<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------ ------------
COMMISSION FILE NUMBER 1-11316
OMEGA HEALTHCARE
INVESTORS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(State of Incorporation)
38-3041398
(I.R.S. Employer Identification No.)
900 VICTORS WAY, SUITE 350, ANN ARBOR, MI 48108
(Address of principal executive offices)
(734) 887-0200
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of March 31, 1999
COMMON STOCK, $.10 PAR VALUE
(Class)
19,823,405
(Number of shares)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
OMEGA HEALTHCARE INVESTORS, INC
FORM 10-Q
MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Balance Sheets
March 31, 1999 (unaudited) and December 31, 1998.......... 2
Statements of Operations (unaudited) --
Three-month periods ended March 31, 1999 and 1998......... 3
Statement of Cash Flows (unaudited) --
Three-month periods ended March 31, 1999 and 1998......... 4
Notes to Financial Statements
March 31, 1999 (unaudited)................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 11
</TABLE>
<PAGE> 3
PART 1 -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OMEGA HEALTHCARE INVESTORS, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
(UNAUDITED) (SEE NOTE)
<S> <C> <C>
ASSETS
Real estate properties
Land and buildings at cost................................ $ 677,300 $ 643,378
Less accumulated depreciation............................. (58,540) (56,385)
---------- ----------
Real estate properties -- net.......................... 618,760 586,993
Mortgage notes receivable................................. 333,744 340,455
---------- ----------
952,504 927,448
Investment in Omega Worldwide, Inc.......................... 6,961 6,226
Investments in Principal Healthcare Finance Ltd............. 1,629 1,629
Other investments........................................... 51,737 33,898
---------- ----------
1,012,831 969,201
Assets held for sale........................................ 31,566 35,289
---------- ----------
Total Investments (Cost of $1,102,937 at March 31, 1999
and $1,060,875 at December 31, 1998)................... 1,044,397 1,004,490
Cash and short-term investments............................. 1,563 1,877
Goodwill and non-compete agreements -- net.................. 4,008 4,422
Other assets................................................ 15,867 21,856
---------- ----------
Total Assets........................................... $1,065,835 $1,032,645
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Acquisition line of credit.................................. $ 176,155 $ 123,000
Unsecured borrowings........................................ 311,570 311,570
Secured borrowings.......................................... 21,707 21,784
Subordinated convertible debentures......................... 48,405 48,405
Accrued expenses and other liabilities...................... 12,137 22,124
---------- ----------
Total Liabilities...................................... 569,974 526,883
Preferred Stock............................................. 107,500 107,500
Common stock and additional paid-in capital................. 447,821 454,445
Cumulative net earnings..................................... 225,259 212,434
Cumulative dividends paid................................... (282,463) (266,054)
Stock option loans.......................................... (2,845) (2,863)
Unamortized restricted stock awards......................... (907) (461)
Accumulated other comprehensive income...................... 1,496 761
---------- ----------
Total Shareholders' Equity............................. 495,861 505,762
---------- ----------
$1,065,835 $1,032,645
========== ==========
</TABLE>
NOTE -- The balance sheet at December 31, 1998, has been derived from audited
consolidated financial statements at that date but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See notes to condensed consolidated financial statements.
2
<PAGE> 4
OMEGA HEALTHCARE INVESTORS, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 1998
---- ----
<S> <C> <C>
Revenues
Rental income............................................. $18,128 $17,281
Mortgage interest income.................................. 10,217 7,205
Other investment income................................... 1,662 1,635
Miscellaneous............................................. 16 147
------- -------
30,023 26,268
Expenses
Depreciation and amortization............................. 5,595 5,127
Interest.................................................. 10,106 7,629
General and administrative................................ 1,497 1,365
------- -------
17,198 14,121
------- -------
Net Earnings Before Preferred Stock Dividends............... 12,825 12,147
Preferred Stock Dividends................................... (2,408) (1,330)
Net Earnings Available to Common Shareholders............... $10,417 $10,817
======= =======
Net Earnings per common share:
Basic..................................................... $0.52 $0.55
======= =======
Diluted................................................... $0.52 $0.55
======= =======
Dividends paid per common share............................. $0.70 $0.670
======= =======
Average Shares Outstanding, Basic........................... 19,899 19,609
======= =======
Average Shares Outstanding, Diluted......................... 19,901 19,709
======= =======
Other comprehensive income, net of taxes:
Unrealized Gain (Loss) on Omega Worldwide, Inc............ $735 $0
Total comprehensive income.................................. $13,560 $12,147
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
OMEGA HEALTHCARE INVESTORS, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
----------------------
1999 1998
---- ----
<S> <C> <C>
Operating activities
Net earnings.............................................. $ 12,825 $ 12,147
Adjustment to reconcile net earnings to cash provided by
operating activities:
Depreciation and amortization.......................... 6,255 5,127
Income realized on assets held for sale................ 659 0
Other non-cash charges................................. 339 112
--------- ---------
Funds from operations available for distribution and
investment............................................. 20,078 17,386
Net change in operating assets and liabilities............ (4,729) (10,300)
--------- ---------
Net cash provided by operating activities................... 15,349 7,086
Cash flows from financing activities Proceeds of acquisition
line of credit............................................ 53,155 131,533
Payments of long-term borrowings.......................... (76) (52)
Receipts from Dividend Reinvestment Plan.................. 260 69
Dividends paid............................................ (16,409) (14,100)
Purchase of 312,100 shares of common stock for
retirement............................................. (8,740) 0
Other..................................................... 1,283 620
--------- ---------
Net cash provided by financing activities................... 29,473 118,070
Cash flows from investing activities
Acquisition of real estate................................ (33,921) (98,027)
Placement of mortgage loans............................... (16,891) (12,000)
Proceeds from assets held for sale........................ 2,914 0
Fundings of other investments -- net...................... (2,532) (11,673)
Temporary advances to Principal Healthcare Finance
Limited................................................ 0 (3,333)
Collection of mortgage principal.......................... 5,776 1,732
Other..................................................... (482) 403
--------- ---------
Net cash used in investing activities....................... (45,136) (122,898)
--------- ---------
(Decrease) Increase in cash and short-term investments...... $ (314) $ 2,258
========= =========
</TABLE>
4
<PAGE> 6
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1999
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for
Omega Healthcare Investors, Inc. (the "Company"), have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 1999, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1998.
NOTE B -- FIRST QUARTER REAL ESTATE INVESTMENTS
During the first quarter of 1999, a $16.2 million Purchase/Leaseback was
completed with TLC Health Care, Inc. The four facilities, located in Illinois,
Missouri, and Ohio, have 417 beds and were leased to affiliates of TLC. The
initial annual yield on the investment is 10.0%, with a term of 14 years.
Additionally, a $9.6 million mortgage was placed on two facilities with 203 beds
owned by TLC Health Care, Inc. The initial annual yield is 10.0%.
Also during the first quarter, a mortgage and two additional
Purchase/Leaseback transactions were completed, totaling $22.8 million. The $7.2
million mortgage is secured by one facility with 246 beds and is priced at
425-525 basis points over LIBOR. The purchase/leaseback transactions include
four facilities with 395 beds. Both are priced with an initial yield of 10.0%
and an initial lease term of 14 years.
As of January 31, 1999 the bankruptcy court confirmed a plan of
reorganization of RainTree Healthcare Corporation, formerly known as Unison
Healthcare Corporation. Pursuant to the plan, the Company agreed to terminate
its lease with RainTree as to six facilities located in Indiana. In exchange for
terminating the lease, the Company received $1 million in cash and a $3 million
secured note. In addition, the Company completed a foreclosure of three
facilities in Texas which were secured by a mortgage. These facilities, with a
cost of $9.6 million after application of proceeds from reorganization, have
been reclassified to purchase/leaseback. An additional investment of $3.7
million was made with RainTree in January, with the total investment generating
an initial yield of 12.56%. All amounts owed to the Company for rent, interest
and late charges were collected from RainTree.
NOTE C -- ASSET CONCENTRATIONS
As of March 31, 1999, 94.7% of the cost of the Company's real estate
investments are related to long-term care facilities, 2.3% to rehabilitation
hospitals, and 3.0% to medical office facilities. The Company's healthcare
facilities are located in 30 states and are operated by 33 independent
healthcare operating companies. Approximately 70.5% of the Company's investments
are operated by seven public companies, including Sun Healthcare Group, Inc.
(25.8%), Integrated Health Services, Inc. (15.4%), Advocat Inc. (11.0%),
RainTree Healthcare Corporation (f.k.a. Unison Healthcare Corporation) (7.3%);
Mariner Post-Acute Network (5.8%), and two other public companies (5.2%). Of the
remaining operators, none operate investments in facilities representing more
than 6.7% of the total investments. The three largest states in which
investments are located are Florida (14.6%), Texas (7.3%) and California (6.8%).
5
<PAGE> 7
Most healthcare operators are now subject to a new prospective payment
system as a result of the Balanced Budget Act of 1997. This system in intended
to reduce payments by Medicare for patient services and ancillary services.
During the past 90 days unexpected adverse financial results have been reported
by several public nursing home companies, including several who are tenants of
the Company. The reports generally focus on the annualized impact of changes in
payment methods and reduced ancillary revenues for therapy businesses. As of
March 31, 1999 and through the date of this report, all of the Company's public
operators are current in their rent and interest payments to the Company.
NOTE D -- OTHER PORTFOLIO MATTERS
In the ordinary course of its business activities, the Company periodically
evaluates investment opportunities and extends credit to customers. It also is
regularly engaged in lease and loan extensions and modifications and believes
its management has the experience and expertise to deal with such issues as may
arise from time to time.
ASSETS HELD FOR SALE
During 1998 management was authorized to initiate a plan to dispose of
certain properties judged to have limited potential and to redeploy the
proceeds. As of March 31, 1999, the carrying value of assets held under plan for
disposition total $31.6 million. During the three-month 1999 period, the Company
realized disposition proceeds of $2.9 million and net revenues of approximately
$650,000. The net revenues from properties were netted against the held for sale
asset and excluded from the operations of the Company.
NOTE E -- PREFERRED STOCK
On April 28, 1998, the Company received gross proceeds of $50 million
resulting from the issuance of 2 million shares of 8.625% Series B Cumulative
Preferred Stock ("Preferred Stock") at $25 per share. Dividends on the Preferred
Stock are cumulative from the date of original issue and are payable quarterly
commencing on August 15, 1998. On April 7, 1997, the Company received gross
proceeds of $57.5 million from the issuance of 2.3 million shares of 9.25%
Series A Cumulative Preferred Stock ("Preferred Stock") at $25 per share.
Dividends on the Series A Preferred Stock are cumulative from the date of
original issue and are payable quarterly.
NOTE F -- NET EARNINGS PER SHARE
Net earnings per share is computed based on the weighted average number of
common shares outstanding during the respective periods. Diluted earnings per
share amounts reflect the dilutive effect of stock options (2,701 shares and
99,683 shares for 1999 and 1998, respectively). The assumed conversion of
convertible debentures is antidilutive.
NOTE G -- STOCK REPURCHASE
The Company purchased 312,100 shares of common stock for retirement in the
first quarter for $8.7 million.
NOTE H -- OMEGA WORLDWIDE, INC.
As of March 31, 1999, the Company holds a $6,961,000 investment in Omega
Worldwide, Inc. ("Worldwide"), represented by 1,163,000 shares of common stock
and 260,000 shares of Preferred stock. The Company has guaranteed repayment of
$25 million of Worldwide permitted borrowings pursuant to a revolving credit
facility in exchange for a 1% annual fee and an unused fee of 25 basis points.
Additionally, the Company has a Services Agreement with Worldwide which provides
for the allocation of indirect costs incurred by the Company to Worldwide. The
allocation of indirect costs is based on the relationship of assets under the
Company's management to the combined total of those assets and assets under
Worldwide's management. Indirect costs allocated to Worldwide for the
three-month period ending March 31, 1999 were $198,000.
6
<PAGE> 8
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
"Safe Harbor" Statement Under the United States Private Securities
Litigation Reform Act of 1995. Statements contained in this document that are
not based on historical fact are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include statements regarding the Company's future development
activities, the future condition and expansion of the Company's markets, the
Company's ability to meet its liquidity requirements and the Company's growth
strategies, as well as other statements which may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "estimate,"
"anticipate," or similar terms, variations of those terms or the negative of
those terms. Statements that are not historical facts contained in Management's
Discussion and Analysis are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ from projected results.
Some of the factors that could cause actual results to differ materially
include: The financial strength of the operators of the Company's facilities as
it affects their continuing ability to meet their obligations to the Company
under the terms of the Company's agreements with such operators; changes in the
reimbursement levels under the Medicare and Medicaid programs; operators'
continued eligibility to participate in the Medicare and Medicaid programs;
changes in reimbursement by other third party payors; occupancy levels at the
Company's facilities; the availability and cost of capital; the strength and
financial resources of the Company's competitors; the Company's ability to make
additional real estate investments at attractive yields; and changes in tax laws
and regulations affecting real estate investment trusts.
Following is a discussion of the consolidated results of operations,
financial position and liquidity and capital resources of the Company, which
should be read in conjunction with the consolidated financial statements and
accompanying notes.
RESULTS OF OPERATIONS
Revenues for the three-month period ending March 31, 1999 totaled $30.0
million, an increase of $3.8 million over the period ending March 31, 1998. The
1999 revenue growth stems primarily from real estate investments of
approximately $224 million during the twelve-month period ending March 31, 1999
offset by a decrease in investments in Principal Healthcare Finance Limited and
other investments of approximately $20.1 million and assets identified for
disposition. Additionally, revenue growth of approximately $0.7 million stems
from participating incremental net revenues which became effective in 1999.
Total investments of $1.10 billion as of March 31, 1999 have an average
annualized yield of approximately 11.25%.
Expenses for the three-month period ended March 31, 1999 totaled $17.2
million, an increase of $3.1 million over expenses for 1998. The provision for
depreciation and amortization for the three-month period ended March 31, 1999
totaled $5,595,000, increasing $468,000 over the same period in 1998 as a result
of additional real estate investments.
Interest expense for the three-month period ended March 31, 1999 was $10.1
million, compared with $7.6 million, for the same period in 1998. The increase
in 1999 is primarily due to higher average outstanding borrowings during the
1999 period at slightly lower rates than the same period in the prior year.
General and administrative expenses for the three-month period ended March
31, 1999 totaled approximately $1.5 million. These expenses for the three-month
period were approximately 5.0% of revenues, as compared to 5.2% of revenues for
the 1998 three-month period.
Net earnings available to common shareholders were $10,417,000 for the
three-month period, decreasing approximately $400,000 from the 1998 period. The
decrease stems from non-recognition of income from assets held for sale as
described above. As a result, net earnings per diluted common share decreased
from $0.55 to $0.52 for the three-month period.
Funds from Operations ("FFO") totaled $16,785,000 for the three-month
period ending March 31, 1999, representing an increase of approximately $728,000
over the same period in 1998. FFO is net earnings available to common
shareholders, excluding any gains or losses from debt restructuring and sales of
assets,
7
<PAGE> 9
plus depreciation and amortization associated with real estate investments and
charges to earnings for non-cash common stock based compensation.
No provision for Federal income taxes has been made since the Company
intends to continue to qualify as a real estate investment trust under the
provisions of Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended. Accordingly, the Company will not be subject to Federal income taxes on
amounts distributed to shareholders, provided it distributes at least 95% of its
real estate investment trust taxable income and meets certain other conditions.
LIQUIDITY AND CAPITAL RESOURCES
The Company continually seeks new investments in healthcare properties,
primarily long-term care facilities, with the objective of profitable growth and
further diversification of the investment portfolio. Permanent financing for
future investments is expected to be provided through a combination of private
and public offerings of debt and equity securities. Management believes the
Company's liquidity and various sources of available capital are adequate to
finance operations, fund future investments in additional facilities, and meet
debt service requirements.
At March 31, 1999, the Company has a strong financial position with total
assets of $1.07 billion, shareholders' equity of $495.9 million, and long-term
debt of $381.7 million, representing approximately 36% of total capitalization.
Long-term debt excludes funds borrowed under its acquisition credit agreement.
The Company anticipates maintaining a long-term debt-to-capitalization ratio of
approximately 40%. In March, 1999 the Company consummated arrangements for a
three-year $50 million secured revolving line of credit facility with a bank.
Borrowings under this facility will bear interest at 200 basis points over
LIBOR. As of the date of this report, no funds have been drawn on this line. The
Company has $250 million available under its revolving credit facilities, of
which $176 million was drawn at March 31, 1999. Net proceeds from dispositions
of assets held for sale for the remainder of 1999 are expected to reduce
borrowings on the credit facility by approximately $32 million.
In February 1997, the Company filed a Form S-4 shelf registration statement
with the Securities and Exchange Commission registering common stock totaling
$100 million to be issued in connection with future property acquisitions.
Additionally, on January 14, 1999, the Company's Form S-3 registration statement
permitting the issuance of up to $300 million related to common stock,
unspecified debt, preferred stock and convertible securities was declared
effective by the Securities and Exchange Commission.
The Company has demonstrated a strong capacity for timely access of capital
markets and has raised more than $1.2 billion in debt and equity capital since
it was organized in 1992. The Company raised more than $500 million in equity,
including $130 million from the initial public offering in 1992, $73 million
from a follow-on common stock offering in 1994, $165 million from the Health
Equity Properties acquisition in 1994 and three additional offerings, including
the offering of Series A and Series B preferred stock. Additionally, over $700
million of debt capital has been raised, some of which has been used to retire
secured borrowings with higher interest rates. In 1996, the Company completed a
placement of $95 million of 8.5% Convertible Subordinated Debentures due 2001,
and executed an agreement to increase its current bank line of credit facility
by $50 million and to extend the term of the revolving credit agreement to July
1999. In April 1997, the Company issued $57.5 million of Series A Preferred
Stock with a yield of 9.25% and in August 1997 completed a $100 million 10-year
senior note offering priced to yield 6.99%. In September 1997, the Company
completed the second amended and restated loan agreement. The new agreement
provided for total permitted borrowings of up to $200 million, reduced interest
rates on borrowings, and extended the term of the agreement to September 2000.
In April 1998, the Company issued $50 million of Series B Preferred Stock with a
yield of 8.625%. In June 1998, the Company completed a $125 million 4-year
senior note offering priced to yield 7.04%.
The Company distributes a large portion of the cash available from
operations. Cash dividends paid totaled $.70 per share for the three-month
period ending March 31, 1999 compared with $.67 per share for the same period in
1998. The current $.70 per quarter rate represents an annualized rate of $2.80
per share. The dividend payout ratio, that is the ratio of per share amounts for
dividends paid to the diluted per share amounts
8
<PAGE> 10
of funds from operations, was approximately 85% for the three-month period ended
March 31, 1999 compared with 82% for the same period in 1998. Approximately 50%
of incremental cash flow from operations is expected to be retained annually
through gradual reductions in the dividend payout ratio, with such funds used to
fund additional investments and provide financial flexibility.
New investments generally are funded from temporary borrowings under the
Company's acquisition credit line agreement. Interest cost incurred by the
Company on borrowings under its revolving credit line facilities will vary
depending upon fluctuations in prime and/or LIBOR rates. With respect to the
unsecured acquisition credit line, interest rates depend in part upon changes in
the Company's ratings by national agencies. Borrowings under the $200 million
facility bear interest at LIBOR plus 1.00% or, at the Company's option, at the
prime rate. The Company expects to periodically replace funds drawn on the
revolving credit facilities through fixed-rate long-term borrowings, the
placement of convertible debentures, or the issuance of additional shares of
common and/or preferred stock. Historically, the Company's strategy has been to
match the maturity of its indebtedness with the maturity of its assets and to
employ fixed-rate long-term debt to the extent practicable.
YEAR 2000 COMPLIANCE
The Year 2000 compliance issue concerns the inability of certain systems
and devices to properly use or store dates beyond December 31, 1999. This could
result in system failures, malfunctions, or miscalculations that disrupt normal
operations. This issue affects most companies and organizations to large and
small degrees, at least to the extent that potential exposures must be
evaluated.
The Company is reviewing risks with regard to the ability of the Company's
own internal operations, the impact of outside vendors' ability to operate, and
the impact of tenants' ability to operate. The Company initially focused this
review on mission-critical operations, recognizing that other potential effects
are expected to be less material. The Company believes its own internal
operations, its technology infrastructure, information systems, and software
applications are likely to be compliant or will be compliant by mid-1999 based
upon certification statements by the applicable vendors. In those cases where
there are compliance issues, these are considered to be minor in nature, and
remedies are already identified. Expenditures for such remedies will not be
material.
With respect to the Company's material outside vendors, such as its banks,
payroll processor, and telecommunications providers, the Company's assessment
will cover the compliance efforts of significant vendors, the effects of
potential non-compliance, and remedies that may mitigate or obviate such effects
as to the Company's business and operations. The Company plans to complete its
assessment of compliance by important vendors by mid-1999.
With respect to the Company's tenants and properties, the Company's
assessment will cover the tenants' compliance efforts, the possibility of any
interface difficulties or electromechanical problems relating to compliance by
material vendors, the effects of potential non-compliance, and remedies that may
mitigate or obviate such effects. The Company plans to process information from
tenant surveys beginning in 1999 and complete its assessment by mid-1999.
Because the Company's evaluation of these issues has been conducted by its
own personnel or by selected inquiries of its vendors and tenants in connection
with their routine servicing operations, the Company believes that its
expenditures for assessing Year 2000 issues, though difficult to quantify, have
not been material. In addition, the Company is not aware of any issues that will
require material expenditures by the Company in the future.
Based upon current information, the Company believes that the risk posed by
foreseeable Year 2000 related problems with its internal systems (including both
information and non-information systems) is minimal. Year 2000 related problems
with the Company's software applications and internal operational programs are
unlikely to cause more than minor disruptions in the Company's operations. Year
2000 related problems at certain of its third-party service providers, such as
its banks, payroll processor, and telecommunications provider, is marginally
greater, though, based upon current information, the Company does not believe
9
<PAGE> 11
any such problems would have a material effect on its operations. For example,
Year 2000 related problems at such third-party service providers could delay the
processing of financial transactions and the Company's payroll and could disrupt
the Company's internal and external communications.
The Company believes that the risk posed by Year 2000 related problems with
its tenants is marginally greater, though, based upon current information, the
Company does not believe any such problems would have a material effect on its
operations. Year 2000 related problems at certain governmental agencies and
third-party payers could delay the processing of tenant financial transactions,
though, based upon current information, the Company does not believe any such
problems would have a material long-term effect on its operations. Year 2000
related problems with the electromechanical systems at its properties are
unlikely to cause more than minor disruptions.
The Company intends to complete outstanding assessments, to implement
identified remedies, to continue to monitor Year 2000 issues, and will develop
contingency plans if, and to the extent, deemed necessary. However, based upon
current information and barring developments, the Company does not anticipate
developing any substantive contingency plans with respect to Year 2000 issues.
In addition, the Company has no plans to seek independent verification or review
of its assessments.
While the Company believes that it will be Year 2000 compliant by December
31, 1999, there can be no assurance that the Company will be successful in
identifying and assessing all compliance issues, or that the Company's efforts
to remedy all Year 2000 compliance issues will be effective such that they will
not have a material adverse effect on the Company's business or results of
operations.
The information above contains forward-looking statements, including,
without limitation, statements relating to the Company's plans, strategies,
objectives, expectations, intentions and adequate resources that are made
pursuant to "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. Readers are cautioned that forward-looking statements about the
Year 2000 should be read in conjunction with the Company's disclosures under the
heading: "Safe Harbor" Statement Under the Private Securities Litigation Reform
Act of 1995.
10
<PAGE> 12
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -- The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
10.1 Form of Loan Agreement by and among Omega Healthcare
Investors, Inc. and certain of its subsidiaries and the
Provident Bank dated March 31, 1999
27 Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K -- NONE WERE FILED.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMEGA HEALTHCARE INVESTORS, INC.
Registrant
<TABLE>
<S> <C>
By: /s/ESSEL W. BAILEY, JR.
-------------------------------------------------
Essel W. Bailey, Jr.
Date: April 13, 1999 President
By: /s/DAVID A. STOVER
-------------------------------------------------
David A. Stover
Date: April 13, 1999 Chief Financial Officer
</TABLE>
12
<PAGE> 14
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
10.1 Form of Loan Agreement by and among Omega Healthcare
Investors, Inc. and certain of its subsidiaries and the
Provident Bank dated March 31, 1999
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
LOAN AGREEMENT
BY AND AMONG
OMEGA HEALTHCARE INVESTORS, INC.
AND CERTAIN OF ITS SUBSIDIARIES
AND
THE PROVIDENT BANK
MARCH 31, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Article 1. Definitions.....................................................................................1
Section 1.1 Provisions Pertaining to Definitions...................................................1
Section 1.2 Defined Terms..........................................................................1
Section 1.3 GAAP..................................................................................15
Article 2. Commitment; Loan...............................................................................16
Section 2.1 Loan..................................................................................16
Section 2.2 Notices Relating to Loan..............................................................16
Section 2.3 Disbursement of Loan Proceeds.........................................................16
Section 2.4 Note..................................................................................16
Section 2.5 Repayment of Loan; Voluntary Changes in Commitment....................................16
Section 2.6 Interest..............................................................................17
Section 2.7 Fees..................................................................................18
Section 2.8 Use of Proceeds.......................................................................18
Section 2.9 Computations..........................................................................18
Section 2.10 Minimum Amount of Borrowings and Repayment............................................18
Section 2.11 Time and Method of Payment............................................................19
Section 2.12 Additional Costs; Capital Requirements................................................19
Section 2.13 Limitation on Types of Rate...........................................................20
Section 2.14 Illegality............................................................................20
Section 2.15 Indemnification.......................................................................21
Section 2.16 Extension of Commitment Period........................................................21
Article 3 Security.......................................................................................22
Section 3.1 Security Interest.....................................................................22
Section 3.2 Guaranties............................................................................22
Section 3.3 Financing Statements; Additional Documents............................................22
Section 3.4 Accounts; Chattel Paper; Lease Agreements.............................................22
Section 3.5 Removal and Substitution of Real Property Collateral..................................23
Section 3.6 Release of Collateral.................................................................24
Article 4 Representations and Warranties.................................................................24
Section 4.1 Organization..........................................................................24
Section 4.2 Power, Authority, Consents............................................................25
Section 4.3 No Violation of Law or Agreements.....................................................25
Section 4.4 Due Execution, Validity, Enforceability...............................................26
Section 4.5 Title to Properties...................................................................26
Section 4.6 Judgments, Actions, Proceedings.......................................................26
Section 4.7 No Defaults, Compliance With Laws.....................................................26
Section 4.8 Burdensome Documents..................................................................26
Section 4.9 Financial Statements..................................................................27
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.10 Tax Returns...........................................................................27
Section 4.11 Intangible Assets.....................................................................27
Section 4.12 Regulation U..........................................................................27
Section 4.13 Full Disclosure.......................................................................28
Section 4.14 Licenses and Approvals................................................................28
Section 4.15 ERISA.................................................................................28
Section 4.16 REIT Status...........................................................................28
Section 4.17 General Collateral Representations....................................................28
Section 4.18 Environmental Representations.........................................................29
Article 5 Conditions to the Loans........................................................................30
Section 5.1 Conditions to Initial Loan(s).........................................................30
Section 5.2 Post-Closing Requirements.............................................................32
Section 5.3 Conditions to Subsequent Borrowings...................................................32
Article 6 Delivery of Financial Reports, Documents and Other Information.................................33
Section 6.1 Annual Financial Statements...........................................................33
Section 6.2 Quarterly Financial Statements........................................................34
Section 6.3 Compliance Information................................................................34
Section 6.4 No Default Certificate................................................................34
Section 6.5 Certificate of Accountants............................................................34
Section 6.6 Business Plans and Budget.............................................................34
Section 6.7 Operator Reports......................................................................35
Section 6.8 Accountants' Reports..................................................................35
Section 6.9 Copies of Documents...................................................................35
Section 6.10 Notices of Defaults...................................................................35
Section 5.11 ERISA Notices and Requests............................................................35
Section 5.12 Additional Information................................................................36
Article 7 Affirmative Covenants..........................................................................36
Section 7.1 Books and Records.....................................................................36
Section 7.2 Inspections and Audits................................................................36
Section 7.3 Maintenance and Repairs...............................................................36
Section 7.4 Continuance of Business...............................................................36
Section 7.5 Copies of Corporate Documents.........................................................36
Section 7.6 Perform Obligations...................................................................37
Section 7.7 Notice of Litigation..................................................................37
Section 7.8 Insurance.............................................................................37
Section 7.9 Financial Covenants...................................................................37
Section 7.10 Notice of Certain Events..............................................................38
Section 7.11 Comply with ERISA.....................................................................38
Section 7.12 Environmental Compliance..............................................................38
Section 7.13 Compliance with Laws..................................................................38
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 7.14 Maintenance of REIT Status............................................................39
Section 7.15 Year 2000 Compliance..................................................................39
Article 8 Negative Covenants.............................................................................39
Section 8.1 Liens.................................................................................40
Section 8.2 Mergers, Acquisitions.................................................................40
Section 8.3 Changes in Structure..................................................................40
Section 8.4 Disposition of Assets.................................................................40
Section 8.5 Fiscal Year...........................................................................40
Section 8.6 ERISA Obligations.....................................................................40
Section 8.7 Capital Expenditures..................................................................41
Section 8.8 Hazardous Material....................................................................41
Section 8.9 Limitation on Nature of Business......................................................41
Article 9 Events of Default..............................................................................41
Section 9.1 Events of Default.....................................................................41
Section 9.2 Remedies..............................................................................43
Section 9.3 No Implied Waiver.....................................................................45
Section 9.4 Set-Off...............................................................................45
Article 10 Miscellaneous Provisions.......................................................................46
Section 10.1 Fees and Expenses; Indemnity..........................................................46
Section 10.2 Taxes ................................................................................47
Section 10.3 Payments..............................................................................47
Section 10.4 Survival of Agreements and Representations; Construction..............................48
Section 10.5 Lien on and Set-off of Deposits ......................................................48
Section 10.6 Modifications. Consents and Waivers; Entire Agreement.................................48
Section 10.7 Further Assurances....................................................................48
Section 10.8 Notices...............................................................................49
Section 10.9 Counterparts..........................................................................50
Section 10.10 Severability..........................................................................50
Section 10.11 Binding Effect; No Assignment or Delegation by Borrowers..............................50
Section 10.12 Participation by Bank.................................................................50
Section 10.13 Interpretation of Loan Documents......................................................51
Section 10.14 Integration of Schedules and Exhibits.................................................51
Section 10.15 Headings..............................................................................51
Section 10.16 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury.......................51
Section 10.17 Joint and Several Obligations.........................................................52
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C>
Exhibits
Exhibit A Form of Note
Exhibit B Form of Mortgage
Exhibit C Form of Security Agreement
Exhibit D Form of Guaranty
Exhibit E Form of Compliance Certificate
Schedules
A Real Property Collateral
4.1 States of Incorporation and Qualification, and Capitalization of Borrowers and
Subsidiaries
4.6 Judgments, Actions, Proceedings
4.7 Defaults; Compliance with Laws, Regulations, Agreements
4.8 Burdensome Documents
4.14 Violations/Revocations of Licenses and Approvals
4.15 Multiemployer Plans
4.17 UCC Filing Offices
4.18 EPA Permits
8.1 Permitted Security Interests, Liens and Encumbrances
</TABLE>
v
<PAGE> 6
LOAN AGREEMENT
This Loan Agreement (the "Agreement") is made and entered into this
31st day of March, 1999, by and between Omega Healthcare Investors, Inc., a
Maryland corporation ("Borrower"), Sterling Acquisition Corp., a Kentucky
corporation, OHI (Iowa), Inc., an Iowa corporation, and Delta Investors II, LLC,
a Maryland limited liability company (referred to collectively as the
"Guarantors" or individually as a "Guarantor) and The Provident Bank, an Ohio
banking corporation ("Bank").
ARTICLE 1 DEFINITIONS.
Section 1.1 Provisions Pertaining to Definitions. For all purposes of
this Agreement, unless otherwise expressly specified:
(a) The expression "this Agreement" shall mean this Loan
Agreement (including all of the Schedules and Exhibits hereto) as originally
executed, or, if supplemented, amended or restated from time to time, as so
supplemented, amended or restated;
(b) Unless the context clearly indicates the contrary, words
importing the singular only shall include the plural and vice versa, and all
references to dollars shall be United States Dollars;
(c) All of the uncapitalized terms contained in this Agreement
which are defined under the UCC will, unless defined in the Loan Documents or
the context clearly indicates otherwise, have the meanings provided for in the
UCC;
(d) The term "including" is used by way of illustration and
not by way of limitation; and
(e) The definition of any document, agreement or instrument
includes all schedules, attachments and exhibits thereto and all renewals,
extensions, supplements, restatements and amendments thereof
Section 1.2 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Accountants" - Ernst & Young LLP or such other firm of certified
public accountants selected by Borrower and acceptable to Bank.
"Accounts"- with respect to any Person, such Person's "accounts" (as
defined in the UCC), rental agreements, contracts, notes, bills, drafts,
acceptances, documents of title and other contract rights, rights to payment and
other forms of obligation for the payment of money, whether now owned or
existing or hereafter acquired or arising or in which such Person now has or
hereafter acquires any rights or interests, including, without limitation, all
(i) accounts receivable (whether or not specifically listed on schedules
furnished to Bank), accounts created by or arising from all of
<PAGE> 7
such Person's sales of goods, financial instruments, documents, permits or other
items, or rendition of services, including funds transfer services, made under
any of such Person's trade names or styles, or through any of such Person's
subsidiaries or divisions, and all accounts acquired by assignment in the
ordinary course of business; (ii) unpaid seller's rights (including rescission,
replevin, reclamation and stopping in transit) relating to the foregoing or
arising therefrom; (iii) rights to any goods represented by any of the
foregoing, including returned or repossessed goods; (iv) reserves and credit
balances held by such Person with respect to any such accounts or account
debtors; (v) guarantees or collateral for any of the foregoing; and (vi)
insurance policies or rights relating to any of the foregoing.
"Additional Costs" - as defined in Section 2.12 hereof.
"Affiliate" - as to any Person, any other Person that directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event: (a) any Person that owns directly or indirectly five (5%) percent or more
of the securities having ordinary voting power for the election of directors or
other governing body of a corporation or five (5%) percent or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such corporation
or other Person; and (b) each shareholder, director and officer of Borrower or
any Guarantor shall be deemed to be an Affiliate of Borrower or such Guarantor,
respectively.
"Applicable Interest Expense" - that portion of the interest due and
payable on the Loan attributable to a particular Property serving as Real
Property Collateral, determined by multiplying the interest due and payable
under the Loan by a fraction, the numerator of which is the Appraised Value for
the Property in question, and the denominator of which is the aggregate
Appraised Value of all Real Property Collateral.
"Appraisal" - an appraisal providing an assessment of the fair market
value of a Property (whether appraised on a stand-alone basis or "in bulk"
together with similar Properties) which is independently and impartially
prepared by a nationally recognized appraiser or an appraiser acceptable to Bank
and having substantial experience in the appraisal of health care facilities and
conforming to Uniform Standards of Professional Appraisal Practice adopted by
the Appraisal Standards Board of the Appraisal Foundation.
"Appraised Value" - with respect to any Real Property Collateral, the
value of such Real Property Collateral reflected in the most recent Appraisal
prepared with respect to such Real Property Collateral, reduced by the amount of
any Indebtedness (other than the Obligations) secured by a Lien on such Real
Property Collateral.
2
<PAGE> 8
"Assessment Rate" - at any time, the rate (rounded upwards, if
necessary, to the nearest 1/100 of one (1%) percent) then charged by the Federal
Deposit Insurance Corporation (or any successor) to the Reference Bank for
deposit insurance for Dollar time deposits with the Reference Bank at the
Principal Office as determined by the Reference Bank.
"Bank" - The Provident Bank, an Ohio banking corporation.
"Borrowing Base" - as of any date as of which the amount thereof shall
be determined, an amount equal to 80% of the Appraised Value of the Real
Property Collateral, not to exceed the maximum amount of the Commitment.
"Borrowing Notice" - as defined in Section 2.2 hereof.
"Business Day" - any day other than Saturday, Sunday or any other day
on which commercial banks in Cincinnati, Ohio are authorized or required to
close.
"Capital Expenditures" - for any period, the aggregate amount of all
payments made or to be made during such period by any Person directly or
indirectly for the purpose of acquiring, constructing or maintaining fixed
assets, real property or equipment that, in accordance with GAAP, would be added
as a debit to the fixed asset account of such Person, including, without
limitation, all amounts paid or payable during such period with respect to
Capitalized Lease Obligations and interest that are required to be capitalized
in accordance with GAAP.
"Capitalized Lease" - any lease, the obligations to pay rent or other
amounts under which constitute Capitalized Lease Obligations.
"Capitalized Lease Obligations" - as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP and, for purposes of this Agreement, the amount
of such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP.
"Cash" - as to any Person, such Person's cash and Cash Equivalents.
"Cash Equivalents" - (i) marketable direct obligations issued or
unconditionally guaranteed or insured by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within three (3) months from the date of
acquisition thereof; (ii) investments in certificates of deposit or bankers'
acceptances maturing within three (3) months from the date of acquisition issued
by any Lender or any other commercial bank organized under the laws of the
United States or any state thereof that is a member of the Federal Reserve
System having capital surplus and undivided profits aggregating at least Two
Hundred Fifty Million Dollars ($250,000,000); (iii) investments in commercial
paper of any lender or of any other Person and maturing not more than six (6)
months from the date of acquisition thereof; (iv)
3
<PAGE> 9
obligations of the type described in (i), (ii) or (iii) above purchased pursuant
to a repurchase agreement obligating the counterpart to repurchase such
obligations not later than thirty (30) days after the purchase thereof, secured
by a fully perfected security interest in any such obligation, and having a
market value at the time such repurchase agreement is entered into of not less
than 100% of the repurchase obligation of the issuing bank, (v) time deposits or
Eurodollar time deposits maturing no more than thirty (30) days from the date of
creation with commercial banks having membership in the Federal Deposit
Insurance Corporation in amounts not exceeding the lesser of One Hundred
Thousand Dollars ($100,000) or the maximum insurance applicable to the aggregate
amount of such Person's deposits in such institution, and (vi) investments in
money market funds in aggregate amount of no more than $3,000,000 at any time
outstanding and substantially all of whose assets are comprised of securities
described in clauses (i) through (v) above.
"Cash Flow" - for any period, (i) EBITDA, less (ii) Capital
Expenditures (to the extent actually made in Cash by a person and excluding the
non-current portion of Capital Expenditures which have been financed), less
(iii) the gross amount capitalized for long term assets (net of Cash received in
respect of long term assets) and paid in Cash, other than Capital Expenditures.
"CERCLA" - the Comprehensive Environmental Response Compensation and
Liability Act of 1980, 42 U.S.C. ss.9601, et seq.
"Chattel Paper" - "chattel paper" as such term is defined in the UCC,
now owned or existing or hereafter acquired or arising or in which a Person now
has or hereafter acquires any rights or interests.
"Code" - the Internal Revenue Code of 1986, as it may be amended from
time to time, and the regulations promulgated thereunder.
"Collateral" - the Real Property Collateral and all of the following
located on, generated by, arising from, or used in connection with, the Real
Property Collateral: a Loan Party's Accounts, Inventory, Equipment, General
Intangibles, fixtures, leases, money, goods, motor vehicles, leasehold
improvements, Documents, Instruments, Chattel Paper, Intellectual Property,
inventory subject to leases and rights under lease agreements for the leasing of
inventory, money, deposit accounts, securities, funds, rights to draw on letters
of credit, permits, licenses and the Cash or noncash produces and Proceeds
(including insurance or other rights to receive payment with respect thereto) of
any of the foregoing and all accessions and additions to and replacements and
substitutions for the foregoing, and all books and records (including, without
limitation, customer lists, credit files, computer programs, printouts and other
computer materials and records of Borrower and each Subsidiary) (whether or not
stored in written or electronic form) pertaining to any of the foregoing.
"Commitment" - the Obligation of Bank to make the Loan, up to a maximum
amount of $50,000,000.00.
4
<PAGE> 10
"Commitment Fee" - as defined in Section 2.7(b) hereof.
"Commitment Period" - the period commencing on the date of this
Agreement and ending on the Commitment Termination Date, as the same may be
extended pursuant to this Agreement.
"Commitment Termination Date" - March 31, 2002, unless otherwise
modified or extended by Bank pursuant to Section 2.16 hereof.
"Compliance Certificate" - a certificate in the form of EXHIBIT E
hereto, executed by the chief executive officer or chief financial officer of
Omega to the effect that: (a) as of the effective date of the certificate, no
Default or Event of Default under this Agreement exists or would exist after
giving effect to the action intended to be taken by the Borrowers as described
in such certificate, including, without limitation, that the covenants set forth
in Section 7.9 hereof would not be breached after giving effect to such action,
together with a calculation in reasonable detail, and in form and substance
satisfactory to Bank, of such compliance, and (b) the representations and
warranties contained in Article 3 hereof are true and with the same effect as
though such representations and warranties were made on the date of such
certificate, except for changes in the ordinary course of business none of
which, either singly or in the aggregate, have had a Material Adverse Effect.
"Current Assets" and "Current Liabilities" - at any time, all assets or
liabilities, respectively, that, in accordance with GAAP, should be classified
as current assets or current liabilities, respectively, on a Person's
consolidated balance sheet.
"Current Ratio" - the ratio of Current Assets (excluding Cash, Cash
Equivalents and any amounts due from affiliates) to Current Liabilities
(excluding the current portion of any long term indebtedness for borrowed money
and any amounts due to affiliates).
"Debt Instrument" - as defined in subsection 9.4(a) hereof.
"Debt Ratio" - as of any computation date, the ratio of (i) Borrower's
indebtedness as of said date to (ii) Borrower's EBITDA for the Reference Period
ending on the computation date.
"Default" - an event which with notice or lapse of time, or both, would
constitute an Event of Default.
"Disbursement Account" - Borrower's account with Bank described in
Section 2.3 hereof.
"Disposition" - the sale, lease, conveyance, transfer or other
disposition of any Real Property Collateral (whether in one or a series of
transactions), including accounts and notes receivable (with or without
recourse) and sale-leaseback transactions.
"Document" - any "document," as such term is defined in the UCC, now
owned or existing or hereafter arising or acquired or in which a Person now has
or hereafter acquires any rights or interests.
5
<PAGE> 11
"Dollars" and "$" - lawful money of the United States of America.
"Dollar Amount" - the principal amount of the Loan stated in Dollars.
"EBITDA" - for any period, with respect to Borrower on a consolidated
basis, determined in accordance with GAAP, the sum of net income (or net loss)
for such period plus, the sum of all amounts treated as expenses for: (a)
interest, (b) depreciation, (c) amortization, and (d) all accrued taxes on or
measured by income to the extent included in the determination of such net
income (or net loss); provided, however, that net income (or net loss) shall be
computed without giving effect to extraordinary losses or gains or interest
income.
"Employee Benefit Plan" - any employee benefit plan within the meaning
of Section 3(3) of ERISA which is subject to ERISA.
"Environmental Laws and Regulations" - individually or collectively any
applicable local, state or federal law, statute, rule, regulation, order,
ordinance, common law, or permit or license term or condition pertaining to the
environment or to environmental contamination, regulation, management, control,
treatment, storage, disposal, containment, removal, clean-up, reporting or
disclosure, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA") (including, but not
limited to, the Superfund Amendments and Reauthorization Act), the Resource
Conservation and Recovery Act (including, but not limited to, the Hazardous and
Solid Waste Amendments of 1984), the Toxic Substances Control Act, the Clean
Water Act, the Safe Drinking Water Act, and the Clean Air Act, all as now or
hereafter amended.
"Environmental Liability" - any liability under any applicable
Environmental Laws and Regulations for any disposal, release or threatened
release of a hazardous substance pollutant or contaminant as those terms are
defined under CERCLA, and any liability which would require a removal, remedial
or response action, as those terms are defined under CERCLA, by any person or by
any environmental regulatory body having jurisdiction over Borrower and its
Subsidiaries and/or any liability arising under any Environmental Laws and
Regulations for Borrower's or any Subsidiary's failure to comply with such laws
and regulations, including without limitation, the failure to comply with or
obtain any applicable environmental permit.
"Environmental Proceeding" - any judgment, action, proceeding or
investigation pending before any court or governmental authority, with respect
to Borrower or any Subsidiary and arising under or relating to any Environmental
Laws and Regulations.
"Equipment" - any "equipment," as such term is defined in the UCC, now
owned or existing or hereafter acquired or arising (or in which a Person now has
or hereafter acquires any rights or interests), and shall include, without
limitation, any and all additions, substitutions, and replacements of any of the
foregoing, wherever located, together with all attachments, components, parts
and
6
<PAGE> 12
accessories installed thereon or affixed thereto, and all other tangible
personal property not otherwise described herein.
"ERISA" - the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time, and the regulations promulgated thereunder.
"ERISA Affiliate" - as applied to any Loan Party, any corporation,
person or trade or business which is a member of a group which is under common
control with any Loan Party, who together with any Loan Party, is treated as a
single employer within the meaning of Section 414(b) - (o) of the Code and, if
applicable, Section 4001(a)(14) and (b) of ERISA.
"Event of Default" - as defined in Article 9 hereof.
"Facility" - a health care facility offering health care-related
products and services, including any acute care hospital, rehabilitation
hospital, nursing home, retirement center, long-term care facility, or medical
office building, and facilities directly related thereto.
"Federal Funds Rate" - for any day, the weighted average of the rates
on overnight federal funds transactions with member banks of the Federal Reserve
System arranged by federal funds brokers as published by the Federal Reserve
Bank of New York for such day, or if such day is not a Business Day, for the
next preceding Business Day (or, if such rate is not so published for any such
day, the average rate charged to Bank on such day on such transactions as
reasonably determined by Bank).
"Fee(s)" - as defined in subsection (c) hereof.
"Fixed Charge Coverage" - the ratio of consolidated Cash Flow during
the 12 month period ending on the computation date to consolidated Fixed Charges
for the same 12 month period.
"Fixed Charges" means for any period, the total of the following for
any Person, each calculated for such period, without duplication: (i) Interest
Expense paid or accrued, minus (ii) interest income earned or accrued as
determined in accordance with GAAP, plus (iii) scheduled payments of principal
with respect to all Indebtedness for borrowed money of a Person including the
principal component of any Cash payments made on any Capital Lease.
"GAAP" - generally accepted accounting principles, as in effect in the
United States.
"General Intangibles" - any "general intangibles," as such term is
defined in the UCC, now owned or existing or hereafter acquired or arising (or
in which a Person now has or hereafter acquires any rights or interests) and, in
any event, shall include, without limitation, all right, title and interest now
in existence or hereafter arising in or to all customer lists, trademarks,
service marks, patents, rights in intellectual property, trade names,
copyrights, trade secrets, proprietary or confidential information, inventions
and technical information, procedures, designs, knowledge, know-how,
7
<PAGE> 13
software, data bases, data, processes, models, drawings, materials, and records
now owned or hereafter acquired, and any and all goodwill and rights of
indemnification, and tax refunds and tax refund claims, pension plan refunds and
reversions.
"Guarantor" - Sterling Acquisition Corp., a Kentucky corporation, OHI
(Iowa), Inc., an Iowa corporation, or Delta Investors II, LLC, a Maryland
limited liability company; referred to collectively as the "Guarantors".
"Guaranty" - the guaranty given by a Guarantor to Bank pursuant to
which such Guarantor guarantees the due and punctual payment, performance and
observance of the Obligations, substantially in the form of EXHIBIT D hereto.
"Hazardous Materials" - any toxic chemical, hazardous substances,
contaminants or pollutants, medical wastes, infectious wastes, or hazardous
wastes defined as such, or included under or regulated by the Environmental Laws
and Regulations.
"Indebtedness" - with respect to any Person, all: (a) liabilities or
obligations, direct and contingent, which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person at the date as of which Indebtedness is to be
determined, including, without limitation, contingent liabilities that in
accordance with such principles, would be set forth in a specific Dollar amount
on the liability side of such balance sheet, and Capitalized Lease Obligations
of such Person; (b) liabilities or obligations of others for which such Person
is directly or indirectly liable, by way of guaranty (whether by direct
guaranty, suretyship, discount, endorsement, take-or-pay agreement, agreement to
purchase or advance or keep in funds or other agreement having the effect of a
guaranty) or otherwise; (c) liabilities or obligations secured by Liens on any
assets of such Person, whether or not such liabilities or obligations shall have
been assumed by it; and (d) liabilities or obligations of such Person, direct or
contingent, with respect to letters of credit issued for the account of such
Person and bankers acceptances created for such Person.
"Instruments" - "instruments," as such term is defined in the UCC, now
owned or existing or hereafter acquired or arising or in which a Person now has
or hereafter acquires any rights or interests.
"Intellectual Property" - all copyrights, patents and trademarks,
together with (a) all inventions, processes, production methods, proprietary
information, know-how and trade secrets; (b) all licenses or user or other
agreements granted to any obligor with respect to any of the foregoing, in each
case whether now or thereafter owned or used including, without limitation, the
licenses or other agreements with respect to copyrights, patents or trademarks;
(c) all information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, computer and automatic machinery
software and programs; (d) all field repair data, sales data and other
information relating to sales or service
8
<PAGE> 14
of products now or hereafter manufactured; (e) all accounting information and
all media on which or in which any information or knowledge or data or records
may be recorded or stored and all computer programs used for the compilation or
printout of such information, knowledge, records or data; (f) all licenses,
consents, permits, variances, certifications and approvals of governmental
agencies now or hereafter held by a Person; and (g) all causes of action, claims
and warranties now or hereafter owned or acquired by a Person in respect of any
of the items listed above.
"Interest Coverage" - as at the last day of any fiscal quarter, the
quotient, expressed as a percentage (which may be in excess of 100%), determined
by dividing (i) EBITDA less Maintenance Capital Expenditures by (ii) Interest
Expense; all of the foregoing calculated for the Reference Period ending on the
computation date.
"Interest Expense" - for any period, on a combined basis, the sum of
all interest paid or payable (excluding unamortized debt issuance costs) on all
items of Indebtedness of Borrower outstanding at any time during such period.
"Interest Period" - each period commencing on the date interest begins
accruing at a LIBOR Based Rate and ending on (i) the same day 1, 2, 3 or 6
months thereafter, as Borrower may select as provided in Section 2.2 hereof,
except that each such Interest Period which commences on the last LIBOR Business
Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last LIBOR Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (a) each Interest Period that would otherwise end
on a day which is not a LIBOR Business Day shall end on the next succeeding
LIBOR Business Day (or, if such next succeeding LIBOR Business Day falls in the
next succeeding calendar month, on the next preceding LIBOR Business Day); (b)
any Interest Period that commences before the Commitment Termination Date shall
end no later than the Commitment Termination Date; and (c) no Interest Period
shall have a duration of less than one month.
"Inventory" - with respect to any Person, such Person's "inventory" (as
defined in the UCC) and other goods (as defined in the UCC), including without
limitation: (i) all raw materials, work in process, parts, components,
assemblies, supplies and materials used or consumed in such Person's business,
wherever located and whether in the possession of such Person or any other
Person; (ii) all goods, wares and merchandise, finished or unfinished, held for
sale or lease or leased or furnished or to be furnished under contracts of
service, wherever located and whether in the possession of such Person or any
other Person; and (iii) all goods returned to or repossessed by such Person.
"Latest Balance Sheet" - as defined in subsection 4.9 hereof.
"Lease Rental Expense" - for any period and with respect to any
Facility or the Post Office Property, the total amount payable during such
period by the lessee thereof to any Loan Party, including, without limitation,
(a) base rent (as adjusted from time to time), plus (b) all incremental charges
to which the Facility or the Post Office Property is subject under the lease
relating thereto.
9
<PAGE> 15
"LIBOR Base Rate" - for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of one (1%) percent) quoted
by the Reference Bank at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) two (2) LIBOR Business Days prior to the first day of
such Interest Period as the rate at which the Reference Bank is offered deposits
in Dollars in the London interbank market where the LIBOR and foreign currency
and exchange operations of the Reference Bank are customarily conducted, having
terms of one (1), two (2), three (3) or six (6) months and in an amount
comparable to the principal amount of the Loan then outstanding.
"LIBOR Based Rate" - the LIBOR Rate plus the Margin.
"LIBOR Business Day" - a Business Day on which dealings in Dollar
deposits and pounds sterling are carried out in the London interbank market.
"LIBOR Election" - an effective election by Borrower to have the
principal balance of the Loan bear interest at a LIBOR Based Rate in accordance
with the provisions of Section 2.2 hereof.
"LIBOR Rate" - the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of one (1%) percent) equal to: (a) the LIBOR Base Rate for
such Interest Period; divided by (b) one (1) minus the Reserve Requirement for
such Interest Period. Bank shall use its best efforts to advise Borrower of the
LIBOR Rate as soon as practicable after each change in the LIBOR Rate; provided,
however, that the failure of Bank to so advise Borrower on any one or more
occasions shall not affect the rights of Bank the obligations of Borrower
hereunder.
"Licenses and Permits" - all licenses, permits, registrations and
recordings thereof and all applications incorporated into such licenses, permits
and registrations now owned or hereafter acquired by any Person and required
from time to time for the business operations of such Person.
"Lien" - any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, claim or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature of any of the foregoing, and the filing of or agreement
to give any financing statement under the UCC.
"Loan" - as defined in subsection 2.1 hereof.
"Loan Documents" - this Agreement, the Note, Security Documents, the
and all other documents executed and delivered in connection herewith or
therewith, including all amendments, modifications and supplements of or to all
such documents.
"Loan Party" - Borrower and each Guarantor.
"Maintenance Capital Expenditures" - Capital Expenditures for the
repair or maintenance of Property.
10
<PAGE> 16
"Margin" - on any date with respect to the Loan, two percent (2.00%)
(two hundred basis points).
"Material Adverse Effect" - any fact or circumstance which (a)
materially and adversely affects the business, operation, property or financial
condition of a Loan Party, or (b) has a material adverse effect on the ability
of any Loan Party to perform its obligations under this Agreement, the Note or
the other Loan Documents.
"Mortgage(s)" - mortgages of Real Property Collateral in favor of Bank,
substantially in the form of EXHIBIT B hereto.
"Multiemployer Plan" - a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which any Loan Party or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions or has made, or been obligated
to make, contributions within the preceding six (6) years.
"Net Issuance Proceeds" - in respect of any issuance of Indebtedness or
equity, the proceeds in Cash received by any Loan Party upon or simultaneously
with such issuance, net of direct costs of such issuance and any taxes paid or
payable by the recipient of such proceeds.
"Net Proceeds" - in respect of any Disposition, the proceeds in Cash
received by a Loan Party upon or simultaneously with such Disposition, net of
(i) direct costs of such Disposition, (ii) any taxes paid or payable by the
recipient of such proceeds, and (iii) amounts required to be applied to repay
any Indebtedness secured by a lien on the asset which is the subject of the
Disposition.
"Note" - the revolving note, initially in the form attached hereto as
EXHIBIT A, or any subsequent note issued in substitution therefor, evidencing
the Loan.
"Obligations" - collectively, all of the Indebtedness of any Loan Party
to Bank, whether now existing or hereafter arising, whether or not currently
contemplated, including, without limitation, those arising under the Loan
Documents.
"Operator" - the lessee of any Real Property Collateral, to the extent
that such entity controls the operation of such Real Property Collateral.
"Origination Fee" as defined in subsection 2.7(a) hereof.
"Patents" mean all of the following in which a Person now holds or
hereafter acquires any interest: (i) all letters patent of the United States or
any country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any
11
<PAGE> 17
similar office or agency of the United States, any state or territory thereof or
any other country, and (ii) all reissues, continuations, continuations-in-part
or extensions thereof.
"PBGC" - Pension Benefit Guaranty Corporation.
"Permitted Liens" - as to any Person: (a) pledges or deposits by such
Person under workers' compensation laws, unemployment insurance laws, social
security laws, or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness of such
Person), or leases to which such Person is a party, or deposits to secure public
or statutory obligations of such Person or deposits of Cash or United States
Government Bonds to secure surety, appeal, performance or other similar bonds to
which such Person is a party, or deposits as security for contested taxes or
import duties or for the payment of rent; (b) liens imposed by law, including
without limitation, carriers', warehousemen's, materialmen's and mechanics'
liens, or liens arising out of judgments or awards or judicial attachment liens
against such Person with respect to which such Person at the time shall
currently be prosecuting an appeal or proceedings for review; (c) liens for
taxes not yet subject to penalties for non-payment and liens for taxes the
payment of which is being contested as permitted by Section 7.6 hereof; (d)
non-consensual liens that have been bonded within thirty (30) days after notice
of such lien(s) by a Person (not an Affiliate of Borrower) reasonably
satisfactory to Bank in an aggregate amount secured by all such liens not in
excess of $5,000,000; (e) minor survey exceptions, minor encumbrances, easements
or reservations of, or rights of, others for rights of way, highways and
railroad crossings, sewers, electric lines, telegraph and telephone lines and
other similar purposes, or zoning or other restrictions as to the use of real
properties, or Liens incidental to the conduct of the business of such Person or
to the ownership of such Person's property that were not incurred in connection
with Indebtedness of such Person, all of which Liens referred to in this clause
(e) do not in the aggregate materially impair the value of the properties to
which they relate or materially impair their use in the operation of the
business taken as a whole of such Person, and as to all the foregoing only to
the extent arising and continuing in the ordinary course of business; and (f)
existing leases on the Real Property Collateral disclosed to Bank.
"Person" - an individual, a corporation, a partnership, a limited
liability company, a joint venture, a trust or unincorporated organization, a
joint stock company or other similar organization, a government or any political
subdivision thereof, a court, or any other legal entity, whether acting in an
individual, fiduciary or other capacity.
"Plan" - at any time an employee pension benefit plan that is covered
by Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code and is either: (a) maintained by a Loan Party for its employees,
or (b) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
any Loan Party is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions.
"Post-Default Rate" - a rate per annum equal to four percent (4.00%) in
excess of (i) the LIBOR Based Rate during any Interest Period, or (ii) the Prime
Rate.
12
<PAGE> 18
"Post Office Property" - that property further identified as the "Post
Office Property" in SCHEDULE A hereto.
"Prime Rate" - the variable per annum rate of interest so designated
from time to time by Bank as its prime rate. Notwithstanding the foregoing,
Borrower acknowledges that the Prime Rate is a reference rate, and Bank may
regularly make domestic commercial loans at rates of interest less than the rate
of interest referred to in the preceding sentence. Each change in any interest
rate provided for herein based upon the Prime Rate resulting from a change in
the Prime Rate shall take effect at the time of such change in the Prime Rate.
"Principal Office" - the principal office of Bank presently located at
One East Fourth Street, Cincinnati, Ohio 45202.
"Proceeds" - "proceeds," as such term is defined in the UCC and, in any
event, shall include, without limitation, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable from time to time with
respect to any of the Collateral, and (ii) any and all payments (in any form
whatsoever) made or due and payable from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental body, authority, bureau or agency (or
any Person acting under color of governmental authority).
"Property" - any estate or interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Quarterly Dates" - the first day of each October, January, April and
July, beginning with July 1, 1999, provided that, if any such date is not a
LIBOR Business Day, the relevant Quarterly Date shall be the next succeeding
LIBOR Business Day (or, if the next succeeding LIBOR Business Day falls in the
next succeeding calendar month, then on the next preceding LIBOR Business Day).
"Real Property Collateral" - that real property subject to the
Mortgages and serving as collateral for the Loan, as set forth in SCHEDULE A
hereto, including the Facilities listed and the Post Office Property, and any
real property hereafter substituted for the same or otherwise serving as
collateral for the full and timely payment and performance of the Obligations
and subject to a Mortgage and the terms and conditions of this Agreement.
"Reference Bank" - a bank appearing on the display designated as page
"LIBOR" on the Reuters Monitor Money Rates Service (or such other page as may
replace the LIBOR page on that service for the purpose of displaying London
interbank offered rates of major banks); provided, that, if no such offered rate
shall appear on such display, "Reference Bank" shall mean a bank in the London
interbank market as selected by Bank.
13
<PAGE> 19
"Reference Period" - with respect to a particular computation date, the
period of four consecutive quarters ending on such computation date.
"Regulation D" - Regulation D of the Board of Governors of the Federal
Reserve System, as the same may be amended or supplemented from time to time.
"Regulatory Change" - any change after the date of this Agreement in
United States federal, or state, or foreign, laws or regulations (including
Regulation D and the laws or regulations that designate any assessment rate
relating to certificates of deposit or otherwise (including the "Assessment
Rate" if applicable to the Loan)) or the adoption or making after such date of
any interpretations, directives or requests applying to a class of banks,
including Bank, of or under any United States federal, or state, or foreign laws
or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"REIT Status" - with respect to any Person, (a) the qualification of
such Person as a real estate investment trust under Sections 856 through 860 of
the Code, and (b) the applicability to such Person and its shareholders of the
method of taxation provided for in Sections 857 et seq. of the Code.
"Rent Coverage" - with respect to any Property serving as Real Property
Collateral, as of the last day of any fiscal quarter, the quotient, expressed as
a percentage (which may be in excess of 100%), determined by dividing a (i) all
sums due and payable from the Operator of Property serving as Real Property
Collateral to the Loan Party owning the same under a lease, management agreement
or other similar form of agreement or contract for such Property by (ii) the
Applicable Interest Expense for such Property.
"Reserve Requirement" - for any monthly period as to which interest is
payable hereunder, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such period under Regulation D by member banks of the Federal Reserve
System with deposits against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks by reason of any Regulatory Change against: (a) any category of
liabilities which includes deposits by references to which the LIBOR Rate is to
be determined as provided in the definition of "LIBOR Base Rate" in this Article
1, or (b) any category of extensions of credit or other assets.
"Security Agreement" - a security agreement executed by a Loan Party
granting Bank a security interest in the Collateral other than the Real Property
Collateral, substantially in the form of EXHIBIT C hereto.
14
<PAGE> 20
"Security Documents" - all documents providing collateral security for
the full and timely payment and performance of the Obligations and the terms and
conditions of this Agreement, including Mortgages, Security Agreements,
Guaranties and UCC financing statements.
"Subsidiary" - with respect to any person, any corporation,
partnership, limited liability company, joint venture or other entity, whether
now existing or hereafter organized or acquired: (a) in the case of a
corporation, of which a majority of the securities having ordinary voting power
for the election of directors (other than securities having such power only by
reason of the happening of a contingency) are at the time owned by such Person
and/or one or more Subsidiaries of such Person, (b) in the case of a partnership
or other entity, in which such Person is a general partner or of which a
majority of the partnership or other equity interests are at the time owned by
such Person and/or one or more of its Subsidiaries, or (c) in the case of a
joint venture, in which such Person is a joint venturer and of which a majority
of the ownership interests are at the time owned by such Person and/or one or
more of its Subsidiaries. Unless the context otherwise requires, references in
this Agreement to "Subsidiary" or "Subsidiaries" shall be deemed to be
references to a Subsidiary or Subsidiaries of Omega.
"Tangible Net Worth" - the sum of capital surplus, earned surplus and
capital stock, minus deferred charges, intangibles and treasury stock, all as
determined in accordance with GAAP consistently applied.
"UCC" - the Uniform Commercial Code as the same may, from time to time,
be in effect in the State of Ohio, provided, however, that in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of Bank's security interest in any of the Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of Ohio, the term "UCC" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
"Unused Commitment" - as at any date, the difference, if any, between:
(a) the Commitment as in effect on such date, and (b) the then aggregate
outstanding principal Dollar Amount of the Loan.
Section 1.3 GAAP. Any accounting terms used in this Agreement that are
not specifically defined herein shall have the meanings customarily given to
them in accordance with GAAP as in effect on the date of this Agreement, except
that references in Article 5 to such principles shall be deemed to refer to such
principles as in effect on the date of the financial statements delivered
pursuant thereto.
ARTICLE 2. COMMITMENT: LOAN.
Section 2.1 Loan. Bank hereby agrees, on the terms and subject to the
conditions of this Agreement, to extend a revolving line of credit in the
maximum amount of the Commitment
15
<PAGE> 21
hereinafter sometimes referred to as the "Loan" to Borrower during the
Commitment Period to and including the Commitment Termination Date; provided,
however, that the Commitment shall not exceed $30,000,000.00 until May 1, 1999;
provided further, that the aggregate principal Dollar Amount of the Loan at any
one time outstanding shall not exceed the Borrowing Base as then in effect;
provided further, that, upon the occurrence and continuation of an Event of
Default by a Loan Party under a material Indebtedness, Bank may refuse to permit
the borrowing of any additional sums under the Commitment, even though such sums
may be available under the Borrowing Base.
Section 2.2 Notices Relating to Loan. Borrower shall give Bank written
notice of each borrowing under or prepayment of the Loan and of the duration of
each Interest Period (in each case, a "Borrowing Notice"). Each such written
notice shall be irrevocable and shall be effective only if received by Bank not
later than 11 a.m., Cincinnati, Ohio time, on the date that is three LIBOR
Business Days prior to the date of the related borrowing or repayment or the
first date of such Interest Period. Each such notice of borrowing, repayment or
prepayment shall specify the amount (subject to Section 2.1 hereof) to be
borrowed, repaid or prepaid and the date of borrowing, repayment or prepayment
(which shall be a LIBOR Business Day).
Section 2.3 Disbursement of Loan Proceeds. Borrower shall give Bank
notice of each borrowing hereunder as provided in Section 2.2 hereof, and, not
later than 11:00 a.m., Cincinnati, Ohio time, on the date specified for each
borrowing hereunder, Bank shall disburse such sum to Borrower by depositing the
amount thereof in an account of Borrower, designated by Borrower and maintained
with Bank (the "Disbursement Account").
Section 2.4 Note. The Loan shall be evidenced by a promissory note of
Borrower in substantially the form of EXHIBIT A hereto, and one or more notes
which may subsequently be issued in substitution thereof (the "Note"). The Note
shall be dated the date hereof, shall be payable to the order of Bank in a
principal amount equal to the Commitment as originally in effect, and shall
otherwise be duly completed. The Note shall be payable as provided in Sections
2.5 and 2.6 hereof.
Section 2.5 Payment of Loans; Voluntary Changes in Commitment:
Mandatory Repayments.
(a) The Loan shall be paid in full not later than the
Commitment Termination Date.
(b) Borrower shall be entitled to terminate or reduce the
Commitment and repay or prepay the principal amount of the Loan provided that
Borrower shall give notice of such termination, reduction, prepayment or
repayment to Bank as provided in Section 2.2 hereof and that any partial
prepayment of the Loan or partial reduction of the Commitment shall be in the
minimum aggregate Dollar Amount of One Million ($1,000,000) Dollars and Dollar
Amount multiples of Five Hundred Thousand ($500,000) Dollars in excess thereof.
Any such termination or reduction of the Commitment shall be permanent and
irrevocable. Any repayment or prepayment of the Loan shall be made on the last
day of the relevant Interest Period.
16
<PAGE> 22
(c) Notwithstanding any other provision of this Agreement, the
Loan shall be repaid as and when necessary to cause the aggregate principal
Dollar Amount of the Loan outstanding not to exceed the Borrowing Base, as at
any date of determination thereof.
(d) If any Loan Party shall at any time agree to a
Disposition, Borrower shall promptly notify Bank of such Disposition and shall,
if required pursuant to Section 8.7, repay the Loan in an amount equal to the
aggregate Net Proceeds of such Disposition.
(e) If Borrower (or any of its Subsidiaries) shall make any
public or private issuance of Indebtedness or equity (other than in connection
with any dividend reinvestment program(s)), Borrower shall promptly notify Bank
of such issuance and repay the Loan in an amount equal to the aggregate Net
Issuance Proceeds of such issuance immediately upon receipt thereof.
Section 2.6 Interest.
(a) Borrower shall pay to Bank interest on the unpaid
principal amount of the Loan for the period commencing on the date of the Loan
until the Loan shall be paid in full, at a rate per annum equal to (i) for each
Interest Period relating thereto, the LIBOR Based Rate; or (ii) the Prime Rate,
but only pursuant to Section 2.6(c) below.
(b) Notwithstanding the foregoing, Borrower shall pay interest
on the Loan or any installment thereof, and on any other amount or Obligation
payable by Borrower hereunder (to the extent permitted by law) that shall not be
paid in full within ten (10) days of the date when due (whether at stated
maturity, by acceleration or otherwise) for the period commencing on the due
date thereof until the same is paid in full at the Post-Default Rate.
(c) Except as otherwise provided in this paragraph, accrued
interest on the Loan shall be payable on the last day of each Interest Period
(and, if such Interest Period exceeds three months' duration, quarterly,
commencing on the first quarterly anniversary of the first day of such Interest
Period). Interest that is payable at the Prime Rate shall be payable on the last
Business Day prior to the commencement of an Interest Period; provided, however,
that if interest accrues at the Prime Rate for a period of one (1) month,
accrued interest shall be paid on the next Quarterly Date, and on each Quarterly
Date thereafter until the commencement of an Interest Period. Interest that is
payable at the Post-Default Rate shall be payable from time to time on demand of
Bank. Promptly after the establishment of any interest rate provided for herein
or any change therein, Bank will notify Borrower, provided that the failure of
Bank to so notify Borrower shall not affect the obligations of the Borrower
hereunder or under the Note in any respect.
(d) Anything in this Agreement or the Note to the contrary
notwithstanding, the obligation of Borrower to make payments of interest shall
be subject to the limitation that payments of interest shall not be required to
the extent that receipt thereof would not be permissible under the law or laws
limiting rates of interest that may be charged or collected. Any such payments
of interest
17
<PAGE> 23
that are not made as a result of the limitation referred to in the preceding
sentence shall be made by Borrower to Bank on the earliest interest payment
date or dates on which the receipt thereof would be permissible under the laws
limiting rates of interest that may be charged or collected. Such deferred
interest shall not bear interest.
Section 2.7 Fees.
(a) Simultaneously with the execution and delivery of this
Agreement, Borrower shall pay Bank a non-refundable origination fee (the
"Origination Fee") of three-eighths of one percent (.00375%) of the Commitment.
In addition, for each extension or renewal of the Loan, simultaneously with the
commencement of the extension or renewal period, Borrower shall pay Bank a
nonrefundable Origination Fee, which Origination Fee shall be negotiated between
Borrower and Bank at the time of such extension or renewal, but, in any event,
not greater than one-eighth of one percent (.00125%).
(b) Borrower shall pay Bank a commitment fee of one-quarter of
one percent (.0025%) (the "Commitment Fee") on the daily average amount of the
Unused Commitment, for the period from the date hereof to and including the
earlier of (i) the date the Commitment is terminated, and (ii) the Commitment
Termination Date. The accrued Commitment Fee shall be payable on the Quarterly
Dates, and on the earlier of (i) the date the Commitment is terminated, or (ii)
the Commitment Termination Date, and in the event Borrower reduces the
Commitment as provided in subsection 2.5 hereof, on the effective date of such
reduction.
(c) The Origination Fee, the Commitment Fee and any other fee
identified in this Agreement as being payable by any Loan Party, are hereinafter
sometimes referred to individually as a "Fee" and collectively as the "Fees".
Section 2.8 Use of Proceeds of Loans. The proceeds of the Loans
hereunder have been and may continue to be used by the Borrower solely: (a) to
acquire Facilities or other real estate assets, (b) to extend or acquire loans
secured by mortgages, (c) for general corporate purposes, (d) capital
investments permitted by subsection 7.8 hereof, and (e) to repay other
borrowings and revolving credit facilities.
Section 2.9 Computations. Interest on the Loan and each Fee shall be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last) occurring in the period for which payable.
Section 2.10 Minimum Amounts of Borrowings and Repayments. Except for
borrowings and repayments that exhaust the full remaining amount of the
Commitment (in the case of borrowings) or result in the repayment of the Loan,
each borrowing and each repayment or prepayment of principal hereunder shall be
in a minimum Dollar Amount of One Million ($1,000,000) Dollars and in integral
Dollar Amount multiples of Five Hundred Thousand ($500,000)
18
<PAGE> 24
Dollars. Bank and Borrower may make immaterial mutually convenient adjustments
to the thresholds and multiples set forth above.
Section 2.11 Time and Method of Payments.
All payments of principal, interest, Fees and other amounts
(including indemnities) payable by Borrower hereunder shall be made in Dollars
in immediately available funds, to Bank at the Principal Office not later than
11:00 a.m., Cincinnati, Ohio time, on the date on which such payment shall
become due, and Bank may, but shall not be obligated to, debit the amount of any
such payment that is not made by such time to any ordinary deposit account of
any Loan Party with Bank. Additional provisions relating to payments are set
forth in Section 10.3 hereof.
Section 2.12 Additional Costs: Capital Requirements.
(a) In the event that any existing or future law or
regulation, guideline or interpretation thereof, by any court or administrative
or governmental authority (foreign or domestic) charged with the administration
thereof, or compliance by Bank with any request or directive (whether or not
having the force of law) of any such authority shall impose, modify or deem
applicable or result in the application of, any capital maintenance, capital
ratio or similar requirement against loan commitments or other obligations
entered into by Bank hereunder, and the result of any event referred to above is
to impose upon any Bank or increase any capital requirement applicable as a
result of the making or maintenance of the Commitment or the obligation of Bank
hereunder (which imposition of capital requirements may be determined by Bank's
reasonable allocation of the aggregate of such capital increases or
impositions), then, upon demand made by Bank as promptly as practicable after it
obtains knowledge that such law, regulation, guideline, interpretation, request
or directive exists and determines to make such demand, Borrower shall
immediately pay Bank additional amounts which shall be sufficient to compensate
Bank for such imposition of or increase in capital requirements together with
interest on each such amount from the date demanded until payment in full
thereof at the Post-Default Rate. A certificate setting forth in reasonable
detail the amount necessary to compensate Bank as a result of an imposition of
or increase in capital requirements submitted by Bank to Borrower shall be
conclusive, absent manifest error, as to the amount thereof.
(b) In the event that any Regulatory Change shall: (i) change
the basis of taxation of any amounts payable to Bank under this Agreement or the
Loan Documents (other than taxes imposed on the overall net income of Bank by
the United States of America or the jurisdiction in which such Bank has its
principal office); or (ii) impose or modify any reserve, Federal Deposit
Insurance Corporation premium or assessment, special deposit or similar
requirements relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, Bank (including any deposits referred to
in the definition of "LIBOR Base Rate" in Article 1 hereof); or (iii) impose any
other conditions affecting this Agreement in respect of the Loan; and the result
of any event referred to in clause (i), (ii) or (iii) above shall be to increase
Bank's costs of making or maintaining the Loan, or to reduce any amount
receivable by Bank hereunder in respect of its Commitment (such
19
<PAGE> 25
increases in costs and reductions in amounts receivable are hereinafter referred
to as "Additional Costs") in each case, only to the extent that such Additional
Costs are not included in the LIBOR Base Rate, then, upon demand made by Bank as
promptly as practicable after it obtains knowledge that such a Regulatory Change
exists and determines to make such demand, Borrower shall pay Bank additional
amounts which shall be sufficient to compensate Bank for such increased cost or
reduction in amounts receivable by Bank from the date of such change, together
with interest on each such amount from the date demanded until payment in full
thereof at the Post-Default Rate.
(c) Determinations by Bank for purposes of this Section 2.12
of the effect of any Regulatory Change on its costs of making or maintaining the
Loan on amounts receivable by it in respect of the Loan, and of the additional
amounts required to compensate Bank in respect of any Additional Costs, shall be
set forth in writing in reasonable detail and shall be conclusive, absent
manifest error.
Section 2.13 Limitation on Types of Interest Rates. Anything herein to
the contrary notwithstanding, if, on or prior to the determination of an
interest rate for any Interest Period, Bank determines (which determination
shall be conclusive):
(a) by reason of any event affecting the money markets in the
United States of America or the London interbank market, quotations of interest
rates for the relevant deposits are not being provided in the relevant amounts
or for the relevant maturities for purposes of determining the rate of interest
for the Loan under this Agreement; or
(b) the rates of interest referred to in the definition of
"LIBOR Base Rate" in Article 1 hereof upon the basis of which the rate of
interest for an Interest Period is determined, do not accurately reflect the
cost to Bank of making or maintaining the Loan for such period,
then Bank shall give Borrower prompt notice thereof (and shall thereafter give
Borrower prompt notice of the cessation, if any, of such condition), and so long
as such condition remains in effect, Bank shall be under no obligation to accept
a LIBOR Election selecting such rate or Interest Period and, on the first day
following the then current Interest Period, the Loan shall accrue interest at a
rate per annum equal to the Prime Rate, until such time as a LIBOR Election may
again be made.
Section 2.14 Illegality. Notwithstanding any other provision in this
Agreement, in the event it becomes unlawful for Bank to honor a LIBOR Election
or permit the continue existence of a LIBOR Based Rate, Bank shall notify
Borrower thereof describing such illegality in reasonable detail. Upon the
giving of such notice, Bank's obligation to honor the LIBOR Election or permit
interest to continue accruing at the LIBOR Based Rate shall be suspended for so
long as such illegality exists and continues, and thereafter interest on the
Loan shall accrue at the Prime Rate
Section 2.15 Indemnification. Borrower shall pay Bank such amount or
amounts as shall compensate Bank for any loss (including loss of profit), cost
or expense incurred by Bank (as reasonably determined thereby) as a result of:
20
<PAGE> 26
(a) any payment or repayment of the Loan on a date other than
the last day of an Interest Period; or
(b) any failure by Borrower to accept any borrowing on the
date therefor specified in the relevant Borrowing Notice under Section 2.2
hereof, such compensation to include, without limitation, an amount equal to:
(i) any loss or expense suffered by Bank during the period from the date of
receipt of such early payment or repayment to the last day of such Interest
Period if the rate of interest obtainable by Bank upon the redeployment of an
amount of funds equal to such payment, repayment or failure to borrow is less
than the rate of interest applicable to the Loan for such Interest Period, or
(ii) any loss or expense suffered by Bank in liquidating LIBOR deposits prior to
maturity which correspond to such payment, repayment or failure to borrow. The
determination by Bank of the amount of any such loss or expense, when set forth
in a written notice to Borrower, containing Bank's calculation thereof in
reasonable detail, shall be presumed correct, in the absence of manifest error.
Section 2.16 Extension of Commitment Period. If Borrower desires to
extend the Commitment Period, Bank agrees to do so, upon the following
conditions:
(a) timely written notice from Borrower served during the last
quarter of the second year following the execution hereof (i.e., the quarter
beginning January 1, 2001 and ending March 31, 2001), and during the last
quarter of each year thereafter;
(b) the Loan Parties are in compliance with, and there has
been no Default or Event of Default under, this Agreement or the Loan Documents;
(c) Bank has not otherwise determined, in its sole and
absolute discretion, to cease extending credit (i) to borrowers in the same
industry or business operation as Borrower, (ii) secured by collateral of the
same nature as the Collateral, or (iii) of the same type or nature, or utilizing
the same interest rate structure, as the Loan; and
(d) Borrower has delivered to Bank (i) Appraisals, dated not
more than eighteen (18) months prior to the date of submission to Bank for this
purpose, for each Property serving as Real Property Collateral, (ii) a
Compliance Certificate and (iii) such other documents and information as Bank
may reasonably require.
Such extension shall be of such length of time not less than one year, and on
such terms and conditions, as Bank may reasonably require. Any provision herein
to the contrary notwithstanding, Bank shall not be required or obligated to
extend the Commitment Period more than three (3) years past the original
Commitment Termination Date herein stated (i.e., March 31, 2002).
ARTICLE 3. SECURITY.
Section 3.1 Security Interest. To secure the due and punctual payment,
performance and observance of the Obligations, each Loan Party hereby grants to,
creates in favor of, and pledges and
21
<PAGE> 27
collaterally assigns to Bank, a lien and security interest in and to all of said
Loan Party's Collateral. To further secure the due and punctual payment,
performance and observance of the Obligations, each Loan Party has executed and
delivered Security Documents applicable to such Loan Party's Collateral; and
shall deliver to Bank, to the extent required herein or upon Bank's request in
accordance with the terms of this Agreement, all Instruments, Documents and
Chattel Paper in which said Loan Party from time to time has an interest and
such other documents as Bank may request to perfect a security interest in the
Collateral.
Section 3.2 Guaranties. To secure prompt repayment of this Agreement,
the Note and Obligations, each Guarantor has executed and delivered to Bank a
non-recourse Guaranty in the form attached hereto as EXHIBIT D.
Section 3.3 Financing Statements; Additional Documents. Each Loan Party
shall take all action necessary or as reasonably requested by Bank to continue
as perfected the first lien and security interest in the Collateral, except for
such Collateral in which a first lien can be perfected only by possession and
such possession is not required by Bank. Such filings shall be in form and
substance required by Bank, and Borrower shall pay all costs of recording and
filing financing statements (and any continuation or termination statements with
respect thereto) and any other documents, titles, statements, assignments or the
like reasonably required to create, maintain, preserve or perfect the liens or
security interests granted under the Loan Documents, together with costs and
expenses of any lien or UCC searches reasonably required by Bank in connection
with the making of the Loan. At Bank's request, each Loan Party shall execute
and deliver to Bank, at any time and from time to time hereafter, all
supplemental documentation that Bank may reasonably request to perfect,
maintain, preserve or continue the security interest and liens granted Bank
hereby and under any of the other Loan Documents, in form and substance
acceptable to Bank, and pay the costs of preparing and recording or filing of
the same. Each Loan Party agrees that a carbon, photographic, or other
reproduction of this Agreement, any Security Agreement or of a financing
statement is sufficient as a financing statement. Except as otherwise provided
in this Agreement, each Loan Party, immediately on acquiring Collateral for
which separate perfection is necessary or reasonably considered desirable by
Bank, shall deliver to Bank any and all evidence of ownership of any such
property and shall take all such action as may be reasonably necessary to
perfect Bank's security interest in such property. Each Loan Party shall perform
all reasonable acts and execute or cause to be executed all documents as Bank
reasonably deems necessary or desirable, to establish, perfect, record and
maintain the security interest in the Intellectual Property and the goodwill
symbolized thereby (whether now existing or hereafter acquired).
Section 3.4 Accounts; Chattel Paper; Lease Agreements. After the
occurrence of an Event of Default and during the continuance thereof, Bank shall
have the right at any time to notify any Person obligated to make payments to
each Loan Party with respect to Accounts, Chattel Paper and lease agreements to
make such payments directly to Bank or directly into the deposit accounts
subject to the Deposit Account.
Section 3.5 Removal and Substitution of Real Property Collateral.
22
<PAGE> 28
(a) Each Loan Party may, upon written notice to Bank, request
that any Property serving as Real Property Collateral hereunder be removed from
serving as such and the Mortgage thereon released and terminated. So long as the
removal of such Property from the Real Property Collateral shall not so reduce
the Appraised Value of the remaining Real Property Collateral such that eighty
percent (80%) thereof shall be less than the Commitment, Bank shall, upon
receipt of such request, notify such Loan Party of the acceptance of the same
and deliver to said Loan Party documentation sufficient to release and terminate
the Mortgage on such Property.
(b) In the event that a Loan Party requests that any Property
serving as Real Property Collateral hereunder be removed from serving as such
and the Mortgage thereon released and terminated, but such removal and release
would reduce the Appraised Value of the remaining Real Property Collateral such
that eighty percent (80%) thereof would be less than the Commitment, then Bank
shall notify such Loan Party of this fact and of the difference between the
Commitment and eighty percent (80%) of the Appraised Value of the proposed
remaining Real Property Collateral. Thereafter, the requesting Loan Party shall
elect to either (i) substitute new Property for the Property being removed,
pursuant to Subsection 3.5(c) below, so that the Appraised Value of the Real
Property Collateral following such removal and substitution shall be sufficient
that eighty percent (80%) thereof shall exceed the Commitment, or (ii) reduce
the Commitment pursuant to Subsection 2.5(b) hereof, to an amount equal to
eighty percent (80%) of the Appraised Value of the remaining Real Property
Collateral; provided, however, that the requesting Loan Party may not elect this
second option if it would result in the Commitment being reduced to an amount
below the Dollar Amount of the Loan.
(c) Adding new Property to the Real Property Collateral, or
substituting new Property for Property being removed from the Real Property
Collateral, shall be subject to the Loan Party in question (i) delivering to
Bank a title examination, abstract, binder or other form of title investigation
on the new Property, which must be reasonably satisfactory to Bank and indicate
that such new Property is owned by such Loan Party free, clear and unencumbered,
except for a lease to an Operator on terms and conditions acceptable to Bank,
(ii) executing and delivering to Bank a Mortgage, in form and content
satisfactory to Bank, on the new Property, and the due and proper recordation of
such Mortgage on the new Property, (iii) delivering to Bank an Appraisal for the
new Property, in form and substance reasonably acceptable to Bank, and (iv)
paying all costs, fees and expenses, including fees of Bank's counsel,
associated with the review of the new Property, the Appraisal thereof and the
new Mortgage, the recording of the same and the preparation of documentation
necessary to release the Mortgage on the Property being removed and released.
(d) With respect to any Property serving as Real Property
Collateral, upon the occurrence of any one of the following events, Bank shall
so notify the Loan Party which owns such Property, and such Property shall be
deemed removed from the Real Property Collateral, and the Appraised Value
thereof shall not be included in any calculation or determination under this
Agreement, thirty (30) days following such notice:
23
<PAGE> 29
(i) upon the occurrence and continuance for a period in excess of three (3)
months of a non-payment default under, or any termination of, any
lease, management agreement, or other similar form of agreement or
contract between such Loan Party and the Operator for such Property;
(ii) upon the attachment to such Property of any Lien other than a Permitted
Lien;
(iii) upon the occurrence of any damage or other casualty to, or the taking
of, through eminent domain or otherwise, such Property
(iv) upon Bank's inability, following reasonable efforts to do so, to
perfect its security interest in such Property;
(v) any Security Document shall cease to be in full force and effect or
shall cease to give Bank the Liens purported to be created thereby in
favor of Bank (unless due to acts or omissions of Bank, such as failure
to file continuation statements); or
(vi) the Property fails to maintain a Rent Coverage of at least 125%.
Such removal shall proceed in the same manner as a removal under Subsections
3.5(a) and (b) above.
(e) If the Dollar Amount of the Loan shall at any time or for
any reason exceed the Borrowing Base, Bank shall so notify the Loan Parties, and
they shall, within twenty-four (24) hours thereafter, notify Bank that either
(i) Borrower shall immediately repay a sufficient portion of the Loan that the
Dollar Amount thereof shall no longer exceed the Borrowing Base or (ii) the Loan
Parties shall, within fifteen (15) business days following such notice, add new
Property to the Real Property Collateral, which new Property shall have
sufficient Appraised Value to increase the Appraised Value of the Real Property
Collateral to an amount such that the Borrowing Base will be equal to or exceed
the Dollar Amount of the Loan.
Section 3.6 Release of Collateral. Upon Borrower's full performance of
its Obligations, including, without limitation, payment in full of the Note, and
termination of Borrower's right to borrow under this Agreement, Bank shall
release its security interest in all Collateral. Upon any sale of Collateral
permitted pursuant to this Agreement or the Security Documents, Bank shall
release its interest in the portion of the Collateral being sold, without
prejudice to the continuation of its lien on any other Collateral.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES. Borrower, and, as applicable, each
Loan Party, hereby represents and warrants to Bank that:
Section 4.1 Organization.
(a) Each Loan Party is duly organized and validly existing
under the laws of the state of its organization, is qualified and licensed in
each jurisdiction wherein the character of the
24
<PAGE> 30
property owned or held under lease by it, or the nature of its business, makes
such qualification necessary or advisable, and has the power to own its assets
and to transact the business in which it is presently engaged and in which it
proposes to be engaged. SCHEDULE 4.1 hereto accurately and completely lists, as
to each Loan Party: (i) its state of incorporation and those states in which it
is qualified to do business, (ii) the classes and number of authorized and
outstanding shares of each Loan Party's capital stock, and (iii) the business in
which each Loan Party is engaged. All of the foregoing shares or other equity
interests that are issued and outstanding have been duly and validly issued and
are fully paid and nonassessable.
(b) Each Loan Party is in good standing in its state of
organization and in each state in which it is qualified to do business. There
are no jurisdictions other than as set forth on SCHEDULE 4.1 hereto in which the
character of the properties owned or proposed to be owned by each Loan Party in
which the transaction of the business of said Loan Party as now conducted or as
proposed to be conducted requires or will require that Loan Party to qualify to
do business and as to which failure so to qualify could have a Material Adverse
Effect on said Loan Party.
(c) Each Guarantor is wholly owned by Borrower, either
directly or indirectly though one or more wholly owned entities.
Section 4.2 Power, Authority, Consents. Each Loan Party has the power
to execute, deliver and perform the Loan Documents to be executed by it, and has
the power to borrow hereunder and has taken all necessary corporate action to
authorize the borrowing hereunder on the terms and conditions of this Agreement.
Each Loan Party has taken all necessary action, corporate or otherwise, to
authorize the execution, delivery and performance of the Loan Documents to be
executed by it. No consent or approval of any Person (including, without
limitation, any stockholder of a Loan Party), no consent or approval of any
landlord or mortgagee, no waiver of any Lien or right of distraint or other
similar right and no consent, license, certificate of need, approval,
authorization or declaration of any governmental authority, bureau or agency, is
or will be required in connection with the execution, delivery or performance by
the Loan Parties of their respective obligations under the Loan Documents, or
the validity or enforcement thereof.
Section 4.3 No Violation of Law or Agreements. The execution and
delivery by each Loan Party of each Loan Document to which it is a party and
performance by it hereunder and thereunder, will not violate any provision of
law and will not conflict with or result in a breach of any order, writ,
injunction, ordinance, resolution, decree, or other similar document or
instrument of any court or governmental authority, bureau or agency, domestic or
foreign, or any certificate of incorporation or by-laws of said Loan Party, or
create (with or without the giving of notice or lapse of time, or both) a
default under or breach of any agreement, bond, note or indenture to which the
Borrower is a party, or by which said Loan Party is bound or any of their
respective properties or assets is affected, except for such defaults and
breaches which in the aggregate could not have a Material Adverse Effect on the
Loan Party, or result in the imposition of any Lien of any nature whatsoever
upon any of the properties or assets owned by or used in connection with the
business of said Loan Party.
25
<PAGE> 31
Section 4.4 Due Execution, Validity, Enforceability. This Agreement and
each other Loan Document to which a Loan Party is a party has been duly executed
and delivered by the Loan Party in question and constitutes the valid and
legally binding obligation thereof, enforceable in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws, now or hereafter in effect,
relating to or affecting the enforcement of creditors' rights generally and
except that the remedy of specific performance and other equitable remedies are
subject to judicial discretion.
Section 4.5 Title to Properties. Each Loan Party has good and
marketable title in fee simple to all real property necessary or used in the
ordinary course of its business, including, but not limited to, its Real
Property Collateral, except for such defects in title as could not, individually
or in the aggregate, have a Material Adverse Effect.
Section 4.6 Judgments, Actions, Proceedings. Except as set forth on
SCHEDULE 4.6 hereto, there are no outstanding judgments, actions or proceedings,
including, without limitation, any Environmental Proceeding, pending before any
court or governmental authority, bureau or agency, with respect to or, to the
best of Borrower's knowledge, threatened against or affecting any Loan Party
involving, which would have a Material Adverse Effect on such Loan Party, nor,
to the best of Borrower's knowledge, is there any reasonable basis for the
institution of any such action or proceeding that is probable of assertion, nor
are there any such actions or proceedings in which any Loan Party is a plaintiff
or complainant.
Section 4.7 No Defaults, Compliance With Laws. Except as set forth on
SCHEDULE 4.7 hereto, no Loan Party is in default under any agreement, ordinance,
resolution, decree, bond, note, indenture, order or judgment to which it is a
party or by which it is bound, or any other agreement or other instrument by
which any of the properties or assets owned by it or used in the conduct of its
business is affected, which default could have a Material Adverse Effect on said
Loan Party. Each Loan Party has complied and is in compliance in all respects
with all applicable laws, ordinances and regulations, resolutions, ordinances,
decrees and other similar documents and instruments of all courts and
governmental authorities, bureaus and agencies, domestic and foreign, including,
without limitation, all applicable provisions of the Americans with Disabilities
Act (42 U.S.C. ss.12101-12213) and the regulations issued thereunder and all
applicable Environmental Laws and Regulations, non-compliance with which could
have a Material Adverse Effect on said Loan Party. No event has occurred and is
continuing, and no condition exists, which constitutes a default or an event of
default.
Section 4.8 Burdensome Documents. Except as set forth on SCHEDULE 4.8
hereto, no Loan Party is a party to or bound by, nor are any of the properties
or assets owned by any Loan Party used in the conduct of its respective
businesses affected by, any agreement, ordinance, resolution, decree, bond,
note, indenture, order or judgment, including, without limitation, any of the
foregoing relating to any Environmental Liability, that materially and adversely
affects its businesses, assets or conditions, financial or otherwise.
26
<PAGE> 32
Section 4.9 Financial Statements.
The financial statements delivered by Borrower to Bank in
connection with this transaction and in preparation for the closing thereof (the
"Current Financial Statement") are complete and present fairly the consolidated
financial position of Borrower as of the date thereof, and have been prepared in
accordance with GAAP. To the best knowledge of Borrower, Borrower neither has
any material obligation, liability or commitment, direct or contingent
(including, without limitation, any Environmental Liability), that is not
reflected in the Current Financial Statements which would be required to be so
reflected in accordance with GAAP. There has been no material adverse change in
the financial position or operations of any of Borrower since the date of the
latest balance sheet included in the Current Financial Statements (the "Latest
Balance Sheet"), and, since the date thereof, there has been no adverse
development in the business or operations or prospects of Borrower which,
individually or in the aggregate might reasonably expect it to have a Material
Adverse Effect thereon. Borrower's fiscal years are the twelve-month period
ending on December 31 in each year.
Section 4.10 Tax Returns. Each Loan Party has filed all federal, state
and local tax returns required to be filed by it and has not failed to pay any
taxes, or interest and penalties relating thereto, on or before the due dates
thereof. Except to the extent that reserves therefor are reflected in the
Financial Statements: (i) there are no material federal, state or local tax
liabilities of any Loan Party, due or to become due for any tax year ended on or
prior to the date of the Latest Balance Sheet relating thereto, whether incurred
in respect of or measured by the income of such entity, that are not properly
reflected in the Latest Balance Sheet, and (ii) there are no material claims
pending or, to the knowledge of each Loan Party, proposed or threatened against
said Loan Party for past federal, state or local taxes, except those, if any, as
to which proper reserves are reflected in the Financial Statements.
Section 4.11 Intangible Assets. Each Loan Party possesses all patents,
trademarks, service marks, trade names, and copyrights, and rights with respect
to the foregoing, necessary to conduct its business as now conducted and as
proposed to be conducted, without any conflict with the patents, trademarks,
service marks, trade names, and copyrights and rights with respect to the
foregoing, of any other Person.
Section 4.12 Regulation U. No part of the proceeds received by the
Borrower from the Loans will be used directly or indirectly for: (a) any purpose
other than as set forth in Section 2.8 hereof, or (b) the purpose of purchasing
or carrying, or for payment in full or in part of Indebtedness that was incurred
for the purposes of purchasing or carrying, any "margin stock", as such term is
defined in ss.221.3 of Regulation U of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II, Part 221.
Section 4.13 Full Disclosure. None of the Financial Statements nor any
certificate, opinion, or any other statement made or furnished in writing to
Bank by or on behalf of the Loan Parties in
27
<PAGE> 33
connection with this Agreement or the transactions contemplated herein, contains
any untrue statement of a material fact, or omits to state a material fact
necessary in order to make the statements contained therein or herein not
misleading, as of the date such statement was made. There is no fact known to
the Loan Party that has, or would in the now foreseeable future have, a Material
Adverse Effect on the Loan Parties, which fact has not been set forth herein, in
the Financial Statements or any certificate, opinion or other written statement
so made or furnished to Bank.
Section 4.14 Licenses and Approvals.
(a) Each Loan Party has all necessary licenses, permits and
governmental authorizations, including, without limitation, licenses, permits
and authorizations arising under or relating to Environmental Laws and
Regulations, to own and operate its properties and to carry on its business as
now conducted, the absence of which would have a Material Adverse Effect on said
Loan Party.
(b) To the best knowledge of each Loan Party, other than as
set forth on SCHEDULE 4.14 hereto, no violation exists of any applicable law
pertaining to the ownership or operation of the Post Office Property or any
Facility or any Operator that would have a reasonable likelihood of leading to
revocation of any license necessary for the operation thereof.
Section 4.15 ERISA.
(a) Except as set forth on SCHEDULE 4.15 hereto, no Employee
Benefit Plan is maintained or has ever been maintained by any Loan Party or any
ERISA Affiliate, nor has any Loan Party or any ERISA Affiliate ever contributed
to a Multiemployer Plan.
(b) There are no agreements which will provide payments to any
officer, employee, shareholder or highly compensated individual which will be
"parachute payments" under 280G of the Code that are nondeductible to any Loan
Party and which will be subject to tax under Section 4999 of the Code which
could have a Material Adverse Effect on said Loan Party.
Section 4.16 REIT Status. The Borrower currently has REIT Status on a
continuous basis since its formation. None of the Borrower's Subsidiaries
currently has REIT Status.
Section 4.17 General Collateral Representation.
(a) Each Loan Party is the sole owner of and has good and
marketable title to its Collateral, free from all Liens in favor of any Person
other than Bank and except Permitted Liens, and has full right and power to
grant Bank a security interest therein. All information furnished to Bank
concerning the Collateral is and will be complete, accurate and correct in all
material respects when furnished.
28
<PAGE> 34
(b) No security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by any Loan Party in favor of Bank pursuant to this
Agreement, or (ii) in respect of the items of Collateral subject to the
Permitted Liens.
(c) The provisions of this Agreement and, when executed, the
Security Agreements, will create in favor of Bank a valid and continuing lien
on, and, subject to the Permitted Liens, first security interest in, the
Collateral under Article 9 of the UCC. Financing statements have been or will
be, within thirty (30) days following the execution hereof, duly executed on
behalf of each Loan Party, and, when such financing statements are duly filed in
the filing offices listed on SCHEDULE 4.17, and the requisite filing fees are
paid, such filings will be sufficient to perfect security interests in such of
the Collateral described in such financing statements as can be perfected by
filing, which perfected security interests will, subject to the Permitted Liens,
be prior to all other Liens in favor of others and rights of others, enforceable
as such as against creditors of and purchasers from each Loan Party.
(d) No Person now having possession or control of any of the
Collateral consisting of Inventory or Equipment has issued, in receipt therefor,
a negotiable bill of lading, warehouse receipt or other document of title.
Section 4.18 Environmental Representations
(a) Except as set forth in SCHEDULE 4.18, to the best of their
knowledge, each Loan Party has obtained all necessary material permits,
licenses, variances, clearances and all other necessary approvals (collectively
the "EPA Permits") for said Loan Parties Real Property Collateral and the
operation and conduct of its business from all applicable federal, state and
local governmental authorities, utility companies or development-related
entities including, but not limited to, any and all appropriate Federal or State
environmental protection agencies and other County or City departments, public
water works and public utilities in regard to the use of the Premises and the
operation and conduct of its business, and the handling, transporting, treating,
storage, disposal, discharge or Release of Hazardous Substances, if any, into,
on or from the environment (including, but not limited to, any air, water or
soil). Except for EPA Permits the absence of which would not result in a
Material Adverse Effect, each issued EPA Permit is in full force and effect, has
not expired or been suspended, denied or revoked, and, to Borrower's knowledge,
is not under challenge by any Person. Each Loan Party is in compliance with each
issued EPA Permit, except for such matters of non-compliance which would not
result in a Material Adverse Effect.
(b) To the best of their knowledge, none of the Loan Parties
or any of their respective Real Property Collateral is subject to any material
private or governmental litigation, threatened litigation, Lien or judicial or
administrative notice, order or action relating to Hazardous Substances or
environmental problems, impairments or liabilities with respect to the Premises
or such other Property.
29
<PAGE> 35
(c) To the best knowledge of each Loan Party, there has been
no "Release" (as defined in Section 101(22) of CERCLA) into, on or from any Real
Property Collateral and no Hazardous Substances (except "Household Waste" as
that term is defined at 40 C.F.R. 261.4(b)(1) (1990)) are located on or have
been treated, stored, processed, disposed of, handled, transported to or from,
or disposed of upon the Real Property Collateral during said Loan Party's
possession or into, upon or from the environment including, but not limited to,
any air, water, or soil in violation of any Environmental Law. No Loan Party has
allowed any Hazardous Substance to exist or be treated, stored, disposed,
Released, located, discharged, possessed, managed, processed or otherwise
handled on said Loan Party's Real property Collateral or in the operation or
conduct of its respective businesses in violation of Environmental Laws, and
each Loan Party, to its knowledge, has complied with all Environmental Laws
affecting the its respective Real Property Collateral.
ARTICLE 5. CONDITIONS TO THE LOANS.
Section 5.1 Conditions to Initial Borrowing. The obligation of Bank to
make the Loan shall be subject to the satisfaction, on or prior to the first
disbursement of proceeds thereunder, of each of the following conditions
precedent:
(a) Certified Copies of Charter Documents and Bylaws. Borrower
shall have received (i) a copy, certified by the Secretary or an Assistant
Secretary of each Loan Party to be true and complete on and as of the Closing
Date, of the charter or other organization documents and by-laws of each Loan
Party as in effect on the Closing Date (together with any amendments thereto);
and (ii) the charter or other organization documents of each Loan Party
certified by the applicable Secretary of State.
(b) Proof of Corporate Authority. Bank shall have received
copies, certified by the Secretary or an Assistant Secretary of Borrower to be
true and complete on and as of the Closing Date, of records of all action taken
by each Loan Party to authorize (i) the execution and delivery of this Agreement
and the other Loan Documents to which it is or is to become a party as
contemplated or required by this Agreement: (ii) each Loan Party's performance
of all of its obligations under the Loan Documents; and (iii) the making by
Borrower of the borrowings contemplated hereby. Provided that such a document or
its equivalent is available in the applicable jurisdiction of organization, Bank
shall have received from the applicable Secretary of State a Certificate of Good
Standing of recent date certifying the existence and good standing of each Loan
Party under the laws of the applicable state of incorporation and its good
standing in each state where each Loan Party, as applicable, is required to
qualify to conduct business.
(c) Closing Certificate. Bank shall have received a
certificate, dated as of the Closing Date, signed by a duly authorized officer
of each Loan Party and (a) giving the name and bearing a specimen signature of
each individual who shall be authorized (i) to sign, in the name and on behalf
of each Loan Party, each of the Loan Documents to which said Loan Party is or is
to become a party, and (ii) to give notices and to take other action on behalf
of said Loan Party under the Loan Documents.
30
<PAGE> 36
(d) Loan Documents Etc. Each of the Loan Documents available
at Closing shall have been duly and properly authorized and executed and
delivered by the parties thereto and shall be in full force and effect on and as
of the Closing Date.
(e) Insurance. Bank shall have received copies of certificates
of insurance executed by each insurer or its authorized agent evidencing the
insurance required to be maintained by Borrower pursuant to Section 7.8, and a
certificate of an insurance broker reasonably satisfactory to Bank certifying
that insurance complying with such Section has been obtained and is in full
force and effect.
(f) Legality of Transactions. No change in applicable law
shall have occurred as a consequence of which it shall have become and continue
to be unlawful (i) for Bank to perform any of its agreements or obligations
under any of the Loan Documents to which it is a party on the Closing Date; or
(ii) for any Loan Party to perform any of its agreements or obligations under
any of the Loan Documents to which it is a party on the Closing Date.
(g) Performance, Etc. Each Loan Party shall have duly and
properly performed, complied with and observed each of its covenants, agreements
and obligations contained in each of the Loan Documents executed by it at
Closing, and no event shall have occurred subsequent thereto and prior to such
disbursement which constitutes a Default or an Event of Default.
(h) Proceedings and Documents. All corporate, governmental and
other proceedings in connection with the transactions contemplated by this
Agreement, each of the other Loan Documents, and all instruments and documents
incidental thereto shall be in form and substance satisfactory to Bank, and Bank
shall have received all such counterpart originals or certified or other copies
of all such instruments and documents as Ban shall have requested.
(i) Compliance with Laws. The borrowings made under this
Agreement are and shall be in compliance with the requirements of all applicable
laws, regulations, rules and orders, including without limitation, the
requirements imposed by the Board of Governors of the Federal Reserve System
under Regulations U, G and X, and by the SEC.
(j) Payment of Commitment Fee. Borrower shall have paid Bank
the all Fees incurred prior to the Closing and submitted to Borrower for
payment, including the Commitment Fee.
31
<PAGE> 37
(k) Changes: None Adverse. From the date of the Current
Financial Statements referred to in Section 4.9 to the Closing Date or the
subsequent of first disbursement, no changes shall have occurred in the assets,
liabilities, financial condition, business, operations or prospects of the Loan
Parties which, individually or in the aggregate, are materially adverse thereto.
(l) Financial Statements. Bank shall have received the Current
Financial Statements referred to in Section 4.9, certified by an officer of
Borrower, and hall have been satisfied that such Current Financial Statements
accurately reflect the consolidated financial status and condition of Borrower.
Section 5.2 Post-Closing Requirements. The following matters must be
completed, to the satisfaction of Bank, within the specified time frames:
(a) Completion of Real Property Collateral Pool. Within seven
(7) business days following closing, Borrower shall provide, or shall arrange
for the provision of, additional Property to serve as Real Property Collateral,
having sufficient Appraised Value that eighty percent (80%) of the Appraised
Value of all the Real Property Collateral equals or exceeds $50,000,000.00. In
order to serve as Real Property Collateral, if the Property is owned by a Loan
Party, Borrower must provide Bank with (i) a legal description for such
Property, (ii) an executed Mortgage thereon, and (iii) an Appraisal stating the
Appraised Value thereof. In addition, if the Property is owned by a Subsidiary
of Borrower other than a Loan Party, such Subsidiary must also execute (I) a
Guaranty, (II) a Security Agreement, (III) such other Security Documents as Bank
shall reasonably require, and (IV) an Addendum to this Loan Agreement agreeing
to be bound to the terms and conditions hereof as a Loan Party. By submitting
any Property for inclusion in the Real Property Collateral, Borrower certifies
that, to the best of its knowledge, the Property is owned in fee simple free and
clear of all Liens and encumbrances other than those Liens Permitted under
Section 8.1 hereof.
(b) Title Examinations. Within ten (10) business days
following closing, Borrower shall provide, or arrange for the provision of,
title examinations on all Property serving as Real Property Collateral,
indicating that (i) the Loan Party in question owns the Property in fee simple,
(ii) there are no Liens or encumbrances upon the Property other than those
permitted in Section 8.1 hereof, (iii) no Lien or encumbrance on he Property has
or will have priority over the Mortgage in question, and (iv) the are no other
matters effecting the title which, in the Bank's reasonable discretion, would
have a Material Adverse Effect on Bank's Mortgage. In the event that the title
examination for any such Property does not meet these requirements, Bank may
require that such property be substituted pursuant to Section 3.5 hereof.
Section 5.3 Conditions to Subsequent Borrowings. The obligation of the
Bank to disburse the Loan proceeds subsequent to the Closing shall be subject to
the fulfillment (to the satisfaction of Bank) of the following conditions
precedent:
32
<PAGE> 38
(a) Borrowing Notice. The Bank shall have received a Borrowing
Notice in accordance with Section 2.2 hereof, together with such information as
to the Real Property Collateral and any Disposition thereof as Bank shall
reasonably require.
(b) Legality of Transactions. It shall not be unlawful (a) for
Bank to perform any of its agreements or obligations under any of the Loan
Documents on the date on which such subsequent borrowing is to be made or (b)
for any Loan Party to perform any of its material agreements or obligations
under any of the Loan Documents.
(c) Representations and Warranties. Each of the
representations and warranties made by or on behalf of each Loan Party in this
Agreement or any other Loan Document (a) shall be true and correct in all
material respects when made and (b) shall, for all purposes of this Agreement,
be deemed to be repeated on and as of the date of Borrower's request for such
subsequent borrowing and shall be true and correct in all material respects as
of such date.
(d) No Default. No Default shall have occurred on or prior to
such date and be continuing on such date, and no condition shall exist on such
date which constitutes a Default or Event of Default.
(e) Maximum Dollar Amount. The borrowing shall not result in
the Dollar Amount of the Loan exceeding the Borrowing Base or Commitment.
(f) Legal Matters. All legal matters incident to such Loan
shall be satisfactory to counsel for the Bank.
ARTICLE 6. DELIVERY OF FINANCIAL REPORTS, DOCUMENTS AND OTHER INFORMATION. While
the Commitment is outstanding, and, in the event any portion of the Loan remains
outstanding, so long as Borrower is indebted to Bank, and until payment in full
of the Note and full and complete performance of all other obligations arising
hereunder, Borrower shall deliver to Bank:
Section 6.1 Annual Financial Statements. Annually, as soon as
available, but in any event within ninety (90) days after the last day of each
of its fiscal years, a consolidated and consolidating balance sheet of Borrower
and its Subsidiaries as at such last day of the fiscal year, and consolidated
and consolidating statements of income and retained earnings and statements of
Cash Flow, for such fiscal year, each prepared in accordance with GAAP
consistently applied, in reasonable detail, and, as to the consolidated
statements, certified without qualification by Ernst & Young or another
nationally recognized independent public accounting firm or by any other
certified public accounting firm satisfactory to Bank, and certified, as to the
consolidating statements, by the chief financial officer of Borrower, as fairly
presenting the financial position and results of operations of Borrower and its
Subsidiaries as at and for the year ending on its date and as having been
prepared in accordance with GAAP; provided, however, Borrower may satisfy its
obligations to deliver the consolidated financial statements described in this
Section 6.1 by furnishing to Bank a copy of its annual report on Form 10-K in
respect of such fiscal year together with the financial statements
33
<PAGE> 39
required to be attached thereto, provided Borrower is required to file such
annual report on Form 10-K with the Securities and Exchange Commission and such
filing is actually made.
Section 6.2 Quarterly Financial Statements. As soon as available, but
in any event within forty-five (45) days after the end of each of Borrower's
fiscal quarters, a consolidated and consolidating balance sheet of Borrower and
its Subsidiaries as of the last day of such quarter and consolidated and
consolidating statements of income and retained earnings and statements of Cash
Flow, for such quarter, and on a comparative basis figures for the corresponding
period of the immediately preceding fiscal year, all in reasonable detail, each
such statement to be certified in a certificate of the chief financial officer
of Borrower as accurately presenting the financial position and the results of
operations of Borrower and its Subsidiaries as at its date and for such quarter
and as having been prepared in accordance with GAAP (subject to year-end audit
adjustments); provided, however, Borrower may satisfy its obligations to deliver
the consolidated financial statements described in this Section 6.2 by
furnishing to the Banks a copy of its quarterly report on Form 10-Q in respect
of such fiscal quarter together with the financial statements required to be
attached thereto, provided Borrower is required to file such quarterly report on
Form 10-Q with the Securities and Exchange Commission and such filing is
actually made.
Section 6.3 Compliance Information. Promptly after a written request
therefor, such other financial data or information evidencing compliance with
the requirements of this Agreement, the Note and the other Loan Documents, as
any Bank may reasonably request from time to time.
Section 6.4 No Default Certificate. At the same time as it delivers the
financial statements required under the provisions of Sections 6.1 and 6.2
hereof, a certificate of the chief executive officer or chief financial officer
of Borrower to the effect that no Event of Default hereunder and that no default
under any other material agreement to which Borrower is a party or by which it
is bound, or by which, to the best knowledge of Borrower, any of its properties
or assets, taken as a whole, may be materially affected, and no event which,
with the giving of notice or the lapse of time, or both, would constitute such
an Event of Default or default, exists, or, if such cannot be so certified,
specifying in reasonable detail the exceptions, if any, to such statement. Such
certificate shall be accompanied by a detailed calculation indicating compliance
with the covenants contained in Section 7.9 hereof in the form annexed hereto as
EXHIBIT E.
Section 6.5 Certificate of Accountants. At the same time as it delivers
the financial statements required under the provisions of Section 6.1 hereof, a
copy of any certificate prepared by the Accountants and required by Section 5.5
of the Second Amended and Restated Loan Agreement By and Among Omega Healthcare
Investors, Inc. and Certain of its Subsidiaries, the Banks Signatory Thereto and
Fleet Bank, N.A., as Agent, dated September 30, 1997.
Section 6.6 Business Plan and Budget. Not later than January 31st in
each fiscal year, copies of Borrower's business plan and budget for such fiscal
year (together with a copy in writing of the assumptions on which such business
plan and budget were based), each prepared by
34
<PAGE> 40
Borrower's chief financial officer and illustrating the projected income
statements, balance sheets and statements of changes in Cash Flow on a
consolidated basis.
Section 6.7 Operator Reports. Such information regarding the Operators
as the Bank may from time to time reasonably request.
Section 6.8 Accountants' Reports. Promptly upon receipt thereof, copies
of all other reports submitted to Borrower by its Accountants in connection with
any annual or interim audit or review of the books of Borrower or its
Subsidiaries made by such Accountants.
Section 6.9 Copies of Documents. Promptly upon their becoming
available, copies of any: (i) financial statements, non-routine reports, notices
(other than routine correspondence), requests for waivers and proxy statements,
in each case, delivered by Borrower or any of its Subsidiaries to any of their
respective existing lending institutions or creditors; (ii) correspondence or
notices received by Borrower from any federal, state or local governmental
authority that regulates the operations of Borrower or any of its Subsidiaries,
relating to an actual or threatened change or development that would be
materially adverse to Borrower or any Subsidiary; (iii) registration statements
and any amendments and supplements thereto, and any regular and periodic
reports, if any, filed by Borrower or any of its Subsidiaries with any
securities exchange or with the Securities and Exchange Commission or any
governmental authority succeeding to any or all of the functions of the said
Commission; (iv) letters of comment or correspondence sent to Borrower or any of
its Subsidiaries by any such securities exchange or such Commission in relation
to Borrower or any of its Subsidiaries and its affairs; (v) written reports
submitted by Borrower or any of its Subsidiaries to its Accountants in
connection with any annual or interim audit of the books of Borrower or its
Subsidiaries made by such accountants; and (vi) any appraisals received by any
Loan Party with respect to the Real Property Collateral during the term of this
Agreement.
Section 6.10 Notices of Defaults. Promptly, notice of the occurrence of
any Default or Event of Default, or any event that would constitute or cause a
Material Adverse Effect in the condition, financial or otherwise, or the
operations of Borrower or any of the Subsidiaries.
Section 6.11 ERISA Notices and Requests.
(a) Concurrently with such filing, a copy of each Form 5500
that is filed with respect to each Plan with the IRS; and
(b) Promptly, upon their becoming available, copies of: (i)
all correspondence with the PBGC, the Secretary of Labor or any representative
of the IRS with respect to any Plan, relating to an actual or threatened change
or development that would be materially adverse to Borrower or its Subsidiaries;
(ii) all actuarial valuations received by Borrower with respect to any Plan; and
(iii) any notices of Plan termination filed by any Plan Administrator (as those
terms are used in ERISA) with the PBGC and of any notices from the PBGC to
Borrower with respect to the intent of the PBGC to institute involuntary
termination proceedings.
35
<PAGE> 41
Section 6.12 Additional Information. Such other material additional
information regarding the business, affairs and condition of Borrower and its
Subsidiaries as Bank may from time to time reasonably request, including,
without limitation, quarterly schedules, in form and substance satisfactory to
the Bank, with respect to Borrower on a consolidated basis, of recorded
liabilities, unfunded commitments, contingent liabilities and other similar
material items.
ARTICLE 7. AFFIRMATIVE COVENANTS. While the Commitment is outstanding, and, in
the event any portion of the Loan remains outstanding, so long as Borrower is
indebted to Bank, and until payment in full of the Note and full and complete
performance of all other obligations arising hereunder, Borrower, and, as
applicable, each Guarantor shall:
Section 7.1 Books and Records. Keep proper books of record and account
in a manner reasonably satisfactory to the Bank in which full and true entries
shall be made of all dealings or transactions in relation to its business and
activities.
Section 7.2 Inspections and Audits. Permit Bank to make or cause to be
made (prior to an Event of Default, at Bank's expense and after the occurrence
of and during the continuance of an Event of Default, at Borrower's expense),
inspections and audits of any books, records and papers of Borrower or any
Subsidiary and to make extracts therefrom and copies thereof, or to make
appraisals, inspections and examinations of any properties and facilities of
Borrower or any Subsidiary on reasonable notice, at all such reasonable times
and as often as Bank may reasonably require, in order to assure that each Loan
Party is and will be in compliance with their obligations under the Loan
Documents.
Section 7.3 Maintenance and Repairs. Cause to be maintained in good
repair, working order and condition, subject to normal wear and tear, all
material properties (including, but not limited to, the Real Property
Collateral) and assets from time to time owned by Borrower or any Subsidiary and
used in or necessary for the operation of its businesses, and make or cause to
be made all reasonable repairs, replacements, additions and improvements
thereto.
Section 7.4 Continuance of Business. Do, or cause to be done, all
things reasonably necessary to preserve and keep in full force and effect the
corporate existence of Borrower or any Subsidiary and all permits, rights and
privileges necessary for the proper conduct of its business, and continue to
engage in the same line of business and comply in all material respects with all
applicable laws, regulations and orders.
Section 7.5 Copies of Corporate Documents. Subject to the prohibitions
set forth in Section 8.6 hereof, promptly deliver to the Bank copies of any
amendments or modifications to the certificate of incorporation and by-laws of
Borrower or any Subsidiary, certified with respect to the certificate of
incorporation by the Secretary of State of its state of incorporation and, with
respect to the by-laws, by the secretary or assistant secretary of such
corporation.
36
<PAGE> 42
Section 7.6 Perform Obligations. Pay and discharge all of the
obligations and liabilities of Borrower or any Subsidiary, including, without
limitation, all taxes, assessments and governmental charges upon its income and
properties when due, unless and to the extent only that such obligations,
liabilities, taxes, assessments and governmental charges shall be contested in
good faith and by appropriate proceedings and that, to the extent required by
generally accepted accounting principles then in effect, proper and adequate
book reserves relating thereto are established by Borrower or any Subsidiary,
and then only to the extent that a bond is filed in cases where the filing of a
bond is necessary to avoid the creation of a Lien against any of its properties.
Section 7.7 Notice of Litigation. Promptly notify Bank in writing of
any litigation, legal proceeding or dispute, other than disputes in the ordinary
course of business or, whether or not in the ordinary course of business,
involving amounts in excess of Five Million ($5,000,000) Dollars, affecting
Borrower or any Subsidiary whether or not fully covered by insurance, and
regardless of the subject matter thereof (excluding, however, any actions
relating to workers' compensation claims or negligence claims relating to use of
motor vehicles, if fully covered by insurance, subject to deductibles).
Section 7.8 Insurance.
(a) (i) Maintain with responsible insurance companies
acceptable to Bank such insurance on such of the properties of Borrower or any
Subsidiary (including, but not limited to, the Real Property Collateral) in such
amounts and against such risks as is customarily maintained by similar
businesses and cause each Operator to do so; (ii) file with Bank upon its
request a detailed list of the insurance then in effect, stating the names of
the insurance companies, the amounts and rates of the insurance, the dates of
the expiration thereof and the properties and risks covered thereby; and (iii)
within ten (10) days after notice in writing from Bank, obtain such additional
insurance as Bank may reasonably request; and
(b) Carry all insurance available through the PBGC or any
private insurance companies covering its obligations to the PBGC
Section 7.9 Financial Covenants. Borrower shall have and maintain, on a
consolidated basis, as at the last day of each fiscal quarter of Borrower:
(i) A ratio of Indebtedness to Tangible Net Worth of not more than 1.35 to
1.00;
(ii) Tangible Net Worth of not less than $425,000,000;
(iii) Interest Coverage of not less than 150%; and
(iv) Fixed Charge Coverage of not less than 1.00 to 1.00.
37
<PAGE> 43
Section 7.10 Notice of Certain Events.
(a) Promptly notify Bank in writing of the occurrence of any
Reportable Event, as defined in Section 4043 of ERISA, if a notice of such
Reportable Event is required under ERISA to be delivered to the PBGC within 30
days after the occurrence thereof, together with a description of such
Reportable Event and a statement of the action Borrower or the ERISA Affiliate
intends to take with respect thereto, together with a copy of the notice thereof
given to the PBGC.
(b) Promptly notify Bank in writing if Borrower or an ERISA
Affiliate receives an assessment of withdrawal liability in connection with a
complete or partial withdrawal with respect to any Multiemployer Plan, together
with a statement of the action that Borrower or such ERISA Affiliate intends to
take with respect thereto.
(c) Promptly notify Bank in writing if any Loan Party
receives: (i) any notice of any violation or administrative or judicial
complaint or order having been filed or about to be filed against any Loan Party
alleging violations of any Environmental Law and Regulation, or (ii) any notice
from any governmental body or any other Person alleging that such Loan Party is
or may be subject to any Environmental Liability; and promptly upon receipt
thereof, provide Bank with a copy of such notice together with a statement of
the action such Loan Party intends to take with respect thereto.
Section 7.11 Comply with ERISA. Materially comply with all applicable
provisions of ERISA and the Code now or hereafter in effect.
Section 7.12 Environmental Compliance. Each Loan Party shall operate
all property owned, operated or leased by it (including, but not limited to, any
Real Property Collateral) in compliance with all Environmental Laws and
Regulations, such that no Environmental Liability arises under any Environmental
Laws and Regulations, which would result in a Lien on any property of any Loan
Party (including, but not limited to, any Real Property Collateral).
Section 7.13 Compliance with Laws.
(a) Borrower and each of its Subsidiaries will comply in all
material respects with all applicable federal, state and local laws, rules,
regulations and orders pertaining to the operation of its business, paying
before the same become delinquent all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or any
Collateral, and paying all lawful claims which if unpaid might become a Lien
upon any of its Collateral, except to the extent contested in good faith by
proper proceedings which stay the imposition of any penalty, fine or Lien
resulting from the non-payment thereof and with respect to which adequate
reserves have been set aside for the payment thereof.
(b) Borrower will promptly notify Bank in the event that
Borrower receives any notice, claim or demand from any governmental agency which
alleges that Borrower or any of its
38
<PAGE> 44
Subsidiaries is in material violation of any of the terms of, or has materially
failed to comply with any applicable order issued pursuant to, any federal,
state or local statute regulating its operation and business, including, but not
limited to, the Occupational Safety and Health Act or any Environmental Law.
Section 7.14 Maintenance of REIT Status. Borrower shall maintain its
REIT Status.
Section 7.15 Year 2000 Compliance.
(a) Each Loan Party: (i) has undertaken a detailed inventory,
review and assessment of all areas within and affecting said Loan Party'
business and operations that could suffer a Material Adverse Effect from the
failure of said Loan Party to be Year 2000 Compliant (as hereinafter defined) on
a timely basis; (ii) developed a plan and time line for becoming Year 2000
Compliant on a timely basis; (iii) to date, have implemented that plan in
accordance with the specified timetable in all material respects; and (iv) will
continue to implement such plan, without change, so that each Loan Party will be
Year 2000 Compliant by January 1, 2000.
(b) Each Loan Party reasonably anticipates that it will be
Year 2000 Compliant on a timely basis.
(c) Each Loan Party shall deliver to Bank: (i) immediately
upon becoming aware of the existence of any condition or event which constitutes
or will constitute, but for the passage of time or giving of notice or both, an
event of default hereunder, a written notice specifying the nature and period of
existence thereof and what action said Loan Party is taking or proposes to take
with respect thereto; and (ii) at the request of Bank, such information,
documentation and materials as Bank may from time to time reasonably require
including, but not limited to, (A) said Loan Party's Year 2000 plan and time
line, (B) any management or other letters from said Loan Party's accountants
addressing or mentioning that Loan Party's Year 2000 Compliance, and (C) such
other information, documentation and materials as Bank may reasonably request
from time to time in order to confirm that each Loan Party is Year 2000
Compliant and the method(s) used by each Loan Party to become Year 2000
Compliant.
(d) As used herein, "Year 2000 Compliant" shall mean that all
software, embedded microchips and other processing capabilities utilized by each
Loan Party or its key suppliers, vendors and customers (other than the United
States government or any agency thereof) will correctly process, sequence and
calculate, without interruption, all date and date-related data for all dates
to, through and after January 1, 2000, including leap year calculations, and
shall recognize, store and transmit date data in a format which clearly
indicates the correct century.
ARTICLE 8. NEGATIVE COVENANTS. While the Commitment is outstanding, and, in the
event any portion of the Loan remains outstanding, so long as Borrower is
indebted to Bank, and until payment in full of the Note and full and complete
performance of all other obligations arising hereunder,
39
<PAGE> 45
Borrower, and, as applicable, each Guarantor shall not do, agree to do, or
permit to be done, any of the following:
Section 8.1 Liens. Create, or assume or permit to exist, any Lien on
any Collateral, except:
(a) Permitted Liens;
(b) Purchase money Liens on Collateral acquired or held by any
Loan Party in the ordinary course of business, securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the cost of acquiring
such Collateral provided, that (i) any such Lien attaches to such Collateral
concurrently with or within twenty (20) days after the acquisition thereof, (ii)
such Lien attaches solely to such Collateral so acquired in such transaction,
and (iii) the principal amount of the debt secured thereby does not exceed 100%
of the cost of such Collateral; and
(c) As set forth on SCHEDULE 8.1 hereto.
Section 8.2 Mergers, Acquisitions. Except as expressly permitted by
this Agreement, merge or consolidate with any Person, or, acquire all or
substantially all of the assets or any of the capital stock of any Person unless
(a) the Loan Party is the surviving entity, and (b) no Default or Event of
Default exists or will occur after giving effect thereto
Section 8.3 Changes in Structure. Except for supplemental issuance of
the authorized common stock and preferred stock of Borrower or any Subsidiary
thereof, make any changes in the equity capital structure of Borrower or any
Subsidiary, or amend its certificate of incorporation or by-laws in a manner
which would be reasonably likely to cause a Material Adverse Effect.
Section 8.4 Disposition of Real Property Collateral. Make any
Disposition of any Real Property Collateral, or enter into any agreement to do
so, which would result in the Loan being in excess of the Borrowing Base
following such Disposition, unless (a) the Disposition is at fair market value,
(b) at the time of the Disposition no Default or Event of Default exists, and
(c) (i) any mandatory prepayment required in connection therewith under Section
2.5 is made as provided therein, or (ii) an additional Facility or other real
estate owned by the Loan Party in question, is substituted as Real Property
Collateral for the Property which is the subject of the Disposition pursuant to
Subsection 3.5 hereof.
Section 8.5 Fiscal Year. Change its fiscal year.
Section 8.6 ERISA Obligations. Permit the establishment of any Employee
Benefit Plan or amend any Employee Benefit Plan which establishment or amendment
could result in liability to any Loan Party or increase the obligation for
post-retirement welfare benefits of any Loan Party which liability or increase,
individually or together with all similar liabilities and increases, has a
Material Adverse Effect on any Loan Party.
40
<PAGE> 46
Section 8.7 Capital Expenditures. Except as otherwise permitted under
this Agreement, make or be or become obligated to make Capital Expenditures in
the aggregate for Borrower and its Subsidiaries on a consolidated basis, during
each fiscal year of Borrower and its Subsidiaries, in excess of Two Hundred
Fifty Thousand ($250,000) Dollars.
Section 8.8 Hazardous Material. Cause or permit: (i) any Hazardous
Material to be placed, held, located or disposed of, on, under or at any
Facility or any part thereof (including, but not limited to, any Facility
serving as real Property Collateral), except for such Hazardous Materials that
are necessary for Borrower's or any Subsidiary's or any Operator's operation of
its business thereon and which shall be used, stored, treated and disposed of in
compliance with all applicable Environmental Laws and Regulations or (ii) such
Facility or any part thereof to be used as a collection, storage, treatment or
disposal site for any Hazardous Material. Borrower and each Subsidiary
acknowledges and agrees that Bank shall have no liability or responsibility for
either:
(a) damage, loss or injury to human health, the environment or
natural resources caused by the presence, disposal, release or threatened
release of Hazardous Materials on any part of such Facility; or
(b) abatement and/or clean-up required under any applicable
Environmental Laws and Regulations for a release, threatened release or disposal
of any Hazardous Materials located at any Facility or used by or in connection
with Borrower's or any Subsidiary's or any Operator's business.
Section 8.9 Limitation on Nature of Business. Borrower and its
Subsidiaries will not at any time make any material change in the nature of
their collective business as carried on at the date hereof or undertake, conduct
or transact any business in a manner prohibited by applicable law.
ARTICLE 9. EVENTS OF DEFAULT.
Section 9.1 Events of Default. If any one or more of the following
events ("Events of Default") shall occur and be continuing, the Commitment shall
terminate and the entire unpaid balance of the principal of and interest on the
Note outstanding and all other Obligations and Indebtedness of Borrower to Bank
arising hereunder and under the other Loan Documents shall immediately become
due and payable upon written notice to that effect given to Borrower by Bank
(except that in the case of the occurrence of any Event of Default described in
Subsection 9.1(f) no such notice shall be required), without presentment or
demand for payment, notice of non-payment, protest or further notice or demand
of any kind, all of which are expressly waived by Borrower:
(a) Payments. Failure by Borrower to make any payment or
mandatory repayment of principal or interest upon the Note or to make any
payment of any Fee when due; or
41
<PAGE> 47
(b) Certain Covenants. Failure by any Loan Party to perform or
observe any applicable provision of Section 7.9 or Article 8 hereof; or
(c) Other Covenants. Failure by any Loan Party to perform or
observe any other applicable term, condition or covenant of this Agreement or of
any of the other Loan Documents to which it is a party, which shall remain
unremedied for a period of thirty (30) days after notice thereof shall have been
given to such Loan Party by Bank; or
(d) Other Defaults.
(i) Failure by any Loan Party to make, within any applicable
grace period, any payment in excess of $10,000,000.00 due under any
Indebtedness, whether such payment is due at maturity or in the ordinary course
of such Indebtedness; or
(ii) The formal default and acceleration of any material
Indebtedness of a Loan Party; or
(e) Representations and Warranties. Any representation or
warranty made in writing to Bank in any of the Loan Documents or in connection
with the making of the Loan, or any certificate, statement or report made or
delivered in compliance with this Agreement, shall have been false or misleading
in any material respect when made or delivered, which in any event results in a
Material Adverse Effect; or
(f) Bankruptcy.
(i) Any Loan Party shall make an assignment for the benefit
of creditors, file a petition in bankruptcy, be adjudicated insolvent, petition
or apply to any tribunal for the appointment of a receiver, custodian, or any
trustee for it or him or a substantial part of its or his assets, or shall
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or any Loan Party shall take
any corporate action to authorize any of the foregoing actions; or there shall
have been filed any such petition or application, or any such proceeding shall
have been commenced against it or him, that remains undismissed for a period of
thirty (30) days or more; or any order for relief shall be entered in any such
proceeding; or any Loan Party by any act or omission shall indicate its or his
consent to, approval of or acquiescence in any such petition, application or
proceeding or the appointment of a custodian, receiver or any trustee for it or
him or any substantial part of any of its or his properties, or shall suffer any
custodianship, receivership or trusteeship to continue undischarged for a period
of thirty (30) days or more; or
(ii) Any Loan Party shall generally not pay its debts as such
debts become due; or
42
<PAGE> 48
(iii) Any Loan Party shall have concealed, removed, or
permitted to be concealed or removed, any part of its Property, with intent to
hinder, delay or defraud its creditors or any of them or made or suffered a
transfer of any of its property that may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or shall have made any transfer of its
Property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or shall have suffered or permitted,
while insolvent, any creditor to obtain a Lien upon any of its Property through
legal proceedings or distraint that is not vacated within thirty (30) days from
the date thereof; or
(g) Judgments. Any judgment against any Loan Party or any
attachment, levy or execution against any of its Properties (including, but not
limited to, the Collateral) for any amount in excess of $1,000,000 shall remain
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period
of thirty (30) days or more; or
(h) ERISA.
(i) The termination of any Plan or the institution by the PBGC
of proceedings for the involuntary termination of any Plan, in either case, by
reason of, or that results or could result in, a "material accumulated funding
deficiency" under Section 412 of the Code; or
(ii) Failure by any Loan Party to make required contributions,
in accordance with the applicable provisions of ERISA, to each of the Plans
hereafter established or assumed by it; or
(i) Material Adverse Effect. There shall occur a Material
Adverse Effect; or
(j) REIT Status Etc. Borrower shall at any time fail to
maintain its REIT Status, or Borrower or any Subsidiary shall lose, through
suspension, termination, impoundment, revocation, failure to renew or otherwise,
any material license or permit; or
(k) Environmental. Any Loan Party or any of Real Property
Collateral shall become subject to one or more liens for costs or damages in
excess of $2,500,000 individually or in the aggregate under any Environmental
Laws and Regulations and such liens shall remain in place for 30 days after the
creation thereof.
Section 9.2 Remedies. From and after the occurrence of an Event of
Default which is continuing and which has not been waived by Bank, Bank may:
(a) proceed to protect and enforce all or any of its rights,
remedies, powers and privileges under this Agreement, the Note or any of the
other Loan Documents by action at law, suit in equity or other appropriate
proceedings, whether for specific performance of any covenant contained in this
Agreement, the Note or any of the other Loan Documents, or in aid of the
exercise of any power granted to Bank herein or therein;
43
<PAGE> 49
(b) remove from any premises where same may be located any and
all Inventory or any and all documents, instruments, files and records
(including the copying of any computer records), and any receptacles or cabinets
containing same, relating to Accounts, and Bank may use (at the expense of any
Loan Party) such of the supplies or space of any Loan Party, at such Loan
Party's place of business or otherwise, as may be necessary to properly
administer and control the Accounts or the handling of collections and
realizations thereon;
(c) bring suit, in the name of Loan Parties or in its own
name, on any of the Accounts and generally have all other rights respecting such
Accounts, including without limitation the right to accelerate or extend the
time of payment, settle, compromise, release in whole or in part any amounts
owing on such Accounts and issue credits in the name of any Loan Party;
(d) sell, assign and deliver such Inventory and Accounts and
any returned, reclaimed or repossessed merchandise, with or without
advertisement, at public or private sale, for Cash, on credit or otherwise, at
Bank's sole discretion, and Bank may bid or become a purchaser at any such sale,
free from any right of redemption, which right is hereby expressly waived by
each Loan Party;
(e) (i) notify the account debtor on any Account or Chattel
Paper of Bank's security interest therein; (ii) demand that monies due or to
become due be paid directly to Bank; (iii) open any Loan Party's mail and
collect any and all amounts due said Loan Party from account debtors; (iv)
enforce payment of Accounts and Chattel Paper by legal proceedings or otherwise;
(v) exercise all of the rights and remedies of a Loan Party with respect to the
collection of Accounts and Chattel Paper; (vi) settle, adjust, compromise,
modify, extend or renew any Accounts or Chattel Paper; (vii) settle, adjust or
compromise any legal proceedings brought to collect any Accounts or Chattel
Paper; (viii) to the extent permitted by applicable law, sell or assign any
Accounts or Chattel Paper upon such terms, for such amounts and at such time or
times as Bank deems advisable; (ix) grant waivers or indulgences with respect
to, accept partial payments from, discharge, release, surrender, substitute any
customer security for, make compromise with or release, any other party liable
on, any Accounts or Chattel Paper; (x) take control, in any manner, of any item
of payment or proceeds from any account debtor; (xi) prepare, file, and sign any
Loan Party's name on any proof of claim in bankruptcy or similar document
against any account debtor; (xii) prepare, file, and sign any Loan Party's name
on any notice of lien, assignment or satisfaction of lien or similar document in
connection with Accounts or Chattel Paper; (xiii) endorse the name of any Loan
Party upon any Chattel Paper, Document, Instrument, invoice, freight bill, bill
of lading or similar document or agreement relating to any of Accounts or
Chattel Paper or Inventory; (xiv) use any Loan Party's stationery and sign such
Loan Party's name to verifications of Accounts or Chattel Paper and notices
thereof to account debtors; and (xv) use the information recorded on or
contained in any data processing equipment or computer hardware or software
relating to any Accounts, Chattel Paper, Inventory or Proceeds thereof to which
any Loan Party has access; and
(f) foreclose the security interests created pursuant to the
Loan Documents by any available judicial procedure, or take possession of any or
all of the Inventory and Equipment
44
<PAGE> 50
without judicial process and enter any premises where any such Inventory and
Equipment may be located for the purpose of taking possession of or removing the
same.
Bank shall have the right, without notice of advertisement, to
sell, lease, or otherwise dispose of all or any part of the Inventory and
Equipment, whether in its then condition or after further preparation or
processing, in the name of any Loan Party or in the name of such other party as
Bank may designate, either at public or private sale or at any broker's board,
in lots or in bulk, for Cash or for credit, with or without warranties or
representations, and upon such other terms and conditions as Bank in its sole
discretion may deem advisable, and Bank shall have the right to purchase at any
such sale. If any such Inventory and Equipment shall require rebuilding,
repairing, maintenance or preparation, Bank shall have the right, at its option,
to do such of the aforesaid as is necessary, for the purpose of putting such
Inventory and Equipment in such saleable form as Bank shall deem appropriate.
Each Loan Party agrees, at the request of Bank, to assemble such Inventory and
Equipment and to make it available to Bank at places which Bank shall reasonably
select, whether at the premises of any Loan Party or elsewhere, and to make
available to Bank the premises and facilities of the Loan Parties for the
purpose of Bank's taking possession of, removing or putting such Inventory and
Equipment in saleable form. However, if notice of intended disposition of any
Collateral is required by law, it is agreed that five (5) Business Days notice
shall constitute reasonable notification and full compliance with the law. Bank
shall be entitled to use all intangibles and computer software programs and data
bases used by any Loan Party in connection with its business or in connection
with the Collateral. The net Cash proceeds resulting from Bank's exercise of any
of the foregoing rights (after deducting all charges, costs and expenses
including reasonable attorneys' fees) shall be applied by Bank to the payment of
the Obligations, whether due or to become due, in such order as Bank may elect.
Borrower shall remain liable to Bank for any deficiencies. The enumeration of
the foregoing rights is not intended to be exhaustive and the exercise of any
right shall not preclude the exercise of any other rights, all of which shall be
cumulative.
Section 9.3 No Implied Waiver; Rights Cumulative. No delay on the part
of Bank in exercising any right, remedy, power or privilege under any of the
Loan Documents or provided by statute or at law or in equity or otherwise shall
impair, prejudice or constitute a waiver of any such right, remedy, power or
privilege or be construed as a waiver of any Default or Event of Default or as
an acquiescence therein. No right, remedy, power or privilege conferred on or
reserved to Bank under any of the Loan Documents or otherwise is intended to be
exclusive of any other right, remedy, power or privilege. Each and every right,
remedy, power and privilege conferred on or reserved to Bank under any of the
Loan Documents or otherwise shall be cumulative and in addition to each and
every other right, remedy, power or privilege so conferred on or reserved to
Bank and may be exercised at such time or times and in such order and manner as
Bank shall (in its sole and complete discretion) deem expedient.
Section 9.4 Set-Off; Pro Rata Sharing. If any Event of Default shall at
any time occur, and for so long as it shall be continuing, any deposits,
balances or other sums credited by or due from Bank or any of the offices or
branches thereof to any Loan Party, may, without any prior notice of
45
<PAGE> 51
any kind to such Loan Party, or compliance with any other conditions precedent
now or hereafter imposed by statute, rule or law or otherwise (all of which are
hereby expressly and irrevocably waived by each Loan Party), be immediately set
off, appropriated and applied by Bank toward the payment and satisfaction of the
Obligations (but not to any other obligations of Borrower to Bank until all of
the Obligations have been paid in full) in such order and manner as Bank (in its
sole and complete discretion) may determine.
ARTICLE 10. MISCELLANEOUS PROVISIONS.
Section 10.1 Fees and Expenses: Indemnity. Borrower will promptly pay
all costs of Bank in preparing the Loan Documents and all costs and expenses of
the issue of the Note and of each Loan Party's performance of and compliance
with all agreements and conditions contained herein on its part to be performed
or complied with and the reasonable fees and expenses and disbursements of
counsel to Bank in connection with the preparation, execution and delivery,
administration, interpretation and enforcement of this Agreement, the other Loan
Documents and all other agreements, instruments and documents relating to this
transaction, including, but not limited to, all instruments, documents and
agreement necessary for the transactions contemplated in Section 10.12 hereof,
the consummation of the transactions contemplated by all such documents, the
preservation of all rights of Bank, the negotiation, preparation, execution and
delivery of any amendment, modification or supplement of or to, or any consent
or waiver under, any such document (or any such instrument that is proposed but
not executed and delivered) and with any claim or action threatened, made or
brought against Bank arising out of or relating to any extent to this Agreement,
the other Loan Documents or the transactions contemplated hereby or thereby
(other than a claim or action resulting from the gross negligence, willful
misconduct, or intentional violation of law by Bank). In addition, Borrower will
promptly pay all costs and expenses (including, without limitation, reasonable
fees and disbursements of counsel) suffered or incurred by Bank in connection
with its enforcement of the payment of the Note or any other sum due to Bank
under this Agreement or any of the other Loan Documents or any of its other
rights hereunder or thereunder. In addition to the foregoing, Borrower shall
indemnify Bank and its directors, officers, employees, attorneys, agents and
Affiliates against, and hold each of them harmless from, any loss, liabilities,
damages, claims, costs and expenses (including reasonable attorneys' fees and
disbursements) suffered or incurred by any of them arising out of, resulting
from or in any manner connected with, the execution, delivery and performance of
each of the Loan Documents, the Loan and any and all transactions related to or
consummated in connection with the Loan (other than as a result of the gross
negligence, willful misconduct or intentional violation of law by the party
seeking indemnification), including, without limitation, losses, liabilities,
damages, claims, costs and expenses suffered or incurred by Bank or any of its
directors, officers, employees, attorneys, agents or Affiliates arising out of
or related to any Environmental Liability or Environmental Proceeding, or in
investigating, preparing for, defending against, or providing evidence,
producing documents or taking any other action in respect of any commenced or
threatened litigation, administrative proceeding or investigation under any
federal securities law or any other statute of any jurisdiction, or any
regulation, or at common law or otherwise against Bank or any of its officers,
directors, affiliates, agents or Affiliates, that is alleged to arise out of or
is based upon: (i) any untrue statement or alleged untrue statement of any
material
46
<PAGE> 52
fact of any Loan Party and its Affiliates in any document or schedule filed with
the Securities and Exchange Commission or any other governmental body; (ii) any
omission or alleged omission to state any material fact required to be stated in
such document or schedule, or necessary to make the statements made therein, in
light of the circumstances under which made, not misleading; (iii) any acts,
practices or omission or alleged acts, practices or omissions of any Loan Party
or its agents related to the making of any acquisition, purchase of shares or
assets pursuant thereto, financing of such purchases or the consummation of any
other transactions contemplated by any such acquisitions that are alleged to be
in violation of any federal securities law or of any other statute, regulation
or other law of any jurisdiction applicable to the making of any such
acquisition, the purchase of shares or assets pursuant thereto, the financing of
such purchases or the consummation of the other transactions contemplated by any
such acquisition; or (iv) any withdrawals, termination or cancellation of any
such proposed acquisition for any reason whatsoever. The indemnity set forth
herein shall be in addition to any other obligations or liabilities of any Loan
Party to Bank hereunder or at common law or otherwise. The provisions of this
Section 10.1 shall survive the payment of the Note and the termination of this
Agreement.
Section 10.2 Taxes. If, under any law in effect on the date of the
closing of the Loan hereunder, or under any retroactive provision of any law
subsequently enacted, it shall be determined that any Federal, state or local
tax is payable in respect of the issuance of the Note, or in connection with the
filing or recording of any assignments, mortgages, financing statements, or
other documents (whether measured by the amount of Indebtedness secured or
otherwise) as contemplated by this Agreement, then Borrower will pay any such
tax and all interest and penalties, if any, and will indemnify Bank against and
save it harmless from any loss or damage resulting from or arising out of the
nonpayment or delay in payment of any such tax. If any such tax or taxes shall
be assessed or levied against Bank or any other holder of the Note, Bank, or
such other holder, as the case may be, may notify Borrower and make immediate
payment thereof, together with interest or penalties in connection therewith,
and shall thereupon be entitled to and shall receive immediate reimbursement
therefor from Borrower. Notwithstanding any other provision contained in this
Agreement, the covenants and agreements of Borrower in this Section 10.2 shall
survive payment of the Note and the termination of this Agreement.
Section 10.3 Payments. As set forth in Article 2 hereof, all payments
by Borrower on account of principal, interest, Fees and other charges (including
any indemnities) shall be made to the Bank at the Principal Office of the Bank,
in lawful money of the United States of America in immediately available funds,
by wire transfer or otherwise, not later than 11:00 A.M. Cincinnati, Ohio time
on the date such payment is due. Any such payment made on such date but after
such time shall, if the amount paid bears interest, be deemed to have been made
on, and interest shall continue to accrue and be payable thereon until, the next
succeeding Business Day. If any payment of principal or interest becomes due on
a day other than a Business Day, such payment may be made on the next succeeding
Business Day and such extension shall be included in computing interest in
connection with such payment. All payments hereunder and under the Note shall be
made without set-off or counterclaim and in such amounts as may be necessary in
order that all such payments shall not be less than the amounts otherwise
specified to be paid under this Agreement and the Note
47
<PAGE> 53
(after withholding for or on account of: (i) any present or future taxes,
levies, imposts, duties or other similar charges of whatever nature imposed by
any government or any political subdivision or taxing authority thereof, other
than any tax (except those referred to in clause (ii) below) on or measured by
the net income of Bank to which any such payment is due pursuant to applicable
federal, state and local income tax laws, and (ii) deduction of amounts equal to
the taxes on or measured by the net income of Bank payable thereby with respect
to the amount by which the payments required to be made under this sentence
exceed the amounts otherwise specified to be paid in this Agreement and the
Note). Upon payment in full of the Note and/or termination of the Commitment,
Bank shall mark the Note "Paid" and return it to Borrower.
Section 10.4 Survival of Agreements and Representations; Construction.
All agreements, representations and warranties made herein shall survive the
delivery of this Agreement and the Note. The headings used in this Agreement and
the table of contents are for convenience only and shall not be deemed to
constitute a part hereof. All uses herein of the masculine gender or of singular
or plural terms shall be deemed to include uses of the feminine or neuter
gender, or plural or singular terms, as the context may require.
Section 10.5 Lien on and Set-off of Deposits. As security for the due
payment and performance of all the Obligations, Borrower hereby grants to Bank a
Lien on any and all deposits or other sums at any time credited by or due from
Bank to the Borrower, whether in regular or special depository accounts or
otherwise, and any and all monies, securities and other property of Borrower,
and the proceeds thereof, now or hereafter held or received by or in transit to
Bank from or for Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and any such deposits, sums, monies,
securities and other property, may at any time after the occurrence and during
the continuance of any Event of Default be set-off, appropriated and applied by
Bank against any of the Obligations, whether or not any of such Obligations is
then due or is secured by any Collateral.
Section 10.6 Modifications, Consents and Waivers; Entire Agreement. No
modification, amendment or waiver of or with respect to any provision of this
Agreement, the Note, or any of the other Loan Documents and all other
agreements, instruments and documents delivered pursuant hereto or thereto, nor
consent to any departure by Borrower from any of the terms or conditions
thereof, shall in any event be effective unless it shall be in writing and
signed by Bank. Any such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No consent to or demand
on Borrower in any case shall, of itself, entitle it to any other or further
notice or demand in similar or other circumstances. This Agreement and the other
Loan Documents embody the entire agreement and understanding among Bank and the
Loan Parties and supersede all prior agreements and understandings relating to
the subject matter hereof.
Section 10.7 Further Assurances. At any time and from time to time,
upon the request of Bank, each Loan Party shall execute, deliver and acknowledge
or cause to be executed, delivered and acknowledged, such further documents and
instruments and do such other acts and things as Bank may reasonably request in
order to fully effect the purposes of this Agreement, the other Loan
48
<PAGE> 54
Documents and any other agreements, instruments and documents delivered pursuant
hereto or in connection with the Loan.
Section 10.8 Notices. All notices, requests, reports and other
communications pursuant to this Agreement shall be in writing, either by letter
(delivered by hand or commercial messenger service or sent by certified mail,
return receipt requested, except for routine reports delivered in compliance
with Article 6 hereof which may be sent by ordinary first-class mail) or
telegram or telecopy, addressed as follows:
(a) If to any Loan Party:
c/o Omega Healthcare Investors, Inc.
900 Victors Way/Suite 350
Ann Arbor, Michigan 48103
Attention: David A. Stover
Telecopier No: (313) 996-0020
with a copy to:
c/o Omega Healthcare Investors, Inc.
900 Victors Way/Suite 350
Ann Arbor, Michigan 48103
Attention: Susan A. Kovach, Esq., General Counsel
Telecopier No: (313) 996-0020
(b) If to Bank:
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Mr. Robert Lafkas
Telecopier No.: (513) 579-2201
with a copy (other than in the case of Borrowing Notices and reports and other
documents delivered in compliance with Article 6 hereof) to:
Kohnen & Patton LLP
1400 Carew Tower
441 Vine Street
Cincinnati, Ohio 45202
Attention: Joseph Beech III, Esq.
Telecopier No.: (513) 381-5823
49
<PAGE> 55
Any notice, request, demand or other communication hereunder shall be deemed to
have been given on: (x) the day on which it is telecopied to such party at its
telecopier number specified above (provided such notice shall be effective only
if followed by one of the other methods of delivery set forth herein) or
delivered by receipted hand or such commercial messenger service to such party
at its address specified above, or (y) on the third Business Day after the day
deposited in the mail, postage prepaid, if sent by mail, or (z) on the day it is
delivered to the telegraph company, addressed as aforesaid, if sent by
telegraph. Any party hereto may change the Person, address or telecopier number
to whom or which notices are to be given hereunder, by notice duly given
hereunder; provided, however, that any such notice shall be deemed to have been
given hereunder only when actually received by the party to which it is
addressed.
Section 10.9 Counterparts. This Agreement may be signed in any number
of counterparts with the same effect as if the signatures thereto and hereto
were upon the same instrument.
Section 10.10 Severability. The provisions of this Agreement are
severable, and if any clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision in this Agreement in
any jurisdiction. Each of the covenants, agreements and conditions contained in
this Agreement is independent and compliance by the Loan Parties with any of
them shall not excuse non-compliance by the Loan Parties with any other. All
covenants hereunder shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or be otherwise within the limitations
of, another covenant shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or condition exists.
Section 10.11 Binding Effect; No Assignment or Delegation by Borrower.
This Agreement shall be binding upon and inure to the benefit of each Loan Party
and their respective successors and to the benefit of Bank and its successors
and assigns. The rights and obligations of each Loan Party under this Agreement
shall not be assigned or delegated without the prior written consent of Bank,
and any purported assignment or delegation without such consent shall be void.
Section 10.12 Participations by Bank.
(a) Bank may, without the prior consent of Borrower, sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of the Commitment, the Loan owing to it, and the Note held by it);
provided, however, that: (i) Bank's obligations under this Agreement (including,
without limitation, its Commitment hereunder) shall remain unchanged, (ii) Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) Bank shall remain the holder of the Note for all
purposes of this Agreement, and the Loan Parties shall continue to deal solely
and directly with the Bank in connection with such Bank's rights and obligations
under this Agreement.
50
<PAGE> 56
(b) Bank may, in connection with any participation or proposed
participation pursuant to this Section 10.12, disclose to the participant or
proposed participant, any information relating to any Loan Party furnished to
Bank by or on behalf of such Loan Party; provided that, prior to any such
disclosure, the participant or proposed participant shall agree to preserve the
confidentiality of any confidential information relating to such Loan Party
received by it from Bank.
(c) Anything in this Section 10.12 to the contrary
notwithstanding, Bank may assign and pledge all or any portion of the Loan and
the Note to any Federal Reserve Bank (and its transferees) as collateral
security pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and any Operating Circular issued by such Federal Reserve Bank.
No such assignment shall release Bank from its obligations hereunder.
Section 10.13 Interpretation of Loan Documents. Whenever possible, the
provisions of each Loan Document will be construed in such a manner as to be
consistent with this Agreement and each other Loan Document. If any of the
provisions of any Loan Document are inconsistent with this Agreement, such
provisions of this Agreement will supersede such provisions of such Loan
Document.
Section 10.14 Integration of Schedules and Exhibits. The Exhibits and
Schedules annexed to this Agreement are an integral part of this Agreement and
are incorporated herein by reference.
Section 10.15 Headings. The headings of the Articles, Sections and
paragraphs of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be a part of this Agreement.
Section 10.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF TRIAL
BY JURY.
(a) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER
DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH AND
THEREWITH, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF OHIO WITHOUT REGARD TO ITS RULES PERTAINING TO
CONFLICTS OF LAWS.
(b) EACH LOAN PARTY IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION
OR PROCEEDING AGAINST IT UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS
AGREEMENT, AND EACH OTHER LOAN DOCUMENT MAY BE BROUGHT IN ANY COURT OF THE STATE
OF OHIO, COUNTY OF HAMILTON, OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF OHIO, WESTERN DIVISION. EACH LOAN PARTY, BY THE EXECUTION
AND DELIVERY OF THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY ASSENTS AND SUBMITS TO
THE PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR
51
<PAGE> 57
PROCEEDING. EACH LOAN PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY
COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS RELATING TO ANY SUCH ACTION OR
PROCEEDING BY DELIVERY THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER PROVIDED
FOR IN SECTION 10.8 HEREOF. EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION OR PROCEEDING BASED ON ANY
ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENT OR
ANY SIMILAR BASIS. EACH LOAN PARTY SHALL NOT BE ENTITLED IN ANY SUCH ACTION OR
PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER THE LAWS OF ANY STATE
OTHER THAN THE STATE OF OHIO UNLESS SUCH DEFENSE IS ALSO GIVEN OR ALLOWED BY THE
LAWS OF THE STATE OF OHIO. NOTHING IN THIS SECTION 10.13 SHALL AFFECT OR IMPAIR
IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF ANY BANK TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE LOAN PARTIES IN ANY JURISDICTION OR
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
(c) EACH LOAN PARTY AND BANK WAIVE TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF,
THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT
DELIVERED PURSUANT TO THIS AGREEMENT, OR THE VALIDITY, PERFECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
Section 10.17 Joint and Several Obligations. All of the Obligations,
indebtedness, liabilities, undertakings, representations and warranties of
Borrower hereunder shall be joint and several obligations of Borrower.
[Remainder of page intentionally left blank.]
52
<PAGE> 58
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers.
THE PROVIDENT BANK
By: _____________________________________
Its: ____________________________________
Printed: ________________________________
OMEGA HEALTHCARE INVESTORS, INC.,
STERLING ACQUISITION CORP.
OHI (IOWA), INC.
DELTA INVESTORS II, LLC
________________________________________
David A. Stover
David A. Stover, as an executive officer of all of the aforementioned
corporations or limited liability companies, has executed this Loan Agreement
and intending that all corporations or limited liability companies above named
are bound and are to be bound by the one signature as if he had executed this
Loan Agreement separately for each of the above named corporations.
April 9, 1999
53
<PAGE> 59
EXHIBIT A
REVOLVING CREDIT NOTE
$50,000,000.00 Cincinnati, Ohio
March 31, 1999
THIS REVOLVING CREDIT NOTE ("Note") is made and entered into as of the
date hereof by OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation
("Borrower"), to the order of THE PROVIDENT BANK, an Ohio banking corporation
(hereinafter, together with its permitted successors and assigns, called
"Bank").
This Note has been executed and delivered pursuant to a certain Loan
Agreement dated as of March 31, 1999 (the "Loan Agreement"), by and among
Borrower, as "Borrower," and Bank, as "Bank," and is subject to the terms and
conditions of the Loan Agreement, including without limitation, acceleration
upon the terms provided therein. All capitalized terms used herein shall have
the meanings assigned to them in the Loan Agreement unless the context hereof
requires otherwise.
Borrower, for value received, promises to pay to the order of Bank, at
Bank's Principal Office, for the account of Bank in accordance with the Loan
Agreement, the principal sum of Fifty Million Dollars ($50,000,000.00) or so
much thereof as is loaned by Bank pursuant to the provisions hereof and the
terms and provisions of the Loan Agreement, together with interest on the unpaid
principal amount thereof at a rate per annum equal to (i) the LIBOR Based Rate,
or, in certain circumstances, (ii) the Prime Rate, all in accordance with the
terms and provisions of the Loan Agreement (the "Interest Rate"). All interest
under this Note shall be computed on the basis of the actual number of days
elapsed over an assumed year consisting of three hundred sixty (360) days.
Interest accruing at the LIBOR Based Rate shall be due and payable, in
arrears, (i) on the last Business Day of the applicable Interest Period, and, if
such Interest Period exceeds three (3) months, quarter annually on each quarter
annual anniversary of the first date of the Interest Period, (ii) on the date of
any prepayment of such Loan and (iii) at maturity, whether by acceleration or
otherwise. Interest accruing at the Prime Rate shall be due and payable (a) on
the last Business Day before the commencement of an Interest Period, provided
that, if interest accrues at the Prime Rate for a period exceeding one (1)
month, it shall also be due and payable on the next occurring Quarterly Date,
and on each Quarterly Date thereafter until the commencement of an Interest
Period, and (b) at maturity (whether by maturity, acceleration or otherwise).
Principal and all remaining accrued interest shall be due and payable
on or before March 31, 2002.
The Prime Rate is not necessarily the lowest lending rate of Bank. This
Note is subject to mandatory prepayment upon the terms and conditions set forth
in the Loan Agreement. This Note may be prepaid in whole or in part as set forth
in the Loan Agreement.
If any payment of principal, interest or other charge due hereunder is
not paid when due, or in the event of an Event of Default under the Loan
Agreement, this Note shall, at the option of Bank, become immediately due and
payable, upon written demand by Bank, except, that if there shall be an Event of
Default under Section 9.6 of the Loan Agreement, this Note shall automatically
and immediately be due and payable without demand, and the outstanding principal
and all accrued interest, as well as any other Obligations due Bank under any
Loan Document, shall thereafter bear interest at the Post-Default Rate.
Subject to the terms and conditions of the Loan Agreement and until the
Commitment Termination
54
<PAGE> 60
Date, Borrower may borrow, repay and reborrow from Bank, and Bank hereby agrees
to lend and relend to Borrower, such amounts, not to exceed the lesser of the
Borrowing Base or the Commitment, as the Borrower may from time to time request.
The Borrower hereby: (i) waives presentment, demand, notice of demand,
protest, notice of protest and notice of nonpayment and any other notice
required to be given by law, except as otherwise specifically provided in the
Loan Agreement, in connection with the delivery, acceptance, performance,
default or enforcement of this Note, or any indorsement or guaranty of this
Note; and (ii) consents to any and all delays, extensions, renewals or other
modifications of this Note or waivers of any term hereof or the failure to act
on the part of Bank or any indulgence shown by Bank, from time to time and in
one or more instances, (without notice to or further assent from Borrower) and
agrees that no such action, failure to act or failure to exercise any right or
remedy, on the part of Bank shall in any way affect or impair the obligations of
Borrower or be construed as a waiver by Bank of, or otherwise affect, any of
Bank's rights under this Note, or under any indorsement or guaranty of this
Note. Borrower further agrees to reimburse Bank for all advances, charges, costs
and expenses, including reasonable attorney's fees, reasonably incurred or paid
in exercising any right, power or remedy conferred by this Note, or in the
enforcement thereof.
Anything herein to the contrary notwithstanding, the obligations of
Borrower under this Note, the Loan Agreement or any other Loan Documents shall
be subject to the limitation that payments of interest shall not be required to
the extent that receipt of any such payment by any Bank would be contrary to the
provisions of law applicable to Bank limiting the maximum rate of interest that
may be charged or collected by Bank. Without limiting the generality of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under this Note which are made for the purposes of determining whether
such rate of interest exceeds the maximum rate of interest permitted by
applicable law shall be made, to the extent permitted by applicable law, by
amortizing, prorating, allocating and spreading in equal parts during the period
of the full stated term of this Note, all interest at any time contracted for,
charged or received in connection with the indebtedness evidenced by this Note,
and then to the extent that any excess remains, all such excess shall be
automatically credited against and in reduction of the principal balance, and
any portion of said excess which exceeds the principal balance shall be paid by
Bank to Borrower, it being the intent of the parties hereto that under no
circumstances shall Borrower be required to pay any interest in excess of the
highest rate permissible under applicable law.
The provisions of this Note shall be governed by and interpreted in
accordance with the laws of Ohio.
The undersigned hereby designates all courts of record sitting in
Cincinnati, Ohio and having jurisdiction over the subject matter, state and
federal, as forums where any action, suit or proceeding in respect of or arising
from or out of this Note, its making, validity or performance, may be prosecuted
as to all parties, their successors and assigns, and by the foregoing
designation the undersigned consents to the jurisdiction and venue of such
courts.
IN ACCORDANCE WITH SECTION 10.15 OF THE LOAN AGREEMENT, AND AFTER
HAVING AN OPPORTUNITY TO CONSULT COUNSEL, BORROWER EXPRESSLY WAIVES (i) ANY AND
ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY OTHER STATE TO OBJECT TO JURISDICTION
WITHIN THE STATE OF OHIO FOR THE PURPOSES OF LITIGATION TO ENFORCE SUCH
OBLIGATIONS OF BORROWER, AND (ii) THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR
PROCEEDING RELATING TO THIS NOTE OR THE LOAN AGREEMENT OR ARISING IN ANY WAY
FROM THE OBLIGATIONS.
55
<PAGE> 61
TIME IS OF THE ESSENCE IN THE PERFORMANCE OF THE OBLIGATIONS OF THIS
NOTE.
IN WITNESS WHEREOF, the undersigned has executed this Revolving Credit
Note as of the day and year set forth above.
OMEGA HEALTHCARE INVESTORS, INC.
------------------------------------------
David A. Stover, Vice President and Chief
Financial Officer
56
<PAGE> 62
EXHIBIT B
- --------------------------------------------------------------------------------
OPEN-END MORTGAGE, ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
[THIS INSTRUMENT SECURES FUTURE ADVANCES AND OBLIGATIONS]
THIS OPEN-END MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the
"Instrument") is made this 31st day of March 1999, between OMEGA HEALTHCARE
INVESTORS, INC., a Maryland corporation, whose address is 900 Victors Way, Suite
350, Ann Arbor, Michigan 48108 (the "Borrower"), and THE PROVIDENT BANK, an Ohio
banking corporation, whose address is One East Fourth Street, Cincinnati, Ohio
45202, (the "Lender").
WHEREAS, pursuant to the terms of a certain Loan Agreement of even date herewith
between Lender and Borrower (as such agreement may be amended, modified or
supplemented from time to time, the "Loan Agreement"), Lender has agreed to
extend credit to Borrower up to the aggregate maximum principal amount of Fifty
Million Dollars ($50,000,000.00), with the balance of the indebtedness if not
sooner paid, due and payable on March 31, 2002 (the "Loan"); and
WHEREAS, such indebtedness is evidenced by: (i) the Loan Agreement; and (iii)
Borrower's revolving promissory note of even date herewith in the maximum
original principal amount of Fifty Million Dollars ($50,000,000.00) ("Note"),
bearing interest at the rate of interest set forth therein and providing for the
payment of principal and interest, with the balance of the indebtedness if not
sooner paid, due and payable on March 31, 2002; and
WHEREAS, the Loan is made pursuant to the terms and in accordance with or
reliance upon certain other agreements and documents, which include, without
limitation, the Loan Agreement, and the Loan Documents (as defined in the Loan
Agreement).
NOW THEREFORE, TO SECURE TO LENDER the repayment of the Obligations, as that
term is defined in the Loan Agreement, BORROWER DOES HEREBY MORTGAGE, WARRANT,
GRANT, BARGAIN, SELL, ASSIGN AND CONVEY TO LENDER, ITS SUCCESSORS AND ASSIGNS,
all of Borrower's estate, right, title and interest in, to and under that
certain parcel of real property commonly known as DES ARC NURSING AND
REHABILITATION CENTER, ROUTE 2, BOX 143B, DES ARC, ARKANSAS 72040, as more
particularly described in Exhibit "A", attached hereto and made a part hereof,
whether now owned or hereafter held or acquired (the "Land"), together with all
right, title and interest which Borrower may have in and to all improvements,
buildings and structures thereon of every nature whatsoever, whether now owned
or hereafter held or acquired (the "Improvements", which together with the Land
shall be referred to as the "Premises") and all appurtenances to said Premises,
including and together with:
(a) all right, title and interest, if any, including any after-acquired
right, title and interest, and including any right of use or occupancy,
which Borrower may now have or hereafter acquire in and to (i) all
easements, rights of way, gores of land or any lands occupied by
streets, ways, alleys, passages, sewer rights, water courses, water
rights and powers, and public
57
<PAGE> 63
places adjoining said Land, and any other interests in property
constituting appurtenances to the Land, or which hereafter shall in any
way belong, relate or be appurtenant thereto, and (ii) all
hereditaments, gas, oil, minerals, and easements, of every nature
whatsoever, located in or on the Premises and all other rights and
privileges hereunto belonging or appertaining and all extensions,
additions, improvements, betterments, renewals, substitutions and
replacements to, or of any of the rights and interests described in
subparagraphs (i) and (ii) above (hereinafter the "Property Rights");
and
(b) all right, title and interest, if any, in and to all fixtures and
appurtenances of every nature whatsoever now or hereafter located in,
on or attached to, and used or intended to be used in connection with,
or with the operation of, the Premises, including, but not limited to
(i) all apparatus, machinery and equipment of Borrower; and (ii) all
extensions, additions, improvements, betterments, renewals,
substitutions, and replacements to or of any of the foregoing (the
"Fixtures"); as well as all personal property and equipment of every
nature whatsoever now or hereafter located in or on the Premises,
including but not limited to all right, title and interest, if any, in
and to (iii) all screens, window shades, blinds, wainscoting, storm
doors and windows, floor coverings, and awnings of Borrower; (iv) all
apparatus, machinery, equipment and appliances of Borrower not included
as Fixtures; (v) all items of furniture, furnishings, and personal
property of Borrower; (vi) all other personal property of Borrower and
all rights and things of value of every kind and nature, tangible or
intangible, absolute or contingent, equal or equitable, including
without limitation: (a) all lists of lessees or other customer lists,
books and records, ledger and account cards, computer tapes and
programs, software, disks, printouts and records, whether now in
existence or hereafter created, of Borrower relating to the Premises;
(b) all right, title and interest, if any, in and to all management
agreements, consulting agreements, employment agreements and other
agreements pertaining to the Premises, now existing or hereafter
arising, each as amended from time to time, including without
limitation all rights and privileges thereunder; (c) all right, title
and interest, if any, in and to all licenses, permits, approvals,
authorizations, qualifications, registrations and recording thereof and
all applications incorporated into such licenses, permits, approvals,
authorizations and registrations now owned or hereafter acquired by
Borrower and required from time to time for the business operations of
Borrower or the Premises, including, but not limited to, Certificates
of Need, to the extent that assignment of the same is permissible under
applicable law; (d) all liens, security interests, mortgages, security,
warranties, guarantees, sureties, payment bonds, performance bonds,
insurance policies, maintenance, repair or replacement agreements, and
other contractual obligations of any contractor, subcontractor, surety,
guarantor, manufacturer, dealer, laborer, supplier or materialman, with
respect to the Premises; (e) all causes of action, goodwill, trade
names, tax refund claims, and all rights to indemnification of
Borrower; (f) all plans, specifications and drawings relating to the
Premises in Borrower's possession or under its reasonable control; and
(g) all claims, rights, powers or privileges and remedies relating to
the foregoing or arising in connection therewith including, without
limitation, all rights to make determinations, to exercise any election
(including, but not limited to, election of remedies) or option or to
give or receive any notice, consent, waiver or approval; and (vii) all
extensions, additions, improvements, betterments, renewals,
substitutions, and
58
<PAGE> 64
replacements to or of any of the foregoing (iii) - (vi) (the "Personal
Property"). It is mutually agreed, intended and declared, that the
Premises and all of the Property Rights and Fixtures owned by Borrower
(referred to collectively herein as the "Real Property") shall, so far
as permitted by law, be deemed to form a part and parcel of the Land
and for the purpose of this Instrument to be real estate and covered by
this Instrument. It is also agreed that if any of the property herein
mortgaged is of a nature so that a security interest therein can be
perfected under the Uniform Commercial Code, this Instrument shall
constitute a security agreement, fixture filing and financing
statement, and Borrower agrees to execute, deliver and file or refile
any financing statement, continuation statement, or other instruments
Lender may reasonably require from time to time to perfect or renew
such security interest under the Uniform Commercial Code. To the extent
permitted by law, (i) all of the Fixtures are or are to become fixtures
on the Land; and (ii) this instrument, upon recording or registration
in the real estate records of the proper office, shall constitute a
"fixture-filing" within the meaning of the Uniform Commercial Code. The
remedies for any violation of the covenants, terms and conditions of
the agreements herein contained shall be as prescribed herein, in
Paragraph 14 hereof or by general law, or, as to that part of the
security in which a security interest may be perfected under the
Uniform Commercial Code, by the specific statutory consequences now or
hereafter enacted and specified in the Uniform Commercial Code, all at
the Lender's sole election; and
(c) (i) all the estate, right, title and interest of the Borrower, in and
to all judgments, insurance proceeds, awards of damages and settlements
resulting from condemnation proceedings or the taking of the Real
Property, or any part thereof, under the power of eminent domain or for
any damage (whether caused by such taking or otherwise) to the Real
Property, the Personal Property or any part thereof, or to any rights
appurtenant thereto, and all proceeds of any sales or other
dispositions of the Real Property, the Personal Property or any part
thereof; and (except as otherwise provided herein or in the Loan
Agreement) the Lender is hereby authorized to collect and receive said
awards and proceeds and to give proper receipts and acquittance
therefor, and to apply the same as provided in the Loan Agreement; and
(ii) all contract rights, general intangibles, actions and rights in
action, relating to the Real Property, or the Personal Property,
including, without limitation, all rights to insurance proceeds and
unearned premiums arising from or relating to damage to the Real
Property; and (iii) all proceeds, products, replacements, additions,
substitutions, renewals and accessions of and to the Real Property or
the Personal Property. (The rights and interests described in this
Paragraph shall hereinafter be called the "Intangibles.")
AS ADDITIONAL SECURITY FOR THE OBLIGATIONS SECURED HEREBY, BORROWER DOES HEREBY
CONVEY, TRANSFER AND ASSIGN TO LENDER from and after the date hereof (including
any period of redemption), primarily and on a parity with said real estate, and
not secondarily, all the rents, issues and profits of the Real Property; all
rents, issues, profits, revenues, royalties, bonuses, rights and benefits due,
payable or accruing (including all deposits of money as advance rent, for
security or as earnest money or as down payment for the purchase of all or any
part of the Real Property or the Personal Property); all monies due and to
become due to Borrower under any lease for services, materials or installations
supplied, whether
59
<PAGE> 65
or not the same were supplied under the terms of any lease; all the proceeds of
all such rents, both cash and non-cash including, but not limited to, any
minimum rents, additional rents, percentage rents, parking, maintenance,
insurance and tax contributions, any damages following default by lessee under
any lease; any penalties or premiums payable by lessee under any lease; and the
proceeds of any policy of insurance covering loss of rents resulting from
destruction of any portion of the Real Property (collectively, the "Rents")
under any and all present and future leases, contracts or other agreements
between Borrower and any other party or parties relative to the ownership of the
Real Property or the Personal Property or to the occupancy of all or any portion
of the Real Property (the "Leases", which term shall include, but not be limited
to, that certain Master Lease between Borrower, as lessor, and Diversicare
Corporation of America, Inc., as lessee (the "Master Lease")). The term "Rents"
shall include, but not be limited to, that portion of the "Minimum Rent" (as
that term is defined in the Master Lease) indicated on Exhibit "B" attached
hereto and made a part hereof. With respect to said conveyance, transfer and
assignment of such Rents, Borrower further covenants and agrees:
(a) Borrower and Lender intend that this assignment shall be a present,
absolute and unconditional assignment and shall, immediately upon
execution, give Lender the right to collect the Rents and to apply them
in payment of the principal and interest and all other sums payable on
the Obligations. However, Lender hereby grants to Borrower the right to
collect and use the Rents as they become due and payable under the
Leases, subject to the provisions set forth below and in the Loan
Agreement, but not more than one (1) month in advance thereof, until an
Event of Default (as defined in the Loan Agreement) has occurred,
provided that the existence of such right shall not operate to
subordinate this assignment to any subsequent assignment, in whole or
in part, by Borrower, and any such subsequent assignment shall be
subject to the rights of Lender under this Instrument.
60
<PAGE> 66
(b) Upon the occurrence of an Event of Default: (1) Borrower agrees, upon
demand, that Lender may assume the management of the Real Property, and
collect the Rents, applying the same upon the Obligations in the manner
provided in the Loan Agreement; and (2) Borrower hereby authorizes and
directs all lessees, guarantors, purchasers or other persons occupying
or otherwise acquiring any interest in any part of the Real Property to
pay the Rents due under the Leases with respect to the Real Property,
but only with respect to the Real Property, to the Lender upon request
of the Lender. Borrower hereby appoints Lender as its true and lawful
attorney in fact to manage said property and collect the Rents, with
full power to bring suit for collection of the Rents and possession of
the Real Property, giving and granting unto Lender and unto its agent
or attorney full power and authority to do and perform all and every
act and thing whatsoever requisite and necessary to be done in the
protection of the security hereby conveyed; provided, however, that (i)
this power of attorney and assignment of rents shall not be construed
as an obligation upon Lender to make or cause to be made any repairs
that may be needful or necessary and (ii) Lender agrees that until such
Event of Default, Lender shall permit Borrower to perform the
aforementioned management responsibilities, including collecting the
Rents.
(c) Upon Lender's receipt of the Rents, at Lender's option, it may pay: (1)
reasonable charges for collection hereunder, costs of necessary repairs
and other costs requisite and necessary during the continuance of this
power of attorney and assignment of rents, (2) general and special
taxes, insurance premiums, and (3) the balance of the Rents pursuant to
the provisions of the Loan Agreement. This power of attorney and
assignment of Rents shall be irrevocable until this Instrument shall
have been satisfied and released of record and the releasing of this
Instrument shall act as a revocation of this power of attorney and
assignment of rents. Lender shall have and hereby expressly reserves
the right and privilege (but assumes no obligation) to demand, collect,
sue for, receive and recover the Rents, or any part thereof, now
existing or hereafter made, and apply the same in accordance with the
provisions of the Loan Agreement.
All of the property described in the foregoing subparagraphs, and each item of
property therein described, including but not limited to, the Land, the
Premises, the Property Rights, the Fixtures, the Real Property, the Personal
Property, the Intangibles and the Rents, is herein collectively referred to as
the "Mortgaged Property".
Nothing herein contained shall be construed as constituting Lender a mortgagee
in-possession in the absence of the taking of actual possession of the Mortgaged
Property by Lender. Nothing contained in this Instrument shall be construed as
imposing on Lender any of the obligations of the lessor under any Leases of the
Real Property. In the exercise of the powers herein granted Lender, no liability
shall be asserted or enforced against Lender, all such liability being expressly
waived and released by Borrower.
This Instrument shall also secure the unpaid balances of future and additional
loan advances made at any time while this Instrument remains unreleased of
record, whether made pursuant to an obligation of Lender or otherwise. Such loan
advances are or may be evidenced by the Note, the
61
<PAGE> 67
Loan Agreement and one or more subsequent notes executed in substitution
therefor. The maximum principal amount of unpaid loan indebtedness to be secured
by this Instrument, exclusive of interest thereon, which may be outstanding at
any time is FIFTY MILLION DOLLARS ($50,000,000.00). In addition to any other
debt or obligation secured hereby, this Instrument shall secure: (i) unpaid
balances of advances made for the payment of taxes, assessments, insurance
premiums, and other costs incurred for the protection of the Mortgaged Property
or the security of this Instrument; and, (ii) to the extent permitted by law,
Lender's collection costs, including its attorneys fees.
Borrower, as an integral part of this Instrument, covenants, warrants,
represents and agrees as follows:
1. PAYMENT OF OBLIGATIONS. Borrower shall promptly pay when due the principal
and interest on the indebtedness evidenced by the Note, any late charges,
prepayment premiums or other sums required to be paid by the Note, and all other
Obligations secured by this Instrument.
2. REPRESENTATIONS AND WARRANTIES. Except as otherwise set forth in Article 4 of
the Loan Agreement, Borrower hereby covenants, represents and warrants that:
(a) Borrower is lawfully seized of a fee simple estate in the real property
hereby conveyed and has the right to mortgage, convey, grant and assign
the Mortgaged Property; the Mortgaged Property is subject in all cases
to no lien, charge or encumbrance other than liens permitted under
Section 8.1 of the Loan Agreement; this Instrument is and will remain a
valid and enforceable first lien on the Mortgaged Property; and
Borrower shall cooperate to preserve such title, and will forever
warrant and defend the title, validity and priority of the lien hereof
against the claims of all persons and parties whomsoever, except for
liens permitted under Section 8.1 of the Loan Agreement.
(b) Borrower is duly authorized to make and enter into this Instrument and
to carry out the transactions contemplated herein.
(c) This Instrument has been duly executed and delivered pursuant to
authority legally adequate therefor; Borrower has been and is
authorized and empowered by all necessary persons having the power of
direction over it to execute and deliver said instrument; said
instrument is a legal, valid and binding obligation of Borrower,
enforceable in accordance with its terms, subject, however, to
bankruptcy and other law, decisional or statutory, of general
application affecting the enforcement of creditors' rights, and to the
fact that the availability of the remedy of specific performance or of
injunctive relief in equity is subject to the discretion of the court
before which any proceeding therefor may be brought.
(d) Borrower is not in default under any instruments or obligations
relating to the Mortgaged Property and no party has asserted any claim
of default against Borrower relating to the Mortgaged Property.
(e) The execution and performance of this Instrument and the consummation
of the transactions hereby contemplated will not result in any breach
of, or constitute a default under, any
62
<PAGE> 68
mortgage, lease, bank loan, or loan and security agreement, trust
indenture, or other instrument to which Borrower is a party or by which
it may be bound or affected; nor do any such instruments impose or
contemplate any obligations which are or may be inconsistent with any
other obligations imposed on Borrower under any other instrument(s)
heretofore or hereafter delivered by Borrower.
(f) There are no actions, investigations, suits or proceedings (including,
without limitation, any condemnation or bankruptcy proceedings) that
are pending or threatened against or affecting Borrower or the
Mortgaged Property and that, if determined adversely to Borrower would
have a material adverse effect on the Mortgaged Property or Borrower's
ability to repay the Obligations, or which may materially and adversely
affect the validity or enforceability of this Instrument, at law or in
equity, or before or by any governmental authority; Borrower is not in
default with respect to any writ, injunction, decree or demand of any
court or any governmental authority affecting the Mortgaged Property.
(g) To the best of Borrower's knowledge, the Real Property presently
complies in all materials respects with, and will continue to comply in
all material respects with, all applicable restrictive covenants and
applicable zoning ordinances and building codes.
(h) (i) To the best of Borrower's knowledge, the operations at the
Real Property and the Real Property itself presently comply in
all material respects with, and will continue to comply in all
material respects with, all applicable environmental, health
and safety statutes, regulations and other governmental
requirements;
(ii) Borrower has obtained and will maintain, or has required its
Operator (as defined in the Loan Agreement) at the Real
Property to obtain and maintain, all environmental, health and
safety permits necessary for the operations of the Real
Property; to the Borrower's best knowledge, all such permits
are in good standing and Borrower is and will remain in
compliance in all material respects with all terms and
conditions of such permits;
(iii) neither Borrower nor, to the best of Borrower's knowledge, any
of the Real Property or its present operations is subject to
any order from or agreement with any governmental authority or
private party respecting the release or threatened release of
a contaminant or pollutant into the environment;
(iv) with respect to the Real Property or the operations thereof,
to the best of Borrower's knowledge, there are no judicial or
administrative proceedings pending alleging a violation of any
environmental health or safety statute, regulation or other
governmental requirement;
(v) to the best of Borrower's knowledge, none of the present or
past operations of the real Property is the subject of any
investigation by any governmental authority evaluating whether
any remedial action is needed to respond to a release or
threatened release
63
<PAGE> 69
of a contaminant or pollutant into the environment;
(vi) Borrower has not filed any notice under any statute,
regulation, or other governmental requirement indicating past
or present treatment, storage or disposal of a hazardous
waste, as that term is defined under 40 CFR Part 261 or any
State equivalent;
(vii) Borrower has not filed any notice under any applicable
statute, regulation or other governmental requirement
reporting a release of a contaminant or pollutant into the
environment;
(viii) there is not now, nor to the best of Borrower's knowledge has
there ever been, on or in the Real Property (A) any
generation, treatment, recycling, storage or disposal of any
material quantities of hazardous waste, as that term is
defined under 40 CFR Part 261 or any state equivalent, except
in compliance with applicable laws (B) any polychlorinated
biphenyls used in hydraulic oils, or other equipment, or (C)
any friable asbestos containing material;
(ix) to the best of its knowledge, Borrower has no material
contingent liability in connection with any release or
threatened release of any contaminants into the environment;
and
(x) to the best of Borrower's knowledge, none of the Real Property
is or will become subject to any lien in favor of any
governmental entity for (A) liability under federal or state
environmental laws or regulations, or (B) damages arising from
or costs incurred by such governmental entity in response to a
release or threatened release of a contaminant or pollutant
into the environment.
(i) To the best of Borrower's knowledge, Borrower and/or its Operator owns,
is licensed, or otherwise has the right to use or is in possession of
all licenses, permits and government approvals or authorizations,
patents, trademarks, service marks, trade names, copyrights,
franchises, authorizations and other rights that are necessary for its
operations on the Real Property, without conflict with the rights of
any other person with respect thereto.
(j) All Leases currently in effect relating to the Real Property have been
disclosed to Lender.
(k) The Mortgaged Property is currently in service and is being utilized
for the purposes intended.
3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise, all
payments received by Lender from Borrower under the Note or this Instrument
shall be applied by Lender as set forth in the Loan Agreement.
4. TAXES AND IMPOSITIONS. (a) Borrower agrees to pay or cause to be paid, before
any
64
<PAGE> 70
penalty or interest attaches, all general taxes and all special taxes,
special assessments, water, drainage and sewer charges and all other charges, of
any kind whatsoever, ordinary or extraordinary, which may be levied, assessed or
imposed on or against the Mortgaged Property (all of which taxes, assessments
and charges are hereinafter referred to as "Impositions") and, at the request of
Lender, to exhibit to Lender official receipts evidencing such payments;
provided, however, that in the case of any special assessment (or other
imposition in the nature of a special assessment) payable in installments, each
installment thereof shall be paid prior to the date on which each such
installment becomes due and payable. Borrower agrees to exhibit to Lender, at
least annually and at any time upon request, official receipts showing payment
of all Impositions which Borrower is required or elects to pay or cause to be
paid hereunder.
(b) If Borrower fails to pay or cause to be paid such Impositions when
due and such failure continues beyond any applicable grace or cure period set
forth herein or in the Loan Agreement, Lender shall have the option to pay and
discharge the same without notice to Borrower and any sum so expended by Lender
shall at once become indebtedness owing from Borrower to Lender, shall be
immediately due and payable by Borrower with interest thereon to the extent
legally enforceable at the Post-Default Rate (as defined in the Loan Agreement)
and shall together be added to the Obligations secured hereunder.
(c) In the event that any court of last resort enters a decision that
the undertaking by the Borrower provided for in this Paragraph 4 to pay
Impositions in connection with the Mortgaged Property, or the manner of
collection of any such taxes, is legally inoperative or cannot be enforced, so
as to affect adversely the Lender, Lender shall have the right to exercise any
remedies it would have upon the occurrence of an Event of Default (as
hereinafter defined) under this Instrument with respect to the Mortgaged
Property, and shall be entitled to apply any amounts realized from the exercise
of such remedies to the Obligations, regardless of whether such Obligations are
then due and payable, in such manner as Lender, in its sole discretion, shall
determine; provided, however, that Borrower, upon the prior written consent of
Lender, shall have the right to contest in good faith any such tax, assessment
or charge.
5. CHANGES IN TAXATION. Borrower agrees that, if the United States or any State
or any of their subdivisions having jurisdiction shall levy, assess, or charge
any tax, assessment or imposition upon this Instrument or the credit or
indebtedness secured hereby or the interest of Lender in the Mortgaged Property
or upon Lender by reason of or as holder of any of the foregoing, or in the
event that any law is enacted changing in any way the laws now in force with
respect to the taxation of mortgages or debts secured thereby for any purpose,
then Borrower shall pay (or reimburse Lender for) such taxes, assessments or
impositions and, unless all such taxes, assessments and impositions are paid or
reimbursed by Borrower when and as they become due and payable, all sums hereby
secured shall become immediately due and payable, at the option of Lender,
notwithstanding anything contained herein or in any law heretofore or hereafter
enacted.
6. INSURANCE. (a) Borrower shall maintain, or shall cause its Operator to
maintain, in full force and effect, during the term of this Instrument, at the
expense of Borrower or the Operator, the property and liability insurance
required under the Leases. If Borrower fails to provide or cause to
65
<PAGE> 71
be provided the aforesaid insurance, and such failure continues beyond any
applicable grace or cure period set forth herein or in the Loan Agreement,
Lender shall have the option to procure and maintain such insurance without
notice to Borrower. Any sum so expended by Lender shall at once become
indebtedness owing from Borrower to Lender and shall immediately become due and
payable by Borrower with interest thereon to the extent legally enforceable at
the Post-Default Rate and shall together be added to the Obligations secured
hereby.
(b) Borrower shall notify Lender, in writing, of any loss to the
Mortgaged Property ("Property Damage"), and Borrower shall have the right, under
Section 3.5 of the Loan Agreement, to require the substitution of Real Property
Collateral (as defined and set forth in the Loan Agreement).
7. FUNDS FOR IMPOSITIONS. (a) Lender, upon the occurrence of an Event of
Default, shall have the right to require that Borrower pay to Lender on the day
monthly installments are payable under the Note (or on another day designated in
writing by Lender), until all Obligations are paid in full, a sum (herein
"Funds") equal to one-twelfth (1/12) of the annual Impositions, as reasonably
estimated initially and from time to time by Lender on the basis of assessments
and bills and reasonable estimates thereof. At Lender's option, Lender from time
to time may waive, and, after any such waiver, may reinstate the provisions of
this Paragraph requiring the monthly payments prescribed herein.
(b) Lender shall apply the Funds to pay said Impositions so long as
Borrower is not in breach of any covenant or agreement of Borrower in this
Instrument. Lender shall make no charge for so holding and applying the Funds,
analyzing said account or for verifying and compiling said assessments and
bills. Lender shall not be required to pay Borrower any interest, earnings or
profits on the Funds and shall have the right to commingle the Funds with the
general funds of Lender.
(c) If the amount of the Funds held by Lender shall exceed the amount
deemed necessary by Lender to provide for the payment of such Impositions as
they fall due, such excess shall be credited to Borrower on the next monthly
installment or installments of Funds due. If at any time the amount of the Funds
held by Lender shall be less than the amount deemed necessary by Lender to pay
Impositions as they fall due, Borrower shall pay to Lender an amount necessary
to make up the deficiency within thirty (30) days after notice from Lender to
Borrower requesting payment thereof. Upon Borrower's breach of any covenant or
agreement of Borrower in this Instrument, Lender may, at its option, apply any
Funds held by Lender at the time of application (i) to pay Impositions, or (ii)
as a credit against sums secured by this Instrument.
8. CONDEMNATION. Borrower shall immediately notify Lender of any action or
proceeding relating to any condemnation or other taking, whether direct or
indirect, of the Mortgaged Property, or any part thereof, and Borrower shall
have the right, under Section 3.5 of the Loan Agreement, to require the
substitution of Real Property Collateral (as defined and set forth in the Loan
Agreement).
9. PRESERVATION AND MAINTENANCE OF MORTGAGED PROPERTY. Borrower: (a) shall not
commit waste or permit impairment or deterioration of the Mortgaged Property and
shall
66
<PAGE> 72
not abandon the Mortgaged Property; (b) shall reconstruct, restore or
repair, or shall cause the Operator to reconstruct, restore or repair, promptly
and in a good and workmanlike manner all or any part of the Mortgaged Property
to the equivalent of its original condition, or such other condition as Lender
may approve in writing (such approval not to be unreasonably withheld), in the
event of any damage, injury or loss thereto, whether or not insurance proceeds
or condemnation awards or damages are available or adequate to cover, in whole
or in part, the costs of such reconstruction, restoration or repair; (c) shall
keep, or shall cause the Operator to keep, the Mortgaged Property in good order,
condition and repair and shall replace, or cause the Operator to replace,
fixtures, equipment, machinery and appliances on the Mortgaged Property when
necessary to keep such items in good repair, and will make or cause to be made,
as and when the same shall become necessary, all structural and nonstructural,
interior and exterior, ordinary and extraordinary, foreseen and unforeseen
repairs, replacements and renewals necessary to that end; (d) shall comply, or
shall cause the Operator to comply, in all material respects with all zoning,
building, health and environmental laws, ordinances and regulations, and all
other laws, regulations and requirements of any governmental body or agency
(whether federal, state or local) having jurisdiction over the Borrower, the
Mortgaged Property, or the use and occupancy thereof by Borrower or the
Operator; (e) shall comply, or shall cause the Operator to comply, in all
material respects with all covenants, restrictions and agreements affecting the
Mortgaged Property; and (f) shall generally operate and maintain the Mortgaged
Property in a manner to insure maximum income. Neither Borrower nor any other
person shall remove, demolish or alter any improvement now existing or hereafter
erected on the Mortgaged Property without the prior written consent of Lender.
10. USE OF MORTGAGED PROPERTY. Unless required by applicable law, permitted
pursuant to the Leases or unless Lender has otherwise agreed in writing,
Borrower shall not allow changes in the use for which all or any part of the
Mortgaged Property was intended at the time this Instrument was executed.
Borrower shall not initiate, approve, participate in or acquiesce to any change
in or modification to the zoning in effect for the Mortgaged Property or any
portion thereof unless Lender shall consent to such action.
11. RESTRICTIONS ON LEASES. (a) Borrower shall not enter into any lease of the
Mortgaged Property without the prior written consent of the Lender. All leases
now or hereafter permitted to be entered into by Borrower will be in form and
substance subject to the approval of Lender. Borrower has provided Lender with
true and accurate copies of all Leases currently in effect regarding the Real
Property, and Lender hereby consents to the same. (b) All permitted leases and
subleases of the Mortgaged Property to which Borrower is a party shall
specifically provide that (i) that the tenant thereof shall attorn to Lender,
such attornment to be effective upon Lender's acquisition of title to
Guarantor's interest in the Mortgaged Property and (ii) that the attornment of
the tenant shall not, in any event, be terminated by foreclosure. (c) If
Borrower becomes aware that any tenant under a permitted Lease proposes to do,
or is doing, any act or thing which may give rise to any right of set-off
against Rent, Borrower shall (i) take such steps as shall be reasonably
calculated to prevent the accrual of any right to a set-off against Rent, (ii)
notify Lender thereof and of the amount of such set-off, and (iii) within ten
(10) days after such accrual, reimburse the tenant who shall have acquired such
right to set-off or take such other steps as shall effectively discharge such
set-off and as shall assure that Rent thereafter due shall continue to be
payable without set-off
67
<PAGE> 73
or deduction. (d) If any Lease provides for a security deposit paid by the
lessee to Borrower, this Instrument transfers to Lender all of Borrower's right,
title and interest in and to the security deposit; provided that Borrower shall
have the right to retain said security deposit so long as no Event of Default
has occurred under this Instrument or under the Loan Agreement or the other Loan
Documents; and provided further that Lender shall have no obligation to the
lessee with respect to such security deposit unless and until Lender comes into
actual possession and control of said deposit. (e) In the event that Borrower
terminates any Lease, or modifies or amends any Lease or any of the terms
thereof, Borrower shall have the right, under Section 3.5 of the Loan Agreement,
to require the substitution of Real Property Collateral (as defined and set
forth in the Loan Agreement). Borrower shall provide Lender with true and
accurate copies of any documents terminating, modifying or amending any Leases
permitted hereunder. (f) Borrower shall not collect any Rents more than thirty
(30) days in advance of the date on which they become due. (g) Borrower shall
not discount any future accruing Rents nor grant any concession in the form of a
waiver, release, reduction, discount or other alteration of Rents due or to
become due. (h) Without the prior written consent of Lender, Borrower shall not
consent to any assignment of any lessee's interest in a Lease, or any subletting
thereunder. (i) Borrower shall not execute any further assignment of any of the
Leases or Rents or any interest therein or suffer or permit any such assignment
to occur by operation of law. (j) Borrower shall faithfully perform and
discharge all obligations of the lessor under any Lease, and shall give prompt
written notice to Lender of any notice of Borrower's default received from any
lessee or any other person and furnish Lender with a complete copy of said
notice. Borrower shall appear in and defend, at no cost to Lender, any action or
proceeding arising under or in any manner connected with any Lease. If
reasonably requested by Lender, Borrower shall enforce each Lease and all
remedies available to Borrower against the lessee in the case of an Event of
Default under any Lease by the lessee. (k) Borrower shall use its best efforts
to deliver to Lender, promptly within thirty (30) days after request, duly
executed estoppel certificates from any one or more lessees as required by
Lender attesting to such facts regarding the Leases as Lender may reasonably
require, including but not limited to attestations that each Lease covered
hereby is in full force and effect, that the lessee is in occupancy and paying
rent on a current basis with no rental offsets or claims, that no rental has
been paid more than thirty (30) days in advance other than as provided for in
the Leases, and that there are no actions, whether voluntary or otherwise,
pending against the lessee under the bankruptcy laws of the United States or any
state thereof.
12. TRANSFERS OF INTEREST IN MORTGAGED PROPERTY. Except as otherwise provided in
the Loan Agreement, Borrower shall not make, create or suffer to be made or
created any sale, transfer, conveyance, assignment or further encumbrance of the
Mortgaged Property, or any part thereof, or any interest therein without
Lender's prior written consent, which consent shall not be unreasonably
withheld. A sale, transfer, conveyance or assignment means the conveyance by the
Borrower of any legal or equitable right, title or interest in the Mortgaged
Property or any part thereof, whether such conveyance is voluntary or
involuntary, by outright sale, deed, installment sale contract, land contract,
lease, lease option contract, pledge or any other method of transferring any
interest in real property. Any encumbrance means a lien, mortgage or any other
encumbrance subordinate or superior to Lender's mortgage excepting, however,
those Liens permitted pursuant to Section 8.1 of the Loan Agreement. Borrower
shall pay, when due, the claims of all persons supplying labor or materials to
or in connection with the Mortgaged Property. Borrower hereby
68
<PAGE> 74
covenants and agrees that Lender shall be subrogated to the lien of any mortgage
or other lien discharged, in whole or in part, by the indebtedness secured
hereby.
13. INSPECTION. Lender, or any person designated by Lender in writing, shall
have the right, from time to time hereafter, to call at the Premises (or at any
other place where information relating thereto is kept or located) during
reasonable business hours and, with reasonable advance notice, to make such
inspection and verification of the Premises, and the affairs, finances and
business of Borrower in connection with the Premises, as Lender may consider
reasonable under the circumstances, and to discuss the same with any officers or
directors of Borrower.
14. SECURITY AGREEMENT. This Instrument shall constitute a Security Agreement
within the meaning of the UCC (as defined in the Loan Agreement) with respect to
so much of the equipment and/or furnishings attached to or used in connection
with the premises as are considered or as shall be determined to be personal
property or "fixtures" (as defined in the UCC), together with all replacements
thereof, substitutions therefor or additions thereto (all included within the
term "Fixtures", as set forth hereinabove), and that a security interest shall
attach thereto for the benefit of the Lender to secure the indebtedness
evidenced by the Note or other obligations secured by this Instrument and all
other sums and charges which may become due hereunder or thereunder. The
Borrower hereby appoints the Lender as its lawful agent and attorney-in-fact to
prepare, execute and file financing and continuation statements with respect to
the Fixtures without the signature of the Borrower. If there shall exist a
default under this Instrument, the Lender, pursuant to the appropriate
provisions of the UCC, shall have the option of proceeding as to both real and
personal property in accordance with its rights and remedies in respect to the
real property, in which event the default provisions of the UCC shall not apply.
The parties agree that, in the event the Lender shall elect to proceed with
respect to the Fixtures separately from the real property, unless a greater
period shall then be mandated by the UCC, ten (10) days notice of the sale of
the Fixtures shall be reasonable notice. The expenses of retaking, holding,
preparing for sale, selling and the like incurred by the Lender shall be
assessed against the Borrower and shall include, but not be limited to, any
legal expenses reasonably incurred by the Lender. The Borrower agrees that it
will not remove or permit to be removed from the Premises any of the Fixtures
without the prior written consent of the Lender except as hereinabove provided.
All replacements, renewals and additions to the Fixtures shall be and become
immediately subject to the security interest of this Instrument and the
provisions of this Security Agreement. The Borrower warrants and represents
that, except for the Liens in Section 8.1 of the Loan Agreement, all Fixtures
now are, and that all replacements thereof, substitutions therefor or additions
thereto, unless the Lender otherwise consents, will be, free and clear of liens,
encumbrances or security interests of others created after the date hereof.
15. BOOKS AND RECORDS. Borrower shall keep and maintain at all times at
Borrower's address stated herein, or such other place as Lender may approve in
writing, complete and accurate books of accounts and records adequate to reflect
correctly the results of the operation of the Mortgaged Property and copies of
all written contracts, leases and other instruments which affect the Mortgaged
Property. Such books, records, contracts, leases and other instruments shall be
subject to examination and inspection at any reasonable time by Lender. Borrower
shall furnish, upon request by Lender, a rent schedule for the Mortgaged
Property, certified by Borrower, in form
69
<PAGE> 75
and content acceptable to Lender. The provisions of this Paragraph 15 shall be
in addition to any requirements contained in the Loan Agreement.
16. HAZARDOUS SUBSTANCES. (a) Borrower hereby covenants and agrees with Lender
that the following terms shall have the following meanings:
(1) "Environmental Laws" mean all federal, state and local
laws, statutes, ordinances and codes relating to the use, storage, treatment,
generation, transportation, processing, handling, production or disposal of any
Hazardous Substance and the rules, regulations, policies, guidelines,
interpretations, decisions, orders and directives with respect thereto.
(2) "Hazardous Substance" means, without limitation, any
flammable explosives, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum based products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials, as defined in the comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901, et seq.), the Toxic Substances Control Act, as amended
(15 U.S.C. Sections 2601, et seq.), or any other applicable Environmental Laws.
(3) "Indemnitee" means Lender, its participants in the loan
evidenced by the Note and all subsequent holders of this Instrument, their
respective successors and assigns, their respective officers, directors,
employees, agents, representatives, contractors and subcontractors and any
subsequent owner of the Mortgaged Property who acquires title thereto from or
through Lender.
(4) "Release" has the same meaning as given to that term in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. Section 9601, et seq.), and the regulations
promulgated thereunder.
(b) Borrower represents and warrants to Lender that, to its
knowledge after due investigation:
(1) that Mortgaged Property is not being and has not been used
for the storage, treatment, generation, transportation, processing, handling,
production or disposal of any Hazardous Substance in violation of any
Environmental Laws;
(2) the Mortgaged Property does not contain any Hazardous
Substance in violation of any Environmental Laws;
(3) there has been no Release of any Hazardous Substance on,
at or from the Mortgaged Property or any Mortgaged Property adjacent to or
within the immediate vicinity of the Mortgaged Property and Borrower has not
received any form of notice or inquiry with regard to such a Release or the
threat of such a Release;
70
<PAGE> 76
(4) no event has occurred with respect to the Mortgaged
Property which, with the passage of time or the giving of notice, or both, would
constitute a violation of any applicable Environmental Laws;
(5) there are no agreements or orders or directives of any
federal, state or local governmental agency or authority relating to the
Mortgaged Property which require any work, repair, construction, containment,
clean up, investigations, studies, removal or other remedial action with respect
to the Mortgaged Property; and
(6) there are no actions, suits, claims or proceedings,
pending or threatened, which seek any remedy that arise out of the condition,
ownership, use, operation, sale, transfer or conveyance of the Mortgaged
Property and (i) a violation or alleged violation of any applicable
Environmental Laws, (ii) the presence of any Hazardous Substance or Release of
any Hazardous Substance or the threat of such a Release, or (iii) human exposure
to any Hazardous Substance.
(c) Borrower covenants and agrees with Lender as follows:
(1) Borrower shall keep, and shall cause all operators,
tenants, sub-tenants, licensees and occupants of the Mortgaged Property to keep,
the Mortgaged Property free of all Hazardous Substances, except for Hazardous
Substances stored, treated, generated, transported, processed, handled, produced
or disposed of in the normal operation of the Mortgaged Property in accordance
with all Environmental Laws.
(2) Borrower shall comply with, and shall cause all operators,
tenants, sub-tenants, licensees and occupants of the Mortgaged Property to
comply with, all Environmental Laws.
(3) Borrower shall promptly provide Lender with a copy of all
notifications which Borrower gives or receives with respect to any past or
present Release of any Hazardous Substance or the threat of such a Release on,
at or from the Mortgaged Property or any Mortgaged Property adjacent to or
within the immediate vicinity of the Mortgaged Property.
(4) Borrower shall undertake and complete all investigations,
studies, sampling and testing for Hazardous Substances required by Lender and,
in accordance with all Environmental Laws, all removal and other remedial
actions necessary to contain, remove and clean up all Hazardous Substances that
are determined to be present at the Mortgaged Property in violation of any
Environmental Laws.
(5) Lender shall have the right, but not the obligation, to
cure any violation by Borrower of the Environmental Laws and Lender's cost and
expense to so cure shall be secured by this Instrument.
(d) (1) Borrower covenants and agrees, at its sole cost and
expense, to indemnify, defend and save harmless Indemnitee from and against any
and all damages, losses, liabilities, obligations,
71
<PAGE> 77
penalties, claims, litigation, demands, defenses, judgments, suits, actions,
proceedings, costs, disbursements and/or expenses (including, without
limitation, reasonable attorneys' and experts' fees and expenses) of any kind or
nature whatsoever which may at any time be imposed upon, incurred by or asserted
or awarded against Indemnitee arising out of the condition, ownership, use,
operation, sale, transfer or conveyance of the Mortgaged Property and (i) the
storage, treatment, generation, transportation, processing, handling, production
or disposal of any Hazardous Substance, (ii) the presence of any Hazardous
Substance or a Release of any Hazardous Substance or the threat of such a
Release, (iii) human exposure to any Hazardous Substance, (iv) a violation of
any Environmental Laws, or (v) a material misrepresentation or inaccuracy in any
representation or warranty or material breach of or failure to perform any
covenant made by Borrower herein (collectively, the "Indemnified Matters").
(2) The liability of Borrower to Indemnitee hereunder shall in
no way be limited, abridged, impaired or otherwise affected by (i) the repayment
of all sums and the satisfaction of all obligations of Borrower under the Note,
this Instrument or other Loan Documents, (ii) the foreclosure of this Instrument
or the acceptance of a deed in lieu thereof, (iii) any amendment or modification
of the Note, this Instrument or other Loan Documents by or for the benefit of
Borrower or any subsequent owner of the Mortgaged Property, (iv) any extensions
of time for payment or performance required by the Note, this Instrument or
other Loan Documents, (v) the release or discharge of this Instrument or of
Borrower, any guarantor of the loan evidenced by the Note or any other person
from the performance or observance of any of the agreements, covenants, terms or
conditions contained in the Note, this Instrument or other Loan Documents
whether by Lender, by operation of law or otherwise, (vi) the invalidity or
unenforceability of any of the terms or provisions of the Note, this Instrument
or other Loan Documents, (vii) any exculpatory provision contained in the Note,
this Instrument or other Loan Documents limiting Lender recourse to Mortgaged
Property encumbered by this Instrument or to any other security or limiting
Lender rights to a deficiency judgment against Borrower, (viii) any applicable
statute of limitations, (ix) the sale or assignment of the Note or this
Instrument, (x) the sale, transfer or conveyance of all or part of the Mortgaged
Property, (xi) the dissolution or liquidation of Borrower, (xii) the death or
legal incapacity of Borrower, (xiii) the release or discharge, in whole or in
part, of Borrower in any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding, or (xiv) any other
circumstances which might otherwise constitute a legal or equitable release or
discharge, in whole or in part, of Borrower under the Note or this Instrument.
(3) The foregoing indemnity shall be in addition to any and
all other obligations and liabilities Borrower may have to Lender at common law
and under the Loan Agreement. In the event of a conflict between the provisions
of this Paragraph 15 and the Loan Agreement, the provisions of either the Loan
Agreement or this Paragraph 15 shall control, at Lender's option.
(e) Lender shall have the right to perform or to require Borrower to
perform an environmental audit and/or an environmental risk assessment of the
Real Property waste management practices and/or waste disposal sites used by
Borrower, provided that such environmental audits and/or environmental risk
assessments are not required more frequently than once annually and Lender has
reasonable cause to believe that the Real Property is contaminated.
72
<PAGE> 78
The environmental audit shall: (1) investigate any environmental hazards or
conditions for which Borrower may be liable with regard to (i) the Real
Property, (ii) waste management practices and/or (iii) waste site disposal sites
used by Borrower; and, (2) determine whether the Borrower's operations on the
Real Property comply in all respects deemed material by Lender with all
applicable environmental, health and safety statutes and regulations. Said audit
and/or risk assessment must be by an environmental consultant satisfactory to
Lender and Borrower, and the audit and/or risk assessment must be satisfactory
to Lender and Borrower. All costs and expenses incurred by Lender in the
performance of any environmental audit and/or risk assessment shall be secured
by this Instrument and shall be payable by Borrower upon demand or charged to
Borrowers' loan balance at the discretion of Lender.
(f) To the extent that the provisions of this Section 16, other than
the indemnification provisions of Subsection (d), would require Borrower to take
any action with respect to the Mortgaged Property, in lieu of taking such
action, Borrower may elect to substitute the Mortgaged Property pursuant to
Section 3.5 of the Loan Agreement.
17. REMEDIES. (a) If any Event of Default shall have occurred and be continuing,
then to the extent permitted by applicable law, and in addition to any rights or
remedies provided in the Loan Agreement, the following provisions shall apply:
(i) All Obligations shall, at the option of Lender, become immediately due
and payable without presentment, demand or further notice.
(ii) It shall be lawful for Lender to: (i) immediately sell the Mortgaged
Property either in whole or in separate parcels, as prescribed by State
law, under power of sale, which power is hereby granted to Lender to
the full extent permitted by State law, and thereupon, to make and
execute to any purchaser(s) thereof deeds of conveyance pursuant to
applicable law; or, (ii) immediately foreclose this Instrument by legal
proceedings. The court in which any proceeding is pending for the
purpose of foreclosure of this Instrument may, at once or at any time
thereafter, either before or after sale, without notice and without
requiring bond, and without regard to the solvency or insolvency of any
person liable for payment of the Obligations secured hereby, and
without regard to the then value of the Mortgaged Property or the
occupancy thereof as a homestead, appoint a receiver (the provisions
for the appointment of a receiver and assignment of rents being an
express condition upon which the loan evidenced by the Loan Agreement
and the other financial accommodations to the Loan Agreement and the
other financial accommodations to Borrower have been made) for the
benefit of Lender, with power to collect the Rents, due and to become
due, during such foreclosure suit and the full statutory period of
redemption. The receiver, out of such Rents, when collected, may pay
costs incurred in the management and operation of the Real Property,
prior and coordinate liens, if any, and taxes, assessments, water and
other utilities and insurance, then due or thereafter accruing, and may
make and pay for any necessary repairs to the Real Property or the
Personal Property, and may, to the extent permitted by law, pay all or
any part of the Obligations then due and payable, or other sums secured
hereby or any deficiency decree entered in such foreclosure
proceedings.
73
<PAGE> 79
(iii) It is agreed that the then owner of the Mortgaged Property, if said
owner is the occupant of the Mortgaged Property or any part thereof,
shall immediately surrender possession of the Mortgaged Property so
occupied to the Lender, and if such occupant is permitted to remain in
possession, the possession shall be as tenant of the Lender and such
occupant shall, on demand, pay monthly in advance to the Lender a
reasonable rental for the space so occupied and in default thereof,
such occupant may be dispossessed by the usual summary proceedings. In
case of foreclosure and the appointment of a receiver of Rents, the
covenants herein contained may be enforced by such receiver.
(iv) Lender shall, at its option, have the right, acting through its agents
or attorneys, either with or without process of law, forcibly or
otherwise, to enter upon and take possession of the Mortgaged Property,
expel and remove any persons, goods, or chattels occupying or upon the
same, to collect or receive all the rents, issues and profits thereof
and to manage and control the same, and to sublease the same or any
part thereof, from time to time, and, after deducting all actual and
reasonable attorneys' and paralegals' fees and expenses, and all
expenses incurred in the protection, care, maintenance, management and
operation of the Mortgaged Property, apply the remaining net income
upon the Obligations or other sums secured hereby or upon any
deficiency decree entered in any foreclosure proceedings as set forth
in the Loan Agreement.
(b) In any foreclosure of this Instrument by action, or any sale of the
Mortgaged Property under power of sale granted herein, there shall be allowed
(and included in the decree for sale in the event of a foreclosure by action),
to be paid out of the rents or the proceeds of such foreclosure proceeding or
sale:
(i) all of the Obligations and other sums secured hereby which then remain
unpaid;
(ii) all other items advanced or paid by Lender pursuant to this Instrument,
with interest thereon to the extent legally enforceable at the
Post-Default Rate (as defined in the Loan Agreement) from the date of
advancement; and
(iii) all court costs, attorneys' and paralegals' fees and expenses,
appraiser's fees, advertising costs, notice expenses, expenditures for
documentary and expert evidence, stenographer's charges, publication
costs, and costs (which may be estimated as to items to be expended
after entry of the decree) of procuring all abstracts of title, title
searches and examinations, title guarantees, title insurance policies,
Torrens certificates and similar data with respect to title which
Lender may deem necessary. All such expenses shall become additional
Obligations secured hereby and immediately due and payable, with
interest thereon to the extent legally enforceable at the Post-Default
Rate, when paid or incurred by Lender in connection with any
proceedings, including but not limited to probate and bankruptcy
proceedings, to which Lender shall be a party, either as plaintiff,
claimant or defendant, by reason of this Instrument or any indebtedness
hereby secured or in connection with the preparations for the
74
<PAGE> 80
commencement of any suit for the foreclosure, whether or not actually
commenced, or sale under power of sale. The proceeds of any sale
(whether through a foreclosure proceeding or Lender's exercise of the
power of sale) shall be distributed and applied to the items described
in (i), (ii), and (iii) of this Paragraph 17(b), as provided in the
Loan Agreement, and any surplus of the proceeds of such sale shall be
paid to Borrower or such other parties as may be entitled to receive
the same.
18. SALE OF PARCELS. To the extent permitted by law, if more than one property,
lot or parcel is covered by this Instrument, and if this Instrument is
foreclosed upon, or judgment is entered upon any Obligations, or if Lender
exercises its power of sale, execution may be made upon or Lender may exercise
its power of sale against any one or more of the properties, lots or parcels and
not upon the others, or upon all of such properties or parcels, either together
or separately, and at different times or at the same time, and execution sales
or sales by advertisement may likewise be conducted separately or concurrently,
in each case at Lender's election.
19. WAIVER OF REDEMPTION RIGHTS. Borrower represents that it has been authorized
to, and Borrower does hereby, waive (to the full extent permitted under state
law) any and all statutory or equitable rights of redemption from sale by
advertisement or sale under any order or decree of foreclosure of this
Instrument on behalf of Borrower and each and every person, except decree or
judgment creditors of Borrower, acquiring any interest in or title to the
Mortgaged Property subsequent to the date hereof. Borrower agrees, to the full
extent permitted by law, that in case of an Event of Default, neither Borrower
nor anyone claiming through or under it shall or will set up, claim or seek to
take advantage of any appraisement, valuation, stay, or extension laws now or
hereafter in force, in order to prevent or hinder the enforcement or foreclosure
of this Instrument or the absolute sale of the Mortgaged Property or the final
and absolute putting into possession thereof, immediately after such sale, of
the purchaser thereat, and Borrower, for itself and all who may at any time
claim through or under it, hereby waives, to the full extent that it may
lawfully so do, the benefit of all such laws, and any and all right to have the
assets comprising the Mortgaged Property marshaled upon any foreclosure of the
lien hereof and agrees that Lender or any court having jurisdiction to foreclose
such lien may sell the Mortgaged Property in part or as an entirety.
20. PROTECTION OF LENDER'S SECURITY. (a) If Borrower fails to perform the
covenants and agreements contained in this Instrument or if any action or
proceeding is commenced which affects the Mortgaged Property or title thereto or
the interest of Lender therein, including, but not limited to, eminent domain,
insolvency, code enforcement, or arrangements or proceedings involving a
bankrupt or decedent, then, at Lender's option, Lender may make such
appearances, disburse such sums and take such actions as Lender deems necessary,
in its sole discretion, to protect Lender's interest herein, including, but not
limited to, (1) disbursement of attorney fees, (2) entry upon the Mortgaged
Property to make repairs, and (3) procurement of satisfactory insurance.
(b) Any amounts disbursed by Lender pursuant to this Paragraph 20,
together with interest thereon, shall become additional indebtedness of Borrower
secured by this Instrument. Unless Borrower and Lender agree to other terms of
payment, such amounts shall be immediately due and payable and shall bear
interest from the date of disbursement to the extent legally enforceable at a
75
<PAGE> 81
rate equal to the Post-Default Rate set forth in the Loan Agreement. Nothing
contained in this Paragraph 20 shall require Lender to incur any expense or take
any action hereunder.
21. MODIFICATION OR EXTENSION NOT A RELEASE. From time to time, Lender may, at
Lender's option, without giving notice to or obtaining the consent of Borrower,
Borrower's successor or assigns, or of any guarantors, without liability on
Lender's part and notwithstanding Borrower's breach of any covenant or agreement
of Borrower in this Instrument, extend the time for payment of the indebtedness
evidenced by the Note or any part thereof, reduce the payments thereon, release
anyone liable on any of said indebtedness, accept a renewal note or notes
therefor, agree with Borrower, in writing, to modify the terms and time of
payment of said indebtedness, release from the lien of this Instrument any part
of the Mortgaged Property, take or release other or additional security,
reconvey any part of the Mortgaged Property, consent to any map or plan of the
Mortgaged Property, consent to the granting of any easement, join in any
extension or subordination agreement, and agree in writing with Borrower to
modify the rate of interest or period of amortization of the Note. Any actions
taken by Lender pursuant to the terms of this Paragraph 21 shall not affect the
obligation of Borrower, or Borrower's successors or assigns, to pay the sums
secured by this Instrument and to observe the covenants of Borrower contained
herein, shall not affect the guaranty of any person, corporation, partnership or
other entity for payment of the indebtedness secured hereby, and shall not
affect the lien or priority of the lien hereof on the Mortgaged Property.
22. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising
any right or remedy hereunder, or otherwise afforded by applicable law, shall
not be a waiver of or preclude the exercise of any such right or remedy. The
acceptance by Lender of payment of any sum secured by this Instrument after the
due date of such payment shall not be a waiver of Lender's right to either
require prompt payment when due of all other sums so secured or to declare a
default for failure to make prompt payment.
23. REMEDIES CUMULATIVE. Lender shall have any additional remedies provided in
the Loan Agreement. Each remedy or right of Lender shall not be exclusive of but
shall be in addition to every other remedy or right now or hereafter existing at
law or in equity. No delay in the exercise or omission to exercise any remedy or
right accruing on any default shall impair any such remedy or right or be
construed to be a waiver of any such default or acquiescence therein, nor shall
it affect any subsequent default of the same or in different nature. To the
extent permitted by law, every such remedy or right may be exercised
concurrently or independently and when and as often as may be deemed expedient
by Lender.
24. ESTOPPEL CERTIFICATE. Borrower shall, within ten (10) days of written
request from Lender, furnish Lender with a written statement, duly acknowledged,
setting forth the sums secured by this Instrument and any right of set-off,
counterclaim or other defense which exists against such sums and the obligations
of Borrower under the Note and this Instrument.
25. NOTICE. All notices and demands hereunder shall be made in writing and in
the manner, and to the addresses, provided for in Section 10.8 of the Loan
Agreement, and shall be deemed delivered in accordance with Section 10.8 of the
Loan Agreement.
76
<PAGE> 82
26. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS. The
covenants and agreements herein contained shall bind, and the rights hereunder
shall inure to, the respective successors and assigns of Lender and Borrower,
subject to the provisions of Paragraph 12 hereof. This Instrument, and any
instrument or documents made in connection herewith, may be assigned by the
Lender without notice to or the consent of Borrower or any other party. All
covenants and agreements of Borrower shall be joint and several. In exercising
any rights hereunder or taking any actions provided for herein, Lender may act
through its employees, agents or independent contractors as authorized by
Lender.
27. CAPTIONS. The captions and headings of the paragraphs of this Instrument are
for convenience only and are not to be used to interpret or define the
provisions hereof.
28. GOVERNING LAW. This Instrument shall be construed under and governed by the
laws of the state wherein the Mortgaged Property is situated.
29. SEVERABILITY. Wherever possible, each provision of this Instrument shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Instrument shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Instrument.
30. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert
any statute of limitations as a bar to the enforcement of the lien of this
Instrument or to any action brought to enforce the Note or any other obligation
secured by this Instrument.
31. COMPLIANCE WITH SECTION 1445 OF INTERNAL REVENUE CODE. Section 1445 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") provides
that a transferee of a U.S. real property interest must withhold tax if the
transferor is a foreign person. To inform Lender that the withholding of tax
will not be required in the event of any disposition of the Mortgaged Property
pursuant to the terms of this Instrument, Borrower hereby certifies, under
penalty of perjury, that:
(a) Borrower is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate, as those terms are defined in the Internal
Revenue Code and the regulations promulgated thereunder; and
(b) Borrower's principal place of business is as set forth at the beginning
of this Instrument.
32. CHANGE IN LAW. In the event of the enactment after the date hereof and prior
to foreclosure of any law, rule or regulation of any governmental entity
deducting from the value of the Mortgaged Property for the purpose of taxation
any lien or security interest thereon, or changing in any way the laws for the
taxation of mortgages, deeds of trust or other liens or debts secured thereby,
77
<PAGE> 83
or the manner of collection of such taxes, so as to affect this Instrument, the
Obligations, Lender or the holders of the Obligations, then, and in such event,
Borrower shall, on demand, pay to Lender or such holder or reimburse Lender or
such holder for payment of, all taxes, assessments, charges or liens for which
Lender or such holder is or may be liable as a result thereof, provided that if
any such payment or reimbursement shall be unlawful or would constitute usury or
render the Obligations wholly or partially usurious under applicable law, then
Lender may, at its option, declare the Obligations immediately due and payable
or require Borrower to pay or reimburse Lender for payment of the lawful and
non-usurious portion thereof.
33. DOCUMENT STAMPS. Borrower agrees that, if the United States Government or
any department, agency or bureau thereof or any state or any of its subdivisions
shall at any time require documentary stamps to be affixed to the Instrument,
Borrower will, upon request, pay for such stamps in the required amount and
deliver them to Lender, and Borrower agrees to indemnify Lender against
liability on account of such documentary stamps, whether such liability arises
before or after payment of the Obligations and regardless of whether this
Instrument shall have been released.
34. FURTHER ASSURANCES. Borrower agrees that, upon request of Lender from time
to time, it will execute, acknowledge and deliver all such additional
instruments and further assurances of title and will do or cause to be done all
such further acts and things as may reasonably be necessary to fully effectuate
the intent of this Instrument. In the event that Borrower shall fail to do any
of the foregoing, Lender may, in its sole discretion, do so in the name of
Borrower, and Borrower hereby appoints Lender as its attorney-in-fact to do any
of the foregoing.
35. NO MERGER. In the event of a foreclosure of this Instrument, the Obligations
then due the Lender shall not be merged into any decree of foreclosure entered
by the court, and Lender may
78
<PAGE> 84
concurrently or subsequently seek to foreclose one or more mortgages or deeds of
trust which also secure said Obligations.
36. PRECEDENCE OF DOCUMENTS. Except as otherwise specifically set forth herein,
in the event of a conflict or inconsistency between this Instrument and the
provisions of either the Loan Agreement, the provisions of the Loan Agreement
shall govern. Except as otherwise provided herein, any terms defined in the Loan
Agreement shall have the same meaning herein.
37. MODIFICATION AND AMENDMENT. Neither this Instrument nor any term hereof may
be changed, waived, discharged or terminated orally, or by any action or
inaction, but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. To the
extent permitted by law, any agreement hereafter made by Borrower and Lender
relating to this Instrument shall be superior to the rights of the holder of any
intervening lien or encumbrance.
38. JURISDICTION, VENUE AND WAIVER OF TRIAL BY JURY. The Borrower hereby waives
any and every right to interpose any counterclaim in any action or proceeding on
or related to this Instrument. The Borrower hereby submits to the jurisdiction
of the courts of the state wherein the Real Property is located and agrees with
the Lender that personal jurisdiction over the Borrower shall rest with such
courts for purposes of any action on or related to this Instrument or the
enforcement of same. The Borrower hereby waives personal service by manual
delivery and agrees that service of process may be made by postpaid certified
mail directed to the Borrower at the Borrower's address set forth at the address
recited in the preamble hereto or at such other address as may be designated in
writing by the Borrower to the Lender, and that upon mailing of such process
such service be effective with the same effect as though personally served. The
Borrower hereby expressly waives any and every right to a trial by jury in any
action on or related to this Instrument or the enforcement of same.
39. WAIVER OF MARSHALING. Notwithstanding the existence of any other security
interests in the Mortgaged Property held by Lender or by any other party, Lender
shall have the right to determine the order in which any or all of the Mortgaged
Property shall be subjected to the remedies provided herein. Lender shall have
the right to determine the order in which any or all portions of the
indebtedness secured hereby are satisfied from the proceeds realized upon the
exercise of the remedies provided herein. Borrower, any party who consents to
this Instrument and any party who now or hereafter acquires a security interest
in the Mortgaged Property and who has actual or constructive notice hereof,
hereby waives any and all right to require the marshaling of assets in
connection with the exercise of any of the remedies permitted by applicable law
or provided herein.
PROVIDED, however, that these presents are upon the condition that if the
Borrower shall well and truly pay to Lender, its successors and assigns, the
total of the indebtedness secured hereby, and shall fully keep and perform all
of the conditions, covenants and agreements to be kept and performed by Borrower
under this Instrument, then this Instrument shall be void and upon demand
therefor following such payment, a satisfaction or release of mortgage shall be
provided by Lender to
79
<PAGE> 85
Borrower or such other party as may be required by law.
IN WITNESS WHEREOF, the said Borrower hereunto duly authorized, has caused this
Instrument to be executed.
Signed and acknowledged in the OMEGA HEALTHCARE INVESTORS, INC.
presence of the following:
- --------------------------------- --------------------------------------------
Printed: David A. Stover, Vice President and Chief
------------------------ Financial Officer
- ---------------------------------
Printed:
------------------------
STATE OF OHIO )
) ss.:
COUNTY OF HAMILTON )
On the 31st day of March, 1999, before me personally came David A. Stover, to me
known, who being by me duly sworn, did depose and say that he is the duly
authorized Vice President and Chief Financial Officer of OMEGA HEALTHCARE
INVESTORS, INC., a Maryland corporation, described in and which executed the
foregoing instrument; and that the foregoing instrument was signed on behalf of
said corporation, and said David A. Stover acknowledged the execution of said
instrument to be his free act and deed and the free act and deed of the
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal
as of the day and year first above written.
--------------------------------------------
Notary Public
This instrument was prepared by, and following recording should be returned to:
Andrew J. Hogan, Esq., Kohnen & Patton LLP, 1400 Carew Tower, 441 Vine Street,
Cincinnati, Ohio 45202 (513) 381-0656
80
<PAGE> 86
EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Security Agreement") entered into this 31st
day of March, 1999, by and between OMEGA HEALTHCARE INVESTORS, INC., a Maryland
corporation, having its principal office at 900 Victors Way, Suite 350, Ann
Arbor, Michigan 48108 ("Borrower"), and THE PROVIDENT BANK, an Ohio banking
corporation, having its principal office at One East Fourth Street, Cincinnati,
Ohio 45202 ("Bank").
1. Granting Clause.
To secure the Obligations (as defined in Section 2 hereof), Borrower
hereby grants to Bank, to the extent of Borrower's right, title and interest, if
any, in the following, a security interest in all of the following located on,
generated by, arising from, or used in connection with, the Real Property
Collateral listed in Exhibit "A" hereto, as the same may be amended from time to
time (the "Premises"): Borrower's Accounts, Inventory, Equipment, General
Intangibles, fixtures, leases, money, goods, motor vehicles, leasehold
improvements, Documents, Instruments, Chattel Paper, Intellectual Property,
inventory subject to leases and rights under lease agreements for the leasing of
inventory, money, deposit accounts, securities, funds, rights to draw on letters
of credit, permits, licenses and the cash or noncash produces and Proceeds
(including insurance or other rights to receive payment with respect thereto) of
any of the foregoing and all accessions and additions to and replacements and
substitutions for the foregoing, and all books and records (including, without
limitation, customer lists, credit files, computer programs, printouts and other
computer materials and records of Borrower and each Subsidiary) (whether or not
stored in written or electronic form) pertaining to any of the foregoing (such
property is hereinafter referred to as the "Collateral"). Capitalized terms used
but not defined herein shall have the meanings assigned to them in that certain
Loan Agreement (as hereinafter defined).
2. Obligations Secured Hereby.
Borrower and Bank have entered into a certain Loan Agreement dated
March 31, 1999 (as such agreement may be amended, modified or supplemented from
time to time, the "Loan Agreement"), providing for extensions of credit to be
made by Bank to Borrower, in accordance with the terms and conditions of the
Loan Agreement, on a revolving credit basis in the aggregate maximum principal
amount of Fifty Million Dollars and 00/100 Dollars ($50,000,000.00) (the
"Loan"). To induce Bank to enter into the Loan Agreement and to extend the
credit thereunder, Borrower hereby grants a security interest in the Collateral
to Bank to secure the full and timely payment and performance of the
Obligations, as defined in the Loan Agreement, including, but not limited to,
the full and timely payment of all sums due under the Note.
3. Borrower's Representations, Warranties and Covenants.
(a) Collateral. Borrower hereby represents and warrants that
(i) except for the security interest granted hereby and the Liens permitted
under Section 8.1 of the Loan Agreement, Borrower is, or to the extent that this
Security Agreement provides that the Collateral is to be acquired after the date
hereof will be, the owner of the Collateral free and clear of all liens,
pledges,
81
<PAGE> 87
security interests or other encumbrances of any nature whatsoever; and
(ii) upon execution of this Security Agreement and recording of applicable
financing statements, the security interest granted hereby will otherwise be the
only security interest in the Collateral.
(b) Enforceability. Borrower represents and warrants that the
execution and performance of this Security Agreement has been duly authorized by
all appropriate action of Borrower and this Security Agreement has been duly
executed by Borrower, delivered to Bank and constitutes the legal, valid and
binding obligation of Borrower, enforceable against it in accordance with its
terms, subject to applicable bankruptcy laws. Neither the execution or delivery
by Borrower of this Security Agreement nor the consummation by Borrower of the
transactions contemplated hereby nor compliance by Borrower with the provisions
hereof, conflicts with or results in a breach of any of the provisions of the
organizational documents of Borrower or of the provisions of any other
agreement, instrument or understanding to which it is a party or by which it or
any of its assets or properties are bound.
(c) Protection of Collateral. (i) Except for Permitted Liens
or as otherwise provided herein, Borrower will keep the Collateral free from any
lien, security interest or other encumbrance adverse to the security interest
granted hereby and in good order and repair (ordinary wear and tear excepted)
and will not waste or destroy the Collateral or any part thereof; (ii) Borrower
will not use the Collateral in violation of any statute, ordinance or
regulation; (iii) Bank may examine and inspect the Collateral at any reasonable
time, wherever located; (iv) Borrower will at any time and from time to time
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments and will take such other action, as Bank reasonably
requests and reasonably deems necessary or advisable to (a) grant Bank a
security interest in all or any portion of the Collateral, (b) maintain or
preserve the lien of this Security Agreement to carry out more effectively the
purpose hereof, (c) perfect, publish notice of or protect the validity of or of
any grant made or to be made by this Security Agreement, (d) enforce this
Security Agreement, or (e) preserve and defend the Collateral and the rights of
Bank therein against the claims and demands of all persons and entities claiming
the same or any interest therein.
(d) Performance of Obligations. Borrower will punctually
perform and observe or cause to be punctually performed and observed all of the
Obligations.
(e) Maintenance and Inspection of Records. Borrower will
maintain accurate and complete records in respect of the Collateral and shall at
all reasonable times allow Bank by any officer, employee or agent to examine,
audit or inspect (including making extracts from) such records and to arrange
for verification of the Collateral. Borrower also agrees to furnish such
information or reports relating to the Collateral as Bank may from time to time
reasonably request.
82
<PAGE> 88
(f) Insurance and Taxes.
(i) Insurance of Collateral. Borrower agrees to
maintain, or shall require its Operator for such Premises to maintain, insurance
at all times with respect to the Collateral in accordance with the lease between
Borrower and its Operator such Premises and the Mortgage in favor of Bank on the
Premises.
(ii) Payment of Taxes and Assessments. Borrower
agrees to promptly pay, or cause its Operator for such Premises to promptly pay,
when due all taxes and assessments imposed on or with respect to all the
Collateral. If such taxes and assessments are not paid when due, Bank may do so
for Borrower's account and all expenditures so paid by Bank will be payable upon
Bank's demand and until paid by Borrower will accrue interest at the
Post-Default Rate. Notwithstanding the foregoing, Borrower shall be permitted to
contest the amount or the validity, in whole or in part, of any tax or tax
claim.
(g) Location of Collateral. Borrower covenants that the
Collateral will be kept at all times on or in the Premises and that the
Collateral will not be removed, in whole or in part, from such Premises without
the prior written consent of Bank; provided, however, Bank agrees that Borrower
may, at any time and from time to time, (i) substitute or replace the Collateral
("Substituted or Replaced Collateral") with Collateral of equal or greater value
and that Borrower may, in connection with each such substitution or replacement,
remove the Substituted or Replaced Collateral from such Premises, and (ii)
dispose of or replace Collateral in the same manner that Borrower is permitted
under the Loan Agreement.
(h) Survival of Representations and Warranties. All
representations and warranties made by Borrower in this Security Agreement shall
survive the execution and delivery of this instrument until such time as the
Note and all other Obligations shall have been paid or otherwise satisfied in
full.
4. Borrower's Rights with Respect to Collateral.
Unless and until the occurrence of an Event of Default which has not
otherwise been waived in writing, Borrower shall have the right to utilize the
Collateral in the ordinary course of its business and to substitute, replace,
transfer, sell or dispose of the Collateral in accord with Section 3(g) hereof,
but shall not have the right to otherwise sell, lease or dispose of or transfer
the Collateral or any interest therein other than in connection with the
Disposition of the Premises in accordance with Section 8.4; provided, however,
so long as an Event of Default shall not have occurred and be continuing, any
portion of the Collateral which constitutes Inventory or Accounts may be sold or
transferred in the ordinary course of business.
83
<PAGE> 89
5. Events of Default and Remedies.
(a) Rights and Remedies upon an Event of Default. If any Event
of Default under the Loan Agreement shall have occurred and has not otherwise
been waived in writing, Bank may proceed to protect and enforce its rights under
this Security Agreement by suit in equity, action at law or any other
appropriate proceeding and Bank shall have, without limitation, all of the
rights and remedies provided by applicable law, including, without limitation,
the rights and remedies of a secured party under the UCC of the state governing
disposition of the Collateral. Borrower shall be liable for any deficiency
remaining after the collection of the Collateral and application of the proceeds
to the Obligations to the fullest extent permitted by applicable law.
(b) Power of Attorney with Respect to the Collateral. Provided
an Event of Default has occurred and has not been waived in writing, Bank shall
have the right with respect to the payment of the Obligations, whether as
scheduled, by acceleration, or otherwise, to notify any account debtor of its
security interest in the Accounts and to require payments to be made directly to
Bank at such address or in such manner as Bank may deem appropriate. Upon
request of Bank upon the occurrence of an Event of Default which has not been
waived in writing, Borrower will so notify the account debtors and will indicate
on all billings to the account debtors that the Accounts are payable to Bank. To
facilitate direct collection, Borrower hereby appoints Bank and any officer or
employee of Bank, as the agent to, provided an Event of Default has occurred and
has not otherwise been waived in writing, (i) receive, open and dispose of all
mail addressed to Borrower and take therefrom any payments on or proceeds of the
Collateral, in which Borrower shall cooperate, to receive Borrower's mail,
including notifying the post office authorities to change the address for
delivery of mail addressed to Borrower to such address as Bank shall designate,
(ii) endorse the name of Borrower in favor of Bank upon any and all checks,
drafts, money orders, notes, acceptances or other evidences or payment or
Collateral that may come into Bank's possession, (iii) sign and endorse the name
of Borrower on any invoice or bill of lading relating to any of the Accounts, on
verifications of Accounts sent to any Borrower, to drafts against account
debtors, to assignments of Accounts and to notices to account debtors, and (iv)
do all acts and things necessary to carry out this Security Agreement, including
signing the name of Borrower on any instruments required by law in connection
with the transactions contemplated hereby and on financing statements as
permitted by the UCC. Borrower hereby ratifies and approves all acts of such
attorneys-in-fact, and neither Bank nor any other such attorney-in-fact shall be
liable for any acts of commission or omission, or for any error of judgment or
mistake of fact or law. This power, being coupled with an interest, is
irrevocable so long as any of the Obligations remain unsatisfied.
Bank shall not, under any circumstances, be liable for any
error or omission or delay of any kind occurring in the settlement, collection
or payment of any Accounts or any instrument received in payment thereof or for
any damage resulting therefrom except for such acts or omissions resulting from
Bank's gross negligence or willful misconduct. Upon the occurrence of an Event
of Default which has not been waived in writing, Bank may, without notice to or
consent from Borrower, sue upon or otherwise collect, extend the time of payment
of, or compromise or settle for cash, credit or otherwise upon any terms, any of
the Accounts or any securities, Instruments or
84
<PAGE> 90
insurance applicable thereto and/or release the obligor thereon. If an Event of
Default has occurred and has not been waived in writing, Bank is authorized to
accept the return of the goods represented by any of the Accounts without notice
to or consent by Borrower, or without discharging or any way affecting the
Obligations hereunder.
Bank shall not be liable for or prejudiced by any loss,
depreciation or other damage to Accounts or other Collateral unless caused by
Bank's gross negligence or willful misconduct, and Bank shall have no duty to
take any action to preserve or collect any Account or other Collateral.
(c) Distribution of Collateral. Upon enforcement of this
Security Agreement following the occurrence of an Event of Default, the proceeds
of the Collateral shall be applied as provided in the Loan Agreement.
(d) Costs and Expenses. Borrower absolutely and
unconditionally agrees to pay to Bank, upon demand by Bank, all reasonable
out-of-pocket costs and expenses which shall be reasonably incurred or sustained
by Bank or any of its directors, officers, employees or agents as a consequence
of, on account of, in relation to or any way in connection with the exercise,
protection or enforcement (whether or not suit is instituted) of any of its
rights, remedies, powers or privileges under this Security Agreement or any of
the Loan Documents or in, to or under all or any part of the Collateral or in
connection with any litigation, proceeding or dispute in any respect related to
this Security Agreement or any of the Loan Documents (including, but not limited
to, all of the reasonable fees and disbursements of consultants, legal advisers,
accountants, experts and agents for Bank, the reasonable travel and living
expenses away from home of employees, consultants, experts or agents of Bank,
and the reasonable fees of agents, consultants and experts not in the full-time
employ of Bank for services rendered on behalf of Bank), except any of the
foregoing resulting from the gross negligence or wilful misconduct of Bank.
(e) Right of Set-Off. Borrower hereby confirms to Bank the
continuing and immediate right of set-off of Bank with respect to all deposits,
balances and other sums credited by or due from Bank or any of the offices or
branches of Bank to Borrower, which right is in addition to any other rights
which Bank may have under applicable law. Regardless of the adequacy of any
Collateral, if any principal, interest or other sum payable by Borrower to Bank
under the Note or any of the Loan Documents is not paid to Bank punctually when
the same shall first become due and payable (after giving effect to any
applicable grace period), or if any Event of Default shall at any time occur and
not be waived in writing, any deposits, balances or other sums credited by or
due from Bank or any of the offices or branches of Bank to Borrower may, without
any prior notice of any kind to Borrower (all of which are hereby expressly and
irrevocably waived by Borrower to the extent permitted by law), be immediately
set off, appropriated and applied by Bank toward the payment and satisfaction of
the Obligations (but not to any other obligations of such Borrower to Bank until
all of the Obligations have been paid in full) in such order and manner as Bank
(in its sole and complete discretion) may determine.
85
<PAGE> 91
6. No Waiver; Cumulative Remedies.
Bank shall not by any act, delay, omission or otherwise be deemed to
have waived any of its rights or remedies hereunder and no waiver shall be valid
unless in writing, signed by the Bank, and then only to the extent therein set
forth. A waiver by Bank of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which Bank would
otherwise have had on any future occasion. No failure to exercise or any delay
in exercising on the part of Bank any right, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights and
remedies provided by law.
7. Severability of Provisions.
The provisions of this Security Agreement are severable, and if any
clause or provision hereof shall be held invalid or unenforceable in whole or in
part, then such invalidity or unenforceability shall attach only to such clause
or provision, or part thereof and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision in this
Security Agreement in any jurisdiction.
8. Amendments; Choice of Law; Binding Effect.
(a) None of the terms or provisions of this Security Agreement may be
altered, modified or amended except by an instrument in writing, duly executed
by each of the parties hereto.
(b) This Security Agreement shall be governed by and be construed and
interpreted in accordance with the laws of the State of Ohio.
(c) This Security Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
9. Notices.
All notices and demands hereunder shall be made in writing and in the
manner, and to the addresses, provided for in Section 10.8 of the Loan
Agreement, and shall be deemed delivered in accordance with Section 10.8 of the
Loan Agreement.
10. Headings.
The descriptive headings herein used are for convenience only and shall
not be deemed to limit or otherwise effect the construction of any provisions
hereof.
86
<PAGE> 92
11. Counterpart Execution.
This Security Agreement may be executed in several counterparts each of
which together shall constitute one and the same agreement.
12. Defeasance Clause.
If Borrower shall pay or cause to be paid the Note secured by this
Security Agreement and perform or cause to be performed the other Obligations,
or if any Premises is actually removed from serving as Real Property Collateral
in accordance with the provisions of the Loan Agreement (other than Subsection
3.5(d)), then the security interest in the Collateral granted hereby shall be
void and terminated and Bank agrees to promptly execute such documents and do
such acts as are necessary to release and terminate such liens.
IN WITNESS WHEREOF, the undersigned have caused this Security Agreement
to be duly executed and delivered by their respective officers hereunto duly
authorized, at Cincinnati, Ohio on the day and year first above written.
THE PROVIDENT BANK OMEGA HEALTHCARE INVESTORS, INC.
By:
------------------------------ --------------------------------------------
David A. Stover, Vice President and Chief
Financial Officer
Its:
-----------------------------
Printed:
-------------------------
87
<PAGE> 93
EXHIBIT D
GUARANTY
THIS GUARANTY (this "Guaranty"), made by DELTA INVESTORS II, LLC, a
Maryland limited liability company ("Guarantor"), to and for the benefit of THE
PROVIDENT BANK, an Ohio banking corporation ("Bank"), is as follows:
WITNESSETH
WHEREAS, Omega Healthcare Investors, Inc. ("Borrower"), Bank and
Guarantor have entered into a Loan Agreement dated March 31, 1999 (the "Loan
Agreement", which term includes any amendment, modification, extension, renewal,
replacement or supplementation thereof), providing for the making of a Loan;
WHEREAS, Guarantor is a direct, wholly-owned Subsidiary of Borrower;
WHEREAS, it is a condition precedent to the making of the Loan under
the Loan Agreement that Guarantor execute and deliver a Guaranty containing the
terms hereof; and
WHEREAS, Guarantor will obtain benefits as a result of the Loan made to
Borrower under the Loan Agreement, and accordingly, Guarantor desires to execute
and deliver this Guaranty to satisfy the condition described in the preceding
paragraph;
NOW THEREFORE, Guarantor hereby makes the following representations and
warranties to, and hereby covenants and agrees with, Bank as follows:
1. Guaranty. For value received and in consideration of the Loan
and Borrower's other Obligations under the Loan Documents, Guarantor, jointly
and severally with any other party serving as a "Guarantor" under the Loan
Agreement (an "Other Guarantor"), unconditionally guarantees to Bank the full
and prompt payment when due of the principal of, all interest on, and all fees
and charges in respect of, the Loan and the full and prompt payment of any and
all other Obligations which are outstanding from time to time under the Loan
Documents (all of the foregoing described indebtedness, liabilities and
obligations which are outstanding from time to time being hereinafter referred
to as the "Guaranteed Obligations"), whether all or any portion of the
Guaranteed Obligations are now or hereafter existing, direct or indirect,
related or unrelated, or absolute or contingent and whenever all or any portion
of the Guaranteed Obligations are due under the terms of the Loan Agreement,
including, without limitation, on the occurrence of an Event of Default, by
reason of the demand for payment, the maturity or acceleration of the Loan, or
otherwise, and at all times after the date when due. Capitalized terms used but
not defined herein shall have the meanings assigned to them in the Loan
Agreement.
2. Nature Of The Guaranty.
2.1 Absolute Obligations. The obligation of Guarantor under
this Guaranty is absolute, unconditional, and will be continuing and remain in
full force and effect subject to Section 2.3 below. This is a continuing
guaranty of payment and not of collection. Guarantor's obligations
88
<PAGE> 94
under this Guaranty will not be released, discharged, affected, modified or
impaired by any event, including, without limitation, any of the following
events:
(i) the compromise, settlement, release, discharge or termination of any or
all of the obligations of Borrower to Bank or any Lender by operation
of law or otherwise, except as may result from the full and prompt
performance and payment of the Guaranteed Obligations;
(ii) the extension of the time for payment of any obligation under the Loan
Agreement, any of the other Loan Documents, any guaranty of any Other
Guarantor, or any Mortgage or Security Agreement made by Guarantor or
the Other Guarantor in favor of Bank (a "Guarantor Security
Agreement"), or the waiver, modification or amendment (whether material
or otherwise) of any obligation under the Loan Agreement or any of the
other Loan Documents or the acceptance of partial payments of the
Guaranteed Obligations;
(iii) the taking or failure to take any action under the Loan Agreement, any
of the other Loan Documents, any Guarantor Security Agreement, this
Guaranty or the guaranty of any Other Guarantor;
(iv) the invalidity or unenforceability of any provision of the Loan
Agreement, any of the other Loan Documents, any Guarantor Security
Agreement, this Guaranty or the guaranty of any Other Guarantor;
(v) any (a) failure by Bank to take any steps to perfect, maintain, or
enforce its Liens on the Collateral (b) loss, release, substitution of,
or other dealing with, any collateral or other security given by
Guarantor or any Other Guarantor with respect to the Guaranteed
Obligations;
(vi) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all of the assets of, the
marshaling of assets and liabilities of, or receivership, insolvency,
bankruptcy, assignment, composition with creditors or readjustment of,
or other similar proceedings affecting the Borrower, the Guarantor or
any Other Guarantor;
(vii) any allegation of invalidity or contest of the validity of this
Guaranty or the guaranty of any Other Guarantor in any of the
proceedings described in clause (vi) above of this Section 2.1;
(viii) any act, election or remedy, or other election, occurrence or
circumstance of any nature, whether or not under Bank's control, that
may affect or impair any subrogation right of Guarantor or any Other
Guarantor or the effectiveness or value thereof;
(ix) the default or failure of Guarantor to perform fully any of its
obligations set forth in this Guaranty;
89
<PAGE> 95
(x) Bank's election, in any proceeding instituted under Chapter 11 of Title
11 of the United States Code (11 U.S.C. Section 101 et seq.) (the
"Bankruptcy Code"), of the application of Section 1 111 (b)(2) of the
Bankruptcy Code;
(xi) any borrowing or grant of a security interest by Borrower, as debtor
in-possession, under Section 364 of the Bankruptcy Code;
(xii) the disallowance of all or any portion of Bank's claim(s) for repayment
of the Guaranteed Obligations under Section 502 of the Bankruptcy Code;
or
(xiii) any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
2.2 Secured, Non-Recourse Guaranty. As security for payment by
Guarantor hereunder, Guarantor hereby grants Bank a security interest in the
Collateral (as defined in a certain Security Agreement of even date herewith
executed by and between Guarantor and Bank) together with certain Real Property
Collateral pursuant to those Mortgages identified in Exhibit "A" attached hereto
(collectively referred to herein as the "Guaranty Collateral"). Bank shall not
be bound to take any steps necessary to preserve any rights in the Guaranty
Collateral against prior parties. If any Obligations hereunder are not paid when
due, Bank shall have recourse only against the Guaranty Collateral, and may, at
its option, demand, sue for, collect or make any compromise or settlement it
deems desirable with reference to the Guaranty Collateral, but (i) neither
Guarantor nor its representatives, successors or assigns shall be personally
liable on the Obligations due under the Note nor for any deficiency between such
amount and the amounts obtained by Bank with respect to the Guaranty Collateral,
and Bank shall look solely to the security of the Guaranty Collateral.
2.3 Revival of Guaranty. If (i) any demand is made at any time
on Bank for the repayment of any amount received by Bank in payment of any of
the Guaranteed Obligations, and (ii) Bank makes any repayment by reason of any
judgment, decree or order of any court or administrative body or by reason of
any settlement or compromise of such demand, Guarantor will be liable under this
Guaranty for all amounts so repaid to the same extent as if such amounts had
never been received originally by Bank.
2.4 Waivers By Guarantor. Guarantor hereby covenants that this
Guaranty will not be discharged except by complete performance of the
obligations contained in this Guaranty. Guarantor hereby waives all set-offs and
counterclaims and all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
acceptance of, and reliance on this Guaranty. Guarantor further waives all (i)
notices of the existence, creation or incurring of new or additional
indebtedness, arising either from additional loans extended to Borrower or
otherwise, (ii) notices that the principal amount, or any portion thereof (and
any interest thereon), of the Loans or any of any other Guaranteed Obligations
is due, (iii) notices of any and all proceedings to collect from Borrower, any
indorser or the Other Guarantor of all or any part of the Guaranteed Obligations
or from anyone else, and (iv), to the extent permitted by law, notices
90
<PAGE> 96
of exchange, sale, surrender or other handling of any security or collateral
given to Bank to secure payment of all or any part of the Guaranteed
Obligations.
2.5 Application of Proceeds by Bank. Bank will have the
exclusive right to determine the application of sums received in respect to this
Guaranty and payments from, and credits to, if any, the Other Guarantor,
Borrower or from any other Person (as defined in the Loan Agreement) on account
of the Guaranteed Obligations in such order and method of application as may be
elected by Bank in its sole discretion.
2.6 Responsibility of Guarantor. Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of
Borrower, the Other Guarantors, and any and all endorsers and other guarantors
of any instrument or document evidencing all or any part of the Guaranteed
Obligations and of all other circumstances bearing on the risk of nonpayment of
the Guaranteed Obligations or any part thereof that diligent inquiry would
reveal. Bank has no duty to advise Guarantor of information known to Bank
regarding such condition or any such circumstances.
3. Representations and Warranties. To induce Bank to extend the
Guaranteed Obligations, and for other good and valuable consideration, Guarantor
hereby represents and warrants that: (i) this Guaranty is the legal, valid and
binding obligation of Guarantor, enforceable in accordance with its terms; (ii)
the execution, delivery, and performance of this Guaranty does not and will not
(a) violate or contravene (1) any authority having the force of law, (2) any
provision of Guarantor's organizational documents, or (3) any agreement,
commitment arrangement or instrument to which, as of any date, Guarantor is a
party or by which Guarantor or any of its properties is bound (including any
note, indenture, loan agreement, mortgage, lease or deed), the performance or
non-performance of which could have a Material Adverse Effect, (b) result in the
creation or imposition of any Lien on any of the properties of Guarantor, or (c)
require the consent or approval of any Person; and (iii) there is no action or
proceeding pending before any court or governmental instrumentality or agency
which materially adversely affects the condition (financial or otherwise) of
Guarantor or any of its properties.
4. Default; Contributions Rights; Subordination.
4.1 Payment of Guaranteed Obligations. At any time after all
or any portion of the Guaranteed Obligations are due and payable, whether on
maturity, on the demand for payment, after the acceleration of the Obligations
on the occurrence of an Event of Default, or otherwise, or any time after the
occurrence of any default under this Guaranty, (i) Bank will have the right to
proceed directly against the Guaranty Collateral under this Guaranty without
first exhausting any other remedy it may have and without resorting to any
security or other guaranty held by it and will have the right to sell, collect,
or otherwise dispose thereof and to apply the proceeds of any collateral or
other security given to Bank with respect to the Guaranteed Obligations, and
(ii) Bank will have the right to exercise all of Bank's other powers, rights and
remedies under this Guaranty, the Guarantor Security Agreement, the Loan
Documents and under applicable law.
91
<PAGE> 97
4.2 Subrogation and Contribution. So long as this Guaranty
remains in effect, Guarantor agrees that it shall have no right of subrogation,
reimbursement or indemnity whatsoever with respect to the debts, liabilities and
obligations of Borrower covered by the Loan Documents or this Guaranty, or to
any monies due and unpaid thereon or any collateral security for the same.
4.3 Subordination. Until the Guaranteed Obligations have been
fully paid, performed and satisfied, (i) any and all claims of Guarantor against
Borrower, any indorser or any Other Guarantor of all or any part of the
Guaranteed Obligations, or against any of Borrower's (or the Other Guarantor's)
properties are, by the execution of this Guaranty by Guarantor, made subordinate
and subject in right of payment to the prior payment to Bank in full of all
Obligations; and (ii) Guarantor may not exercise any right to enforce any remedy
which Guarantor now has or may in the future have against Borrower, any indorser
or any Other Guarantor of all or any part of the Guaranteed Obligations.
5. General.
5.1 Cumulative Remedies. No waiver of any default under this
Guaranty will operate as a waiver of any other default or of the same default on
a future occasion. No failure or delay on the part of Bank in the exercise of
any power, remedy or right will operate as a waiver thereof nor will any single
or partial exercise of any power, remedy or right or the exercise of any other
power, remedy or right operate as a waiver thereof. Bank may assert any of its
powers, rights or remedies successively, concurrently, independently or
cumulatively. The remedies of Bank provided for in this Guaranty are not
intended to be Bank's sole remedies.
5.2 No Implied Waiver; Amendments. A waiver, amendment,
release or modification of this Guaranty will not be established by conduct,
custom or course of dealing and will occur solely by an instrument in writing,
signed by Bank.
5.3 Entire Agreement. This Guaranty and the Guarantor Security
Agreement set forth the entire agreement between the parties with respect to the
subject matter of this Guaranty, and supersedes all prior written and oral
agreements and understandings.
5.4 Counterparts; Construction. This Guaranty may be executed
in several counterparts, each of which will be regarded as an original
instrument but together constitute one and the same instrument. The captions in
this Guaranty are for reference purposes only and will not relate to the
interpretation of any provision of this Guaranty. Any and all references in this
Guaranty to any other document or documents will be references to the other
document or documents as they may, from time to time, be modified, amended,
renewed, consolidated, extended or replaced.
5.5 Separate Instrument. This Guaranty constitutes a separate
instrument, enforceable in accordance with its terms, and neither this Guaranty
nor the obligations of Guarantor under this Guaranty will, under any
circumstance or in any legal proceeding, be deemed to have merged into any other
agreement or obligation of Guarantor.
92
<PAGE> 98
5.6 Severability. If any term of this Guaranty is found
invalid under Ohio law (or laws of mandatory application) by a court with
jurisdiction, the invalid term will be considered excluded from this Guaranty
and will not invalidate the remaining terms of this Guaranty.
5.7 Ohio Law. This Guaranty will be governed by and construed
in accordance with the internal laws of the State of Ohio (without regard to
Ohio conflicts of law principles).
5.8 CHOICE OF FORUM. AS A SPECIFICALLY BARGAINED INDUCEMENT
FOR BANK TO ACCEPT THIS GUARANTY AND FOR BANK TO EXTEND CREDIT TO BORROWER,
GUARANTOR AGREES THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING
OUT OF THIS GUARANTY, ITS VALIDITY OR PERFORMANCE, AT THE SOLE OPTION OF BANK,
ITS SUCCESSORS AND ASSIGNS, AND WITHOUT LIMITATION ON THE ABILITY OF BANK, ITS
SUCCESSORS AND ASSIGNS, TO INITIATE AND PROSECUTE IN ANY APPLICABLE JURISDICTION
ACTIONS RELATED TO REPAYMENT OF THE GUARANTEED OBLIGATIONS, WILL BE INITIATED
AND PROSECUTED AS TO ALL PARTIES AND THEIR SUCCESSORS AND ASSIGNS AT CINCINNATI,
OHIO. GUARANTOR AND BANK CONSENT TO AND SUBMIT TO THE EXERCISE OF JURISDICTION
OVER THEIR PERSON BY ANY COURT SITUATED AT CINCINNATI, OHIO HAVING JURISDICTION
OVER THE SUBJECT MATTER AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
ON THEM AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL
DIRECTED TO GUARANTOR AND BANK AS SET FORTH BELOW. GUARANTOR AND BANK WAIVE
TRIAL BY JURY, AND GUARANTOR WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS,
AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED UNDER THIS GUARANTY.
5.9 Successors and Assigns. This Guaranty will inure to the
benefit of Bank and it successors and assigns and be binding on the successors
and assigns of Guarantor.
5.10 Notices. All notices and demands hereunder shall be made
in writing and in the manner, and to the addresses, provided for in Section 10.8
of the Loan Agreement, and shall be deemed delivered in accordance with Section
10.8 of the Loan Agreement.
In witness whereof, Guarantor has signed this Guaranty as of March 31,
1999.
DELTA INVESTORS II, LLC
By: Omega Healthcare Investors, Inc., its
Sole Member
---------------------------------------
David A. Stover, Vice President and Chief
Financial Officer
93
<PAGE> 99
EXHIBIT E
COMPLIANCE CERTIFICATE FOR
FISCAL QUARTER/YEAR ENDING ("COMPUTATION DATE")
1. The undersigned hereby certifies that he is the Chief Financial
Officer of OMEGA HEALTHCARE INVESTORS, INC. ("Borrower") and is authorized to
execute this Compliance Certificate on behalf of Borrower.
2. Pursuant to Section 6.4 of the Loan Agreement (the "Loan Agreement")
dated as of March 31, 1999, among Borrower and THE PROVIDENT BANK, AGENT
("Bank"), the undersigned hereby certifies that he has reviewed the provisions
of the Loan Agreement and the other Loan Documents (as defined in the Loan
Agreement), that Borrower and Guarantors (as defined in the Loan Agreement) are
in compliance with all of the covenants and restrictions set forth in the Loan
Documents, and that the undersigned is not aware of any condition which exists
on the date hereof which constitutes a Default or Event of Default under the
Loan Agreement, except the following:
Nature of Default ______________________________________
Period of Default ______________________________________
Action by Borrower _____________________________________
3. All capitalized terms used herein shall have the meanings assigned
to them in the Loan Agreement unless the context hereof requires otherwise.
4. Financial Covenants. In particular, the undersigned certifies that
as of the relevant computation date as set forth in the Loan Agreement, Borrower
is and shall be in compliance with the financial covenants set forth in Section
7.9 of the Loan Agreement, and compliance with these covenants is evidenced by
the following:
a. Indebtedness to Tangible Net Worth. As of the last day of
each fiscal quarter of Borrower, the ratio of Indebtedness outstanding as of
such date to Tangible Net Worth, determined on a consolidated basis, shall not
exceed 1.35 to 1.00.
As of the computation date, Indebtedness Borrower was
$___________ and Tangible Net Worth was $___________, equal to a ratio of
_______ to _______.
b. Minimum Net Worth. Borrower shall maintain a consolidated
Tangible Net Worth of not less than $425,000,000.00.
As of the computation date, the consolidated Tangible
Net Worth of Borrower was $___________________.
94
<PAGE> 100
c. Interest Coverage. Borrower shall maintain an Interest
Coverage, determined by dividing (i) EBITDA less Maintenance Capital
Expenditures by (ii) Interest Expense, of not less than 150%.
As of the computation date, Borrower's EBITDA was
$____________________, its Maintenance Capital Expenditures was
$___________________, and its Interest Expense was $___________________,
yielding Interest Coverage of ________%.
d. Fixed Charge Coverage. Borrower shall maintain a Fixed
Charge Coverage, determined as the ratio of Consolidated Cash Flow of Borrower
for the 12 month period ending on the Computation Date to Consolidated Fixed
Charges of Borrower for that same 12 month period of not less than 1.00 to 1.00.
As of the Computation Date, Consolidated Cash Flow of
Borrower was $__________________ and Consolidated Fixed Charges of Borrower was
$________________, equal to a ratio of _______ to _______.
5. Limitation on Capital Expenditures. Pursuant to Section 8.7 of the
Loan Agreement, Borrower shall not make, incur or permit any Capital
Expenditures during its fiscal year in an aggregate in excess of the sum of
$250,000.00.
As of the Computation Date, the aggregate amount of Capital
Expenditures of Borrower was $_______.
6. Limitation on Mortgages, Lien and Encumbrances. Borrower has not
created, assumed, incurred or permitted to exist, any mortgage, Lien or other
encumbrance in respect of the Collateral, except for Liens permitted by Section
8.1 of the Loan Agreement.
DATED: ________________ OMEGA HEALTHCARE INVESTORS, INC.
----------------------------------------
David A. Stover, Chief Financial Officer
95
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1563
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1065835
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1065835
<SALES> 0
<TOTAL-REVENUES> 30023
<CGS> 0
<TOTAL-COSTS> 15701
<OTHER-EXPENSES> 1497
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10106
<INCOME-PRETAX> 12825
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12825
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
