------------------
A-2
<PAGE>
Schedule 1
To
Compliance Certificate
For the _____________ Ended ______________, 19__
SECTION 6.9.A TANGIBLE NET WORTH ($ Thousands)
A. Consolidated Book Value:
(i) Facilities (net of accumulated
depreciation), PLUS $___________
(ii) Cash, PLUS $___________
(iii) Permitted Investments, PLUS $___________
(iv) Prepaid Expenses, PLUS $___________
(v) Equity interest in Unconsolidated
Partnership (net of Borrower's pro rata
share of Unconsolidated Partnership's
secured indebtedness), PLUS $___________
(vi) Leasehold Projects (sum of
(A)(1), and (2)) $___________
(1) aggregate book value of
Finance Leases, PLUS $___________
(2) aggregate book value of all
outstanding Existing Purchase
Money Mortgages not in default $___________
(vii) Consolidated Book Value (sum of
(A)(i) through (A)(vi), inclusive) $___________
B. Consolidated total liabilities of
Borrower and the Consolidated Partnership: $___________
C. Tangible Net Worth (A(vii)-B): $___________
D. MINIMUM TANGIBLE NET WORTH ($ THOUSANDS): $100,000
SECTION 6.9.B INDEBTEDNESS TO CONSOLIDATED
BOOK VALUE ($ Thousands)
A. Indebtedness: $___________
B. Consolidated Book Value
(from A(vi) above): $___________
C. Indebtedness to Consolidated
Book Value (A/B): ____: 1.00
D. MAXIMUM INDEBTEDNESS TO CONSOLIDATED
BOOK VALUE: .50: 1.00
A-3
<PAGE>
SECTION 6.9.C MAXIMUM SECURED DEBT ($ Thousands)
A. Secured Indebtedness: $___________
B. MAXIMUM SECURED INDEBTEDNESS -
((i) $40,800 ($ THOUSANDS) OR (ii) 20% OF
CONSOLIDATED BOOK VALUE (FROM A(vi) ABOVE): $___________
A-4
<PAGE>
SECTION 6.9.D. DEBT SERVICE COVERAGE ($ Thousands)
(All figures are for the period from
___________ __, 19__ to ____________ __, 19__,
inclusive)
A. Net Operating Income:
(i) gross income derived from Facilities,
PLUS $___________
(ii) earnings derived from cash and
cash equivalents, PLUS $___________
(iii) net earnings derived from Unconsolidated
Partnership Interest, PLUS $___________
(iv) net rent from Leasehold Projects, PLUS $___________
(v) interest payments on Existing Purchase
Money Mortgages not in default $___________
(vi) Gross Income (sum of (i) through (v)) $___________
(vii) Operating Expenses $___________
(viii) Administrative Expenses $___________
(ix) Net Operating Income ((vi)-((vii)+(viii)) $___________
B. Debt Service
(i) Interest payments on Loan: $___________
(ii) Interest payments on all
other Indebtedness: $___________
(iii) Debt Service ((i)+(ii)) $___________
C. Debt Service Coverage Ratio ((A)(viii)/B(iii)) ____ to 1.0
D. MAXIMUM DEBT SERVICE COVERAGE RATIO: 2.5 TO 1.0
A-5
<PAGE>
Exhibit B
[Sanwa Properties]
1. Parkglen Apartments
2. Windrush Apartments
3. Skypark Professional Building
4. Valencia Medical Center
5. PSICOR Building
B-1
<PAGE>
Exhibit C
[Intentionally Deleted]
C-1
<PAGE>
Exhibit D
[Attach Opinion]
D-1
<PAGE>
Exhibit E
[Pending Litigation]
E-1
<PAGE>
Exhibit F
[Existing Facilities]
F-1
<PAGE>
Exhibit G
[Land Use Compliance Disclosure]
G-1
<PAGE>
Exhibit H
[Intentionally Deleted]
H-1
<PAGE>
Exhibit I
[Environmental Compliance Disclosure]
I-1
<PAGE>
Exhibit J
[Description of Deeds of Trust]
1. Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents, Proceeds and Agreements dated as of July 7,
1995 executed by Borrower in favor of Lender and encumbering the
Canyon Villa Apartment Project located in San Diego County,
California.
2. Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents, Proceeds and Agreements dated as of July 7,
1995 executed by Borrower in favor of Lender and encumbering the
Summit Apartment Project located in San Bernardino County,
California.
3. Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents, Proceeds and Agreements dated as of July 7,
1995 executed by Borrower in favor of Lender and encumbering the
Shaliko Apartment Project located in Placer County, California.
4. Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents, Proceeds and Agreements dated as of July 7,
1995 executed by Borrower in favor of Lender and encumbering the
Rocklin Gold Apartment Project located in Placer County,
California.
J-1
<PAGE>
Exhibit K
[Secured Facilities/Core Secured Facilities]
1. Canyon Villa Apartments (CORE SECURED FACILITY)
2. Summit Apartments (CORE SECURED FACILITY)
3. Shaliko Apartments
4. Rocklin Gold Apartments
K-1
<PAGE>
Exhibit L
ENVIRONMENTAL QUESTIONNAIRE
PROPERTY OWNER:
---------------------------------------------------------------
PROPERTY:
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
BORROWER:
(if other than Owner)
---------------------------------------------------------------
THE OWNER/BORROWER HEREBY DELIVERS THIS ENVIRONMENTAL QUESTIONNAIRE TO THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA ("PRUDENTIAL") AND THE OWNER/BORROWER
UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT THIS ENVIRONMENTAL QUESTIONNAIRE
SHALL CONSTITUTE A WRITTEN REQUEST FOR INFORMATION CONCERNING THE
ENVIRONMENTAL CONDITION OF THE MORTGAGED PREMISES PURSUANT TO SECTION 726.5
OF THE CALIFORNIA CODE OF CIVIL PROCEDURE THE OWNER/BORROWER HEREBY MAKES THE
FOLLOWING REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE MORTGAGED
PREMISES AND UNDERSTANDS THAT PRUDENTIAL IS RELYING ON SUCH REPRESENTATIONS
AND WARRANTIES IN MAKING THE LOAN.
A. CURRENT/FORMER USES OF THE MORTGAGED PREMISES
1. Name of all former owner(s):
2. Description of current use(s) of the Mortgaged Premises (if other
than office use exclusively, please provide name(s) of current
occupant(s) and date(s) of occupancy):
3. Date of completion of original construction and any substantial
renovations (including tenant improvements):
4. Name(s) of previous tenants, operators or other occupant(s):
5. Description of previous use(s) of the Mortgaged Premises by prior
owners, tenants or others:
6. Description of uses of adjacent properties:
B. ASBESTOS
L-1
<PAGE>
1. Is there asbestos currently in any of the construction materials
contained in the building(s)?
2. If so, has a survey been conducted to assess the type, amount,
location and condition of asbestos? (If so, please attach a copy
of any survey report.)
3. Have asbestos air samples been taken? If so, what are the
results?
4. Is there an existing maintenance program? If so, please describe
or attach a copy.
C. POLYCHLORINATED BIPHENYLS ("PCBS"
1. Have polychlorinated biphenyls ("PCBs" been used in electrical
transformers, capacitors or other equipment at the Mortgaged
Premises?
2. If so, please describe the use and quantity of PCBs used on the
Mortgaged Premises, and if they are contained and/or enclosed and
where such PCBs are located in relation to air conditioning
and/or other ventilation devices and vents.
D. FUEL/CHEMICAL STORAGE TANKS, DRUMS AND PIPELINES
1. Are there any aboveground or underground gasoline, diesel, fuel
oil or other chemical storage tanks on the Mortgaged Premises?
2. If so, please describe the substances stored and the capacity of
tank(s).
3. Have the tanks been inspected or tested for leakage? (If so,
please attach a copy of any such report.) When was the most
recent test? What were the results? Do the tanks have
monitoring devices attached?
4. Are any other chemicals stored on, under or about the Mortgaged
Premises in drums, containers or otherwise? If so, please
describe the substances, quantities stored, locations on the
Mortgaged Premises, and types of containers.
5. Have there been any spills, leaks, or other releases of chemicals
on, under or about the Mortgaged premises? If so, please
describe the chemicals and quantities released, any cleanup
measures taken, and the results of any soil or groundwater
samples taken to detect the presence of the chemicals spilled,
leaked, or released on the Mortgaged Premises.
6. Have there been any governmental or regulatory enforcement
actions or cleanup orders relating to the Mortgaged Premises?
7. Please attach copies of any permits or licenses pertaining to the
use, storage, handling, or disposal of chemicals on the Mortgaged
Premises.
E. AIR EMISSIONS
1. Describe air emissions from each source of air pollutants,
including fuel-burning equipment (describe type of fuel burned),
on the Mortgaged Premises.
L-2
<PAGE>
2. Describe air pollution control equipment used to reduce emissions
for each source of air emissions.
3. Are air emissions monitored? If so, indicate frequency of
monitoring.
4. Please attach copies of any air permits or licenses pertaining to
operations on the Mortgaged Premises.
F. WATER DISCHARGES
1. List all sources of wastewater discharges to surface waters,
septic systems, or holding ponds:
2. List all sources of wastewater discharges to public sewer
systems.
3. For each discharge list the average daily flow:
4. Please attach copies of any water discharge permits or licenses
pertaining to operations on the Mortgaged Premises.
G. WASTE DISPOSAL
1. Describe the types of liquid wastes (other than wastewater
described in part F above) and/or solid wastes generated at the
Mortgaged Premises.
2. Describe how the liquid and/or solid wastes generated at the
Mortgaged Premises are disposed of.
3. Please attach copies of any waste disposal permits or licenses
pertaining to operations on the Mortgaged Premises.
H. IF THE MORTGAGED PREMISES OR ANY ADJACENT PROPERTY HAS BEEN OR IS USED FOR
INDUSTRIAL PURPOSES, THE FOLLOWING ADDITIONAL INFORMATION SHOULD BE
PROVIDED:
1. Has the Mortgaged Premises or any adjacent property been used for
disposal of any liquid or solid waste? If so, describe the
location of all disposal sites, the type of wastes disposed of at
each site, the results of any soil or groundwater samples taken
in the vicinity of each site, and the manner in which each site
not presently in use was closed.
L-3
<PAGE>
2. Has the Mortgaged Premises or any adjacent property been used for
the incineration of any liquid or solid waste? If so, describe
the location of such incineration, the type of wastes incinerated
at each site, the results of any air, soil or groundwater samples
taken in the vicinity of each site, and the manner in which each
site not presently in use was closed.
3. Have evaporation or storage ponds or leach fields or injection
wells been located on the Mortgaged Premises or any adjacent
property? If so, describe the location of all such ponds, fields
and wells, the type of wastes placed in each pond, field or well,
the results of any soil or groundwater samples taken in the
vicinity of each pond, field or well, and the manner in which
each pond, field or well not presently in use was closed.
4. Have wastewater treatment facilities, such as acid neutralization
vaults, been located on the Mortgaged Premises or any adjacent
property? If so, please describe the location of all facilities,
the type of wastes treated in each facility, the results of any
soil or groundwater samples taken in the vicinity of each
facility, and the manner in which each facility not presently in
use was closed.
5. Are there raw chemical or waste chemical storage areas on the
Mortgaged Premises or any adjacent property? If so, please
describe the location of all such areas, the type of products or
wastes stored in each area, the amount of products or wastes
stored in each area, the results of any soil or groundwater
samples taken in the vicinity of each area, and the manner in
which each area not presently in use was closed.
6. Are there transportation or transfer stations on the Mortgaged
Premises or any adjacent property for any raw chemicals or waste
chemicals? If so, please describe the location of all such
areas, the type of products or wastes transported or transferred
in each area, the amounts of products or wastes transported or
transferred, the results of any soil or ground water samples
taken in the vicinity of each area, and the manner in which each
area not presently in use was closed.
I. IF THE MORTGAGED PREMISES OR ADJACENT PROPERTY HAS BEEN OR IS USED FOR
AGRICULTURAL PURPOSES, THE FOLLOWING ADDITIONAL INFORMATION SHOULD BE
PROVIDED:
1. Have pesticides, herbicides or other agricultural chemicals been
applied to the Mortgaged Premises or any adjacent property? If
so, please describe the locations where such pesticides,
herbicides or chemicals were applied, the type of pesticides,
herbicides or chemicals applied in each area, and the results of
any soil or groundwater analyses performed to detect pesticides,
herbicides or chemicals used at the site.
2. Have pesticides, herbicides or other agricultural chemicals been
mixed, formulated, rinsed, or disposed of on the Mortgaged
Premises or any adjacent property? If so, please describe the
locations where such pesticides, herbicides or chemicals were
mixed, formulated, rinsed, or disposed of, the type of
pesticides, herbicides or chemicals mixed, formulated, rinsed, or
disposed of at each location, and the results of and soil or
groundwater analyses performed to detect pesticides, herbicides
or chemicals mixed, formulated, rinsed, or disposed of at the
site.
As the present owner of the Mortgaged Premises [an officer or a general partner
of the present owner of the Mortgaged Premises (or the duly authorized
representative of such owner)], I am familiar with all of the operations
presently conducted on the Mortgaged Premises, have made a diligent inquiry into
the former uses of the Mortgaged Premises, and hereby certify to and for the
benefit of any purchaser of the Mortgaged Premises and/or any prospective
mortgagee of the Mortgaged Premises, that the information disclosed above is
true, accurate and correct.
L-4
<PAGE>
---------------------------------------
(Signature)
---------------------------------------
(Title)
L-5
<PAGE>
Exhibit 10.35
FIRST AMENDMENT TO LOAN AGREEMENT
[$18,000,000]
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment"), is made as of
April 30, 1996, 1996 by and between THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("Lender"), and BRE PROPERTIES, INC., a
Maryland corporation ("Borrower"), as ultimate successor-in-interest by merger
to Real Estate Investment Trust of California, a California real estate
investment trust ("Original Borrower").
RECITALS:
A. Lender has made a loan (the "Loan") to Original Borrower in the
original principal amount of $18,000,000, which loan is governed by that certain
Loan Agreement dated as of July 7, 1995 by and between Original Borrower and
Lender (the "Loan Agreement") and evidenced by that certain Promissory Note
dated as of July 7, 1995 executed by Original Borrower in favor of Lender (the
"Note").
B. Pursuant to a series of mergers, Original Borrower merged into Real
Estate Investment Trust of Maryland, a Maryland real estate investment trust,
which in turn merged into BRE Properties Inc., a Delaware corporation, which in
turn merged into Borrower (which was then and formerly known as BRE Maryland,
Inc., a Maryland corporation).
C. Pursuant to the terms of that certain Assumption Agreement dated as of
even date herewith by and between Borrower and Lender, Borrower absolutely and
irrevocably assumed the Loan, the Loan Agreement, the Note and the other Loan
Documents and the obligations of Original Borrower thereunder.
D. Borrower and Lender have agreed to modify and amend the Loan Agreement
as provided herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
AGREEMENT:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined, shall have the meanings given thereto in the Loan Agreement.
<PAGE>
2. AMENDMENTS TO LOAN AGREEMENT. Borrower and Lender agree that the Loan
Agreement shall be amended as provided in this Paragraph 2.
2.1. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Approved Indebtedness, in its entirety, with the following revised
definition therefor:
"APPROVED INDEBTEDNESS" means collectively, (i) this
Loan, (ii) the 525 Prudential Loan, (iii) the Sanwa Line of
Credit (including amounts borrowed thereunder after the
Closing Date in compliance with the terms hereof), (iv) the
PruExpress Loans, (v) the Tango Loan, (vi) the Bank of
America Line of Credit (including amounts borrowed
thereunder after the Closing Date in compliance with the
terms hereof), (vii) debt incurred in the ordinary course of
business to acquire goods, supplies, services or merchandise
on normal trade credit, (viii) surety bonds which are
obtained in the ordinary course of business,
(ix) Indebtedness secured by New Purchase Money Liens,
(x) Existing BRE Secured Debt, and (xi) Capital Lease
Obligations in an amount not to exceed, at any time,
$1,000,000; provided, however, that in any and all events,
such Approved Indebtedness shall be subject to, and included
within the calculations relating to, the financial covenants
set forth in Section 6.9 hereof.
2.2. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Approved Liens, in its entirety, with the following revised
definition therefor:
"APPROVED LIENS" means the Prudential Liens, the
PruExpress Liens, the Tango Lien, the Existing BRE Liens,
any New Purchase Money Liens, and liens for real property
taxes described in Section 6.2(i) hereof.
2.3. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"BANK OF AMERICA LINE OF CREDIT" means that certain unsecured
line of credit in the maximum amount of $70,000,000 provided to
Borrower by Bank of America, NT&SA.
2.4. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"EXISTING BRE LIENS" means the Liens on the Existing BRE
Properties which secure the Existing BRE Secured Debt.
2.5. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"EXISTING BRE SECURED DEBT" means the Indebtedness of Borrower
existing as of the date of merger with the Original Borrower as
identified in EXHIBIT M attached hereto and incorporated herein, which
is secured by the Facilities described in such Exhibit (collectively,
the "Existing BRE Facilities").
2.6. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"NEW PURCHASE MONEY LIENS" means Liens entered into or
2
<PAGE>
assumed after April 30, 1996 which (i) finances the purchase and
acquisition by Borrower of any New Facility as permitted under Section
6.1 hereof, (ii) secures an amount equal to the lesser of (x) the then
existing indebtedness on such New Facility prior to the time of
purchase, or (y) seventy-five percent (75%) of the purchase price of
such New Facility, and (iii) encumbers only the New Facility so
acquired by Borrower.
2.7. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"PRUEXPRESS LOANS" means that certain $13,000,000 term loan made
by Lender to Borrower under Loan No. 6-100-537 secured by the real
property commonly known as Selby Ranch and that certain $17,500,000
term loan made by Lender to Borrower under Loan No. 6-100-032 secured
by the real property commonly known as Montanosa Apartments.
2.8. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"PRUEXPRESS LIENS" means the Liens securing the PruExpress Loans.
2.9. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"UNENCUMBERED ASSETS" means the sum of the Consolidated
Book Value of all Facilities which are not encumbered in
whole or in part by any Lien.
2.10. Section 1.1 of the Loan Agreement shall be amended by adding the
following definition to be inserted therein in alphabetical order:
"UNSECURED DEBT" means the aggregate of all
Indebtedness which is not secured in whole or in part by any
Lien.
2.11. Section 1.1 of the Loan Agreement shall be amended by deleting
the definitions of "Union Line of Credit" and "Union Liens."
2.12. Section 5.12 of the Loan Agreement shall be amended, in its
entirety, to provide as follows:
5.12 OBTAIN/MAINTAIN RATING.
On or before November 30, 1996, Borrower will obtain, and shall
thereafter always maintain in effect, a rating for the long-term
unsecured debt of Borrower from Standard & Poor's Rating Group, Moody
Investor Services, Fitch Investor Services, Duff & Phelps or any other
nationally recognized rating agency approved by Lender (an "Approved
Rating Agency"). After receiving such rating, Borrower shall take all
steps necessary to maintain such rating and shall provide the Approved
Rating Agency and Lender with all such information as may be necessary
to monitor, assess and maintain such rating. Borrower shall pay all of
the fees, costs and expenses incurred in connection with obtaining and
maintaining such rating.
2.13. A new Section 5.13 of the Loan Agreement shall be added thereto
and shall provide, in its entirety, as follows:
5.13 INFORMATION REQUIRED BY RULE 144A. Borrower
covenants that it will, upon the request of
3
<PAGE>
Lender, provide Lender, and any qualified institutional buyer
designated by Lender, such financial and other information as such
holder may reasonably determine to be necessary in order to permit
compliance with the information requirements of Rule 144A under the
Securities Act of 1933 in connection with the resale of the Loan and
the Note, except at such times as the Borrower is subject to the
reporting requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934. For the purpose of this Section 5.13, the term
"qualified institutional buyer" shall have the meaning specified in
Rule 144A under the Securities Act of 1933.
2.14. Section 6.9 of the Loan Agreement shall be amended, in its
entirety, to provide as follows:
6.9 FINANCIAL COVENANTS.
Borrower shall at all times comply with the terms of this Section
6.9 provided that compliance with the terms of this Section 6.9 shall
be measured quarterly as of the last day of each fiscal quarter of
Borrower.
A. TANGIBLE NET WORTH. Borrower will not permit its
Tangible Net Worth to be less than Three Hundred Million Dollars
($300,000,000).
B. INDEBTEDNESS TO CONSOLIDATED BOOK VALUE. Borrower and
the Consolidated Partnership shall not create, incur, suffer or
allow to exist Indebtedness (including, with respect to the Sanwa
Line of Credit and the Bank of America Line of Credit, only the
funded portion of such line of credit indebtedness within the
calculation of Indebtedness) in excess of fifty-five percent
(55%) of Consolidated Book Value.
C. MAXIMUM SECURED DEBT. Borrower and the Consolidated
Partnership shall not create, incur, suffer or allow to exist
Indebtedness secured in whole or in part by any of its properties
(including, without limitation, the Facilities, but excluding,
for the purpose of this Section 6.9.C only, this Loan from the
calculation of such secured Indebtedness) or other assets which
at any time exceeds twenty-five percent (25%) of Consolidated
Book Value.
D. DEBT SERVICE COVERAGE. Borrower and the Consolidated
Partnership shall not permit or allow the Debt Service Coverage
to be less than 2.2 to 1.0.
E. UNSECURED DEBT TO UNENCUMBERED ASSETS. Borrower and the
Consolidated Partnership shall not create, incur, suffer or allow
to exist Unsecured Debt (including, with respect to the Sanwa
Line of Credit and the Bank of America Line of Credit, only the
funded portion of such line of credit indebtedness within the
calculation of Indebtedness) in excess of fifty percent (50%) of
Unencumbered Assets.
2.15. Section 6.12 of the Loan Agreement shall be amended, in its
entirety, to provide as follows:
6.12 NO COLLATERAL FOR LINES OF CREDIT.
As of the date hereof, Borrower shall have converted
4
<PAGE>
the Sanwa Line of Credit into an unsecured facility and shall have
caused a release and reconveyance of all Liens on the Sanwa
Properties. Neither the Sanwa Line of Credit, the Bank of America
Line of Credit nor any other revolving, line of credit, or other
general Indebtedness shall be at any time secured in whole or in part
by the Facilities or any assets of Borrower.
2.16. Section 7.2.A of the Loan Agreement shall be amended, in its
entirety, to provide as follows:
A. FAILURE TO MAKE PAYMENTS. Failure of Borrower or
the Consolidated Partnership to pay when due any principal
or interest on any Indebtedness (including, without
limitation, the Tango Loan, the Sanwa Line of Credit, the
Bank of America Line of Credit, and/or the Existing BRE
Secured Debt) (other than Indebtedness referred to in
Section 7.1 and Section 7.2.C) or Contingent Obligation; or
2.17. Section 7.2.C of the Loan Agreement shall be amended, in its
entirety, to provide as follows:
C. DEFAULT UNDER PRUDENTIAL LOANS. Any default,
Event of Default or Potential Event of Default under or as
defined in any of the 525 Loan Documents or under or with
respect to any loan document evidencing, securing or
relating to any of the PruExpress Loans; or
2.18. Section 7.14 of the Loan Agreement shall be amended, in its
entirety, to provide as follows:
7.14 FAILURE TO OBTAIN/MAINTAIN RATING.
On and after November 30, 1996, Borrower shall have failed to
obtain or maintain a rating for the long-term unsecured debt of
Borrower from an Approved Rating Agency;
2.19. A new Section 9.5 shall be added to the Loan Agreement which
shall provide, in its entirety, as follows:
9.5 CONVERSION OF PRUEXPRESS LOANS TO UNSECURED LOANS.
A. Borrower and Lender understand, acknowledge and agree that in
connection with obtaining Lender's consent and approval of
Borrower's assumption of Original Borrower's obligations,
Borrower and Lender have mutually agreed that, upon Lender's
election (to be exercised or not exercised by Lender in its sole
and absolute discretion), the PruExpress Loans shall be converted
into unsecured facilities and shall be amended such that (i) the
PruExpress Loans shall be fully recourse to Borrower, (ii) the
PruExpress Loans shall be governed by a loan agreement and
financial covenants in substantially the same form and substance
of this Agreement, (iii) the PruExpress Liens shall be released
and reconveyed as security for the PruExpress Loans, and (iv) on
and after such conversion, the PruExpress Loans shall be
unsecured loans and the California one-action and antideficiency
laws relating to real property secured transactions (including,
without limitation, Sections 580a, 580b, 580d, and 726 of the
California Code of Civil Procedure) shall not apply to the
PruExpress Loans or be available to Borrower as a defense or
right with respect to the PruExpress Loans.
5
<PAGE>
2.20. EXHIBIT A to the Loan Agreement shall be replaced with SCHEDULE
ONE attached hereto.
2.21. EXHIBIT F to the Loan Agreement shall be replaced with an update
thereto attached as SCHEDULE TWO hereto.
2.22. A new EXHIBIT M shall be added to the Loan Agreement in the form
attached hereto as SCHEDULE THREE.
3. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties to Lender all of which are material and are made
to induce Lender to enter into this Amendment.
3.1. All representations and warranties in the Loan Documents were
true, accurate and complete in every material respect as of the date
made and are true, accurate and complete in every respect as of the
date hereof, and do not fail to disclose any material fact necessary
to make the representations not misleading.
3.2. Borrower has full power, legal capacity and authority to execute
and deliver this Amendment.
3.3. This Amendment has been duly authorized, executed and delivered
by Borrower.
4. NO OTHER MODIFICATIONS. Except as provided herein, the Loan Agreement
shall remain unchanged and in full force and effect.
5. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
6. SEVERABILITY. If any term, provision, covenant or condition of this
Amendment or any application thereof should be held by a court of competent
jurisdiction to be invalid, void or unenforceable, all terms, provisions,
covenants and conditions hereof and all applications thereof not held invalid,
void or unenforceable shall continue in full force and effect and shall in no
way be affected, impaired or invalidated thereby.
7. SUCCESSOR AND ASSIGNS. The provisions of this Amendment shall be
binding upon and inure solely to the benefit of Lender and Borrower, and their
respective heirs, legal representatives, successors and assigns.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original, and all of which counterparts, taken together, shall constitute but
one and the same Amendment.
6
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have caused this Amendment to be
executed as of the day and year first above written.
BORROWER:
BRE PROPERTIES, INC., a Maryland corporation
By:
--------------------------------------------
Name:
------------------------------------------
Title:
------------------------------------------
By:
--------------------------------------------
Name:
------------------------------------------
Title:
------------------------------------------
LENDER:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
------------------------------------------
Its:
------------------------------------------
<PAGE>
SCHEDULE ONE
EXHIBIT A
COMPLIANCE CERTIFICATE
The Prudential Insurance
Company of America
Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel
Gentlemen:
I, the undersigned, the _________________________ of BRE Properties,
Inc., a Maryland corporation ("Borrower"), do hereby certify, represent and
warrant as follows:
1. This Certificate is furnished pursuant to [Section 3.1.L] [Section
5.1.A.[(i)][(b)]] of that certain Loan Agreement dated as of July 5, 1995, as
amended ______, 1996, as further amended from time to time (the "Loan
Agreement", the terms defined therein being used herein as therein defined) by
and between Borrower and The Prudential Insurance Company of America, a New
Jersey corporation ("Lender").
2. SCHEDULE 1 attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with Section 6.9 of the Loan Agreement, all
of which data and computations are complete, true and correct.
3. No Event of Default or Potential Event of Default under the Loan
Agreement or the other Loan Documents has occurred and is continuing.
4. The representations and warranties set forth in Article 4 of the Loan
Agreement are true and correct as of the date hereof as though made on and as of
the date hereof.
5. The total credit commitments relating to, and the principal balance
of, all Indebtedness of the Borrower and the Consolidated Partnership as of
___________ __, 19__ are as follows:
LENDER/CREDITOR COMMITTED AMOUNT PRINCIPAL BALANCE
--------------- ---------------- -----------------
Prudential $18,000,000 $_____________
525 Prudential Loan $55,000,000 $_____________
Sanwa $__________ $_____________
Bank of America $70,000,000 $_____________
Tango Loan $ 4,300,000 $_____________
Existing BRE
Secured Debt ___________ $_____________
New Purchase
Money Liens ___________ $_____________
_______________ ___________ $_____________
6. The total credit commitments relating to, and the principal balance
of, all secured Indebtedness of the Borrower and the Consolidated Partnership as
of ___________ __, 19__ are as follows:
LENDER/CREDITOR COMMITTED AMOUNT PRINCIPAL BALANCE
--------------- ---------------- -----------------
Prudential $18,000,000 $_____________
<PAGE>
Tango Loan $ 4,300,000 $_____________
Existing BRE
Secured Debt $___________ $_____________
New Purchase
Money Liens $___________ $_____________
The only properties and/or assets serving as security for secured
Indebtedness of the Borrower and the Consolidated Partnership are the Secured
Facilities, the Existing BRE Properties, the Tango Property, and the New
Facilities encumbered by the New Purchase Money Liens as shown on SCHEDULE 2
attached hereto.
7. The total credit commitments relating to, and the principal balance
of, all unsecured Indebtedness of the Borrower and the Consolidated Partnership
as of ___________ __, 19__ are as follows:
LENDER/CREDITOR COMMITTED AMOUNT PRINCIPAL BALANCE
--------------- ---------------- -----------------
525 Prudential Loan $55,000,000 $_____________
Sanwa $__________ $_____________
Bank of America $70,000,000 $_____________
_______________ $_____________
_______________ $_____________
8. The total unencumbered assets/Facilities of Borrower (as well as the
Consolidated Book Value thereof) are listed on the attached SCHEDULE 3 hereof.
Executed this ____ day of _____________, 19__.
-------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
<PAGE>
Schedule 1
To
Compliance Certificate
For the _____________ Ended ______________, 19__
SECTION 6.9.A TANGIBLE NET WORTH ($ Thousands)
A. Consolidated Book Value:
(i) Facilities (net of accumulated
depreciation), PLUS $___________
(ii) Cash, PLUS $___________
(iii) Permitted Investments, PLUS $___________
(iv) Prepaid Expenses, PLUS $___________
(v) Equity interest in Unconsolidated
Partnership (net of Borrower's pro rata
share of Unconsolidated Partnership's
secured indebtedness), PLUS $___________
(vi) Leasehold Projects (sum of
(A)(1), and (2)) $___________
(1) aggregate book value of
Finance Leases, PLUS $___________
(2) aggregate book value of all
outstanding Existing Purchase
Money Mortgages not in default $___________
(vii) Consolidated Book Value (sum of
(A)(i) through (A)(vi), inclusive) $___________
B. Consolidated total liabilities of
Borrower and the Consolidated Partnership: $___________
C. Tangible Net Worth (A(vii)-B): $___________
D. MINIMUM TANGIBLE NET WORTH ($ THOUSANDS): $300,000
SECTION 6.9.B INDEBTEDNESS TO CONSOLIDATED
BOOK VALUE ($ Thousands)
A. Indebtedness: $___________
B. Consolidated Book Value
(from A(vii) above): $___________
C. Indebtedness to Consolidated
Book Value (A/B): ____: 1.00
D. MAXIMUM INDEBTEDNESS TO CONSOLIDATED
BOOK VALUE: .55: 1.00
<PAGE>
SECTION 6.9.C MAXIMUM SECURED DEBT ($ Thousands)
A. Secured Indebtedness (excluding this Loan): $___________
B. MAXIMUM SECURED INDEBTEDNESS -
(TWENTY-FIVE (25%) OF
CONSOLIDATED BOOK VALUE (FROM A(vii) ABOVE): $___________
<PAGE>
SECTION 6.9.D. DEBT SERVICE COVERAGE ($ Thousands)
(All figures are for the period from
___________ __, 19__ to ____________ __, 19__,
inclusive)
A. Net Operating Income:
(i) gross income derived from Facilities,
PLUS $___________
(ii) earnings derived from cash and
cash equivalents, PLUS $___________
(iii) net earnings derived from Unconsolidated
Partnership Interest, PLUS $___________
(iv) net rent from Leasehold Projects, PLUS $___________
(v) interest payments on Existing Purchase
Money Mortgages not in default $___________
(vi) Gross Income (sum of (i) through (v)) $___________
(vii) Operating Expenses $___________
(viii) Administrative Expenses $___________
(ix) Net Operating Income ((vi)-((vii)+(viii)) $___________
B. Debt Service
(i) Interest payments on Loan: $___________
(ii) Interest payments on all
other Indebtedness: $___________
(iii) Debt Service ((i)+(ii)) $___________
C. Debt Service Coverage Ratio ((A)(viii)/B(iii)) ____ to 1.0
D. MAXIMUM DEBT SERVICE COVERAGE RATIO: 2.2 TO 1.0
<PAGE>
SECTION 6.9.E UNSECURED INDEBTEDNESS TO
UNENCUMBERED ASSETS ($ Thousands)
A. Unsecured Indebtedness: $___________
B. Unencumbered Assets: $___________
C. Unsecured Indebtedness to Unencumbered
Assets (A/B): ____: 1.00
D. MAXIMUM UNSECURED INDEBTEDNESS TO
UNENCUMBERED ASSETS: .50: 1.00
<PAGE>
Schedule 2
To
Compliance Certificate
For the _____________ Ended ______________, 19__
[New Purchase Money Liens]
PROP LOC UNITS PUR PRICE LIEN AMT LTV LENDER MAT DATE %RATE
- ---- ---- ----- --------- -------- --- ------ -------- -----
<PAGE>
Schedule 3
To
Compliance Certificate
For the _____________ Ended ______________, 19__
[Unencumbered Assets]
PROPERTY LOCATION UNITS CONSOLD BOOK VALUE
- -------- -------- ----- ------------------
<PAGE>
SCHEDULE TWO
Exhibit F
[Existing Facilities]
<PAGE>
SCHEDULE THREE
Exhibit M
[Existing BRE Secured Debt]
PROPERTY LOCATION UNITS LOAN BALANCE LENDER MAT DATE %RATE
- -------- -------- ----- ------------ ------ -------- -----
<PAGE>
Exhibit 10.36
SECOND AMENDMENT TO LOAN AGREEMENT
[$18,000,000]
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment"), is dated as
of November 20, 1996 by and between THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("Lender"), and BRE PROPERTIES, INC., a
Maryland corporation ("Borrower"), as ultimate successor-in-interest by
merger to Real Estate Investment Trust of California, a California real
estate investment trust ("Original Borrower").
RECITALS:
A. Lender has made a loan (the "Loan") to Original Borrower in the
original principal amount of $18,000,000, which loan is governed by that
certain Loan Agreement dated as of July 7, 1995 by and between Original
Borrower and Lender, as amended by that certain First Amendment to Loan
Agreement dated as of April 30, 1996 (collectively, the "Loan Agreement"),
and evidenced by that certain Promissory Note dated as of July 7, 1995
executed by Original Borrower in favor of Lender (the "Note").
B. Pursuant to a series of mergers, Original Borrower merged into Real
Estate Investment Trust of Maryland, a Maryland real estate investment trust,
which in turn merged into BRE Properties Inc., a Delaware corporation, which
in turn merged into Borrower (which was then and formerly known as BRE
Maryland, Inc., a Maryland corporation).
C. Pursuant to the terms of that certain Assumption Agreement dated as
of April 30, 1996 by and between Borrower and Lender, Borrower absolutely and
irrevocably assumed the Loan, the Loan Agreement, the Note and the other Loan
Documents and the obligations of Original Borrower thereunder.
D. Borrower and Lender have agreed to modify and amend the Loan
Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
AGREEMENT:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined, shall have the meanings given thereto in the Loan
Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. Borrower and Lender agree that the Loan
Agreement shall be amended as provided in this Paragraph 2.
2.1. Section 1.1 of the Loan Agreement shall be amended by replacing the
definition of Bank of America Line of Credit, in its entirety, with the
following revised definition therefor:
"BANK OF AMERICA LINE OF CREDIT" means that certain unsecured
line of credit in the maximum amount of $120,000,000 provided to
Borrower by Bank of America, NT&SA.
2.2. A new Section 5.14 of the Loan Agreement shall be added thereto and
shall provide, in its entirety, as follows:
5.14 S&P RATING.
Borrower will use its best efforts to obtain on or before
December 31, 1997, and shall thereafter always maintain in effect,
an investment grade rating for the long-term unsecured debt of
Borrower from Standard & Poor's Rating Group or Moody Investor
<PAGE>
Services. Borrower shall pay all of the fees, costs and expenses
incurred in connection with obtaining and maintaining such rating.
2.3. On and after the occurrence of the Unsecured Conversion as
described in Paragraph 3 below, (i) any Secured Facilities or Core Secured
Facilities shall thereafter constitute Facilities under the Loan Agreement,
and (ii) any provision of the Loan Agreement which is made subject to any term
or provision contained in any of the Deeds of Trust shall be disregarded.
3. Borrower and Lender understand, acknowledge and agree that for the
purposes of Section 9.2.C of the Loan Agreement, Lender has agreed to accept
in satisfaction thereof, a rating of BBB+ from Duff & Phelps and that
therefore, Borrower has satisfied the conditions precedent set forth in
Section 9.2 of the Loan Agreement and immediately prior to the execution and
delivery of this Amendment, Lender has reconveyed the Secured Facilities as
collateral for the Loan, thereby converting the Loan from a fully recourse
secured Loan into a fully recourse unsecured Loan (an "Unsecured
Conversion") in accordance with the terms of Section 9.2 of the Loan
Agreement. Borrower hereby (i) reaffirms its understandings, agreements and
acknowledgments set forth in Sections 9.3 and 9.4 of the Loan Agreement, (ii)
agrees that such Unsecured Conversion shall not impair, reduce, satisfy, or
otherwise limit any of Borrower's obligations under the Loan Documents and/or
any of Lender's rights or remedies with respect thereto, and all such
obligations, rights and remedies shall remain in full force and effect, and
(iii) as of the execution and delivery hereof, the Loan shall be an unsecured
Loan and the California one-action and antideficiency laws relating to real
property secured transactions (including, without limitation, Sections 580a,
580b, 580d, and 726 of the California Code of Civil Procedure) shall not
apply to the Loan or be available to Borrower as a defense or right with
respect to the Loan or with respect to an Unsecured Conversion of the Loan.
4. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties to Lender all of which are material and are
made to induce Lender to enter into this Amendment.
4.1. All representations and warranties in the Loan Documents were
true, accurate and complete in every material respect as of the
date made and are true, accurate and complete in every respect as
of the date hereof, and do not fail to disclose any material fact
necessary to make the representations not misleading.
4.2. Borrower has full power, legal capacity and authority to
execute and deliver this Amendment.
4.3. This Amendment has been duly authorized, executed and
delivered by Borrower.
5. NO OTHER MODIFICATIONS. Except as provided herein, the Loan Agreement
shall remain unchanged and in full force and effect.
6. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
2
<PAGE>
7. SEVERABILITY. If any term, provision, covenant or condition of
this Amendment or any application thereof should be held by a court of
competent jurisdiction to be invalid, void or unenforceable, all terms,
provisions, covenants and conditions hereof and all applications thereof not
held invalid, void or unenforceable shall continue in full force and effect
and shall in no way be affected, impaired or invalidated thereby.
8. SUCCESSOR AND ASSIGNS. The provisions of this Amendment shall
be binding upon and inure solely to the benefit of Lender and Borrower, and
their respective heirs, legal representatives, successors and assigns.
9. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be
an original, and all of which counterparts, taken together, shall constitute
but one and the same Amendment.
3
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have caused this Amendment
to be executed as of the day and year first above written.
BORROWER:
BRE PROPERTIES, INC., a Maryland corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
LENDER:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: _____________________________________
Its: _____________________________________
<PAGE>
BRE PROPERTIES, INC.
EXHIBIT 11--COMPUTATION OF EARNINGS PER SHARE
STATEMENT OF EARNINGS PER SHARE
AVERAGE SHARES OUTSTANDING ARE COMPUTED BY ADDING THE SHARES OUTSTANDING AT
EACH MONTH END AND DIVIDING THAT RESULT BY THE NUMBER OF MONTHS ELAPSED IN THE
YEAR-TO-DATE PERIOD. (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Net income before gain (loss) on sales of investments (a)...................... $ 37,014 $ 23,789 $ 22,566
Weighted average number of shares outstanding.................................. 30,520 21,905 21,840
Computation.................................................................... $ 1.21 $ 1.09 $ 1.03
Net gain (loss) on sales of investments and provision for possible investment
loss (a)..................................................................... $ 52,825 ($ 1,779) $ 1,646
Computation.................................................................... $ 1.73 $ (.08) $ .08
Net Income..................................................................... $ 89,839 $ 22,010 $ 24,212
EARNINGS PER SHARE (a)......................................................... $ 2.94 $ 1.01 $ 1.11
ADDITIONAL PRIMARY COMPUTATION:
Net Income..................................................................... $ 89,839 $ 22,010 $ 24,212
Weighted average number of shares outstanding.................................. 30,520 21,905 21,840
Additional adjustment for the dilutive effect of outstanding options (as
determined by the application of the treasury stock method).................. 267 26 27
--------- --------- ---------
Weighted average number of shares outstanding, as adjusted..................... 30,787 21,931 21,867
Primary earnings per share, as adjusted (b).................................... $ 2.92 $ 1.00 $ 1.11
FULLY DILUTED EARNINGS PER SHARE
Net Income..................................................................... $ 89,839 $ 22,010 $ 24,212
Weighted average number of shares outstanding.................................. 30,520 21,905 21,840
Additional adjustment for the dilutive effect of outstanding options (as
determined by the application of the treasury stock method).................. 471 89 30
--------- --------- ---------
Weighted average number of shares outstanding, as adjusted..................... 30,991 21,994 21,870
Fully diluted earnings per share, as adjusted (b).............................. $ 2.90 $ 1.00 $ 1.11
</TABLE>
- ------------------------
(a) These amounts agree with the related amounts in the Statements of Income.
(b) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-09945) pertaining to the BRE Properties, Inc. Dividend Stock
Purchase and Dividend Reinvestment Plan, the Registration Statement (Form S-8
No. 333-02257) pertaining to the Amended and Restated Non-Employee Director
Stock Option Plan of BRE Properties, Inc. and the Assumed Real Estate Investment
Trust of California 1991 Officer Stock Option Plan, the Registration Statement
(Form S-8 No. 33-61209) pertaining to the BRE Properties, Inc. 1994 Non-Employee
Director Stock Plan, the Registration Statement (Form S-8 No. 33-60082)
pertaining to the BRE Properties, Inc. 1992 Employee Stock Option Plan, and the
Registration Statement (Form S-8 No. 33-5389) pertaining to the BRE Properties,
Inc. 1984 Stock Option Plan of our report dated January 14, 1997 (except Note
13, as to which the date is February 12, 1997), with respect to the financial
statements and related financial schedule of BRE Properties, Inc. included in
the Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/ Ernst & Young LLP
February 13, 1997
San Francisco, California
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 184
<SECURITIES> 0
<RECEIVABLES> 18,081
<ALLOWANCES> (1,250)
<INVENTORY> 0
<CURRENT-ASSETS> 17,015
<PP&E> 816,389
<DEPRECIATION> (49,690)
<TOTAL-ASSETS> 713,714
<CURRENT-LIABILITIES> 7,615
<BONDS> 311,985
0
0
<COMMON> 329
<OTHER-SE> 463,785
<TOTAL-LIABILITY-AND-EQUITY> 783,714
<SALES> 101,651<F1>
<TOTAL-REVENUES> 101,651<F2>
<CGS> 31,030
<TOTAL-COSTS> 31,030
<OTHER-EXPENSES> 17,282<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,325
<INCOME-PRETAX> 37,014
<INCOME-TAX> 0
<INCOME-CONTINUING> 37,014
<DISCONTINUED> 0
<EXTRAORDINARY> 52,825<F4>
<CHANGES> 0
<NET-INCOME> 89,839
<EPS-PRIMARY> 2.94
<EPS-DILUTED> 2.94
<FN>
<F1>Rental & Other Income
<F2>Real estate expenses
<F3>Includes $13,283 of depreciation, a non cash change
<F4>Net Gain (loss) on sales of investments
</FN>
</TABLE>
