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SECOND AMENDMENT TO LOAN AGREEMENT
This SECOND AMENDMENT TO LOAN AGREEMENT (the "Second Amendment") is
made as of October 27, 1998, by NET 2 L.P., a Delaware limited partnership
("Borrower"), and NATIONSCREDIT COMMERCIAL CORPORATION, a Delaware corporation,
successor to Nations Financial Capital Corporation ("Lender").
R E C I T A L S:
A. Borrower and Lender entered into a Loan Agreement dated as of May
31, 1994, as amended by a First Amendment to Loan Agreement dated as of
September 28, 1998 (the "First Amendment"; the Loan Agreement, as amended by
the First Amendment, is referred to as the "Loan Agreement"). Capitalized terms
used herein will have the same meanings given them in the Loan Agreement.
B. Pursuant to the First Amendment, Lender made Borrower an interim
loan in the amount of $1,500,000 (the "Interim Loan"), Borrower acquired the
Wilsonville Premises using Future Acquisition Funds from the sale of the
Seattle Premises, and Borrower placed a first lien deed of trust on the
Wilsonville Premises in favor of Lender. The Seattle Premises are no longer
part of the Land, Buildings, Improvements or Premises and all references in the
Loan Agreement to the Seattle Unit and the Seattle Premises are hereby deleted.
C. Borrower has requested that Lender increase the Loan by $12,500,000
(the "Loan Increase") to $24,500,000, and Lender has agreed to do so upon
certain terms and conditions.
D. In connection with such increase, Borrower and Lender desire to
enter into certain amendments to the Loan Agreement.
In consideration of the foregoing and the mutual covenants and promises
set forth in this Second Amendment and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Lender and
Borrower agree as follows:
1. Amendments to Loan Agreement. The Loan Agreement is amended as
follows:
a. Recital B is amended and restated to read as follows:
"B. The Loan. Borrower desires to borrow from Lender an amount
(the "Loan") up to $24,500,000."
b. Section 1.1.I. is amended by adding the following at the end
thereof: "The Wilsonville Premises is duly and validly zoned PID (Planned
Industrial Development), which permits the use thereof for office and
distribution purposes, which zoning has been enacted without any limitations to
its effectiveness and is in full force and effect."
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c. Section 1.1 U. is amended by deleting clause (4) and adding the
following at the end of clause (10):
"(11) The Amended and Restated Office Lease dated as of
October 17, 1997 between Hollywood Entertainment Corporation and TC
Portland, Inc. relating to the Wilsonville Premises."
d. Section 1.1 is amended by adding Section 1.1 X., such section to
read as follows:
"X. Year 2000 Compliance. Borrower has (i) initiated a review
and assessment of all areas within its and each of its Affiliates'
business and operations (including those affected by suppliers and
vendors) that could be adversely affected by the Year 2000 Problem
(i.e., the risk that computer applications used by Borrower or any of
its Affiliates, suppliers or vendors may be unable to recognize and
properly perform date-sensitive functions involving certain dates prior
to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan in accordance with that timetable.
Borrower reasonably believes that all computer applications (including
those of its suppliers and vendors) that are material to its or any of
its Affiliates' business and operations will on a timely basis be able
to properly perform date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 Compliant"), except to
the extent that a failure to do so could not reasonably be expected to
have a material adverse effect on Borrower or the Premises."
e. Section 2.1 A is amended and restated to read as follows:
A. Note. An amended and restated promissory note (the "Note")
in the amount of TWENTY-FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS
($24,500,000) payable to the order of Lender on or before May 1, 2000
(the "Initial Maturity Date"), subject to two one-year extension
options which may be exercised on the terms and conditions set forth in
the Note (any date to which the maturity date of the Note has been
extended is referred to as an "Extended Maturity Date" and the term of
the Note after the Initial Maturity Date and before the Extended
Maturity Date is called an "Extended Term").
f. Section 2.1 K. and Section 2.1 L. are deleted.
g. The definition of "Major Premises" in Section 2.2 B is amended to
delete the Seattle Premises and add the Wilsonville Premises and the New Haven,
Connecticut Premises previously acquired by Borrower.
h. Section 2.3 is amended to provide that such the requirements of this
Section are applicable to the Wilsonville Premises.
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i. Section 3.1 M is amended by changing "(C)" to "C."
j. The first two paragraphs of Section 3.1 Q. are amended and restated
to read as follows:
"Q. Commencing on the first day of the first month following
the Initial Disbursement and continuing until the Initial Maturity
Date, Net Operating Income (hereinafter defined) from the Premises
shall be tested each month, on an aggregate basis from all Premises,
and annualized. If the Debt Service Coverage ratio (hereinafter
defined) falls below 1.50 during the term prior to the Initial Maturity
Date or below 1. 15 during the first Extended Term, then Borrower shall
deposit in an account (the "Excess Funds Account") with Lender all Net
Cash Flow (hereinafter defined) for the following months, such deposit
to be made on or before the fifteenth (15th) day of each month. In the
event that the Premises achieves the requisite Debt Service Coverage
ratio as set forth above for a period of three (3) consecutive calendar
months (a "Period") then the funds on deposit with Lender in the Excess
Funds Account and interest thereon will be paid to Borrower upon such
achievement, provided no Default or Event of Default has occurred and
is continuing. Notwithstanding such achievement, Borrower shall
continue to comply with the calculation provisions of this section and,
if the Debt Service Coverage ratio is less than the requisite amount
for any month, the provisions for the deposit of Net Cash Flow in this
Section with respect to Excess Funds will continue to apply. If Excess
Funds are required to be held by Lender for two consecutive Periods,
all Excess Funds on deposit with Lender in the Excess Funds Account
together with interest thereon and all Net Cash Flow subsequently
deposited with Lender will be applied as a mandatory prepayment of the
Note in inverse order of maturity, except that the provisions of the
fourth and subsequent sentences of this paragraph will continue to
apply. Mandatory prepayments made under this section are not subject to
the Prepayment Fee under the Note.
"As used herein, "Debt Service Coverage" ratio will mean the
ratio of Net Operating Income to the amount of principal and interest
payable on the average outstanding amount of the Loan during such month
or Period less any regularly scheduled payments of principal on the
Note made by Borrower."
k. Sections 3.1 R. and 3.1.U are deleted.
l. Sections 3.1. V. and W are added, such sections to read as follows:
"V. Year 2000 Compliance. Borrower will promptly notify Lender
in the event the Borrower discovers or determines that any computer
application (including those of its suppliers and vendors) that is
material to its or any of its Affiliates, business and operations will
not be Year 2000 compliant on a
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timely basis, except to the extent that such failure could not
reasonably be expected to have a material adverse effect.
"W. Wilsonville UST. Borrower agrees to remove or cause to be
removed, in compliance with Environmental Laws, the 2,000 gallon
underground storage tank located on the Wilsonville Premises and to
replace same with a new 2,000 gallon double wall tank, which new tank
shall be installed in compliance with Environmental Laws, on or before
March 1, 1999. Borrower will cause appropriate testing to be done in
connection with said removal to establish the absence of soil
contamination in the area of said tank. If there is any contamination
disclosed by said tests, Borrower will remove or cause to be removed
all such contamination. Borrower will furnish Lender copies of all such
reports."
m. Section 4.1 is amended by adding the following after subparagraph D:
"E. Loan Increase. On the basis of the covenants, agreements
and representations of Borrower contained in this Agreement (including
the Second Amendment) and the Loan Documents, and subject to the terms
and conditions set forth in this Agreement and the Loan Documents,
Lender agrees to lend to Borrower the Loan Increase. Borrower agrees to
use the proceeds of the Loan Increase for the purpose for which they
were advanced and for no other purpose. The Loan Increase will be
disbursed when the conditions in Section 3 of the Second Amendment have
been satisfied, for the following purposes and subject to the following
conditions:
"A. Up to $1,500,000 of the Loan Increase will repay
the Interim Note.
"B. Up to $1,100,000 of the Loan increase will repay
a loan from LCP Group to Borrower.
"C. Up to $525,000 will be used to pay Lender's
Expenses and the expenses of Borrower in connection with the
sale of the Seattle Premises, the purchase of the Wilsonville
Premises, the First Amendment and the Second Amendment.
"D. Up to $1,500,000 will be disbursed to the
partners of Borrower.
"E. Up to $8,775,000 will be deposited in the Future
Acquisition Account to be used in connection with Future
Acquisitions as provided in Section 4.3 below. To the extent
that less than all of the funds allocated in clauses B, C and
D are disbursed for the stated purposes, the positive
difference, if any, shall be funded into the Future
Acquisition Account."
n. Section 4.3 A is amended and restated to read as follows:
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"A. Borrower and Lender anticipate that Borrower may make
acquisitions of property from time to time (such acquisitions are
called "Future Acquisitions"). Borrower may acquire Future Acquisitions
without Lender's approval only if (1) the only sources of funds for
such Future Acquisition are Net Cash Flow which is not restricted under
Section 3.1 Q., (2) no Future Acquisition Funds are used in connection
with such acquisition, (3) title to such property is taken in the name
of a subsidiary of Borrower and not in Borrower's name, and (4) neither
Borrower nor General Partner has or will have any liability, direct or
indirect, in connection with any financing in connection with such
property, whether as a direct obligor, contingent obligor, guarantor,
partner or otherwise."
o. Section 4.3 B is amended by adding the word "and" before the word
"value" in the last line.
p. Section 4.5 is amended by adding the words "or Future Acquisition
Funds" after the words "Loan proceeds" in the fourth to last line of said
section.
q. Section 4.6 is amended and restated to read as follows:
"4.6 Release Payments. A Premises may be sold by Borrower and
Lender agrees to release such Premises from the applicable Mortgage in
connection with such sale (but not in connection with a refinance) upon
the following conditions:
"A. The net sales proceeds (i.e. the gross purchase price less
normal and customary closing costs paid to third parties) paid to
Lender are equal to or greater than 80% of the amount listed in the
column "1998 Appraised Value" with respect to such Premises on Exhibit
I (First Revised) (the "Release Payment") and all of such net sales
proceeds are paid to Lender;
"B. Borrower pays Lender a release fee of $5,000 (the "Release
Feel") for the release of each Premises other than the Texas Premises,
as to which no Release Fee is payable; and
"C. Borrower pays Lender all net sales proceeds to be either,
at Borrower's discretion, held in the Future Acquisition Fund Account
or used to repay the Loan. Notwithstanding the foregoing, if in
connection with such a sale Borrower desires to attempt to effect a
delayed tax-free exchange, then instead of depositing the net sales
proceeds in the Future Acquisition Fund Account, Borrower may deposit
up to $7,000,000 of net sales proceeds, in the aggregate at any time
(the "Exchange Amount"), in a tax free exchange account established
with a reputable exchange company on the following conditions:
(1) E. Xxxxxx Xxxxxxx and The LCP Group L.P. jointly
and severally guarantee, pursuant to a guaranty
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in form and substance satisfactory to Lender, payment to
Lender all of any portion of the Exchange Amount if for any
reason, including action by Borrower or a creditor of
Borrower, all of the funds deposited in said account are not
either applied as set forth in the preceding sentence or used
for Future Acquisitions in accordance with the terms and
conditions of this Agreement, and
(2) the exchange agreement provides that at the end
of the exchange period, if Borrower has not used all of the
Exchange Amount to fund Future Acquisitions in accordance with
this Agreement, all of the Exchange Proceeds will be paid to
Lender, as well as such other modifications consistent with
the foregoing, as Lender may request, excluding a grant of a
security interest (unless applicable law is changed to permit
such a security interest without adversely affecting
Borrower's claim for benefits under Section 1031 of the
Internal Revenue Code).
In the event Borrower chooses to repay the Loan, then the
Prepayment Fee (as defined in the Note) will not be payable
with respect to such Premises but the Release Fee will be
payable.
"Notwithstanding the foregoing, if an Event of Default or
Default exists at the time of a sale of a Premises, all net sales
proceeds will be paid to Lender to pay the Prepayment Fee and then
applied to the Loan as a prepayment.
"In addition, Borrower may request that Lender accept a
Release Payment with respect to a Premises if a condemnation or eminent
domain proceeding is commenced with respect to such Premise or if
Borrower is unable to satisfy the provisions of Section 5.3 for use of
Proceeds with respect to such Premises, or if a Premises is rezoned
without the agreement or acquiescence of Borrower.
"Upon receipt of a Release Payment and all net sales proceeds
with respect to a Premises and the release of such Premises from the
lien of the applicable Mortgage, such Premises will no longer be
considered a Premises for purposes of this Agreement."
r. Exhibit I is replaced by Exhibit I (First Revised) attached hereto.
s. Section 8.7 is amended to delete the name "E. Xxxxxx Xxxxxxx" from
the Borrower's address and to substitute the name "Xxxxx Xxxxx".
2. Representations. In order to induce Lender to enter into this
Amendment, Borrower represents and warrants to Lender as follows:
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a. All of the representations and warranties of Borrower in
the Loan Agreement and the Loan Documents are true and complete on the
date hereof in all material respects.
b. The Loan Agreement and the Loan Documents are in full force
and effect and free from an Event of Default or Default.
c. The principal amount of the Loan (including the Interim
Loan) outstanding as of October 27, 1998 is $11,908,789.35, and
Borrower has no offsets, defenses or counterclaims with respect
thereto.
d. The execution and delivery by Borrower of this Second
Amendment and all documents executed and delivered by Borrower pursuant
hereto, and the performance by Borrower of this Second Amendment and
such documents W are within its powers; (ii) have been duly authorized
by all necessary partnership action; and (iii) do not conflict with,
violate or constitute a default under any law, rule, regulation, decree
or judgment applicable to Borrower or any indenture, mortgage, deed of
trust, agreement, instrument, contract or other restriction binding on
or affecting Borrower.
e. This Second Amendment and all documents executed and
delivered by Borrower pursuant hereto are the legal, valid and binding
obligations of Borrower enforceable in accordance with their terms.
3. Conditions to Effectiveness. As a condition to the effectiveness of
this Second Amendment, Borrower shall satisfy all of the following conditions:
a. Borrower shall pay Lender a commitment fee equal to $70,500, less
$50,000 which has already been paid to Lender. Said commitment fee is deemed
fully earned upon execution hereof and is not refundable.
b. Borrower shall pay Lender all of Lenders Expenses in connection with
the First Amendment and the Second Amendment.
c. Borrower will execute and deliver or cause to be executed and
delivered to Lender all of the following, all of which shall constitute "Loan
Documents" under the Loan Agreement:
(1) The Note.
(2) An Acknowledgement and Agreement executed by General
Partner with respect to the General Partner's Agreement.
(3) An amended and restated Deed of Trust on the Wilsonville
Premises and, if requested by Lender, an assignment of rents.
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(4) An opinion of counsel of Borrower and General Partner
dated the date of this Amendment and relating to such matters with
respect to this Second Amendment and the Loan Documents executed
pursuant hereto and the transaction contemplated hereby as Lender may
reasonably request.
(5) Amendments to each of the Mortgages ("Mortgage
Amendments") reflecting the increase to the principal amount of the
Note and this Amendment.
(6) Such other documents and instruments as Lender may
request.
d. Borrower shall deliver authorization documents as outlined in
Section 2.2 F with respect to this Second Amendment, the Note, the Mortgage
Amendments and the other Loan Documents executed pursuant to this Second
Amendment
e. Borrower shall deliver endorsements to each Title Policy later
dating the Title Policy, reflecting the Mortgage Amendments and increasing the
amount of coverage to the amount of the Loan.
f. Borrower shall satisfy all of the requirements and conditions set
forth in Section 2.3 with respect to the Wilsonville Premises.
4. Miscellaneous.
a. This Second Amendment shall be construed according to and governed
by the laws of the State of Connecticut.
b. If any provision of this Second Amendment is adjudicated to be
invalid, illegal or unenforceable, in whole or in part, it will be deemed
omitted to that extent and all other provisions of this Second Amendment will
remain in full force and effect.
c. This Second Amendment shall be binding upon and inure to the benefit
of the parties and their respective legal representatives, successors and
assigns.
d. Except as amended hereby, the Loan Agreement is and shall remain in
full force and effect in accordance with its terms and is hereby ratified and
confirmed.
[EXECUTION PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Second Amendment as
of the date first above written.
NET 2 L.P., a Delaware limited partnership
By: LEPERCQ NET 2 L.P., a Delaware
limited partnership, Its General
Partner
By: LEPERCQ NET 2 INC., a Delaware
corporation
By:
-------------------------------
Its Vice President
NATIONSCREDIT COMMERCIAL CORPORATION, a
Delaware corporation
By:
-----------------------------------------
Name:
Title:
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EXHIBIT I
Property 1998 Appraised Value
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Highland Heights, OH $6,863,000
Tempe, AZ $2,050,000
Xxxxxxx, XX x/x
Xxxxxxxx, XX $1,779,000
Earth City, MO $3,170,000
Tucson, AZ $3,155,000
Milford, CT $3,064,000
Wilsonville, OR $13,700,000
El Paso, TX $754,000
12 Michigan sites $,792,000
13 San Antonio, TX $5,293,000
