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FIRST AMENDMENT TO LOAN AGREEMENT
(Maryland Acquisition Loan)

BETWEEN

OHI ASSET III (PA) TRUST, as Lender

and

BEL PRE LEASING CO., LLC
RIDGE (MD) LEASING CO, LLC
MARLBORO LEASING CO., LLC
FAYETTE LEASING CO., LLC
LIBERTY LEASING CO., LLC
HOWARD LEASING CO., LLC
PALL MALL LEASING CO., LLC
WASHINGTON (MD) LEASING CO., LLC
MARYLAND NH ASSET, LLC
as Borrowers

and

OMG RE HOLDINGS, LLC
 OMG RE LEASING CO., LLC
OMG ASSET OWNERSHIP, LLC
HEALTH CARE FACILITY MANAGEMENT, LLC
RESIDENT CARE CONSULTING, LLC
as Parent Guarantors

Dated:    March 15, 2009

 
 

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FIRST AMENDMENT TO LOAN AGREEMENT
(Maryland Acquisition Loan)

This First Amendment to Loan Agreement (“Agreement”) is dated as of March
15,2009, and is by and among OHI ASSET III (PA) TRUST, a Maryland business trust
(“Lender”), and BEL PRE LEASING CO., LLC, an Ohio limited liability company,
RIDGE (MD) LEASING CO., LLC, an Ohio limited liability company, MARLBORO LEASING
CO., LLC, an Ohio limited liability company, FAYETTE LEASING CO., LLC, an Ohio
limited liability company, LIBERTY LEASING CO., LLC, an Ohio limited liability
company, HOWARD LEASING CO., LLC, an Ohio limited liability company, PALL MALL
LEASING CO., LLC, an Ohio limited liability company, WASHINGTON (MD) LEASING
CO., LLC, an Ohio limited liability company, and MARYLAND NH ASSET, LLC, an Ohio
limited liability company (each a “Borrower”, and collectively, as the
“Borrowers”) and OMG RE HOLDINGS, LLC, an Ohio limited liability company (“RE
Holdings”), OMG RE LEASING CO, LLC, an Ohio limited liability company (“RE
Leasing”), and OMG ASSET OWNERSHIP, LLC, an Ohio limited liability company
(“AO”), HEALTH CARE FACILITY MANAGEMENT, LLC, an Ohio limited liability company
(“HCFM”), and RESIDENT CARE CONSULTING, LLC, an Ohio limited liability company
(“RCC”, and together with RE Holdings, RE Leasing, AO, and HCFM each a “Parent
Guarantor” and collectively, the “Parent Guarantors”).
 
                                                RECITALS:

A. Borrowers and Parent Guarantors have executed and delivered to Lender a Loan
Agreement dated April 18, 2008 (the “Existing Loan Agreement”) pursuant to which
Lender has made a loan (the “Loan”) to Borrowers.   The Loan is evidenced by the
Note and secured by the Loan Documents (as defined below).

B. Pursuant to 2.9 of the Existing Loan Agreement, on the Loan Closing Date,
Borrowers and Lender escrowed the Northwest Funds in contemplation of the
acquisition of the Northwest Facility at a later date.

C. Borrowers have determined that they will not be acquiring the Northwest
Facility and, as a result, Borrowers are entitled to the release from escrow of
the Northwest Funds and the Northwest Allocation Funds.

D. Pursuant to Section 2.9 of the Existing Loan Agreement, upon release to
Borrowers of the Northwest Funds and the Northwest Allocation Funds, Borrowers
were obligated to repay such funds to Lender.

E. Borrowers and Lender have agreed to (i) the repayment of the Northwest Funds
to Lender, and (ii) the addition of the Northwest Allocation Funds to the
Escrowed Capex Funds to be held and disbursed pursuant to Section 2.8 of the
Existing Loan Agreement.

F. Lender and the Borrowers desire to amend the Existing Loan Agreement as set
forth in this Amendment.

NOW THEREFORE, the parties agree as follows:

1. Definitions.
 
(a)           Any capitalized term used but not defined in this Amendment will
have the meaning assigned to such term in the Existing Loan Agreement.

(b)           The following definitions defined in §2.1 of the Existing Loan
Agreement are hereby amended in their entirety as follows:

Facility or Facilities:  The skilled nursing facilities referred to below, each
of which is located on a parcel of real property described in Deeds of Trust:

Facility
Owner
Operator
 
Bel Pre Health & Rehabilitation Center
2601 Bel Pre Road
Silver Spring MD 20906
 
Maryland NH Asset, LLC
Bel Pre Leasing Co., LLC
Ellicott City Health & Rehabilitation Center
3000 N. Ridge Road
Ellicott City MD 21043
 
Maryland NH Asset, LLC
Ridge (MD) Leasing Co., LLC
Forestville Health & Rehabilitation Center
7420 Marlboro Pike
Forestville MD 20747
 
Maryland NH Asset, LLC
Marlboro Leasing Co., LLC
Franklin Square Health & Rehabilitation Center
1217 W. Fayette Street
Baltimore MD 21223
 
Maryland NH Asset, LLC
Fayette Leasing Co., LLC
Liberty Heights Health & Rehabilitation Center
4017 Liberty Heights Avenue
Baltimore MD 21207
 
Maryland NH Asset, LLC
Liberty Leasing Co., LLC
Marley Neck Health & Rehabilitation Center
7575 E. Howard Road
Glen Burnie MD 21060
 
Maryland NH Asset, LLC
Howard Leasing Co., LLC
South River Health & Rehabilitation Center
144 Washington Road
Edgewater MD 21037
Maryland NH Asset, LLC
Washington (MD) Leasing Co., LLC

2. Section 2.8.  Section 2.8 of the Existing Loan Agreement is hereby amended
and restated in its entirety as follows:
 
2.8           Escrowed Capital Improvements Funds.   As of the date of this
Amendment, Lender and Borrowers have escrowed with the Title Company a portion
of the Loan equal to Three Million Seven Hundred Seventy Five Thousand Dollars
($3,775,000) (the “Escrowed Capex Funds”) pursuant to an escrow agreement in
form and substance acceptable to Borrowers and Lender.   Borrowers shall propose
the specific Escrow Improvements for Lender’s approval, which approval shall not
be unreasonably withheld, conditioned or delayed.  After receipt of approval as
to any specific Escrowed Improvement, the Borrowers shall promptly undertake,
and complete each such Escrowed Improvement on or before December 31, 2009;
provided, however, that with respect to Scheduled Improvements to the Bel Pre
Health & Rehabilitation Center and Marley Neck Health & Rehabilitation Center to
be funded from the $1,400,000 added to the Escrowed Capex Funds on December 2,
2008, such Scheduled Improvement shall be completed on or before December 31,
2010.   Upon written certification from Borrowers to Lender that an Scheduled
Improvement has been completed, in whole or in part, and upon compliance with
the procedures set forth below, so long as no Event of Default or Unmatured
Event of Default has occurred and is continuing, Borrowers may withdraw an
amount of Escrowed Capex Funds equal to the amount set forth on Schedule 2.8 for
such Scheduled Improvement.  Any amounts so paid to Borrowers by Lender shall be
used first to pay the costs of the Scheduled Improvements.  To the extent the
actual cost of a Scheduled Improvement exceeds the amount set forth on Schedule
2.8 for such Scheduled Improvement, then Borrowers shall pay such cost
themselves.

(a)           Borrowers may not request disbursement of the Escrowed Capex Funds
more than once per month;

(b)           With each request for disbursement, Borrowers shall deliver a
certification from an officer of Borrowers that no Event of Default or Unmatured
Event of Default exists;

(c)           The Scheduled Improvements shall be done pursuant to plans and
specifications and a cost statement approved by Lender;

(d)           After the first disbursement to Borrowers, sworn statements and
lien waivers in an amount at least equal to the amount of funds previously paid
to Borrowers (or lien subordination agreements pursuant to Maryland law) or such
other adequate evidence of payment shall be delivered to Lender and the Title
Company from all contractors, subcontractors and material suppliers covering all
labor and materials invoiced prior to the date of the previous disbursement;

(e)           Borrowers shall deliver to Lender such other evidence as Lender
reasonably may request, from time to time during the course of the work on the
Scheduled Improvements, of compliance with the approved plans and
specifications, of the cost of work and of the total amount needed to complete
the Scheduled Improvements, and showing that there are no liens against the
Facilities arising in connection with the work with respect to which the cost
statement delivered to, and approved by, Lender does not provide for their
payment; and

(f)           At the election of Lender, the funds may be disbursed by the Title
Company to Borrowers or to the persons entitled to receive payment thereof from
Borrowers.

3. Section 2.9.  Section 2.9 is hereby amended and restated in its entirety as
follows:
 
2.9           Northwest.

(a)           Escrow of Northwest Funds.  On the Loan Closing Date, Lender
escrowed a portion of the Loan equal to Four Million Nine Hundred Thousand
Dollars ($4,900,000) plus certain closing costs (the “Northwest Funds”) with the
Title Company pursuant to the terms of the Northwest Escrow
Agreement.   Notwithstanding anything in this Agreement or the Note to the
contrary, Borrowers shall not pay interest on the Northwest Funds until the
earlier of (i) the release of the Northwest Funds to Sellers (as defined in the
Northwest Escrow Agreement) or (ii) the date that is ninety (90) days after the
Loan Closing Date; provided, however, that all interest earned on the Northwest
Funds shall be paid over to Lender during such ninety (90) period.   On December
2, 2008, Lender received from the Title Company the sum of $49,056.22 as
interest on the Northwest Funds.  Lender and Borrowers agree to allocate the
interest on the Northwest Funds as follows: $19,628.02 to Lender and $29,878.20
to Borrowers.  As such, concurrently with the date of this Amendment, Lender
shall pay over by wire transfer of immediate funds to Borrowers the sum of
$29,878.20.

(b)           Repayment of Northwest Funds.  As of the date of this Amendment,
(i) Owner determined it would not acquire the Northwest Facility, (ii) Borrowers
have caused the Northwest Funds to be paid directly to Lender, (iii) the
Northwest Funds have been applied by Lender to the outstanding principal balance
of the Loan, and (iv) Lender has not charged Borrowers with a Prepayment Premium
in connection with such payment.

(c)           Northwest Allocation Funds.  Borrowers and Lender originally
contemplated that, if the Northwest Facility were not acquired, that the
difference between $1,449,518 less that portion of the Northwest Allocation
Funds actually received by Lender would be reallocated among the remaining
Facilities in proportion to the number of licensed beds at each remaining
Facility bears to the total number of licensed beds at all Facilities, which
reallocation would also have increased the Third Year Release Payment and the
Seventh Year Release Payment in the amount reallocated to such
Facilities.  However, instead of such repayment and reallocation, Borrowers and
Lenders have agreed to contribute the Northwest Allocation Funds in the amount
of $1,400,000 to the Escrowed Capex Funds as set forth in Section 2 of this
Amendment.

4. Section 3.4.  Section 3.4 of the Existing Loan Agreement is hereby amended
and restated in its entirety as follows:
 
3.3          Release of Certain Facilities during First Three Years.
 
(a) On or before the third anniversary of the Closing, provided that (i) no
Event of Default has occurred and is continuing under the Loan Documents, (ii)
no Unmatured Event of Default has occurred and is continuing, and (iii)
Borrowers are selling the Facility or Facilities to an unrelated third party,
upon the payment to Lender of the applicable release payment set forth below
(each a “Three Years Release Payment”), Lender would agree to release the
applicable Facility listed below (each a “Three Years Facility”) from the lien
of the Loan Documents.  No Prepayment Premium would be payable in connection
with such prepayment and release.  The initial release prices (to be increased
by any reallocations as discussed below or any funded capex under Section 2.8)
are:
 
Facility Name
 
Initial Release Payment
 
 
Liberty Heights Health & Rehabilitation Center
4017 Liberty Heights Avenue
Baltimore MD 21207
 
  $ 7,870,070.28  
Franklin Square Health & Rehabilitation Center
1217 W. Fayette Street
Baltimore MD 21223
  $ 10,689,070.16  

Each Third Year Release Payment will increase 2.5% per year (compounding) on
each anniversary of the Closing and pursuant to subparagraph (b) below.

(b) If, after exercising reasonable efforts to sell any Three Years Facility,
Borrowers are unable to find a buyer willing to pay an amount sufficient to
satisfy the applicable Three Years Release Payment, then Lender will accept as a
Three Years Release Payment a lower release payment provided that: (i) the
release payment is no less than 50% of the otherwise applicable Third Year
Release Payment, and (ii) after giving effect to the sale of the Facility and
the pay down of the Loan, the Borrowers remain in compliance with the Cash Flow
Coverage Ratio and Combined Cash Flow Coverage Ratio required as of the date of
the payment.   The difference between the actual release payment and the Three
Years Release Payment shall be reallocated among the remaining Facilities in
proportion to the number of licensed beds at each remaining Facility bears to
the total number of licensed beds at all Facilities, which reallocation shall
also increase the Third Year Release Payment under this Section and the Seventh
Year Release Payment under Section 3.4 in the amount reallocated to such
Facilities.
 
(c) Borrowers must sell the Facilities to unrelated third parties in order for
the Facilities to be released from the lien of the Loan Documents pursuant to
this Section.
 
(d) Upon payment of the applicable Third Year Release Payment, the amount of the
Security Deposit required under this Agreement and the Master Lease will be
reduced by an amount equal to (i) the amount of the applicable Third Year
Release Payment actually paid to Lender multiplied by (ii) the Interest Rate
divided by (iii) four (4).
 
(e) Upon payment of the applicable Third Year Release Payment, Lender shall
release the applicable Facility from the Option to Purchase.
 
5. Section 3.4.  Section 3.4 of the Existing Loan Agreement is hereby amended
and restated in its entirety as follows:
 
3.4          Release of Certain Facilities after Seven Years.  
 
(a) During the one year period commencing on the seventh anniversary of the
Closing, provided that (i) no Event of Default has occurred and is continuing
under the loan documents, (ii) no Unmatured Event of Default has occurred and is
continuing, (iii) the prepayment is made concurrently with respect to all such
Facilities (to the extent they have not previously been released as provided for
in Section 3.3), and (iv) the Lessee Purchase Option is closed concurrently,
upon the payment to Seller of $41,402,379.96 (as such amount may be increased or
reduced pursuant to Sections 3.3(b) and 3.4(b), the “Seventh Year Release
Payment”), Seller will release the Facilities listed below from the lien of the
Loan Documents.  No Prepayment Premium would be payable in connection with such
prepayment and release.  Borrowers would not be obligated to sell the Facilities
in connection with such prepayment and release.  The Facilities covered by this
Section are as follows:
 
Bel Pre Health & Rehabilitation Center
2601 Bel Pre Road
Silver Spring MD 20906
 
Liberty Heights Health & Rehabilitation Center
4017 Liberty Heights Avenue
Baltimore MD 21207
 
Marley Neck Health & Rehabilitation Center
7575 E. Howard Road
Glen Burnie MD 21060
 
Franklin Square Health & Rehabilitation Center
1217 W. Fayette Street
Baltimore MD 21223

(b) The Seventh Year Release Payment will be reduced by the amount any Third
Year Release Payment paid in connection with any of the Seventh Year Facilities
which are also Third Year Facilities.
 
(c) If Borrowers do not sell or otherwise transfer the Facilities to third
parties, but instead continue to own and operate them, then upon payment of the
Seventh Year Release Payment and release of the Seventh Year Facilities from the
lien of the Loan Documents, the ownership of the applicable Borrowers which own
or operate such Facilities shall be transferred such that HCREH and the Parent
Guarantors no longer own or control such Borrowers.  Upon such transfer, Lender
will release such Borrowers from their obligations arising under the Loan
Document and their guaranty of the Master Lease and the City View Loan.
 
(d) Upon payment of the Seventh Year Release Payment, the amount of the Security
Deposit required under this Agreement and the Master Lease will be reduced by an
amount equal to (i) the amount of the Seventh Year Release Payment actually paid
to Lender multiplied by (ii) the Interest Rate divided by (iii) four (4).
 
(e) Upon payment of the Seventh Year Release Payment, Lender shall release the
Facilities covered by this Section from the Option to Purchase.
 
6. Representations and Warranties.
 
(a) Each of Borrower and Parent Guarantor hereby confirms and makes all of the
representations and warranties set forth in the Loan Agreement and other Loan
Documents with respect to such Borrower or Parent Guarantor, this Amendment and
the Loan Documents as of the date hereof and confirms that they are true and
correct in all material respects.
 
(b) Each of Borrower and Parent Guarantor hereby represents and warrants as of
the date of this Amendment as follows:  (i) it is duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of organization; (ii) the execution, delivery and performance by it
of this Amendment and the Loan Documents, as applicable, are within its powers,
have been duly authorized, and do not contravene (A) its articles of
organization, operating agreement, or other organizational documents, or (B) any
applicable law; (iii) no consent, license, permit, approval or authorization of,
or registration, filing or declaration with any Governmental Authority or other
Person (except for those that have already been obtained), is required in
connection with the execution, delivery, performance, validity or enforceability
of this Amendment or the Loan Documents, as applicable, by or against it; (iv)
this Amendment and the Loan Documents, as applicable, have been duly executed
and delivered by it; (v) this Amendment and the Loan Documents, as applicable,
constitute its legal, valid and binding obligations enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally or by general principles of equity;
(vi) it is not in default under the Loan Agreement and no Event of Default or
Unmatured Event of Default exists, has occurred or is continuing, and (vii)
Lender has fully performed all of its obligations under each of the Loan
Documents through the date of this Agreement, and Lender is in full compliance
with its obligations under each of the Loan Documents.
 
7. Expenses of Lender. Borrowers shall pay all reasonable expenses of Lender
incurred in connection with this Amendment, including reasonable attorneys fees
and expenses.
 
8. Execution and Counterparts.  This Amendment may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but when taken together shall constitute one and the same
Amendment.
 
9. Entire Agreement.  This Amendment, together with the other Loan Documents,
constitute the entire agreement of the parties in respect of the subject matter
described herein.  This Amendment may not be changed or modified except by an
agreement in writing signed by the Lender and the Borrowers hereto.
 
10. Headings.  Section headings used in this Amendment are for reference only
and shall not affect the construction of the Amendment.
 
11. Enforceability.  Except as expressly and specifically set forth herein, the
Existing Loan Agreement remains unmodified and in full force and effect.  In the
event of any discrepancy between the Existing Loan Agreement and this Amendment,
the terms and conditions of this Amendment will control and the Existing Loan
Agreement is deemed amended to conform hereto.
 
                                [SIGNATURES APPEAR ON FOLLOWING PAGES]

 

 
 
 

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Signature Page to
FIRST AMENDMENT TO LOAN AGREEMENT
(Maryland Acquisition Loan)

LENDER:

OHI ASSET III (PA) TRUST

 
By:
OHI Asset (PA), LLC, a Delaware limited liability company, its sole trustee

By:      Omega Healthcare Investors, a Maryland
 corporation, its sole member

 
By:           /s/ Daniel J. Booth
Name:      Daniel J. Booth
Title:        Chief Operating Officer
 

 
THE STATE OF  MARYLAND                              )
)
COUNTY OF       BALTIMORE                              )
 
This instrument was acknowledged before me on the 13th day of March, 2009, by
Daniel J. Booth, the Chief Operating Officer of Omega Healthcare Investors,
Inc., a Maryland corporation, the sole member of OHI Asset (PA), LLC, a Delaware
limited liability company, the sole trustee of OHI Asset III (PA) Trust, a
Maryland business trust, on behalf of said business trust.
 

Judith A. Jacobs                                                      
 
Notary Public, Baltimore County, MD
My commission expires: May 12, 2012
 

Page S- 1 of  S-3

 
 

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Signature Page to
FIRST AMENDMENT TO LOAN AGREEMENT
(Maryland Acquisition Loan)

BORROWERS:

BEL PRE LEASING CO., LLC
RIDGE (MD) LEASING CO., LLC
MARLBORO LEASING CO., LLC
FAYETTE LEASING CO., LLC
LIBERTY LEASING CO., LLC
HOWARD LEASING CO., LLC
PALL MALL LEASING CO., LLC
WASHINGTON (MD) LEASING CO., LLC
MARYLAND NH ASSET, LLC

By:           /s/ Charles R. Stoltz
Name:                      Charles R. Stoltz
Title:                      CFO and Treasurer

PARENT GUARANTORS:
                           OMG RE HOLDINGS, LLC
                                                         
                      OMG RE LEASING CO., LLC
OMG ASSET OWNERSHIP, LLC
HEALTH CARE FACILITY MANAGEMENT, LLC
RESIDENT CARE CONSULTING, LLC

By:           /s/ Charles R. Stoltz
Name:       Charles R. Stoltz
Title:         CFO and Treasurer

Page S-2 of S-3

 
 

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Signature Page to
FIRST AMENDMENT TO LOAN AGREEMENT
(Maryland Acquisition Loan)

STATE OF Ohio                                   )
) ss.
COUNTY OF Hamilton                        )
 
The foregoing instrument was acknowledged before me this 2nd day of March 2009,
by Charles R. Stoltz, who is the CFO and Treasurer of the limited liability
companies listed above, on behalf of all such limited liability companies.
 

Kathleen M.
Portman                                                                
 
Notary Public, Hamilton County, Ohio
My commission expires: March 28, 2012
 

Page S- 3 of  S-3

 
 

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List of Exhibits to
FIRST AMENDMENT TO LOAN AGREEMENT
(Maryland Acquisition Loan)

EXHIBITS

C           Scheduled Improvements

 
 

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FIRST AMENDMENT TO LOAN AGREEMENT
(Maryland Acquisition Loan)

EXHIBIT C

SCHEDULED IMPROVEMENTS

Facility
Address
City
ST
 
Allocation of $3.775M CAP-EX (1)
 
Bel Pre Health & Rehabilitation Center
2601 Bel Pre Road
Silver Spring
MD
    1,050,000.00  
Ellicott City Health & Rehabilitation Center
3000 N. Ridge Road
Ellicott City
MD
    300,000.00  
Forestville Health & Rehabilitation Center
7420 Marlboro Pike
Forestville
MD
    425,000.00  
Franklin Square Health & Rehabilitation Center (Fayette)
1217 W. Fayette Street
Baltimore
MD
    400,000.00  
Liberty Heights Health & Rehabilitation Center
4017 Liberty Heights Avenue
Baltimore
MD
    300,000.00  
Marley Neck Health & Rehabilitation Center
7575 E. Howard Road
Glen Burnie
MD
    1,050,000.00  
South River Health & Rehabilitation Center
144 Washington Road
Edgewater
MD
    250,000.00      
 
Total
    $ 3,775,000  

(1)           Specific improvements, budgets, and plans must be approved prior
to the commencement of any improvement.

Exhibit C  – Page 1 of 1

 
 

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