SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
-----------------------
Enstar Income Program IV-3 L.P.
(Name of Subject Company)
Madison Liquidity Investors 104, LLC
Madison/OHI Liquidity Investors, LLC
(Bidders)
LIMITED PARTNERSHIP INTERESTS
(Title of Class of Securities)
None
(CUSIP Number of Class of Securities)
--------------------------
Copy to:
Ronald M. Dickerman Lance D. Myers, Esq.
Madison Liquidity Investors 104, LLC Cullen and Dykman
Madison/OHI Liquidity Investors, LLC 177 Montague Street
P.O. Box 7461 Brooklyn, New York 11201
Incline Village, Nevada 89452 (718) 780-0048
(212) 687-0251
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications on Behalf of Bidders)
Calculation of Filing Fee
-----------------------------------------------------------------------------
Transaction Amount of
Valuation Filing Fee
$635,950.00 $127.19
---------------------------------------------------------------------
* For purposes of calculating the filing fee only. This amount assumes the
purchase of 3,950 Limited Partnership Interests ("Units") of the subject company
at $161.00 in cash per Unit.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid:
Form or Registration Number:
Filing Party:
Date Filed:
<PAGE>
CUSIP NO. None 14D-1 Page __ of __ Pages
1. Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Person
Madison Liquidity Investors 104, LLC
134022656
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [X]
3. SEC Use Only
4. Sources of Funds (See Instructions)
WC, PF and OO
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[ ]
6. Citizenship or Place of Organization
Delaware
7. Aggregate Amount Beneficially Owned by Each Reporting Person
1,949 Madison Partnership Liquidity Investors 52, LLC
20 Gramercy Park Investments, LP
-----
1,969
8. Check if the Aggregate in Row (7) Excludes Certain Shares (See
Instructions)
[ ]
9. Percent of Class Represented by Amount in Row (7)
4.9
10. Type of Reporting Person (See Instructions)
OO
<PAGE>
CUSIP NO. None 14D-1 Page __ of __ Pages
1. Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Person
Madison/OHI Liquidity Investors, LLC
137167955
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [X]
3. SEC Use Only
4. Sources of Funds (See Instructions)
WC, PF and OO
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[ ]
6. Citizenship or Place of Organization
Delaware
7. Aggregate Amount Beneficially Owned by Each Reporting Person
1,949 Madison Partnership Liquidity Investors 52, LLC
20 Gramercy Park Investments, LP
-----
1,969
8. Check if the Aggregate in Row (7) Excludes Certain Shares (See
Instructions)
[ ]
9. Percent of Class Represented by Amount in Row (7)
4.9
10. Type of Reporting Person (See Instructions)
OO
<PAGE>
CUSIP NO. None 14D-1 Page __ of __ Pages
Item 1. Security and Subject Company.
(a) This Schedule relates to limited partnership interests (the "Units") of
Enstar Income Program IV-3 (the "Issuer"), the subject company. The address of
the Issuer's principal executive offices is: 10900 Wilshire Boulevard, 15th
Floor, Los Angeles, California 90024.
(b) This Schedule relates to the offer by Madison Liquidity Investors 104,
LLC (the "Purchaser"), to purchase up to 3,950 Units for cash at a price equal
to $161.00 per Unit less the amount of any cash distributions made on or after
February 10, 1999, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated February 10, 1999 (the "Offer to Purchase") and the
related Agreement of Assignment and Transfer, copies of which are attached
hereto as Exhibits (a)(1) and (a)(2), respectively. The Issuer had 39,900 Units
outstanding as of September 30, 1998, according to its Form 10-Q.
(c) The information set forth under the captions
"Introduction-Establishment of the Offer Price" and "Effects of the Offer" in
the Offer to Purchase is incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d) The information set forth in "Introduction," "Certain Information
Concerning the Purchasers" and in Schedule I of the Offer to Purchase is
incorporated herein by reference.
(e)-(g) The information set forth in "Certain Information Concerning the
Purchasers" and Schedule I in the Offer to Purchase is incorporated herein by
reference. Other than as set forth in the Offer to Purchase, during the last
five years, neither the Purchasers nor, to the best of the knowledge of the
Purchasers, any person named on Schedule I to the Offer to Purchase nor any
affiliate of the Purchasers (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding were or are subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, Federal or State securities laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
(a)-(b) Not applicable.
Item 4. Source and Amount of Funds or Other Consideration.
(a) The information set forth under the caption "Source of Funds" of the
Offer to Purchase is incorporated herein by reference.
(b)-(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
(a)-(e) and (g) The information set forth under the caption "Future Plans"
in the Offer to Purchase is incorporated herein by reference.
(f) Not applicable.
<PAGE>
CUSIP NO. None 14D-1 Page __ of __ Pages
Item 6. Interest in Securities of the Subject Company.
(a) and (b) The information set forth in "Certain Information Concerning
the Purchaser" of the Offer to Purchase is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect
to the Subject Company's Securities.
The information set forth in "Certain Information Concerning the Purchaser"
of the Offer to Purchase is incorporated herein by reference.
Item 8. Persons Retained, Employed or To Be Compensated.
None.
Item 9. Financial Statements of Certain Bidders.
Not applicable.
Item 10. Additional Information.
(a) None.
(b)-(c) The information set forth in "Certain Legal Matters" of the Offer
to Purchase is incorporated herein by reference.
(d) None.
(e) None.
(f) Reference is hereby made to the Offer to Purchase and the related
Agreement of Assignment and Transfer, copies of which are attached hereto as
Exhibits (a)(1) and (a)(2), respectively, and which are incorporated herein in
their entirety by reference.
Item 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase dated February 10, 1999
(a)(2) Agreement of Assignment and Transfer
(a)(3) Form of Letter to Unitholders dated February 10, 1999
(a)(4) Form of Advertisement (if applicable)
(b)(1) Loan Agreement between Madison/OHI Liquidity Investors, LLC and
Omega Healthcare Investors, Inc. dated as of October 2, 1998.
(c)-(f) Not applicable.
<PAGE>
CUSIP NO. None 14D-1 Page __ of __ Pages
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: February 10, 1999
Madison Liquidity Investors 104, LLC
By Ronald M. Dickerman, Managing Director
By: /s/ Ronald M. Dickerman
Ronald M. Dickerman, Managing Director
Madison/OHI Liquidity Investors, LLC
By Ronald M. Dickerman, Managing Director
By: /s/ Ronald M. Dickerman
Ronald M. Dickerman, Managing Director
<PAGE>
CUSIP NO. None 14D-1 Page __ of __ Pages
EXHIBIT INDEX
Exhibit Description Page
(a)(1) Offer to Purchase dated February 10, 1999
(a)(2) Agreement of Assignment and Transfer
(a)(3) Form of Letter to Unitholders dated February 10, 1999
(a)(4) Form of Advertisement (if applicable)
(b)(1) Loan Agreement between Madison/OHI Liquidity Investors, LLC
and Omega Healthcare Investors, Inc. dated as of
October 2, 1998.
OFFER TO PURCHASE FOR CASH
LIMITED PARTNERSHIP INTERESTS
OF
ENSTAR INCOME PROGRAM IV-3, L.P.
a Georgia Limited Partnership
AT
$161.00 PER UNIT
by
MADISON LIQUIDITY INVESTORS 104, LLC
(the "Purchaser")
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD
TIME, ON MARCH 11, 1999, UNLESS THE OFFER IS EXTENDED.
Madison Liquidity Investors 104, LLC (the "Purchaser")(1) hereby seeks to
acquire limited partnership interests (the "Units") in Enstar Income Program
IV-3, L.P., a Georgia limited partnership (the "Partnership"). The Purchaser
hereby offers to purchase up to 3,950 Units at $161.00 per Unit (the "Purchase
Price"), in cash, reduced by (i) the $25.00 transfer fee (per transfer, not per
Unit) charged by the Partnership and (ii) any cash distributions made on or
after February 10, 1999 (the "Offer Date"), without interest, upon the terms and
subject to the conditions set forth in this Offer to Purchase (the "Offer to
Purchase") and in the related Agreement of Assignment and Transfer and
accompanying documents, as each may be supplemented or amended from time to time
(which together constitute the "Offer"). The Offer will expire at 5:00 p.m.,
Eastern Standard Time, on March 11, 1999 or such other date to which this Offer
may be extended (the "Expiration Date"). The Units sought pursuant to the Offer
represent 9.9% of the Units outstanding as of September 30, 1998. Neither Enstar
Communications Corporation, the General Partner of Enstar Income Program IV-3,
L.P. (the "General Partner"), nor Enstar Income Program IV-3, L.P., or their
respective affiliates or subsidiaries are parties to this Offer.
Unitholders are urged to consider the following factors:
- Unitholders who tender their Units will give up the opportunity to
participate in any future benefits from the ownership of Units,
including potential future distributions by the Partnership, and the
purchase price per Unit payable to a tendering Unitholder by the
Purchaser may be less than the total amount which might otherwise be
received by the Unitholder with respect to the Units over the
remaining term of the Partnership.
- The Purchaser is making the Offer for investment purposes and with the
intention of making a profit from the ownership of the Units. In
establishing the purchase price of $161.00 per Unit, the Purchaser is
motivated to establish the lowest price which might be acceptable to
Unitholders consistent with the Purchaser's objectives. Such
objectives and motivations may conflict with the interests of the
Unitholders in receiving the highest price for their Units.
- The net asset value of the Units, as disseminated by the General
Partner, is $235.00 to $275.00 per Unit, which is more than the Offer
Price. However, the Purchaser believes that the net asset value does
not necessarily reflect the fair market value of a Unit, which may be
higher or lower than the net asset value depending on several factors.
The General Partner estimates net asset value based upon a
hypothetical sale of all of the Partnership's assets, as of a
hypothetical date, and the distribution to the Limited Partners and
the General Partner of the gross proceeds of such sales, net of
related indebtedness. Additionally, the net asset value estimate
prepared by the General Partner does not take into account (i) future
changes in market conditions, (ii) timing considerations or (iii)
unforeseeable costs associated with winding up the Partnership.
- Although not necessarily an indication of value, the $161.00 purchase
price per Unit is approximately 1.7% higher than the $158.34 weighted
average selling price for the Units (as adjusted for typical
commissions), as reported by The Partnership Spectrum, an independent,
third-party source. As further reported by The Partnership Spectrum
during the two month period ended November 1998, there were 2 trades
conducted representing an aggregate of 58 Units sold or transferred.
Because the gross sales prices reported by The Partnership Spectrum do
not necessarily reflect the net sales proceeds received by sellers of
Units, which typically are reduced by commissions and other secondary
market transaction costs to amounts less than the reported prices, the
Purchaser cannot, and does not, know whether the information compiled
by The Partnership Spectrum is accurate or complete.
- Our offer price of $161.00 per Unit is 15% higher than recent tender
offers from Smithtown Bay, LLC of $140.00 and 109% higher than the
Everest offer of $77.00 per Unit.
- After the consummation of the Offer, and unless otherwise prohibited,
the Purchaser will vote the Units acquired in the Offer in its own
interest, which may be different from or in conflict with the
interests of the remaining Unitholders.
- --------
(1) For purposes of the applicable securities law, the Purchaser's sole member
and funding source, Madison/OHI Liquidity Investors, LLC ("Madison/OHI"),
is a co-bidder to this Offer. As such, references in this Offer to the
"bidder" may be deemed to include Madison/OHI. However, the purchaser of
the Units will be Madison Liquidity Investors 104, LLC.
<PAGE>
- In the event a total of more than 3,950 Units are tendered, the
Purchasers may accept only a portion of the Units tendered by a
Unitholder on a pro rata basis.
- The Partnership paid distributions totaling $125,900 and $377,800
during the three and nine months ended September 30, 1998
respectively. However, the Partnership has stated that there can be no
assurances regarding the level, timing or continuation of future
distributions.
- The eventual transfer of all tendered Units is subject to the final
approval of the Partnership or General Partner and is subject to their
discretion.
THE OFFER TO PURCHASE IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF UNITS BEING
TENDERED. A UNITHOLDER MAY TENDER ANY OR ALL UNITS OWNED BY SUCH UNITHOLDER.
The Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, (i) to extend the period of time during which the Offer
is open and thereby delay acceptance for payment of, and the payment for, any
Units, (ii) upon the occurrence of any of the conditions specified in Section 14
of this Offer to Purchase, to terminate the Offer and not accept for payment any
Units not theretofore accepted for payment or paid for, or to delay the
acceptance for payment of, or payment for, any Units not theretofore accepted
for payment or paid for, and (iii) to amend the Offer in any respect. Notice of
any such extension, termination or amendment will promptly be disseminated to
Unitholders in a manner reasonably designed to inform Unitholders of such change
in compliance with Rule 14d-4(c) under the Securities Exchange Act of 1934 (the
"Exchange Act"). In the case of an extension of the Offer, such extension will
be followed by a press release or public announcement which will be issued no
later than 9:00 a.m., Eastern Standard Time, on the next business day after the
scheduled Expiration Date, in accordance with Rule 14e-1(d) under the Exchange
Act.
February 10, 1999
IMPORTANT
Any Unitholder desiring to tender any Units should complete and sign the
Agreement of Assignment and Transfer (a copy of which is printed on yellow paper
and enclosed with this Offer to Purchase) in accordance with the instructions to
the Agreement of Assignment and Transfer (see Instructions to Complete the
Agreement of Assignment and Transfer) and mail or deliver an executed Agreement
of Assignment and Transfer and any other required documents to Madison Liquidity
Investors 104, LLC in care of its Tender Agent, Gemisys Tender Services (the
"Tender Agent" or "Gemisys"), at the address set forth below.
MADISON LIQUIDITY INVESTORS 104, LLC
c/o Gemisys Tender Services
7103 South Revere Parkway
Englewood, Colorado 80112
Telephone: (303) 705-6390
Facsimile: (303) 705-6276 (No Agreements of Assignment and Transfer will be
accepted by fax)
Questions or requests for assistance or additional copies of this Offer to
Purchase or the Agreement of Assignment and Transfer may be directed to Madison
Liquidity Investors 104, LLC in care of Gemisys at (303) 705-6390.
- ----------
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY REPRESENTATION
ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY INFORMATION OTHER THAN AS CONTAINED
HEREIN OR IN THE AGREEMENT OF ASSIGNMENT AND TRANSFER. NO SUCH RECOMMENDATION,
INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
- ----------
The Partnership is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file reports and other
information with the Securities and Exchange Commission (the "SEC" or
"Commission") relating to its business, financial condition and other matters.
Such reports and other information are available on the Commission's electronic
data gathering and retrieval (EDGAR) system, at its internet web site at
www.sec.gov, may be inspected at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and are available for inspection and copying at the
regional offices of the Commission located in Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Room of the Commission in Washington, D.C.
at prescribed rates.
The Purchaser has or will be filing with the Commission a Tender Offer
Statement on Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 of the
General Rules and Regulations under the Exchange Act, furnishing certain
additional information with respect to the Offer. Such statement and any
amendments thereto, including exhibits, may be inspected and copies may be
obtained from the offices of the Commission in the manner specified above.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION.................................................................. 1
TENDER OFFER
Section 1. Terms of the Offer.......................................... 2
Section 2. Procedures for Tendering Units.............................. 2
Section 3. Acceptance for Payment and Payment for Units................ 2
Section 4. Proration................................................... 3
Section 5. Withdrawal Rights........................................... 3
Section 6. Extension of Tender Period; Termination; Amendment.......... 3
Section 7. Certain Federal Income Tax Consequences..................... 4
Section 8. Effects of the Offer........................................ 4
Section 9. Future Plans................................................ 4
Section 10. The Business of the Partnership............................. 5
Section 11. Conflicts of Interest....................................... 6
Section 12. Certain Information Concerning the Purchaser................ 6
Section 13 Source of Funds............................................. 7
Section 14. Conditions of the Offer..................................... 7
Section 15. Certain Legal Matters....................................... 8
Section 16. Fees and Expenses........................................... 8
Section 17. Miscellaneous............................................... 8
Schedule I. The Purchaser and Its Respective Principals................. 9
<PAGE>
To the Unitholders of Enstar Income Program IV-3, L.P.:
INTRODUCTION
The Purchaser hereby offers to purchase up to 3,950 of the outstanding
units of limited partnership interest ("Units"), representing approximately 9.9%
of the Units outstanding, in Enstar Income Program IV-3, L.P. (the
"Partnership") at a purchase price of $161.00 per Unit, in cash, reduced by (i)
the $25.00 transfer fee (per transfer, not per Unit) charged by the Partnership
and (ii) any cash distributions made on or after February 10, 1999 (the "Offer
Date"), upon the terms and subject to the conditions set forth in the Offer. The
Offer will expire at 5:00 p.m., Eastern Standard Time, on March 11, 1999, or
such other date to which this Offer may be extended (the "Expiration Date"). The
Offer is not conditioned on any aggregate minimum number of Units being
tendered. The transfer of all tendered Units is subject to the approval of the
Partnership and/or the General Partner. Unitholders who tender their Units will
not be obligated to pay any brokerage commissions in connection with the tender
of Units.
For further information concerning the Purchaser, see Section 12 below and
Schedule "I".
Establishment of the Offer Price
The Purchaser has set the Offer Price at $161.00 per Unit, in cash, reduced
by (i) the $25.00 transfer fee (per transfer, not per Unit) charged by the
Partnership and (ii) any cash distributions made on or after February 10, 1999.
The Purchaser established the Offer Price based on the General Partner's
net asset value range of $235.00 to $275.00 per Unit and the Purchaser's own
analysis that concluded the value of the Partnership Units could range as high
as $358.06. The Purchaser conducted internal analysis on the Partnership based
on the September 30, 1998 Quarterly Report filed on Form 10-Q and the Annual
Report filed on Form 10-K for the year ending December 31, 1997. The Purchaser
estimated projected cash flow for 1998 of $1,368,128 and applied a gross
multiple of ten times this cash flow which yielded a value of $13,681,288 for
the Partnership's cable systems. The Purchaser then added the net cash of the
Partnership as of September 30, 1998 and subtracted the General Partner's 1%
share of sales and refinancing proceeds to arrive at a total value of
$14,286,669 or $358.06 per Partnership Unit. The Purchaser believes that the
cash flow multiple utilized by it is within a range of multiples currently
employed in the marketplace for cable systems of this age and quality.
Therefore, based on the General Partner's net asset value range and the
Purchaser's own internal analysis, the Purchaser believes the net asset value of
the Partnership to be a range of $235.00 per Unit to $358.06 per Unit.
The Purchaser's Offer Price represents a discount range of 31.5% to 55.0%
to the Purchaser's estimated net asset value range of $235.00 to $358.06 per
Unit. The Purchaser chose the Offer Price based primarily on the motivation to
establish the lowest price which might be acceptable to Unitholders consistent
with the Purchaser's objectives. In addition, the Purchaser took into account
the lack of liquidity, lack of control over the Partnership and certain tax
considerations in establishing the Offer Price.
The net asset value of the Units, as disseminated by the General Partner,
is a range of $235.00 to $275.00 per Unit. However, the Purchaser believes that
the net asset value does not necessarily reflect the fair market value of a
Unit, which may be higher or lower than the net asset value depending on several
factors. The Purchaser does not propose that the Offer Price represents the fair
market value of the Units.
As the Purchaser has had no access to the books and records of the
Partnership, it has based its analysis upon publicly available information and
its own investigation and analysis. The Offer Price is not the result of arm's
length negotiations between the Purchaser and the Partnership.
The Offer Price represents the price at which the Purchaser is willing to
purchase Units. No independent person has been retained to evaluate or render
any opinion with respect to the fairness of the Offer Price and no
representation is made by the Purchaser or any affiliate of the Purchaser as to
such fairness. Other measures of the value of the Units may be relevant to
Unitholders. Unitholders are urged to consider carefully all of the information
contained herein and consult with their own advisors, tax, financial or
otherwise, in evaluating the terms of the Offer before deciding whether to
tender Units.
Additional Factors to Consider When Tendering.
The Purchaser believes that the following are potentially beneficial
aspects of the Offer that should be considered when deciding whether or not to
tender Units:
- - The Partnership paid distributions totaling $125,900 and $377,800 during
the three and nine months ended September 30, 1998. However, there can be
no assurances regarding the level, timing or continuation of future
distributions.
- - For Unitholders who sell their Units in accordance with this Offer, 1999
will be the final year for which you receive a K-1 Tax Form from the
Partnership assuming that the transfer of your Units is effectuated by the
General Partner in 1999. Many investors who have tax professionals prepare
their taxes find the cost of filing K-1s to be burdensome, particularly if
more than one limited partnership is owned.
- - The decision to accept the Offer eliminates the potential uncertainty
related to waiting for future distributions of sales and final liquidation
proceeds. Furthermore, by selling the Units for cash now, the Unitholder
would enjoy the ability to redeploy investment assets into alternative and
potentially more liquid investments.
General Background Information
Certain information contained in this Offer to Purchase which relates to,
or represents, statements made by the Partnership or the General Partner, has
been derived from information provided in reports filed by the Partnership with
the Securities and Exchange Commission. The Purchaser expressly disclaims any
responsibility for the information included in these filed reports and extracted
in this discussion.
According to publicly available information, as of September 30, 1998,
there were 39,900 Units issued and outstanding. As of the Partnership's most
recent filing on Form 10-K for the year ended December 31, 1997 these
outstanding Units were held by approximately 1030 Unitholders. Certain
affiliates of the Purchaser currently beneficially own an aggregate of 1,969 or
approximately 4.9% of the outstanding Units (see Section 12 of the Tender Offer
- - "Certain Information Concerning the Purchaser" below).
Tendering Unitholders will not be obligated to pay brokerage fees or
commissions on the sale of the Units to the Purchaser pursuant to the Offer. The
Purchaser will pay all charges and expenses incurred in connection with the
Offer with the exception of the transfer fees that will be paid by the
Unitholder via a reduction in the proceeds from the sale of the Units. The
Purchaser desires to purchase all of the Units tendered by each Unitholder, up
to 9.9% of the total outstanding Units and subject to Proration, when
applicable, except where otherwise prohibited. (See Section 4 to the Tender
Offer-"Proration" below).
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to Unitholders pursuant to the Offer, such increased consideration will
be paid with respect to all Units that are purchased pursuant to the Offer,
whether or not such Units were tendered prior to such increase in consideration.
Unitholders are urged to read this Offer to Purchase and the accompanying
Agreement of Assignment and Transfer carefully before deciding whether to tender
their Units.
1
<PAGE>
TENDER OFFER
Section 1. Terms of the Offer.
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for Units validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with Section 5 of this Offer to
Purchase. The term "Expiration Date" shall mean 5:00 p.m., Eastern Standard
Time, on March 11, 1999, unless and until the Purchaser shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Offer, as so extended by
the Purchaser, shall expire.
The Offer is conditioned on satisfaction of certain conditions. (See
Section 14, which sets forth in full the conditions of the Offer.) The Purchaser
reserves the right (but shall not be obligated), in its sole discretion and for
any reason, to waive any or all of such conditions. If, by the Expiration Date,
any or all of such conditions have not been satisfied or waived, the Purchaser
reserves the right (but shall not be obligated) to (i) decline to purchase any
of the Units tendered, terminate the Offer and return all tendered Units to
tendering Unitholders, (ii) waive all the unsatisfied conditions and, subject to
complying with the applicable rules and regulations of the Commission, purchase
all Units validly tendered, (iii) extend the Offer and, subject to the right of
Unitholders to withdraw Units until the Expiration Date, retain the Units that
have been tendered during the period or periods for which the Offer is extended
or (iv) amend the Offer.
Section 2. Procedures for Tendering Units.
Valid Tender. For Units to be validly tendered pursuant to the Offer, a properly
completed and duly executed Agreement of Assignment and Transfer (a copy of
which is enclosed and printed on yellow paper) with any other documents required
by the Agreement of Assignment and Transfer, or instructions thereto, must be
received by the Purchaser in care of its Tender Agent at its address, Madison
Liquidity Investors 104, LLC c/o Gemisys Tender Services, 7103 South Revere
Parkway, Englewood, Colorado 80112 on or prior to the Expiration Date. A
Unitholder may tender any or all Units owned by such Unitholder.
In order for a tendering Unitholder to participate in the Offer, the
Unitholder must complete, in its entirety, the following documents that
accompany this Offer to Purchase:
(1) The Agreement of Assignment and Transfer; and
(2) Any other applicable documents included herewith or in the
Instructions to Complete the Agreement of Assignment and Transfer.
In order for a tendering Unitholder to participate in the Offer, Units must
be validly tendered and not withdrawn prior to the Expiration Date, which is
5:00 p.m., Eastern Standard Time, on March 11, 1999, or such date to which the
Offer may be extended.
The method of delivery of the Agreement of Assignment and Transfer and all
other required documents is at the option and risk of the tendering Unitholder
and delivery will be deemed made only when actually received by the Tender
Agent.
Backup Federal Income Tax Withholding. To prevent the possible application of
31% backup federal income tax withholding with respect to payment of the Offer
Price for Units purchased pursuant to the Offer, a tendering Unitholder must
provide the Tender Agent with such Unitholder's correct taxpayer identification
number ("TIN") or Social Security Number and make certain certifications that
such Unitholder is not subject to backup federal income tax withholding. Each
tendering Unitholder must insert in the Agreement of Assignment and Transfer the
Unitholder's taxpayer identification number or social security number in the
space provided on the signature page to the Agreement of Assignment and
Transfer. The Agreement of Assignment and Transfer also includes a substitute
Form W-9, which contains the certifications referred to above. (See the
Instructions to the Agreement of Assignment and Transfer and the accompanying
Tax Certification page).
FIRPTA Withholding. To prevent the withholding of federal income tax in an
amount equal to 10% of the sum of the Offer Price plus the amount of Partnership
liabilities allocable to each Unit tendered, each Unitholder must complete the
FIRPTA Affidavit included in the Agreement of Assignment and Transfer certifying
such Unitholder's TIN or Social Security Number and address and that the
Unitholder is not a foreign person. (See the Instructions to the Agreement of
Assignment and Transfer and Section 7-"Certain Federal Income Tax
Consequences").
Other Requirements. By executing an Agreement of Assignment and Transfer as set
forth above, a tendering Unitholder irrevocably appoints the designees of the
Purchaser as such Unitholder's proxy, in the manner set forth in the Agreement
of Assignment and Transfer, each with full power of substitution, to the full
extent of such Unitholder's rights with respect to the Units tendered by such
Unitholder and accepted for payment by the Purchaser. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts such Units
for payment and has received confirmation from the General Partner that the
Units have been transferred. Upon such acceptance for payment and confirmation
from the General Partner of the transfer, all prior proxies given by such
Unitholder with respect to such Units will, without further action, be revoked,
and no subsequent proxies may be given (and if given will not be effective). The
designees of the Purchaser will, with respect to such Units, be empowered to
exercise all voting and other rights of such Unitholder as they in their sole
discretion may deem proper at any meeting of Unitholders, by written consent or
otherwise. In addition, by executing an Agreement of Assignment and Transfer,
and not otherwise timely withdrawing pursuant to the provisions of Section 5
herein, a Unitholder also assigns to the Purchaser all of the Unitholder's
rights to receive distributions from the Partnership with respect to the Units
which are accepted for payment and purchased pursuant to the Offer, including
those cash distributions made on or after the Offer Date-February 10, 1999.
Determination of Validity; Rejection of Units; Waiver of Defects; No Obligation
to Give Notice of Defects. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Units
pursuant to the procedures described above will be determined by the Purchaser,
in its sole discretion, which determination shall be final and binding. The
Purchaser reserves the absolute right to reject any or all tenders if not in
proper form or if the acceptance of, or payment for, the Units tendered may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the right to waive any defect or irregularity in any tender with respect to any
particular Units of any particular Unitholder, and the Purchaser's
interpretation of the terms and conditions of the Offer (including the Agreement
of Assignment and Transfer and the Instructions thereto) will be final and
binding. Neither the Purchaser, the Tender Agent, nor any other person will be
under any duty to give notification of any defects or irregularities in the
tender of any Units or will incur any liability for failure to give any such
notification.
A tender of Units pursuant to any of the procedures described above will
constitute a binding agreement between the tendering Unitholder and the
Purchaser upon the terms and subject to the conditions of the Offer, including
the tendering Unitholder's representation and warranty that (i) such Unitholder
owns the Units being tendered within the meaning of Rule 14e-4 under the
Exchange Act and (ii) the tender of such Units complies with Rule 14e-4. Rule
14e-4 requires, in general, that a tendering security holder will actually be
able to deliver the security subject to the tender offer, and is of concern
particularly to any Unitholders who have granted options to sell or purchase the
Units, hold option rights to acquire such securities, maintain "short" positions
in the Units (i.e., have borrowed the Units) or have loaned the Units to a short
seller. Because of the nature of limited partnership interests, the Purchaser
believes it is unlikely that any option trading or short selling activity exists
with respect to the Units. In any event, a Unitholder will be deemed to tender
Units in compliance with Rule 14e-4 and the Offer if the holder is the record
owner of the Units and the holder (i) delivers the Units pursuant to the terms
of the Offer, (ii) causes such delivery to be made, (iii) guarantees such
delivery, (iv) causes a guaranty of such delivery, or (v) uses any other method
permitted in the Offer (such as a facsimile delivery of the Agreement of
Assignment and Transfer).
Section 3. Acceptance for Payment and Payment for Units.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment, and will pay for, Units
validly tendered and not withdrawn in accordance with Section 5, as promptly as
practicable following the Expiration Date. The tendering Unitholders will be
paid promptly following (i) receipt of a valid, properly and fully executed
Agreement of Assignment and Transfer and (ii) receipt by the Purchaser of the
Partnership's confirmation that the transfer of Units have been effectuated,
subject to Section 4 ("Proration") of this Offer to Purchase. The Tender Agent
will issue payment only to the Unitholder of record and payment will be
forwarded only to the address listed on the Agreement of Assignment and
Transfer.
2
<PAGE>
For purposes of the Offer, the Purchaser shall be deemed to have been
accepted for payment (and thereby purchased) tendered Units when the Purchaser
is in receipt of the Partnership's confirmation that the transfer of Units has
been effectuated. Upon the terms and subject to the conditions of the Offer,
payment for the Units purchased pursuant to the Offer will in all cases be made
by the Tender Agent.
Under no circumstances will interest be paid on the Offer Price by reason
of any delay in making such payment.
If any tendered Units are not purchased for any reason, the Agreement of
Assignment and Transfer with respect to such Units not purchased will be of no
force or effect. If, for any reason whatsoever, acceptance for payment of, or
payment for, any Units tendered pursuant to the Offer is delayed or the
Purchaser is unable to accept for payment, purchase or pay for the Units
tendered pursuant to the Offer, then without prejudice to the Purchaser's rights
under Section 14 (but subject to compliance with Rule 14e-1(c) under the
Exchange Act), the Tender Agent may, nevertheless, on behalf of the Purchaser,
retain tendered Units, subject to any limitations of applicable law, and such
Units may not be withdrawn except to the extent that the tendering Unitholders
are entitled to withdrawal rights as described in Section 5.
If, prior to the Expiration Date, the Purchaser shall increase the
consideration offered to Unitholders pursuant to the Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant to the
Offer, whether or not such Units were tendered prior to such increase.
Unless otherwise prohibited, the Purchaser reserves the right to transfer
or assign, in whole or from time to time in part, the right to purchase Units
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the Offer or prejudice the rights
of tendering Unitholders to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
Section 4. Proration.
If not more than 3,950 Units are validly tendered and not properly
withdrawn prior to the Expiration Date, the Purchaser, upon the terms and
conditions of the Offer and subject to the approval of the Partnership and/or
the General Partner, will accept for payment all such Units so tendered.
If more than 3,950 Units are validly tendered and not properly withdrawn on
or prior to the Expiration Date, the Purchaser, upon the terms and conditions of
the Offer and subject to the approval of the Partnership and/or the General
Partner, will accept for payment and pay for an aggregate of 3,950 Units so
tendered, pro rata according to the number of Units validly tendered by each
Limited Partner and not properly withdrawn on or prior to the Expiration Date,
on a pro rata basis, with appropriate adjustments to avoid tenders of fractional
Units and purchases that may otherwise violate the Partnership's Limited
Partnership Agreement, where applicable.
In the event that proration is required, the Purchaser will determine the
precise number of Units to be accepted and will forward payment together with a
notice explaining the final results of the proration as soon as practicable. The
Purchaser will not pay for any Units tendered until after the final proration
factor has been determined.
Section 5. Withdrawal Rights.
Except as otherwise provided in this Section 5, all tenders of Units
pursuant to the Offer are irrevocable, provided that Units tendered pursuant to
the Offer may be withdrawn at any time prior to the Expiration Date.
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Tender Agent (i.e. a valid notice of withdrawal must be
received after February 10, 1999 but on or before March 11, 1999, or such other
date to which this Offer may be extended) at the address set forth in the
attached Agreement of Assignment and Transfer. Any such notice of withdrawal
must specify the name of the person who tendered the Units to be withdrawn and
must be signed by the person(s) who signed the Agreement of Assignment and
Transfer and must also contain a Medallion Signature Guarantee.
If purchase of, or payment for, Units is delayed for any reason, or if the
Purchaser is unable to purchase or pay for Units for any reason, then, without
prejudice to the Purchaser's rights under the Offer, tendered Units may be
retained by the Tender Agent on behalf of the Purchaser and may not be withdrawn
except to the extent that tendering Unitholders are entitled to withdrawal
rights as set forth in this Section 5, subject to Rule 14e-1(c) under the
Exchange Act, which provides, in part, that no person who makes a tender offer
shall fail to pay the consideration offered or return the securities (i.e.
Units) deposited by or on behalf of security holders promptly after the
termination or withdrawal of the tender offer.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. Neither the
Purchaser, the Tender Agent, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
will incur any liability for failure to give any such notification.
Any Units properly withdrawn will be deemed not to be validly tendered for
purposes of the Offer. Withdrawn Units may be re-tendered, however, by following
the procedures described in Section 2 at any time prior to the Expiration Date.
Section 6. Extension of Tender Period; Termination; Amendment.
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, (i) to extend the period of time during which the
Offer is open and thereby delay acceptance for payment of, and the payment for,
validly tendered Units, (ii) upon the occurrence or failure to occur of any of
the conditions specified in Section 14, to delay the acceptance for payment of,
or payment for, any Units not heretofore accepted for payment or paid for, or to
terminate the Offer and not accept for payment any Units not theretofore
accepted for payment or paid for, by giving written notice, of such termination
to the Tender Agent, and (iii) to amend the Offer in any respect (including,
without limitation, by increasing or decreasing the consideration offered or the
number of Units being sought in the Offer or both or changing the type of
consideration) by giving written notice of such amendment to the Tender Agent.
Any extension, termination or amendment will be followed as promptly as
practicable by public announcement, the announcement in the case of an extension
to be issued no later than 9:00 a.m., Eastern Standard Time, on the next
business day after the previously scheduled Expiration Date, in accordance with
the public announcement requirement of Rule 14d-4(c) under the Exchange Act.
Without limiting the manner in which the Purchaser may choose to make any public
announcement, except as provided by applicable law (including Rule 14d-4(c)
under the Exchange Act), the Purchaser will have no obligation to publish,
advertise or otherwise communicate any such public announcement, other than by
issuing a release to the Dow Jones News Service. The Purchaser may also be
required by applicable law to disseminate to Unitholders certain information
concerning the extensions of the Offer or any other material changes in the
terms of the Offer.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Units) is delayed in its payment for Units
or is unable to pay for Units pursuant to the Offer for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Tender Agent
may retain tendered Units on behalf of the Purchaser, and such Units may not be
withdrawn except to the extent tendering Unitholders are entitled to withdrawal
rights as described in Section 5. However, the ability of the Purchaser to delay
payment for Units that the Purchaser has accepted for payment is limited by Rule
14e-1 under the Exchange Act, which requires that the Purchaser pay the
consideration offered or return the securities deposited by or on behalf of
holders of securities promptly after the termination or withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an
offer must remain open following a material change in the terms of the Offer or
information concerning the Offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the change in the terms or information.
With respect to a change in price or a change in percentage of securities sought
(other than an increase of not more than 2% of the securities sought), however,
a minimum ten business day period is generally required to allow for adequate
dissemination to security holders and for investor response. As used in this
Offer to Purchase, "business day" means any day other than a Saturday, Sunday or
a federal holiday, and consists of the time period from 12:01 a.m. through 12:00
midnight, Eastern Standard Time.
3
<PAGE>
Section 7. Certain Federal Income Tax Consequences.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED HEREIN FOR
GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF TAXATION
THAT MAY BE RELEVANT TO A PARTICULAR UNITHOLDER. For example, this discussion
does not address the effect of any applicable foreign, state, local or other tax
laws other than federal income tax laws. Certain Unitholders (including trusts,
foreign persons, tax-exempt organizations or corporations subject to special
rules, such as life insurance companies or "S Corporations") may be subject to
special rules not discussed below. This discussion is based on the Internal
Revenue Code of 1986, as amended (the "I.R.C." or "Code"), existing regulations,
court decisions and Internal Revenue Service ("IRS") rulings and other
pronouncements. EACH UNITHOLDER TENDERING UNITS SHOULD CONSULT SUCH UNITHOLDER'S
OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH UNITHOLDER OF
ACCEPTING THE OFFER, INCLUDING THE APPLICATION OF THE ALTERNATIVE MINIMUM AND
FEDERAL, FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
The following discussion is based on the assumption that the Partnership is
treated as a partnership for federal income tax purposes and is not a "publicly
traded partnership" as that term is defined in the Code.
Gain or Loss. A taxable Unitholder will recognize a gain or loss on the sale of
such Unitholder's Units in an amount equal to the difference between (i) the
amount realized by such Unitholder on the sale and (ii) such Unitholder's
adjusted tax basis in the Units sold. The amount realized by a Unitholder will
include the Unitholder's share of the Partnership's liabilities, if any (as
determined under I.R.C. ss.752 and the regulations thereunder). If the
Unitholder is a corporation and reports a loss on the sale, such loss generally
could not be currently deducted by such Unitholder except against such
Unitholder's capital gains from such other investments. If the Unitholder is an
individual and reports a loss on the sale, such loss generally could not be
deducted by such Unitholder except against such Unitholder's capital gains from
such other investments and up to $3,000 in the aggregate against ordinary
income. Assuming the activities engaged in by the Partnership constitute passive
activities as defined in I.R.C. ss.469, such loss would be treated as a passive
activity loss. (See "Suspended 'Passive Activity Losses'" below.)
The adjusted tax basis in the Units of a Unitholder will depend upon
individual circumstances. (See also "Partnership Allocations in Year of Sale"
below.) Each Unitholder who plans to tender hereunder should consult with the
Unitholder's own tax advisor as to the Unitholder's adjusted tax basis in the
Unitholder's Units and the resulting tax consequences of a sale.
If any portion of the amount realized by a Unitholder is attributable to
such Unitholder's share of "unrealized receivables" or "substantially
appreciated inventory items" as defined in I.R.C. ss.751, a corresponding
portion of such Unitholder's gain or loss will be treated as ordinary gain or
loss. It is possible that the basis allocation rules of I.R.C. ss.751 may result
in a Unitholder's recognizing ordinary income with respect to the portion of the
Unitholder's amount realized on the sale of a Unit that is attributable to such
items while recognizing a capital loss with respect to the remainder of the
Unit.
A tax-exempt Unitholder (other than an organization described in I.R.C.
ss.ss.501(c)(7) (social club), 501(c)(9) (voluntary employee benefit
association), 501(c)(17) (supplementary unemployment benefit trust), or
501(c)(20) (qualified group legal services plan)) should not be required to
recognize unrelated trade or business income upon the sale of its Units pursuant
to the Offer, assuming that such Unitholder does not hold its Units as a
"dealer" and has not acquired such Units with debt financed proceeds.
Partnership Allocations in Year of Sale. A tendering Unitholder will be
allocated the Unitholder's pro rata share of the annual taxable income and
losses from the Partnership, in accordance with the terms and conditions of the
Partnership Agreement, with respect to the Units sold for the period through the
date of sale, even though such Unitholder will assign to the Purchaser his, her
or its rights to receive certain cash distributions with respect to such Units.
Such allocations and any Partnership distributions for such period would affect
a Unitholder's adjusted tax basis in the tendered Units and, therefore, the
amount of gain or loss recognized by the Unitholder on the sale of the Units.
Possible Tax Termination. The Code provides that if 50% or more of the capital
and profits interests in a partnership are sold or exchanged within a single
12-month period, such partnership generally will terminate for federal income
tax purposes. It is possible that the Partnership could terminate for federal
income tax purposes as a result of consummation of the Offer. If so, the
Partnership will be treated as having made a liquidating distribution of an
undivided interest in all of its assets to the Unitholders, in proportion to
their respective interests in the Partnership's properties, the partners of the
Partnership after consummation of the Offer (i.e., the non-tendering Unitholders
and the Purchaser) would be treated as having recontributed their interests in
Partnership assets to a new Partnership, and the capital accounts of all
partners would be restated. A Unitholder would recognize gain on the liquidating
distribution only to the extent that the amount of cash deemed distributed to
the Unitholder exceeded the Unitholder's basis in the Units. Depending on the
Unitholders' basis in their Units and the Partnership's tax basis in its
property, a tax termination could affect, perhaps adversely, the amount of
depreciation deductions reported by the Partnership for the period following the
date of such termination. A tax termination of the Partnership also could have
the adverse effect on Unitholders whose tax year is not the calendar year, of
the inclusion of more than one year of Partnership tax items in one tax return
of such Unitholders, resulting in a "bunching" of income or deductions. In
addition, a tax termination could have the adverse effect on non-tendering
Unitholders who subsequently dispose of their Units at a gain of requiring them
to treat a greater portion of such gain as ordinary income (due to the
application of I.R.C. ss.735) than would otherwise be required absent a tax
termination of the Partnership.
Suspended "Passive Activity Losses". A Unitholder who sells all of the
Unitholder's Units would be able to deduct "suspended" passive activity losses
from the Partnership, if any, in the year of sale free of the passive activity
loss limitation. If it is determined that the Partnership is engaged in
activities that are defined by I.R.C. ss.469 as "passive activities", the
ability of a Unitholder, as a limited partner of the Partnership, who or which
is subject to the passive activity loss rules, to claim tax losses from the
Partnership is limited. Upon sale of all of the Unitholder's Units, such
Unitholder would be able to use any "suspended" passive activity losses first
against gain, if any, on sale of the Unitholder's Units and then against any
other net income or gain from all other passive activities and then against any
non-passive income.
Foreign Unitholders. Gain realized by a foreign Unitholder on a sale of a Unit
pursuant to the Offer will be subject to federal income tax. Under I.R.C.
ss.1445, the transferee of a partnership interest held by a foreign person is
generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. The Purchaser will withhold 10% of the amount
realized by a tendering Unitholder from the purchase price payment to be made to
such Unitholder unless the Unitholder properly completes and signs the FIRPTA
Affidavit included as part of the Tax Certification certifying the Unitholder's
TIN, that such Unitholder is not a foreign person and the Unitholder's address.
Amounts withheld would be creditable against a foreign Unitholder's federal
income tax liability and, if in excess thereof, a refund could be obtained from
the Internal Revenue Service by filing a U.S. income tax return.
Section 8. Effects of the Offer.
Effect on Trading Market. There is no established public trading market for the
Units and, therefore, a reduction in the number of Unitholders should not
materially further restrict the Unitholders' ability to find purchasers for
their Units on any secondary market.
Voting Power of Purchaser. Depending on the number of Units acquired by the
Purchaser pursuant to the Offer, the Purchaser may have the ability to exert
certain influence on matters subject to the vote of Unitholders, unless
otherwise prohibited.
The Units are registered under the Exchange Act, which requires, among
other things that the Partnership furnish certain information to its Unitholders
and to the Commission and comply with the Commission's proxy rules in connection
with meetings of, and solicitation of consents from, Unitholders.
Section 9. Future Plans.
Following the completion of the Offer, the Purchaser, or its affiliates,
may acquire additional Units. Any such acquisitions may be made through private
purchases, one or more future tender offers or by any other means deemed
advisable or appropriate. Any such acquisitions may be at a consideration higher
or lower than the consideration to be paid for the Units purchased pursuant to
the Offer.
4
<PAGE>
The Purchaser is acquiring the Units pursuant to the Offer solely for
investment purposes. Although the Purchaser has no present intention to seek
control of the Partnership or to change the management or operations of the
Partnership, the Purchaser reserves the right, at an appropriate time, to
exercise its rights as a limited partner, unless otherwise prohibited, to vote
on matters subject to a limited partner vote, including a vote to cause the sale
of the Partnership's remaining property and the liquidation and dissolution of
the Partnership.
Section 10. The Business of the Partnership.
Enstar Income Program IV-3, L.P., a Georgia limited partnership (the
"Partnership"), is engaged in the ownership, operation and development, and,
when appropriate, sale or other disposition, of cable television systems in
small to medium-sized communities. The Partnership was formed on November 4,
1985. The general partner of the Partnership is Enstar Communications
Corporation, a Georgia corporation (the "General Partner"). On September 30,
1988, ownership of the General Partner was acquired by Falcon Cablevision, a
California limited partnership that has been engaged in the ownership and
operation of cable television systems since 1984 ("Falcon Cablevision"). The
general partner of Falcon Cablevision is Falcon Holding Group, L.P. ("FHGLP"),
which provides certain management services to the Partnership. The general
partner of FHGLP is Falcon Holding Group, Inc., a California corporation
("FHGI"). The General Partner, FHGLP and affiliated companies are responsible
for the day to day management of the Partnership and its operations.
The Partnership began its cable television business operations in January
1987 with the acquisition of three cable television systems that provide service
to customers in and around the municipalities of Fairfield and Shelbyville,
Illinois and Fulton, Kentucky. In 1988 the Partnership entered into a general
partnership agreement with two affiliated partnerships (which are also cable
television limited partnerships sponsored by the General Partner) to form Enstar
Cable of Macoupin County (the "Joint Venture"). The Joint Venture was formed in
order to enable each of its partners to participate in the acquisition and
ownership of a more diverse pool of systems by combining certain of their
financial resources. The Joint Venture began its cable television business
operations in January 1988 with the acquisition of a cable television system
providing service in and around the municipalities of Carlinville, Virden,
Girard, Thayer and Auburn, Illinois. As of December 31, 1997, cable systems
owned by the Partnership and the Joint Venture served approximately 6,000 and
4,400 basic subscribers, respectively.
The principal executive offices of the Partnership, the General Partner and
FHGLP are located at 10900 Wilshire Boulevard, 15th Floor, Los Angeles,
California 90024, and their telephone number is (310) 824-9990.
Additional information concerning the Partnership, its assets, operations
and management is contained in its Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q and other filings with the Securities and Exchange
Commission. Such reports and filings are available on the Commission's EDGAR
system, at its internet website at www.sec.gov, and are available for inspection
at the Commission's principal office in Washington, D.C. and at its regional
offices in New York, New York and Chicago, Illinois. The Purchaser expressly
disclaims any responsibility for the information included in such reports and
extracted in this discussion.
For additional information, please see the discussion above under
Introduction- "Establishment of the Offer Price."
Selected Financial Data. Set forth below is a summary of certain financial
data for the Partnership which has been excerpted from the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1997. The financial
information set forth below is qualified in its entirety by reference to such
reports and documents filed with the Securities and Exchange Commission and the
financial statements and related notes contained therein. The Purchaser
expressly disclaims any responsibility for the information contained in these
filed reports and extracted in this discussion.
The following table sets forth in comparative tabular form a summary of
selected financial data for each of the Partnership's last five full years:
<TABLE>
<CAPTION>
For the Years Ended December 31
(In Dollars, Except per Unit Amounts)
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Operations Statement Data:
Revenues $ 2,658,100 $ 2,489,000 $ 2,311,800 $ 2,241,600 $ 2,222,100
Cost and Expenses (1,582,900) (1,428,700) (1,442,700) (1,448,800) (1,339,900)
Depreciation and Amortization (499,700) (703,600) (689,100) (712,500) (727,100)
Operating Income 575,500 356,700 180,000 80,300 155,100
Interest Expense (12,900) (30,500) (61,800) (58,500) (78,400)
Interest Income 32,500 23,400 32,000 9,600 20,400
Gain (Loss) on Sale of Assets 45,000 (4,700) -- -- --
Equity in Net Income (Loss)
of Joint Venture 131,900 123,500 28,000 11,900 (36,200)
Net Income 772,000 468,400 178,200 43,300 60,900
Distributions Paid to Partners 503,800 503,800 503,800 503,800 503,800
Per Unit of Limited Partnership
Interest:
Net Income 19.16 11.62 4.42 1.07 1.51
Distributions 12.50 12.50 12.50 12.50 12.50
Other Operating Data:
Net Cash Provided
by Operating Activities 1,342,100 661,300 1,174,100 752,400 811,500
Net Cash Used in
Investing Activities (500,900) (265,800) (392,800) 179,700 (247,800)
Net Cash Used in
Financing Activities (503,800) (887,000) (503,800) (509,400) (1,495,800)
EBITDA 1,075,200 1,060,300 869,100 792,800 882,200
EBITDA to Revenues 40.4% 42.6% 37.6% 35.4% 39.7%
Total Debt to EBITDA -- -- .4x .5x .4x
Capital Expenditures 556,000 608,900 373,700 122,700 227,900
General Partner's Deficit (49,300) (52,000) (51,700) (48,500) (43,900)
Limited Partners' Capital 3,441,500 3,176,000 3,211,100 3,533,500 3,989,400
Total Assets 4,113,300 3,504,300 4,293,800 4,275,600 4,734,600
Total Debt -- -- 383,200 383,200 383,200
</TABLE>
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<PAGE>
Section 11. Conflicts of Interest.
It is the Purchaser's belief that other than the 1,969 Units owned by
certain affiliates of the Purchaser, there is no conflict of interest between
the Purchaser and the Partnership or the General Partner.
At this time, both the Partnership and the Purchaser have retained the
services of the Gemisys Corporation to perform administrative services. However,
due to the unique, separate and administrative nature of the work performed by
the Gemisys Corporation for both the Purchaser and the Partnership, it is the
Purchaser's belief that this relationship should have no impact on this Offer.
Section 12. Certain Information Concerning the Purchaser.
The Purchaser is Madison Liquidity Investors 104, LLC, a limited liability
company organized under the laws of the State of Delaware. For information
concerning the Purchaser and its principals, please refer to Schedule "I"
attached hereto. The principal business of the Purchaser is investment in
securities, particularly limited partnership securities. The principal business
address of the Purchaser is P.O. Box 7461, Incline Village, Nevada 89452.
The Purchaser has made binding commitments to contribute and has available
sufficient amounts of liquid capital necessary to fund the acquisition of all
Units subject to the Offer, the expenses to be incurred in connection with the
Offer, and all other anticipated costs of the Purchaser. The Purchaser is not a
public company and has not prepared audited financial statements. The Purchaser,
its principals, owners and members have an aggregate net worth in excess of $5
million, including net liquid assets of more than $1 million.
As of the date of this offer, the Purchaser, through certain affiliates,
owned 1,969 Units or approximately 4.9% of the outstanding Units of the
Partnership. These Units were acquired during 1997 and 1998 through unregistered
tender offers and secondary market transactions, at prices ranging from $115.00
to $143.00 per Unit. In consideration of the limited and inefficient nature of
the market for the Units the Purchaser does not believe that the prices paid for
previously acquired Units should be relied upon as a complete and accurate
representation as to the current fair market value of the Units.
Except as otherwise set forth herein, (i) neither the Purchaser nor, to the
best knowledge of the Purchaser, the persons listed on Schedule "I" nor any
affiliate of the Purchaser, beneficially owns or has a right to acquire any
Units, (ii) neither the Purchaser nor, to the best knowledge of the Purchaser,
the persons listed on Schedule "I" nor any affiliate of the Purchaser, or any
director, executive officer or subsidiary of any of the foregoing has effected
any transaction in the Units within the past 60 days, (iii) except as set forth
in Section 15 of this Offer to Purchase ("Certain Legal Matters"), neither the
Purchaser nor, to the best knowledge of the Purchaser, the persons listed on
Schedule "I" nor any affiliate of the Purchaser have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Partnership, including but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies,
consents or authorizations, (iv) there have been no transactions or business
relationships which would be required to be disclosed under the rules and
regulations of the Commission between the Purchaser or, to the best knowledge of
the Purchaser, the persons listed on Schedule "I", or any affiliate of the
Purchaser on the one hand, and the Partnership or its affiliates, on the other
hand, and (v) there have been no contracts, negotiations or transactions between
the Purchaser, or to the best knowledge of the Purchaser any affiliate of the
Purchaser, on the one hand, the persons listed on Schedule "I", and the
Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
Set forth below is certain unaudited financial information with respect to
the Purchaser's sole member and funding source, Madison/OHI Liquidity Investors,
LLC ("Madison/OHI").
Consolidated Balance Sheet
November 30, 1998
Assets
Cash $ 459,290
Investment in limited partnerships 2,092,152
Other Assets 29,004
----------
Total Assets $2,580,446
==========
Liabilities and Members' Equity
Liabilities:
Accounts payable and accrued expenses $ 227,859
Notes payable 1,048,825
Advances from affiliates 1,149,201
----------
Total Liabilities $2,425,885
Members' Equity 154,561
----------
Total Liabilities and Members' Equity $2,580,446
==========
On October 2, 1998, Madison/OHI entered into a revolving credit facility with a
lender to finance its investment operations. The revolving credit facility is
committed through September 30, 2005 and it allows for maximum borrowings of
$30,000,000 through October 20, 2003 and $25,000,000 after this date. Borrowings
under the credit facility are collateralized by the Company's investments and
eight percent of the total borrowings are guaranteed by the personal guarantees
of the Company's members.
Borrowing under the credit facility accrues interest at rates of up to sixteen
percent per annum simple interest (or of fifteen percent per annum simple
interest for borrowings financing designated investments). Principal advances
and accrued interest are repayable from the proceeds of the liquidation or sale
of the investments following liquidation or sale events. In addition, a portion
of the total accrued interest is payable quarterly at the rate of 9% per annum
simple interest. Such quarterly interest payments are due in cash for designated
investments and the required payments may be financed with an additional
principal advance by the lender for the other designated investments.
Additional proceeds of sales or liquidations of the investments are required to
be placed in a cash collateral account which will be equal to ten percent of the
unpaid balance of the loan.
Total interest expense incurred for the period ended November 30, 1998 was
$18,698. There were no cash payments for interest expense during this period.
6
<PAGE>
Section 13. Source of Funds.
The Purchaser expects that approximately $635,950.00 would be required to
purchase up to the 3,950 Unit maximum of the outstanding Units, if tendered, and
approximately an additional $100,000.00 may be required to pay related fees and
expenses. The Purchaser anticipates funding all of the purchase price and
related expenses through existing equity sources and/or borrowing facilities. It
is expected that the Purchaser will obtain its funding from its Member,
Madison/OHI Liquidity Investors, LLC ("OHI"), which in turn has represented that
it intends to utilize its existing capital sources and borrowings from its
credit facility. The Offer is not contingent on obtaining financing.
The following is a summary description of the existing credit facility (the
"Facility") provided for the benefit of the Purchaser, pursuant to the Loan
Agreement, dated as of October 2, 1998 (the "Loan Agreement"), among Madison
Liquidity, as borrower, Omega Health Source as the lender (the "Lender"). This
summary description does not purport to be complete and is qualified in its
entirety by reference to the Loan Agreement, a copy of which has been filed as
an exhibit to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed
with the Commission.
Pursuant to the Loan Agreement, the Lender has made available to the
Purchaser a revolving credit facility of up to $30 million at any one time
outstanding, which amount is reduced to $25 million after the fifth (5th)
anniversary of the first funding date, October 20, 2003. Loans under the
Facility (the "Loans") may be utilized to finance certain permitted investments.
The Facility matures on the earlier of the seventh (7th) anniversary of the
first funding date, October 20, 2005, or the date upon which the Lender duly
accelerates the due date of all unpaid principal and interest owed by the
Borrower to the Lender.
Loans bear interest, at rates ranging from 9% per annum to 16% per annum,
based on various classifications made under the Loan Agreement. As of the date
hereof, the Purchaser currently has made three draw downs aggregating $4.1
million under the Facility.
The Purchaser is obligated to pay a fee on the unused portion of the
Facility. Such unused fee is payable quarterly in arrears and calculated based
on the actual number of days elapsed over a 365 day period. The quarterly unused
fee is required to be paid 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. 12-1/2 basis points) by (b) the amount by which $30 million 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 on the Loan pursuant to the Loan Agreement.
The Loans are subject to mandatory prepayment only to the extent that the
aggregate outstanding principal amount of the Loans on any day exceeds the
amount of the Facility then in effect. Voluntary prepayments of the Loans and
voluntary reductions of the Facility are permitted, in whole or in part, at the
option of the Purchaser in minimum principal amounts, without premium or
penalty, subject to reimbursement of certain of the Lender's costs under certain
conditions.
The Purchaser's obligations under the Facility have been guaranteed by
limited personal guarantees of the managing directors of the Purchaser, Bryan E.
Gordon and Ronald M. Dickerman.
The Facility contains representations and warranties, conditions precedent,
covenants, events of default and other provisions customarily found in similar
transactions.
Section 14. Conditions of the Offer.
Notwithstanding any other terms of the Offer, the Purchaser shall not be
required to accept for payment or to pay for any Units tendered if all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or been obtained
on or before the Expiration Date.
The Purchaser shall not be required to accept for payment or pay for any
Units not theretofore accepted for payment or paid for and may terminate or
amend the Offer as to such Units if, at any time on or after the date of the
Offer and before the Expiration Date, any of the following conditions exist:
(a) a preliminary or permanent injunction or other order of any federal or
state court, government or governmental authority or agency shall have been
issued and shall remain in effect which (i) makes illegal, delays or otherwise
directly or indirectly restrains or prohibits the making of the Offer or the
acceptance for payment of or payment for any Units by the Purchaser, (ii)
imposes or confirms limitations on the ability of the Purchaser effectively to
exercise full rights of ownership of any Units, including, without limitation,
the right to vote any Units acquired by the Purchaser pursuant to the Offer or
otherwise on all matters properly presented to the Partnership's Unitholders,
(iii) requires divestiture by the Purchaser of any Units, (iv) causes any
material diminution of the benefits to be derived by the Purchaser as a result
of the transactions contemplated by the Offer or (v) might materially adversely
affect the business, properties, assets, liabilities, financial condition, tax
status, operations, results of operations or prospects of the Purchaser or the
Partnership;
(b) there shall be any action taken, or any statute, rule, regulation or
order proposed, enacted, enforced, promulgated, issued or deemed applicable to
the Offer by any federal or state court, government or governmental authority or
agency, other than the application of the waiting period provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which might,
directly or indirectly, result in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened since
the date hereof, in the business, properties, assets, liabilities, financial
condition, tax status, operations, results of operations or prospects of the
Partnership, which, in the reasonable judgment of the Purchaser, is or may be
materially adverse to the Partnership, or the Purchaser shall have become aware
of any fact that, in the reasonable judgment of the Purchaser, does or may have
a material adverse effect on the value of the Units;
(d) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or in
the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of a
limitation on the markets thereof, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer a material acceleration or
worsening thereof;
(e) it shall have been publicly disclosed or the Purchaser shall have
otherwise learned that (i) more than fifty percent of the outstanding Units have
been or are proposed to be acquired by another person (including a "group"
within the meaning of Section 13(d)(3) of the Exchange Act), or (ii) any person
or group that prior to such date had filed a Statement with the Commission
pursuant to Section 13(d) or (g) of the Exchange Act has increased or proposes
to increase the number of Units beneficially owned by such person or group as
disclosed in such Statement by two percent or more of the outstanding Units; or
(f) any developments that would substantially impair or encumber those
benefits that the Purchaser is attempting to achieve in this Tender Offer.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to such
conditions or may be waived by the Purchaser in whole or in part at any time and
from time to time in its sole discretion. Any termination by the Purchaser
concerning the events described above will be final and binding upon all
parties.
7
<PAGE>
Section 15. Certain Legal Matters.
General. Except as set forth in this Section 15, the Purchaser is not aware of
any filings, approvals or other actions by any domestic or foreign governmental
or administrative agency that would be required prior to the acquisition of
Units by the Purchaser pursuant to the Offer. Should any such approval or other
action be required, it is the Purchaser's present intention that such additional
approval or action would be sought. While there is no present intent to delay
the purchase of Units tendered pursuant to the Offer pending receipt of any such
additional approval or the taking of any such action, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Partnership's business, or that certain parts of the Partnership's business
might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchaser to elect to terminate the Offer without
purchasing Units thereunder. The Purchaser's obligation to purchase and pay for
Units is subject to certain conditions, including conditions related to the
legal matters discussed in this Section 15.
In its annual filing on Form 10-K for the year ended December 31, 1997, the
Partnership has disclosed that it is periodically a party to various legal
proceedings, however, it does not believe that these proceedings, in the
aggregate, will have a material adverse effect on the financial condition of the
Partnership or Joint Venture.
Antitrust. The Purchaser does not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of Units
pursuant to the Offer.
Margin Requirements. The units are not "margin securities" under the regulations
of the Board of Governors of the Federal Reserve System and, accordingly, such
regulations are not applicable to the Offer.
State Takeover Laws. A number of states have adopted anti-takeover laws which
purport, to various degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, security holders, principal executive offices or principal places of
business therein. These laws are directed at the acquisition of corporations and
not partnerships. The Purchaser, therefore, does not believe that any
anti-takeover laws apply to the transactions contemplated by the Offer.
Although the Purchaser has not attempted to comply with any state
anti-takeover statutes in connection with the Offer, the Purchaser reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer nor any action taken in
connection herewith is intended as a waiver of such right. If any state
anti-takeover statute is applicable to the Offer, the Purchaser might be unable
to accept for payment or purchase Units tendered pursuant to the Offer or be
delayed in continuing or consummating the Offer. In such case, the Purchaser may
not be obligated to accept for purchase or pay for any Units tendered.
Section 16. Fees and Expenses.
The Purchaser has retained Gemisys Tender Services, to act as the
Purchaser's Tender Agent. The Purchaser will pay Gemisys reasonable and
customary compensation for its services in connection with the Offer and will
indemnify Gemisys against certain liabilities and expenses in connection
therewith, including liabilities under the federal securities laws. Except as
otherwise set forth herein, the Purchaser will also pay all costs and expenses
of printing, publication and mailing of the Offer.
Section 17. Miscellaneous.
THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON
BEHALF OF) UNITHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR
THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. THE PURCHASER IS NOT AWARE OF ANY JURISDICTION WITHIN THE UNITED
STATES IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD BE
ILLEGAL.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the
Agreement of Assignment and Transfer and, if given or made, such information or
representation must not be relied upon as having been authorized.
February 10, 1999
MADISON LIQUIDITY INVESTORS 104, LLC
MADISON/OHI LIQUIDITY INVESTORS, LLC
8
<PAGE>
SCHEDULE I
THE PURCHASER AND ITS RESPECTIVE PRINCIPALS
Madison Liquidity Investors 104, LLC is a Delaware limited liability company
founded by Bryan E. Gordon and Ronald M. Dickerman that was organized for the
purpose of acquiring Units in the Partnership as well as Units in certain other
partnerships, some of which are also sponsored by the Partnership's General
Partner. The Purchaser's sole member is Madison/OHI which is an affiliate of The
Madison Avenue Capital Group LLC (all three entities may collectively be
referred to as "Madison"). The names of the managing directors of the Purchaser,
Madison/OHI and The Madison Avenue Capital Group, LLC and their principal
occupations and five year employment histories are set forth below. Each
individual is a citizen of the United States. The business address of Madison is
P.O. Box 7461, Incline Village, Nevada 89452.
Madison/OHI Liquidity Investors, LLC is a Delaware limited liability company
founded by Bryan E. Gordon and Ronald M. Dickerman, both of whom are managing
directors of the limited liability company. Madison/OHI is the sole member of
the Purchaser and, as further described in Section 13 to this Offer to Purchase,
is the primary funding source for the Offer. The business address of Madison is
P.O. Box 7461, Incline Village, Nevada 89452.
The Madison Avenue Capital Group, LLC is a Delaware limited liability company
founded by Bryan E. Gordon and Ronald M. Dickerman. Madison is an investment
management boutique with a value investing philosophy. Madison invests in
limited partnership units, common stock and other securities issued by companies
which own diversified portfolios of real estate, cable television systems,
transportation and other leased equipment, film portfolios, LBO/venture
investment portfolios and other cash flow producing assets. Madison and its
affiliates have over $270 million in committed capital. To date, over 45,000
limited partners nationwide in over 250 limited partnerships have sold their
units to Madison and its affiliates. The business address of Madison is P.O. Box
7461, Incline Village, Nevada 89452.
Bryan E. Gordon is a Managing Director of the Purchaser as well as being a
Managing Director of The Madison Avenue Capital Group, LLC. Prior to co-founding
predecessor entities to The Madison Avenue Capital Group, LLC in January 1995,
Mr. Gordon had 13 years of experience in the investment banking and management
consulting fields, with an emphasis on real estate and corporate finance. Mr.
Gordon has extensive experience with equity and debt financings, mergers and
acquisitions, roll-up and formation transactions, and restructurings of limited
partnerships, REITs, corporations and joint ventures. Mr. Gordon's experience
includes: seven years in the Real Estate and Partnership Finance Groups at Smith
Barney, Inc.; two years in the Investment Banking Division of Bear, Stearns &
Co. Inc.; one year in the Real Estate and Partnership Finance Group at EF Hutton
& Company; and three years in management consulting with Tillinghast/Towers,
Perrin, Foster & Crosby. Mr. Gordon earned an MBA from Columbia University's
Graduate School of Business and a BSE from the Wharton School of the University
of Pennsylvania.
Ronald M. Dickerman is a Managing Director of the Purchaser as well as being a
Managing Director of The Madison Avenue Capital Group, LLC. Prior to co-founding
predecessor entities to The Madison Avenue Capital Group, LLC in January 1995,
Mr. Dickerman had 14 years of experience in the analysis, acquisition,
financing, management, and disposition of income-producing real estate. In 1991,
Mr. Dickerman founded First Equity Realty Corp., a real estate investment firm
specializing in the acquisition of multi-family properties from financial
institutions, utilizing a value-added approach. From 1987-1991, Mr. Dickerman
was an investment banker in the Partnership Finance Group of Smith Barney,
Harris, Upham & Co., Inc. His responsibilities included the origination,
analysis, structuring, acquisition, asset management, disposition and marketing
of real estate and other limited partnerships. Mr. Dickerman earned an MBA from
Columbia University's Graduate School of Business and a BA from Tufts
University.
9
096-883*1
AGREEMENT of ASSIGNMENT and TRANSFER
For Limited Partnership Interests in
Enstar Income Program IV-3, L.P.
Please make any corrections to name/mailing address in space to the left. I
hereby tender to Madison Liquidity Investors 104, LLC, a Delaware limited
liability company ("Madison"), the above-described limited partnership interests
(the "Units") in Enstar Income Program IV-3, L.P., a Georgia limited partnership
(the "Partnership"), for $161.00 per Unit in cash (reduced by the amount of (i)
any transfer fee payable to the Partnership in respect of the Units tendered
hereby and (ii) any cash distributions made to me by the Partnership on or after
February 10, 1999) in accordance with the terms and subject to the conditions of
Madison's Offer to Purchase as Exhibit (a)(1) to Schedule 14D-1 dated February
10, 1999 (the "Offer to Purchase") and this Agreement of Assignment and Transfer
(which, together with the Offer to Purchase and any supplements or amendments,
constitutes the "Offer"). I acknowledge that I have received the Offer to
Purchase. The Offer will remain open until March 11, 1999, subject to extension
at the discretion of Madison. It is understood that payment for the Units
tendered hereby will be made by check mailed to me at the address above promptly
after the date of the Partnership's confirmation that the transfer of the Units
to Madison is effective, subject to Section 4 (Proration) and Section 5
(Withdrawal Rights) of the Offer to Purchase. The Offer is subject to Section 14
(Conditions of the Offer) of the Offer to Purchase.
Subject to, and effective upon, acceptance of this Agreement of Assignment and
Transfer and payment for the Units tendered hereby in accordance with the terms
and subject to the conditions of the Offer, I hereby sell, assign, transfer,
convey and deliver (the "Transfer") to Madison, all of my right, title and
interest in and to the Units tendered hereby and accepted for payment pursuant
to the Offer and any and all non-cash distributions, other Units or other
securities issued or issuable in respect thereof on or after February 10, 1999,
including, without limitation, to the extent that they exist, all rights in, and
claims to, any Partnership profits and losses, cash distributions, voting rights
and other benefits of any nature whatsoever distributable or allocable to the
Units under the Partnership's limited partnership agreement (the "Partnership
Agreement"), (i) unconditionally to the extent that the rights appurtenant to
the Units may be transferred and conveyed without the consent of the general
partner of the Partnership (the "General Partner"), and (ii) in the event that
Madison elects to become a substituted limited partner of the Partnership,
subject to the consent of the General Partner to the extent such consent may be
required in order for Madison to become a substituted limited partner of the
Partnership.
It is my intention that Madison, if it so elects, succeed to my interest as a
Substitute Limited Partner, as defined in the Partnership Agreement, in my place
with respect to the transferred Units. It is my understanding, and I hereby
acknowledge and agree, that Madison shall be entitled to receive all
distributions of cash or other property from the Partnership attributable to the
transferred Units that are made on or after February 10, 1999, including,
without limitation, all distributions of Distributable Cash Flow and Net Cash
Proceeds, without regard to whether the cash or other property that is included
in any such distribution was received by the Partnership before or after the
Transfer and without regard to whether the applicable sale, financing,
refinancing or other disposition took place before or after the Transfer. It is
my further understanding, and I further acknowledge and agree, that the taxable
income and taxable loss attributable to the transferred Units with respect to
the taxable period in which the Transfer occurs shall be divided among and
allocated between me and Madison as provided in the Partnership Agreement, or in
accordance with such other lawful allocation methodology as may be agreed upon
by the Partnership and Madison. I represent and warrant that I have the full
right, power and authority to transfer the subject Units and to execute this
Agreement of Assignment and Transfer and all other documents executed in
connection herewith without the joinder of any other person or party, and if I
am executing this Agreement of Assignment and Transfer or any other document in
connection herewith on behalf of a business or other entity other than an
individual person, I have the right, power and authority to execute such
documents on behalf of such entity without the joinder of any other person or
party.
Subject to Section 5 (Withdrawal Rights) of the Offer to Purchase, I hereby
irrevocably constitute and appoint Madison as my true and lawful agent and
attorney-in-fact with respect to the Units, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) vote or act in such manner as any such attorney-in-fact shall,
in its sole discretion, deem proper with respect to the Units; (ii) deliver the
Units and transfer ownership of the Units on the Partnership's books maintained
by the General Partner; (iii) endorse, on my behalf, any and all payments
received by Madison from the Partnership that are made on or after February 10,
1999, which are made payable to me, in favor of Madison or any other payee
Madison otherwise designates; (iv) execute a Loss and Indemnity Agreement
relating to the Units on my behalf if I fail to include my original
certificate(s) (if any) representing the Units with this Agreement; (v) execute
on my behalf any applications for transfer and any distribution allocation
agreements required by National Association of Securities Dealers Notice to
Members 96-14 to give effect to the transactions contemplated by this Agreement;
(vi) receive all benefits and cash distributions and otherwise exercise all
rights of beneficial ownership of the Units; and (vii) direct the General
Partner to immediately change the address of record of the registered owner of
the transferred Units to that of Madison, as my attorney-in-fact. Madison is
further authorized, as part of its powers as my attorney-in-fact with respect to
the Units, to commence any litigation that Madison, in its sole discretion,
deems necessary to enforce any exercise of Madison's powers as my
attorney-in-fact as set forth herein. Madison shall not be required to post bond
of any nature in connection with this power of attorney. I hereby direct the
Partnership and the General Partner to remit to Madison any distributions made
by the Partnership with respect to the Units on or after February 10, 1999. To
the extent that any distributions are made by the Partnership with respect to
the Units on or after February 10, 1999, that are received by me, I agree to
promptly pay over such distributions to Madison. I further agree to pay any
costs incurred by Madison in connection with the enforcement of any of my
obligations hereunder or my breach of any of the agreements, representations and
warranties made by me herein.
I hereby direct the General Partner to immediately change my address of record
as the registered owner of the Units to be transferred herein to that of
Madison, conditional solely upon Madison's execution of this Agreement.
If legal title to the Units is held through an IRA or KEOGH or similar account,
I understand that this Agreement must be signed by the custodian of such IRA or
KEOGH account. Furthermore, I hereby authorize and direct the custodian of such
IRA or KEOGH to confirm this Agreement.
I hereby represent and warrant to Madison that I (i) have received and reviewed
the Offer to Purchase and (ii) own the Units and have full power and authority
to validly sell, assign, transfer, convey and deliver to Madison the Units, and
that effective when the Units are accepted for payment by Madison, I hereby
convey to Madison, and Madison will hereby acquire good, marketable and
unencumbered title thereto, free and clear of all options, liens, restrictions,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale or transfer thereof, and the Units will not be subject to
any adverse claim. I further represent and warrant that I am a "United States
person," as defined in Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended.
I hereby release and discharge the General Partner and its officers,
shareholders, directors, employees and agents from all actions, causes of
action, claims or demands I have, or may have, against the General Partner that
result from the General Partner's reliance on this Agreement of Assignment and
Transfer or any of the terms and conditions contained herein. I hereby indemnify
and hold harmless the Partnership from and against all claims, demands, damages,
losses, obligations and responsibilities arising, directly or indirectly, out of
a breach of any one or more representations and warranties set forth herein.
All authority herein conferred or agreed to be conferred shall survive my death
or incapacity and all of my obligations shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. In
addition, I hereby agree not to offer, sell or accept any offer to purchase any
or all of the Units to or from any third party while the Offer remains open.
Upon request, I will execute and deliver any additional documents deemed by
Madison to be necessary or desirable to complete the assignment, transfer and
purchase of the Units.
<PAGE>
I hereby certify, under penalties of perjury, that the statements in Box A, Box
C, Box D and, if applicable, Box E below are true and correct.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware. I waive any claim that any State or Federal court located
in the State of Delaware is an inconvenient forum, and waive any right to trial
by jury.
<TABLE>
<S> <C> <C>
PLEASE COMPLETE ALL SHADED AREAS
SIGN HERE TO TENDER YOUR UNITS
====================================================================================================================================
BOX A
(See Instructions to Complete Agreement of Assignment and Transfer - Box A)
- ------------------------------------------------------------------------------------------------------------------------------------
All
Date:__________________________, 1999________________________________________________
(If you desire to sell less than all of your Units, strike
"All" and indicate the number of Units to be sold)
- ----------------------------------- ------------------------------------- ----------------------------------------------------
Your Social Security or Your Telephone Number Signature of Co-Seller and Medallion Signature
Taxpayer Identification Number Guarantee (If applicable)
- ---------------------------------------------------------------------------------
Your Signature and Medallion Signature Guarantee
- ---------------------------------------------------------------------------------
Custodian Signature and Medallion Signature Guarantee (Required if Units held in IRA/KEOGH)
Please note: A Medallion Signature Guarantee is similar to a notary, but is provided by your bank or brokerage house where you have
an account.
====================================================================================================================================
BOX B
MEDALLION SIGNATURE GUARANTEE
(Required for all Sellers) (See Instructions to Complete Agreement of Assignment and Transfer - Box B)
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Address of Bank or Brokerage House: _________________________________________________________________________
Authorized Signature of Bank or Brokerage House Representative:_________________________ Title: _____________________
Name: _______________________________________________________________________ Date: __________________, 199__
Please note: A Medallion Signature Guarantee is similar to a notary, but is provided by your bank or brokerage house where you have
an account.
====================================================================================================================================
BOX C
SUBSTITUTE FORM W-9
(See Instructions to Complete Agreement of Assignment and Transfer - Box C)
- ------------------------------------------------------------------------------------------------------------------------------------
The person signing this Agreement of Assignment and Transfer hereby certifies the following to the Purchaser under penalties of
perjury:
(i) The TIN set forth in the signature box in Box A of this Agreement of Assignment and Transfer is the correct TIN of the
Unitholder, or if this box [ ] is checked, the Unitholder has applied for a TIN. If the Unitholder has applied for a TIN, a TIN has
not been issued to the Unitholder, and either: (a) the Unitholder has mailed or delivered an application to receive a TIN to the
appropriate IRS Center or Social Security Administration Office, or (b) the Unitholder intends to mail or deliver an application in
the near future (it being understood that if the Unitholder does not provide a TIN to the Purchaser within sixty (60) days, 31% of
all reportable payments made to the Unitholder thereafter will be withheld until a TIN is provided to the Purchaser); and
(ii) Unless this box [ ] is checked, the Unitholder is not subject to backup withholding either because the Unitholder: (a) is
exempt from backup withholding, (b) has not been notified by the IRS that the Unitholder is subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) has been notified by the IRS that such Unitholder is no longer
subject to backup withholding.
Note: Place an "X" in the box in (ii) if you are unable to certify that the Unitholder is not subject to backup withholding.
====================================================================================================================================
BOX D
FIRPTA AFFIDAVIT
(See Instructions to Complete Agreement of Assignment and Transfer - Box D)
- ------------------------------------------------------------------------------------------------------------------------------------
Under Section 1445(e)(5) of the Internal Revenue Code and Treas. Reg. 1.1445-11T(d), a transferee must withhold tax equal to
10% of the amount realized with respect to certain transfers of an interest in a partnership if 50% or more of the value of its
gross assets consists of U.S. real property interests and 90% or more of the value of its gross assets consists of U.S. real
property interests plus cash equivalents, and the holder of the partnership interest is a foreign person. To inform the Purchaser
that no withholding is required with respect to the Unitholder's interest in the Partnership, the person signing this Agreement of
Assignment and Transfer hereby certifies the following under penalties of perjury:
(i) Unless this box [ ] is checked, the Unitholder, if an individual, is a U.S. citizen or a resident alien for purposes of
U.S. income taxation, and if other than an individual, is not a foreign corporation, foreign partnership, foreign estate or foreign
trust (as those terms are defined in the Internal Revenue Code and Income Tax Regulations); (ii) the Unitholder's U.S. social
security number (for individuals) or employer identification number (for non-individuals) is correctly printed in the signature box
in Box A of this Agreement of Assignment and Transfer; and (iii) the Unitholder's home address (for individuals) or office address
(for non-individuals), is correctly printed (or corrected) on the top of this Agreement of Assignment and Transfer. If a
corporation, the jurisdiction of incorporation is ________________________.
The person signing this Agreement of Assignment and Transfer understands that this certification may be disclosed to the IRS by
the Purchaser and that any false statements contained herein could be punished by fine, imprisonment, or both.
====================================================================================================================================
BOX E
SUBSTITUTE FORM W-8
(See Instructions to Complete Agreement of Assignment and Transfer - Box E)
- ------------------------------------------------------------------------------------------------------------------------------------
By checking this box [ ], the person signing this Agreement of Assignment and Transfer hereby certifies under penalties of
perjury that the Unitholder is an "exempt foreign person" for purposes of the backup withholding rules under the U.S. federal income
tax laws, because the Unitholder:
(i) Is a nonresident alien individual or a foreign corporation, partnership, estate or trust;
(ii) If an individual, has not been and plans not to be present in the U.S. for a total of 183 days or more during the calendar
year; and
(iii)Neither engages, nor plans to engage, in a U.S. trade or business that has effectively connected gains from transactions
with a broker.
====================================================================================================================================
AGREED TO AND ACCEPTED:
Madison Liquidity Investors 104, LLC
By:_______________________________________________________
Madison Liquidity Investors 104, LLC, c/o Gemisys Tender Services, 7103 South Revere Parkway, Englewood, CO 80112
Tel: 303-705-6390 Fax: 303-705-6276
</TABLE>
Madison Liquidity Investors 104, LLC
- --------------------------------------------------------------------------------
c/o Gemisys Tender Serviceso 7103 South Revere Parkwayo Englewood, CO 80112
o Tel: 303.705.6390o Fax: 303.705.6276
February 10, 1999
To Unitholders in Enstar Income Program IV-3, L.P.
RE: Offer to Purchase Limited Partnership Interests
Dear Fellow Investor:
Madison Liquidity Investors 104, LLC ("Madison") is seeking to buy your Limited
Partnership Interests (the "Units") in Enstar Income Program IV-3, L.P. (the
"Partnership") for $161.00 per Unit in cash. This amount will be reduced by the
$25.00 transfer fee (per transfer, not per Unit) charged by the Partnership and
any cash distributions made by the Partnership on or after February 10, 1999.
We are an investment firm which buys units in dozens of underperforming limited
partnerships and are not affiliated with the Partnership nor the General
Partner. We are principals seeking to acquire Units for our investment portfolio
only (we are not a matching service or professional broker who resells units).
Madison and its affiliates have over $270 million in capital that is committed
to paying limited partners for their units. To date, over 45,000 limited
partners nationwide in over 250 limited partnerships have chosen to sell their
units to us. This has made Madison a leading and reliable choice for limited
partnership investors seeking a time and cost efficient liquidity option.
Please consider the following points in evaluating our offer:
o FAST, COMMISSION-FREE SALE. Our offer provides you with the opportunity to
immediately sell your Units without the commission costs (generally, up to
10% of the sales price, subject to a $150-$200 minimum commission per
trade) paid by the seller in typical secondary market sales. Remember, with
secondary market matching services, the process to sell your Units will not
even begin until an interested buyer can be found, which cannot be assured
and can take days, weeks or even months.
o HISTORICAL PARTNERSHIP PERFORMANCE. The Partnership was closed 13 years
ago. You invested $250.00 per Unit and to date an original investor has
received total cash distributions of approximately $128.38 per Unit from
the Partnership. When combined with the remaining net asset value (as
estimated by the General Partner) this would represent an annual return on
your investment in the range of 3.5% to 4.7%.
o HIGHER PRICE THAN RECENT SALES. Our offer price of $161.00 per Unit is 15%
higher than recent tender offers from Smithtown Bay, LLC of $140.00, and
109% higher than the Everest offer of $77.00 per Unit. Our offer price of
$161.00 per Unit is 1.7% higher than the recent secondary market trading
price. The weighted average of the secondary market price of Units sold
during the period from October to November 1998 (the most recent period for
which information is available) was $158.34 per Unit according to the
November/December 1998 issue of The Partnership Spectrum after accounting
for commissions (typically 10% of the sales price).
o ILLIQUID UNITS. The relative illiquidity of the Units resulting from the
absence of a formal trading market means the Units are difficult to sell.
In fact, there were only two sales representing 58 Units during the months
of October and November 1998 (the most recent period for which information
is available) according to the November/December 1998 issue of The
Partnership Spectrum.
o SIMPLIFIED TAX FILING. If you sell your Units now, 1999 will be the final
year for which you receive a K-1 tax form from the Partnership, assuming
the transfer of your Units is completed by year end. Many investors who
have tax professionals prepare their taxes find the cost of filing K-1s to
be burdensome, particularly if more than one limited partnership is owned.
o ABILITY TO REDEPLOY SALE PROCEEDS INTO OTHER INVESTMENTS. The decision to
sell your Units for cash now would provide you with the ability to redeploy
your investment assets into potentially stronger and liquid investments.
This could, depending on your individual investment decisions, provide
current income and capital appreciation potential, as well as liquidity if
needed.
o ELIMINATION OF RETIREMENT ACCOUNT FEES. If you sell your Units now, 1999
could be the final year in which you incur fees for your IRA or retirement
account. Due to the lackluster performance and declining value of limited
partnership units generally, many custodians will not allow the transfer of
limited partnership units into new retirement accounts. While many
investors have consolidated their retirement accounts and taken advantage
of custodial services offered through discount brokerage firms, they may
have had to maintain separate retirement accounts for limited partnership
units, because of custodian restrictions on the transfer of such units.
Once our cash payment is sent directly to your retirement account, you are
free to consolidate your retirement accounts or transfer the funds to a
custodian that offers lower fees.
<PAGE>
o UNCERTAIN TIMING OF FINAL PARTNERSHIP LIQUIDATION. A sale of all of the
assets of a partnership is no guarantee that full liquidation will occur
immediately after such sale or shortly thereafter. As stated in the
July/August 1998 issue of The Partnership Spectrum, "Long suffering
partnership investors rejoicing over the sale of their partnership's assets
typically don't realize that it could be months or even years before their
partnership is formally dissolved and the final K-1 is mailed out. While
warranties and representations made to buyers in connection with asset
sales often keep a partnership from dissolving for six to twelve months
after the last property has been sold, a lawsuit can require a partnership
to stay open for years." Accordingly, to the extent that the Partnership
continues to exist after its final asset sale, you will continue to receive
a K-1 in each year in which the Partnership continues to exist and there
can be no assurance that the Partnership will make cash distributions in
each of such years.
o Unitholders who tender their Units will give up the opportunity to
participate in any future benefits from the ownership of Units, including
potential future distributions by the Partnership, and the purchase price
per Unit payable to a tendering Unitholder by the Purchaser may be less
than the total amount which might otherwise be received by the Unitholder
with respect to the Units over the remaining term of the Partnership.
o The Purchaser is making the Offer for investment purposes and with the
intention of making a profit from the ownership of the Units. In
establishing the purchase price of $161.00 per Unit, the Purchaser is
motivated to establish the lowest price which might be acceptable to
Unitholders consistent with the Purchaser's objectives.
o Because the gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of Units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices, the Purchaser
cannot, and does not, know whether the information compiled by The
Partnership Spectrum is accurate or complete.
o The eventual transfer of all tendered Units is subject to the final
approval of the Partnership or General Partner and is subject to their
discretion.
Madison will only purchase a maximum of 9.9% of the outstanding Units pursuant
to this offer. If more Units are offered to us, we will prorate our purchase
ratably to all sellers. You will be paid promptly following (i) receipt of a
valid, properly executed Agreement of Assignment and Transfer (see the yellow
document enclosed) and (ii) receipt by Madison of the Partnership's confirmation
that the transfer of Units has been effectuated, subject to Section 4
(Proration) of the Offer to Purchase. All sales of Units will be irrevocable by
you, subject to Section 5 (Withdrawal Rights) of the Offer to Purchase.
A comprehensive discussion of the terms of the offer can be found in the Offer
to Purchase, Exhibit (a)(1) to the Schedule 14D-1.
If you wish to accept our offer, please complete and Medallion Signature
Guarantee (this must be done by your broker or a bank where you have an account)
the enclosed yellow Agreement of Assignment and Transfer and return it in the
enclosed envelope, along with your limited partnership certificate (if one was
issued to you and is available).
Our offer will expire at 5:00 p.m., Eastern Standard Time, on March 11, 1999,
unless the offer is extended. We encourage you to act promptly.
Please call us at (303)705-6390, or send a fax to (303)705-6276, if you have any
questions. Thank you for your consideration of our offer.
Very truly yours,
Madison Liquidity Investors 104, LLC
The price offered hereby may be more or less than prices recently quoted by
secondary market matching market services. We believe that transactions through
these secondary market services are costly and time consuming, and that the
quoted prices often differ from the price a seller actually receives. Therefore,
you may prefer to sell to us even at a lower price than otherwise so quoted. We
believe that the value of the Units will ultimately be more than the price
offered hereby. However, there are numerous risks and uncertainties that may
cause our belief to be wrong. If you wish to have us bear those risks and
uncertainties, you should consider selling your Units to us. We reserve the
right to apply procedural considerations in determining which Units to accept.
We may extend the term of our offer at our discretion. At times when a Madison
tender offer for Units of the Partnership is not outstanding, affiliates of
Madison may purchase Units at negotiated prices which may be more or less than
the price offered hereby.
<PAGE>
COMMONLY ASKED QUESTIONS AND ANSWERS
WHY WOULD I WANT TO SELL MY UNITS TO MADISON?
Have your original objectives for this investment been met? Are your pleased
with the way this investment has performed to date? We have found that most
investors are disappointed with the performance of their limited partnership
investments. Many investors have been in these investments far longer than
originally anticipated and their returns have been disappointing. In addition,
the tax reporting requirements for limited partnerships are burdensome and
costly, often requiring an accountant to prepare your taxes. Recent requirements
by certain states have also increased this burden by requiring limited partners
to file state income tax returns, and potentially to pay taxes, in states where
a partnership owns properties, regardless of the overall profitability of the
partnership.
Many investors feel that selling their limited partnership units will free up
funds to pursue more attractive investment options. And unlike limited
partnerships, most other investments provide immediate liquidity in the event an
investor needs access to his/her funds.
While emotionally difficult to accept, many investors are realizing that not
only will original projections never be met on many of these limited
partnerships, but, in some cases, original investment capital will never be
fully recovered. Thus, a readily available purchase offer for an underperforming
investment with an uncertain termination date may be an opportunity worthy of
your consideration.
WHY DOES MADISON WANT TO BUY MY UNITS?
Madison purchases units in dozens of underperforming limited partnerships for
its own investment portfolio... not for the purposes of reselling the units or
matching buyers and sellers, as is the case with secondary market matching
services. By agreeing to sell to Madison, you are assuring a sale of your Units,
subject to proration rights and other conditions having been met. A secondary
market firm cannot assure a sale unless it can locate a buyer who is interested
in purchasing your particular Units. Most individual investors are not
interested in purchasing limited partnership units for their investment
portfolios, so Madison is providing you with a liquidity option that is
generally not otherwise readily available.
Unlike other firms that purchase limited partnership units, Madison is typically
not interested in acquiring controlling interests in limited partnerships.
Furthermore, buying units in a broad portfolio of limited partnerships allows us
to diversify our investment portfolio, thus mitigating our risk of purchasing
such underperforming investments.
WHAT OTHER OPTIONS ARE AVAILABLE TO ME TO SELL MY UNITS?
Not many! Unlike Madison, secondary market firms will only match buyers and
sellers, they do not provide a firm bid, so the only way you can sell your Units
through this market is if they can locate an interested buyer. Furthermore,
Madison charges no commissions (secondary market firms generally charge up to
10%, subject to a $150 - $200 minimum commission per trade) and our offer price
is often higher than recent secondary market prices!
HOW DO I SUBSCRIBE TO MADISON'S OFFER AND WHEN WILL I BE PAID?
The purchase process involves several steps. By carefully following the
instructions on the enclosed checklist, you are ensuring the fastest possible
turnaround time for the sale of your Units. Properly completed Agreements of
Assignment and Transfer are forwarded by Madison to the General Partner on a
weekly basis following the completion of the offer. Most General Partners will
take approximately four weeks thereafter to confirm the number of Units you own
and provide Madison with the effective transfer date. IRA investors should add
approximately two weeks because of the additional signatures required from your
custodian. Thereafter, you will be promptly paid by Madison.
HOW DID MADISON GET MY NAME?
In every limited partnership in which Madison conducts a tender offer, one of
its affiliates is a limited partner, and as such, we are entitled to receive a
list of the names and addresses of all of our fellow limited partners or have
the General Partner forward this correspondence to you.
WHAT HAPPENS IF I DON'T SELL MY UNITS?
Nothing. If you choose to retain your investment in the Partnership, you will be
a limited partner until all its assets and the Partnership have been liquidated.
Remember, however, that even if the Partnership had an original anticipated
holding period of five, seven or ten years, there is usually nothing requiring
liquidation within this time frame. In fact, most limited partnerships can
legally continue for up to twenty or thirty years, or longer, from inception.
If you have any additional questions, please call:
Madison Liquidity Investors 104, LLC
c/o Gemisys Tender Services
(303) 705-6390
<PAGE>
INSTRUCTIONS TO COMPLETE AGREEMENT OF ASSIGNMENT AND TRANSFER
Forming Part of the Terms and Conditions of the Offer
By checking-off below all of the items that pertain to your form of ownership,
you are guaranteeing the fastest turnaround time for payment for your Units.
Refer to the "Other Common Oversights" section below to make sure you are not
forgetting anything that may delay processing.
Upon our receipt of your Agreement of Assignment and Transfer, Madison will
evaluate it to determine if it is complete by the General Partner's standards.
If your Agreement is incomplete, you will receive a deficiency letter from us
that will let you know the additional information that we need to process your
sale. Please respond promptly to such request for additional information. Your
failure to provide this additional information can add weeks to the processing
time.
1. BOX A
- Individual Owner/Joint Owners of Record
[ ] Sign Agreement (both owners must sign if joint account).
[ ] Provide a Medallion Signature Guarantee.
[ ] Enclose your original limited partnership certificate, if
available.
[ ] Return Agreement to Madison c/o Gemisys Tender Services in
pre-paid/pre-addressed envelope provided.
- IRA Investors
[ ] Beneficial owner should sign Agreement.
Madison will work directly with your Custodian to get the
necessary custodial signature/medallion guarantee and we will
then forward your check directly to your IRA account.
- Trust, Profit Sharing and Pension Plans
[ ] Authorized signatory should sign Agreement.
[ ] Enclose first, last and other applicable pages of Trust or Plan
Agreement showing that signor(s) is authorized signatory.
- Corporations
[ ] Authorized signatory should sign Agreement.
[ ] Include Corporate Resolution showing that signor(s) is authorized
signatory.
- Other Common Oversights
[ ] Death Certificates: If the owner of the Units has died, please
enclose a copy of the Death Certificate and evidence of your
signature authority.
[ ] Letters Testamentary: If you have inherited the Units, include
a copy of the original owner's Death Certificate and a copy of
the Letters Testamentary or Will showing that you are the legal
owner of the Units.
2. BOX B - MEDALLION SIGNATURE GUARANTEE.
Required to be signed by your bank or brokerage house only.
3. BOX C - SUBSTITUTE FORM W-9.
Please check the shaded box in Box C(i) if you do not have a Taxpayer
Identification Number or Social Security Number ("TIN") but have already
applied for a TIN. Please check the shaded box in Box C(ii) if you are
subject to the 31% federal tax backup withholding.
4. BOX D - FIRPTA AFFIDAVIT.
Please check the shaded box in Box D(i) if you are not a U.S. citizen or a
resident alien for purposes of U.S. income taxation, or are a foreign
corporation, foreign partnership, foreign estate or foreign trust. If the
Unitholder is a corporation, please indicate the state of incorporation in
the shaded area in Box D(iii).
5. BOX E - FOREIGN PERSONS.
Please check the shaded box in Box E if you are an "exempt foreign person"
for purposes of the backup withholding rules under the U.S. federal income
tax laws.
Please note: A Medallion Signature Guarantee is similar to a notary, but is
provided by your bank or brokerage house where you have an account.
If you have any additional questions, please call:
Madison Liquidity Investors 104, LLC
c/o Gemisys Tender Services
(303) 705-6390
Madison Liquidity Investors 104, LLC, c/o Gemisys Tender Services,
7103 South Revere Parkway, Englewood, CO 80112
Tel: 303-705-6390 Fax: 303-705-6276
OFFER TO PURCHASE FOR CASH
LIMITED PARTNERSHIP INTERESTS
OF
ENSTAR INCOME /GROWTH PROGRAM IV-3, L.P.
AT
$161.00 PER UNIT
by
MADISON LIQUIDITY INVESTORS 104, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD
TIME, ON MARCH 11, 1999, UNLESS THE OFFER IS EXTENDED.
Madison Liquidity Investors 104, LLC (the "Purchaser") hereby seeks to
acquire limited partnership interests (the "Units") in ENSTAR INCOME/GROWTH
PROGRAM IV-3, L.P., a Delaware limited partnership (the "Partnership"). The
Purchaser hereby offers to purchase up to 3,950 Units at $161.00 per Unit (the
"Purchase Price"), in cash, reduced by (i) the $25.00 transfer fee (per
transfer, not per Unit) charged by the Partnership and (ii) any cash
distributions made on or after February 10, 1999 (the "Offer Date"), without
interest, upon the terms and subject to the conditions set forth in this Offer
to Purchase (the "Offer to Purchase") and in the related Agreement of Assignment
and Transfer, as each may be supplemented or amended from time to time (which
together constitute the "Offer"). The Offer will expire at 5:00 p.m., Eastern
Standard Time, on March 11, 1999 or such other date to which the Offer may be
extended (the "Expiration Date"). The Units sought pursuant to the Offer
represent 9.9% of the Units outstanding as of September 30, 1998. This Offer is
being made by the Purchaser solely for investment purposes. In the event that
more than 3,950 Units are tendered and not validly withdrawn prior to the
Expiration Date, the Purchaser will accept for payment and pay for an aggregate
of 3,950 validly tendered Units on a pro rata basis in accordance with the terms
and conditions of the Offer. All validly tendered Units that are not properly
withdrawn prior to the Expiration Date, and not otherwise subject to proration,
shall be paid to the Unitholder by the Purchaser's Tender Agent in accordance
with the terms and conditions of the Offer. The Purchaser intends to file a
Schedule 14D-1 with the United States Securities and Exchange Commission in
connection with the Offer. The Purchaser's information contained in its
anticipated filing on Schedule 14D-1 and the exhibits thereto will be
incorporated herein by reference. This Offer to Purchase is not conditioned upon
any minimum number of Units being tendered. A Unitholder may tender any or all
Units owned by such Unitholder as long as such tender does not otherwise violate
the terms of the Limited Partnership Agreement.
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, (i) to extend the period of time during which the
Offer is open and thereby delay acceptance for payment of, and the payment for,
any Units, (ii) upon the occurrence of any of the conditions specified in
Section 14 of the Offer to Purchase, to terminate the Offer and not accept for
payment any Units not theretofore accepted for payment or paid for, or to delay
the acceptance for payment of, or payment for, any Units not theretofore
accepted for payment or paid for, and (iii) to amend the Offer in any respect.
Notice of any such extension, termination or amendment will promptly be
disseminated to Unitholders in a manner reasonably designed to inform
Unitholders of such change in compliance with Rule 14d-4(c) under the Securities
Exchange Act of 1934 (the "Exchange Act"). In the case of an extension of the
Offer, such extension will be followed by a press release or public announcement
which will be issued no later than 9:00 a.m., Eastern Standard Time, on the next
business day after the scheduled Expiration Date, in accordance with Rule
14e-1(d) under the Exchange Act. In conjunction with this publication, a request
of the General Partner will be made for the use of the list of Unitholders and
security position listings for the purpose of dissiminating this Offer to
Unitholders. Tender offer materials will be mailed to Unitholders of record and
will be furnished to brokers, banks and similar persons whose name appears or
whose nominee appears on the list of Unitholders or, if applicable, who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of such securities.
Questions and requests for assistance or additional copies of the offering
material may be directed to Madison Liquidity Investors 104, LLC c/o Gemisys
Tender Services, 7103 South Revere Parkway, Englewood, Colorado 80112, telephone
(303) 705-6390.
February 10, 1999
LOAN AGREEMENT
$30 Million Credit Facility Between
Omega Healthcare Investors, Inc.
and
Madison/OHI Liquidity Investors, LLC
October 2, 1998
<PAGE>
Table of Contents
Page
Section 1 - Definitions........................................................I
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.............................................22
Section 7 - Negative Covenants................................................27
Section 8 - Application of Proceeds...........................................28
Section 9 - Events of Default and Remedies....................................28
Section 10 - Conditions Precedent to Advances of the Loan.....................30
Section 11- Limitation on Loan Advances.......................................31
Section 12 - Option to Restructure Investments................................32
Section 13 - Acceptance of Proceeds...........................................32
Section 14 - Confidentiality..................................................32
Section 15 - Indemnification..................................................33
Section 16 - Miscellaneous....................................................34
<PAGE>
LOAN AGREEMENT
This Loan Agreement is made as of October 2, 1998, between OMEGA HEALTHCARE
INVESTORS, INC., a Maryland corporation (the "Lender"), 900 Victors Way, Suite
350, Ann Arbor, Michigan 48108, and MADISON/OHI- LIQUIDITY INVESTORS, LLC, a
Delaware limited liability company (the "Borrower"), P. 0. Box 7461, Incline
Village, Nevada 89452.
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,
<PAGE>
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 Bryan E. Gordon, means any
physical or mental incapacity which prevents Bryan E. Gordon 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.
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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 Bryan E. Gordon or Ronald M. Dickerman; "Guarantors"
means Bryan E. Gordon and Ronald M. Dickerman.
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
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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
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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 Moody's; (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 A- and A- 1 by S&P
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and at least A3 and PI by Moody's; (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 Moody's; 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.
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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.
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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 Bryan E. Gordon or Ronald M. Dickerman, 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 Bryan E. Gordon 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. Ronald M. Dickerman 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%
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of MACG.
2.3 Bryan E. Gordon 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 Ronald M. Dickerman 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 Bryan E.
Gordon and Ronald M. Dickerman 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.
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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,
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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 Lender,
per Investment of the lesser of: (a) $2.5 million; or (b) 75% of the
Carrying Value of the
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Position (See Investment Position (except that the maximum draw
Section 3.2 of for Investment Positions that constitute "margin
this Agreement) 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)
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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 by the
Account 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
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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
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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
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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
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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
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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
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<PAGE>
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,
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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 Bryan E. Gordon 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 Ronald M. Dickerman 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 John Hancock 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
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(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
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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
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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, Fromm & 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
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(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
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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
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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
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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
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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.
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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
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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 Bryan E. Gordon.
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
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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 Bryan
E. Gordon, 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
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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"
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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
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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.
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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.
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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
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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: 592 Fallen Leaf Way
Incline Village, NV 89451
For Regular Mail: P.O. Box 7461
Incline Village, Nevada 89452
Attention: Bryan E. Gordon, Managing Director
Fax Numbers: (702) 832-9027 and (212) 687-2335
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.
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<PAGE>
and to the Lender as:
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, MI 48108
Attention: F. Scott Kellman, 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
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<PAGE>
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
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<PAGE>
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]
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<PAGE>
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: _____________________________________________
Bryan E. Gordon, Managing Director
OMEGA HEALTHCARE INVESTORS, INC.
By: _____________________________________________
Essel W. Bailey, Jr., Chief Executive Officer
STATE OF MICHIGAN )
) ss.
COUNTY OF WASHTENAW )
The foregoing instrument was acknowledged before me this 2nd day of
October, 1998, by Bryan E. Gordon, 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: __________________________
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<PAGE>
STATE OF MICHIGAN )
) ss.
COUNTY OF WASHTENAW )
The foregoing instrument was acknowledged before me this 2nd day of
October, 1998 by Essel W. Bailey, Jr., 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: __________________________
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<PAGE>
SCHEDULE 2.9
Nolan Brothers of Texas Inc. instituted an action against, amongst others, Bryan
E. Gordon 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 Nolan Brothers of Texas, Inc., to buy McNeil 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 Bryan E. Gordon, 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 Nolan Brothers of Texas, Inc. The complaint alleges, among other things,
conspiracy to interfere with prospective contractual relationships. Wolf,
Haldenstein, Adler Freeman & Herz LLP, who are defending the action, have
advised that the defendants have a meritorious defense.
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<PAGE>
$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
b. Madison 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. Ronald M. Dickerman
b. Bryan E. Gordon
6. Assignment of Life Insurance Policies
a. Ronald M. Dickerman
b. Bryan E. Gordon
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)
b. Madison 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)
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<PAGE>
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)
b. Madison 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
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