TITAN MANAGEMENT, L.P.
53 Forest Avenue, 2nd floor
Old Greenwich, CT 06870
Voice: (203) 698-0736 Fax: (203)637-8551
January 6, 1998
Mr. Leo Ullman
SKR Management Corp.
44 South Bayles Avenue
Port Washington, NY 11050
RE: Acquisition Loan Commitment for Cedar Income Fund
Gentlemen:
This letter will confirm that Titan Management, L.P. ("Titan" or "Lender")
is prepared to make a share acquisition loan facility (the "Loan") to a New York
general partnership formed by two affiliates of SKR Management Corp.
("Borrower") upon the terms and conditions outlined below (the "Commitment").
This Commitment is subject to the terms and conditions contained herein and the
execution and delivery by the Borrower of the definitive loan documentation
satisfactory to Titan and its counsel. Please indicate your acceptance of this
loan commitment by signing and returning this commitment letter along with the
required fees to the attention of our attorney, Theodore Fichtenholtz, Esq. on
or before January 8, 1998 or this Commitment will expire.
I. Summary of Loan Terms
Borrower: Cedar Bay Company
Maximum Loan Amount: $16,250,000.00 (subject to the terms and conditions set forth herein).
Term: One year.
Interest Rate: 13.00 fixed rate of interest for the term of the Loan.
Amortization: None
Purpose of Loan: Acquisition of stock in Cedar Income Fund, Ltd. (the "REIT")
Closing Date: On or before February 11, 1998, time being of the essence as to the
Borrower.
Payments/Escrows: Interest is payable in arrears on the first day of each month.
Prepayment: The Loan has a prepayment lockout equivalent to the Lender having
received 12 months of interest. No partial prepayments will be per-
mitted.
Security: The Loan shall be secured by a first lien on all shares of the REIT
("Shares") which shall be pledged to Lender and delivered to Lend-
er's counsel or depository bank with stock powers executed in blank.
Lender's security interest shall constitute valid first liens, subject to
no other liens or encumbrances, on the good and marketable title to
the Shares.
Guarantor[s]: All general partners of Borrower, Leo S. Ullman, and SKR Manage-
ment Corp.
Loan Expenses: Borrower shall pay all costs associated with the origination and
closing of the Loan and enforcement of Lender's rights under this
Commitment, including appraisal fees, engineering and environmen-
tal fees, title insurance premiums, survey fees, Lender's attorney
fees, mortgage recording and filing fees, and any third party broker
fees.
Origination Fee: 2.25 of maximum loan amount due at the closing of the Loan.
Deposits: Upon signing and returning this commitment, the Borrower shall deposit
$3,500.00 to be applied towards Lender's attorney fee in connection
with this Loan. If the Loan does not close for any reason, the unused
portion of this fee shall be refunded with counsel having billed at
the rate of $250.00 per hour. The Borrower shall also deposit the sum
of $10,000.00 as a good faith deposit which will be applied at closing
to the Origination Fee or Lender's other out of pocket costs. This
deposit shall be deemed to be earned by Lender at the time it is paid
and is non-refundable with the exception of Lender's willful default
pursuant to this Commitment. Both deposits should be made by wire
transfer payable to Theodore Fichtenholtz Esq., escrow agent.
Net Disbursement of Loan The amount disbursed under this Commitment at closing will be equal to
Proceeds at Closing the amount necessary to purchase the Tendered stock, to pay unpaid
fees and expenses which are the obligation of the Borrower, including,
unpaid Loan Expenses, Origination Fee, Escrows required by the Lender
and short interest due through the end of the first payment period
of the Loan.
II. Conditions of Loan
1. Borrower. The Borrower shall be the New York general partnership that is formed
to own and which ultimately purchases the stock of Cedar Income Fund,
Ltd. Each general partner shall have at least one independent director
in its controlling entity. The independent director shall be mutually
acceptable to both Borrower and Lender. The independent director's
responsibilities will be limited to those related to a bankruptcy
filing by the Borrower or the general partner. The Borrower's
organizational documents shall contain provisions satisfactory to the
Lender. The sole business activity of the Borrower shall be the
ownership of the Shares. The Borrower shall be prohibited from
incurring additional debt, other than the Loan, without the written
consent of the Lender. Any fees earned by Borrower, Guarantor or any
affiliates thereof shall be subordinated to repayment of all principal
and interest due under the Loan Documents.
2. Guarantor. The Loan shall be personally guaranteed by all of the general partners
of the Borrower. All partnership interests/shares in Borrower and/or
the entity which manages/operates same shall be pledged to the Lender
as security for payment of the Loan and/or performance under the
guaranty.
3. Loan Amount. The Maximum Loan Amount for this Commitment was approved based on (a)
a 13.00% Interest Rate for the term of the Loan, (b) a maximum Loan to
Value ratio of 70% based on the value of the assets of the REIT and of
the subject properties which are referred to in the commitment letters
dated January 6, 1998 concerning the properties owned by The Point Associates,
L.P. and Triangle Center Community L.P., each a general partner of Cedar Bay
Company, and if the Lender determines through its due diligence that the LTV
requirement is not met, the Lender reserves the right, in its absolute
discretion to reduce the Loan amount, require additional collateral
or cancel this commitment. For purposes of this Commitment, LTV is the
ratio of the amount of the Loan to the appraised value, as approved by
the Lender, of the Subject Property and any other collateral securing
the Loan.
4. Due Diligence. Closing of the Loan is subject to the satisfactory receipt and review
by the Lender, in its sole discretion, of the following, at least 7
days prior to the Closing Date:
a. An M.A.I. appraisal from an appraiser selected by the Lender
showing the value of the property owned by the REIT to be in
excess of $16,000,000.00;
b. A Phase I environmental site assessment from an environmental
consultant selected by the Lender and any follow up environ-
mental analysis deemed necessary by the Lender based on the
results of the Phase I;
c. A structural engineering report on the properties owned by the
REIT from an engineer selected by the Lender;
d. The receipt, review and approval of all current and pending
leases, service contracts and sales contracts on the property
owned by the REIT;
e. A current rent roll and two previous years of operating state-
ments on the properties owned by the REIT;
f. Two previous years of federal income tax returns for the general
partners of the Borrower and SKR Management Corp.;
g. A credit report and current financial statements for the general
partners of the Borrower and SKR Management Corp; and
h. A commitment for title insurance for each of the properties owned
by the REIT.
5. Loan Documents. Closing of the Loan is subject to the Borrower's and Guarantor's
execution of Lender's standard loan documents, including but not
limited to, the Note, the Security Agreement, Negative Pledge, the
Guaranty, and Environmental Indemnity Agreement.
6. Reporting. After the closing of this Loan, the Borrower shall furnish to the
Lender the following information with respect to the properties owned
by the REIT and the operations of the REIT:
a. An updated rent roll as of the end of each applicable period;
b. Quarterly and year-to-date operating statements as of the end of
each applicable period.
c. An operating statement, balance sheet and sources and uses of
funds for the operations of the REIT.
d. Any other information required under the loan closing documents.
The Lender reserves the right to require an independent audit of any information provided
under these Reporting Requirements at Borrower's expense.
7. Governing Law. This Commitment and the loan shall be governed by the laws of New York.
III. Closing Requirements
At least three days prior to closing, the Lender and its counsel must
receive the following in a form satisfactory to the Lender in its sole
discretion:
For each property owned by the REIT:
1. A standard form ALTA loan policy of title insurance, to be chosen by
Lender's Counsel, in an amount not less than the Loan Amount insuring
the first priority lien of the Mortgage against Borrower's fee simple
interest in the Subject Property, any easements, rights, covenants or
restrictions appurtenant thereto, with only such exceptions to title as
shall be acceptable to Lender in its sole discretion, and with such
endorsements as may be required by Lender;
2. A survey of the applicable property prepared in accordance with ACSM
standards with a surveyor's certification;
3. Evidence that all insurance coverage which Lender requires is in full
force and effect with respect to the applicable property with insurance
carriers acceptable to the Lender. Additionally, if required by Lender,
certification as to whether the Applicable property lies within a
'flood plain area and/or an earthquake zone;
4. All applicable property taxes and assessments will be paid at the
Closing;
For Borrower and each general partner:
1. Certified corporate charter, by-laws and current good standing
certificate for the Borrower/general partner and the Borrower's/general
partners corporate resolution authorizing the Loan transaction and
electing the independent director required by this Commitment or
equivalent documents for noncorporate borrowers.
2. All applicable property taxes and assessments will be paid at the
Closing. An opinion of Borrower's and Guarantor's counsel licensed to
practice law in the state where the Borrower and its constituent
entities are organized that:
a. Borrower is duly organized, validly existing, in good standing, and
properly licensed under the laws of the state(s) where it is
organized and doing business;
b. Borrower is properly licensed and otherwise qualified to do
business in the state where the Applicable property is located;
c. All Loan documents have been duly authorized executed and delivered
and constitute legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective
terms, and are not in conflict with the formation documents of
Borrower, any obligations of Borrower or any law, rule, regulation,
order or decree to which the Borrower, its assets are bound or
subject. The opinion of such counsel may be qualified to the extent
that enforceability of any instrument referred to therein may be
limited by applicable bankruptcy, moratorium or other similar laws,
now or hereafter in effect, affecting the enforceability of
creditors rights generally;
d. The Loan is not usurious under the laws of the state of New York.
e. No court actions are pending or (to the best knowledge of said
counsel) threatened against Borrower which would materially affect
Borrower's obligations or its financial condition;
f. No consent or approval of any governmental body or regulatory
authority is or will be required in connection with the execution
and delivery of, or performance under the Loan documents;
g. All security interests against the Shares have been perfected under
the UCC;
h. Such other matters as may be requested by the Lender.
If the Borrower is other than a corporation, comparable legal opinions must
be delivered for the borrower and each of its managing/operating entities. The
counsel providing such opinions shall provide evidence that they carry
professional liability insurance in an amount satisfactory to the Lender.
3. A certification from the Borrower and Guarantor/principal that no material
adverse change has occurred since the date of this Commitment with respect
to the credit and financial condition of the Borrower and any of the
Borrower's principals or guarantors.
IV. Additional Terms
1. This Commitment is issued in reliance upon and subject to the accuracy of
all information, representations and other material submitted in support of
the loan request. This Commitment may be terminated by the Lender at its
sole option without liability in the event:
a. The Borrower shall fail to comply with any of the terms hereof;
b. Any material information provided to Lender by Borrower (either
verbally or in writing) in connection with this Loan is false,
misleading or otherwise incomplete;
c. There is filed by or against Borrower or Guarantor a petition under
any of the provisions of the Federal Bankruptcy Code, as amended, or
under any other federal or state insolvency or similar law.
2. No changes made by Borrower to this commitment letter shall be binding on
lender unless confirmed by a subsequent commitment modification letter
signed by both parties.
3. This Commitment is executed by an individual strictly in his capacity as a
representative of the Lender. By the acceptance of this Commitment,
Borrower agrees that no representative, member, partner, shareholder,
employee or agent of the Lender shall be personally liable for the payment
of any claim or the performance of any obligations hereunder.
4. The Loan shall be cross collateralized and cross defaulted to any loan
with any loan made by Titan to the Borrower, any affiliate of Borrower or
any partner of Borrower. Titan's obligation to close and fund the Loan is
contingent upon the acceptance and closing of two loans, one to each
general partner, secured by first mortgages on commercial properties owned
by the general partners located in Lancaster, PA and Harrisburg, PA.
5. The REIT shall be prohibited from incurring any additional indebtedness,
other than that which is in existence on the date of this commitment
(approximately $1.4 Million Dollars), without the consent of Lender.
6. The Lender will give the Borrower the option to renew the Loan for a
second year at a rate of interest of 13.00%, provided that:
a. The Borrower has not been in default on any Loan term or condition
during the life of the Loan;
b. The Borrower gives the Lender at least ninety days written notice
of its intention to renew the Loan;
c. The Borrower pays a renewal fee of 2.00% of the Loan Amount
simultaneously with the exercise of its option to renew the loan
pursuant with 4b. above;
d. The all initial loan underwriting criteria are still met.
7. The Borrower commits to use Titan's brokerage services to obtain
permanent financing during the term of this loan if Titan can obtain
equally favorable or more favorable terms than those which the Borrower
obtains independently of Titan.
8. The Borrower agrees to pay a brokerage fee to Milt Ciplet and
acknowledges that no broker or other parties are entitled to be paid a fee
in connection with this Loan and agrees to indemnify the Lender against
any claims to the contrary.
9. After closing of the Loan, the Lender shall have the right to advertise
that it has made the Loan.
10. SKR Management Corp, Leo Ullman, and Brenda Walker agree to pay Lender a
breakup fee of $100,000.00 if the deal does not close for any reason not
at the fault of the Lender.
Sincerely,
Titan Management, L.P.
By: GHZ I L.L.C., its General Partner,
By /s/ Ira E. Saferstein
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Name: Ira E. Saferstein
Title: Member
Date: January 6, 1998
Accepted and Agreed:
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