EXCHANGE AGREEMENT

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT, dated as of August 3, 2009 (this “ Agreement ”), is entered into by and among OHI FINANCING, INC., a Delaware corporation (the “ Company ”), ORLEANS HOMEBUILDERS, INC., a Delaware corporation, as guarantor (“ Guarantor ”), and TABERNA PREFERRED FUNDING III, LTD. (“ Taberna III ”), TABERNA PREFERRED FUNDING IV, LTD. (“ Taberna IV ”), and TABERNA PREFERRED FUNDING VI, LTD. (“ Taberna VI ”, and together with Taberna III and Taberna IV, collectively, “ Taberna ”).

 

RECITAL:

 

A.                                  Reference is made to that certain Junior Subordinated Indenture dated as of November 23, 2005, as amended by that certain Supplemental Indenture No. 1, dated as of August 10, 2007 (collectively, the “ Existing Indenture ”), by and between the Company and The Bank of New York Mellon Trust Company, National Association (“ BNYM ”) (as successor to JPMorgan Chase Bank, National Association), as trustee (the “ Existing Indenture Trustee ”).

 

B.                                    Reference is made to that certain Amended and Restated Trust Agreement dated as of November 23, 2005 (the “ Trust Agreement ”), by and among the Company, as depositor, BNYM (successor to JPMorgan Chase Bank, National Association), as property trustee (the “ Property Trustee ”), BNY Mellon Trust of Delaware (as successor to Chase Bank USA, National Association), as Delaware trustee (the “ Delaware Trustee ”), and the respective administrative trustees named therein.

 

C.                                    Orleans Homebuilders Trust II (“ Trust II ”) is the holder of the Junior Subordinated Note due 2036 in the original principal amount of $77,320,000 issued by the Company pursuant to the Existing Indenture (“ Subordinated Note II ”).

 

D.                                   Taberna III, Taberna IV and Taberna VI are the holders of Preferred Securities in the original aggregate principal amount of $75,000,000 issued by Trust II pursuant to the Trust Agreement, copies of which are attached hereto as Exhibit A-1 ( the “ Original Preferred Securities ”).

 

E.                                     Simultaneously herewith, the Company and The Bank of New York Mellon, as trustee (the “ New Indenture Trustee ”) have entered into that certain Junior Subordinated Indenture (the “ New Indenture ”) pursuant to which Company proposes to issue Ninety Three Million Seven Hundred Fifty Thousand Dollars ($93,750,000) in aggregate principal amount of the Junior Subordinated Notes due 2036 as follows (collectively, the “ Securities ”):

 

(i)                                     Junior Subordinated Note due 2036 in the original principal amount of $35,156,000 issued by the Company to Taberna III, a copy of which is attached hereto as Exhibit B-1 (“ Note 1 ”);

 

(ii)                                 Junior Subordinated Note due 2036 in the original principal amount of $30,469,000 issued by the Company to Taberna IV, a copy of which is attached hereto as Exhibit B-2 (“ Note 2 ”); and

 

 

(iii)                             Junior Subordinated Note due 2036 in the original principal amount of $28,125,000 issued by the Company to Taberna VI, a copy of which is attached hereto as Exhibit B-3 (“ Note 3 ”).

 

F.                                      The Securities will be guaranteed by the Guarantor as to the payment of the Parent Guarantee Payments, as defined in and in accordance with that certain Parent Guarantee Agreement, dated as of the date hereof, by and between the Guarantor and the New Indenture Trustee (the “ Parent Guarantee ”).

 

G.                                   On the terms and subject to the conditions set forth in this Agreement, the Company and Taberna have agreed to exchange the Original Preferred Securities for the Securities.

 

NOW, THEREFORE, in consideration of the mutual agreements and subject to the terms and conditions herein set forth, the parties hereto agree as follows:

 

1.                                        Definitions .                                 This Agreement, the New Indenture, the Securities and the Parent Guarantee are collectively referred to herein as the “ Operative Documents .”  All other capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed thereto in the New Indenture.

 

“1934 Act Reports” has the meaning set forth in Section 4(z).

 

“ Bankruptcy Code ” means the Bankruptcy Reform Act of 1978, 11 U.S.C. §§101 et seq., as amended.

 

“ Benefit Plan ” means an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, a “plan” as defined in Section 4975 of the Code or any entity whose assets include (for purposes of U.S. Department of Labor Regulations Section 2510.3-101 or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan.”

 

“ BNYM ” has the meaning set forth in the Recitals.

 

“ CDO Trustee ” has the meaning set forth in Section 2(b)(i) .

 

“ Code ” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated under it.

 

“ Closing Date ” has the meaning set forth in Section 2(b).

 

“ Closing Room ” has the meaning set forth in Section 2(b).

 

“ Company ” has the meaning set forth in the introductory paragraph hereof.

 

“ Company Counsel ” has the meaning set forth in Section 3(b).

 

“ Commission ” has the meaning set forth in Section 4(v)

 

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“Credit Facilities” means the Second Amended and Restated Revolving Credit Loan Agreement, dated as of September 30, 2008, by and among Greenwood Financial, Inc., certain affiliates and the Guarantor, as borrowers and or guarantors, the lenders party thereto and Wachovia Bank National Association, as Administrative Agent for the lenders, including any notes, guarantees, collateral and security documents, instruments and agreements executed in connection therewith (including Hedging Obligations related to the Debt incurred thereunder), as amended, amended and restated, supplemented, refinanced or otherwise modified, including any agreement or instrument extending the maturity of refinancing, replacing or otherwise restructuring (including refinancing such bank facility with secured or unsecured debt securities and/or other forms of Debt and/or adding, substituting or deleting parties thereto (including borrowers, obligors, guarantors, lenders, creditors and/or agents)) all or any portion of the Debt under any such agreements with the same of any other agents, creditor, lender or group of creditors or lenders.

 

“ Delaware Trustee ” has the meaning set forth in the Recitals.

 

“ Environmental Law ” has the meaning set forth in Section 4(ll).

 

“ Environmental Laws ” shall have the correlative meaning.

 

“ Equity Interests ” means with respect to any Person (a) if such a Person is a partnership, the partnership interests (general or limited) in such partnership, (b) if such Person is a limited liability company, the membership interests in such limited liability company and (c) if such Person is a corporation, the shares or stock interests (both common stock and preferred stock) in such corporation.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated under it.

 

“ Exchange ” has the meaning set forth in Section 2(b).

 

“ Exchange Act ” has the meaning set forth in Section 4(j).

 

“ Existing Indenture ” has the meaning set forth in the Recitals.

 

“ Existing Indenture Trustee ” has the meaning set forth in the Recitals.

 

“ Existing Subordinated Notes ” has the meaning set forth in the Recitals.

 

“ Financial Statements ” has the meaning set forth in Section 4(w).

 

“ GAAP ” has the meaning set forth in Section 4(w).

 

“ Governmental Entities ” has the meaning set forth in Section 4(o).

 

“ Governmental Licenses ” has the meaning set forth in Section 4(r).

 

“ Guarantor ” means Orleans Homebuilders, Inc., a Delaware corporation.

 

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“ Hazardous Materials ” has the meaning set forth in Section 4(ll).

 

“ Holder ” has the meaning set forth in the New Indenture.

 

“ Impairment ” means any claim, counterclaim, setoff, defense, action, demand, litigation (including administrative proceedings or derivative actions), encumbrance, right (including expungement, avoidance, reduction, contractual or equitable subordination, or otherwise) or defect.

 

“ Indemnified Party ” has the meaning set forth in Section 8(a).  “ Indemnified Parties ” shall have the correlative meaning.

 

“ Interim Financial Statements ” shall have the mean set forth in Section 4(w).

 

“ Investment Company Act ” has the meaning set forth in Section 4(j).

 

“ Letter of Credit ” has the meaning set forth in Section 3(f).

 

“ Lien ” has the meaning set forth in Section 4(o).

 

“ Material Adverse Effect ” means a material adverse effect (other than any Material Adverse Effect directly or indirectly attributable to the passage of time in connection with the existence of any default under the Credit Facilities) on the condition (financial or otherwise), earnings, business, liabilities or assets of the Guarantor and its Subsidiaries taken as a whole.

 

“ Material Adverse Change ” has the meaning set forth in Section 3(e)(ii).

 

“ New Indenture ” has the meaning set forth in the Recitals.

 

“ New Indenture Trustee ” has the meaning set forth in the Recitals.

 

“ Note 1 ” has the meaning set forth in the Recitals.

 

“ Note 2 ” has the meaning set forth in the Recitals.

 

“ Note 3 ” has the meaning set forth in the Recitals.

 

“ Offering Documents ” means the documents set forth as Annex E hereto.

 

“ Original Parent Guarantee ” means that certain Parent Guarantee Agreement, dated November 23, 2005 by and between Orleans Homebuilders, Inc., as Parent Guarantor, and JPMorgan Chase Bank, National Association, as Guarantee Trustee, as the same may be amended from time to time.

 

“ Original Preferred Securities ” has the meaning set forth in the Recitals.

 

“ Properties ” has the meaning set forth in Section 4(ii).

 

“ Property Trustee ” has the meaning set forth in the Recitals.

 

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“ Regulation D ” has the meaning set forth in Section 4(h).

 

“ Repayment Event ” has the meaning set forth in Section 4(o).

 

“ Rule 144A(d)(3) ” has the meaning set forth in Section 4(j).

 

“ Securities ” has the meaning set forth in the Recitals.

 

“ Securities Act ” means the Securities Act of 1933, 15 U.S.C. §§77a et seq. , as amended, and the rules and regulations promulgated under it.

 

“ Subsidiary ” means any Person wherein at least fifty percent (50%) of the Equity Interests is owned, directly or indirectly, by the Guarantor.  “ Subsidiaries ” means, collectively, each and every Subsidiary.

 

“ Subordinated Note II ” has the meaning set forth in the Recitals.

 

“ Taberna ” has the meaning set forth in the introductory paragraph hereof.

 

“ Taberna III ” has the meaning set forth in the introductory paragraph hereof.

 

“ Taberna IV ” has the meaning set forth in the introductory paragraph hereof.

 

“ Taberna VI ” has the meaning set forth in the introductory paragraph hereof.

 

“ Taberna Capital Management, LLC” means Taberna Capital Management, LLC and its successors and/or assigns as collateral manager of the Holders, as applicable.

 

“ Taberna Transferred Rights ” means any and all of Taberna’s right, title, and interest in, to and under the Original Preferred Securities, together with the following:

 

(i)                                      the Existing Indenture and the Original Parent Guarantee;

 

(ii)                                   all amounts payable to Taberna under the Original Preferred Securities, and the Existing Indenture;

 

(iii)                                all claims (including “claims” as defined in Bankruptcy Code §101(5)), suits, causes of action, and any other right of Taberna, whether known or unknown, against the Company or any of its affiliates (including the Trusts), agents, representatives, contractors, advisors, or any other entity that in any way is based upon, arises out of or is related to any of the foregoing, including all claims (including contract claims, tort claims, malpractice claims, and claims under any law governing the exchange of, purchase and sale of, or indentures for, securities), suits, causes of action, and any other right of Taberna against any attorney, accountant, financial advisor, or other entity arising under or in connection with the Original Preferred Securities, the Existing Indenture or the transactions related thereto or contemplated thereby;

 

(iv)                               all guarantees and all collateral and security of any kind for or in respect of the foregoing;

 

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(v)                                  all cash, securities, or other property, and all setoffs and recoupments, to be received, applied, or effected by or for the account of Taberna under the Original Preferred Securities (including that certain letter of credit dated as of August 17, 2007 related thereto), other than fees, costs and expenses payable to Taberna hereunder and all cash, securities, interest, dividends, and other property that may be exchanged for, or distributed or collected with respect to, any of the foregoing; and

 

(vi)                               all proceeds of the foregoing.

 

“ Trust II ” has the meaning set forth in the Recitals.

 

“ Trust Agreement ” has the meaning set forth in the Recitals.

 

2.                                        Exchange of Original Preferred Securities for Securities .

 

(a)                                   The Company agrees to issue the Securities in accordance with the New Indenture and has requested that Taberna accept such Securities in exchange for the Original Preferred Securities, and Taberna hereby accepts such Securities in exchange for the Original Preferred Securities upon the terms and conditions set forth herein.

 

(b)                                  The closing of the exchange contemplated herein shall occur at the offices of Nixon Peabody, LLP in New York, New York (the “ Closing Room ”), or such other place as the parties hereto and BNYM shall agree, at 11:00 a.m. New York time, on August 3, 2009 or such later date as the parties may agree (such date and time of delivery the “ Closing Date ”). The Company and Taberna hereby agree that the exchange (the “ Exchange ”) will occur in accordance with the following requirements:

 

(i)                                      Taberna Capital Management, LLC (as collateral manager for each of the Taberna entities) shall have delivered an issuer order instructing each trustee (in each such capacity, a “ CDO Trustee ”) under the applicable indenture pursuant to which such CDO Trustee serves as trustee for the holders of the Original Preferred Securities to exchange the Original Preferred Securities for the Securities and to deliver the Original Preferred Securities to the Property Trustee for cancellation and reissuance in the name of the Company.

 

(ii)                                   The Original Preferred Securities and the Securities shall have been delivered to the Closing Room, copies of which Original Preferred Securities and Securities shall have previously been made available for inspection, if so requested.

 

(iii)                                Company shall have directed the New Indenture Trustee to authenticate the Securities and deliver them to the applicable CDO Trustee, as follows: (i) Note 1 to Taberna III, (ii) Note 2 to Taberna IV, and (iii) Note 3 to Taberna VI.

 

(iv)                               New Indenture Trustee shall have authenticated the Securities in accordance with the terms of the New Indenture and delivered them as provided above.

 

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(v)                                  BNYM, shall have obtained the Original Preferred Securities and shall promptly thereafter, if requested by the Company, cancel and reissue them in the name of the Company.

 

(vi)                               the Company shall have paid to the BNYM all of such party’s legal fees, costs and other expenses in connection with the Exchange, as well as all other accrued and unpaid fees, costs and expenses under the Existing Indenture and the Trust Agreement, if any.

 

(vii)                            The Company shall have paid to the Trustee, for applications upon the Original Preferred Securities and for distribution to the applicable Taberna entities holding such Original Preferred Securities pursuant to the terms of the Existing Indenture, all accrued interest for the period commencing on the most recent interest payment date under the Original Preferred Securities and continuing through and including July 30, 2009, provided, that the Company and Taberna agree that the amount of interest payable for such period with respect to the Original Preferred Securities shall be based upon an interest rate of one percent (1.0%) per annum.

 

(viii)                         Upon the occurrence of the events described in subsections (i) through (vii) above and all of the conditions precedent set forth in Section 3, Taberna shall consummate the Exchange and (A) each Taberna entity holding the applicable Original Preferred Securities irrevocably transfers, assigns, grants and conveys the related Taberna Transferred Rights to the Company and the Company assumes all rights and obligations of Taberna with respect to the Original Preferred Securities and the Taberna Transferred Rights and (B) each Holder shall be entitled to all of the rights, title and interest of a Holder of the Securities under the terms of the Securities, the New Indenture and any other Operative Documents.

 

3.                                        Conditions Precedent .  The obligations of the parties under this Agreement are subject to the following conditions precedent:

 

(a)                                   The representations and warranties contained herein shall be accurate as of the date of delivery of the Securities.

 

(b)                                  Cahill Gordon & Reindel LLP, counsel for the Company and Guarantor (the “ Company Counsel ”), shall have delivered an opinion, dated the Closing Date, addressed to each Holder and to the New Indenture Trustee, in substantially the form set out in Annex A-1 hereto, Lawrence J. Dugan, General Counsel to the Guarantor, shall have delivered an opinion, dated the Closing Date, addressed to each Holder and to the New Indenture Trustee, in substantially the same form set out in Annex A-2 hereto and the Company shall have furnished to the Holders of the Securities a certificate signed by the Guarantor’s Chief Executive Officer, President, an Executive Vice President, Chief Financial Officer, Treasurer or Assistant Treasurer, dated the Closing Date, addressed to the Holders of the Securities, in substantially the form set out in Annex D hereto.  In rendering its opinion, the Company Counsel may rely as to factual matters upon certificates or other documents furnished by officers and directors of the Company and the Guarantor and by government officials.  The Company Counsel may specify the jurisdictions in which it is admitted to practice and that it is not admitted to practice in any

 

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other jurisdiction and is not an expert in the law of any other jurisdiction.  Such Company Counsel Opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).

 

(c)                                   The Offering Documents shall state that an opinion of Ernst & Young LLP, tax counsel to the Company, has been rendered to the Company regarding the treatment of the Securities as debt for U.S. Federal income tax purposes and Taberna shall have been furnished a copy of such opinion.

 

(d)                                  The Holders of the Securities shall have received the opinion of Gardere Wynne Sewell LLP, special counsel for the New Indenture Trustee, dated as of the Closing Date, addressed to the Holders of the Securities and their successors and assigns, in substantially the form set out in Annex C hereto.

 

(e)                                   Each of the Guarantor and the Company shall have furnished to the Holders of the Securities a certificate of the Guarantor and the Company, as applicable, signed by its Chief Executive Officer, President or an Executive Vice President, and Chief Financial Officer, Treasurer or Assistant Treasurer, dated as of the Closing Date, as to (i) and (ii) below:

 

(i)                                      the representations and warranties in this Agreement, the New Indenture and the Parent Guarantee are true and correct on and as of the Closing Date, and the Company and the Guarantor have complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; and

 

(ii)                                   since the date of the latest Financial Statements, there has been no material adverse change (other than any Material Adverse Change directly or indirectly attributable to the passage of time in connection with the existence of any default under the Credit Facilities) in the condition (financial or other), earnings, business or assets of the Guarantor and its Subsidiaries, taken as a whole, whether or not arising from transactions occurring in the ordinary course of business (a “ Material Adverse Change ”).

 

(f)                                     On the Closing Date, the Company shall have delivered to and in favor of the Trustee, as beneficiary, an original, irrevocable letter of credit in the notional amount of Five Million Dollars ($5,000,000) (the “ Letter of Credit ”) in form and substance reasonably satisfactory to Taberna Capital Management, LLC and otherwise in accordance with the terms and provisions of the New Indenture.

 

(g)                                  Prior to the Closing Date, the Company and the Guarantor shall have furnished to the Holders of the Securities and their counsel such further information, certificates and documents as the Holders of the Securities or such counsel may reasonably request.

 

Each certificate signed by any officer of the Company and/or the Guarantor and delivered to the Holders of the Securities or the Holders’ counsel in connection with the Operative Documents and the transactions contemplated hereby and thereby shall be deemed to be a

 

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representation and warranty of the Company and/or the Guarantor, as applicable, and not by such officer in any individual capacity.

 

4.                                        Representations and Warranties of the Company and the Guarantor .  Each of the Company and the Guarantor jointly and severally, as of the date hereof and as of the Closing Date, represent and warrant to, and agree with Taberna, as holders of the Original Preferred Securities and with the Holders of the Securities, as follows:

 

(a)                                   Each of the Company and the Guarantor (i) is duly organized and validly existing under the laws of its jurisdiction of organization or incorporation, (ii) is in good standing under such laws and (iii) has full power and authority to execute, deliver and perform its obligations under this Agreement and the other Operative Documents.

 

(b)                                  It is an “accredited investor” as defined in Rule 501 under the Securities Act. Without characterizing the Original Preferred Securities or any of the Taberna Transferred Rights as a “security” within the meaning of applicable securities laws, it is not acquiring the Original Preferred Securities or the Taberna Transferred Rights with a view towards the sale or distribution thereof in violation of the Securities Act.

 

(c)                                   Intentionally omitted.

 

(d)                                  None of the Securities or the Letter of Credit is subject to any Lien. The Company has received reasonable consideration in exchange for its obligations under the Operative Documents.

 

(e)                                   Each of the Company and the Guarantor (i) is a sophisticated entity with respect to the Exchange and/or the Parent Guarantee, as applicable, (ii) has such knowledge and experience, and has made investments of a similar nature, so as to be aware of the risks and uncertainties inherent in the Exchange and the Parent Guarantee and (iii) has independently and without reliance upon Taberna, any Holder of the Securities, Taberna Capital Management, LLC or Trustee or any of their affiliates, and based on such information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that it has relied upon Taberna’s express representations, warranties, covenants and agreements in this Agreement.  The Company and the Guarantor acknowledge that none of Taberna, any Holders of the Securities, Taberna Capital Management, LLC or Trustee or any of their affiliates has given it any investment advice, credit information or opinion on whether the Exchange is prudent.

 

(f)                                     None of the Company or the Guarantor has engaged any broker, finder or other entity acting under the authority of it or any of its affiliates that is entitled to any broker’s commission or other fee in connection with the transaction for which Taberna, any Holder, Trustee or any of their affiliates could be responsible.

 

(g)                                  No interest in the Taberna Transferred Rights is being acquired by or on behalf of an entity that is, or at any time while the Taberna Transferred Rights are held thereby will be, one or more Benefit Plans.

 

(h)                                  None of the Company or the Guarantor or any of their respective “Affiliates” (as defined in Rule 501(b) of Regulation D (“ Regulation D ”) under the Securities

 

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Act (as defined below)), nor any person acting on its or their behalf, has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of any of the Securities under the Securities Act.

 

(i)                                      None of the Company or the Guarantor or any of their respective Affiliates, or any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of any of the Securities.

 

(j)                                      The Securities (i) are not and have not been listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or quoted on a U.S. automated inter-dealer quotation system and (ii) are not of an open-end investment company, unit investment trust or face-amount certificate company that are, or are required to be, registered under Section 8 of the Investment Company Act of 1940, as amended (the “ Investment Company Act ”), and the Securities otherwise satisfy the eligibility requirements of Rule 144A(d)(3) promulgated pursuant to the Securities Act (“ Rule 144A(d)(3) ”).

 

(k)                                   None of the Company or the Guarantor or any of their respective Affiliates, or any person acting on its or their behalf, has engaged, or will engage, in any “directed selling efforts” within the meaning of Regulation S under the Securities Act with respect to the Securities.

 

(l)                                      Assuming the accuracy of the representations made by Taberna hereunder, neither the Company nor the Guarantor is, and immediately following consummation of the transactions contemplated hereby, will be, an “investment company” or an entity “controlled” by an “investment company,” in each case within the meaning of Section 3(a) of the Investment Company Act.

 

(m)                                Each of this Agreement, the New Indenture and the Parent Guarantee, as applicable, and the consummation of the transactions contemplated herein and therein have been duly authorized by the Company and the Guarantor and, on the Closing Date, will have been duly executed and delivered by the Company and the Guarantor, and, assuming due authorization, execution and delivery by Taberna and/or the Trustee, as applicable, will be the legal, valid and binding obligations of the Company and the Guarantor enforceable against it in accordance with their respective terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general principles of equity.

 

(n)                                  The Securities have been duly authorized by the Company and, on the Closing Date, will have been duly executed and delivered to the Trustee for authentication in accordance with the New Indenture and, when authenticated in the manner provided for in the New Indenture and deliver