Document:

exhibit_4-13.htm

Exhibit 4.13

 

SHAREHOLDERS AGREEMENT

 

Made and entered into on the 28th day of February, 2011

By and between

 

	
1.

	
THE PHOENIX PENSION AND PROVIDENT FUND LTD.

ON BEHALF OF AND IN THE NAME OF THE PHOENIX COMPREHENSIVE PENSION

a company organized under the laws of the State of Israel

C.N. 51- 1751513

(“Phoenix Pension”); and

 

	
2.

	
THE PHOENIX INSURANCE COMPANY LTD.,

a company organized under the laws of the State of Israel, C.N. 52-0023185

(“Phoenix Insurance”)

(Phoenix Pension and Phoenix Insurance, collectively “The Phoenix”)

of the first part;

and

	
  

	 

	
3.

	
OPTIBASE LTD.,

a company organized under the laws of the State of Israel,

C.N. 52-0037078  (“Optibase”)

 

of the second part;

 

Each of Phoenix Pension, Phoenix Insurance and Optibase shall be referred to hereinafter as an “Initial Shareholder”. The Initial Shareholders and any person or entity who becomes a shareholder of OPCTN S.A., a private limited liability company registered Great Duchy of Luxembourg (the “Company”)  in the future is referred to herein as a "Shareholder".

The Initial Shareholders or the Shareholders, as applicable are together referred to as the “Parties”.

 

	
WHEREAS 

	
the Initial Shareholders, as of the date hereof, are the record holders of the entire issued and outstanding share capital of the Company in accordance with the proportions specified in Section 2.2 below; and

 

	
WHEREAS 

	
the Company wishes to acquire the entire issued and paid up share capital of Eldista GmbH, a private limited liability company registered in Switzerland (the “Subsidiary”), which is the sole owner of a real estate asset known as Centres des Technologies Nouvelles (CTN) situated at Plan-les-Ouates, Geneva (the “Real Estate”); and

 

	
WHEREAS 

	
the Initial Shareholders wish to set forth the relations between themselves;

 

NOW, THEREFORE, the Parties hereby declare, covenant and agree as follows:

 

	
1.

	
General

 

	
  

	
1.1.

	
Preamble. The Preamble to this Agreement forms an integral part hereof.

 

	
  

	
1.2.

	
Recitals. The recitals to this Agreement are an integral part hereof.

 

	
  

	
1.3.

	
Section headings. The section headings are for convenience and in no way alter, modify, amend, limit, or restrict any contractual obligations hereunder.

 

  

 

  

 

	
2.

	
   Company Share Capital

 

	
  

	
2.1.

	
Registered Capital

 

The registered share capital of the Company, as of the date hereof, is CHF 50,000  divided into 50,000 Shares with par nominal value of CHF 1 each (“Shares”).

 

	
  

	
2.2.

	
Issued and Paid Up Capital

 

As of the date hereof, the issued and paid up share capital of the Company is held as follows:

 

	
  

	
Optibase – fifty one (51%) percent of the issued and paid up share capital of Company consisting of 25,500 Shares.

 

	
  

	
The Phoenix – forty nine (49%) percent of the issued and paid up share capital of Company equal to 24,500 Shares as follows:

 

	
  

	
Phoenix Pension - fourteen percent (14%) of the issued and paid up share capital of Company consisting of 7,000 Shares.

 

	
  

	
Phoenix Insurance - thirty five percent (35%) of the issued and paid up share capital of Company consisting of 17,500  Shares.

 

	
  

	
2.3.

	
The ownership or entitlement to ownership of Shares by the Shareholders is referred to herein as the “Shareholdings”.

 

	
3.

	
Shareholders Meetings

 

	
  

	
3.1.

	
Meetings. Subject to applicable law, the Shareholders of the Company shall have a meeting (a “Shareholders Meeting”) at least once a year.

 

	
  

	
3.2.

	
Special Meetings. Special Shareholders Meetings shall be convened upon:

 

	
  

	
(a)

	
a majority vote of the Board requesting such meeting; or

 

	
  

	
(b)

	
a request by Shareholders holding at least ten percent (10%) of the outstanding Shares; or

 

	
  

	
(c)

	
a request by a  person or persons empowered by law to convene a Shareholders Meeting.

 

Each of the parties referred to in this Section 3.2 above shall include in their request to convene the Shareholders Meeting a detailed list of matters they wish to be discussed and the votes to be taken – at the Shareholders Meeting.

 

	
  

	
3.3.

	
Quorum. Subject to notice requirements set out below, the requisite quorum for convening a Shareholders Meeting (in this section 3.3 "Quorum") shall be the presence, in person or by proxy, of more than fifty percent (50%) of the outstanding Shares.  Without derogating from the foregoing, the presence, in person or by proxy of either of Optibase and Phoenix Insurance shall also be required to constitute a Quorum if, as applicable, either of The Phoenix and Optibase holds at least twenty percent (20%) of the outstanding Shares and together Optibase and The Phoenix hold at least fifty percent (50%) of the outstanding Shares. If either Optibase or The Phoenix holds fewer than twenty percent (20%) of the outstanding Shares but together Optibase and The Phoenix hold at least fifty percent (50%) of the outstanding Shares, then only the presence of that party holding at least twenty percent (20%) of the outstanding Shares shall be required.

 

If a Quorum is not present at the originally scheduled meeting, then the Shareholders Meeting shall be reconvened seven (7) days following the originally scheduled date at the same address and venue. Unless otherwise expressly confirmed by Phoenix Insurance, upon convening of the Shareholders Meeting, Phoenix Pension's holdings shall not be counted towards the minimum shareholdings required to constitute a Quorum or to attain the minimum 50% holdings together with Optibase as stipulated above.

  

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3.4.

	
Venue. The venue of the shareholding meetings shall be 6, rue Jean Bertholet, L-1233  Luxembourg, Luxembourg, or any other location in Europe as decided by the Board.

 

	
  

	
3.5.

	
Notice. Shareholders Meeting notices shall be sent by the Board forthwith following the request of any of the parties listed in Section 3.2 above, to all registered shareholders at least twenty-one (21) days prior to the date of the Shareholders Meeting by mail, facsimile or e-mail. A Shareholders Meeting notice shall include the date, time and place of the Shareholders Meeting as well as an outline of the matters to be discussed and the resolutions to be decided.

	
  

	
3.6.

	
Voting Rights.  Subject to Section ‎5 below, all decisions at the Shareholders Meetings shall be decided by a simple majority of the issued and paid up Shares present (whether in person or by proxy) at the Shareholders Meeting, without taking into account the votes of abstainees.  Each Share shall have one (1) vote. Notwithstanding the foregoing, regardless of the number of shares that The Phoenix may own, Phoenix Insurance shall not be permitted to vote more than forty nine percent (49%) of the outstanding Shares at a Shareholders Meeting (the “Phoenix Control Limitation”).  The Phoenix Control Limitation shall remain in effect until such time that the Phoenix delivers written notice to the Company that the Phoenix Control Limitation is terminated.

	
  

	
3.7.

	
Minutes. Minutes of the Shareholders Meeting shall be recorded in the English language, and any other language required by law and copies of such minutes shall be maintained at the offices of the Company.

	
  

	
3.8.

	
Meetings. The Shareholders may participate in Shareholder Meetings in person or by telephone or video conference, provided that each Shareholder participating in such meeting can hear all of the other Shareholders participating in such meeting.

	
  

	
3.9.

	
Resolutions by Unanimous Written Consent. To the extent permitted by applicable law, the Shareholders shall be permitted to pass resolutions by the unanimous written consent of all Shareholders without necessity of convening a Shareholders Meeting. For as long as the Initial Shareholders and their Permitted Transferees (herein defined) hold more than fifty percent (50%) of the Shares, any other Shareholder holding less than ten percent (10%) of the Shares shall be obligated to sign any written resolution proposed by the Initial Shareholders or his signature shall not be required if permitted by law.

 

	
4.

	
Board of Directors of the Company

 

	
  

	
4.1.

	
Powers. Subject to matters expressly reserved to the Shareholders Meetings under applicable law and/or hereunder, the business and affairs of the Company (including the nomination and compensation of the Company's general manager and the approval of the budget) shall be managed by the board of directors of the Company (the "Board").

 

	
  

	
4.2.

	
Composition of the Board.

 

	
  

	
4.2.1.

	
A Shareholder shall be entitled to appoint one (1) director to the Board for each twenty percent (20%) of the Shares held by such Shareholder.

 

	
  

	
4.2.2.

	
Notwithstanding Section 4.2.1, for as long as The Phoenix at its Permitted Transferees together own less than fifty percent (50%) of the Shareholdings, The Phoenix Insurance shall not be entitled to appoint more than one (1) director and one (1) observer to the Board.  In the event that The Phoenix owns fifty percent (50%) or more of the Shareholdings, then The Phoenix shall only be permitted to appoint more than one (1) director and one (1) observer to the Board if the Phoenix Control Limitation has been terminated.

 

  

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4.2.3.

	
Any Shareholder which has the right to appoint a director shall also have the right at any time to notify the Company by written notice if it wishes to remove and replace the director appointed.

 

	
  

	
4.2.4.

	
The initial Board shall be composed of three (3) directors, two (2) of whom shall be appointed by Optibase and one (1) of whom shall be appointed by Phoenix Insurance.  Phoenix Insurance shall also be entitled at any time to appoint one (1) observer to the Board. 

 

	
  

	
4.3.

	
Quorum.  A quorum for a meeting of the Board (in this section 4.3 "Quorum") shall require the presence of directors representing more than fifty percent (50%) of the outstanding Shares of the Company.  Without derogating from the foregoing, the presence of at least one director appointed by Optibase and one director appointed by Phoenix Insurance shall also be required to constitute a Quorum so long as the respective party holds at least twenty percent (20%) of the outstanding Shares and together Optibase and The Phoenix hold at least fifty percent (50%) of the outstanding Shares. If either Optibase or The Phoenix holds fewer than twenty percent (20%) of the outstanding Shares but Optibase and The Phoenix together hold at least fifty percent (50%) of the outstanding Shares, then only the presence of the director appointed by the party holding at least twenty percent (20%) of the outstanding Shares shall be required.

 

	
  

	
4.4.

	
Voting Rights.  Subject to Section 4.5 (Special Votes) and ‎5 Major Decisions) below, all decisions at the Board shall be decided by a simple majority of directors present (whether in person or by proxy) at the Board, without taking into account the votes of abstainees. Each director shall have one (1) vote and an observer shall not be permitted to vote at a Board meeting.

 

	
  

	
4.5.

	
Special Votes of the Board. The following decisions shall require the affirmative consent of the directors appointed by Optibase and Phoenix Insurance: (i) opening of bank accounts and (ii) engaging special advisors to the Company (including, accounting firm, lawyers) ("Special Votes").

 

	
  

	
4.6.

	
Meetings. The Board shall meet at least once every calendar quarter. The directors may participate in Board meetings in person or by telephone or video conference, provided that each director participating in such meeting can hear all of the other directors participating in such meeting.  Decisions of the Board may also be resolved by written consent provided all of the directors then serving shall have signed such written consent.

 

	
  

	
4.7.

	
Venue. The venue of the Board meetings shall be in Luxemburg, or any other location in Europe as shall be decided upon by the Board.

 

	
  

	
4.8.

	
Minutes. Minutes of the Board meetings shall be recorded in the English language, and in any other language required by law and copies of such minutes shall be maintained at the offices of the Company.

 

	
5.

	
Major Decisions

 

	
  

	
5.1.

	
Notwithstanding anything to the contrary in this Agreement, the decisions listed in Section 5.3 below (the “Major Decisions”) whether made by the Company with respect to itself or made by the Company in its capacity as a shareholder of the Subsidiary, shall require:

 

	
  

	
 5.1.1.

	
First, the approval of the Board (with the presence of a Quorum as required in Section 4 above); and if approved by the Board.

 

	
  

	
 5.1.2.

	
Second, the approval of the Shareholders Meeting (with the presence of a Quorum as required by Section 3 above) provided that the affirmative vote or written consents of both Optibase and The Phoenix shall be required if each party holds at least twenty percent (20%) of the outstanding Shares and Optibase and The Phoenix together hold at least fifty percent (50%) of the outstanding Shares.  If either Optibase or The Phoenix holds fewer than twenty percent (20%) of the outstanding Shares but Optibase and The Phoenix together hold at least fifty percent (50%) of the outstanding Shares, then only the vote of that party holding at least twenty percent (20%) of the outstanding Shares shall be required

 

  

4

  

	
  

	
5.2.

	
   Major Decisions:

 

	
  

	
5.2.1.

	
amending the Company’s or the Subsidiary's Articles of Association or other governing or charter documents;

 

	
  

	
5.2.2.

	
extending, transferring and/or otherwise changing the Company’s business activities and/or the Subsidiary’s business activities in a manner that materially effects the financial status of the Company and/or the Subsidiary’s, including by means of transfer of a material part of their assets;

 

	
  

	
5.2.3.

	
refinancing of the Subsidiary’s loans with a third party or obtaining financing from a third party for the Company or the Subsidiary;

 

	
  

	
5.2.4.

	
entering into agreements and/or introducing amendments into agreements between the Company or the Subsidiary and any Related Party relating to the management of the Real Estate, or relating to any other purpose. For the purposes of this Section 5.3, "Related Party" shall mean: any entity which (i) is an entity (i.e. including "person") which controls, or is controlled by or under common control with one of the Parties and “control” shall mean holding at least ten percent (10%) of all issued share capital and voting rights and rights to nominate ten  percent  10%) of the directors; or (ii) has business dealings with one of the Initial Shareholders or any of their Related Parties;

 

	
  

	
5.2.5.

	
causing the Subsidiary to renew, extend, or enter into a lease agreement (i) which relates to twenty-five percent (25%) or more of the leasable area of the Real Estate or (ii) which accounts for twenty-five percent (25%) or more of the lease fees generated from the Real Estate;

 

	
  

	
5.2.6.

	
investing funds exceeding the annual budget by CHF 1,000,000 in any given year or CHF 2,500,000 in the aggregate.

 

	
  

	
5.3.

	
   Termination of Consultancy Agreement and Transactions with Related Parties.

 

	
  

	
5.3.1

	
If The Phoenix holds at least twenty percent (20%) of the Shares, The Phoenix Insurance may elect to have the Company or the Subsidiary terminate any agreement with a Related Party of Optibase (including, without limitation, the Consultancy Agreement between the Subsidiary and Swiss Pro Capital - for as long as Swiss Pro Capital is a Related Party) (an "Optibase Related Party Agreement") by delivering notice to the other Initial Shareholder and to the Company.  Upon receipt of such notice, the Company shall terminate or shall cause the Subsidiary to terminate (as may be the case) such agreement.

 

	
  

	
5.3.2.

	
If Optibase holds at least twenty percent (20%) of the Shares, Optibase may elect to have the Company or the Subsidiary terminate any agreement with a Related Party of The Phoenix (a "Phoenix Related Party Agreement") by delivering notice to The Phoenix and to the Company. Upon receipt of such notice, the other Initial Shareholder, the Company shall terminate or shall cause the Subsidiary to terminate (as may be the case) such agreement.

 

	
  

	
5.3.3.

	
The other Initial Shareholder in sections 5.3.1 and 5.3.2 above shall be referred to in section 5.3.4 below as the "Interested Party".

 

	
  

	
5.3.4.

	
For the avoidance of doubt and notwithstanding any provisions to the contrary hereunder, the Parties confirm that if Phoenix Insurance requests to terminate an Optibase Related Party Agreement pursuant to Section 5.3.1 above or Optibase requests to terminate a Phoenix Related Party Agreement pursuant to Section 5.3.2 above, such termination shall not require the approval of the Board of the Company or the Board of the Subsidiary, or the resolution of the Shareholder's Meeting.  However if applicable law provides that the termination of such agreements requires the approval of the Board or the Shareholders Meeting, the Parties agree that the directors nominated by the Interested Party shall not participate in such Board resolutions and further, that the Interested Party shall not participate in the Shareholders' Meeting with regard to the termination of the respective Related Party agreement,  and accordingly the directors nominated by the Interested Party and the Interested Party shall not be counted for attaining the Quorums set out in sections 3 and section 4 above.

 

  

5

  

	 	
5.4.

	
In the event that the Company's approval is required to approve an action of the Subsidiary, the provisions of this Section 5 above shall apply mutatis mutandis to the Company’s decision regarding the Subsidiary as long as the Company Controls the Subsidiary,  i.e. both the Board and Shareholders' Meeting approvals as stipulated in this Section 5 shall be required.

 

	
6.

	
Funding of the Company’s Activities

 

	 	
6.1.

	
Funding of Critical Expenses

 

	
  

	
 6.1.1.

	
The Parties confirm and agree that if at any time the Subsidiary's and the Company's resources are insufficient to fund Critical Expenses (as defined hereinafter) and the Company or the Subsidiary is unable to obtain adequate third party financing, the Shareholders shall provide the funding required to finance the Critical Expenses in the manner described in this Section 6.1 in proportion to their Shareholdings (the "Critical Funding").

 

	
  

	 	
“Critical Expenses” shall mean (i) ordinary operating expenses of the Subsidiary and the Property that are not adequately funded by ongoing income from the Property; and/or (ii) capital expenditures for the Property that the management company for the Property ("MC") deems in its professional written opinion to be urgent and necessary to maintain the quality or physical structure of the Property ("MC Recommended Expenditure") up to CHF 2 million per event; and/or (iii) any MC Recommended Expenditure(s) which amounts to sums between CHF 2 million and CHF 5 million (inclusive), per event provided such capital expenditure is also recommended by a reputable third-party building engineering company.

 

	
  

	 	
The Company undertakes that within fourteen (14) days of being notified of a  MC Recommended Expenditure under sub section (iii) above, it shall request the professional opinion of a reputable third-party building engineering company.

 

	
  

	
 6.1.2.

	
The Company shall, forthwith upon the occurrence of any of the events set out in sub section 6.1.1 above, provide written notice to the Shareholders requesting that they provide the Critical Funding (the “Critical Funding Notice").  The Critical Funding Notice shall specify: (i) the total amount of the requested contribution (the "Critical Funding"); (ii) the portion of the Critical Funding requested from each Shareholder which shall be proportional to the Shareholdings); (iii) the proposed use of the requested funds; and (iv) the dates on which the Critical Funding is required which shall not be sooner than thirty (30) days from the date of the Critical Funding Notice.

 

	
  

	
 6.1.3.

	
The Shareholders undertake to cause the Company to deliver the Critical Funding Notice in order to fund Critical Expenses within seven (7) days of the date that the Company becomes aware of the need for Critical Funding (the "Notice Date").  If a Shareholder prevents the Company from delivering a Critical Funding Notice, the Company will nonetheless be deemed to have issued the Critical Funding Notice as of the Notice Date in the amount of the Critical Expenses and the Shareholders shall be obligated to provide the Critical Funding as set forth below.

 

  

6

  

	
  

	
  6.1.4.

	
The Shareholders undertake to provide the Critical Funding in the amounts and on the dates set out in the Critical Funding Notice.

 

	
  

	
  6.1.5.

	
Critical Funding shall be provided as a "Shareholder loan" unless if a Shareholders' Meetings is convened and the Shareholders Meeting determines,  that it will be paid to the Company in a different manner, i.e. as equity, convertible loan, guarantees and/or other means of securities or payments. The Shareholders will be entitled to the simultaneous repayment of the "shareholders loans" pro rata to their Shareholdings as shall be applicable at the time of repayment of such "shareholders loans", unless otherwise provided hereunder.

 

	
  

	
6.2.

	
Other Funding

 

	
  

	
 6.2.1.

	
In the event that first the Board and thereafter the Shareholders Meeting resolve that the Company requires additional funds to finance its or the Subsidiary's activities which are not "Critical Expenses" as referred to in sub-section 6.1 above, and the Company is unable to obtain adequate financing from its own resources or from third party lending institutions ("Other Funding"), then each Party shall be obliged to contribute such Other Funding or to provide  guarantees or similar undertaking to secure such Other Funding pro rata to its Shareholding.

 

	
  

	
 6.2.2.

	
Other Funding shall be provided to the Company in the same manner as prescribed for Critical Funding in Section 6.1.2, 6.1.4, and Section 6.1.5 shall apply mutatis mutandis.

 

	
7.

	
Dilution

 

	
  

	
7.1.

	
Default Notice.  If any Shareholder shall fail to contribute all or any portion of its share of Critical Funding or Other Funding (together, “Additional Funding”) within the applicable period of time (a “Defaulting Shareholder”), then the Board shall send a second notice (a “Default Notice”) to all Shareholders inviting the Shareholders who contributed their portion of the Additional Funding (the “Contributing Shareholder”) to provide the Defaulting Shareholder's share in the Additional Funding.

 

	
  

	
7.2.

	
Default Loan.  The Contributing Shareholders shall be entitled, but not required, to provide a shareholders loan to the Company up to the amount of the Defaulting Shareholders' unpaid portion of the Additional Funding (the "Unpaid Contribution"). Any loan funded by a Contributing Shareholder in lieu of a Defaulting Shareholder (a “Default Loan”) shall bear interest at a rate equal to the CHF SWAP rate plus 8%, but in any event not less than ten percent (10%) per annum. Interest shall accrue on any Default Loans from the date the funds are actually received by the Company until the date that the Default Loans are repaid in full.   Outstanding Default Loans shall be repaid by the Company prior to repayment of shareholder loans or distribution of dividends by the Company.

 

	
  

	
7.3.

	
Right to Cure.  Within six (6) months of receiving a Default Notice (the "Default Cure Period"), the Defaulting Shareholder shall have the right to pay to the Company the Defaulting Shareholders Unpaid Contribution together with any interest incurred by the Company under Default Loans that were made as a result of the Unpaid Contribution (the "Accrued Interest" and  collectively the "Repayment Amount"). The Company will promptly repay the related Default Loans with the Accrued Interest to the Contributing Shareholder  and will credit the Repayment Amount (less the Accrued Interest) against the Defaulting Shareholder's Unpaid Contribution.

 

  

7

  

	
  

	
7.4.

	
Dilution Notice.  If there remains Unpaid Contribution and/or outstanding Default Loan with Accrued Interest at the expiration of the Default Cure Period, then the Contributing Shareholders may provide written notice to the Company (a “Dilution Notice”) instructing the Company to: (a) convert (i) Defaulting Loans together with outstanding Accrued Interest; and/or (ii) at Contributing Shareholder's sole discretion its share in the Additional Funding  (together with accrued and unpaid interest),  or any part thereof,  into capital contributions of the Shareholders providing such funding; and (b) to dilute the shareholdings of the Defaulting Shareholder.

	
  

	
7.5.

	
Dilution. Pursuant to a the Dilution Notice the dilution of the Defaulting Shareholder's shareholdings in the Company shall be first based upon the Capital Dilution described below in Section 7.5.1 and followed, if so requested by the Contributing Shareholder under the Dilution Notice  by the Market dilution described in Section 7.5.2.

Capital Dilution.  Within thirty (30) days of Dilution Notice, the Company shall issue an amount of Shares to the Contributing Shareholders that will increase the percentage Shareholdings of the Contributing Shareholders to the Adjusted Shareholding Percentage.

"Adjusted Shareholding Percentage" means the percentage of Shares reflected in the equation below.

Excess Funding + Capital Funding

TCF

In the above formula:

“Excess Funding” means the sum of: (i) one hundred and fifty percent (150%) of the amount of the Default Loans (together with Accrued Interest) that was converted to a capital contribution; plus, if applicable pursuant  to 7.4 above, (ii) the amount paid by the Contributing Shareholder for its share of the Additional Funding that was converted to a capital contribution.

"Capital Funding" means the aggregate amount of capital contributions to the Company made by the Contributing Shareholder until the date of the Dilution Notice (whether as equity or outstanding shareholders loans or funds secured by guaranties or securities), as adjusted for dividends.

"TCF" means the total cumulative funding provided by all Shareholders to the Company (whether as equity or shareholders loans or funds secured by guaranties or securities) including the Default Loans and Additional Funding that are being converted to a capital contribution.

By way of example, if (i) Shareholder A (40% of Shares) and Shareholder B (60% of Shares) previously made cumulative contributions of CHF 40 and CHF 60 respectively and (ii) the Company requested Critical Funding in the amount of CHF 20, and (iii) Shareholder B provided CHF 20 of such Critical Funding and Shareholder A did not contribute, then:

Excess Funding of Shareholder B:  (i) 150% X CHF 8 (Default Loan) plus (ii) CHF 12 (the Contributing Shareholders portion) = CHF 24.

Capital Funding of Shareholder B:  CHF 60

TCF:  CHF 120.

  

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Shareholder B Adjusted Shareholding Percentage: (60+24)/120 = 70% of total Shareholdings

	
  

	
Market Dilution.  If the Contributing Shareholder has requested in the Dilution Notice that the dilution percentage be increased to reflect Market Value Dilution the Company shall issue an amount of Shares that will increase the percentage Shareholdings of the Contributing Shareholders to the MV Adjusted Shareholding Percentage.

"MV Adjusted Shareholding" means the percentage of Shares reflected in the equation below:

 

	

Excess Funding + Capital Funding

MV X 0.9

 

In the above formula:

“Excess Funding” means the sum of: (i) the amount of the Contributing Shareholder's Default Loans (including accrued interest) that was converted to a capital contribution and if applicable pursuant to section 7.4 above (ii) the amount paid by the Contributing Shareholder for its share of the Additional Funding that was converted to a capital contribution.

"Capital Funding" means the aggregate amount of capital contributions to the Company made by the Contributing Shareholder until the date of the Dilution Notice (whether as equity or outstanding shareholders loans or funds secured by guaranties or securities), as adjusted for dividends.

“MV” means the fair market value of the Company, as of the Default Notice as determined by one of the “big four” accounting firms selected by the Contributing Shareholder.

 

In any event, the percentage of Share issued by the Company shall not be less than the Capital Dilution Percentage.

	
  

	
7.6.

	
Dilution of Shareholder Loans. The amount of any outstanding shareholder loans owed by the Company to a Defaulting Shareholder shall be assigned to the Contributing Shareholders in a manner that is proportionate to the dilution of the Defaulting Shareholder's Shareholdings and the increase in the Contributing Shareholders Shareholdings.  The foregoing arrangement regarding assignment of shareholder loans shall be deemed to be included in the terms of every shareholder loan provided by Shareholders to the Company.

 

Upon assignment of the shareholders loan pursuant to the foregoing, the repayment rights will be adjusted to reflect the proportionate ownership of the Shareholders Loans (i.e. which reflect the new Shareholdings following the dilutions.

 

	
  

	
7.7.

	
Notwithstanding any of the provisions contained in this Agreement, the Defaulting Shareholder undertakes to vote in favor of all Shareholders Meeting resolutions and/or any other resolutions necessary to carry out the provisions of this Section 7, and to sign or issue all requisite documents and/or statements necessary for the implementation thereof. In the event the Defaulting Shareholder shall abstain, for whatever reason, from voting in favor of all shareholders resolutions necessary to carry out the above, the Defaulting Shareholder shall be deemed to have voted in favor of any decision pertaining to the above.

 

  

9

  

	
  

	
7.8.

	
In the event that dilution of the Defaulting Shareholder cannot be implemented due to restrictions of applicable law, the Parties shall act as if their Shareholdings have been adjusted according to this Section 7 and accordingly:

 

	
  

	
7.8.1

	
the shareholder loans shall be assigned and the  rights of repayment of shareholder's loans shall be adjusted  in accordance with Section 7.6 above; and

 

	
  

	
7.8.2

	
any other rights and obligations conferred upon the holder of Shares (including the rights to dividends and the right to participate in distribution of surplus capital) shall allocated among the Shareholders in accordance with the adjusted Shareholdings as calculated pursuant to this Section 7.

 

	
  

	
7.9.

	
Costs. Any cost incurred in the process of issuing and allotting additional Shares and assigning shareholder loans pursuant to this Section 7 shall be borne by the Defaulting Shareholder and, if not promptly paid by the Defaulting Shareholder, shall be included in the calculation of Excess Funding above.

 

	
  

	
7.10.

	
Losses.  Any losses and/or obligations the Company has accumulated, by the date of allotment of additional shares to the Contributing Shareholder  as the case may be, shall be allocated to the Shareholders pro rata to their Shareholdings prior to the date of allotment of the additional shares.

 

	
  

	
7.11.

	
For the purposes of this Section 7, Phoenix Insurance and Phoenix Pension shall be deemed one shareholder and, unless the Company is otherwise notified in writing by Phoenix Insurance, any dilution or increase of The Phoenix's Shareholdings shall be made in accordance with Phoenix Insurance's and Phoenix Pension's proportionate shareholdings.

 

	
8.

	
Share Transfer – General

 

	
  

	
8.1.

	
Forbidden Transfers.

 

	
  

	
8.1.1

	
No Shareholder shall sell, transfer, donate, assign or otherwise dispose of its respective Shares or other securities of the Company, whether by agreement or operation of law (a “Transfer”) other than pursuant to Sections 8, 9, 10 and 11. Other than with respect to the Initial Shareholders, a Transfer shall include a change in the beneficial interests of or control in the Shareholder.

 

	
  

	
8.1.2

	
No Transfer shall become effective unless the transferee has provided the Company and the other Shareholders with a confirmation in writing that it is bound by all terms and conditions of this Agreement.

 

	
  

	
8.1.3

	
None of the Shareholders shall be entitled to Transfer their Shares in the Company prior to the expiry of one (1) year as of becoming a Shareholder in the Company.

 

	
  

	
8.1.4

	
The Parties agree that only the rights and obligations set forth in this Agreement shall limit the Parties abilities to Transfer Shares. The Parties and the Company hereby waive any right of first refusal, pre-emption right, or other transfer limitations that may be imposed by Applicable Law on the Transfer of the Shares.

 

	
  

	
8.2.

	
Identity of Third Party Transferee

 

	
  

	
8.2.1.

	
Notification. A Shareholder desiring to sell its all or part of its Shares (a “Selling Shareholder”) shall notify the Company and those Shareholders holding more than twenty five percent (25%) of the outstanding Shares (the “Significant Shareholders”) at least twenty-one (21) days prior to entering into a binding agreement for the sale of such Shares (a “Transfer Notice”).  The Transfer Notice shall specify, among others:

 

	
  

	
(a)

	
The number of Shares the Selling Shareholder desires to sell (the “Offered Shares”);

 

	
  

	
(b)

	
The consideration per share the Selling Shareholder desires to receive; and

 

  

10

  

	
  

	
(c)

	
All other material terms and conditions of the desired transaction.

 

	
  

	
8.2.2.

	
Consent to Share Transfers.  Subject to the restrictions set forth below, the consent of Optibase and/or The Phoenix shall be required for any transfer of Shares to a third  party if Optibase and/or The Phoenix holds at least twenty percent (20%) of the outstanding Shares and Optibase and The Phoenix together hold at least fifty percent (50%) of the outstanding Shares.  If either Optibase or The Phoenix holds fewer than twenty percent (20%) of the outstanding Shares but together Optibase and The Phoenix hold at least fifty percent (50%) of the outstanding Shares, then only the consent of that party holding at least twenty percent (20%) of the outstanding Shares shall be required.  Optibase and The Phoenix shall not withhold their consent unless: (a) the transferee lacks good financial standing; (b) the transferee does not comply with all applicable anti-corruption and anti-money laundering laws and regulations; or (c) the transferee is a competitor of the party whose consent is required.

	
  

	
8.3.

	
Lien on Shares.  In the event that a Shareholder shall create a lien on its Shares, such Shareholder shall be obligated to inform the lien holder of the obligations under this Agreement.  The exercise of the lien shall be deemed a Transfer which is subject to the provisions of Sections, 8, 9, 10, and 11 hereunder.

	
  

	
8.4.

	
In any Transfer of Shares the Transferor shall assign to the Transferee its rights under shareholder loans in proportion to the transferred Shares.

	
9.

	
Permitted Transfers

 

	
  

	
9.1.

	
Sections 8.2, 10 and 11 shall not apply to the transfer of Shares to a Permitted Transferee.

 

	
  

	
9.2.

	
For the purposes of this Agreement, a “Permitted Transferee” means, an entity or person, as the case may be: (i) in which a Selling Shareholder holds, directly or indirectly, more than fifty percent (50%) of the equity rights and the rights to appoint the directors and/or management thereof, or (ii) which holds, directly or indirectly, more than fifty percent (50%) of the equity rights and the rights to appoint the directors and/or management of the Selling Shareholder, or (iii) in which an entity mentioned in (ii) above holds, directly or indirectly, more than fifty percent (50%) of the equity rights and/or the rights to appoint the directors or management thereof, or (iv) an entity which is controlled, directly or indirectly, by the Selling Shareholder or an entity mentioned in (i), (ii) and (iii) above.  A company or corporation shall be treated as being controlled by another if that other company or corporation is able to direct its affairs pursuant to a management contract and/or to control the composition of its board of directors or equivalent body, as well as the original Party in the event of a re- transfer.

 

	
  

	
9.3.

	
If a Shareholder transfers shares to a Permitted Transferee (and the transferor does not voluntarily subject itself to the rights set forth in Sections 8, 9, 10 and 11) and the transferee ceases to be a Permitted Transferee within twelve (12) months of the transfer, then the transferee shall be obligated to re-transfer the Shares to the transferring shareholder within thirty (30) days, on the same terms and conditions as when originally transferred. Following this twelve-month period, any change in the ownership or control of a Permitted Transfer shall be subject to the limitations set forth in Sections 8, 9, 10 and 11 of this Agreement.

	
10.

	
Right of First Offer

 

	
  

	
10.1.

	
The Significant Shareholders shall have an option, exercisable for a period of twenty one (21) days from the date of delivery of the Transfer Notice (the “Option Period”), to purchase not less than all of the Offered Shares for the same consideration per share and on the same terms and conditions set forth in the Transfer Notice. Such option may be exercised by delivering written notice to the Selling Shareholder (the “Acceptance Notice”).

  

11

  

	
  

	
10.2.

	
In the event that the Significant Shareholders do not exercise the option to purchase all of the Offered Shares during the Option Period, the option to purchase the Offered Shares shall terminate, and the Selling Shareholder shall, subject to Section11  below and Section 8 above be entitled to sell the Offered Shares to a third party within ninety (90) days of the expiration of the Option Period (the “Sale Period”) upon terms and conditions that are not significantly more favorable to the Selling Shareholder than the terms specified in the Transfer Notice.

	
  

	
10.3.

	
If the Selling Shareholder does not complete the sale of the Offered Shares during the Sale Period, then the Selling Shareholder shall again be obligated to deliver a Transfer Notice and a subsequent sale shall be subject to this Section 10 anew. Notwithstanding the foregoing, if the Selling Shareholder entered in to a binding sale agreement during the Sale Period and the completion of the sale of the Offered Shares is delayed due to a required statutory approval, then the Selling Shareholder shall be entitled to complete the sale according to the terms of the sale agreement even if the completion date occurs after the Sale Period.

 

	
11.

	
Tag Along

 

	
  

	
11.1.

	
During the Option Period, a Significant Shareholder may inform the Selling Shareholder in writing that it desires to join in the sale of the Offered Shares (a “Participation Notice” and a “Participating Shareholder”).

 

	
  

	
11.2.

	
If the Participating Shareholder delivers a Participation Notice, then the Seller shall not enter into a binding sale agreement unless the purchaser of the Shares (the “Purchaser”) agrees to purchase, on the same terms and conditions, a number of Shares held by the Participating Shareholder that is proportionate to the relative Shareholdings of the Selling Shareholder and the Participating Shareholder.

 

	
  

	
11.3.

	
If a Significant Shareholder does not deliver a Participation Notice during the Option Period, then the Significant Shareholder will not have a right to participate in the sale of Shares and the Selling Shareholder shall have the right to sell the Shares during the Sale Period.

 

	
  

	
11.4.

	
If the Selling Shareholder does not complete the sale of the Offered Shares during the Sale Period, then the Selling Shareholder shall again deliver a sale notice which will be subject to the Tag Along rights set forth in this Section 11. Notwithstanding the foregoing, if the Selling Shareholder entered in to a binding sale agreement during the Sale Period and the completion of the sale of the Offered Shares is delayed due to a required statutory approval, then the Selling Shareholder shall be entitled to complete the sale according to the terms of the sale agreement even if the completion date occurs after the Sale Period.

 

	
12.

	
Drag Along

 

	
  

	
12.1.

	
If, following the fourth (4th) year anniversary of this Agreement, (i) an offer is made by an Unrelated Third Party (as defined below) (an “Acquiring Party”) to purchase one hundred percent (100%) of the Shares and a Shareholder holding at least forty percent (40%) of the outstanding Shares agrees in writing to sell its Shares to such Acquiring Party, the remaining shareholder/s shall be obligated, subject to Section 12.2 below, to sell all their Shares to the Acquiring Party on the same terms and conditions proposed by the Acquiring Party.  For the purposes of this Section 12, the shareholdings of Phoenix Insurance and Phoenix Pension shall be aggregated to determine whether such parties meet the above forty percent (40%) threshold.

 

	
  

	
12.2.

	
Notwithstanding the foregoing, an Initial Shareholder and a Significant Shareholder will not be obligated to sell its Shares to the Acquiring Party unless the proceeds from such sale, operation costs and transaction costs reflect an Internal Rate of Return (IRR) of at least twenty percent (20%).

 

	
  

	
12.3.

	
An “Unrelated Third Party” shall mean any entity which does not control or which is not controlled by a Significant Shareholder.  For the purpose of this section, “control” shall mean holding at least ten percent (10%) of all issued share capital and voting rights and rights to nominate ten percent (10%) of the directors.

 

  

12

  

 

	
13.

	
Information and Reporting

 

	
  

	
13.1.

	
The Company shall prepare and approve quarterly reviewed financial reports and yearly audited financial reports in the form, content and deadlines as required under SEC rules and the Israeli Securities Legislation, and shall provide these reports to its Shareholders, which may incorporate or refer to them in their own financial reports. The Company shall obtain all necessary consents from the Company's accountants in order to effect the foregoing.  In any case, both the quarterly and yearly financial reports shall also be prepared in accordance with US GAAP and IFRS. Quarterly financial reports and yearly financial reports, as specified in this Section 13.1, shall be prepared by the Company no later than the 30 days after the last day of the quarter and 60 days after the last day of the year for which such reports are referring to, respectively.  Tax reports for the Company shall be submitted by the Company in accordance with applicable law, and not later than March 1st of each calendar year.

 

	
  

	
13.2.

	
The Real Estate shall be appraised at the end of each calendar year by an experienced appraiser. The identity of the appraiser will be determined by the Parties by mutual consent. The appraiser will provide the Company with a draft report, regarding its reevaluation of the Real estate, no later than the 15th of December, and a signed copy of such report no later than the 31st of December of each calendar year.

 

	
  

	
13.3.

	
The outstanding loan at the date hereof, granted to the Subsidiary by Credit Suisse, or any other loan granted to the Subsidiary as of the date hereof which shall either replace the outstanding loan or be in addition thereto (collectively the “Loans”), shall be appraised at the end of each calendar year, by an experienced assessor, the identity of whom will be determined by the Parties by mutual consent. Such reevaluations of the Loans shall be submitted by the assessor no later than the 15th of December, and a signed copy of such reevaluations report no later than the 31st of December of each calendar year.

 

	
  

	
13.4.

	
The Company shall provide the Shareholders, on a monthly basis, reports about the ongoing activity of the Company, in a format to be agreed between the Parties.

 

	
  

	
13.5.

	
The Company will provide the Shareholders with a yearly budgetary report, in accordance with the specifications, determinations and requirements of the Shareholders, no later than the first day of December, for each calendar year.

 

	
  

	
13.6.

	
Without derogating from the foregoing, upon a written request thereto by any of the Shareholders, the Company shall provide the Parties with the requested information on the Company’s activities.

 

	
  

	
13.7.

	
Immediately upon receipt of a notice from the relevant authorities or any third party that a suit, action, claim, charge, cause of action or procedure has been commenced, the Company shall inform that Shareholders thereof.

 

	
14.

	
Dividend Distribution

 

	
  

	
14.1.

	
The Parties agree that the Company will not distribute dividends to the Shareholders until the Company has first repaid all outstanding Default Loans including any unpaid Accrued Interest thereon.

 

	
  

	
14.2.

	
Subject to the limitations set forth herein, the Company shall distribute to its Shareholders all funds that are available for distribution as dividends (and shall cause the Subsidiary to act in the same manner).  Notwithstanding the foregoing, the Company shall at all times maintain funds in the Subsidiary that are necessary for the operation of the Property for a period of at least six (6) months.

 

  

13

  

	
15.

	
Representations and Warranties

 

	
  

	
15.1.

	
As of the date hereof, each Party represents and warrants to the other Party that:

 

	
  

	
15.2.

	
It is duly organized, validly existing and in good standing under the applicable laws of the state of its incorporation.

 

	
  

	
15.3.

	
The execution and delivery by it of this Agreement has been duly authorized by all requisite corporate action and this Agreement and the obligations and resulting transactions contemplated hereby, constitute valid and legally binding obligations with respect thereto, enforceable against it in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws affecting the rights of creditors generally and by general principles of equity.

 

	
  

	
15.4.

	
It is not subject to any restriction, obligation, agreement, law or order which prohibits or would be violated by the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated herein or pursuant to which the consent of any person or authority is required.

 

	
  

	
15.5.

	
It is not subject or party to any civil, criminal, administrative, or investigative proceeding which may adversely affect or challenges the legality, validity or enforceability of the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.

 

	
  

	
15.6.

	
No administrator, examiner, receiver, liquidator, trustee or similar officer has been appointed with respect to it or any of its assets and no action by any third party or governmental authority for its winding-up, liquidation or dissolution is pending or threatened.

 

	
  

	
15.7.

	
It has no contract, understanding, agreement or arrangement with any person to transfer or grant a participation or right to any person, with respect to any interests in the Company.

 

	
16.

	
Non-Disclosure

 

No Party shall, without the express prior written consent of the other Party, directly or indirectly, disclose or divulge to any other person or entity any proprietary, confidential, sensitive or trade secret information of or concerning the Company or its past, present or future business activities, operations, condition or affairs (“Confidential Information”) nor shall any Party, directly or indirectly, make use of any Confidential Information which is for its own benefit or the benefit of a third party. Confidential Information does not include information that: (a) is or becomes publicly available other than as a result of a breach of this Agreement or other obligations of confidentiality imposed on such Party; (b) is already known or rightfully received by the Party free of restriction and without breach of this or any other obligation. Nothing herein shall be construed to prohibit disclosure of Confidential Information to legal or regulatory authorities under compulsion of legal process, provided, however, that the Party promptly notifies the other Party and cooperates with the Company so that all action legally permissible shall be taken by the Party compelled to produce or disclose Confidential Information to limit the nature and extent of the disclosure of Confidential Information, solely to the persons and for the purposes required by said law or regulation. Nothing in this section shall prohibit the Parties from including the results from operations of the Company in the appropriate financial statements of such Party as required by applicable accounting rules.

 

	
17.

	
Termination

 

	
  

	
17.1.

	
This Agreement shall terminate on the earlier of the dates on which: (i) all the Shares are held by one and the same shareholder or a third party; (ii) an IPO of the Company is consummated; (iii) the consolidation or merger of the Company with or into a third party, resulting in the Company not being the surviving entity immediately after the consummation of such transaction is consummated; (iv) the Parties mutually agree in writing this Agreement is terminated; or (v) with respect to a Party, upon a liquidator, trustee in bankruptcy, receiver or other similar officer being appointed to or over such Party or otherwise seizing control over all or a substantial part of the assets of such Party, provided that a notice of termination has been given by the other Parties.

 

  

14

  

	
  

	
17.2.

	
Upon termination of this Agreement, all further obligations of the Parties under this Agreement shall terminate, provided however that no Party shall be relieved of any obligation that accrued prior to such termination or of any liability arising from any prior breach by such Party of any provision of this Agreement.

	
18.

	
Articles of Association

	
  

	 	
The provisions of this Agreement, regulating the legal relationship between Phoenix Pension, Phoenix Insurance and Optibase as shareholders and  between  themselves and the Company shall be included in the Company’s Articles of Association. In the event of conflicts arising between this Agreement and the Articles of Association of the Company, the provisions of this Agreement shall prevail and regulate the rights and obligations of the Parties between themselves.

	
  

	
The Parties agree to cause the Subsidiary to adopt Articles of Association that reflect the terms of this Agreement which pertain to the Subsidiary, including without limitation, with respect to the provisions  of Section 5 hereunder.

	
19.

	
Governing Law

 

This Agreement shall be governed by and construed in accordance with the laws of Israel except for matters which pertain strictly to corporate issues which are required by the laws of the Great Duchy of Luxemburg to be governed by and construed in accordance with the laws of the Great Duchy of Luxemburg (respectively, the “Applicable Law”).

 

	
20.

	
Settlement of Disputes; Arbitration.

 

	
  

	
20.1.

	
The Parties shall endeavor to settle amicably any dispute, controversy or claim (collectively “Dispute”) arising out of or in connection with this Agreement, its interpretation and implementation. If the Parties cannot settle such Dispute within  fourteen (14) days they shall refer the dispute to the CEO’s of the Parties.  If the CEO’s will not reach an agreement within fourteen (14) days as of the Dispute being referred to them, such Dispute may be referred to arbitration by any of the Parties and the provisions of Section 20.2 shall apply.

 

	
  

	
20.2.

	
The Parties hereby agree and acknowledge that any disputes or disagreements and/or differences of opinion whatsoever, about any matter related to or in connection with this Agreement, including, without limitation, regarding the interpretation, performance or violation thereof (and including in connection with the jurisdiction of the Arbitrator pursuant to this clause), not resolved pursuant to the provisions of sub-section 20.1 above shall be considered and determined by arbitration proceedings before an arbitrator to be selected by the Parties.

 

	
  

	
20.3.

	
In the event that the Parties are unable to agree on an arbitrator, then each Party shall designate a representative which is an experienced arbitrator in Israel.  The Parties' representatives shall meet and agree upon the identity of a third party who shall serve as the arbitrator for the Parties' dispute.

 

	
  

	
20.4.

	
The arbitration shall take place in Tel-Aviv, Israel. The language to be used in arbitration shall be Hebrew provided however that if the Company is a Party to the dispute the language to be used in the arbitration procedures shall be English. An arbitral award made hereunder shall be final and the Parties agree to carry out such award without delay. Any arbitral award made hereunder may be entered into the court of competent jurisdiction for executing thereof.

 

	
  

	
20.5.

	
This arbitration clause under this Section 20 shall be treated as an arbitration contract between the Parties for all intents and purposes and the provisions of the Israeli Arbitration Law of 1968 (the “Arbitration Law”) shall be applied to the arbitration proceedings and the Arbitrator, unless the Parties expressly agree to the contrary.

 

  

15

  

	
  

	
20.6.

	
Prior to the beginning of the arbitration proceedings, the Arbitrator shall disclose to the Parties any and all information concerning his/her direct and/or indirect relationships with any of the Parties, their stockholders and/or their affiliates, whatever they may be, and after hearing each side’s objections concerning any such relationships, and his/her ability to arbitrate objectively, the Arbitrator shall determine whether or not he/she is capable to continue in his/her capacity as the Arbitrator.

 

	
  

	
20.7.

	
In any arbitration or legal dispute arising hereunder, the prevailing party shall be entitled to recovery of its legal costs and fees, and an award of these fees shall be included in the Arbitrator’s findings.

 

	
  

	
20.8.

	
The Arbitrator shall record its decision in writing stating the basis and grounds thereof, and shall take its decisions entirely on the basis of the substantive law of the State of Israel and shall be subject to any evidence rules and/or regulations and the procedures rules and regulations. The Arbitrator shall not have the power to perform any provisions of this Agreement or to impose any obligation on any of the Parties, or take any other action, which could not be imposed or taken by a court in the State of Israel. The decision of the Arbitrator shall be final to the fullest extent permitted by law and a judgment by any court of competent jurisdiction may be entered thereon. The Parties shall keep the proceedings and any decision made by the arbitrator in confidence, except to the extent necessary to enforce a decision of the Arbitrator by judicial proceedings.

 

	
  

	
20.9.

	
Any of the Parties shall be entitled to request to appeal any arbitration ruling given by the Arbitrator before a duly authorized court, if that Party believes that the Arbitrator has made a basic error in the application of the law that could result in a miscarriage of justice. The appeal process and procedures shall be governed by Section 29B of the Arbitration Law.

 

	
  

	
20.10.

	
The Arbitrator or the Parties shall be entitled to nominate an expert to rule on certain issues in connection with the arbitration proceedings, whose decision shall be final and binding upon the Parties, and shall not be subject to any arbitration proceedings.

 

	
  

	
20.11.

	
The Arbitrator’s fees shall be paid by the Parties, shared equally between them, unless the Arbitrator rules otherwise.

 

	
21.

	
Jurisdiction.

 

Subject to Section ‎20, the competent courts of Tel-Aviv, Israel shall have exclusive jurisdiction concerning any matter arising out of this Agreement or which, under the laws of Israel the competent court has auxiliary authority to that of the arbitrator.

 

	
22.

	
Miscellaneous

 

	
  

	
22.1.

	
Entire Agreement. This Agreement and all agreements and instruments to be delivered by the Parties pursuant hereto, represent the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof and supersede all prior oral and written and all contemporaneous oral negotiations, representations, commitments and understandings between such Parties not contained in this Agreement.

 

	
  

	
22.2.

	
Amendments, Waivers and Modifications. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Parties.

 

	
  

	
22.3.

	
Negotiations. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

 

	
  

	
22.4.

	
Delays or Omissions; Waiver. No delay or omission to exercise any right, power, or remedy accruing to any of the Parties upon any breach or default by the other Party under this Agreement shall impair any such right or remedy nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein or in any similar breach or default thereafter occurring.

 

  

16

  

	
  

	
22.5.

	
Severability. Any provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction, provided that such invalidity does not undermine the purpose and intent of this Agreement.

 

	
  

	
22.6.

	
Notices. Any notice, consent, authorization, designation and request and other communication required or permitted to be given under this Agreement shall be:

 

	 	
i.

	
in writing;

 

	 	
ii.

	
addressed to the Party to be notified at the following address and numbers, unless otherwise notified by the Party to be notified:

 

if to Optibase to:

Optibase Ltd.

7 Shenkar Street

Herzliya 46725, Israel

With a copy to:

Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.

One Azrieli Center, Round Building, 39th Floor

Tel-Aviv 67021, Israel

Attention: Lawrence Sternthal, Adv.

 

if to The Phoenix to:

The Phoenix Israel Insurance Company Ltd.

53 Derech Hasalom

Givatayim 53454, Israel

If delivered personally, shall be deemed to have been delivered upon delivery;

 

If sent by mail, shall be deemed to have been delivered 72 hours after the delivery thereof to the post office; and

 

If sent by facsimile or any other electronic mean, shall be deemed to have been delivered upon the receipt of any proof of receipt of such facsimile or electronic means by the recipient.

 

	
  

	
22.7.

	
No Third Party Beneficiary.  None of the provisions of this Agreement shall be construed as existing for the benefit of any creditor of the Company or the Shareholders or for the benefit of any other person, and no provision shall be enforceable by a party not a signatory to this Agreement.

 

 [Remainder of Page Left Intentionally Blank]

 

  

17

  

IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties hereto as of and on the date first above written.

 

	

 

 

OPTIBASE LTD.

 

	

THE PHOENIX PENSION AND PROVIDENT 

FUND LTD. ON BEHALF OF AND IN THE 

NAME OF THE PHOENIX 

COMPREHENSIVE PENSION

	

 

By: /s/ Tom Wyler

     Name: Tom Wyler

     Title:   President and CEO

	

 

By: /s/ Eyal Lapidot

     Name: Eyal Lapidot

     Title:   CEO

	 	 
	

By: /s/ Alex Hilman

     Name: Alex Hillman

     Title:  Chairman of the Board of Directors

	

By: /s/ Gady Greenstein

     Name: Gady Greenstein

     Title:   CIO

	 	 
	

By: /s/ Amir Philips

     Name: Amir Philips

     Title:   Chief Financial Officer

	 
	 	 
	 	

THE PHOENIX INSURANCE COMPANY LTD.

	 	 
	 	

By: /s/ Eyal Lapidot

     Name: Eyal Lapidot

     Title:   CEO

	 	 
	 	

By: /s/ Gady Greenstein

     Name: Gady Greenstein

     Title:   CIO

 

  

18

  

The Company hereby acknowledges and agrees to the terms of this Shareholders Agreement and undertakes to perform all the obligations of the Company under this Agreement including, without limitation, in order to give effect to the Parties' undertakings hereunder.

OPCTN S.A.

By: /s/ Alex Hilman

     Name:  Alex Hillman

     Title:   Member of the Board of Managers

By: /s/ Yves Mertz

     Name: Yves Mertz

     Title:   Member of the Board of Managers

By: /s/ Detlef Xhonneux

     Name: Detlef Xhonneux

     Title:   Member of the Board of Managers

 

19exhibit_4-14.htm

Exhibit 4.14

 

Agreement no.: 3301854000

LOAN AGREEMENT

between

Optibase Bavaria GmbH & Co KG,

c/o McCafferty, Maximilianstraße 47, 80538 Munich, Germany

(hereinafter referred to as the "Borrower")

and

Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft

Postal address: Rosenstraße 2, 20095 Hamburg

 

Sales tax ID no.: DE811141281

(hereinafter referred to as the "Bank")

 

1. Loan amount

The Bank shall grant the Borrower a loan in the amount of

€ 21,000,000.00

(in words: twenty-one million euros)

2. Net loan amount

The loan shall be awarded at a payout price of 100%.

The one-off, immediately owed, not term-related processing fee totals 0.55% of the loan amount of € 21,000,000.00, i.e. € 115,500.00 (see Clause 5.2).

 

Please also see Clause 5.2 for the costs that must be paid to the Bank, and Clause 5.3 for the other costs.

 

  

Page 1

  

3. Purpose

 

3.1 The loan shall partially serve as collateral for the purchase price for a portfolio consisting of 27 commercial properties (food markets operated by EDEKA Südbayern GmbH (22) and Buchbauer GmbH (5)) in Bavaria (26) and Saxony (1) with the following addresses (see Appendix 1 for details), whereby the loan shall not include one property (Salzweg), since it will no longer be operated:

 

	
1

	
93176

	
Beratzhausen

	
Staufferstraße 7

	
2

	
93413

	
Cham

	
Darsteiner Str. 10

	
3

	
93167

	
Falkenstein, S-A

	
Regensburger Str. 12

	
4

	
84140

	
Gangkofen

	
Frontenhausener Str. 2c

	
5

	
85049

	
Ingolstadt

	
Krumenauer Str. 58

	
6

	
87437

	
Kempten-Lenzfried

	
Wettermannsberger Weg 1

	
7

	
86438

	
Kissing

	
Bahnhofstr. 40c

	
8

	
93462

	
Lam

	
Arberstr. 76

	
9

	
83661

	
Lenggries

	
Bergbahnstraße 5

	
10

	
92431

	
Neunburg v. Wald

	
Ambergerstr. 14

	
11

	
09465

	
Neudorf (Sehmatal)

	
Crottendorfer Straße 3

	
12

	
93081

	
Obertraubling

	
Edekastr. 5

	
13

	
87772

	
Pfaffenhausen

	
Industriestr. 4

	
14

	
85298

	
Scheyern

	
Fernhager Str. 1-3

	
15

	
94508

	
Schöllnach

	
Leutzing 2

	
16

	
94518

	
Spiegelau

	
Konrad Willsdorf-Str. 1a

	
17

	
94234

	
Viechtach

	
Mönchshofstr. 60

	
18

	
94161

	
Ruderting

	
Passauer Straße 26 a

	
19

	
94107

	
Untergriesbach

	
Kreuzwiesenweg 1

	
20

	
94538

	
Fürstenstein

	
Vilshofener Str. 13

	
21

	
94110

	
Wegscheid

	
Passauer Straße 78

	
22

	
93192

	
Rossbach (Wald)

	
Bahnhofstraße 1

	
23

	
94269

	
Rinchnach

	
Herrenmühle 2

	
24

	
93466

	
Chamerau

	
In der Grube 2

	
25

	
94060

	
Pocking

	
Marktplatz 5b

	
26

	
94575

	
Windorf (Hidring)

	
Turmstraße 2a

(hereinafter referred to as the "Mortgage Property" or "Mortgage Properties")

  

Page 2

  

wherein the total financing is calculated as follows (in accordance with the Borrower's calculation of 28 November 2014):

 

	Purchase price financed properties   	 	€	29,550,000.00	 
	Purchase price Salzweg	 	€	200,000.00	 
	Ancillary acquisition costs	 	€	2,200,000.00	 
	Extension Lenggries  	 	€	600,000.00	 
	Total cost 	 	€	32,550,000.00	 
	less equity	 	€	11,550,000.00	 
	Total financing 	 	€	21,000,000.00	 

 

Deviations from the financing structure described here are only possible with the prior written approval of the Bank.

 

4. Term and repayment

4.1

The loan has a term of 5 years.

Irrespective of the other provisions in this Agreement, the loan for € 21,000,000.00 shall fall due for repayment no later than on 31 May 2020 for the amount of the remaining capital valued at that time.

 

4.2

The loan must be repaid in quarterly instalments after payout, i.e., in the amount of € 105,000.00 on 31 March, 30 June, 30 September, and 31 December of each year.

If a payment falls due on a day that is not a bank workday, the payment date shall be shifted to the following bank workday in the same calendar month, or to the immediate preceding bank workday in the event that the next bank workday falls in the following month ("modified following").

The month is calculated with the exact days and the year is calculated with 360 days (act/360). Applicable holiday calendar is the TARGET calendar.

 

4.3 Allocated Loan Amounts (ALA) and Release Amounts in the case of a sale of individual Mortgage Properties

The Mortgage Properties individually listed in Clause 3.1 are Allocated Loan Amounts (ALA) of the loan amount stated in Clause 1 ("Initial ALA"). The following table provides the corresponding amounts.

 

  

Page 3

  

 

	
Mortgage property

	
Initial ALA

	
Minimum

	  	
in €

	
Release amounts

in €

	
1. Beratzhausen

	
550,545

	
660,700

	
2. Cham

	
1,664,589

	
1,997,500

	
3. Falkenstein, S-A

	
900,303

	
1,080,400

	
4. Gangkofen

	
997,458

	
1,197,000

	
5. Ingolstadt

	
647,700

	
777,200

	
6. Kempten-Lenzfried

	
1,424,940

	
1,709,900

	
7. Kissing

	
1,198,245

	
1,437,900

	
8. Lam

	
654,177

	
785,000

	
9. Lenggries

	
2,169,795

	
2,603,800

	
10. Neunburg v. Wald

	
492,252

	
590,700

	
11. Neudorf (Sehmatal)

	
602,361

	
722,800

	
12. Obertraubling

	
615,315

	
738,400

	
13. Pfaffenhausen

	
777,240

	
932,700

	
14. Scheyern

	
770,763

	
924,900

	
15. Schöllnach

	
744,855

	
893,800

	
16. Spiegelau

	
848,487

	
1,018,200

	
17. Viechtach

	
459,867

	
551,800

	
18. Ruderting

	
1,418,463

	
1,702,200

	
19. Untergriesbach

	
667,131

	
800,600

	
20. Fürstenstein

	
417,767

	
501,300

	
21. Wegscheid

	
764,286

	
917,100

	
22. Rossbach (Wald)

	
825,818

	
991,000

	
23. Rinchnach

	
408,051

	
489,700

	
24. Chamerau

	
474,116

	
568,900

	
25. Pocking

	
194,310

	
233,200

	
26. Windorf (Hidring)

	
310,896

	
373,100

In the case of a divestiture of individual Mortgage Properties prior to the final maturity date, a Release Amount must be paid for the release of the property-specific collateral. The Release Amount is determined by the higher of the following alternatives:

 

	
  

	
a)

	
the minimum Release Amount listed in the table, and

	
  

	
b)

	
75% of the generated net sales proceeds for the corresponding Mortgage Property after the deduction of the standard costs and taxes in connection with the sale. The Bank reserves the right to request proof of the costs and taxes.

The respective Release Amount may not be more than the total from the loan amounts still outstanding on the respective release date plus owed interest, fees, other costs from this Agreement and the exit fee in accordance with Clause 5.5 and the refinancing damage in accordance with Clause 5.6 of this Agreement.

  

Page 4

  

After the respective Release Amount plus allocated interest, fees, other costs from this Agreement and the exit fee in accordance with Clause 5.5, and the refinancing loss in accordance with Clause 5.6 of this Agreement have been received in the loan account, the Bank shall release the respective property-specific collateral (if need be, through a trustee by concluding an appropriate trustee agreement prior to the receipt of the Release Amount).

 

The provisions in this Clause 4.3 shall not apply if the sale of one or more Mortgage Properties and a corresponding partial repayment of the loan means that the DSCR ratio in accordance with Clause 9.1 and/or the LTV ratio in accordance with Clause 9.2 cannot be observed. In this case, the Bank reserves the right to refuse approval for the sale of these Mortgage Properties.

The provisions in this Clause 4.3 shall not apply if the Bank terminated the loan, irrespective of the reasons for termination.

 

5. Conditions

5.1.1 The loan shall bear interest from the closing date/partial closing date; if the payout takes place through a trustee, it shall bear interest from the date of the transfer to the trustee.

The loan shall bear interest at an amount of 1.75% p.a. above the 3 month EURIBOR from the closing date. The Bank shall set the interest rate for each interest period on the basis of the 3 month EURIBOR published by Reuters two bank workdays before the first payout or the expiration of the current interest period at approx. 11:00 am MEZ and notify the Borrower immediately thereof. In deviation from this, the interest periods shall end in each case on the repayment days or on the final maturity date as specified in accordance with Clause 4. If interest periods of less than 3 months result, the EURIBOR for this time period shall form the basis of the interest calculation.

If the interest rate is calculated on the basis of the EURIBOR and no EURIBOR interest rate exists at the agreed point in time, the interest rate for the selected interest period shall be 1.75% p.a. above the Bank's interbank bid rate for term loans with a corresponding term.

If the reference interest rate falls below zero, it is considered to be set at zero.

The Borrower shall be obligated to limit the interest burden (including margin) for the loan to a maximum of 2.50% p.a. (2.5% per year) by concluding a suitable interest rate hedge before the first payout of the loan.

	
  

	
(a)

	
A suitable interest rate hedge is an interest rate hedge derivative (e.g., swap, cap or other financial derivatives) on the basis of the German Framework Agreement for Financial Forward Transactions (Deutschen Rahmenvertrages für Finanz-termingeschäfte // DRV).

	
  

	
(b)

	
The suitable interest rate hedge must be guaranteed and maintained until the last day of repayment.

  

Page 5

  

 

	
  

	
(c)

	
The suitable interest rate hedge should be agreed, preferably, with DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main.                               The Borrower may also conclude the derivative with another bank if this other bank is a bank with at least an A+ rating (for current, non-subordinated, uncollateralized liabilities) from a recognized rating agency. Any (incl. subordinate) hedging by another bank with respect to the collateral pledged for the loan by the Bank is prohibited.

	
  

	
(d)

	
If a (partial) repayment – besides the regular repayments – of a hedged amount takes place prior to the expiration of the term for the suitable interest rate hedge, the suitable interest rate hedge shall be closed for the amount repaid prematurely. The suitable interest rate hedge must also be closed if the loan is not accepted in part or in full.

	
  

	
(e)

	
For the conclusion of the interest rate hedge with DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, the Borrower shall place an order with the Bank, in accordance with the appendix 2, for the assumption of the guarantees listed in more detail there prior to the conclusion of the interest rate hedge.

	
  

	
(f)

	
The Bank is released from bank secrecy with respect to DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, in the case of an interest rate hedge.

	
  

	
(g)

	
All the collateral that is assigned for this loan also serves to secure the claims of the Bank from the suitable interest rate hedge as well as the claims of the Bank against the Borrower due to the assumed guarantees in accordance with letter (e).

	
  

	
(h)

	
The rights and claims on account of the suitable interest rate hedge are to be assigned or pledged to the Bank (in each case in accordance with the Bank's form).

The conclusion of an interest rate hedge is a requirement for payout in accordance with Section 10.

 

5.1.2 The requirements stipulated in Clauses 8.2, 8.3 and 10.2 (requirements for mortgage loans, e.g. proof of insurance, appraisal with mortgage valuation, ranked, real collateral pursuant to Sections 12-16 of the German Covered Bond Act (PfandbG) must be met by 30 June 2015. If this deadline is not complied with, the Bank shall calculate additional interest of 0.14% p.a. on the share of the loan amount (weighted by mortgage value less recognised prior encumbrances) until the fulfilment of the requirements specified in Clause 10.2. This shall be calculated on the remaining capital at the end of the quarter. If the requirements are met in the course of the quarter, a proportionate calculation shall be made. With regard to the documents/proof, costs may be incurred under certain circumstances that are described in more detail in Clause 10.2.

  

Page 6

  

5.1.3 The interest shall fall due at the end of each quarter for the previous quarter on 31 March, 30 June, 30 September and 31 December of each year.

If a payment falls due on a day that is not a bank workday, the payment date shall be shifted to the following bank workday in the same calendar month, or to the immediate preceding bank workday in the event that the next bank workday falls in the following month ("modified following").

The month is calculated with the exact days and the year is calculated with 360 days (act/360).

 

5.2 Costs to be paid to the Bank:

Commitment fee:

0.30% p.a. on the loan amount for which a contractual commitment has been made, but the conditions of which have not been finalised, beginning on 1 June 2015.

The commitment fee is calculated proportionately and quarterly for the preceding quarter.

Processing fee:

In addition, a one-off, individually negotiated processing fee in the amount of € 115,500.00 must be paid (see Clause 2).

Appraisal costs:

Furthermore, the Borrower shall incur appraisal costs in the amount of € 70,000.00.

5.3 Other costs

The Borrower shall also bear the costs – not known to the Bank upon conclusion of the Agreement – for fire, drinking water and storm damage insurance, for notary insurance and for other insurance concluded in connection with this Loan Agreement, all the costs incurred in connection with collateralising the loan with mortgages, particularly the notary and land register costs in accordance with the statutory provisions, and the costs to be paid to guarantors in the case of a guaranteeing of the loan, brokerage commissions for the brokers used by the Borrower.

5.4 Non-acceptance damage

If the Borrower does not accept the loan in full or in part contrary to its contractual obligations, the Borrower must compensate the Bank for the contractually agreed, incurred arrangement fees, commitment fees and the processing fees as well as the damage arising from the failure to accept.

5.5 Exit fee

 

Upon provision of the loan, the Bank assumes a total term for the loan of up to the final maturity date. For premature, partial or full repayment, the Borrower shall pay the Bank an exit fee in addition to the damage incurred from the premature repayment (in accordance with Clause 5.6).

 

  

Page 7

  

The amount of this exit fee is 0.30% per remaining year of the term, calculated from the beginning of the interest commitment period following the premature repayment and on the basis of the respective Release Amount.

5.6 Compensation / Fee for premature payment

If the loan falls due in full or in part prior to the end of the interest commitment period, the Borrower shall compensate the Bank for possible damage incurred due to premature repayment.

5.7 The services here involve financial services not subject to the value-added tax.

6. Payout

The payout of the loan and the billing shall take place in accordance with the special payment instructions that must be presented at least 4 bank workdays before payout by the Bank. Two payouts are possible.

7. Collateral

To secure all the current and future claims of the Bank from this Loan Agreement, along with interest and all other ancillary claims, the Bank is assigned the following collateral:

7.1 Mortgages

1. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a (registered) senior mortgage in the amount of € 660,700.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Beratzhausen Land Register at the Regensburg Local Court, Volume 59, Page 2073, Section III, with utilisation of the reservation of rank senior to Section II No. 5 and 6, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 5 - Right to operate a business

Section II, No. 6 - Pre-emptive right

Section II, No. 7 - Waste water pipeline right

Section II, No. 8 - Right of passage and way

Section II, No. 9 - Right of passage and way

Section II, No. 10 - Prohibition to develop clearance space

Section II, No. 11 - Prohibition to develop clearance space

Section III: -None-

 

  

Page 8

  

2. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 1,997,500.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Cham Land Register at the Cham Local Court, Volume 132, Page 4731, Section III, and in the Cham Land Register at the Cham Local Court Volume 143, Page 5148, Section III with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Page 4731:

Section II, No. 3 - Waste water pipeline right

Section II, No. 4 - Water pipeline right

Section II, No. 6 - Right to use the property for commercial purposes

Section II, No. 7 - Conditional pre-emptive right for all cases of sale

Page 5148

Section II, No. 3 - Waste water pipeline right

Section II, No. 4 - Water pipeline right

Section II, No. 5 - Electricity and street lighting cable right

Section II, No. 7 - Right to use the property for commercial purposes

Section II, No. 8 - Conditional pre-emptive right for all cases of sale

In each case: Section III: -None-

3. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 1,080,400.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Falkenstein Land Register at the Cham Local Court, Page 1849, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (See Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Right of way

Section II, No. 2 - Right of passage and way

Section II, No. 3 - Waste water plant operation right

Section II, No. 4 - Right to use the property for commercial purposes

Section II, No. 5 - Conditional pre-emptive right for all cases of sale

Section III: -None-

4. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 1,197,000, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Gangkofen Land Register at the Eggenfelden Local Court, Page 2715, Section III, with subjection to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

 

  

Page 9

  

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Commercial operation limitation

Section II, No. 2 - Commercial operation right

Section II, No. 3 - Conditional pre-emptive right for all cases of sale

Section III: -None-

5. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (certified) mortgage in the amount of € 777,200.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Ingolstadt Partial Ownership Land Register at the Ingolstadt Local Court, Volume 812, Page 34277, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 2 - Substation as well as high voltage and low voltage power lines

Section II, No. 4 - Commercial operation right

Section II, No. 5 - Conditional pre-emptive right for all cases of sale

Section III: -None-

 

6. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 1,709,900.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the St. Mang Land Register at the Kempten Local Court (Allgäu), Volume 188, Page 6315, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Electricity plant operation right

Section II, No. 4 - Right to operate a commercial business

Section II, No. 5 - Conditional pre-emptive right for all cases of sale

Section III: -None-

 

7. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 1,437,900.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Kissing Land Register at the Aichach Local Court, Volume 206, Page 7591, Section III, with subjugation to immediate enforcement for the encumbered properties and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 2 - Vehicle parking right

Section II, No. 4 - Commercial right of use

Section II, No. 5 - Conditional pre-emptive right for all cases of sale

Section III: -None-

  

Page 10

  

8. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 785,000.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Lam Land Register at the Cham Local Court, Kötzting Branch, Volume 55, Page 2261, Section III, with subjugation to immediate enforcement for the encumbered properties and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Right of passage and way

Section II, No. 2 - Utility line connection rights

Section II, No. 3 - Construction limitation

Section II, No. 5 - Commercial right of use

Section II, No. 6 - Conditional pre-emptive right for all cases of sale

Section III: -None-

9. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 2,603,800.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Lenggries Land Register at the Wolfratshausen Local Court, Page 6383, Section III, with subjugation to immediate enforcement for the encumbered properties and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 2 - Flood waste water diversion canal right

Section II, No. 3 - Right of passage and way

Section II, No. 4 - Pipeline right

Section II, No. 5 - Right of passage and way

Section II, No. 7 - Product sales right

Section II, No. 8 - Conditional pre-emptive right for all cases of sale

Section II, No. 9 - Right of passage and way

Section II, No. 10 - Substation right

Section III: -None-

10. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 590,700.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Neunburg v. W. Land Register at the Schwandorf Local Court, Volume 82, Page 3349, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Right of passage and way

Section II, No. 3 - Right to use the property for commercial purposes

Section II, No. 4 - Conditional pre-emptive right for all cases of sale

Section III: -None-

  

Page 11

  

11. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 722,800.00, along with 15% p.a. interest and 10% one-off ancillary payment, is entered in the Neudorf Land Register at the Marienberg Local Court, Annaberg.-B Branch, Page 888, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Water pipeline right

Section II, No. 2 - Right of passage and way

Section II, No. 4 - Business operation right

Section II, No. 5 - Conditional pre-emptive right for all cases of sale

Section III: -None-

12. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 738,400.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Obertraubling Land Register at the Regensburg Local Court, Page 2944, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

 

Section II, No. 1 - Substation construction and high voltage power line right

Section II, No. 2 - Commercial business operation right

Section II, No. 3 - Conditional pre-emptive right for all cases of sale

Section III: -None-

13. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior mortgage in the amount of € 932,700.00, along with 15% p.a. interest and 10% one-off ancillary payment, is entered in the Pfaffenhausen Land Register at the Memmingen Local Court, Volume 29, Page 1075, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be higher than the mortgage in rank.

Section II, No. 4 - Right to operate a commercial business

Section II, No. 5 - Conditional pre-emptive right for all cases of sale

Section III: -None-

14. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 924,900.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Scheyern Land Register at the Pfaffenhausen Local Court, Volume 45, Page 1580, Section III, with subjugation to immediate enforcement for the encumbered properties and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be higher than the mortgage in rank.

Section II, No. 2 - Commercial right of use

Section II, No. 3 - Conditional pre-emptive right for all cases of sale

Section III: -None-

  

Page 12

  

15. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 893,800.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Schnöllnach Land Register at the Deggendorf Local Court, Page 2341, Section III, and Page 6737 in Section III with subjugation to immediate enforcement for the encumbered properties and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be higher than the mortgage in rank.

Section II, No. 2 - Commercial right of use

Section II, No. 3 - Conditional pre-emptive right for all cases of sale

Section III: -None-

16. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 1,018,200.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Klingenbrunn Land Register at the Freyung Local Court, Volume 58, Page 1982, Section III, with subjugation to immediate enforcement for the encumbered properties and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

 

Only the following entries may be higher than the mortgage in rank.

Section II, No. 1 - Renovation notation (no rank)

Section II, No. 3 - Commercial right of use

Section II, No. 4 - Conditional pre-emptive right for all cases of sale

Section III: -None-

17. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 551,800.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Viechtach Land Register at the Viechtach Local Court, Volume 84, Page 3109, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Right of passage and way

Section II, No. 10 - Commercial right of use

Section II, No. 11 - Conditional pre-emptive right for all cases of sale

Section III: -None-

18. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 1,702,200.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Ruderting Land Register at the Passau Local Court, Volume 57, Page 2131, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

  

Page 13

  

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - High voltage power line right

Section II, No. 2 - Electricity and telephone line right

Section II, No. 3 - Rainwater and waste water diversion right

Section II, No. 4 - Right of way

Section II, No. 5 - Right of passage and way

Section II, No. 6 - High voltage power line right

Section II, No. 7 - Waste water pipeline right

Section II, No. 8 - Right of passage and way

Section II, No. 10 – Commercial right of space utilization

Section II, No. 14 - Notice of conveyance for municipality partial surface 130 sqm

Section II, No. 15 - Right of passage and way

Section II, No. 17 - Right of passage and way

Section III: -None-

19. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 800,600.00 along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Untergriesbach Land Register at the Passau Local Court, Volume 46, Page 1725, Section III, with subjection to immediate enforcement for the encumbered property and under acceptance of the personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

 

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - High voltage power line right

Section III: -None-

20. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 501,300.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Fürstenstein Land Register at the Passau Local Court, Volume 80, Page 3199, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

No entry in Section II or Section III of the Land Register may precede the mortgage.

21. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 917,100.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Eidenberg Land Register at the Passau Local Court, Volume 17, Page 696, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Water pipeline right

Section III: -None-

22. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 991,000.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Wald Land Register at the Cham Local Court, Page 1662, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

  

Page 14

  

No entry in Section II or Section III of the Land Register may precede the mortgage.

23. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 489,700.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Kasberg Land Register at the Viechtach Local Court, Volume 24, Page 714, Section III, with subjugation to immediate enforcement for the encumbered properties and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

 

No entry in Section II or Section III of the Land Register may precede the mortgage.

24. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 568,900.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Chamerau Leasehold Estate Land Register at the Cham Local Court, Volume 38, Page 1507, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Leasehold estate rent

Section II, No. 2 - Pre-emptive right for all owners

Section III: -None-

25. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 233,200.00, along with 15% p.a. interest and a 10% one-off ancillary payment, is entered in the Hartkirchen Land Register at the Passau Local Court, Volume 41, Page 1640, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Cable line right

Section II, No. 2 - Right of passage and way and parking space co-use right

Section III: -None-

26. It shall be necessary to ensure, within three months after the conclusion of the Agreement, that a senior (registered) mortgage in the amount of € 373,100.00, along with 15% p.a. interest and 10% one-off ancillary payment, is entered in the Otterskirchen Land Register at the Passau Local Court, Vilshofen Branch, Volume 50, Page 1627, Section III, with subjugation to immediate enforcement for the encumbered property and under acceptance of personal liability by the Borrower and with subjugation to immediate enforcement with respect to all the assets of the Borrower (see Clause 7.2).

Only the following entries may be senior to the mortgage in rank:

Section II, No. 1 - Waste water pipeline right

Section II, No. 2 - Right of passage and way

Section III: -None-

 

  

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The Borrower shall be obligated, upon request by the Bank, to approve a conversion of the registered mortgages to certified mortgages.

The claims to restitution of the mortgages serving as collateral for the loan may only be transferred with the approval of the Bank.

7.2 Executable abstract promise of payment

The Borrower must assume personal liability for the payment of a monetary sum in the amount of € 21,000,000.00 and is subject to immediate enforcement with respect to all its assets in this regard. This can also be met in that the Borrower assumes personal liability for the sum of the mortgage amount in the respective mortgage assignment deed and is consequently subject to immediate personal enforcement proceedings with respect to all its assets.

The Bank may enforce the personal liability independently of the entry and continuation of the mortgages as well as without previous enforcement with respect to the Mortgage Property.

7.3 Furthermore, the following collateral is assigned:

- Assignment of rights and claims from the suitable interest rate hedge concluded with DZ BANK AG in accordance with Clause 5.1.1.

- Assignment of rent claims from all lease agreements concluded or to be concluded with regard to the Mortgage Properties. In deviation from the provisions of the concluded or still-to-be-concluded rent assignment agreements, the Bank is in agreement, until further notice, that the rents are to be paid into certain accounts to be determined by the Borrower/Pledger and incoming payments in accounts at other banks shall not be transferred to an account of the Bank. With respect to incoming payments on accounts at other banks, all bank statement copies of the rental accounts are to be submitted to the Bank upon request. The Bank is authorised at any time to enforce its rights and claims from the rent assignment agreement and to specify an account where the rental payments shall be deposited.

The Borrowers/Pledgers are obligated to obtain the consent of the Bank before reaching an agreement on rental prepayments, postponements and offsetting.

- Pledging the credit balance on the accounts set up/to be set up for the incoming rental payments to the Bank (in accordance with the Bank's form). The pledge must be reported to the bank where the account is held and confirmed by it.

- Assignment of rights and claims from the building insurance (in accordance with the Bank's form) for the risks of fire, drinking water, sprinkler leakage, storm, hail, flood water and other elementary risks and explosion damage at the original value, and loss of rent for at least 24 months of rent.

The proper insurance is to be proven before payout of the loan and done so continuously and annually. The copy of the insurance policy is to be provided to the Bank upon request.

- Assignment of the claims against the buyer(s) from all purchase agreements already concluded or to be concluded in future with respect to the Mortgage Properties.

- Declarations of subordination and loan retention / subordination and standstill agreement for existing shareholder loans (in accordance with the Bank's form).

  

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7.4 If the Bank uses the claims secured by the mortgage in full or in part as coverage for covered bonds in terms of the German Covered Bond Act (Pfandbriefgesetz), the mortgage shall be senior to the claim used for coverage independently of any other - even future - provision on the purpose of the pledge (Sicherungszweckregelung) agreed between the pledger and the Bank. Accordingly, income from the realisation of the mortgage is senior to any claim serving as coverage for a covered bond.

8. Other agreements

8.1. The Borrower is obligated to accept the loan in full within six months after the signing of the Loan Agreement by the Bank. The Bank is authorised to terminate its loan commitment in the amount of the total not yet used.

The Bank is also authorised to terminate its loan commitment if the Borrower does not meet all the conditions, payout pre-requisites and requirements within three months after the conclusion of the loan agreement, particularly if the planned collateral has not been assigned.

Irrespective of deviating - also future - provisions, all payments shall be credited to the personal claim and not to the collateral or the promise of payment.

The Bank may also terminate the loan for good cause if one or more Mortgage Properties are encumbered with another mortgage without the approval of the Bank.

The parties are in agreement that in the case of legal changes which have an impact on the design of conditions, particularly in the case of an increase in the equity and/or liquidity requirements for the Bank, upon written request by one party, they will promptly take up negotiations with the goal of making an adjustment to the Agreement that meets the interests of both parties.

 

8.2 Commercial business easement

In the land registers of Mortgage Properties 1 - 18 (pursuant to Clause 3.1), a senior, fixed-term, limited personal easement (commercial business easement) has been entered in Section II for the benefit of EDEKA Handelsgesellschaft Südbayern mbH or Fischer GmbH & Co. KG. For these rights, if their subordination to the financing mortgages is not possible to negotiate, the agreement of a maximum amount as value replacement in accordance with Section 882 of the German Civil Code (BGB) and the termination reasons as condition subsequent (in accordance with the sample appended in Appendix 3) and the entry of the agreement in the land registers shall take place after the approvals have been presented.

If the entries or the presentation of notary confirmation, in accordance with the Bank's requirements, does not take place by 31 July 2015, the additional interest shall be calculated on the amounts assigned in accordance with Clause 4.3 on the basis of Clause 5.1.2 until the entry is made for the mortgage properties.

8.3. Pre-emptive rights

In the land registers of Mortgage Properties:

1 - 17 (pursuant to Clause 3.1),

the pre-emptive rights are to be entered in Section II. For these rights, if it is not possible to negotiate subordination to the financing mortgages, it shall be necessary to obtain a standstill declaration in accordance with the sample appended in Appendix 4 in which the parties entitled to pre-emptive rights shall waive a possibly existing cancellation claim and value replacement.

  

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If the statement of subordination or the standstill declaration has not been issued or presented by 31 July 2015, the additional interest on the amounts assigned in accordance with Clause 4.3 shall be calculated on the basis of Clause 5.1.2 until entry of the subordination or the presentation of the standstill declaration has taken place.

8.4 Expansion at Mortgage Property Lenggries

The Bank awarded the credit under the assumption that the Mortgage Property Lenggries would be expanded in accordance with the documents presented to the Bank. The Borrower must verify the following by 30 September 2016:

	
  

	
-

	
Completion of the extension for the Lenggries property

	
  

	
-

	
Acceptance of the space by the tenant and

	
  

	
-

	
Commencement of the payment of rent in the amount of at least € 239,000.00 p.a.

	
  

	
-

	
Presentation of final market and mortgage appraisal by VR Wert, which must show a market value of at least € 3,350,000.00 and a mortgage value of at least € 2,750,000.00.

If the Borrower does not provide proof hereof by the deadline, it shall be obligated to repay an amount of € 600,000.00 by no later than 31 December 2016. All costs in this connection are borne by the Borrower. This includes the exit fee (Clause 5.5) and the compensation/fee for premature repayment (Clause 5.6).

8.5 Leasehold estate for Mortgage Property Chamerau

The Bank awarded the loan under the assumption that the leasehold estate agreement for the Mortgage Property Chamerau would be renewed for at least 10 years through 14 July 2038. The Borrower must prove this by 30 June 2016 by presenting an addendum to the leasehold estate agreement and a corresponding entry in the land register.

In addition, a notary-certified “Declaration on the leasehold estate and pre-emptive rights” of the owner of the property in Chamerau (in accordance with the template provided in Appendix 5) must be presented before 30 June 2016.

If the Borrower does not provide this proof by this deadline, it is obligated to repay an amount of € 474,116.00 by no later than 31 December 2016. All costs in this connection are to be borne by the Borrower. This includes the exit fee (Clause 5.5) and the compensation/fee for premature repayment (Clause 5.6).

9. Covenants

 

The Borrower shall ensure that the following covenants will be observed at all times during the term of the loan:

9.1. DSCR – Debt service cover ratio

The rental income from the Mortgage Properties must have a DSCR (debt service cover ratio) of at least 130% (soft default) or 110% (hard default).

  

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The DSCR indicates, on the effective date, the percentage of the calculated debt service for the calculation period that is covered by the expected net rental income in the calculation period.

Compliance with the key performance indicator must be proven to the Bank every six months on 30 June and 31 December of each year, for the first time on 31 December 2015. The Bank calculates the DSCR on this effective date by dividing the net rental income expected over the following 12 months ("Calculation Period") by the calculated debt service.

The “calculated debt service” is the product of the outstanding loan amount and 7%.

"Net rental income" is the total of all the net rental income from the Mortgage Property expected in the Calculation Period on the basis of the contractual status applicable on the respective effective date less the operating costs, maintenance/investment expenses (not: modernisation) and other expenses not covered by the tenants for the Mortgage Property for which the greater of a) a lump sum of 15% of the net rental income or b) the actual costs are applied.

Only lease agreements that were properly serviced in the preceding quarter and only rental income that falls due prior to the first legally possible termination of the rental agreement shall be taken into account.

The Bank must be notified immediately in the case of a breach or in the event of matters and circumstances that would endanger compliance.

The Borrower and the Bank are in agreement that an elevated risk analysis of the claims against the Borrower is justified in the case of a breach of the aforesaid agreed requirements. In this case, the Bank is authorised to pursue the legal consequences described in Clause 9.3.

9.2. LTV – Loan to value

LTV is the ratio of the total debit balance of the loan to the current market value of the Mortgage Property, as determined by an independent appraiser on behalf of the Bank (certified by VR Wert or Hyp-Zert).

The LTV (loan to value) may not exceed 70% in the first three years of the term, from the date of payout; and in the 4th and 5th year it may not exceed 65%.

The Bank shall calculate or check the LTV upon presentation of a new appraisal or an update of an appraisal by dividing the entire debit balance of the loan by the current market value of the Mortgage Properties at the time of the calculation.

The entire debit balance includes the loan amount (remaining debt) outstanding at the time of the calculation in accordance with this Agreement, and, if need be, not yet paid-out partial amounts, the owed interest and all other owed amounts that are owed to the Bank at the time of the calculation less the amounts available in the locked reserve account in accordance with Clause 9.3, Paragraph 2.

The authoritative market value as of 3 December 2014 is a total of € 32,422,000.00. It consists of the market values of the Mortgage Properties.

  

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The Bank can have the current market and collateral value of the Mortgage Properties

	
  

	
·

	
calculated at intervals of two years, for the first time on 30 September 2016, at the cost of the Borrower and also

	
  

	
·

	
at any time at its own cost,

by an independent appraiser hired by the Bank, e.g. VR Wert Gesellschaft für Immobilienbewertung mbH. The calculation of the market value is based on the respectively valid German Valuation Regulation (BelWertV) or the German Valuation Guidelines (WertR).

 

The Bank must be notified immediately in the case of a breach or in the event of matters and circumstances that would endanger compliance.

The Borrower and the Bank are in agreement that an elevated risk analysis of the claims against the Borrower is justified in the case of a breach of the aforesaid agreed requirements. In this case, the Bank is authorised to pursue the legal consequences described in Clause 9.3.

 

9.3 Legal consequences of a breach of covenants

Breach of DSCR covenant (hard default) and/or LTV covenant

If the DSCR falls below 110% or the LTV exceeds 70% or 65% as of 1 March 2018, the Borrower is obligated to make a special repayment immediately, but no later than 4 (four) weeks after discovery if the breach has not been corrected by this time. The special repayment shall be made on the loan in an amount such that the loan and the attributable calculated capital servicing is reduced so that a DSCR of 130% is not exceeded or an LTV of 70% to 65% is not exceeded.

Breach of DSCR covenant (soft default)

If a DSCR of 130% is breached, the Borrower must immediately ensure that the surpluses from the income generated with the Mortgage Properties – after paying the current operating costs/administrative costs and the due payments owed to the Bank in accordance with this Loan Agreement – shall be transferred on the 30th of a month to a reserve account pledged to the Bank and locked with respect to the disposal of the Borrower.

It shall be necessary to provide the Bank with all the bank statements of the rental payment account as of the 30th of the month and a list of the income and expenses (operating costs/administrative costs) in the respective month and possibly additional information within 10 bank workdays in order to prove these surpluses.

The saved amounts shall be used to repay the loan on the next possible interest payment date as soon as the DSCR covenant has not been observed on two successive test dates or released within 5 bank workdays if the DSCR covenant is observed on two successive interest payment dates. Upon request by the Borrower, the pledged amounts may also be used for the repayment on the interest payment deadline.

 

Any form of distribution or payment to the shareholders is not permitted during the length of a breach of financial covenants.

 

  

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General information

The other rules in Sections 13 to 19 of the General Terms and Conditions (AGB) and Section 4 of the General Loan Terms and Conditions remain unaffected hereby.

The Borrower shall assume all the damage, including the incurred prepayment penalty (Clause 5.5 and 5.6), which arises for the Bank in this connection.

10. Payout requirements and conditions

The loan can only be used after the Bank has provided the collateral described under Clause 7 and has met the following requirements:

Contract and legitimation

- Legally binding, signed Loan Agreement

- Legally binding, signed signature test page with proof of the legitimation of the Borrower and the authorised undersigner

- Presentation of a copy of the Articles of Association and the by-laws of the Borrower and its personally liable shareholder in the version last submitted to the trade register

- Presentation of a current (not older than 14 days) excerpt from the trade register of the Borrower and its personally liable shareholder

- Presentation of a signed organisational chart with information about the shareholdings

- Presentation of the respective payment order (in accordance with the sample from the Bank)

- Presentation of the legally binding, signed direct debit authorisation

(in accordance with sample provided by the Bank)

- Payment notification by Notary with respect to the purchase price

- Payment of the processing fee and the appraisal fee

- Presentation of proof of advanced contribution of equity in the amount of EUR 11,550,000.00 in a form considered suitable by the Bank

- Compliance with the money laundering requirements

- Completion of an adequate interest rate hedge in accordance with Clause 5.1.1

- Guarantee mandate for the conclusion of the interest rate hedge with DZ Bank AG (according to the Bank's template)

Mortgages

- Enforceable copies of the 26 mortgage assignment deeds with respect to the mortgages for a total of EUR 25,199,800.00 and presentation of the abstract acknowledgement of debt in the amount of EUR 21,000,000.00

  

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- Simple copies of the 26 mortgage assignment deeds with respect to the mortgages for a total of EUR 25,199,800.00

- Legally binding, signed declaration of purchase for the mortgage (Grundschuldzweckerklärung) with respect to the assigned mortgages

- Certified land register excerpts to prove the correct ranking of the mortgage entries, alternatively a notary confirmation initially approved by the Bank

Rental property/securities

- The lease agreements along with all the addenda and, if need be, existing lease guarantees with the corresponding proof of representation of the tenant/landlord, which will be or was concluded with the tenants (Edeka Handelsgesellschaft Südbayern mbH und Buchbauer GmbH), must be submitted to the Bank or sent to it for inspection.

 

- Legally binding, signed assignment of the rental claim from all the lease agreements concluded or still to be concluded with respect to the Mortgage Property

- Legally binding, signed pledge declaration with respect to the rental account

- Presentation of building insurance proof, which is sufficient according to the Bank's interpretation, along with real right confirmation (the real right confirmation is not a requirement for the payout) of the respective insurer (required scope of coverage: fire, drinking water, sprinkler leakage, storm, hail and other risks from the elements, and explosion damage, as well as rental defaults for at least 24 months and sufficient liability insurance)

 

- Confirmation of the payment of the insurance premium for the current year.

- Annual financial statements of the tenants for financial year 2013 (if possible)

Other collateral

- Legally binding signed statement of subordination for the planned shareholder loans (according to the Bank’s template) and presentation of the loan agreements for the shareholder loans. The maturity of the shareholder loan must be after the date of the final maturity of the financing loan.

- Presentation of a legal opinion (expanded capacity opinion), issued to the Bank and satisfactory for the Bank, of a local and practicing law firm in the applicable legal field, engaged by the Borrower, at the cost of the Borrower, and coordinated with the Bank, for the statement of subordination and the loan maintenance agreement (including confirmation that the declaration of subordination and loan maintenance declaration and compliance with the planned obligations do not breach mandatory law (the “ordre public”) and are covered by company documents and any required resolutions adopted by shareholders and/or managing directors).

- Legally binding, signed declaration of assignment with respect to the claims against the buyer/s from all already concluded or future purchase agreements related to the Mortgage Properties

- Legally binding, signed declaration of assignment with respect to rights and claims from the interest hedge concluded with DZ BANK AG in accordance with Clause 5.1.1.

  

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- Legally binding, signed declaration of assignment for the rights and claims from the building insurance (according to the template provided by the Bank) for the risks related to fire, drinking water, sprinkler leakage, storm, hail, flooding and other hazards from the elements, as well as explosion damage at the reinstatement value, and for a loss of rent for at least 24 months.

Contractual basis of property

- Presentation of the notary-certified property purchase agreement, including all the appendices and the purchase deed that form the basis of the Mortgage Properties

- Final market value and collateral appraisals by VR Wert, except for the Lenggries and Chamerau properties

- A complete tenant list, together with information about the rent collateral, rent arrears and lease terminations as well as proof that the current rental income totals at least EUR 2,986,438.00 p.a.

- Complete property documents (construction permits, specifications, construction plans, surface calculations)

- Presentation of the official hallway maps and layout plans

- Copy of the leasehold estate agreement with all addenda for the Chamerau property and presentation of the approval of 8 June 2000, Deed no. 116-L; the Bank reserves the right to check and make additional requirements

- Presentation of a copy of the notary-certified declaration of division with the related appendices and division plan as well as the certificate of completion from the building authorities for the property in Ingolstadt

- Legal due diligence that shows no loan-preventing discoveries

 

Credit rating

- Opening balance sheet of GmbH & Co. KG and the general partner

10.2 Conditions for the granting of mortgage loan conditions

The additional interest stipulated in Clause 5.1.2 shall not apply to the respective loan amount if the collateral for the respective Mortgage Property described in Section 7 has been provided to the Bank and the conditions in accordance with Clause 8.2 and 8.3 and the following requirements are met:

- Correct entry of rank for the mortgages in accordance with Section 7 and proof of the conveyance of ownership for the Borrower

- Presentation of the final appraisals by VR WERT GmbH for the Mortgage Properties

- Presentation of sufficient building insurance proof for the Mortgage Properties and confirmation of the in rem registration (Realrechtsanmeldung) and proof of the premium payment

  

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In order to keep the Bank’s expenditure of time reasonable, the proof of compliance with the aforementioned requirements shall take place in blocks. More than three submissions of proof in blocks are not planned. For each additional case of proof, a fee of € 500.00 shall be charged and will first fall due at the end of the respectively valid interest period.

10.3 Disclosure and notification duty

The Borrower shall be obligated to disclose its economic situation to the Bank.

The Borrower shall provide the following documents for this annually, but no later than by a deadline of 9 (nine) months after the reporting deadline:

- Its audited financial statements along with the notes to the financial statements and a possible management report

- The annual financial statements or supplementary documents from equity investment companies or other companies that may have a significant impact on the economic situation of the Borrower (including the situation of the general partner), according to the Bank's opinion

- Annual financial statements of the tenants (if possible)

 

Annually, no later than on 15 September:

- A uncertified, current trade register excerpt and a current list of shareholders at limited liability companies

- Presentation of the equity investment structure of the Borrower based on a list of shareholders or partners or a current organisational chart

- Addenda to the existing lease agreements and new lease agreements with respect to the Mortgage Properties

- Building insurance proof from the respective insurance companies, including proof of the payment of insurance premiums (required scope of coverage: fire, drinking water, sprinkler leakage, storm, hail and other hazards from the elements, and explosion damage, as well as rental defaults for at least 24 months and sufficient liability insurance)

- Legitimation documentation of companies that hold an equity investment above 25% (above 10% in the case of a US company with an equity investment), to the satisfaction of the Bank

Semi-annually, no later than 21 days after the deadlines of 30 June and 31 December

A signed tenant list for the Mortgage Properties in Excel format (incl. disclosure of the names of the tenants, space, rent/lease payments and term; change in operating and administrative costs, particularly the recoverable and non-recoverable administrative costs, possibly existing payment arrears, including the reasons for this if they are known; outstanding enforced or announced offsetting against the rent/lease payments or enforced or announced rent/lease payment reductions, including the reasons for this, if known; other events or circumstances in regard to the Mortgage Property, which could significantly and disadvantageously influence the value of the Mortgage Property; possibly forthcoming repair/maintenance work). The Bank also has the right to inspect the originals at any time.

  

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- Signed "DSCR-compliance" certificate (including calculation of the DSCR covenants in accordance with the provisions in Clause 9.1 and the presentation of corresponding calculation proof)

The Borrower must confirm that all the information is correct and complete.

The Borrower shall provide the Bank with additional information immediately if a reasonable request is made in writing or ensure that additional information is provided to the Bank immediately.

 

The Bank and its hired representatives are authorised to inspect at any time the property during normal business hours after reasonable notification of 3 workdays in advance. The Bank must give consideration to the legitimate interests of the tenants in an inspection.

Furthermore, the Borrower shall provide the Bank with the following documents

upon request:

- excerpts from the Registry of Public Land Charges

- excerpts from the Registry of Contaminated Sites

- current excerpts from the Land Register

10.4 Change of control

The Bank assumes the shareholder structure outlined in Appendix 6 to this Loan Agreement.

The economic reputation of the Borrower and the shareholders behind him as well as the confidence in the qualification of its management are significant factors for a positive risk assessment of the entire financing project and thus significant conditions for the awarding of credit from the Bank's point of view. Since a change in one of the previously-described factors will result in a significant deterioration of risk with respect to the loan, justify a (partial) risk of default or have bank regulatory consequences, the following is stipulated:

In the event of an intended change in the ownership structure of the Borrower, the Bank must be notified immediately and before such a change.

	
  

	
"Control" means that a person or a group of people that act jointly, hold directly or indirectly 50% or more of the shares (does not include business shares that come with no voting rights or do not provide any right to the distribution of profits/capital beyond a certain amount) and/or voting rights, or has the ability to determine the majority of the members of Management. Furthermore, a company shall be viewed as directly or indirectly controlled by a person if the company is included in the consolidated financial statements of this person in accordance with the recognised rules of accounting under the applicable law. Joint action takes place when natural or legal persons coordinate their behaviour on the basis of an agreement or another basis.

In such a case, it is necessary to seek an agreement on the continuation of the loan with the possibly amended conditions, e.g. with regard to interest, collateral or other agreements, prior to such circumstances. Negotiations must be started within a week of notification. If an agreement cannot be reached after another 4 weeks and prior to implementation of the intended changes in the articles of association, and the change is then completed nonetheless, the Bank is authorised to give notice of extraordinary termination of the Loan Agreement, unless the change does not entail any alteration in the financing risk position for the Bank, according to the Bank's interpretation.

 

The other provisions in Sections 13 to 19 of the General Terms and Conditions (AGB) and Section 4 of the General Loan Terms and Conditions remain unaffected hereby.

  

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10.5 Shareholder loan

The Borrower’s acceptance of shareholder loans is only permitted upon prior consent in writing by the Bank and under the condition that a statement of subordination and a stillstand agreement are concluded with the Bank in a form that is satisfactory to the Bank.

11. Syndication clause

The Bank is authorised to syndicate or transfer parts or the entire financing with or to other banks at its own cost.

12. Accuracy and completeness of the information

All the documents provided directly and indirectly by the Borrower to the Bank and the notifications issued (also if this comes from a due diligence audit) must be based on current information that is judged to be correct and complete after a careful review. The transferred documents and issued information must take into account all the circumstances that are of major significance for the decision to award credit on the basis of trust and faith in a commercial assessment of risk. This applies in particular to all documents in regard to the existing rental and lease agreements.

13. Paying agent clause

All payments on the basis of this loan agreement must be made by the Borrower cost-free, on time and free of any offsetting, right of retention or deposit of security, to the business premises of the Bank or to a place designated by it.

14. Supplementary contractual conditions

The other loan conditions result from the General Loan Terms and Conditions of the Bank in the version dated June 2014 and appended as a significant part of this Agreement.

The General Terms and Conditions of the Bank, which are contained in the appendix and are valid for the conclusion of this Loan Agreement, shall also apply to the loan.

By undersigning this Agreement, the Borrower confirms that it has received a copy of the General Loan Terms and Conditions and the General Terms and Conditions.

The conditions of this Loan Agreement shall take precedence over the General Loan Terms and Conditions and the General Terms and Conditions of the Bank, if there are contradictory provisions in an individual case.

If it does not involve damage compensation claims, the Bank's claims arising from this Loan Agreement shall expire after 5 years. The deadline shall begin at the end of the year in which the claim fell due.

  

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15. Data protection

The personal data required in connection with the processing of the loan may be saved, processed and shared between the banks involved in the financing in compliance with the German Data Protection Act (Bundesdatenschutzgesetz).

16. Cooperation duties of the customer in accordance with the German Money Laundering Act

The Borrower has been identified in accordance with the German Money Laundering Act. The information on the economic beneficiary has been provided. The Borrower recognises the obligation to provide the required information and documents for identification and clarification of the economic beneficiary and to report changes.

17. Email clause and written form

The Borrower and the Bank agree that communication is permitted for purely informational purposes between each other and with third parties that were or will be engaged by them and are or will be involved in the financing, for example, as part of consortium, by email or comparable internet-based communication forms without special encryption and without electronic signature, irrespective of the information in question. The Borrower and the Bank are aware that the security of the data transfer by email or comparable internet-based communication forms cannot be ensured.

If one of the parties does not wish for the aforesaid communications form in total or with regard to individual information for security reasons, it shall notify the other party thereof in due time so that either communication can take place in encrypted form, if this is technically possible and practicable, or the communication will be sent by another means (fax, phone, post).

Amendments and supplements to this Agreement are only effective in writing. The same applies to the waiving of this requirement. Ancillary agreements were not made. Declarations in electronic form or text form do not meet the written form requirement.

18. Severability clause

If one of the aforementioned provisions is invalid or cannot be enforced in full or in part, this agreement shall not be otherwise affected thereby. The parties shall replace the partially or fully invalid or unenforceable provisions with a valid or enforceable provision that comes closest economically to the invalid or unenforceable provision. This applies accordingly if it is subsequently discovered that this agreement contains loopholes.

19. Agreement on place of jurisdiction

Place of jurisdiction is Hamburg, if permitted by law. Law in the Federal Republic of Germany shall apply to this Agreement.

 

  

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20. Validity

Sending one signed copy of the Loan Agreement until the 15.05.2015 by fax shall be in compliance with the deadline if it is sent immediately by post thereafter. This Loan Agreement shall take effect when a copy of the Agreement has been signed by all the Borrowers and returned to the Bank. If we receive the contract offer with a delay or changed conditions, we are able to decline the contract.

 

	
Munich,11.05.2015

 

/s/ Amir Philips

 
/s/ Alex Hilman

 

Optibase Bavaria GmbH & Co KG

	
Hamburg, 19.05.2015

 

/s/ Mike van Wanrooy

/s/ Petra Brumshagen

 

Deutsche Genossenschafts-

Hypothekenbank Aktiengesellschaft

 

 

Page 28

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