LOAN AGREEMENT
$30 Million Credit Facility Between
Omega Healthcare Investors, Inc.
and
Madison/OHI Liquidity Investors, LLC
October 2, 1998
Table of Contents
Page
Section 1 - Definitions........................................................1
Section 2 - Warranties and Representations.....................................8
Section 3 - The Loan..........................................................11
Section 4 - Interest Rate; Advance Procedures.................................16
Section 5 - Security and Release of Collateral................................19
Section 6 - Affirmative Covenants.............................................23
Section 7 - Negative Covenants................................................27
Section 8 - Application of Proceeds...........................................29
Section 9 - Events of Default and Remedies....................................29
Section 10- Conditions Precedent to Advances of the Loan .....................31
Section 11- Limitation on Loan Advances.......................................32
Section 12- Option to Restructure Investments ................................32
Section 13- Acceptance of Proceeds ...........................................33
Section 14- Confidentiality ..................................................33
Section 15- Indemnification ..................................................35
Section 16- Miscellaneous ....................................................36
LOAN AGREEMENT
This Loan Agreement is made as of October 2, 1998, between OMEGA
HEALTHCARE INVESTORS, INC., a Maryland corporation (the "Lender"), 000 Xxxxxxx
Xxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxx 00000, and MADISON/OHI- LIQUIDITY INVESTORS,
LLC, a Delaware limited liability company (the "Borrower"), P. 0. Xxx 0000,
Xxxxxxx Xxxxxxx, Xxxxxx 00000.
RECITALS:
A. The Borrower has requested the Lender to extend the credit facility
described below, the proceeds of which will be used by the Borrower in its
business as set forth in this Agreement.
B. The Lender is willing to extend the credit facility on the terms and
subject to the conditions set forth in this Agreement.
The parties agree as follows:
SECTION 1 - DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following, definitions shall apply for purposes of this Agreement:
1.1 "Acquisition Cost" means the cash price paid by the Borrower for its
acquisition of an Investment Position, including reasonable incidental costs
paid to third-parties directly relating to such acquisitions. Acquisition Costs
shall also include payments or accruals to Affiliates of equitably allocated
general and administrative costs and reimbursements to Affiliates of expenses
initially defrayed by Affiliates in respect of the acquisition of Investment
Positions.
1.2 "Affiliate" means (a) First Equity Realty, (b) the Harmony Group, or
(c) MACG.
1.3 "Agreement" means this Loan Agreement, as this Agreement hereafter may
be amended.
1.4 "Borrower" means Madison/OHI Liquidity Investors, LLC, a Delaware
limited liability company.
1.5 "Borrower's Due Diligence Documents" has the meaning given such term
in Section 4.7 of this Agreement.
1.6 "Business Day" has the meaning given such term in the Note.
1.7 "Carrying Value of the Investment Position" means the amount, in cash,
that the Borrower reasonably expects to receive upon the Sale or Liquidation of
the Investment Position,
as determined by the Borrower at the time of its acquisition of the Investment
Position.
1.8 "Cash Collateral Account" means a cash deposit account established and
maintained by the Borrower with the Collateral Agent for the benefit of the
Lender; the Cash Collateral Account shall be pledged to the Lender as security
for payment of the Borrower's indebtedness to the Lender.
1.9 "Collateral" means all of the real property and tangible and
intangible personal property now or hereafter serving as security for the
obligations of the Borrower to the Lender, including but not necessarily limited
to that described in Section 5 of this Agreement. Collateral shall not include
any Investment Position consisting of a limited partnership interest or a
membership interest in a limited liability company in which the constituent
documents of the issuer of such interest prohibit the granting of a security
interest therein (unless the requisite consents for the granting of such
security interest to the Lender have been obtained); provided, however, that if
any such requisite consents have not been obtained, the economic interest in the
limited partnership or limited liability company represented by such limited
partnership or membership interest shall constitute Collateral as if the holder
thereof were an assignee of such interest rather than a substitute limited
partner or member, as the case may be.
1.10 "Collateral Agent" means a "broker" as defined in ss. 8-303 of the
UCC in effect in the State of Michigan who constitutes a "financial
intermediary" as defined in ss. 8-313 of the UCC in effect in the State of
Michigan which shall be E-Trade or such other broker as is approved by the
Lender (such approval not to be unreasonably withheld).
1.11 "Combined Balance of the Loan" means, at any time, the sum of (a) the
Premium Rate Balance of the Loan then outstanding plus (b) the Standard Rate
Balance of the Loan then outstanding.
1.12 "Confidential Information" has the meaning given such term in Section
14.1 of this Agreement.
1.13 "Contamination" or "Contaminated" means, when used with reference to
any real or personal property, that a Hazardous Substance is present on or in
the property in any amount or level.
1.14 "Disability", when used in connection with Xxxxx X. Xxxxxx, means any
physical or mental incapacity which prevents Xxxxx X. Xxxxxx from working for
the Borrower and its Affiliates in his present capacity in the Ordinary Course
for a period of 120 consecutive days or more.
1.15 "Disclosing Party" has the meaning given such term in Section 14.1 of
this Agreement.
- 2 -
1.16 "Draw Fee Advance" has the meaning given such term in Section 4.2 of
this Agreement.
1.17 "Environmental Laws" means all applicable laws, ordinances, rules,
regulations, and orders that regulate or are intended to protect public health
or the environment, or that establish liability for the investigation, removal,
or clean up of, or damage caused by any Contamination including, without
limitation, any law, ordinance, rule, regulation, or order that regulates, or
prescribes requirements for, air quality, water quality, or the disposition,
transportation, or management of waste materials or toxic substances.
1.18 "ERISA" has the meaning given such term in Section 2.17 of this
Agreement.
1.19 "Event of Default" has the meaning given such term in Section 9.1 of
this Agreement.
1.20 "First Equity Realty" means First Equity Realty, LLC, a New York
limited liability company.
1.21 "Funding Date" means a Business Day on which an advance of Loan
proceeds is made.
1.22 "GAAP" means generally accepted accounting principles set forth from
time to time 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 agencies with
similar functions of comparable stature and authority within the U. S.
accounting profession), which are applicable to the circumstances as of the date
of determination.
1.23 "Guarantor" means Xxxxx X. Xxxxxx or Xxxxxx X. Xxxxxxxxx;
"Guarantors" means Xxxxx X. Xxxxxx and Xxxxxx X. Xxxxxxxxx.
1.24 "Guarantee" means each Limited Personal Guarantee dated the date of
this Agreement, executed and delivered by a Guarantor to the Lender, together
with any renewals, extensions, modifications or replacements of any such
Guarantee.
1.25 "Harmony Group" means The Harmony Group II, LLC, a Delaware limited
liability company.
1.26 "Hazardous Substance" means any substance or waste which is (a)
included in the definition of "hazardous substance" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 USC Sec.
9601, et seq.; (b) included in the definition of "hazardous substance" in the
Michigan Environmental Response Act, MCLA Sec. 299.6901, et seq.; (c) included
in the definition of "hazardous waste" in the Resource
- 3 -
Conservation and Recovery Act, 42 USC Sec. 6901, et seq.; or (d) included in the
definition of the same or any similar term found within any applicable local,
state or federal law, statute, rule, or regulation, including, without
limitation, asbestos and polychlorinated biphenyls.
1.27 "Indebtedness" means indebtedness for borrowed money, indebtedness
representing the deferred purchase price of property or services (excluding
indebtedness under normal trade credit for property or services purchased in the
normal course of operations), obligations under notes payable or drafts accepted
representing extensions of credit, indebtedness (whether or not assumed) secured
by mortgages, security interests, or other liens on property owned by the
Borrower, and any obligation of the Borrower to pay future rentals under a lease
which, in accordance with GAAP, is required to be shown as a liability on the
balance sheet of the Borrower.
1.28 "Interest Calculation Date" means each March 1, June 1, September 1,
and December 1 during the period that (a) starts on the date of this Agreement
and (b) ends on the date upon which all of the Borrower's indebtedness to the
Lender (including but not necessarily limited to that arising under this
Agreement) has been paid in full.
1.29 "Interest Payment Advance" has the meaning given such term in Section
4.2 of this Agreement.
l.30 "IRC" means the Internal Revenue Code of 1986, as amended.
1.31 "IRS" means the Internal Revenue Service of the United States of
America.
1.32 "Investment Position" means any economic interest or right acquired
using the proceeds of the Loan to fund all or any portion of the Acquisition
Cost. Subject to the terms and conditions of this Agreement, the Borrower may
acquire an Investment Position: (a) in debt or equity securities issued by any
corporation, partnership, limited partnership, limited liability company, or
other legal entity; or (b) by direct acquisition of real property or tangible
personal property; or (c) by acquisition at a discount of a participation in a
future income stream.
1.33 "Lender" means Omega Healthcare Investors, Inc., a Maryland
corporation.
1.34 "Loan" means the revolving line of credit loan described in Section 3
of this Agreement.
l.35 "Loan Documents" means this Agreement, the Guarantee, the Note, the
Pledge Agreement, each and every Real Estate Mortgage or Security Agreement
pursuant to which the Lender holds a lien or security interest for the
Borrower's indebtedness to the Lender, all assignments of rents, leases and
profits securing the Borrower's indebtedness to the Lender, and each and every
other document evidencing, securing or otherwise relating to the Borrower's
indebtedness to the Lender (whether arising under this Agreement or otherwise),
and all
- 4 -
renewals, extensions, amendments, modifications or replacements of any of the
foregoing.
1.36 "Loan Documentation and Closing Costs" has the meaning given such
term in Section 16.1 of this Agreement.
1.37 "MACG" means The Madison Avenue Capital Group, LLC, a Delaware
limited liability company.
1.38 "Madison Liquidity Investors 104" means and refers to Madison
Liquidity Investors 104, LLC, a Delaware limited liability company.
1.39 "Material Adverse Effect" means any material adverse effect
whatsoever upon (a) the validity, performance, or enforceability of any Loan
Document, (b) the properties, contracts, business operations, profits, or
condition (financial or otherwise) of the Borrower, any Affiliate or a
Guarantor, or (c) the ability of the Borrower or a Guarantor to fulfill their
respective obligations under the Loan Documents.
1.40 "Non-Qualified REIT Investment" means any Investment Position which,
if owned by the Lender, would not qualify as "real estate asset" as defined
under Section 856(c)(6)(B) and Section 856(c)(6)(C) of the IRC.
1.41 "Note" means any form of promissory note executed and delivered by
the Borrower pursuant to this Agreement, together with all renewals, extensions,
amendments, modifications or replacements thereof, including without limitation
the form of Promissory Note attached hereto as Exhibit A.
1.42 "Notice of Requested Borrowing" has the meaning given such term in
Section 4.6 of this Agreement.
1.43 "Ordinary Course" means, when used with respect to the Borrower, any
activity performed in accordance with the historical or customary practices of
the Borrower.
1.44 "Payment Rate" means the rate defined as such in Section 4.1 of this
Agreement.
1.45 "Permitted Investments" means (i) cash; (ii) investments in U.S.
Government obligations maturing within 365 days of the date of acquisition
thereof; (iii) investments in demand deposits, certificates of deposit,
Eurodollar deposits, bank promissory notes and bankers' acceptances maturing
within 365 days of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States or any state
thereof and which has a combined capital and surplus of at least US$500 million
and is rated at least A- by S&P and at least A3 by Xxxxx'x; (iv) investments in
repurchase agreements involving Permitted Investments maturing within 365 days
of the date of acquisition thereof, entered into with any bank, trust company or
investment bank rated at least X- xxx X- 0 by S&P
- 5 -
and at least A3 and PI by Xxxxx'x; (v) investments in money market funds or
accounts at least 75% of whose assets consist of Permitted Investments; (vi)
commercial paper of a United States issuer maturing no more than 270 days from
the creation thereof and currently having the highest rating available from S&P
or Xxxxx'x; and (vii) investments in interest rate and foreign currency hedging
transactions entered into with respect to the obligations of the Borrower.
1.46 "Permitted Liens" means (a) security interests, mortgages, and liens
in favor of the Lender; (b) liens for taxes not delinquent or, in a jurisdiction
where payment of taxes is deferred during the period of any contest, being
contested in good faith by appropriate proceedings as prescribed by law, with
adequate reserves therefor being set aside on the Borrower's books; (c) inchoate
materialmens', mechanics', workmens', repairmens', or other like liens arising
in the Ordinary Course and, in each case, not delinquent, (d) liens securing
brokerage commissions and incidental costs relating to the Borrower's
acquisition of Investment Positions, and (e) restrictions in contracts entered
into in the Ordinary Course placing limitations on free exercise of property
rights (e.g., stand still or voting arrangements in respect of limited
partnerships in which opportunities to acquire Investment Positions present
themselves).
1.47 "Permitted Use" has the meaning given such term in Section 14.3 of
this Agreement.
1.48 "Pledge Agreement" means the Pledge Agreement dated the date of this
Agreement by Harmony Group and First Equity Realty, as pledgers, to and in favor
of the Lender, as secured party, and all renewals, extensions, amendments,
modifications or replacements thereof.
1.49 "Pre-Funding Acquisition Advance" has the meaning given such term in
Section 4.2 of this Agreement.
1.50 "Pre-Funding Acquisition Costs" has the meaning given such term in
Section 11.3 of this Agreement.
1.51 "Premium Accrual Rate" means the rate defined as such in Section 4.1
of this Agreement.
1.52 "Premium Rate Advance" has the meaning given such term in Section 4.2
of this Agreement.
1.53 "Premium Rate Balance of the Loan" means that portion of the
outstanding principal balance of the Loan from time to time defined as Such in
Section 4.1 of this Agreement.
1.54 "Premium Rate Investment Position" has the meaning given such term in
Section 4.2 of this Agreement.
- 6 -
1.55 "Receiving Party" has the meaning given such term in Section 14.1 of
this Agreement.
1.56 "Required Release Price" means the amount that must be paid to the
Lender upon Sale or Liquidation of an Investment Position in order to obtain the
release and discharge the Lender's security interest therein, calculated in
accordance with the paragraphs captioned "Payments" and "Cash Collateral
Account" Section 3.1 of this Agreement, below.
1.57 "Request for Release of Collateral" means the written request that
must be made by the Borrower and delivered to the Collateral Agent, in the case
of Collateral constituting certificated securities, or to the Lender, in the
case of any Collateral other than certificated securities.
1.58 "Rents from Real Property" has the meaning given such term in Section
856(d) of the IRC.
1.59 "Sale or Liquidation" means, when used with respect to an Investment
Position, any: (a) sale, lease, transfer or other disposition (including but not
limited to sale-lease backs, transfers that are the equivalent of a mortgage or
pledge, and transfers by operation of law) by the Borrower of legal or
beneficial title to the Investment Position (except transfers from the Borrower
to an entity which controls, or is controlled by, or is under common control
with the Borrower), whether for cash or other consideration, and whether or not
in the Ordinary Course; and (b) any other event upon the occurrence of which the
Borrower receives consideration in exchange for an Investment Position,
including but not limited to the dissolution and liquidation of any entity in
which the Borrower holds an Investment Position.
1.60 "Securities Collateral Account" means a securities account
established and maintained by the Borrower with the Collateral Agent for the
benefit of the Lender, and which shall be pledged to the Lender as security for
payment of the Borrower's indebtedness to the Lender.
1.61 "Standard Accrual Rate" means the rate defined as Such in Section 4.1
of this Agreement.
1.62 "Standard Rate Advance" has the meaning given such term in Section
4.2 of this Agreement.
1.63 "Standard Rate Balance of the Loan" means that portion of the
outstanding principal balance of the Loan from time to time defined as such in
Section 4.1 of this Agreement.
1.64 "Stub Period" has the meaning given such term in the paragraph of
Section 3.1 of this Agreement captioned " Unused Fee", below.
- 7 -
1.65 "Supplemental Security Documents" has the meaning given such term in
Section 4.8 of this Agreement.
1.66 "To the Borrower's Knowledge" means the actual knowledge, after
reasonable inquiry, of Xxxxx X. Xxxxxx or Xxxxxx X. Xxxxxxxxx, such inquiry to
be consistent with normal practice substantially as reflected in the description
of Borrower's Due Diligence Documents as defined in Section 4.7.
1.67 "Unused Fee Advance" has the meaning given such term in Section 4.2
of this Agreement.
1.68 "UCC" means the Uniform Commercial Code.
1.69 "Value of the Borrower's Investment Portfolio" means the sum of the
Carrying Value of the Investment Position for all Investment Positions owned by
the Borrower.
1.70 "Value of the Lender's Total Assets" means the sum of: (a) the
product obtained by multiplying (i) the total number of shares of the Lender's
common stock outstanding by (ii) the price per share of such stock, as quoted on
the New York Stock Exchange; plus (b) the aggregate market value of all series
of the Lender's preferred stock outstanding, as quoted on the New York Stock
Exchange; plus (c) the Lender's total debt. For purposes of this Agreement, the
Value of the Lender's Total Assets shall be determined as of the last day of the
Lender's fiscal quarter in which the event with respect to which the
determination is to be made occurred.
SECTION 2 - WARRANTIES AND REPRESENTATIONS
To induce the Lender to enter into this Agreement and to make the Loan,
the Borrower represents and warrants to the Lender that the following statements
are true, correct and accurate both before and after giving effect to the
transactions contemplated by the Loan Documents:
2.1 The Borrower is a limited liability company duty organized, validly
existing and in good standing under the laws of the State of Delaware. The
Borrower is duly qualified and authorized to do business, and is in good
standing as a foreign limited liability company, in all jurisdictions in which
(a) the Borrower owns interests in real estate, or (b) tangible personal
property in which the Borrower has an interest is located, or (c) the Borrower
maintains offices or employees.
2.2 Xxxxx X. Xxxxxx is the general partner of a limited partnership which,
together with a family trust as limited partner, owns legal and beneficial title
to 100% of the outstanding equity interests in Harmony Group. Harmony Group owns
legal and beneficial title to 50% of MACG. Xxxxxx X. Xxxxxxxxx is the general
partner of a limited partnership which, together with a family trust as limited
partner, owns legal and beneficial title to 100% of the outstanding equity
interests in First Equity Realty. First Equity Realty owns legal and beneficial
title to 50%
- 8 -
of MACG.
2.3 Xxxxx X. Xxxxxx is the general partner of a limited partnership which,
together with a family trust as limited partner, owns legal and beneficial title
to 100% of the outstanding equity interest in the Harmony Group; the Harmony
Group owns legal and beneficial title to 75% of the outstanding equity interests
in the Borrower.
2.4 Xxxxxx X. Xxxxxxxxx is the general partner of a limited partnership
which, together with a family trust as limited partner, owns legal and
beneficial title to 100% of the outstanding equity interests in First Equity
Realty; First Equity Realty owns legal and beneficial title to 25% of the
outstanding equity interests in the Borrower.
2.5 Madison Liquidity Investors 104 is a wholly-owned subsidiary of the
Borrower.
2.6 The Borrower and its Affiliates have all requisite legal power and
authority and all necessary licenses and permits, the absence of which would
have a Material Adverse Effect, to own and operate their respective properties
and to carry on their respective businesses as now conducted and as Xxxxx X.
Xxxxxx and Xxxxxx X. Xxxxxxxxx contemplate that such businesses will be
conducted in the future. The Borrower and its Affiliates are in compliance with
all laws, rules, and regulations, the non-compliance with which would have a
Material Adverse Effect.
2.7 All financial statements of the Borrower, any of its Affiliates or the
Guarantors that have been delivered to the Lender and present fairly the
financial position of the subjects thereof as of the dates indicated, and the
results of operations of such persons or entities for the periods indicated. No
changes having a Material Adverse Effect have occurred since the date of the
most recent of such financial statements. Except as expressly set forth in such
financial statements, neither the Borrower nor any Affiliate nor any Guarantor
has any material contingent liability or liability for taxes.
2.8 Neither this Agreement nor the financial statements referred to in
Section 2.7 above, nor any other written statement furnished by or on behalf of
the Borrower or any Affiliate to the Lender in connection with the negotiation
of the Loan contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein or herein not
misleading. To the Borrower's Knowledge, there is no fact that the Borrower has
not disclosed to the Lender that has, or in the future is likely to have, a
Material Adverse Effect.
2.9 Except as set forth in Schedule 2.9, there are no proceedings pending,
or to the Borrower's Knowledge threatened, before any court, governmental
authority, or arbitration board or tribunal, against or affecting the Borrower,
any Affiliate or a Guarantor, which might have a Material Adverse Effect.
Neither the Borrower, any Affiliate nor any Guarantor is in default with respect
to any order, judgment, or decree of any court, governmental authority, or
arbitration board or tribunal.
- 9 -
2.10 All of the equity interests of the Borrower are validly issued, fully
paid and nonassessable.
2.11 The Borrower has good and marketable title to all of the assets that
it purports to own, including the assets described in the financial statements
referred to in Section 2.7 hereof, free and clear of all liens, encumbrances,
security interests, claims, charges, and restrictions whatever, except Permitted
Liens. The Borrower owns no interest (whether in fee, leasehold or other) in
real property other than any Investment Positions that may be acquired by the
Borrower after the date of this Agreement and which constitute Collateral.
2.12 The Borrower has full power and authority to execute, deliver, and
perform the Loan Documents; the execution, delivery, and performance of the Loan
Documents required to be given hereunder by the Borrower have been duly
authorized by appropriate action of the members and managers of the Borrower and
will not violate the provisions of the articles of organization or operating
agreement of the Borrower or of any law, rule, judgment, order, agreement, or
instrument to which the Borrower is a party or by which it is bound, or to which
any of its assets are subject, nor do the same require any approval or consent
of any public authority or other third party; and the Loan Documents have been
duly executed and delivered by, and are the valid and binding obligations of,
the parties thereto, enforceable in accordance with their terms.
2.13 All tax returns required to be filed by the Borrower and each
Affiliate in any jurisdiction have been filed, and all taxes, assessments, fees,
and other governmental charges upon the Borrower and each Affiliate, or upon
their respective assets, income, or franchises, have been paid before the time
that those taxes became delinquent. To the Borrower's Knowledge, there are no
proposed additional tax assessments against the Borrower or any Affiliate which
would have a Material Adverse Effect.
2.14 Neither the Borrower nor any Affiliate maintains, or has ever
maintained, any employee benefit pension plan with respect to which the Borrower
or an Affiliate is or was an "employer" or "party in interest", as those terms
are defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
2.15 To the Borrower's Knowledge, unless otherwise disclosed by written
notice from the Borrower to the Lender, all of the entities in which the
Borrower holds an Investment Position are in compliance with all Environmental
Laws; and to the Borrower's Knowledge there is no reasonable basis to believe
that the Carrying Value of any such Investment Positions will be materially
adversely affected because any such entities: (a) hold assets that are
Contaminated by, or that are the site of, the disposal or release of any
Hazardous Substance; (b) hold assets that are the source of any Contamination of
any adjacent property or of any groundwater or surface water; or (c) hold assets
that are the source of any air emissions in excess of any legal limit now or
hereafter in effect. To the Borrower's Knowledge, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation or
deficiency,
- 10 -
investigation, proceeding, notice or demand letter pending or threatened against
any entity in which the Borrower holds an Investment Position under any
Environmental Law which could reasonably be expected to result in a material
fine, penalty or other cost or expense. To the Borrower's Knowledge, unless
otherwise disclosed by written notice from the Borrower to the Lender, all of
the Collateral constituting tangible real or personal property is in compliance
with all Environmental Laws; and to the Borrower's Knowledge there is no
reasonable basis to believe that the Carrying Value of any Investment Positions
in such tangible real or personal property will be materially adversely affected
because such property: (a) is Contaminated by, or is the site of, the disposal
or release of any Hazardous Substance; (b) is the source of any Contamination of
any adjacent property or of any groundwater or surface water; or (c) is the
Source of any air emissions in excess of any legal limit now or hereafter in
effect.
2.16 The execution, delivery and performance by the Borrower of each Loan
Document, the issuance, delivery and performance of the Note, and the
consummation of the transactions contemplated hereby or related hereto do not
and will not (a) 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
the Borrower or an Affiliate, (b) result in or require the creation or
imposition of any lien (other than liens in favor of the Lender) upon any
properties or assets of the Borrower or an Affiliate, or (c) require any
approval or consent of governmental authority or other person or entity that, as
of the date of this Agreement, has not been obtained in writing and delivered to
the Lender.
2.17 Neither the Borrower nor any Affiliate is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any actual or purported contractual obligation of the
Borrower or Affiliate, and no condition exists that, with the giving of notice
or the lapse of time, or both, would constitute such a default.
SECTION 3 - THE LOAN
3.1 The Loan shall be advanced subject to and in conformity with the
following terms and conditions:
Loan Maximum The lesser of (a) $30 million ($25 million on
and after the fifth (5th) anniversary of the
first Funding Date); or (b) an amount equal
to 4.5% of the Value of the Lender's Total
Assets as of the date of the Notice of
Requested Borrowing; or (c) the amount set
forth under the paragraph of this Section 3.1
captioned "Availability", below.
Minimum Draw $100,000.
Maximum Draw Unless otherwise agreed in writing by the
per Investment of Lender, the lesser of: (a) $2.5 million; or
(b) 75% of the Carrying Value of the
- 11 -
Position (See Investment Position (except that the maximum
Section 3.2 of draw for Investment Positions that constitute
this Agreement) "margin stock", as defined in Regulation G of
the Board of Governors of the Federal Reserve
System, shall be the maximum amount that the
Lender is then permitted under such
Regulation to advance, but in no event more
than 75% of the Carrying Value Of the
Investment Position).
Availability At no time shall the outstanding balance of
the Loan exceed the lesser of: (a) the Loan
Maximum; or (b) 70% of the Value of the
Borrower's Investment Portfolio. The
availability of Loan advances is also subject
to the limitations set forth in Section 11 of
this Agreement.
Payments Accrued interest on the Combined Balance of
the Loan shall be calculated by the Borrower
at the Payment Rate as of each March 1, June
1, September 1, and December 1 for the
preceding quarter (each such date is referred
to as an "Interest Calculation Date"). Within
ten (10) Business Days after each Interest
Calculation Date, the Borrower shall pay to
the Lender the amount calculated in good
faith by the Borrower to be the accrued
interest at the Payment Rate on the Combined
Balance of the Loan as of the most recent
Interest Calculation Date, and with such
payment the Borrower shall deliver to the
Lender the Borrower's written calculation of
the amount of such payment and the amount of
the Unused Fee due in accordance with the
paragraph of this Section 3.1 captioned
"Unused Fee", below. If the Lender disagrees
with any of the Borrower's calculations, the
Borrower shall pay any additional interest or
fee that the Lender determines to be due
within ten (10) days after receipt of the
Lender's written determination of the
additional amount due.
In addition to such quarterly payments of
interest at the Payment Rate, the following
payments shall be made upon the Sale or
Liquidation of an Investment Position: (a) an
amount equal to the principal amount advanced
by the Lender to fund the Acquisition Cost of
the Investment Position that is the subject
of the Sale or Liquidation, which shall be
applied, in the case of repayment of a
Premium Rate Advance, toward reduction of the
Premium Rate Balance of the Loan, and in the
case of repayment of a Standard Rate Advance,
toward reduction of the Standard Rate Balance
of the Loan; plus (b)
- 12 -
in the case of repayment of a Premium Rate
Advance, an amount equal to the difference
between the Premium Accrual Rate and the
Payment Rate, computed on the amount of the
principal repayment, and in the case of
repayment of a Standard Rate Advance, an
amount equal to the difference between the
Standard Accrual Rate and the Payment Rate,
computed on the amount of the principal
repayment. The sum of the payments required
by this paragraph and the payments, if any,
required under the paragraph of this Section
3.1 captioned "Cash Collateral Account",
below, is referred to in this Agreement as
the "Required Release Price".
The Combined Balance of the Loan shall be
reduced to not more than $25 million on the
fifth (5th) anniversary of the first Funding
Date.
The principal amount of all Pre-Funding
Acquisition Advances shall be repaid within
ten (10) Business Days after the end of the
quarter in which the Borrower abandons its
intention to make the potential
acquisition(s) with respect to which such
Pre-Funding Acquisition Advances were
incurred.
On the Maturity Date, the Premium Rate
Balance of the Loan then outstanding,
together all accrued and unpaid interest
thereon, and the Standard Rate Balance of the
Loan then outstanding, together with all
accrued and unpaid interest thereon, shall be
due and payable in full.
Maturity Date The earlier of: (a) the seventh (7th)
anniversary of the first Funding Date; (b)
September 30, 2005; or (c) the date upon
which the Lender duly accelerates the due
date of all unpaid principal and interest
owed by the Borrower to the Lender.
Cash Collateral If the aggregate principal amount deposited
Account by the Borrower into the Cash Collateral
Account is not equal to at least ten percent
(10%) of the Combined Balance of the Loan
outstanding after a repayment of principal
has been made, the Borrower shall use the
proceeds of Sale or Liquidation of an
Investment Position first to make the
payments required under the paragraph of this
Section captioned "Payments", above, in the
order of priority set forth therein, then to
payment of the federal, state and municipal
income tax liability of the ultimate
beneficial owners for income tax purposes
(taking
- 13 -
into account all tiering arrangements)
arising in connection with the Sale or
Liquidation of, or other distribution from,
an Investment Position, and then to bringing
the principal balance of the Cash Collateral
Account to an amount equal to ten percent
(10%) of the Combined Balance of the Loan
outstanding, after such principal reduction.
Interest Rate As set forth in Section 4 of this Agreement.
Unused Fee The Borrower shall pay the Lender a quarterly
fee in an amount equal to twenty-five percent
(25%) of the product obtained by multiplying
(a) one-eighth (1/8) of one (1) percent
(i.e., 12-1/2basis points) by (b) the amount
by which $30 million ($25 million on and
after the fifth (5th) anniversary of the
first Funding Date) exceeds the average
outstanding principal balance of the Loan
during the three (3) month period beginning
December 1, 1998, and ending February 28,
1999, and each successive quarter thereafter
until the Lender is no longer obligated to
make advances of the Loan pursuant to this
Agreement. For the period beginning on the
date of this Agreement and ending November
30, 1998, and for any other period of less
than three (3) full calendar months (each
such period is referred to as a "Stub
Period"), the Borrower shall pay the Lender a
fee in an amount equal to (a) the product
obtained by multiplying one-eighth (1/8) of
one (1) percentage point (i.e., 12-1/2 basis
points) by the amount by which $30 million
($25 million on and after the fifth (5th)
anniversary of the first Funding Date)
exceeds the average outstanding principal
balance of the Loan during the relevant Stub
Period multiplied by (b) a fraction, the
numerator of which shall be equal to the
number of days in the relevant Stub Period
and the denominator of which shall be 365.
The Borrower shall calculate and pay the
amount required by this paragraph
simultaneously with making the calculation
and payment of accrued interest at the
Payment Rate required under the paragraph of
this Section 3.1 captioned "Payments", above.
Disagreements If the Lender and the Borrower cannot resolve
any disagreements that may arise between them
concerning the calculation of the amount of
any payment required to be made by the
Borrower to the Lender pursuant to this
Agreement, they shall submit the unresolved
question(s) to their respective
- 14 -
outside independent certified public
accountants for resolution. If such
accountants fail to reach agreement within 45
days after the question(s) have been
submitted to them for resolution, the
accountants shall select a third certified
public accounting firm, having no prior
relationship to the Lender or the Borrower,
to resolve the question(s). The determination
of such third accounting firm shall be final
and binding upon the Lender and the Borrower,
and judgment may be rendered on such
determination by a court of competent
jurisdiction. If, within 15 days after the
independent accounting firms for the Lender
and the Borrower have reached impasse on the
unresolved question(s), they cannot agree on
a third accounting firm to which the
unresolved question(s) shall be submitted,
the Lender and the Borrower shall be free to
take such action as may be available at law
or in equity, including but not limited to
seeking a declaratory judgment.
Draw Fee Concurrently with each advance of the Loan
proceeds, the Borrower shall pay the Lender a
draw fee in an amount equal to one percent
(1%) of the principal amount of the advance
requested in the Notice of Requested
Borrowing. The Lender is irrevocably
authorized to add the draw fee to the
principal amount of the Borrower's
indebtedness to the Lender under this
Agreement, and to retain the draw fee for the
Lender's account, at the time the Lender
makes any advance of the Loan proceeds to the
Borrower in accordance with this Agreement.
Purpose Subject to the provisions of this Agreement,
to: (a) fund up to ninety-eight percent (98%)
of the Acquisition Cost of each Investment
Position acquired by the Borrower; (b) pay
accrued interest at the Payment Rate on that
portion of the Combined Balance of the Loan
that constitutes the Premium Rate Balance of
the Loan; (c) pay the Unused Fee in
accordance with the paragraph of this Section
3.1 captioned "Unused Fee", above, (d) pay
the Draw Fee in accordance with the
provisions of this Section 3.1 captioned
"Draw Fee" above, and (e) pay Pre-Funding
Acquisition Costs in accordance with the
provisions of Section 11.3 of this Agreement.
3.2 In determining the Maximum Draw per Investment Position, the following
Investments Positions shall be aggregated and treated as one: (a) all Investment
Positions in the
- 15 -
same legal entity; and (b) concurrent Investment Positions in the same parcel of
real estate or item of personal property, or in parcels of real estate that are
contiguous to a parcel of real estate in which the Borrower holds an Investment
Position.
3.3 Subject to the terms and conditions of this Agreement and the other
Loan Documents, the Lender shall be obligated from time to time to make advances
of the Loan to the Borrower subject to and in accordance with the terms and
conditions contained in this Agreement and all of the other Loan Documents.
3.4 The Borrower may terminate this credit facility upon six months' prior
written notice to the Lender. Upon the expiration of six months after delivery
of such notice to the Lender: (a) the Lender shall have no further obligation to
make any further advances of Loan proceeds, and (b) the Borrower shall have no
further obligation to pay any portion of the Unused Fee (referred to in Section
3.1 above) thereafter accruing. If the outstanding principal balance of the Loan
is zero for a period of six consecutive months, or more, the Lender may, at its
option (exercisable by written notice to the Borrower), terminate this credit
facility, with such termination to be effective 15 days after the date of
delivery of such notice to the Borrower. Upon termination of this credit
facility by the Lender: (a) the Lender shall have no further obligation to make
any further advances of Loan proceeds, and 9b) the Borrower shall have no
further obligation to pay any portion of the Unused Fee (referred to in Section
3.1 above) thereafter accruing. Except as expressly provided in this Section,
termination of the credit facility by the Borrower or the Lender pursuant to
this Section shall not modify or otherwise affect the rights or obligations of
the parties under any of the Loan Documents as then in effect.
SECTION 4 - INTEREST RATE; ADVANCE PROCEDURES
4.1 Interest shall accrue at the rate of sixteen percent (16%) per year,
at simple interest (the "Premium Accrual Rate"), on that portion of the
outstanding principal balance of the Loan from time to time that constitutes:
(a) a Premium Rate Advance; or (b) an Interest Payment Advance; or (c) an Unused
Fee Advance; or (d) a Draw Fee Advance; or (e) a Pre- Funding Acquisition
Advance (that portion of the Combined Balance of the Loan with respect to which
the Premium Accrual Rate applies is referred to in this Agreement as the
"Premium Rate Balance of the Loan"). Interest shall accrue at the rate of
fifteen percent (15%) per year, at simple interest (the "Standard Accrual
Rate"), on the remainder of the outstanding principal balance of the Loan from
time to time (the "Standard Rate Balance of the Loan"). Accrued interest on the
Combined Balance of the Loan shall be paid quarterly at the rate of nine percent
(9%) per year, at simple interest (the "Payment Rate"), in accordance with the
provisions of Section 3.1 captioned "Payments", above.
4.2 Within ten (10) Business Days after the end of each quarter, beginning
with the quarter ended November 30, 1998 (or at such earlier time as may be
required in order to make the interest payment required upon Sale or Liquidation
of an Investment Position), the Borrower shall give the Lender written notice of
all Investment Positions acquired during the preceding
- 16 -
quarter that the Borrower does not expect to generate annual income of nine
percent (9%) or more prior to Sale or Liquidation (any such Investment Position
is referred to in this Agreement as a "Premium Rate Investment Position"). An
advance of Loan proceeds for the purpose of acquiring a Premium Rate Investment
Position is referred to in this Agreement as a "Premium Rate Advance". The
Borrower may request an advance of Loan proceeds for the purpose of paying
interest at the Payment Rate on that portion of the Combined Balance of the Loan
that constitutes the Premium Rate Balance of the Loan. An advance of Loan
proceeds for the purpose of paying interest at the Payment Rate on that portion
of the Combined Balance of the Loan that constitutes the Premium Rate Balance of
the Loan is referred to in this Agreement as an "Interest Payment Advance". An
advance of Loan proceeds for the purpose of acquiring an Investment Position
that the Borrower does not designate as a Premium Rate Investment Position is
referred to in this Agreement as a "Standard Rate Advance". The Borrower shall
have no right to advances of Loan proceeds for the purpose of paying interest at
the Payment Rate on that portion of the Combined Balance of the Loan that
Constitutes the Standard Rate Balance of the Loan. An advance of Loan proceeds
for the purpose of paying Pre-Funding Acquisition Costs is referred to in this
Agreement as a "Pre-Funding Acquisition Advance".
An advance of Loan proceeds for the purpose of paying the Draw Fee in accordance
with that paragraph of Section 3.1 above that is captioned "Draw Fee" is
referred to in this Agreement as a "Draw Fee Advance". An advance of Loan
proceeds for the purpose of paying the Unused Fee in accordance with that
paragraph of Section 3.1 above that is captioned "Unused Fee" is referred to in
this Agreement as an "Unused Fee Advance".
4.3 Within ten (10) Business Days after each March 1, the Borrower shall
have the right to reclassify any Investment Position previously designated as a
Premium Rate Investment Position to an Investment Position that is not a Premium
Rate Investment Position, and to designate any Investment Position not
previously designated as a Premium Rate Investment Position to a Premium Rate
Investment Position. No such reclassification shall be effective unless written
notice thereof is delivered to the Lender within the period specified in the
immediately preceding sentence, and such reclassification shall be deemed
effective as of the March 1 immediately preceding the Lender's receipt of notice
of the reclassification. Any notice of reclassification of an Investment
Position to an Investment Position that is not a Premium Rate Investment
Position shall be accompanied by copies of the Borrower's analysis of the basis
for such reclassification and the supporting documentation for such analysis.
4.4 Notwithstanding anything to the contrary contained in the Loan
Documents, following the Maturity Date: (a) the outstanding Premium Rate Balance
of the Loan shall bear interest at the rate of interest that is 300 basis points
above the Premium Accrual Rate; and (b) the Outstanding Standard Rate Balance of
the Loan shall bear interest at the rate of interest that is 300 basis points
above the Standard Accrual Rate.
4.5 Interest on advances shall be computed on the basis of a 365-day year
and the actual number of days elapsed in the period during which it accrues. In
computing interest on
- 17 -
any advance, the date of the making of the advance shall be included and the
date payment is received shall be excluded; provided that if an advance is
repaid on the same day on which it is made, one day's interest shall be paid on
that advance.
4.6 The Borrower shall give the Lender notice of its request for each Loan
advance (each a "Notice of Requested Borrowing") not later than 12:00 noon, Ann
Arbor, Michigan time, at least two (2) Business Days before the date upon which
such advance is requested to be made; provided, however, that in no event shall
the Lender be obligated to advance any Loan proceeds until the fifth (5th)
Business Day after the Lender's receipt of the Borrower's Due Diligence
Documents referred to in Section 4.7 of this Agreement and the Supplemental
Security Documents referred to in Section 4.8 of this Agreement. Subject to the
terms and conditions of this Agreement, the proceeds of each such requested
advance shall be made available to the Borrower by wire transfer of funds to the
Borrower's account specified in the Notice of Requested Borrowing.
4.7 Prior to the Borrower's acquisition of any Investment Position, the
Borrower shall deliver to the Lender complete copies of the following documents
and items (collectively the"Borrower's Due Diligence Documents"): (a) all
initial forms of offering documents, if any, that the Borrower proposes to use
in connection with its acquisition of the Investment Position;
(b)profiles/research reports, if any, with respect to the issuer of the
Investment Position; (c) financial analyses, including a written description of
the valuation assumptions, methods and procedures employed by the Borrower in
determining the Carrying Value of the Investment Position; (d) property
reports/photos, if any; (e) report on legal due diligence, if any; (f)
litigation memorandum, if any; (g) tax analysis, if any, with respect to the
Investment Position; (h) reports on Form 10-K, 10-Q and 8-K with respect to the
issuer of the Investment Position, to the extent available; and (i) any
partnership agreement, partnership certificate, operating agreement, articles of
organization, or other constituent documents for the issuer of the Investment
Position, if available. If the amount requested in the Notice of Requested
Borrowing is more than $500,000, the Lender shall have the right, for any reason
or no reason, to refuse to advance any Loan proceeds (regardless of whether the
Borrower subsequently reduces the amount of the requested Loan advance to
$500,000 or less), by giving the Borrower notice of the Lender's decision not to
advance Loan proceeds at any time prior to the expiration of four (4) Business
Days after the Lender's receipt of the Borrower's Due Diligence Documents. The
Lender also shall have the right, without regard to the amount requested in the
Notice of Requested Borrowing, to refuse to advance Loan proceeds to be used in
whole or in part to finance the acquisition of limited partnership interests or
membership interests in limited liability companies if, in the opinion of the
Lender's counsel, the constituent documents of the issuer of such interest
prohibit the granting of a security interest therein and in the economic
interest represented thereby.
4.8 Prior to the Borrower's use of Loan proceeds to fund any part of the
Acquisition Cost of an Investment Position that, in the opinion of Lender's
legal counsel, the then-existing security documents do not cover or do not cover
with legally sufficient specificity, the Borrower
- 18 -
shall deliver to the Lender such documents as the Lender may reasonably require
to create or perfect a valid first priority security interest in the Investment
Position to be acquired, or to continue or supplement an existing security
document or perfected security interest (collectively the "Supplemental Security
Documents"). The Supplemental Security Documents shall include, but shall not
necessarily be limited to, such new mortgages, deeds of trust, assignments of
rents, leases and profits, security agreements, pledge agreements, financing
statements and other security documents as the Lender may require to create and
perfect a valid first priority security interest in the Investment Position.
4.9 The Borrower may prepay any part of the principal balance of the Loan
at any time, without prior notice to the Lender and without prepayment penalty
or premium.
4.10 Subject to the terms and conditions of this Agreement, amounts
borrowed under the Loan may be repaid and re-borrowed.
4.11 Unless the Lender agrees in writing, the Borrower shall not acquire
any Investment Position: (a) in any real estate that is to the Borrower's
Knowledge Contaminated by, or that is the, site of, the disposal or release of
any Hazardous Substance, or that to the Borrower's Knowledge is the source of
any Contamination of any adjacent property or of any groundwater or surface
water; or that to the Borrower's Knowledge is the source of any air emissions in
excess of any legal limit now or hereafter in effect; or (b) in any item of
personal property that is Contaminated; or (c) in any legal entity that, to the
Borrower's Knowledge, owns any real estate having any of the characteristics
described in clause (a) of this Section 4.11, or any item of personal property
having any of the characteristics described in clause (b) of this Section 4.11.
SECTION 5 - SECURITY AND RELEASE OF COLLATERAL
5.1 Without limiting the terms and conditions of any of the Loan
Documents, to secure payment of all obligations and indebtedness of the Borrower
to the Lender under this Agreement and all other indebtedness and obligations
now and hereafter owing by the Borrower to the Lender, the Borrower shall
execute and deliver to the Lender (or, in the case of documents to be executed
and delivered by others, shall cause such documents to be executed and delivered
to the Lender):
(a) a promissory note, substantially in the form of Exhibit A;
(b) security agreement(s), substantially in the form of Exhibit B,
granting to the Lender valid first priority security interests in all
assets of the Borrower and of Madison Liquidity Investors 104, and all
additions thereto and substitutions, increments, proceeds and products
thereof;
(c) pledge agreement(s), substantially in the form of Exhibit C,
- 19 -
granting to the Lender a valid first priority security interest in
100% of the Borrower's outstanding equity interests;
(d) a pledge agreement, substantially in the form of Exhibit D, granting
to the Lender a valid first priority security interest in all cash and
cash equivalents now or hereafter on deposit in the Cash Collateral
Account;
(e) a pledge agreement, substantially in the form of Exhibit E, granting
to the Lender a valid first priority security interest in all
certificated securities now or hereafter on deposit in the Securities
Collateral Account;
(f) within 45 days after the date of this Agreement, an account control
agreement(s), substantially in the form of Exhibit F, granting to the
Lender control over the Securities Collateral Account and the Cash
Collateral Account;
(g) a cross-default agreement, substantially in the form of Exhibit G;
(h) within 45 days after the date of this Agreement, an assignment of a
policy of life insurance on the life of Xxxxx X. Xxxxxx in the amount
of $2.5 million (such life insurance policy shall be acceptable in
form and substance to the Lender and shall be issued by Sun Life of
Canada or another life insurance company approved by the Lender, which
approval shall not be unreasonably withheld);
(i) within 45 days after the date of this Agreement, an assignment of a
policy of life insurance on the life of Xxxxxx X. Xxxxxxxxx in the
amount of $2.5 million (such life insurance policy shall be acceptable
in form and substance to the Lender and shall be issued by Xxxx
Xxxxxxx Mutual Insurance Company or another life insurance company
approved by the Lender, which approval shall not be unreasonably
withheld);
(j) the Guarantee;
(k) all financing statements, assignments, document of title, and other
documents, agreements, and instruments as the Lender may reasonably
request in connection with the creation, perfection and priority of
any security described above; and
- 20 -
(l) all of the Supplemental Security Documents.
5.2 All Investment Positions which, in the opinion of Counsel for the
Lender, constitute certificated securities (as defined by UCC Section 8 in
effect in the state of organization of the issuer) shall be deposited and
maintained in the Securities Collateral Account and shall be released therefrom
only upon arrangement for payment to the Collateral Agent, for the benefit of
the Lender, of the Required Release Price. The Required Release Price shall be
calculated by the Borrower, in accordance with the applicable provisions of this
Agreement, at the time the Borrower submits a Request for Release of Collateral
to the Collateral Agent. Upon receipt by the Collateral Agent of a Request for
Release of Collateral, the Collateral Agent shall forward a copy thereof, by
facsimile and U. S. mail, and by a nationally recognized overnight courier
service (such as Federal Express, UPS, Purolator, or the like) to the Lender for
delivery on the next Business Day. The Collateral Agent shall be authorized to
release the Collateral described in the Request for Release of Collateral upon
receipt of evidence of arrangement for payment of funds to the Collateral Agent,
for the account of the Lender, in the amount of the Required Release Price
specified in the Request for Release of Collateral. The Collateral Agent shall,
immediately upon receipt thereof, remit to the Lender all sums tendered to the
Collateral Agent by the Borrower by wire transfer of collected funds to the
account specified by written notice from Lender to Collateral Agent. The
Borrower shall not be entitled to the release of any Collateral from the
Securities Collateral Account any time after the Lender declares, by written
notice to the Collateral Agent and the Borrower, the existence of an Event of
Default.
5.3 All documents evidencing or otherwise relating to Investment Positions
other than certificated securities shall be held by the Borrower until the
Lender makes written demand therefor following the occurrence of an Event of
Default; subject, however, to a perfected first security interest therein in
favor of the Lender. Except as otherwise provided in this Agreement, the
Borrower shall be entitled to sell or otherwise dispose of any such Investment
Position only upon (a) delivery to the Lender of a Request for Release of
Collateral, which shall include the Borrower's calculation of the Required
Release Price therefor, determined by the Borrower in accordance with the
applicable provisions of this Agreement, and (b) arrangement for payment to the
Lender, by wire transfer of collected funds to an account specified by the
Lender, of the Required Release Price specified in the Request for Release of
Collateral or such other amount the Lender may determine to be required by this
Agreement. The Borrower shall not be entitled to release of any Collateral in
its possession at any time after the Lender declares, by written notice to the
Borrower, the existence of an Event of Default.
5.4 The Borrower shall request a release and discharge of the Lender's
security interest in Investment Positions which, in the opinion of counsel for
the Lender, constitute direct interests in real property or tangible personal
property by (a) delivering to the Lender a Request for Release of Collateral,
which shall include the Borrower's calculation of the Required Release Price
therefor, determined by the Borrower in accordance with the applicable
provisions of this Agreement, and (b) tendering payment to the Lender, by wire
transfer of collected funds to an
- 21 -
account specified by the Lender, of the Required Release Price specified in the
Request for Release of Collateral or such other amount as the Lender may
determine to be required by this Agreement. The Lender shall be obligated to
release and discharge its security interest in any Collateral of the type
described in this Section 5.4 on the fifth (5th) Business Day after its receipt
of the Request for Release of Collateral (provided the Lender has then received
the Required Release Price and the Lender has not then declared, by written
notice to the Borrower, the existence of an Event of Default).
5.5 Upon Sale or Liquidation of each Investment Position, the Borrower
shall apply the proceeds of Sale or Liquidation first to making the payments
required under the paragraph of Section 3.1 captioned "Payments", above. The
Borrower thereafter shall be entitled to deduct from the remaining proceeds of
Sale or Liquidation the amount required to pay the Federal, State and Municipal
income tax liability of the ultimate beneficial owners for income tax purposes
(taking into account all tiering arrangements) of the Borrower arising in
connection with the Sale or Liquidation of or other distribution from an
Investment Position. The Borrower shall apply 100% of the balance of the
proceeds of Sale or Liquidation to funding the Cash Collateral Account until
such time as the principal amount on deposit therein is equal to ten percent
(10%) of the Combined Balance of the Loan. The amount on deposit in such Cash
Collateral Account shall be invested in such Permitted Investments as may be
designated by the Borrower. All amounts in excess of ten percent (10%) of the
Combined Balance of the Loan may be paid out by the Borrower at any time prior
to the Lender making a written demand on the Collateral Agent following the
occurrence of an Event of Default. The Borrower shall be entitled to all
interest earnings on such funds unless and until the Lender makes written demand
therefor on the Collateral Agent following the occurrence of an Event of
Default.
5.6 The proceeds of the policies of the life insurance policies referred
to in Sections 5.1(e) and 5.1(f) above shall, upon receipt by the Lender, be
applied toward reduction of the Combined Balance of the Loan, with application
first to the Premium Rate Balance and then to the Standard Rate Balance. Any
remaining proceeds after such application shall be promptly remitted to the
Borrower.
5.7 To further secure payment of the Loan and all of the Borrower's
liabilities and obligations to the Lender, the Borrower grants to the Lender a
continuing security interest in any and all securities and other property of the
Borrower in the custody, possession or control of the Lender. The Lender shall
have the right at any time after an Event of Default to apply its own debt or
liability to the Borrower in whole or partial payment of the Loan and any other
present or future indebtedness of the Borrower to the Lender, without any
requirement of mutual maturity.
5.8 Any of the Borrower's other property in which the Lender has a
security interest to secure payment of any other debt, whether absolute,
contingent, direct or indirect, including the Borrower's guaranties of the debts
of others, shall also secure payment of and be part of the collateral for the
Loan and any other present or future indebtedness of the Borrower to the
- 22 -
Lender (whether or not arising under this Agreement).
SECTION 6 - AFFIRMATIVE COVENANTS
Beginning on the date of this Agreement and continuing until the Lender
has no further obligation to make advances of the Loan to the Borrower pursuant
to this Agreement and the Loan and all other indebtedness of the Borrower to the
Lender has been repaid in full, the Borrower shall:
6.1 Furnish to the Lender:
(a) within 120 days after the end of each of the Borrower's fiscal years,
beginning with its fiscal year ending December 1, 1998, an audited
financial report prepared in accordance with GAAP by Sax, Macy, Xxxxx
& Co. or replacement independent certified public accountants
satisfactory to the Lender, containing the Borrower's balance sheet as
of the end of that year, its related profit and loss, and a statement
of shareholder's equity for that year, its statement of cash flows for
that year, together, with any management letter prepared by those
certified public accountants, and such comments and financial details
as are customarily included in reports of like character and the
unqualified opinion of the certified public accountants as to the
fairness of the statements therein and together with such written
assurances as the Lender may reasonably request from the Borrower's
independent certified public accountants to confirm the Lender's
entitlement to rely upon such audited financial report and
accompanying materials;
(b) within 45 days after the end of each calendar quarter, beginning with
the calendar quarter ended December 31, 1998, a written report
summarizing all acquisitions of Investment Positions by the Borrower
for the preceding quarter and the results of the Sale or Liquidation
of each Investment Position for the preceding quarter;
(c) within 5 days after the end of each week, a written report summarizing
all Investment Positions that the Borrower acquired or offered to
acquire during the preceding week, and the status of all then
outstanding offers by the Borrower to acquire Investment Positions,
whether such offers were made in the preceding week or earlier;
(d) such other information, books, and records the Lender may reasonably
request, in such form and at such time and place as the Lender may
reasonably request, concerning the Borrower's activities and plans
that are prepared by or for the Borrower in the Ordinary Course; and
- 23 -
(e) within 120 days after the end of each of the Borrower's fiscal years,
an update of the Borrower's estimated value of each Investment
Position then owned, taking into account all relevant realized events
that occurred during the preceding year.
6.2 Promptly in form the Lender of the occurrence of any Event of Default,
or of any occurrence that, with the giving of notice or the lapse of time, or
both, would be an Event of Default, and of any other occurrence which has a
Material Adverse Effect; grant to the Lender or its representatives the right to
examine the Borrower's books and records and the Collateral at any reasonable
time or times on reasonable notice; maintain complete and accurate books and
records of its transactions in accordance with good accounting practices; and
furnish to the Lender any information that it may reasonably request concerning
the Borrower's financial affairs that is prepared by or for the Borrower in the
Ordinary Course within 10 business days after receipt of a request for that
information.
6.3 Maintain insurance, including, but not limited to, fire and extended
coverage in insurance, workers' compensation insurance, and casualty and
liability insurance with responsible insurance companies on such of its
properties and against such risks and in such amounts as is customarily
maintained by similar businesses; furnish to the Lender upon its request the
details with respect to that insurance and satisfactory evidence of that
insurance coverage. Each insurance policy required under this Section 6.3 shall
be, to the extent practicable, written or endorsed so as to make losses, if any,
payable to the Borrower and the Lender as their respective interests may appear,
and shall include, where appropriate, a mortgage clause or endorsement in favor
of the Lender in form and substance satisfactory to the Lender.
6.4 Pay and discharge, as often as the same may become due and payable,
all taxes, assessments and other governmental monetary obligations, of whatever
nature, that may be levied or assessed against it or any of its properties,
unless and to the extent only that in a jurisdiction where payment of taxes and
assessments is abated during the period of any contest, those taxes or
assessments shall be contested in good faith by appropriate proceedings and that
the Borrower shall have set aside on its books adequate reserves with respect to
those taxes and assessments.
6.5 Pay and perform at the time such payment or performance is due, all
indebtedness and obligations owing by it, and pay all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable, except any indebtedness, obligation or claim being
contested in good faith by appropriate proceedings and for which the Borrower
shall have set aside on its books adequate reserves with respect to such
indebtedness, obligation or claim.
6.6 Maintain its existence as a limited liability company in good standing
in the State of Delaware and its qualification in good standing in every other
jurisdiction in which the failure to be so qualified or authorized to do
business would have a Material Adverse Effect; continue
- 24 -
to conduct and operate its business substantially as contemplated to be
conducted and operated and as MACG has conducted and operated its business in
the past; and comply with all governmental laws, rules, regulations, and orders
applicable to it, the failure to comply with which would or may have a Material
Adverse Effect.
6.7 Act prudently and in accordance with customary industry standards in
managing or operating its assets, properties, business, and investments; and
keep in good working order and condition, ordinary wear and tear excepted, all
of its assets and properties that are necessary to the conduct of its business.
6.8 Notify the Lender in writing within 30 days after receipt whenever the
Borrower receives written notice of (a) the commencement or threatened
commencement of formal proceedings or any investigation by a federal or state
environmental agency against the Borrower, or any property owned by the
Borrower, or by any entity in which the Borrower holds an Investment Position,
or regarding compliance by the Borrower with Environmental Laws, or (b) any
other judicial or administrative proceeding or litigation commenced against the
Borrower, except those occurring in the Ordinary Course that would not have a
Material Adverse Effect. The Borrower shall, promptly upon request, deliver to
the Lender copies of such pleadings, documents and other information concerning
such pending or threatened claim or proceeding as the Lender may reasonably
request.
6.9 Promptly provide to the Lender copies of any correspondence received
by the Borrower or an Affiliate from any governmental authority regarding any
alleged violation of law by the Borrower or any Affiliate that could have a
Material Adverse Effect.
6.10 Comply with all applicable laws, including but not limited to federal
and state securities laws, applicable to the Borrower's acquisition, or offer to
acquire, an Investment Position, and to furnish to the Lender, promptly upon
written request, the Borrower's due diligence legal review with respect to such
Investment Position.
6.11 At all times preserve, renew and keep in full force and effect the
rights, licenses, permits, franchises, agency agreements, trade names, patents,
trademarks, copyrights, licenses and service marks, the loss of which could have
a Material Adverse Effect.
6.12 Permit representatives of the Lender, on reasonable notice, during
the Borrower's normal business hours, to enter the Borrower's premises, review
the Borrower's business records, and interview the Borrower's employees as
reasonably required by the Lender to conduct periodic audits of the Borrower's
business and the Borrower's compliance with its obligations under this
Agreement.
6. 13 Refer to the Lender any opportunities to purchase or otherwise
acquire nursing home facilities, assisted living facilities and the like of
which the Borrower or its Affiliates acquire knowledge; it being further agreed
that the Lender will, to the extent it is permitted to do
- 25 -
so by the terms of the Opportunity Agreement dated April 2, 1998 with Omega
Worldwide, Inc., refer to the Borrower all opportunities to acquire interests in
limited partnerships, limited liability companies and other limited liability
vehicles, or to acquire at discount future income streams, of which Lender
acquires knowledge. Neither party shall be required by this Section to divulge
information that it acquired in confidence, and any information that may be
furnished to a party pursuant to this Section shall be furnished without any
representation or warranty whatever. Neither party shall be liable to the other
for money damages for breach of this Section 6.14, or for any loss, cost or
damage incurred by a party as a result of its acts or omissions in response to
information furnished pursuant to this Section 6.14.
6.14 Cooperate with Lender by all reasonable means to do such things as
the Lender may reasonably request in writing to preserve the Lender's status as
a "real estate investment trust" under the IRC, including but not limited to
divesting one or more Investment Positions in which the Lender holds a security
interest if, in the written opinion of outside counsel to the Lender, it is more
probable than not that retention by the Lender of such security interest, or
ownership of such Investment Position(s) following foreclosure or other
realization upon such security interest, would jeopardize the Lender's status as
a "real estate investment trust" under the IRC if such issue were to be raised
in an administrative or judicial proceeding. Payment of the Required Release
Price shall be made after the Lender makes written demand upon the Borrower and
delivers to the Borrower, wine such written demand, a copy or written summary of
the opinion of the Lender's said outside counsel upon which the demand is based,
within thirty (30) days after the effective date of the divestiture.
6.15 In order to preserve and ensure the Borrower's separate and distinct
identity:
(a) establish and maintain a post office address that is separate and
apart from that of any Affiliate;
(b) maintain separate records and books of account from those of any
Affiliate;
(c) not commingle assets, funds or accounts with those of any Affiliate
(except that the Borrower may, without breaching this Section 6.15(c),
periodically deposit funds of the Borrower and its Affiliates with a
service agent to enable such agent to remit such funds, on behalf of
the Borrower and its Affiliates, to employees and independent
contractors of the Borrower and its Affiliates or to investors from
whom the Borrower or its Affiliates buy Investment Positions);
(d) conduct its own business in its own name (except that the Borrower
may, without breaching this Section 6.15(d), make offers to acquire
Investment Positions, and may consummate
- 26 -
acquisitions of Investments Positions, for its own account through and
in the name of its wholly-owned subsidiary, Madison Liquidity
Investors 104 or, upon the expiration of not less than 10 Business
Days after delivering such supplemental security documents and
financing statements as the Lender may require, in the name of any
other majority owned subsidiary of the Borrower;
(e) maintain financial statements separate from any Affiliate;
(f) pay any liabilities out of its own funds, including salaries of any
employees (except as otherwise permitted in Section 6.16(c) above);
(g) Maintain relationships with its Affiliates that are not inequitable as
to the Lender or other third-parties who are justifiably relying upon
the separateness of the Borrower from its Affiliates;
(h) Not guarantee or become obligated for the debts of any other entity,
including any Affiliate, except for the endorsement of negotiable
instruments for deposit or collection in the Ordinary Course, or hold
out its credit as being available to satisfy the obligations of
others;
(i) Use stationery, invoices and checks separate from any Affiliate;
(j) Not pledge its assets for the benefit of any other entity, including
any Affiliate; and
(k) At all times have a class of managers whose unanimous vote will be
required to approve the filing of a petition in bankruptcy, an
assignment for the benefit of creditors or any similar federal or
state authorized procedure for debt or relief, of which at least one
manager may be designated by the Lender at anytime.
SECTION 7 - NEGATIVE COVENANTS
Beginning on the date of this Agreement and continuing until the Lender has
no further obligation to make advances of the Loan to the Borrower pursuant to
this Agreement and the Loan and all other indebtedness of the Borrower to the
Lender has been repaid in full, the Borrower shall not, without the prior
written consent of the Lender:
7.1 Create or permit to exist any lien, mortgage, pledge, attachment,
garnishment, execution, or other legal process, or encumbrance on any of the
Collateral, except Permitted
- 27 -
Liens.
7.2 Guarantee, endorse, assume, or otherwise incur or suffer to exist any
contingent liability in respect of, any obligation of any other person, firm, or
corporation, except by the endorsement of negotiable instruments for deposit or
collection in the Ordinary Course.
7.3 Purchase or otherwise acquire all, or substantially all, of the
assets, obligations, or capital stock or equity interests in any other person or
legal entity.
7.4 Purchase, retire, redeem, or otherwise acquire any of its outstanding
equity interests or declare or pay dividends or make any other distribution of
its assets, by reduction of capital or otherwise, other than (a) as permitted by
Section 5.5 and (b) in connection with the organization of subsidiaries or other
affiliates to facilitate the operation of its business.
7.5 Subordinate any indebtedness owing to the Borrower by any person,
firm, or corporation to indebtedness of that person, firm, or corporation owing
to any other person, firm, or corporation.
7.6 Engage, directly or indirectly, in any line of business other than the
acquisition of Investment Positions.
7.7 Issue, incur, assume, or permit to remain outstanding any
Indebtedness, other than Indebtedness owing to the Lender.
7.8 Change its fiscal year or method of accounting except as required by
GAAP.
7.9 Change its name or the name of Madison Liquidity Investors 104 without
prior written approval from the Lender; except that the Borrower may change its
name or the name of Madison Liquidity Investors 104 if the Borrower has given 60
days' prior written notice of the name change and has taken such action as the
Lender deems necessary to continue the perfection of the security interests and
liens granted to the Lender under the Loan Documents.
7.10 Establish, maintain or participate in an employee benefit pension
plan with respect to which the Borrower is an "employer" or "party in interest",
as those terms are defined in ERISA.
7.11 Name or otherwise identify the Lender in any documents used by the
Borrower in connection with its acquisition of any Investment Positions, or in
connection with any offer to acquire any Investment Positions.
7.12 Use Loan proceeds to acquire any "margin stock", within the meaning
of Regulation G of the Board of Governors of the Federal Reserve System, without
prior written notice to the Lender.
- 28 -
SECTION 8 - APPLICATION OF PROCEEDS
The proceeds of the Loan shall be used by the Borrower solely for the
purpose set forth in Section 3, and for no other purpose.
SECTION 9 - EVENTS OF DEFAULT AND REMEDIES
9.1 The following events shall constitute an "Event of Default" under this
Agreement, the occurrence of which shall entitle the Lender to pursue any and
all rights and remedies, legal and equitable, available to it under any Loan
Document or otherwise. The Occurrence of an Event Default under this Agreement
shall constitute a default under each and every other Loan Document. The
Lender's rights and remedies are cumulative and may be exercised concurrently or
successively from time to time. Any action by the Lender against any property or
party shall not serve to release or discharge any other security, property or
party in connection with this transaction. The Events of Default are as follows:
(a) Failure to pay the principal or interest on the Borrower's present or
future indebtedness to the Lender, whether or not arising pursuant to
this Agreement, when and as the same shall be due and payable, whether
by acceleration or otherwise; provided that such default has not been
cured prior to the expiration of ten (10) days following the date upon
which the Lender gives the Borrower written Notice of Default. In this
Section 9, Notice of Default shall be deemed to have been given (i) on
the date of personal delivery of such written notice to a Guarantor,
or (ii) on the date on which a duly authorized representative of the
Borrower acknowledges receipt of such written notice, or (iii) on the
day after sending such written notice to the Borrower by a commonly
recognized overnight courier service, such as Federal Express,
Purolator, UPS or the like, or (iv) on the third day after sending
such written notice to the Borrower by facsimile (to both numbers set
forth in Section 16.7) or by depositing the same in the United States
mail, postage prepaid, for delivery to the Borrower.
(b) Failure to observe, perform and comply with any of the obligations
evidenced or secured by a Loan Document, other than as provided in
Sections 9.1(a) above; provided that such default has not been cured
prior to the expiration of thirty (30) days following the date upon
which the Lender gives the Borrower written Notice of Default.
(c) Failure to duly and punctually pay, observe and discharge all
Indebtedness and other obligations of the Borrower to any third party,
unless the same is being contested in good faith by appropriate
proceedings and the Borrower has set aside on its books adequate
- 29 -
reserves with respect to such Indebtedness or other obligations.
(d) The discovery by the Lender of any material inaccuracy in any
statement, assurance, representation, covenant, warranty, term or
condition by the Borrower contained in this Agreement or in any
document delivered or to be delivered by or on behalf of the Borrower
pursuant to this Agreement, which inaccuracy would result in a
Material Adverse Effect (except that inaccuracies in the Borrower's
Due Diligence Documents attributable to the fault or neglect of
third-parties shall not constitute a breach of this Section 9.1(d)),
or in any other Loan Document, or in any other agreement between the
Borrower and the Lender.
(e) The filing of a petition by or against the Borrower or any Affiliate
seeking relief under the Federal Bankruptcy Code, 11 U.S.C. ss. 101,
et seq., and any amendments thereto, or any similar law or regulation,
whether federal, state or local, not dismissed within 30 days.
(f) The commencement of a proceeding by or against the Borrower or any
Affiliate under any statute or other law providing for an assignment
for the benefit of creditors, the appointment of a receiver, or any
other similar law or regulation, whether federal, state or local, not
dismissed within 30 days.
(g) The garnishment, attachment, levy or other similar action taken by or
on behalf of any creditor of the Borrower, any Affiliate, or any of
their respective properties which could have a Material Adverse
Effect.
(h) Any change in control of the Borrower, Madison Liquidity Investors
104, MACG from that disclosed in Section 2 of this Agreement.
9.2 The Lender may, at its option, terminate its obligation to make
advances of the Loan, without notice to the Borrower: (a) upon the occurrence
and continuance of any Event of Default set forth in subsections 9.1(a) through
9.1(h) above; or (b) upon the occurrence and continuance of any event which,
with the giving of notice or the lapse of time, or both, would constitute an
Event of Default or (C) upon the death or disability of Xxxxx X. Xxxxxx.
9.3 Upon the occurrence and continuance of any Event of Default set forth
in subsections 9.1(a) through 9.1(h) above, the Lender shall have the right (a)
to declare all outstanding principal and accrued interest on the Loan, and on
any other indebtedness of the Borrower to the Lender (whether or not arising
under this Agreement) to be immediately due and payable, without presentment,
demand, or notice of any kind, all of which are hereby expressly waived by the
Borrower, and (b) to exercise any and all remedies that it may have for default
under any Loan Document or at law or in equity, and such remedies may be
exercised
- 30 -
concurrently or separately until all of the Borrower's indebtedness to the
Lender (whether or not arising under this Agreement) and each and every one of
the Borrower's obligations to the Lender (whether or not arising under the Loan
Documents) have been fully satisfied. In connection with the enforcement of any
such remedies of the Lender, the Lender and its employees, attorneys, agents,
and other persons and entities designated by the Lender, shall have the right,
without notice, to enter the Borrower's places of business for such purposes as
may be reasonably required to permit the Lender to preserve, protect, take
possession of and/or sell or otherwise dispose of any Collateral, and to store
the Collateral at the Borrower's places of business, without charge, for such
periods as may be determined by the Lender.
9.4 Upon the expiration of 180 days after the death or Disability of Xxxxx
X. Xxxxxx, the Lender shall have the right to declare all outstanding principal
and accrued interest on the Loan, and on any other indebtedness of the Borrower
to the Lender (whether or not arising under this Agreement) to be immediately
due and payable, without presentment, demand, or notice of any kind, all of
which are hereby expressly waived by the Borrower, and the Lender thereafter
shall have all of the rights, and the Borrower shall have all of the
obligations, provided for in Section 9.3 above.
SECTION 10 - CONDITIONS PRECEDENT TO ADVANCES OF THE LOAN
In addition to the other conditions Precedent to advances described in
this Agreement, each Loan advance requested under this Agreement shall be
subject to prior satisfaction of the following conditions:
10.1 The representations and warranties contained herein and in the other
Loan Documents shall be true, correct and accurate in all material respects on
and as of the Funding Date of such requested advance, except for those relating
to specific dates or time periods and as changed as permitted by this Agreement.
10.2 The Borrower shall have performed in all material respects all
agreements and satisfied all conditions that this Agreement and each of the
other Loan Documents provides shall be performed by the Borrower on or before
such Funding Date.
10.3 No order, judgment or decree of any court, arbitrator, or
governmental authority, shall purport to enjoin or restrain the Lender from
making such an advance.
10.4 There shall not be pending or, to the Borrower's Knowledge
threatened: (a) any action, suit, proceeding, governmental investigation or
arbitration against or affecting the Borrower or an Affiliate, or any property
of the Borrower or an Affiliate, that, in the opinion of the Lender, could
reasonably be expected to have a Material Adverse Effect upon the Borrower or an
Affiliate; and (b) there shall have occurred no development in any action, suit,
proceeding, governmental investigation or arbitration previously disclosed to
the Lender pursuant to this Agreement, that, in the opinion of the Lender, could
reasonably be expected to have a Material
- 31 -
Adverse Effect upon the Borrower or an Affiliate. No injunction or other
restraining order shall have been issued and no hearing to cause an injunction
or other restraining order shall be pending or noticed with respect to any
action, suit or proceeding seeking to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a result of, this
Agreement or the making of the Loan hereunder.
10.5 Since the date of the most recent Borrower and Affiliate financial
statements submitted to the Lender, pursuant to Section 2.7, nothing shall have
occurred or become known which the Lender shall have determined has a Material
Adverse Effect upon the Borrower or an Affiliate.
10.6 The Lender shall have received a Notice of Requested Borrowing at the
time and in form required by Section 4.6 above. The furnishing by the Borrower
of a Notice of Requested Borrowing shall be deemed to constitute a
representation and warranty of the Borrower to the effect that all the
conditions set forth in this Agreement for the requested advance are satisfied
as of the date of delivery and will be satisfied on the applicable Funding Date.
SECTION 11 - LIMITATION ON LOAN ADVANCES
11.1 Notwithstanding anything to the contrary contained herein or in any
of the other Loan Documents, the principal amount of the Loan that may be used
by the Borrower to make Non-Qualified REIT Investments shall not exceed 4.5% of
the Value of the Lender's Total Assets.
11.2 The Lender shall not be required to make any advance of the Loan
proceeds unless, simultaneously with the Lender making an advance of the Loan
proceeds, the Borrower pays cash in an amount equal to at least two percent (2%)
of Acquisition Cost of such Investment Position. The Borrower shall, upon
request by the Lender, demonstrate to the Lender that the Borrower has the
requisite cash available for and irrevocably committed to such purpose, and that
such cash was in fact so applied by the Borrower.
11.3 The Borrower expects from time to time to incur due diligence
expenses and other expenses in connection with its evaluation of potential
Investment Positions that the Borrower ultimately decides not to acquire (such
costs are referred to in this Agreement as "Pre- Funding Acquisition Costs").
The Borrower shall be entitled to request advances of Loan proceeds to pay such
Pre-Funding Acquisition Costs provided that they do not exceed, as to any
Investment Position, $50,000 or 75% of the anticipated Carrying Cost of the
Investment Position, whichever is less.
SECTION 12 - OPTION TO RESTRUCTURE INVESTMENTS
The Lender may apply to the IRS for a ruling as to whether "look-through
treatment"
- 32 -
will be accorded Investment Positions acquired by the Borrower using proceeds of
the Loan. For purposes of this Agreement, "look-through treatment" would be
deemed to be so accorded if the IRS were to rule that, for purposes of
determining whether, as to the Lender, such Investment Positions constitute
"real estate assets" within the meaning of IRC Section 856(c)(5)(B) and Treasury
Regulation 1.856-3(g), the Lender will be deemed to be the owner of such
Investment Positions. If, within six months after the date of this Agreement,
the IRS rules that "look-through treatment" will not be accorded such Investment
Positions, or the Lender withdraws, under any circumstances, its application
prior to the issuance by the IRS of its ruling, the Lender and the Borrower
agree that it will be in their mutual interest to restructure the
debtor-creditor relationship established pursuant to this Agreement with respect
to the real estate portion of the Borrower's Investment Position portfolio as
necessary to convert the revenue stream to be derived by the Lender on account
of such Investment Positions from "interest income" to "rents from real
property" as defined in IRC Section 856(d)(i) for federal income tax purposes.
The Borrower shall use good faith efforts to assist the Lender in accomplishing
such objective within three months after being requested to do so in writing by
the Lender. All reasonable expenses incurred in connection with restructuring
the debtor-creditor relationship in the manner specified in this Section shall
be borne 50% by the Lender and 50% by the Borrower.
SECTION 13 - ACCEPTANCE OF PROCEEDS
The acceptance of the proceeds of the Loan shall constitute the
representation and warranty by the Borrower to the Lender that all of the
applicable conditions specified herein have been satisfied as of that time,
except for such conditions that have been expressly waived in writing hereunder
by the Lender.
SECTION 14 - CONFIDENTIALITY
14.1 The Borrower and the Lender acknowledge that in the course of the
business relationship reflected in this Agreement, the Borrower and/or its
Affiliates will or may disclose to the Lender proprietary or confidential
information ("Confidential Information"), including, without limitation, client
lists, business plans and strategies and the forms of documents employed by
Borrower or its Affiliates. (A party who discloses such Confidential Information
is referred to hereafter as a "Disclosing Party" and the party who receives such
information is referred to hereafter as a "Receiving Party".) A Receiving Party
shall not at any time during the term of the Loan Agreement or thereafter
disclose or use in any manner other than for a Permitted Use (as defined below)
any Confidential Information received by it, except to the extent required by a
court order or other legal process, in which event the Receiving Party shall
provide the Disclosing Party with timely notice of such order or process and
cooperate with the Disclosing Party (at the expense of the Disclosing Party) in
any attempts to stay or limit required disclosure. Except as described in the
definition of "Permitted Use" below, Confidential Information shall not include
(a) information (other than the form of documents employed by the Borrower
and/or its Affiliates) which is now, or subsequently becomes, in the public
- 33 -
domain, other than through a violation of the Receiving Party's obligations
hereunder, (b) information that was available to the Receiving Party on a
nonconfidential basis from a source other than the Disclosing Party prior to its
disclosure by the Disclosing Party, (c) information that becomes available to
the Receiving Party on a nonconfidential basis from a Source other than the
Disclosing Party, which source is not otherwise bound by a confidentiality
agreement, or other obligations of secrecy to, the Disclosing Party or (d)
information that was independently developed or discovered by the Receiving
Party.
14.2 The Disclosing Party shall be entitled to injunction and other
equitable relief without the necessity of posting a bond in the event of any
failure by a Receiving Party to comply with the provisions of this Section 14,
and to recovery from the Receiving Party of the Disclosing Party's reasonable
attorneys' fees and expenses incurred in obtaining such relief. A Receiving
Party shall indemnify the Disclosing Party and hold it harmless from and against
any and all loss, damage, liability, cost or expense (including reasonable
attorneys' and experts' fees) incurred by the Disclosing Party as a result of
the breach by such Receiving Party of any obligation under this Section 14. The
provisions of this Section 14.2 in respect of equitable relief shall in no way
be deemed to limit the remedies of a Disclosing Party.
14.3 "Permitted Use" of Confidential Information by a Receiving Party
shall be limited to the use of such information for the sole purpose of carrying
out its obligations, availing itself of its remedies and administering the loans
made pursuant to this Loan Agreement. Confidential Information may be disclosed
on a need to know basis to advisors to the Lender (including, without
limitation, Counsel and tax advisors), it being understood, however, that such
advisors shall be informed by the Lender of the confidential nature of the
Confidential Information and shall agree to be bound by the provisions of this
Section 14. The parties understand and agree that the Lender may be required to
file reports or respond to inquiries by regulatory agencies, which reports and
responses shall be deemed a Permitted Use, it being agreed, however, that every
effort will be made by Lender to limit the amount of Confidential Information
included in any such report or response and that Lender will include in any such
report or response only so much of the Confidential Information as Lender is
advised by written opinion of its outside counsel is required.
- 34 -
SECTION 15 - INDEMNIFICATION
15.1 The Lender shall indemnify and hold harmless the Borrower, Madison
Liquidity Investors 104, and any of their respective officers and employees,
members, managers or directors (each an "Indemnified Party" and collectively
"Indemnified Parties") from and against any and all loss, liability, claim and
expense arising under the federal or state securities laws and resulting
directly and solely from the Lender's failure to fund a Loan advance pursuant to
this Agreement if: (a) such failure to fund constitutes a breach by the Lender
of its obligations under this Agreement and (b) such breach continues for a
period in excess of five (5) Business Days after the date specified by the
Borrower as the date upon which the advance was to be made.
15.2 The Borrower shall indemnify and hold harmless the Lender and any of
its officers, employees, managers or directors (each an "Indemnified Party" and
collectively "Indemnified Parties") from and against any and all loss,
liability, claim and expense, arising as a result of a violation of the federal
or state securities laws in connection with an offer to acquire, or the
acquisition of, an Investment Position.
15.3 This indemnification shall apply to any Indemnified Party who is a
party or subject of any pending or completed action, suit or proceeding, whether
civil or administrative in circumstances governed by Section 15.1 or 15.2.
15.4 All reasonable expenses and costs of the Indemnified Parties
(including, without limitation, attorneys and experts fees) in defending,
investigating or appealing any action, suit or proceeding shall be paid by the
Lender, with respect to its obligations under Section 15.1, or the Borrower,
with respect to its obligations under Section 15.2 (in each case, the
"Indemnifying Party"), within ten (10) Business Days of submission by an
Indemnified Party of a request for such reimbursement, together with reasonable
substantiation of the expenses and costs involved. The Indemnifying Party shall
have the right to approve the Indemnified Parties' counsel and such counsel may,
at the option of the Indemnifying Party, represent more than one of the
Indemnified Parties so long as no conflict of interest exists which would
preclude such counsel from representing one or more of the Indemnified Parties.
In the event there is a good faith dispute between the Indemnified Parties and
the Indemnifying Party as to whether this Section 15 applies to such action,
suit or proceeding, the Indemnifying Party shall not be obligated to make any
advance for expenses and costs under this Section 15.4 pending a determination
by a court of competent jurisdiction of the applicability of this Section 15.
Any offer of settlement or compromise of a claim shall be promptly communicated
to the Indemnifying Party and shall not be accepted unless agreed upon in
writing by the Indemnified Parties and the Indemnifying Party. If the
Indemnified Party declines to accept a bona fide offer of settlement which is
recommended by the Indemnifying Party, the maximum liability of the Indemnifying
Party shall not exceed that amount which it would have been liable for had such
settlement been accepted. If the Indemnifying Party declines to accept a bona
fide offer of settlement recommended by the Indemnified Parties, the
Indemnifying Party shall be liable for whatever outcome results from such
third-party claim.
- 35 -
15.5 The indemnification and reimbursement of expenses and costs pursuant
to this Section 15 shall be the Indemnified Parties' exclusive remedy (a) with
respect to the Lender for matters covered by Section 15.1 and (b) with respect
to the Borrower for matters covered by Section 15.2.
SECTION 16 - MISCELLANEOUS
16.1 The Borrower and the Lender shall, within 45 days after the date of
this Agreement, exchange a written accounting of the reasonable and customary
out-of-pocket costs each incurred in connection with the negotiation of the Loan
Documents and the closing of the Loan (the "Loan Documentation and Closing
Costs"). The Loan Documentation and Closing Costs incurred by the Lender shall
be added to the Loan Documentation and Closing Costs incurred by the Borrower,
and each party shall pay 50% of the grand total of the Loan Documentation and
Closing Costs. Any payment that one party is required to pay to the other to
equalize the Loan Documentation and Closing Costs borne by each shall be paid,
in cash, within 60 days after the date of this Agreement. Only those reasonable
and customary out-of-pocket costs properly appearing on the written accounting
referred to in the first sentence of this Section shall be allocated between the
parties pursuant to this Section; none of the costs referred to in Section 16.2
of this Agreement shall be allocated between the parties pursuant to this
Section 16.1.
16.2 The Borrower shall reimburse the Lender for all reasonable costs
(including but not limited to reasonable fees and expenses for appraisers,
attorneys, architects, accountants, brokers, copy services, court reporters,
engineers, expert witnesses, overnight couriers, recording fees and taxes, title
and lien searches, and surveyors) incurred by the Lender in: (a) creating and
perfecting a first priority security interest in the Collateral; (b) preserving
and protecting the Collateral; (c) enforcing any provision of any of the Loan
Documents; (d) collecting the Loan or any other present or future Indebtedness
of the Borrower to the Lender, whether or not arising under this Agreement; and
(e) foreclosing any lien or security interest in any of the Collateral, or in
taking action in lieu of foreclosure.
16.3 The Borrower acknowledges that the Lender shall have the right, upon
an Event of Default, or any event which with the giving of notice or lapse of
time, or both, would constitute an Event of Default, to set off any indebtedness
from time to time owing to the Borrower by the Lender against any indebtedness
that shall at any time be due and payable by the Borrower to the Lender.
16.4 Each and every right granted to the Lender hereunder or under any
other Loan Document, or allowed it by law or equity, shall be cumulative and may
be exercised from time to time. No failure on the part of the Lender to
exercise, and no delay in exercising, any right shall operate as a waiver
thereof or as a waiver of any other right. No single or partial exercise by the
Lender of any right or remedy shall preclude any other future exercise of it or
the exercise of any other right or remedy. No waiver or indulgence by the Lender
of any default shall be
- 36 -
effective unless in writing and signed by the Lender, nor shall a waiver on one
occasion be construed as a bar to or waiver of that right on any future
occasion. This Agreement may not be amended except by a writing signed by all
the parties hereto.
16.5 The relationship between the Borrower and the Lender is solely that
of borrower and lender. The Lender has no fiduciary responsibilities to the
Borrower as a result of this Loan Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby. The Lender does
not undertake any responsibility to the Borrower to review or inform the
Borrower of any matter in connection with any phase of the Borrower's business
or operations. The Borrower shall rely entirely upon its own judgment with
respect to its business, and any review, inspection, supervision, or information
supplied to the Borrower by the Lender is for the protection of the Lender and
neither the Borrower nor any third party is entitled to rely thereon. Neither
the Borrower nor the Guarantors have any fiduciary responsibility toward the
Lender as the result of this Loan Agreement, the other Loan Documents and the
consummation of the transactions contemplated hereby or thereby. Without
limiting the generality of the foregoing, neither the Borrower nor the
Guarantors is acting as an investment advisor, investment manager, financial
planner, financial consultant or supplier of financial services to the Lender,
within the meaning of any federal or state regulatory pattern or otherwise.
16.6 This Agreement is made in the State of Michigan. The validity of this
Agreement, and the validity of any documents incorporated herein or executed in
connection herewith, and the construction, interpretation and enforcement
thereof, and the rights of the parties thereto, shall be determined under and
construed in accordance with the internal laws of the State of Michigan, without
regard to principles of conflicts of law.
16.7 Any and all notices or other communications required or permitted
under this Agreement shall be in writing, and shall be served either personally
or by certified United States mail with postage thereon full prepaid addressed
to the Borrower as:
Madison/OHI Liquidity Investors, LLC
FOR FEDERAL EXPRESS: 000 Xxxxxx Xxxx Xxx
Xxxxxxx Xxxxxxx, XX 00000
FOR REGULAR MAIL: X.X. Xxx 0000
Xxxxxxx Xxxxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Managing Director
Fax Numbers: (000) 000-0000 and (000) 000-0000
with copies to each Guarantor at his address set forth in the Guarantee, or such
other place or places as a Guarantor shall designate by written notice served
upon the Lender and the Borrower.
- 37 -
and to the Lender as:
Omega Healthcare Investors, Inc.
000 Xxxxxxx Xxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: F. Xxxxx Xxxxxxx, Chief Operating Officer
or such other place or places as any party shall designate by written notice
served upon other parties.
16.8 this Agreement shall be binding upon and shall inure to the benefit
of the Borrower may and the Lender and their respective successors and assigns;
provided, however, that the Borrower may, with the prior written consent of the
Lender (which shall not be unreasonably withheld), assign its rights and
obligations under this Agreement to an entity that is controlled the Guarantors.
The Lender may condition its consent to any such assignment upon, among other
things: (a) payment by the Borrower of all reasonable costs incurred by the
Lender in connection with evaluating the Borrower's request and preparing the
documents required in the opinion of the Lender's counsel to document the
requested assignment; (b) requiring the assignee to assume and agree to observe
and perform all of the Borrower's obligations under this Agreement and the other
Loan Documents; (c) obtaining consents to such assignment, satisfactory in form
and substance to the Lender, from the Guarantors; and (d) obtaining such
amendments to or replacements of the Loan Documents, and the filing of
supplemental financing statements, as the Lender may reasonably request. The
Borrower shall not otherwise have any right to assign, transfer, hypothecate or
otherwise transfer or dispose of any of its rights or obligations under this
Agreement or the other Loan Documents (voluntarily, by operation of law, as
security, by gift or otherwise) without the Lender's consent, which consent may
be withheld in the sole discretion of the Lender. The Lender may, with the
consent of the Borrower (which consent shall not unreasonably be withheld),
assign, negotiate, pledge or otherwise hypothecate all or any portion of this
Agreement, or grant participations herein and in the Loan Documents, or in any
of its rights or security hereunder or thereunder, including, without
limitation, the instruments securing the Borrower's obligations hereunder;
provided, however, that the Lender promptly will inform the Borrower of any such
assignment, negotiation, pledge or other hypothecation and of the parties
involved therewith and, provided further, that no such assignment, negotiation,
pledge or other hypothecation by the Lender will relieve the Lender of its
obligation under this Agreement. In connection with any assignment or
participation, the Lender may disclose to the proposed assignee or participant
any information that the Borrower is required to deliver to the Lender pursuant
to this Agreement (including but not limited to Confidential Information, as
defined in Section 14.1 above).
16.9 The Borrower waives and releases any and all right that it may have
to require that the Lender marshal any of the Collateral. The Borrower shall
upon the request of the Lender promptly execute and deliver to the Lender a
written statement, in form and substance reasonably satisfactory to the Lender,
identifying all of the Collateral in which the Lender holds
- 38 -
an interest as security for the Loan made pursuant to this Agreement. The Lender
may file or record such written statements in the appropriate public records as
determined by the Lender in its sole and absolute discretion.
16.10 Should any part, term or provision of this Agreement, or of any
documents incorporated herein or executed in connection herewith, be determined
by the courts to be illegal, unenforceable or in conflict with any law of the
State of Michigan, federal law or any other applicable law, the validity and
enforceability of the remaining portions or provisions of such document(s) shall
not be affected thereby.
16.11 The Borrower shall execute any and all additional or supplemental
documentation as the Lender may reasonably require to give full effect to the
terms and conditions of this Agreement. The Borrower grants the Lender power of
attorney to execute (on behalf of the Borrower and Madison Liquidity Investors
104) and file financing statements and continuation statements provided,
however, that the Lender shall take no action for or on behalf of the Borrower
pursuant to this Section 16.11 unless the Borrower has failed or neglected to
take specific action within 10 days after being requested in writing by the
Lender. The power of attorney hereby granted by the Borrower to the Lender is
coupled with an interest and may be revoked only after the Lender is no longer
obligated to make advances of the Loan to the Borrower pursuant to this
Agreement and the Loan and all of the Borrower's other present or future
indebtedness, if any, to the Lender, has been fully repaid.
16.12 Time is of the essence with respect to all provisions of this
Agreement.
16.13 The headings in this Agreement have been inserted for convenience
only and shall not affect the meaning or interpretation of this Agreement.
16.14 This Agreement may be executed in one or more counterparts, each of
which shall be considered an original and all of which shall constitute the same
instrument.
16.15 This Agreement contains the entire agreement of the parties hereto
with respect to the subject matter hereof. The parties hereto shall not be bound
by any other different, additional or further agreements or understandings
except as consented to in writing by them.
16.16 The Recitals are incorporated into and form a part of this
Agreement.
16.17 The Lender and the Borrower, after consulting or having had the
opportunity to consult with counsel, knowingly, voluntarily and intentionally
waive any right either of them may have to a trial by jury in any litigation
based upon or arising out of this Agreement or any related instrument or
agreement or any of the transactions contemplated by this Agreement or any
course of conduct, dealing, statements (whether oral or written), or actions of
either of them. Neither the Lender nor the Borrower shall seek to consolidate,
by counterclaim or otherwise, any such action in which a jury trial has been
waived with any other action in which a jury trial
- 39 -
cannot be or has not been waived. These provisions shall not be deemed to have
been modified in any respect or relinquished by either the Lender or Borrower
except by a written instrument executed by both of them.
16.18 There are no third party beneficiaries of this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 40 -
IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of
the day and year first above written.
WITNESSES:
MADISON/OHI LIQUIDITY INVESTORS, LLC
By:_________________________________
Xxxxx X. Xxxxxx, Managing
Director
OMEGA HEALTHCARE INVESTORS, INC.
By:_________________________________
Xxxxx X. Xxxxxx, Xx., Chief
Executive Officer
STATE OF MICHIGAN )
) ss.
COUNTY OF WASHTENAW )
The foregoing instrument was acknowledged before me this 2nd day of
October, 1998, by Xxxxx X. Xxxxxx, who is a Managing Director of MADISON/OHI
LIQUIDITY INVESTORS, LLC, a Delaware limited liability company, on behalf of the
limited liability company.
Notary Public, _______________County, Michigan
My commission expires:________________________
- 41 -
STATE OF MICHIGAN )
) ss.
COUNTY OF WASHTENAW )
The foregoing instrument was acknowledged before me this 2nd day of
October, 1998 by Xxxxx X. Xxxxxx, Xx., who is the Chief Executive Officer of
OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation, on behalf of the
corporation.
Notary Public,________________County, Michigan
My commission expires:________________________
- 42 -
SCHEDULE 2.9
Xxxxx Xxxxxxxx of Texas Inc. instituted an action against, amongst others, Xxxxx
X. Xxxxxx and The Harmony Group, in the United States Court for the Northern
District of Texas, Dallas Division (Civil Action No. 3-97 CV 1498-R), arising
out of an attempt by Xxxxx Xxxxxxxx of Texas, Inc., to buy XxXxxx Real Estate
Fund XXVII, L.P. Plaintiff failed in its attempt to buy the target in
circumstances in which an entity (other than the Borrower, 104 or the Harmony
Group) connected to Xxxxx X. Xxxxxx, The Harmony Group and others sold 4.9% of
the target owned by it to the sponsors of the target, who opposed the takeover
by Xxxxx Xxxxxxxx of Texas, Inc. The complaint alleges, among other things,
conspiracy to interfere with prospective contractual relationships. Wolf,
Haldenstein, Xxxxx Xxxxxxx & Xxxx LLP, who are defending the action, have
advised that the defendants have a meritorious defense.
- 43 -
$30 Million Credit Facility between
OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation and
MADISON/OHI LIQUIDITY INVESTORS, LLC, a Delaware limited liability company
October 2, 1998
1. Loan Agreement (including Schedule 2.9)
2. $30,000,000.00 Promissory Note (copy - original delivered to Omega on
October 2, 1998)
3. Security Agreement
a. Madison/OHI Liquidity Investors, LLC
x. Xxxxxxx Liquidity Investors 104, LLC
4. Pledge Agreement re Madison/OHI Liquidity Investors, LLC (including
executed Assignment in Blank)
a. First Equity Realty, LLC
b. The Harmony Group II, LLC
5. Limited Personal Guaranties
a. Xxxxxx X. Xxxxxxxxx
b. Xxxxx X. Xxxxxx
6. Assignment of Life Insurance Policies
a. Xxxxxx X. Xxxxxxxxx
b. Xxxxx X. Xxxxxx
7. Cross-Default Agreement
8. Due Authorization, Delivery and Perfection Opinion Letter
9. Non-consolidation Opinion Letter
a. Opinion Letter
b. Members' Certificate
10. Agreement
11. UCC Financing Statements - Central Filings
a. Madison/OHI Liquidity Investors, LLC (Delaware, New York, Nevada)
x. Xxxxxxx Liquidity Investors 104, LLC (Delaware, New York, Nevada)
c. The Harmony Group II, LLC (Delaware, New York, Nevada)
d. First Equity Realty, LLC (Connecticut, New York)
- 44 -
12. Madison/OHI Liquidity Investors, LLC
a. Articles of Organization
b. Certificate of Good Standing
c. Operating Agreement
d. Incumbency Certificate
e. Authorizing Resolution
13. Madison Liquidity Investors 104, LLC
a. Articles of Organization
b. Certificate of Good Standing
c. Operating Agreement
d. Incumbency Certificate
e. Authorizing Resolution
14 First Equity Realty, LLC
a. Articles of Organization
b. Certificate of Good Standing
c. Operating Agreement
d. Incumbency Certificate
e. Authorizing Resolution
15. The Harmony Group II, LLC
a. Articles of Organization
b. Certificate of Good Standing
c. Operating Agreement
d. Incumbency Certificate
e. Authorizing Resolution
16. Certificate of Authority to Conduct Business
a. Madison/OHI Liquidity Investors, LLC (New York, Michigan, Nevada)
x. Xxxxxxx Liquidity Investors 104, LLC (New York, Michigan, Nevada)
17. Pledge Agreement re Securities Accounts
a. Cash Deposit Account
b. Securities Account
18. Brokerage Account Control Agreement
a. Cash Deposit Account
b. Securities Account
19. Article 8 Opinion of Counsel
- 45 -
